<PAGE> 1
As filed with the Securities and Exchange Commission on August 8, 1996
Registration No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LASON HOLDINGS, 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)
------------------------
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 & 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. / /
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, par value $0.01 per share..... $48,875,000 $16,854
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
------------------------
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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<PAGE> 2
LASON HOLDINGS, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
SHOWING LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF PART I OF
FORM S-1.
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REGISTRATION STATEMENT
ITEM NUMBER AND CAPTION CAPTION OR LOCATION IN PROSPECTUS
--------------------------------------------------- ----------------------------------------
<C> <S> <C>
1 Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Outside Front Cover Page
2 Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page; Outside Back
Cover Page
3 Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Prospectus Summary; Risk Factors
4 Use of Proceeds.................................... Use of Proceeds
5 Determination of Offering Price.................... Underwriting
6 Dilution........................................... Dilution
7 Selling Security Holders........................... Inapplicable
8 Plan of Distribution............................... Outside Front Cover Page; Underwriting
9 Description of Securities to be Registered......... Description of Capital Stock
10 Interests of Named Experts and Counsel............. Inapplicable
11 Information with Respect to the Registrant......... Outside Front Cover Page; Prospectus
Summary; Risk Factors; The Company; Use
of Proceeds; Dividend Policy;
Capitalization; Selected Consolidated
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Relationships and
Related Transactions; Principal
Stockholders; Description of Credit
Agreement; Description of Capital Stock;
Shares Eligible for Future Sale;
Validity of Common Stock; Experts;
Unaudited Pro Forma Condensed
Consolidated Financial Information,
Financial Statements, and Consolidated
Financial Statements
12 Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... Inapplicable
</TABLE>
<PAGE> 3
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 AUGUST 8, 1996
[LASON LOGO]
SHARES
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold by Lason
Holdings, 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 $ and
$ per share. See "Underwriting" for information relating to the method of
determining the initial public offering price. Application will be made to list
the Common Stock on the NASDAQ National Market under the symbol "LSON."
------------------------
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.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
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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
$ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 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 the Company will be $ , $ and
$ , respectively.
------------------------
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 ("Robertson, Stephens &
Company"), San Francisco, California, on or about , 1996.
ROBERTSON, STEPHENS & COMPANY WILLIAM BLAIR & COMPANY
The date of this Prospectus is , 1996
<PAGE> 4
LASON LOGO
"THE IMAGING COMPANY"
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- --------------------------------------------- ------------------------------------------
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
- ---------------------------------------------
- ON-SITE FACILITIES MANAGEMENT [PICTURES OF COMPACT DISKS AND OF
- HIGH VOLUME REPROGRAPHICS COMPUTER CONTROL PANEL OF
- LASON DOCUMENT EXPRESS PRINT ON DEMAND HIGH SPEED COPIER/PRINTER]
- DIGITAL GRAPHICS ------------------------------------------
- --------------------------------------------- ------------------------------------------
BUSINESS COMMUNICATIONS
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- COLLECTION LETTER PROCESSING [PICTURE OF MULTIPLE
- DIRECT MAIL/STIMULUS RESPONSE COMPUTER TERMINALS]
- 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.
2
<PAGE> 5
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.
------------------------
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................................................................... 4
Risk Factors.......................................................................... 8
The Company........................................................................... 15
Recent Acquisitions................................................................... 16
Use of Proceeds....................................................................... 18
Dividend Policy....................................................................... 18
Capitalization........................................................................ 19
Dilution.............................................................................. 20
Selected Consolidated Financial Data.................................................. 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 22
Business.............................................................................. 30
Management............................................................................ 42
Certain Relationships and Related Transactions........................................ 49
Principal Stockholders................................................................ 53
Description of Credit Agreement....................................................... 54
Description of Capital Stock.......................................................... 56
Shares Eligible for Future Sale....................................................... 59
Underwriting.......................................................................... 61
Validity of Common Stock.............................................................. 62
Experts............................................................................... 62
Additional Information................................................................ 62
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
<PAGE> 6
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 Holdings,
Inc. and include Lason Holdings, Inc. and all of its subsidiaries and its and
their respective predecessors and subsidiaries.
THE COMPANY
Lason is a leading provider of 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, allowing customers to fulfill their document management outsourcing
needs with a single vendor. The Company has increased its annual net revenues
from approximately $1 million at the time of its founding in 1985 to $46.6
million for the year ended December 31, 1995. On a pro forma basis, the Company
had net revenues of approximately $75.0 million and approximately $41.7 million
for the year ended December 31, 1995 and for the six months ended June 30, 1996,
respectively. See "Selected Consolidated Financial Data." 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 has
accomplished such expansion through internal growth by offering a wide range of
services to its customers and by using technology to expand its service
offerings and through selected acquisitions.
The document management industry is highly fragmented, consisting of a
large number of small companies providing limited service offerings. For
example, a 1994 Association for Information and Image Management ("AIIM") survey
identified approximately 2,000 firms providing information and image management
services. Of the over six hundred firms responding to the survey, over 85% of
such firms reported revenues for 1993 of less than $10 million. 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 seven companies and has executed an
agreement to acquire an eighth company, which the Company expects to complete in
August 1996, although no assurance can be given that this acquisition will be
completed. These eight companies had aggregate net revenues exceeding $28.4
million for the year ended December 31, 1995. The Company will continue to seek
and evaluate additional acquisition opportunities.
4
<PAGE> 7
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 is also a leader in
providing customized processing services for over 400 collection agencies
located throughout the United States.
Recent studies have indicated that U.S. companies spend from $94 to $120
billion per year to distribute, store and process paper forms, that there are
over 300 billion pages of paper documents on file with over 90 billion new pages
added each year, and that 90% of all communications continue to exist on paper.
A significant portion of the storage, processing and management of these
documents is outsourced to document management services businesses such as the
Company. According to the AIIM survey, the information and image management
market was approximately $4.6 billion for the year 1993. Electronic information
management products and services accounted for 57% of the total information and
image management market. While the overall market for information and image
management had a compounded annual growth rate of 8.3% from 1990 to 1993, the
electronic information management segment had a compounded annual growth rate of
14.1% for the same period. While the document management services industry is
highly fragmented and generally composed of small companies, the Company
believes that the users of a majority of these outsourced services are larger
companies with complex document management needs for whom it is more efficient
and cost-effective to outsource.
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 rarely be fully
utilized 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 that 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;
5
<PAGE> 8
- 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.
THE OFFERING
Common Stock offered by the
Company............................. shares
Common Stock outstanding after the
Offering(1)....................... 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."
Proposed NASDAQ National Market
Symbol.............................. LSON
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(1) Includes shares and 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 $ per share (see "Recent
Acquisitions") and excludes 555,740 shares of Common Stock issuable upon
exercise of stock options outstanding after the Offering, shares of
Common Stock issuable upon exercise of the Underwriters' over-allotment
option, shares of Common Stock issuable in connection with the
conversion of a convertible promissory note in the amount of $400,000
issued by the Company in connection with the acquisition of National
Reproductions Corporation, assuming an initial public offering price of
$ per share (see "Recent Acquisitions") and 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").
6
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SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts)
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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)
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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 14,455 4,563 5,273 7,626
Compensatory option
expense.................... -- -- -- -- 308 976 32 167 131
Amortization of
intangibles................ -- 87 163 266 817 1,320 465 379 631
------ ------- ------- ------- ------- ------- ------- ------- -------
Income from operations....... 1,218 2,450 3,324 5,270 4,847 4,987 3,151 3,574 4,394
Interest expense............. 54 83 126 185 1,760 1,187 764 885 599
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 3,907 2,465 2,714 3,940
Provision for income taxes... -- -- -- -- 1,139 1,481 890 992 1,426
Loss due to early
extinguishment of debt,
net........................ -- -- -- -- -- 276 -- -- --
------ ------- ------- ------- ------- ------- ------- ------- -------
Net income................... $1,187 $ 2,274 $ 3,219 $ 5,106 $ 2,014 2,150 1,575 1,722 2,514
====== ======= ======= ======= ======= ======= ======= ======= =======
Primary and fully diluted
earnings per share(2)...... $ $ $ $ $
======= ======= ======= ======= =======
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 2,150 1,433 1,300 2,514
====== ======= ======= ======= ======= ======= ======= ======= =======
Pro forma primary and fully
diluted earnings per
share...................... $ $ $ $ $
======= ======= ======= ======= =======
Weighted average number of
common and common
equivalent shares
outstanding................
</TABLE>
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<CAPTION>
PREDECESSOR COMPANY
----------- ---------------------------------------------
DECEMBER 31,
----------------------
JUNE 30, 1996
HISTORICAL ----------------------------------
---------------------- PRO AS
1994 1995 ACTUAL FORMA(5) ADJUSTED(6)
----------- ------- ------- -------- -----------
(UNAUDITED)
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BALANCE SHEET DATA:
Working capital.................................... $ 3,218 $ 4,911 $ 5,791 $ 8,364 $ 8,364
Total assets....................................... 15,692 37,309 40,684 64,601 65,007
Long-term obligations, less current portion........ 261 18,547 19,146 36,084 12,968
Total stockholders' equity......................... 6,623 9,214 11,108 12,998 37,598
</TABLE>
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(1) Gives effect to the Acquisitions, the sale of 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. For purposes of this presentation, the Company has assumed net
proceeds from the Offering of $36.5 million. 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.
For purposes of this presentation, the Company has assumed net proceeds from
the Offering of $36.5 million. See "Use of Proceeds" and Pro Forma Financial
Information.
7
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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
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 Data." On an historical basis, 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 RELATED TO THE COMPANY'S ACQUISITION STRATEGY
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. In addition, there can be no
assurance that companies acquired in the future will be profitable at the time
of acquisition or will achieve sales and profitability justifying the Company's
investment. 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. See
"Recent Acquisitions" and "Business -- Acquisition Strategy."
NEED FOR ADDITIONAL FINANCING TO CONTINUE ACQUISITION STRATEGY
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
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after consummation of the Offering, the Company plans to file a registration
statement covering up to 2.5 million 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
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. Inc. 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.
POTENTIAL FOR SIGNIFICANT FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
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 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
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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."
RAPID TECHNOLOGICAL CHANGE
The document management, records management and business communications
services industry is characterized by rapid technological change, evolving
customer needs and emerging technical standards. 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 products and 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 BREACH OF CONFIDENTIALITY
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.
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."
CONTROL BY EXISTING 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 % of the outstanding shares of Common Stock (or
approximately % 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 in favor of the director nominees designated by
certain of the Existing Stockholders. The Existing Stockholders may not vote to
remove a director nominated
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pursuant to the Voting Agreement and, conversely, must vote to remove a director
nominated pursuant to the Voting Agreement if directed to do so by the Existing
Stockholder who designated such director. 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 third quarter 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 EXISTING STOCKHOLDER
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. See "Certain Relationships and Related
Transactions -- The Recapitalization" and "Description of Capital Stock -- The
Recapitalization."
REGULATION; 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, shares of Common Stock will be
outstanding ( if the Underwriters' over-allotment option is exercised
in full). The shares of Common Stock sold in the Offering (plus up to
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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<PAGE> 15
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 1.0 million 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 2.5 million shares of Common
Stock by the Company for use as consideration in future acquisitions), without
the prior written consent of Robertson, Stephens & Company, 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. The existence of the
Registration Agreement and the perception that such 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" 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 1.0 million shares of Common
Stock in connection with its 1995 Stock Option Plan and a registration statement
covering up to 2.5 million 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."
CERTAIN CHARTER, BY-LAWS AND STATUTORY ANTI-TAKEOVER 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 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
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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. 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
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, the Company had net revenues of
$46.6 million. On a pro forma basis, the Company had net revenues of
approximately $75.1 million and approximately $41.7 million for the year ended
December 31, 1995 and for the six months ended June 30, 1996, respectively. See
"Selected Consolidated Financial Data." The Company has accomplished such
expansion through internal growth by offering a wide range of services to its
customers and by using technology to expand its service offerings and through
selected acquisitions.
In January 1995, the founders recapitalized the Predecessor by selling
substantially all of its assets to Lason Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Lason Holdings, Inc. (the "1995
Recapitalization"). 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 seven
companies and has executed an agreement to acquire an eighth company. These
eight companies had aggregate net revenues exceeding $28.4 million for the year
ended December 31, 1995. These acquisitions include the acquisition of Adcom
Mailers, Inc. and an affiliated company in June 1995, Mail-Away Corporation in
January 1996 and Diversified Support Services, Inc. in February 1996, Delaware
Legal Copy, Inc. in April 1996, and Information & Image Technology of America,
Inc., Micro-Pro, Inc. and MP Services, Inc. (two affiliated companies) and Great
Lakes Micrographics Corporation in July 1996, and the execution of an agreement
in August 1996 to acquire National Reproductions Corporation, which the Company
expects to complete in August 1996, although no assurance can be given that this
transaction will be completed. See "Recent Acquisitions."
Lason Holdings, 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
seven companies, and has executed an agreement to acquire all of the stock of an
eighth company (the "Acquired Companies"), which complement the Company's core
competencies. These acquisitions (the "Acquisitions") involve: (i) Adcom
Mailers, Inc. and an affiliated company (collectively, "Adcom"), specializing in
the sorting of mass mailings through electronic devices, in June 1995; (ii)
Mail-Away Corporation ("Mail-Away"), specializing in overnight and priority mail
creation and distribution services, in January 1996; (iii) Diversified Support
Services, Inc. ("Diversified"), involved in reprographics facilities management
in the Chicago, Illinois and Cleveland, Ohio regional markets, in February 1996;
(iv) Delaware Legal Copy, Inc. ("Delaware Legal"), an imaging company and leader
in the litigation support services business in Wilmington, Delaware, in April
1996; (v) 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) 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; and (vii) 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. In
August 1996, the Company executed an agreement to acquire National Reproductions
Corporation ("NRC"), involved in providing imaging, reprographics and facilities
management services with facilities in Madison Heights, Detroit and Southfield,
Michigan, which the Company expects to complete in August 1996, although no
assurance can be given that this acquisition will be completed.
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 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 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 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
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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. 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 $ per share, the Company will issue shares of
Common Stock to the IITA Stockholders. 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
$ per share, the Company will issue shares of
Common Stock to the Great Lakes Stockholders. 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 $ per
share, the promissory note is convertible into 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.
17
<PAGE> 20
USE OF PROCEEDS
The net proceeds from the sale by the Company of the shares of
Common Stock offered hereby will be approximately $ million ($ million
if the Underwriters' over-allotment option granted by the Company is exercised
in full), based upon an assumed initial public offering price of $ per share
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by the Company. The Company intends to use
approximately $ 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 also expects to terminate the Credit
Agreement 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 $15 million of term loans
payable in 26 quarterly installments ending June 30, 2001, a $10 million
revolving line of credit, subject to a borrowing base limitation, expiring on
June 30, 2001 and an additional $10 million acquisition line of credit expiring
June 30, 2001, or upon the occurrence of an initial public offering. 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 line of credit and the
acquisition revolving line of credit, respectively, with a weighted average
annual interest rate of 8.18%, 8.23% and 8.16%, respectively. In addition, the
Company expects to amend the Credit Agreement to provide for an additional line
of credit and to borrow approximately an additional $8.2 million in connection
with the acquisition of NRC. The Company also expects to amend the Credit
Agreement to increase the existing $10 million revolving line of credit to $13
million. 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.
18
<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 shares of
Common Stock offered hereby at an assumed initial public offering price of
$ 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 $ $ --
======== ======== ========
Long-term debt, less current portion.......................... $19,146 $ $
Common stock with a put option................................
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,
5,012,718, and shares issued and
outstanding (Actual, Pro Forma and As Adjusted,
respectively)............................................ 50
Additional paid-in capital.................................. 8,622
Loans to stockholders....................................... (628) -- --
Retained earnings........................................... 3,064
-------- -------- --------
Total stockholders' equity............................... 11,108
-------- -------- --------
Total capitalization................................... $32,254 $ $
======== ======== ========
</TABLE>
19
<PAGE> 22
DILUTION
The net tangible book value (deficit) of the Company as of June 30, 1996,
was approximately $(16.3 million), or $ 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. After giving effect to the sale by the Company of
shares of Common Stock offered hereby at an assumed initial public offering
price of $ per share and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds," the pro forma net tangible book
value of the Company at June 30, 1996, would have been approximately $
million, or approximately $ per share. This represents an immediate increase
of $ per share in the net tangible book value to existing stockholders and
an immediate dilution of $ 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.............. $
Net tangible book value (deficit) per share before
the Offering............................................
Increase per share attributable to new investors........... $
-------
Pro forma net tangible book value per share after the
Offering...................................................
-------
Dilution per share to new investors.......................... $
=======
</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
shares of Common Stock offered hereby at an assumed initial public
offering price of $ 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)............. % $ % $
New investors........................
---------- ---- ----------- -----
Total(1)........................... 100% $ 100%
========== ==== =========== =====
</TABLE>
- ------------
(1) Does not give effect to the redemption of shares of Common Stock
upon consummation of Offering. See "Description of Capital Stock -- The
Recapitalization."
20
<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 14,455
Compensatory option expense.......................... -- -- -- -- 308 976
Amortization of intangibles.......................... -- 87 163 266 817 1,320
------ -------- -------- -------- -------- --------
Income from operations............................... 1,218 2,450 3,324 5,270 4,847 4,987
Interest expense..................................... 54 83 126 185 1,760 1,187
Other (income) expense, net.......................... (23) 93 (21) (21) (66) (107)
------ -------- -------- -------- -------- --------
Income before taxes.................................. 1,187 2,274 3,219 5,106 3,153 3,907
Provision for income taxes........................... -- -- -- -- 1,139 1,481
------ -------- -------- -------- -------- --------
Loss due to early extinguishment of debt, net........ -- -- -- -- -- 276
Net income........................................... $1,187 $ 2,274 $ 3,219 $ 5,106 $ 2,014 $ 2,150
====== ======== ======== ======== ======== ========
Primary and fully diluted earnings per share(2)...... $ $
======== ========
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 $ 2,150
====== ======== ======== ======== ======== ========
Pro forma primary and fully diluted earnings per
share............................................... $ $
Weighted average number of common and common
equivalent shares outstanding.......................
<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 7,626
Compensatory option expense.......................... 32 167 131
Amortization of intangibles.......................... 465 379 631
-------- -------- --------
Income from operations............................... 3,151 3,574 4,394
Interest expense..................................... 764 885 599
Other (income) expense, net.......................... (78) (25) (145)
-------- -------- --------
Income before taxes.................................. 2,465 2,714 3,940
Provision for income taxes........................... 890 992 1,426
-------- -------- --------
Loss due to early extinguishment of debt, net........ -- -- --
Net income........................................... $ 1,575 $ 1,722 $ 2,514
======== ======== ========
Primary and fully diluted earnings per share(2)...... $ $ $
======== ======== ========
Pro forma compensatory option expense(3)............. 142 422 --
Pro forma provision for income taxes(4).............. -- -- --
-------- -------- --------
Pro forma net income................................. $ 1,433 $ 1,300 $ 2,514
======== ======== ========
Pro forma primary and fully diluted earnings per
share............................................... $ $ $
Weighted average number of common and common
equivalent shares outstanding.......................
</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 $ 8,364 $ 8,364
Total assets.................................................. 40,684 64,601 69,007
Long-term obligations, less current portion................... 19,146 36,084 12,968
Total stockholders' equity.................................... 11,108 12,998 37,598
</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. For purposes of this presentation, the Company has assumed net
proceeds from the Offering of $36.5 million. 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.
For purposes of this presentation, the Company has assumed net proceeds from
the Offering of $36.5 million. See "Use of Proceeds" and Pro Forma Financial
Information.
21
<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 is a leading provider of 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."
The Company has increased its annual net revenues from approximately $1
million at the time of its founding in 1985 to $46.6 million for the year ended
December 31, 1995. On a pro forma basis, the Company had net revenues of
approximately $75.0 million and approximately $41.7 million for the year ended
December 31, 1995 and for the six months ended June 30, 1996, respectively. See
"Selected Consolidated Financial Data." The Company has accomplished such
expansion through internal growth by offering a wide range of services to its
customers and by using technology to expand its service offerings and through
selected acquisitions.
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 seven companies and has executed an agreement to
acquire an eighth company, which the Company expects to complete in August 1996,
although no assurance can be given that this transaction will be completed.
These eight companies had aggregate net revenues exceeding $28.4 million for the
year ended December 31, 1995. 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,
22
<PAGE> 25
marketing and selling activities (principally wages and related costs), and
financial and other administrative expenses.
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 19.3 19.3 19.5 18.3
Income from operations.............. 10.7 12.9 10.4 6.6 13.3 13.2 10.5
Net income.......................... 10.3 12.4 4.3 2.9 6.6 6.4 6.0
</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 18.3% of pro forma net revenues for the six
months ended June 30, 1996. This amount includes a reduction in compensation
expenses of $319,000 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.
Pro forma amortization of approximately $631,000 includes $246,000 related
to amortized pro forma goodwill 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 $1.4 million for the six
months ended June 30, 1996. This amount represents an effective tax rate of
36.2%, which includes applicable anticipated federal and state tax expenses (net
of federal income tax benefit) of the Acquisitions. For future periods, the
Company anticipates filing as a consolidated group, including the Acquisitions,
for federal income tax purposes.
23
<PAGE> 26
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, 1996 to approximately $27.1 million in the
comparable 1996 period. The approximate $3.4 million increase resulted
principally from growth in the Company's direct mail/stimulus response,
collection letter processing, and document conversion revenues. In addition, the
areas showing the largest percentage period over period growth were digital
imaging, digital graphics and collection letter processing.
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, primarily resulted from 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 $5.4 million increase resulted principally from growth in
the Company's collection letter processing and document conversion revenues. In
addition, the areas showing the largest percentage period over period growth
were collection letter processing, digital imaging and micrographics.
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. 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 result of the GTCR
Fund IV investment and the 1995 Recapitalization. See "The Company" and "Certain
Relationships and Related Transactions."
24
<PAGE> 27
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 direct mail/stimulus response, collection letter processing and
facilities management revenues. In addition, the areas showing the largest
percentage period over period growth were collection letter processing, direct
mail/stimulus response and micrographics.
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 -- Potential for
Significant Fluctuations in Quarterly Operating Results." The tables should be
read in conjunction with "Selected Consolidated Financial Data," the
consolidated financial statements of the Company
25
<PAGE> 28
and the financial statements of the Predecessor and related notes, and the other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------------------------------------------------------------------------------------------------
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
-------- -------- --------- -------- -------- -------- --------- -------- -------- --------
(UNAUDITED, IN THOUSANDS)
<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
--------------------------------------------------------------------------------------------------------------
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
-------- -------- --------- -------- -------- -------- --------- -------- -------- --------
(UNAUDITED)
<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>
- ------------
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 -- Potential for Significant Fluctuations in
Quarterly Operating Results" 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.
WORKING CAPITAL
At December 31, 1995 and June 30, 1996, the Company's working capital was
approximately $4.9 million and $5.8 million, respectively. At such dates, the
Company had approximately $103,000 and $720,000, respectively, in cash. On a pro
forma basis, after giving effect to the Acquisitions as if they had occurred on
June 30, 1996, the Offering and the application of the estimated net proceeds
therefrom as described under "Use of Proceeds," the Company's working capital
would have been approximately $8.4 million.
26
<PAGE> 29
Trade receivables at June 30, 1996 increased approximately $1.4 million as
compared to December 31, 1995 principally as a result of the acquisition of
Delaware Legal effective April 1, 1996 and the Company's increased net revenues.
SOURCES (USES) OF FUNDS
During the years ended December 31, 1993, 1994, and 1995, and the six
months ended June 30, 1996, the Company generated cash flows from operations of
$2.9 million, $5.7 million, $1.3 million and $2.4 million, respectively. Net
cash flows provided by (used in) financing activities were $(1.1) million,
$(3.9) million, $(224,000) and $974,000 for the years ended December 31, 1993,
1994 and 1995, and the six months ended June 30, 1996, respectively.
Substantially all such funding for the years ended December 31, 1995, and the
six months ended June 30, 1996 was 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 line of
credit, 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 line of credit, expiring June 30, 2001 or
upon the occurrence of an initial public offering by the Company. To finance the
Acquisitions closed after June 30, 1996, the Company borrowed an additional $9
million under the acquisition line of credit and, at July 31, 1996, had unused
and available revolving credit of approximately $2.4 million. In addition, the
Company expects to amend the Credit Agreement to provide for an additional line
of credit and to borrow approximately an additional $8.2 million in connection
with the acquisition of NRC. The Company also expects to amend the Credit
Agreement to increase the existing $10 million revolving line of credit to $13
million. 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 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
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
27
<PAGE> 30
consummation of the Offering, the Company expects to register 2.5 million 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 AND PENDING 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 seven
companies and has executed an agreement to acquire an eighth company for an
aggregate purchase price of approximately $27.1 million. 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, approximately $9.0 million was
borrowed in July 1996 to fund certain of the Acquisitions. See "Recent
Acquisitions." In addition, the Company expects to borrow approximately an
additional $8.2 million in connection with the acquisition of NRC.
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 $ million of indebtedness using funds from the
New Credit Agreement, the Company would have had an aggregate of $ 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, 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
28
<PAGE> 31
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.
29
<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 is a leading provider of 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, allowing customers to fulfill their document management outsourcing
needs with a single vendor. The Company has increased its annual net revenues
from approximately $1 million at the time of its founding in 1985 to $46.6
million for the year ended December 31, 1995. On a pro forma basis, the Company
had net revenues of approximately $75.0 million and approximately $41.7 million
for the year ended December 31, 1995 and for the six months ended June 30, 1996,
respectively. See "Selected Consolidated Financial Data." 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 has
accomplished such expansion through internal growth by offering a wide range of
services to its customers and by using technology to expand its service
offerings and through selected acquisitions.
The document management industry is highly fragmented, consisting of a
large number of small companies providing limited service offerings. For
example, a 1994 Association for Information and Image Management ("AIIM") survey
identified approximately 2,000 firms providing information and image management
services. Of the over six hundred firms responding to the survey, over 85% of
such firms reported revenues for 1993 of less than $10 million. 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 seven companies and has executed an
agreement to acquire an eighth company, which the Company expects to complete in
August 1996, although no assurance can be given that this transaction will be
completed. These eight companies had aggregate net revenues exceeding $28.4
million for the year ended December 31, 1995. 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
30
<PAGE> 33
response to specific events. The Company is also a leader in providing
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 rarely be fully utilized 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 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
Recent studies have indicated that U.S. companies spend from $94 to $120
billion per year to distribute, store and process paper forms, that there are
over 300 billion pages of paper documents on file with over 90 billion new pages
added each year, and that 90% of all communications continue to exist on paper.
A significant portion of the storage, processing and management of these
documents is outsourced to document management services businesses such as the
Company. According to the AIIM survey, the information and image management
market was approximately $4.6 billion for the year 1993. Electronic information
management products and services accounted for 57% of the total information and
image management market. While the overall market for information and image
management had a compounded annual growth rate of 8.3% from 1990 to 1993, the
electronic information management segment had a compounded annual growth rate of
14.1% for the same period. While the document management services industry is
highly fragmented and generally composed of small companies, the Company
believes that the users of a majority of these outsourced services are larger
companies with complex document management needs for whom it is more efficient
and cost-effective to outsource.
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,
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<PAGE> 34
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 that 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 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 seven companies, and has executed an agreement to acquire an
eighth company, 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 Related to the Company's
Acquisition Strategy" and "-- Need for Additional Financing to Continue
Acquisition Strategy," "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
32
<PAGE> 35
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 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 seven companies and has executed an agreement to
acquire an eighth company. 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.
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<PAGE> 36
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 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
34
<PAGE> 37
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% 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.
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<PAGE> 38
- 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.
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
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<PAGE> 39
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
collection letters are generated each month.
- Direct Mail/Stimulus Response
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.
- 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.
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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.
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. On a pro forma basis, net revenues from the
three major domestic automobile manufacturers would have accounted for
approximately 47.2% and 43.7% of the Company's net revenues for the year ended
December 31, 1995, and for the six months ended June 30, 1996, respectively. See
"Selected Consolidated Financial Information." 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, other than General Motors
Corporation and Ford Motor Company, which accounted for approximately 30.7% and
13.5%, respectively, of the Company's net revenues, no customer accounted for
more than 10% of the Company's net revenues for the year ended December 31,
1995. 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
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<PAGE> 41
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. Inc. 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.
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.
FACILITIES
As of July 31, 1996, including the Acquisitions, the Company conducted
operations through 21 leased facilities in seven states containing in the
aggregate approximately 313,860 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)..................... 56,000 Business communications
Madison Heights, MI.............................. 49,900 Document and records
management
Troy, MI......................................... 47,050 Document and records
management, headquarters
</TABLE>
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<PAGE> 42
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION SQUARE FOOTAGE USE
- ------------------------------------------------- -------------- ----------------------------
<S> <C> <C>
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 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
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<PAGE> 43
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 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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<PAGE> 44
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.................... 31 Director
</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
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<PAGE> 45
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 1984. 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.
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
43
<PAGE> 46
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(4)
Chairman(3)
Gary L. Monroe(5)............................. 46,723 -- 170,452 40,000(6)
Chief Executive Officer
Allen J. Nesbitt.............................. 130,000 116,071 -- 10,562(7)
President
Donald L. Elland.............................. 66,149 113,894 28,410 3,080(8)
Vice President-Operations (Livonia)
Richard 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) Mr. Yanover served as chief executive officer of the Company until September
19, 1995.
(4) Represents expenses incurred by the Company in connection with operation of
an automobile by Mr. Yanover.
(5) Mr. Monroe began employment with the Company on September 19, 1995. His base
annual compensation is $175,000.
(6) Represents reimbursed relocation expenses paid under terms of Mr. Monroe's
employment agreement.
(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> 47
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>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM(2)
OPTIONS IN FISCAL EXERCISE EXPIRATION --------------------
NAME GRANTED(1) YEAR 1995 PRICE DATE 5% 10%
- ------------------------------- ---------- ---------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Gary L. Monroe................. 170,452 40.65% $.40 12/21/2002
Donald L. Elland............... 28,410 6.78% $.40 1/17/2002
Richard C. Kowalski............ 28,410 6.78% $.40 1/17/2002
</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.
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
SECURITIES UNDERLYING NET VALUES OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS(2)
------------------------------- ----------------------------
NAME EXERCISABLE(1) UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- -------------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary L. Monroe............................. 56,817 113,635 $ $
Donald L. Elland........................... 0 28,410 0
Richard C. Kowalski........................ 0 28,410 0
</TABLE>
- ------------
(1) Exercisable in accordance with the vesting provisions described above in
note (1) to the table entitled "Option Grants in Fiscal 1995."
(2) Calculated on the basis of the fair market value of the underlying
securities at of $ per share minus the aggregate exercise price.
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.
45
<PAGE> 48
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 1.0 million 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 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
46
<PAGE> 49
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 each of the first five anniversaries of the date
of the Jablonski Stock Option Agreement, 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 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.
47
<PAGE> 50
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. The directors are reimbursed for
out-of-pocket expenses incurred in connection with attending meetings. 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 6.7% of Mr. Rauwerdink's total holdings in his new
employer's common stock.
48
<PAGE> 51
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 1,000,002 shares of the Company's Class B Common Stock for an
aggregate purchase price of $10 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 1,172,652, 1,172,660,
72,037, 62,500 and 20,145 shares of 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
49
<PAGE> 52
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
50
<PAGE> 53
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 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 a director nominated pursuant to the Voting Agreement and must
vote to remove a director nominated pursuant to the Voting Agreement if directed
to do so by the Existing Stockholder who designated such director. 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, % of the Common Stock ( % 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 amount of $21,800, $32,700, $75,200 and $33,700,
respectively, for the years ended December 31, 1993,
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<PAGE> 54
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 % of the Common Stock.
Mr. Deitch is also a shareholder in the law firm of Seyburn, Kahn, Ginn, Bess,
Deitch & 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 & 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 shares of
Common Stock (assuming an initial public offering price of $ 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 shares of Common Stock owned by GTCR Fund IV at
an aggregate price of approximately $11.7 million (assuming an initial public
offering price of $ and consummation of the Offering on September 30,
1996). See "Description of Capital Stock -- The Recapitalization."
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<PAGE> 55
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock after giving effect to the Recapitalization (see
"Description of Capital Stock -- The Recapitalization") and immediately
following the Offering (i) by each person who is known by the Company to own
beneficially more than 5% of the Common Stock, (ii) by each current executive
officer and director of the Company and (iii) 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>
SHARES BENEFICIALLY OWNED
-------------------------------
PERCENT OF CLASS(1)
-------------------
NUMBER BEFORE AFTER
NAME OF BENEFICIAL OWNER OF SHARES OFFERING OFFERING
- ------------------------------------------------------------------- --------- -------- --------
<S> <C> <C> <C>
Golder, Thoma, Cressey, Rauner Fund IV, L.P. (2)(3)................ 2,500,002 % %
Joseph Jonathan Yanover and Jennifer D. Yanover Irrevocable Trust
dated January 5, 1993 (Colin W. L. Armstrong, Trustee)(2)(4)..... 415,185 % %
Robert A. Yanover(2)(5)............................................ 476,442 % %
Allen J. Nesbitt(2)(6)............................................. 1,101,635 % %
Gary L. Monroe(7).................................................. 170,452 % %
William J. Rauwerdink(8)........................................... 11,000 * *
Brian E. Jablonski(9).............................................. 12,000 * *
Donald M. Gleklen(10).............................................. 2,500 * *
Bruce V. Rauner(11)................................................ 2,500,002 % %
All Executive Officers and Directors of the Company as a group
(8 persons)(12).................................................. 4,689,216 % %
</TABLE>
- ------------
* Indicates less than 1%.
(1) The number of shares of Common Stock deemed outstanding prior to the
Offering is and the number of shares of Common Stock deemed
outstanding after the Offering is ( if the Underwriters'
over-allotment option is exercised in full). Each of these numbers includes
shares and shares of Common Stock issuable in connection with
the acquisition of IITA and Great Lakes, respectively, assuming an initial
public offering price of $ 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,
shares of Common Stock issuable in connection with the conversion of a note
in the amount of $400,000 issued by the Company in connection with the
acquisition of NRC, assuming an initial public offering price of $ per
share (see "Recent Acquisitions") and shares of Common Stock to be
redeemed upon consummation of the Offering (see "Description of Capital
Stock -- The Recapitalization").
(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) Excludes shares of Common Stock owned by GTCR Fund IV to be redeemed
upon consummation of the Offering. See "Description of Capital Stock -- The
Recapitalization." The address of this holder is 6100 Sears Tower, Chicago,
Illinois 60606.
(4) The address of this holder is 116 Laurel Court, Ponte Verde Beach, Florida
32082.
(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. Mr. Rauner 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. Mr. Rauner
disclaims beneficial ownership of the shares of Common Stock owned by GTCR
Fund IV. The address of this holder 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> 56
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, and July 10,
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 $10 million revolving credit
facility (the "Revolving Credit Facility") and an additional $10 million credit
facility for acquisitions (the "Acquisition Credit Facility"). In addition, the
Company expects to amend the Credit Agreement to provide for an additional line
of credit and to borrow approximately an additional $8.2 million in connection
with the acquisition of NRC. The Company also expects to amend the Credit
Agreement to increase the Revolving Credit Facility to $13 million.
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 or (ii) 75 basis points if such Loan is under the
Revolving Credit 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: $500,000 at the end of each of its fiscal quarters
beginning June 30, 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 ninety
(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) $10 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
Credit Facility, the Company is required to pay the following amounts quarterly
in arrears, expressed as a percentage of the outstanding principal under the
Acquisition Credit 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
Credit Facility must be paid no later than June 30, 2001 and all loans under the
Acquisition Credit Facility must be paid upon receipt by the Company of the
proceeds of this Offering if such 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 Credit 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
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<PAGE> 57
agreements. In addition, the Credit Agreement requires the Company to invest
additional equity in 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 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> 58
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 million shares of common stock, par
value $0.01 per share (the "Common Stock"), and five million shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"), and 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 Company intends to apply for quotation and trading of the
Common Stock 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 ($9,900,000), 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 $ 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
shares of Common Stock, shares after the stock split (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
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<PAGE> 59
Common Stock in the Offering (the "Redemption," and together with the
Reclassification and Stock Split, the "Recapitalization").
COMMON STOCK
Following the Recapitalization and immediately prior to consummation of the
Offering, there will be shares of Common Stock outstanding held by 27
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. 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 will require that special meetings of the
stockholders of the Company be called only by a majority of the Board or by
certain officers. These provisions
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<PAGE> 60
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 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 has approved 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 -- Certain
Charter, By-Laws and Statutory Anti-Takeover 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. In addition, the Amended and Restated Certificate of Incorporation provides
that the Company shall indemnify directors and officers of the Company to the
fullest extent permitted by such law. 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.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock will be First Chicago
NBD.
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<PAGE> 61
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of the Offering, shares of Common Stock will be
outstanding ( if the Underwriters' over-allotment option is exercised
in full). The shares of Common Stock sold in the Offering (plus up to
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 1.0 million 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 2.5 million shares of Common Stock by the Company for use
as consideration in further acquisitions), without the prior written consent of
Robertson Stephens & Company, 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) one percent of the outstanding
Common Stock (approximately shares of Common Stock immediately after the
Offering or 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. The existence of the Registration
Agreement and the perception that such 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 "Certain Relationships and Related Transactions -- Registration
Agreement."
Promptly after consummation of the Offering, the Company expects to file
with the Commission a registration statement on Form S-8 covering up to 1.0
million shares of Common Stock with respect to
59
<PAGE> 62
the 1995 Stock Option Plan and a registration statement covering up to 2.5
million 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."
60
<PAGE> 63
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.........................................................
==========
</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
additional shares of Common Stock at the same price per share as the
Company will receive for the 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 shares offered hereby. If purchased, such
additional shares will be sold by the Underwriters on the same terms as those on
which the 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,
until 180 days after the date of this Prospectus, 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 180
days after the date of this Prospectus, 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.
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,
61
<PAGE> 64
the net revenues and results of operations of the Company in recent periods,
market valuations of 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, and for the Underwriters by Winston & Strawn,
Chicago, Illinois.
EXPERTS
The consolidated financial statements and financial statement schedules 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 public 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.
62
<PAGE> 65
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION, FINANCIAL STATEMENTS, AND
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LASON HOLDINGS, 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 HOLDINGS, INC.
Report of Independent Accountants.................................................. F-14
Consolidated Balance Sheets as of December 31, 1995 and June 30, 1996
(Unaudited)..................................................................... F-15
Consolidated Statements of Income for the year ended December 31, 1995 and for the
six months ended June 30, 1995 and 1996 (Unaudited)............................. F-16
Consolidated Statements of Stockholders' Equity for the year ended December 31,
1995 and for the six months ended June 30, 1996 (Unaudited)..................... F-17
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-18
Notes to Consolidated Financial Statements......................................... F-19
LASON SYSTEMS, INC.
Report of Independent Accountants.................................................. F-27
Balance Sheet as of December 31, 1994.............................................. F-28
Statements of Income for the years ended December 31, 1993 and 1994................ F-29
Statements of Stockholders' Equity for the years ended December 31, 1993 and
1994............................................................................ F-30
Statements of Cash Flows for the years ended December 31, 1993 and 1994............ F-31
Notes to Financial Statements...................................................... F-32
GREAT LAKES MICROGRAPHICS CORPORATION
Report of Independent Accountants.................................................. F-35
Balance Sheets as of December 31, 1995 and June 30, 1996 (Unaudited)............... F-36
Statements of Income for the year ended December 31, 1995 and for the six months
ended June 30, 1995 and 1996 (Unaudited)........................................ F-37
Statements of Stockholders' Equity for the year ended December 31, 1995 and for the
six months ended June 30, 1996 (Unaudited)...................................... F-38
Statements of Cash Flows for the year ended December 31, 1995 and for the six
months ended June 30, 1995 and 1996 (Unaudited)................................. F-39
Notes to Financial Statements...................................................... F-40
NATIONAL REPRODUCTIONS CORPORATION
Report of Independent Accountants.................................................. F-42
Balance Sheets as of December 31, 1994 and 1995 and June 30, 1996 (Unaudited)...... F-43
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-44
Statements of Stockholders' Equity for the years ended December 31, 1994 and 1995
and for the six months ended June 30, 1996 (Unaudited).......................... F-45
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-46
Notes to Financial Statements...................................................... F-47
</TABLE>
F-1
<PAGE> 66
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> 67
LASON HOLDINGS, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
AS ADJUSTED
LASON ACQUISITIONS(1) ADJUSTMENTS LASON
------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets.......................... $15,819 $ 4,745 $ 628 D $ 21,192
Property, plant and equipment, net...... 3,278 2,116 (61)F 5,333
Goodwill, net........................... 18,272 134 16,873 A 35,279
Other assets............................ 3,315 302 (414)E,F 3,203
------- ------- ------- --------
Total assets.......................... $40,684 $ 7,297 $17,026 $ 65,007
======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion, long term debt......... $ 2,000 $ 1,325 $(2,000)B $ 1,325
Other current liabilities............... 8,028 2,575 900 B 11,503
------- ------- ------- --------
Total current liabilities............. 10,028 3,900 (1,100) 12,828
Long term debt, less current portion.... 19,146 928 (7,114)B 12,960
Minority interest and other............. 402 -- 159 C 561
------- ------- ------- --------
Total liabilities..................... 29,576 4,828 (8,055) 26,349
Common stock with a put option.......... -- -- 1,060 B 1,060
Common stock............................ 50 35 (33)B 52
Additional paid in capital.............. 8,622 10 26,072 B 34,704
Loans to stockholders................... (628) (123) 751 D --
Retained earnings....................... 3,064 2,547 (2,769)B,E 2,842
------- ------- ------- --------
Total stockholders' equity............ 11,108 2,469 24,021 37,598
------- ------- ------- --------
Total liabilities and stockholders'
equity............................. $40,684 $ 7,297 $17,026 $ 65,007
======= ======= ======= ========
</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> 68
SCHEDULE A
LASON HOLDINGS, 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> 69
LASON HOLDINGS, 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 administration expenses... 5,273 2,672 (319)G 7,626
Compensatory option expense.................... 167 -- (36)H 131
Amortization of intangibles.................... 379 6 246 I 631
------- ------- ------ -------
Income from operations......................... 3,574 711 109 4,394
Other income................................... 53 148 201
Interest expense............................... (885) (91) 377 J (599)
------- ------- ------ -------
Total other income (expense)................... (832) 57 377 (398)
Income before minority interest and provision
for income taxes............................. 2,742 768 486 3,996
Minority interest in net income of
subsidiary................................... (28) -- (28)M (56)
Provision for income taxes..................... (992) -- (434)K (1,426)
------- ------- ------ -------
Net income..................................... $ 1,722 $ 768 $ 24 $ 2,514
======= ======= ====== =======
Weighted average common and common equivalent
shares outstanding...........................
Pro forma primary and fully diluted earnings
per share.................................... $
=======
</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> 70
SCHEDULE B
LASON HOLDINGS, 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 administration 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> 71
LASON HOLDINGS, 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 administration
expenses................................... 9,406 5,805 (756) G 14,455
Compensatory option expense.................. 308 -- 668 H 976
Amortization of intangibles.................. 817 11 492 (I) 1,320
------ ------- ------
Income from operations..................... 4,847 544 (404) 4,987
Other income................................. 66 70 -- 136
Interest expense............................. (1,760) (177) 750 J (1,187)
------ ------- ------
Total other income (expense)............... (1,694) (107) 750 (1,051)
Income before provision
for income taxes........................... 3,153 437 346 3,936
Minority interest in net income of
subsidiary................................. -- -- (29)(M) (29)
Provision for income taxes................... (1,139) (11) (331) K (1,481)
------ ------- ------
Income before extraordinary loss............. 2,014 426 (14) 2,426
Loss due to early extinguishment of debt (net
of income tax effect of $156).............. -- -- (276)(L) (276)
------ ------- ------
Net income................................... $ 2,014 $ 426 $(290) $ 2,150
====== ======= ====== =======
Weighted average common and common equivalent
shares outstanding.........................
Pro forma primary and fully diluted earnings
per share.................................. $
=======
</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> 72
SCHEDULE C
LASON HOLDINGS, 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 administration 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> 73
LASON HOLDINGS, 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 Corporation ("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 $23.7 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 adjustments 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.
(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 price,
as illustrated below, may change upon final appraisal of the fair market value
of the net assets acquired.
F-9
<PAGE> 74
LASON HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
ACQUISITIONS COMPLETED SUBSEQUENT TO JUNE 30, 1996: (in millions)
<TABLE>
<S> <C>
Book value of net assets acquired................................................ $ 2.3
Allocation of purchase price in excess of acquired assets (Goodwill)............. 16.9
------
Assets of Acquisitions Completed Subsequent to June 30, 1996..................... $19.2
------
Plus: Liabilities assumed........................................................ 4.5
Total Purchase Price of Completed Acquisitions................................... $23.7
======
</TABLE>
The acquisitions completed subsequent to June 30, 1996 were financed using
approximately $16.0 million principally from long-term debt 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 $16.9 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> 75
LASON HOLDINGS, 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>
COMMON STOCK ADDITIONAL
CURRENT LONG-TERM WITH COMMON PAID IN RETAINED
LIABILITIES DEBT PUT OPTION STOCK CAPITAL EARNINGS
----------- --------- ------------ ------ ---------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Acquisition Entries
Estimate of additional acquisition
costs................................. $ 0.9
Debt of acquired companies not
assumed............................... $ (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.............. 15.6 $1.1 $ 1.2
Record promissory note issued in
conjunction with the acquisition of
NRC(1)................................ 0.4
----- ------ ---- ------ ------ -----
Total Acquisition Entries........... 0.9 15.7 $1.1 -- 1.2 (2.5)
----- ------ ---- ------ ------ -----
Use of Proceeds Entries
Estimated net proceeds(2)............... $ 36.5
Redemption of Common Stock and unpaid
yield(3).............................. (11.7)
Use of proceeds to repay debt issued to
finance acquisitions.................. $(2.0) (15.8)
Use of proceeds to repay other debt..... (7.0)
----- ------ ---- ------ ------ -----
Total Use of Proceeds Entries....... (2.0) (22.8) -- -- 24.8 0
----- ------ ---- ------ ------ -----
Total Adjustment.......................... $(1.1) $ (7.3) $1.1 -- $ 26.0 $ (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) The pro forma presentation assumes net proceeds from the Offering of $36.5
million.
(3) Redemption and retirement of Class B stock and unpaid yield.
(C) The pro forma adjustment to record the 20 percent minority
interest in Micro-Pro.
(D) The pro forma adjustment to settle the Lason $628,000 shareholder
loan to be received in cash by the Company. In addition, the pro forma
adjustment for the NRC $123,000 shareholder loan which will not be
purchased as part of the acquisition.
(E) Pro forma adjustment to eliminate $335,000 of deferred financing
costs, net of $113 deferred tax asset, which would have been written off
when the associated debt was extinguished using a portion of the proceeds
of the Offering.
(F) Pro Forma adjustment to reduce other assets by 192,000 and
property plant and equipment by 61,000 to eliminate assets of NRC which
will not be acquired.
F-11
<PAGE> 76
LASON HOLDINGS, 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:
(G) 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 $756,000 and $319,000,
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 new
employment agreements. Additional cost savings that the Company expects to
realize through integration of the Acquisitions into Lason operations have
not been included.
(H) Pro forma adjustment to adjust compensatory option expense for the
effects of accelerated vesting provisions which provide for immediate
vesting of unvested shares assuming the effective date of the Offering was
January 1, 1995.
(I) A pro forma adjustment for the year ended December 31, 1995 and
for the six months ended June 30, 1996 have been made to increase
depreciation and amortization by $556,000 and $278,000, respectively,
related to the fair market value of the assets acquired, as if the
Acquisitions had occurred as of January 1, 1995. Property and equipment are
depreciated over three to 50 years, and goodwill is amortized over 30
years. Such depreciation and 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.
(J) 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 $750,000 million and $377,000, respectively, on debt retired by
the Company using a portion of the estimated net proceeds of $36.5 million.
(K) 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 based on
the statutory tax rates then in effect. Additionally, the pro forma
adjustments have been tax effected at a 34% statutory rate.
F-12
<PAGE> 77
LASON HOLDINGS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONCLUDED
(L) Pro forma adjustment to write off $276,000 net of tax of deferred
financing costs as if the associated debt was extinguished using a portion
of the proceeds of the Offering on January 1, 1995.
(M) Pro forma adjustment to record the minority interest in net income
of Micro-Pro.
F-13
<PAGE> 78
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Lason Holdings, Inc.:
We have audited the accompanying consolidated balance sheet of Lason Holdings,
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 Holdings, 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 6, 1996
F-14
<PAGE> 79
LASON HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
JUNE 30,
1996
DEC. 31, -----------
1995
-------- (UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash........................................................................ $ 103 $ 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
Income tax refund receivable................................................ 649 206
Supplies.................................................................... 1,245 1,393
Prepaid expenses and other.................................................. 1,372 1,019
-------- --------
Total current assets.................................................... 14,459 15,819
PROPERTY AND EQUIPMENT:
Computer equipment and software............................................. 1,430 1,733
Production and office equipment............................................. 1,237 1,941
Leasehold improvements...................................................... 695 895
Other....................................................................... 124 173
-------- --------
3,486 4,742
Less accumulated depreciation and amortization.......................... (978) (1,464)
-------- --------
Net property and equipment.............................................. 2,508 3,278
Deferred income taxes....................................................... 2,817 2,706
Goodwill (net of accumulated amortization of $572 and $882 at
December 31, 1995 and June 30, 1996, respectively)........................ 16,848 18,272
Other intangibles (net of accumulated amortization of $105 and $173 at
December 31, 1995 and June 30, 1996, respectively)........................ 677 609
-------- --------
Total assets............................................................ $ 37,309 $40,684
======== ========
LIABILITIES
CURRENT LIABILITIES:
Cash Overdraft.............................................................. $ 230 $ 600
Current portion of long-term debt........................................... 2,000 2,000
Accounts payable to affiliates.............................................. 219 209
Accounts payable............................................................ 2,525 2,005
Customer deposits........................................................... 914 1,307
Accrued expenses............................................................ 2,254 1,822
Accrued copier expenses..................................................... 750 1,429
Deferred income taxes....................................................... 656 656
-------- --------
Total current liabilities............................................... 9,548 10,028
Long-term debt, less current portion........................................ 18,547 19,146
Minority interest and other................................................. -- 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..... 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.............................................................. -- --
Class B common stock, $.01 par value, 1,000,002 shares authorized, issued
and outstanding at December 31, 1995 and June 30, 1996.................... 10 10
Preferred stock, $.01 par value; 1,000,000 shares authorized, none issued
and outstanding at December 31, 1995 and June 30, 1996.................... -- --
Additional paid-in capital.................................................. 8,480 8,652
Loans to stockholders....................................................... (1,256) (628)
Retained earnings........................................................... 1,970 3,064
-------- --------
9,214 11,108
-------- --------
Total liabilities and stockholders' equity.............................. $ 37,309 $40,684
======== ========
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-15
<PAGE> 80
LASON HOLDINGS, 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................... $ .93 $ .73 $ .79
======== ======== ========
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.......... $ .72 $ .67 $ .60
======== ======== ========
Weighted average number of common and common share
equivalents.................................................. 2,171 2,151 2,187
======== ======== ========
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-16
<PAGE> 81
LASON HOLDINGS, 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 1,000,002 $ 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 -- -- 1,000,002 $ 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 -- 1,000,002 $ 10 $8,652 $ (628) $3,064 $11,108
======= ==== ===== == ========= ==== ====== ======== ====== =======
</TABLE>
The accompanying Notes are an integral part of the financial statements.
F-17
<PAGE> 82
LASON HOLDINGS, 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-18
<PAGE> 83
LASON HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
1. FORMATION AND ACQUISITION:
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 Holdings, 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-19
<PAGE> 84
LASON HOLDINGS, 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 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.
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-20
<PAGE> 85
LASON HOLDINGS, 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, and present the options granted in 1995 and 1996, as outstanding for
all periods presented using the treasury stock method.
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>
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
F-21
<PAGE> 86
LASON HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
5. STOCKHOLDER LOANS -- CONCLUDED
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, 1995) on $2,047. Revolving credit availability is
based on 85 percent of eligible accounts receivable.
F-22
<PAGE> 87
LASON HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
6. LONG-TERM DEBT -- CONCLUDED
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).
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 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>
F-23
<PAGE> 88
LASON HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
7. INCOME TAXES -- CONCLUDED
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, the Company 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 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.
F-24
<PAGE> 89
LASON HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
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 1,000,002 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 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.
F-25
<PAGE> 90
LASON HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
13. STOCK OPTION PLAN -- CONCLUDED
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>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30, 1996
DECEMBER 31, -------------
1995
------------ (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........................................ 573,011 508,011
======== ========
</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 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 $13,700, $10,300 of which was funded by bank borrowings and $2,300
through the issuance of common stock.
On August 6, 1996, the Company signed an agreement to acquire all the
common stock of National Reproductions Corporation for approximately $8,600,
which will be financed 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").
The Company intends to use approximately $11.7 million of the proceeds to
redeem a portion of its outstanding Common Stock and to repay debt with the
remaining proceeds.
F-26
<PAGE> 91
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-27
<PAGE> 92
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-28
<PAGE> 93
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-29
<PAGE> 94
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-30
<PAGE> 95
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-31
<PAGE> 96
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-32
<PAGE> 97
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-33
<PAGE> 98
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
Holdings, 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-34
<PAGE> 99
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Lason Holdings, Inc.:
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-35
<PAGE> 100
GREAT LAKES MICROGRAPHICS CORPORATION
BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ -----------
(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-36
<PAGE> 101
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-37
<PAGE> 102
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-38
<PAGE> 103
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-39
<PAGE> 104
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-40
<PAGE> 105
GREAT LAKES MICROGRAPHICS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(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 Holdings, Inc. The
purchase price of $5,300 was comprised of $4,240 in cash, with the remainder
payable in common stock of Lason Holdings, Inc.
F-41
<PAGE> 106
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
of National Reproductions Corporation:
We have audited the accompanying balance sheets of National Reproductions
Corporation 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
Corporations 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-42
<PAGE> 107
NATIONAL REPRODUCTIONS CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
JUNE 30,
1996
DEC 31, DEC 31, -----------
1994 1995
------- ------- (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-43
<PAGE> 108
NATIONAL REPRODUCTIONS CORPORATION
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-44
<PAGE> 109
NATIONAL REPRODUCTIONS CORPORATION
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-45
<PAGE> 110
NATIONAL REPRODUCTIONS CORPORATION
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-46
<PAGE> 111
NATIONAL REPRODUCTIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Organization and Business Purpose: National Reproductions Corporation
(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-47
<PAGE> 112
NATIONAL REPRODUCTIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --
CONTINUED
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. $760 $1,080
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............
NOTES PAYABLE -- BANK: The Company has a $175 note payable calling for -- 175
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....
---- ------
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-48
<PAGE> 113
NATIONAL REPRODUCTIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(IN THOUSANDS)
3. LONG-TERM DEBT -- CONTINUED
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-49
<PAGE> 114
NATIONAL REPRODUCTIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
(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 Holdings, Inc.,
for a purchase price of approximately $8,600.
F-50
<PAGE> 115
[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> 116
[LASON LOGO]
<PAGE> 117
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................. $16,854
National Association of Securities Dealers fee...................... 5,388
NASDAQ original listing fee......................................... 15,000
Blue sky fees and expenses (including attorneys' fees and
expenses)......................................................... *
Printing and engraving expenses..................................... *
Transfer agent's fees and expenses.................................. *
Accounting fees and expenses........................................ *
Legal fees and expenses............................................. *
Miscellaneous expenses.............................................. *
--------
Total.......................................................... *
========
</TABLE>
- ------------
* To be filed by amendment.
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.
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 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
II-1
<PAGE> 118
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> 119
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 $ ,
per share , , , , , , ,
, and 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 $ per share, and shares of
Class A Common Stock 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.
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 Corporation 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*
</TABLE>
II-3
<PAGE> 120
<TABLE>
<C> <S>
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
10.12 Employee Stock Option Agreement dated January 17, 1995 by and among the Company,
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 Amendment 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
</TABLE>
II-4
<PAGE> 121
<TABLE>
<C> <S>
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
21.1 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Kirkland & Ellis (to be included in opinion filed as Exhibit 5.1)*
24.1 Powers of Attorney (included on the signature page included in this Part II)
27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
(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> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Troy, State of Michigan
on August 8, 1996.
Lason Holdings, Inc.
By: /s/ GARY L. MONROE
--------------------------------------
Gary L. Monroe
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gary L. Monroe, Allen J. Nesbitt and William J.
Rauwerdink, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities (including his capacity as a director
and/or officer of Lason Holdings, Inc), to sign and file any and all amendments
(including post-effective amendments) to this Registration Statement, or any
registration statement relating to this offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with all exhibits thereto, and other documents in connection therewith
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
* * * *
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement and Power of Attorney have been signed on August 8, 1996,
by the following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- ------------------------------------------- ---------------------------------------------
<S> <C>
/s/ ROBERT A. YANOVER Chairman of the Board
- -------------------------------------------
Robert A. Yanover
/s/ GARY L. MONROE Chief Executive Officer (principal executive
- ------------------------------------------- officer) and Director
Gary L. Monroe
/s/ 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)
/s/ DONALD M. GLEKLEN Director
- -------------------------------------------
Donald M. Gleklen
/s/ BRUCE V. RAUNER Director
- -------------------------------------------
Bruce V. Rauner
/s/ JOSEPH P. NOLAN Director
- -------------------------------------------
Joseph P. Nolan
</TABLE>
II-6
<PAGE> 123
SCHEDULE I
LASON HOLDINGS, 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> 124
LASON HOLDINGS, 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> 125
LASON HOLDINGS, 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> 126
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
- ------- ------------------------------------------------------------------------------ -----
<S> <C> <C>
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 Corporation 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>
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<TABLE>
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EXHIBIT PAGE
NO. DESCRIPTION NO.
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<C> <S> <C>
10.12 Employee Stock Option Agreement dated January 17, 1995 by and among the
Company, 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 Amendment 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
21.1 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Kirkland & Ellis (to be included in opinion filed as Exhibit 5.1)*
24.1 Powers of Attorney (included on the signature page included in this Part II)
27.1 Financial Data Schedule
</TABLE>
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* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 29, 1995, between ADCOM
MAILERS, INC., a Michigan corporation ("Seller"), JOHN J. MORAD, SR. ("Morad")
and LASON SYSTEMS, INC., a Delaware corporation ("Buyer").
R E C I T A L S :
The following is a recital of the facts underlying this
Agreement:
A. Seller is engaged in the business of sorting mass
mailings by zip code through the use of electronic sorting devices (the "Zip
Plus Sorting Business") and the business of producing computer generated laser
printing (the "Laser Printing Business") (collectively, the "Zip Plus Sorting
Business" and the "Laser Printing Business" are sometimes referred to
collectively as the "Business"). The Business is conducted at 1150 Maplelawn,
Troy, Michigan 48084 (the "Premises").
B. Buyer desires to purchase, and Seller desires to sell
to Buyer, the assets of Seller used in connection with the Business pursuant to
the terms and subject to the conditions of this Agreement. Collectively,
those assets are more particularly described in Paragraph 1 hereof as the
"Purchased Assets."
C. Concurrent herewith, Lason is purchasing the assets
of Linkster Leasing, a Michigan co-partnership, of which Morad is a partner
pursuant to that certain Equipment Purchase Agreement of even date herewith
(the "EPA"). The assets of Linkster Leasing consist of the some of the
significant equipment needed for the operation of the Business.
D. As a further condition to Buyer's willingness to
purchase the Purchased Assets from Seller, Morad has agreed to provide certain
consulting services to Buyer pursuant to a Consulting Agreement in the form
attached as Schedule 5.1 (the "Consulting Agreement"). In addition, because
(i) Morad is an integral member of Seller's management team actively
participating in the operation of the Business, (ii) Morad will receive a
substantial economic benefit from Buyer's purchase of the Purchased Assets and
the Linkster Leasing assets and from the Consulting Agreement, and (iii) the
Agreement, the EPA and the Consulting Agreement are interconnected and
interdependent, as a material inducement to Buyer to purchase the Purchased
Assets from Seller, Morad is joining in this Agreement as a party fully bound
and liable to the full extent of his personal assets for all loss or damage of
whatsoever type or kind (including attorney fees) suffered by Buyer as a result
of a breach of each and every representation, warranty, covenant, agreement and
indemnification.
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<PAGE> 2
A G R E E M E N T S :
NOW, THEREFORE, in consideration of the above-recitals and the
terms and conditions set forth in this Agreement, and for other valuable
consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, Seller, Morad and Buyer agree as follows:
1. PURCHASE AND SALE OF ASSETS
1. ASSETS PURCHASED. Seller hereby sells, assigns,
conveys, transfers, sets over, and delivers to Buyer all of the Seller's right,
title and interest in and to the following assets (the "Purchased Assets"):
1.1 All equipment which is used by Seller in
connection with the Business, which equipment is listed on Schedule
1.1 (the "Equipment").
1.2 All rights under contracts between Seller and
any third party (including Linkster Leasing) relating to the Business
(including, without limitation, maintenance agreements with respect to
the Equipment), and contracts to provide services to Blue Cross/Blue
Shield of Michigan ("BCBS"), First of America Bank ("FOA"), Allnet
Communication Services, Inc. ("Allnet"), and NBD Bank, N.A. (the
"Contracts"), which Contracts are listed on Schedule 1.2. True and
correct copies of the maintenance agreement and Seller's currently in
effect contracts with BCBS and Allnet are attached hereto as part of
Schedule 1.2.
1.3 All Seller's right, title, benefit, and
interest in and to, direct or indirect ownership, license, use,
control (in whole or in part) of, inventions, discoveries,
improvements, designs, prototypes, trade secrets, trademarks,
copyrights, patents, software, software enhancements, manufacturing
and engineering drawings, process sheets, specifications, bills of
material, formulae and secret and confidential processes, know-how,
technology, and other industrial property (whether patentable or
unpatentable) related to or, in any way, used in connection with the
Business (the "Intellectual Property"), which Intellectual Property is
listed on Schedule 1.3.
1.4 The full benefit of any and all purchase
orders placed with and accepted by Seller on or before the date hereof
that have not been completely performed or filled before the date
hereof, covering the purchase from Seller of services to be supplied
by Seller, and including all deposits, progress payments, and credits,
relating to the Business (the "Commitments"), which Commitments are
listed on Schedule 1.4.
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<PAGE> 3
1.5 All records and lists that pertain directly
or indirectly, in whole or in part, to any one or more of the
following: Seller's customers, suppliers, advertising, promotional
material, sales, services, delivery, internal organization, employees,
and/or operations, as relate to the Business.
1.6 All security deposits, prepaid expenses, and
similar items relating to the Business and/or the Purchased Assets.
1.7 All transferable local, state, and federal
franchises, licenses, bonds, permits, and similar items pertaining to
the Business and/or the Purchased Assets.
1.8 Any goodwill associated with the Business.
1.9 All raw materials of Seller related to or, in
any way, used in connection with the Business and/or the Purchased
Assets.
Notwithstanding anything to the contrary set forth herein, the following assets
of Seller are expressly excluded from this transaction and are to be retained
by Seller:
(a) All accounts receivable.
(b) All cash, cash equivalents and
amounts held on deposit in any savings, checking,
money market or other account.
2. TEMPORARY USE OF PREMISES
2.1 TEMPORARY USE OF PREMISES. Immediately following the
closing contemplated herein, Buyer, in connection with operation of the Zip
Plus Business as it is currently conducted, shall be entitled to use the
approximate 8,153 square feet of the Premises currently used for the Zip Plus
Sorting Business on a month-to-month basis until Buyer provides Seller with
notice that it intends to vacate Premises, for a total gross rent of $7,543.00
per month (which rental payment includes a portion of Seller's lease payments,
utilities, and personal property taxes).
3. LIABILITIES ASSUMED
3.1 NO ASSUMPTION, EXCEPT MAINTENANCE AGREEMENT. Seller
acknowledges and agrees that Buyer assumes no liabilities of Seller whatsoever,
whether accrued, absolute, contingent, known, unknown, or otherwise, EXCEPT for
those obligations of Seller under that certain Full Coverage Preventive
Maintenance Agreement between Bell & Howell Phillipsburg Company and Seller
dated March 29, 1995 relating to the two Bell & Howell Jetstar 3000 Multiline
OCR Mail Sorters, Serial Nos. 096-091263 and 096-083475 (the "Bell & Howell
Maintenance Agreement"), and which obligations relate to time
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<PAGE> 4
periods commencing on or after the date of this Agreement (the "Assumed
Liabilities"). Seller remains obligated for all obligations under the Bell &
Howell Maintenance Agreement from commencement of the Bell & Howell Maintenance
Agreement to the date of this Agreement.
4. PURCHASE PRICE FOR PURCHASED ASSETS
4.1 THE PURCHASE PRICE. The purchase price paid by Buyer
to Seller for the Purchased Assets (the "Purchase Price") shall, in addition to
the Assumed Liabilities, be Six Hundred Fifty Thousand ($650,000) Dollars.
4.2 PAYMENT OF PURCHASE PRICE. Buyer shall pay the
Purchase Price concurrent herewith as follows:
(a) First, Buyer may, at closing, use so much of the
Purchase Price as is necessary to pay in full any
liens or encumbrances upon any of the Purchased
Assets, to pay all amounts owing under the Bell &
Howell Maintenance Agreement, to pay Buyer all
amounts owing Buyer for maintenance of the two Xerox
9790 Laser Printers with Tape Controller Units, and
to set aside $49,000 for certain liabilities of
Seller.
(b) The balance of the Purchase Price shall be wire
transferred to the account of Seller.
4.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price
shall be allocated among the Purchased Assets in accordance with attached
Schedule 4.3. Buyer and Seller agree to file duplicate IRS Forms 8594, with an
allocation of the Purchase Price in accordance with this Section 4.3, and to
file all other returns and reports in a manner consistent with the allocations
in this Section.
5. COVENANTS
5.1 CONSULTING AGREEMENT. Concurrent herewith, Morad
shall execute and deliver to Buyer the Consulting Agreement in the form of the
attached Schedule 5.1.
5.2 DELIVERY FREE OF ENCUMBRANCES. Seller shall deliver
good title to the Purchased Assets free and clear of all mortgages, liens,
claims, demands, charges, options, equity interests, leases, tenancies,
easements, pledges, security interests, and other encumbrances
("Encumbrances"). Without limiting the foregoing, Seller acknowledges and
agrees that, by the execution hereof, any equipment lease it has with Linkster
Leasing with respect to the Equipment as defined in the EPA is hereby
terminated.
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<PAGE> 5
6. CLOSING MATTERS
6.1 DOCUMENTS TO BE DELIVERED AT CLOSING. The following
documents shall be delivered by Seller (or applicable third parties) to Buyer
concurrent herewith (it being agreed that delivery of all of the foregoing in
form and content satisfactory to Buyer shall be a condition precedent to
Buyer's obligation to close hereunder):
6.1.1 INSTRUMENTS OF TRANSFER, ETC. Seller shall
deliver to Buyer all bills of sale, general instruments of transfer,
conveyances, assurances, transfers, assignments, approvals, consents,
and any other instruments and documents containing the usual and
customary covenants and warranties of title that are consistent with
the requirements of Section 5.2 and that shall be convenient,
necessary, or reasonably required by Buyer to effectively transfer the
Purchased Assets to Buyer with good title, free and clear of all
Encumbrances, in the form of the attached Schedule 6.1.1.
6.1.2 LIEN AND LITIGATION SEARCHES. Buyer shall
receive UCC lien searches and litigation searches in form and content
satisfactory to Buyer.
6.1.3 CONSENTS. Buyer shall receive, in writing, all
consents and estoppels relating to the Business and/or the Purchased
Assets necessary or desirable to consummate or to facilitate
consummation of this Agreement and any related transactions. With
respect to the Bell & Howell Maintenance Agreement, Buyer shall
provide Seller prior to closing with the consent to the assignment and
an estoppel (in the form attached hereto as Schedule 6.1.3.a). In
addition, with respect to BCBS, Allnet, and FOA, Seller shall obtain
prior to closing, with each entity, either a consent to the assignment
of Seller's contract with such entity (in the form attached hereto as
Schedule 6.1.3.b), or a new contract between such entity and Lason.
The new contracts will be (i) on the same or better terms and
conditions, and for the same remaining duration, as the current
written contracts with BCBS and Allnet, and (ii) for a 3-year term
with FOA. If, with respect to each entity, Seller, despite its best
efforts, does not provide Buyer with such a consent or new contract,
Seller shall bill any of the foregoing customers for work performed by
Buyer under the name "Adcom Mailers, Inc." with instructions to
forward all payments to the lockbox number and address provided to
Seller by Buyer. Additionally, Buyer will be entitled to a setoff
against Morad's compensation under the Consulting Agreement in the
event that work from BCBS, Allnet, and FOA does not continue at the
certain levels set forth in the Consulting Agreement.
6.1.4 OTHER DOCUMENTS AND INSTRUMENTS. Buyer shall
receive from Seller at closing such other documents and instruments
relating to the Buyer as it reasonably requests.
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<PAGE> 6
6.1.5 APPROVALS BY BUYER'S COUNSEL. Buyer's counsel
shall reasonably approve all legal matters and the form and substance
of all documents that Buyer or Seller is to deliver at the Closing.
6.1.6 OPINION OF COUNSEL. An opinion of Valenti,
Bolger & Gorcyca, legal counsel for the Seller, with respect to the matters set
forth in Schedule 6.1.6 addressed to the Buyer, which opinion will be dated the
Closing Date and will be in form satisfactory to Buyer's legal counsel.
6.1.7 RESOLUTION. A copy of the resolution duly
adopted by the Seller's Board of Directors and stockholders authorizing the
Seller's execution, delivery, and performance of this Agreement and the
consummation of the sale of the Purchased Assets and all other transactions
contemplated by this Agreement, as in effect as of the date of closing,
certified by an officer of the Seller.
6.2 CERTAIN CLOSING EXPENSES; PRORATIONS. Seller shall
be liable for any charges properly payable on and in connection with Seller's
conveyance and transfer of the Purchased Assets to Buyer (but not for Buyer's
costs of moving the Equipment to Buyer's place of business). Maintenance
agreement fees on the maintenance agreement assumed by Buyer shall be prorated
ratably as of the date hereof. Such proration shall be computed and paid
concurrent herewith.
6.3 FURTHER ASSURANCES. Seller and Morad shall cooperate
with and assist Buyer with the sale of the Purchased Assets under this
Agreement and shall take all other reasonable actions to assure that the
Purchased Assets and the Business are smoothly transferred to Buyer. In the
event that a document of sale or transfer is required by Buyer and was not
obtained at closing, from time to time after the Closing Date, Seller and Morad
shall, at the request of Buyer, execute and deliver such additional
conveyances, transfers, documents, instruments, assignments, applications,
certifications, papers, and other assurances to effectively carry out the
intent of this Agreement and to sell and transfer the Purchased Assets and the
Business to Buyer.
7. SELLER'S AND MORAD'S REPRESENTATIONS AND WARRANTIES
Seller and Morad, jointly and severally, represent and warrant
the following to Buyer (and acknowledge and confirm that Buyer is relying on
these representations and warranties in entering into this Agreement and that
full, fair, and adequate consideration as described in this Agreement has been
received therefor):
7.1 RECITALS ACCURATE. The above recitals are accurate.
7.2 ORGANIZATION AND STANDING. Seller is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Michigan, and Seller has all requisite power and authority (corporate
and otherwise) to own its properties and
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<PAGE> 7
conduct its business as it is now being conducted. The nature of the Business
and the character of the Purchased Assets Seller owns or leases do not make the
licensing or qualification of Seller as a foreign corporation necessary under
the laws of any other jurisdiction. Seller has not used or assumed any other
name in connection with the conduct of its business during the last five years.
7.3 AUTHORIZATION. Seller has all requisite power and
authority, (a) to execute, deliver, and perform this Agreement, and (b) to
consummate the transactions contemplated under this Agreement. Seller has
taken all necessary corporate action (including the approval of its board of
directors and shareholders) to approve the execution, delivery, and performance
of this Agreement and the consummation of the transactions contemplated in this
Agreement. This Agreement is the legal, valid, and binding obligation of
Seller, enforceable against it in accordance with the Agreement's particular
terms.
7.4 EXISTING AGREEMENTS AND GOVERNMENTAL APPROVALS.
(a) The execution, delivery, and performance of this
Agreement and the consummation of the transactions
contemplated therein: (i) do not and will not violate
any provisions of law applicable to Seller, the
Business, or the Purchased Assets; (ii) do not and
will not conflict with, result in the breach or
termination of any provision of, or constitute a
default under (in each case whether with or without
the giving of notice or the lapse of time or both) of
Seller's Articles of Incorporation, Bylaws, or any
indenture, mortgage, lease, deed of trust, or other
instrument, contract, or agreement or any order,
judgment, arbitration award, or decree relating to
the Business to which Seller is a party or by which
Seller or any of the Purchased Assets are bound
(including, without limitation, Seller's contracts
with BCBS and Allnet; and (iii) do not and will not
result in the creation of any Encumbrance on the
Purchased Assets.
(b) Other than the consents of BCBS and Allnet, no
approval, authority, or consent of, or filing by
Seller with, or notification to, any federal, state,
or local court, authority, or governmental or
regulatory body or agency or any other corporation,
partnership, individual, or other entity is necessary
(i) to authorize the execution and delivery of this
Agreement by Seller, (ii) to authorize the
consummation of the transactions contemplated by this
Agreement by Seller, or (iii) to continue Buyer's use
and operation of the Purchased Assets after the date
hereof.
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<PAGE> 8
7.5 NO SUBSIDIARIES. Seller has no subsidiaries and does
not directly or indirectly own any interest or have any investment in any other
corporation, partnership, or other entity.
7.6 NO INSOLVENCY. No insolvency proceeding of any
character, including, without limitation, bankruptcy, receivership,
reorganization, composition, or arrangement with creditors, voluntary or
involuntary, affecting Seller or any of its assets or properties is pending or,
to the Best Knowledge of Seller, threatened. Seller has not taken any action
in contemplation of, or that would constitute the basis for, the institution of
any such insolvency proceedings. For the purposes of this Agreement, the
phrase "Best Knowledge" of Seller, or words of similar import, mean such
knowledge as any of the parties providing warranties hereunder would have after
due inquiry into the matter in question.
7.7 PERMITS AND LICENSES. Seller has all necessary
permits, certificates, licenses, approvals, consents, and other authorizations
required to carry on and conduct the Business and to own, lease, use, and
operate the Purchased Assets at the places and in the manner in which the
Business is conducted, all of which to the extent transferable shall be
transferred or assigned to Buyer concurrent herewith, without expense to Buyer.
7.8 FINANCIAL STATEMENTS. Seller has delivered to Buyer
certain financial information relative to the operation of the Business as
provided in Schedule 7.8 attached hereto and made a part hereof (the
"Financial Information"). The Financial Information fairly and accurately
presents Seller's financial position as of the dates indicated and the results
of its operations as of the dates indicated and for the periods covered
thereby, are true and correct in all material respects, and accurately and
fairly reflect Seller's Business for a typical period of time. There were no
items of income or expense in the Financial Information that are unusual or of
a nonrecurring nature. Seller's books, records, and work papers are complete
and correct; have been maintained on an accrual basis in accordance with GAAP;
and accurately reflect Seller's financial condition and the results of Seller's
operations.
7.9 NO UNDISCLOSED LIABILITIES. Except with respect to
liens on certain of the Equipment as defined in the EPA held by Citizens Bank
and First of America Bank, respectively, and used by Seller with respect to the
Business, and the liabilities described in Sections 3.1 and 4.2 above, there
are no other liabilities related to the Business and/or the Purchased Assets
whether accrued, absolute, contingent, or otherwise which are the
responsibility and obligation of Seller but which will become the
responsibility or obligation of Buyer (including all applicable taxes (federal,
state, and local) and any postage deposits), and there exists no fact or
circumstance that could give rise to any such liabilities or obligations in the
future.
7.10 PURCHASED ASSETS AND CONTINUATION OF BUSINESS. The
Purchased Assets constitute less than 50% of Seller's total assets. Seller
intends to continue doing business (for in excess of six months) other than the
Business following the closing. Such other
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<PAGE> 9
business consists of offset printing, fulfillment and distribution and a
lettershop. Seller shall use Buyer exclusively for all of Seller's customers'
zip plus sorting and laser printing needs during the five years following the
date of this Agreement.
7.11 CONDUCT OF BUSINESS. As relates to the Business,
since the date on which Buyer's due diligence review of the Seller began,
Seller has not:
(a) Entered into, materially amended, or terminated any
contract, license, lease, commitment, or permit.
(b) Experienced any labor disturbance.
(c) Incurred or become subject to any obligation or
liability (absolute, accrued, contingent, or
otherwise), except in the ordinary course of business
consistent with past practices.
(d) Mortgaged, pledged, or subjected any of the Purchased
Assets to any Encumbrance.
(e) Sold, transferred, or agreed to sell or transfer any
asset, property, or business; cancelled or agreed to
cancel any debt or claim; or waived any right.
(f) Disposed of or permitted to lapse any Intellectual
Property.
(g) Experienced any material damage, destruction, or loss
(whether or not covered by insurance) affecting its
properties, assets, or Business.
(h) Failed to regularly maintain or repair the Purchased
Assets.
(i) Entered into any other transaction other than in the
ordinary course of business consistent with past
practices.
(j) Agreed or committed to do any of the foregoing.
7.12 NO ADVERSE CHANGES. With respect to the Business,
since the date in which Buyer's due diligence review of Seller began, there has
not been any occurrence, condition, or development that has adversely affected,
or is likely to adversely affect, Seller, its prospects, its condition
(financial or otherwise), its affairs, its operations, or the Purchased Assets.
7.13 EMPLOYEE BENEFIT PLANS. Seller does not maintain or
offer any pension plan or welfare benefit plan as those terms are defined in
the Employee Retirement Income Security Act ("ERISA").
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<PAGE> 10
7.14 MATERIAL CONTRACTS. Except for the Contracts and
Commitments listed in Schedules 1.2 and 1.4, Seller is not a party to nor bound
by any agreement or commitment that affects the Business, the Purchased Assets,
or the Assumed Liabilities. All Contracts and Commitments are valid and
binding obligations of the parties thereto in accordance with their respective
terms. No default or alleged default exists on the part of Seller, nor, to the
Best Knowledge of Seller and Morad, on the part of any other party, under any
of the Contracts and Commitments. True and complete copies of all Contracts
and Commitments have been delivered to Buyer.
7.15 TITLE TO PURCHASED ASSETS. Seller is the sole and
absolute owner of the Purchased Assets and has good title to all of the
Purchased Assets, free and clear of any and all Encumbrances, except as set
forth in Schedule 7.14 hereof. Any property which is used in the conduct of
the Business which is owned by (or in which an interest is claimed) by any
other person (whether a customer, supplier, or other person) is listed on
Schedule 7.14 together with copies of all related agreements. All such
property is situated on the Premises and is in such condition that upon return
to its owner, Buyer will not be liable in any amount to the owner.
7.16 CONDITION OF PURCHASED ASSETS. The Equipment is in
good working order and repair. Each item of Equipment is situated at the
Premises and is fit for its intended purpose, with no material defects.
7.17 SUFFICIENCY OF PURCHASED ASSETS. The Purchased
Assets constitute all the property and assets, real, personal, and mixed,
tangible and intangible (including, without limitation, contract rights), that
are used or are useful in, or are necessary for the conduct of, the Business in
accordance with present practices.
7.18 TAXES.
(a) For the purposes of this Agreement, Tax or Taxes
shall mean all federal, state, county, local, and
other taxes (including, without limitation, income
taxes; premium taxes; single-business taxes; excise
taxes; sales taxes; use taxes; value-added taxes;
gross receipts taxes; franchise taxes; ad valorem
taxes; severance taxes; capital levy taxes; transfer
taxes; stamp taxes; employment, unemployment, and
payroll-related taxes; withholding taxes; and
governmental charges and assessments), and includes
interest, additions to tax, and penalties.
(b) Seller has filed on a timely basis all Tax returns it
is required to file under federal, state, or local
law and has paid or established an adequate reserve
with respect to all Taxes for the periods covered by
such returns. No agreements have been made by or on
behalf of Seller for any waiver or for the extension
of any statute of limitations
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governing the time of assessment or collection of any
Taxes. Seller and its officers have received
no notice of any pending or threatened audit by the
IRS or any state or local agency related to Seller's
Tax returns or Tax liability for any period, and no
claim for assessment or collection of Taxes has been
asserted against Seller. There are no federal, state,
or local tax liens outstanding against any of
Seller's assets (including, without limitation, the
Purchased Assets) or the Business. The sale of the
Business and the transfer of the Purchased Assets
will not result in the imposition of any Tax against
Buyer for the operations of the Business and use of
the Purchased Assets prior to the sale of the
Business and transfer of the Purchased Assets to
Buyer.
(c) Until Buyer removes the Equipment (including the
Equipment defined in the EPA) from the Premises,
Seller shall be solely responsible for, and shall
pay, all of the personal property taxes on such
Equipment (including the Equipment as defined in the
EPA).
7.19 LITIGATION. There are no claims, disputes, actions,
suits, proceedings, or investigations pending or, to the Best Knowledge of the
Seller or Morad, threatened against or directly affecting Seller, the Business,
or the Purchased Assets, except as previously disclosed to Buyer.
7.20 COMPLIANCE WITH LAWS. At all times prior to the date
hereof, Seller has complied with all laws, orders, regulations, rules, decrees,
and ordinances affecting to any extent or in any manner all aspects of the
Business or the Purchased Assets.
7.21 SUPPLIERS AND CUSTOMERS.
(a) A complete and accurate list of Seller's suppliers
and customers in connection with the Business and the
address of each customer and supplier and the amount
each customer purchased from Seller during the last
fiscal year as relates to the Business is set forth
in Schedule 7.21.
(b) Seller has no information that might reasonably
indicate that any customer of Seller intends to cease
purchasing from, selling to, or dealing with Seller
or any supplier intends to cease supplying Seller.
No information has been brought to Seller's attention
that might reasonably lead Seller to believe that any
customer intends to alter, in any material respect,
the amount of its purchases or the extent of its
dealings with Seller, or would alter in any material
respect its purchases from, or dealings with Buyer in
the event that the transactions contemplated by this
Agreement are consummated. No
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information has been brought to Seller's attention
that might reasonably lead Seller to believe that any
supplier intends to alter, the amount it supplies to,
or the extent of its dealings with Seller, or would
alter in any material respect the amount it supplies
to or dealings with Buyer in the event that the
transactions contemplated by this Agreement are
consummated.
7.22 PROGRESS PAYMENTS. Attached Schedule 7.22 contains a
true and complete list and description of all security deposits, progress
payments, and the like that Seller has received relating in any way to any
purchase orders, leases, or other agreements that are part of the Purchased
Assets.
7.23 NO BROKERS. Seller has not engaged, and is not
responsible for any payment to, any finder, broker, or consultant in connection
with the transactions contemplated by this Agreement.
7.24 NO COMMISSIONS. With respect to the Business, no
commissions or payments of any type or kind have been made to, or are necessary
to maintain the volume of business with, BCBS, Allnet, or FOA, or are necessary
to maintain the relationships with, BCBS, Allnet, or FOA, or any of their
respective employees.
7.25 INTELLECTUAL PROPERTY. Schedule 1.3 lists all
Intellectual Property of the Seller that Seller directly or indirectly owns,
licenses, uses, requires for use, or controls in whole or in part and all
licenses and other agreements allowing Seller to use the intellectual property
of third parties. Seller does not own, directly or indirectly, or use any
patents, copyrights, trademarks, or service marks in the Business. None of the
Seller's Intellectual Property infringes on any other person's intellectual
property, and, to the Best Knowledge of the Seller or Morad, no activity of any
other person infringes on any of the Intellectual Property. The Seller has
been and is now conducting the Business in a manner that has not been and is
not now in violation of any other person's intellectual property or proprietary
rights, and the sale and transfer of the Business and the Purchased Assets will
not violate any other person's intellectual property or proprietary rights.
Seller does not require a license or other proprietary right to so operate the
Business and the Purchased Assets.
7.26 NO SUCCESSOR LIABILITY. Seller has had no
relationship whatsoever with Adcom, Inc., a Michigan corporation, which could
conceivably cause a claim to be made against Seller and/or Buyer for successor
liability for the debts of Adcom, Inc., which company is currently involved in
an involuntary Chapter 7 bankruptcy proceeding in the United States District
Court for the Eastern District of Michigan. The complete schedule of
liabilities of Adcom, Inc. as of the date hereof are set forth in attached
Schedule 7.26. The companies, entities and individuals identified with an
asterisk in Schedule 7.26 are related to, affiliated with or controlled by
Seller and/or Morad, and will not bring a claim against Buyer directly or
indirectly for successor liability or any similar type of claim.
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7.27 ENVIRONMENTAL MATTERS. Since the date on which
Seller (or Morad, or any person, trust, corporation or other entity related to
or affiliated with Seller or Morad) first acquired an ownership, leasehold or
other possessory interest in the Premises, there has been no release or
discharge of any Hazardous Material (as defined below) on or under the Premises
or, to the Best Knowledge of Seller or Morad, in the vicinity thereof, and,
neither Seller nor Morad have received any notice of and have no actual
knowledge of any such release or discharge prior to the date of this Agreement.
Additionally, Seller and Morad have received no notice of any investigation or
other action taken or to be taken by any federal, state, or local government
unit in regard to the Premises pursuant to the Environmental Laws (as defined
below). For purposes of this Agreement, the term "Hazardous Materials" shall
mean any hazardous, toxic or radioactive substance, material, matter, or waste
that is or that becomes regulated by or pursuant to any federal, state, or
local law, ordinance, order, rule, regulation, code or any other governmental
restriction or requirement, and shall include, but is not limited to, asbestos;
petroleum products; "Hazardous Substance(s)" as defined in or under the
Comprehensive Environmental Response and Compensation Liability Act ("CERCLA"),
42 USC Section 9601 et seq., as amended now or at any time hereafter; and the
Part 207 of the National Resources and Environmental Protection Act, MCLA
324.2010 et seq., as amended now or at any time hereafter; and "Hazardous
Waste(s)" as defined in or under the Resource Conservation Recovery Act
("RCRA"), 42 USC Section 6901 et seq., as amended now or at any time hereafter;
the Michigan Hazardous Waste Management Act, MCL Section 299.50, et seq., as
amended now or any time thereafter. For purposes of this Agreement, the term
"Environmental Laws" shall mean the above-listed statutes and all other
federal, state, and local environmental legislation, and rules, orders, and the
regulations adopted and publications promulgated pursuant thereto.
8. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller that:
8.1 ORGANIZATION AND STANDING. Buyer is a corporation
duly organized and validly existing under the laws of the State of Delaware,
and Buyer has all the requisite power and authority (corporate and otherwise)
to own its properties and to conduct its business as it is now being conducted.
8.2 AUTHORIZATION. Buyer has taken all necessary
corporate action (a) to duly approve the execution, delivery, and performance
of this Agreement, and (b) to consummate any related transactions. Buyer has
duly executed and delivered this Agreement. This Agreement is a legal, valid,
and binding obligation of Buyer, enforceable against Buyer in accordance with
their respective terms.
8.3 DUE DILIGENCE. With respect to the Business, Buyer's
due diligence review of Seller did not reveal any occurrence, condition, or
development adversely affecting Seller.
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9. EMPLOYEES
9.1 RIGHT (BUT NO OBLIGATION) TO HIRE. Buyer shall have
no obligation to hire any of Seller's employees employed in the Business;
PROVIDED, HOWEVER, that Buyer shall be free to negotiate with and hire any of
Seller's employees employed in the Business, and Seller shall cooperate and
encourage such employees to accept employment with Buyer. Seller shall be
responsible and liable for any salary, wages, bonuses, commissions, accrued
vacations, or sick-leave time; profit sharing or pension benefits; and any
other compensation or benefits, as well as any actions or causes of action,
including, but not limited to, unemployment compensation claims and worker's
compensation claims and claims for race, age, and sex discrimination and sexual
harassment that any of such employees assert. Seller shall further be
responsible for all rights of Seller's employees under the Consolidated Omnibus
Budget Reconciliation Act of 1985 (COBRA). At the election of any of Seller's
employees employed in the Business that Buyer has hired, Seller shall fully
cooperate with Buyer in rolling over the account balances of any Profit Sharing
and 401(k) Plan maintained by Seller into Buyer's comparable plan.
10. POSTCLOSING
10.1 POSTCLOSING RECEIPTS. Seller will bill for all work
in process which is completed after closing on the Contracts and Commitments
and will immediately transfer to Buyer that amount of any payments which it
receives in connection with same which relate to work done after closing.
10.2 POSTCLOSING JOINT WORK. Seller and Buyer will do
work jointly for those certain customers listed on Schedule 10.2 (the "Joint
Customers"). Seller and Buyer agree that Seller will bill the Joint Customers
for all such work and will promptly remit to Buyer all monies owed to it on a
basis to be agreed upon by Seller and Buyer.
10.3 SELLER'S POSTCLOSING WORK FOR BUYER. Buyer will do
certain work for Seller after closing. Such work will be done by Buyer for 1
1/2 cents per piece. Seller will promptly remit to Buyer all payments for
services rendered to Seller by Buyer. Seller agrees that Buyer will be the
exclusive source for Seller's customers zip plus sorting and laser printing
needs during the five years following the date of this Agreement.
10.4 POSTCLOSING DISMISSAL. Seller shall provide Buyer
with a true copy of the Dismissal with Prejudice of Employment Exchange, Inc.
v. Adcom, Inc., et. al., Oakland County Circuit Court, Case No. 94-475591-CZ.
11. NON-COMPETITION AND NON-SOLICITATION
A. Non-Competition. During the five years after the
date of this Agreement, Seller agrees that it will
not, anywhere within the United States or Canada,
directly or indirectly, as a member of a joint
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venture, partnership, limited liability company,
entity or firm, or as a shareholder of any
corporation, own, manage, control, participate in,
consult with, render services for, or in any manner
engage in, concerned with, or, otherwise be
affiliated in any manner (including as an investor in
or lender to any such entity or as an informal
"advisor"), with any business or commercial pursuit
engaged in the same or similar business as the
Business. "Engaging in such Business" within the
territory described above includes operating from an
office within such territory, or serving customers
who are located within such territory.
B. Non-Solicitation. Seller agrees that during the five
years after the date of this Agreement, it will not,
directly or indirectly, for itself or for any other
person, interfere or attempt to interfere with, or
seek to obtain, any existing contract (written or
oral) between Buyer and any of its customers.
Further, Seller agrees that it will not, at any time,
solicit, engage or hire for employment by Seller or
any other person or entity, any then-current employee
or consultant of Buyer, or any former employee or
consultant whose employment or engagement with Buyer
terminated within six (6) months of Seller's
solicitation or hire of such employee or consultant.
C. Remedies. Seller hereby acknowledges and agrees that
the restrictions set forth herein are fair and
reasonable and are reasonably required for the
protection of Buyer's legitimate business interests.
Further, Seller hereby acknowledges and agrees that
in the event of a breach (or attempted breach) of any
of the covenants contained in this Paragraph 11,
Buyer's damages will be substantial and difficult, if
not impossible, to ascertain, and money damages may
not afford adequate relief. Accordingly, Seller
hereby consents that, in the event of its breach (or
attempted breach) of any of the covenants contained
herein, upon application by Buyer to any court of
competent jurisdiction, such court shall grant Buyer
injunctive relief, both temporary and permanent, to
prevent or restrain such breach (or attempted breach)
by Seller, in addition to and any other remedy
available to Buyer. Seller further agrees that the
applicable time period for all restrictions under
this Agreement shall automatically be extended for a
period of time equal to the time that it is in breach
of any of the covenants herein. Seller also further
expressly agrees that although it considers the
covenants contained in this Paragraph 11 to be
reasonably necessary for the protection of Buyer, if
such covenants are found by a court of competent
jurisdiction to be unreasonable or too broad with
respect to the time period and/or the geographic area
designated, then such covenants
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shall be considered amended as to such time period
and/or geographic area as may be considered
reasonable by such court and as so amended, shall be
fully enforced.
D. For purposes of this Paragraph 11, Seller includes
any successor through merger or share exchange and
(any parent thereof) and any individual and/or entity
acquiring all or substantially all of the assets of
Seller not acquired by Buyer pursuant to this
Agreement.
12. INDEMNIFICATION
12.1 INDEMNITY. Seller and Morad, jointly and severally,
shall indemnify, and hold harmless, Buyer and its directors, officers,
shareholders, employees, agents, representatives, successors, and assigns (the
"Indemnitees") from and against (and pay, as and when incurred) any and all
costs, losses, claims, liabilities, fines, expenses, penalties, and damages
(including attorneys' fees) in connection with or resulting from:
12.2 All debts, liabilities, and obligations of Seller,
whether accrued, absolute, contingent, known, unknown, or otherwise, but
excluding any Assumed Liabilities.
12.3 Any misrepresentation or breach of any representation
or warranty or agreement of Seller and/or Morad contained in this Agreement or
any Schedule, exhibit or certificate hereto, including the Consulting
Agreement.
12.4 Any failure by either Seller or Morad to perform or
observe in full, or to have performed or observed in full, any covenant,
agreement, or condition to be performed or observed by the Seller under this
Agreement.
12.5 With respect to the defense of any third party
action, lawsuit, proceeding, investigation, or other claim (a "Proceeding"),
against or involving an Indemnitee in which the person bringing the Proceeding
seeks only the recovery of a sum of money for which indemnification is provided
hereunder, at its option, Seller and/or Morad may appoint lead counsel for such
defense; provided that in assuming control of such defense, Seller and Morad
are thereby agreeing to be fully responsible (with no reservation of any rights
other than the right to be subrogated to the rights of the Indemnitee) for all
costs, losses, liabilities, etc., relating to such Proceeding and
unconditionally guaranteeing the payment and performance of any liability or
obligation which may arise with respect to such Proceeding or the facts giving
rise to such claim for Indemnification.
12.6 The Indemnitee is entitled to participate in the
defense of any Proceeding, subject to Seller and/or Morad's right to control
the conduct of the defense and settlement of the related claim (subject to
Section 12.8 below), and to employ counsel
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of its choice for such purpose at its own expense (provided, however, that if
the Indemnitee gives Seller and/or Morad notice of the commencement of the
Proceeding in question and Seller and/or Morad do not assume the defense within
ten days after notification, then Seller and/or Morad will bear the reasonable
fees and expenses of such separate counsel incurred prior to the date upon
which Seller and/or Morad effectively assume control of such defense.
12.7 Notwithstanding the above, Seller and/or Morad will
not be entitled to assume control of the defense of a Proceeding, and will pay
the reasonable fees and expenses of legal counsel retained by Indemnitee, if
there exists an actual or potential conflict of interest which, under
applicable principles of legal ethics, could prohibit a single, legal counsel
from representing both Seller and/or Morad and the Indemnitee in such
Proceeding.
12.8 Seller and/or Morad must obtain the prior written
consent of the Indemnitee (which the Indemnitee will not unreasonably withhold)
prior to (A) entering into any settlement of any claim or Proceeding which
would require Seller and/or Morad to pay any amount or take or refrain from
taking any other action, or (B) ceasing to defend such claim or Proceeding.
12.9 By the execution of this Agreement, Morad
acknowledges that (i) he is directly indemnifying Indemnitee as provided above,
or (ii) if his indemnification is interpreted under Michigan laws as a
guarantee of the obligations of Seller, it is a complete and unconditional
guaranty of the obligations of Seller hereunder; and (iii) Indemnitee's claims
for indemnification may be set off against any and all amounts due and owing to
Morad under that certain Consulting Agreement of even date herewith. Nothing
hereunder shall prevent Morad from seeking contribution from Seller for any
indemnification paid by Morad to Indemnitee.
13. EXPENSES
13.1 EXPENSES. Each of the parties shall pay all of the
costs that it or he incurs incident to the preparation, execution, and delivery
of this Agreement and the performance of any related obligations, whether or
not the transactions contemplated by this Agreement shall be consummated.
14. MISCELLANEOUS PROVISIONS
14.1 REPRESENTATIONS AND WARRANTIES. All representations,
warranties, and agreements (including the indemnification, the non-compete and
the non-solicitation) made by the parties pursuant to this Agreement shall
survive the consummation of the transactions contemplated by this Agreement and
shall be binding notwithstanding any due diligence investigation by Buyer.
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14.2 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 following:
if to Seller or Morad: John J. Morad, Sr.
30600 Telegraph Road
Suite 3250
Bingham Farms, Michigan 48025
FAX: (810) 644-0019
if to Buyer: Lason Systems, Inc.
28400 Schoolcraft Road
Livonia, Michigan 48150
FAX: (313) 525-4619
Attention: Allen J. Nesbitt
or to such other address or facsimile number that the parties may
designate in writing.
14.3 ASSIGNMENT. Neither the Seller nor Buyer shall
assign this Agreement, or any interest in it, without the prior written consent
of the other, except that Buyer may assign any or all of its rights under this
Agreement to any subsidiary without Seller's consent.
14.4 PARTIES IN INTEREST. This Agreement shall inure to
the benefit of, and shall be binding on, the named parties and their respective
successors and permitted assigns, but not any other person.
14.5 CHOICE OF LAW. This Agreement shall be governed,
construed, and enforced in accordance with the laws of the State of Michigan.
14.6 COUNTERPARTS. This Agreement may be signed in any
number of counterparts with the same effect as if the signature on each
counterpart were on the same instrument.
14.7 ENTIRE AGREEMENT. This Agreement and all related
documents, schedules, exhibits, or certificates represent the entire
understanding and agreement between the parties with respect to the subject
matter and supersede all prior agreements or negotiations between the parties.
This Agreement may be amended, supplemented, or changed only by an agreement in
writing that makes specific reference to this Agreement or the agreement
delivered pursuant to it and that is signed by the party against whom
enforcement of any such amendment, supplement, or modification is sought.
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14.8 ARBITRATION. Any dispute between the parties
regarding any provision in this Agreement (except for the provisions in
Paragraph 11 allowing Buyer equitable relief, disputes over which shall be
resolved at the option of Buyer through court litigation and not arbitration)
shall be resolved by binding arbitration before the American Arbitration
Association in Southfield, Michigan according to its then applicable commercial
arbitration rules. Judgment upon the award of the arbitrators may be entered
by any court of competent jurisdiction. All of the costs of the arbitration
shall be borne by the losing party.
(signatures begin on next page)
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The parties have executed this Agreement on the date set forth on the
first page of this Agreement.
SELLER:
ADCOM MAILERS, INC., a Michigan corporation
By: J. Robert Langan
---------------------------------
J. Robert Langan
Its: President
LASON SYSTEMS, INC., a Delaware corporation
By: Allen J. Nesbitt
---------------------------------
Allen J. Nesbitt
Its: President
John J. Morad
-------------------------------------
JOHN J. MORAD, SR., Individually
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EQUIPMENT PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 29, 1995, between LINKSTER LEASING, a
Michigan co-partnership ("Seller"), JOHN J. MORAD, SR. ("Morad") and LASON
SYSTEMS, INC., a Delaware corporation ("Buyer").
R E C I T A L S :
The following is a recital of the facts underlying this Agreement:
A. Seller is an equipment lessor which owns the following assets:
2 Bell & Howell Jetstar 3000 Multi-line OCR Mail Sorters, Serial No.
096-083475 and Serial No. 096-091263;
2 Xerox 9790 LASER Printers with Tape Controller Units, Serial No.
X956-003000 and Serial No. X956-003581;
and accompanying software, trays, rigging, etc., all as more
particularly described in the contracts included in Schedule 1.2
attached hereto and made a part hereof.
(the "Equipment").
B. The Equipment is leased to Adcom Mailers, Inc., a Michigan corporation
("Mailers"), and is located at the premises of Mailers at 1150 Maplelawn, Troy,
Michigan 48084 (the "Premises"). The Equipment is used by Mailers in
connection with the business of sorting mass mailings by zip code through the
use of electronic sorting devices (the "Zip Plus Sorting Business") and the
business of producing computer generated laser printing (the "Laser Printing
Business") (collectively, the "Zip Plus Sorting Business" and the "Laser
Printing Business" are sometimes referred to collectively as the "Business").
C. Buyer desires to purchase, and Seller desires to sell to Buyer, the
Equipment pursuant to the terms and subject to the conditions of this
Agreement.
D. Concurrent herewith, Lason is purchasing the assets of Mailers used in
connection with the Business of which Morad is an integral part pursuant to
that certain Asset Purchase Agreement of even date herewith (the "APA").
E. As a further condition to Buyer's willingness to purchase the Equipment
from Seller, Morad has agreed to provide certain consulting services to Buyer
pursuant to a Consulting Agreement in the form attached as Schedule 4.1 (the
"Consulting
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Agreement"). In addition, because (i) Morad is a partner of Seller and is an
integral member of Mailers management team actively participating in the
operation of the Business, (ii) Morad will receive a substantial economic
benefit from Buyer's purchase of the Equipment from Seller and of the assets of
Mailers, and from the Consulting Agreement, and (iii) the Agreement, the APA
and the Consulting Agreement are interconnected and interdependent, as a
material inducement to Buyer to purchase the Equipment from Seller, Morad is
joining in this Agreement as a party fully bound and liable to the full extent
of his personal assets for each and every representation, warranty, covenant,
agreement and indemnification.
A G R E E M E N T S :
NOW, THEREFORE, in consideration of the above-recitals and the terms and
conditions set forth in this Agreement, and for other valuable consideration,
the receipt, adequacy and sufficiency of which is hereby acknowledged, Seller,
Morad and Buyer agree as follows:
1. PURCHASE AND SALE OF ASSETS
1. ASSETS PURCHASED. Seller hereby sells, assigns, conveys, transfers,
sets over, and delivers to Buyer all of the Seller's right, title and interest
in and to the following assets (the "Purchased Assets"):
1.1 The Equipment.
1.2 All rights under contracts between Seller and any third party
relating to the Equipment, (including, without limitation, that certain
Equipment Order Agreement between Bell & Howell Phillipsburg Company ("Bell &
Howell") and Seller dated September 25, 1991 (the "Bell & Howell Order
Agreement), that certain Agreement between Bell & Howell and Seller dated
July 13, 1993, that certain Sales Agreement between Laser Solutions, Inc. and
Seller dated August 26, 1993, and that certain Equipment Sale Agreement
between Bell & Howell and Seller (the "Contracts"), which Contracts are
listed on Schedule 1.2, attached hereto and made a part hereof. True and
correct copies of the agreements are attached hereto as part of Schedule 1.2.
1.3 All of Seller's right, title, benefit, and interest in and to,
direct or indirect ownership, license, use, control (in whole or in part) of,
inventions, discoveries, improvements, designs, prototypes, trade secrets,
patents, trademarks, copyrights, software, software enhancements,
manufacturing and engineering drawings, process sheets, specifications, bills
of material, formulae and secret and confidential processes, know-how,
technology, and other industrial property (whether patentable or
unpatentable) related to or, in any way, used in connection
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with the Equipment (the "Intellectual Property"), which Intellectual Property
is listed on Schedule 1.3.
2. LIABILITIES ASSUMED
2.1 NO ASSUMPTION. Seller acknowledges and agrees that Buyer assumes
no liabilities of Seller whatsoever, whether accrued, absolute, contingent,
known, unknown, or otherwise.
3. PURCHASE PRICE FOR PURCHASED ASSETS
3.1 THE PURCHASE PRICE. The purchase price paid by Buyer to Seller for
the Purchased Assets (the "Purchase Price") shall be Seven Hundred Eighty
Thousand ($780,000) Dollars.
3.2 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase Price
concurrent herewith as follows:
(a) First, Buyer shall, at closing, use so much of the Purchase Price as
is necessary to pay in full any liens or encumbrances upon the
Purchased Assets.
(b) The balance of the Purchase Price shall be wire transferred to the
account of Seller.
4. COVENANTS
4.1 CONSULTING AGREEMENT. Concurrent herewith, Morad shall execute and
deliver to Buyer the Consulting Agreement in the form of the attached
Schedule 4.1.
4.2 DELIVERY FREE OF ENCUMBRANCES. Seller shall deliver good title to
the Purchased Assets free and clear of all mortgages, liens, claims, demands,
charges, options, equity interests, leases, tenancies, easements, pledges,
security interests, and other encumbrances ("Encumbrances"). Without
limiting the foregoing, Seller acknowledges and agrees that, by the execution
hereof, any equipment lease it has with Mailers with respect to any of the
Purchased Assets is hereby terminated.
5. CLOSING MATTERS
5.1 DOCUMENTS TO BE DELIVERED AT CLOSING. The following documents shall
be delivered by Seller (or applicable third parties) to Buyer concurrent
herewith (it being
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agreed that delivery of all of the foregoing in form and content satisfactory
to Buyer shall be a condition precedent to Buyer's obligation to close
hereunder):
5.1.1 INSTRUMENTS OF TRANSFER, ETC. Seller shall deliver to Buyer all
bills of sale, general instruments of transfer, conveyances, assurances,
transfers, assignments, approvals, consents, and any other instruments and
documents containing the usual and customary covenants and warranties of
title that are consistent with the requirements of Section 4.2 and that shall
be convenient, necessary, or reasonably required by Buyer to effectively
transfer the Purchased Assets to Buyer with good title, free and clear of all
Encumbrances, in the form of the attached Schedule 5.1.1.
5.1.2 LIEN AND LITIGATION SEARCHES. Buyer shall receive UCC lien searches
and litigation searches in form and content satisfactory to Buyer.
5.1.3 CONSENTS. Buyer shall receive, in writing, all consents and
estoppels relating to the Purchased Assets necessary or desirable to
consummate or to facilitate consummation of this Agreement and any related
transactions. Such consents must include, without limitation, consent to the
assignment of Seller's contract with the Bell & Howell Equipment Sale
Agreement and an estoppel in the form attached hereto as Schedule 5.1.3 (the
"Customer Consents").
5.1.4 OTHER DOCUMENTS AND INSTRUMENTS. Buyer shall receive from Seller at
closing such other documents and instruments relating to the Buyer as it
reasonably requests.
5.1.5 APPROVALS BY BUYER'S COUNSEL. Buyer's counsel shall reasonably
approve all legal matters and the form and substance of all documents that
Buyer or Seller is to deliver at the Closing.
5.1.6 OPINION OF COUNSEL. An opinion of Valenti, Bolger & Gorcyca, legal
counsel for the Seller, with respect to the matters set forth in Schedule
5.1.6 addressed to the Buyer, which opinion will be dated the Closing Date
and will be in form satisfactory to Buyer's legal counsel.
5.2 CERTAIN CLOSING EXPENSES. Seller shall be liable for any charges
properly payable on and in connection with Seller's conveyance and transfer of
the Purchased Assets to Buyer.
5.3 FURTHER ASSURANCES. Seller and Morad shall cooperate with and assist
Buyer with the sale of the Purchased Assets under this Agreement and shall take
all other reasonable actions to assure that the Purchased Assets are smoothly
transferred to Buyer. In the event that a document of sale or transfer is
required by Buyer and was not obtained at closing, from time to time after the
date of closing, Seller and Morad shall, at the
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request of Buyer, execute and deliver such additional conveyances, transfers,
documents, instruments, assignments, applications, certifications, papers, and
other assurances to effectively carry out the intent of this Agreement and to
sell and transfer the Purchased Assets to Buyer.
6. SELLER'S AND MORAD'S REPRESENTATIONS AND WARRANTIES
Seller and Morad, jointly and severally, represent and warrant the following
to Buyer (and acknowledge and confirm that Buyer is relying on these
representations and warranties in entering into this Agreement and that full,
fair, and adequate consideration as described in this Agreement has been
received therefor):
6.1 RECITALS ACCURATE. The above recitals are accurate.
6.2 ORGANIZATION AND STANDING. Seller is a Michigan co-partnership,
validly existing under the laws of the State of Michigan, all of whose partners
are included on page 13 hereof, and Seller has all requisite power and
authority to own its properties and conduct its business as it is now being
conducted. Seller has not used or assumed any other name in connection with
the conduct of its business during the last five years.
6.3 AUTHORIZATION. Seller has all requisite power and authority, (a) to
execute, deliver, and perform this Agreement, and (b) to consummate the
transactions contemplated under this Agreement. Seller has taken all necessary
action to approve the execution, delivery, and performance of this Agreement
and the consummation of the transactions contemplated in this Agreement. This
Agreement is the legal, valid, and binding obligation of Seller, enforceable
against it in accordance with the Agreement's particular terms.
6.4 EXISTING AGREEMENTS AND GOVERNMENTAL APPROVALS.
(a) The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated therein: (i) do not and
will not violate any provisions of law applicable to Seller or to the
Purchased Assets; (ii) do not and will not conflict with, result in
the breach or termination of any provision of, or constitute a default
under (in each case whether with or without the giving of notice or
the lapse of time or both) of Seller's co-partnership agreement, if
any, or any indenture, mortgage, lease, deed of trust, or other
instrument, contract, or agreement or any order, judgment, arbitration
award, or decree to which Seller is a party or by which Seller or any
of the Purchased Assets are bound; and (iii) do not and will not
result in the creation of any Encumbrance on the Purchased Assets.
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(b) Other than the consent of Bell & Howell to the assignment of the
Equipment Sale Agreement, no approval, authority, or consent of, or
filing by Seller with, or notification to, any federal, state, or
local court, authority, or governmental or regulatory body or agency
or any other corporation, partnership, individual, or other entity is
necessary (i) to authorize the execution and delivery of this
Agreement by Seller, (ii) to authorize the consummation of the
transactions contemplated by this Agreement by Seller, or (iii) to
continue Buyer's use and operation of the Purchased Assets after the
date hereof.
6.5 NO INSOLVENCY. No insolvency proceeding of any character, including,
without limitation, bankruptcy, receivership, reorganization, composition, or
arrangement with creditors, voluntary or involuntary, affecting Seller or any
of its assets or properties is pending or, to the Best Knowledge of Seller,
threatened. Seller has not taken any action in contemplation of, or that would
constitute the basis for, the institution of any such insolvency proceedings.
For the purposes of this Agreement, the phrase "Best Knowledge" of Seller, or
words of similar import, mean such knowledge as any of the parties providing
warranties hereunder would have after due inquiry into the matter in question.
6.6 PERMITS AND LICENSES. Seller has all necessary permits,
certificates, licenses, approvals, consents, and other authorizations required
to own, lease, use, and operate the Purchased Assets, all of which to the
extent transferable shall be transferred or assigned to Buyer concurrent
herewith, without expense to Buyer.
6.7 NO UNDISCLOSED LIABILITIES. Except with respect to liens on certain
of the Equipment held by Citizens Bank and First of America Bank, respectively,
there are no other liabilities related to the Purchased Assets whether accrued,
absolute, contingent, or otherwise which are the responsibility and obligation
of Seller but which will become the responsibility or obligation of Buyer
(including all applicable taxes (federal, state, and local)), and there exists
no fact or circumstance that could give rise to any such liabilities or
obligations in the future.
6.8 PURCHASE OF ALL ASSETS. The Purchased Assets constitute all of the
assets of Seller.
6.9 EMPLOYEES. During the last five years, Seller has had no employees.
6.10 CONDUCT OF BUSINESS. As relates to the Purchased Assets, during the
last three months, Seller has not:
(a) Entered into, materially amended, or terminated any contract, license,
lease, commitment, or permit.
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(b) Incurred or become subject to any obligation or liability (absolute,
accrued, contingent, or otherwise), except in the ordinary course of
business consistent with past practices.
(c) Mortgaged, pledged, or subjected any of the Purchased Assets to any
Encumbrance.
(d) Sold, transferred, or agreed to sell or transfer any Purchased Asset.
(e) Disposed of or permitted to lapse any Intellectual Property.
(f) Experienced any material damage, destruction, or loss (whether or not
covered by insurance) affecting its Purchased Assets.
(g) Failed to regularly maintain or repair the Purchased Assets.
(h) Agreed or committed to do any of the foregoing.
6.11 NO ADVERSE CHANGES. During the last three months, there has not been
any occurrence, condition, or development that has adversely affected, or is
likely to adversely affect, the Purchased Assets.
6.12 MATERIAL CONTRACTS. Except for the Contracts listed in Schedules 1.2,
Seller is not a party to nor bound by any agreement or commitment that affects
the Purchased Assets. All Contracts are valid and binding obligations of the
parties thereto in accordance with their respective terms. No default or
alleged default exists on the part of Seller, nor, to the Best Knowledge of
Seller and Morad, on the part of any other party, under any of the Contracts.
True and complete copies of all Contracts have been delivered to Buyer.
6.13 TITLE TO PURCHASED ASSETS. Seller is the sole and absolute owner of
the Purchased Assets and has good title to all of the Purchased Assets, free
and clear of any and all Encumbrances, except as set forth in Schedule 6.13
hereof.
6.14 CONDITION OF PURCHASED ASSETS. The Equipment is in good working order
and repair. Each item of Equipment is situated at the Premises and is fit for
its intended purpose, with no material defects.
6.15 TAXES.
(a) For the purposes of this Agreement, Tax or Taxes shall mean all
federal, state, county, local, and other taxes (including, without
limitation, income taxes; premium taxes; single-business taxes; excise
taxes; sales taxes; use taxes; value-added taxes; gross receipts
taxes;
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franchise taxes; ad valorem taxes; severance taxes; capital levy
taxes; transfer taxes; stamp taxes; employment, unemployment, and
payroll-related taxes; withholding taxes; and governmental charges and
assessments), and includes interest, additions to tax, and penalties.
(b) Seller has filed on a timely basis all Tax returns it is required to
file under federal, state, or local law and has paid or established an
adequate reserve with respect to all Taxes for the periods covered by
such returns. No agreements have been made by or on behalf of Seller
for any waiver or for the extension of any statute of limitations
governing the time of assessment or collection of any Taxes. Seller
and its officers have received no notice of any pending or threatened
audit by the IRS or any state or local agency related to Seller's Tax
returns or Tax liability for any period, and no claim for assessment
or collection of Taxes has been asserted against Seller. There are no
federal, state, or local tax liens outstanding against any of Seller's
assets (including, without limitation, the Purchased Assets). The
sale and the transfer of the Purchased Assets will not result in the
imposition of any Tax against Buyer for the operations of Seller's
business and use of the Purchased Assets prior to the sale and
transfer of the Purchased Assets to Buyer.
6.16 LITIGATION. There are no claims, disputes, actions, suits,
proceedings, or investigations pending or, to the Best Knowledge of the Seller
or Morad, threatened against or directly affecting Seller, or the Purchased
Assets.
6.17 COMPLIANCE WITH LAWS. At all times prior to the date hereof, Seller
has complied with all laws, orders, regulations, rules, decrees, and ordinances
affecting to any extent or in any manner of the Purchased Assets.
6.18 NO BROKERS. Seller has not engaged, and is not responsible for any
payment to, any finder, broker, or consultant in connection with the
transactions contemplated by this Agreement.
6.19 INTELLECTUAL PROPERTY. Schedule 1.3 lists all Intellectual Property
of the Seller that Seller directly or indirectly owns, licenses, uses, requires
for use, or controls in whole or in part and all licenses and other agreements
allowing Seller to use the intellectual property of third parties. Seller does
not own, directly or indirectly, or use any patents, copyrights, trademarks, or
service marks in the Business. None of the Seller's Intellectual Property
infringes on any other person's intellectual property, and, to the Best
Knowledge of the Seller or Morad, no activity of any other person infringes on
any of the Intellectual Property. The Seller has been and is now conducting
its business in a manner that has not been and is not now in violation of any
other person's intellectual property,
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or proprietary rights, and the sale and transfer of the Business and the
Purchased Assets and the use of the Purchased Assets by Buyer will not violate
any other person's intellectual property or proprietary rights. Except with
respect to the 3/5 Digit Selective Sort Software relating to the Bell & Howell
Equipment Sale Agreement, Seller does not require a license or other
proprietary right with respect to the Purchased Assets.
6.20 NO SUCCESSOR LIABILITY. Seller has had no relationship whatsoever
with Adcom, Inc., a Michigan corporation, which could conceivably cause a claim
to be made against Seller and/or Buyer for successor liability for the debts of
Adcom, Inc., which company is currently involved in an involuntary Chapter 7
bankruptcy proceeding in the United States District Court for the Eastern
District of Michigan. The complete schedule of liabilities of Adcom, Inc. as
of the date hereof are set forth in attached Schedule 6.20. The companies,
entities and individuals identified with an asterisk in Schedule 6.20 are
related to, affiliated with or controlled by Seller and/or Morad, and will not
bring a claim against Buyer directly or indirectly for successor liability or
any similar type of claim.
7. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller that:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation duly organized and
validly existing under the laws of the State of Delaware, and Buyer has all the
requisite power and authority (corporate and otherwise) to own its properties
and to conduct its business as it is now being conducted.
7.2 AUTHORIZATION. Buyer has taken all necessary corporate action (a) to
duly approve the execution, delivery, and performance of this Agreement, and
(b) to consummate any related transactions. Buyer has duly executed and
delivered this Agreement. This Agreement is a legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with their
respective terms.
7.3 DUE DILIGENCE. With respect to the Equipment, Buyer's due diligence
review of Seller did not reveal any condition adversely affecting the
Equipment.
8. INDEMNIFICATION
8.1 INDEMNITY. Seller and Morad, jointly and severally, shall indemnify,
and hold harmless Buyer and its directors, officers, shareholders, employees,
agents, representatives, successors, and assigns (the "Indemnitees") from and
against (and pay as and when incurred) any and all costs, losses, claims,
liabilities, fines, expenses, penalties, and damages (including attorneys'
fees) in connection with or resulting from:
8.2 All debts, liabilities, and obligations of Seller, with respect to the
Purchased Assets, whether accrued, absolute, contingent, known, unknown, or
otherwise.
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8.3 Any misrepresentation or breach of any representation or warranty or
agreement of Seller and/or Morad contained in this Agreement or any Schedule,
exhibit or certificate hereto, including the Consulting Agreement.
8.4 Any failure by either Seller or Morad to perform or observe in full,
or to have performed or observed in full, any covenant, agreement, or condition
to be performed or observed by the Seller under this Agreement.
8.5 With respect to the defense of any third party action, lawsuit,
proceeding, investigation, or other claim (a "Proceeding"), against or
involving an Indemnitee in which the person bringing the Proceeding seeks only
the recovery of a sum of money for which indemnification is provided hereunder,
at its option, Seller and/or Morad may appoint lead counsel for such defense;
provided that in assuming control of such defense, Seller and Morad are thereby
agreeing to be fully responsible (with no reservation of any rights other than
the right to be subrogated to the rights of the Indemnitee) for all costs,
losses, liabilities, etc., relating to such Proceeding and unconditionally
guaranteeing the payment and performance of any liability or obligation which
may arise with respect to such Proceeding or the facts giving rise to such
claim for Indemnification.
8.6 The Indemnitee is entitled to participate in the defense of any
Proceeding, subject to Seller and/or Morad's right to control the conduct of
the defense and settlement of the related claim (subject to Section 8.8 below),
and to employ counsel of its choice for such purpose at its own expense
(provided, however, that if the Indemnitee gives Seller and/or Morad notice of
the commencement of the Proceeding in question and Seller and/or Morad do not
assume the defense within ten days after notification, then Seller and/or Morad
will bear the reasonable fees and expenses of such separate counsel incurred
prior to the date upon which Seller and/or Morad effectively assume control of
such defense.
8.7 Notwithstanding the above, Seller and/or Morad will not be entitled to
assume control of the defense of a Proceeding, and will pay the reasonable fees
and expenses of legal counsel retained by Indemnitee, if there exists an actual
or potential conflict of interest which, under applicable principles of legal
ethics, could prohibit a single, legal counsel from representing both Seller
and/or Morad and the Indemnitee in such Proceeding.
8.8 Seller and/or Morad must obtain the prior written consent of the
Indemnitee (which the Indemnitee will not unreasonably withhold) prior to (A)
entering into any settlement of any claim or Proceeding which would require
Seller and/or Morad to pay any amount or take or refrain from taking any other
action, or (B) ceasing to defend such claim or Proceeding.
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8.9 By the execution of this Agreement, Morad acknowledges that (i) he is
directly indemnifying Indemnitee as provided above, or (ii) if his
indemnification is interpreted under Michigan laws as a guarantee of the
obligations of Seller, it is a complete and unconditional guaranty of the
obligations of Seller hereunder; and (iii) Indemnitee's claims for
indemnification may be set off against any and all amounts due and owing to
Morad under that certain Consulting Agreement of even date herewith. Nothing
hereunder shall prevent Morad from seeking contribution from Seller for any
indemnification paid by Morad to Indemnitee.
9. EXPENSES
9.1 EXPENSES. Each of the parties shall pay all of the costs that it or
he incurs incident to the preparation, execution, and delivery of this
Agreement and the performance of any related obligations, whether or not the
transactions contemplated by this Agreement shall be consummated.
10. MISCELLANEOUS PROVISIONS
10.1 REPRESENTATIONS AND WARRANTIES. All representations, warranties, and
agreements (including indemnification) made by the parties pursuant to this
Agreement shall survive the consummation of the transactions contemplated by
this Agreement and shall be binding notwithstanding any due diligence
investigation by Buyer.
10.2 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 following:
if to Seller or Morad: John J. Morad, Sr.
30600 Telegraph Road
Suite 3250
Bingham Farms, Michigan 48025
FAX: (810) 644-0019
if to Buyer: Lason Systems, Inc.
28400 Schoolcraft Road
Livonia, Michigan 48150
FAX: (313) 525-4619
Attention: Allen J. Nesbitt
or to such other address or facsimile number that the parties may designate
in writing.
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10.3 ASSIGNMENT. Neither the Seller nor Buyer shall assign this Agreement,
or any interest in it, without the prior written consent of the other, except
that Buyer may assign any or all of its rights under this Agreement to any
subsidiary without Seller's consent.
10.4 PARTIES IN INTEREST. This Agreement shall inure to the benefit of,
and shall be binding on, the named parties and their respective successors and
permitted assigns, but not any other person.
10.5 CHOICE OF LAW. This Agreement shall be governed, construed, and
enforced in accordance with the laws of the State of Michigan.
10.6 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each counterpart were
on the same instrument.
10.7 ENTIRE AGREEMENT. This Agreement and all related documents,
schedules, exhibits, or certificates represent the entire understanding and
agreement between the parties with respect to the subject matter and supersede
all prior agreements or negotiations between the parties. This Agreement may
be amended, supplemented, or changed only by an agreement in writing that makes
specific reference to this Agreement or the agreement delivered pursuant to it
and that is signed by the party against whom enforcement of any such amendment,
supplement, or modification is sought.
10.8 ARBITRATION. Any dispute between the parties regarding any provision
in this Agreement shall be resolved by binding arbitration before the American
Arbitration Association in Southfield, Michigan according to its then
applicable commercial arbitration rules. Judgment upon the award of the
arbitrators may be entered by any court of competent jurisdiction. All of the
costs of the arbitration shall be borne by the losing party.
(signatures begin on next page)
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The parties have executed this Agreement on the date set forth on the
first page of this Agreement.
SELLER: BUYER:
LINKSTER LEASING, a Michigan co- LASON SYSTEMS, INC., a Delaware
partnership corporation
By: John J. Morad, Sr. By: Allen J. Nesbitt
---------------------------------- -------------------------------
John J. Morad, Sr. Allen J. Nesbitt
Its: Partner Its: President
--------------------------------- ------------------------------
By: John J. Mastin MORAD:
----------------------------------
John J. Mastin
Its: Partner JOHN J. MORAD, SR.
--------------------------------- ----------------------------------
JOHN J. MORAD, SR., Individually
By: J. Robert Langan
----------------------------------
J. Robert Langan
Its: Partner
---------------------------------
By: Robert Young
----------------------------------
Robert Young
Its: Partner
--------------------------------
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EXHIBIT 2.2
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, MADE AND ENTERED INTO ON THE 28TH DAY OF
DECEMBER 1995, BY AND BETWEEN MAIL-AWAY CORPORATION, a Delaware corporation, of
4321 Delemere Court, Royal Oak, Michigan 48073-1809 ("Seller"), and LASON
SYSTEMS, INC., a Delaware corporation, of 28400 Schoolcraft Road, Livonia,
Michigan 48150 ("Buyer"), shall become effective on January 1, 1996.
R E C I T A L S :
The following is a recital of the facts underlying this
Agreement:
A. Seller is engaged in the business of providing
overnight and priority mail creation and distribution services to numerous
corporations (the "Business").
B. Buyer desires to purchase, and Seller desires to sell
to Buyer, certain of the assets of Seller used in connection with the Business
pursuant to the terms and subject to the conditions of this Agreement.
Collectively, those assets are more particularly described in Paragraph 1
hereof as the "Purchased Assets."
A G R E E M E N T S :
NOW, THEREFORE, in consideration of the above-recitals and the
terms and conditions set forth in this Agreement, and for other valuable
consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, Seller and Buyer agree as follows:
1. PURCHASE AND SALE OF ASSETS
1. ASSETS PURCHASED. Seller hereby sells, assigns,
conveys, transfers, sets over, and delivers to Buyer all of Seller's right,
title and interest in and to the following assets (the "Purchased Assets"):
1.1 Various items of machinery and equipment used
in connection with the Business (the "Equipment"), which Equipment is
listed on Schedule 1.1.
1.2 All rights existing under contracts, leases,
insurance policies, licenses, permits, supply and distribution
arrangements, employment and consulting agreements, consignment
arrangements, warranties, consents, and all other agreements,
arrangements and understandings. All of Buyer's contracts are listed
on Schedule 1.2 (the "Contracts").
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1.3 All of Seller's right, title, benefit, and
interest in and to, direct or indirect ownership, license, use,
control (in whole or in part) of, inventions, discoveries,
improvements, designs, prototypes, trade secrets, trademarks,
copyrights, patents, software, software enhancements, manufacturing
and engineering drawings, process sheets, specifications, bills of
material, formulae and secret and confidential processes, know-how,
technology, and other industrial property (whether patentable or
unpatentable) related to or, in any way, used in connection with the
Business (the "Intellectual Property"), which Intellectual Property is
listed on Schedule 1.3.
1.4 The full benefit of any and all purchase
orders placed with and accepted by Seller on or before the date hereof
that have not been completely performed or filled before the date
hereof (i.e., Seller's work in process), covering the purchase from
Seller of services to be supplied by Seller (the "Commitments"), which
Commitments are listed on Schedule 1.4.
1.5 All office supplies, production supplies,
spare parts, other miscellaneous supplies, and other tangible property
of any kind wherever located, including all property of any kind
located in any building, warehouse, office, or other space leased,
owned, or occupied by the Seller (the "Inventory"), which Inventory is
listed on Schedule 1.5.
1.6 All advertising, marketing and promotional
materials, and all other printed or written
materials.
1.7 The names "Mail-Away Corporation" and "First
Class Mail," any assumed names of Seller, and all derivatives thereof.
1.8 All records and lists that pertain directly
or indirectly, in whole or in part, to any one or more of the
following: Seller's customers, suppliers, advertising, promotional
material, sales, services, delivery, internal organization, employees,
and/or operations, as relate to the Business.
1.9 All transferable local, state, and federal
franchises, licenses, bonds, permits, and similar items pertaining to
the Business and/or the Purchased Assets.
1.10 All goodwill associated with the Business.
1.11 All raw materials of Seller related to or, in
any way, used in connection with the Business and/or the Purchased
Assets.
1.12 Except as specified in Section 2.1 below, all
other property owned by Seller, or in which it has an interest, on the
date of closing of the transaction contemplated herein (the "Closing
Date").
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<PAGE> 3
2. LIABILITIES ASSUMED
2.1 NO ASSUMPTION OF LIABILITIES. Seller acknowledges
and agrees that Buyer assumes no liabilities of Seller whatsoever, whether
accrued, absolute, contingent, known, unknown, or otherwise. Seller is to
retain all of its accounts receivable and its cash, cash equivalents and
amounts held on deposit and shall, therefore, be solely responsible for the
payment of all of its liabilities, as aforesaid.
3. PURCHASE PRICE FOR PURCHASED ASSETS
3.1 THE PURCHASE PRICE. The purchase price which is to
be paid by Buyer to Seller for the Purchased Assets (the "Purchase Price") is
Three Hundred Seventy Five Thousand ($375,000) Dollars. Seller agrees that
Buyer shall have the right to pay those amounts necessary to discharge certain
Specified Liabilities directly to the affected creditors as set forth in
Section 3.2 below. Seller also agrees that the Purchase Price shall be offset
by Thirty Thousand ($30,000) Dollars which is the amount of an advance made to
Seller by Buyer pursuant to a letter agreement dated December 13, 1995 (the
"Advance"). After payment of the Specified Liabilities and the Advance the
balance of the Purchase Price shall be paid to Seller.
3.2 CLOSING METHODOLOGY. Buyer and Seller agree that the
transaction contemplated herein will be closed in accordance with the following
protocol:
(a) The Closing Date shall be December 28, 1995 subject
to satisfaction of the conditions precedent to
closing set forth in Article V hereof.
(b) On the Closing Date, the Purchase Price will be
deposited into escrow with Seyburn, Kahn, Ginn, Bess,
Deitch and Serlin, P.C. ("SKG"), Buyer's attorneys,
along with the closing documents pursuant to an
escrow agreement which is to be delivered on that
date (the "Escrow Agreement"). The Escrow Agreement
shall, inter alia, authorize SKG to pay the Specified
Liabilities directly to the creditors of Seller which
hold such Specified Liabilities in exchange for duly
executed UCC Termination Statements and/or other
releases as deemed necessary by SKG in its sole,
absolute, and exclusive discretion. When all of the
Specified Liabilities have been paid as aforesaid,
the balance of the Purchase Price shall be remitted
to Seller.
(c) For the purposes hereof, the term "Specified
Liability" or "Specified Liabilities" shall mean
those certain liabilities listed on Schedule 3.2
hereof.
(d) Seller shall have until the close of business on
January 31, 1996 (the "Settlement Date") to settle
all of the Specified Liabilities on terms
satisfactory to it. In the event that all of such
Specified Liabilities are not paid by the Settlement
Date, SKG shall be authorized to pay such
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<PAGE> 4
Specified Liabilities directly from escrow on terms
satisfactory to SKG in its sole, absolute, and
exclusive discretion.
(e) Notwithstanding the foregoing, neither Buyer or SKG
shall have the authority to settle the unsecured
claims of David Hamilton and the Envelope Printery
(as listed as No. 7 of Schedule 3.2) without the
approval of Seller. However, until such time as that
Specified Liability is paid and released the balance
of the Purchase Price shall remain in escrow.
(f) Upon payment of all of the Specified Liabilities, the
balance of the Purchase Price shall be paid to Seller
by SKG with the closing documents being released to
the parties as well, as aforesaid.
3.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price
shall be allocated among the Purchased Assets in accordance with attached
Schedule 3.3, which shall be mutually agreeable to Buyer and Seller. Buyer and
Seller agree to file duplicate IRS Forms 8594, with an allocation of the
Purchase Price in accordance with this Section 3.3, and to file all other
returns and reports in a manner consistent with the allocations in this
Section.
4. COVENANTS
4.1 EMPLOYMENT AGREEMENTS. On the Closing Date, Buyer
shall execute and deliver the Employment Agreement between Buyer and
Demyanovich in the form of the attached Schedule 4.1.
4.2 DELIVERY FREE OF ENCUMBRANCES. Seller shall deliver
good title to the Purchased Assets free and clear of all mortgages, liens,
claims, demands, charges, options, equity interests, leases, tenancies,
easements, pledges, security interests, and other encumbrances, including, but
not limited to, the Specified Liabilities (the "Encumbrances").
5. CLOSING MATTERS
5.1 DOCUMENTS TO BE DELIVERED AT CLOSING. The following
documents shall be delivered by Seller (or applicable third parties) to Buyer
on the Closing Date (it being agreed that delivery of all of the foregoing in
form and content satisfactory to Buyer shall be a condition precedent to
Buyer's obligation to close hereunder):
5.1.1 INSTRUMENTS OF TRANSFER, ETC. Seller shall
deliver to Buyer all bills of sale, general instruments of transfer,
conveyances, assurances, transfers, assignments, approvals, consents,
and any other instruments and documents containing the usual and
customary covenants and warranties of title that are consistent with
the requirements of Section 4.2 hereof and that shall be convenient,
necessary, or reasonably required by
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Buyer to effectively transfer the Purchased Assets to Buyer with good
title, free and clear of all Encumbrances, in the form of the attached
Schedule 5.1.1.
5.1.2 LIEN AND LITIGATION SEARCHES. Buyer shall
receive UCC lien searches and litigation searches in form and content
satisfactory to Buyer.
5.1.3 CONSENTS. Buyer shall receive, in writing, all
consents and estoppels relating to the Business and/or the Purchased
Assets which it determines are necessary or desirable to consummate or
to facilitate consummation of the transaction contemplated herein and
any related transactions, including, but not limited to, the consent
of certain of Seller's customers as listed on the attached Schedule
5.1.3.a. The form of such consent is set forth on Schedule 5.1.3.b.
5.1.4 EMPLOYMENT AGREEMENT. Buyer shall receive a
fully executed employment agreement in the form of the attached
Schedule 4.1.
5.1.5 OTHER DOCUMENTS AND INSTRUMENTS. Buyer shall
receive from Seller at closing such other documents and instruments
relating to the Buyer as it reasonably requests.
5.1.6 APPROVALS BY BUYER'S COUNSEL. Buyer's counsel
shall reasonably approve all legal matters and the form and substance
of all documents that Buyer or Seller is to deliver at the Closing.
5.1.7 OPINION OF COUNSEL. An opinion of Arslanian,
Pugh and Suo, P.C., legal counsel for the Seller, with respect to the matters
set forth in Schedule 5.1.7 addressed to the Buyer, which opinion will be dated
the Closing Date and will be in form satisfactory to Buyer's legal counsel.
5.1.8 RESOLUTION. A copy of a resolution duly
adopted by the Seller's Board of Directors authorizing Seller's execution,
delivery, and performance of this Agreement and the consummation of the sale
of the Purchased Assets and all other transactions contemplated by this
Agreement, as in effect as of the date of closing, certified by an officer of
the Seller.
5.1.9. TAX CLEARANCE/RELEASES. Tax clearances
issued by the requisite department of the State of Michigan and Releases from
the creditors which are owed the Specified Liabilities. Notwithstanding the
foregoing, if Buyer does not receive Releases from every creditor, it may, in
its sole, absolute, and exclusive discretion, elect to close with Seller
pursuant to the provisions of Section 3.2 above.
5.1.10. INCUMBENCY CERTIFICATE. An Incumbency
Certificate signed by an officer of the Seller.
5.2 CERTAIN CLOSING EXPENSES. Seller shall be liable for
any charges properly payable on and in connection with Seller's conveyance and
transfer of the Purchased Assets to Buyer. Such charges, if any, shall be
deducted from the Purchase Price.
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<PAGE> 6
5.3 FURTHER ASSURANCES. Seller shall cooperate with and
assist Buyer with the sale of the Purchased Assets under this Agreement and
shall take all other reasonable actions to assure that the Purchased Assets and
the Business are smoothly transferred to Buyer. In the event that a document
of sale or transfer is required by Buyer and was not obtained at closing, from
time to time after the Closing Date, Seller shall, at the request of Buyer,
execute and deliver such additional conveyances, transfers, documents,
instruments, assignments, applications, certifications, papers, and other
assurances as are determined necessary by counsel for Buyer in order to
effectively carry out the intent of this Agreement and to sell and transfer the
Purchased Assets and the Business to Buyer.
6. SELLER'S AND DEMYANOVICH'S REPRESENTATIONS AND WARRANTIES
Seller and Demyanovich, jointly and severally, represent and
warrant the following to Buyer (and acknowledge and confirm that Buyer is
relying on these representations and warranties in entering into this Agreement
and that full, fair, and adequate consideration as described in this Agreement
has been received therefor):
6.1 RECITALS ACCURATE. All of the recitals set forth in
this Agreement are accurate.
6.2 ORGANIZATION AND STANDING. Seller is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware, and Seller has all requisite power and authority (corporate
and otherwise) to own its properties and conduct its business as it is now
being conducted. Except with respect to doing business in Michigan, the nature
of the Business and the character of the Purchased Assets Seller owns or leases
do not make the licensing or qualification of Seller as a foreign corporation
necessary under the laws of any other jurisdiction. Seller has not used or
assumed any other name in connection with the conduct of its business during
the last five years.
6.3 AUTHORIZATION. Seller has all requisite power and
authority, (a) to execute, deliver, and perform this Agreement, and (b) to
consummate the transactions contemplated under this Agreement. Seller has
taken all necessary corporate action (including the approval of its board of
directors and shareholders) to approve the execution, delivery, and performance
of this Agreement and the consummation of the transactions contemplated in this
Agreement. This Agreement is the legal, valid, and binding obligation of
Seller, enforceable against it in accordance with the Agreement's particular
terms.
6.4 EXISTING AGREEMENTS AND GOVERNMENTAL APPROVALS.
(a) The execution, delivery, and performance of this
Agreement and the consummation of the transactions
contemplated therein: (i) do not and will not violate
any provisions of law applicable to Seller, the
Business, or the Purchased Assets; (ii) do not and
will not conflict with, result in the breach or
termination of any provision of, or constitute a
default under (in each case whether with or without
the giving of notice or the lapse of time
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or both) of Seller's Articles of Incorporation,
Bylaws, or any indenture, mortgage, lease, deed of
trust, or other instrument, contract, or agreement or
any order, judgment, arbitration award, or decree
relating to the Business to which Seller is a party
or by which Seller or any of the Purchased Assets are
bound; and (iii) do not and will not result in the
creation of any encumbrance on the Purchased Assets.
(b) Except for the required consents of those persons set
forth in Schedule 5.1.3.a, no approval, authority, or
consent of, or filing by Seller with, or notification
to, any federal, state, or local court, authority, or
governmental or regulatory body or agency or any
other corporation, partnership, individual, or other
entity is necessary (i) to authorize the execution
and delivery of this Agreement by Seller, (ii) to
authorize the consummation of the transactions
contemplated by this Agreement by Seller, or (iii) to
continue Buyer's use and operation of the Purchased
Assets after the date hereof.
6.5 NO SUBSIDIARIES. Seller has no subsidiaries and does
not directly or indirectly own any interest or have any investment in any other
corporation, partnership, or other entity.
6.6 NO INSOLVENCY. No insolvency proceeding of any
character, including, without limitation, bankruptcy, receivership,
reorganization, composition, or arrangement with creditors, voluntary or
involuntary, affecting Seller or any of its assets or properties is pending or,
to the Best Knowledge of Seller, threatened. Seller has not taken any action
in contemplation of, or that would constitute the basis for, the institution of
any such insolvency proceedings. For the purposes of this Agreement, the
phrase "Best Knowledge" of Seller, or words of similar import, mean such
knowledge as any of the parties providing warranties hereunder would have after
due inquiry into the matter in question.
6.7 PERMITS AND LICENSES. Seller has all necessary
permits, certificates, licenses, approvals, consents, and other authorizations
required to carry on and conduct the Business and to own, lease, use, and
operate the Purchased Assets at the places and in the manner in which the
Business is conducted, all of which to the extent transferable shall be
transferred or assigned to Buyer concurrent herewith, without expense to Buyer.
6.8 FINANCIAL STATEMENTS. Seller has delivered to Buyer
certain financial information relative to the operation of the Business as
provided in Schedule 6.8 attached hereto and made a part hereof (the "Financial
Information"). The Financial Information fairly and accurately presents
Seller's financial position as of the dates indicated and the results of its
operations as of the dates indicated and for the periods covered thereby, are
true and correct in all material respects, and accurately and fairly reflect
Seller's Business for a typical period of time. There were no items of income
or expense in the Financial Information that are unusual or of a nonrecurring
nature. Seller's books, records, and work papers are complete and correct;
have been maintained on an accrual basis in accordance with GAAP; and
accurately reflect Seller's financial condition and the results of Seller's
operations.
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<PAGE> 8
6.9 NO UNDISCLOSED LIABILITIES. Except as set forth in
Schedule 6.9, there are no other liabilities related to the Business and/or the
Purchased Assets whether accrued, absolute, contingent, or otherwise which are
the responsibility and obligation of Seller but which will become the
responsibility or obligation of Buyer (including all applicable taxes (federal,
state, and local) and any postage deposits), and there exists no fact or
circumstance that could give rise to any such liabilities or obligations in the
future.
6.10 CONDUCT OF BUSINESS. As relates to the Business,
since the date on which Buyer's due diligence review of Seller began, Seller
has not:
(a) Entered into, materially amended, or terminated any
contract, license, lease, commitment, or permit.
(b) Experienced any labor disturbance.
(c) Incurred or become subject to any obligation or
liability (absolute, accrued, contingent, or
otherwise), except in the ordinary course of business
consistent with past practices.
(d) Mortgaged, pledged, or subjected any of the Purchased
Assets to any encumbrance.
(e) Sold, transferred, or agreed to sell or transfer any
asset, property, or business; cancelled or agreed to
cancel any debt or claim; or waived any right.
(f) Disposed of or permitted to lapse any Intellectual
Property.
(g) Experienced any material damage, destruction, or loss
(whether or not covered by insurance) affecting its
properties, assets, or Business.
(h) Failed to regularly maintain or repair the Purchased
Assets.
(i) Entered into any other transaction other than in the
ordinary course of business consistent with past
practices.
(j) Agreed or committed to do any of the foregoing.
6.11 NO ADVERSE CHANGES. With respect to the Business,
since the date in which Buyer's due diligence review of Seller began, there has
not been any occurrence, condition, or development that has adversely affected,
or is likely to adversely affect, Seller, its prospects, its condition
(financial or otherwise), its affairs, its operations, or the Purchased Assets.
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6.12 EMPLOYEE BENEFIT PLANS. Seller does not maintain or
offer any pension plan or welfare benefit plan as those terms are defined in
the Employee Retirement Income Security Act ("ERISA").
6.13 MATERIAL CONTRACTS. Except for the Contracts and
Commitments listed in Schedules 1.2 and 1.4, Seller is not a party to nor bound
by any agreement or commitment that affects the Business or the Purchased
Assets. All Contracts and Commitments are valid and binding obligations of the
parties thereto in accordance with their respective terms. No default or
alleged default exists on the part of Seller, nor, to the Best Knowledge of
Seller, on the part of any other party, under any of the Contracts and
Commitments. True and complete copies of all Contracts and Commitments have
been delivered to Buyer.
6.14 TITLE TO PURCHASED ASSETS. Seller is the sole and
absolute owner of the Purchased Assets and has good title to all of the
Purchased Assets, free and clear of any and all encumbrances, except as set
forth in Schedule 3.2 hereof. Any property which is used in the conduct of the
Business which is owned by (or in which an interest is claimed) by any other
person (whether a customer, supplier, or other person) is listed on Schedule
3.2 together with copies of all related agreements. All such property is
situated at Seller's place of business (the "Premises") and is in such
condition that upon return to its owner, Buyer will not be liable in any amount
to the owner.
6.15 CONDITION OF PURCHASED ASSETS. The Equipment is in
good working order and repair. Each item of Equipment is situated at the
Premises and is fit for its intended purpose, with no material defects.
6.16 SUFFICIENCY OF PURCHASED ASSETS. The Purchased
Assets constitute all the property and assets, real, personal, and mixed,
tangible and intangible (including, without limitation, contract rights), that
are used or are useful in, or are necessary for the conduct of, the Business in
accordance with present practices.
6.17 TAXES.
(a) For the purposes of this Agreement, Tax or Taxes
shall mean all federal, state, county, local, and
other taxes (including, without limitation, income
taxes; premium taxes; single-business taxes; excise
taxes; sales taxes; use taxes; value-added taxes;
gross receipts taxes; franchise taxes; ad valorem
taxes; severance taxes; capital levy taxes; transfer
taxes; stamp taxes; employment, unemployment, and
payroll-related taxes; withholding taxes; and
governmental charges and assessments), and includes
interest, additions to tax, and penalties.
(b) Except as provided in Schedule 6.17: Seller has
filed on a timely basis all Tax returns it is
required to file under federal, state, or local law
and has paid or established an adequate reserve with
respect to all Taxes for the periods covered by such
returns. No agreements have been made by or on
behalf of Seller for any waiver or for the extension
of any statute
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of limitations governing the time of assessment or
collection of any Taxes. Seller and its officers
have received no notice of any pending or threatened
audit by the IRS or of any state or local agency
related to Seller's Tax returns or Tax liability for
any period, and no claim for assessment or collection
of Taxes has been asserted against Seller. There are
no federal, state, or local tax liens outstanding
against any of Seller's assets (including, without
limitation, the Purchased Assets) or the Business.
The sale of the Business and the transfer of the
Purchased Assets will not result in the imposition of
any Tax against Buyer for the operations of the
Business and use of the Purchased Assets prior to the
sale of the Business and transfer of the Purchased
Assets to Buyer.
6.18 LITIGATION. Except as set forth in Schedule 6.18,
there are no claims, disputes, actions, suits, proceedings, or investigations
pending or, to the Best Knowledge of the Seller, threatened against or directly
affecting Seller, the Business, or the Purchased Assets.
6.19 COMPLIANCE WITH LAWS. At all times prior to the date
hereof, Seller has complied with all laws, orders, regulations, rules, decrees,
and ordinances affecting to any extent or in any manner all aspects of the
Business or the Purchased Assets.
6.20 CUSTOMERS.
(a) A complete and accurate list of Seller's customers in
connection with the Business and the address of each
customer and the amount each customer purchased from
Seller during the last fiscal year as relates to the
Business is set forth in Schedule 6.20.
(b) Seller has no information that might reasonably
indicate that any customer of Seller intends to cease
purchasing from, selling to, or dealing with Seller.
No information has been brought to Seller's attention
that might reasonably lead Seller to believe that any
customer intends to alter, in any material respect,
the amount of its purchases or the extent of its
dealings with Seller, or would alter in any material
respect its purchases from, or dealings with Buyer in
the event that the transactions contemplated by this
Agreement are consummated.
6.21 PROGRESS PAYMENTS. Attached Schedule 6.21 contains a
true and complete list and description of all security deposits, progress
payments, and the like that Seller has received relating in any way to any
purchase orders, leases, or other agreements that are part of the Purchased
Assets.
6.22 NO BROKERS. Seller has not engaged, and is not
responsible for any payment to, any finder, broker, or consultant in connection
with the transactions contemplated by this Agreement.
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6.23 NO COMMISSIONS. With respect to the Business, no
commissions or payments of any type or kind have been made to, or are necessary
to maintain the volume of business with Seller's customers or are necessary to
maintain the relationships with Seller's customers or any of their respective
employees.
6.24 INTELLECTUAL PROPERTY. Schedule 1.3 lists all
Intellectual Property of the Seller that Seller directly or indirectly owns,
licenses, uses, requires for use, or controls in whole or in part and all
licenses and other agreements allowing Seller to use the intellectual property
of third parties. Seller does not own, directly or indirectly, or use any
patents, copyrights, trademarks, or service marks in the Business. None of the
Seller's Intellectual Property infringes on any other person's intellectual
property, and, to the Best Knowledge of the Seller, no activity of any other
person infringes on any of the Intellectual Property. The Seller has been and
is now conducting the Business in a manner that has not been and is not now in
violation of any other person's intellectual property or proprietary rights,
and the sale and transfer of the Business and the Purchased Assets will not
violate any other person's intellectual property or proprietary rights.
Seller does not require a license or other proprietary right to so operate the
Business and the Purchased Assets.
7. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller that:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation
duly organized and validly existing under the laws of the State of Delaware,
and Buyer has all the requisite power and authority (corporate and otherwise)
to own its properties and to conduct its business as it is now being conducted.
7.2 AUTHORIZATION. Buyer has taken all necessary
corporate action (a) to duly approve the execution, delivery, and performance
of this Agreement, and (b) to consummate any related transactions. Buyer has
duly executed and delivered this Agreement. This Agreement is a legal, valid,
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms.
8. INDEMNIFICATION
8.1 INDEMNITY. Seller and Demyanovich hereby, jointly
and severally, indemnify, and hold harmless, Buyer and its directors, officers,
shareholders, employees, agents, representatives, successors, and assigns (the
"Indemnitees") from and against (and pay, as and when incurred) any and all
costs, losses, claims, liabilities, fines, expenses, penalties, and damages
(including attorneys' fees) in connection with or resulting from:
8.2 All debts, liabilities, and obligations of Seller,
whether accrued, absolute, contingent, known, unknown, or otherwise, except the
Specified Liabilities as set forth in Schedule 3.2.
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8.3 Any misrepresentation or breach of any representation
or warranty or agreement of Seller contained in this Agreement or any Schedule,
exhibit or certificate hereto, including the Employment Agreement referenced in
Section 4.1 above.
8.4 Any failure by Seller to perform or observe in full,
or to have performed or observed in full, any covenant, agreement, or condition
to be performed or observed by the Seller under this Agreement.
8.5 With respect to the defense of any third party
action, lawsuit, proceeding, investigation, or other claim (a "Proceeding"),
against or involving an Indemnitee in which the person bringing the Proceeding
seeks only the recovery of a sum of money for which indemnification is provided
hereunder, at its option, Seller may appoint lead counsel for such defense;
provided that in assuming control of such defense, Seller is thereby agreeing
to be fully responsible (with no reservation of any rights other than the right
to be subrogated to the rights of the Indemnitee) for all costs, losses,
liabilities, etc., relating to such Proceeding and unconditionally guaranteeing
the payment and performance of any liability or obligation which may arise with
respect to such Proceeding or the facts giving rise to such claim for
Indemnification.
8.6 The Indemnitee is entitled to participate in the
defense of any Proceeding, subject to Seller right to control the conduct of
the defense and settlement of the related claim (subject to Section 8.8 below),
and to employ counsel of its choice for such purpose at its own expense
(provided, however, that if the Indemnitee gives Seller notice of the
commencement of the Proceeding in question and Seller does not assume the
defense within ten days after notification, then Seller will bear the
reasonable fees and expenses of such separate counsel incurred prior to the
date upon which Seller effectively assumes control of such defense).
8.7 Notwithstanding the above, Seller will not be
entitled to assume control of the defense of a Proceeding, and will pay the
reasonable fees and expenses of legal counsel retained by Indemnitee, if there
exists an actual or potential conflict of interest which, under applicable
principles of legal ethics, could prohibit a single, legal counsel from
representing both Seller and the Indemnitee in such Proceeding.
8.8 Seller must obtain the prior written consent of the
Indemnitee (which the Indemnitee will not unreasonably withhold) prior to (A)
entering into any settlement of any claim or Proceeding which would require
Seller to pay any amount or take or refrain from taking any other action, or
(B) ceasing to defend such claim or Proceeding.
9. EXPENSES
9.1 EXPENSES. Each of the parties shall pay all of the
costs that it incurs incident to the preparation, execution, and delivery of
this Agreement and the performance of any related obligations, whether or not
the transactions contemplated by this Agreement shall be consummated.
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10. POST-CLOSING ACTION
10.1 SELLER'S NAME CHANGE. As soon as practicable after the
Closing Date, Seller will coordinate with Buyer to change its name to a name
which is not (and which is not confusingly similar to) "Mail-Away Corporation"
and to release the use of the name "First Class Mail" so that Buyer can file
those names as assumed names, in order to effect the intent of the parties
hereto that from and after the Closing Date, Buyer will have the sole right as
against the Seller to conduct business under such names.
11. MISCELLANEOUS PROVISIONS
11.1 REPRESENTATIONS AND WARRANTIES. All representations,
warranties, and agreements (including the indemnification) made by the parties
pursuant to this Agreement shall survive the consummation of the transactions
contemplated by this Agreement and shall be binding notwithstanding any due
diligence investigation by Buyer.
11.2 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 following:
<TABLE>
<S> <C>
if to Seller: Mail-Away Corporation
4321 Delemere Court
Royal Oak, Michigan 48073-1809
ATTN: Robert P. Demyanovich
Fax: (810) 549-1146
if to Buyer: Lason Systems, Inc.
28400 Schoolcraft Road
Livonia, Michigan 48150
ATTN: Allen J. Nesbitt, President
Fax: (313) 525-4619
with a copy to: Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, P.C.
2000 Town Center, Suite 1500
Southfield, Michigan 48075
ATTN: Laurence B. Deitch
Fax: (810) 353-3727
</TABLE>
or to such other address or facsimile number that the parties may
designate in writing.
11.3 ASSIGNMENT. Neither the Seller nor Buyer shall
assign this Agreement, or any interest in it, without the prior written consent
of the other, except that Buyer may assign any or all of its rights under this
Agreement to any subsidiary without Seller's consent.
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11.4 PARTIES IN INTEREST. This Agreement shall inure to
the benefit of, and shall be binding on, the named parties and their respective
successors and permitted assigns, but not any other person.
11.5 CHOICE OF LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Michigan, without
giving effect to any choice of law or conflict provision or rule, whether of
the State of Michigan (or any other jurisdiction) that would cause the laws of
any jurisdiction other than the State of Michigan to be applied. In
furtherance of the foregoing, the internal law of the State of Michigan will
control the interpretation and construction of this Agreement, even if under
such jurisdiction's choice of law or conflict of law or analysis, the
substantive law of some other jurisdiction would ordinarily apply. Further,
the parties hereto agree that jurisdiction and venue shall properly lie in the
Oakland County Circuit Court or in the United States District Court for the
Eastern District of Michigan, Southern Division.
11.6 COUNTERPARTS. This Agreement may be signed in any
number of counterparts with the same effect as if the signature on each
counterpart were on the same instrument.
11.7 ENTIRE AGREEMENT. This Agreement and all related
documents, schedules, exhibits, or certificates represent the entire
understanding and agreement between the parties with respect to the subject
matter and supersede all prior agreements or negotiations between the parties.
This Agreement may be amended, supplemented, or changed only by an agreement in
writing that makes specific reference to this Agreement or the agreement
delivered pursuant to it and that is signed by the party against whom
enforcement of any such amendment, supplement, or modification is sought.
The parties have executed this Agreement on the date set forth on the
first page of this Agreement.
SELLER: BUYER:
MAIL-AWAY CORPORATION, LASON SYSTEMS, INC.,
A DELAWARE CORPORATION A DELAWARE CORPORATION
By: ROBERT P. DEMYANOVICH By: ALLEN J. NESBITT
--------------------------------------- -----------------------------
Robert P. Demyanovich Allen J. Nesbitt
Its: President Its: President
ROBERT P. DEMYANOVICH
- ------------------------------------------
Robert P. Demyanovich, Individually
for purposes of agreeing to be bound
to the provisions of Articles 6 and 8 hereof
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<PAGE> 1
EXHIBIT 2.3
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is made and entered into on this 6th day of
February, 1996, but is effective as of February 1, 1996, (the "effective date")
by and between DIVERSIFIED SUPPORT SERVICES, INC., an Illinois corporation, of
320 South Jefferson Street, Chicago, Illinois 60661 ("Seller") and LASON
SYSTEMS, INC., a Delaware corporation, of 1305 Stephenson Highway, Troy,
Michigan 48084 ("Buyer").
R E C I T A L S :
The following is a recital of the facts underlying this
Agreement:
A. Seller is engaged in the business of providing
reprographics facilities management services to professional service firms and
other corporations in the Chicago, Illinois and Cleveland, Ohio markets (the
"Business").
B. Buyer desires to purchase, and Seller desires to sell
to Buyer, the assets of Seller used in connection with the Business pursuant to
the terms and subject to the conditions of this Agreement. Collectively, those
assets are more particularly described in Paragraph 1 hereof as the "Purchased
Assets."
A G R E E M E N T S :
NOW, THEREFORE, in consideration of the above-recitals and the
terms and conditions set forth in this Agreement, and for other valuable
consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged, Seller and Buyer agree as follows:
1. PURCHASE AND SALE OF ASSETS
1. ASSETS PURCHASED. Seller hereby sells, assigns,
conveys, transfers, sets over, and delivers to Buyer all of the Seller's right,
title and interest in and to the following assets (the "Purchased Assets"):
1.1 All leasehold improvements and all owned or
leased machinery, equipment (including all office equipment),
fixtures, trade fixtures, furniture, wherever located in any building,
warehouse, office or other space leased, owned or occupied by Seller
or used in connection with the Business. All of Seller's equipment
is listed on Schedule 1.1 (the "Equipment").
1.2 All rights existing under contracts, leases,
insurance policies, licenses, permits, supply and distribution
arrangements, employment and consulting agreements, consignment
arrangements, warranties, consents, and all other agreements,
arrangements and understandings. All of Seller's contracts are
listed on Schedule 1.2 (the "Contracts").
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1.3 All of Seller's right, title, benefit, and
interest in and to, direct or indirect ownership, license, use,
control (in whole or in part) of, inventions, discoveries,
improvements, designs, prototypes, trade secrets, trademarks,
copyrights, patents, software, software enhancements, manufacturing
and engineering drawings, process sheets, specifications, bills of
material, formulae and secret and confidential processes, know-how,
technology, and other industrial property (whether patentable or
unpatentable) related to or, in any way, used in connection with the
Business (the "Intellectual Property"), which Intellectual Property is
listed on Schedule 1.3.
1.4 The full benefit of any and all purchase
orders placed with and accepted by Seller on or before the date hereof
that have not been completely performed or filled before the date
hereof (i.e., Seller's work in process), covering the purchase from
Seller of services to be supplied by Seller (the "Commitments"), which
Commitments are listed on Schedule 1.4.
1.5 All real property, whether owned or leased,
including all real property described on the attached Schedule 1.5 and
all buildings and other improvements located on such owned or leased
property, and all easements, licenses, rights-of-way, permits and all
appurtenances to such owned or leased property, including, without
limitation, all appurtenant rights in and to public streets whether or
not vacated.
1.6 All office supplies, production supplies,
spare parts, other miscellaneous supplies, and other tangible property
of any kind wherever located, including all property of any kind
located in any building, warehouse, office, or other space leased,
owned, or occupied by the Seller.
1.7 All advertising, marketing and promotional
materials, and all other printed or written materials.
1.8 The name "Diversified Support Services", any
assumed names of Seller, and all derivatives thereof.
1.9 All records and lists that pertain directly
or indirectly, in whole or in part, to any one or more of the
following: Seller's customers, suppliers, advertising, promotional
material, sales, services, delivery, internal organization, employees,
and/or operations, as relate to the Business.
1.10 All transferable local, state, and federal
franchises, licenses, bonds, permits, and similar items pertaining to
the Business and/or the Purchased Assets, if any.
1.11 All goodwill associated with the Business.
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<PAGE> 3
1.12 All raw materials of Seller related to or, in
any way, used in connection with the Business and/or the Purchased
Assets.
1.13 Except as specified below, all other property
owned by the Seller, or in which it has an interest, on the effective
date of this Agreement.
Notwithstanding anything to the contrary set forth herein, the following assets
of Seller are expressly excluded from this transaction and are to be retained
by Seller:
(a) All accounts receivable listed
on the attached Schedule 1.13.
(b) All cash, cash equivalents and
amounts held on deposit in any savings, checking,
money market or other account on the effective date
of this Agreement.
2. LIABILITIES ASSUMED
2.1 NO ASSUMPTION OF LIABILITIES. Seller acknowledges
and agrees that Buyer assumes no liabilities of Seller whatsoever, whether
accrued, absolute, contingent, known, unknown, or otherwise, except for the
Debt (as defined below), if any.
3. PURCHASE PRICE FOR PURCHASED ASSETS
3.1 THE PURCHASE PRICE. The purchase price which is to
be paid by Buyer to Seller for the Purchased Assets (the "Purchase Price") is
One Hundred Twenty Thousand ($120,000) Dollars, less the Debt (as defined
below), if any.
3.2 PAYMENT OF PURCHASE PRICE. Buyer shall pay the
Purchase Price on the date of this Agreement as follows:
(a) First, Buyer shall deduct from the Purchase Price all
of the indebtedness and accrued expenses of Seller as
set forth in its books and records on the effective
date of this Agreement (the "Debt").
(b) Second, the balance of the Purchase Price shall be
paid via federal wire transfer of collected funds to
the account of Seller.
3.3 ALLOCATION OF PURCHASE PRICE. The Purchase Price
shall be allocated among the Purchased Assets in accordance with attached
Schedule 3.3. Buyer and Seller agree to file duplicate IRS Forms 8594, with an
allocation of the Purchase Price in accordance with this Section 3.3, and to
file all other returns and reports in a manner consistent with the allocations
in this Section.
3.4 ADDITIONAL PAYMENT. In addition to the Purchase
Price which is to be paid to Seller, Buyer shall pay to Philip Mullaney and
Edward Hrebic, who are the sole
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shareholders of Seller (the "Shareholders") the additional amount of Sixteen
Thousand and Seventy-One and 00/100 ($16,071.00) Dollars representing the
mutual, good faith determination of the respective tax counsel to Buyer and
Seller of one-half of all adverse tax consequences to the Shareholders as a
result of the sale of assets contemplated hereunder as opposed to a sale of
stock (the "Tax Payment"). The Tax Payment shall be payable at such time as
relevant federal and state taxes are due and payable by the Shareholders.
4. COVENANTS
4.1 EMPLOYMENT AGREEMENTS. On the date of this
Agreement, Buyer shall execute and deliver the Employment Agreement - Philip
Mullaney, the Employment Agreement - Edward Hrebic, and the Employment
Agreement - Carol Mullaney in the respective forms of the attached Schedule
4.1.a., 4.1.b., and 4.1.c.
4.2 DELIVERY FREE OF ENCUMBRANCES. Seller shall deliver
good title to the Purchased Assets free and clear of all mortgages, liens,
claims, demands, charges, options, equity interests, leases, tenancies,
easements, pledges, security interests, and other encumbrances
("Encumbrances").
5. CLOSING MATTERS
5.1 DOCUMENTS TO BE DELIVERED AT CLOSING. The following
documents shall be delivered by Seller (or applicable third parties) to Buyer
on the date of this Agreement (it being agreed that delivery of all of the
foregoing in form and content satisfactory to Buyer shall be a condition
precedent to Buyer's obligation to close hereunder):
5.1.1 INSTRUMENTS OF TRANSFER, ETC. Seller shall
deliver to Buyer all bills of sale, general instruments of transfer,
conveyances, assurances, transfers, assignments, approvals, consents,
and any other instruments and documents containing the usual and
customary covenants and warranties of title that are consistent with
the requirements of Section 4.2 hereof and that shall be convenient,
necessary, or reasonably required by Buyer to effectively transfer the
Purchased Assets to Buyer with good title, free and clear of all
Encumbrances, in the form of the attached Schedule 5.1.1.
5.1.2 LIEN AND LITIGATION SEARCHES. Buyer shall
receive UCC lien searches and litigation searches in form and content
satisfactory to Buyer.
5.1.3 CONSENTS. Buyer shall receive, in writing a
consent and estoppel from Thompson, Hine and Flory. The form of
such consent and estoppel is set forth on Schedule 5.1.3.
5.1.4 EMPLOYMENT AGREEMENTS. Buyer shall receive
fully executed employment agreements in the respective forms of the
attached Schedule 4.1.a., 4.1.b. and 4.1.c.
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5.1.5 CLOSING STATEMENT. Buyer and Seller shall
execute a Closing Statement in a mutually satisfactory form and
content setting forth the amount of the Debt, prorations of expenses,
the amount anticipated to be owed to Seller in connection with the
Commitments and various other items as are appropriate and customary
for a transaction of this type.
5.1.6 APPROVALS BY BUYER'S COUNSEL. Buyer's counsel
shall reasonably approve all legal matters and the form and substance
of all documents that Buyer or Seller is to deliver at the Closing.
5.1.7 OPINION OF COUNSEL. An opinion of Sosin &
Lawler, legal counsel for the Seller, with respect to the matters set
forth in Schedule 5.1.7 addressed to the Buyer, which opinion
will be dated the date of this Agreement and will be in form
satisfactory to Buyer's legal counsel.
5.1.8 RESOLUTION. Copies of resolutions duly adopted
by the Seller's Board of Directors and the Shareholders authorizing
the Seller's execution, delivery, and performance of this Agreement
and the consummation of the sale of the Purchased Assets and all
other transactions contemplated by this Agreement, as in effect as
of the date of closing, certified by an officer of the Seller.
5.1.9. TAX CLEARANCE. Evidence of compliance with
the requirements of the Illinois Departments of Labor and Revenue
concerning the payment of unemployment compensation and sales taxes.
5.1.10 OTHER DOCUMENTS AND INSTRUMENTS. Buyer shall
receive from Seller at closing such other documents and instruments
relating to the Buyer as it reasonably requests.
5.2 CERTAIN CLOSING EXPENSES. Seller shall be liable for
any charges properly payable on and in connection with Seller's conveyance and
transfer of the Purchased Assets to Buyer, if any. Such charges, if any, shall
be deducted from the Purchase Price.
5.3 FURTHER ASSURANCES. Seller shall cooperate with and
assist Buyer with the sale of the Purchased Assets under this Agreement and
shall take all other reasonable actions to assure that the Purchased Assets and
the Business are smoothly transferred to Buyer. In the event that a document
of sale or transfer is required by Buyer and was not obtained at closing, from
time to time after the date of this Agreement, Seller shall, at the request of
Buyer, execute and deliver such additional conveyances, transfers, documents,
instruments, assignments, applications, certifications, papers, and other
assurances as are determined necessary by counsel for Buyer in order to
effectively carry out the intent of this Agreement and to sell and transfer the
Purchased Assets and the Business to Buyer.
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6. SELLER'S AND SHAREHOLDERS' REPRESENTATIONS AND WARRANTIES
Seller and the Shareholders, jointly and severally, represent
and warrant the following to Buyer (and acknowledge and confirm that Buyer is
relying on these representations and warranties in entering into this Agreement
and that full, fair, and adequate consideration as described in this Agreement
has been received therefor):
6.1 RECITALS ACCURATE. All of the recitals set forth in
this Article 6 are accurate.
6.2 ORGANIZATION AND STANDING. Seller is a corporation
duly organized, validly existing, and in good standing under the law of the
State of Illinois , and Seller has all requisite power and authority (corporate
and otherwise) to own its properties and conduct its business as it is now
being conducted. The nature of the Business and the character of the Purchased
Assets Seller owns or leases do not make the licensing or qualification of
Seller as a foreign corporation necessary under the laws of any other
jurisdiction. Seller has not used or assumed any other name in connection with
the conduct of its business during the last five years.
6.3 AUTHORIZATION. Seller has all requisite power and
authority, (a) to execute, deliver, and perform this Agreement, and (b) to
consummate the transactions contemplated under this Agreement. Seller has
taken all necessary corporate action (including the approval of its board of
directors and shareholders) to approve the execution, delivery, and performance
of this Agreement and the consummation of the transactions contemplated in this
Agreement. This Agreement is the legal, valid, and binding obligation of
Seller, enforceable against it in accordance with the Agreement's particular
terms.
6.4 EXISTING AGREEMENTS AND GOVERNMENTAL APPROVALS.
(a) The execution, delivery, and performance of this
Agreement and the consummation of the transactions
contemplated therein: (i) do not and will not violate
any provisions of law applicable to Seller, the
Business, or the Purchased Assets; (ii) do not and
will not conflict with, result in the breach or
termination of any provision of, or constitute a
default under (in each case whether with or without
the giving of notice or the lapse of time or both) of
Seller's Articles of Incorporation, Bylaws, or any
indenture, mortgage, lease, deed of trust, or other
instrument, contract, or agreement or any order,
judgment, arbitration award, or decree relating to
the Business to which Seller is a party or by which
Seller or any of the Purchased Assets are bound; and
(iii) do not and will not result in the creation of
any Encumbrance on the Purchased Assets.
(b) No approval, authority, or consent of, or filing by
Seller with, or notification to, any federal, state,
or local court, authority, or
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governmental or regulatory body or agency or
any other corporation, partnership, individual, or
other entity is necessary (i) to authorize the
execution and delivery of this Agreement by Seller,
(ii) to authorize the consummation of the
transactions contemplated by this Agreement by
Seller, or (iii) to continue Buyer's use and
operation of the Purchased Assets after the date
hereof.
6.5 NO SUBSIDIARIES. Seller has no subsidiaries and does
not directly or indirectly own any interest or have any investment in any other
corporation, partnership, or other entity.
6.6 NO INSOLVENCY. No insolvency proceeding of any
character, including, without limitation, bankruptcy, receivership,
reorganization, composition, or arrangement with creditors, voluntary or
involuntary, affecting Seller or any of its assets or properties is pending or,
to the Best Knowledge of Seller, threatened. Seller has not taken any action
in contemplation of, or that would constitute the basis for, the institution of
any such insolvency proceedings. For the purposes of this Agreement, the
phrase "Best Knowledge" of Seller, or words of similar import, mean such
knowledge as any of the parties providing warranties hereunder would have after
due inquiry into the matter in question.
6.7 PERMITS AND LICENSES. Seller has all necessary
permits, certificates, licenses, approvals, consents, and other authorizations
required to carry on and conduct the Business and to own, lease, use, and
operate the Purchased Assets at the places and in the manner in which the
Business is conducted, all of which to the extent transferable shall be
transferred or assigned to Buyer concurrent herewith, without expense to Buyer.
6.8 FINANCIAL STATEMENTS. Seller has delivered to Buyer
certain compiled financial statements relative to the operation of the Business
as provided in Schedule 6.8 attached hereto and made a part hereof (the
"Financial Information"). To the best of Seller's knowledge after making a
complete, thorough and diligent inquiry, the Financial Information fairly and
accurately presents Seller's financial position as of the dates indicated and
the results of its operations as of the dates indicated and for the periods
covered thereby, are true and correct in all material respects, and accurately
and fairly reflect Seller's Business for a typical period of time. There were
no items of income or expense in the Financial Information that are unusual or
of a nonrecurring nature. Seller's books, records, and work papers are
complete and correct; have been maintained on an accrual basis in accordance
with GAAP; and accurately reflect Seller's financial condition and the results
of Seller's operations.
6.9 NO UNDISCLOSED LIABILITIES. Except with respect to
the equipment leases set forth in Schedule 1.1 and except as set forth in
Schedule 6.9, to the best of Seller's knowledge after making a complete,
thorough and diligent inquiry, there are no other liabilities related to the
Business and/or the Purchased Assets whether accrued, absolute, contingent, or
otherwise which are the responsibility and obligation of Seller but which will
become the responsibility or obligation of Buyer (including all applicable
taxes
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(federal, state, and local) and any postage deposits), and there exists no fact
or circumstance that could give rise to any such liabilities or obligations in
the future.
6.10 CONDUCT OF BUSINESS. As relates to the Business,
since the date on which Buyer's due diligence review of Seller began, Seller
has not:
(a) Entered into, materially amended, or terminated any
contract, license, lease, commitment, or permit.
(b) Experienced any labor disturbance.
(c) Incurred or become subject to any obligation or
liability (absolute, accrued, contingent, or
otherwise), except in the ordinary course of business
consistent with past practices.
(d) Mortgaged, pledged, or subjected any of the Purchased
Assets to any Encumbrance.
(e) Sold, transferred, or agreed to sell or transfer any
asset, property, or business; cancelled or agreed to
cancel any debt or claim; or waived any right.
(f) Disposed of or permitted to lapse any Intellectual
Property.
(g) Experienced any material damage, destruction, or loss
(whether or not covered by insurance) affecting its
properties, assets, or Business.
(h) Failed to regularly maintain or repair the Purchased
Assets.
(i) Entered into any other transaction other than in the
ordinary course of business consistent with past
practices.
(j) Agreed or committed to do any of the foregoing.
6.11 NO ADVERSE CHANGES. With respect to the Business,
since the date in which Buyer's due diligence review of Seller began, there has
not been any occurrence, condition, or development that has adversely affected,
or is likely to adversely affect, Seller, its prospects, its condition
(financial or otherwise), its affairs, its operations, or the Purchased Assets.
6.12 EMPLOYEE BENEFIT PLANS. Seller does not maintain or
offer any pension plan or welfare benefit plan as those terms are defined in
the Employee Retirement Income Security Act ("ERISA").
6.13 MATERIAL CONTRACTS. Except for the Contracts and
Commitments listed in Schedules 1.2 and 1.4, Seller is not a party to nor bound
by any agreement or
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6.12 EMPLOYEE BENEFIT PLANS. Seller does not maintain or
offer any pension plan or welfare benefit plan as those terms as defined in the
Employee Retirement Income Security Act ("ERISA").
6.13 MATERIAL CONTRACTS. Except for the Contracts and
Commitments listed in Schedules 1.2 and 1.4, Seller is not a party to nor bound
by any agreement or commitment that affects the Business or the Purchased
Assets. All Contracts and Commitments are valid and binding obligations of the
parties thereto in accordance with their respective terms. No default or
alleged default exists on the part of Seller, nor, to the Best Knowledge of
Seller, on the part of any other party, under any of the Contracts and
Commitments. True and complete copies of all Contracts and Commitments have
been delivered to Buyer.
6.14 TITLE TO PURCHASED ASSETS. Seller is the sole and
absolute owner of the Purchased Assets and has good title to all of the
Purchased Assets, free and clear of any and all Encumbrances, except as set
forth in Schedule 6.14 hereof. Any property which is used in the conduct of
the Business which is owned by (or in which an interest is claimed) by any
other person (whether a customer, supplier, or other person) is listed on
Schedule 6.14 together with copies of all related agreements. All such
property is situated on the Premises or at customers' respective facilities and
is in such condition that upon return to its owner, Buyer will not be liable in
any amount to the owner.
6.15 CONDITION OF PURCHASED ASSETS. The Equipment is in
good working order and repair. Each item of Equipment is situated at the
Premises and is fit for its intended purpose, with no material defects.
6.16 SUFFICIENCY OF PURCHASED ASSETS. The Purchased
Assets constitute all the property and assets, real, personal, and mixed,
tangible and intangible (including, without limitation, contract rights), that
are used or are useful in, or are necessary for the conduct of, the Business in
accordance with present practices.
6.17 TAXES.
(a) For the purposes of this Agreement, Tax or Taxes
shall mean all federal, state, county, local, and
other taxes (including, without limitation, income
taxes; premium taxes; single-business taxes; excise
taxes; sales taxes; use taxes; value-added taxes;
gross receipts taxes; franchise taxes; ad valorem
taxes; severance taxes; capital levy taxes; transfer-
taxes; stamp taxes; employment, unemployment, and
payroll-related taxes; withholding taxes; and
governmental charges and assessments), and includes
interest, additions to tax, and penalties.
(b) Seller has filed on a timely basis all Tax returns it
is required to file under federal, state, or local
law and has paid or established an adequate reserve
with respect to all Taxes for the periods covered by
such returns. No agreements have been made by or on
behalf of Seller for any waiver or for the extension
of any statute of limitations governing the time of
assessment or collection of any Taxes. Seller and
its officers have received no notice of any pending
or threatened audit by the IRS or of any state or
local agency related to Seller's Tax returns or Tax
liability for any period, and no claim for assessment
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or collection of Taxes has been asserted against
Seller. There are no federal, state, or local tax
liens outstanding against any of Seller's assets
(including, without limitation, the Purchased Assets)
or the Business. The sale of the Business and the
transfer of the Purchased Assets will not result in
the imposition of any Tax against Buyer for the
operations of the Business and use of the Purchased
Assets prior to the sale of the Business and transfer
of the Purchased Assets to Buyer.
6.18 LITIGATION. There are no claims, disputes, actions,
suits, proceedings, or investigations pending or, to the Best Knowledge of the
Seller, threatened against or directly affecting Seller, the Business, or the
Purchased Assets.
6.19 COMPLIANCE WITH LAWS. At all times prior to the date
hereof, Seller has complied with all laws, orders, regulations, rules, decrees,
and ordinances affecting to any extent or in any manner all aspects of the
Business or the Purchased Assets.
6.20 SUPPLIERS AND CUSTOMERS.
Seller has no information that might reasonably indicate that
any customer of Seller intends to cease purchasing from, selling to, or dealing
with Seller or any supplier intends to cease supplying Seller. No information
has been brought to Seller's attention that might reasonably lead Seller to
believe that any customer intends to alter, in any material respect, the amount
of its purchases or the extent of its dealings with Seller, or would alter in
any material respect its purchases from, or dealings with Buyer in the event
that the transactions contemplated by this Agreement are consummated. No
information has been brought to Seller's attention that might reasonably lead
Seller to believe that any supplier intends to alter, the amount it supplies
to, or the extent of its dealings with Seller, or would alter in any material
respect the amount it supplies to or dealings with Buyer in the event that the
transactions contemplated by this Agreement are consummated.
6.21 PROGRESS PAYMENTS. Attached Schedule 6.21 contains a
true and complete list and description of all security deposits, progress
payments, and the like that Seller has received relating in any way to any
purchase orders, leases, or other agreements that are part of the Purchased
Assets.
6.22 NO BROKERS. Seller has not engaged, and is not
responsible for any payment to, any finder, broker, or consultant in connection
with the transactions contemplated by this Agreement.
6.23 NO COMMISSIONS. With respect to the Business, no
commissions or payments of any type or kind have been made to, or are necessary
to maintain the volume of business with Seller's customers or are necessary to
maintain the relationships with Seller's customers or any of their respective
employees.
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6.24 INTELLECTUAL PROPERTY. Schedule 1.3 lists all
Intellectual Property of the Seller that Seller directly or indirectly owns,
licenses, uses, requires for use, or controls in whole or in part and all
licenses and other agreements allowing Seller to use the intellectual property
of third parties. Seller does not own, directly or indirectly, or use any
patents, copyrights, trademarks, or service marks in the Business. None of the
Seller's Intellectual Property infringes on any other person's intellectual
property, and, to the Best Knowledge of the Seller, no activity of any other
person infringes on any of the Intellectual Property. The Seller has been and
is now conducting the Business in a manner that has not been and is not now in
violation of any other person's intellectual property or proprietary rights,
and the sale and transfer of the Business and the Purchased Assets will not
violate any other person's intellectual property or proprietary rights. Seller
does not require a license or other proprietary right to so operate the
Business and the Purchased Assets.
6.25 ENVIRONMENTAL MATTERS. Since the date on which
Seller or any person, trust, corporation or other entity related to or
affiliated with Seller) first acquired an ownership, leasehold or other
possessory interest in any real property occupied by it, including, but not
limited to, 320 South Jefferson Street, Chicago, Illinois 60661 (collectively,
the "Premises"), there has been no release or discharge of any Hazardous
Material (as defined below) on or under the Premises or, to the Best Knowledge
of Seller, in the vicinity thereof, and, Seller has not received any notice of
and has no actual knowledge of any such release or discharge prior to the date
of this Agreement. Additionally, Seller has not received any notice of any
investigation or other action taken or to be taken by any federal, state, or
local government unit in regard to the Premises pursuant to the Environmental
Laws (as defined below). For purposes of this Agreement, the term "Hazardous
Materials" shall mean any hazardous, toxic or radioactive substance, material,
matter, or waste that is or that becomes regulated by or pursuant to any
federal, state, or local law, ordinance, order, rule, regulation, code or any
other governmental restriction or requirement, and shall include, but is not
limited to, asbestos; petroleum products; "Hazardous Substance(s)" as defined
in or under the Comprehensive Environmental Response and Compensation Liability
Act ("CERCLA"), 42 USC Section 9601 et seq., as amended now or at any time
hereafter; and the Illinois Environmental Protection Act, 415 ILCS 5/1 et seq.,
as amended now or at any time hereafter; and "Hazardous Waste(s)" as defined in
or under the Resource Conservation Recovery Act ("RCRA"), 42 USC Section 6901
et seq., as amended now or at any time hereafter. For purposes of this
Agreement, the term "Environmental Laws" shall mean the above-listed statutes
and all other federal, state, and local environmental legislation, and rules,
orders, and the regulations adopted and publications promulgated pursuant
thereto.
7. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to Seller that:
7.1 ORGANIZATION AND STANDING. Buyer is a corporation
duly organized and validly existing under the laws of the State of Delaware,
and Buyer has all the requisite
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power and authority (corporate and otherwise) to own its properties and to
conduct its business as it is now being conducted.
7.2 AUTHORIZATION. Buyer has taken all necessary
corporate action (a) to duly approve the execution, delivery, and performance
of this Agreement, and (b) to consummate any related transactions. Buyer has
duly executed and delivered this Agreement. This Agreement is a legal, valid,
and binding obligation of Buyer, enforceable against Buyer in accordance with
its terms.
8. INDEMNIFICATION OF SELLER AND THE SHAREHOLDERS
8.1 INDEMNITY. Seller and the Shareholders hereby,
jointly and severally, indemnify, and hold harmless, Buyer and its directors,
officers, shareholders, employees, agents, representatives, successors, and
assigns (the "Indemnitees") from and against (and pay, as and when incurred)
any and all costs, losses, claims, liabilities, fines, expenses, penalties, and
damages (including attorneys' fees) in connection with or resulting from:
(a) All debts, liabilities, and obligations of Seller,
whether accrued, absolute, contingent, known,
unknown, or otherwise, except the Debt as hereinabove
defined.
(b) Any misrepresentation or breach of any representation
or warranty or agreement of Seller contained in this
Agreement or any Schedule, exhibit or certificate
hereto, including the respective Employment
Agreements referenced in Section 4.1 above.
(c) Any failure by Seller to perform or observe in full,
or to have performed or observed in full, any
covenant, agreement, or condition to be performed or
observed by the Seller under this Agreement.
8.2 With respect to the defense of any third party
action, lawsuit, proceeding, investigation, or other claim (a "Proceeding"),
against or involving an Indemnitee in which the person bringing the Proceeding
seeks only the recovery of a sum of money for which indemnification is provided
hereunder, at its option, Seller may appoint lead counsel for such defense;
provided that in assuming control of such defense, Seller is thereby agreeing
to be fully responsible (with no reservation of any rights other than the right
to be subrogated to the rights of the Indemnitee) for all costs, losses,
liabilities, etc., relating to such Proceeding and unconditionally guaranteeing
the payment and performance of any liability or obligation which may arise with
respect to such Proceeding or the facts giving rise to such claim for
Indemnification.
8.3 The Indemnitee is entitled to participate in the
defense of any Proceeding, subject to Seller's right to control the conduct of
the defense and settlement of the related claim (subject to Section 8.5 below),
and to employ counsel of its choice for such purpose at its own expense
(provided, however, that if the Indemnitee gives Seller notice of the
commencement of the Proceeding in question and Seller does not assume the
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defense within ten days after notification, then Seller will bear the
reasonable fees and expenses of such separate counsel incurred prior to the
date upon which Seller effectively assumes control of such defense).
8.4 Notwithstanding the above, Seller will not be
entitled to assume control of the defense of a Proceeding, and will pay the
reasonable fees and expenses of legal counsel retained by Indemnitee, if there
exists an actual or potential conflict of interest which, under applicable
principles of legal ethics, could prohibit a single, legal counsel from
representing both Seller and the Indemnitee in such Proceeding.
8.5 Seller must obtain the prior written consent of the
Indemnitee (which the Indemnitee will not unreasonably withhold) prior to (A)
entering into any settlement of any claim or Proceeding which would require
Seller to pay any amount or take or refrain from taking any other action, or
(B) ceasing to defend such claim or Proceeding.
9. BUYER'S INDEMNIFICATION
9.1 INDEMNITY. Buyer hereby indemnifies, and holds
harmless, Seller and its directors, officers, shareholders, employees, agents,
representatives, successors, and assigns (the "Seller Indemnitees") from and
against (and pay, as and when incurred) any and all costs, losses, claims,
liabilities, fines, expenses, penalties, and damages (including attorneys'
fees) in connection with or resulting from:
(a) The Debt as hereinabove defined.
(b) Any misrepresentation or breach of any representation
or warranty or agreement of Buyer contained in this
Agreement.
(c) Any failure by Buyer to perform or observe in full,
or to have performed or observed in full, any
covenant, agreement, or condition to be performed or
observed by Buyer under this Agreement.
(d) Any failure by Buyer to perform or observe in full,
or have performed or observed in full, any obligation
under leases or contracts which it assumes in
accordance with the terms and conditions hereof.
9.2 With respect to the defense of any Proceeding against
or involving one or more of Seller Indemnitees in which the person bringing the
Proceeding seeks only the recovery of a sum of money for which indemnification
is provided hereunder, at its option, Buyer may appoint lead counsel for such
defense; provided that in assuming control of such defense, Buyer is thereby
agreeing to be fully responsible (with no reservation of any rights other than
the right to be subrogated to the rights of the Indemnitee) for all costs,
losses, liabilities, etc., relating to such Proceeding and unconditionally
guaranteeing the payment and performance of any liability or obligation which
may arise with respect to such Proceeding or the facts giving rise to such
claim for Indemnification.
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9.3 Seller Indemnitees are entitled to participate in the
defense of any Proceeding, subject to Buyer's right to control the conduct of
the defense and settlement of the related claim (subject to Section 9.5 below),
and to employ counsel of its choice for such purpose at its own expense
(provided, however, that if the Seller Indemnitees give Buyer notice of the
commencement of the Proceeding in question and Buyer does not assume the
defense within ten days after notification, then Buyer will bear the reasonable
fees and expenses of such separate counsel incurred prior to the date upon
which Buyer effectively assumes control of such defense).
9.4 Notwithstanding the above, Buyer will not be entitled
to assume control of the defense of a Proceeding, and will pay the reasonable
fees and expenses of legal counsel retained by Seller Indemnitees, if there
exists an actual or potential conflict of interest which, under applicable
principles of legal ethics, could prohibit a single, legal counsel from
representing both Buyer and the Seller Indemnitees in such Proceeding.
9.5 Buyer must obtain the prior written consent of the
Seller Indemnitees (which the Seller Indemnitees will not unreasonably
withhold) prior to (A) entering into any settlement of any claim or Proceeding
which would require Buyer to pay any amount or take or refrain from taking any
other action, or (B) ceasing to defend such claim or Proceeding.
10. DUE DILIGENCE
10.1 DUE DILIGENCE. Through the date hereof, Buyer shall
have the right to continue the complete due diligence review of Seller's
Business which it has previously commenced including a review of its books and
records, contracts and equipment. As part of such review, Buyer may speak to
those of Seller's customers as it deems necessary or appropriate. The results
of such due diligence review as aforesaid shall be satisfactory to Buyer in the
exercise of its sole, absolute and exclusive discretion. A satisfactory due
diligence review as aforesaid shall be a condition precedent to Buyer's
obligation to proceed hereunder.
11. EXPENSES
11.1 EXPENSES. Each of the parties shall pay all of the
costs that it incurs incident to the preparation, execution, and delivery of
this Agreement and the performance of any related obligations, whether or not
the transactions contemplated by this Agreement shall be consummated.
12. POST-CLOSING
12.1 SELLER'S NAME CHANGE. As soon as practicable after the
date of this Agreement, Seller will coordinate with Buyer to change its name to
a name which is not (and which is not confusingly similar to) "Diversified
Support Services" and so that Buyer can file that name as an assumed name, in
order to effect the intent of the parties hereto
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<PAGE> 15
that from and after the date of this Agreement, the Buyer will have the sole
right as against the Seller to conduct business under such name.
12.2 PAYMENTS ON ACCOUNTS RECEIVABLE. Any payments received
from a customer whose account receivable is listed on Schedule 1.13 shall
reduce the amount of the account receivable and shall be promptly paid to
Seller until such time as the account receivable is reduced to zero. After
such account receivable has been paid in full, all payments from the customer
shall be retained by Buyer.
13. MISCELLANEOUS PROVISIONS
13.1 REPRESENTATIONS AND WARRANTIES. All representations,
warranties, and agreements (including the indemnification) made by the parties
pursuant to this Agreement shall survive the consummation of the transactions
contemplated by this Agreement and shall be binding notwithstanding any due
diligence investigation by Buyer.
13.2 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 following:
if to Seller: Diversified Support Services, Inc.
320 South Jefferson Street
Chicago, Illinois 60661
ATTN: Philip Mullaney and Edward
Hrebic
Fax: (312) 441-0604
with a copy to: Sosin & Lawler
11800 South 75th Street
Suite 300
Palos Heights, Illinois 60463
ATTN: David B. Sosin, Esq.
Fax: (708) 448-8140
if to Buyer: Lason Systems, Inc.
1350 Stephenson Highway
Troy, Michigan 48083
ATTN: Gary L. Monroe, Executive
Vice President
Fax: (810) 597-5810
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with a copy to: Seyburn, Kahn, Ginn, Bess, Deitch &
Serlin, P.C.
2000 Town Center
Suite 1500
Southfield, Michigan 48075
ATTN: Laurence B. Deitch
Fax: (810) 353-3727
or to such other address or facsimile number that the parties may
designate in writing.
13.3 ASSIGNMENT. Neither the Seller nor Buyer shall
assign this Agreement, or any interest in it, without the prior written consent
of the other, except that Buyer may assign any or all of its rights under this
Agreement to any subsidiary without Seller's consent.
13.4 PARTIES IN INTEREST. This Agreement shall inure to
the benefit of, and shall be binding on, the named parties and their respective
successors and permitted assigns, but not any other person.
13.5 CHOICE OF LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Illinois, without
giving effect to any choice of law or conflict provision or rule, whether of
the State of Illinois (or any other jurisdiction) that would cause the laws of
any jurisdiction other than the State of Illinois to be applied. In
furtherance of the foregoing, the internal law of the State of Illinois will
control the interpretation and construction of this Agreement, even if under
such jurisdiction's choice of law or conflict of law or analysis, the
substantive law of some other jurisdiction would ordinarily apply. Further,
the parties hereto agree that jurisdiction and venue shall properly lie in the
Cook County Circuit Court or in the United States District Court.
13.6 COUNTERPARTS. This Agreement may be signed in any
number of counterparts with the same effect as if the signature on each
counterpart were on the same instrument.
13.7 ENTIRE AGREEMENT. This Agreement and all related
documents, schedules, exhibits, or certificates represent the entire
understanding and agreement between the parties with respect to the subject
matter and supersede all prior agreements or negotiations between the parties.
This Agreement may be amended, supplemented, or changed only by an agreement in
writing that makes specific reference to this Agreement or the agreement
delivered pursuant to it and that is signed by the party against whom
enforcement of any such amendment, supplement, or modification is sought.
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The parties have executed this Agreement on the date set forth on the
first page of this Agreement.
SELLER:
DIVERSIFIED SUPPORT SERVICES, INC.,
an Illinois corporation
By: Philip J. Mullaney
-----------------------------------------
Philip Mullaney
Its: President
----------------------------------------
By: Edward Hrebic
----------------------------------------
Edward Hrebic
Its: V.P.
----------------------------------------
Philip J. Mullaney
--------------------------------------------
PHILIP MULLANEY, Shareholder for the purpose
of being bound to the provisions of
Articles 6 and 8 hereof
Edward Hrebic
--------------------------------------------
EDWARD HREBIC, Shareholder for the purpose
of being bound to the provisions of
Articles 6 and 8 hereof
LASON SYSTEMS, INC.,
a Delaware corporation
By: Gary L. Monroe
-----------------------------------------
Gary L. Monroe
Its: Executive Vice President
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<PAGE> 1
EXHIBIT 2.4
AGREEMENT OF PURCHASE AND SALE OF STOCK
THIS AGREEMENT is made and effective as of the 25th day of
March, 1996, between and among LASON SYSTEMS, INC., a Delaware corporation, the
address of which is 1305 Stephenson Highway, Troy, Michigan 48084 ("Buyer");
BRUCE DUFF whose address is 1904-B Marsh Road, Wilmington, Delaware 19810,
MICHAEL TRUDGEON AND TRACY TRUDGEON, whose address is 260 Cedar Place, Wayne,
Pennsylvania 19087, MICHAEL BROWN, whose address is 6191 W. Mill Road,
Flourtown, Pennsylvania 19031, and BRIAN CLEMENT, whose address is 40 Dover
Lane, Sicklersville, New Jersey 08081 (collectively referred to herein as
"Shareholders"); and DELAWARE LEGAL COPY, INC., a Delaware corporation, the
address of which is 710 North King Street, Suite 140, Wilmington, Delaware
19801 ("Corporation"). Shareholders and corporation are collectively referred
to in this Agreement as "Selling Parties".
R E C I T A L S:
Shareholders have represented that they own all of the issued
and outstanding capital stock of Corporation as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
- ----------- ------------- --------------
<S> <C> <C>
Bruce Duff ("Duff") 255 51%
Michael Trudgeon and
Tracy Trudgeon
(together "Trudgeon") 145 29%
Michael Brown ("Brown") 75 15%
Brian Clement ("Clement") 25 5%
------ -----
500 100%
</TABLE>
Buyer desires to purchase all of the shares in the Corporation owned by
Trudgeon, Brown and Clement and eighty (80) shares in the Corporation owned by
Duff so that the aggregate shares (the "Shares") to be purchased by Buyer will
give Buyer a sixty-five (65%) percent ownership interest in the Corporation.
Shareholders desire to sell the Shares to Buyer, and Corporation desires that
this transaction be consummated.
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<PAGE> 2
Now, therefore, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
SECTION 1.1 SALE AND TRANSFER OF SHARES. Subject to the
terms and conditions set forth in this Agreement, on the Closing Date (as
defined below in Section 7.1), each Shareholder will transfer and convey his or
her respective Shares to Buyer, and Buyer will acquire the Shares from
Shareholders, free and clear of all liens, encumbrances, security agreements,
equities, options, claims, charges and restrictions. The certificates
representing the Shares shall be duly endorsed in blank for transfer, or
accompanied by a separate written instrument of assignment and shall be
accompanied by such other or further supporting documents as Buyer or its
counsel may reasonably require.
SECTION 1.2 PURCHASE PRICE. The purchase price for the
Shares is One Million Four Hundred Ninety-Five Thousand and 00/100
($1,495,000.00) Dollars (the "Purchase Price"). It is understood and agreed
that said aggregate Purchase Price is calculated on a uniform price of Four
Thousand Six Hundred and 00/100 ($4,600.00) Dollars for each of the Shares.
The amounts to which each of the Shareholders are entitled are set forth on
Exhibit "1.2".
SECTION 1.3 DEFERRED COMPENSATION. Currently,
Corporation has a certain uncollected receivable which is the subject of a
lawsuit filed on behalf of Corporation in the Superior Court of the State of
Delaware, New Castle County, namely Delaware Legal Copy, Inc. v. Imaging
Management Associates, Inc. and Brook-Med Imaging, P.A., C.A. No.
96C-03-003-JOH (the "Lawsuit"). Corporation shall diligently pursue the
resolution of the Lawsuit. At such time as a settlement is received or a
judgment collected with respect to the Lawsuit, the Corporation shall deduct
therefrom all costs and expenses incurred by it in connection with the receipt
of the settlement and/or collection of the judgment and the net amount shall be
paid to the Shareholders pro rata as additional compensation for their prior
services to Corporation. Corporation shall have the right to settle the
Lawsuit for any amount which it chooses in the exercise of its sole and
exclusive discretion.
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<PAGE> 3
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Selling Parties, jointly and severally except as otherwise
noted, represent and warrant to Buyer that, as of the date hereof:
SECTION 2.1 ORGANIZATION, STANDING AND POWER.
Corporation is duly organized, validly existing and in good standing under the
laws of the State of Delaware, has all necessary corporate power to own its
properties and to carry on its business as now owned and operated by it, is
duly qualified to do intrastate business and is in good standing in each
jurisdiction in which the nature of its business or its properties makes such
qualification necessary. Each jurisdiction in which Corporation is so
qualified to do business is listed on Exhibit "2.1".
SECTION 2.2 CAPITALIZATION. The authorized capital stock
of Corporation consists of One Thousand (1,000) shares of common stock having a
par value of $.01 each, of which Five Hundred (500) shares are issued and
outstanding. All of the Shares are validly issued, fully paid, nonassessable,
and, to the best of Selling Parties' knowledge, have been so issued in full
compliance with all applicable federal and state securities laws. There are no
outstanding subscriptions, options, rights, warrants, convertible securities or
other agreements or commitments obligating Corporation to issue or to transfer
from treasury any additional shares of its capital stock of any class.
SECTION 2.3 TITLE TO SHARES. Shareholders are the
owners, beneficially and of record, of all of the Shares, free and clear of all
liens, encumbrances, security agreements, equities, options, claims, charges
and restrictions except as set forth in Exhibit "2.3". Notwithstanding
anything else contained herein to the contrary, each Shareholder only makes
this representation and warranty with respect to his own Shares.
SECTION 2.4 SUBSIDIARIES. Corporation does not own,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or other entity.
SECTION 2.5 AUTHORITIES AND CONSENTS. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, has been duly and validly authorized
by the Board of Directors of Corporation. Selling Parties represent and
warrant that they have the right, power, legal capacity and authority to enter
into and perform their
3
<PAGE> 4
respective obligations under this Agreement and that, to the best of Selling
Parties' knowledge, no consent or approval of, notice to or filing with any
governmental authority having jurisdiction over any aspect of the business or
assets of Corporation, and no consent or approval of or notice to any other
person or entity (except consents, approvals and notices required in connection
with contracts and leases listed in Exhibits "2.14" and "2.24"), is required in
connection with the execution and delivery by Selling Parties of this Agreement
or the consummation by Selling Parties of the transactions contemplated hereby.
Except with respect to the first sentence of this Section 2.5, notwithstanding
anything else contained herein to the contrary, each Shareholder only makes the
representations and warranties contained in this Section 2.5 with respect to
his own Shares.
SECTION 2.6 NO BREACH OR VIOLATION. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, does not and will not result in or
constitute any of the following: (i) a breach of any term or provision of this
Agreement; (ii) a default, breach or violation, or an event that, with notice
or lapse of time or both, would be a default, breach or violation of any of the
terms, conditions or provisions of the Articles of Incorporation or By-Laws of
Corporation, or any lease, license, promissory note, security agreement,
commitment, indenture, mortgage, deed of trust or other agreement, instrument
or arrangement to which Corporation is a party or by which it or its property
is bound; (iii) an event that would permit any party to terminate or rescind
any agreement or to accelerate the maturity of any indebtedness or other
obligation of Corporation; or (iv) the creation or imposition of any lien,
charge or encumbrance on any of the properties of Corporation.
SECTION 2.7 FINANCIAL STATEMENTS. There have heretofore
been delivered to Buyer: (i) compiled financial statements, including balance
sheets, statements of income and retained earnings, and statements of changes
in financial position for Corporation as of December 31, 1993, December 31,
1994 and December 31, 1995, and for the twelve (12) month period then ended
prepared by Theodore Hagedorn, C.P.A., independent public accountants, whose
opinions with respect to said statement are included therein (the "Financial
Statements"); and (ii) gross sales and expense figures for Corporation for the
months of January and February, 1996, accompanied by a certificate of the Chief
Executive Officer or Chief Financial Officer of Corporation stating that such
gross sales and expense figures are a fair presentation of the results for the
period indicated.
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<PAGE> 5
The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved. The Financial Statements present fairly the financial
positions of Corporation to which they relate as at the respective dates
thereof, and the related results of operations of Corporation for the periods
therein referred to.
SECTION 2.8 UNDISCLOSED LIABILITIES. Except as set forth
in Exhibit "2.8", Corporation has no material debts, liabilities or obligations
of any kind, whether accrued, absolute, contingent or otherwise, which, under
generally accepted accounting principles, should have been so reflected or
reserved against or disclosed in Corporation's balance sheet dated as of
December 31, 1995, included in the Financial Statements, except for those that
may have been incurred subsequent to the date of that balance sheet. All
debts, liabilities and obligations incurred after December 31, 1995 were
incurred in the ordinary course of business and are usual and normal in amount
both individually and in the aggregate.
SECTION 2.9 ABSENCE OF CERTAIN CHANGES. Except as set
forth in Exhibit "2.9", since December 31, 1995, the business of Corporation
has been operated only in the ordinary course and, without limiting the
generality of the foregoing, Corporation has not:
A. Declared, set aside or paid any dividend or other
distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any of its capital stock;
B. Sustained any damage, destruction or loss, by reason
of fire, explosion, earthquake, casualty, labor trouble, requisition
or taking of property by any government or agency thereof, windstorm,
embargo, riot, act of God or public enemy, flood, accident, revocation
of license or right to do business, total or partial termination,
suspension, default or modification of contracts, governmental
restriction or regulation, other calamity or other similar or
dissimilar event (whether or not covered by insurance), materially and
adversely affecting its condition (financial or otherwise), earnings,
business, assets, liabilities, properties, operations or prospects;
C. Had any material adverse change in its condition
(financial or otherwise), earnings, business, assets, properties,
liabilities, operations or prospects;
D. Issued, authorized for issuance, or sold any equity
security, bond, note or other security, or granted,
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<PAGE> 6
or entered into, any commitment or obligation to issue or sell any
such equity security, bond, note or other security, whether pursuant
to offers, stock option agreements, stock bonus agreements, stock
purchase plans, incentive compensation plans, warrants, calls,
conversion rights or otherwise;
E. Incurred additional debt for borrowed money, or
incurred any obligation or liability (fixed, contingent or otherwise)
except in the ordinary and usual course of its business;
F. Paid any obligation or liability (fixed, contingent
or otherwise), or discharged or satisfied any lien or encumbrance, or
settled any liability, claim, dispute, proceeding, suit or appeal,
pending or threatened against them or any of their assets or
properties, except in the ordinary and usual course of its business;
G. Mortgaged, pledged, otherwise encumbered or subjected
to lien any of its assets or properties, tangible or intangible,
except for liens for current taxes which are not yet due and payable
and purchase-money liens arising out of the purchase or sale of
products or services made in the ordinary and usual course of its
business;
H. Sold, transferred, leased, licensed or otherwise
disposed of any asset or property, tangible or intangible, except in
the ordinary and usual course of its business, or discontinued any
product line or the manufacture, sale or other disposition of any of
its products or services;
I. Purchased or otherwise acquired any debt or equity
securities of any corporation, partnership, joint venture, firm or
other entity;
J. Made any expenditure for the purchase, acquisition,
construction or improvement of a capital asset, except in the ordinary
and usual course of its business;
K. Entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of
business and not involving an amount in any case in excess of
$5,000.00;
L. Waived any right or claim or cancelled any debts or
claims or voluntarily suffered any extraordinary losses;
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<PAGE> 7
M. Sold, assigned, transferred or conveyed any property
rights, except in the ordinary and usual course of business;
N. Effected any amendment or supplement to any employee
profit sharing, stock option, stock purchase, pension, bonus,
incentive, retirement, medical reimbursement, life insurance deferred
compensation or any other employee benefit plan or arrangement;
O. Paid to or for the benefit of any of its directors,
officers, employees or shareholders any compensation of any kind other
than wages, salaries and benefits at times any rates in effect prior
to December 31, 1995;
P. Effected any change in its directors or executive
management;
Q. Effected any amendment or modification in its
Articles of Incorporation or By-Laws;
R. Had any labor trouble that has or might materially
and adversely affect its condition (financial or otherwise), earnings,
business, assets, liabilities, properties, operations or prospects;
S. Changed its accounting methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates);
T. Revalued any of its assets;
U. Increased the salary or other compensation payable or
to become payable to any of its officers, directors or employees, or
declared, paid or committed to pay a bonus or other additional salary
or compensation to any such person;
V. Made any loan to any person or entity, or guaranteed
any loan;
W. To the best of Selling Parties' knowledge, had any
other event or condition of any character that has or might reasonably
have a material and adverse effect on its condition (financial or
otherwise), earnings, business, assets, liabilities, properties,
operations or prospects; or
X. Agreed, committed or entered into any other
understanding to do any of the things described in the preceding
Subsections A through W.
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<PAGE> 8
SECTION 2.10 TAXES. To the best of Selling Parties'
knowledge, within the times and in the manner prescribed by law, Corporation
has filed all tax returns required to be filed and has paid or made adequate
provision for payment of all taxes upon it, its properties, income or
franchises, due and payable on or before the date hereof. There are no claims
pending against Corporation for past-due taxes, nor has Corporation been
notified of any claims. There are no present disputes or discussions with
federal, state, local, foreign, commonwealth or other authorities with respect
to any taxes of any nature payable by Corporation. There are no outstanding
waivers or agreements by Corporation for the extension of the time for the
assessment of any tax. The tax returns of Corporation, if audited, have been
finally determined by the Internal Revenue Service or other taxing authority,
or otherwise closed, and any penalties, deficiencies, assessments, additions to
tax and interest proposed as a result of such audits have been paid or settled.
To the best of Selling Parties' knowledge, the charges, accruals and reserves
for taxes reflected in the balance sheet as of December 31, 1995, and included
in the Financial Statements, are, adequate for any and all taxes for the
periods ending the date of such balance sheets and for all prior periods,
whether or not disputed. As used in this Section 2.10, the terms "tax" and
"taxes" refer to any tax, assessment, additions to tax, fee, penalty, interest
or other governmental charge imposed by any federal, state, county, local,
foreign, commonwealth or other governmental entity. Corporation has never
filed, nor will it file, any consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended, on or before the Closing Date.
SECTION 2.11 RECEIVABLES. Except as set forth in Exhibit
"2.11", all receivables of Corporation shown on the balance sheets included in
the Financial Statements are carried at values determined in accordance with
generally accepted accounting principles consistently applied, reflect all
pertinent facts known to Corporation as of the date hereof, and represent valid
and binding obligations of the debtors requiring no further performance by
Corporation. Except as set forth in Exhibit "2.11", reserves for doubtful
accounts have been established on the books of Corporation in accordance with
generally accepted accounting principles consistently applied and are reflected
on the balance sheets included in the Financial Statements.
SECTION 2.12 INVESTMENTS AND INVESTMENT SECURITIES.
Corporation has no interest, of record or beneficial, direct or indirect, in
any governmental bonds or notes, other investment securities and assets held
for investment except as set forth in Exhibit "2.12".
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<PAGE> 9
SECTION 2.13 REAL PROPERTY.
A. Exhibit "2.13" sets forth a complete and accurate
address of each parcel of real property, together with all buildings,
fixtures and other improvements located thereon (collectively, the
"Real Property") leased to Corporation. Corporation does not own or
have an ownership interest in any real estate.
B. To the best of Selling Parties' knowledge, the Real
Property and the current and planned use thereof is and will be in
compliance with any applicable lease thereof.
C. No notice of violation of any applicable federal,
state or local statute, law, ordinance, rule, regulation, order or
requirement, or of any covenant, condition, restriction or easement
affecting the Real Property or with respect to the use or occupancy of
the Real Property, has been given to Corporation by any governmental
authority having jurisdiction over the Real Property or by any other
person entitled to enforce the same.
D. Corporation has not subjected, and will not subject
or suffer to be subjected hereafter the Real Property or any portion
thereof to any lease (except a lease by Corporation), sublease,
tenancy, concession, license, occupancy agreement or similar right,
mortgage, deed of trust, lien, encumbrance, claim, charge, equity,
covenant, condition, restriction, easement, right of way or other
matter affecting the Real Property or any portion thereof except as
set forth in Exhibit "2.13".
E. To the best of Selling Parties' knowledge there are
no unpaid taxes, assessments (special, general or otherwise) or bonds
of any nature affecting the Real Property or any portion thereof due
and payable by Corporation.
SECTION 2.14 LEASES. Exhibit "2.14" lists all leases,
rental agreements, conditional sales contracts and other similar agreements
(collectively, "Leases"), as amended, which cannot be terminated by Corporation
without liability at any time upon less than thirty (30) days' notice or which
involve payment by them in the future of more than $10,000, under which
Corporation holds or uses any real or personal property or leases any of the
same to others. Corporation has complied with the material provisions of all
Leases, and all such Leases are valid, in good standing and enforceable by
Corporation in accordance with their terms, except as limited
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<PAGE> 10
by bankruptcy, insolvency or other similar laws affecting the rights of
creditors generally and by limitations or enforceability applicable to
contracts generally. Notwithstanding anything contained in the Leases,
Corporation has such title to or interests thereunder as are necessary to
continue to conduct its business as presently conducted or as presently
proposed to be conducted, and there is, to the best of Selling Parties'
knowledge, no title defect to which any of the Leases is subject which might be
expected at any time to have a material adverse effect on Corporation or its
condition (financial or other), earnings, assets, liabilities, business,
operations or prospects. Exhibit "2.14" sets out any and all advances,
deposits and prepayments made by Corporation under the Leases.
SECTION 2.15 ENVIRONMENTAL MATTERS.
A. None of the operations or property of Corporation is
or has been subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a
violation of or liability under any requirements of law derived from
or relating to all federal, state and local laws relating to or
addressing the environment, health or safety (including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section Section 9601 et seq., Occupational
Safety and Health Act, 29 U.S.C. Section Section 651 et seq.,
Resource Conversation and Recovery Act, 42 U.S.C. Section Section
6901 et seq., Clean Air Act, 42 U.S.C. Section Section 7401 et seq.,
Federal Water Pollution Control Act, 33 U.S.C. Section Section 1251
et seq., and any similar federal or state acts or statutes now in
effect), which requirements are sometimes herein collectively referred
to as the "Environmental Laws".
B. Other than the customary disposal of toner cartridges
and other ordinary waste associated with equipment owned or leased by
the Corporation through Corporation's trash removal service, which
disposal, to the best of Selling Parties' knowledge, has been in
compliance with applicable Environmental Laws, Corporation has no
actual knowledge of a "Release" nor has it filed any notice under any
applicable Environmental Laws reporting such "Release" (defined as any
spill, emission, leaking, deposit, discharge, dispersal or other
release) into the indoor or outdoor environment or into or out of any
of the Real Estate (including movement in or through the air, soil,
surface water, groundwater or property) of a "Contaminant" (defined as
any hazardous substance, toxic substance, hazardous waste, special
waste, petroleum or petroleum-derived substance or waste, asbestos,
polychlorinated biphenyls, or any constituent of any of
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<PAGE> 11
the foregoing, including such items as are defined under any federal,
state or local law or regulation), or indicating past or present
treatment, storage (other than for less than ninety (90) days) or
disposal of a "hazardous waste" (as that term is defined under 40 Code
of Federal Regulations ("CFR") Part 261 or any state equivalent) or
reporting a material violation of any applicable Environmental Laws.
C. Corporation has not received any written notice,
claim or report from any governmental authority or third party to the
effect that Corporation is or may be liable to any other person or
entity as a result of the Release or threatened Release of a
Contaminant into the environment.
SECTION 2.16 PATENTS, ETC. Exhibit "2.16" contains a list
and brief description of all trade names, trademarks, trademark registrations
and applications for registration, service marks, patent rights, patent
applications, trade secrets, copyrights and applications therefor (herein
collectively referred to as "Proprietary Rights") owned by Corporation, useful
or necessary to the conduct of its business, or in which Corporation has any
rights, licenses or immunities and of all patent licensing and similar
arrangements to which Corporation is a party. All Proprietary Rights are owned
by Corporation, and are, valid and in full force and effect.
SECTION 2.17 NON-INFRINGEMENT; AGREEMENTS. Except as set
forth in Exhibit "2.17", no Proprietary Right is the subject of litigation or
other adversary proceedings. To the best of Selling Parties' knowledge, no
present or presently proposed operation or activity of Corporation infringes
the rights of any other person or entity, and no person or entity is infringing
the Proprietary Rights of Corporation. Corporation has the right and
authority, including without limitation, adequate licenses, to use such
Proprietary Rights as are necessary to enable Corporation to conduct and
continue to conduct all phases of its business in the manner presently
conducted by it. Corporation is not a party to or bound by any license or
agreement requiring the payment by it of any royalty, override or similar
payment in connection with any activity conducted or to be conducted by it.
Except as provided for by the terms of contracts with governmental authorities,
Corporation is not a party to any agreement: (i) prohibiting or restricting its
use or sale of any special device, item, customer list, secret process or the
like; or (ii) limiting its business to any territory, pricing policy or
customers; or (iii) requiring exclusive dealing or otherwise in restraint of
its business.
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SECTION 2.18 INSURANCE. All policies of liability, theft,
life, fire, title and other forms of insurance and surety bonds (including,
without limitation, any standby letters of credit), insuring Corporation, its
directors, officers, employees, properties, assets and business are listed and
briefly described on Exhibit "2.18". All of said policies are valid and in
good standing.
SECTION 2.19 INTERESTED TRANSACTIONS. Except as set forth
in Exhibit "2.19", Corporation has no contract or agreement (oral or written)
with, any outstanding loans to or from, or any outstanding liabilities (except
for no more than one (1) months' salary at no more than the current annual
rate) to any officer, director, employee or stockholder of Corporation or any
relative of any such person or any corporation or other entity in which any of
such persons has a material financial interest, direct or indirect, or of which
any such person is an officer, director or partner.
SECTION 2.20 CUSTOMERS AND SALES. A correct and current
list of all customers of Corporation whose annual purchases exceed $100,000,
is set forth on Exhibit "2.20". There are no facts or circumstances known to
the Selling Parties or any of them indicating that any customer who has ordered
products or services from Corporation which have not yet been delivered intends
to cancel such order. Selling Parties have no knowledge that any of the
customers of Corporation intend to cease doing business with Corporation, or
materially alter the amount of the business that they are presently doing with
Corporation.
SECTION 2.21 EXISTING EMPLOYMENT CONTRACTS AND/OR
REMUNERATION AGREEMENTS. Exhibit "2.21" sets forth a complete and accurate
list of all employment contracts or other agreements or arrangements providing
for employee remuneration or benefits to which Corporation is a party or by
which Corporation is bound, copies of the originals of which have been provided
to Buyer. All such contracts and arrangements are in full force and effect,
and neither Corporation nor any other party is in default under any such
contract or arrangement, nor are there any amendments, modifications, changes
or releases thereto, written or oral. There have been no claims of defaults
and there are no facts or conditions which if continued, or upon notice, will
result in a default under such contracts or arrangements. There is no pending
or threatened labor dispute, strike or work stoppage affecting the business of
Corporation.
SECTION 2.22 EMPLOYEE BENEFITS PLANS. Exhibit "2.22" sets
forth a complete and accurate list of all collective bargaining agreements and
all pension, bonus, profit-sharing, stock option or other plan or arrangement
providing for employee benefits (including any plan within the
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meaning of Section 3(3) of the Employment Retirement Income Security Act), to
which Corporation is a party or by which Corporation is bound, copies of the
originals of which are attached hereto as Exhibit "2.22". There are no
unfunded liabilities or other obligations of Corporation with respect to any
such collective bargaining agreements, or pensions, bonus, profit-sharing,
stock option or other plans or arrangements providing for employee benefits
except as set forth on Exhibit "2.22" hereto. No employees of Corporation
except Duff have employment contracts.
SECTION 2.23 WORKERS COMPENSATION; EMPLOYMENT
DISCRIMINATION; LABOR RELATIONS. To the best of Selling Parties' knowledge,
Corporation has complied in all material respects with all applicable federal,
state and local laws, rules, regulations and executive orders relating to
employment, all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, and the withholding and payment of taxes from
compensation of employees and the payment of premiums and benefits under
applicable worker compensation laws. There are no employment discrimination
proceedings by any employee or former employees against Corporation currently
threatened or pending before any state or federal court or state or federal
administrative agency, tribunal, commission or board and no facts or
circumstances exist which may result in the filing or commencement of any such
proceeding. All currently pending or outstanding worker's compensation claims
are listed on Exhibit "2.23" attached hereto and all such claims are fully
insured against. There is no effort being made to organize the employees of
Corporation into any collective bargaining unit or to solicit them to join any
labor organization and Corporation has no knowledge of any intention on the
part of any labor organization to organize such employees or to solicit them to
join any labor organization. Corporation is not bound by any prior court,
administrative agency, tribunal, commission or board, decree, judgment,
decision, arbitration agreement or settlement relating to collective bargaining
agreements, conditions of employment or, to the best of Selling Parties'
knowledge, attempts to organize a collective bargaining unit which may
adversely affect the business and affairs of Corporation or the transactions
contemplated hereby. Except as set forth on Exhibit "2.23", there is no unfair
labor practice compliant against Corporation pending before the National Labor
Relations Board.
SECTION 2.24 OTHER CONTRACTS. Exhibit "2.24" lists and
briefly describes all contracts, agreements, commitments, guarantees, letters
of intent, understandings or other arrangements of a contractual nature,
written or oral (including, but not limited to, franchise, patent, trademark
and royalty agreements), other than outstanding purchase orders made in the
ordinary course of business, to which Corporation is a party and which: (i)
involve payment by Corporation of
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more than $10,000; or (ii) materially affect the condition (financial or
other), earnings, assets, liabilities, business, operations or prospects of
Corporation. Corporation has, to the best of Selling Parties' knowledge,
complied in all material respects with the provisions of all contracts under
which it is bound, and has not been in material default or claimed default
under any thereof. For purposes of the preceding sentence, any breach or
claims of breach, other than those which could be cured by the payment of not
more than $20,000 in the aggregate for all breaches and claimed breaches
(whether or not related) shall be deemed "material".
SECTION 2.25 OFFICERS AND DIRECTORS, ETC. Exhibit "2.25"
is a true and complete list of:
A. The names of all present officers and directors of
Corporation and their current annual salary or other compensation
(such as, but not limited to, consultant's fees) and including all
bonuses, whether deferred, accrued or otherwise, which were paid or
accrued during 1995;
B. The names, titles and annual compensation of all
salaried employees of Corporation whose compensation (in whatever
form) from Corporation as of the date hereof will equal or exceed an
annual rate of $50,000, or equalled such amount in the year ended
December 31, 1995.
C. The name of each bank or other financial institution
in which Corporation has an account, deposit or safe deposit box, and
the names of all persons authorized to draw thereon or to have access
thereto;
D. The names of all persons holding tax or other powers
of attorney from Corporation and a summary of the terms of each; and
E. The names of all persons authorized (by the By-Laws
or by resolution of the Board of Directors or otherwise) to write
checks or borrow funds on behalf of Corporation.
SECTION 2.26 CORPORATE DOCUMENTS. Corporation has
furnished or made available to Buyer or its representatives for its
examination, the originals, or true, correct and complete copies, of: (i) the
Articles of Incorporation and By-Laws of Corporation; (ii) the minute books of
Corporation containing all records required to be set forth of all proceedings,
consents, actions and meetings of the shareholders and Board of Directors;
(iii) all permits, orders and consents issued by any governmental authority
(domestic or foreign) with respect to Corporation, or any security issued by
them, and all applications for such permits, orders and consents; and (iv)
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the stock transfer books of Corporation setting forth all issuances and
transfers of any capital stock.
SECTION 2.27 LITIGATION AND CLAIMS. Except as set forth
on Exhibit "2.27", there is: (i) no action, suit, proceeding, claim or
investigation pending or, to the best of Selling Parties' knowledge,
threatened, in any court or before any arbitrator or before or by any federal,
state or other governmental department, commission, bureau, agency or
instrumentality, domestic or foreign; and (ii) no other unresolved claim made
against Corporation or affecting it or its properties or business, or the
transactions contemplated by this Agreement or any factual or legal basis for
any such action, suit, proceeding, claim or investigation which would
materially affect any of the same. All correspondence, memoranda and other
written notifications (collectively "Complaints") which it has received within
the twelve (12) months preceding the date hereof concerning, or relating to,
complaints or expressions of dissatisfaction with the products, services or
personnel of Corporation, which Complaints, either individually, or in the
aggregate, could result in a material adverse change to the condition
(financial or other), earnings, business, assets, operations or prospects of
Corporation are listed on Exhibit "2.27" and Buyer has been provided with
accurate and complete copies of same. The matters set forth in Exhibits
"2.27", if decided adversely to Corporation will not result in a material
adverse change in the earnings, business, assets or condition (financial or
other), operations or prospects of Corporation. Except as set forth on Exhibit
"2.27", Corporation is not presently engaged in any legal action to recover
monies due to it or damages sustained by it.
SECTION 2.28 GENERAL LIABILITY. Selling Parties have no
knowledge of any statement of facts or the occurrence of any event forming the
basis for any present tort claim against Corporation not covered by insurance.
SECTION 2.29 OTHER TANGIBLE PERSONAL PROPERTY. Exhibit
"2.29" contains a complete and accurate list and brief description of all
machinery, tools, dies, appliances, vehicles, furniture, equipment (including
essential replacement parts) and other tangible personal property of any kind
and description, other than inventories, owned or leased by Corporation (the
"Tangible Personal Property"). The Tangible Personal Property constitutes all
tangible personal property necessary for the conduct by Corporation of its
business as now conducted. All motor vehicles listed on Exhibit "2.29" have
current smog certificates or have passed emission standards examinations
required by applicable law. Except as stated in Exhibit "2.29", no Tangible
Personal Property used by Corporation in connection with its business is held
under any lease, security agreement, conditional sales contract or other
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title retention or security arrangement, or is located other than in the
possession of Corporation.
SECTION 2.30 TITLE TO ASSETS. Except for property leased
by Corporation, Corporation has good and marketable title to all its assets and
interests in assets, whether real, personal, mixed, tangible and intangible,
which constitute all the assets and interests in assets that are used in its
business. All these assets are free and clear of mortgages, liens, pledges,
charges, encumbrances, equities, claims, easements, rights of way, covenants,
conditions or restrictions, except for: (i) those disclosed in Corporation's
balance sheet included in the Financial Statements; (ii) the lien of current
taxes not yet due and payable; and (iii) possible minor matters that, in the
aggregate, are not substantial in amount and do not materially detract from or
interfere with the present or intended use of any of these assets, nor
materially impair business operations. All real property and tangible personal
property of Corporation is in good operating condition and repair, ordinary
wear and tear excepted. Corporation is in possession of all premises leased to
it from others. No officer, nor any director or employee of Corporation, nor
any spouse, child or relative of any of these persons, owns or has any
interest, directly or indirectly, in any of the real or personal property owned
by or leased to or any copyrights, patents, trademarks, trade names or trade
secrets licensed by Corporation.
SECTION 2.31 BEST KNOWLEDGE. The term "to the best of
Selling Parties' knowledge", or equivalent terms, as used to qualify any of the
foregoing representations and warranties, means knowledge of Duff, Trudgeon,
Brown and Clement after diligent and reasonable investigation as to the
subject matter of such representations and warranties.
SECTION 2.32 ACCURACY AND COMPLETENESS OF REPRESENTATIONS
AND WARRANTIES. No representation or warranty made by Selling Parties in this
Agreement and no statement contained in any document or instrument delivered or
to be delivered to Buyer pursuant hereto or in connection with the transactions
contemplated hereby contain or will contain any untrue statement of a known
material fact, or omits or will omit to state a known material fact necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Selling Parties as
follows:
SECTION 3.1 ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and is duly authorized to carry on its
business where and as now conducted and to own, lease and operate properties as
it now does.
SECTION 3.2 AUTHORIZATION. Buyer has full power and
authority to enter into this Agreement and to perform this Agreement in
accordance with its terms, and the execution, delivery and performance of this
Agreement by Buyer has been duly authorized by all requisite corporate action,
including approval by Buyer's Board of Directors.
SECTION 3.3 NO BREACH. Buyer knows of no facts or
circumstances that may tend to cause, or relate to, an existing or potential
breach or default by Selling Parties of the material terms, conditions,
representations and warranties set forth herein.
ARTICLE 4
FURTHER AGREEMENTS OF THE PARTIES
SECTION 4.1 ACCESS TO INFORMATION. Buyer and its
representatives may make such investigation of the properties, assets and
business of Corporation as Buyer may reasonably request, and Corporation shall
give to Buyer and to its counsel, accountants and other representatives, full
access during normal business hours to all of the properties, books, contracts,
commitments, records and files of Corporation, and shall furnish to Buyer all
such documents and copies of documents (certified as true and complete if
requested) and such information concerning the business and affairs of
Corporation as Buyer may reasonably request. Such investigation shall not be
deemed in any way to diminish the liability of Selling Parties in respect of
the representations, warranties, schedules, certificates or agreements given
hereunder. Notwithstanding the foregoing, Buyer acknowledges that it has no
knowledge on the date hereof of any information which would give rise to a
claim of breach of warranty against Selling Parties.
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SECTION 4.2 CONDUCT OF BUSINESS BY CORPORATION. From
the date hereof until the Closing Date, except as Buyer may previously consent
in writing, Corporation shall:
A. Carry on its business and activities in the ordinary
course as previously carried on, and shall not make or institute any
methods of management, accounting or operation that will vary
materially from those methods used by Corporation as of the date of
this Agreement. Without limitation of the generality of the
foregoing, Corporation shall not enter into any agreement or
arrangement involving sale or lease of a material portion of its
assets or the granting of any preferential right to purchase such
assets, properties or rights, except in connection with the sale or
lease of inventory to customers in the ordinary course of business;
B. Maintain in full force and effect the insurance
policies listed in Exhibit "2.18" to this Agreement;
C. Make no change in its Articles of Incorporation or
By-Laws;
D. Make no change in its authorized or issued capital
stock and issue or grant no options, warrants or rights to purchase
shares of or convert other securities into its capital stock;
E. Declare or pay no dividend or other distribution in
respect of any shares of its capital or make any payments of salary or
bonus to any of Shareholders (other than Duff in connection with his
current employment contract) including, but not limited to, the second
monthly distribution for March, 1996 or the quarterly distribution
which has been made historically by Corporation;
F. Purchase, redeem or otherwise acquire, directly or
indirectly, no shares of its capital stock;
G. Use its best efforts to preserve its business
organization intact, to keep available the services of its present
officers and employees, except in the case of unsatisfactory
performance, and to preserve the good will of all those having
business relations with it (including, but not limited to, its
customers);
H. Enter no contract or commitment, except contracts or
commitments entered into in the ordinary course of business, none of
which (other than inventory purchases customary in nature and amount)
shall involve payment by Corporation of more than $5,000;
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I. Terminate none of the contracts or agreements listed
in Exhibit "2.24" or modify any of said contracts or agreements except
in accordance with their terms;
J. Except pursuant to existing arrangements disclosed in
Exhibit "2.25": (i) grant no increase in salaries or compensation
payable or to become payable by it, to any officer, employee, sales
agent or representative, other than increases in customary amounts
pursuant to normally scheduled salary reviews; or (ii) increase
benefits payable under any employee plan or otherwise to any officer,
employee, sales agent or representative;
K. To the best of Selling Parties' knowledge, duly
comply with all laws, regulations, ordinances, orders, injunctions and
decrees applicable to it and to the conduct of its business;
L. Encumber or mortgage none of its property or incur
any liability for borrowed money, other than in the ordinary course of
business, make any loans or advances to or assume, guarantee, endorse
or otherwise become liable with respect to, the obligations of any
other person, firm or corporation;
M. Acquire or agree to acquire none of the assets or
capital stock of any other person, firm or corporation, except for
purchases from suppliers in the ordinary course of business;
N. Make or agree to make no capital expenditures in
excess of $10,000 for any single item, or $10,000 in the aggregate, or
enter into any leases of capital equipment or property under which the
annual lease charge is in excess of $10,000;
O. Maintain and keep its properties and facilities in as
good condition and working order as at present, except for
depreciation through ordinary wear and tear;
P. Perform all of its obligations under contracts
relating to or affecting its assets, properties and rights, except for
non-material failures;
Q. Not do, or agree to do, except in the ordinary course
of business, any of the following acts: (i) pay any obligation or
liability, fixed or contingent, other than current liabilities; (ii)
waive or compromise any right or claim; or (iii) cancel, without full
payment, any note, loan or other obligation owing to Corporation;
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R. Enter into no negotiations or agreements with any
governmental authority (other than negotiations or agreements for the
purchase of goods or services from Corporation) which would affect the
future operation of its business; and
S. Write off none of the receivables on its books other
than the receivable which is the subject of the Lawsuit, which will be
written off prior to the Closing Date.
SECTION 4.3 CONSENTS. Corporation shall use its best
efforts to obtain the consent of all persons whose consent is required to the
consummation of the transactions contemplated hereby, in form and substance
satisfactory to Buyer.
SECTION 4.4 COMMUNICATIONS. Each party hereto agrees to
consult and obtain the prior approval of the other parties, which approval
shall not be unreasonably withheld or delayed, on reasonable notice as to the
content of any press releases or any written statements for general circulation
regarding the subject contained in this Agreement.
SECTION 4.5 UPDATING OF SCHEDULES. From the date hereof
until the Closing Date, Corporation shall keep up to date all of the schedules,
exhibits and certificates furnished (or to be furnished) under this Agreement,
and shall promptly notify Buyer of any changes, additions or events which may,
after the lapse of time, cause any change or addition thereto.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING PARTIES
The obligations of Selling Parties to consummate the
transactions contemplated by this Agreement shall be subject to the following
conditions, except as Selling Parties may waive in writing in accordance with
Section 10.5 below:
SECTION 5.1 PERFORMANCE. Buyer shall have performed and
complied with all agreements and covenants required by this Agreement to be
performed or satisfied by it on or prior to the Closing Date.
SECTION 5.2 REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants of Buyer, set forth in Article 3
hereof, shall be true and correct in all material aspects on the date hereof,
and on the Closing Date, as if made again at and as of such time, subject to
any transactions which are contemplated or permitted by this Agreement.
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SECTION 5.3 CERTIFICATE OF OFFICER. Selling Parties
shall have been furnished with a certificate executed by an officer of Buyer,
in form and substance satisfactory to Selling Parties, certifying the
fulfillment of the condition set forth in Section 5.2 above.
SECTION 5.4 LEGAL OPINION. Seyburn, Kahn, Ginn, Bess,
Deitch and Serlin, counsel for Buyer, shall have delivered to Selling Parties
its opinion to the effect set forth in Exhibit "5.4".
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the following conditions,
except as Buyer may waive in writing in accordance with Section 10.5 below:
SECTION 6.1 AUTHORIZATION OF TRANSACTION. All action
necessary to authorize the execution, delivery and performance of this
Agreement by Selling Parties and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors of Corporation and by the Shareholders.
SECTION 6.2 UNTRUE STATEMENTS. This Agreement, together
with the Exhibits attached hereto or subsequently provided to Buyer at the time
of Closing, shall not contain any untrue statement of a known material fact or
omit to state a known material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
SECTION 6.3 MATERIAL ADVERSE CHANGE. There shall have
been no material adverse change in the condition (financial or otherwise),
earnings, business, assets, liabilities, properties, operations or prospects of
Corporation, and there shall not have been any occurrence, circumstance or
combination thereof (whether arising heretofore or hereafter), including
litigation pending or threatened, which might result in any such material
adverse change before or after the Closing Date.
SECTION 6.4 REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Selling Parties contained herein, except as
contemplated hereby, shall be true at and as of the Closing Date with the same
effect as though such representations and warranties have been made at and as
of such time, and Selling Parties shall have performed or complied with all
obligations, covenants and conditions required by this
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Agreement to be performed or complied with by them prior to or at the Closing
Date.
SECTION 6.5 CERTIFICATE OF SELLING PARTIES. Buyer shall
have been furnished with a certificate executed by an officer of Corporation
and certificates executed by each of the Shareholders, in form and substance
satisfactory to Buyer, certifying to the fulfillment of the condition set forth
in Section 6.4 above.
SECTION 6.6 LEGAL OPINION. Potter, Anderson & Corroon,
counsel for Duff, and Hepburn, Willcox, Hamilton & Putnam, counsel for
Corporation, Trudgeon, Brown and Clement, shall have each delivered to Buyer
their opinion to the effect set forth in Exhibit "6.6".
SECTION 6.7 LITIGATION. Immediately prior to the Closing
Date, there shall be no litigation or proceeding: (i) pending or threatened
against Buyer or Corporation, or any of their respective directors, officers or
shareholders, or involving the assets or properties of any of them, for the
purpose of enjoining or preventing the consummation of this Agreement or
otherwise claiming that such consummation is improper; or (ii) pending against
Buyer or Corporation which, if decided adversely, would adversely affect the
right of Buyer to retain the stock, property and other assets or to continue
the operations of the property, assets and business of Corporation (or of Buyer
or any of its subsidiaries) after the Closing Date, and which, in the judgment
of the Board of Directors of Buyer, would make the consummation of this
Agreement inadvisable. Immediately prior to the Closing Date, there shall be
no governmental investigation pending or threatened which, in the judgment of
the Board of Directors of Buyer, might lead to or result in any litigation or
proceeding of the nature referred to in the foregoing sentence.
SECTION 6.8 THIRD PARTY CONSENTS. Prior to the Closing ,
Corporation shall have obtained the written consent, waiver or approval of each
person: (i) who is a party to a contract or agreement with Corporation or a
contract or agreement by which Corporation or its property is bound; (ii) whose
consent, waiver or approval is required under such contract or agreement as a
result of consummation of the transactions contemplated by this Agreement; and
(iii) whose failure to provide such consent, waiver or approval would have or
might reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), earnings, business, assets, liabilities, operations
or prospects of Corporation.
SECTION 6.9 CORPORATE ACTION. Immediately prior to the
Closing, Buyer shall have received, in form and substance reasonably
satisfactory to Buyer, the resignations of
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such officers and directors of Corporation, effective as of the Closing Date,
as Buyer may have stipulated to Corporation in writing prior to the Closing
Date.
SECTION 6.10 EMPLOYMENT AGREEMENT. Duff shall have
executed and delivered to Buyer an employment agreement with Corporation on
mutually acceptable terms and conditions.
ARTICLE 7
THE CLOSING
SECTION 7.1 TIME AND PLACE. The transfer of the Shares
by Shareholders to Buyer (the "Closing") shall take place at the offices of
Buyer in Troy, Michigan, or at the office of Duff's counsel in Wilmington,
Delaware at 10:00 a.m., local time, on March 25, 1996, or at such other time
and place as the parties may agree to in writing (the "Closing Date").
Notwithstanding anything to the contrary set forth herein, if Selling Parties
have, due to circumstances beyond their control, been unable to satisfy any of
the conditions precedent to Buyer's obligations set forth in Article 6 hereof
by the aforesaid date, they shall be entitled to an automatic fourteen (14) day
extension of the Closing Date set forth herein.
SECTION 7.2 SELLING PARTIES' OBLIGATIONS AT CLOSING. At
the Closing, Shareholders shall deliver to Buyer the following instruments, in
form and substance satisfactory to Buyer and its counsel, against delivery of
the items specified in Section 7.3:
A. Certificates representing the Shares, registered in
the name of the respective Shareholders, duly endorsed by the
respective Shareholders for transfer as specified in Section 1.1 above
or accompanied by a separate written instrument of assignment. On
submission of those certificates to Corporation for transfer,
Corporation shall issue to Buyer a new certificate representing the
Shares, registered in the name of Buyer and will also issue a new
certificate to Duff;
B. The stock book, stock ledger, minute book and
corporate seal of Corporation;
C. The opinions of counsel as provided in Section 6.6;
D. Except as otherwise specified by Buyer, the written
resignations of all the officers and directors of Corporation;
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E. The certificates executed by Corporation's officer
and the Shareholders, dated the Closing Date, as provided in Section
6.5; and
F. A termination of that certain Shareholders Agreement
dated January 8, 1992.
G. Consent of Landlord.
SECTION 7.3 BUYER'S OBLIGATIONS AT CLOSING. At the
Closing, Buyer shall deliver to Shareholders the following instruments and
documents against delivery of the items specified in Section 7.2:
A. The Initial Purchase Price payable to Shareholders in
the amounts specified in Section 1.2, payable to Shareholders in their
respective proportions;
B. Certified resolutions of Buyer's Board of Directors,
in form reasonably satisfactory to counsel for Selling Parties,
authorizing the execution, delivery and performance of this Agreement
and all actions to be taken by Buyer under this Agreement; and
C. The certificate executed by Buyer's officer, dated
the Closing Date, as provided in Section 5.3.
D. The opinion of counsel as provided in Section 5.4.
ARTICLE 8
OBLIGATIONS AFTER CLOSING
SECTION 8.1 AGREEMENT TO REFRAIN FROM COMPETITION. The
parties agree that the provisions of this Section 8.1 are intended to supersede
and replace Section 7 of the Stockholders Agreement dated January 24, 1992 by,
between and among Duff, Trudgeon, Brown and Clement. The provisions of
Sections 8.1A, 8.1B, 8.1C and 8.1D of this Agreement in favor of Buyer and Duff
shall apply only to the following persons and to no others: Michael Trudgeon;
Michael Brown; and Brian Clement (hereinafter collectively referred to as
"Investor Shareholders") it being acknowledged that the noncompetition
agreement of Duff in favor of Buyer is contained in the separate employment
agreement between Duff and the Corporation.
A. Investor Shareholders agree, individually, that they
will not, directly or indirectly (and whether or not for
compensation), within the two (2) year period immediately following
the Closing Date, actively solicit
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the following types of business within the City of Wilmington,
Delaware:
copying, collating, imaging, printing, binding and facilities
management activities engaged in by Corporation on the date of
this Agreement in the litigation support services business as
long as Buyer (or any successor) shall, directly or
indirectly, be engaged in such activity in Wilmington,
Delaware; provided, however, that nothing contained in this
Section 8.1A shall prevent Investor Shareholders from
investing in any company the shares of which are traded on a
securities exchange or in the over-the-counter market.
Nothing contained herein shall preclude Investor Shareholders from
responding to requests for proposals or other forms of inquiries from
businesses within the City of Wilmington, Delaware.
B. If, in any judicial proceeding, a court shall
refuse to enforce the covenants included herein, then said
unenforceable covenant 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 Buyer, Duff and Investor
Shareholders that these covenants be given the maximum force, effect
and application permissible under law.
C. During the period specified in Section 8.1A, Investor
Shareholders further agree not to: (i) divulge, communicate, use to
the detriment of Corporation or Buyer or for the benefit of any other
person or persons, or misuse in any way, any confidential information
or trade secrets of Corporation, including personnel information,
know-how, computer programs, customer lists or other technical data;
(ii) divert or attempt to divert from Corporation any business of any
kind in which Corporation is engaged on the date hereof; or (iii)
induce or attempt to induce any person who is an employee of
Corporation on the date hereof to leave the employ of Corporation or
Buyer. Investor Shareholders acknowledge and agree that any
information or data which is unique to Corporation that they have
acquired on any of these matters or items was received in confidence
and as a fiduciary of Corporation. Notwithstanding the foregoing,
nothing contained herein shall be deemed to limit Investor
Shareholders from maintaining their ownership and management interests
in Reliable Copy Service, Inc., Reliable Management Services, Inc.,
Reliable Imaging Services, Inc., New Jersey Legal
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Copy, Inc., and Atomike, Inc. (trading as JPS Graphics) (collectively
referred to herein as the "Investor Shareholder Affiliates").
D. Each of the Investor Shareholders has had knowledge
of the affairs, trade secrets, customers, potential customers and
other proprietary information of Corporation, and each Investor
Shareholder acknowledges and agrees that compliance with the covenants
set forth in this Section 8.1 is necessary for the protection of the
good will and other proprietary interest of Corporation and Buyer.
Each Investor Shareholder acknowledges and agrees that in the event of
a breach of such covenants, neither Corporation, Buyer nor any
successors would have an adequate remedy at law, and Corporation,
Buyer and any successor shall be entitled to injunctive relief in
addition to any other remedies which may be available to them
hereunder. Notwithstanding the foregoing, nothing contained herein
shall be deemed to limit Investor Shareholders from maintaining their
ownership and management interests in the Investor Shareholder
Affiliates.
E. Buyer and Duff each agrees that it/he will not,
directly or indirectly (and whether or not for compensation), within
the two (2) year period immediately following the Closing Date,
actively solicit the following types of business within the City of
Philadelphia, Pennsylvania:
copying, collating, imaging, printing, binding and facilities
management activities engaged in by Investor Shareholder
Affiliates on the date of this Agreement in the litigation
support services business as long as the Investor Shareholders
(or any successor) shall, directly or indirectly, be engaged
in such activity in Philadelphia, Pennsylvania; provided,
however, that nothing contained in this Section 8.1E shall
prevent Buyer or Duff from investing in any company the shares
of which are traded on a securities exchange or in the
over-the-counter market.
Nothing contained herein shall preclude Buyer and Duff from responding
to requests for proposals or other forms of inquiries from businesses
within the City of Philadelphia, Pennsylvania.
F. If, in any Judicial proceeding, a court shall refuse
to enforce the covenants included herein, then said unenforceable
covenant shall be deemed eliminated from these provisions for the
purpose of those proceedings to
26
<PAGE> 27
the extent necessary to permit the remaining separate covenants to be
enforced. It is the intent and agreement of Buyer, Duff and Investor
Shareholders that these covenants be given the maximum force, effect
and application permissible under law.
G. During the period specified in Section 8.1E, each of
Duff and Buyer further agrees not to: (i) divulge, communicate, use
to the detriment of Investor Shareholders or for the benefit of any
other person or persons, or misuse in any way, any confidential
information or trade secrets of the Investor Shareholder Affiliates,
including personnel information, know-how, computer programs, customer
lists or other technical data; (ii) divert or attempt to divert from
the Investor Shareholder Affiliates any business of any kind in which
the Investor Shareholder Affiliates are engaged on the date hereof; or
(iii) induce or attempt to induce any person who is an employee of the
Investor Shareholder Affiliates on the date hereof to leave the employ
of any of the Investor Shareholder Affiliates. Duff acknowledges and
agrees that any information or data which is unique to the Investor
Shareholder Affiliates that he has acquired on any of these matters or
items was received in confidence and as a fiduciary of the Investor
Shareholder Affiliates. Notwithstanding the foregoing, nothing
contained herein shall be deemed to limit Duff from maintaining an
ownership interest in Corporation or Buyer.
H. Duff has knowledge of the affairs, trade secrets,
customers, potential customers and other proprietary information of
the Investor Shareholder Affiliates and Duff acknowledges and agrees
that compliance with the covenants set forth in this Section 8.1 is
necessary for the protection of the good will and other proprietary
interests of the Investor Shareholders. Duff acknowledges and agrees
that in the event of a breach of such covenant, neither the Investor
Shareholder nor any successors would have an adequate remedy at law,
and the Investor Shareholder and any successor shall be entitled to
injunctive relief in addition to any other remedies which may be
available to them hereunder. Notwithstanding the foregoing, nothing
contained herein shall be deemed to limit Duff from maintaining an
ownership interest in the Corporation.
SECTION 8.2 FURTHER ASSURANCES. From time to time, at
Buyer's request (whether or not after the Closing), and without further
consideration and at the expense of Buyer, Shareholders will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably
27
<PAGE> 28
request in order to consummate more effectively the transactions contemplated
by this Agreement, and to vest in Buyer good, valid and marketable title to the
Shares.
SECTION 8.3 DUFF CALL/PUT. At any time subsequent to the
eighteen (18) month anniversary of the Closing Date, Buyer shall have the right
to acquire or "call" all of the remaining shares of capital stock in
Corporation owned by Duff (the "Duff Shares"). In the event Buyer exercises
such right, the purchase price for the Duff Shares shall be equal to
Corporation's actual earnings before interest and taxes have been paid ("EBIT")
plus $50,000.00 for the twelve (12) calendar months immediately preceding the
giving of notice to Duff, multiplied by six (6) and further multiplied by the
percentage ownership in Corporation evidenced by the Duff Shares. For example,
if the EBIT for the twelve (12) calendar months preceding the giving of notice
to Duff is $410,000.00 and the Duff Shares constitute thirty-five (35%) percent
of the outstanding and issued capital stock of Corporation, the formula for
computing the purchase price shall be: ($460,000.00 x 6) x 35% - $966,000.00.
Buyer's right to purchase the Duff Shares shall be exercised by written notice
to Duff, which notice shall be accompanied by a profit and loss statement,
prepared by Corporation's certified public accountants, for the twelve (12)
calendar months preceding the giving of the notice. The closing of Buyer's
purchase of the Duff Shares shall occur within thirty (30) days of the giving
of the notice. At the closing, Duff shall deliver to Buyer certificates,
endorsed in blank or accompanied by a separate assignment, evidencing Duff's
remaining ownership interest in the Corporation, a resignation if an officer,
and a certification of those representations and warranties set forth in
Section 2.3 of this Agreement.
In the event Buyer has not previously exercised its right to
purchase the Duff Shares, then, at any time subsequent to the thirty (30) month
anniversary of the Closing Date, Duff shall have the right to "put" or require
Buyer to purchase the Duff Shares. If Duff exercises such right, the purchase
price for the Duff Shares shall be equal to Corporation's EBIT for the twelve
(12) calendar months immediately preceding the giving of notice to Buyer,
multiplied by five (5) and further multiplied by the percentage ownership in
Corporation evidenced by the Duff Shares. Duff's right to require Buyer to
purchase the Duff Shares shall be exercised by written notice to Corporation.
Within thirty (30) days of the giving of such notice, Corporation shall provide
to Duff a profit and loss statement, prepared by Corporation's certified public
accountants, for the twelve (12) calendar months preceding the giving of the
notice. The closing of Buyer's purchase of the Duff Shares shall occur within
thirty (30) days of Duff's
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<PAGE> 29
receipt of the profit and loss statement. At the closing, Duff shall deliver
to Buyer certificates, endorsed in blank or accompanied by a separate
assignment, evidencing Duff's remaining ownership interest in the Corporation,
a resignation if an officer, and a certification of those representations and
warranties set forth in Section 2.3 of this Agreement.
For the purposes of this Section 8.3, in determining EBIT, all
ordinary, reasonable and necessary expenses (whether one time or ongoing) shall
be charged against income; provided, however, that no amounts paid to Buyer or
Buyer's Affiliates which are not directly attributable to the fair market value
of actual goods or services (including management services) provided by Buyer
or Buyer's Affiliates to the Corporation shall be charged against income unless
mutually agreed upon by Buyer and Duff.
Until such time as Buyer has purchased the Duff Shares, Buyer
agrees that it shall not, without Duff's prior consent, cause Corporation to
issue or sell any of its capital stock, whether pursuant to offers, stock
option agreements, stock bonus agreements, stock purchase plans, incentive
compensation plans, warranties, calls, conversion rights or otherwise, it being
the intent of Buyer to not dilute Duff's percentage ownership interest in
Corporation.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 BUYER'S INDEMNITY. Buyer agrees to indemnify
and hold harmless Shareholders from and against, and in respect to, any and all
losses, expenses, costs, obligations and liabilities, including interest,
penalties and reasonable attorneys' fees they may incur by reason of Buyer's
breach of or failure to perform any of its representations, warranties,
commitments or covenants in this Agreement, or by reason of any act or omission
of Buyer, or any of its successors or assigns, after the Closing Date, that
constitutes a breach or default under, or a failure to perform, any obligation,
duty or liability of any of the Selling Parties under any loan agreement,
lease, contract, order or other agreement (relating to the business of
Corporation) to which any of the Selling Parties is a party or by which any of
them are bound at the Closing Date.
SECTION 9.2 SHAREHOLDERS' INDEMNITY. Subject to the
limitations hereinafter set forth, Shareholders hereby indemnify, defend and
hold harmless Buyer from and against, and in respect to, any and all losses,
expenses, costs, obligations, liabilities, damages and deficiencies between the
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<PAGE> 30
aggregate amount of $15,000.00 and $1,495,000.00 allocated among the selling
Shareholders in the same percentage as each held the shares sold to Buyer
(collectively referred to herein as "Losses"), that Buyer shall incur or suffer
which result from the breach of, or failure by Selling Parties to perform, any
of their representations, warranties, covenants or agreements in this
Agreement, including any exhibit hereto; provided, however, that no single
shareholder shall be liable for any sum in excess of the amount to be paid to
such shareholder hereunder. Buyer shall give each of the Shareholders prompt
written notice, certified mail return receipt requested, of any claim to be
made by Buyer under this Section 9.2, which notice shall set forth the amount
of the claim and all of the facts relating thereto. In the event Buyer is
entitled to indemnification hereunder due to a breach of Section 8.1 by less
than all of the Selling Parties, only such of the Selling Parties responsible
for such breach shall be required to indemnity Buyer hereunder. Shareholders
shall have a reasonable opportunity to confirm such claim, at Shareholders'
expense and within ten (10) business days after receipt of the aforesaid
notice, including, without limitation, review by them or by an attorney and/or
accountant retained by them of the factual basis for such claim. Buyer agrees
to cooperate with any such confirmation request and make available to
Shareholders, or to the attorney and/or accountant appointed by them, at all
reasonable times, for inspection and review, the books and records of Buyer
relating to the claim, including, but not limited to, any worksheets relating
to computation of the claim.
If, as a result of the confirmation, Shareholders do not agree
that Buyer is entitled to indemnification with respect to the claim and such
disagreement cannot, with good faith effort, be promptly settled within an
additional ten (10) business days, Buyer and Shareholders shall each appoint
within five (5) business days an arbitrator, and the two arbitrators so
appointed shall appoint a third arbitrator. If said two arbitrators cannot
agree on the selection of a third arbitrator within the next ten (10) business
days, then either Buyer or Shareholders shall be entitled to apply to the
American Arbitration Association sitting at Wilmington, Delaware for the
selection of a third arbitrator who shall then participate in such arbitration
proceedings, and who shall be selected from a list of arbitrators possessing
the qualifications set forth below. Any arbitrator appointed pursuant to this
Section 9.2 shall be a qualified expert with generally recognized current
competence in mergers and acquisitions and complex business transactions.
Except as otherwise provided herein, such arbitration shall be conducted at
Wilmington, Delaware in accordance with the Commercial Arbitration Rules of the
American Arbitration Association.
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<PAGE> 31
Within thirty (30) business days of the date of selection of
the last of the arbitrators to be selected by the foregoing procedure, the
arbitrators shall furnish the parties with their written determination. Such
written determination shall be certified and signed by at least a majority of
the arbitrators, and shall be final and binding on the parties, except with
respect to any alleged breach under Section 8.1 as to which the parties may
pursue other remedies at law or in equity. Except with respect to any alleged
breach under Section 8.1, judgment may be entered on any award rendered by the
arbitrators in any federal or state court having jurisdiction over the parties.
Each of Buyer and Shareholders shall pay the arbitrator selected by it, and the
costs of the third arbitrator shall be paid one-half (1/2) by Buyer and
one-half (1/2) by Shareholders.
In the event a claim or demand is made upon Buyer by a third
party, which claim or demand Buyer believes could result in a claim by Buyer
for indemnification under this Section 9.2, Buyer shall give Shareholders
prompt written notice of such claim or demand as soon as practicable after
receipt thereof by Buyer. Buyer shall consult with Shareholders to determine
what defenses to such claims should be asserted. Shareholders may participate
in, but not control, the negotiation, defense or settlement of any third-party
claim or demand and may retain counsel at their own expense to represent them
in such matters and participate on their behalf.
Notwithstanding anything to the contrary set forth herein, it
is understood and agreed that: (i) the arbitration methodologies set forth in
this Section 9.2 represent Buyer's sole available procedural remedies for
enforcement of the within indemnity, except with respect to any alleged breach
under Section 8.1 as to which Buyer may pursue other remedies at law or in
equity; (ii) only Shareholders shall have any liability under the indemnity
given to Buyer hereunder; and (iii) the extent of Shareholders' liability for
damages for a breach of any of the representations, warranties, covenants or
agreements in this Agreement, except for any alleged breaches of Section 8.1 or
2.10 hereof, shall be limited to the remedies and procedures, set forth in this
Section 9.2.
With regard to any civil actions which may arise out of any
alleged breach of Section 8.1, such civil action shall be heard de novo.
SECTION 9.3 Survival Of Representations And Warranties.
All representations, warranties and covenants made by the Selling Parties in
this Agreement, or in any schedule, exhibit, certificate or other document
delivered in connection with this Agreement, shall not be deemed to be waived
or otherwise affected by any investigation made by the other party
31
<PAGE> 32
hereto and shall survive the Closing Date, provided, however, that such
representations, warranties, covenants and agreements shall survive only so
long and to the extent that the right of indemnification for breach thereof has
not expired pursuant to Sections 9.4 and 9.5 hereof.
SECTION 9.4 LIMITATION ON INDEMNIFICATION. No
indemnification shall be required as to amounts recovered pursuant to any
insurance policy by the party seeking indemnification.
SECTION 9.5 PERIOD FOR ASSERTING INDEMNIFICATION RIGHTS.
Irrespective of any statute of limitations that would otherwise be a bar, all
claims and suits arising under any provision of Section 9.2 may be made or
asserted at any time prior to the second anniversary of the Closing Date.
ARTICLE 10
MISCELLANEOUS PROVISIONS
SECTION 10.1 FINDER'S OR BROKER'S FEES. Each of the
parties represents and warrants that it has dealt with no broker or finder in
connection with any of the transactions contemplated by this Agreement, and,
insofar as it knows, no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions. Selling Parties and
Buyer each agree to indemnify and hold harmless one another against any loss,
liability, damage, cost, claim or expense incurred by reason of any brokerage,
commission or finder's fee alleged to be payable by reason of any act, omission
or statement of the indemnifying party.
SECTION 10.2 EXPENSES. Buyer shall pay all costs and
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated hereby.
Costs or expenses related to Buyer's review and corporate actions in
anticipation of the consummation of the transaction contemplated hereby shall
be borne or paid by Corporation. In the event that this Agreement should be
terminated in accordance with Section 10.10, all legal, accounting and other
costs and expenses incurred in connection therewith, and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
SECTION 10.3 EFFECT OF HEADINGS. The subject headings of
the Articles and Sections of this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any of the provisions hereof.
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<PAGE> 33
SECTION 10.4 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This
Agreement, together with all of the exhibits furnished hereunder, constitutes
the sole and entire agreement between the parties pertaining to the subject
matter contained herein, and supersedes all prior and contemporaneous
agreements, representations and understandings of the parties. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all the parties.
SECTION 10.5 WAIVER. Buyer may waive in writing
compliance by Selling Parties, and Selling Parties may waive in writing
compliance by Buyer, with any of the covenants or conditions contained in this
Agreement, except those conditions imposed by law. No act, failure to act,
practice or custom shall constitute an implied waiver of full compliance with
any of the provisions hereof. The granting of a written waiver pursuant to
this Section shall apply, unless expressly set forth therein to the contrary,
only to the specific incident of noncompliance with the specific provisions of
this Agreement set forth therein.
SECTION 10.6 COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 10.7 PARTIES IN INTEREST. Nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties to it and their respective successors and assigns, or is intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement. None of the provisions hereof shall be deemed to give
any third persons any right of subrogation or action over or against any party
to this Agreement.
SECTION 10.8 BINDING EFFECT. This Agreement shall be
binding on, and shall inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns.
SECTION 10.9 RECOVERY OF LITIGATION COSTS. Except as
otherwise provided elsewhere in this Agreement, if any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement or by reason of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
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<PAGE> 34
SECTION 10.10 CONDITIONS PERMITTING TERMINATION. Subject
to the provisions of Section 7.1 relating to the postponement of the Closing
Date, either party may, on or before the Closing Date, terminate this Agreement
without liability to the other if a condition to its performance shall not be
fulfilled or a material default or breach cannot be cured at or prior to March
25, 1996, or such later date as is agreed to by Buyer and Selling Parties,
provided such terminating party is not in default pursuant to the terms of this
Agreement. Termination as provided herein shall not waive any rights of any
party against another for default or breach of any provision of this Agreement
SECTION 10.11 NOTICES. All notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given on the date of service if
served personally on the party to whom notice is to be given, or on the fifth
(5th) day after mailing if mailed to the party to whom notice is to be given,
by first-class mail, registered or certified, postage paid and properly
addressed as follows:
To Corporation At: Delaware Legal Copy, Inc.
710 North King Street
Suite 140
Wilmington, Delaware 19801
Attn: Bruce Duff
With A Copy To: John J. Hubbert, III
Hepburn Willcox Hamilton
& Putnam
1100 One Penn Center
Philadelphia, Pennsylvania 19103
To Shareholders At: Bruce Duff
1904-B Marsh Road
Wilmington, Delaware 19810
Michael Trudgeon
Tracy Trudgeon
260 Cedar Place
Wayne, Pennsylvania 19087
Michael Brown
6191 W. Mill Road
Flourtown, Pennsylvania 19031
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<PAGE> 35
Brian Clement
40 Dover Lane
Sicklersville, N.J. 08081
With A Copy To: Walter S. Peake, Esq.
Potter, Anderson & Corroon
350 Delaware Trust Building
Wilmington, Delaware 19899
To Buyer At: Lason Systems, Inc.
1305 Stephenson Highway
Troy, Michigan 48084
Attn: Gary L. Monroe
With A Copy To: Laurence B. Deitch, Esq.
Seyburn, Kahn, Ginn, Bess,
Deitch And Serlin
2000 Town Center, Suite 1500
Southfield, Michigan 48075-1195
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth above.
SECTION 10.12 GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Delaware
without regard to its conflict of laws principles. Each of the parties hereto
hereby irrevocably submits to the jurisdiction of the competent courts of the
State of Delaware and the Federal District Court in the District of Delaware in
respect of any action or legal proceeding hereunder, and waives any other right
to any jurisdiction to which they may be entitled to, now or hereafter, by
reason of its place of residence or domicile. Further, each of the parties
hereto consents to service of process by any of the means provided in the Laws
of the State of Delaware.
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<PAGE> 36
THIS AGREEMENT was executed as of the date and year first set
forth above.
BUYER:
LASON SYSTEMS, INC., a Delaware
corporation
By: Gary L. Monroe
------------------------------------
Gary L. Monroe
Its: Chief Executive Officer
------------------------------------
CORPORATION:
DELAWARE LEGAL COPY, INC., a
Delaware corporation
By: Bruce Duff
------------------------------------
Its: President
------------------------------------
SHAREHOLDERS:
Bruce Duff
---------------------------------------
BRUCE DUFF
Michael Trudgeon
---------------------------------------
MICHAEL TRUDGEON
By Michael Trudgeon
Tracy Trudgeon per power of atty.
---------------------------------------
TRACY TRUDGEON
Michael Brown
---------------------------------------
MICHAEL BROWN
Brian Clement
---------------------------------------
BRIAN CLEMENT
36
<PAGE> 1
EXHIBIT 2.5
AGREEMENT OF PURCHASE AND SALE OF STOCK
THIS AGREEMENT is made and entered into on the 16th day of July,
1996 but effective as of July 1, 1996, between and among LASON SYSTEMS, INC., a
Delaware corporation, the address of which is 1305 Stephenson Highway, Troy,
Michigan 48084 ("Buyer"); RICHARD J. WOLFSON whose address is P.O. Box 5518,
Jacksonville, Florida 32247-5518, DONALD M. WOLFSON whose address is P.O. Box
5518, Jacksonville, Florida 32247-5518, SAUL WOLFSON whose address is P.O. Box
5518, Jacksonville, Florida, 32247-5518, BOBBY R. STEVENS, SR. whose address is
7833 Bayberry Road, Jacksonville, Florida 32256, DR. EUGENE WOLCHOK whose
address is 9020 Baycove Lane, Jacksonville, Florida 32257 (collectively
referred to herein as "Shareholders"); DONALD WOLFSON CHARITABLE REMAINDER
UNITRUST, whose address is P.O. Box 5518, Jacksonville, Florida 32247-5518;
RICHARD WOLFSON CHARITABLE REMAINDER UNITRUST whose address is P.O. Box 5518,
Jacksonville, Florida 32247-5518; SAUL WOLFSON CHARITABLE REMAINDER UNITRUST
whose address is P.O. Box 5518 Jacksonville, Florida 32247-5518; EUGENE B. AND
BRENDA R. WOLCHOK CHARITABLE REMAINDER UNITRUST whose address is 9020 Baycove
Lane, Jacksonville, Florida 32257; and INFORMATION & IMAGE TECHNOLOGY OF
AMERICA, INC., a Florida corporation, the address of which is 7829-7833
Bayberry Road, Jacksonville, Florida 32256 ("Corporation") Shareholders and
Corporation are collectively referred to in this Agreement as "Selling
Parties."
R E C I T A L S:
Shareholders have represented that they own all of the issued and
outstanding capital stock of Corporation as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
- ----------- ------------- --------------
<S> <C> <C>
Richard J. Wolfson
("Richard W.") 36.67 3.67%
Richard Wolfson Charitable
Remainder Unitrust 146.66 14.67%
Donald M. Wolfson
("Donald M.") 73.33 7.33%
Donald M. Wolfson Charitable
Remainder Unitrust 110 11.0%
Saul Wolfson
("Saul W.") 73.34 7.33%
Saul Wolfson Charitable
Remainder Unitrust 110 11.0%
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
- ----------- ------------- --------------
<S> <C> <C>
Bobby R. Stevens, Sr.
("Stevens") 250 25.0%
Dr. Eugene Wolchok
("Wolchok") 80 8.0%
Eugene B. and Brenda R. Wolchok
Charitable Remainder Unitrust 120 12%
------ ------
1000 100%
</TABLE>
Buyer desires to purchase all of the shares in the Corporation owned by
Shareholders so that the aggregate shares (the "Shares") to be purchased by
Buyer will give Buyer one hundred (100%) percent ownership interest in the
Corporation. Shareholders desire to sell the Shares to Buyer, and Corporation
desires that this transaction be consummated.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
SECTION 1.1 SALE AND TRANSFER OF SHARES. Subject to the
terms and conditions set forth in this Agreement, on the Closing Date (as
defined below in Section 7.1), Shareholders will transfer and convey the Shares
to Buyer, and Buyer will acquire the Shares from Shareholders, free and clear
of all liens, encumbrances, security agreements, equities, options, claims,
charges and restrictions. On the Closing Date, the certificates representing
the Shares are to be duly endorsed in blank for transfer, or accompanied by a
separate written instrument of assignment and are to be accompanied by such
other or further supporting documents as Buyer or its counsel may reasonably
require.
SECTION 1.2 PURCHASE PRICE. Subject to the possible
adjustment contemplated in Section 1.3 hereof, the purchase price for the
Shares is $3,150,000.00 (the "Purchase Price"). It is understood and agreed
that said aggregate Purchase Price is calculated on a uniform per share price
of $3,150.00 for each of the Shares. The Purchase Price shall be paid in cash
and in shares of the Class A-1 Common Stock, par value of $0.01 per share (the
2
<PAGE> 3
"Class A-1 Shares") of Buyer's parent corporation, Lason Holdings, Inc., a
Delaware corporation ("Holdings"), as follows: $1,890,000.00 and 35,906 Class
A-1 Shares, respectively for all of the Shares, with each Class A-1 Share being
valued at $35.09. The respective amounts of cash and Class A-1 Shares to
which each of the Shareholders are entitled are set forth on Exhibit "1.2".
The Class A-1 Shares being issued to Shareholders are subject to the
restrictions on resale described in Section 1.3 and provided under federal and
State securities laws. At closing, there shall be deducted from the cash
portion of the Purchase Price which is to be paid to the Shareholders those
certain debts of the Corporation scheduled on Exhibit "1.2".
SECTION 1.3 ADJUSTMENT TO PURCHASE PRICE. The
Shareholders and Buyer agree that the pro forma EBITDA for Corporation for the
period of March 1, 1996 to February 28, 1997 (the "Review Period") is
$630,000.00 (the "Target Earnings"). To the extent that the actual EBITDA for
the Review Period is different from the Target Earnings, an adjustment to the
Purchase Price, up or down, shall be made as soon following February 28, 1997
as actual financial results are known. The adjustment shall be equal to the
percentage increase or decrease from the Target Earnings subject to: (i) a
maximum percentage increase of 30% of the Purchase Price; and (ii) a maximum
percentage decrease of 15% of the Purchase Price. (Examples: If actual EBITDA
for the Review Period is $830,000.00 instead of the Target Earnings then, and
in that event, the Purchase Price previously paid will be increased by thirty
(30%) percent to $4,095,000.00. Alternatively, if actual EBITDA is $530,000.00
(a decrease of 15.87%) then, and in that event, the Purchase Price previously
paid will be decreased by fifteen (15%) percent to $2,677,500.00.
At each Shareholders' election, the foregoing adjustment will
be made in either cash or Class A-1 Shares (at the value per share of such
Class A-1 Shares as set forth in Section 1.2 hereof adjusted for the stock
split discussed below [should such split occur] for any adjustment related to a
decrease in actual EBITDA and at such value per share if Holdings is not a
public company on the date when actual EBITDA is known or at the market value
of a share of Holdings' common stock on that date which is the earlier of the
date of the Shareholders' Notice (as defined below) or 10 days following the
date of the Company Notice (as defined below) if no Shareholders' Notice is
given if Holdings is a public company and the adjustment relates to an increase
in actual EBITDA over the Target Earnings). Buyer will give the Shareholders
written notice of actual EBITDA for the Review Period as soon as such results
are known (the "Company Notice"). The Company Notice will be accompanied by
reasonable and appropriate backup financial information. Thereafter, each
Shareholder shall have 10 business days in which to elect to have the
adjustment made in cash or by shares or partly in each, as the case may be.
Such election shall be made by written notice to Buyer signed by each electing
3
<PAGE> 4
Shareholder (the "Shareholder's Notice"). Such payment, return of shares or
issuance of shares is to be accomplished within 10 business days after the date
of the Shareholders' notice. In the event that Shareholders do not make the
requisite payments or return of Class A-1 Shares on a timely basis as
aforesaid, then, and in that event, Buyer may cause the requisite number of
Class A-1 shares to be assigned back to Holdings without further action by the
Shareholders being required. In order to facilitate a final possible negative
adjustment, Shareholders agree that they will not offer or sell or otherwise
transfer or dispose of their respective Class A-1 Shares until the adjustment
contemplated herein has been determined and made and the Class A-1 Shares being
issued to them shall contain a legend setting forth such limitation.
Shareholders further agree to enter into an escrow agreement in the form of
Exhibit 1.3 hereto, pursuant to which Shareholders will escrow their respective
Class A-1 Shares with Buyer's counsel, Seyburn, Kahn, Ginn, Bess, Deitch and
Serlin, and execute assignments separate from certificate in blank to such
shares in order to enable Buyer to accomplish a re-assignment of Class A-1
Shares in case such re-assignment is either elected or required, as set forth
above. Notwithstanding anything to the contrary set forth herein, the
Corporation's share of Newco Net Earnings (as defined in Section 8.4) earned
from the transaction referenced in Section 8.4 shall not be included in the
actual calculation of EBITDA provided for herein.
In connection with the issuance of Class A-1 Shares and
possible re-adjustment to the Purchase Price contemplated herein Selling
Parties acknowledge and agree to the following:
A. Holdings is currently working on a possible Initial
Public Offering which may or may not be completed but if it is
completed will involve a re-capitalization of Holdings' current stock
structure with the final parameters of same yet to be determined.
However, it is anticipated that there may be 1 class of common stock
in place of the current 3 classes following a stock split in the range
of somewhere between 2 and 3 to 1 and, accordingly, all of
Shareholders' stock may be converted to the single class of common
stock on the same basis as the stock held by all of the other holders
of Class A-1 and Class A-2 common stock. Accordingly, all references
herein to "Class A-1 Shares" shall be understood to refer to Holdings'
common stock as same may evolve as part of the contemplated Initial
Public Offering. For purposes of this Agreement, "Initial Public
Offering" means the sale in an initial underwritten public offering
registered under the Securities Act of 1933 (other than on Form S-8 or
a similar form) of shares of common stock of Holdings.
B. In the escrow agreement contemplated above,
Shareholders will constitute Gary L. Monroe or William J. Rauwerdink
as their attorney in fact to execute any and all
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instruments determined to be necessary or desirable by Holdings'
counsel in order to accomplish the re-capitalization referred to in
sub-paragraph A above. At the conclusion of the re-capitalization,
Shareholders will likely hold more shares of Holdings' common stock
than the 35,906 Class A-1 Shares set forth in Section 1.2 hereof;
provided, however, that in no event will Shareholders be entitled to
receive more shares of Holdings' Common Stock than shares worth
$1,260,000.00 valued at the offering price to the public on the date
of the Initial Public Offering.
C. Shareholders will be bound by all re-sale
restrictions which will be imposed by the terms and conditions of the
contemplated underwriting and by applicable federal and state
securities laws.
D. In the event that Buyer: (i) elects to sell all of
the Shares or substantially all of the assets of Corporation prior to
the expiration of the Review Period; or (ii) materially and adversely
changes the business of Corporation without the consent of
Shareholders prior to the expiration of the Review Period and such
change deprives Shareholders of a reasonable opportunity to achieve an
increase in the Purchase Price as contemplated herein, then, and in
either event, Shareholders will be entitled to receive the maximum
possible adjustment to the Purchase Price (i.e., $945,000.00)
regardless of the Corporation's actual EBITDA as compared to the
Target Earnings.
E. Buyer, as parent corporation of Corporation, will use
its reasonable efforts to facilitate the Corporation's economic
performance during the Review Period but makes no commitments as to an
application of resources to the Corporation. During the Review
Period, the Corporation will remain under the direction of its'
currently in place management team subject to the directives of its
Board of Directors, and, accordingly, each of the Shareholders
acknowledge that neither Buyer nor Holdings have made any
representation or warranty whatsoever concerning the achievability of
obtaining additional compensation (bonus or otherwise; an additional
positive adjustment to the Purchase Price or income from the NEWCO
transaction (as that term is defined in Section 8.4 hereof.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Selling Parties, jointly and severally, represent and warrant
to Buyer that, as of the date hereof:
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SECTION 2.1 ORGANIZATION, STANDING AND POWER.
Corporation is duly organized, validly existing and in good standing under the
laws of the State of Florida, has all necessary corporate power to own its
properties and to carry on its business as now owned and operated by it, is
duly qualified to do intrastate business and is in good standing in each
jurisdiction in which the nature of its business or its properties makes such
qualification necessary. Each jurisdiction in which Corporation is so
qualified to do business is listed on Exhibit "2.1".
SECTION 2.2 CAPITALIZATION. The authorized capital stock
of Corporation consists of ten thousand (10,000) shares of common stock having
a par value of $1.00 each, of which one thousand (1000) shares are issued and
outstanding. All of the Shares are validly issued, fully paid, nonassessable,
and have been so issued in full compliance with all applicable federal and
state securities laws. There are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements or commitments
obligating Corporation to issue or to transfer from treasury any additional
shares of its capital stock of any class.
SECTION 2.3 TITLE TO SHARES. Shareholders are the
owners, beneficially and of record, of all of the Shares, free and clear of all
liens, encumbrances, security agreements, equities, options, claims, charges
and restrictions except as set forth in Exhibit "2.3".
SECTION 2.4 SUBSIDIARIES. Corporation does not own,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or other entity.
SECTION 2.5 AUTHORITIES AND CONSENTS. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, have been duly and validly authorized
by the Board of Directors of Corporation. Selling Parties represent and
warrant that they have the right, power, legal capacity and authority to enter
into and perform their respective obligations under this Agreement and that no
consent or approval of, notice to or filing with any governmental authority
having jurisdiction over any aspect of the business or assets of Corporation,
and no consent or approval of or notice to any other person or entity (except
consents, approvals and notices required in connection with contracts and
leases listed in Exhibits "2.14" and "2.24"), is required in connection with
the execution and delivery by Selling Parties of this Agreement or the
consummation by Selling Parties of the transactions contemplated hereby.
SECTION 2.6 NO BREACH OR VIOLATION. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, does not and
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will not result in or constitute any of the following: (i) a breach of any term
or provision of this Agreement; (ii) a default, breach or violation, or an
event that, with notice or lapse of time or both, would be a default, breach or
violation of any of the terms, conditions or provisions of the Articles of
Incorporation or By-Laws of Corporation, or any lease, license, promissory
note, security agreement, commitment, indenture, mortgage, deed of trust or
other agreement, instrument or arrangement to which Corporation is a party or
by which it or its property is bound; (iii) an event that would permit any
party to terminate or rescind any agreement or to accelerate the maturity of
any indebtedness or other obligation of Corporation; or (iv) the creation or
imposition of any lien, charge or encumbrance on any of the properties of
Corporation.
SECTION 2.7 FINANCIAL STATEMENTS. There have heretofore
been delivered to Buyer: (i) unaudited financial statements, including balance
sheets, statements of income and retained earnings, and statements of changes
in financial position for Corporation as of December 31, 1993, December 31,
1994 and December 31, 1995, and for the twelve (12) month period then ended
prepared by Daniel H. Borcher, certified public accountant, independent public
accountants, whose opinions with respect to said statement are included
therein; (ii) unaudited balance sheet and statement of income and retained
earnings for Corporation as of March 1, 1996 and for the 3 month period then
ended; and (iii) unaudited balance sheet and statement of income and retained
earnings for Corporation as of May 31, 1996 and for the 5-month period then
ended . Both of the statements contemplated in (ii) and (iii) hereof shall be
accompanied by a certificate of the Chief Executive Officer or Chief Financial
Officer of Corporation stating that such balance sheet and statement of income
are unaudited but include all adjustments considered necessary for a fair
presentation of the results for the period indicated.
All of the financial statements referred to above (the "Financial
Statements") have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
The Financial Statements present fairly the financial positions of Corporation
to which they relate as at the respective dates thereof, and the related
results of operations of Corporation for the periods therein referred to.
SECTION 2.8 UNDISCLOSED LIABILITIES. Except as set forth
in Exhibit "2.8", Corporation has no material debts, liabilities or obligations
of any kind, whether accrued, absolute, contingent or otherwise, which, under
generally accepted accounting principles, should have been so reflected or
reserved against or disclosed in Corporation's balance sheet dated as of May
31, 1996, included in the Financial Statements, except for those that may have
been incurred subsequent to the date of that balance sheet.
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All debts, liabilities and obligations incurred after May 31, 1996 were
incurred in the ordinary course of business and are usual and normal in amount
both individually and in the aggregate.
SECTION 2.9 ABSENCE OF CERTAIN CHANGES. Except as set
forth in Exhibit "2.9", since March 1, 1996, the business of Corporation has
been operated only in the ordinary course and, without limiting the generality
of the foregoing, Corporation has not:
A. Declared, set aside or paid any dividend or other
distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any of its capital stock ;
B. Sustained any damage, destruction or loss, by reason
of fire, explosion, earthquake, casualty, labor trouble, requisition
or taking of property by any government or agency thereof, windstorm,
embargo, riot, act of God or public enemy, flood, accident, revocation
of license or right to do business, total or partial termination,
suspension, default or modification of contracts, governmental
restriction or regulation, other calamity or other similar or
dissimilar event (whether or not covered by insurance), materially and
adversely affecting its condition (financial or otherwise), earnings,
business, assets, liabilities, properties, operations or prospects;
C. Had any material adverse change in its condition
(financial or otherwise), earnings, business, assets, properties,
liabilities, operations or prospects;
D. Issued, authorized for issuance, or sold any equity
security, bond, note or other security, or granted, or entered into,
any commitment or obligation to issue or sell any such equity
security, bond, note or other security, whether pursuant to offers,
stock option agreements, stock bonus agreements, stock purchase plans,
incentive compensation plans, warrants, calls, conversion rights or
otherwise;
E. Incurred additional debt for borrowed money, or
incurred any obligation or liability (fixed, contingent or otherwise)
except in the ordinary and usual course of its business;
F. Paid any obligation or liability (fixed, contingent
or otherwise), or discharged or satisfied any lien or encumbrance, or
settled any liability, claim, dispute, proceeding, suit or appeal,
pending or threatened against them or any of their assets or
properties, except in the ordinary and usual course of its business;
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G. Mortgaged, pledged, otherwise encumbered or subjected
to lien any of its assets or properties, tangible or intangible,
except for liens for current taxes which are not yet due and payable
and purchase-money liens arising out of the purchase or sale of
products or services made in the ordinary and usual course of its
business;
H. Sold, transferred, leased, licensed or otherwise
disposed of any asset or property, tangible or intangible, except in
the ordinary and usual course of its business, or discontinued any
product line or the manufacture, sale or other disposition of any of
its products or services;
I. Purchased or otherwise acquired any debt or equity
securities of any corporation, partnership, joint venture, firm or
other entity;
J. Made any expenditure for the purchase, acquisition,
construction or improvement of a capital asset, except in the ordinary
and usual course of its business;
K. Entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of
business and not involving an amount in any case in excess of
$5,000.00;
L. Waived any right or claim or cancelled any debts or
claims or voluntarily suffered any extraordinary losses;
M. Sold, assigned, transferred or conveyed any property
rights, except in the ordinary and usual course of business;
N. Effected any amendment or supplement to any employee
profit sharing, stock option, stock purchase, pension, bonus,
incentive, retirement, medical reimbursement, life insurance deferred
compensation or any other employee benefit plan or arrangement;
O. Paid to or for the benefit of any of its directors,
officers, employees or shareholders any compensation of any kind other
than wages, salaries and benefits at times any rates in effect prior
to December 31, 1995;
P. Effected any change in its directors or executive
management;
Q. Effected any amendment or modification in its
Articles of Incorporation or By-Laws;
R. Had any labor trouble that has or might materially
and adversely affect its condition (financial or otherwise), earnings,
business, assets, liabilities, properties, operations or prospects;
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S. Changed its accounting methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates);
T. Revalued any of its assets;
U. Increased the salary or other compensation payable or
to become payable to any of its officers, directors or employees, or
declared, paid or committed to pay a bonus or other additional salary
or compensation to any such person;
V. Made any loan to any person or entity, or guaranteed
any loan;
W. Had any other event or condition of any character
that has or might reasonably have a material and adverse effect on its
condition (financial or otherwise), earnings, business, assets,
liabilities, properties, operations or prospects; or
X. Agreed, committed or entered into any other
understanding to do any of the things described in the preceding
Subsections A through W.
SECTION 2.10 TAXES. Except as set forth in Exhibit "2.10"
within the times and in the manner prescribed by law, Corporation has filed all
tax returns required to be filed and has paid or made adequate provision for
payment of all taxes upon it, its properties, income or franchises, due and
payable on or before the date hereof. Except as set forth in Exhibit "2.10",
there are no claims pending against Corporation for past-due taxes, nor has
Corporation been notified of any claims. There are no present disputes or
discussions with federal, state, local, foreign, commonwealth or other
authorities with respect to any taxes of any nature payable by Corporation.
Except as set forth in Exhibit "2.10", there are no outstanding waivers or
agreements by Corporation for the extension of the time for the assessment of
any tax. The tax returns of Corporation, if audited, have been finally
determined by the Internal Revenue Service or other taxing authority, or
otherwise closed, and any penalties, deficiencies, assessments, additions to
tax and interest proposed as a result of such audits have been paid or settled.
The charges, accruals and reserves for taxes reflected in the balance sheet as
of May 31, 1996, and included in the Financial Statements, are, adequate for
any and all taxes for the periods ending the date of such balance sheets and
for all prior periods, whether or not disputed. As used in this Section 2.10,
the terms "tax" and "taxes" refer to any tax, assessment, additions to tax,
fee, penalty, interest or other governmental charge imposed by any federal,
state, county, local, foreign, commonwealth or other governmental entity.
Corporation has never filed, nor will it file, any consent under Section 341(f)
of the Internal Revenue Code of 1986, as amended, on or before the Closing
Date. The Buyer will have prepared and the Shareholders
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will be responsible for the cost of such preparation and filing all requisite
federal and state tax returns for the period ending June 30, 1996
notwithstanding the fact that Buyer as the post closing parent corporation of
Corporation shall be responsible for preparing same.
SECTION 2.11 RECEIVABLES. Except as set forth in Exhibit
"2.11", all receivables of Corporation shown on the balance sheets included in
the Financial Statements are carried at values determined in accordance with
generally accepted accounting principles consistently applied, reflect all
pertinent facts known to Corporation as of the date hereof, and represent valid
and binding obligations of the debtors requiring no further performance by
Corporation. Except as set forth in Exhibit "2.11", reserves for doubtful
accounts have been established on the books of Corporation in accordance with
generally accepted accounting principles consistently applied and are reflected
on the balance sheets included in the Financial Statements.
SECTION 2.12 INVESTMENTS AND INVESTMENT SECURITIES.
Corporation has no interest, of record or beneficial, direct or indirect, in
any governmental bonds or notes, other investment securities and assets held
for investment except as set forth in Exhibit "2.12".
SECTION 2.13 REAL PROPERTY.
A. Exhibit "2.13" sets forth a complete and accurate
address of each parcel of real property, together with all buildings,
fixtures and other improvements located thereon (collectively, the
"Real Property") which is either owned by or leased to Corporation.
B. To the best of Selling Parties' knowledge, the Real
Property and the current and currently planned use thereof is and will
be in compliance with all applicable use restrictions and/or lease
covenants.
C. No notice of violation of any applicable federal,
state or local statute, law, ordinance, rule, regulation, order or
requirement, or of any covenant, condition, restriction or easement
affecting the Real Property or with respect to the use or occupancy of
the Real Property, has been given to Corporation by any governmental
authority having jurisdiction over the Real Property or by any other
person entitled to enforce the same.
D. Corporation has not subjected, and will not subject
or suffer to be subjected hereafter the Real Property or any portion
thereof to any lease (except a lease by Corporation), sublease,
tenancy, concession, license, occupancy agreement or similar right,
mortgage, deed of trust, lien, encumbrance, claim, charge, equity,
covenant, condition, restriction,
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easement, right of way or other matter affecting the Real Property or
any portion thereof except as set forth in Exhibit "2.13".
E. There are no unpaid taxes, assessments (special,
general or otherwise) or bonds of any nature affecting the Real
Property or any portion thereof due and payable by Corporation.
SECTION 2.14 LEASES. Exhibit "2.14" lists all leases,
rental agreements, conditional sales contracts and other similar agreements
(collectively, "Leases"), as amended, which cannot be terminated by Corporation
without liability at any time upon less than thirty (30) days' notice or which
involve payment by it in the future of more than $10,000.00, under which
Corporation holds or uses any real or personal property or leases any of the
same to others. Corporation has complied with the material provisions of all
Leases, and all such Leases are valid, in good standing and enforceable by
Corporation in accordance with their terms, except as limited by bankruptcy,
insolvency or other similar laws affecting the rights of creditors generally
and by limitations on enforceability applicable to contracts generally.
Notwithstanding anything contained in the Leases, Corporation has such title to
or interests thereunder as are necessary to continue to conduct its business as
presently conducted or as presently proposed to be conducted, and there is no
title defect to which any of the Leases is subject which might be expected at
any time to have a material adverse effect on Corporation or its condition
(financial or other), earnings, assets, liabilities, business, operations or
prospects. Exhibit "2.14" sets out any and all advances, deposits and
prepayments made by Corporation under the Leases.
SECTION 2.15 ENVIRONMENTAL MATTERS.
A. None of the operations or property of Corporation is
or has been subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a
violation of or liability under any requirements of law derived from
or relating to all federal, state and local laws relating to or
addressing the environment, health or safety (including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section Section 9601 et seq., Occupational
Safety and Health Act, 29 U.S.C. Section Section 651 et seq.,
Resource Conversation and Recovery Act, 42 U.S.C. Section Section
6901 et seq., Clean Air Act, 42 U.S.C. Section Section 7401 et seq.,
Federal Water Pollution Control Act, 33 U.S.C. Section Section 1251
et seq., and any similar federal or state acts or statutes now in
effect), which requirements are sometimes herein collectively referred
to as the "Environmental Laws".
B. Corporation has no knowledge of a "Release" nor has
it filed any notice under any applicable Environmental Laws reporting
such "Release" (defined as any spill, emission,
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leaking, deposit, discharge, dispersal or other release) into the
indoor or outdoor environment or into or out of any of the Real Estate
(including movement in or through the air, soil, surface water,
groundwater or property) of a "Contaminant" (defined as any hazardous
substance, toxic substance, hazardous waste, special waste, petroleum
or petroleum-derived substance or waste, asbestos, polychlorinated
biphenyls, or any constituent of any of the foregoing, including such
items as are defined under any federal, state or local law or
regulation), or indicating past or present treatment, storage (other
than for less than ninety (90) days) or disposal of a "hazardous
waste" (as that term is defined under 40 Code of Federal Regulations
("CFR") Part 261 or any state equivalent) or reporting a material
violation of any applicable Environmental Laws.
C. Corporation has not received any written notice,
claim or report from any governmental authority or third party to the
effect that Corporation is or may be liable to any other person or
entity as a result of the Release or threatened Release of a
Contaminant into the environment.
SECTION 2.16 PATENTS, ETC. Exhibit "2.16" contains a list
and brief description of all trade names, trademarks, trademark registrations
and applications for registration, service marks, patent rights, patent
applications, trade secrets, copyrights and applications therefor (herein
collectively referred to as "Proprietary Rights") owned by Corporation, useful
or necessary to the conduct of its business, or in which Corporation has any
rights, licenses or immunities and of all patent licensing and similar
arrangements to which Corporation is a party. All Proprietary Rights are owned
by Corporation, and are, valid and in full force and effect.
SECTION 2.17 NON-INFRINGEMENT; AGREEMENTS. Except as set
forth in Exhibit "2.17", no Proprietary Right is the subject of litigation or
other adversary proceedings. No present or presently proposed operation or
activity of Corporation infringes the rights of any other person or entity, and
no person or entity is infringing the Proprietary Rights of Corporation.
Corporation has the right and authority, including without limitation, adequate
licenses, to use such Proprietary Rights as are necessary to enable Corporation
to conduct and continue to conduct all phases of its business in the manner
presently conducted by it. Corporation is not a party to or bound by any
license or agreement requiring the payment by it of any royalty, override or
similar payment in connection with any activity conducted or to be conducted by
it. Except as provided for by the terms of contracts with governmental
authorities, Corporation is not a party to any agreement: (i) prohibiting or
restricting its use or sale of any special device, item, customer list, secret
process or the like; or (ii) limiting its business to any territory, pricing
policy or customers; or (iii) requiring exclusive dealing or otherwise in
restraint of its business.
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SECTION 2.18 INSURANCE. All policies of liability, theft,
life, fire, title and other forms of insurance and surety bonds (including,
without limitation, any standby letters of credit), insuring Corporation, its
directors, officers, employees, properties, assets and business are listed and
briefly described on Exhibit "2.18". All of said policies are valid and in
good standing. Corporation has experienced no losses or made claims under any
of such policies which are extraordinary for a company of its' size except as
are set forth on Exhibit "2.18".
SECTION 2.19 INTERESTED TRANSACTIONS. Corporation has no
contract or agreement (oral or written) with, any outstanding loans to or from,
or any outstanding liabilities (except for no more than one (1) months' salary
at no more than the current annual rate) to any officer, director, employee or
stockholder of Corporation or any relative of any such person or any
corporation or other entity in which any of such persons has a material
financial interest, direct or indirect, or of which any such person is an
officer, director or partner, except as set forth in Exhibit "2.19".
SECTION 2.20 CUSTOMERS AND SALES. A correct and current
list of all customers of Corporation whose annual purchases exceed $100,000.00,
is set forth on Exhibit "2.20". There are no facts or circumstances known to
the Selling Parties or any of them indicating that any customer who has ordered
products or services from Corporation which have not yet been delivered intends
to cancel such order. Selling Parties have no knowledge that any of the listed
customers of Corporation intend to cease doing business with Corporation, or
materially alter the amount of the business that they are presently doing with
Corporation.
SECTION 2.21 EXISTING EMPLOYMENT CONTRACTS AND/OR
REMUNERATION AGREEMENTS. Exhibit "2.21" sets forth a complete and accurate
list of all employment contracts or other agreements or arrangements providing
for employee remuneration or benefits to which Corporation is a party or by
which Corporation is bound, copies of the originals of which have been provided
to Buyer. All such contracts and arrangements are in full force and effect,
and neither Corporation nor any other party is in default under any such
contract or arrangement, nor are there any amendments, modifications, changes
or releases thereto, written or oral. There have been no claims of defaults
and there are no facts or conditions which if continued, or upon notice, will
result in a default under such contracts or arrangements. There is no pending
or threatened labor dispute, strike or work stoppage affecting the business of
Corporation.
SECTION 2.22 EMPLOYEE BENEFITS PLANS. Exhibit "2.22" sets
forth a complete and accurate list of all collective bargaining agreements and
all pension, bonus, profit-sharing, stock option or other plan or arrangement
providing for employee benefits
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(including any plan within the meaning of Section 3(3) of the Employment
Retirement Income Security Act), to which Corporation is a party or by which
Corporation is bound, copies of the originals of which are attached hereto as
Exhibit "2.22". There are no unfunded liabilities or other obligations of
Corporation with respect to any such collective bargaining agreements, or
pensions, bonus, profit-sharing, stock option or other plans or arrangements
providing for employee benefits except as set forth on Exhibit "2.22" hereto.
SECTION 2.23 WORKERS COMPENSATION; EMPLOYMENT
DISCRIMINATION; LABOR RELATIONS. To the best of Selling Parties' knowledge,
Corporation has complied in all material respects with all applicable federal,
state and local laws, rules, regulations and executive orders relating to
employment, all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, and the withholding and payment of taxes from
compensation of employees and the payment of premiums and benefits under
applicable worker compensation laws. There are no employment discrimination
proceedings by any employee or former employees against Corporation currently
threatened or pending before any state or federal court or state or federal
administrative agency, tribunal, commission or board and no facts or
circumstances exist which may result in the filing or commencement of any such
proceeding. All currently pending or outstanding worker's compensation claims
are listed on Exhibit "2.23" attached hereto and all such claims are fully
insured against. There is no effort being made to organize the employees of
Corporation into any collective bargaining unit or to solicit them to join any
labor organization and Corporation has no knowledge of any intention on the
part of any labor organization to organize such employees or to solicit them to
join any labor organization. Corporation is not bound by any prior court,
administrative agency, tribunal, commission or board, decree, judgment,
decision, arbitration agreement or settlement relating to collective bargaining
agreements, conditions of employment or, to the best of Selling Parties'
knowledge, attempts to organize a collective bargaining unit which may
adversely affect the business and affairs of Corporation or the transactions
contemplated hereby. Except as set forth on Exhibit "2.23", there is no unfair
labor practice complaint against Corporation pending before the National Labor
Relations Board.
SECTION 2.24 OTHER CONTRACTS. Exhibit "2.24" lists and
briefly describes all contracts, agreements, commitments, guarantees, letters
of intent, understandings or other arrangements of a contractual nature,
written or oral (including, but not limited to, franchise, patent, trademark
and royalty agreements), other than outstanding purchase orders made in the
ordinary course of business and other than as listed in any other schedule
hereto, to which Corporation is a party and which: (i) involve payment by
Corporation of more than $10,000.00; or (ii) materially affect the
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condition (financial or other), earnings, assets, liabilities, business,
operations or prospects of Corporation. Corporation has, to the best of
Selling Parties' knowledge, complied in all material respects with the
provisions of all contracts under which it is bound, and has not been in
material default or claimed default under any thereof.
SECTION 2.25 OFFICERS AND DIRECTORS, ETC. Exhibit "2.25"
is a true and complete list of:
A. The names of all present officers and directors of
Corporation and their current annual salary or other compensation
(such as, but not limited to, consultant's fees) and including all
bonuses, whether deferred, accrued or otherwise, which were paid or
accrued during 1995;
B. The names, titles and annual compensation of all
salaried employees of Corporation whose compensation (in whatever
form) from Corporation as of the date hereof which will equal or
exceed or which will be likely to exceed an annual rate of $50,000.00,
in 1996 or equalled such amount in the year ended December 31, 1995.
C. The name of each bank or other financial institution
in which Corporation has an account, deposit or safe deposit box, and
the names of all persons authorized to draw thereon or to have access
thereto;
D. The names of all persons holding tax or other powers
of attorney from Corporation and a summary of the terms of each; and
E. The names of all persons authorized (by the By-Laws
or by resolution of the Board of Directors or otherwise) to write
checks or borrow funds on behalf of Corporation.
SECTION 2.26 CORPORATE DOCUMENTS. Corporation has
furnished or made available to Buyer or its representatives for its
examination, the originals, or true, correct and complete copies, of: (i) the
Articles of Incorporation and By-Laws of Corporation; (ii) the minute books of
Corporation containing all records of all proceedings, consents, actions and
meetings of the shareholders and Board of Directors; (iii) all permits, orders
and consents issued by any governmental authority (domestic or foreign) with
respect to Corporation, or any security issued by them, and all applications
for such permits, orders and consents; and (iv) the stock transfer books of
Corporation setting forth all issuances and transfers of any capital stock.
All of Corporation's records are complete and correct in all material respects
and all such records have been maintained in accordance with sound business
practices.
SECTION 2.27 LITIGATION AND CLAIMS. Except as set forth
on Exhibit "2.27", there is: (i) no action, suit, proceeding,
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claim or investigation pending or, to the best of Selling Parties' knowledge,
threatened, in any court or before any arbitrator or before or by any federal,
state or other governmental department, commission, bureau, agency or
instrumentality, domestic or foreign; and (ii) no other unresolved claim made
against Corporation or affecting it or its properties or business, or the
transactions contemplated by this Agreement or any factual or legal basis for
any such action, suit, proceeding, claim or investigation which would
materially affect any of the same. All correspondence, memoranda and other
written notifications (collectively, "Complaints") which it has received within
the twelve (12) months preceding the date hereof concerning, or relating to,
complaints or expressions of dissatisfaction with the products, services or
personnel of Corporation, which Complaints, either individually, or in the
aggregate, could result in a material adverse change to the condition
(financial or other), earnings, business, assets, operations or prospects of
Corporation are listed on Exhibit "2.27" and Buyer has been provided with
accurate and complete copies of same. The matters set forth in Exhibits
"2.27", if decided adversely to Corporation will not result in a material
adverse change in the earnings, business, assets or condition (financial or
other), operations or prospects of Corporation. Except as set forth on Exhibit
"2.27", Corporation is not presently engaged in any legal action to recover
monies due to it or damages sustained by it.
SECTION 2.28 GENERAL LIABILITY. Selling Parties have no
knowledge of any statement of facts or the occurrence of any event forming the
basis for any present tort claim against Corporation not covered by insurance.
SECTION 2.29 OTHER TANGIBLE PERSONAL PROPERTY. Exhibit
"2.29" contains a complete and accurate list and brief description of all
machinery, tools, dies, appliances, vehicles, furniture, equipment (including
essential replacement parts) and other tangible personal property of any kind
and description, other than inventories, owned or leased by Corporation (the
"Tangible Personal Property"). The Tangible Personal Property constitutes all
tangible personal property necessary for the conduct by Corporation of its
business as now conducted. All motor vehicles listed on Exhibit "2.29" have
passed emission standards examinations required by applicable law. Except as
stated in Exhibit "2.29", no Tangible Personal Property used by Corporation in
connection with its business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement, or
is located other than in the possession of Corporation.
SECTION 2.30 TITLE TO ASSETS. Except for property leased
by Corporation, Corporation has good and marketable title to all its assets and
interests in assets, whether real, personal, mixed, tangible and intangible,
which constitute all the assets and interests in assets that are used in its
business. All these assets are free and clear of mortgages, liens, pledges,
charges,
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encumbrances, equities, claims, easements, rights of way, covenants, conditions
or restrictions, except for: (i) those disclosed in Corporation's balance sheet
included in the Financial Statements; (ii) the lien of current taxes not yet
due and payable; and (iii) possible minor matters that, in the aggregate, are
not substantial in amount and do not materially detract from or interfere with
the present or intended use of any of these assets, nor materially impair
business operations. All real property and tangible personal property of
Corporation is in good operating condition and repair, ordinary wear and tear
excepted. Corporation is in possession of all premises leased to it from
others. No officer, nor any director or employee of Corporation, nor any
spouse, child or relative of any of these persons, owns or has any interest,
directly or indirectly, in any of the real or personal property owned by or
leased to or any copyrights, patents, trademarks, trade names or trade secrets
licensed by Corporation.
SECTION 2.31 INVESTMENT REPRESENTATIONS. In connection
with the Shareholders' purchase of the Class A-1 Shares:
A. Shareholders were given the opportunity to ask
questions and receive answers concerning Holdings and the terms and
conditions of the offer and sale and to obtain any additional
information possessed by Holdings or which Holdings could acquire
without unreasonable effort or expense necessary to verify the
accuracy of the information provided to Shareholders about Holdings;
B. Shareholders are purchasing the Shares solely for
their own respective accounts for investment and not with the view to
sale or distribution of the Class A-1 Shares or any portion thereof
and not with any intention of selling, offering to sell, or otherwise
disposing of or distributing the Class A-1 Shares or any portion
thereof.
C. Shareholders received all information they
respectively deemed necessary and appropriate to enable them to
evaluate the financial risk inherent in making an investment in the
Class A-1 Shares;
D. Shareholders either are accredited investors as such
term is defined in Regulation D, Rule 501 under the Securities Act of
1933, as amended, or are sophisticated in financial matters and able
to evaluate the risk and benefits of an investment in Holdings; and
E. Shareholders are aware that the Class A-1 Shares have
not been registered under the Securities Act of 1933, as amended (the
"Act") and, therefore, cannot be resold unless they are registered
under the Act or unless an exemption from registration under the Act
is available (such as that provided by Rule 144 under the Securities
Act) and that each certificate representing the Class A-1 Shares will
contain a legend noting the restrictions on resale under the Act.
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F. Shareholders are aware of the fact that Buyer's
proposed initial public offering may or may not be completed and
acknowledge that Buyer has made no representation or warranty
whatsoever regarding such initial public offering which has, in any
way, induced Shareholders into entering into the transaction
contemplated herein.
G. Each of the Shareholders represents and warrants that
he will not sell, assign or transfer any of the shares of common stock
of Holdings received in exchange for Shares except (i) pursuant to an
effective registration statement under the Securities Act; (ii)
following expiration of the restrictions imposed by Holdings'
contemplated underwriting; or (iii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to Buyer is not
required to be registered under the Securities Act.
H. Shareholders are aware of the fact that if an initial
public offering is completed they will not have registration rights of
any type or kind, except those rights which are more particularly
described in Section 10.13 hereof.
SECTION 2.32 BEST KNOWLEDGE. The term "to the best of
Selling Parties' knowledge", or equivalent terms, as used to qualify any of the
foregoing representations and warranties, means knowledge of Richard W., Donald
M., Saul W., Stevens and Wolchok after a diligent and thorough investigation
as to the subject matter of such representations and warranties.
SECTION 2.33 ACCURACY AND COMPLETENESS OF REPRESENTATIONS
AND WARRANTIES. No representation or warranty made by Selling Parties in this
Agreement and no statement contained in any document or instrument delivered or
to be delivered to Buyer pursuant hereto or in connection with the transactions
contemplated hereby contain or will contain any untrue statement of a known
material fact, or omits or will omit to state a known material fact necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS
Buyer with respect to Buyer and Holdings with respect to
Holdings, hereby represent and warrant to Selling Parties as follows:
SECTION 3.1 ORGANIZATION. Buyer and Holdings are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware, and have the corporate power and are duly
authorized to carry on their businesses where and as now conducted and to own,
lease and operate properties as they now do.
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SECTION 3.2 AUTHORIZATION. Buyer and Holdings have full
power and authority to enter into this Agreement and to perform this Agreement
in accordance with its terms, and the execution, delivery and performance of
this Agreement by Buyer and Holdings have been duly authorized by all requisite
corporate action, including approval by Buyer's and Holdings' Boards of
Directors.
SECTION 3.3 NO BREACH. Buyer and Holdings know of no
facts or circumstances that may tend to cause, or relate to, an existing or
potential breach or default by Selling Parties of the material terms,
conditions, representations and warranties set forth herein.
SECTION 3.4 VALIDLY ISSUED. The total authorized number
of shares of capital stock which Holdings has authority to issue is 19,000,002
shares, consisting of 13,000,000 shares of Class A-1 Common Stock, of which
999,998 shares are issued and outstanding; 4,000,000 shares of Class A-2 Common
Stock, of which approximately 5,115 shares are issued and outstanding;
1,000,002 shares of Class B Common Stock, of which 1,000,002 shares are issued
and outstanding; and 1,000,000 shares of Preferred Stock, none of which shares
are issued and outstanding. Additionally, certain persons hold options to
acquire 119,181 Class A-1 Common Stock and certain persons hold 101,615 options
to acquire 101,615 Class A-2 Common Stock. When issued in accordance with the
terms of this Agreement, the Class A-1 Shares will be validly issued, fully
paid and non-assessable.
SECTION 3.5 MATERIAL ADVERSE CHANGE. Since December 31,
1995 there has been no material adverse change in, and no event, occurrence or
development in the business of Buyer or Holdings that, taken together with
other events, occurrences and developments with respect to such business, would
have or would reasonably be expected to have a material adverse effect on
Buyer's financial condition, business or operations.
SECTION 3.6 ADVICE OF CHANGES. Between the date hereof
and the Closing Date, Buyer shall promptly advise Selling Parties in writing of
any fact which, if existing or known at the date hereof, would have been
required to set forth or disclosed in or pursuant to this Agreement or any fact
which, if existing or known at the date hereof, would have any of the
representations contained herein materially untrue.
SECTION 3.7 The Financial Statement. There has
heretofore been delivered to Buyer the audited Financial Statement, including a
balance sheet, statement of income and retained earnings, and statement of
changes in financial position for Buyer as of December 31, 1995 and for the
twelve (12) month period then ended (the "Financial Statement") prepared by
Coopers & Lybrand, L.L.P., independent public accountants, whose opinions with
respect to said statement is included therein. The Financial Statement
referred to above has been prepared in accordance with generally
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accepted accounting principles consistently applied throughout the period
involved. The Financial Statement presents fairly the financial position of
the Buyer to which it relates at the date thereof and the related results of
operations of Buyer for the period therein referred to.
SECTION 3.8 UNDISCLOSED LIABILITIES. Buyer has no
material debts, liabilities, or obligations of any kind, whether accrued,
absolute, contingent or otherwise, which, under generally accepted accounting
principles, should have been so reflected or reserved against or disclosed in
Corporation's balance sheet dated as of December 31, 1995, except those that
may have been incurred subsequent to the date of that balance sheet. All
debts, liabilities and obligations incurred after December 31, 1995 were
incurred in the ordinary course of business and are usual and normal in amount
both individually and in the aggregate.
SECTION 3.9 LITIGATION. There is: (i) no action, suit,
proceeding, claim or investigation pending or to the best of Buyer's knowledge,
threatened, in any court or before any arbitrator or by and federal, state, or
other governmental department, commission, bureau, agency or instrumentality,
domestic or foreign; and (ii) no other unresolved claim made against Buyer or
affecting it or its' properties or business where the transaction is
contemplated by this Agreement or any factual or legal basis for any such
action, suit, proceeding, claim or investigation which would materially affect
any of the same.
SECTION 3.10 TAXES. Within the times and in the manner
prescribed by law, Buyer has filed all tax returns required to be filed and has
paid or made adequate provision for payment of all taxes upon it, its'
properties, income or franchises, due and payable on or before the date hereof.
There are no claims pending against Buyer for past due taxes, nor has Buyer
been notified of any claim. There are no present disputes or discussions with
federal, state, local, foreign, commonwealth, or other authorities with respect
to any taxes of any nature payable by Buyer. There are no outstanding waivers
or agreements by Buyer for the extension of the time for the assessment of any
taxes. The tax returns of Buyer, if audited, have been finally determined by
the Internal Revenue Service or any other taxing authority, or otherwise
disclosed, and any penalties, deficiencies, assessments, additions to tax and
interest proposes as result of such audits have been paid or settled. The
charges, accruals and reserves for taxes reflected in the balance sheet as of
December 31, 1995 and included in the Financial Statement, are, adequate for
any and all taxes for the period ending the date of such balance sheet and for
all prior periods, whether or not disputed. As used in this Section 3.10, the
terms "tax" and "taxes" refer to any tax, assessment, addition to tax, fee,
penalty, interest or other governmental charge imposed by any federal, state,
county, local, foreign, commonwealth, or other governmental entity.
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SECTION 3.11 UNFUNDED LIABILITIES. There are no unfunded
liabilities or other obligations of Buyer with respect to any collective
bargaining agreements, or pensions, bonus, profit sharing, stock option or any
plans or arrangements providing for employee benefits.
SECTION 3.12 ACCURACY OF WARRANTIES. No representation or
warranty made by Buyer in this Agreement and no statement containing any
document or instrument delivered or to be delivered to Buyer pursuant hereto or
in connection with the transactions contemplated hereby, contain or will
contain any untrue statement of a known and material fact, or omits or will
omit to state a known material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which they were made,
not misleading.
SECTION 3.13 ENVIRONMENTAL MATTERS.
A. None of the operations or property of Buyer is or has
been subject to any judicial or administrative proceeding, order,
judgment, decree or settlement alleging or addressing a violation of
or liability under any requirements of law derived from or relating to
all federal, state and local laws relating to or addressing the
environment, health or safety (including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section Section 9601 et seq., Occupational Safety and Health
Act 29 U.S.C. Section Section 651 et seq., Resource Conservation and
Recovery Act, 42 U.S.C. Section Section 6901 et seq., Clean Air Act 42
U.S.C. Section 7401 et seq., Federal Water Pollution Control Act 33
U.S.C. Section Section 1251 et seq., and any similar federal or state
acts or statutes now in effect), which requirements are sometimes
herein collectively referred to as "Environmental Laws".
B. Buyer has no knowledge of a "Release", nor has it
filed any notice under any applicable Environmental Laws reporting
such "Release" (defined as any spill, emission, leaking, deposit,
discharge, dispersal or other release) into the indoor or outdoor
environment or into or out of any of its real estate (including
movement in or through the air, soil, surface water, ground water or
property of a "Capitalized Contaminant" (defined as any hazardous
substance, toxic substance, hazardous waste, special waste, petroleum
or petroleum derived substance or waste, asbestos, polychlorinated
biphenyls or any constituent of any of the foregoing, including such
items as are defined under any federal, state or local law or
regulation), or indicating past or present treatment, storage (other
than for less than ninety (90) days) or disposal of a "Hazardous
Waste" (as that term is defined under 40 Code of Federal Regulations
("CFR") Part 261 or any state equivalent) or reporting a material
violation of any applicable Environmental Laws.
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C. Buyer has not received any written notice, claim or
report from any governmental authority or third party to the effect
that Buyer is or may be liable to any other person or entity as a
result of the release or threatened release of a contaminant into the
environment.
SECTION 3.14 RESALES. Buyer shall take the following
actions to facilitate resale of the shares in compliance with federal and state
securities laws: (i) in the event that Buyer becomes subject to the reporting
requirements of the federal securities laws, Buyer shall timely file all
periodic reports required thereunder; and (ii) if Buyer does not become subject
to said reporting requirements, Buyer shall provide Shareholders with
information required by Rule 15c2-11 under the Securities Exchange Act of 1934
and take such actions as may be necessary to facilitate such publication of the
information specified in that rule.
ARTICLE 4
FURTHER AGREEMENTS OF THE PARTIES
SECTION 4.1 ACCESS TO INFORMATION. Buyer and its
representatives may make such investigation of the properties, assets and
business of Corporation as Buyer may reasonably request, and Corporation shall
give to Buyer and to its counsel, accountants and other representatives, full
access during normal business hours to all of the properties, books, contracts,
commitments, records and files of Corporation, and shall furnish to Buyer all
such documents and copies of documents (certified as true and complete if
requested) and such information concerning the business and affairs of
Corporation as Buyer may reasonably request. Such investigation shall not be
deemed in any way to diminish the liability of Selling Parties in respect of
the representations, warranties, schedules, certificates or agreements given
hereunder.
SECTION 4.2 CONDUCT OF BUSINESS BY CORPORATION. From
the date hereof until the Closing Date, except as Buyer may previously consent
in writing, Corporation shall:
A. Carry on its business and activities in the ordinary
course as previously carried on, and shall not make or institute any
methods of management, accounting or operation that will vary
materially from those methods used by Corporation as of the date of
this Agreement. Without limitation of the generality of the
foregoing, Corporation shall not enter into any agreement or
arrangement involving sale or lease of a material portion of its
assets or the granting of any preferential right to purchase such
assets, properties or rights, except in connection with the sale or
lease of inventory to customers in the ordinary course of business;
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B. Maintain in full force and effect the insurance
policies listed in Exhibit "2.18" to this Agreement;
C. Make no change in its Articles of Incorporation or
By-Laws;
D. Make no change in its authorized or issued capital
stock and issue or grant no options, warrants or rights to purchase
shares of or convert other securities into its capital stock;
E. Declare or pay no dividend or other distribution in
respect of any shares of its capital or make any payments of salary or
bonus to any of Shareholders other than in connection with current
employment contracts, all of which have heretofore been delivered to
Buyer;
F. Purchase, redeem or otherwise acquire, directly or
indirectly, no shares of its capital stock;
G. Use its best efforts to preserve its business
organization intact, to keep available the services of its present
officers and employees, except in the case of unsatisfactory
performance, and to preserve the good will of all those having
business relations with it (including, but not limited to, its
customers);
H. Enter into no contract or commitment, except
contracts or commitments entered into in the ordinary course of
business, none of which (other than inventory purchases customary in
nature and amount) shall involve payment by Corporation of more than
$10,000.00;
I. Terminate none of the contracts or agreements listed
in Exhibit "2.24" or modify any of said contracts or agreements except
in accordance with their terms;
J. Except pursuant to existing arrangements disclosed in
Exhibit "2.25": (i) grant no increase in salaries or compensation
payable or to become payable by it, to any officer, employee, sales
agent or representative, other than increases in customary amounts
pursuant to normally scheduled salary reviews; or (ii) increase no
benefits payable under any employee plan or otherwise to any officer,
employee, sales agent or representative;
K. Duly comply with all laws, regulations, ordinances,
orders, injunctions and decrees applicable to it and to the conduct of
its business;
L. Encumber or mortgage none of its property or incur no
liability for borrowed money, other than in the ordinary
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course of business, make no loans or advances to or assume, guarantee,
endorse or otherwise become liable with respect to, the obligations of
any other person, firm or corporation;
M. Acquire or agree to acquire none of the assets or
capital stock of any other person, firm or corporation, except for
purchases from suppliers in the ordinary course of business;
N. Make or agree to make no capital expenditures in
excess of $10,000.00 for any single item, or $10,000.00 in the
aggregate, or enter into any leases of capital equipment or property
under which the annual lease charge is in excess of $10,000.00;
O. Maintain and keep its properties and facilities in as
good condition and working order as at present, except for
depreciation through ordinary wear and tear;
P. Perform all of its obligations under contracts
relating to or affecting its assets, properties and rights, except for
non-material failures;
Q. Not do, or agree to do, except in the ordinary course
of business, any of the following acts: (i) pay any obligation or
liability, fixed or contingent, other than current liabilities; (ii)
waive or compromise any right or claim; or (iii) cancel, without full
payment, any note, loan or other obligation owing to Corporation;
R. Enter into no negotiations or agreements with any
governmental authority (other than negotiations or agreements for the
purchase of goods or services from Corporation) which would affect the
future operation of its business;
S. Write off none of the receivables on its books; and.
T. Enter into a lease for real property with any of
Shareholders or any persons or entities affiliated with them.
SECTION 4.3 CONSENTS. Corporation shall obtain the
consent of all persons whose consent is required to the consummation of the
transactions contemplated hereby, in form and substance satisfactory to Buyer.
SECTION 4.4 COMMUNICATIONS. Each party hereto agrees to
consult and obtain the prior approval of the other parties, which approval
shall not be unreasonably withheld or delayed, on reasonable notice as to the
content of any press releases or any written statements for general circulation
regarding the subject contained in this Agreement.
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SECTION 4.5 UPDATING OF SCHEDULES. From the date hereof
until the Closing Date, Corporation shall keep up to date all of the schedules,
exhibits and certificates furnished (or to be furnished) under this Agreement,
and shall promptly notify Buyer of any changes, additions or events which may,
after the lapse of time, cause any change or addition thereto.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING PARTIES
The obligations of Selling Parties to consummate the
transactions contemplated by this Agreement shall be subject to the following
conditions, except as Selling Parties may waive in writing in accordance with
Section 10.5 below:
SECTION 5.1 PERFORMANCE. Buyer shall have performed and
complied with all agreements and covenants required by this Agreement to be
performed or satisfied by it on or prior to the Closing Date.
SECTION 5.2 REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants of Buyer and Holdings, set forth in
Article 3 hereof, shall be true and correct in all material aspects on the date
hereof, and on the Closing Date, as if made again at and as of such time,
subject to any transactions which are contemplated or permitted by this
Agreement.
SECTION 5.3 CERTIFICATE OF OFFICER. Selling Parties
shall have been furnished with certificates executed by an officer of Buyer and
an officer of Holdings, in form and substance satisfactory to Selling Parties,
certifying the fulfillment of the condition set forth in Section 5.2 above.
SECTION 5.4 LEGAL OPINION. Seyburn, Kahn, Ginn, Bess,
Deitch and Serlin, counsel for Buyer and Holdings, shall have delivered to
Selling Parties its opinions to the effect set forth in Exhibit "5.4.".
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the following conditions,
except as Buyer may waive in writing in accordance with Section 10.5 below:
SECTION 6.1 AUTHORIZATION OF TRANSACTION. All action
necessary to authorize the execution, delivery and performance of this
Agreement by Selling Parties and the consummation of the
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transactions contemplated hereby shall have been duly and validly taken by the
Board of Directors of Corporation and by the Shareholders.
SECTION 6.2 SATISFACTORY INVESTIGATIONS. The
investigation of the business of the Corporation contemplated in Section 4.1
hereof shall be satisfactory to Buyer in all respects as determined in the
exercise of its sole, absolute and exclusive discretion.
SECTION 6.3 UNTRUE STATEMENTS. This Agreement, together
with the Exhibits attached hereto or subsequently provided to Buyer at the time
of Closing, shall not contain any untrue statement of a known material fact or
omit to state a known material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
SECTION 6.4 MATERIAL ADVERSE CHANGE. There shall have
been no material adverse change in the condition (financial or otherwise),
earnings, business, assets, liabilities, properties, operations or prospects of
Corporation, and there shall not have been any occurrence, circumstance or
combination thereof (whether arising heretofore or hereafter), including
litigation pending or threatened, which might result in any such material
adverse change before or after the Closing Date.
SECTION 6.5 REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Selling Parties contained in this Agreement,
shall be true at and as of the Closing Date with the same effect as though such
representations and warranties have been made at and as of such time, and
Selling Parties shall have performed or complied with all obligations,
covenants and conditions required by this Agreement to be performed or complied
with by them prior to or at the Closing Date.
SECTION 6.6 CERTIFICATE OF SELLING PARTIES. Buyer shall
have been furnished with a certificate executed by an officer of Corporation
and certificates executed by each of the Shareholders, in form and substance
satisfactory to Buyer, certifying to the fulfillment of the condition set forth
in Section 6.4 above.
SECTION 6.7 LEGAL OPINION. Kent, Ridge & Crawford,
counsel for the Shareholders and the Corporation shall have each delivered to
Buyer its opinion to the effect set forth in Exhibit "6.6".
SECTION 6.8 LITIGATION. Immediately prior to the Closing
Date, there shall be no litigation or proceeding: (i) pending or threatened
against Buyer, Holdings or Corporation, or any of their respective directors,
officers or shareholders, or
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involving the assets or properties of any of them, for the purpose of enjoining
or preventing the consummation of this Agreement or otherwise claiming that
such consummation is improper; or (ii) pending against Buyer, Holdings or
Corporation which, if decided adversely, would adversely affect the right of
Buyer to retain the stock, property and other assets or to continue the
operations of the property, assets and business of Corporation (or of Buyer,
Holdings or any of its subsidiaries) after the Closing Date, and which, in the
judgment of the Board of Directors of Buyer or Holdings, would make the
consummation of this Agreement inadvisable. Immediately prior to the Closing
Date, there shall be no governmental investigation pending or threatened which,
in the judgment of the Board of Directors of Buyer or Holdings, might lead to
or result in any litigation or proceeding of the nature referred to in the
foregoing sentence.
SECTION 6.9 THIRD PARTY CONSENTS. Prior to the Closing,
Corporation shall have obtained the written consent, waiver or approval of each
person: (i) who is a party to a contract or agreement with Corporation or a
contract or agreement by which Corporation or its property is bound; (ii) whose
consent, waiver or approval is required under such contract or agreement as a
result of consummation of the transactions contemplated by this Agreement; and
(iii) whose failure to provide such consent, waiver or approval would have or
might reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), earnings, business, assets, liabilities, operations
or prospects of Corporation.
SECTION 6.10 CORPORATE ACTION. Immediately prior to the
Closing, Buyer shall have received, in form and substance reasonably
satisfactory to Buyer, the resignations of such officers and directors of
Corporation, effective as of the Closing Date, as Buyer may have stipulated to
Corporation in writing prior to the Closing Date.
SECTION 6.11 EMPLOYMENT AGREEMENTS. Donald M., Richard
W. and Stevens each shall have executed and delivered to Buyer an employment
agreement with Corporation on mutually acceptable terms and conditions.
SECTION 6.12 ESCROW AGREEMENT. The Shareholders shall have
executed and delivered to Buyer an Escrow Agreement (including assignments
separate from certificate as will be required thereunder) on mutually
acceptable terms and conditions.
ARTICLE 7
THE CLOSING
SECTION 7.1 TIME AND PLACE. The transfer of the Shares
by Shareholders to Buyer (the "Closing") shall take place at
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the offices of Buyer's counsel in Southfield, Michigan at 10:00 a.m., local
time, on July 16, 1996, or at such other time and place as the parties may
agree to in writing (the "Closing Date"), with the closing to be effective as
of July 1, 1996.
SECTION 7.2 SELLING PARTIES' OBLIGATIONS AT CLOSING. At
the Closing, Shareholders shall deliver to Buyer the following instruments, in
form and substance satisfactory to Buyer and its counsel, against delivery of
the items specified in Section 7.3:
A. Certificates representing the Shares, registered in
the name of the respective Shareholders, duly endorsed by the
respective Shareholders for transfer as specified in Section 1.1 above
or accompanied by a separate written instrument of assignment. On
submission of those certificates to Corporation for transfer,
Corporation shall issue to Buyer a new certificate representing the
Shares, registered in the name of Buyer;
B. The stock book, stock ledger, minute book and
corporate seal of Corporation;
C. The opinions of counsel as provided in Section 6.6;
D. Except as otherwise specified by Buyer, the written
resignations of all the officers and directors of Corporation;
E. The certificates executed by Corporation's officer
and the Shareholders, dated the Closing Date, as provided in Section
6.5; and
F. The Pledge Agreement and assignments separate from
certificate as provided in Section 1.3.
SECTION 7.3 BUYER'S OBLIGATIONS AT CLOSING. At the
Closing, Buyer shall deliver to Shareholders the following instruments and
documents against delivery of the items specified in Section 7.2:
A. The cash portion of the Purchase Price payable to
Shareholders in the amounts specified in Section 1.2, payable to
Shareholders in their respective proportions;
B. The shares of Holdings in the amounts specified in
Section 1.2, issued to Shareholders in their respective proportions;
C. Certified resolutions of Buyer's and Holdings' Boards
of Directors, in forms reasonably satisfactory to counsel for Selling
Parties, authorizing the execution, delivery and performance of this
Agreement and all actions to be taken by Buyer and Holdings under this
Agreement; and
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<PAGE> 30
D. The certificate executed by Buyer's and Holdings'
officers, dated the Closing Date, as provided in Section 5.3.
E. The opinion of counsel as provided in Section 5.4.
F. Buyer will cause the cash payments to be made to
Stevens and the Wolfson Group as set forth in Exhibit 1.2.
ARTICLE 8
OBLIGATIONS AFTER CLOSING
SECTION 8.1 AGREEMENT TO REFRAIN FROM COMPETITION. The
provisions of Sections 8.1A, 8.1B, 8.1C and 8.1D of this Agreement in favor of
Buyer, shall apply only to the following persons and to no others: Saul W. and
Wolchok (hereinafter collectively referred to as "Investor Shareholders") it
being acknowledged that each noncompetition agreement of Richard W., Donald M.
and Stevens in favor of Buyer is contained in the separate employment agreement
between each and the Corporation.
A. Investor Shareholders agree, individually, that they
will not, directly or indirectly (and whether or not for
compensation), within the forty-two (42) month period immediately
following the Closing Date, actively solicit the following types of
business within the states of Florida and Georgia: records management
and document management activities (including micrographics, scanning
and conversion services and imaging) engaged in by Corporation on the
date of this Agreement as long as Buyer (or any successor) shall,
directly or indirectly, be engaged in such activity in the state of
Florida.
B. Investor Shareholders further agree that they 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.
C. During the period specified in Section 8.1A, Investor
Shareholders further agree not to: (i) divulge, communicate, use to
the detriment of Corporation or Buyer or for the benefit of any other
person or persons, or misuse in any way, any confidential information
or trade secrets of Corporation, including personnel information,
know-how, computer programs, customer lists or other technical data;
(ii) divert or attempt to divert from Corporation any business
30
<PAGE> 31
of any kind in which Corporation is engaged on the date hereof; or
(iii) induce or attempt to induce any person who is an employee of
Corporation on the date hereof to leave the employ of Corporation or
Buyer. Investor Shareholders acknowledge and agree that any
information or data which is unique to Corporation that they have
acquired on any of these matters or items was received in confidence
and as a fiduciary of Corporation.
D. Each of the Investor Shareholders has had knowledge
of the affairs, trade secrets, customers, potential customers and
other proprietary information of Corporation, and each Investor
Shareholder acknowledges and agrees that compliance with the covenants
set forth in this Section 8.1 is necessary for the protection of the
good will and other proprietary interest of Corporation and Buyer.
Each Investor Shareholder acknowledges and agrees that in the event of
a breach of such covenants, neither Corporation, Buyer nor any
successors would have an adequate remedy at law, and Corporation,
Buyer and any successor shall be entitled to injunctive relief in
addition to any other remedies which may be available to them
hereunder.
E. If, in any judicial proceeding, a court shall refuse
to enforce the covenants included herein, then said unenforceable
covenant 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 Buyer, Richard W., Donald M. and Stevens and Investor
Shareholders that these covenants be given the maximum force, effect
and application permissible under law.
F. The Investor Shareholders shall, on the Closing Date,
be paid $ 5,000.00 each in exchange for the foregoing Agreement to
Refrain from competition, which amount is included within the Purchase
Price.
SECTION 8.2 FURTHER ASSURANCES. From time to time, at
Buyer's request (whether or not after the Closing), and without further
consideration and at the expense of Buyer, Shareholders will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated by this Agreement, and to vest in Buyer good, valid and marketable
title to the Shares.
SECTION 8.3 SHAREHOLDERS PUT AND DISCLAIMER REGARDING
HOLDINGS' STOCK. (a) In the event that Holdings has not completed an initial
public offering of the shares of its common stock within 6 months of the
Closing Date and for the next 30 months thereafter, each Shareholder shall have
the right until such time as Holdings completes an initial public offering to
"put" or require Holdings
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<PAGE> 32
to purchase not less than all of his Class A-1 Shares. If a Shareholder
exercises such right, the purchase price for all of his Class A-1 Shares shall
be equal to the lower of (i) the Corporation's EBITDA for the twelve (12)
calendar months immediately preceding the giving of the notice of exercise to
Holdings multiplied by 5, further multiplied by four tenths (0.4) and further
multiplied by the Shareholder's percentage of Shareholders' Class A-1 Shares as
set forth in Exhibit 1.2; or (ii) the Cash Value of Class A-1 Shares for that
Shareholder as set forth in Exhibit 1.2.
Each Shareholder's right to require Holdings to purchase his Class A-1
Shares shall be exercised by written notice to Holdings. Within forty-five
(45) days of the giving of such notice, the Corporation shall provide to the
applicable Shareholder, an unaudited profit and loss statement of the
Corporation, prepared by the Corporation's certified public accountants, for
the 12 calendar months preceding the month during which notice was given. The
closing of Holdings' purchase of the Class A-1 Shares shall occur within 30
days of the applicable Shareholder's receipt of the profit and loss statement.
The notice may, at Shareholder's election specify a minimum purchase price
based upon the Shareholder's assumptions respecting Corporation's earnings in
which case the Shareholder shall not be required to sell if the purchase price
based upon the profit and loss statement is less than such minimum purchase
price. At closing, the applicable Shareholder shall deliver to Holdings the
applicable certificate endorsed in blank or accompanied by a separate
assignment and a representation that the Shareholder is the owner,
beneficially, and of record, of all of the applicable Class A-1 Shares, free
and clear of all liens, encumbrances, security agreements, equities, options,
claims, charges and restrictions.
(b) Shareholders acknowledge, agree and understand that nothing in
this Agreement prevents Holdings from offering, issuing, or selling any of its
capital stock or other securities, whether pursuant to registered public
offerings, stock option agreements, stock bonus agreements, stock purchase
plans, incentive compensation plans, warrants, calls, conversion rights or
otherwise, whether or not the issuance, sale, grant and so forth has a dilutive
effect on Shareholders' percentage ownership interest in Holdings. In
addition, Shareholders acknowledge, agree and understand that except for the
put right discussed herein, the Class A-1 Shares are subject to the rights,
preferences and limitations set forth in the Certificate of Incorporation of
Holdings and, in connection therewith Shareholders do not have preemptive or
any type of registration rights with respect to the Class A-1 Shares.
SECTION 8.4 NEWCO. With respect to any work performed by
the Corporation for a new corporation or entity ("Newco") involved in the
business of operating an imaging center formed by Bank of Boston Mortgage
Corporation, Thomas H. Lee Company, Barnett
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Bank Mortgage Corporation and Madison Dearborn Partners, all net income
determined in accordance with GAAP derived by the Corporation from this work
for the first three (3) years from the date work is first performed by the
Corporation for Newco ("Newco Net Earnings") will be divided fifty (50%)
percent to the Corporation and fifty (50%) percent to the Shareholders (and
divided among the Shareholders in those percentages set forth under percentage
of Total Shares Sold in Exhibit 1.2). Thereafter, all Newco Net Earnings will
belong solely to Corporation.
Corporation shall calculate the Newco Net Earnings in the month
following the end of (i) the first full year in which work has been performed
by Corporation for Newco, and (ii) each of the next two years, and shall pay
Shareholders fifty (50%) percent of the Newco Net Earnings by the end of the
month in which the calculation is performed. Illustration: The Corporation
performs work for Newco on May 1, 1996. The Newco Net Earnings are calculated
for the period May 1, 1996 through April 30, 1997. The calculation is made in
May 1997 and paid to Shareholders by the end of May 1997.
Newco Net Earnings shall mean earnings after payments of interest,
taxes and depreciation computed on an accrual basis for each year of the 3
years during which the Shareholders are entitled to fifty (50%) percent of
Newco Net Earnings. For purposes of computing Newco Net Earnings, the
following conventions shall apply:
1. Overhead and G & A Expenses may be allocated between
Corporation's business operations and the operations performed for
Newco on a fair and reasonable basis as determined in mutual good
faith by Corporation and Shareholders.
2. Except as otherwise expressly provided herein,
generally accepted accounting principles shall be applied on a
consistent basis for the purpose of making the calculations
contemplated herein.
Notwithstanding anything to the contrary set forth herein, in the
event that Corporation does not have an executed, binding letter of intent to
do the Newco work within twelve (12) months of the Closing Date then, and in
that event, the foregoing provision shall be null and void.
ARTICLE 9
INDEMNIFICATION AND LOAN REPAYMENT
SECTION 9.1 BUYER'S INDEMNITY. Buyer agrees to indemnify
and hold harmless Shareholders from and against, and in respect to, any and all
losses, expenses, costs, obligations and liabilities, including interest,
penalties and reasonable
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<PAGE> 34
attorneys' fees they may incur by reason of Buyer's breach of or failure to
perform any of its representations, warranties, commitments or covenants in
this Agreement, or by reason of any act or omission of Buyer, or Corporation,
or any of their respective successors or assigns, after the Closing Date, that
constitutes a breach or default under, or a failure to perform, any obligation,
duty or liability of any of the Selling Parties under any loan agreement,
lease, contract, order or other agreement (relating to the business of
Corporation) to which any of the Selling Parties is a party or by which any of
them are bound at the Closing Date.
SECTION 9.2 SHAREHOLDERS' INDEMNITY. Shareholders
hereby, jointly and severally, indemnify, defend and hold harmless Buyer from
and against, and in respect to, any and all losses, expenses, costs,
obligations, liabilities, damages and deficiencies (collectively referred to
herein as "Losses"), that Buyer shall incur or suffer which result from the
breach of, or failure by Selling Parties to perform, any of their
representations, warranties, covenants or agreements in this Agreement,
including any exhibit hereto. Buyer shall give each of the Shareholders prompt
written notice, certified mail return receipt requested, of any claim to be
made by Buyer under this Section 9.2, which notice shall set forth the amount
of the claim and all of the facts relating thereto. Shareholders shall have a
reasonable opportunity to confirm such claim, at Shareholders' expense and
within 30 business days after receipt of the aforesaid notice, including,
without limitation, review by them or by an attorney and/or accountant retained
by them of the factual basis for such claim. Buyer agrees to cooperate with
any such confirmation request and make available to Shareholders, or to the
attorney and/or accountant appointed by them, at all reasonable times, for
inspection and review, the books and records of Buyer relating to the claim,
including, but not limited to, any worksheets relating to computation of the
claim.
If, as a result of the confirmation, Shareholders do not agree
that Buyer is entitled to indemnification with respect to the claim and such
disagreement cannot, with good faith effort, be promptly settled within an
additional ten (10) business days, Buyer and Shareholders shall each appoint
within five (5) business days an arbitrator, and the two arbitrators so
appointed shall appoint a third arbitrator. If said two arbitrators cannot
agree on the selection of a third arbitrator within the next ten (10) business
days, then either Buyer or Shareholders shall be entitled to apply to the
American Arbitration Association sitting at Detroit, Michigan for the selection
of a third arbitrator who shall then participate in such arbitration
proceedings, and who shall be selected from a list of arbitrators possessing
the qualifications set forth below. Any arbitrator appointed pursuant to this
Section 9.2 shall be a qualified expert with generally recognized current
competence in mergers and acquisitions and complex business transactions.
Except as otherwise provided herein, such
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<PAGE> 35
arbitration shall be conducted at Detroit, Michigan in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.
Within thirty (30) business days of the date of selection of
the last of the arbitrators to be selected by the foregoing procedure, the
arbitrators shall furnish the parties with their written determination. Such
written determination shall be certified and signed by at least a majority of
the arbitrators, and shall be final and binding on the parties, except with
respect to any alleged breach under Section 8.1 as to which the parties may
pursue other remedies at law or in equity. Except with respect to any alleged
breach under Section 8.1, judgment may be entered on any award rendered by the
arbitrators in any federal or state court having jurisdiction over the parties.
Each of Buyer and Shareholders shall pay the arbitrator selected by it, and the
costs of the third arbitrator shall be paid 1/2 by Buyer and 1/2 by
Shareholders.
In the event a claim or demand is made upon Buyer by a third
party, which claim or demand Buyer believes could result in a claim by Buyer
for indemnification under this Section 9.2, Buyer shall give Shareholders
prompt written notice of such claim or demand as soon as practicable after
receipt thereof by Buyer. Buyer shall consult with Shareholders to determine
what defenses to such claims should be asserted. Shareholders may participate
in, but not control, the negotiation, defense or settlement of any third-party
claim or demand and may retain counsel at their own expense to represent them
in such matters and participate on their behalf.
Notwithstanding anything to the contrary set forth herein, it
is understood and agreed that: (i) the arbitration methodologies set forth in
this Section 9.2 represent Buyer's sole available procedural remedies for
enforcement of the within indemnity, except with respect to any alleged breach
under Section 8.1 as to which Buyer may pursue other remedies at law or in
equity; (ii) only Shareholders shall have any liability under the indemnity
given to Buyer hereunder; and (iii) the extent of Shareholders' liability for
damages for a breach of any of the representations, warranties, covenants or
agreements in this Agreement, except for any alleged breaches of Section 8.1 or
2.10 hereof, shall be limited to the remedies and procedures, set forth in this
Section 9.2.
With regard to any civil actions which may arise out of any
alleged breach of Section 8.1, such civil action shall be heard de novo.
SECTION 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties and covenants made by the Selling Parties in
this Agreement, or in any schedule, exhibit,
35
<PAGE> 36
certificate or other document delivered in connection with this Agreement,
shall not be deemed to be waived or otherwise affected by any investigation
made by the other party hereto and shall survive the Closing Date, provided,
however, that such representations, warranties, covenants and agreements shall
survive only to the extent that the right of indemnification for breach thereof
is not otherwise limited pursuant to Section 9.4 hereof.
SECTION 9.4 LIMITATION ON INDEMNIFICATION. No
indemnification shall be required as to amounts recovered pursuant to any
insurance policy by the party seeking indemnification.
SECTION 9.5 LOAN RE-PAYMENT. On the Closing Date, the
Balance Sheet of Corporation shows a debt of $492,500,000.00 to the
"Wolfson Group" (i.e., to Donald W., Richard W. Saul W.). Notwithstanding that
fact, Buyer and Shareholders have agreed that $392,500.00 (the "Debt") is
validly owing to the Wolfson Group by Corporation with the balance of
$100,000.00 actually representing consideration to Stevens which will not
remain the debt of Corporation once it is controlled by Buyer. Accordingly,
Donald W., Richard W., Saul W. hereby, jointly and severally, indemnify and
hold Buyer and Corporation harmless from any and all costs and expenses of
whatsoever type or kind related to claims by Stevens that the aforesaid
$100,000.00 is owed to Stevens by either Buyer or Corporation. The Debt
shall be re-paid as follows: Corporation shall have 24 months from and after
the Effective Date of this Agreement to re-pay the Debt in full. The Debt
shall be interest free for 6 months from and after the Effective Date of this
Agreement. In the event that the Debt is not re-paid in full within 30 days of
the date of Holdings' Initial Public Offering (if any) Corporation shall be
obligated to pay to the Wolfson Group $100,000.00 as a reduction to principal
on said 30th day. Thereafter, the Debt (as so reduced) shall accrue interest
at the Prime Rate of Interest announced from time to time by First Union
National Bank of North Carolina plus 1% per annum until paid. As set forth
above, the Debt (as reduced, if applicable) plus accrued but unpaid interest
shall be due and payable in full on the 24th month anniversary of the Closing
Date. Corporation will have the right to prepay the Debt in whole or in part
at any time without penalty or fee whatsoever. If and to the extent that funds
are not available for Corporation to meet such obligation when and as due,
Buyer shall timely make or cause such payment to be made.
ARTICLE 10
MISCELLANEOUS PROVISIONS
SECTION 10.1 FINDER'S OR BROKER'S FEES. Each of the
parties represents and warrants that it has dealt with no broker or finder in
connection with any of the transactions contemplated by
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<PAGE> 37
this Agreement, and, insofar as it knows, no broker or other person is entitled
to any commission or finder's fee in connection with any of these transactions.
Selling Parties and Buyer each agree to indemnify and hold harmless one another
against any loss, liability, damage, cost, claim or expense incurred by reason
of any brokerage, commission or finder's fee alleged to be payable by reason of
any act, omission or statement of the indemnifying party.
SECTION 10.2 EXPENSES. Buyer and Shareholders shall,
individually, pay all costs and expenses incurred or to be incurred by either
of them in negotiating and preparing this Agreement and in closing and carrying
out the transactions contemplated hereby.
SECTION 10.3 EFFECT OF HEADINGS. The subject headings of
the Articles and Sections of this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any of the provisions hereof.
SECTION 10.4 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This
Agreement, together with all of the exhibits furnished hereunder, constitutes
the sole and entire agreement between the parties pertaining to the subject
matter contained herein, and supersedes all prior and contemporaneous
agreements, representations and understandings of the parties. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all the parties.
SECTION 10.5 WAIVER. Buyer may waive in writing
compliance by Selling Parties, and Selling Parties may waive in writing
compliance by Buyer, with any of the covenants or conditions contained in this
Agreement, except those conditions imposed by law. No act, failure to act,
practice or custom shall constitute an implied waiver of full compliance with
any of the provisions hereof. The granting of a written waiver pursuant to
this Section shall apply, unless expressly set forth therein to the contrary,
only to the specific incident of noncompliance with the specific provisions of
this Agreement set forth therein.
SECTION 10.6 COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 10.7 PARTIES IN INTEREST. Nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties to it and their respective successors and assigns, or is intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement. None of the provisions hereof shall be deemed to give
any third persons any right of subrogation or action over or against any party
to this Agreement.
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SECTION 10.8 BINDING EFFECT. This Agreement shall be
binding on, and shall inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns.
SECTION 10.9 RECOVERY OF LITIGATION COSTS. Except as
otherwise provided elsewhere in this Agreement, if any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement or by reason of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
SECTION 10.10 CONDITIONS PERMITTING TERMINATION. Either
party may, on or before the Closing Date, terminate this Agreement without
liability to the other if a condition to its performance shall not be fulfilled
or a material default or breach cannot be cured at or prior to July 16, 1996,
or such later date as is agreed to by Buyer and Selling Parties, provided such
terminating party is not in default pursuant to the terms of this Agreement.
Termination as provided herein shall not waive any rights of any party against
another for default or breach of any provision of this Agreement.
SECTION 10.11 NOTICES. All notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given on the date of service if
served personally on the party to whom notice is to be given, or on the fifth
(5th) day after mailing if mailed to the party to whom notice is to be given,
by first-class mail, registered or certified, postage paid and properly
addressed as follows:
To Corporation At: Information & Image Technology
of America, Inc.
7829-33 Bayberry Road
Jacksonville, Florida 32256
Attn: Donald M. Wolfson,
Chairman
With A Copy To: John R. Crawford, Esq.
Kent Ridge & Crawford
225 Water Street, Suite 900
Jacksonville, Florida 32202
To Shareholders At: Richard J. Wolfson
7829-33 Bayberry Road
Jacksonville, Florida 32256
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<PAGE> 39
Donald M. Wolfson
7829-33 Bayberry Road
Jacksonville, Florida 32256
Saul Wolfson
7829-33 Bayberry Road
Jacksonville, Florida 32256
Bobby R. Stevens, Sr.
9238 Jaybird Circle
Jacksonville, Florida 32257
Dr. Eugene Wolchok
9020 Baycove Lane
Jacksonville, Florida 32257
With A Copy To: John R. Crawford, Esq.
Kent Ridge & Crawford
225 Water Street, Suite 900
Jacksonville, Florida 32202
To Buyer At: Lason Systems, Inc.
1305 Stephenson Highway
Troy, Michigan 48084
Attn: Gary L. Monroe
With A Copy To: Laurence B. Deitch, Esq.
Seyburn, Kahn, Ginn, Bess,
Deitch And Serlin
2000 Town Center, Suite 1500
Southfield, Michigan 48075-1195
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth above.
SECTION 10.12 CHOICE OF LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Michigan,
without giving effect to any choice of law or conflict provision or rule,
whether of the State of Michigan (or any other jurisdiction) that would cause
the laws of any jurisdiction other than the State of Michigan to be applied.
In furtherance of the foregoing, the internal law of the State of Michigan will
control the interpretation and construction of this Agreement, even if under
such jurisdiction's choice of law or conflict of law or analysis, the
substantive law of some other jurisdiction would ordinarily apply. Further,
the parties hereto agree that jurisdiction and venue shall properly lie in the
courts of the State of Michigan or in the United States District Court for the
Eastern District of Michigan or in the United States District Court for the
Middle District of Florida.
SECTION 10.13 PIGGYBACK REGISTRATION RIGHTS. In connection with the
Holdings common stock which is being acquired by
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<PAGE> 40
Shareholders as part of the Purchase Price, Holdings agrees to provide
Shareholders with certain piggyback registration rights pursuant to that
certain Piggyback Registration Agreement attached hereto and incorporated
herein by reference as Exhibit 10.13.
THIS AGREEMENT was executed as of the date and year first set forth
above.
BUYER:
LASON SYSTEMS, INC., a Delaware corporation
By: Gary L. Monroe
----------------------------------------
Gary L. Monroe
Its: Chief Executive Officer
CORPORATION:
INFORMATION & IMAGE TECHNOLOGY OF
AMERICA, INC., a Florida
corporation
By: Donald M. Wolfson
----------------------------------------
Its: Chairman of the Board
---------------------------------------
HOLDINGS:
LASON HOLDINGS, INC., a Delaware
corporation
(solely for the purpose of being
bound by Section 1.2, Schedule 1.3
Article 3 , Section 8.3 and
Section 10.13 of this Agreement)
By: Gary L. Monroe
---------------------------------------
Gary L. Monroe
Its: Chief Executive Officer
--------------------------------------
(SIGNATURES CONTINUED ON NEXT PAGE)
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<PAGE> 41
SHAREHOLDERS:
Richard J. Wolfson
-------------------------------------------
RICHARD J. WOLFSON
Donald M. Wolfson
-------------------------------------------
DONALD M. WOLFSON
Saul Wolfson
-------------------------------------------
SAUL WOLFSON
Bobby R. Stevens, Sr.
-------------------------------------------
BOBBY R. STEVENS, SR.
Eugene Wolchok
-------------------------------------------
DR. EUGENE WOLCHOK
DONALD M. WOLFSON CHARITABLE
REMAINDER UNITRUST
By: Richard J. Wolfson
----------------------------------------
Richard J. Wolfson, Trustee
RICHARD WOLFSON CHARITABLE REMAINDER
UNITRUST
By: Saul Wolfson
----------------------------------------
Saul Wolfson, Trustee
(SIGNATURES CONTINUED ON NEXT PAGE)
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<PAGE> 42
SAUL WOLFSON CHARITABLE REMAINDER
UNITRUST
By: Richard J. Wolfson
----------------------------------------
Richard J. Wolfson, Trustee
EUGENE B. AND BRENDA R. WOLCHOK
CHARITABLE REMAINDER UNITRUST
By: Alan B. Chepenik
----------------------------------------
Alan B. Chepenik, Trustee
42
<PAGE> 1
EXHIBIT 2.6
AGREEMENT OF PURCHASE AND SALE OF STOCK
THIS AGREEMENT is made and entered into on the 17th day of
July, 1996 but effective as of July 1, 1996, between and among LASON SYSTEMS,
INC., a Delaware corporation, the address of which is 1305 Stephenson Highway,
Troy, Michigan 48084 ("Buyer"); LASON HOLDINGS, INC., a Delaware corporation,
the address of which is 1305 Stephenson Highway, Troy, Michigan 48084
("Holdings"); ROBIN L. MARSHALL whose address is 3829 Glengarry Lane,
Kalamazoo, Michigan 49007, and WILLIAM E. MARVIN whose address is 9517
Gulfshore Drive North, Naples, Florida 33963 (sometimes collectively referred
to herein as "Shareholders"); and GREAT LAKES MICROGRAPHICS CORPORATION, D/B/A
GREAT LAKES TECHNOLOGIES CORPORATION a Michigan corporation, the address of
which is 300 S. Kalamazoo Mall, Suite 210, Kalamazoo, Michigan 49007
("Corporation"). Shareholders and Corporation are collectively referred to in
this Agreement as "Selling Parties."
R E C I T A L S:
Shareholders have represented that they own all of the issued
and outstanding capital stock of Corporation as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
- ----------- ------------- --------------
<S> <C> <C>
Robin L. Marshall
("Marshall") 1,000 50%
William E. Marvin
("Marvin") 1,000 50%
------ -----
2,000 100%
</TABLE>
Buyer desires to purchase all of the shares in the Corporation owned by
Shareholders so that the aggregate shares (the "Shares") to be purchased by
Buyer will give Buyer one hundred (100%) percent ownership interest in the
Corporation. Shareholders desire to sell the Shares to Buyer, and Corporation
desires that this transaction be consummated.
Now, therefore, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES
SECTION 1.1 SALE AND TRANSFER OF SHARES. Subject to the
terms and conditions set forth in this Agreement, on the
1
<PAGE> 2
Closing Date (as defined below in Section 7.1), Shareholders will transfer and
convey the Shares to Buyer, and Buyer will acquire the Shares from
Shareholders, free and clear of all liens, encumbrances, security agreements,
equities, options, claims, charges and restrictions. On the Closing Date, the
certificates representing the Shares are to be duly endorsed in blank for
transfer, or accompanied by a separate written instrument of assignment and are
to be accompanied by such other or further supporting documents as Buyer or its
counsel may reasonably require.
SECTION 1.2 PURCHASE PRICE. The purchase price for the
Shares is $5,300,000.00 (the "Purchase Price"). It is understood and agreed
that said aggregate Purchase Price is calculated on a uniform per share price
of $2,650.00 for each of the Shares. The Purchase Price shall consist of
$4,240,000.00 in cash and that number of shares of the Class A-1 Common Stock,
par value of $0.01 per share (the "Class A-1 Shares") Holdings (which is
Buyer's parent corporation), equal to $1,060,000.00 divided by the Estimated
Initial Public Offering Price (as that term is defined in Section 1.3 hereof).
Accordingly, for the purposes hereof, each Class A-1 Share is being valued at
approximately $35.09, it being understood that such price is an estimation of
the price of Holdings' stock upon its initial sale to the public pursuant to
its Initial Public Offering (as that term is defined in Section 1.3 hereof),
prior to giving effect to the stock split discussed in Section 1.3 hereof. The
respective amounts of cash and Class A-1 Shares to which each of the
Shareholders are entitled at closing are set forth on Exhibit "1.2". The Class
A-1 Shares being issued to Shareholders are subject to the restrictions on
resale described in Section 1.3 and provided under federal and State securities
laws.
SECTION 1.3 CERTAIN MATTERS RELATED TO THE ACQUISITION OF
CLASS A-1 SHARES. In connection with the issuance of Class A-1 Shares and
possible re-adjustment to the number of shares of Holdings' stock being issued
as part of the Purchase Price contemplated herein Selling Parties acknowledge
and agree to the following:
A. Holdings is currently working on a possible Initial
Public Offering which may or may not be completed but if it is
completed will involve a re-capitalization of Holdings' current stock
structure with the final parameters of same yet to be determined.
However, it is anticipated that there will be 1 class of common stock
in place of the current 3 classes following a stock split in the range
of somewhere between 2 and 3 to 1, and, accordingly, all of
Shareholders' stock will be converted to the single class of common
stock on the same basis as the stock held by all of the holders of
Class A-1 and Class A-2 common stock. Accordingly, all references
herein to "Class A-1 Shares" shall be understood to refer to Holdings'
common stock as same may evolve as part of the contemplated
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Initial Public Offering. For the purposes of this Agreement, the term
"Initial Public Offering" means the sale in an initial underwritten
public offering registered under the Securities Act of 1933 (other
than on Form S-8 or a similar form) of shares of common stock of
Holdings. The term "Estimated Initial Public Offering Price" means
the estimated price at which such shares will be offered to the public
in the Initial Public Offering, without giving effect to the
contemplated stock split.
B. Should the contemplated Initial Public Offering not
be completed, then, and in that event, the per share value for each of
the Class A-1 Shares as set forth in Section 1.2 hereof shall remain
in effect as same pertains to this transaction. Alternatively, should
the Initial Public Offering be completed, then, and in that event, the
price per share shall be revised (if necessary) using the actual
Initial Public Offering price to the public. In connection therewith,
it is understood and agreed that, in no event, will Shareholders
ultimately receive more than that number of shares of Holdings' common
stock equal in value to $1,060,000.00 taking into account the actual
offering price to the public on the date of the Initial Public
Offering and the stock split hereinabove discussed.
Accordingly, in order to facilitate the contemplated
re-capitalization and adjustment on the Closing Date, the Class
A-1 Shares shall be placed in escrow with Buyer's counsel Seyburn, Kahn
Ginn, Bess, Deitch and Serlin, pursuant to that certain escrow
agreement attached hereto as Exhibit 1.3. Such escrow agreement will
provide, inter alia for: (i) an adjustment methodology consistent
with both the re-capitalization described generally in Section 1.2
above and the possible adjustment in per share price contemplated in
this Section 1.3; and (ii) either one of Gary L. Monroe or William J.
Rauwerdink to serve as Shareholders' attorney in fact to execute any
and all instruments determined to be necessary or desirable by
Holdings' counsel in order to accomplish the re-capitalization and
possible re-valuation contemplated herein.
C. Shareholders will be bound by all resale restrictions
which will be imposed by the terms and conditions of the contemplated
underwriting and by applicable federal and state securities laws.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Selling Parties, jointly and severally, represent and warrant
to Buyer that, as of the date hereof:
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SECTION 2.1 ORGANIZATION, STANDING AND POWER.
Corporation is duly organized, validly existing and in good standing under the
laws of the State of Michigan, has all necessary corporate power to own its
properties and to carry on its business as now owned and operated by it, is
duly qualified to do intrastate business and is in good standing in each
jurisdiction in which the nature of its business or its properties makes such
qualification necessary. Each jurisdiction in which Corporation is so
qualified to do business is listed on Exhibit "2.1".
SECTION 2.2 CAPITALIZATION. The authorized capital stock
of Corporation consists of fifty thousand (50,000) shares of common stock
having a par value of $1.00 each of which two thousand (2,000) shares are
issued and outstanding. All of the Shares are validly issued, fully paid,
nonassessable, and, have been so issued in full compliance with all applicable
federal and state securities laws. There are no outstanding subscriptions,
options, rights, warrants, convertible securities or other agreements or
commitments obligating Corporation to issue or to transfer from treasury any
additional shares of its capital stock of any class.
SECTION 2.3 TITLE TO SHARES. Shareholders are the
owners, beneficially and of record, of all of the Shares, free and clear of all
liens, encumbrances, security agreements, equities, options, claims, charges
and restrictions except as set forth in Exhibit "2.3".
SECTION 2.4 SUBSIDIARIES. Corporation does not own,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or other entity.
SECTION 2.5 AUTHORITIES AND CONSENTS. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, have been duly and validly authorized
by the Board of Directors of Corporation. Selling Parties represent and
warrant that they have the right, power, legal capacity and authority to enter
into and perform their respective obligations under this Agreement and that, no
consent or approval of, notice to or filing with any governmental authority
having jurisdiction over any aspect of the business or assets of Corporation,
and no consent or approval of or notice to any other person or entity (except
consents, approvals and notices required in connection with contracts and
leases listed in Exhibits "2.14" and "2.24"), is required in connection with
the execution and delivery by Selling Parties of this Agreement or the
consummation by Selling Parties of the transactions contemplated hereby.
SECTION 2.6 NO BREACH OR VIOLATION. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, does not and will not result in or
constitute any of the following: (i) a breach
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of any term or provision of this Agreement; (ii) a default, breach or
violation, or an event that, with notice or lapse of time or both, would be a
default, breach or violation of any of the terms, conditions or provisions of
the Articles of Incorporation or By-Laws of Corporation, or any lease, license,
promissory note, security agreement, commitment, indenture, mortgage, deed of
trust or other agreement, instrument or arrangement to which Corporation is a
party or by which it or its property is bound; (iii) an event that would permit
any party to terminate or rescind any agreement or to accelerate the maturity
of any indebtedness or other obligation of Corporation; or (iv) the creation or
imposition of any lien, charge or encumbrance on any of the properties of
Corporation.
SECTION 2.7 FINANCIAL STATEMENTS. There have heretofore
been delivered to Buyer: (i) unaudited financial statements, including balance
sheets, statements of income and retained earnings, and statements of changes
in financial position for Corporation as of December 31, 1993, December 31,
1994 and December 31, 1995, and for the twelve (12) month period then ended
prepared by Kim A. Burkey, Certified Public Accountant, whose opinions with
respect to said statements are included therein; and (ii) unaudited balance
sheet and statement of income and retained earnings for Corporation as of May
31, 1996 and for the 5-month period then ended, accompanied by a certificate of
the Chief Executive Officer or Chief Financial Officer of Corporation stating
that such balance sheet and statement of income are unaudited but include all
adjustments considered necessary for a fair presentation of the results for the
period indicated.
Subject to such changes that may result from an audit of the
Financial Statements (which changes in the aggregate will not be material) all
of the financial statements referred to above (the "Financial Statements") have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved. Except as set forth in
Exhibit "2.7", the Financial Statements present fairly the financial positions
of Corporation to which they relate as at the respective dates thereof, and the
related results of operations of Corporation for the periods therein referred
to.
SECTION 2.8 UNDISCLOSED LIABILITIES. Except as set forth
in Exhibit "2.8", Corporation has no material debts, liabilities or obligations
of any kind, whether accrued, absolute, contingent or otherwise, which, under
generally accepted accounting principles, should have been so reflected or
reserved against or disclosed in Corporation's balance sheet dated as of May
31, 1996, included in the Financial Statements, except for those that may have
been incurred subsequent to the date of that balance sheet. All debts,
liabilities and obligations incurred after May 31, 1996 were incurred in the
ordinary course of business and are usual and normal in amount both
individually and in the aggregate.
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SECTION 2.9 ABSENCE OF CERTAIN CHANGES. Except as set
forth in Exhibit "2.9", since January 1, 1996, the business of Corporation has
been operated only in the ordinary course and, without limiting the generality
of the foregoing, Corporation has not:
A. Declared, set aside or paid any dividend or other
distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any of its capital stock;
B. Sustained any damage, destruction or loss, by reason
of fire, explosion, earthquake, casualty, labor trouble, requisition
or taking of property by any government or agency thereof, windstorm,
embargo, riot, act of God or public enemy, flood, accident, revocation
of license or right to do business, total or partial termination,
suspension, default or modification of contracts, governmental
restriction or regulation, other calamity or other similar or
dissimilar event (whether or not covered by insurance), materially and
adversely affecting its condition (financial or otherwise), earnings,
business, assets, liabilities, properties, operations or prospects;
C. Had any material adverse change in its condition
(financial or otherwise), earnings, business, assets, properties,
liabilities, operations or prospects;
D. Issued, authorized for issuance, or sold any equity
security, bond, note or other security, or granted, or entered into,
any commitment or obligation to issue or sell any such equity
security, bond, note or other security, whether pursuant to offers,
stock option agreements, stock bonus agreements, stock purchase plans,
incentive compensation plans, warrants, calls, conversion rights or
otherwise;
E. Incurred additional debt for borrowed money, or
incurred any obligation or liability (fixed, contingent or otherwise)
except in the ordinary and usual course of its business;
F. Paid any obligation or liability (fixed, contingent
or otherwise), or discharged or satisfied any lien or encumbrance, or
settled any liability, claim, dispute, proceeding, suit or appeal,
pending or threatened against them or any of their assets or
properties, except in the ordinary and usual course of its business;
G. Mortgaged, pledged, otherwise encumbered or subjected
to lien any of its assets or properties, tangible or intangible,
except for liens for current taxes which are not yet due and payable
and purchase-money liens arising out of the purchase or sale of
products or services made in the ordinary and usual course of its
business;
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H. Sold, transferred, leased, licensed or otherwise
disposed of any asset or property, tangible or intangible, except in
the ordinary and usual course of its business, or discontinued any
product line or the manufacture, sale or other disposition of any of
its products or services;
I. Purchased or otherwise acquired any debt or equity
securities of any corporation, partnership, joint venture, firm or
other entity;
J. Made any expenditure for the purchase, acquisition,
construction or improvement of a capital asset, except in the ordinary
and usual course of its business;
K. Entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of
business and not involving an amount in any case in excess of
$5,000.00;
L. Waived any right or claim or cancelled any debts or
claims which would have a material adverse effect on the Corporation's
financial condition, business or operations or voluntarily suffered
any extraordinary losses;
M. Sold, assigned, transferred or conveyed any property
rights, except in the ordinary and usual course of business;
N. Effected any amendment or supplement to any employee
profit sharing, stock option, stock purchase, pension, bonus,
incentive, retirement, medical reimbursement, life insurance deferred
compensation or any other employee benefit plan or arrangement;
O. Paid to or for the benefit of any of its directors,
officers, employees or shareholders any compensation of any kind other
than wages, salaries and benefits at times and rates in effect prior
to December 31, 1995;
P. Effected any change in its directors or executive
management;
Q. Effected any amendment or modification in its
Articles of Incorporation or By-Laws;
R. Had any labor trouble that has or might materially
and adversely affect its condition (financial or otherwise), earnings,
business, assets, liabilities, properties, operations or prospects;
S. Changed its accounting methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates), the effect of which would have a
material adverse effect on the Corporation's financial condition,
business, or operations;
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T. Revalued any of its assets, the effect of which would
have a material adverse effect on the Corporation's financial
condition, business or operations;
U. Increased the salary or other compensation payable or
to become payable to any of its officers, directors or employees, or
declared, paid or committed to pay a bonus or other additional salary
or compensation to any such person except in the ordinary and usual
course of business as to officers, directors or employees other than
the Selling Shareholders;
V. Made any loan to any person or entity, or guaranteed
any loan;
W. Had any other event or condition of any character
that has or might reasonably have a material and adverse effect on its
condition (financial or otherwise), earnings, business, assets,
liabilities, properties, operations or prospects; or
X. Agreed, committed or entered into any other
understanding to do any of the things described in the preceding
Subsections A through W.
SECTION 2.10 TAXES. Except as set forth in Exhibit
"2.10", within the times and in the manner prescribed by law, Corporation has
filed all tax returns required to be filed and has paid or made adequate
provision for payment of all taxes upon it, its properties, income or
franchises, due and payable on or before the date hereof. Except as set forth
in Exhibit "2.10", there are no claims pending against Corporation for past-due
taxes, nor has Corporation been notified of any claims. There are no present
disputes or discussions with federal, state, local, foreign, commonwealth or
other authorities with respect to any taxes of any nature payable by
Corporation. Except as set forth in Exhibit "2.10" there are no outstanding
waivers or agreements by Corporation for the extension of the time for the
assessment of any tax. The tax returns of Corporation, if audited, have been
finally determined by the Internal Revenue Service or other taxing authority,
or otherwise closed, and any penalties, deficiencies, assessments, additions to
tax and interest proposed as a result of such audits have been paid or settled.
The charges, accruals and reserves for taxes reflected in the balance sheet as
of May 31, 1996, and included in the Financial Statements, are, adequate for
any and all taxes for the periods ending the date of such balance sheets and
for all prior periods, whether or not disputed. As used in this Section 2.10,
the terms "tax" and "taxes" refer to any tax, assessment, additions to tax,
fee, penalty, interest or other governmental charge imposed by any federal,
state, county, local, foreign, commonwealth or other governmental entity.
Corporation has never filed, nor will it file, any consent under Section 341(f)
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of the Internal Revenue Code of 1986, as amended, on or before the Closing
Date. The Buyer will have prepared and the Shareholders will be responsible
for the cost of such preparation and filing all requisite federal and state tax
returns for the period ending June 30, 1996 notwithstanding the fact that
Buyer as the post closing parent corporation of Corporation shall be
responsible for preparing same.
SECTION 2.11 RECEIVABLES. Except as set forth in Exhibit
"2.11", all receivables of Corporation shown on the balance sheets included in
the Financial Statements are carried at values determined in accordance with
generally accepted accounting principles consistently applied, reflect all
pertinent facts known to Corporation as of the date hereof, and represent valid
and binding obligations of the debtors requiring no further performance by
Corporation. Except as set forth in Exhibit "2.11", reserves for doubtful
accounts have been established on the books of Corporation in accordance with
generally accepted accounting principles consistently applied and are reflected
on the balance sheets included in the Financial Statements.
SECTION 2.12 INVESTMENTS AND INVESTMENT SECURITIES.
Corporation has no interest, of record or beneficial, direct or indirect, in
any governmental bonds or notes, other investment securities and assets held
for investment except as set forth in Exhibit "2.12".
SECTION 2.13 REAL PROPERTY.
A. Exhibit "2.13" sets forth a complete and accurate
address of each parcel of real property, together with all buildings,
fixtures and other improvements located thereon (collectively, the
"Real Property") which is either owned by or leased to Corporation.
B. To the best of Selling Parties' knowledge, the Real
Property and the current and currently planned use thereof is and will
be in compliance with all applicable use restrictions and/or lease
covenants.
C. No notice of violation of any applicable federal,
state or local statute, law, ordinance, rule, regulation, order or
requirement, or of any covenant, condition, restriction or easement
affecting the Real Property or with respect to the use or occupancy of
the Real Property, has been given to Corporation by any governmental
authority having jurisdiction over the Real Property or by any other
person entitled to enforce the same.
D. Corporation has not subjected, and will not subject
or suffer to be subjected hereafter the Real Property or any portion
thereof to any lease (except a lease by Corporation),
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sublease, tenancy, concession, license, occupancy agreement or similar
right, mortgage, deed of trust, lien, encumbrance, claim, charge, equity,
covenant, condition, restriction, easement, right of way or other matter
affecting the Real Property or any portion thereof except as set forth
in Exhibit "2.13".
E. To the best of Selling Parties' knowledge, there are
no unpaid taxes, assessments (special, general or otherwise) or bonds of
any nature affecting the Real Property or any portion thereof due and
payable by Corporation.
SECTION 2.14 LEASES. Exhibit "2.14" lists all leases, rental
agreements, conditional sales contracts and other similar agreements
(collectively, "Leases"), as amended, which cannot be terminated by Corporation
without liability at any time upon less than thirty (30) days' notice or which
involve payment by it in the future of more than $10,000.00, under which
Corporation holds or uses any real or personal property or leases any of the
same to others. Corporation has complied in all material respects with the
provisions of all Leases, and to the best of Selling Parties' knowledge all
such Leases are valid, in good standing and enforceable by Corporation in
accordance with their terms, except as limited by bankruptcy, insolvency or
other similar laws affecting the rights of creditors generally and by
limitations on enforceability applicable to contracts generally.
Notwithstanding anything contained in the Leases, Corporation has such title to
or interests thereunder as are necessary to continue to conduct its business as
presently conducted or as presently proposed to be conducted, and there is, no
title defect to which any of the Leases is subject which might reasonably be
expected at any time to have a material adverse effect on Corporation or its
condition (financial or other), earnings, assets, liabilities, business,
operations or prospects. Exhibit "2.14" sets out any and all advances,
deposits and prepayments made by Corporation under the Leases.
SECTION 2.15 ENVIRONMENTAL MATTERS.
A. None of the operations or property of Corporation is
or has been subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a violation
of or liability under any requirements of law derived from or relating
to all federal, state and local laws relating to or addressing the
environment, health or safety (including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section Section 9601 et seq., Occupational Safety and Health
Act, 29 U.S.C. Section Section 651 et seq., Resource Conversation and
Recovery Act, 42 U.S.C. Section Section 6901 et seq., Clean Air Act, 42
U.S.C. Section Section 7401 et seq., Federal Water Pollution Control
Act, 33 U.S.C. Section Section 1251
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et seq., and any similar federal or state acts or statutes now in
effect), which requirements are sometimes herein collectively referred
to as the "Environmental Laws".
B. Corporation has no knowledge of a "Release" nor has
it filed any notice under any applicable Environmental Laws reporting
such "Release" (defined as any spill, emission, leaking, deposit,
discharge, dispersal or other release) into the indoor or outdoor
environment or into or out of any of the Real Estate (including
movement in or through the air, soil, surface water, groundwater or
property) of a "Contaminant" (defined as any hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or
petroleum-derived substance or waste, asbestos, polychlorinated
biphenyls, or any constituent of any of the foregoing, including such
items as are defined under any federal, state or local law or
regulation), or indicating past or present treatment, storage (other
than for less than ninety (90) days) or disposal of a "hazardous
waste" (as that term is defined under 40 Code of Federal Regulations
("CFR") Part 261 or any state equivalent) or reporting a material
violation of any applicable Environmental Laws.
C. Corporation has not received any written notice,
claim or report from any governmental authority or third party to the
effect that Corporation is or may be liable to any other person or
entity as a result of the Release or threatened Release of a
Contaminant into the environment.
SECTION 2.16 PATENTS, ETC. Exhibit "2.16" contains a list
and brief description of all trade names, trademarks, trademark registrations
and applications for registration, service marks, patent rights, patent
applications, trade secrets, copyrights and applications therefor (herein
collectively referred to as "Proprietary Rights") owned by Corporation, useful
or necessary to the conduct of its business, or in which Corporation has any
rights, licenses or immunities and of all patent licensing and similar
arrangements to which Corporation is a party. All Proprietary Rights are owned
by Corporation, and are, to the best of Selling Parties' knowledge valid and in
full force and effect.
SECTION 2.17 NON-INFRINGEMENT; AGREEMENTS. Except as set
forth in Exhibit "2.17", no Proprietary Right is the subject of litigation or
other adversary proceedings. To the best of Selling Parties' knowledge, no
present or presently proposed operation or activity of Corporation infringes
the rights of any other person or entity, and no person or entity is infringing
the Proprietary Rights of Corporation. Except as set forth in Exhibit 2.17",
Corporation has the right and authority, including without limitation, adequate
licenses, to use such Proprietary rights as are necessary to enable Corporation
to conduct and continue to conduct all phases of its business in the manner
presently
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conducted by it. Except as set forth in Exhibit "2.17", Corporation is not a
party to or bound by any license or agreement requiring the payment by it of
any royalty, override or similar payment in connection with any activity
conducted or to be conducted by it. Except as provided for by the terms of
contracts with governmental authorities, Corporation is not a party to any
agreement: (i) prohibiting or restricting its use or sale of any special
device, item, customer list, secret process or the like; or (ii) limiting its
business to any territory, pricing policy or customers; or (iii) requiring
exclusive dealing or otherwise in restraint of its business.
SECTION 2.18 INSURANCE. All policies of liability, theft,
life, fire, title and other forms of insurance and surety bonds (including,
without limitation, any standby letters of credit), insuring Corporation, its
directors, officers, employees, properties, assets and business are listed and
briefly described on Exhibit "2.18". All of said policies are, to the best of
Selling Parties' knowledge, valid and in good standing. Corporation has
experienced no losses or made claims under any of such policies which are
extraordinary for a company of its' size except as are set forth on Exhibit
"2.18".
SECTION 2.19 INTERESTED TRANSACTIONS. Corporation has no
contract or agreement (oral or written) with, any outstanding loans to or from,
or any outstanding liabilities (except for no more than one (1) months' salary
at no more than the current annual rate) to any officer, director, employee or
stockholder of Corporation or any relative of any such person or any
corporation or other entity in which any of such persons has a material
financial interest, direct or indirect, or of which any such person is an
officer, director or partner, except as set forth in Exhibit "2.19".
SECTION 2.20 CUSTOMERS AND SALES. A correct and current
list of all customers of Corporation whose annual purchases exceed $50,000.00,
is set forth on Exhibit "2.20". There are no facts or circumstances known to
the Selling Parties or any of them indicating that any customer who has ordered
products or services from Corporation which have not yet been delivered intends
to cancel such order. Selling Parties have no knowledge that any of the
customers of Corporation intend to cease doing business with Corporation, or
materially alter the amount of the business that they are presently doing with
Corporation.
SECTION 2.21 EXISTING EMPLOYMENT CONTRACTS AND/OR
REMUNERATION AGREEMENTS. Exhibit "2.21" sets forth a complete and accurate
list of all employment contracts or other agreements or arrangements providing
for employee remuneration or benefits to which Corporation is a party or by
which Corporation is bound, copies of the originals of which have been provided
to Buyer. To the best of Selling Parties' knowledge, all such contracts and
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arrangements are in full force and effect, and neither Corporation nor any
other party is in default under any such contract or arrangement, nor are there
any amendments, modifications, changes or releases thereto, written or oral.
There have been no claims of defaults and there are no facts or conditions
which if continued, or upon notice, will result in a material default under
such contracts or arrangements. There is no pending or threatened labor
dispute, strike or work stoppage affecting the business of Corporation.
SECTION 2.22 EMPLOYEE BENEFITS PLANS. Exhibit "2.22" sets
forth a complete and accurate list of all collective bargaining agreements and
all pension, bonus, profit-sharing, stock option or other plan or arrangement
providing for employee benefits (including any plan within the meaning of
Section 3(3) of the Employment Retirement Income Security Act), to which
Corporation is a party or by which Corporation is bound, copies of the
originals of which are attached hereto as Exhibit "2.22". There are no
unfunded liabilities or other obligations of Corporation with respect to any
such collective bargaining agreements, or pensions, bonus, profit-sharing,
stock option or other plans or arrangements providing for employee benefits
except as set forth on Exhibit "2.22" hereto. Except as disclosed pursuant to
Section 2.21 hereinabove, no employees of Corporation have employment
contracts.
SECTION 2.23 WORKERS COMPENSATION; EMPLOYMENT
DISCRIMINATION; LABOR RELATIONS. To the best of Selling Parties' knowledge,
Corporation has complied in all material respects with all applicable federal,
state and local laws, rules, regulations and executive orders relating to
employment, all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, and the withholding and payment of taxes from
compensation of employees and the payment of premiums and benefits under
applicable worker compensation laws. There are no employment discrimination
proceedings by any employee or former employees against Corporation currently
threatened or pending before any state or federal court or state or federal
administrative agency, tribunal, commission or board and to the best of Selling
Parties' knowledge no facts or circumstances exist which may result in the
filing or commencement of any such proceeding. All currently pending or
outstanding worker's compensation claims are listed on Exhibit "2.23" attached
hereto and all such claims are to the best of Selling Parties' knowledge fully
insured against. To the best of Selling Parties' knowledge there is no effort
being made to organize the employees of Corporation into any collective
bargaining unit or to solicit them to join any labor organization and
Corporation has no knowledge of any intention on the part of any labor
organization to organize such employees or to solicit them to join any labor
organization. Corporation is not bound by any prior court, administrative
agency, tribunal, commission or board, decree, judgment, decision, arbitration
agreement or settlement relating to collective bargaining agreements,
conditions
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of employment or, to the best of Selling Parties' knowledge, attempts to
organize a collective bargaining unit which may adversely affect the business
and affairs of Corporation or the transactions contemplated hereby. Except as
set forth on Exhibit "2.23", there is no unfair labor practice complaint
against Corporation pending before the National Labor Relations Board.
SECTION 2.24 OTHER CONTRACTS. Exhibit "2.24" lists and
briefly describes all contracts, agreements, commitments, guarantees, letters
of intent, understandings or other arrangements of a contractual nature,
written or oral (including, but not limited to, franchise, patent, trademark
and royalty agreements), other than outstanding purchase orders made in the
ordinary course of business, to which Corporation is a party and which: (i)
involve payment by Corporation of more than $10,000.00; or (ii) materially
affect the condition (financial or other), earnings, assets, liabilities,
business, operations or prospects of Corporation. Corporation has, to the best
of Selling Parties' knowledge, complied in all material respects with the
provisions of all contracts under which it is bound, and has not been in
material default or claimed default under any thereof.
SECTION 2.25 OFFICERS AND DIRECTORS, ETC. Exhibit "2.25"
is a true and complete list of:
A. The names of all present officers and directors of
Corporation and their current annual salary or other compensation
(such as, but not limited to, consultant's fees) and including all
bonuses, whether deferred, accrued or otherwise, which were paid or
accrued during 1995;
B. The names, titles and annual compensation of all
salaried employees of Corporation whose compensation (in whatever
form) from Corporation as of the date hereof will equal or exceed or
which will be likely to exceed an annual rate of $50,000.00 in 1996,
or equalled such amount in the year ended December 31, 1995.
C. The name of each bank or other financial institution
in which Corporation has an account, deposit or safe deposit box, and
the names of all persons authorized to draw thereon or to have access
thereto;
D. The names of all persons holding tax or other powers
of attorney from Corporation and a summary of the terms of each; and
E. The names of all persons authorized (by the By-Laws
or by resolution of the Board of Directors or otherwise) to write
checks or borrow funds on behalf of Corporation.
SECTION 2.26 CORPORATE DOCUMENTS. Corporation has
furnished or made available to Buyer or its representatives for its
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examination, the originals, or true, correct and complete copies, of: (i) the
Articles of Incorporation and By-Laws of Corporation; (ii) the minute books of
Corporation containing all records of all proceedings, consents, actions and
meetings of the shareholders and Board of Directors; (iii) all permits, orders
and consents issued by any governmental authority (domestic or foreign) with
respect to Corporation, or any security issued by them, and all applications
for such permits, orders and consents; and (iv) the stock transfer books of
Corporation setting forth all issuances and transfers of any capital stock.
All of Corporation's records are complete and correct in all material respects
and all such records have been maintained in accordance with sound business
practices.
SECTION 2.27 LITIGATION AND CLAIMS. Except as set forth
on Exhibit "2.27", there is: (i) no action, suit, proceeding, claim or
investigation pending or, to the best of Selling Parties' knowledge,
threatened, in any court or before any arbitrator or before or by any federal,
state or other governmental department, commission, bureau, agency or
instrumentality, domestic or foreign; and (ii) no other unresolved claim made
against Corporation or affecting it or its properties or business, or the
transactions contemplated by this Agreement or any factual or legal basis for
any such action, suit, proceeding, claim or investigation which would
materially affect any of the same. All correspondence, memoranda and other
written notifications (collectively, "Complaints") which it has received within
the twelve (12) months preceding the date hereof concerning, or relating to,
complaints or expressions of dissatisfaction with the products, services or
personnel of Corporation, which Complaints, either individually, or in the
aggregate, could reasonably result in a material adverse change to the
condition (financial or other), earnings, business, assets, operations or
prospects of Corporation are listed on Exhibit "2.27" and Buyer has been
provided with accurate and complete copies of same. The matters set forth in
Exhibits "2.27", if decided adversely to Corporation will not in Selling
Parties' reasonable belief result in a material adverse change in the earnings,
business, assets or condition (financial or other), operations or prospects of
Corporation. Except as set forth on Exhibit "2.27", Corporation is not
presently engaged in any legal action to recover monies due to it or damages
sustained by it.
SECTION 2.28 GENERAL LIABILITY. Selling Parties have no
knowledge of any statement of facts or the occurrence of any event forming the
basis for any present tort claim against Corporation not covered by insurance.
SECTION 2.29 OTHER TANGIBLE PERSONAL PROPERTY. Exhibit
"2.29" contains a complete and accurate list and brief description of all
machinery, tools, dies, appliances, vehicles, furniture, equipment (including
essential replacement parts) and other tangible personal property of any kind
and description, other than inventories, owned or leased by Corporation (the
"Tangible Personal Property"). The Tangible Personal Property constitutes all
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tangible personal property necessary for the conduct by Corporation of its
business as now conducted. All motor vehicles listed on Exhibit "2.29" have
passed emission standards examinations required by applicable law. Except as
stated in Exhibit "2.29", no Tangible Personal Property used by Corporation in
connection with its business is held under any lease, security agreement,
conditional sales contract or other title retention or security arrangement, or
is located other than in the possession of Corporation.
SECTION 2.30 TITLE TO ASSETS. Except for property leased
by Corporation, Corporation has good and marketable title to all its assets and
interests in assets, whether real, personal, mixed, tangible and intangible,
which constitute all the assets and interests in assets that are used in its
business. All these assets are free and clear of mortgages, liens, pledges,
charges, encumbrances, equities, claims, easements, rights of way, covenants,
conditions or restrictions, except for: (i) those disclosed in Corporation's
balance sheet included in the Financial Statements; (ii) the lien of current
taxes not yet due and payable; and (iii) possible minor matters that, in the
aggregate, are not substantial in amount and do not materially detract from or
interfere with the present or intended use of any of these assets, nor
materially impair business operations. All real property and tangible personal
property of Corporation is in good operating condition and repair, ordinary
wear and tear excepted. Corporation is in possession of all premises leased to
it from others. No officer, nor any director or employee of Corporation, nor
any spouse, child or relative of any of these persons, owns or has any
interest, directly or indirectly, in any of the real or personal property owned
by or leased to or any copyrights, patents, trademarks, trade names or trade
secrets licensed by Corporation.
SECTION 2.31 INVESTMENT REPRESENTATIONS. In connection
with the Shareholders' purchase of the Class A-1 Shares:
A. Shareholders were given the opportunity to ask
questions and receive answers concerning Holdings and the terms and
conditions of the offer and sale and to obtain any additional
information possessed by Holdings or which Holdings could acquire
without unreasonable effort or expense necessary to verify the
accuracy of the information provided to Shareholders about Holdings;
B. Shareholders are purchasing the Shares solely for
their own respective accounts for investment and not with the view to
sale or distribution of the Class A-1 Shares or any portion thereof
and not with any intention of selling, offering to sell, or otherwise
disposing of or distributing the Class A-1 Shares or any portion
thereof.
C. Shareholders received all information they
respectively deemed necessary and appropriate to enable them to
evaluate the financial risk inherent in making an investment in the
Class A-1 Shares;
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D. Shareholders either are accredited investors as such
term is defined in Regulation D, Rule 501 under the Securities Act of
1933, as amended, or are sophisticated in financial matters and able
to evaluate the risk and benefits of an investment in Holdings; and
E. Shareholders are aware that the Class A-1 Shares have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act") and, therefore, cannot be resold unless they are
registered under the Act or unless an exemption from registration
under the Act is available (such as that provided by Rule 144 under
the Securities Act); and that each certificate representing the Class
A-1 Shares will contain a legend noting the restrictions on resale
under the Act.
F. Shareholders are aware of the fact that Buyer's
proposed initial public offering may or may not be completed and
acknowledge that Buyer has made no representation or warranty
whatsoever regarding such initial public offering which has, in any
way, induced Shareholders into entering into the transaction
contemplated herein.
G. Each of the Shareholders represents and warrants that
he will not sell, assign or transfer any of the shares of common stock
of Holdings received in exchange for Shares except (i) pursuant to an
effective registration statement under the Securities Act; (ii)
following expiration of the restrictions imposed by Holdings'
contemplated underwriting or (iii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to Buyer is not
required to be registered under the Securities Act.
H. Shareholders are aware of the fact that if an initial
public offering is completed they will not have registration rights of
any type or kind, except those rights which are more particularly
described in Section 10.13 hereof.
SECTION 2.32 BEST KNOWLEDGE. The term "to the best of
Selling Parties' knowledge", or equivalent terms, as used to qualify any of the
foregoing representations and warranties, means knowledge of Marshall or Marvin
after a diligent and thorough investigation as to the subject matter of such
representations and warranties.
SECTION 2.33 ACCURACY AND COMPLETENESS OF REPRESENTATIONS
AND WARRANTIES. No representation or warranty made by Selling Parties in this
Agreement and no statement contained in any document or instrument delivered or
to be delivered to Buyer pursuant hereto or in connection with the transactions
contemplated hereby contain or will contain any untrue statement of a known
material fact, or omits or will omit to state a known material fact
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necessary to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND HOLDINGS
Buyer with respect to Buyer and Holdings with respect to
Holdings, hereby represent and warrant to Selling Parties as follows:
SECTION 3.1 ORGANIZATION. Buyer and Holdings are
corporations duly organized, validly existing and in good standing under the
laws of the State of Delaware, and have the corporate power and are duly
authorized to carry on their businesses where and as now conducted and to own,
lease and operate properties as they now do.
SECTION 3.2 AUTHORIZATION. The execution, delivery and
performance of this Agreement by Buyer and Holdings, and the consummation of
the transactions contemplated hereby, have been duly and validly authorized by
the Boards of Directors of Buyer and Holdings. Buyer and Holdings represent
and warrant that they have the right, power, legal capacity and authority to
enter into and perform their respective obligations under this Agreement and no
consent or approval of, notice to or filing with any governmental authority
having jurisdiction over any aspect of the business or assets of Buyer or
Holdings, and no consent or approval of or notice to any other person or entity
is required in connection with the execution and delivery by Buyer and Holdings
of this Agreement or the consummation by Buyer and Holdings of the transactions
contemplated hereby.
SECTION 3.3 NO BREACH. The execution, delivery and
performance of this Agreement by Buyer and Holdings and the consummation of the
transactions contemplated hereby does not and will not result in or constitute
any of the following: (i) a breach of any term or provision of this Agreement;
(ii) a default, breach or violation, or an event that, with notice or lapse of
time or both, would be a default, breach or violation of any of the terms,
conditions or provisions of the Articles of Incorporation or Bylaws of Buyer or
Holdings or any lease, license, promissory note, security agreement,
commitment, indenture, mortgage, deed of trust or other agreement, instrument
or arrangement to which Buyer and/or Holdings is a party or by which it or its'
property is bound; (iii) an event that would permit any party to terminate or
rescind any agreement or to accelerate the maturity of any indebtedness or
other obligation of Buyer and/or Holdings; or (iv) the creation or imposition
of any lien, charge or encumbrance on any of the properties of Buyer or
Holdings.
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SECTION 3.4 VALIDLY ISSUED. The total authorized number
of shares of capital stock which Holdings has authority to issue is 19,000,002
shares, consisting of 13,000,000 shares of Class A-1 Common Stock, of which
999,998 shares are issued and outstanding; 4,000,000 shares of Class A-2 Common
Stock, of which approximately 5,115 shares are issued and outstanding;
1,000,002 shares of Class B Common Stock, of which 1,000,002 shares are issued
and outstanding; and 1,000,000 shares of Preferred Stock, none of which shares
are issued and outstanding. Additionally, certain persons hold 119,181 options
to acquire Class A-1 Common Stock and certain persons hold 101,615 options to
acquire Class A-2 Common Stock. When issued in accordance with the terms of
this Agreement, the Class A-1 Shares will be validly issued, fully paid and
non-assessable.
SECTION 3.5 MATERIAL ADVERSE CHANGE. Since May 20, 1996
there has been no material adverse change in, and no event, occurrence or
development in the business of Buyer or Holdings that, taken together with
other events, occurrences and developments with respect to such business, would
have or would reasonably be expected to have a material adverse effect on
Buyer's financial condition, business or operations.
SECTION 3.6 ADVICE OF CHANGES. Between the date hereof
and the Closing Date, Buyer shall promptly advise Selling Parties in writing of
any fact which, if existing or known at the date hereof, would have been
required to set forth or disclosed in or pursuant to this Agreement or any fact
which, if existing or known at the date hereof, would have any of the
representations contained herein materially untrue.
SECTION 3.7 THE FINANCIAL STATEMENT. There has
heretofore been delivered to Buyer the audited Financial Statement, including a
balance sheet, statement of income and retained earnings, and statement of
changes in financial position for Buyer as of December 31, 1995 and for the
twelve (12) month period then ended (the "Financial Statement") prepared by
Coopers & Lybrand, L.L.P., independent public accountants, whose opinions with
respect to said statement is included therein. The Financial Statement
referred to above has been prepared in accordance with generally accepted
accounting principles consistently applied throughout the period involved. The
Financial Statement presents fairly the financial position of the Buyer to
which it relates at the date thereof and the related results of operations of
Buyer for the period therein referred to.
SECTION 3.8 UNDISCLOSED LIABILITIES. Buyer has no
material debts, liabilities, or obligations of any kind, whether accrued,
absolute, contingent or otherwise, which, under generally accepted accounting
principles, should have been so reflected or reserved against or disclosed in
Corporation's balance sheet dated as of December 31, 1995, except those that
may have been incurred
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subsequent to the date of that balance sheet. All debts, liabilities and
obligations incurred after December 31, 1995 were incurred in the ordinary
course of business and are usual and normal in amount both individually and in
the aggregate.
SECTION 3.9 LITIGATION. There is: (i) no action, suit,
proceeding, claim or investigation pending or to the best of Buyer's knowledge,
threatened, in any court or before any arbitrator or by and federal, state, or
other governmental department, commission, bureau, agency or instrumentality,
domestic or foreign; and (ii) no other unresolved claim made against Buyer or
affecting it or its' properties or business where the transaction is
contemplated by this Agreement or any factual or legal basis for any such
action, suit, proceeding, claim or investigation which would materially affect
any of the same.
SECTION 3.10 TAXES. Within the times and in the manner
prescribed by law, Buyer has filed all tax returns required to be filed and has
paid or made adequate provision for payment of all taxes upon it, its'
properties, income or franchises, due and payable on or before the date hereof.
There are no claims pending against Buyer for past due taxes, nor has Buyer
been notified of any claim. There are no present disputes or discussions with
federal, state, local, foreign, commonwealth, or other authorities with respect
to any taxes of any nature payable by Buyer. There are no outstanding waivers
or agreements by Buyer for the extension of the time for the assessment of any
taxes. The tax returns of Buyer, if audited, have been finally determined by
the Internal Revenue Service or any other taxing authority, or otherwise
disclosed, and any penalties, deficiencies, assessments, additions to tax and
interest proposes as result of such audits have been paid or settled. The
charges, accruals and reserves for taxes reflected in the balance sheet as of
December 31, 1995 and included in the Financial Statement, are, adequate for
any and all taxes for the period ending the date of such balance sheet and for
all prior periods, whether or not disputed. As used in this Section 3.10, the
terms "tax" and "taxes" refer to any tax, assessment, addition to tax, fee,
penalty, interest or other governmental charge imposed by any federal, state,
county, local, foreign, commonwealth, or other governmental entity.
SECTION 3.11 UNFUNDED LIABILITIES. There are no unfunded
liabilities or other obligations of Buyer with respect to any collective
bargaining agreements, or pensions, bonus, profit sharing, stock option or any
plans or arrangements providing for employee benefits.
SECTION 3.12 ACCURACY OF WARRANTIES. No representation or
warranty made by Buyer in this Agreement and no statement containing any
document or instrument delivered or to be delivered to Buyer pursuant hereto or
in connection with the transactions contemplated hereby, contain or will
contain any untrue statement
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of a known and material fact, or omits or will omit to state a known material
fact necessary to make the statements contained herein or therein, in light of
the circumstances under which they were made, not misleading.
SECTION 3.13 ENVIRONMENTAL MATTERS.
A. None of the operations or property of Buyer is or has
been subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a
violation of or liability under any requirements of law derived from or
relating to all federal, state and local laws relating to or addressing
the environment, health or safety (including, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act,
42 U.S.C. Section Section 9601 et seq., Occupational Safety and Health
Act 29 U.S.C. Section Section 651 et seq., Resource Conservation and
Recovery Act, 42 U.S.C. Section Section 6901 et seq., Clean Air Act 42
U.S.C. Section 7401 et seq., Federal Water Pollution Control Act 33
U.S.C. Section Section 1251 et seq., and any similar federal or state
acts or statutes now in effect), which requirements are sometimes
herein collectively referred to as "Environmental Laws".
B. Buyer has no knowledge of a "Release", nor has it
filed any notice under any applicable Environmental Laws reporting
such "Release" (defined as any spill, emission, leaking, deposit,
discharge, dispersal or other release) into the indoor or outdoor
environment or into or out of any of its real estate (including
movement in or through the air, soil, surface water, ground water or
property of a "Capitalized Contaminant" (defined as any hazardous
substance, toxic substance, hazardous waste, special waste, petroleum
or petroleum derived substance or waste, asbestos, polychlorinated
biphenyls or any constituent of any of the foregoing, including such
items as are defined under any federal, state or local law or
regulation), or indicating past or present treatment, storage (other
than for less than ninety (90) days) or disposal of a "Hazardous
Waste" (as that term is defined under 40 Code of Federal Regulations
("CFR") Part 261 or any state equivalent) or reporting a material
violation of any applicable Environmental Laws.
C. Buyer has not received any written notice, claim or
report from any governmental authority or third party to the effect
that Buyer is or may be liable to any other person or entity as a
result of the release or threatened release of a contaminant into the
environment.
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ARTICLE 4
FURTHER AGREEMENTS OF THE PARTIES
SECTION 4.1 ACCESS TO INFORMATION. Buyer and its
representatives may make such investigation of the properties, assets and
business of Corporation as Buyer may reasonably request, and Corporation shall
give to Buyer and to its counsel, accountants and other representatives, full
access during normal business hours to all of the properties, books, contracts,
commitments, records and files of Corporation, and shall furnish to Buyer all
such documents and copies of documents (certified as true and complete if
requested) and such information concerning the business and affairs of
Corporation as Buyer may reasonably request. Such investigation shall not be
deemed in any way to diminish the liability of Selling Parties in respect of
the representations, warranties, schedules, certificates or agreements given
hereunder.
SECTION 4.2 CONDUCT OF BUSINESS BY CORPORATION. From
the date hereof until the Closing Date, except as Buyer may previously consent
in writing, Corporation shall:
A. Carry on its business and activities in the ordinary
course as previously carried on, and shall not make or institute any
methods of management, accounting or operation that will vary
materially from those methods used by Corporation as of the date of
this Agreement. Without limitation of the generality of the
foregoing, Corporation shall not enter into any agreement or
arrangement involving sale or lease of a material portion of its
assets or the granting of any preferential right to purchase such
assets, properties or rights, except in connection with the sale or
lease of inventory to customers in the ordinary course of business;
B. Maintain in full force and effect the insurance
policies listed in Exhibit "2.18" to this Agreement;
C. Make no change in its Articles of Incorporation or
By-Laws;
D. Make no change in its authorized or issued capital
stock and issue or grant no options, warrants or rights to purchase
shares of or convert other securities into its capital stock;
E. Declare or pay no dividend or other distribution in
respect of any shares of its capital or make any payments of salary or
bonus to any of Shareholders other than in connection with current
employment contracts, all of which have heretofore been delivered to
Buyer;
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F. Purchase, redeem or otherwise acquire, directly or
indirectly, no shares of its capital stock;
G. Use its best efforts to preserve its business
organization intact, to keep available the services of its present
officers and employees, except in the case of unsatisfactory
performance, and to preserve the good will of all those having
business relations with it (including, but not limited to, its
customers);
H. Enter into no contract or commitment, except
contracts or commitments entered into in the ordinary course of
business, none of which (other than inventory purchases customary in
nature and amount) shall involve payment by Corporation of more than
$5,000.00;
I. Terminate none of the contracts or agreements listed
in Exhibit "2.24" or modify any of said contracts or agreements except
in accordance with their terms;
J. Except pursuant to existing arrangements disclosed in
Exhibit "2.25": (i) grant no increase in salaries or compensation
payable or to become payable by it, to any officer, employee, sales
agent or representative, other than increases in customary amounts
pursuant to normally scheduled salary reviews; or (ii) increase no
benefits payable under any employee plan or otherwise to any officer,
employee, sales agent or representative;
K. Duly comply with all laws, regulations, ordinances,
orders, injunctions and decrees applicable to it and to the conduct of
its business;
L. Encumber or mortgage none of its property or incur no
liability for borrowed money, other than in the ordinary course of
business, make no loans or advances to or assume, guarantee, endorse
or otherwise become liable with respect to, the obligations of any
other person, firm or corporation;
M. Acquire or agree to acquire none of the assets or
capital stock of any other person, firm or corporation, except for
purchases from suppliers in the ordinary course of business;
N. Make or agree to make no capital expenditures in
excess of $10,000.00 for any single item, or $20,000.00 in the
aggregate, or enter into any leases of capital equipment or property
under which the annual lease charge is in excess of $10,000.00;
O. Maintain and keep its properties and facilities in as
good condition and working order as at present, except for
depreciation through ordinary wear and tear;
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P. Perform all of its obligations under contracts
relating to or affecting its assets, properties and rights, except for
non-material failures;
Q. Not do, or agree to do, except in the ordinary course
of business, any of the following acts: (i) pay any obligation or
liability, fixed or contingent, other than current liabilities; (ii)
waive or compromise any right or claim; or (iii) cancel, without full
payment, any note, loan or other obligation owing to Corporation;
R. Enter into no negotiations or agreements with any
governmental authority (other than negotiations or agreements for the
purchase of goods or services from Corporation) which would affect the
future operation of its business; and
S. Write off none of the receivables on its books.
SECTION 4.3 CONDUCT OF BUSINESS BY BUYER AND HOLDINGS.
From and after the execution and delivery of this Agreement and until the
Closing Date, Buyer and Holdings will:
A. Conduct its and their business and operate only in
the usual ordinary course of business and maintain its and their
properties, books, contracts, business, operations, commitments,
records, and investments in accordance with generally accepted
accounting principles;
B. Conduct its and their business and operate only in
accordance with sound business practices;
C. Not take any action which constitutes a breach or
default of its obligations under this Agreement or which is reasonably
likely to cause any of the other conditions set forth in Article 5
hereof to fail.
SECTION 4.4 CONSENTS. Corporation shall obtain the
consent of all persons whose consent is required to the consummation of the
transactions contemplated hereby, in form and substance satisfactory to Buyer.
SECTION 4.5 COMMUNICATIONS. Each party hereto agrees to
consult and obtain the prior approval of the other parties, which approval
shall not be unreasonably withheld or delayed, on reasonable notice as to the
content of any press releases or any written statements for general circulation
regarding the subject contained in this Agreement.
SECTION 4.6 UPDATING OF SCHEDULES. From the date hereof
until the Closing Date, Corporation shall keep up to date all of the schedules,
exhibits and certificates furnished (or to be furnished) under this Agreement,
and shall promptly notify Buyer of any changes, additions or events which may,
after the lapse of time, cause any change or addition thereto.
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ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING PARTIES
The obligations of Selling Parties to consummate the
transactions contemplated by this Agreement shall be subject to the following
conditions, except as Selling Parties may waive in writing in accordance with
Section 10.5 below:
SECTION 5.1 PERFORMANCE. Buyer shall have performed and
complied with all agreements and covenants required by this Agreement to be
performed or satisfied by it on or prior to the Closing Date.
SECTION 5.2 REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants of Buyer and Holdings, set forth in
Article 3 hereof, shall be true and correct in all material aspects on the date
hereof, and on the Closing Date, as if made again at and as of such time,
subject to any transactions which are contemplated or permitted by this
Agreement.
SECTION 5.3 CERTIFICATE OF OFFICER. Selling Parties
shall have been furnished with certificates executed by an officer of Buyer and
an officer of Holdings, in form and substance satisfactory to Selling Parties,
certifying the fulfillment of the condition set forth in Section 5.2 above.
SECTION 5.4 LEGAL OPINION. Seyburn, Kahn, Ginn, Bess,
Deitch and Serlin, counsel for Buyer and Holdings, shall have delivered to
Selling Parties its opinions to the effect set forth in Exhibit "5.4".
SECTION 5.5 ABSENCE OF CERTAIN CHANGES OR EVENTS. From
the date hereof to the Closing Date, there shall be and have been no material
adverse change in the capitalization, business, properties or financial
condition of Buyer or Holdings.
SECTION 5.6 CONSENTS AND APPROVALS. Any consents or
approvals required to be secured by Buyer under the terms of this Agreement or
otherwise reasonably necessary in the opinion of Selling Parties to consummate
the transactions contemplated by this Agreement shall have been obtained and
shall be satisfactory to Selling Parties.
SECTION 5.7 LITIGATION. Neither Buyer nor Holdings shall
be made a party to, or to the best knowledge of Buyer, be threatened by, any
actions, suits, proceedings, litigation or legal proceedings which, in the
reasonable opinion of Selling Parties, have or are likely to have a material
adverse effect on the assets, properties, business, operations or condition,
financial or otherwise, of Buyer or Holdings. No action, suit, proceeding or
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claim shall have been instituted, made or threatened by any person relating to
the validity or propriety of the transactions contemplated by this Agreement.
SECTION 5.8 EMPLOYMENT AGREEMENTS. As of the Closing
Date, Corporation shall have entered into employment agreements with each of
Marshall, Christopher Abruzzo, Rene Loudin and Michael Schulze on terms and
conditions reasonably acceptable to Selling Parties.
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the following conditions,
except as Buyer may waive in writing in accordance with Section 10.5 below:
SECTION 6.1 AUTHORIZATION OF TRANSACTION. All action
necessary to authorize the execution, delivery and performance of this
Agreement by Selling Parties and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors of Corporation and by the Shareholders.
SECTION 6.2 SATISFACTORY INVESTIGATIONS. The
investigation of the business of the Corporation contemplated in Section 4.1
hereof shall be satisfactory to Buyer in all respects as determined in the
exercise of its sole, absolute and exclusive discretion.
SECTION 6.3 UNTRUE STATEMENTS. This Agreement, together
with the Exhibits attached hereto or subsequently provided to Buyer at the time
of Closing, shall not contain any untrue statement of a known material fact or
omit to state a known material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
SECTION 6.4 MATERIAL ADVERSE CHANGE. There shall have
been no material adverse change in the condition (financial or otherwise),
earnings, business, assets, liabilities, properties, operations or prospects of
Corporation, and there shall not have been any occurrence, circumstance or
combination thereof (whether arising heretofore or hereafter), including
litigation pending or threatened, which might result in any such material
adverse change before or after the Closing Date.
SECTION 6.5 REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Selling Parties contained in this
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Agreement, shall be true in all material respects at and as of the Closing Date
with the same effect as though such representations and warranties have been
made at and as of such time, and Selling Parties shall have performed or
complied with all obligations, covenants and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing
Date.
SECTION 6.6 CERTIFICATE OF SELLING PARTIES. Buyer shall
have been furnished with a certificate executed by an officer of Corporation
and certificates executed by each of the Shareholders, in form and substance
satisfactory to Buyer, certifying to the fulfillment of the condition set forth
in Section 6.5 above.
SECTION 6.7 LEGAL OPINION. Howard & Howard, counsel for
the Shareholders and the Corporation shall have each delivered to Buyer its
opinion to the effect set forth in Exhibit "6".
SECTION 6.8 LITIGATION. Immediately prior to the Closing
Date, there shall be no litigation or proceeding: (i) pending or threatened
against Buyer, Holdings or Corporation, or any of their respective directors,
officers or shareholders, or involving the assets or properties of any of them,
for the purpose of enjoining or preventing the consummation of this Agreement
or otherwise claiming that such consummation is improper; or (ii) pending
against Buyer, Holdings or Corporation which, if decided adversely, would
adversely affect the right of Buyer to retain the stock, property and other
assets or to continue the operations of the property, assets and business of
Corporation (or of Buyer, Holdings or any of its subsidiaries) after the
Closing Date, and which, in the judgment of the Board of Directors of Buyer or
Holdings, would make the consummation of this Agreement inadvisable.
Immediately prior to the Closing Date, there shall be no governmental
investigation pending or threatened which, in the judgment of the Board of
Directors of Buyer or Holdings, might lead to or result in any litigation or
proceeding of the nature referred to in the foregoing sentence.
SECTION 6.9 THIRD PARTY CONSENTS. Prior to the Closing,
Corporation shall have obtained the written consent, waiver or approval of each
person: (i) who is a party to a contract or agreement with Corporation or a
contract or agreement by which Corporation or its property is bound; (ii) whose
consent, waiver or approval is required under such contract or agreement as a
result of consummation of the transactions contemplated by this Agreement; and
(iii) whose failure to provide such consent, waiver or approval would have or
might reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), earnings, business, assets, liabilities, operations
or prospects of Corporation.
SECTION 6.10 CORPORATE ACTION. Immediately prior to the
Closing, Buyer shall have received, in form and substance
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<PAGE> 28
reasonably satisfactory to Buyer, the resignations of such officers and
directors of Corporation, effective as of the Closing Date, as Buyer may have
stipulated to Corporation in writing prior to the Closing Date.
SECTION 6.11 EMPLOYMENT AGREEMENTS. Each of Marshall,
Christopher Abruzzo, Rene Loudin and Michael Schulze shall have executed and
delivered to Buyer employment agreements with Corporation on mutually
acceptable terms and conditions.
SECTION 6.12 ESCROW AGREEMENT. The Shareholders shall
have executed and delivered to Buyer an Escrow Agreement (including assignments
separate from certificate as will be required thereunder) in the form attached
as Exhibit "1.3".
ARTICLE 7
THE CLOSING
SECTION 7.1 TIME AND PLACE. A closing of the
transactions provided for herein (the "Closing") shall take place at the
offices of Buyer's counsel in Southfield, Michigan at 10:00 a.m., local time,
on July 17, 1996, or at such other time and place as the parties may agree to
in writing (the "Closing Date"), with the closing to be effective as of July 1,
1996.
SECTION 7.2 SELLING PARTIES' OBLIGATIONS AT CLOSING. At
the Closing, Shareholders shall deliver to Buyer the following instruments, in
form and substance satisfactory to Buyer and its counsel, against delivery of
the items specified in Section 7.3:
A. Certificates representing the Shares, registered in
the name of the respective Shareholders, duly endorsed by the
respective Shareholders for transfer as specified in Section 1.1 above
or accompanied by a separate written instrument of assignment. On
submission of those certificates to Corporation for transfer,
Corporation shall issue to Buyer a new certificate representing the
Shares, registered in the name of Buyer;
B. The stock book, stock ledger, minute book and
corporate seal of Corporation;
C. The opinion of counsel as provided in Section 6.7;
D. Except as otherwise specified by Buyer, the written
resignations of all the officers and directors of Corporation;
E. The certificates executed by Corporation's officer
and the Shareholders, dated the Closing Date, as provided in Section
6.6; and
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<PAGE> 29
F. The Escrow Agreement and assignments separate from
certificate as provided in Section 1.3.
SECTION 7.3 BUYER'S OBLIGATIONS AT CLOSING. At the
Closing, Buyer shall deliver to Shareholders the following instruments and
documents against delivery of the items specified in Section 7.2:
A. The cash portion of the Purchase Price payable to
Shareholders in the amounts specified in Section 1.2, payable to
Shareholders in their respective proportions;
B. The shares of Holdings in the amounts specified in
Section 1.2, issued to Shareholders in their respective proportions;
C. Certified resolutions of Buyer's and Holdings' Boards
of Directors, in forms reasonably satisfactory to counsel for Selling
Parties, authorizing the execution, delivery and performance of this
Agreement and all actions to be taken by Buyer and Holdings under this
Agreement; and
D. The certificate executed by Buyer's and Holdings'
officers, dated the Closing Date, as provided in Section 5.3.
E. The opinion of counsel as provided in Section 5.4.
ARTICLE 8
OBLIGATIONS AFTER CLOSING
SECTION 8.1 AGREEMENT TO REFRAIN FROM COMPETITION. The
provisions of Sections 8.1A, 8.1B, 8.1C and 8.1D of this Agreement in favor of
Buyer, shall apply only to the following person and to no others: Marvin
(hereinafter referred to as "Investor Shareholder") it being acknowledged that
the non-competition agreement of Marshall in favor of Buyer is contained in the
separate employment agreement between he and the Corporation.
A. Investor Shareholder agrees, that he will not,
directly or indirectly (and whether or not for compensation),
within the forty-two (42) month period immediately following the
Closing Date, actively solicit the following types of business within
any of the counties in which Corporation operates at any time: records
management and document management activities (including micrographics,
scanning and conversion services and imaging) engaged in by Corporation
on the date of this Agreement as long as Buyer (or any successor)
shall, directly or indirectly, be engaged in such activity in any of
such counties.
29
<PAGE> 30
B. Investor Shareholder 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.
C. During the period specified in Section 8.1A, Investor
Shareholder further agrees not to: (i) divulge, communicate, use to
the detriment of Corporation or Buyer or for the benefit of any other
person or persons, or misuse in any way, any confidential information
or trade secrets of Corporation, including personnel information,
know-how, computer programs, customer lists or other technical data;
(ii) divert or attempt to divert from Corporation any business of any
kind in which Corporation is engaged on the date hereof; or (iii)
induce or attempt to induce any person who is an employee of
Corporation on the date hereof to leave the employ of Corporation or
Buyer. Investor Shareholder acknowledges and agrees that any
information or data which is unique to Corporation that he has
acquired on any of these matters or items was received in confidence
and as a fiduciary of Corporation.
D. Investor Shareholder has had knowledge of the
affairs, trade secrets, customers, potential customers and other
proprietary information of Corporation, and Investor Shareholder
acknowledges and agrees that compliance with the covenants set forth
in this Section 8.1 is necessary for the protection of the goodwill
and other proprietary interest of Corporation and Buyer. Investor
Shareholder acknowledges and agrees that in the event of a breach of
such covenants, neither Corporation, Buyer nor any successors would
have an adequate remedy at law, and Corporation, Buyer and any
successor shall be entitled to injunctive relief in addition to any
other remedies which may be available to them hereunder.
E. If, in any judicial proceeding, a court shall refuse
to enforce the covenants included herein, then said unenforceable
covenant 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 Buyer and Investor Shareholder that these covenants be
given the maximum force, effect and application permissible under law.
F. Investor Shareholder shall, on the Closing Date, be
paid $5,000.00 in exchange for the foregoing Agreement to refrain from
competition, which amount is included within the Purchase Price.
30
<PAGE> 31
SECTION 8.2 FURTHER ASSURANCES. From time to time, at
Buyer's request (whether or not after the Closing), and without further
consideration and at the expense of Buyer, Shareholders will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated by this Agreement, and to vest in Buyer good, valid and marketable
title to the Shares.
SECTION 8.3 SHAREHOLDERS PUT, POTENTIAL RIGHT TO RECEIVE
CASH DIFFERENTIAL AND DISCLAIMER REGARDING HOLDINGS' STOCK.
A. Beginning six (6) months after the Closing Date and
for the next thirty (30) months thereafter, each Shareholder shall
have the right to "put" or require Holdings to purchase not less than
all of the Class A-1 Shares then owned by such Shareholder. If
Marshall exercises such right, the purchase price for all of the Class
A-1 Shares issued to him on the Closing Date as set forth on Exhibit
1.2 hereto, shall be $530,000.00. If Marvin exercises such right, the
purchase price for all of the Class A-1 Shares set forth shall be
$530,000.00. Notwithstanding anything to the contrary set forth
herein, in the event that either Marshall or Marvin has sold some of
the Class A-1 Shares owned by him prior to exercising the aforesaid
"put" the amount of money actually received by Marshall or Marvin
shall be deducted from the amount to be paid by Holdings to reacquire
the balance of such person's Class A-1 Shares, it being the intent of
the parties hereto that Marshall and Marvin are to receive aggregate
consideration of $1,060,000.00 if they elect to exercise their put
rights taking into account previous sales, and not more. In
connection with the foregoing, if either Marshall or Marvin own less
than all of the Class A-1 Shares issued to them on the Closing Date
then, and in that event, Holdings shall have the right to review the
applicable Shareholder's transaction records to substantiate the
amounts previously received by such Shareholder in its prior sales of
Class A-1 Shares.
Each Shareholder's right to require Holdings to
purchase his Class A-1 Shares shall be exercised by written notice to
Holdings. The closing of Holdings' purchase of the Class A-1 Shares
shall occur within thirty (30) days of the applicable Shareholder's
written notice to Holdings. At closing, the applicable Shareholder
shall deliver to Holdings the applicable certificate endorsed in blank
or accompanied by a separate assignment and a representation that the
Shareholder is the owner, beneficially, and of record, of all of the
applicable Class A-1 Shares, free and clear of all liens,
encumbrances, security agreements, equities, options, claims, charges
and restrictions.
B. Shareholders acknowledge, agree and understand that
nothing in this Agreement prevents Holdings from offering,
31
<PAGE> 32
issuing, or selling any of its capital stock or other securities,
whether pursuant to registered public offerings, offers, stock option
agreements, stock bonus agreements, stock purchase plans, incentive
compensation plans, warrants, calls, conversion rights or otherwise,
whether or not the issuance, sale, grant and so forth has a dilutive
effect on Shareholders' percentage ownership interest in Holdings. In
addition, Shareholders acknowledge, agree and understand that except
for the put right discussed herein, the Class A-1 Shares are subject
to the rights, preferences and limitations set forth in the
Certificate of Incorporation of Holdings (as same may be amended from
time to time) and, in connection therewith, Shareholders do not have
preemptive or any type of registration rights with respect to the
Class A-1 Shares.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 BUYER'S INDEMNITY. Buyer agrees to indemnify
and hold harmless Shareholders from and against, and in respect to, any and all
losses, expenses, costs, obligations and liabilities, including interest,
penalties and reasonable attorneys' fees they may incur by reason of Buyer's
breach of or failure to perform any of its representations, warranties,
commitments or covenants in this Agreement, or by reason of any act or omission
of Buyer, or any of its successors or assigns, after the Closing Date, that
constitutes a breach or default under, or a failure to perform, any obligation,
duty or liability of any of the Selling Parties under any loan agreement,
lease, contract, order or other agreement (relating to the business of
Corporation) to which any of the Selling Parties is a party or by which any of
them are bound at the Closing Date.
SECTION 9.2 SHAREHOLDERS' INDEMNITY. Shareholders
hereby, jointly and severally, indemnify, defend and hold harmless Buyer from
and against, and in respect to, any and all losses, expenses, costs,
obligations, liabilities, damages and deficiencies (collectively referred to
herein as "Losses"), that Buyer shall incur or suffer which result from the
breach of, or failure by Selling Parties to perform, any of their
representations, warranties, covenants or agreements in this Agreement. Buyer
shall give each of the Shareholders prompt written notice, certified mail
return receipt requested, of any claim to be made by Buyer under this Section
9.2, which notice shall set forth the amount of the claim and all of the facts
relating thereto. Shareholders shall have a reasonable opportunity to confirm
such claim, at Shareholders' expense and within ten (10) business days after
receipt of the aforesaid notice, including, without limitation, review by them
or by an attorney and/or accountant retained by them of the factual basis for
such claim. Buyer agrees to cooperate with any such confirmation request and
make available to
32
<PAGE> 33
Shareholders, or to the attorney and/or accountant appointed by them, at all
reasonable times, for inspection and review, the books and records of Buyer
relating to the claim, including, but not limited to, any worksheets relating
to computation of the claim.
If, as a result of the confirmation, Shareholders do not agree
that Buyer is entitled to indemnification with respect to the claim and such
disagreement cannot, with good faith effort, be promptly settled within an
additional ten (10) business days, Buyer and Shareholders shall each appoint
within five (5) business days an arbitrator, and the two arbitrators so
appointed shall appoint a third arbitrator. If said two arbitrators cannot
agree on the selection of a third arbitrator within the next ten (10) business
days, then either Buyer or Shareholders shall be entitled to apply to the
American Arbitration Association sitting at Detroit, Michigan for the selection
of a third arbitrator who shall then participate in such arbitration
proceedings, and who shall be selected from a list of arbitrators possessing
the qualifications set forth below. Any arbitrator appointed pursuant to this
Section 9.2 shall be a qualified expert with generally recognized current
competence in mergers and acquisitions and complex business transactions.
Except as otherwise provided herein, such arbitration shall be conducted at
Detroit, Michigan in accordance with the Commercial Arbitration Rules of the
American Arbitration Association.
Within thirty (30) business days of the date of selection of
the last of the arbitrators to be selected by the foregoing procedure, the
arbitrators shall furnish the parties with their written determination. Such
written determination shall be certified and signed by at least a majority of
the arbitrators, and shall be final and binding on the parties, except with
respect to any alleged breach under Section 8.1 as to which the parties may
pursue other remedies at law or in equity. Except with respect to any alleged
breach under Section 8.1, judgment may be entered on any award rendered by the
arbitrators in any federal or state court having jurisdiction over the parties.
Each of Buyer and Shareholders shall pay the arbitrator selected by it, and the
costs of the third arbitrator shall be paid 1/2 by Buyer and 1/2 by
Shareholders.
In the event a claim or demand is made upon Buyer by a third
party, which claim or demand Buyer believes could result in a claim by Buyer
for indemnification under this Section 9.2, Buyer shall give Shareholders
prompt written notice of such claim or demand as soon as practicable after
receipt thereof by Buyer. Buyer shall consult with Shareholders to determine
what defenses to such claims should be asserted. Shareholders may participate
in, but not control, the negotiation, defense or settlement of any third-party
claim or demand and may retain counsel at their own expense to represent them
in such matters and participate on their behalf.
33
<PAGE> 34
Notwithstanding anything to the contrary set forth herein, it
is understood and agreed that: (i) the arbitration methodologies set forth in
this Section 9.2 represent Buyer's sole available procedural remedies for
enforcement of the within indemnity, except with respect to any alleged breach
under Section 8.1 as to which Buyer may pursue other remedies at law or in
equity; (ii) only Shareholders shall have any liability under the indemnity
given to Buyer hereunder; and (iii) the extent of Shareholders' liability for
damages for a breach of any of the representations, warranties, covenants or
agreements in this Agreement, except for any alleged breaches of Section 8.1
shall be limited to the remedies and procedures, set forth in this Section 9.2.
With regard to any civil actions which may arise out of any
alleged breach of Section 8.1, such civil action shall be heard de novo.
SECTION 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties and covenants made by the parties hereto, or in
any schedule, exhibit, certificate or other document delivered in connection
with this Agreement, shall not be deemed to be waived or otherwise affected by
any investigation made by the other party hereto and shall survive the Closing
Date, provided, however, that such representations, warranties, covenants and
agreements shall survive only to the extent that the right of indemnification
for breach thereof is not otherwise limited pursuant to Section 9.4 hereof.
SECTION 9.4 LIMITATION ON INDEMNIFICATION. No
indemnification shall be required as to amounts recovered pursuant to any
insurance policy by the party seeking indemnification.
ARTICLE 10
MISCELLANEOUS PROVISIONS
SECTION 10.1 FINDER'S OR BROKER'S FEES. Each of the
parties represents and warrants that it has dealt with no broker or finder in
connection with any of the transactions contemplated by this Agreement, and,
insofar as it knows, no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions. Selling Parties and
Buyer each agree to indemnify and hold harmless one another against any loss,
liability, damage, cost, claim or expense incurred by reason of any brokerage,
commission or finder's fee alleged to be payable by reason of any act, omission
or statement of the indemnifying party.
SECTION 10.2 EXPENSES. Buyer and Selling Parties shall
each pay all of their own costs and expenses incurred or to be incurred by it
in negotiating and preparing this Agreement and in closing and carrying out the
transactions contemplated hereby.
34
<PAGE> 35
SECTION 10.3 EFFECT OF HEADINGS. The subject headings of
the Articles and Sections of this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any of the provisions hereof.
SECTION 10.4 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This
Agreement, together with all of the exhibits furnished hereunder, constitutes
the sole and entire agreement between the parties pertaining to the subject
matter contained herein, and supersedes all prior and contemporaneous
agreements, representations and understandings of the parties. No supplement,
modification or amendment of this Agreement shall be binding unless executed in
writing by all the parties.
SECTION 10.5 WAIVER. Buyer may waive in writing
compliance by Selling Parties, and Selling Parties may waive in writing
compliance by Buyer, with any of the covenants or conditions contained in this
Agreement, except those conditions imposed by law. No act, failure to act,
practice or custom shall constitute an implied waiver of full compliance with
any of the provisions hereof. The granting of a written waiver pursuant to
this Section shall apply, unless expressly set forth therein to the contrary,
only to the specific incident of noncompliance with the specific provisions of
this Agreement set forth therein.
SECTION 10.6 COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
SECTION 10.7 PARTIES IN INTEREST. Nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties to it and their respective successors and assigns, or is intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement. None of the provisions hereof shall be deemed to give
any third persons any right of subrogation or action over or against any party
to this Agreement.
SECTION 10.8 BINDING EFFECT. This Agreement shall be
binding on, and shall inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns.
SECTION 10.9 RECOVERY OF LITIGATION COSTS. Except as
otherwise provided elsewhere in this Agreement, if any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement or by reason of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
35
<PAGE> 36
SECTION 10.10 CONDITIONS PERMITTING TERMINATION. Either
party may, on or before the Closing Date, terminate this Agreement without
liability to the other if a condition to its performance shall not be fulfilled
or a material default or breach of any representation, warranty or covenant
cannot be cured at or prior to July 17, 1996, or such later date as is agreed
to by Buyer and Selling Parties, provided such terminating party is not in
default pursuant to the terms of this Agreement. Termination as provided
herein shall not waive any rights of any party against another for default or
breach of any provision of this Agreement
SECTION 10.11 NOTICES. All notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given on the date of service if
served personally on the party to whom notice is to be given, or on the fifth
(5th) day after mailing if mailed to the party to whom notice is to be given,
by first-class mail, registered or certified, postage paid and properly
addressed as follows:
To Corporation At: Great Lakes Micrographics
Corporation
300 S. Kalamazoo Mall, Ste. 210
Kalamazoo, Michigan 49007
Attn: Robin L. Marshall
With A Copy To: Peter J. Livingston, Esq.
Howard & Howard
107 W. Michigan Avenue, Ste. 400
Kalamazoo, Michigan 49007-3970
To Shareholders At: Robin L. Marshall
3829 Glengarry Lane
Kalamazoo, Michigan 49007
William E. Marvin
9517 Gulfshore Drive North
Naples, Florida 33963
With A Copy To: Peter J. Livingston, Esq.
Howard & Howard
107 W. Michigan Avenue, Ste. 400
Kalamazoo, Michigan 49007-3970
To Buyer or Holdings At: Lason Systems, Inc.
1305 Stephenson Highway
Troy, Michigan 48084
Attn: Gary L. Monroe
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<PAGE> 37
With A Copy To: Laurence B. Deitch, Esq.
Seyburn, Kahn, Ginn, Bess, Deitch
And Serlin
2000 Town Center, Suite 1500
Southfield, Michigan 48075-1195
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth above.
SECTION 10.12 GOVERNING LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Michigan.
SECTION 10.13 PIGGYBACK REGISTRATION RIGHTS. In connection
with the Holdings common stock which is being acquired by Shareholders as part
of the Purchase Price, Holdings agrees to provide Shareholders with certain
piggyback registration rights pursuant to that certain Piggyback Registration
Agreement attached hereto and incorporated herein by reference as Exhibit
10.13.
SECTION 10.14 EASTMAN KODAK LIEN. Shareholders shall use
their best efforts to remove the lien of Eastman Kodak Company on the
Corporation's accounts receivable and inventories within thirty (30) days of
the Closing Date.
THIS AGREEMENT was executed as of the date and year first set
forth above.
BUYER:
LASON SYSTEMS, INC., a Delaware
corporation
By: Gary L. Monroe
---------------------------------
Gary L. Monroe
Its: Chief Executive Officer
---------------------------------
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<PAGE> 38
CORPORATION:
GREAT LAKES MICROGRAPHICS
CORPORATION a Michigan
corporation
By: Robin L. Marshall
---------------------------------
Robin L. Marshall
Its: President
---------------------------------
HOLDINGS:
LASON HOLDINGS, INC., a Delaware
corporation
By: Gary L. Monroe
---------------------------------
Gary L. Monroe
Its: Chief Executive Officer
--------------------------------
SHAREHOLDERS:
Robin L. Marshall
---------------------------------
ROBIN L. MARSHALL
William E. Marvin
---------------------------------
WILLIAM E. MARVIN
38
<PAGE> 39
EXHIBIT "1.2"
AMOUNT TO BE PAID
<TABLE>
<CAPTION>
CASH VALUE
CLASS % OF SHAREHOLDERS' OF CLASS
SHAREHOLDER CASH A-1 SHARES CLASS A-1 SHARES A-1 SHARES
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Robin L. Marshall $2,120,000 15,104 50% $ 530,000
William E. Marvin $2,120,000 15,104 50% $ 530,000
$4,240,000 30,208 100% $1,060,000
TOTAL 100%
</TABLE>
39
<PAGE> 1
EXHIBIT 2.7
AGREEMENT OF PURCHASE AND SALE OF STOCK
THIS AGREEMENT is made and entered into on 24th of July, 1996,
but effective as of the 1st day of July, 1996, between and among LASON SYSTEMS,
INC., a Delaware corporation, the address of which is 1305 Stephenson Highway,
Troy, Michigan 48084 ("Buyer"); MURRAY ASTARITA, whose address is 215 Hibiscus
Drive, Rochester, New York 14618, ANN ASTARITA, whose address is 215 Hibiscus
Drive, and MICHAEL ASTARITA, whose address is 365 Kilbourne Road, Rochester,
New York 14618 (collectively referred to as "Shareholders"); MICRO-PRO, INC.,
a New York corporation ("Micro-Pro"), the address of which is 3543 Winton
Place, Rochester, New York, 14623 and M P SERVICES, INC., a New York
corporation ("Services"), the address of which is 3543 Winton Place, Rochester,
New York 14623 (together sometimes hereinafter collectively referred to as
"Corporation"). Shareholders and Corporation are collectively referred to in
this Agreement as "Selling Parties".
R E C I T A L S:
Shareholders have represented that they own all of the issued
and outstanding capital stock of Micro-Pro, Inc. ("Micro-Pro") as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
----------- ------------- --------------
<S> <C> <C>
Murray Astarita
("Murray") 94 94%
Ann Astarita ("Ann") 0 0%
Michael Astarita
("Michael") 6 6%
---- ----
100 100%
</TABLE>
Shareholders have represented that they own all of the issued and outstanding
capital stock of M P Services, Inc. ("M P Services") as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
----------- ------------- --------------
<S> <C> <C>
Murray 0 0%
Ann 75 75%
Michael 25 25%
---- ----
100 100%
</TABLE>
1
<PAGE> 2
Buyer desires to purchase eighty (80%) percent of the capital stock in
Micro-Pro (the "Micro-Pro Shares") so that the ownership structure of Micro-Pro
following the closing contemplated herein would be as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
----------- ------------- --------------
<S> <C> <C>
Murray 19 18.80%
Ann 0 0%
Michael 1 1.2%
Buyer 80 80%
---- -----
100 100%
</TABLE>
In addition, Buyer desires to purchase eighty (80%) percent of the capital
stock in M P Services (the "M P Services Shares") so that the ownership
structure of M P Services following the closing contemplated herein would be
as follows:
<TABLE>
<CAPTION>
SHAREHOLDER NO. OF SHARES % OF OWNERSHIP
----------- ------------- --------------
<S> <C> <C>
Murray 0 0%
Ann 15 15%
Michael 2 5%
Buyer 80 80%
---- ----
100 100%
</TABLE>
The Micro-Pro Shares and the M P Services Shares to be acquired by Buyer are
sometimes together referred to as the "Shares".
Buyer desires to purchase the Shares from Shareholders, and
Shareholders desire to sell the Shares to Buyer, and Corporation desires that
this transaction be consummated.
NOW, THEREFORE, in consideration of the mutual covenants,
agreements, representations and warranties contained in this Agreement, the
parties hereto agree as follows:
ARTICLE 1
PURCHASE AND SALE OF SHARES/MERGER
SECTION 1.1 SALE AND TRANSFER OF SHARES. Subject to the
terms and conditions set forth in this Agreement, on the Closing Date (as
defined below in Section 7.1), Shareholders will
2
<PAGE> 3
transfer and convey the Shares to Buyer, and Buyer will acquire the Shares from
Shareholders, free and clear of all liens, encumbrances, security agreements,
equities, options, claims, charges and restrictions. The certificates
representing the Shares shall be duly endorsed in blank for transfer, or
accompanied by a separate written instrument or assignment, and shall be
accompanied by such other or further supporting documents as Buyer or its
counsel may reasonably require.
SECTION 1.2 PURCHASE PRICE. The purchase price for the
Shares is $1,280,000.00 (the "Purchase Price"). The Purchase Price shall be
paid to Shareholders on the Closing Date, in accordance with the provisions of
Sections 7.3, in immediately available funds, by certified or bank cashier's
checks or by confirmed wire-transfer, at Buyer's option. The allocation of the
Purchase Price between Micro-Pro Shares and the M P Services Shares as well as
the amounts to which each of the Shareholders are entitled hereunder (which
shall be in proportion to their ownership interests in each of the Micro-Pro
Shares and the M P Services Shares) are set forth on Exhibit "1.2".
SECTION 1.3 EXCESS CASH/VEHICLES.
Prior to the Closing Date (and the effective date of this
Agreement), Shareholders shall have the right to withdraw, as a dividend, the
Corporation's "excess cash" defined as Corporation's cash on hand less that
amount of cash necessary to meet the Corporation's current operating expenses
such as, by way of illustration and not limitation, payroll. Additionally, 2
executive vehicles previously purchased by the Corporation shall be distributed
to the persons designated by the Shareholders. Notwithstanding anything to
the contrary set forth herein, Buyer shall have the right to approve the
amount of excess cash to be withdrawn as a dividend on the Closing Date, which
amount is set forth on Exhibit "1.3" hereto.
SECTION 1.4 MERGER.
Shareholders acknowledge that as soon following Closing as is
practicable, Buyer will merge Micro-Pro and Services. The surviving entity
will be known as Micro-Pro, Inc., at the conclusion of the merger.
Shareholders will execute any and all documents required of them by counsel for
Buyer in order to effectuate the merger contemplated herein.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES
Selling Parties, jointly and severally, represent and warrant
to Buyer that, as of the date hereof:
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SECTION 2.1 ORGANIZATION, STANDING AND POWER.
Corporation is duly organized, validly existing and in good standing under the
laws of the State of New York, has all necessary corporate power to own its
properties and to carry on its business as now owned and operated by it, is
duly qualified to do intrastate business and is in good standing in each
jurisdiction in which the nature of its business or its properties makes such
qualification necessary. Each jurisdiction in which Corporation is so
qualified to do business is listed on Exhibit "2.1".
SECTION 2.2 CAPITALIZATION. The authorized capital stock
of Micro-Pro consists of Two Hundred (200) shares of common stock having a par
value of $0 each, of which One Hundred (100) shares are issued and outstanding.
The authorized capital stock of M P Services consists of Two Hundred (200)
shares of common stock having a par value of $0 each, of which One Hundred
(100) shares are issued and outstanding. All of the Shares are validly
issued, fully paid, nonassessable, and have been so issued in full compliance
with all federal and state securities laws. There are no outstanding
subscriptions, options, rights, warrants, convertible securities or other
agreements or commitments obligating Corporation to issue or to transfer from
treasury any additional shares of its capital stock of any class.
SECTION 2.3 TITLE TO SHARES. Murray and Michael are the
owners, beneficially and of record, of all the Micro-Pro Shares, free and clear
of all liens, encumbrances, security agreements, equities, options, claims,
charges and restrictions. Ann and Michael are the owners, beneficially and of
record, of all the M P Services Shares, free and clear of all liens,
encumbrances, security agreements, equities, options, claims, charges and
restrictions.
SECTION 2.4 SUBSIDIARIES. Corporation does not own,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or other entity.
SECTION 2.5 AUTHORITIES AND CONSENTS. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, has been duly and validly authorized
by the Board of Directors of Corporation. Selling Parties represent and
warrant that they have the right, power, legal capacity and authority to enter
into and perform their respective obligations under this Agreement and that no
consent or approval of, notice to or filing with any governmental authority
having jurisdiction over any aspect of the business or assets of Corporation,
and no consent or approval of or notice to any other person or entity, is
required in connection with the execution and delivery by Selling Parties of
this Agreement or the consummation by Selling Parties of the transactions
contemplated hereby.
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SECTION 2.6 NO BREACH OR VIOLATION. The execution,
delivery and performance of this Agreement by Corporation, and the consummation
of the transactions contemplated hereby, does not and will not result in or
constitute any of the following: (i) a breach of any term or provision of this
Agreement; (ii) a default, breach or violation, or an event that, with notice
or lapse of time or both, would be a default, breach or violation of any of the
terms, conditions or provisions of the Articles Of Incorporation or By-Laws of
Corporation, or any lease, license, promissory note, security agreement,
commitment, indenture, mortgage, deed of trust or other agreement, instrument
or arrangement to which Corporation is a party or by which it or its property
is bound; (iii) an event that would permit any party to terminate or rescind
any agreement or to accelerate the maturity of any indebtedness or other
obligation of Corporation; or (iv) the creation or imposition of any lien,
charge or encumbrance on any of the properties of Corporation.
SECTION 2.7 FINANCIAL STATEMENTS. There have heretofore
been delivered to Buyer: (i) unaudited financial statements, including balance
sheets, statements of income and retained earnings, and statements of changes
in financial position for Corporation as of December 31, 1993, December 31,
1994 and December 31, 1995, and for the twelve (12) month period then ended
prepared by Maggio, Salmin & Celona, independent public accountants, whose
opinions with respect to said statement are included therein ; and (ii)
unaudited balance sheet and statement of income and retained earnings for
Corporation as of May 31, 1996 and for the 5-month period then ended,
accompanied by a certificate of the Chief Executive Officer or Chief Financial
Officer of Corporation stating that such balance sheet and statement of income
are unaudited but include all adjustments considered necessary for a fair
presentation of the results for the period indicated.
All of the financial statements referred to above (the "Financial
Statements") have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved.
The Financial Statements present fairly the financial positions of Corporation
to which they relate as at the respective dates thereof, and the related
results of operations of Corporation for the periods therein referred to.
SECTION 2.8 UNDISCLOSED LIABILITIES. Except as set forth
in Exhibit "2.8", Corporation has no material debts, liabilities or obligations
of any kind, whether accrued, absolute, contingent or otherwise, which, under
generally accepted accounting principles, should have been so reflected or
reserved against or disclosed in Corporation's balance sheet dated as of May
31, 1996, included in the Financial Statements, except for those that may have
been incurred subsequent to the date of that balance sheet. All debts,
liabilities and obligations incurred after May 31, 1996 were incurred in the
ordinary course of business and are usual and normal in amount both
individually and in the aggregate.
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SECTION 2.9 ABSENCE OF CERTAIN CHANGES. Except as set
forth in Exhibit "2.9", since January 1, 1996, the business of Corporation has
been operated only in the ordinary course of business and, without limiting the
generality of the foregoing, Corporation has not:
A. Declared, set aside or paid any dividend or other distribution
in respect of its capital stock or redeemed, purchased or otherwise
acquired, directly or indirectly, any of its capital stock;
B. Sustained any damage, destruction or loss, by reason of fire,
explosion, earthquake, casualty, labor trouble, requisition or taking of
property by any government or agency thereof, windstorm, embargo, riot, act
of God or public enemy, flood, accident, revocation of license or right to
do business, total or partial termination, suspension, default or
modification of contracts, governmental restriction or regulation, other
calamity or other similar or dissimilar event (whether or not covered by
insurance), materially and adversely affecting its condition (financial or
otherwise), earnings, business, assets, liabilities, properties, operations
or prospects;
C. Had any material adverse change in its condition (financial or
otherwise), earnings, business, assets, properties, liabilities, operations
or prospects;
D. Issued, authorized for issuance, or sold any equity security,
bond, note or other security, or granted, or entered into, any commitment or
obligation to issue or sell any such equity security, bond, note or other
security, whether pursuant to offers, stock option agreements, stock bonus
agreements, stock purchase plans, incentive compensation plans, warrants,
calls, conversion rights or otherwise;
E. Incurred additional debt for borrowed money, or incurred any
obligation or liability (fixed, contingent or otherwise) except in the
ordinary and usual course of its business;
F. Paid any obligation or liability (fixed, contingent or
otherwise), or discharged or satisfied any lien or encumbrance, or settled
any liability, claim, dispute, proceeding, suit or appeal, pending or
threatened against them or any of their assets or properties, except
liabilities included in the Balance Sheets and in the Financial Statements,
and current liabilities incurred in the ordinary and usual course of its
business;
G. Mortgaged, pledged, otherwise encumbered or subjected to lien
any of its assets or properties, tangible or intangible, except for liens
for current taxes which are not
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yet due and payable and purchase-money liens arising out of the purchase or
sale of products or services made in the ordinary and usual course of its
business;
H. Sold, transferred, leased, licensed or otherwise disposed of
any asset or property, tangible or intangible, except in the ordinary and
usual course of its business, or discontinued any product line or the
manufacture, sale or other disposition of any of its products or services;
I. Purchased or otherwise acquired any debt or equity securities
of any corporation, partnership, joint venture, firm or other entity;
J. Made any expenditure for the purchase, acquisition,
construction or improvement of a capital asset, except in the ordinary and
usual course of its business;
K. Entered into any transaction or contract, or made any
commitment to do the same, except in the ordinary and usual course of
business and not involving an amount in any case in excess of $10,000.00;
L. Waived any right or claim or cancelled any debts or claims or
voluntarily suffered any extraordinary losses;
M. Sold, assigned, transferred or conveyed any property rights,
except in the ordinary and usual course of business;
N. Effected any amendment or supplement to any employee profit
sharing, stock option, stock purchase, pension, bonus, incentive,
retirement, medical reimbursement, life insurance deferred compensation or
any other employee benefit plan or arrangement;
O. Paid to or for the benefit of any of its directors, officers,
employees or shareholders any compensation of any kind other than wages,
salaries and benefits at times any rates in effect prior to May 31, 1996;
P. Effected any change in its directors or executive management;
Q. Effected any amendment or modification in its Articles of
Incorporation or By-Laws;
R. Had any labor trouble that has or might materially and
adversely affect its condition (financial or otherwise), earnings, business,
assets, liabilities, properties, operations or prospects;
S. Changed its accounting methods or practices (including, without
limitation, any change in depreciation or amortization policies or rates);
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T. Revalued any of its assets;
U. Increased the salary or other compensation payable or to become
payable to any of its officers, directors or employees, or declared, paid or
committed to pay a bonus or other additional salary or compensation to any
such person;
V. Made any loan to any person or entity, or guaranteed any loan;
W. To the best of Selling Parties' knowledge, had any other event
or condition of any character that has or might reasonably have a material
and adverse effect on its condition (financial or otherwise), earnings,
business, assets, liabilities, properties, operations or prospects; or
X. Agreed, committed or entered into any other understanding to do
any of the things described in the preceding Subsections A through W.
For purposes hereof, the term "ordinary course of business"
anticipates conduct which has historically occurred as well as conduct
customary for commercial enterprises situated and of a similar nature in a
similar location as Micro Pro and Services.
SECTION 2.10 TAXES. Except as set forth in Exhibit
"2.10", within the times and in the manner prescribed by law, Corporation has
filed all tax returns required to be filed and has paid or made adequate
provision for payment of all taxes upon it, its properties, income or
franchises, due and payable on or before the date hereof. Except as set forth
in Exhibit "2.10", there are no claims pending against Corporation for past-due
taxes, nor has Corporation been notified of any claims. Except as set forth in
Exhibit "2.10", there are no present disputes or discussions with federal,
state, local, foreign, commonwealth or other authorities with respect to any
taxes of any nature payable by Corporation. Except as set forth in Exhibit
"2.10", there are no outstanding waivers or agreements by Corporation for the
extension of the time for the assessment of any tax. The tax returns of
Corporation, if audited, have been finally determined by the Internal Revenue
Service or other taxing authority, or otherwise closed, and any penalties,
deficiencies, assessments, additions to tax and interest proposed as a result
of such audits have been paid or settled. The charges, accruals and reserves
for taxes reflected in the balance sheets as of May 31, 1996 and in the
Financial Statements, are adequate for any and all taxes for the periods ending
the date of such Balance Sheets and for all prior periods, whether or not
disputed. As used in this Section 2.10, the terms "tax" and "taxes" refer to
any tax, assessment, additions to tax, fee, penalty, interest or other
governmental charge imposed by any federal, state, county, local, foreign,
commonwealth or other governmental entity. Corporation has never filed, nor
will it
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file, any consent under Section 341(f) of the Internal Revenue Code of 1954, as
amended, on or before the Closing Date. Buyer will have prepared and
Shareholders will be responsible for the cost of such preparation and filing all
requisite federal and states taxes for the stub period notwithstanding the fact
that Buyer as the post closing parent corporation of Corporation shall be
responsible for preparing same.
SECTION 2.11 RECEIVABLES. Except as set forth in Exhibit
"2.11", all receivables of Corporation shown on the Balance Sheets and the
Financial Statements and arising thereafter are carried at values determined in
accordance with generally accepted accounting principles consistently applied,
reflect all pertinent facts known to Corporation as of the date hereof, and
represent valid and binding obligations of the debtors requiring no further
performance by Corporation. Except as set forth in Exhibit "2.11", reserves
for doubtful accounts have been established on the books of Corporation in
accordance with generally accepted accounting principles consistently applied
and are reflected on the balance sheets included in the Financial Statements.
SECTION 2.12 INVESTMENTS AND INVESTMENT SECURITIES.
Corporation has no interest, of record or beneficial, direct or indirect, in
any governmental bonds or notes, other investment securities and assets held
for investment.
SECTION 2.13 REAL PROPERTY.
A. Exhibit "2.13" sets forth a complete and accurate
address and legal description of each parcel of real property owned by
or leased to Corporation (collectively, the "Real Property").
B. To the best of Selling Parties' knowledge, the Real
Property and the current and planned use thereof is and will be in
compliance with all, and is and will not be in violation of any,
applicable federal, state or local statute, ordinance, order,
requirement, law, rule or regulation (including, without limitation,
building, zoning or environmental laws) affecting the Real Property
and its use.
C. No notice of violation of any applicable federal,
state or local statute, law, ordinance, rule, regulation, order or
requirement, or of any covenant, condition, restriction or easement
affecting the Real Property or with respect to the use or occupancy of
the Real Property, has been given to Corporation by any governmental
authority having jurisdiction over the Real Property or by any other
person entitled to enforce the same.
D. To the best of Selling Parties' knowledge, there is
not: (i) any intended public improvement which may involve any
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charge being levied or assessed or which may result in the creation of
any lien upon the Real Property; (ii) any intended or proposed
federal, state or local statute, ordinance, order, requirement, law or
regulation (including, but not limited to, zoning changes) which may
adversely affect the current or planned use of the Real Property; or
(iii) any suit, action, claim or legal, administrative, arbitration or
other proceeding or governmental investigation pending or threatened
or contemplated against or affecting the Real Property nor is there
any basis for any such matters.
E. Corporation has not subjected, and will not subject
or suffer to be subjected hereafter the Real Property or any portion
thereof to any lease, sublease, tenancy, concession, license,
occupancy agreement or similar right, mortgage, deed of trust, lien,
encumbrance, claim, charge, equity, covenant, condition, restriction,
easement, right of way or other matter affecting the Real Property or
any portion thereof except as set forth in Exhibit "2.13", and has not
entered into, and shall not enter into, any agreement to do any of the
above.
F. There are no unpaid taxes, assessments (special,
general or otherwise) or bonds of any nature affecting the Real
Property or any portion thereof due and payable by Corporation.
SECTION 2.14 LEASES. Exhibit "2.14" lists all leases,
rental agreements, conditional sales contracts and other similar agreements
(collectively, "Leases") which cannot be terminated by Corporation without
liability at any time upon less than thirty (30) days' notice or which involve
payment by it in the future of more than $10,000.00, under which Corporation
holds or uses any real or personal property or leases any of the same to
others. Corporation has complied with the material provisions of all such
leases, and all such leases are valid, in good standing and enforceable by
Corporation in accordance with their terms, except as limited by bankruptcy,
insolvency or other similar laws affecting the rights of creditors generally
and by limitations or enforceability applicable to contracts generally.
Notwithstanding anything contained in said leases, Corporation has such title
to or interests thereunder as are necessary to continue to conduct its business
as presently conducted or as presently proposed to be conducted, and there is
no title defect to which any of said leases is subject which might be expected
at any time to have a material adverse effect on Corporation or its condition
(financial or other), earnings, assets, liabilities, business, operations or
prospects. Exhibit "2.14" sets out any and all advances, deposits and
prepayments made by Corporation under such leases.
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SECTION 2.15 ENVIRONMENTAL MATTERS.
A. None of the operations or property of Corporation is
or has been subject to any judicial or administrative proceeding,
order, judgment, decree or settlement alleging or addressing a
violation of or liability under any requirements of law derived from
or relating to all federal, state and local laws relating to or
addressing the environment, health or safety (including, without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section Section 9601 et seq., Occupational
Safety and Health Act, 29 U.S.C. Section Section 651 et seq.,
Resource Conversation and Recovery Act, 42 U.S.C. Section Section
6901 et seq., Clean Air Act, 42 U.S.C. Section Section 7401 et seq.,
Federal Water Pollution Control Act, 33 U.S.C. Section Section 1251
et seq., and any similar federal or state acts or statutes now in
effect), which requirements are sometimes herein collectively referred
to as the "Environmental Laws".
B. Corporation has no knowledge of a "Release" nor has
it filed any notice under any applicable Environmental Laws reporting
such "Release" (defined as any spill, emission, leaking, deposit,
discharge, dispersal or other release) into the indoor or outdoor
environment or into or out of any of the Real Estate (including
movement in or through the air, soil, surface water, groundwater or
property) of a "Contaminant" (defined as any hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or
petroleum-derived substance or waste, asbestos, polychlorinated
biphenyls, or any constituent of any of the foregoing, including such
items as are defined under any federal, state or local law or
regulation), or indicating past or present treatment, storage (other
than for less than ninety (90) days) or disposal of a "hazardous
waste" (as that term is defined under 40 Code of Federal Regulations
("CFR") Part 261 or any state equivalent) or reporting a material
violation of any applicable Environmental Laws.
C. Corporation has not received any written notice,
claim or report from any governmental authority or third party to the
effect that Corporation is or may be liable to any other person or
entity as a result of the Release or threatened Release of a
Contaminant into the environment.
SECTION 2.16 PATENTS, ETC. Exhibit "2.16" contains a list
and brief description of all trade names, trademarks, trademark registrations
and applications for registration, service marks, patent rights, patent
applications, trade secrets, copyrights and applications therefor (herein
collectively referred to as "Proprietary Rights") owned by Corporation, useful
or necessary to the conduct of its business, or in which Corporation has any
rights, licenses or immunities and of all patent licensing and similar
arrangements to which Corporation is a party. All
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Proprietary Rights are owned by Corporation, and are, to the best of Selling
Parties' knowledge, valid and in full force and effect.
SECTION 2.17 NON-INFRINGEMENT; AGREEMENTS. Except as set
forth in Exhibit "2.17", no Proprietary Right is the subject of litigation or
other adversary proceedings. To the best of Selling Parties' knowledge, no
present or presently proposed operation or activity of Corporation infringes
the rights of any other person or entity, and no person or entity is infringing
the Proprietary Rights of Corporation. Corporation has the right and
authority, including without limitation, adequate licenses, to use such
Proprietary Rights as are necessary to enable Corporation to conduct and
continue to conduct all phases of its business in the manner presently
conducted by it. Corporation is not a party to or bound by any license or
agreement requiring the payment by it of any royalty, override or similar
payment in connection with any activity conducted or to be conducted by it.
Except as provided for by the terms of contracts with governmental authorities,
Corporation is not a party to any agreement: (i) prohibiting or restricting its
use or sale of any special device, item, customer list, secret process or the
like; or (ii) limiting its business to any territory, pricing policy or
customers; or (iii) requiring exclusive dealing or otherwise in restraint of
its business.
SECTION 2.18 INSURANCE. All policies of liability, theft,
life, fire, title and other forms of insurance and surety bonds (including,
without limitation, any standby letters of credit), insuring Corporation, its
directors, officers, employees, properties, assets and business are listed and
briefly described in Exhibit "2.18". All of said policies are valid and in
good standing. Corporation has experienced no losses or made no claims under
any such policies which are extraordinary for a company of its size except as
are set forth on Exhibit "2.18".
SECTION 2.19 INTERESTED TRANSACTIONS. Except as set forth
on Exhibit 1.3 and Exhibit 2.19, Corporation has no contract or agreement (oral
or written) with, any outstanding loans to or from, or any outstanding
liabilities (except for no more than one (1) months' salary at no more than the
annual rate) to any officer, director, employee or stockholder of Corporation or
any relative of any such person or any corporation or other entity in which any
of such persons has a material financial interest, direct or indirect, or of
which any such person is an officer, director or partner.
SECTION 2.20 CUSTOMERS AND SALES. A correct and current
list of all customers of Corporation whose annual purchases exceed $100,000.00,
together with recent summaries of the sales made to each such customer during
the most recent completed fiscal year is set forth on Exhibit "2.20". There
are no facts or circumstances known to the Selling Parties or any of them
indicating that any customer who has ordered products or services from
Corporation which have not yet been delivered intends to
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cancel such order. Selling Parties have no knowledge that any of the customers
of Corporation intend to cease doing business with Corporation, or materially
alter the amount of the business that they are presently doing with
Corporation.
SECTION 2.21 EXISTING EMPLOYMENT CONTRACTS AND/OR
REMUNERATION AGREEMENTS. Exhibit "2.21" sets forth a complete and accurate
list of all employment contracts or other agreements or arrangements providing
for employee remuneration or benefits to which Corporation is a party or by
which Corporation is bound, copies of the originals of which have been provided
to Buyer. All such contracts and arrangements are in full force and effect,
and neither Corporation nor any other party is in default under any such
contract or arrangement, nor are there any amendments, modifications, changes
or releases thereto, written or oral. There have been no claims of defaults
and there are no facts or conditions which if continued, or upon notice, will
result in a default under such contracts or arrangements. Corporation has no
obligation to employ or engage any agent, consultant, employee, officer,
director or shareholder, or to provide bonuses, profit sharing payments,
severance pay or retirement benefits, life, medical or other insurance or any
other employee benefits or any other payments, which in each case is not
terminable at will without liability to Corporation.
SECTION 2.22 EMPLOYEE BENEFITS PLANS. Exhibit "2.22" sets
forth a complete and accurate list of all pension, bonus, profit-sharing, stock
option or other plan or arrangement providing for employee benefits (including
any plan within the meaning of Section 3(3) of the Employment Retirement Income
Security Act), to which Corporation is a party or by which Corporation is
bound, copies of the originals of which are attached hereto as Exhibit "2.22".
There are no unfunded liabilities or other obligations of Corporation with
respect to any such pension, bonus, profit-sharing, stock option or other plans
or arrangements providing for employee benefits except as set forth on Exhibit
"2.22" hereto.
SECTION 2.23 WORKERS COMPENSATION; EMPLOYMENT
DISCRIMINATION; LABOR RELATIONS. To the best of Selling Parties' knowledge,
Corporation has complied in all material respects with all applicable federal,
state and local laws, rules, regulations and executive orders relating to
employment, all applicable laws, rules and regulations governing payment of
minimum wages and overtime rates, and the withholding and payment of taxes from
compensation of employees and the payment of premiums and benefits under
applicable worker compensation laws. There are no employment discrimination
proceedings by any employee or former employees against Corporation currently
threatened or pending before any state or federal court or state or federal
administrative agency, tribunal, commission or board and no facts or
circumstances exist which may result in the filing or commencement of any such
proceeding. All currently pending or outstanding worker's
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compensation claims are listed on Exhibit "2.23" attached hereto and all such
claims are fully insured against. Corporation has no union contracts or
collective bargaining agreements with, or any other obligations to, employee
organizations or groups, nor is Corporation currently engaged in any labor
negotiations excepting minor grievances not involving any employee organization
or group. There is no effort being made to organize the employees of
Corporation into any collective bargaining unit or to solicit them to join any
labor organization and Corporation has no knowledge of any intention on the
part of any labor organization to organize such employees or to solicit them to
join any labor organization. There is no pending or threatened labor dispute,
strike or work stoppage affecting the business of the Corporation. Corporation
is not bound by any prior court, administrative agency, tribunal, commission or
board, decree, judgment, decision, arbitration agreement or settlement relating
to collective bargaining agreements, conditions of employment or, to the best
of Selling Parties' knowledge, attempts to organize a collective bargaining
unit which may adversely affect the business and affairs of Corporation or the
transactions contemplated hereby. Except as set forth on Exhibit "2.23", there
is no unfair labor practice compliant against Corporation pending before the
National Labor Relations Board.
SECTION 2.24 OTHER CONTRACTS. Exhibit "2.24" lists and
briefly describes all contracts, agreements, commitments, guarantees, letters
of intent, understandings or other arrangements of a contractual nature,
written or oral (including, but not limited to, franchise, patent, trademark
and royalty agreements), other than outstanding purchase orders made in the
ordinary course of business, to which Corporation is a party and which: (i)
involve payment by Corporation of more than $10,000.00; or (ii) materially
affect the condition (financial or other), earnings, assets, liabilities,
business, operations or prospects of Corporation. Corporation has, to the best
of Selling Parties' knowledge, complied in all material respects with the
provisions of all contracts under which it is bound, and has not been in
material default or claimed default under any thereof. For purposes of the
preceding sentence, any breach or claims of breach, other than those which
could be cured by the payment of not more than $10,000.00 in the aggregate for
all breaches and claimed breaches (whether or not related) shall be deemed
"material".
SECTION 2.25 OFFICERS AND DIRECTORS, ETC. Exhibit "2.25"
is a true and complete list of:
A. The names of all present officers and directors of
Corporation and their current annual salary or other compensation
(such as, but not limited to, consultant's fees) and including all
bonuses, whether deferred, accrued or otherwise, which were paid or
accrued during 1995;
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B. The names, titles and annual compensation of all
salaried employees of Corporation whose compensation (in whatever
form) from Corporation as of the date hereof which will equal or
exceed or which will be likely to exceed an annual rate of $50,000.00
in 1996, or equalled such amount in the year ended December 31, 1995.
C. The name of each bank or other financial institution
in which Corporation has an account, deposit or safe deposit box, and
the names of all persons authorized to draw thereon or to have access
thereto;
D. The names of all persons holding tax or other powers
of attorney from Corporation and a summary of the terms of each; and
E. The names of all persons authorized (by the By-Laws
or by resolution of the Board of Directors or otherwise) to write
checks or borrow funds on behalf of Corporation.
SECTION 2.26 CORPORATE DOCUMENTS. Corporation has
furnished or made available to Buyer or its representatives for its
examination, the originals, or true, correct and complete copies, of: (i) the
Articles of Incorporation and By-Laws of Corporation; (ii) the minute books of
Corporation containing all records of all proceedings, consents, actions and
meetings of the shareholders and Board of Directors; (iii) all permits, orders
and consents issued by any governmental authority (domestic or foreign) with
respect to Corporation, or any security issued by them, and all applications
for such permits, orders and consents; and (iv) the stock transfer books of
Corporation setting forth all issuances and transfers of any capital stock.
All of Corporation's records are complete and correct in all material respects
and all such records have been maintained in accordance with sound business
practices.
SECTION 2.27 LITIGATION AND CLAIMS. Except as set forth
on Exhibit 2.27, there is: (i) no action, suit, proceeding, claim or
investigation pending or, to the best of Selling Parties' knowledge,
threatened, in any court or before any arbitrator or before or by any federal,
state or other governmental department, commission, bureau, agency or
instrumentality, domestic or foreign, and, to the best of Selling Parties'
knowledge; (ii) no other unresolved claim made against Corporation or affecting
it or its properties or business, or the transactions contemplated by this
Agreement; and there is no factual or legal basis for any such action, suit,
proceeding, claim or investigation which would materially affect any of the
same. All correspondence, memoranda and other written notifications
(collectively "Complaints") which it has received within the twelve (12) months
preceding the date hereof concerning, or relating to, complaints or expressions
of dissatisfaction with the products, services or personnel of
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Corporation, which Complaints, either individually, or in the aggregate, could
result in a material adverse change to the condition (financial or other),
earnings, business, assets, operations or prospects of Corporation are listed
on Exhibit "2.27" and Buyer has been provided with accurate and complete copies
of same. The matters set forth in Exhibit "2.27", if decided adversely to
Corporation will not result in a material adverse change in the earnings,
business, assets or condition (financial or other), operations or prospects of
Corporation. Corporation is not presently engaged in any legal action to
recover monies due to it or damages sustained by it.
SECTION 2.28 GENERAL LIABILITY. Selling Parties have no
knowledge of any statement of facts or the occurrence of any event forming the
basis for any present tort claim against Corporation not covered by insurance.
SECTION 2.29 OTHER TANGIBLE PERSONAL PROPERTY. Exhibit
"2.29" contains a complete and accurate list and brief description of all
machinery, tools, dies, appliances, vehicles, furniture, equipment (including
essential replacement parts) and other tangible personal property of any kind
and description, other than inventories, owned or leased by Corporation (the
"Tangible Personal Property"). The Tangible Personal Property constitutes all
tangible personal property necessary for the conduct by Corporation of its
business as now conducted. All motor vehicles listed on Exhibit "2.29" have
current smog certificates or have passed emission standards examinations
required by applicable law. Except as stated in Exhibit "2.29", no Tangible
Personal Property used by Corporation in connection with its business is held
under any lease, security agreement, conditional sales contract or other title
retention or security arrangement, or is located other than in the possession
of Corporation.
SECTION 2.30 TITLE TO ASSETS. Corporation has good and
marketable title to all its assets and interests in assets, whether real,
personal, mixed, tangible and intangible, which constitute all the assets and
interests in assets that are used in its business. All these assets are free
and clear of mortgages, liens, pledges, charges, encumbrances, equities,
claims, easements, rights of way, covenants, conditions or restrictions, except
for: (i) those disclosed in the Balance Sheets and in the Financial Statements;
(ii) the lien of current taxes not yet due and payable; and (iii) possible
minor matters that, in the aggregate, are not substantial in amount and do not
materially detract from or interfere with the present or intended use of any of
these assets, nor materially impair business operations. All real property and
tangible personal property of Corporation is in good operating condition and
repair, ordinary wear and tear excepted. Corporation is in possession of all
premises leased to it from others. No officer, director or employee of
Corporation, nor any spouse, child or relative of any of these persons, owns or
has any interest,
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directly or indirectly, in any of the real or personal property owned by or
leased to or any copyrights, patents, trademarks, trade names or trade secrets
licensed by Corporation.
SECTION 2.31 BEST KNOWLEDGE. The term "to the best of
Selling Parties' knowledge", or equivalent terms, as used to qualify any of the
foregoing representations and warranties, means knowledge of Murray, Ann and
Michael after diligent and reasonable investigation by them as to the subject
matter of such representations and warranties.
SECTION 2.32 ACCURACY AND COMPLETENESS OF REPRESENTATIONS
AND WARRANTIES. No representation or warranty made by Selling Parties in this
Agreement and no statement contained in any document or instrument delivered or
to be delivered to Buyer pursuant hereto or in connection with the transactions
contemplated hereby contain or will contain any untrue statement of a known
material fact, or omits or will omit to state a known material fact necessary
to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Selling Parties as
follows:
SECTION 3.1 ORGANIZATION. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and is duly authorized to carry on its
business where and as now conducted and to own, lease and operate properties as
it now does.
SECTION 3.2 AUTHORIZATION. Buyer has full power and
authority to enter into this Agreement and to perform this Agreement in
accordance with its terms, and the execution, delivery and performance of this
Agreement by Buyer has been duly authorized by all requisite corporate action,
including approval by Buyer's Board of Directors.
SECTION 3.3 NO BREACH. Buyer knows of no facts or
circumstances that may tend to cause, or relate to, an existing or potential
breach or default by Selling Parties of the material terms, conditions,
representations and warranties set forth herein.
SECTION 3.4 EXHIBITS. Buyer acknowledges receipt of all
of the written information and/or documents forwarded to it as listed on the
various exhibits to this Agreement and acknowledges the accuracy and
applicability of such exhibits to the representations and warranties to which
each provides a
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qualification of fact.
ARTICLE 4
FURTHER AGREEMENTS OF THE PARTIES
SECTION 4.1 ACCESS TO INFORMATION. Buyer and its
representatives may make such investigation of the properties, assets and
business of Corporation as Buyer may reasonably request, and Corporation shall
give to Buyer and to its counsel, accountants and other representatives, full
access during normal business hours to all of the properties, books, contracts,
commitments, records and files of Corporation, and shall furnish to Buyer all
such documents and copies of documents (certified as true and complete if
requested) and such information concerning the business and affairs of
Corporation as Buyer may reasonably request. Such investigation shall not be
deemed in any way to diminish the liability of Selling Parties in respect of
the representations, warranties, schedules, certificates or agreements given
hereunder.
SECTION 4.2 CONDUCT OF BUSINESS BY CORPORATION. From the
date hereof until the Closing Date, except as Buyer may previously consent in
writing, Corporation shall:
A. Carry on its business and activities in the ordinary
course as previously carried on, and shall not make or institute any
methods of management, accounting or operation that will vary
materially from those methods used by Corporation as of the date of
this Agreement. Without limitation of the generality of the
foregoing, Corporation shall not enter into any agreement or
arrangement involving sale or lease of a material portion of its
assets or the granting of any preferential right to purchase such
assets, properties or rights, except in connection with the sale or
lease of inventory to customers in the ordinary course or business
(for purposes hereof, the term "ordinary course of business"
anticipates conduct which has historically occurred as well as conduct
customary for commercial enterprises situated and of similar nature in
a similar location as Micro Pro and Services);
B. Maintain in full force and effect the insurance
policies listed in Exhibit "2.18" to this Agreement;
C. Make no change in its Articles of Incorporation or
By-Laws;
D. Make no change in its authorized or issued capital
stock and issue or grant no options, warrants or rights to purchase
shares of or convert other securities into its capital stock;
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E. Declare or pay no dividend or other distribution in
respect of any shares of its capital;
F. Purchase, redeem or otherwise acquire, directly or
indirectly, no shares of its capital stock;
G. Use its best efforts to preserve its business
organization intact, to keep available the services of its present
officers and employees, except in the case of unsatisfactory
performance, and to preserve the good will of all those having
business relations with it (including, but not limited to, its
customers);
H. Enter no contract or commitment, except contracts or
commitments entered into in the ordinary course of business, none of
which (other than inventory purchases customary in nature and amount)
shall involve payment by Corporation of more than $10,000.00;
I. Terminate none of the contracts or agreements listed
in Exhibit "2.24" or modify any of said contracts or agreements except
in accordance with their terms;
J. Except pursuant to existing arrangements disclosed in
Exhibit "2.25": (i) grant no increase in salaries or compensation
payable or to become payable by it, to any officer, employee, sales
agent or representative, other than increases in customary amounts
pursuant to normally scheduled salary reviews; or (ii) increase
benefits payable under any employee plan or otherwise to any officer,
employee, sales agent or representative;
K. Duly comply with all laws, regulations, ordinances,
orders, injunctions and decrees applicable to it and to the conduct of
its business;
L. Encumber or mortgage none of its property or incur
any liability for borrowed money, make any loans or advances to or
assume, guarantee, endorse or otherwise become liable with respect to,
the obligations of any other person, firm or corporation;
M. Acquire or agree to acquire none of the assets or
capital stock of any other person, firm or corporation, except for
purchases from suppliers in the ordinary course of business;
N. Make or agree to make no capital expenditures in
excess of $10,000.00 for any single item, or $10,000.00 in the
aggregate, or enter into any leases of capital equipment or property
under which the annual lease charge is in excess of
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$10,000.00;
O. Maintain and keep its properties and facilities in as
good condition and working order as at present, except for
depreciation through ordinary wear and tear;
P. Perform all of its obligations under contracts
relating to or affecting its assets, properties and rights, except for
non-material failures;
Q. Not do, or agree to do, except in the ordinary course
of business, any of the following acts: (i) pay any obligation or
liability, fixed or contingent, other than current liabilities; (ii)
waive or compromise any right or claim; or (iii) cancel, without full
payment, any note, loan or other obligation owing to Corporation; and
R. Enter into no negotiations or agreements with any
governmental authority (other than negotiations or agreements for the
purchase of goods or services from Corporation) which would affect the
future operation of its business.
SECTION 4.3 CONSENTS. Corporation shall use its best
efforts to obtain the consent of all persons whose consent is required to the
consummation of the transactions contemplated hereby, in form and substance
satisfactory to Buyer.
SECTION 4.4 COMMUNICATIONS. Each party hereto agrees to
consult and seek the prior approval of the other parties on reasonable notice,
which approval shall not be unreasonably withheld or delayed, as to the content
of any press releases or any written statements for general circulation
regarding the subject contained in this Agreement.
SECTION 4.5 UPDATING OF SCHEDULES. From the date hereof
until the Closing Date, Corporation shall keep up to date all of the schedules,
exhibits and certificates furnished (or to be furnished) under this Agreement,
and shall promptly notify Buyer of any changes, additions or events which may,
after the lapse of time, cause any change or addition thereto.
ARTICLE 5
CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLING PARTIES
The obligations of Selling Parties to consummate the
transactions contemplated by this Agreement shall be subject to the following
conditions, except as Selling Parties may waive in writing in accordance with
Section 10.5 below:
SECTION 5.1 PERFORMANCE. Buyer shall have performed and
complied with all agreements and covenants required by this
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Agreement to be performed or satisfied by it on or prior to the Closing Date.
SECTION 5.2 REPRESENTATIONS AND WARRANTIES. The
representations, warranties and covenants of Buyer, set forth in Article 3
hereof, shall be true and correct in all material aspects on the date hereof,
and on the Closing Date, as if made again at and as of such time, subject to
any transactions which are contemplated or permitted by this Agreement.
SECTION 5.3 CERTIFICATE OF OFFICER. Selling Parties
shall have been furnished with a certificate executed by an officer of Buyer,
in form and substance satisfactory to Selling Parties, certifying the
fulfillment of the condition set forth in Section 5.2 above.
SECTION 5.4 LEGAL OPINION. Seyburn, Kahn, Ginn, Bess,
Deitch And Serlin, counsel for Buyer, shall have delivered to Selling Parties
its opinion to the effect set forth in Exhibit "5.4"
ARTICLE 6
CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the transactions
contemplated by this Agreement shall be subject to the following conditions,
except as Buyer may waive in writing in accordance with Section 10.5 below:
SECTION 6.1 AUTHORIZATION OF TRANSACTION. All action
necessary to authorize the execution, delivery and performance of this
Agreement by Selling Parties and the consummation of the transactions
contemplated hereby shall have been duly and validly taken by the Board of
Directors of Corporation and by the Shareholders.
SECTION 6.2 REPRESENTATIONS AND WARRANTIES. All
representations and warranties of Selling Parties contained herein, except as
contemplated hereby, shall be true at and as of the Closing Date with the same
effect as though such representations and warranties have been made at and as
of such time, and Selling Parties shall have performed or complied with all
obligations, covenants and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing Date.
SECTION 6.3 CERTIFICATE OF SELLING PARTIES. Buyer shall
have been furnished with a certificate executed by an officer of Corporation
and by Shareholders, in form and substance satisfactory to Buyer, certifying to
the fulfillment of the condition set forth in Section 6.2 above.
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SECTION 6.4 LEGAL OPINION. Harter, Secrest & Emery,
counsel for Selling Parties, shall have delivered to Buyer its opinion to the
effect set forth in Exhibit "6.4".
SECTION 6.5 SATISFACTORY INVESTIGATIONS. The
investigation of the business of the Corporation contemplated in Section 4.1
hereof shall be satisfactory to Buyer in all respects as determined in the
exercise of its sole, absolute and exclusive discretion.
SECTION 6.6 UNTRUE STATEMENTS. This Agreement, together
with the Exhibits attached hereto or subsequently provided to Buyer at the time
of Closing, shall not contain any untrue statement of a known material fact or
omit to state a known material fact required to be stated therein or necessary
to make the statements contained therein, in light of the circumstances under
which they were made, not misleading.
SECTION 6.7 MATERIAL ADVERSE CHANGE. There shall have
been no material adverse change in the condition (financial or otherwise),
earnings, business, assets, liabilities, properties, operations or prospects of
Corporation, and there shall not have been any occurrence, circumstance or
combination thereof (whether arising heretofore or hereafter), including
litigation pending or threatened, which might result in any such material
adverse change before or after the Closing Date.
SECTION 6.8 LITIGATION. Immediately prior to the Closing
Date, there shall be no litigation or proceeding: (i) pending or threatened
against Buyer or Corporation, or any of their respective directors, officers or
shareholders, or involving the assets or properties of any of them, for the
purpose of enjoining or preventing the consummation of this Agreement or
otherwise claiming that such consummation is improper; or (ii) pending against
Buyer or Corporation which, if decided adversely, would adversely affect the
right of Buyer to retain the stock, property and other assets or to continue
the operations of the property, assets and business of Corporation (or of Buyer
or any of its subsidiaries) after the Closing Date, and which, in the judgment
of the Board of Directors of Buyer, would make the consummation of this
Agreement inadvisable. Immediately prior to the Closing Date, there shall be
no governmental investigation pending or threatened which, in the judgment of
the Board of Directors of Buyer, might lead to or result in any litigation or
proceeding of the nature referred to in the foregoing sentence.
SECTION 6.9 THIRD PARTY CONSENTS. Prior to the Closing
Date, Corporation shall have obtained the written consent, waiver or approval
of each person: (i) who is a party to a contract or agreement with Corporation
or a contract or agreement by which Corporation or its property is bound; (ii)
whose consent, waiver or approval is required under such contract or agreement
as a result
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of consummation of the transactions contemplated by this Agreement; and (iii)
whose failure to provide such consent, waiver or approval would have or might
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise), earnings, business, assets, liabilities, operations
or prospects of Corporation.
SECTION 6.10 CORPORATE ACTION. Immediately prior to the
Closing Date, Buyer shall have received, in form and substance reasonably
satisfactory to Buyer, the resignations of such officers and directors of
Corporation, effective as of the Closing Date, as Buyer may have stipulated to
Corporation in writing prior to the Closing Date.
SECTION 6.11 EMPLOYMENT AGREEMENT. Murray and Michael
shall have each executed and delivered to Buyer an employment agreement which
in form and substance is mutually acceptable.
ARTICLE 7
THE CLOSING
SECTION 7.1 TIME AND PLACE. The transfer of the Shares
by Shareholders to Buyer (the "Closing") shall take place at the offices of
Seller's counsel in Rochester, New York at 10:00 a.m., local time, on July 24,
1996, or at such other time and place as the parties may agree to in writing
(the "Closing Date"), with the Closing to be effective as of July 1, 1996.
SECTION 7.2 SELLING PARTIES' OBLIGATIONS AT CLOSING. At
the Closing, Shareholders shall deliver to Buyer the following instruments, in
form and substance satisfactory to Buyer and its counsel, against delivery of
the items specified in Section 7.3:
A. Certificates representing the Shares, registered in
the name of the respective Shareholders, duly endorsed by the
respective Shareholders for transfer as specified in Section 1.1 or
accompanied by a separate written instrument of assignment. On
submission of those certificates to Corporation for transfer,
Corporation shall issue to Buyer a new certificate representing the
Shares, registered in the name of Buyer and shall issue to
Shareholders new certificates representing their remaining shares in
the Corporation;
B. The stock book, stock ledger, minute book and
corporate seal of Corporation;
C. Except as otherwise specified by Buyer, the written
resignations of all the officers and directors of Corporation;
D. The certificate executed by Corporation's officer and
by Shareholders, dated the Closing Date, as provided in
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Section 6.3; and
E. The opinion of counsel as provided in Section 6.4.
SECTION 7.3 BUYER'S OBLIGATIONS AT CLOSING. At the
Closing, Buyer shall deliver to Shareholders the following instruments and
documents against delivery of the items specified in Section 7.2:
A. The Purchase Price payable to Shareholders in their
respective proportions;
B. Certified resolutions of Buyer's Board of Directors,
in form reasonably satisfactory to counsel for Selling Parties,
authorizing the execution, delivery and performance of this Agreement
and all actions to be taken by Buyer under this Agreement;
C. The certificate executed by Buyer's officer, dated
the Closing Date, as provided in Section 5.3; and
D. An opinion of Buyer's counsel, dated the Closing
Date, as provided for in Section 5.4.
ARTICLE 8
OBLIGATIONS AFTER CLOSING
SECTION 8.1 AGREEMENT TO REFRAIN FROM COMPETITION. The
provisions of Section 8.1 shall apply only to the following person and to no
others: Ann Astarita (hereinafter collectively referred to as "Key
Shareholder"), it being acknowledged that the non-competition agreements of
each of Murray Astarita and Michael Astarita are contained in separate
employment agreements between each and the Corporation.
A. Key Shareholder agrees, individually, that for the
forty-eight (48) month period immediately following the Closing Date
(the "Non-Compete Period"), Key Shareholder 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, 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: records management and document
management activities (including micrographics, scanning and
conversion
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services and imaging) 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 Key Shareholder
from investing in any corporation the shares of which are traded on a
securities exchange or in the over-the-counter market.
B. Key Shareholder further agrees that it 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.
C. During the Non-Compete Period, Key Shareholder shall
keep secret and inviolate and shall not divulge, communicate, use to
the detriment of Corporation or Buyer 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, personnel information, computer programs, technical data,
customer lists and unpublished matters relating to the business,
assets, accounts, books, records, customers and contracts of the
Corporation which they may know as a result of their association with
and which is unique to the Corporation ("Confidential Information").
Key Shareholder may disclose Confidential Information if required by
any judicial or governmental request, requirement or order; provided
that Key Shareholder will take reasonable steps to give Corporation
sufficient prior notice in order to contest such request, requirement
or order.
D. Key Shareholder has had knowledge of the affairs,
trade secrets, customers, potential customers and other proprietary
information of Corporation, and Key Shareholder acknowledges and
agrees that compliance with the covenants set forth in this Section
8.1 is necessary for the protection of the goodwill and other
proprietary interests of Corporation and Buyer and that any violation
of this Section 8.1 will cause severe and irreparable injury to the
business and goodwill of Corporation and Buyer, which injury is not
compensable by money damages. Accordingly, in the event of a breach
(or threatened or attempted breach) of this Section 8.1, Corporation,
Buyer 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.
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E. 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 Buyer and Key Shareholders that
these covenants be given the maximum force, effect and application
permissible under law.
F. Key Shareholder shall, on the Closing Date, be paid
$5,000.00 in exchange for the foregoing Agreement to refrain from
competition, which amount is included within the Purchase Price.
SECTION 8.2 FURTHER ASSURANCES. From time to time, at
Buyer's request (whether or not after the Closing), and without further
consideration and at the expense of Buyer, Shareholders will execute and
deliver to Buyer such other documents, and take such other action, as Buyer may
reasonably request in order to consummate more effectively the transactions
contemplated by this Agreement, and to vest in Buyer good, valid and marketable
title to the Shares.
SECTION 8.3 CALL/PUT. At any time subsequent to the
eighteen (18) month anniversary of the Closing Date, Buyer shall have the right
to acquire or "call" all of the remaining shares of capital stock in
Corporation owned by Shareholders (the "Remaining Shares"). In the event Buyer
exercises such right, the purchase price for the Remaining Shares shall be
equal to Corporation's actual earnings before interest and taxes have been paid
("EBIT") for the twelve (12) calendar months immediately preceding the giving
of notice to Shareholders, multiplied by six (6) and further multiplied by the
percentage ownership in Corporation evidenced by the Remaining Shares. For
example, if the EBIT for the twelve (12) calendar months preceding the giving
of notice to Shareholders is $340,000.00 and the Remaining Shares constitute
twenty (20%) percent of the outstanding and issued capital stock of
Corporation, the formula for computing the purchase price shall be:
($340,000.00 x 6) x 20% = $408,000.00. Buyer's right to purchase the Remaining
Shares shall be exercised by written notice to Shareholders, which notice shall
be accompanied by a profit and loss statement, prepared by Corporation's
certified public accountants, for the twelve (12) calendar months preceding the
giving of the notice. The closing of Buyer's purchase of the Remaining Shares
shall occur within thirty (30) days of the giving of the notice. At the
closing, Shareholders shall deliver to Buyer certificates, endorsed in blank or
accompanied by a separate assignment, evidencing Shareholders' remaining
ownership interest in the Corporation, a resignation if an officer, and a
certification of those representations and warranties set forth in Section 2.3
of this Agreement.
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In the event Buyer has not previously exercised its right to
purchase the Remaining Shares, then, at any time subsequent to the thirty (30)
month anniversary of the Closing Date, Shareholders shall have the right to
"put" or require Buyer to purchase the Remaining Shares. If Shareholders
exercises such right, the purchase price for the Remaining Shares shall be
equal to Corporation's EBIT for the twelve (12) calendar months immediately
preceding the giving of notice to Buyer, multiplied by four (4) and further
multiplied by the percentage ownership in Corporation evidenced by the
Remaining Shares. Shareholders' right to require Buyer to purchase the
Remaining Shares shall be exercised by written notice to Buyer. Within thirty
(30) days of the giving of such notice, Corporation shall provide to
Shareholder a profit and loss statement, prepared by Corporation's certified
public accountants, for the twelve (12) calendar months preceding the giving of
the notice. The closing of Buyer's purchase of the Remaining Shares shall
occur within thirty (30) days of Shareholders' receipt of the profit and loss
statement. At the closing, Shareholders shall deliver to Buyer certificates,
endorsed in blank or accompanied by a separate assignment, evidencing
Shareholders' remaining ownership interest in the Corporation, a resignation if
an officer, and a certification of those representations and warranties set
forth in Section 2.3 of this Agreement.
Until such time as Buyer has purchased the Remaining Shares,
Buyer agrees that it shall not, without Shareholders' prior consent, cause
Corporation to issue or sell any of its capital stock, whether pursuant to
offers, stock option agreements, stock bonus agreements, stock purchase plans,
incentive compensation plans, warrants, calls, conversion rights or otherwise,
it being the intent of Buyer to not dilute Shareholders' percentage ownership
interest in Corporation.
For purposes of this Agreement, "EBIT" shall mean Earnings
Before Interest and Taxes of the Corporation as determined by an independent
certified public accountant then employed by Buyer in accordance with Generally
Accepted Accounting Principles ("GAAP"). In calculating EBIT, Buyer shall take
into account historical calculations of earnings of the Corporation provided
that same are in accordance with GAAP. In no event shall Buyer record against
earnings expenses incurred by the Corporation that could not reasonably be
attributed to such Corporation, such as, for example, expenses of buyer which
do not provide a direct benefit to Corporation.
For the purposes hereof, "Generally Accepted Accounting
Principles" or "GAAP", means methods and practices (a) then set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants, and statements and pronouncements of
the Financial Accounting Standards Board or of such other entity as may then be
approved by a significant segment of the accounting profession,
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which are (b) consistently maintained and applied throughout the periods
referenced.
Within 30 days of receipt of statement setting forth EBIT,
Seller or Seller's accountants shall be entitled to review and propose
adjustment to the EBIT calculation. In the absence of any such objections, the
EBIT calculation shall be final and binding upon the parties. If any objections
are made, the parties and their accountants shall negotiate in good faith with a
view toward agreeing on matters in dispute. If such negotiations fail to
resolve all disputed items within 30 days after such objections are made, the
remaining disputed items shall be submitted for resolution to a firm of
independent public accountants designated jointly by Seller's accountants and
Buyer's accountants. After affording each of the parties and their respective
accountants the opportunity to present their positions as to such determination
(which opportunity shall not extend for more than 30 days), the accounting firm
so selected shall determine the disputed items and such determination shall be
binding for the purposes hereof. The fee, costs and expenses of the accounting
firm so selected shall be borne equally by Buyer and Seller.
ARTICLE 9
INDEMNIFICATION
SECTION 9.1 BUYER'S INDEMNITY. Buyer agrees to indemnify
and hold harmless Shareholders from and against, and in respect to, any and all
losses, expenses, costs, obligations and liabilities, including interest,
penalties and reasonable attorneys' fees they may incur by reason of Buyer's
breach of or failure to perform any of its representations, warranties,
commitments or covenants in this Agreement, or in any exhibit furnished or to
be furnished by or on behalf of Buyer under this Agreement, or by reason of any
act or omission of Buyer, or any of its successors or assigns, after the
Closing Date, that constitutes a breach or default under, or a failure to
perform, any obligation, duty or liability to any of the Selling Parties under
any loan agreement, lease, contract, order or other agreement (relating to the
business of Corporation) to which any of the Selling Parties is a party or by
which any of them are bound at the Closing Date.
SECTION 9.2 SHAREHOLDERS' INDEMNITY. Shareholders,
jointly and severally, do hereby indemnify, defend and hold harmless Buyer from
and against, and in respect to, any and all losses, expenses, costs,
obligations, liabilities, damages and deficiencies (collectively referred to
herein as "Losses"), that Buyer shall incur or suffer which result from the
breach of, or failure by Selling Parties to perform, any of their
representations, warranties, covenants or agreements in this Agreement,
including any exhibit hereto. Buyer shall give Shareholders prompt written
notice, certified mail return receipt requested, of any claim to be made by
Buyer under this Section 9.2,
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which notice shall set forth the amount of the claim and all of the facts
relating thereto. Shareholders shall have a reasonable opportunity to confirm
such claim, at Shareholders' expense and within ten (10) business days after
receipt of the aforesaid notice, including, without limitation, review by them
or by an attorney and/or accountant retained by them of the factual basis for
such claim. Buyer agrees to cooperate with any such confirmation request and
make available to Shareholders, or to the attorney and/or accountant appointed
by them, at all reasonable times, for inspection and review, the books and
records of Buyer relating to the claim, including, but not limited to, any
worksheets relating to computation of the claim.
If, as a result of the confirmation, Shareholders do not agree
that Buyer is entitled to indemnification with respect to the claim and such
disagreement cannot, with good faith effort, be promptly settled within an
additional ten (10) business days, Buyer and Shareholders shall each appoint
within five (5) business days an arbitrator, and the two arbitrators so
appointed shall appoint a third arbitrator. If said two arbitrators cannot
agree on the selection of a third arbitrator within the next ten (10) business
days, then either Buyer or Shareholders shall be entitled to apply to the
American Arbitration Association sitting at Detroit, Michigan for the selection
of a third arbitrator who shall then participate in such arbitration
proceedings, and who shall be selected from a list of arbitrators possessing
the qualifications set forth below. Any arbitrator appointed pursuant to this
Section 9.2 shall be a qualified expert with generally recognized current
competence in mergers and acquisitions and complex business transactions.
Except as otherwise provided herein, such arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association.
Within thirty (30) business days of the date of selection of
the last of the arbitrators to be selected by the foregoing procedure, the
arbitrators shall furnish the parties with their written determination. Such
written determination shall be certified and signed by at least a majority of
the arbitrators, and shall be final and binding on the parties, except with
respect to any alleged breach under Section 8.1 as to which the parties may
pursue other remedies at law or in equity. Except with respect to any alleged
breach under Section 8.1, judgment may be entered on any award rendered by the
arbitrators in any federal or state court having jurisdiction over the parties.
Each of Buyer and Shareholders shall pay the arbitrator selected by it, and the
costs of the third arbitrator shall be paid one-half (1/2) by Buyer and
one-half (1/2) by Shareholders.
In the event a claim or demand is made upon Buyer by a third
party, which claim or demand Buyer believes could result in a claim by Buyer
for indemnification under this Section 9.2, Buyer shall give Shareholders
prompt written notice of such claim or demand as soon as practicable after
receipt thereof by Buyer.
29
<PAGE> 30
Buyer shall consult with Shareholders to determine what defenses to such claims
should be asserted. Shareholders may participate in, but not control, the
negotiation, defense or settlement of any third-party claim or demand and may
retain counsel at their own expense to represent them in such matters and
participate on their behalf.
Notwithstanding anything to the contrary set forth herein, it
is understood and agreed that: (i) the arbitration methodologies set forth in
this Section 9.2 represent Buyer's sole available procedural remedies for
enforcement of the within indemnity, except with respect to any alleged breach
under Section 8.1 as to which Buyer may pursue other remedies at law or in
equity; (ii) only Shareholders shall have any liability under the indemnity
given to Buyer hereunder; and (iii) the extent of Shareholders' liability for
damages for a breach of any of the representations, warranties, covenants or
agreements in this Agreement, except for any alleged breaches of Section 8.1 or
2.10 hereof, shall be limited to the remedies, procedures and limitations set
forth in this Section 9.2.
With regard to any civil actions which may arise out of any
alleged breach of Section 8.1, such civil action shall be heard de novo.
SECTION 9.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
All representations, warranties and covenants made by the Selling Parties in
this Agreement, or in any schedule, exhibit, certificate or other document
delivered in connection with this Agreement, shall not be deemed to be waived
or otherwise affected by any investigation made by the other party hereto and
shall survive the Closing Date, provided however, that such representations,
warranties, covenants and agreements shall survive only to the extent that the
right of indemnification for breach thereof is not otherwise limited pursuant
to Section 9.4 hereof.
SECTION 9.4 LIMITATION OF INDEMNIFICATION. No
indemnification shall be required as to amounts recovered pursuant to any
insurance policy by the party seeking indemnification. Further, Shareholders
will have no liability (for indemnification or otherwise) with respect to the
matters described in Section 9.3 until the total of all Losses with respect to
such matters exceeds $27,500.00 and then only for the amount by which such
Losses exceed $27,500.00. However, this Section 9.4 will not apply to any
intentional breach by any Seller of any covenant or obligation, and
Shareholders will be jointly and severally liable for all Losses with respect
to such breach provided that any information set forth in the due diligence
materials delivered by Shareholders on or before the date hereof shall be
deemed to be not "intentional" for purposes of this sentence.
ARTICLE 10
30
<PAGE> 31
MISCELLANEOUS PROVISIONS
SECTION 10.1 FINDER'S OR BROKER'S FEES. Each of the
parties represents and warrants that it has dealt with no broker or finder in
connection with any of the transactions contemplated by this Agreement, and,
insofar as it knows, no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions. Selling Parties and
Buyer each agree to indemnify and hold harmless one another against any loss,
liability, damage, cost, claim or expense incurred by reason of any brokerage,
commission or finder's fee alleged to be payable by reason of any act, omission
or statement of the indemnifying party.
SECTION 10.2 EXPENSES. Buyer shall pay all costs and
expenses incurred or to be incurred by it in negotiating and preparing this
Agreement and in closing and carrying out the transactions contemplated hereby.
Costs or expenses related to Buyer's review and corporate actions in
anticipation of the consummation of the transaction contemplated hereby shall
be borne or paid by Corporation. In the event that this Agreement should be
terminated in accordance with Section 10.10, all legal, accounting and other
costs and expenses incurred in connection therewith, and the transactions
contemplated hereby shall be paid by the party incurring such expenses.
SECTION 10.3 EFFECT OF HEADINGS. The subject headings of
the Articles and Sections of this Agreement are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any of the provisions hereof.
SECTION 10.4 ENTIRE AGREEMENT; MODIFICATION; WAIVER. This
Agreement, together with the Disclosure Schedule and all of the exhibits
furnished hereunder, constitutes the sole and entire agreement between the
parties pertaining to the subject matter contained herein, and supersedes all
prior and contemporaneous agreements, representations and understandings of the
parties. No supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by all the parties.
SECTION 10.5 WAIVER. Buyer may waive in writing
compliance by Selling Parties, and Selling Parties may waive in writing
compliance by Buyer, with any of the covenants or conditions contained in this
Agreement, except those conditions imposed by law. No act, failure to act,
practice or custom shall constitute an implied waiver of full compliance with
any of the provisions hereof. The granting of a written waiver pursuant to
this Section shall apply, unless expressly set forth therein to the contrary,
only to the specific incident of noncompliance with the specific provisions of
this Agreement set forth therein.
SECTION 10.6 COUNTERPARTS. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall
31
<PAGE> 32
constitute one and the same instrument.
SECTION 10.7 PARTIES IN INTEREST. Nothing in this
Agreement, whether express or implied, is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than the
parties to it and their respective successors and assigns, or is intended to
relieve or discharge the obligation or liability of any third persons to any
party to this Agreement. None of the provisions hereof shall be deemed to give
any third persons any right of subrogation or action over or against any party
to this Agreement.
SECTION 10.8 BINDING EFFECT. This Agreement shall be
binding on, and shall inure to the benefit of, the parties hereto and their
respective heirs, legal representatives, successors and assigns.
SECTION 10.9 RECOVERY OF LITIGATION COSTS. Except as
otherwise provided elsewhere in this Agreement, if any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement or by reason of an alleged dispute, breach, default or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be
entitled.
SECTION 10.10 CONDITIONS PERMITTING TERMINATION. Subject to
the provisions of Section 7.1 relating to the postponement of the Closing Date,
either party may, on or before the Closing Date, terminate this Agreement
without liability to the other if a condition to its performance shall not be
fulfilled or a material default or breach cannot be cured at or prior to July
24, 1996, or such later date as is agreed to by Buyer and Selling Parties,
provided such terminating party is not in default pursuant to the terms of this
Agreement. Termination as provided herein shall not waive any rights of any
party against another for default or breach of any provision of this Agreement.
SECTION 10.11 NOTICES. All notices, requests, demands and
other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given on the date of service if
served personally on the party to whom notice is to be given, or on the fifth
(5th) day after mailing if mailed to the party to whom notice is to be given,
by first-class mail, register or certified, postage paid and properly addressed
as follows:
To Corporation At: 3543 Winton Place
Rochester, New York 14625
Attn: Murray Astarita
32
<PAGE> 33
With A Copy To: James Jenkins, Esq.
Harter, Secrest & Emery
700 Midtown Tower
Rochester, New York 14604-2070
To Shareholders At: 3543 Winton Place
Rochester, New York 14625
Attn: Murray Astarita
With A Copy To: James Jenkins, Esq.
Harter, Secrest, & Emery
700 Midtown Tower
Rochester, New York 14604-2070
To Buyer At: Lason Systems, Inc.
1305 Stephenson Highway
Troy, Michigan 48084
Attn: Gary L. Monroe
With A Copy To: Laurence B. Deitch, Esq.
Seyburn, Kahn, Ginn, Bess, Deitch And Serlin
2000 Town Center, Suite 1500
Southfield, Michigan 48075-1195
Any party may change its address for purposes of this paragraph by giving the
other parties written notice of the new address in the manner set forth above.
SECTION 10.12 CHOICE OF LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of Michigan,
without giving effect to any choice of law or conflict provision or rule,
whether of the State of Michigan (or any other jurisdiction) that would cause
the laws of any jurisdiction other than the State of Michigan to be applied.
In furtherance of the foregoing, the internal law of the State of Michigan will
control the interpretation and construction of this Agreement, even if under
such jurisdiction's choice of law or conflict of law or analysis, the
substantive law of some other jurisdiction would ordinarily apply. Further,
the parties hereto agree that jurisdiction and venue shall properly lie in the
courts of the State of Michigan or in the United States District Court for the
Eastern District of Michigan or in the United States District Court for the
Western District of New York.
THIS AGREEMENT was executed as of the date and year first set forth above.
BUYER:
LASON SYSTEMS, INC., a Delaware
corporation
33
<PAGE> 34
By: Gary L. Monroe
-------------------------------
GARY L. MONROE
Its: Chief Executive Officer
------------------------------
SHAREHOLDERS:
Murray Astarita
------------------------------------
MURRAY ASTARITA
Ann Astarita
------------------------------------
ANN ASTARITA
Michael Astarita
------------------------------------
MICHAEL ASTARITA
(SIGNATURES CONTINUED ON NEXT PAGE)
34
<PAGE> 35
CORPORATION:
MICRO-PRO, INC., a New York corporation
By: Murray Astarita
---------------------------------
Its: President
--------------------------------
M P SERVICES, INC., a New York
corporation
By: Michael Astarita
---------------------------------
Its: President
--------------------------------
35
<PAGE> 1
EXHIBIT 10.1
ASSET PURCHASE AGREEMENT
BY AND AMONG
LASON ACQUISITION CORP.,
LASON SYSTEMS, INC.,
AND
THE STOCKHOLDERS THEREOF
JANUARY 17, 1995
<PAGE> 2
TABLE OF CONTENTS
Page
<TABLE>
<S> <C> <C>
ARTICLE 1 PURCHASE AND SALE; ASSUMPTION OF CERTAIN
LIABILITIES; CLOSING............................................. 1
1.1 Purchase and Sale................................................. 1
1.2 Assumption of Certain Liabilities................................. 4
1.3 Purchase Price.................................................... 4
1.4 The Closing....................................................... 5
ARTICLE 2 TRANSITIONAL ARRANGEMENTS......................................... 5
2.1 Seller's Name Change.............................................. 5
2.2 Employees......................................................... 5
ARTICLE 3 CONFIDENTIALITY................................................... 6
3.1 Confidentiality Obligations of the Seller and
the Stockholders.................................................. 6
3.2 Confidentiality Obligations of the Purchaser...................... 7
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................... 7
4.1 Organization of the Purchaser..................................... 7
4.2 Authorization; Binding Effect; No Breach.......................... 8
4.3 Brokerage......................................................... 8
4.4 Disclosure........................................................ 8
4.5 Accuracy on Closing Date.......................................... 8
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE SELLER AND
THE STOCKHOLDERS.................................................. 9
5.1 Organization and Corporate Power.................................. 9
5.2 Authorization; Binding Effect; No Breach.......................... 9
5.3 Outstanding Stock of the Seller................................... 10
5.4 Subsidiaries; Investments......................................... 10
5.5 Financial Statements and Related Matters.......................... 10
5.6 Absence of Undisclosed Liabilities................................ 11
</TABLE>
- i -
<PAGE> 3
<TABLE>
<S> <C> <C>
5.7 Purchased Assets................................................. 11
5.8 Absence of Certain Developments.................................. 12
5.9 Tax Matters...................................................... 13
5.10 Contracts and Commitments........................................ 15
5.11 Proprietary Rights............................................... 17
5.12 Certain Litigation............................................... 18
5.13 Brokerage........................................................ 18
5.14 Insurance........................................................ 19
5.15 Employees........................................................ 19
5.16 Employee Benefits................................................ 19
5.17 Real Estate...................................................... 21
5.18 Compliance with Laws............................................. 22
5.19 Product and Service Warranty..................................... 23
5.20 Disclosure....................................................... 23
5.21 Accuracy on Closing Date......................................... 24
ARTICLE 6 ACCESS TO RECORDS................................................ 24
ARTICLE 7 SURVIVAL AND INDEMNIFICATION..................................... 25
7.1 Survival of Representations and Warranties....................... 25
7.2 Indemnification Obligations of the Seller and
the Stockholders................................................. 25
7.3 Indemnification Obligations of the Purchaser..................... 26
7.4 Indemnification Procedures....................................... 27
7.5 Treatment of Indemnification Payments............................ 28
7.6 Arbitration...................................................... 28
ARTICLE 8 CLOSING DELIVERIES............................................... 30
8.1 Deliveries to the Purchaser...................................... 30
8.2 Conditions of the Seller's Obligation............................ 31
ARTICLE 9 OTHER COVENANTS.................................................. 31
9.1 Transaction Expenses............................................. 31
9.2 Further Assurances............................................... 32
9.3 Announcements.................................................... 32
9.4 FICA............................................................. 32
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 10 DEFINITIONS...................................................... 32
10.1 Definitions...................................................... 32
10.2 Other Definitional Provisions.................................... 36
ARTICLE 11 OTHER AGREEMENTS................................................. 37
11.1 Remedies......................................................... 37
11.2 Consent to Amendments............................................ 38
11.3 Successors and Assigns........................................... 38
11.4 Governing Law.................................................... 38
11.5 Notices.......................................................... 38
11.6 Severability of Provisions....................................... 39
11.7 Schedules and Exhibits........................................... 40
11.8 Counterparts..................................................... 40
11.9 No Third-Party Beneficiaries..................................... 40
11.10 Headings......................................................... 40
11.11 Merger and Integration........................................... 40
11.12 Allocation of Purchase Price..................................... 40
11.13 Acknowledgment by the Purchaser.................................. 40
</TABLE>
- iii -
<PAGE> 5
LIST OF SCHEDULES
Schedule 5.1 - Organization
Schedule 5.2 - Consents
Schedule 5.4 - Subsidiaries
Schedule 5.5(a) - Financial Disclosure
Schedule 5.6 - Liabilities
Schedule 5.7 - Assets
Schedule 5.8 - Developments
Schedule 5.9 - Taxes
Schedule 5.10(a) - Contracts
Schedule 5.10(e) - Affiliated Transactions
Schedule 5.11 - Proprietary Rights
Schedule 5.12 - Litigation
Schedule 5.13 - Brokerage
Schedule 5.14 - Insurance
Schedule 5.16 - Employee Benefits
Schedule 5.17 - Real Estate
Schedule 5.18(a) - Compliance
Schedule 5.18(b) - Permits
Schedule 5.18(c) - Environmental Matters
Schedule 5.19 - Warranties
Schedule 8.1(m) - Business Employees
- iv -
<PAGE> 6
LIST OF EXHIBITS
Exhibit A - Stockholders' Shares
Exhibit B - Seller's Financial Statements
Exhibit C - Opinions of Seller's Counsel
Exhibit D - Purchase Price Allocation
- v -
<PAGE> 7
CROSS REFERENCE LIST OF DEFINITIONS
Adverse Effect 11
Affiliate 48
Agreement 48
Assumed Liabilities 5
Assumption 6
Books and Records 3
Business 48
Business Proprietary Rights 21
Cash Purchase Price 6
Closing Date 6
Closing 6
Code 48
Confidential Information 7
Consents 36
Contracts 20
DOJ 44
Employment Agreement 37
Environmental Lien 48
Environmental Affiliates 48
Environmental and Safety Requirements 48
ERISA 48
Excluded Assets 4
Excluded Liabilities 5
Financial Statements 13
FTC 44
GAAP 49
Government Entity 49
HSR Act 36
Indebtedness 49
Indemnification Claim Notice 33
Indemnified Party 33
Indemnifying Party 33
Investment 49
Knowledge 49
Latest Balance Sheet 13
Lease Agreement 37
Leased Real Property 25
Leases 26
Legal Requirement 49
Lien 50
Loan Agreement 37
- vi -
<PAGE> 8
Loss 50
Officer's Certificate 50
Owned Real Property 23
Parties 1
PCBs 48
Permitted Real Estate Liens 24
Person 50
Proceeding 33
Proprietary Rights 50
Purchase Price 6
Purchased Assets 1
Purchaser Indemnitees 31
Purchaser 1
Real Estate 2
Sale 6
Seller Indemnitees 32
Seller 1
Stockholders 1
Subsidiary 51
Tax Return 52
Taxes 51
Transaction Documents 52
Treasury Regulations 52
- vii -
<PAGE> 9
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of January 17, 1995, by and
among Lason Acquisition Corp., a Delaware corporation (the "Purchaser"), Lason
Systems, Inc., a Michigan corporation (the "Seller"), and the Robert A. Yanover
Living Trust u/a/d May 11, 1982 (the "R. Yanover Trust"), Allen J. Nesbitt
("Nesbitt"), the Joseph Jonathan Yanover and Jennifer D. Yanover Irrevocable
Trust dated January 5, 1993 (the "J. Yanover Trust"), Gregory Carey ("Carey"),
Donald L. Elland ("Elland") and Richard C. Kowalski ("Kowalski" and, together
with the R. Yanover Trust, Nesbitt, the J. Yanover Trust, Carey and Elland, the
"Stockholders"). The Purchaser, the Seller and the Stockholders are
collectively referred to herein as the "Parties." Capitalized terms used but
not defined prior to their first usage herein are defined in Section 10.1. A
cross reference list of defined terms is set forth after the table of contents
which precedes this Agreement.
WHEREAS, upon the terms and subject to the conditions set forth in
this Agreement, the Purchaser desires to acquire from the Seller, and the Seller
desires to sell to the Purchaser, substantially all of the Seller's assets
(subject to certain of the Seller's liabilities as specifically provided
herein).
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1
PURCHASE AND SALE; ASSUMPTION OF
CERTAIN LIABILITIES; CLOSING
1.1 PURCHASE AND SALE.
(a) Purchased Assets. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing (as defined below) the
Seller will sell, assign, transfer and deliver to the Purchaser, and the
Purchaser will purchase, all properties, assets, rights and interests of every
kind and nature, whether tangible or intangible, and wherever located and by
whomever possessed, owned by the Seller as of the Closing Date (as defined
below), except as set forth in Section 1.1(b) below (collectively, the
"Purchased Assets"), including, without limitation:
<PAGE> 10
(i) all cash and cash equivalents (including, without limitation,
all bank accounts and deposits and all petty cash), notes and accounts
receivable (whether current or non-current);
(ii) all securities and other Investments;
(iii) all certificates of deposit, bankers' acceptances, government
securities and other investments;
(iv) all prepayments, prepaid expenses and all interests in
insurance policies;
(v) all raw materials, work-in-process, finished goods, consigned
goods and other inventories and related supplies;
(vi) all Proprietary Rights, along with all income, royalties,
damages and payments due or payable (including damages and payments for past,
present, or future infringements or misappropriations thereof), the right to sue
and recover for past infringements and misappropriations thereof, and any and
all corresponding rights that, now or hereafter, may be secured throughout the
world, in each case together with all books, records, drawings or other indicia
thereof, and in each case together with goodwill associated therewith;
(vii) all real property, whether owned or leased, including all
real property described on the attached Real Estate Schedule, and all plants,
buildings and other improvements located on such owned or leased property, and
all easements, licenses, rights of way, permits and all appurtenances to such
owned or leased property, including, without limitation, all appurtenant rights
in and to public streets, whether or not vacated (collectively, the "Real
Estate");
(viii) all office supplies, production supplies, spare parts, other
miscellaneous supplies, and other tangible property of any kind wherever
located, including all property of any kind located in any building, office or
other space
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<PAGE> 11
leased, owned or occupied by the Business or in any warehouse where any of
the properties or assets associated with the Business may be situated;
(ix) all leasehold improvements and all owned or leased machinery,
equipment (including all transportation and office equipment), fixtures,
trade fixtures, tools, dyes and furniture, wherever located, including all
such items which are located in any building, warehouse, office or other
space leased, owned or occupied by Seller or used in connection with the
Real Estate or otherwise in connection with the Business;
(x) all rights existing under contracts, leases, insurance
policies, licenses, permits, supply and distribution arrangements, sales
and purchase agreements and orders, employment and consulting agreements,
consignment arrangements, warranties, consents, orders, registrations,
privileges, memberships, certificates, approvals or other similar rights
and all other agreements, arrangements and understandings; (xi) the
right to receive and retain mail, accounts and notes receivable payments
and other communications and collections (including, without limitation,
mail and communications from customers, suppliers, distributors, agents and
others and accounts receivable and other payments), other than with respect
to the Excluded Assets;
(xii) all lists and records pertaining to customers, suppliers,
distributors, personnel and agents and all other files, documents,
correspondence, plats, architectural plans, drawings and specifications,
computer programs and business records of every kind and nature, in each
case whether evidenced in writing, electronically (including by computer)
or otherwise (the "Books and Records");
(xiii) all creative materials (including, without limitation,
photographs, films, art work, color separations and the like) used in
advertising and promotional materials and all other printed or written
materials;
(xiv) all claims, refunds, credits, causes of action, choses in
action, rights of recovery and rights of set-off of
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<PAGE> 12
every kind and nature, other than with respect to the Excluded Assets;
(xv) all goodwill as a going concern and all other intangible
properties;
(xvi) all advertising, marketing and promotional materials and all
other printed or written materials;
(xvii) all franchises, approvals, permits, licenses, orders,
registrations, certificates, variances and similar rights obtained from all
Government Entities and other permitting, licensing, accrediting and
certifying agencies, and the rights to all data and records held by such
Government Entities or other permitting, licensing, accrediting and
certifying agencies;
(xviii) all certifications, ratings, listings and similar rights or
benefits obtained from any product certification organization; y
(xix) the right to bill and receive payment for products shipped or
delivered and/or services performed but unbilled or unpaid as of the
Closing Date;
(xx) the names "Lason Systems, Inc.," "Laser Maintenance" and
"Diversitec Image Technology", and all derivatives thereof; and
(xxi) except as specified in Section 1.1(b), all other property
owned by the Seller, or in which it has an interest, on the Closing Date.
(b) Excluded Assets. Notwithstanding Section 1.1(a), the following
assets (the "Excluded Assets") are expressly excluded from the purchase and sale
contemplated hereby and, as such, are not included in the Purchased Assets:
(i) qualifications to do business as a foreign entity, arrangements
with registered agents relating to foreign qualifications, taxpayer and
other identification numbers, seals, minute books, transfer books and other
documents relating to the organization, maintenance and
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<PAGE> 13
existence of the Seller as a corporation (which books and other documents
will not constitute part of the Books and Records);
(ii) that certain Sea Ray boat docked at St. Clair Shores,
Michigan; and
(iii) the Seller's rights under or pursuant to this Agreement or
under any other agreement between the Seller on the one hand and the
Purchaser on the other hand entered into on or after the date of this
Agreement.
1.2 ASSUMPTION OF CERTAIN LIABILITIES.
(a) Assumed Liabilities. Subject to Section 1.2(b), as additional
consideration for the Purchased Assets, at the Closing the Purchaser will assume
all of the Assumed Liabilities. The "Assumed Liabilities" are all liabilities
of the Seller as of the Closing Date other than (i) the Seller's outstanding
liabilities and obligations to Comerica Bank, N.A. pursuant to the Revolving
Credit Agreement dated September 29, 1994 between the Seller and Comerica Bank,
N.A. (it being understood that the Seller's liabilities under the Comerica
Leases will be Assumed Liabilities), and (ii) any liability of the Seller which
is required to be disclosed, but which is not disclosed, on the attached
Liabilities Schedule in order that the representations and warranties set forth
in Section 5.6 be true and correct in all respects.
(b) Excluded Liabilities. The Purchaser will not assume or become
liable for, and will not be deemed to have assumed or have become liable for,
any of the Seller's liabilities and obligations which is not an Assumed
Liability (collectively, the "Excluded Liabilities").
1.3 PURCHASE PRICE. The purchase price for the Purchased Assets (the
"Purchase Price") will consist of (i) $28,000,000 (the "Cash Purchase Price")
and (ii) the assumption by the Purchaser of the Assumed Liabilities.
1.4 THE CLOSING. The closing of the purchase and sale of the Purchased
Assets, the assumption of the Assumed Liabilities, and the transactions relating
thereto (the "Closing") will take place contemporaneously with the execution and
delivery of this
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<PAGE> 14
Agreement. The date and time of the Closing are herein referred to as the
"Closing Date." At the Closing:
(a) the Seller will convey to the Purchaser good title to all of
the Purchased Assets, free and clear of all Liens, and deliver to the Purchaser
warranty deeds, bills of sale, assignments of leases and contracts and all other
instruments of conveyance which the Purchaser reasonably deems necessary or
desirable to effect transfer of the Purchased Assets (the "Sale");
(b) the Purchaser will deliver to the Seller such instruments of
assumption as the Seller reasonably deems necessary in order for the Purchaser
to assume the Assumed Liabilities (the "Assumption");
(c) the Purchaser will deliver to the Seller (or, at the Seller's
direction, to creditors of the Seller or other third parties), the Cash Purchase
Price by wire transfer of immediately available funds; and
(d) there will be delivered to the Purchaser and the Seller the
opinions, certificates and other documents and instruments provided to be
delivered to them under Article 8.
The Sale and the Assumption will be deemed to be effective as of the open of
Business on the Closing Date.
ARTICLE 2
TRANSITIONAL ARRANGEMENTS
2.1 SELLER'S NAME CHANGE. As soon as practicable (in any event within
five (5) days) after the Closing, the Seller will change its corporate name to a
name which is not (and which is not confusingly similar to) "Lason Systems,
Inc." in order to effect the intent of the Parties that from and after the
Closing the Purchaser and its Affiliates will have the sole right as against the
Seller and all other Persons to conduct Business under such name and that the
Purchaser or an Affiliate of the Purchaser will commence doing so at the time of
the Closing.
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2.2 EMPLOYEES. On or before the Closing Date, the Purchaser will offer
employment to all Business Employees (as defined in Section 8.1(m)(vii))
commencing at the time of the Closing; provided that, except as provided in any
written agreement between the Purchaser and any such Business Employee, such
offer of employment will not constitute an offer of employment by the Purchaser
for any minimum period of time or on any other particular terms or conditions
(other than any period of time or other terms and conditions which are specified
on the attached Contracts Schedule under any Contract).
ARTICLE 3
CONFIDENTIALITY
3.1 CONFIDENTIALITY OBLIGATIONS OF THE SELLER AND THE STOCKHOLDERS.
(a) Confidential Treatment. From and after Closing, each of the
Seller and the Stockholders will (and will use reasonable efforts to cause each
of its Affiliates to) treat and hold as confidential all proprietary information
concerning the conduct or affairs of the Business (the "Confidential
Information"), refrain from using any Confidential Information, and, at the
Purchaser's request, deliver to the Purchaser or destroy all tangible
embodiments (and all copies) of any Confidential Information, and materials
containing Confidential Information, which are in the Seller's, any such
Stockholder's or any such Affiliate's possession; provided that, Seller may
retain copies of such Confidential Information which Seller reasonably
anticipates may be necessary to defend potential future claims, audits and other
unknown contingencies. This Section 3.1(a) will not apply to any Confidential
Information which is generally available to the public (other than by reason of
any disclosure by the Seller or a Stockholder or any of their Affiliates which
constitutes or is the result of breach of this Section 3.1(a) or any disclosure
by any such Affiliate which would constitute a breach of this Section 3.1(a) if
such Affiliate were the Seller or a Stockholder) immediately prior to the time
of disclosure.
(b) Forced Disclosure. If the Seller or a Stockholder or any of
their Affiliates is requested or required (by oral
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question or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar process) to
disclose any Confidential Information, the Seller will notify the Purchaser
promptly of such request or requirement so that the Purchaser may seek an
appropriate protective order or waive compliance with the provisions of
this Section 3.1. If, in the absence of such a protective order or waiver,
the Seller or a Stockholder or any of their Affiliates, on the advice of
counsel, is compelled to disclose any Confidential Information to any
Government Entity, the Seller and each Stockholder will use reasonable
efforts to ensure that such disclosure is limited to Confidential
Information which is so required to be disclosed and obtain an order or
other assurance that confidential treatment will be accorded to any
Confidential Information disclosed.
3.2 CONFIDENTIALITY OBLIGATIONS OF THE PURCHASER.
(a) Confidential Treatment. From the date of this Agreement
until the Closing, the Purchaser will (and will use reasonable best efforts
to cause each of its Affiliates to) treat and hold as confidential all
Confidential Information, refrain from using any Confidential Information
(other than in preparation for the transactions contemplated by this
Agreement), and, at the Seller's request after termination of this
Agreement pursuant to Section 11.1, deliver to the Seller or destroy all
tangible embodiments (and all copies) of any Confidential Information, and
any materials containing Confidential Information, which are in the
Purchaser's or any such Affiliate's possession. This Section 3.2(a) will
not apply to any Confidential Information which is generally available to
the public (other than by reason of any disclosure by the Purchaser or any
Affiliate of the Purchaser which constitutes or is the result of a breach
of this Section 3.2(a) or any disclosure by such an Affiliate which would
constitute a breach of this Section 3.2(a) if such Affiliate were the
Purchaser) immediately prior to the time of disclosure.
(b) Forced Disclosure. If the Purchaser or any Affiliate of
the Purchaser is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any
Confidential Information prior to the Closing, the Purchaser will notify
the Seller promptly of such
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request or requirement so that the Seller may seek an appropriate
protective order or waive compliance with the provisions of this Section
3.2. If, in the absence of such a protective order or waiver, the
Purchaser or any Affiliate of the Purchaser, on the advice of counsel, is
compelled to disclose any Confidential Information to any Government
Entity, the Purchaser will use reasonable efforts to ensure that such
disclosure is limited to Confidential Information which is so required to
be disclosed and obtain an order or other assurance that confidential
treatment will be accorded to any Confidential Information disclosed.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As a material inducement to the Seller and the Stockholders to enter
into this Agreement, the Purchaser hereby represents and warrants that:
4.1 ORGANIZATION OF THE PURCHASER. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Purchaser has the requisite corporate power and
authority and all licenses, permits and authorizations necessary to enter
into, deliver and carry out its obligations pursuant to the Transaction
Documents.
4.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. The Purchaser's
execution, delivery and performance of each Transaction Document to which
the Purchaser is a party has been duly authorized by the Purchaser. Each
Transaction Document to which the Purchaser is a party constitutes a valid
and binding obligation of the Purchaser which is enforceable in accordance
with its terms, except as such enforceability may be limited by (a)
applicable insolvency, bankruptcy, reorganization, moratorium or other
similar laws affecting creditors' rights generally and (b) applicable
equitable principles (whether considered in a proceeding at law or in
equity). The execution, delivery and performance by the Purchaser of the
Transaction Documents to which the Purchaser is a party do not and will
not:
(i) conflict with or result in a breach of the terms, conditions or
provisions of,
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(ii) constitute a default under,
(iii) result in a violation of, or
(iv) require any authorization, consent, approval, exemption or other
action by or declaration or notice to any Government Entity pursuant
to,
the charter or bylaws of the Purchaser or any agreement, instrument, or
other document, or any Legal Requirement, to which the Purchaser or any of
its assets is subject.
4.3 BROKERAGE. There is no claim for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by the Transaction Documents based on any arrangement or
agreement which is binding upon the Purchaser.
4.4 DISCLOSURE. Neither this Article 4 nor any certificate or
other item delivered to the Seller by or on behalf of the Purchaser with
respect to the transactions contemplated by the Transaction Documents
contains any untrue statement of a material fact or omits a material fact
which is necessary to make any statement contained herein or therein not
misleading.
4.5 ACCURACY ON CLOSING DATE. Each representation and warranty
set forth in this Article 4 and all information contained in any
certificate delivered by or on behalf of the Purchaser pursuant to this
Agreement will be true and correct as of the time of the Closing as though
then made, except (a) as affected by the transactions expressly
contemplated by the Transaction Documents and (b) to the extent that such
representation or warranty by its terms expressly relates solely to an
earlier date. The Purchaser has no Knowledge of any breach of any
representation or warranty of the Seller or the Stockholders set forth in
Article 5.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND THE STOCKHOLDERS
As a material inducement to the Purchaser to enter into this Agreement, the
Seller and the Stockholders hereby represent and warrant that:
5.1 ORGANIZATION AND CORPORATE POWER. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Michigan and is duly qualified to do Business in each jurisdiction in which its
ownership of property or conduct of Business requires it to so qualify, except
to the extent that the failure of the Seller to be so qualified could not
reasonably be expected to have a materially adverse effect on the Sale, the
Purchased Assets, the Assumption, the Assumed Liabilities or the financial
condition, operating results, assets, business prospects or employee, customer
or supplier relations of the Business, or the ability of the Seller or either
Stockholder to perform its obligations under any Transaction Document (an
"Adverse Effect"). The Organization Schedule attached hereto lists every
jurisdiction where the Seller is duly qualified to do business. The Seller has
the requisite corporate power necessary to own and operate its properties, carry
on the Business and enter into, deliver and carry out the transactions
contemplated by the Transaction Documents. Each of the Stockholders has the
requisite power and capacity to enter into, deliver and carry out the
transactions contemplated by the Transaction Documents.
5.2 AUTHORIZATION; BINDING EFFECT; NO BREACH. The Seller's execution,
delivery and performance of each Transaction Document to which the Seller is a
party has been duly authorized by the Seller. Each Transaction Document to
which the Seller or any Stockholder is a party constitutes a valid and binding
obligation of such Person which is enforceable in accordance with its terms,
except as such enforceability may be limited by (a) applicable insolvency,
bankruptcy, reorganization, moratorium or other similar laws affecting
creditors' rights generally and (b) applicable equitable principles (whether
considered in a proceeding at law or in equity). Except as set forth on the
attached Consents Schedule, the execution, delivery and performance of the
Transaction
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Documents to which the Seller or any Stockholder is a party do not and will
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 upon any of the Purchased
Assets or any other asset or property of such Person under,
(iv) give any third party the right to modify, terminate or accelerate
any Assumed Liability or other liability or obligation of such person
under,
(v) result in a violation of, or
(vi) require any authorization, consent, approval, exemption or other
action by or declaration or notice to any Government Entity pursuant
to,
the charter or bylaws of the Seller or any agreement, instrument or other
document, or any Legal Requirement, to which the Seller, any Stockholder or
any of the Seller's or such Stockholder's assets is subject. Without
limiting the generality of the foregoing, neither the Seller, the
Stockholders nor any of their Affiliates has entered into any agreement, or
is bound by any obligation of any kind whatsoever, directly or indirectly,
to transfer or dispose of (whether by sale of stock or assets, assignment,
merger, consolidation or otherwise) the Business or the Purchased Assets,
or any substantial portion thereof (other than the sale of Seller's
products in the ordinary course of the Business), to any Person other than
the Purchaser, and none of the Seller, the Stockholders and any of their
Affiliates has entered into any agreement, nor is any such Person bound by
any obligation of any kind whatsoever, to issue any capital stock of the
Seller to any Person.
5.3 OUTSTANDING STOCK OF THE SELLER. All of the issued and
outstanding shares of the Seller have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held of record and
beneficially by the Stockholders in the amounts set forth in Exhibit A.
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5.4 SUBSIDIARIES; INVESTMENTS. The Seller does not own or hold,
or own or hold any rights to acquire, any capital stock or any other
security, interest or Investment in any other Person other than investments
which constitute cash or cash equivalents. Except as set forth on the
attached Subsidiaries Schedule, the Seller has not had a Subsidiary during
the last five (5) years. The Seller has acquired (by merger or purchase)
all of the assets and properties of Laser Maintenance, Inc. and Diversitec
Image Technology, Inc., which were Affiliates of the Seller.
5.5 FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) Financial Statements. Attached to this Agreement as
Exhibit B are: (i) the audited balance sheets of the Seller as of December
31, 1991, December 31, 1992 and December 31, 1993, and the audited related
statements of income and cash flows for the respective 12-month periods
then ended, and (ii) the unaudited balance sheet of the Seller as of
November 30, 1994 (the "Latest Balance Sheet") and the related unaudited
statements of income and cash flows for the fiscal year then ended
(collectively, the "Financial Statements"). Except as set forth on the
attached Financial Disclosure Schedule, each of the Financial Statements
(including in all cases the notes thereto, if any) presents fairly in all
material respects the financial condition and results of operations of the
Seller, is consistent with the books and records of the Seller (which, in
turn, are accurate and complete in all material respects) and has been
prepared in accordance with GAAP, consistently applied.
(b) Receivables. The notes and accounts receivable which
are part of the Purchased Assets will be valid receivables, will be current
assets, and will be subject to no valid counterclaims or setoffs, and will
be collectible in full within 270 days after the Closing at the aggregate
amount recorded on the Seller's books and records as of the Closing, net of
an amount of allowances for doubtful accounts which relate to those
receivables computed in a manner consistent with GAAP and the accounting
practices used in the preparation of the Latest Balance Sheet.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on
the attached Liabilities Schedule, as of the Closing Date, the Seller will
not have any liability (whether accrued, absolute, con-
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tingent, unliquidated or otherwise, whether or not known to the Seller,
whether due or to become due, and regardless of when asserted) other than:
(a) the liabilities set forth on the Latest Balance Sheet (including the
notes thereto), (b) current liabilities which have arisen after the date of
the Latest Balance Sheet in the ordinary course of the Business and
consistent with the Seller's past practice (none of which is a liability
resulting from breach of contract, breach of warranty, tort, infringement,
claim or lawsuit), (c) other liabilities and obligations expressly
disclosed in the other Schedules to this Agreement, and (iv) other
liabilities which have arisen in the ordinary course of business and do not
exceed $100,000 in the aggregate.
5.7 PURCHASED ASSETS. Except as set forth on the attached Assets
Schedule:
(a) the Purchased Assets constitute all of the assets and rights
(other than the Excluded Assets) which are necessary for the conduct of the
Business as currently conducted;
(b) the Seller has good and marketable title to, or (as
indicated on the attached Assets Schedule) a valid leasehold interest in,
all properties and assets used by it, located on its premises, or shown on
the Latest Balance Sheet or acquired by it since the date of the Latest
Balance Sheet, in each case free and clear of all Liens, other than (i)
properties and assets disposed of in the ordinary course of the Business
and consistent with its past practice since the date of the Latest Balance
Sheet, (ii) Liens granted in favor of Comerica Bank, N.A. which will be
released contemporaneously with the Closing, (iii) any Lien granted to
Comerica Bank, N.A., pursuant to a Comerica Lease on property leased by the
Seller (as lessee) pursuant to such Comerica Lease, and (iv) Liens
disclosed on the Latest Balance Sheet (including any notes thereto); and
(c) to the best of the Seller's and each Stockholder's Knowledge,
the Seller's equipment and other tangible assets are in normal working
order and repair and fit for use in the ordinary course of the Business,
subject only to the provision of usual and customary maintenance provided
in the ordinary course of the Business with respect to equipment and
tangible assets of like age and construction.
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<PAGE> 23
5.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as set forth on the
attached Developments Schedule, since the date of the Latest Balance Sheet,
there has been no event or occurrence which has had, or which could be expected
to have, an Adverse Effect. Without limiting the generality of the preceding
sentence, since the date of the Latest Balance Sheet, the Seller has conducted
the Business in, and the Seller has not taken any action with respect to the
Business other than in, the ordinary course, on an arm's-length basis and in
accordance in all material respects with all Legal Requirements and the
Seller's past custom and practice. Without limiting the generality of the
preceding sentences, except as expressly contemplated by this Agreement or as
set forth on the attached Developments Schedule, since the date of the Latest
Balance Sheet, the Seller has not:
(a) engaged in any activity which has resulted in (i) any
acceleration or delay of the collection of its accounts or notes receivable,
(ii) any acceleration or delay in the payment in its accounts payable or (iii)
any increase or decrease in its purchases of products or services, in each case
as compared with its custom and practice in the conduct of the Business
immediately prior to the date of the Latest Balance Sheet;
(b) discharged or satisfied any Lien or paid any
obligation or liability which would not constitute an Assumed Liability if it
were unpaid on the Closing Date, other than current liabilities paid in the
ordinary course of the Business and consistent with the Seller's past practice;
(c) mortgaged or pledged any Purchased Asset or subjected
any Purchased Asset to any Lien;
(d) sold, assigned, conveyed, transferred, permitted to
lapse, canceled or waived any property, tangible asset, Proprietary Right or
other intangible asset or right which, if it were held by the Seller on the
Closing Date, would constitute a Purchased Asset, other in the ordinary course
of the Business and consistent with the Seller's past practice;
(e) disclosed any Confidential Information to any Person
other than the Purchaser and the Purchaser's representatives, agents,
attorneys, accountants and present and proposed financing sources;
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(f) waived any right other than in the ordinary course of
the Business or consistent with the Seller's past practice;
(g) made commitments for capital expenditures which, in the
aggregate, would exceed $25,000;
(h) made any loan or advance to, or guarantee for the
benefit of, or any Investment in, any other Person;
(i) granted any bonus or any increase in wages, salary or
other compensation to any employee, other than any increase in wages or
salaries granted to an employee other than the Stockholders in the ordinary
course of the Business and consistent with the Seller's past practice
granted to any employee;
(j) made any charitable contributions in excess of $10,000
in the aggregate;
(k) suffered damages, destruction or casualty losses which,
in the aggregate, exceed $10,000 (whether or not covered by insurance) to
any Purchased Asset or any other property or asset which, if it existed and
was held by the Seller on the Closing Date, would constitute a Purchased
Asset;
(l) received any indication from any material supplier of
the Seller to the effect that such supplier will stop, or materially
decrease the rate of, supplying materials, products or services to the
Seller (or to the Purchaser, if the Sale is consummated), or received any
indication from any material customer of the Seller to the effect that such
customer will stop, or materially decrease the rate of, buying materials,
products or services from the Seller (or from the Purchaser, if the Sale is
consummated);
(m) engaged in any activity which would accelerate or delay
the collection of its accounts or notes receivable, accelerate or delay the
payment of its accounts payable, other than in the ordinary course of the
conduct of the Business,
(n) entered into any transaction other than in the ordinary
course of the Business and consistent with the Seller's past practice, or
entered into any other material transaction, whether
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or not in the ordinary course of the Business, which could be expected to
have an Adverse Effect; or
(o) agreed to do any act described in any of clauses 5.8(a)
through (n).
5.9 TAX MATTERS. Except as set forth in the attached Taxes
Schedule:
(a) the Seller has filed all Tax Returns and other reports
which it was required to file and each such return or other report was
correct and complete in all respects, and the Seller has paid all Taxes due
and owing by it (whether or not shown on any Tax Return or other report)
and has withheld and paid over all Taxes which it is obligated to withhold
from amounts paid or owing to any employee, independent contractor,
stockholder, creditor or other third party;
(b) the Seller has not been a member of an affiliated group
other than one in which the Seller was the common parent, or filed or been
included in a combined, consolidated or unitary Tax Return, other than one
filed by the Seller;
(c) no Tax audits are pending or being conducted with
respect to the Seller;
(d) there are no Liens on any of the assets of the Seller
that arose in connection with any failure (or alleged failure) to pay any
Tax;
(e) no information related to Tax matters has been requested
by any Taxing authority and the Seller has not received notice indicating
an intent to open an audit or other review from any Taxing authority;
(f) there are no unresolved disputes or claims concerning
the Seller's Tax liability;
(g) no claim has ever been made by any jurisdiction in which
the Seller does not file Tax Returns to the effect that the Seller is or
may be subject to any Tax imposed by that jurisdiction;
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(h) a valid election to be an S Corporation (as defined in
Code Section 1361(d) and the corresponding provision of Michigan state
law) has been in effect with respect to the Seller at all times since its
incorporation;
(i) the Seller is not a party to any agreement that could
obligate it to make any payments that would not be deductible pursuant to
Code Section 280G;
(j) the Seller will not be required (i) as a result of a
change in method of accounting for a taxable period ending on or prior to
the Closing Date, to include any adjustment in taxable income for any
taxable period (or portion thereof) ending after the Closing Date or (ii)
as a result of any "closing agreement," as described in Section 7121 of the
Code (or any corresponding provision of state or local income Tax law), to
include any item of income in, or exclude any item of deduction from,
Taxable income for any Taxable period (or portion thereof) ending after the
Closing Date;
(k) the Seller has made adequate provision for Taxes payable
by it for the current period and any previous period for which Tax Returns
are not yet required to be filed by it;
(l) there are no actions, suits, proceedings, investigations
or claims pending or, to the best of the Seller's and each Stockholder's
Knowledge, threatened against, the Seller in respect of Taxes, governmental
charges or assessments, nor are any material matters under discussion with
any Government Entity relating to Taxes, governmental charges or
assessments asserted by such Government Entity;
(m) the Seller has not made an election pursuant to Code
Section 341(f);
(n) the Seller has not waived any statute of limitations in
respect of Taxes or agreed to an extension of time with respect to any Tax
assessment or deficiency; and
(o) the Seller is not a party to any Tax sharing or
allocation agreement, and Seller does not have any liability for the Taxes
of any Person under Section 1.1502-6 of the Treasury
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<PAGE> 27
Regulations (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract, or otherwise.
5.10 CONTRACTS AND COMMITMENTS.
(a) Contracts Schedule. Other than this Agreement or as
described on the attached Contracts Schedule, the Seller is not a party to
any written or oral:
(i) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit, welfare or stock
plan or arrangement which is not described on the attached Employee
Benefits Schedule, or any contract with any labor union, or any severance
agreement;
(ii) contract for the employment or engagement as an
independent contractor of any Person on a full-time, part-time, consulting
or other basis other than any oral agreement for the employment of any
individual at the will of the Seller;
(iii) contract pursuant to which the Seller has advanced or
loaned funds, or agreed to advance or loan funds, to or made any other
Investment in any other Person;
(iv) contract or indenture relating to any Indebtedness or the
mortgaging, pledging or otherwise placing a Lien on any of the Purchased
Assets;
(v) contract pursuant to which the Seller is the lessee of, or
holds or operates, any real or personal property owned by any other Person;
(vi) contract pursuant to which the Seller is the lessor of,
or permits any third party to hold or operate, any real or personal
property owned by the Seller or of which the Seller is a lessee;
(vii) assignment, license, indemnification or other contract
with respect to any intangible property (including any Proprietary Right);
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(viii) contract or agreement with respect to services rendered
or goods sold or leased to or from others, other than any customer purchase
order accepted in the ordinary course of the Business and in accordance
with the Seller's past practice which both (A) does not require delivery or
performance after the date which is six months after the Closing Date and
(B) does not involve a sale price of more than $25,000;
(ix) contract prohibiting it from freely engaging in any
business anywhere in the world;
(x) independent sales representative or distributorship
agreement with respect to the Business; or
(xi) any other contract which is material to the Business or
involves a consideration in excess of $25,000.
(b) Enforceability. To the best of the Seller's and each
Stockholder's Knowledge, except as set forth on the attached Consents Schedule,
each item described on the attached Contracts Schedule (the "Contracts") is
valid, binding and enforceable in accordance with its terms, except as such
enforceability may be limited by (i) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and (ii) applicable equitable principles (whether considered in a
proceeding at law or in equity).
(c) Compliance. To the best of the Seller's and each
Stockholder's Knowledge, the Seller has performed all obligations required to be
performed by it under each Contract, and, to the best of the Seller's and each
Stockholder's Knowledge, the Seller is not in default under or in breach in any
material respect of (nor is it in receipt of any claim of default or breach
under) any such obligation. To the best of the Seller's and each Stockholder's
Knowledge, no event has occurred which with the passage of time or the giving of
notice (or both) would result in a default, breach or event of noncompliance in
any material respect under any obligation of the Seller pursuant to any
Contract. The Seller has no present expectation or intention of not fully
performing any obligation of the Seller pursuant to any Contract, and neither
the Seller nor any of the Stockholders has Knowledge of any breach or
anticipated breach by any other party to any Contract.
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(d) Leases. With respect to each Contract which is a lease
of personal property, except as set forth on the attached Consents Schedule, the
Seller holds a valid and existing leasehold interest under such lease for the
term set forth with respect to such lease on the attached Contracts Schedule.
(e) Affiliated Transactions. Except as set forth on the
attached Affiliated Transactions Schedule, no officer, director, stockholder or
Affiliate of the Seller (and no individual related by blood or marriage to any
such Person, and no entity in which any such Person or individual owns any
beneficial interest) is a party to any agreement, contract, commitment or
transaction with the Seller (other than this Agreement) or has any material
interest in any material property used by the Seller.
(f) Copies. The Purchaser's legal counsel has been supplied
with a true and correct copy of each written Contract and a correct and complete
written summary of the material terms and conditions of each oral Contract, each
as currently in effect.
5.11 PROPRIETARY RIGHTS.
(a) Schedule. The attached Proprietary Rights Schedule
contains a complete and accurate list of (i) all patented or registered
Proprietary Rights owned by the Seller or used in connection with the Business,
(ii) all pending patent applications and applications for registrations of other
Proprietary Rights filed by or on behalf of the Seller, (iii) all trade names,
corporate names and unregistered trade names, trademarks and service marks owned
by the Seller or used in connection with the Business, and (iv) all unregistered
copyrights and computer software, in each case, the loss or absence of which
could be expected to have an Adverse Effect. The attached Proprietary Rights
Schedule also contains a complete and accurate list of all licenses and other
rights granted by the Seller to any third party, and all licenses and other
rights granted by any third party to the Seller, with respect to any Proprietary
Rights.
(b) Ownership; Claims. Except as set forth on the attached
Proprietary Rights Schedule, the Seller owns and possesses all right, title and
interest in and to (or, as indicated on such Schedule, has the right to use
pursuant to a valid and enforceable license) all Proprietary Rights necessary or
desirable for the
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operation of the Business as presently conducted and as presently proposed to
be conducted (the "Business Proprietary Rights"), in each case free and clear
of all Liens, and the Seller has taken all necessary actions to maintain and
protect the Proprietary Rights which it owns and uses. To the best of the
Seller's and each Stockholder's Knowledge, the owners of the Proprietary Rights
licensed to the Seller have taken all necessary actions to maintain and protect
the Proprietary Rights which are subject to such licenses. Except as indicated
on the attached Proprietary Rights Schedule:
(i) there have been no claims made against the Seller
asserting the invalidity, misuse or unenforceability of any Business
Proprietary Right, or claims challenging the Seller's ownership of, right
to maintain any registration of or right to use any Business Proprietary
Right, and, to the best of the Seller's and each Stockholder's Knowledge,
there are no grounds for any such claim,
(ii) the Seller has not received any notice of (nor is it
aware of any facts which indicate a likelihood of) any infringement or
misappropriation by, or conflict with, any Person with respect to any
Business Proprietary Right (including any demand or request that the Seller
license rights from any Person),
(iii) the conduct of the Business has not infringed or
misappropriated, and does not infringe or misappropriate, any Proprietary
Right of any other Person, nor would the Purchaser's conduct of the
Business as presently conducted or as proposed to be conducted infringe or
misappropriate any Proprietary Right of any other Person,
(iv) to the best of the Seller's and each Stockholder's
Knowledge, the Business Proprietary Rights have not been infringed or
misappropriated by any other Person, and
(v) the consummation of the transactions contemplated by this
Agreement will have no adverse effect on any Business Proprietary Right.
5.12 CERTAIN LITIGATION. Except as set forth on the attached Litigation
Schedule, there is no action, suit, proceeding, order,
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investigation or claim pending (or, to the best of the Seller's and each
Stockholder's Knowledge, threatened) against or affecting the Seller or the
Business (or to the best of the Seller's and each Stockholder's Knowledge,
pending or threatened against or affecting any officer, director or employee of
the Seller with respect to the Business), at law or in equity, or before or by
any Government Entity (a) with respect to the transactions contemplated by the
Transaction Documents, or (b) concerning the design, manufacture, rendering or
sale by the Seller of any product or service in the course of the Business or
otherwise concerning the conduct of the Business, and, to the best of the
Seller's and each Stockholder's Knowledge, there is no basis for any of the
foregoing.
5.13 BROKERAGE. Except as set forth on the attached Brokerage
Schedule, there is no claim for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by the
Transaction Documents based on any arrangement or agreement which may be
binding upon the Seller or to which the Seller or any of the Purchased Assets
may be subject.
5.14 INSURANCE. The attached Insurance Schedule contains a
description of each insurance policy maintained by the Seller with respect to
its properties, assets or Business, and each such policy is in full force and
effect. The Seller is not in default of any obligation pursuant to any
insurance policy maintained by it.
5.15 EMPLOYEES.
(a) Continued Employment. To the best of the Seller's and
each Stockholder's Knowledge, no executive or key employee of the Seller or any
group of employees of the Seller has any plans to terminate employment with the
Seller.
(b) Compliance and Restrictions. The Seller has complied
with all laws relating to the employment of labor, including provisions of such
laws relating to wages, hours, equal opportunity, collective bargaining and the
payment of social security and other taxes, and, to the best of the Seller's and
each Stockholder's Knowledge, the Seller has no material labor relations
problems (including any union organization activities, threatened or actual
strikes or work stoppages or material grievances). Neither the Seller nor any
of its employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting
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or similar agreements relating to, affecting, or in conflict with, the
Business activities as presently conducted or as proposed to be conducted.
5.16 EMPLOYEE BENEFITS.
(a) The attached Employee Benefits Schedule lists all Plans
(as defined below) with respect to which the Seller has or is reasonably
expected to have any liability or potential liability (whether or not any
such plan has terminated or whether or not any such plan is or was
maintained for current or former employees of the Seller or current or
former employees of any current or former member of the controlled group of
companies (within the meaning of Section 414 of the Code of which the
Seller is or ever was a member) (the "Company Plans"). The term "Plans"
means any (i) employee benefit plan (as defined in Section 3(3) of ERISA),
(ii) employment agreement, and (iii) fringe benefit plan, program, policy
or arrangement, whether or not subject to ERISA and whether or not funded.
(b) Except as set forth on the attached Employee Benefits
Schedule, the Company does not have any liability or potential liability
with respect to (i) any multiemployer plan (as defined in Section 3(37) of
ERISA), (ii) any plan of the type described in Sections 4063 and 4064 of
ERISA or in Section 413(c) of the Code, (iii) any plan which provides
health, life insurance, accident or other "welfare-type" benefits with
respect to current or future retirees or current or future former employees
of the Seller, other than in accordance with Section 4980B of the Code or
applicable state continuation coverage law, (iv) any plan subject to Title
IV of ERISA or to the minimum funding requirements of Section 412 of the
Code or Section 302 of ERISA or (v) any plan that obligates the Seller to
pay separation, severance, termination or similar-type benefits solely as a
result of any transaction contemplated by this Agreement or solely as a
result of a "change in control," as such term is described in Section 280G
of the Code.
(c) Except as set forth on the attached Employee Benefits
Schedule, (i) each Company Plan, and all related trusts, insurance
contracts and funds, has been maintained, administered and funded in
accordance with its terms in all respects and is in compliance in all
respects with all applicable laws and Company regulations; (ii) no
transaction with respect to any of the Plans
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has occurred which could subject the Seller or any other individual or
business entity to a penalty under any law or regulation; (iii) no
non-routine actions, suits, claims, complaints, or investigations with
respect to the Company Plans are pending or threatened; (iv) with respect
to each Company Plan, all required or recommended payments, premiums,
contributions, reimbursements or accruals for all periods ending prior to
or as of the Closing Date shall have been made or properly accrued; and (v)
no Company Plan has any material unfunded liabilities.
(d) Except as set forth on the attached Employee Benefits
Schedule, each Company Plan that is intended to be qualified under Section
401(a) of the Code has received a favorable determination letter from the
Internal Revenue Service as to its qualification under the Code and nothing
has occurred that could adversely affect the qualification of such Company
Plan.
(e) Except as set forth on the attached Employee Benefits
Schedule, no underfunded defined benefit plan (as defined in Section 3(35)
of ERISA) has been, during the five years preceding the Closing Date,
transferred out of the controlled group of companies (within the meaning of
Code Section 414) of which the Company is or was a member during such
five-year period.
(f) Except as set forth on the attached Employee Benefits
Schedule, with respect to each Company Plan, the Seller has provided
Purchasers with true, complete and correct copies, to the extent
applicable, of (i) all documents pursuant to which the Plans are
maintained, funded and administered, (ii) the two most recent annual
reports (Form 5500 series) filed with the Internal Revenue Service (with
attachments), (iii) the two most recent actuarial reports, (iv) the two
most recent financial statements, (v) all governmental rulings,
determinations, and opinions (and pending requests for governmental
rulings, determinations, and opinions), and (vi) the most recent valuation
(but in any case at least one that has been completed within the last
calendar year) of the present and future obligations under each Company
Plan that provides post-retirement or post-employment health, life
insurance, accident or other "welfare-type" benefits.
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5.17 REAL ESTATE.
(a) Owned Properties. The Seller does not own, and has
never owned, any Real Property.
(b) Leased Property. The attached Real Estate Schedule lists
and describes briefly all real property leased or subleased to the Seller
and all other real property which is used in the Business and not owned by
the Seller (the "Leased Real Property"). The Seller has delivered to the
Purchaser's special legal counsel correct and complete copies of the leases
and subleases listed on the Real Estate Schedule (collectively, the
"Leases"). With respect to the Livonia Lease and the Livonia Property and,
to the best of the Seller's and each Stockholder's Knowledge, with respect
to each other Lease and Leased Real Property:
(i) such Lease is legal, valid, binding, enforceable, and
in full force and effect;
(ii) such Lease is fully assignable to the Purchaser and
will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
Sale and the Assumption and the commencement of the operation of the
Business by the Purchaser;
(iii) no party to such Lease is in breach or default, and
no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration of such lease or sublease;
(iv) no party to such Lease has repudiated any provision
thereof;
(v) there are no disputes, oral agreements, or
forbearance programs in effect as to such Lease;
(vi) in the case of each Lease which is a sublease, the
representations and warranties set forth in clauses 5.17(b)(i) through
(v) are true and correct with respect to the underlying lease;
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(vii) the Seller has not assigned, transferred, conveyed,
mortgaged, deeded in trust, or encumbered any interest in the leasehold or
subleasehold created pursuant to such Lease;
(viii) none of the Leases has been modified in any respect,
except to the extent that such modifications are in writing and have been
delivered or made available to the Purchaser;
(ix) all buildings, improvements and other structures located
upon the Leased Real Property have received all approvals of governmental
authorities, including licenses and permits, required in connection with
the operation of the Business thereon and have been operated and maintained
in accordance with all applicable Legal Requirements and the terms and
conditions of the Leases; and
(x) all buildings, structures and other improvements located
upon the Leased Real Property, including, without limitation, all
components thereof, are, to the best of the Seller's and each Stockholder's
Knowledge, in normal working order and repair, subject to the provision of
usual and customary maintenance in the ordinary course of business with
respect to buildings, structures and improvements of like age and
construction and all water, gas, electrical, steam, compressed air,
telecommunications, sanitary and storm sewage and other utility lines and
systems serving the Leased Real Property are sufficient to enable the
continued operation of the Leased Real Property in the manner currently
being used in connection with the operation of the Business.
5.18 COMPLIANCE WITH LAWS.
(a) Generally. Except as set forth on the attached Compliance
Schedule, the Seller has not violated any Legal Requirement the violation of
which could be expected to have an Adverse Effect, and the Seller has not
received notice alleging any such violation.
(b) Required Permits. The Seller has complied with (and is in
compliance with) all permits, licenses and other authorizations required for the
occupation of the Seller's
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facilities and the operation of the Business. The items described on the
attached Permits Schedule constitute all of the permits, filings, notices,
licenses, consents, authorizations, accreditations, waivers, approvals and
the like of, to or with any Government Entity which are required for the
consummation of the Sale, the Assumption or any other transaction
contemplated by the Transaction Documents or the ownership of the Purchased
Assets or the Purchaser's conduct of the Business (as it is presently
conducted by the Seller) thereafter.
(c) Environmental and Safety Matters. Without limiting the
generality of Section 5.18(a) and (b), except as set forth on the attached
Environmental Matters Schedule, the Seller and all Environmental Affiliates
have complied (and are in compliance, in all respects) with all applicable
Environmental and Safety Requirements, and neither the Seller nor any
Environmental Affiliate has received any notice, report or information
regarding any liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise), or any corrective, investigatory or remedial
obligations, arising under any Environmental and Safety Requirement.
Without limiting the generality of the preceding sentence:
(i) no underground storage tank, asbestos-containing
material in any form or condition, or PCB-containing materials or
equipment, exists at any property owned or occupied by the Seller or
any Environmental Affiliate;
(ii) the transactions contemplated to be consummated
pursuant to the Transaction Documents will not result in the
imposition of any obligations under Environmental and Safety
Requirements for site investigation, cleanup or notification to or
consent of any government agency or third party;
(iii) no equipment, facts, events, conditions, conduct or
methods relating to the past or present facilities, properties or
operations of the Seller or any Environmental Affiliate will prevent,
hinder or limit continued compliance with any Environmental and Safety
Requirement, give rise to or result in any corrective, investigatory
or remedial obligation pursuant to Environmental and Safety
Requirements, or give rise to or result in any other liability
(including any
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liability relating to onsite or offsite hazardous or non-hazardous
substance releases, personal injury, cleanup, remediation, property
damage or natural resources damage) pursuant to any Environmental and
Safety Requirement; and
(iv) no Environmental Lien has attached to any property of the
Seller or any Environmental Affiliate.
5.19 PRODUCT AND SERVICE WARRANTY. Except as set forth on the
attached Warranties Schedule, all services provided by the Seller in
connection with the Business, and products manufactured, serviced,
distributed, sold or delivered by the Seller in connection with the
Business, have been rendered, manufactured, serviced, distributed, sold
and/or delivered in conformity with all applicable contractual commitments
and all express and implied warranties. No material liability of the Seller
exists for replacement or other damages in connection with any such service
or product except as is presently covered by applicable insurance, which
insurance will remain in effect through the Closing Date.
5.20 DISCLOSURE. Neither this Article 5 nor any schedule,
attachment, written statement, document, certificate or other item supplied
to the Purchaser by or on behalf of the Seller or any Stockholder with
respect to the transactions contemplated by the Transaction Documents
contains any untrue statement of a material fact or omits a material fact
necessary to make each statement contained herein or therein not
misleading; provided that, neither the Seller nor any Stockholder makes any
representation or warranty herein concerning the accuracy or correctness of
certain financial projections of the Business which employees of the Seller
may have previously supplied to the Purchaser. There is no fact which the
Seller has not disclosed to the Purchaser in writing and of which any
Stockholder or any officer, director or executive employee of the Seller
has Knowledge (other than matters of a general economic nature) and which
has had or could reasonably be expected to have an Adverse Effect.
5.21 ACCURACY ON CLOSING DATE. Each representation and warranty
set forth in this Article 5 and all information contained in any exhibit,
schedule or attachment to this Agreement or in any certificate or other
writing delivered by, or on behalf of, the Seller to the Purchaser will be
true and correct as of the time of the Closing as though then made, except
(a) as affected by the
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transactions expressly contemplated by the Transaction Documents, and (b) to the
extent that such representation or warranty by its terms expressly relates
solely to an earlier date. Neither the Seller nor any Stockholder has Knowledge
of any breach of any representation or warranty of the Purchaser set forth in
Article 4.
ARTICLE 6
ACCESS TO RECORDS
To the extent reasonably required for any bona fide business purpose, each
Party will allow, and will use its best efforts to cause its Affiliates to
allow, the other Party (and the other Party's agents, representatives and
Affiliates) access to all business records and files concerning the Business,
the Purchased Assets or the Assumed Liabilities which relate to the period prior
to the Closing Date and will permit such Persons to make copies of the same.
Such access will be granted upon reasonable advance notice, during normal
business hours, and in such a manner so as not to interfere unreasonably with
the operations of the Person affording such access. Without limiting the
generality of the foregoing, if either Party or any of its Affiliates actively
is contesting or defending against any charge, complaint, action, suit,
proceeding, hearing, investigation, claim, or demand in connection with (a) any
transaction contemplated by the Transaction Documents, or (b) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing relating to the Business, then the other Party will cooperate,
and use its best efforts to cause its Affiliates to cooperate, with the
contesting or defending Person and its counsel in such contest or defense, make
available such other Party's and its Affiliates' personnel and provide such
testimony and access to books and records as are reasonably requested in
connection with such contest or defense, all at the contesting or defending
Person's expense (unless the contesting or defending Person is entitled to
indemnification therefor pursuant to Section 7.2 or 7.3). No provision of this
Article 6 will be construed so as to limit the Seller's obligation to transfer
to the Purchaser all Books and Records as part of the Purchased Assets.
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ARTICLE 7
SURVIVAL AND INDEMNIFICATION
7.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Survival Term. All representations and warranties
contained herein or made in writing by any Party in connection herewith
will survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (regardless of any
investigation made by any Party or on its behalf) and will continue in full
force and effect for:
(i) the period prescribed by the applicable statute of
limitations with respect to the substantive matters addressed therein,
in the case of the representations and warranties in Sections 4.1,
4.2, 4.3, 4.4, 4.5, 5.1, 5.2, 5.9, 5.11(b), 5.13 and (insofar as it
relates to the representations and warranties set forth in the
foregoing Sections of Article 5) 5.21; and
(ii) May 31, 1996, in the case of all other
representations and warranties set forth in Article 5.
(b) No Waiver. Neither a Party's participation in the
consummation of any transaction pursuant to any Transaction Document nor
any waiver of any condition to such participation (including any condition
that a representation or warranty of any other Party be true and correct)
will constitute a waiver by such participating Party of any representation
or warranty of any Party or otherwise affect the survival of any such
representation or warranty.
7.2 INDEMNIFICATION OBLIGATIONS OF THE SELLER AND THE
STOCKHOLDERS.
(a) Specific Indemnifiable Losses. The Seller and the
Stockholders will indemnify the Purchaser and its Affiliates, stockholders,
officers, directors, employees, agents, representatives and permitted
successors and assigns (collectively, the "Purchaser Indemnitees") in
respect of, and save and hold each Purchaser Indemnitee harmless against
and pay on behalf of or reimburse each Purchaser Indemnitee as and when
incurred, any Loss
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which any Purchaser Indemnitee suffers, sustains or becomes subject to as a
result of, in connection with, relating or incidental to or by virtue of,
without duplication:
(i) (x) any item described in item (B) of the attached
Employee Benefits Schedule or (y) subject to the survival provisions
of Section 7.1, any misrepresentation or breach of any representation
or warranty by the Seller or any Stockholder set forth in this
Agreement or any Schedule, Exhibit, certificate or other instrument or
document furnished to the Purchaser by the Seller or any Stockholder
pursuant to any Transaction Document, provided that, neither the
Seller nor any Stockholder will have any liability under this Section
7.2(a)(i) with respect to any Loss unless a claim for indemnification
in respect of such Loss is asserted in a written notice given to such
Person prior to the expiration of the survival of the representation
or warranty in question (as specified in Section 7.1(a)) and unless
and until the aggregate of all Losses resulting under this Section
7.2(a)(i) exceeds $100,000, in which event the Seller and the
Stockholders will be liable for all Losses thereafter until the
aggregate of all such Losses exceeds $16,000,000, after which point
neither the Seller nor any Stockholder will be liable for any further
Losses resulting under this Section 7.2(a)(i); or
(ii) any liability or obligation of the Seller or any
Stockholder which is not an Assumed Liability.
For purpose of determining whether any Loss has occurred by virtue of any
misrepresentation or breach of representation or warranty regarding the
Latest Balance Sheet set forth in Section 5.5(a), all overstatements,
understatements and omissions with respect to the Seller's assets and
liabilities will be taken into account and only the resulting net Loss will
be subject to indemnification pursuant to this Section 7.2.
(b) Joint and Several Liability. Each Stockholder will be
jointly and severally liable to any Purchaser Indemnitee for any Loss
incurred by such Purchaser Indemnitee under Section 7.2(a); provided that,
as to any such Loss, no Designated Stockholder will be required to pay
more than the amount of such Loss multiplied by
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the percentage specified for such Designated Stockholder on the attached
Exhibit A.
7.3 INDEMNIFICATION OBLIGATIONS OF THE PURCHASER. The Purchaser
will indemnify the Seller and its Affiliates, stockholders, officers,
directors, employees, agents, representatives and permitted successors and
assigns (collectively, the "Seller Indemnitees") and hold each of them
harmless against any Loss which such Seller Indemnitee suffers, sustains or
becomes subject to as a result of, in connection with, relating to or by
virtue of, without duplication:
(a) any misrepresentation or breach of any representation or
warranty by the Purchaser set forth in this Agreement or any certificate
delivered to the Seller pursuant to any Transaction Document; or
(b) the Assumed Liabilities.
7.4 INDEMNIFICATION PROCEDURES.
(a) Notice of Claim. Any Person making a claim for
indemnification pursuant to Section 7.2 or 7.3 above (an "Indemnified
Party") must give the Party from whom indemnification is sought (an
"Indemnifying Party") written notice of such claim (an "Indemnification
Claim Notice") promptly after the Indemnified Party receives any written
notice of any action, lawsuit, proceeding, investigation or other claim (a
"Proceeding") against or involving the Indemnified Party by a Government
Entity or other third party or otherwise discovers the liability,
obligation or facts giving rise to such claim for indemnification; provided
that the failure to notify or delay in notifying an Indemnifying Party will
not relieve the Indemnifying Party of its obligations pursuant to Section
7.2 or 7.3, as applicable, except to the extent that such failure actually
harms the Indemnifying Party. Such notice must contain a description of
the claim and the nature and amount of such Loss (to the extent that the
nature and amount of such Loss is known at such time).
(b) Control of Defense: Conditions. With respect to the
defense of any Proceeding against or involving an Indemnified Party in
which a Government Entity or other third party in question seeks only the
recovery of a sum of money for which indemnification
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is provided in Section 7.2 or 7.3, at its option, an Indemnifying Party may
appoint as lead counsel of such defense any legal counsel selected by the
Indemnifying Party; provided that before the Indemnifying Party assumes
control of such defense it must first enter into an agreement with the
Indemnified Party (in form and substance satisfactory to the Indemnified
Party) pursuant to which the Indemnifying Party agrees to be fully
responsible (with no reservation of any rights other than the right to be
subrogated to the rights of the Indemnified Party) for all Losses relating
to such Proceeding and unconditionally guarantees the payment and
performance of any liability or obligation which may arise with respect to
such Proceeding or the facts giving rise to such claim for indemnification.
(c) Control of Defense: Exceptions and Related Matters.
Notwithstanding Section 7.4(b):
(i) the Indemnified Party will be entitled to participate
in the defense of such claim, subject to the Indemnifying Party's
right to control the conduct of such defense and settlement of the
related claim (subject to clause (c)(iii) below), and to employ
counsel of its choice for such purpose at its own expense (provided
that if the Indemnified Party gives the Indemnifying Party notice of
the commencement of the Proceeding in question not later than the
tenth business day after the Indemnified Party becomes aware of such
commencement, then the Indemnifying Party will bear the reasonable
fees and expenses of such separate counsel incurred prior to the date
upon which the Indemnifying Party effectively assumes control of such
defense);
(ii) the Indemnifying Party will not be entitled to
assume control of the defense of such claim, and will pay the
reasonable fees and expenses of legal counsel retained by the
Indemnified Party, if there exists an actual or potential conflict of
interest which, under applicable principles of legal ethics, could
prohibit a single legal counsel from representing both the Indemnified
Party and the Indemnifying Party in such Proceeding; and
(iii) the Indemnifying Party must obtain the prior
written consent of the Indemnified Party (which the Indemnified Party
will not unreasonably withhold) prior to (A)
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entering into any settlement of such claim or Proceeding which would
require the Indemnifying Person to pay any amount or take or refrain
from taking any other action, or (B) ceasing to defend such claim or
Proceeding.
Notwithstanding anything in this Section 7.4(c) to the contrary, in the
event that the Indemnifying Party is precluded from assuming control of the
defense of a claim pursuant to Section 7.4(c)(ii), the Indemnified Party
agrees to (i) provide the Indemnifying Party with all material information
requested by such party relating to the defense of such claim, (ii) confer
with the Indemnifying Party as to the most cost-effective manner in which
to defend such claim and (iii) use its reasonable best efforts to minimize
the cost of defending such claim.
7.5 TREATMENT OF INDEMNIFICATION PAYMENTS. Amounts paid to or on
behalf of the Purchaser or the Seller as indemnification hereunder will be
treated as adjustments to the Purchase Price. If any Tax authority asserts
that an indemnification payment is not an adjustment to the Purchase Price,
the Indemnifying Party will indemnify the Indemnified Party against any Tax
imposed on the receipt of such indemnification payment pursuant to Section
7.2 or 7.3, including any Tax imposed on any payment pursuant to this
Section 7.5.
7.6 ARBITRATION.
(a) Generally. The Purchaser (on behalf of all Purchaser
Indemnitees), and the Seller and the Stockholders (on behalf of all Seller
Indemnitees), agree that the arbitration procedures described in this
Section 7.6 will be the sole and exclusive method of resolving and
remedying disputes regarding claims for indemnification and other matters
arising under this Article 7 ("Disputes"); provided that nothing in this
Section 11.18 will prohibit a Person from instituting litigation to enforce
any Final Arbitration Award. Except as otherwise provided in the
Commercial Arbitration Rules of the American Arbitration Association as in
effect from time to time (the "AAA Rules"), the arbitration procedures
described in this Section 7.6 and any Final Arbitration Award will be
governed by, and will be enforceable pursuant to, the Uniform Arbitration
Act as in effect in the State of Michigan from time to time.
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(b) Notice of Arbitration. If the Purchaser, the Seller, a
Stockholder, a Purchaser Indemnitee or a Seller Indemnitee asserts that
there exists a Dispute, then such Person (the "Disputing Person") will give
each other party involved in such Dispute a written notice setting forth
the nature of the asserted Dispute. If such parties do not resolve any
such asserted Dispute prior to the tenth business day after such notice is
given, then the Disputing Person may commence arbitration pursuant to this
Section 7.6 by giving each other party involved in such Dispute a written
notice to that effect (an "Arbitration Notice"), setting forth any matters
which are required to be set forth therein in accordance with the AAA
Rules.
(c) Selection of Arbitrator. The Purchaser and the Seller
will attempt to select a single arbitrator by mutual agreement. If no such
arbitrator is selected prior to the twentieth business day after the
related Arbitration Notice is given, then an arbitrator which is
experienced in matters of the type which are the subject matter of the
Dispute will be selected in accordance with the AAA Rules.
(d) Conduct of Arbitration. The arbitration will be
conducted in Detroit, Michigan, under the AAA Rules, as modified by any
written agreement between the Purchaser and the Seller. The arbitrator
will conduct the arbitration in a manner so that the final result,
determination, finding, judgment or award determined by the arbitrator (the
"Final Arbitration Award") is made or rendered as soon as practicable, and
the parties will use reasonable efforts to cause a Final Arbitration Award
to occur not later than the sixtieth day after the arbitrator is selected.
Any Final Arbitration Award will be final and binding upon the Purchaser,
the Seller, the Stockholders and all other Purchaser Indemnitees and Seller
Indemnitees, and there will be no appeal from or reexamination of any Final
Arbitration Award, except in the case of fraud, perjury or evident
partiality or misconduct by the arbitrator prejudicing the rights of any
Person or to correct manifest clerical errors.
(e) Enforcement. A Final Arbitration Award may be enforced
in any state or federal court having jurisdiction over the subject matter
of the related Dispute.
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(f) Expenses. The party or parties which do not prevail in
any arbitration proceeding pursuant to this Section 7.6 will be responsible
for, and will indemnify and hold harmless the prevailing party or parties
against, the fees and expense of the arbitrator in connection with such
proceeding. The arbitrator will be responsible for determining which party
or parties are the prevailing and non-prevailing parties for purposes of
this Section 7.6(f); provided that (1) if an arbitrator is unable to
determine that one or more parties is/are the prevailing party or parties
in the arbitration proceeding in question, then such costs and expenses
will be equitably allocated by such arbitrator upon the basis of the
outcome of such arbitration proceeding, and (2) if such arbitrator is
unable to allocate such costs and expenses and expenses in such a manner,
then the costs and expenses of such arbitration will be paid one-half by
the Seller and the Stockholders, collectively, and one-half by the Buyer,
collectively. As part of any Final Arbitration Award, the arbitrator shall
specify the allocation of the fees and expenses of the arbitrator for
purposes of this Section 7.6(f).
ARTICLE 8
CLOSING DELIVERIES
8.1 DELIVERIES TO THE PURCHASER. At the Closing, the Seller will
deliver to the Purchaser the following items:
(a) an opinion of Seyburn, Kahn, Ginn, Bess, Deitch & Serlin,
P.C., legal counsel for the Seller, with respect to the matters set
forth in Exhibit C addressed to the Purchaser, which opinion will be
dated the Closing Date and will be in form satisfactory to the
Purchaser's legal counsel;
(b) an Officer's Certificate of the Seller dated the Closing
Date, stating that each representation and warranty set forth in
Article 5 is true and correct in all material respects at and as of
the Closing as though then made, except to the extent of any change
solely caused by the transactions expressly contemplated by the
Transaction Documents;
(c) a copy of the resolutions duly adopted by the Seller's
board of directors and stockholders authorizing the
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<PAGE> 46
Seller's execution, delivery and performance of the Transaction Documents
to which the Seller is a party and the consummation of the Sale and all
other transactions contemplated by the Transaction Documents, as in effect
as of the Closing, certified by an officer of the Seller;
(d) certificates (dated not less than five (5) business days prior
to the Closing) of the Secretary of State of the State of Michigan as to
the good standing of the Seller in the State of Michigan;
(e) the Books and Records;
(f) such a bill of sale, warranty deeds, warranty assignments of
leases and all other instruments of conveyance which in the Purchaser's
reasonable judgment are necessary or desirable to effect the Sale;
(g) a Business Employees Schedule consisting of all active
employees of the Seller and its Affiliates engaged in the conduct of the
Business on the Closing Date, including any such employee who on the
Closing Date is on a leave of absence which has been approved in accordance
with the Seller's past practice (collectively, the "Business Employees");
and
(h) such other documents relating to the transactions contemplated
by the Transaction Documents as the Purchaser reasonably requests.
8.2 CONDITIONS OF THE SELLER'S OBLIGATION. At the Closing, the
Purchaser will deliver to the Seller the following items:
(a) an Officer's Certificate of the Purchaser dated the Closing
Date, stating that each representation and warranty set forth in Article 4
is true and correct in all material respects at and as of the Closing as
though then made, except to the extent of any change solely caused by the
transactions expressly contemplated by the Transaction Documents;
(b) all instruments which in the Seller's reasonable judgment are
necessary or desirable to effect the Assumption; and
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<PAGE> 47
(c) such other documents relating to the transactions
contemplated by the Transaction Documents to be consummated at the
Closing as the Seller reasonably requests.
ARTICLE 9
OTHER COVENANTS
9.1 TRANSACTION EXPENSES. The Purchaser will pay and be
responsible for the filing fees associated with all filings required to be
made under the HSR Act in connection with the Sale and the Assumption and
the fees and disbursements of the Purchaser's senior lender (including
those of its legal counsel), and the fees and disbursements of the
environmental consulting firm retained by GTCR in connection with the
transactions contemplated by this Agreement. In addition, the Purchaser
will reimburse GTCR for all fees and other out-of-pocket expenses incurred
by GTCR in connection with the Purchaser's and GTCR's negotiation,
preparation and entry into the Transaction Documents and the consummation
of the transactions to be consummated pursuant to the Transaction Documents
(the "GTCR Expenses"), and the Purchaser will reimburse the Seller for an
amount of the fees and expenses incurred by the Seller and the Stockholders
in connection with the negotiation, preparation and entry into the
Transaction Documents and the consummation of the transactions to be
consummated pursuant to the Transaction Documents (including brokerage or
investment banking fees and expenses), up to the amount of the GTCR
Expenses for which the Purchaser reimburses GTCR.
9.2 FURTHER ASSURANCES. From and after the Closing, the Seller
will execute all documents and take any other action which it is reasonably
requested to execute or take to further effectuate the transactions
contemplated by the Transaction Documents.
9.3 ANNOUNCEMENTS. Prior to the Closing, the Purchaser will not
make any public announcement of or regarding this transactions contemplated
by this Agreement without the prior approval of the Seller as to the timing
and content of such announcement (which approval the Seller may not
unreasonably withhold or delay). The Seller and the Stockholders will not
make any public announcement of or regarding the transactions contemplated
by this Agreement without the prior approval of the Purchaser as to the
timing and
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<PAGE> 48
content of such announcement (which approval the Purchaser may not
unreasonably withhold or delay).
9.4 FICA. The alternative procedure established in Section 5 of
Revenue Procedure 84-77, 1984-2 C.B. 753, relating to employment tax
returns and statements will be adopted by the Purchaser and the Seller for
transferred employees. The Seller will, in a timely fashion, furnish the
Purchaser with the information it needs to comply with this procedure.
ARTICLE 10
DEFINITIONS
10.1 DEFINITIONS. For purposes hereof, the following terms, when
used herein with initial capital letters, will have the respective meanings
set forth herein:
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such first Person.
"Agreement" means this Asset Purchase Agreement, including all
Exhibits and Schedules hereto, as it may be amended from time to time in
accordance with its terms.
"Business" means the business of the Seller as currently
conducted.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Comerica Leases" means the Master Lease dated as of October 11,
1993 between Comerica Bank, N.A. (as assignee of Computer Leasing of
Michigan Inc., a Michigan corporation) and the Seller, together with
Equipment Schedules 0002, 0003 and 0004 executed and delivered thereunder.
"Designated Stockholder" means Carey, Elland or Kowalski.
"Environmental Affiliates" means, with respect to any particular
matter, all other Persons whose liabilities or
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<PAGE> 49
obligations with respect to that particular matter have been assumed by, or
are otherwise deemed by law to be those of, the Seller.
"Environmental and Safety Requirements" means all federal, state,
local and foreign statutes, regulations, ordinances and similar provisions
having the force or effect of law, all judicial and administrative orders
and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety and pollution
or protection of the environment, including all such standards of conduct
and bases of obligations relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or
wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or by-products, asbestos,
polychlorinated biphenyls ("PCBs"), noise or radiation.
"Environmental Lien" means any Lien, whether recorded or
unrecorded, in favor of any Government Entity relating to any liability of
the Seller or any Environmental Affiliate arising under any Environmental
and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"GAAP" means, at a given time, United States generally accepted
accounting principles, consistently applied.
"Government Entity" means the United States of America or any
other nation, any state or other political subdivision thereof, or any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of government.
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P., and
its Affiliates (other than the Purchaser).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
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<PAGE> 50
"Indebtedness" of any Person means, without duplication: (a)
indebtedness for borrowed money or for the deferred purchase price of
property or services in respect of which such Person is liable,
contingently or otherwise, as obligor or otherwise (other than trade
payables and other current liabilities incurred in the ordinary course of
business) and any commitment by which such Person assures a creditor
against loss, including contingent reimbursement obligations with respect
to letters of credit; (b) indebtedness guaranteed in any manner by such
Person, including a guarantee in the form of an agreement to repurchase or
reimburse; (c) obligations under capitalized leases in respect of which
such Person is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or in respect of which obligations such Person assures a
creditor against loss; and (d) any unsatisfied obligation of such Person
for "withdrawal liability" to a "multiemployer plan," as such terms are
defined under ERISA.
"Investment" means, with respect to any Person, any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or other ownership or
beneficial interest (including partnership interests and joint venture
interests) of any other Person, and any capital contribution by such Person
to any other Person.
"Knowledge" means, with respect to a Person the actual knowledge
of such Person (which includes the actual knowledge of all officers,
directors and executive employees of such Person).
"Legal Requirement" means any requirement arising under any
action, law, treaty, rule or regulation, determination or direction of an
arbitrator or Government Entity, including any Environmental and Safety
Requirement.
"Lien" means any mortgage, pledge, security interest,
encumbrance, easement, restriction, charge, or other lien.
"Livonia Lease" means the Lease Agreement dated September 3,
1985, between MART Associates, a Michigan co-partnership, and the Seller,
as amended by the First Amendment thereto dated June 26, 1990 and the
Second Amendment thereto dated January 6, 1995.
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<PAGE> 51
"Livonia Property" means the premises leased to the Seller
pursuant to the Livonia Lease.
"Loss" means, with respect to any Person, any diminution in
value, consequential or other damage, liability, demand, claim, action,
cause of action, cost, damage, deficiency, Tax, penalty, fine or other loss
or expense, whether or not arising out of a third party claim, including
all interest, penalties, reasonable attorneys' fees and expenses and all
amounts paid or incurred in connection with any action, demand, proceeding,
investigation or claim by any third party (including any Government Entity)
against or affecting such Person or which, if determined adversely to such
Person, would give rise to, evidence the existence of, or relate to, any
other Loss and the investigation, defense or settlement of any of the
foregoing, together with interest thereon from the date on which such
Person provides the written notice of the related claim as described in
Section 7.4 through and including the date on which the total amount of the
claim, including such interest, is recovered or recouped pursuant to
Article 7.
"Officer's Certificate" of any Person means a certificate signed
by such Person's president or chief financial officer (or an individual
having comparable responsibilities with respect to such Person) stating
that (a) the individual signing such certificate has made or has caused to
be made such investigations as are necessary in order to permit such
individual to verify the accuracy of the information set forth in such
certificate and (b) to the best of such individual's Knowledge, such
certificate does not misstate any material fact and does not omit to state
any fact necessary to make the fact stated therein not misleading.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or
any department, agency or political subdivision thereof.
"Proprietary Rights" means all of the following: (a) all
inventions (whether patentable or unpatentable and whether or not reduced
to practice), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof; (b) all trademarks, service
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<PAGE> 52
marks, trade dress, logos, trade names, and corporate names, together with
all translations, adaptations, derivations, and combinations thereof and
including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith; (c) all copyrightable
works (including, without limitation, all software developed by the Seller
for use in the Business), all copyrights, and all applications,
registrations, and renewals in connection therewith; (d) all mask works and
all applications, registrations, and renewals in connection therewith; (e)
all trade secrets and confidential Business information (including ideas,
research and development, know-how, formulas, compositions, manufacturing
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information,
and Business and marketing plans and proposals); (f) all computer software
(including data and related documentation); (g) all other proprietary
rights; and (h) all copies and tangible embodiments thereof (in whatever
form or medium).
"Subsidiary" means, with respect to any Person, any corporation a
majority of the total voting power of shares of stock of which is 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 any
partnership, association or other business entity a majority of the
partnership or other similar ownership interest of which is at the time
owned or controlled, directly or indirectly, by that Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes of this
definition, a Person is deemed to have a majority ownership interest in a
partnership, association or other business entity if such Person is
allocated a majority of the gains or losses of such partnership,
association or other business entity or is or controls the managing
director or general partner of such partnership, association or other
business entity.
"Taxes" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes
imposed pursuant to Section 59A of the Code), customs duties, capital
stock, franchise, profits, withholding, social security, unemployment,
disability, real
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<PAGE> 53
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, or other tax, fee, assessment or
charge of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates and other documents to be entered
into or delivered by any Party in connection with the transactions
contemplated to be consummated pursuant to any of the foregoing.
"Treasury Regulations" means the United States Treasury
Regulations promulgated pursuant to the Code.
10.2 OTHER DEFINITIONAL PROVISIONS.
(a) Accounting Terms. Accounting terms which are not
otherwise defined in this Agreement have the meanings given to them under
GAAP. To the extent that the definition of accounting term that is defined
in this Agreement is inconsistent with the meaning of such term under GAAP,
the definition set forth in this Agreement will control. In addition, to
the extent that Financial Statements were prepared in accordance with GAAP,
no change in accounting principles will be made from those utilized in
preparing the Financial Statements (without regard to materiality)
including, without limitation, with respect to the nature of accounts,
level of reserves or level of accruals. For purposes of the preceding
sentence, "changes in accounting principles" includes all changes in
accounting principles, policies, practices, procedures or methodologies
with respect to financial statements, their classification or their
display, as well as all changes in practices, methods, conventions or
assumptions (unless required by objective changes in underlying events)
utilized in making accounting estimates.
(b) "Hereof," etc. The terms "hereof," "herein" and
"hereunder" and terms of similar import are references to this Agreement as
a whole and not to any particular provision of this
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<PAGE> 54
Agreement. Section, clause, Schedule and Exhibit references contained in
this Agreement are references to Sections, clauses, Schedules and Exhibits
in or to this Agreement, unless otherwise specified.
(c) Number and Gender. Each defined term used in this
Agreement has a comparable meaning when used in its plural or singular
form. Each gender-specific term used in this Agreement has a comparable
meaning whether used in a masculine, feminine or gender-neutral form.
(d) "Including," etc. Whenever the term "including"
(whether or not that term is followed by the phrase "but not limited to" or
"without limitation" or words of similar effect) is used in this Agreement
in connection with a listing of items within a particular classification,
that listing will be interpreted to be illustrative only and will not be
interpreted as a limitation on, or an exclusive listing of, the items
within that classification.
(e) Successor Laws. Any reference to any particular Code
section or any other law or regulation will be interpreted to include any
revision of or successor to that section regardless of how it is numbered
or classified.
ARTICLE 11
OTHER AGREEMENTS
11.1 REMEDIES. No failure to exercise, and no delay in exercising,
any right, remedy, power or privilege under this Agreement by any Party
will operate as a waiver of such right, remedy, power or privilege, nor
will any single or partial exercise of any right, remedy, power or
privilege under this Agreement preclude any other or further exercise of
such right, remedy, power or privilege or the exercise of any other right,
remedy, power or privilege. Subject to Section 7.6 with respect to the
forum for the resolution of claims under Section 7, the rights, remedies,
powers and privileges provided pursuant to this Agreement are cumulative
and not exhaustive of any other rights, remedies, powers and privileges
which may be provided by law (including any remedy for fraud).
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<PAGE> 55
11.2 CONSENT TO AMENDMENTS. No waiver, amendment, modification or
supplement of this Agreement will be binding upon the Seller or any
Stockholder unless such waiver, amendment, modification or supplement is
set forth in writing and is executed by the Seller. No waiver, amendment,
modification or supplement of this Agreement will be binding upon the
Purchaser unless such waiver, amendment, modification or supplement is set
forth in writing and is executed by the Purchaser. No other course of
dealing between or among any of the Parties or any delay in exercising any
rights pursuant to this Agreement will operate as a waiver of any rights of
any Party.
11.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly
provided in this Agreement, all covenants and agreements set forth in this
Agreement by or on behalf of the Parties will bind and inure to the benefit
of the respective successors and assigns of the Parties, whether so
expressed or not, except that neither this Agreement or any of the rights,
interests or obligations hereunder may be (i) assigned by Seller without
the Purchaser's prior written consent or (ii) assigned by the Purchaser
without the Sellers' prior written consent; provided that without obtaining
the Sellers' consent (a) the Purchaser may, at any time prior to the
Closing, in whole or in part, assign its rights and delegate its
obligations to purchase the Purchased Assets and assume the Assumed
Liabilities pursuant to this Agreement to one or more of its Affiliates,
and the Purchaser may, at its sole discretion, direct the Seller to convey
the Purchased Assets, in whole or in part, to one or more of the
Purchaser's Affiliates, (b) the Purchaser (or any permitted assignee
thereof) may assign its rights under this Agreement for collateral purposes
to any lender or other Person providing financing to the Purchaser or such
assignee, and (c) the Purchaser (or any permitted assignee thereof) may
assign its rights hereunder to any Person who acquires all or any portion
of the business or assets of such assigning Person after the Closing.
11.4 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the domestic laws of the State of Michigan,
without giving effect to any choice of law or conflict provision or rule
(whether of the State of Michigan or any other jurisdiction) that would
cause the laws of any jurisdiction other than the State of Michigan to be
applied. In furtherance of the foregoing, the internal law of the State of
Michigan will control the interpretation and construction of this
Agreement, even if
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<PAGE> 56
under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
11.5 NOTICES.
(a) All demands, notices, communications and reports
provided for in this Agreement will be in writing and will be either
personally delivered, mailed by first class mail (postage prepaid) or sent
by reputable overnight courier service (delivery charges prepaid) to any
Party at the address specified below, or at such address, to the attention
of such other Person, and with such other copy, as the recipient party has
specified by prior written notice to the sending Party pursuant to the
provisions of this Section 11.5.
If to the Seller or any Stockholder:
Lason Systems, Inc.
28400 Schoolcraft Road
Livonia, Michigan 48150
Attn: Allen J. Nesbitt
Robert A. Yanover
with a copy, which will
not constitute notice to
the Seller or any Stockholder, to:
Seyburn, Kahn, Ginn, Bess,
Deitch & Serlin, P.C.
2000 Town Center
Suite 1500
Southfield, Michigan 48075
Attn: Laurence B. Deitch
If to the Purchaser:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attn: Bruce V. Rauner
Elliot W. Maluth
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<PAGE> 57
with a copy, which will
not constitute notice
to the Purchaser, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attn: John L. Kuehn
(b) Any such demand, notice, communication or report will be
deemed to have been given pursuant to this Agreement when delivered
personally, on the third business day after deposit in the U.S. mail or on
the business day after deposit with a reputable overnight courier service,
as the case may be.
11.6 SEVERABILITY OF PROVISIONS. If any covenant, agreement,
provision or term of this Agreement is held to be invalid for any reason
whatsoever, then such covenant, agreement, provision or term will be deemed
severable from the remaining covenants, agreements, provisions and terms of
this Agreement and will in no way affect the validity or enforceability of
any other provision of this Agreement.
11.7 SCHEDULES AND EXHIBITS. The Schedules and Exhibits constitute
a part of this Agreement and are incorporated into this Agreement for all
purposes.
11.8 COUNTERPARTS. The Parties may execute this Agreement in
separate counterparts (no one of which need contain the signatures of all
Parties), each of which will be an original and all of which together will
constitute one and the same instrument.
11.9 NO THIRD-PARTY BENEFICIARIES. Except as otherwise expressly
provided in this Agreement, no Person which is not a Party will have any
right or obligation pursuant to this Agreement.
11.10 HEADINGS. The headings used in this Agreement are for the
purpose of reference only and will not affect the meaning or interpretation
of any provision of this Agreement.
11.11 MERGER AND INTEGRATION. Except as otherwise provided in this
Agreement, this Agreement sets forth the entire understanding of the
Parties relating to the subject matter hereof, and all prior
understandings, whether written or oral are superseded by this Agreement.
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<PAGE> 58
11.12 ALLOCATION OF PURCHASE PRICE. The allocation of the Purchase
Price among the Purchased Assets will be made in accordance with Section
1060 of the Code and applicable Treasury Regulations thereunder in
accordance with a Exhibit D to this Agreement (it being agreed that the
allocations to current assets, current liabilities and goodwill will be
adjusted, as may reasonably be agreed by the Purchaser and the Seller, to
reflect the actual amounts of the current assets and current liabilities of
the Seller as of the Closing Date). Such allocation will be used by the
Parties in allocating the Purchase Price among the Purchased Assets as of
the Closing Date and in preparing (a) Form 8594, Asset Acquisition
Statement, for each of the Purchaser and the Seller, and (b) all Tax
Returns. Each of the Purchaser and the Seller will file Form 8594,
prepared in accordance with this Section, with its federal income Tax
Return for its Tax period including the Closing Date.
11.13 ACKNOWLEDGMENT BY THE PURCHASER. The Purchaser has conducted,
to its satisfaction, an independent investigation and verification of the
financial condition, results of operations, assets, liabilities, properties
and projected operations of the Business. In determining to proceed with
the transactions contem plated by the Transaction Documents, the Purchaser
has relied on the results of such independent investigation and
verification, the representations, warranties and covenants of Seller and
the Stockholders set forth in this Agreement, and the certificates and
other materials to be delivered to the Purchaser pursuant to Article 8.
The Purchaser acknowledges that such representations and warranties
constitute the sole and exclusive representations and warranties of the
Seller and the Stockholders to the Purchaser in connection with the Sale
and the Assumption, and the Purchaser understands, acknowledges and agrees
that all other representations and warranties of any kind or nature and
whether oral or contained in any writing other than this Agreement or any
such certificate (including any representation or warranty relating to the
projected or future financial condition or results of operations relating
to the Business) are specifically disclaimed by the Seller and the
Stockholders.
* * * * *
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<PAGE> 59
IN WITNESS WHEREOF, the Parties have executed this Asset
Purchase Agreement as of the date first written above.
LASON ACQUISITION CORP.
By: /s/ Elliot Maluth
-----------------------------
Its: Assistant Secretary
----------------------------
LASON SYSTEMS, INC.
By: /s/ Allen J. Nesbitt
-----------------------------
Allen J. Nesbitt
President
ROBERT A. YANOVER LIVING TRUST
U/A/D MAY 11, 1982
By: /s/ Robert A. Yanover
-----------------------------
Its: Trustee
----------------------------
/s/ Allen J. Nesbitt
-------------------------------
Allen J. Nesbitt
JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE
TRUST DATED JANUARY 5, 1993
By: /s/ Laurence B. Deitch
-----------------------------
Laurence B. Deitch
Trustee
/s/ Gregory Carey
--------------------------------
Gregory Carey
/s/ Donald L. Elland
--------------------------------
Donald L. Elland
/s/ Richard C. Kowalski
--------------------------------
Richard C. Kowalski
<PAGE> 60
EXHIBIT A
STOCKHOLDERS' SHARES
Stockholder Share (%)
___________________________________________________
R. Yanover Trust 40.299%
Nesbitt 46.907%
J. Yanover Trust 6.607%
Carey .806%
Elland 2.882%
Kowalski 2.499%
---------
100.000%
<PAGE> 61
EXHIBIT B
SELLER'S FINANCIAL STATEMENTS
[SEE ATTACHED]
<PAGE> 62
EXHIBIT C
OPINIONS OF SELLER'S COUNSEL
Reference is made to the Asset Purchase Agreement, dated as of
January 17, 1995 (the "Agreement"), by and among Lason Acquisition Corp., a
Delaware corporation, Lason Systems, Inc., a Michigan corporation (the
"Seller"), and the Robert A. Yanover Living Trust u/a/d May 11, 1982, Allen
J. Nesbitt, the Joseph Jonathan Yanover and Jennifer D. Yanover Irrevocable
Trust dated January 5, 1993, Gregory Carey, Donald L. Elland and Richard C.
Kowalski. Capitalized terms used herein have the meanings accorded to such
terms in the Agreement.
(1) The Seller is a corporation duly organized and validly
existing under the laws of the State of Michigan, with all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted and to enter into the Agreement and the
other agreements contemplated thereby and to perform its obligations
thereunder. The Seller is duly organized as a foreign corporation to
transact business in, and is in good standing in, every jurisdiction in
which the failure to so qualify could reasonably be expected to have an
Adverse Effect.
(2) Each of the Stockholders has the requisite power and
capacity to enter into the Agreement and the other agreements contemplated
thereby and to perform his or her respective obligations thereunder.
(3) Each of the Agreement and the other agreements contemplated
thereby has been duly authorized, executed and delivered by the Seller and
each of the Stockholders who is a party thereto, and each of the Agreement
and the other agreements contemplated thereby is a valid and binding
obligation of the Seller and each of the Stockholders who is a party
thereto, enforceable in accordance with its terms, except as such
enforceability may be limited by (a) applicable insolvency, bankruptcy,
reorganization, moratorium or other similar laws affecting creditors rights
generally; and (b) applicable equitable principles (whether considered in a
proceeding at law or in equity).
<PAGE> 63
(4) Except as set forth in the Schedule attached to this opinion
letter, the execution and delivery by the Seller and the Stockholders of
the Agreement and the other agreements contemplated thereby, and the
fulfillment of and the compliance with the respective terms thereof by the
Seller and the Stockholders do not and will not (a) conflict with or result
in a breach of the terms, conditions or provisions of, (b) constitute a
default under, (c) result in the creation of any lien, mortgage, security
interest, charge or other encumbrance upon the Seller's assets pursuant to,
(d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent,
approval, exemption or other action by or notice to any Person pursuant to,
(i) the Seller's charter or bylaws, (ii) any law, statute, rule or
regulation to which the Seller is subject or (iii) any contract, agreement
or instrument set forth on the Contracts Schedule to the Agreement.
<PAGE> 64
EXHIBIT D
ALLOCATION OF PURCHASE PRICE
[PLEASE PROVIDE]
<PAGE> 1
EXHIBIT 10.2
PURCHASE AGREEMENT
THIS AGREEMENT is made as of January 17, 1995 between Lason Holdings,
Inc., a Delaware corporation (the "Company"), and Golder, Thoma, Cressey,
Rauner Fund IV, L.P., a Delaware limited partnership ("GTCR").
The Company and GTCR desire to enter into an agreement pursuant to which
GTCR will purchase, and the Company will sell, 1,000,002 shares of the
Company's Class B Common Stock, par value $.01 per share (the "Class B
Common"). Certain definitions are set forth in paragraph 5 of this Agreement.
The parties hereto agree as follows:
1. Purchase and Sale of Class B Common.
(a) The closing of the purchase and sale of the Class B Common hereunder
(the "Closing") shall take place at the offices of Robinson, Bradshaw & Hinson,
1900 Independence Center, Charlotte, North Carolina 28246 at 10:00 a.m. on the
date hereof, or at such other place or on such other date as may be mutually
agreeable to the Company and GTCR. At the Closing, GTCR will purchase, and the
Company will sell to GTCR, 1,000,002 shares of Class B Common, for an aggregate
price of $10,000,000. The Company will deliver to GTCR the certificate
representing its Class B Common, registered in the name of GTCR, and GTCR will
deliver to the Company a cashier's or certified check or wire transfer of funds
in the amount of $10,000,000.
(b) In connection with the purchase and sale of the GTCR Stock hereunder,
GTCR represents and warrants to the Company that:
(i) The GTCR Stock to be acquired by it pursuant to this Agreement
will be acquired for its own account and not with a view to, or intention
of, distribution thereof in violation of the Securities Act, or any
applicable state securities laws, and such GTCR Stock will not be
disposed of in contravention of the Securities Act or any applicable
state securities laws.
<PAGE> 2
(ii) It is sophisticated in financial matters and is able to
evaluate the risks and benefits of its investment in the GTCR Stock.
(iii) It is able to bear the economic risk of its investment in the
GTCR Stock for an indefinite period of time because the GTCR Stock has
not been registered under the Securities Act and, therefore, cannot be
sold unless subsequently registered under the Securities Act or an
exemption from such registration is available.
(iv) It has had an opportunity to ask questions and receive answers
concerning the terms and conditions of the offering of the GTCR Stock and
has had full access to such other information concerning the Company as
it has requested. It has reviewed, or has had an opportunity to review,
a copy of the Asset Purchase Agreement, dated as of the date hereof,
between Lason Acquisition Corp., a Delaware corporation ("Lason
Acquisition"), Lason Systems, Inc., a Michigan corporation ("Lason
Systems"), and the stockholders of Lason Systems, pursuant to which Lason
Acquisition acquired substantially all of the assets of Lason Systems,
and it is familiar with the transactions contemplated thereby. It has
also reviewed, or has had an opportunity to review, the following
documents: (A) the Company's Certificate of Incorporation and bylaws; and
(B) the loan agreements, notes and related documents with the Company's
senior lender.
(v) This Agreement constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms, and the execution,
delivery and performance of this Agreement by it does not and will not
conflict with, violate or cause a breach of any agreement, contract or
instrument to which it is a party or any judgment, order or decree to
which it is subject.
2. Covenants.
(a) Financial Statements and Other Information. The Company
shall deliver to GTCR (i) the same information and financial data as the
Company and its Subsidiaries are required to
2
<PAGE> 3
provide as of the date hereof pursuant to Section 7.1 of the Loan Agreement
(whether or not the Loan Agreement is still in effect), (ii) within ten days
after transmission thereof, copies of all financial statements, proxy
statements, reports and any other general written communications which the
Company send to its stockholders and copies of all registration statements and
all regular, special or periodic reports which it files, or any of its officers
or directors file with respect to the Company, with the Securities and Exchange
Commission or with any securities exchange on which any of its securities are
then listed, and copies of all press releases and other statements made
available generally by the Company to the public concerning material
developments in the Company's businesses and (iii) such other information and
financial data concerning the Company and its Subsidiaries as GTCR may
reasonably request. Notwithstanding the foregoing, if the Loan Agreement is no
longer in effect, the provisions of paragraph 2(a)(i) shall cease to be
effective so long as the Company (a) is subject to the periodic reporting
requirements of the Securities Exchange Act and continues to comply with such
requirements and (b) promptly provides to GTCR all reports and other materials
filed by the Company with the Securities and Exchange Commission pursuant to
the periodic reporting requirements of the Securities Exchange Act.
(b) Current Public Information. At all times after the Company has filed a
registration statement with the Securities and Exchange Commission pursuant to
the requirements of either the Securities Act or the Securities Exchange Act,
the Company shall file and shall cause each of its Subsidiaries to file all
reports required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder and shall take such further action as any holder
or holders of Class B Common may reasonably request, all to the extent required
to enable such holders to sell Class B Common pursuant to (i) Rule 144 adopted
by the Securities and Exchange Commission under the Securities Act (as such
rule may be amended from time to time) or any similar rule or regulation
hereafter adopted by the Securities and Exchange Commission or (ii) a
registration statement on Form S-2 or S-3 or any similar registration form
hereafter adopted by the Securities and Exchange Commission. Upon request, the
Company shall deliver
3
<PAGE> 4
to any holder of Class B Common a written statement as to whether it has
complied with such requirements.
(c) Unrelated Business Taxable Income. The Company shall not, and shall
not allow any of its Subsidiaries to, engage in any transaction which is
reasonably likely to cause GTCR or any of its limited partners which are exempt
from income taxation under Section 501(a) of the IRC and, if applicable, any
pension plan that any such trust may be a part of, to recognize unrelated
business taxable income as defined in Section 512 and Section 514 of the IRC.
3. Representations and Warranties of the Company. In connection with the
issuance of the Class B Common hereunder, the Company represents to GTCR that,
in each case, as of the date hereof:
(a) 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 might 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. The Company
has all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be conducted
and to carry out the transactions contemplated by this Agreement, the
Stockholders Agreement and the Registration Agreement (collectively, the
"Investment Agreements"). The copies of the Company's Certificate of
Incorporation and bylaws which have been furnished to GTCR reflect all
amendments made thereto at any time prior to the date of this Agreement and are
correct and complete.
(b) Capital Stock and Related Matters.
(i) As of the date hereof and immediately thereafter, the authorized
capital stock of the Company shall consist of 1,000,000 shares of
Preferred Stock and 18,000,002 shares of Common Stock, of which
13,000,000 shares shall be designated
4
<PAGE> 5
as Class A-1 Common Stock, par value $.01 per share, 4,000,000 shares
shall be designated Class A-2 Common Stock, par value $.01 per share, and
1,000,002 shares shall be designated as Class B Common. The Company
shall not have outstanding any stock or securities convertible or
exchangeable for any shares of its capital stock or containing any profit
participation features, nor shall it have outstanding any rights or
options to subscribe for or to purchase its capital stock or any stock or
securities convertible into or exchangeable for its capital stock or any
stock appreciation rights or phantom stock plans other than pursuant to
and as contemplated by the Investment Agreements. The Company shall not
be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock, except
pursuant to the Investment Agreements. All of the outstanding shares of
the Company's capital stock shall be validly issued, fully paid and
nonassessable.
(ii) There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the issuance of the Class B
Common hereunder. 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 Class B
Common pursuant to this Agreement do not and will not require
registration under the Securities Act or any applicable state
securities laws. To the best of the Company's knowledge, there are no
agreements between the Company's stockholders with respect to the voting
or transfer of the Company's capital stock or with respect to any other
aspect of the Company's affairs, except for the Investment Agreements.
4. Restrictions on Transfer.
(a) Transfer of GTCR Stock. GTCR shall not sell, transfer, assign,
pledge or otherwise dispose of (whether with or without consideration and
whether voluntarily or involuntarily or by operation of law) (a "Transfer") any
shares of GTCR Stock or any
5
<PAGE> 6
interest therein, except pursuant to the provisions of paragraph IV of the
Stockholders Agreement.
(b) Legend. The certificates representing the Class B Common will
bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN
OTHER AGREEMENTS SET FORTH IN A PURCHASE AGREEMENT BETWEEN THE
COMPANY AND CERTAIN INVESTORS IN THE COMPANY DATED AS OF JANUARY
17, 1995. A COPY OF SUCH AGREEM NT MAY BE OBTAINED BY THE HOLDER
HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
(c) Opinion of Counsel. No holder of GTCR Stock may sell, transfer
or dispose of any GTCR Stock (except pursuant to an effective registration
statement under the Securities Act) without first delivering to the Company an
opinion of counsel (reasonably acceptable in form and substance to the Company)
that neither registration nor qualification under the Securities Act and
applicable state securities laws is required in connection with such transfer.
5. Definitions.
"GTCR Stock" means the Class B Common purchased by GTCR hereunder
and will continue to be GTCR Stock in the hands of any holder other than
an GTCR (except for the Company and except for transferees in a Public Sale),
and except as otherwise provided herein, each such other holder of GTCR Stock
will succeed to all rights and obligations attributable to GTCR as a holder
of GTCR Stock hereunder. GTCR Stock will also include shares of the Company's
capital stock issued with respect to GTCR Stock by way of a stock split, stock
dividend or other recapitalization.
6
<PAGE> 7
"IRC" means the Internal Revenue Code of 1986, as amended, and any
reference to any particular IRC section shall be interpreted to include any
revision of or successor to that section regardless of how numbered or
classified.
"Loan Agreement" means the Loan Agreement dated as of the date hereof
among Lason Acquisition Corp., a Delaware corporation, First Union National
Bank of North Carolina, as agent, and certain lenders party thereto, as in
effect from time to time.
"Public Sale" means any sale pursuant to a registered public offering
under the Securities Act or any sale to the public pursuant to Rule 144
promulgated under the Securities Act effected through a broker, dealer or
market maker.
"Registration Agreement" means the Registration Agreement dated as of the
date hereof among the Company, GTCR and certain stockholders of the Company, as
in effect from time to time.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Stockholders Agreement" means the Stockholders Agreement dated as of the
date hereof among the Company, GTCR and certain stockholders of the Company, as
in effect from time to time.
"Subsidiary" means any corporation of which the Company owns securities
having a majority of the ordinary voting power in electing the board of
directors directly or through one or more subsidiaries.
6. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested)
7
<PAGE> 8
or sent by reputable overnight courier service (charges prepaid) to the
Company and GTCR at the addresses below indicated:
If to the Company:
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
and:
Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, P.C.
2000 Town Centre, Suite 1500
Southfield, MI 48075
Attention: Laurence Deitch
If to GTCR:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
with a copy, which will not constitute
notice to GTCR, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
8
<PAGE> 9
Attention: John L. Kuehn
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
7. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any GTCR Stock or any interest therein in violation of any
provision of this Agreement shall be void, and the Company shall not
record such Transfer on its books or treat any purported transferee of such
GTCR Stock or interest therein as the owner of such stock or interest for any
purpose.
(b) Severability. Whenever possible, each provision of this Agreement
will 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 will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the
complete agreement and understanding among the parties and supersede and
preempt 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.
(d) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
9
<PAGE> 10
(e) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by GTCR and
the Company and their respective successors and assigns (including subsequent
holders of GTCR Stock); provided that the rights and obligations of GTCR under
this Agreement shall not be assignable except in connection with a permitted
transfer of GTCR Stock hereunder.
(f) Choice of Law. The corporate law of the State of Delaware will govern
all questions 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 hereto will be governed by
the internal law, and not the law of conflicts, of the State of Michigan.
(g) Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
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 any party may in its sole discretion apply to any court of law or
equity of competent jurisdiction (without posting any bond or deposit) for
specific performance and/or other injunctive relief in order to enforce or
prevent any violations of the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be amended
and waived only with the prior written consent of the Company and GTCR.
* * * * *
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LASON HOLDINGS, INC.
By /s/ Allen J. Nesbitt
----------------------------
Its President
---------------------------
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 /s/ Bruce Rauner
----------------------------
Its Principal
---------------------------
<PAGE> 1
EXHIBIT 10.3
EXECUTIVE STOCK AGREEMENT
THIS AGREEMENT is made as of January 17, 1995 between Lason Holdings,
Inc., a Delaware corporation (the "Company"), and the parties listed on the
Schedule of Executives attached hereto (the "Executives").
The Company and the Executives desire to enter into an agreement pursuant
to which the Executives will purchase, and the Company will sell, 999,998
shares of the Company's Class A-1 Common Stock, par value $.01 per share (the
"Class A-1 Common"). Certain definitions are set forth in paragraph 5 of this
Agreement.
The parties hereto agree as follows:
1. Purchase and Sale of Executive Stock.
(a) The closing of the initial purchase and sale of the Class A-1 Common
hereunder (the "Closing") shall take place at the offices of Robinson, Bradshaw
& Hinson, 1900 Independence Center, Charlotte, NC 28246 at 10:00 a.m. on the
date hereof, or at such other place or on such other date as may be mutually
agreeable to the Company and the Executives. At the Closing, each Executive
will purchase, and the Company will sell to such Executive, the number of
shares of Class A-1 Common set forth opposite such Executive's name on the
Schedule of Executives attached hereto, for an aggregate price of $999,998, to
be paid ratably among the Executives based upon the number of shares of Class
A-1 Common purchased by each Executive from the Company pursuant to this
Agreement. The Company will deliver to each Executive the certificate
representing such Executive's Class A-1 Common to be purchased from the
Company, and each Executive will deliver to the Company a cashier's or
certified check or wire transfer of funds in the amount set forth opposite such
Executive's name on the Schedule of Executives attached hereto.
(b) Following the sale of the Class A-1 Common by the Company to the
Executives pursuant to paragraph 1(a) above, certain of the Executives and
certain other persons (the "Purchasers") will purchase or otherwise acquire,
and certain of the Executives (the
<PAGE> 2
"Sellers") will sell or otherwise transfer, the number of shares of Class
A-1 Common set forth opposite such Purchaser's or such Seller's name on the
Schedule of Purchasers attached hereto.
(c) In connection with the purchase and sale of the Executive Stock
hereunder, each Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by such Executive pursuant to
this Agreement will be acquired for such Executive's own account and not
with a view to, or intention of, distribution thereof in violation of the
Securities Act, or any applicable state securities laws, and such
Executive Stock will not be disposed of in contravention of the
Securities Act or any applicable state securities laws.
(ii) Such Executive is sophisticated in financial matters and is
able to evaluate the risks and benefits of such its investment in the
Executive Stock.
(iii) Such Executive is able to bear the economic risk of its
investment in the Executive Stock for an indefinite period of time
because the Executive Stock has not been registered under the Securities
Act and, therefore, cannot be sold unless subsequently registered under
the Securities Act or an exemption from such registration is available.
(iv) Such Executive has had an opportunity to ask questions and
receive answers concerning the terms and conditions of the offering of
the Executive Stock and has had full access to such other information
concerning the Company as such Executive has requested. Such Executive
has reviewed, or has had an opportunity to review, a copy of the Asset
Purchase Agreement, dated as of the date hereof, between Lason
Acquisition Corp., a Delaware corporation ("Lason Acquisition"), Lason
Systems, Inc., a Michigan corporation ("Lason Systems"), and the
stockholders of Lason Systems, pursuant to which Lason Acquisition
acquired substantially all of the assets of Lason Systems, and such
Executive is familiar with the transactions contemplated thereby. Such
Executive has also reviewed, or has had an opportunity to review, the
2
<PAGE> 3
following documents: (A) the Company's Certificate of Incorporation
and bylaws; and (B) the loan agreements, notes and related documents with
the Company's senior lender.
(v) This Agreement constitutes the legal, valid and binding
obligation of such Executive, enforceable in accordance with its terms,
and the execution, delivery and performance of this Agreement by such
Executive does not and will not conflict with, violate or cause a breach
of any agreement, contract or instrument to which such Executive is
a party or any judgment, order or decree to which such Executive is
subject.
(d) As an inducement to the Company to issue the Executive Stock to
the Executives, as a condition thereto, each Executive acknowledges and
agrees that neither the issuance of the Executive Stock to such Executive nor
any provision contained herein shall entitle such Executive, or, in the case of
an Executive which is a trust, any beneficiary of such trust, to remain in the
employment of the Company and its Subsidiaries or affect the right of the
Company to terminate such Executive's or such beneficiary's employment at any
time for any reason.
2. Current Public Information. At all times after the Company has filed a
registration statement with the Securities and Exchange Commission pursuant to
the requirements of either the Securities Act or the Securities Exchange Act,
the Company shall file and shall cause each of its Subsidiaries to file all
reports required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder and shall take such further action as any holder
or holders of Class A-1 Common may reasonably request, all to the extent
required to enable such holders to sell Class A-1 Common pursuant to (i) Rule
144 adopted by the Securities and Exchange Commission under the Securities Act
(as such rule may be amended from time to time) or any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission or
(ii) a registration statement on Form S-2 or S-3 or any similar registration
form hereafter adopted by the Securities and Exchange Commission. Upon
request, the Company shall deliver
3
<PAGE> 4
to any holder of Class A-1 Common a written statement as to whether it has
complied with such requirements.
3. Representations and Warranties of the Company. In connection with the
issuance of the Class A-1 Common hereunder, the Company represents to each
Executive that, in each case, as of the date hereof:
(a) 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 might 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. The Company
has all requisite corporate power and authority and all material licenses,
permits and authorizations necessary to own and operate its properties, to
carry on its businesses as now conducted and presently proposed to be
conducted and to carry out the transactions contemplated by this Agreement, the
Stockholders Agreement and the Registration Agreement (collectively, the
"Investment Agreements"). The copies of the Company's Certificate of
Incorporation and bylaws which have been furnished to each of the Executives
reflect all amendments made thereto at any time prior to the date of this
Agreement and are correct and complete.
(b) Capital Stock and Related Matters.
(i) As of the date hereof and immediately thereafter, the authorized
capital stock of the Company shall consist of 1,000,000 shares of
Preferred Stock and 18,000,002 shares of Common Stock, of which
13,000,000 shares shall be designated as Class A-1 Common, 4,000,000
shares shall be designated Class A-2 Common Stock, par value $.01 per
share, and 1,000,002 shares shall be designated as Class B Common Stock,
par value $.01 per share. The Company shall not have outstanding any
stock or securities convertible or exchangeable for any shares of its
capital stock or containing any profit participation features, nor shall
it have outstanding any rights or options to subscribe for or to purchase
its capital stock or any stock or securities
4
<PAGE> 5
convertible into or exchangeable for its capital stock or any stock
appreciation rights or phantom stock plans other than pursuant to and as
contemplated by the Investment Agreements. The Company shall not be
subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of its capital stock or any
warrants, options or other rights to acquire its capital stock, except
pursuant to the Investment Agreements. All of the outstanding shares of
the Company's capital stock shall be validly issued, fully paid and
nonassessable.
(ii) There are no statutory or contractual stockholders preemptive
rights or rights of refusal with respect to the issuance of the Class A-1
Common hereunder. 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 Class
A-1 Common pursuant to this Agreement do not and will not require
registration under the Securities Act or any applicable state securities
laws. To the best of the Company's knowledge, there are no agreements
between the Company's stockholders with respect to the voting or transfer
of the Company's capital stock or with respect to any other aspect of the
Company's affairs, except for the Investment Agreements.
4. Restrictions on Transfer.
(a) Transfer of Executive Stock. No Executive shall sell, transfer,
assign, pledge or otherwise dispose of (whether with or without consideration
and whether voluntarily or involuntarily or by operation of law) (a "Transfer")
any shares of Executive Stock or any interest therein, except pursuant to the
provisions of paragraph IV of the Stockholders Agreement.
(b) Legend. The certificates representing the Class A-1 Common
will bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
5
<PAGE> 6
(THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER
AGREEMENTS SET FORTH IN AN EXECUTIVE STOCK AGREEMENT BETWEEN THE COMPANY
AND CERTAIN INVESTORS IN THE COMPANY DATED AS OF JANUARY 17, 1995. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(c) Opinion of Counsel. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an
effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel (reasonably acceptable in form
and substance to the Company) that neither registration nor qualification under
the Securities Act and applicable state securities laws is required in
connection with such transfer.
5. Definitions.
"Executive Stock" means the Class A-1 Common purchased by the
Executives hereunder and will continue to be Executive Stock in the hands
of any holder other than an Executive (except for the Company and GTCR and
except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights
and obligations attributable to such Executive as a holder of Executive Stock
hereunder. Executive Stock will also include shares of the Company's capital
stock issued with respect to Executive Stock by way of a stock split, stock
dividend or other recapitalization.
"GTCR" means Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware
limited partnership.
"Public Sale" means any sale pursuant to a registered public offering
under the 1933 Act or any sale to the public pursuant to Rule 144 promulgated
under the 1933 Act effected through a broker, dealer or market maker.
6
<PAGE> 7
"Registration Agreement" means the Registration Agreement dated as
of the date hereof among the Company, GTCR and the Executives, as in effect
from time to time.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
"Stockholders Agreement" means the Stockholders Agreement dated as
of the date hereof among the Company, GTCR and the Executives, as in effect
from time to time.
"Subsidiary" means any corporation of which the Company owns
securities having a majority of the ordinary voting power in electing the
board of directors directly or through one or more subsidiaries.
6. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to
7
<PAGE> 8
the Executives at the addresses indicated on the Company records and to
the Company at the address below indicated:
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
and:
Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, P.C.
2000 Town Centre, Suite 1500
Southfield, MI 48075
Attention: Laurence Deitch
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
7. General Provisions.
(a) Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Executive Stock or any interest therein in violation of any
provision of this Agreement shall be void, and the Company shall not record
such Transfer on its books or treat any purported transferee of such Executive
Stock or interest therein as the owner of such stock or interest for any
purpose.
(b) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be
8
<PAGE> 9
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 will not affect any other provision or any other jurisdiction,
but this Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable provision had never
been contained herein.
(c) Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the
complete agreement and understanding among the parties and supersede and
preempt 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.
(d) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by each
Executive and the Company and their respective successors and assigns
(including subsequent holders of Executive Stock); provided that the rights and
obligations of any Executive under this Agreement shall not be assignable
except in connection with a permitted transfer of Executive Stock hereunder.
(f) Choice of Law. The corporate law of the State of Delaware will govern
all questions 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 hereto will be governed by
the internal law, and not the law of conflicts, of the State of Michigan.
(g) Remedies. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this
9
<PAGE> 10
Agreement and to exercise all other rights existing in its 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 any party may in
its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or deposit) for specific performance
and/or other injunctive relief in order to enforce or prevent any violations of
the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement may be amended
and waived only with the prior written consent of the Company and the
Executives.
* * * * *
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
---------------------------------
Its: President
--------------------------------
EXECUTIVES
ROBERT A. YANOVER LIVING
TRUST U/A/D MAY 11, 1982
By: /s/ Robert A. Yanover
---------------------------------
Its: Trustee
--------------------------------
JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER
IRREVOCABLE TRUST DATED JANUARY 5, 1993
By: /s/ Laurence B. Deitch
---------------------------------
Laurence B. Deitch
Trustee
ALLEN J. NESBITT LIVING TRUST
DATED DECEMBER 7, 1994
By: /s/ Allen J. Nesbitt
---------------------------------
Its: Trustee
--------------------------------
/s/ Richard C. Kowalski
-------------------------------------
11
<PAGE> 12
Richard C. Kowalski
/s/ Donald L. Elland
------------------------------
Donald L. Elland
/s/ Gregory Carey
------------------------------
Gregory Carey
12
<PAGE> 13
SCHEDULE OF EXECUTIVES
<TABLE>
<CAPTION>
Shares
Purchased
from the Purchase
Executive Company Price
--------- --------- --------
<S> <C> <C>
Robert A. Yanover 402,987 $402,987
Living Trust u/a/d
May 11, 1982
Joseph Jonathan 66,074 $66,074
Yanover and
Jennifer D. Yanover
Irrevocable Trust
dated January 5,
1993
Allen J. Nesbitt 469,064 $469,064
Living Trust dated
December 7, 1994
Richard C. Kowalski 25,000 $25,000
Donald L. Elland 28,815 $28,815
Gregory Carey 8,058 $8,058
</TABLE>
13
<PAGE> 14
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Shares Shares
Purchaser Acquired Transferred
or from the to the
Seller Sellers Purchasers
-------- -------- -----------
<S> <C> <C>
Robert A. Yanover 0 28,410
Living Trust u/a/d
May 11, 1982
Allen J. Nesbitt 0 28,411
Living Trust dated
December 7, 1994
Donald L. Elland 5,682 0
Gregory Carey 2,841 0
Karl H. Hartig 8,523 0
James J. Dewan 8,523 0
Lawrence C. Jones 8,523 0
Scott L. Christensen 8,523 0
Daniel J. Buckley 8,523 0
Paul G. Dugan 5,682 0
</TABLE>
14
<PAGE> 1
EXHIBIT 10.4
STOCKHOLDERS AGREEMENT
THIS AGREEMENT is made as of January 17, 1995 by and between Lason
Holdings, Inc., a Delaware corporation (the "Company"), Golder, Thoma, Cressey,
Rauner Fund IV, L.P. ("GTCR") and each of the Persons listed on the Schedule of
Executives attached hereto (the "Executives") and Robert A. Yanover ("Yanover")
and Allen J. Nesbitt ("Nesbitt"). GTCR and the Executives are collectively
referred to as the "Stockholders" and individually as a "Stockholder."
Capitalized terms used herein are defined in paragraph XII hereof.
GTCR will purchase shares of the Company's Class B Common Stock, par value
$.01 per share (the "Class B Common") pursuant to a purchase agreement between
GTCR and the Company dated as of the date hereof (as in effect from time to
time, the "GTCR Agreement"). The Company and the Executives are parties to an
executive stock agreement dated as of the date hereof (as in effect from time
to time, the "Executive Stock Agreement" and, together with the GTCR Agreement,
the "Purchase Agreements"), pursuant to which such Executives will purchase
shares of the Company's Class A-1 Common Stock, par value $.01 per share (the
"Class A-1 Common").
The Company and the Stockholders desire to enter into this Agreement for
the purposes, among others, of (i) establishing the composition of the
Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company, (iii) limiting the manner and terms by
which the Stockholders' Common Stock may be transferred and (iv) setting forth
certain limitations with respect to the governance of the affairs of the
Company. The execution and delivery of this Agreement is a condition to the
purchase of the Company's stock pursuant to the Purchase Agreements.
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 hereby agree as follows:
<PAGE> 2
I. Board of Directors.
A. From and after the Closing (as defined in the Purchase Agreement) and
until the provisions of this paragraph I cease to be effective, each
Stockholder shall vote all of its Stockholder Shares and any other voting
securities of the Company over which such Stockholder has voting control
and shall take all other necessary or desirable actions within its control
(whether in its 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 stockholder
meetings), so that:
1. the authorized number of directors on the Board shall be
established at no fewer than five;
2. 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 Elliot W.
Maluth);
b. two individuals designated by holders of a majority of the
Executive Stock (which individuals initially shall be the Senior
Executives);
c. one, two or three individuals (the "Outside Directors")
designated by GTCR who are not members of the Company's management
or employees or officers of the Company or its subsidiaries (the
"Outside Directors"), and who are reasonably acceptable to holders
of a majority of the Executive Stock, provided that if, after 60
days of reasonable best efforts, GTCR and holders of a majority of
the Executive Stock are unable to agree upon the designation of any
Outside Director(s), GTCR may designate such Outside Director(s);
2
<PAGE> 3
3. the composition of the board of directors of each of the
Company's subsidiaries (a "Sub Board") shall be the same as that of the
Board;
4. the removal from the Board or a Sub Board (with or without
cause) of any representative designated hereunder by GTCR under paragraph
(2)(a) or (2)(c) above or by holders of a majority of the Executive Stock
under paragraph (2)(b) above shall be at GTCR's or such holders' written
request, respectively, but only upon such written request and under no
other circumstances; and
5. in the event that any representative designated hereunder by GTCR
under paragraph (2)(a) or (2)(c) above or by holders of a majority of the
Executive Stock under paragraph (2)(b) above for any reason ceases to
serve as a member of the Board or a Sub Board during his term of office,
the resulting vacancy on the Board or the Sub Board shall be filled by a
representative designated by GTCR or holders of a majority of the
Executive Stock, respectively, as provided hereunder.
B. The Company shall pay the reasonable out-of-pocket expenses
incurred by each director in connection with attending the meetings of the
Board, any Sub Board and any committee thereof.
C. The rights of GTCR under this paragraph I shall terminate at such
time as GTCR and its Permitted Transferees hold in the aggregate less than 50%
of the Stockholder Shares held by such persons on the date hereof.
D. The rights of the holders of Executive Stock under this paragraph I
shall terminate at such time as the Designated Stockholders and their Permitted
Transferees hold in the aggregate less than 20% of the outstanding Common Stock
on a Fully Diluted Basis.
E. The provisions of this paragraph I shall terminate automatically
and be of no further force and effect upon an Initial Public Offering.
3
<PAGE> 4
F. If any party fails to designate a representative to fill a
directorship pursuant to the terms of this paragraph I, the election of a person
to such directorship shall be accomplished in accordance with the Company's
bylaws and applicable law.
G. Each of GTCR and the holders of a majority of the Executive Stock
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 VII(B) prior to the designation of such persons as
directors.
II. Other Corporate Governance Matters.
A. Approval of Certain Actions. With the exception of the provisos
to paragraph II(A)(9) below, which shall remain in effect regardless of the
aggregate amount of Common Stock held by the Designated Stockholders, until such
time as the Designated Stockholders hold in the aggregate less than 20% (which
shall be determined as if such Designated Stockholders had not transferred any
Common Stock in accordance with the provisions of paragraph 1(b) of the
Executive Stock Agreement) of the outstanding Common Stock on a Fully Diluted
Basis, without the prior written approval of the holders of at least one-third
of the outstanding Executive Stock, the Company shall not directly or
indirectly:
1. Merge or consolidate with any Person (other than a
Subsidiary), or permit any Subsidiary to merge or consolidate with any
Person (other than the Company or a Subsidiary); provided that such
approval shall not be required if, subsequent to the merger or
consolidation of the Company or any Subsidiary with any Person, the
holders of Stockholder Shares prior to such merger or consolidation
hold greater than 50% of the voting stock of the surviving entity;
2. Issue, or permit any Subsidiary to issue, at less than fair
market value, determined by the Board in its reasonable good faith
judgment or, if requested in writing by the holders of a majority of
the Executive Stock, and at the expense of such holders, by a
nationally recognized investment banking firm selected by GTCR and
approved by the holders of a majority of the Executive Stock, which
approval shall not be
4
<PAGE> 5
unreasonably withheld (it being understood that any Additional GTCR
Securities as to which the condition described in clause (2) of paragraph
II(B) below is fulfilled will be deemed not to be issued at "less than
fair market value" within the meaning of this paragraph II(A)(2)), (a)
any notes or debt securities, (b) any equity securities (or any
securities convertible into or exchangeable for any equity securities) or
(c) any combination of such debt or equity securities; provided that such
approval shall not be required for the issuance (i) of shares, or options
to purchase shares, of Common Stock to employees or Outside Directors of
the company and its Subsidiaries or the issuance of Common Stock upon the
exercise of any such option, provided that (A) the aggregate number of
shares so issued to employees and Outside Directors (assuming the
exercise in full of all such options issued to employees of the Company
and its Subsidiaries or Outside Directors) shall not exceed 272,727 (as
such number may be proportionately adjusted to reflect any stock split,
reverse stock split, stock dividend or other subdivision or combination
of the Common Stock) and (B) in the case of the issuance of options to
any Outside Director, the exercise price of such options is determined by
the Board in its reasonable good faith judgment to be at or above the
fair market value of the underlying securities at the time of the
issuance of such options, (ii) of equity securities issued upon the
exercise, exchange or conversion of other equity securities issued
not in violation of this paragraph II(A)(2) in accordance with the terms
of such latter equity securities and (iii) to any employee of the Company
or any of its Subsidiaries or any Outside Director, of shares, or options
to purchase shares, of Common Stock previously issued (or covered by
options previously issued) in accordance with paragraph II(A)(2)(i)(A) in
the event that such shares or options have been repurchased or otherwise
reacquired by the Company or such option has expired or been terminated
prior to being fully exercised;
3. Consummate an Initial Public Offering;
4. Sell, lease or otherwise dispose of, or permit any Subsidiary to
sell, lease or otherwise dispose of, all or
5
<PAGE> 6
substantially all of the consolidated assets of the Company and its
Subsidiaries in any transaction or series of related transactions
(other than sales in the ordinary course of business and other than to
the Company or any Subsidiary of the Company);
5. Enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than the
business in which Lason Systems is actively engaged or considering
engaging immediately prior to the acquisition of the assets of Lason
Systems by Lason Acquisition on the date hereof;
6. Enter into, or permit any Subsidiary to enter into, any
transaction with GTCR or any of its Affiliates (including, but not
limited to, the payment by the Company or any of its Subsidiaries of any
management fees to GTCR or any of its Affiliates), or pay any
compensation (other than that provided for in paragraph I(B) above) or
issue any equity securities to the GTCR Directors;
7. Dismiss Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, P.C. or
Coopers & Lybrand as legal or accounting advisors for the Company or any
of its Subsidiaries or retain any other legal counsel or independent
auditor for the Company or any of its Subsidiaries;
8. Redeem any equity securities of the Company; provided that such
approval shall not be required for (a) the repurchase of shares, options
or other securities from any employee of the Company or any of its
Subsidiaries, or any Outside Director, upon the termination of his
employment with the Company and its Subsidiaries or directorship, as the
case may be, or (b) the repurchase or redemption of any securities
issued to any Person other than GTCR or any Affiliate of GTCR not in
violation of paragraph II(A)(2) above pursuant to any right or binding
obligation of the Company or any Subsidiary to repurchase or redeem such
securities;
9. Make any distributions upon the Class A Common or Class B Common;
provided that, until such time as the Unpaid
6
<PAGE> 7
Preference Amount and the Unpaid Yield have been paid in full, such
approval shall not be required for (a) a distribution to the holders
of Class B Common of up to one-third of the proceeds, net of underwriting
discounts and commissions, of a registered primary public offering of the
Company's equity securities, or (b) a distribution by the Company to the
holders of Class B Common after the second anniversary of the date hereof
of all or any portion of any amount described in Section 8.8(ii)(A) of
the Loan Agreement, provided that no such distribution shall be made
without such approval while any Deemed Loan (as defined in the Seller
Credit Agreements) is outstanding under any Seller Credit Agreement;
10. Amend the Company's Certificate of Incorporation or its bylaws
in any manner which modifies the rights of the holders of Executive Stock
pursuant to this Agreement or could reasonably be expected to have a
material adverse effect on the holders of Class A Common, provided that
such approval shall not be required for any such amendment providing for
the authorization of (and the relative rights, preferences and
obligations with respect to) securities which are subsequently issued in
compliance with paragraph II(A)(2) above; or
11. Enter into any agreement to do any of the foregoing.
For purposes of clause (A)(2) above, the term "fair market value" of any
securities means the cash purchase price which a willing buyer would pay a
willing seller for such securities as of the date of the related issuance.
B. Additional Investments by GTCR. From time to time, at its option,
the Company or any of its Subsidiaries may issue additional debt or equity
securities (the "Additional GTCR Securities") to GTCR or its Affiliates,
provided that, unless such issuance is a Designated Financing (as defined
below), prior to such investment(s) (each an "Additional Investment"), the terms
thereof (including the issue price of the Additional Investment as well as the
rights and characteristics of the Additional GTCR Securities) shall be either
(1) consented to by holders of a majority of the Executive Stock or (2)
determined by a nationally recognized investment banking firm selected by
holders of a
7
<PAGE> 8
majority of the Executive Stock and with whom none of the Senior Executives or
any of their respective Affiliates or Family Members, the Company, the
Company's Subsidiaries nor Lason Systems has had any prior dealings, to be fair
to the Company and the holders of each class of the Company's equity
securities, taking into consideration the potential dilutive effect of the
issuance of the Additional GTCR Securities, as well as the terms and conditions
upon which similar financing could be obtained from a third party which is not
an Affiliate of either the Company, GTCR or the Executives. Any issuance of
Additional GTCR Securities shall be subject to the provisions of paragraph IV
below. A "Designated Financing" shall mean the issuance of additional debt or
equity securities by the Company (x) at any time in which the Company is in
default in the payment of principal or interest under any of its outstanding
Indebtedness, (y) the proceeds of which will be used to permit the Company to
avoid a default in the payment of principal or interest under any of its
outstanding Indebtedness, or (z) in connection with the cure or waiver of an
actual or anticipated default under any financial covenant applicable any of
the Company's outstanding Indebtedness.
C. Put of Executive Stock Upon Certain Equity Investments.
(1) Right to Put. Except for issuances
(i) in connection with a Designated Financing,
(ii) pursuant to a registered primary public offering, or
(iii) upon the exercise of any option or other right
previously granted to acquire equity securities of the Company (it
being understood that pursuant to this paragraph II(C) the dilutive
impact of such option or other right shall be taken into account
upon the grant thereof),
if the issuance of any additional equity securities of the Company would cause
the Designated Stockholders and their Permitted Transferees to hold less than
20% of the outstanding Common Stock
8
<PAGE> 9
on a Fully Diluted Basis (giving effect to the securities, if any,
acquired by any Executive or Permitted Transferee pursuant to paragraph IV in
connection with such issuance), then the Company shall give each Designated
Stockholder at least 30 days' prior written notice of such proposed issuance,
and each Designated Stockholder shall have the right (the "Put") to require
GTCR to purchase all (but not less than all) of the Executive Stock held by
such Designated Stockholder, at the Market Value for such shares, by delivering
to GTCR prior to such issuance a written notice (the "Put Notice") to GTCR
specifying the number of shares to be purchased. The right to exercise the Put
will inure to the benefit of each Designated Stockholder's Permitted
Transferees with respect to shares transferred to such Permitted Transferee by
such Designated Stockholder (other than pursuant to paragraph 1(b) of the
Executive Stock Agreement). In connection with any exercise of the Put, the
Market Value of the Executive Stock in question will be determined in
accordance with paragraph II(C)(2) below. Within ten days after the final
determination of the Market Value for the Executive Stock to be purchased, GTCR
will purchase and the Designated Stockholder or Permitted Transferee in
question will sell the number of shares of Executive Stock specified in the Put
Notice at a mutually agreeable time and place (the "Put Closing"). At the Put
Closing, the participating Designated Stockholders and Permitted Transferees
shall deliver to GTCR certificates representing the Executive Stock to be
purchased by GTCR, and GTCR shall deliver to such selling Stockholder(s) the
Market Value of such Executive Stock by cashier's or certified check(s) payable
to such selling Stockholder(s) or by wire transfer of immediately available
funds to the account(s) designated by such selling Stockholder(s).
(2) Determination of Market Value.
(a) Whenever any determination of the Market Value of any
Executive Stock is required in connection with any exercise of the
Put, if, within ten days after the delivery of the related Put
Notice, GTCR and the holders of a majority of the shares of
Executive Stock which are required to be purchased by GTCR (the
"Put Holder Majority") agree in writing as to the amount of such
Market Value or a method of determination of Market Value
9
<PAGE> 10
not set forth in this paragraph II(C)(2) (e.g., the use of one
rather than three appraisers), such agreement shall be final,
binding and conclusive as to GTCR and all holders of such Executive
Stock and shall obviate the need for any Person to comply with the
appraisal procedures provided in paragraph II(C)(2)(b) and (c)
below.
(b) If, within ten days after the delivery of a Put Notice,
GTCR and the Put Holder Majority are unable to reach an agreement
as described in paragraph II(C)(2)(a) above, promptly (and in any
event not later than the twentieth day after the delivery of the
related Put Notice) each of GTCR, on the one hand, and the Put
Holder Majority, on the other hand, shall appoint a nationally
recognized investment banking firm (each an "Appraiser") and,
promptly after each such appointment, the two appointed investment
banking firms will mutually appoint a third nationally recognized
investment banking firm (also an "Appraiser") which has had no
prior business dealings with any of GTCR or its Affiliates, either
Senior Executive or any of his Affiliates or Family Members, the
Company or any of its Subsidiaries or Lason Systems. Each of GTCR
and the holders of Executive Stock exercising the Put shall use
reasonable efforts to cause each Appraiser to deliver its report
(an "Appraisal Report") setting forth its determination of the
Market Value (as defined in this Agreement) of the Executive Stock
in question (an "Appraisal Value") to GTCR and such holders within
thirty days of its selection. All fees and expenses of any
Appraiser in connection with any determination of Market Value
pursuant to this paragraph II(C)(2) shall be borne by the Company.
(c) The Market Value of any Executive Stock for purposes of
any exercise of the Put shall be the arithmetic mean of the amounts
of the Appraisal Values set forth in the Appraisal Reports of the
three Appraisers. Each determination of Market Value of any
Executive Stock to be purchased in connection with any exercise of
the Put and made in accordance with the
10
<PAGE> 11
paragraph II(C)(2) shall be final, binding and conclusive as to
GTCR and the holders of such Executive Stock.
D. Forgiveness. If at any time after the date hereof and prior
to the Initial Public Offering the Company issues any Common Stock or options or
other rights to acquire Common Stock, then, notwithstanding the provisions of
the Seller Credit Agreements, (a) each Designated Stockholder's obligation to
repay the Loans made to such Designated Stockholder (including Loans deemed to
have been made to such Designated Stockholder pursuant to Section 1.1(B)(ii) of
any Seller Credit Agreement, but not including any Deemed Loans made by such
Designated Stockholder pursuant to Section 1.1(B)(ii) of any Seller Credit
Agreement) will be forgiven to the extent necessary so that the remaining unpaid
principal amount of such Loans will equal the product of (i) the aggregate
unpaid principal amount of such Loans outstanding at the time of such issuance
(but prior to giving effect to such forgiveness) multiplied by (ii) the quotient
of (A) the percentage of the outstanding Common Stock on a Fully Diluted Basis
held by such Designated Stockholder and such Designated Stockholder's Permitted
Transferees after giving effect to such issuance divided by (B) the percentage
of Common Stock on a Fully Diluted Basis held by such Designated Stockholder and
such Designated Stockholder's Permitted Transferees at the time of such issuance
(but prior to giving effect to such issuance) (such quotient being hereinafter
referred to as the "Forgiveness Fraction"), and (b) each Designated
Stockholder's obligation to pay the unpaid accrued interest on such Loans will
be forgiven to the extent necessary so that the aggregate amount of the
remaining accrued unpaid interest on such Loans will equal the product of (i)
the aggregate amount of the accrued unpaid interest on such Loans outstanding at
the time of such issuance (but prior to giving effect to such issuance)
multiplied by (ii) the Forgiveness Fraction.
For example, if (1) prior to an issuance described in this paragraph
II(D), a Designated Stockholder holds 20% of the outstanding Common Stock
on a Fully Diluted Basis, (2) after giving effect to such issuance, such
Designated Stockholder will hold 18% of the outstanding Common Stock on a
Fully Diluted Basis, (3) the unpaid principal amount of such Designated
Stockholder's Loans equals $500,000, and (4) the
11
<PAGE> 12
accrued unpaid interest on such Designated Stockholder's Loans equals
$5,000, then a portion of such Loans and such interest will be forgiven
such that the remaining principal amount of such Loans will equal
$450,000 ($500,000 x (18 / 20)) and the remaining accrued unpaid interest
will equal $4500 ($5,000 x (18 / 20)).
All Taxes imposed on any Designated Stockholder and attributable to the amount
of the unpaid principal and unpaid interest forgiven pursuant to this paragraph
II(D) shall be paid by such Designated Stockholder and shall not entitle such
Designated Stockholder to any Future Advance under any Seller Credit Agreement
or otherwise be treated as a Tax for purposes of any Seller Credit Agreement.
No forgiveness pursuant to this paragraph II(D) will reduce the "Total Loan
Amount" referred to in any Seller Credit Agreement. For purposes of this
paragraph II(D), (1) Loans made under any Seller Credit Agreement to Yanover
will be treated as if such Loans had been made to the Yanover Trusts, and the
Yanover Trusts will be treated as a single Designated Stockholder, and (2)
Loans made under any Seller Credit Agreement to Nesbitt will be treated as if
such Loans had been made to the Nesbitt Trust.
III. Restrictions on Transfer of Stockholder Shares.
A. Transfer of Stockholder Shares. No Stockholder shall sell, transfer,
assign, pledge or otherwise dispose of (a "Transfer") any Stockholder Shares or
any interest therein except pursuant to the provisions of this paragraph III or
pursuant to a Public Sale, a sale pursuant to paragraph II(C) above or a
transfer by such Stockholder described in paragraph 1(b) of the Executive Stock
Agreement. Each Stockholder agrees not to consummate any Transfer of
Stockholder Shares (other than a Public Sale, a sale pursuant to paragraph
II(C) above or a transfer by such Stockholder described in paragraph 1(b) of
the Executive Stock Agreement) until 30 days after the later of the delivery to
the Company and the other Stockholders of such Stockholder's Sale Notice (as
described in paragraph III(B) below), unless the parties to the Transfer have
been finally determined pursuant to paragraph III(B) below prior to the
expiration of such 30-day period (the "Election Period").
12
<PAGE> 13
B. Participation Rights.
1. At least 30 days prior to any Transfer of Stockholder Shares
(other than a Public Sale, a sale pursuant to paragraph II(C) above or a
transfer described in paragraph 1(b) of the Executive Stock Agreement),
the Stockholder making such Transfer (the "Transferring Stockholder")
shall deliver a written notice (the "Sale Notice") to the Company and the
other Stockholders (the "Other Stockholders"), specifying in reasonable
detail the identity of the prospective transferee(s) and the terms and
conditions of the Transfer. The Other Stockholders may elect to
participate in the contemplated Transfer by delivering written notice to
the Transferring Stockholder within 30 days after delivery of the Sale
Notice. If any Other Stockholders have elected to participate in such
Transfer, the Transferring Stockholder and such Other Stockholders shall
be entitled to sell in the contemplated Transfer, on the same terms and
at the price calculated pursuant to paragraph III(B)(2) below, a number
of Stockholder Shares equal to the product of (i) the quotient determined
by dividing the number of Stockholder Shares owned by such person by the
aggregate number of Stockholder Shares owned by the Transferring
Stockholder and the Other Stockholders participating in such sale and
(ii) the number of Stockholder Shares to be sold in the contemplated
Transfer.
For example, if the Sale Notice contemplated a sale of 100
Stockholder Shares by the Transferring Stockholder, and if the
Transferring Stockholder at such time owns 30 Stockholder Shares
and if one Other Stockholder elects to participate and owns 20
Stockholder Shares, the Transferring Stockholder would be entitled
to sell 60 shares (30 / 50 x 100 shares) and the Other Stockholder
would be entitled to sell 40 shares (20 / 50 x 100 shares).
Each Stockholder shall use best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Other Stockholders
in any contemplated Transfer, and no Stockholder shall transfer any of
its Stockholder Shares to the prospective transferee(s) if the
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<PAGE> 14
prospective transferee(s) declines to allow the participation of all
Other Stockholders which elect to participate.
2. The purchase price to be paid by any transferee for Stockholder
Shares Transferred in accordance with this paragraph III(B) shall be
determined as follows:
(a) If the Transferring Stockholder has agreed to Transfer any
Class B Common to such transferee, then (i) the price per share to
be paid for Class B Common included in such Transfer shall be equal
to the amount per share of Class B Common which such transferee has
agreed to pay the Transferring Stockholder, and (ii) the price per
share to be paid for Class A Common included in such Transfer shall
be the price per share of Class B Common described in clause (i)
reduced (but not below zero) by the quotient (the "Per Share
Preference") of (A) the sum of the Unpaid Preference Amount and the
Unpaid Yield at such time divided by (B) the number of shares of
Class B Common then outstanding.
(b) If the Transferring Stockholder has not agreed to Transfer
Class B Common to such transferee, then (i) the price per share to
be paid for Class A Common included in such Transfer shall be equal
to the amount per share of Class A Common which such transferee has
agreed to pay to the Transferring Stockholder and (ii) the price
per share to be paid for Class B Common included in such Transfer
shall be the price per share described in clause (i) plus the Per
Share Preference at such time.
C. Permitted Transfers. The restrictions contained in this
paragraph III shall not apply with respect to any Transfer of
Stockholder Shares by any Stockholder:
1. in the case of any Stockholder who is an individual, pursuant to
applicable laws of descent and distribution or among such Stockholder and
members of such Stockholder's Family Group, or
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<PAGE> 15
2. in the case of any Stockholder, among such Stockholder and its
Affiliates;
(with respect to Stockholder Shares so Transferred to them, members of such
Family Group and such Affiliates being collectively referred to herein as
"Permitted Transferees"); provided that the restrictions contained in this
paragraph III shall continue to be applicable to the Stockholder Shares after
any such Transfer, and provided further that the transferee(s) of such
Stockholder Shares shall have agreed in writing to be bound as a "Stockholder"
by the provisions of this Agreement.
D. Termination of Restrictions. The restrictions on the Transfer of
Stockholder Shares set forth in this paragraph III shall continue with respect
to each Stockholder Share until the date on which such Stockholder Share has
been transferred in a Public Sale.
IV. Pre-Emptive Rights.
A. Except for issuances of equity securities of the Company or
options or other rights to acquire equity securities of the Company
1. in connection with a registered primary public offering,
2. to employees or Outside Directors of the Company or its
Subsidiaries,
3. to any lender (other than GTCR or any of its Affiliates) in
connection with the incurrence of Indebtedness ("Equity-Linked
Indebtedness") by the Company or any of its Subsidiaries,
4. as payment of all or a portion of the purchase price of any
business or assets thereof acquired by the Company or any of its
Subsidiaries, or
5. upon the exercise of any option or other right described in any
of clauses (1) through (4) above or any other
15
<PAGE> 16
option or right to acquire equity securities issued by the Company,
if the Company authorizes the issuance or sale of any equity securities of the
Company or any securities containing options or rights to acquire any equity
securities of the Company (other than as a dividend on outstanding Common
Stock), the Company shall first offer to sell to each Stockholder, at the same
price and on the same terms, a portion of such securities, options or rights
(the "New Securities") equal to the quotient of (i) the number of Stockholder
Shares held by such Stockholder divided by (ii) the total number of shares of
Common Stock outstanding on a Fully Diluted Basis, in each case immediately
prior to the issuance or sale in question.
B. In order to exercise its purchase rights hereunder, a Stockholder must
within 30 days after receipt of written notice from the Company describing in
reasonable detail the New Securities being offered, the purchase price thereof,
the payment terms and such Stockholder's percentage allotment, deliver a
written notice to the Company describing its election hereunder. If all of the
New Securities offered to the Stockholders is not fully subscribed by the
Stockholders, the remaining New Securities shall be reoffered by the Company to
the Stockholders purchasing their full allotment upon the terms set forth in
this paragraph IV until either all such New Securities have been subscribed for
or no Stockholder subscribes for additional New Securities, except that such
Stockholder must give written notice of its election to purchase such reoffered
New Securities within five (and not 30) days after receipt of notice of any
such reoffer.
C. If a Stockholder purchases all or any portion of any New Securities
offered pursuant to this paragraph V ("Purchased New Securities"), such
Stockholder shall be required to concurrently purchase an equal proportion of
each other class of debt or equity securities of the Company or any of its
Subsidiaries which are issued contemporaneously with such Purchased New
Securities.
D. During the 90 days after the expiration of the offering periods
described above, the Company shall be entitled to sell any New Securities which
the Stockholders have not elected to
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<PAGE> 17
purchase, on terms and conditions no more favorable to the purchasers
thereof than those offered to the Stockholders. Any New Securities offered or
sold by the Company after such 90-day period must be reoffered to the
Stockholders pursuant to the terms of this paragraph IV.
E. Prior to the issuance or incurrence of Equity-Linked Indebtedness, the
Company will permit each Stockholder a reasonable opportunity to provide or
subscribe for such Stockholder's pro rata portion of such Equity-Linked
Indebtedness (including any equity securities issued in connection therewith)
upon the same terms and conditions upon which such Equity-Linked Indebtedness
and such equity securities are to be issued or incurred. A Stockholder's "pro
rata portion" for purposes of the preceding sentence shall be equal to the
quotient of (i) the number of Stockholder Shares held by such Stockholder
divided by (ii) the total number of shares of Common Stock outstanding on a
Fully Diluted Basis, in each case immediately prior to the issuance or
incurrence of the Equity-Linked Indebtedness in question.
F. The rights under this paragraph IV shall terminate upon the earlier of
(i) the Initial Public Offering and (ii) such time as the Executives hold in
the aggregate less than 20% of the Common Stock on a Fully Diluted Basis.
V. Initial Public Offering. Subject to the provisions of paragraph
II(A)(3) above, in the event that the Initial Public Offering is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the Common Stock structure shall adversely affect
the marketability of the offering, each Stockholder shall consent to and vote
for a recapitalization, reorganization and/or exchange of the Common Stock into
securities that the managing underwriters find acceptable and shall take all
necessary or desirable actions in connection with the consummation of the
recapitalization, reorganization and/or exchange; provided that the resulting
securities reflect and are consistent with the relative rights and preferences
among the outstanding classes of securities set forth in the Company's
Certificate of Incorporation, and such recapitalization, reorganization or
exchange is otherwise fair and reasonable to the Company and the holders of
each class of the
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<PAGE> 18
Company's equity securities in light of such relative rights and preferences.
VI. Sale of the Company. Upon the tenth anniversary of the date hereof,
in the event that the Company has not consummated an Initial Public Offering,
the Stockholders, Yanover, Nesbitt and the Company agree to collectively use
best efforts to sell the Company (by merger, consolidation or sale of stock or
assets) on terms and conditions which maximize shareholder value (taking into
account, among other things, potential tax consequences), and to cause the
Company to retain an investment banking firm or broker (selected by the Company
and approved by (a) GTCR and (b) the holders of a majority of the Executive
Stock then outstanding, each of which approvals shall not be unreasonably
withheld) to assist the Stockholders in finding a buyer and consummating such a
sale of the Company.
VII. Confidential Information.
A. Each Executive which is an employee of the Company or Lason
Acquisition, and each of Yanover and Nesbitt, acknowledges that the
confidential or proprietary information, observations and data obtained by him
while employed by the Company and/or its Subsidiaries (including those obtained
while employed by Lason Systems, Inc., a Michigan corporation ("Lason
Systems"), prior to the date of this Agreement and the acquisition of Lason
Systems by the Company and its wholly owned Subsidiary) concerning the business
or affairs of the Company, Lason Systems or any Subsidiary of the Company
("Confidential Information") are the property of the Company or such
Subsidiary. Therefore, each Executive which is an employee of the Company or
Lason Acquisition, and each of Yanover and Nesbitt, 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, 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 Executive which is an employee of the Company or Lason Acquisition, and
each of Yanover and Nesbitt, shall deliver to the Company at the termination of
his employment, or at any other time the Company may request, all memoranda,
notes, plans, records, reports, computer tapes and software and other
18
<PAGE> 19
documents and data (and copies thereof) relating to the Confidential
Information, work product or the business of the Company, Lason Systems or any
Subsidiary of the Company 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, Lason Systems or any other Subsidiary 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 software and other documents
and data (and copies thereof) relating to such information, observations and
data or the business of the Company, Lason Systems or any Subsidiary of the
Company which it may then possess or have under his control.
VIII. Non-Compete; Non-Solicitation.
A. Each of Yanover, Nesbitt, Richard C. Kowalski and Donald L. Elland (the
"Designated Sellers") acknowledges that in the course of his ownership of stock
of, and during his employment with, Lason Systems he has become familiar, and
in the course of his employment with the Company and/or its Subsidiaries he
will become familiar, with Lason Systems', the Company's and its 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 Seller agrees that, during his term
of employment with the Company and its Subsidiaries and for five years
thereafter (the "Noncompete Period"), he shall not directly or indirectly own,
manage, control, participate in, consult with, render services for, or in any
manner engage in, any business competing with the businesses of the Company or
its Subsidiaries as such businesses exist or are in process on the date of the
19
<PAGE> 20
termination of such Designated Seller'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 any Designated Seller 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 Seller has no
active participation in the business of such corporation.
B. During the Noncompete Period, each Designated Seller 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 Seller's period of employment with the Company or any Subsidiary, or
(iii) induce or attempt to induce any customer, supplier, licensee or other
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 or any Subsidiary.
C. If, at the time of enforcement of this paragraph VIII, a court shall
hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable 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 by law.
D. In the event of the breach or a threatened breach by any Designated
Seller of any of the provisions of this paragraph VIII, 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 to enforce or
prevent any violations of the provisions hereof (without posting a bond or
other security).
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<PAGE> 21
IX. Legend. Each certificate evidencing Stockholder Shares and each
certificate issued in exchange for or upon the transfer of any Stockholder
Shares (if such shares remain Stockholder Shares as defined herein after such
transfer) shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDERS AGREEMENT DATED AS OF
JANUARY 17, 1995 AMONG THE ISSUER OF SUCH SECURITIES
(THE "COMPANY") AND CERTAIN OF THE COMPANY'S
STOCKHOLDERS. A COPY OF SUCH STOCKHOLDERS 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 Stockholder
Shares outstanding prior to the date hereof. The legend set forth above shall
be removed from the certificates evidencing any shares which cease to be
Stockholder Shares in accordance with the definition of the term "Stockholder
Shares" in paragraph XII below.
X. Transfer. Prior to transferring any Stockholder Shares (other than in
a Public Sale or a sale pursuant to paragraph II(C) above) to any person or
entity, the transferring Stockholder shall cause the prospective transferee to
execute and deliver to the Company, for the benefit of the Company and the
other Stockholders a counterpart of this Agreement pursuant to which such
transferee agrees to be bound as a "Stockholder" by the provisions of this
Agreement.
XI. Additional Stockholders. In connection with the issuance of any
equity securities of the Company (other than in connection with a public
offering) to any Person, the Company may permit such Person to become a party
to this Agreement and succeed to all of the rights and obligations of a
"Stockholder" under this Agreement by obtaining an executed counterpart
signature page to this Agreement, and, upon such execution, such Person shall
for all purposes be a "Stockholder" party to this Agreement.
21
<PAGE> 22
XII. 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; provided that, for the purposes of
paragraph II(A)(6) hereof, neither the Company nor any of its Subsidiaries
shall be deemed to be an "Affiliate" of GTCR.
"Class A Common" means (i) the Class A-1 Common and (ii) the Class A-2
Common.
"Class A-2 Common" means the Company's Class A-2 Common Stock, par value
$.01 per share.
"Common Stock" means the Class A Common and the Class B Common.
"Designated Stockholder" means each of the Yanover Trusts, the Nesbitt
Trust, Richard C. Kowalski, Donald L. Elland and Gregory Carey.
"Executive Stock" means any Class A-1 Common purchased by any Designated
Stockholder in the transactions described in paragraph 1(a) of that certain
Executive Stock Agreement of even date herewith and not contemplated to be
transferred by such Designated Stockholder pursuant to paragraph 1(b) of the
Executive Stock Agreement, in each case so long as such shares are held by any
Designated Stockholder or a Permitted Transferee thereof.
"Family Group" of any 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.
"Fully Diluted Basis" means, without duplication, (i) all shares of Common
Stock outstanding at the time of determination plus (ii) all shares of Common
Stock issuable upon conversion of any convertible securities or the exercise of
any option, warrant or similar right, whether or not such conversion, right or
option,
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<PAGE> 23
warrant or similar right is then exercisable. For purposes of determining the
amount of Common Stock outstanding on a Fully Diluted Basis, each Stockholder
will be deemed to hold all Common Stock issuable upon conversion of any
convertible securities or the exercise of any option, warrant or similar right
held by such Stockholder, whether or not such conversion, right or option,
warrant or similar right is then exercisable.
"Future Advance" has the meaning assigned to such term in the Seller
Credit Agreements.
"Indebtedness" means all indebtedness for borrowed money, all indebtedness
under revolving credit arrangements, all capitalized lease obligations and all
guarantees of any of the foregoing.
"Initial Public Offering" means the sale in an initial underwritten
public offering registered under the Securities Act (other than on Form S-8 or
a similar form) of shares of the Company's Common Stock.
"Lason Acquisition" means Lason Systems, Inc., a Delaware corporation
formerly known as "Lason Acquisition Corp."
"Loan Agreement" means the Loan Agreement dated as of the date hereof
among Lason Acquisition, First Union National Bank of North Carolina, as agent,
and certain lenders party thereto, as in effect from time to time.
"Loans" has the meaning assigned to such term in the Seller Credit
Agreements.
"Market Value" of any shares of Executive Stock means the cash purchase
price which a willing buyer would pay a willing seller for such shares of
Executive Stock as of the date of the related issuance described in paragraph
II(C) above, as determined in accordance with paragraph II(C)(2).
"Nesbitt Trust" means the Allen J. Nesbitt Living Trust dated December 7,
1994.
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<PAGE> 24
"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.
"Permitted Transferee" shall have the meaning set forth in paragraph
III(C) hereof.
"Public Sale" means any sale of Stockholder Shares to the public pursuant
to an offering registered under the Securities Act or to the public through a
broker, dealer or market maker pursuant to the provisions of Rule 144 adopted
under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Seller Credit Agreements" means the Credit Agreements dated as of the
date hereof each between Lason Acquisition, on the one hand, and one of the
Designated Stockholders, Yanover or Nesbitt, on the other hand, as in effect
from time to time.
"Senior Executive" means Yanover or Nesbitt, in each case so long as he or
any of his Permitted Transferees holds any Stockholder Shares.
"Stockholder Shares" means (i) any Common Stock purchased or otherwise
acquired by any Stockholder and (ii) any equity securities issued or issuable
directly or indirectly with respect to the Common Stock 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. As to any particular shares constituting Stockholder Shares,
such shares will cease to be Stockholder Shares when they have been
(x) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them or (y) sold to the
public through a broker, dealer or market maker pursuant to Rule 144 (or any
similar provision then in force) under the Securities Act.
"Subsidiary" means any corporation of which the securities having a
majority of the ordinary voting power in
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<PAGE> 25
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.
"Tax" has the meaning assigned to such term in the Seller Credit
Agreements.
"Unpaid Preference Amount" means the "Unpaid Preference Amount" as defined
in the Company's Certificate of Incorporation.
"Unpaid Yield" means the "Unpaid Yield" as defined in the Company's
Certificate of Incorporation.
"Yanover Trusts" means the Robert A. Yanover Living Trust U/A/D May 11,
1982 and the Joseph Jonathan Yanover and Jennifer D. Yanover Irrevocable Trust
dated January 5, 1993.
XIII. Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares or any interest therein in violation of any
provision of this Agreement shall be void, and the Company shall not record
such Transfer on its books or treat any purported transferee of such
Stockholder Shares or interest therein as the owner of such shares or interest
for any purpose.
XIV. 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 in writing by each of (i) the Company, (ii) the
holders of a majority of the Class B Common which are Stockholder Shares, and
(iii) (a) at any time when the Designated Stockholders hold in the aggregate
20% or more of the Common Stock outstanding on a Fully Diluted Basis, the
holders of a majority of the Executive Stock, and (b) at any other time, the
holders of a majority of the Class A Common which are Stockholder Shares. 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 provisions and shall not affect the
right of such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
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<PAGE> 26
XV. 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 or any other jurisdiction, 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.
XVI. 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 have related to the subject matter
hereof in any way.
XVII. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Stockholders and any subsequent
holders of Stockholder Shares and the respective successors and assigns of each
of them, so long as they hold Stockholder Shares.
XVIII. 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.
XIX. 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 any Stockholder may in
its sole discretion apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive relief
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<PAGE> 27
(without posting a bond or other security) in order to enforce or prevent
any violation of the provisions of this Agreement.
XX. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the Company and to GTCR at the addresses set forth below and to the
Executives and any subsequent holder of Stockholder Shares subject to this
Agreement at such addresses as indicated by the Company's records, or at such
address or to the attention of such other person as the recipient party has
specified by prior written notice to the sending party. Notices will be deemed
to have been given hereunder when delivered personally, 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 Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: President
with copies, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, P.C.
2000 Town Center
Suite 1500
Southfield, Michigan 48075
Attention: Laurence B. Deitch
and
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<PAGE> 28
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: John L. Kuehn
If to GTCR:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
with a copy, which will not constitute
notice to GTCR, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attention: John L. Kuehn
XXI. 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 shall be governed by the internal law, and not the law of conflicts,
of Michigan.
XXII. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
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<PAGE> 29
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LASON HOLDINGS, INC.
By /s/ Allen J. Nesbitt
-----------------------------
Its President
----------------------------
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 /s/ Bruce Rauner
-----------------------------
Its Principal
----------------------------
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<PAGE> 30
ROBERT A. YANOVER LIVING TRUST
U/A/D MAY 11, 1982
By: /s/ Robert A. Yanover
-----------------------------
Its: Trustee
----------------------------
JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE
TRUST DATED JANUARY 5, 1993
By: /s/ Laurence B. Deitch
-----------------------------
Laurence B. Deitch
Trustee
ALLEN J. NESBITT LIVING TRUST,
DATED DECEMBER 7, 1994
By: /s/ Allen J. Nesbitt
-----------------------------
Allen J. Nesbitt
Trustee
/s/ Robert A. Yanover
---------------------------------
Robert A. Yanover
/s/ Allen J. Nesbitt
---------------------------------
Allen J. Nesbitt
/s/ Richard C. Kowalski
---------------------------------
Richard C. Kowalski
/s/ Donald L. Elland
---------------------------------
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<PAGE> 31
Donald L. Elland
/s/ Gregory Carey
------------------------------
Gregory Carey
31
<PAGE> 32
SCHEDULE OF EXECUTIVES
Robert A. Yanover Living
Trust U/A/D May 11, 1982
Joseph Jonathan Yanover
and Jennifer D. Yanover
Irrevocable Trust
Dated January 5, 1993
Allen J. Nesbitt Living
Trust Dated December 7, 1994
Richard C. Kowalski
Donald L. Elland
Gregory Carey
32
<PAGE> 1
EXHIBIT 10.5
REGISTRATION AGREEMENT
THIS REGISTRATION AGREEMENT (this "Agreement") is made as of January 17,
1995, between Lason Holdings, Inc., a Delaware corporation (the "Company");
Golder, Thoma, Cressey, Rauner Fund IV, L.P., a Delaware limited partnership
("GTCR"), and each of the stockholders listed on the Schedule of Executives
attached hereto (the "Executives").
The Company and GTCR are parties to a Purchase Agreement of even date
herewith (as in effect from time to time, the "Purchase Agreement"). The
Company and the Executives are parties to an Executive Stock Agreement of even
date herewith (as in effect from time to time, the "Executive Agreement"). In
addition, the Company, GTCR and the Executives are parties to a Stockholders
Agreement of even date herewith (as in effect from time to time, the
"Stockholders Agreement"). In order to induce GTCR to enter into the Purchase
Agreement and the Executives to enter into the Executive Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement.
Unless otherwise provided in this Agreement, capitalized terms used herein
shall have the meanings set forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) At any time after the 180th day after the closing of the Initial
Public Offering, (i) the holders of a majority of Executive Registrable
Securities may request (A) one registration under the Securities Act of all or
part of their Executive Registrable Securities on Form S-1 or any similar
long-form registration (a "Long-Form Registration") or, if available, on Form
S-2 or S-3 or any similar short-form registration (a "Short-Form Registration")
in which the Company will pay all Registration Expenses (as defined in
paragraph 5 below) and (B) in addition to the Demand Registration (as defined
below) set forth in paragraph 1(a)(i)(A), two Short-Form Registrations of all
or part of their Executive Registrable Securities in which the Company will pay
all Registration Expenses and (ii) GTCR may request (A) one
<PAGE> 2
Long-Form Registration or, if available, Short-Form Registration of all or part
of its GTCR Registrable Securities in which the Company will pay all
Registration Expenses and (B) in addition to the Demand Registration set forth
in paragraph 1(a)(ii)(A), two Short-Form Registrations of all or part of its
GTCR Registrable Securities in which the Company will pay all Registration
Expenses. Each request for a Demand Registration shall specify the approximate
number of Registrable Securities requested to be registered and the anticipated
per share price range for such offering. Within ten days after receipt of any
such request, the Company will give written notice of such requested
registration to all other holders of Registrable Securities and will include in
such registration all Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 15 days after the
receipt of the Company's notice. All registrations requested pursuant to this
paragraph 1(a) are referred to herein as "Demand Registrations."
(b) Demand Registrations will be Short-Form Registrations whenever the
Company is permitted to use any applicable short form. The Company will use
its best efforts to make Short-Form Registrations available for the sale of
Registrable Securities. Any requested registration will count as a permitted
Demand Registration only if it has become effective (or if such Demand
Registration does not become effective due solely to the fault of the holders
requesting such registration, and such holders do not reimburse the Company for
all Registration Expenses paid by the Company and bear all other Registration
Expenses in connection therewith).
(c) If a Demand Registration is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the number of
Registrable Securities and other securities requested to be included in such
offering exceeds the number of Registrable Securities and other securities
which can be sold therein without adversely affecting the marketability of the
offering, the Company will include in such registration prior to the inclusion
of any securities which are not Registrable Securities the number of
Registrable Securities requested to be included which in the opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering, pro rata among the respective holders thereof on the basis of the
number of Registrable Securities requested to be included in such registration
by each such holder.
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<PAGE> 3
(d) The Company will not be obligated to effect any Demand Registration
within six months after the effective date of a Demand Registration or a
registration in which the holders of Registrable Securities were given
piggyback rights pursuant to paragraph 2. The Company may postpone once, but
not in succession, for up to six months, the filing or the effectiveness of a
registration statement for a Demand Registration if such Demand Registration
would reasonably be expected to have an adverse effect on any proposal or plan
by the Company or any of its Subsidiaries to engage in any acquisition of
assets (other than in the ordinary course of business) or any merger,
consolidation, tender offer or other transaction or any material corporate
development; provided that in such event, the holders of Registrable Securities
initially requesting such Demand Registration will be entitled to withdraw such
request and, if such request is withdrawn, such Demand Registration will not
count as one of the permitted Demand Registrations hereunder and the Company
will pay all Registration Expenses in connection with such registration.
(e) The holders of a majority of the Registrable Securities initially
requesting registration will have the right to select the investment banker(s)
and manager(s) to administer the offering, subject to the approval of the
Company, which approval will not be unreasonably withheld.
2. Piggyback Registrations.
(a) Right to Piggyback. At any time after the closing of the Initial
Public Offering, if the Company proposes to register any of its securities
under the Securities Act (other than pursuant to a Demand Registration) and the
registration form to be used may be used for the registration of Registrable
Securities (in each case, a "Piggyback Registration"), the Company will give
prompt written notice to all holders of Registrable Securities of its intention
to effect such a registration and will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within fifteen (15) days after the receipt of
the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders of
Registrable Securities will be paid by the Company in all Piggyback
Registrations.
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<PAGE> 4
(c) Priority on Primary Registrations. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the
marketability of the offering, the Company will include in such registration in
the following order of priority (i) first, the securities the Company proposes
to sell and (ii) second, the Registrable Securities and other securities of the
Company requested to be included in such registration, pro rata among the
holders of such Registrable Securities and other securities of the Company on
the basis of the number of Registrable Securities and other securities
requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback Registration is
an underwritten secondary registration undertaken pursuant to the exercise of a
contractual right to require such registration by holders of the Company's
securities, and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in such offering without
adversely affecting the marketability of the offering, the Company will include
in such registration in the following order of priority (i) first, the
securities requested to be included therein by the holders initiating such
registration and (ii) second, the Registrable Securities and other securities
of the Company requested to be included in such registration, pro rata among
the holders of such Registrable Securities and other securities of the Company
on the basis of the number of Registrable Securities and other securities
requested to be included in such registration.
(e) Selection of Underwriters. If any Piggyback Registration is an
underwritten offering, the Company shall select the investment banker(s) and
manager(s) for the offering, subject to the approval of the holders of a
majority of the Registrable Securities included in such Piggyback Registration,
which approval will not be unreasonably withheld.
3. Holdback Agreements. Each holder of Registrable Securities agrees not
to effect any public sale or distribution (including sales pursuant to Rule
144) of equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven (7) days
prior to
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<PAGE> 5
and the 180-day period beginning on the effective date of an Initial Public
Offering, any underwritten Demand Registration or any Piggyback Registration in
which Registrable Securities are eligible to be included (except as part of
such underwritten registration), unless the underwriters managing such
registration otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered
pursuant to this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof and pursuant thereto the Company will as
expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission a
registration statement with respect to such Registrable Securities and use its
best efforts to cause such registration statement to become effective;
(b) prepare and file with the Securities and Exchange Commission such
amendments and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to comply with the provisions
of the Securities Act with respect to the disposition of all securities covered
by such registration statement;
(c) furnish to each seller of Registrable Securities such number of copies
of such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such seller may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
as any seller reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable such seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such seller (provided that the Company will not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph,
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<PAGE> 6
(ii) subject itself to taxation in any such jurisdiction or (iii) consent to
general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus and/or registration statement so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on the NASD automated quotation system;
(g) provide a transfer agent and registrar for all Registrable Securities
not later than the effective date of the first registration statement relating
to Registrable Securities or securities of any class;
(h) enter into such customary agreements (including underwriting
agreements in customary form) in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable Securities,
any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
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<PAGE> 7
(j) otherwise use its best efforts to comply with all applicable rules and
regulations of the Securities and Exchange Commission and those of applicable
state securities regulatory authorities, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve (12) months beginning with the first day of the
Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder; and
(k) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company will use its reasonable best efforts promptly to
obtain the withdrawal of such order.
5. Registration Expenses. All expenses incident to the Company's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with federal
securities or state blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Company (all such expenses being
herein called "Registration Expenses"), will be borne by the Company. In
connection with each Demand Registration and each Piggyback Registration, the
Company will reimburse the holders of Registrable Securities for the reasonable
fees and disbursements of one legal counsel designated by the holders of a
majority of the Registrable Securities requested to be included in such
registration (which counsel will represent all holders of Registrable
Securities requested to be included in such registration).
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by law, each
holder of Registrable Securities, each holder's officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, damages, liabilities and expenses (including
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<PAGE> 8
reasonable attorneys' fees) caused by any untrue or alleged untrue statement of
material fact contained in any registration statement, prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
the same are caused by or contained in any information furnished in writing to
the Company by such holder expressly for use therein or by such holder's
failure to deliver a copy of the registration statement or prospectus or any
amendments or supplements thereto after the Company has furnished such holder
with a sufficient number of copies of the same. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a holder of
Registrable Securities is participating, each such holder will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Securities Act) against any losses, claims, damages, liabilities
and expenses resulting from any untrue or alleged untrue statement of material
fact contained in the registration statement, prospectus or preliminary
prospectus or any amendment thereof or supplement thereto or any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, but only to the extent that such
untrue statement or omission is contained in any information or affidavit so
furnished in writing by such holder; provided that the obligation to indemnify
will be individual to each holder and will be limited to the net amount of
proceeds received by such holder from the sale of Registrable Securities
pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
-8-
<PAGE> 9
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
(1) counsel for all parties indemnified by such indemnifying party with respect
to such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities.
7. Participation in Underwritten Registrations. No Person may participate
in any registration hereunder which is underwritten unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements entered into by the Company, (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements, and (c) completes and executes any other documents reasonably
required.
8. Definitions.
"Common Stock" means any share of the Company's Class A-1 Common Stock,
par value $.01 per share (the "Class A-1 Common"), Class A-2 Common Stock, par
value $.01 per share, or Class B Common Stock, par value $.01 per share ("Class
B Common").
"Executive Registrable Securities" means, irrespective of which Person
actually holds such securities, (i) any shares of Common Stock acquired as of
the date hereof by the Executives pursuant to the Executive Agreement or the
Stockholders Agreement, (ii) any shares of Common Stock acquired hereafter by
the Executives, or any executive employee of the Company or its Subsidiaries
who becomes a party to this Agreement, and (iii) any
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<PAGE> 10
capital stock of the Company issued or issuable with respect to the securities
referred to in clauses (i) - (ii) above by way of a stock dividend, stock
split, conversion or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. As to any
particular Executive Registrable Securities, such securities will cease to be
Executive Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144 (or
any similar rule then in force) under the Securities Act. For purposes of this
Agreement, a Person will be deemed to be a holder of Executive Registrable
Securities whenever such Person has the right to acquire such Executive
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected.
"GTCR Registrable Securities" means, irrespective of which Person actually
holds such securities, (i) any shares of Common Stock acquired as of the date
hereof by GTCR pursuant to the Purchase Agreement, (ii) any shares of Common
Stock acquired hereafter by GTCR, and (ii) any capital stock of the Company
issued or issuable with respect to the securities referred to in clauses (i) -
(ii) above by way of a stock dividend, stock split, conversion or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular GTCR Registrable Securities, such
securities will cease to be GTCR Registrable Securities when they have been
distributed to the public pursuant to an offering registered under the
Securities Act or sold to the public through a broker, dealer or market maker
in compliance with Rule 144 (or any similar rule then in force) under the
Securities Act. For purposes of this Agreement, a Person will be deemed to be
a holder of GTCR Registrable Securities whenever such Person has the right to
acquire such GTCR Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or not
such acquisition has actually been effected.
"Initial Public Offering" means the sale in an initial underwritten
public offering registered under the Securities Act
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<PAGE> 11
(other than on Form S-8 or a similar form) of shares of the Company's Common
Stock.
"Person" means an individual, a partnership, a joint venture, a
corporation, a trust, a limited liability company, an unincorporated
organization or a government or any department or agency thereof.
"Registrable Securities" means, collectively, the Executive Registrable
Securities and the GTCR Registrable Securities.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person:
(a) any corporation a majority of the total voting
power of shares of stock of which is 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
(b) any partnership, association or other business
entity a majority of the partnership or other similar
ownership interest of which is at the time owned or
controlled, directly or indirectly, by that Person or one or
more Subsidiaries of that Person or a combination thereof.
For purposes of this definition, a Person is deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person is allocated a majority of the gains or losses of such partnership,
association or other business entity or is or controls the managing director or
general partner of such partnership, association or other business entity.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities
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<PAGE> 12
which is inconsistent with or violates the rights granted to the holders of
Registrable Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company will not
take any action, or permit any change to occur, with respect to its securities
which would materially and adversely affect the ability of the holders of
Registrable Securities to include such Registrable Securities in a registration
undertaken pursuant to this Agreement or which would materially and adversely
affect the marketability of such Registrable Securities in any such
registration (including, without limitation, effecting a stock split or a
combination of shares).
(c) Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law. 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 any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or other security) for specific performance and for other injunctive
relief in order to enforce or prevent violation of the provisions of this
Agreement.
(d) Amendments and Waivers. The provisions of this Agreement may be
amended, modified or waived only upon the prior written consent of the Company
and holders of a majority of the Registrable Securities which are Class A-1
Common or Class B Common; provided that no such amendment, modification or
waiver which adversely affects the holders of Class A-1 Common shall be
effective unless it is approved in writing by the holders of a majority of the
Class A-1 Common which are Registrable Securities, and no such amendment,
modification or waiver which adversely affects the holders of Class B Common
shall be effective unless its is approved in writing by the holders of a
majority of the Class B Common which are Registrable Securities. No amendment
or modification which merely grants to any other Person rights equivalent to
those of the parties hereto (on a pro rata basis according to the number of
shares of the Company's capital stock held by such Person and such parties)
shall be deemed to "adversely affect" any party hereto. The failure of any
party to enforce any of the provisions of this Agreement will in no way be
construed as a waiver of such provisions and will not affect the right of such
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<PAGE> 13
party thereafter to enforce each and every provision of this Agreement in
accordance with its terms.
(e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable
Securities.
(f) Severability. Whenever possible, each provision of this Agreement
will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
(g) 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 will constitute one
and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
(i) Governing Law. The corporate law of Delaware will 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 will be governed by the internal law, and not the law of conflicts,
of Michigan.
(j) Notices. All notices 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 express courier service (charges prepaid) or
mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid. Such notices and other
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<PAGE> 14
communications will be sent to each Executive at the address indicated on the
Company records and to the Company and GTCR at the addresses indicated below:
If to the Company:
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
and:
Seyburn, Kahn, Ginn, Bess, Deitch & Serlin, P.C.
2000 Town Centre, Suite 1500
Southfield, MI 48075
Attention: Laurence Deitch
If to GTCR:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
with a copy, which will not constitute
notice to GTCR, to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Attn: John L. Kuehn
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<PAGE> 15
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.
* * * * *
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<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
LASON HOLDINGS, INC.
By /s/ Allen J. Nesbitt
-------------------------------
Its President
------------------------------
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 /s/ Bruce Rauner
-------------------------------
Its Principal
------------------------------
EXECUTIVES
ROBERT A. YANOVER LIVING
TRUST U/A/D MAY 11, 1982
By /s/ Robert A. Yanover
-------------------------------
Its Trustee
------------------------------
JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE
TRUST DATED JANUARY 5, 1993
By /s/ Laurence B. Deitch
-------------------------------
16
<PAGE> 17
Laurence B. Deitch
Trustee
ALLEN J. NESBITT LIVING TRUST
DATED DECEMBER 7, 1994
By: /s/ Allen J. Nesbitt
----------------------------
Its: Trustee
---------------------------
/s/ Richard C. Kowalski
--------------------------------
Richard C. Kowalski
/s/ Donald L. Elland
--------------------------------
Donald L. Elland
/s/ Gregory Carey
--------------------------------
Gregory Carey
17
<PAGE> 18
SCHEDULE OF EXECUTIVES
Robert A. Yanover Living Trust u/a/d May 11, 1982
Joseph Jonathan Yanover and Jennifer D. Yanover Irrevocable Trust dated
January 5, 1993
Allen J. Nesbitt Living Trust dated December 7, 1994
Richard C. Kowalski
Donald L. Elland
Gregory Carey
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<PAGE> 1
EXHIBIT 10.6
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of January 17, 1995 between Robert A.
Yanover ("Borrower"), Lason Acquisition Corp., a Delaware corporation
("Lender"), and the Robert A. Yanover Living Trust u/a/d May 11, 1982 (the "R.
Yanover Trust") and the Joseph Jonathan Yanover and Jennifer D. Yanover
Irrevocable Trust dated January 5, 1993 (the "J. Yanover Trust", and, together
with the R. Yanover Trust, the "Trusts"). Capitalized terms used herein are
defined in Section 7 hereof.
WHEREAS, Lason Holdings, Inc., a Delaware corporation and the parent
company of the Lender ("Holdings"), and the Trusts are parties to an Executive
Stock Agreement dated as of the date hereof, pursuant to which the R. Yanover
Trust has purchased, and now holds, 402,987 shares (the "R. Yanover Shares") of
Holdings' Class A-1 Common Stock, $.01 par value, and the J. Yanover Trust has
purchased and now holds 66,074 shares of Holdings' Class A-1 Common Stock, par
value $.01 per share (together with the R. Yanover Shares, the "Shares");
WHEREAS, the Borrower desires that the Lender extend loans to the Borrower
to enable the Borrower to pay certain taxes which the Borrower will or may
incur in connection with the acquisition of the assets of Lason Systems, Inc.,
a Michigan corporation, by the Lender; and
WHEREAS, the Trusts, which exist substantially for the benefit of Borrower
and members of his immediate family, as a condition precedent to the Lender
making loans pursuant to this Agreement, have entered into a Stock Pledge
Agreement, dated as of the date hereof, and have pledged the Shares to secure
the obligations of the Borrower under this Agreement to the Lender;
NOW, THEREFORE, in consideration of the premises and the agreements and
provisions herein contained, the Borrower, the Lender and the Trusts agree as
follows:
SECTION 1
AMOUNTS AND TERMS OF LOANS
<PAGE> 2
1.1 Loans. Subject to the terms of this Agreement and in reliance upon
the representations and warranties of the Borrower and the Trusts contained
herein and the agreements of the Trusts pursuant to the Stock Pledge Agreement:
(A) Term Loan. Lender agrees to lend to the Borrower, in one draw,
on the date of this Agreement, an aggregate amount of $609,778 (the
"Term Loan"), which is an estimate of the Additional Tax Amount. The Term Loan
shall be evidenced by a Promissory Note (the "Term Note"), dated as of the date
hereof, a copy of which is attached hereto as Exhibit A. The outstanding
principal amount of the Term Loan (if any), together with all unpaid accrued
interest in respect of the Term Loan, shall be repaid on the tenth anniversary
of the date of this Agreement; provided that, except as provided in the final
sentence of Section 1.1(C) below, the Lender's sole recourse for the repayment
of the Term Loan, and the payment of any interest accruing in respect of the
Term Loan, shall be to the Shares and the direct and indirect proceeds thereof.
(B) Future Advances.
(i) If at any time and from time to time after the date of this
Agreement and prior to the tenth anniversary of the date of this
Agreement the Additional Tax Amount is determined by audit or otherwise
(including by the Borrower's tax advisors) to be greater than the Total Loan
Amount at such time, then the Lender shall make an additional loan to the
Borrower, within 10 days after its receipt from the Borrower of a written
request for a Future Advance (as defined herein) and documentation of the
amounts constituting such requested Future Advance Amount in form and substance
reasonably satisfactory to the Lender, in an aggregate amount up to the Future
Advance Amount (each such loan being a "Future Advance"). Each Future Advance
shall be evidenced by a Promissory Note (each an "Advance Note", and together
with the Term Note and the other Advance Notes, the "Notes"), dated as of the
date of the advance of funds to the Borrower (the "Advance Date"), in the form
attached hereto as Exhibit B, and delivered to the Lender contemporaneously
with the making of such Future Advance. The outstanding principal amount of
the Future Advances (if any), together with all unpaid accrued interest in
respect of the Future Advances, shall be repaid on the tenth anniversary of the
date of this Agreement; provided that, except as provided in the final
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sentence of Section 1.1(C) below, the Lender's sole recourse for the repayment
of any Future Advance, and the payment of any interest accruing in respect of
any Future Advance, shall be to the Shares and the direct and indirect proceeds
thereof.
(ii) If at any time the Lender is unable (by reason of the
limitation set forth in Section 4.1 of the FUNB Loan Agreement or
otherwise) to make any Future Advance which it is required to make pursuant to
Section 1.1(B)(i) above, then the Lender will so notify the Borrower and (a)
the Borrower will nonetheless execute and deliver to the Lender an Advance Note
in principal amount equal to the Future Advance Amount in question, (b) the
Borrower will be deemed to have made a loan to the Lender (a "Deemed Loan") in
the amount of such principal amount, as of the date of such Advance Note, and
such Deemed Loan shall be evidenced by a Promissory Note dated as of date of
such Deemed Loan, in the form and substance reasonably satisfactory to the
Borrower and the Lender, and (c) the Lender will be deemed to have made such
Future Advance as of the date of such Advance Note. Each such Deemed Loan, and
each such deemed Future Advance, will bear interest at the same rate, and
computed in the same manner, as interest on the Term Loan and other Future
Advances hereunder. Subject to all applicable legal and contractual limitations
(including those set forth in the FUNB Loan Agreement), the Lender will repay
each Deemed Loan as promptly as practicable, including by the application of
amounts described in Sections 8.8(ii) and 8.21 of the FUNB Loan Agreement
(which amounts will be applied to the payment of all Deemed Loans deemed made
hereunder and all "Deemed Loans" deemed made under any Other Credit Agreement,
pro rata according to the respective unpaid principal amounts thereof), and the
Lender will not make any dividends or distributions on its capital stock while
any Deemed Loan is outstanding. At any time and from time to time, the
Borrower may elect by written notice to the Lender to offset the unpaid portion
of the principal amount of the Loans and/or accrued interest thereon by
reducing the unpaid portion of the principal amount of any Deemed Loan and/or
accrued interest thereon by a like amount.
(C) Adjustments to Total Loan Amount. If at any time and from time to
time after the date of this Agreement and prior to the tenth anniversary of the
date of this Agreement the Additional Tax Amount is determined on account of an
audit, refund (including by credit or offset against other tax liabilities), or
otherwise to be less than the Total Loan Amount at such time, then
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the Borrower shall transfer promptly to the Lender an amount equal to the
difference between the Total Loan Amount at such time and the Additional Tax
Amount (the "Adjusted Amount"), together with any interest received thereon (or
avoided thereby), such payment to be applied first to the payment of accrued
interest and then principal on the Future Advances, if any, in the
chronological order in which Future Advances are made, and then to the payment
of accrued interest and then principal on the Term Loan, and the Total Loan
Amount will be reduced by such Adjusted Amount (exclusive of any interest
thereon or avoided thereby); provided that the Borrower may elect by written
notice to the Lender to instead retain such Adjusted Amount (or any portion
thereof) in payment of the unpaid principal amount of any Deemed Loan deemed to
have been made pursuant to Section 1.1(B)(ii) above and accrued interest
thereon (up to the aggregate unpaid principal amount of all Deemed Loans
theretofore deemed to have been made and all unpaid accrued interest thereon).
The Lender's recourse for obligations of the Borrower to make payments pursuant
to this Section 1.1(C) shall not be limited to the Shares and the direct and
indirect proceeds thereof, but shall include recourse to the Borrower and the
Borrower's assets generally.
1.2 Interest. Except as otherwise expressly provided in Section 3.1(B)(i)
below, interest shall accrue at a rate equal to the lesser of (a) the
"applicable federal rate" for short-term obligations (as published monthly in
the Internal Revenue Bulletin) in effect from time to time, and (b) the highest
rate permitted by applicable law from time to time, on the unpaid principal
amount of the Term Loan and/or the Future Advances, including any Future
Advance deemed to have been made pursuant to Section 1.1(B)(ii) above
(collectively, the "Loans"), outstanding from time to time and, to the extent
permitted by applicable law, on the accrued and unpaid interest thereon. All
unpaid accrued interest on the Loans will be payable in full upon the maturity
of the Loans (whether on the tenth anniversary of the date of this Agreement or
pursuant to Section 3.1(B) hereof); provided that, except as provided in the
final sentence of Section 1.1(C) above, the Lender's sole recourse for the
payment of any interest accruing in respect of either the Term Loan or any
Future Advance shall be to the Shares and the direct and indirect proceeds
thereof. Interest will be computed on the basis of a 365-day or 366-day year,
as the case may be, and the actual days elapsed.
1.3 Prepayments.
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(A) At any time and from time to time, the Borrower, in his sole
discretion, may prepay the then outstanding principal amount of, and accrued
interest on, the Loans, in whole or in part, without penalty. All prepayments
shall be applied first to the payment of accrued interest and then to payment
of principal.
(B) If at any time either of the Trusts receives any cash proceeds with
respect to the Shares, including any cash proceeds derived directly or
indirectly from non-cash proceeds of the Shares, in each case whether by way of
a sale, a distribution in connection with any recapitalization, reorganization
or reclassification, a dividend, a public offering or otherwise, such Trust
shall promptly transfer to the holder(s) of the outstanding Note(s) (the
"Holder(s)") the Applicable Percentage (as that term is defined below) of the
full amount of such cash proceeds (or, if less, a portion of such cash proceeds
in an amount equal to the amount of unpaid accrued interest and principal with
respect to the Loans which is then outstanding) as a payment on the Loans, such
payment to be applied first to the payment of accrued interest and then
principal on the Future Advances, if any, in the chronological order in which
Future Advances are made, and then to the payment of accrued interest and then
principal on the Term Loan; provided that, by written notice to the Lender, the
Borrower may instead elect to require such Trust to remit to the Borrower such
proceeds (or any portion thereof) in payment (on behalf of the Lender) of the
unpaid principal amount of any Deemed Loan deemed to have been made pursuant to
Section 1.1(B)(ii) above and accrued interest thereon (up to the aggregate
unpaid principal amount of all Deemed Loans theretofore deemed to have been
made and all unpaid accrued interest thereon). With respect to any cash
proceeds of the Shares, the "Applicable Percentage" means the portion of the
Shares from which such proceeds are derived or to which such proceeds relate
(e.g., if the cash proceeds are a cash dividend paid in respect of all of the
Shares, then the "Applicable Percentage" with respect to such proceeds will be
100%; if such cash proceeds are the proceeds of the sale of 40% of the Shares,
then the "Applicable Percentage" with respect to such proceeds will be 40%).
1.4 Payment. Payments of principal and interest are to be delivered to
the Holder(s) at the following address:
Lason Systems, Inc.
28400 Schoolcraft
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Livonia, MI 48150
or to such other address or to the attention of such person as specified by
prior written notice to the Borrower.
All payments of principal and interest shall be made in lawful money of
the United States by certified or cashier's check or wire transfer of
immediately available funds. If the due date for payment of interest and/or
principal falls on a date other than a Business Day (as hereinafter defined),
then such payment shall be due on the next succeeding Business Day, and any
additional interest on such payment shall accrue and be payable on such
Business Day for the day(s) between the original due date and such Business
Day. A "Business Day" shall mean any day other than days on which banks
located in Michigan are authorized to be closed.
SECTION 2
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make the
Loans, each of the Borrower and each Trust represents and warrants to the
Lender that the following statements are and, after giving effect to this
Agreement and the Related Transactions Documents, will be (and at the time of
each Future Advance, if any, will be) true, correct and complete:
2.1 Capacity and Binding Obligation. Each of the Borrower and each of the
Trusts has all requisite capacity and authority to enter into this Agreement
and all Related Transactions Documents to which it is a party. This Agreement
is, and the Related Transactions Documents to which the Borrower or such Trust
is a party when executed and delivered will be, the legally valid and binding
obligations of the Borrower or such Trust, as the case may be, each enforceable
against the Borrower or such Trust, as applicable, in accordance with their
respective terms.
2.2 Title to Shares. Each Trust is the beneficial nd record owner of the
Shares specified for such Trust in the introductory paragraphs of this
Agreement, and no such Shares are subject to any lien or other encumbrance
other than liens in favor of the Lender granted pursuant to the Stock Pledge
Agreement.
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SECTION 3
DEFAULT, RIGHTS AND REMEDIES
3.1 Events of Default.
(A) Definition. For purposes of this Agreement, an "Event of
Default" will be deemed to have occurred if:
(i) all or any portion of the principal amount of or
accrued interest on any Loan is not paid when due in accordance with
this Agreement (including pursuant to Section 1.1(C) or Section 1.3(B) hereof);
(ii) the Borrower or either of the Trusts fails to
perform or observe any other provision contained in this Agreement or
any of the Related Transactions Documents to which it is a party; or
(iii) the Borrower makes an assignment for the benefit
of creditors or admits in writing his inability to pay his debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Borrower bankrupt or insolvent and continues for 30 days
unstayed or undismissed; or any order for relief with respect to the Borrower
is entered under the Federal Bankruptcy Code; or the Borrower petitions or
applies to any tribunal for the appointment of a custodian, trustee, receiver
or liquidator of the Borrower, or of any substantial part of the assets of the
Borrower, or commences any proceeding relating to the Borrower under any
bankruptcy or insolvency law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced, against the Borrower
and either (x) the Borrower by any act indicates his approval thereof, consent
thereto or acquiescence therein or (y) such petition, application or proceeding
is not dismissed within 60 days.
(B) Consequences of Events of Default.
(i) If an Event of Default has occurred, the interest rate on the
Loans as set forth in Section 1.2 will increase immediately by an
increment of two percentage points (i.e., 2% per annum), to the extent
permitted by law. Any increase of the interest rate resulting from the
operation of this Section 3.1(B)(i) will terminate as of the close of business
on the next
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date on which no Event of Default exists (subject to subsequent increases
pursuant to this Section 3.1(B)(i)).
(ii) If an Event of Default of the type described in
Section 3.1(A)(i) or Section 3.1(A)(iii) has occurred, the aggregate
principal amount of the Loans (together with all accrued interest thereon and
all other amounts payable in connection therewith) shall become immediately due
and payable without any action on the part of any Holder, and the Borrower
shall immediately pay to any Holder all amounts due and payable with respect to
the Loans.
(iii) If an Event of Default of the type described in
Section 3.1(A)(ii) has occurred and has continued for 30 days after
notice thereof has been given by the Holder(s) to the Borrower, the Holder(s)
may declare all or any portion of the outstanding principal amount of the Loans
(together with all accrued interest thereon and all other amounts due in
connection therewith) due and payable and demand immediate payment of all or
any portion of the outstanding principal amount of the Loans.
(iv) Each Holder will also have any other rights which such
Holder or the Lender may have been afforded under any Related
Transactions Document or any other contract or agreement and any other rights
which such Holder may have pursuant to applicable law.
(v) The Borrower and each Trust, in each case of behalf of his or
its successors and assigns, hereby waive diligence, presentment,
protest and demand and notice of protest, demand, dishonor and nonpayment of
the Loans, and expressly agree that the Loans, or any payments hereunder, may
be extended from time to time and that the Lender or the Holder(s) may accept
security for the Loans or release security for the Loans, all without in any
way affecting the liability of the Borrower or either Trust under this
Agreement or any Related Transactions Document.
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SECTION 4
COVENANTS OF THE BORROWER
4.1 Notice of Claim or Audit. The Borrower will promptly notify the
Lender of any claim or audit made or to be made by a Taxing Authority and which
could affect or concerns the Additional Tax Amount (a "Tax Claim/Audit"), and
will use reasonable efforts to keep the Lender apprised of all material
developments relating thereto.
4.2 Contest of Tax Claim/Audit. The Borrower will engage in a good faith
contest (a "Good Faith Defense") of any Tax Claim/Audit but shall retain
control of the defense and settlement of such Tax Claim/Audit.
SECTION 5
ASSIGNMENT AND PARTICIPATION
5.1 Assignment and Participation. The Lender may assign all or any
portion of its rights under this Agreement and further may assign, or sell
participations in all or any part of the Loans.
SECTION 6
MISCELLANEOUS
6.1 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.
6.2 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
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<PAGE> 10
prohibition or invalidity, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
6.3 Usury Laws.
It is the intention of the Borrower, the Trusts and the Lender to conform
strictly to the usury laws now or hereafter in force in the State of Michigan,
and any interest payable under the Loans will be subject to reduction to the
amount not in excess of the maximum nonusurious amount allowed under the usury
laws of Michigan as now or hereafter construed by the courts having
jurisdiction over such matters. The aggregate of all interest contracted for,
chargeable or receivable under the Loans will under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of the Loans remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it will be deemed a mistake, and such excess will be cancelled automatically
and, if theretofore paid, rebated to the Borrower or credited on the principal
amount of the Loans, or if the Loans have been repaid, then such excess will be
rebated to the Borrower.
6.4 Costs and Attorneys' Fees. All costs and expenses, including
reasonable attorneys' fees, incurred in exercising any right, power or remedy
conferred by this Agreement or in the enforcement thereof, shall become part of
the "Loans" hereunder; provided that the Lender's sole recourse with respect
the payment of such costs and expenses shall be to the Shares and the direct
and indirect proceeds thereof.
6.5 No Waiver; Cumulative Remedies. Neither the Lender, the Borrower,
either Trust nor any Holder shall by any act, delay, omission or otherwise be
deemed to have waived any of its rights or remedies hereunder, and no waiver
shall be valid unless in writing, signed by such Person, and then only to the
extent therein set forth. A waiver by any such Person of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which such Person would otherwise have on any future occasion. No
failure to exercise nor any delay in exercising on the part of any such Person,
any right, power or privilege hereunder shall preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
rights and remedies herein provided are cumulative and may be exercised singly
or concurrently, and are not exclusive of any rights or remedies provided by
law.
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6.6 Successors and Assigns. All agreements set forth in this Agreement by
or on behalf of the Borrower, the Lender or either Trust will bind and inure to
the benefit of each of their respective successors and assigns, whether so
expressed or not, except that neither this Agreement nor any of the rights,
interests or obligations hereunder may be assigned by the Borrower or either
Trust without the Lender's prior written consent.
6.7 Headings. The headings used in this Agreement are for the purpose of
reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
6.8 Counterparts. The Lender, the Borrower and each of the Trusts may
execute this Agreement in separate counterparts (no one of which need contain
the signatures of each of the Lender, the Borrower and each of the Trusts),
each of which will be an original and both of which together will constitute
one and the same instrument.
6.9 Exhibits. The exhibits attached to this Agreement constitute a part
of this Agreement and are incorporated into this Agreement for all purposes.
6.10 Complete Agreement. This Agreement and the Related Transactions
Documents embody the complete agreement and understanding among the parties and
supersede and preempt 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.
6.11 Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Borrower, the
Lender and each of the Trusts.
SECTION 7
DEFINITIONS
7.1 Certain Defined Terms. The terms defined below are used in this
Agreement as so defined. Terms defined in the Preface and in sections of the
Agreement other than this Section 7 are used in this Agreement as so defined.
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"Additional Tax Amount" means the Borrower's share of the aggregate amount
of actual Tax liability paid by the Borrower or Lason as a direct result of the
Lender's acquisition of the assets of Lason, to the extent that the Borrower's
share of such actual Tax liability exceeds the Borrower's share of the
aggregate amount of Tax liability that would have resulted if the Lender had
acquired the stock of Lason for an economically equivalent purchase price
(taking into account the effect of the liabilities of Lason assumed by the
Lender in such asset acquisition), and all out-of-pocket expenses (including
legal and accounting fees and disbursements) incurred by the Borrower in
connection with any dispute relating thereto.
"Agreement" means this Credit Agreement (including all exhibits hereto).
"Federal Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect and all
rules and regulations promulgated thereunder.
"FUNB Loan Agreement" means the Loan Agreement dated as of the date hereof
among the Lender, First Union National Bank of North Carolina ("FUNB") and the
other financial institutions which may become parties thereto as Lenders, and
FUNB, as Agent, as in effect from time to time.
"Future Advance Amount" for any Future Advance means the difference
between the Additional Tax Amount and the Total Loan Amount immediately prior
to such Future Advance.
"Lason" means Lason Systems, Inc., a Michigan corporation.
"Other Credit Agreements" means the various Credit Agreements dated as of
the date hereof each between the Lender, on the one hand, and one or more
stockholders of Lason (and, in certain instances, a related person), on the
other hand, each as in effect from time to time.
"Person" means any of the Lender, the Borrower, a Trust or any Holder.
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"Related Transactions Documents" means this Agreement, the Term Note and
the Advance Notes, if any, the Stock Pledge Agreement and all other
instruments, documents and agreements executed or delivered in connection with
the funding and repayment of the Loans.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated as of the
date hereof by and between the Lender and the Trusts, as in effect from time to
time.
"Tax" means any federal, state or local income, gross receipts,
alternative or add-on minimum or other tax imposed by any Taxing Authority,
including any interest on or penalty or addition with respect thereto.
"Taxing Authority" means the United States Internal Revenue Service or, if
applicable, the relevant state taxing authority.
"Total Loan Amount" means the sum of the initial principal amounts of the
Term Loan and all Future Advances, if any, in each case without giving effect
to any payment by the Borrower, as adjusted pursuant to Section 1.1(C).
* * * * *
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IN WITNESS WHEREOF, the Borrower, the Lender and each of the Trusts have
executed and delivered this Agreement as of the day and year first above
written.
/s/ Robert A. Yanover
--------------------------------
Robert A. Yanover
LASON ACQUISITION CORP.
By: /s/ Allen J. Nesbitt
-----------------------------
Its: President
-----------------------------
ROBERT A. YANOVER LIVING TRUST
U/A/D MAY 11, 1982
By: /s/ Robert A. Yanover
-----------------------------
Its: Trustee
-----------------------------
JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE
TRUST DATED DECEMBER 7, 1993
By: /s/ Laurence B. Deitch
-----------------------------
Its: Trustee
-----------------------------
14
<PAGE> 15
EXHIBIT A
TERM NOTE
[SEE ATTACHED]
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EXHIBIT B
FORM OF ADVANCE NOTE
[SEE ATTACHED]
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<PAGE> 17
STOCK PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of January 17, 1995 between the Robert A.
Yanover Living Trust u/a/d May 11, 1982 (the "R. Yanover Trust"), the Joseph
Jonathan Yanover and Jennifer D. Yanover Irrevocable Trust dated January 5,
1993 (the "J. Yanover Trust" and, together with the R. Yanover Trust, the
"Pledgors"), and Lason Systems, Inc., a Delaware corporation formerly known as
"Lason Acquisition Corp." (the "Company").
The Company and Pledgors are parties to an Executive Stock Agreement dated
as of the date hereof, pursuant to which the R. Yanover Trust has purchased and
now holds 402,987 shares of the Company's Class A-1 Common Stock, $.01 par
value (the "R. Yanover Trust Shares"), and the J. Yanover Trust has purchased
and now holds 66,074 shares of the Company's Class A-1 Common Stock, $.01 par
value (the "J. Yanover Trust Shares" and, together with the R. Yanover Trust
Shares, the "Pledged Shares").
Robert A. Yanover (the "Borrower") has delivered to the Company a promissory
note dated as of the date hereof in the principal amount of $609,778 pursuant
to the Credit Agreement dated as of the date hereof between the Borrower, the
Pledgors and the Company (as in effect from time to time, the "Credit
Agreement"). Each capitalized term used and not otherwise defined in this
Pledge Agreement has the meaning which the Credit Agreement assigns to that
term.
Each Pledgor has been established substantially for the benefit of, and is
currently controlled by, the Borrower or members of his immediate family. In
consideration for the Company's agreement to make certain loans pursuant to the
Credit Agreement which provide a substantial economic benefit to the Borrower,
each Pledgor has agreed to pledge the Pledged Shares as security for the
Borrower's obligations pursuant to the Notes which have been or may be issued
pursuant to the Credit Agreement. This Pledge Agreement provides the terms and
conditions upon which the Notes which have been or may be issued pursuant to
the Credit Agreement will be secured by such pledge.
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Pledgors and the Company hereby agree as follows:
1. Pledge. Each Pledgor hereby pledges to the Company, and grants to the
Company a security interest in, the Pledged Shares held by such Pledgor, as
security for the prompt and complete payment when due of the unpaid principal
of and interest on the Notes, and all other obligations of the Borrower and the
Pledgor's which have arisen or may arise under the Credit Agreement
(collectively with such principal and interest, the "Obligations"). The
obligations and agreements of the Pledgor pursuant to this Agreement and the
Credit Agreement shall constitute a guaranty of payment and not a guaranty of
collection.
<PAGE> 18
2. Delivery of Pledged Shares. Contemporaneously with the execution and
delivery of this Pledge Agreement, each Pledgor is delivering to the Company
the certificate(s) representing the Pledged Shares held by it, each together
with a stock power, duly executed in blank, in form acceptable to the Company
and such Pledgor.
3. Voting Rights. Notwithstanding anything to the contrary contained
herein, during the term of this Pledge Agreement, except during the continuance
of an Event of Default, each Pledgor shall be entitled to all voting rights
with respect to the Pledged Shares held by such Pledgor.
4. Stock Dividends; Distributions, etc. If, while this Pledge Agreement is
in effect, either Pledgor becomes entitled to receive or receives any
securities in addition to, in substitution of, or in exchange for, any of the
Pledged Shares (whether as a distribution in connection with any
recapitalization, reorganization or reclassification, a stock dividend or
otherwise), such Pledgor shall accept such securities on behalf of and for the
benefit of the Company as additional security for the Obligations and shall
promptly deliver such securities to the Company together with duly executed
forms of assignment, and such securities shall be deemed to be part of the
Pledged Shares hereunder.
5. Default. If an Event of Default of a type described in subparagraph
3.1(A)(i) or 3.1(A)(iii) of the Credit Agreement occurs, or any other Event of
Default under the Credit Agreement occurs and continues for 30 days, the
Company may exercise any and all rights, powers and remedies of any owner of
the Pledged Shares (including the right to vote the shares and receive
dividends and distributions with respect to such shares), provided that all
cash dividends and cash distributions with respect to such shares shall be
applied in accordance with the Credit Agreement, and shall have and may
exercise without demand any and all of the rights and remedies granted to a
secured party upon default under the Uniform Commercial Code or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to the Pledgor in
question, at such price or prices and upon such terms as the Company may deem
advisable. Neither Pledgor shall have the right to redeem the Pledged Shares
held by it after any such sale or assignment. At any such sale or auction, the
Company may bid for, and become the purchaser of, the whole or any part of the
Pledged Shares offered for sale. In case of any such sale, after deducting the
costs, attorneys' fees and other expenses of sale and delivery, the remaining
proceeds of such sale shall be applied to the Obligations in a manner
consistent with the terms of the Credit Agreement; provided, however, that
after payment in full of the Obligations, the balance of the proceeds of sale
then remaining
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shall be paid to Pledgors, and Pledgors shall be entitled to the return of any
of the Pledged Shares remaining in the Company's possession.
6. Costs and Attorneys' Fees. All costs and expenses, including reasonable
attorneys' fees, incurred in exercising any right, power or remedy conferred by
this Pledge Agreement or in the enforcement thereof shall become part of the
Obligations.
7. Payment of Obligations and Release of Pledged Shares. Upon payment in
full of the Obligations, the Company shall surrender to Pledgors all Pledged
Shares in the Company's possession, together with all related forms of
assignment.
8. Further Assurances. Each Pledgor agrees that at any time and from time
to time upon the written request of the Company, such Pledgor will execute and
deliver such further documents and do such further acts and things as the
Company may reasonably request in order to effect the purposes of this Pledge
Agreement.
9. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. Waivers and Amendments; Cumulative Remedies. None of the terms or
provisions of this Pledge Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by the parties hereto.
Without limiting the foregoing, the Company shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by the
parties hereto, and then only to the extent therein set forth. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise
have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive
of any rights or remedies provided by law.
11. Applicable Law. This Pledge Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws, and not the
principles of conflicts of laws, of the State of Michigan.
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<PAGE> 20
12. Successors and Assigns. All covenants and agreements set forth in
this Pledge Agreement by or on behalf of the Pledgors or the Company will bind
and inure to the benefit of each of their respective successors and assigns,
whether so expressed or not, except that neither this Pledge Agreement or any
of the rights, interests or obligations hereunder may be assigned by either
Pledgor without the Company's prior written consent.
13. Headings. The headings used in this Pledge Agreement are for the
purpose of reference only and will not affect the meaning or interpretation of
any provision of this Pledge Agreement.
14. Conflict. The terms and conditions of the Credit Agreement are
incorporated in this Pledge Agreement by this reference. In the event of any
conflict between the terms of this Pledge Agreement and the terms of the Credit
Agreement, the terms of the Credit Agreement shall control.
* * * * *
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<PAGE> 21
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
LASON SYSTEMS, INC.
By /s/ Allen J. Nesbitt
----------------------------
Its President
---------------------------
ROBERT A. YANOVER LIVING TRUST
U/A/D MAY 11, 1982
By: /s/ Robert A. Yanover
----------------------------
Its: Trustee
----------------------------
JOSEPH JONATHAN YANOVER AND
JENNIFER D. YANOVER IRREVOCABLE
TRUST DATED DECEMBER 7, 1993
By: /s/ Laurence B. Deitch
----------------------------
Its: Trustee
----------------------------
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<PAGE> 1
EXHIBIT 10.7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of January 17, 1995 between
Allen J. Nesbitt ("Borrower"), Lason Acquisition Corp., a Delaware corporation
("Lender"), and the Allen J. Nesbitt Living Trust dated December 7, 1994 (the
"Trust"). Capitalized terms used herein are defined in Section 7 hereof.
WHEREAS, Lason Holdings, Inc., a Delaware corporation and the
parent company of the Lender ("Holdings"), and the Trust are parties to an
Executive Stock Agreement dated as of the date hereof, pursuant to which the
Trust has purchased, and now holds, 469,064 shares of Holdings' Class A-1
Common Stock, par value $.01 per share (the "Shares");
WHEREAS, the Borrower desires that the Lender extend loans to
the Borrower to enable the Borrower to pay certain taxes which the Borrower
will or may incur in connection with the acquisition of the assets of Lason
Systems, Inc., a Michigan corporation, by the Lender; and
WHEREAS, the Trust, which exists substantially for the benefit
of Borrower and members of his immediate family, as a condition precedent to
the Lender making loans pursuant to this Agreement, has entered into a Stock
Pledge Agreement, dated as of the date hereof, and has pledged the Shares to
secure the obligations of the Borrower under this Agreement to the Lender;
NOW, THEREFORE, in consideration of the premises and the
agreements and provisions herein contained, the Borrower, the Lender and the
Trust agree as follows:
SECTION 1
AMOUNTS AND TERMS OF LOANS
1.1 Loans. Subject to the terms of this Agreement and in
reliance upon the representations and warranties of the Borrower and the Trust
contained herein and the agreements of the Trust pursuant to the Stock Pledge
Agreement:
(A) Term Loan. Lender agrees to lend to the
Borrower, in one draw, on the date of this Agreement, an aggregate amount of
$609,791 (the "Term Loan"), which is an estimate of the Additional Tax Amount.
The Term Loan shall be evidenced by a Promissory Note (the "Term Note"), dated
as of the date hereof, a copy of which is attached hereto as Exhibit A. The
outstanding principal amount of the Term Loan (if any), together with all
unpaid accrued interest in respect of the Term Loan, shall be repaid on the
tenth anniversary of the date of this Agreement;
<PAGE> 2
provided that, except as provided in the final sentence of Section 1.1(C)
below, the Lender's sole recourse for the repayment of the Term Loan, and the
payment of any interest accruing in respect of the Term Loan, shall be to the
Shares and the direct and indirect proceeds thereof.
(B) Future Advances.
(i) If at any time and from time to time
after the date of this Agreement and prior to the tenth anniversary of the date
of this Agreement the Additional Tax Amount is determined by audit or otherwise
(including by the Borrower's tax advisors) to be greater than the Total Loan
Amount at such time, then the Lender shall make an additional loan to the
Borrower, within 10 days after its receipt from the Borrower of a written
request for a Future Advance (as defined herein) and documentation of the
amounts constituting such requested Future Advance Amount in form and substance
reasonably satisfactory to the Lender, in an aggregate amount up to the Future
Advance Amount (each such loan being a "Future Advance"). Each Future Advance
shall be evidenced by a Promissory Note (each an "Advance Note", and together
with the Term Note and the other Advance Notes, the "Notes"), dated as of the
date of the advance of funds to the Borrower (the "Advance Date"), in the form
attached hereto as Exhibit B, and delivered to the Lender contemporaneously
with the making of such Future Advance. The outstanding principal amount of
the Future Advances (if any), together with all unpaid accrued interest in
respect of the Future Advances, shall be repaid on the tenth anniversary of the
date of this Agreement; provided that, except as provided in the final sentence
of Section 1.1(C) below, the Lender's sole recourse for the repayment of any
Future Advance, and the payment of any interest accruing in respect of any
Future Advance, shall be to the Shares and the direct and indirect proceeds
thereof.
(ii) If at any time the Lender is unable (by
reason of the limitation set forth in Section 4.1 of the FUNB Loan Agreement or
otherwise) to make any Future Advance which it is required to make pursuant to
Section 1.1(B)(i) above, then the Lender will so notify the Borrower and (a)
the Borrower will nonetheless execute and deliver to the Lender an Advance Note
in principal amount equal to the Future Advance Amount in question, (b) the
Borrower will be deemed to have made a loan to the Lender (a "Deemed Loan") in
the amount of such principal amount, as of the date of such Advance Note, and
such Deemed Loan shall be evidenced by a Promissory Note dated as of date of
such Deemed Loan, in the form and substance reasonably satisfactory to the
Borrower and the Lender, and (c) the Lender will be deemed to have made such
Future Advance as of the date of such Advance Note. Each such Deemed Loan, and
each such deemed Future Advance, will bear interest at the same rate, and
computed in the same manner, as interest on the Term Loan and other Future
Advances hereunder. Subject to all applicable legal and contractual
limitations (including those set forth in the FUNB Loan Agreement), the Lender
will repay each
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<PAGE> 3
Deemed Loan as promptly as practicable, including by the application of amounts
described in Sections 8.8(ii) and 8.21 of the FUNB Loan Agreement (which
amounts will be applied to the payment of all Deemed Loans deemed made
hereunder and all "Deemed Loans" deemed made under any Other Credit Agreement,
pro rata according to the respective unpaid principal amounts thereof), and the
Lender will not make any dividends or distributions on its capital stock while
any Deemed Loan is outstanding. At any time and from time to time, the
Borrower may elect by written notice to the Lender to offset the unpaid portion
of the principal amount of the Loans and/or accrued interest thereon by
reducing the unpaid portion of the principal amount of any Deemed Loan and/or
accrued interest thereon by a like amount.
(C) Adjustments to Total Loan Amount. If at any
time and from time to time after the date of this Agreement and prior to the
tenth anniversary of the date of this Agreement the Additional Tax Amount is
determined on account of an audit, refund (including by credit or offset
against other tax liabilities), or otherwise to be less than the Total Loan
Amount at such time, then the Borrower shall transfer promptly to the Lender an
amount equal to the difference between the Total Loan Amount at such time and
the Additional Tax Amount (the "Adjusted Amount"), together with any interest
received thereon (or avoided thereby), such payment to be applied first to the
payment of accrued interest and then principal on the Future Advances, if any,
in the chronological order in which Future Advances are made, and then to the
payment of accrued interest and then principal on the Term Loan, and the Total
Loan Amount will be reduced by such Adjusted Amount (exclusive of any interest
thereon or avoided thereby); provided that the Borrower may elect by written
notice to the Lender to instead retain such Adjusted Amount (or any portion
thereof) in payment of the unpaid principal amount of any Deemed Loan deemed to
have been made pursuant to Section 1.1(B)(ii) above and accrued interest
thereon (up to the aggregate unpaid principal amount of all Deemed Loans
theretofore deemed to have been made and all unpaid accrued interest thereon).
The Lender's recourse for obligations of the Borrower to make payments pursuant
to this Section 1.1(C) shall not be limited to the Shares and the direct and
indirect proceeds thereof, but shall include recourse to the Borrower and the
Borrower's assets generally.
1.2 Interest. Except as otherwise expressly provided in
Section 3.1(B)(i) below, interest shall accrue at a rate equal to the lesser of
(a) the "applicable federal rate" for short-term obligations (as published
monthly in the Internal Revenue Bulletin) in effect from time to time, and (b)
the highest rate permitted by applicable law from time to time, on the unpaid
principal amount of the Term Loan and/or the Future Advances, including any
Future Advance deemed to have been made pursuant to Section 1.1(B)(ii) above
(collectively, the "Loans"), outstanding from time to time and, to the extent
permitted by applicable law, on the accrued and unpaid interest thereon. All
unpaid accrued interest on the Loans
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<PAGE> 4
will be payable in full upon the maturity of the Loans (whether on the tenth
anniversary of the date of this Agreement or pursuant to Section 3.1(B)
hereof); provided that, except as provided in the final sentence of Section
1.1(C) above, the Lender's sole recourse for the payment of any interest
accruing in respect of either the Term Loan or any Future Advance shall be to
the Shares and the direct and indirect proceeds thereof. Interest will be
computed on the basis of a 365-day or 366-day year, as the case may be, and the
actual days elapsed.
1.3 Prepayments.
(A) At any time and from time to time, the
Borrower, in his sole discretion, may prepay the then outstanding principal
amount of, and accrued interest on, the Loans, in whole or in part, without
penalty. All prepayments shall be applied first to the payment of accrued
interest and then to payment of principal.
(B) If at any time the Trust receives any cash
proceeds with respect to the Shares, including any cash proceeds derived
directly or indirectly from non-cash proceeds of the Shares, in each case
whether by way of a sale, a distribution in connection with any
recapitalization, reorganization or reclassification, a dividend, a public
offering or otherwise, the Trust shall promptly transfer to the holder(s) of
the outstanding Note(s) (the "Holder(s)") the Applicable Percentage (as that
term is defined below) of the full amount of such cash proceeds (or, if less, a
portion of such cash proceeds in an amount equal to the amount of unpaid
accrued interest and principal with respect to the Loans which is then
outstanding) as a payment on the Loans, such payment to be applied first to the
payment of accrued interest and then principal on the Future Advances, if any,
in the chronological order in which Future Advances are made, and then to the
payment of accrued interest and then principal on the Term Loan; provided that,
by written notice to the Lender, the Borrower may instead elect to require the
Trust to remit to the Borrower such proceeds (or any portion thereof) in
payment (on behalf of the Lender) of the unpaid principal amount of any Deemed
Loan deemed to have been made pursuant to Section 1.1(B)(ii) above and accrued
interest thereon (up to the aggregate unpaid principal amount of all Deemed
Loans theretofore deemed to have been made and all unpaid accrued interest
thereon). With respect to any cash proceeds of the Shares, the "Applicable
Percentage" means the portion of the Shares from which such proceeds are
derived or to which such proceeds relate (e.g., if the cash proceeds are a cash
dividend paid in respect of all of the Shares, then the "Applicable Percentage"
with respect to such proceeds will be 100%; if such cash proceeds are the
proceeds of the sale of 40% of the Shares, then the "Applicable Percentage"
with respect to such proceeds will be 40%).
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<PAGE> 5
1.4 Payment. Payments of principal and interest are to
be delivered to the Holder(s) at the following address:
Lason Systems, Inc.
28400 Schoolcraft
Livonia, MI 48150
or to such other address or to the attention of such person as specified by
prior written notice to the Borrower.
All payments of principal and interest shall be made in lawful
money of the United States by certified or cashier's check or wire transfer of
immediately available funds. If the due date for payment of interest and/or
principal falls on a date other than a Business Day (as hereinafter defined),
then such payment shall be due on the next succeeding Business Day, and any
additional interest on such payment shall accrue and be payable on such
Business Day for the day(s) between the original due date and such Business
Day. A "Business Day" shall mean any day other than days on which banks
located in Michigan are authorized to be closed.
SECTION 2
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and
to make the Loans, each of the Borrower and the Trust represents and warrants
to the Lender that the following statements are and, after giving effect to
this Agreement and the Related Transactions Documents, will be (and at the time
of each Future Advance, if any, will be) true, correct and complete:
2.1 Capacity and Binding Obligation. Each of the
Borrower and the Trust has all requisite capacity and authority to enter into
this Agreement and all Related Transactions Documents to which it is a party.
This Agreement is, and the Related Transactions Documents to which the Borrower
or the Trust is a party when executed and delivered will be, the legally valid
and binding obligations of the Borrower or the Trust, as the case may be, each
enforceable against the Borrower or the Trust, as applicable, in accordance
with their respective terms.
2.2 Title to Shares. The Trust is the beneficial nd
record owner of the Shares, and no Shares are subject to any lien or other
encumbrance other than liens in favor of the Lender granted pursuant to the
Stock Pledge Agreement.
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<PAGE> 6
SECTION 3
DEFAULT, RIGHTS AND REMEDIES
3.1 Events of Default.
(A) Definition. For purposes of this Agreement, an "Event of
Default" will be deemed to have occurred if:
(i) all or any portion of the principal
amount of or accrued interest on any Loan is not paid when due in accordance
with this Agreement (including pursuant to Section 1.1(C) or Section 1.3(B)
hereof);
(ii) the Borrower or the Trust fails to
perform or observe any other provision contained in this Agreement or any of
the Related Transactions Documents to which it is a party; or
(iii) the Borrower makes an assignment for
the benefit of creditors or admits in writing his inability to pay his debts
generally as they become due; or an order, judgment or decree is entered
adjudicating the Borrower bankrupt or insolvent and continues for 30 days
unstayed or undismissed; or any order for relief with respect to the Borrower
is entered under the Federal Bankruptcy Code; or the Borrower petitions or
applies to any tribunal for the appointment of a custodian, trustee, receiver
or liquidator of the Borrower, or of any substantial part of the assets of the
Borrower, or commences any proceeding relating to the Borrower under any
bankruptcy or insolvency law of any jurisdiction; or any such petition or
application is filed, or any such proceeding is commenced, against the Borrower
and either (x) the Borrower by any act indicates his approval thereof, consent
thereto or acquiescence therein or (y) such petition, application or proceeding
is not dismissed within 60 days.
(B) Consequences of Events of Default.
(i) If an Event of Default has occurred,
the interest rate on the Loans as set forth in Section 1.2 will increase
immediately by an increment of two percentage points (i.e., 2% per annum), to
the extent permitted by law. Any increase of the interest rate resulting from
the operation of this Section 3.1(B)(i) will terminate as of the close of
business on the next date on which no Event of Default exists (subject to
subsequent increases pursuant to this Section 3.1(B)(i)).
(ii) If an Event of Default of the type
described in Section 3.1(A)(i) or Section 3.1(A)(iii) has occurred, the
aggregate principal amount of the Loans (together with all accrued interest
thereon and all other amounts payable in connection therewith) shall become
immediately due and payable without any action on the part of any Holder, and
the Borrower
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<PAGE> 7
shall immediately pay to any Holder all amounts due and payable with respect to
the Loans.
(iii) If an Event of Default of the type
described in Section 3.1(A)(ii) has occurred and has continued for 30 days
after notice thereof has been given by the Holder(s) to the Borrower, the
Holder(s) may declare all or any portion of the outstanding principal amount of
the Loans (together with all accrued interest thereon and all other amounts due
in connection therewith) due and payable and demand immediate payment of all or
any portion of the outstanding principal amount of the Loans.
(iv) Each Holder will also have any other
rights which such Holder or the Lender may have been afforded under any Related
Transactions Document or any other contract or agreement and any other rights
which such Holder may have pursuant to applicable law.
(v) The Borrower and the Trust, in each
case of behalf of his or its successors and assigns, hereby waive diligence,
presentment, protest and demand and notice of protest, demand, dishonor and
nonpayment of the Loans, and expressly agree that the Loans, or any payments
hereunder, may be extended from time to time and that the Lender or the
Holder(s) may accept security for the Loans or release security for the Loans,
all without in any way affecting the liability of the Borrower or the Trust
under this Agreement or any Related Transactions Document.
SECTION 4
COVENANTS OF THE BORROWER
4.1 Notice of Claim or Audit. The Borrower will promptly
notify the Lender of any claim or audit made or to be made by a Taxing
Authority and which could affect or concerns the Additional Tax Amount (a "Tax
Claim/Audit"), and will use reasonable efforts to keep the Lender apprised of
all material developments relating thereto.
4.2 Contest of Tax Claim/Audit. The Borrower will engage
in a good faith contest (a "Good Faith Defense") of any Tax Claim/Audit but
shall retain control of the defense and settlement of such Tax Claim/Audit.
SECTION 5
ASSIGNMENT AND PARTICIPATION
5.1 Assignment and Participation. The Lender may assign
all or any portion of its rights under this Agreement and further may assign,
or sell participations in all or any part of the Loans.
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<PAGE> 8
SECTION 6
MISCELLANEOUS
6.1 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.
6.2 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
provision or the remaining provisions of this Agreement.
6.3 Usury Laws.
It is the intention of the Borrower, the Trust and the Lender
to conform strictly to the usury laws now or hereafter in force in the State of
Michigan, and any interest payable under the Loans will be subject to reduction
to the amount not in excess of the maximum nonusurious amount allowed under the
usury laws of Michigan as now or hereafter construed by the courts having
jurisdiction over such matters. The aggregate of all interest contracted for,
chargeable or receivable under the Loans will under no circumstances exceed the
maximum legal rate upon the unpaid principal balance of the Loans remaining
unpaid from time to time. If such interest does exceed the maximum legal rate,
it will be deemed a mistake, and such excess will be cancelled automatically
and, if theretofore paid, rebated to the Borrower or credited on the principal
amount of the Loans, or if the Loans have been repaid, then such excess will be
rebated to the Borrower.
6.4 Costs and Attorneys' Fees. All costs and expenses,
including reasonable attorneys' fees, incurred in exercising any right, power
or remedy conferred by this Agreement or in the enforcement thereof, shall
become part of the "Loans" hereunder; provided that the Lender's sole recourse
with respect the payment of such costs and expenses shall be to the Shares and
the direct and indirect proceeds thereof.
6.5 No Waiver; Cumulative Remedies. Neither the Lender,
the Borrower, the Trust nor any Holder shall by any act, delay, omission or
otherwise be deemed to have waived any of its rights or remedies hereunder, and
no waiver shall be valid unless in writing, signed by such Person, and then
only to the extent therein set
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<PAGE> 9
forth. A waiver by any such Person of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which such
Person would otherwise have on any future occasion. No failure to exercise nor
any delay in exercising on the part of any such Person, any right, power or
privilege hereunder shall preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided are cumulative and may be exercised singly or concurrently, and
are not exclusive of any rights or remedies provided by law.
6.6 Successors and Assigns. All agreements set forth in
this Agreement by or on behalf of the Borrower, the Lender or the Trust will
bind and inure to the benefit of each of their respective successors and
assigns, whether so expressed or not, except that neither this Agreement nor
any of the rights, interests or obligations hereunder may be assigned by the
Borrower or the Trust without the Lender's prior written consent.
6.7 Headings. The headings used in this Agreement are
for the purpose of reference only and will not affect the meaning or
interpretation of any provision of this Agreement.
6.8 Counterparts. The Lender, the Borrower and the Trust
may execute this Agreement in separate counterparts (no one of which need
contain the signatures of each of the Lender, the Borrower and the Trust), each
of which will be an original and both of which together will constitute one and
the same instrument.
6.9 Exhibits. The exhibits attached to this Agreement
constitute a part of this Agreement and are incorporated into this Agreement
for all purposes.
6.10 Complete Agreement. This Agreement and the Related
Transactions Documents embody the complete agreement and understanding among
the parties and supersede and preempt 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.
6.11 Amendment and Waiver. The provisions of this Agreement
may be amended and waived only with the prior written consent of the Borrower,
the Lender and the Trust.
SECTION 7
DEFINITIONS
7.1 Certain Defined Terms. The terms defined below are
used in this Agreement as so defined. Terms defined in the Preface and in
sections of the Agreement other than this Section 7 are used in this Agreement
as so defined.
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<PAGE> 10
"Additional Tax Amount" means the Borrower's share of
the aggregate amount of actual Tax liability paid by the Borrower or Lason as a
direct result of the Lender's acquisition of the assets of Lason, to the extent
that the Borrower's share of such actual Tax liability exceeds the Borrower's
share of the aggregate amount of Tax liability that would have resulted if the
Lender had acquired the stock of Lason for an economically equivalent purchase
price (taking into account the effect of the liabilities of Lason assumed by
the Lender in such asset acquisition), and all out-of-pocket expenses
(including legal and accounting fees and disbursements) incurred by the
Borrower in connection with any dispute relating thereto.
"Agreement" means this Credit Agreement (including
all exhibits hereto).
"Federal Bankruptcy Code" means Title 11 of the
United States Code entitled "Bankruptcy", as amended from time to time or any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect and all rules and regulations promulgated thereunder.
"FUNB Loan Agreement" means the Loan Agreement dated
as of the date hereof among the Lender, First Union National Bank of North
Carolina ("FUNB") and the other financial institutions which may become parties
thereto as Lenders, and FUNB, as Agent, as in effect from time to time.
"Future Advance Amount" for any Future Advance means
the difference between the Additional Tax Amount and the Total Loan Amount
immediately prior to such Future Advance.
"Lason" means Lason Systems, Inc., a Michigan
corporation.
"Other Credit Agreements" means the various Credit
Agreements dated as of the date hereof each between the Lender, on the one
hand, and one or more stockholders of Lason (and, in certain instances, a
related person), on the other hand, each as in effect from time to time.
"Person" means any of the Lender, the Borrower, the
Trust or any Holder.
"Related Transactions Documents" means this
Agreement, the Term Note and the Advance Notes, if any, the Stock Pledge
Agreement and all other instruments, documents and agreements executed or
delivered in connection with the funding and repayment of the Loans.
"Stock Pledge Agreement" means the Stock Pledge
Agreement dated as of the date hereof by and between the Lender and the Trust,
as in effect from time to time.
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<PAGE> 11
"Tax" means any federal, state or local income, gross
receipts, alternative or add-on minimum or other tax imposed by any Taxing
Authority, including any interest on or penalty or addition with respect
thereto.
"Taxing Authority" means the United States Internal
Revenue Service or, if applicable, the relevant state taxing authority.
"Total Loan Amount" means the sum of the initial
principal amounts of the Term Loan and all Future Advances, if any, in each
case without giving effect to any payment by the Borrower, as adjusted pursuant
to Section 1.1(C).
* * * * *
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<PAGE> 12
IN WITNESS WHEREOF, the Borrower, the Lender and the Trust
have executed and delivered this Agreement as of the day and year first above
written.
/s/ Allen J. Nesbitt
--------------------------------
Allen J. Nesbitt
LASON ACQUISITION CORP.
By: /s/ Robert A. Yanover
-----------------------------
Its: Chairman
----------------------------
ALLEN J. NESBITT LIVING TRUST
DATED DECEMBER 7, 1994
By: /s/ Allen J. Nesbitt
-----------------------------
Its: Trustee
----------------------------
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<PAGE> 13
EXHIBIT A
TERM NOTE
[SEE ATTACHED]
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<PAGE> 14
EXHIBIT B
FORM OF ADVANCE NOTE
[SEE ATTACHED]
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<PAGE> 15
STOCK PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made as of January 17, 1995 between the Allen J.
Nesbitt Living Trust dated December 7, 1994 (the "Pledgor") and Lason Systems,
Inc., a Delaware corporation formerly known as "Lason Acquisition Corp." (the
"Company").
The Company and the Pledgor are parties to an Executive Stock Agreement
dated as of the date hereof, pursuant to which the Pledgor has purchased and
now holds 469,064 shares of the Company's Class A-1 Common Stock, $.01 par
value (the "Pledged Shares").
Allen J. Nesbitt (the "Borrower") has delivered to the Company a promissory
note dated as of the date hereof in the principal amount of $609,791 pursuant
to the Credit Agreement dated as of the date hereof between the Borrower, the
Pledgor and the Company (as in effect from time to time, the "Credit
Agreement"). Each capitalized term used and not otherwise defined in this
Pledge Agreement has the meaning which the Credit Agreement assigns to that
term.
The Pledgor has been established substantially for the benefit of, and is
currently controlled by, the Borrower or members of his immediate family. In
consideration for the Company's agreement to make certain loans pursuant to the
Credit Agreement which provide a substantial economic benefit to the Borrower,
the Pledgor has agreed to pledge the Pledged Shares as security for the
Borrower's obligations pursuant to the Notes which have been or may be issued
pursuant to the Credit Agreement. This Pledge Agreement provides the terms and
conditions upon which the Notes which have been or may be issued pursuant to
the Credit Agreement will be secured by such pledge.
NOW, THEREFORE, in consideration of the premises contained herein and other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the Pledgor and the Company hereby agree as follows:
1. Pledge. The Pledgor hereby pledges to the Company, and grants to the
Company a security interest in, the Pledged Shares, as security for the prompt
and complete payment when due of the unpaid principal of and interest on the
Notes, and all other obligations of the Borrower and the Pledgor's which have
arisen or may arise under the Credit Agreement (collectively with such
principal and interest, the "Obligations"). The obligations and agreements of
the Pledgor pursuant to this Agreement and the Credit Agreement shall
constitute a guaranty of payment and not a guaranty of collection.
2. Delivery of Pledged Shares. Contemporaneously with the execution and
delivery of this Pledge Agreement, the Pledgor is delivering to the Company the
certificate(s) representing the Pledged Shares, each together with a stock
power, duly executed in blank, in form acceptable to the Company and the
Pledgor.
<PAGE> 16
3. Voting Rights. Notwithstanding anything to the contrary contained
herein, during the term of this Pledge Agreement, except during the continuance
of an Event of Default, the Pledgor shall be entitled to all voting rights with
respect to the Pledged Shares.
4. Stock Dividends; Distributions, etc. If, while this Pledge Agreement is
in effect, the Pledgor becomes entitled to receive or receives any securities
in addition to, in substitution of, or in exchange for, any of the Pledged
Shares (whether as a distribution in connection with any recapitalization,
reorganization or reclassification, a stock dividend or otherwise), the Pledgor
shall accept such securities on behalf of and for the benefit of the Company as
additional security for the Obligations and shall promptly deliver such
securities to the Company together with duly executed forms of assignment, and
such securities shall be deemed to be part of the Pledged Shares hereunder.
5. Default. If an Event of Default of a type described in subparagraph
3.1(A)(i) or 3.1(A)(iii) of the Credit Agreement occurs, or any other Event of
Default under the Credit Agreement occurs and continues for 30 days, the
Company may exercise any and all rights, powers and remedies of any owner of
the Pledged Shares (including the right to vote the shares and receive
dividends and distributions with respect to such shares), provided that all
cash dividends and cash distributions with respect to such shares shall be
applied in accordance with the Credit Agreement, and shall have and may
exercise without demand any and all of the rights and remedies granted to a
secured party upon default under the Uniform Commercial Code or otherwise
available to the Company under applicable law. Without limiting the foregoing,
the Company is authorized to sell, assign and deliver at its discretion, from
time to time, all or any part of the Pledged Shares at any private sale or
public auction, on not less than ten days written notice to the Pledgor, at
such price or prices and upon such terms as the Company may deem advisable.
The Pledgor shall have no right to redeem the Pledged Shares after any such
sale or assignment. At any such sale or auction, the Company may bid for, and
become the purchaser of, the whole or any part of the Pledged Shares offered
for sale. In case of any such sale, after deducting the costs, attorneys' fees
and other expenses of sale and delivery, the remaining proceeds of such sale
shall be applied to the Obligations in a manner consistent with the terms of
the Credit Agreement; provided, however, that after payment in full of the
Obligations, the balance of the proceeds of sale then remaining shall be paid
to the Pledgor, and the Pledgor shall be entitled to the return of any of the
Pledged Shares remaining in the Company's possession.
6. Costs and Attorneys' Fees. All costs and expenses, including reasonable
attorneys' fees, incurred in exercising any right, power or remedy conferred by
this Pledge Agreement or in the enforcement thereof shall become part of the
Obligations.
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<PAGE> 17
7. Payment of Obligations and Release of Pledged Shares. Upon payment in
full of the Obligations, the Company shall surrender to Pledgor all Pledged
Shares in the Company's possession, together with all related forms of
assignment.
8. Further Assurances. The Pledgor agrees that at any time and from time
to time upon the written request of the Company, it will execute and deliver
such further documents and do such further acts and things as the Company may
reasonably request in order to effect the purposes of this Pledge Agreement.
9. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective only to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. Waivers and Amendments; Cumulative Remedies. None of the terms or
provisions of this Pledge Agreement may be waived, altered, modified or amended
except by an instrument in writing, duly executed by the parties hereto.
Without limiting the foregoing, the Company shall not by any act, delay,
omission or otherwise be deemed to have waived any of its rights or remedies
hereunder, and no waiver shall be valid unless in writing, signed by the
parties hereto, and then only to the extent therein set forth. A waiver by the
Company of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Company would otherwise
have on any future occasion. No failure to exercise nor any delay in
exercising on the part of the Company, any right, power or privilege hereunder
shall preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided are
cumulative and may be exercised singly or concurrently, and are not exclusive
of any rights or remedies provided by law.
11. Applicable Law. This Pledge Agreement shall be governed by, and
construed and interpreted in accordance with, the internal laws, and not the
principles of conflicts of laws, of the State of Michigan.
12. Successors and Assigns. All covenants and agreements set forth in
this Pledge Agreement by or on behalf of the Pledgor or the Company will bind
and inure to the benefit of each of their respective successors and assigns,
whether so expressed or not, except that neither this Pledge Agreement or any
of the rights, interests or obligations hereunder may be assigned by the
Pledgor without the Company's prior written consent.
13. Headings. The headings used in this Pledge Agreement are for the
purpose of reference only and will not affect
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<PAGE> 18
the meaning or interpretation of any provision of this Pledge Agreement.
14. Conflict. The terms and conditions of the Credit Agreement are
incorporated in this Pledge Agreement by this reference. In the event of any
conflict between the terms of this Pledge Agreement and the terms of the Credit
Agreement, the terms of the Credit Agreement shall control.
* * * * *
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<PAGE> 19
IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date
first above written.
LASON SYSTEMS, INC.
By /s/ Robert A. Yanover
----------------------------
Its Chairman
---------------------------
ALLEN J. NESBITT LIVING TRUST
DATED DECEMBER 7, 1994
By: /s/ Allen J. Nesbitt
----------------------------
Its: Trustee
----------------------------
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<PAGE> 1
EXHIBIT 10.8
[LASON SYSTEMS, INC. LETTERHEAD]
August 22, 1995
Mr. Gary Monroe
FAX: 716-724-3250
Dear Gary:
Please consider this an offer of employment for you to join Lason Systems, Inc.
1. Your position will be Executive Vice President, reporting directly to
the Chairman of the Board.
2. Your salary shall be $175,000 per year, plus a percentage of N.O.C.
targeted to a bonus of approximately 50% of your salary.
3. You will receive an option to purchase 68,181 shares of Lason stock
for fair market value of $1.00 (3% of fully diluted stock), to be
vested as follows:
1/3 upon your joining Lason Systems, Inc.
1/3 upon completion of one year of employment
1/3 upon completion of two years of employment
You will have an anti-dilution provision on these options as follows:
In the event additional capital is invested, you will have the
right (but not the obligation) to match pro-rata such
investment to protect your equity percentage. This additional
investment will be accomplished by signing a non-recourse note
bearing the minimum interest percentage allowed by statute.
The security for this note will be the underlying equity of
the options.
4. We agree on an annual basis, to review your contributions, and in the
sole discretion of the Board, to issue additional options as merited.
5. In the event that Lason Systems, Inc. terminates your services during
the first two (2) years of employment for reasons other than cause, we
will pay you a severance sum equal to nine (9) months salary.
6. You will be granted a seat on Lason's Board.
7. We will pay relocation costs up to a maximum of $40,000.
<PAGE> 2
Gary, I really think this is a good opportunity for you and for Lason. I hope
you decide to accept this offer. Please let me know as soon as possible.
Sincerely,
/s/ Bob Yanover
Robert A. Yanover
Chairman of the Board
LASON SYSTEMS, INC.
<PAGE> 1
EXHIBIT 10.9
[LASON SYSTEMS, INC. LETTERHEAD]
April 30, 1996
William J. Rauwerdink
3172 Interlaken
Orchard Lake, Michigan 48323
Dear Bill:
Please accept this letter as an offer of employment from Lason Systems, Inc.
The following outlines the general terms of the offer.
POSITION - Chief Financial Officer and Treasurer and Executive Vice
President
BASE SALARY - $135,000 annually
BONUS - Targeted at 50% of base annual salary
STOCK OPTIONS - 22,000 options with an exercise price of $8.00 vesting
over 5 years and governed by the existing option program rules. In
the event Lason has an IPO prior to completing your first full year of
employment, the first year options or 20% will vest immediately
following the IPO.
SEPARATION - In the event of termination without cause, you will be
entitled to 90 days salary and bonus.
BENEFITS - As we discussed, you will be entitled to all Lason benefits
as governed by the plans.
Bill, I believe you will be a great addition to our company.
Sincerely,
/s/ Gary L. Monroe
Gary L. Monroe
Chief Executive Officer
Lason Systems, Inc.
<PAGE> 1
[LASON SYSTEMS, INC. LETTERHEAD]
EXHIBIT 10.10
June 12, 1996
Brian Jablonski
10 Misty Meadow Way
Fairport, NY 14450
Dear Brian:
Thank you for inquiring about employment opportunities at Lason Systems, Inc.
Please accept this letter as an offer of employment. I've outlined below the
major items regarding the offer.
- Your position will be Vice President of Marketing and Sales
- Base annual salary $135,000.00
- Annual Bonus will be targeted at 50% of base annual salary ($67,500)
- 24,000 options to purchase Lason common stock with an exercise price
of $8.00 per share vesting 20% per year
- Relocation and miscellaneous expense package of approximately
$65,000 gross
- You will be entitled to all other customary Lason benefits.
Brian, I know you have received an offer from another company and have
submitted your resignation to Kodak Imaging Services. However, I hope you
accept this offer. I believe it will be a good move for you and the company.
Sincerely,
Gary L. Monroe Brian Jablonski
- ----------------- ----------------------
Gary L. Monroe Brian Jablonski
Chief Executive Officer
Date: 6/12/96 Date: 6/13/96
------------ -----------------
<PAGE> 1
EXHIBIT 10.11
LASON HOLDINGS, INC.
1995 STOCK OPTION PLAN
ARTICLE 1
Identification of the Plan
1.1 Title. The plan described herein shall be known as the "Lason
Holdings, Inc. 1995 Stock Option Plan" and is herein called this "Plan."
1.2 Purpose. The purpose of this Plan is (i) to compensate Key Persons of
Lason Holdings, Inc. (the "Company") and its Subsidiaries for services rendered
by such persons; (ii) to provide Key Persons of the Company and its
Subsidiaries with significant additional incentive to promote the financial
success of the Company; and (iii) to provide an incentive which may be used to
induce able persons to enter into or remain in the employment of, or to provide
services to, the Company or any Subsidiary.
1.3 Adoption of This Plan. This Plan was adopted by the Company's
stockholders on January 17, 1995.
1.4 Defined Terms. Certain capitalized terms used in this Plan have the
meanings indicated for such terms in Section 10.1 of this Plan.
ARTICLE 2
Administration of this Plan
2.1 Committee's Powers. This Plan shall be administered by a committee
(the "Committee") composed of persons appointed by the Board of Directors of
the Company in accordance with the provisions of Section 2.2. The Committee
shall have full power and authority to prescribe, amend and rescind rules and
procedures governing administration of this Plan. The Committee shall have
full power and authority (i) to interpret the terms of this Plan, the terms of
the Options, and the rules and procedures established
<PAGE> 2
by the Committee and (ii) to determine the meaning of or requirements imposed
by or rights of any person under this Plan, any Option, or any rule or
procedure established by the Committee. Each action of the Committee which is
within the scope of the authority delegated to the Committee by this Plan or by
the Board shall be binding on all persons.
2.2 Committee Membership. The Committee shall be composed of
non-management members of the Board. The Board shall have the power to
determine the number of members which the Committee shall have and to change
the number of membership positions on the Committee from time to time. The
Board shall appoint all members of the Committee. The Board may from time to
time appoint members to the Committee in substitution for, or in addition to,
members previously appointed and may fill vacancies, however caused, on the
Committee. Any member of the Committee may be removed from the Committee by
the Board at any time without cause. If at any time no special committee has
been constituted by the Board especially for the purposes of this Plan, then
the non-management members of the Board shall have all powers and rights
delegated to the Committee under this Plan. Notwithstanding anything to the
contrary in this Section 2.2, the Committee shall not grant an Option to a
Section 16 Holder unless the Committee is constituted so as to comply with
Securities and Exchange Commission Rule 16b-3 as amended or any successor rules
or government pronouncements.
2.3 Committee Procedures. The Committee shall hold its meetings at such
times and places as it may determine. The Committee may make such rules and
regulations for the conduct of its business as it shall deem advisable. Unless
the Board or the Committee expressly decides to the contrary, a majority of the
members of the Committee shall constitute a quorum and any action taken by a
majority of the Committee members in attendance at a meeting at which a quorum
of Committee members is present shall be deemed an act of the Committee.
2.4 Indemnification. No member of the Committee shall be liable, in the
absence of bad faith, for any act or omission with respect to his or her
service on the Committee under this Plan. Service on the Committee shall
constitute service as a director of the Company so that the members of the
Committee shall
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<PAGE> 3
be entitled to indemnification and reimbursements as directors of the Company
for any action or any failure to act in connection with service on the
Committee to the full extent provided for at any time in the Company's
Certificate of Incorporation and By-Laws, or in any insurance policy or other
agreement intended for the benefit of the Company's directors.
ARTICLE 3
Persons Eligible to Receive Options
A person shall be eligible to be granted an Option only if, on the
proposed Granting Date for such Option, such person is an officer of the
Company or meets the following standards: (i) (A) such person is employed by
the Company or a Subsidiary and such person has managerial, supervisory or
similar responsibilities, (B) such person is an independent contractor who
provides key services to the Company or a Subsidiary or (C) such person is a
director of the Company or a Subsidiary and (ii) such person is not covered by
any collective bargaining agreement binding on such person's employer. A
person eligible to be granted an Option is herein called a "Key Person."
ARTICLE 4
Options Grant
4.1 Power to Grant Options. The Committee shall have the right and the
power to grant at any time to any Key Person an option entitling such person to
purchase Class A Common from the Company in such quantity, at such price, on
such terms and subject to such conditions consistent with the provisions of
this Plan as may be established by the Committee on or prior to the Granting
Date for such option. Each option to purchase Class A Common which shall be
granted by the Committee pursuant to the provisions of this Plan is herein
called an "Option."
4.2 Granting Date. An Option shall be deemed to have been granted under
this Plan on the date (the "Granting Date") which the Committee designates as
the Granting Date at the time it approves such Option, provided that the
Committee may not designate a Granting Date with respect to any Option which is
earlier than
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<PAGE> 4
the date on which the granting of such Option is approved by the Committee.
4.3 Option Terms Which The Committee May Determine. The Committee shall
have the power to determine the Key Persons to whom Options are granted, the
number of Shares subject to each Option, the number of Options awarded to each
Key Person and the time at which each Option is granted. Except as otherwise
expressly provided in this Plan, the Committee shall also have the power to
determine, at the time of the grant of each Option, all terms and conditions
governing the rights and obligations of the holder with respect to such Option,
including but not limited to: (a) the purchase price per Share or the method
by which the purchase price per Share will be determined; (b) the length of the
period during which the Option may be exercised and any limitations on the
number of Shares purchasable with the Option at any given time during such
period; (c) the times at which the Option may be exercised; (d) any conditions
precedent to be satisfied before the Option may be exercised; (e) any
restrictions on resale of any Shares purchased upon exercise of the Option; and
(f) whether the Option will constitute an Incentive Stock Option.
4.4 Option Agreement. No person shall have any rights under any Option
unless and until the Company and the person to whom such Option is granted have
executed and delivered an agreement expressly granting the Option to such
person and containing provisions setting forth the terms of the Option (an
"Option Agreement").
ARTICLE 5
Option Terms
5.1 Plan Provisions Control Option Terms. The terms of this Plan shall
govern all the Options. In the event any provision of any Option Agreement
conflicts with any term in this Plan as constituted on the Granting Date of
such Option, the term in this Plan as constituted on the Granting Date of the
Option shall control. Except as provided in Article 8, the terms of any Option
may not be changed after the Granting Date of such Option without the written
approval of the Option Holder.
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<PAGE> 5
5.2 Price Limitation. Subject to Article 8, the price at which each Share
may be purchased upon the exercise of any Option may not be less than the
greater of $.01 and the Per Share Market Value on the Granting Date for such
Option, provided that if an Incentive Stock Option is granted to a person who
owns, on the Granting Date of such Incentive Stock Option, stock possessing
more than ten percent of the total combined voting power of all classes of
stock of the Company (or of any parent or Subsidiary of the Company in
existence on the Granting Date of such Option), the price at which each Share
may be purchased upon exercise of such Incentive Stock Option may not be less
than 110% of the Per Share Market Value on the Granting Date for such Option.
5.3 Term Limitation. No Incentive Stock Option may be granted under this
Plan which is exercisable more than ten years after its Granting Date. This
Section 5.3 shall not be deemed to limit the term which the Committee may
specify for any Options granted under the Plan which are not intended to be
Incentive Stock Options.
5.4 Transfer Limitations. No Incentive Stock Option or other Option
granted to any Section 16 Holder shall be transferable other than by will or
the laws of descent and distribution or exercisable during the lifetime of the
person to whom the Option is initially granted by anyone other than the initial
grantee. Notwithstanding the terms of the Option Agreement, if any Option
(other than an Incentive Stock Option) is issued to a Holder who is not a
Section 16 Holder on the Granting Date and such Holder becomes a Section 16
Holder before such Holder has fully exercised such Option, then such Option
shall not be transferable other than by will or the laws of descent and
distribution or exercisable during the lifetime of the initial grantee by
anyone other than the initial grantee. Subject to the preceding sentence,
Options (other than Incentive Stock Options) which are granted to anyone other
than a Section 16 Holder may be transferred (i) to any members of the initial
grantee's immediate family or (ii) to any inter vivos trust solely for the
benefit of any members of the initial grantee's immediate family or (iii) as a
result of the death of the initial grantee, testate or intestate. Nothing in
the preceding three sentences shall be construed as making an Option
transferable if the Option Agreement provides otherwise. It shall be a
condition precedent to any transfer of any Option that the
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<PAGE> 6
transferee executes and delivers an agreement acknowledging that such Option
has been acquired for investment and not for distribution and is and shall
remain subject to this Plan and the Option Agreement. The "Holder" of any
Option shall mean (i) the initial grantee, or (ii) the person or trust, if any,
to whom the Option is transferred.
5.5 No Right to Employment Conferred. Nothing in this Plan or (in the
absence of an express provision to the contrary) in any Option Agreement (i)
confers any right or obligation on any person to continue in the employ of the
Company or any Subsidiary, to continue to provide services to the Company or
any Subsidiary as an independent contractor, or to continue to be a director of
the Company or any Subsidiary or (ii) affects or shall affect in any way any
person's right or the right of the Company or any Subsidiary to terminate such
person's employment or services to the Company or any Subsidiary at any time,
for any reason, with or without cause.
ARTICLE 6
Option Exercise
6.1 Normal Option Term. Except as otherwise provided in Sections 6.3, 6.5
or 6.7 or in the Option Agreement, the right to exercise any Option shall
terminate at the earlier of the following dates: (i) the Termination Date of
the initial grantee of the Option, or (ii) the Expiration Date of the Option.
6.2 Exercise Time. No Option granted to a Section 16 Holder shall become
exercisable within six months after the applicable Granting Date, except in the
case of the death or disability of the Holder. Notwithstanding the terms of
the Option Agreement, if any Option is issued to a Holder who is not a Section
16 Holder on the Granting Date and such Holder becomes a Section 16 Holder
before such Holder exercises such Option, then such Option shall not become
exercisable within six months after the applicable Granting Date, except in the
case of the death or disability of the Holder. Subject to the preceding two
sentences, each Option shall become exercisable at the time provided in the
Option Agreement, provided that the Committee in its sole discretion shall have
the
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<PAGE> 7
right (but shall not in any case be obligated) to permit the exercise of such
Option prior to such time.
6.3 Extension of Exercise Time. The Committee in its sole discretion
shall have the right (but shall not in any case be obligated) to permit any
Option to be exercised after the Termination Date of the Holder of such Option.
Notwithstanding the preceding sentence but subject to Section 6.7, the
Committee shall not have the right to permit the exercise of any Option after
its Expiration Date.
6.4 Exercise Procedures. Each Option shall be exercised by written notice
to the Company. Any Holder of any Option shall be required, as a condition to
such Holder's right to purchase securities with such Option, to supply the
Committee at such person's expense with such evidence, representations,
agreements or assurances (including but not limited to opinions of counsel
satisfactory to the Committee) as the Committee may deem necessary or desirable
in order to establish to the satisfaction of the Committee the right of such
person to exercise such Option, and of the propriety of the sale of securities
by reason of such exercise under the Securities Act and any other laws or
requirements of any governmental authority specified by the Committee. The
Company shall not be obligated to sell any Shares subject to such Option until
all evidence, representations, agreements and assurances required by the
Committee have been supplied. An Option Holder shall not have any rights as a
stockholder with respect to Shares issuable under any Option until and unless
such Shares are sold and delivered to such Option Holder. The purchase price
of Shares purchased upon the exercise of an Option shall be paid in full in
cash or by check by the Option Holder at the time of the delivery of such
Shares, provided that the Committee may (but need not) permit payment to be
made by (i) delivery to the Company of outstanding Shares, (ii) retention by
the Company of Shares which would otherwise be transferred to the Option Holder
upon exercise of the Option or (iii) any combination of cash, check, the
Holder's delivery of outstanding Shares and retention by the Company of Shares
which would otherwise be transferred to the Option Holder upon exercise of the
Option. In the event any Common Stock is delivered to or retained by the
Company to satisfy all or any part of the purchase price, the part of the
purchase price deemed to have been satisfied by such Common Stock shall be
equal to the
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<PAGE> 8
product derived by multiplying the Per Share Market Value as of the date of
exercise times the number of Shares delivered to or retained by the Company.
The number of Shares delivered to or retained by the Company in satisfaction of
the purchase price shall not be a number which when multiplied by the Per Share
Market Value as of the date of exercise would result in a product greater than
the purchase price. No fractional Shares shall be delivered to or retained by
the Company in satisfaction of the purchase price. Any part of the purchase
price paid in cash or by check upon the exercise of any Option shall be added
to the general funds of the Company and may be used for any proper corporate
purpose. Notwithstanding Article 7, unless the Board shall otherwise
determine, for each Share delivered to or retained by the Company as payment of
all or part of the purchase price upon the exercise of any Option, the
aggregate number of Shares subject to this Plan shall be increased by one Share.
6.5 Death or Permanent Disability of Option Holder. Except as otherwise
provided in the Option Agreement, if the Holder of an Option dies while such
Option Holder is still employed by, or is providing services as a director or
an independent contractor to, the Company or any Subsidiary, then the right to
exercise all unexpired installments of such Option shall terminate; provided
that, except as otherwise provided in the Option Agreement and subject to
Section 6.7, if the Holder of an Option dies and such Option is otherwise
exercisable at the date of death, then the Holder's estate or the person or
persons to whom the Holder's rights under the Option shall pass by reason of
the Holder's death shall have the right to exercise the Option for 30 days
after the date of death and the Option shall expire at the end of such 30-day
period. Except as otherwise provided in the Option Agreement, if the Holder of
an Option suffers a Permanent Disability while such Holder is still employed
by, or is providing services as a director or an independent contractor to, the
Company or any Subsidiary, then the right to exercise all unexpired
installments of such Option shall terminate as of the later of the date of such
Permanent Disability or the date of discovery of such Permanent Disability (the
"Permanent Disability Date"); provided that, except as otherwise provided in
the Option Agreement and subject to Section 6.7, if the Holder of the Option
suffers a Permanent Disability and such Option is otherwise exercisable at the
Permanent Disability Date, then the Holder shall have the right to
-8-
<PAGE> 9
exercise the Option for 30 days after the Permanent Disability Date and the
Option shall expire at the end of such 30-day period.
6.6 Taxes. The Company or any Subsidiary shall be entitled, if the
Committee deems it necessary or desirable, to withhold from an Option Holder's
salary or other compensation (or to secure payment from the Option Holder in
lieu of withholding) all or any portion of any withholding or other tax due
from the Company or any Subsidiary with respect to any Shares deliverable under
such Holder's Option or the Committee may (but need not) permit payment of such
withholding by the Company's retention of Shares which would otherwise be
transferred to the Option Holder upon exercise of the Option. In the event any
Common Stock is retained by the Company to satisfy all or any part of the
withholding, the part of the withholding deemed to have been satisfied by such
Common Stock shall be equal to the product derived by multiplying the Per Share
Market Value as of the date of exercise by the number of Shares retained by the
Company. The number of Shares retained by the Company in satisfaction of
withholding shall not be a number which when multiplied by the Per Share Market
Value as of the date of exercise would result in a product greater than the
withholding amount. No fractional Shares shall be retained by the Company in
satisfaction of withholding. Notwithstanding Article 7, unless the Board shall
otherwise determine, for each Share retained by the Company in satisfaction of
all or any part of the withholding amount, the aggregate number of Shares
subject to this Plan shall be increased by one Share. The Company may defer
delivery under a Holder's Option until indemnified to its satisfaction.
6.7 Securities Law Compliance. Each Option shall be subject to the
condition that such Option may not be exercised if and to the extent the
Committee determines that the sale of securities upon exercise of the Option
may violate the Securities Act or any other law or requirement of any
governmental authority. The Company shall not be deemed by any reason of the
granting of any Option to have any obligation to register the Shares subject to
such Option under the Securities Act or to maintain in effect any registration
of such Shares which may be made at any time under the Securities Act. An
Option shall not be exercisable if the Committee or the Board determines there
is non-public information material to the decision of the Holder to exercise
such Option
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<PAGE> 10
which the Company cannot for any reason communicate to such Holder.
Notwithstanding Sections 6.1, 6.3 and 6.5 and the terms of the Option
Agreement, if (i) any Holder makes a bona fide request to exercise any Option
which complies with Section 6.4, (ii) the Committee or the Board determines
such Option cannot be exercised for a period of time pursuant to this Section
6.7 and (iii) such Option expires during such period, then the term of such
Option shall be extended until the end of such period.
ARTICLE 7
Shares Subject to This Plan
An aggregate of 740,740 shares of Class A Common shall be subject to this
Plan; provided that the Committee may increase or decrease such number of
shares from time to time. Except as provided in Sections 6.4 and 6.6 and
Article 8, the Options shall be limited so that the sum of the following shall
not as of any given time exceed such number of Shares (as increased or
decreased by the Committee from time to time): (i) all Shares subject to
Options outstanding under this Plan at the given time and (ii) all Shares which
shall have been sold by the Company by reason of the exercise at or prior to
the given time of any of the Options. In the event any Option shall expire or
be terminated before it is fully exercised or in the event of any repurchase or
other reacquisition by the Company of Shares issued upon the exercise of any
Option, then all Shares formerly subject to such Option as to which such Option
was not exercised, and all Shares issued pursuant to any Option and repurchased
or otherwise reacquired by the Company, shall be available for any Option
subsequently granted in accordance with the provisions of this Plan.
ARTICLE 8
Adjustments to Reflect Organic Changes
The Board shall appropriately and proportionately adjust the number and
kind of Shares subject to outstanding Options, the price for which Shares may
be purchased upon the exercise of outstanding Options, and the number and kind
of Shares available for Options subsequently granted under this Plan to reflect
any stock dividend, stock split, combination or exchange of shares,
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<PAGE> 11
merger, consolidation or other change in the capitalization of the Company
which the Board determines to be similar, in its substantive effect upon this
Plan or the Options, to any of the changes expressly indicated in this
sentence. The Board may (but shall not be required to) make any appropriate
adjustment to the number and kind of Shares subject to outstanding Options, the
price for which Shares may be purchased upon the exercise of outstanding
Options, and the number and kind of Shares available for Options subsequently
granted under this Plan to reflect any spin-off, spin-out or other distribution
of assets to stockholders or any acquisition of the Company's stock or assets
or other change which the Board determines to be similar, in its substantive
effect upon this Plan or the Options, to any of the changes expressly indicated
in this sentence. The Committee shall have the power to determine the amount
of the adjustment to be made in each case described in the preceding two
sentences, but no adjustment approved by the Committee shall be effective until
and unless it is approved by the Board. In the event of any reorganization,
reclassification, consolidation, merger or sale of all or substantially all of
the Company's assets which is effected in such a way that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock,
the Board may (but shall not be required to) substitute the per share amount of
such stock, securities or assets for Shares upon any subsequent exercise of any
Option. If any fractional Share becomes subject to any Option as a result of
any change made under this Article 8, then (i) such Option may not be exercised
with respect to such fractional Share until and unless such Option is exercised
as to all other Shares subject to such Option and (ii) if such Option is
exercised with respect to such fractional Share, the Company shall have the
right to deliver to the Holder in lieu of such fractional Share cash in an
amount equal to the product derived by multiplying the fraction representing
the portion of a full Share represented by such fractional Share times the Per
Share Market Value on the exercise date of the Option with respect to such
fractional Share established as prescribed in this Plan.
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<PAGE> 12
ARTICLE 9
Amendment and Termination of This Plan
9.1 Amendment. Except as provided in the following two sentences, the
Board shall have complete power and authority to amend this Plan at any time
and no approval by the Company's stockholders or by any other person, committee
or other entity of any kind shall be required to make any amendment approved by
the Board effective. The Board shall not, without the affirmative approval of
the Company's stockholders, amend the Plan in any manner which would cause any
outstanding Incentive Stock Options to no longer qualify as Incentive Stock
Options. If any Section 16 Holder holds any Option, the Board shall not,
without the affirmative approval of the Company's stockholders, make any
material amendment to this Plan which alters the rights or obligations of such
Holder under this Plan. No termination or amendment of this Plan may, without
the written consent of the Holder of any Option prior to termination or the
adoption of such amendment, adversely affect the rights of such Holder under
such Option.
9.2 Termination. The Board shall have the right and the power to
terminate this Plan at any time, provided that no Incentive Stock Options may
be granted after the tenth anniversary of the adoption of this Plan. No Option
shall be granted under this Plan after the termination of this Plan, but the
termination of this Plan shall not have any other effect. Any Option
outstanding at the time of the termination of this Plan may be exercised after
termination of this Plan at any time prior to the Expiration Date of such
Option to the same extent such Option would have been exercisable had this Plan
not terminated.
ARTICLE 10
Interpretation of This Plan
10.1 Definitions. Each term defined in 10.1 has the meaning indicated in
this 10.1 whenever such term is used in this Plan:
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<PAGE> 13
Board of Directors -- The term "Board of Directors" and the term "Board"
both mean the Board of Directors of the Company as constituted at the time the
term is applied.
Class A Common -- The term "Class A Common" means the issued or issuable
Class A-1 Common Stock, par value $.01 per share, and Class A-2 Common Stock,
par value $.01 per share, of the Company.
Code -- The term "Code" means the Internal Revenue Code of 1986, as
amended.
Committee -- The term "Committee" has the meaning such term is given in
Section 2.1 of this Plan.
Common Stock -- The term "Common Stock" means, collectively, the Company's
issued or issuable Class B Common Stock, par value $.01 per share, and the
Class A Common.
Company -- The term "Company" as applied as of any given time shall mean
Lason Holdings, Inc., except that if prior to the given time any corporation or
other entity has acquired all or a substantial part of the assets of the
"Company" (as herein defined) and has agreed to assume the obligations of the
"Company" under this Plan, or is the survivor in a merger or consolidation to
which the "Company" was a party, such corporation or other entity shall be
deemed to be the "Company" at the given time.
Expiration Date -- The term "Expiration Date" as applied to any Option
means the date specified in the Option Agreement between the Company and the
Holder as the expiration date of such Option. If no expiration date is
specified in the Option Agreement relating to any Option, then the Expiration
Date of such Option shall be the day prior to the seventh anniversary of the
Granting Date of such Option. Notwithstanding the preceding sentence, if the
person to whom any Incentive Stock Option is granted owns, on the Granting Date
of such Option, stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company (or of any parent or
Subsidiary of the Company in existence on the Granting Date of such Option),
and if no earlier expiration date is specified in the Option Agreement relating
to such Option, then the Expiration Date of such Option shall be the
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<PAGE> 14
day prior to the fifth anniversary of the Granting Date of such Option.
Granting Date -- The term "Granting Date" has the meaning such term is
given in Section 4.2 of this Plan.
Holder -- The term "Holder" has the meaning such term is given in Section
5.4 of this Plan.
Incentive Stock Option -- The term "Incentive Stock Option" means an
incentive stock option, as defined in Code Section 422, which is granted
pursuant to this Plan.
Key Person -- The term "Key Person" has the meaning such term is given in
Article 3 of this Plan.
Option -- The term "Option" has the meaning such term is given in Section
4.1 of this Plan.
Option Agreement -- The term "Option Agreement" has the meaning such term
is given in Section 4.4 of this Plan.
Permanent Disability -- The term "Permanent Disability" shall mean a
physical or mental disability suffered by an initial grantee of an Option which
the Committee determines in its sole discretion will permanently prevent such
initial grantee from working for, or providing services to, the Company in the
same or a substantially similar position as such initial grantee occupied prior
to suffering such disability.
Permanent Disability Date -- The term "Permanent Disability Date" has the
meaning such term is given in Section 6.5 of this Plan.
Per Share Market Value -- The term "Per Share Market Value" on any given
date shall be the fair market value of one Share on the given date determined
in such manner as shall be prescribed in good faith by the Committee.
Plan -- The term "Plan" has the meaning such term is given in Section 1.1
of this Plan.
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<PAGE> 15
Section 16 Holder -- The term "Section 16 Holder" refers to any person
who, with respect to the Company, is subject to Section 16 of the Securities
Exchange Act of 1934 as amended at any time or any law or statute which
succeeds Section 16.
Securities Act -- The "Securities Act" at any given time shall consist of:
(i) the Securities Act of 1933 as constituted at the given time; (ii) any
other law or laws promulgated prior to the given time by the United States
Government which are in effect at the given time and which regulate or govern
any matters at any time regulated or governed by the Securities Act of 1933;
(iii) all regulations, rules, registration forms and other governmental
pronouncements issued under the laws specified in clauses (i) and (ii) of this
sentence which are in effect at the given time; and (iv) all interpretations by
any governmental agency or authority of the things specified in clause (i),
(ii) or (iii) of this sentence which are in effect at the given time. Whenever
any provision of this Plan requires that any action be taken in compliance with
any provision of the Securities Act, such provision shall be deemed to require
compliance with the Securities Act as constituted at the time such action takes
place.
Share -- The term "Share" means a share of Common Stock.
Subsidiary -- Any corporation (other than the Company) in an unbroken
chain of corporations beginning with the Company if, at the Granting Date of
the Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
Termination Date -- The term "Termination Date" as applied to the initial
grantee of any Option means the first date on which such initial grantee is not
employed by, nor providing services as a director or an independent contractor
to, either the Company or any Subsidiary for any reason (including but not
limited to voluntary or involuntary termination of employment or voluntary or
involuntary termination of the relationship with the Company or any Subsidiary
as a director or an independent contractor) other than death or Permanent
Disability. The Committee may specify in the original terms of an Option (or
if not so specified, shall
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<PAGE> 16
determine) whether an authorized leave of absence or absence on military or
government service or absence for any other reason shall constitute a
termination of employment or termination of the relationship with the Company
or any Subsidiary as a director or an independent contractor for the purposes
of this Plan.
10.2 Captions. The captions used in this Plan are for convenience only,
do not constitute a part of this Plan, and shall not be deemed to limit,
characterize or affect in any way any provisions of this Plan. All provisions
in this Plan shall be construed as if no captions had been used in this Plan.
10.3 Severability.
(a) General. Whenever possible, each provision in this Plan and in every
Option at any time granted under this Plan shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Plan or any Option at any time granted under this Plan is held to be prohibited
by or invalid under applicable law, then (i) such provision shall be deemed
amended to accomplish the objectives of the provision as originally written to
the fullest extent permitted by law and (ii) all other provisions of this Plan
and every Option at any time granted under this Plan shall remain in full force
and effect.
(b) Incentive Stock Options. Whenever possible, each provision in this
Plan and in every Option at any time granted under this Plan which is evidenced
by an Option Agreement which expressly states such Option is intended to
constitute an Incentive Stock Option under Code Section 422 (an "intended ISO")
shall be interpreted in such manner as to entitle such intended ISO to the tax
treatment afforded by the Code to Incentive Stock Options under Code Section
422, but if any provision of this Plan or any intended ISO at any time granted
under this Plan is held to be contrary to the requirements necessary to entitle
such intended ISO to the tax treatment afforded by the Code to Incentive Stock
Options under Code Section 422, then (i) such provision shall be deemed to have
contained from the outset such language as shall be necessary to entitle such
intended ISO to the tax treatment afforded by the Code to Incentive Stock
Options under Code Section 422, and (ii) all other provisions of this Plan and
such intended ISO shall remain in full force and effect; provided that, to the
extent that the
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<PAGE> 17
aggregate fair market value of stock with respect to which what would otherwise
be Incentive Stock Options are exercisable for the first time by an Key
Employee during any calendar year exceeds $100,000, such options shall be
treated as Options other than Incentive Stock Options. If any Option Agreement
covering an intended ISO granted under this Plan does not explicitly include
any terms required to entitle such intended ISO to the tax treatment
afforded by the Code to Incentive Stock Options under Code Section 422, then
all such terms shall be deemed implicit in the intention to afford such
treatment to such Option and such Option shall be deemed to have been granted
subject to all such terms.
10.4 No Strict Construction. No rule of strict construction shall be
applied against the Company, the Committee, or any other person in the
interpretation of any of the terms of this Plan, any Option or any rule or
procedure established by the Committee.
10.5 Choice of Law. This Plan and all documents contemplated hereby, and
all remedies in connection therewith and all questions or transactions relating
thereto, shall be construed in accordance with and governed by the laws of the
State of Delaware.
* * * * *
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<PAGE> 1
EXHIBIT 10.12
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Donald L. Elland
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the "Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Donald L. Elland 11,364
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 2
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
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<PAGE> 3
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
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<PAGE> 4
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
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<PAGE> 5
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
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<PAGE> 6
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Donald L. Elland
7359 Deer Run #422
Bloomfield Hills, MI 48301
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 7
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
-------------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Donald L. Elland
-----------------------------------
Donald L. Elland
7
<PAGE> 8
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
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<PAGE> 9
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Donald L. Elland
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 10
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Richard C. Kowalski
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Richard C. Kowalski 11,364
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 11
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 12
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 13
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 14
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 15
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Richard C. Kowalski
5455 Lyngre Drive
Howell, MI 48843
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 16
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
------------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Richard C. Kowalski
----------------------------------
Richard C. Kowalski
7
<PAGE> 17
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 18
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Richard C. Kowalski
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 19
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Gregory P. Carey
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Gregory P. Carey 2,841
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 20
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 21
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 22
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 23
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 24
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Gregory P. Carey
2820 Wall Street
Keego Harbor, Mi 48320
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 25
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
---------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Gregory P. Carey
---------------------------
Gregory P. Carey
7
<PAGE> 26
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 27
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Gregory P. Carey
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 28
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Karl H. Hartig
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the "Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Karl H. Hartig 8,523
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 29
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall become Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
<PAGE> 30
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 31
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 32
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 33
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Karl H. Hartig
7150 32 Mile Road
Romeo, MI 48095
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 34
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
---------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Karl H. Hartig
---------------------------
Karl H. Hartig
7
<PAGE> 35
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 36
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Karl H. Hartig
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 37
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: James J. Dewan
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
James J. Dewan 8,523
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 38
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 39
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 40
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 41
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 42
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
James J. Dewan
14016 Talbot
Warren, MI 48093
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 43
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By:/s/ Allen J. Nesbitt
-------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ James J. Dewan
---------------------------
James J. Dewan
7
<PAGE> 44
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 45
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
James J. Dewan
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 46
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Lawrence C. Jones
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Lawrence C. Jones 8,523
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 47
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 48
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 49
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 50
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 51
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Lawrence C. Jones
41682 Charleston Lane
Novi, MI 48377
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 52
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
--------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Lawrence C. Jones
---------------------------
Lawrence C. Jones
7
<PAGE> 53
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 54
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Lawrence C. Jones
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 55
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Scott L. Christensen
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Scott L. Christensen 8,523
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 56
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 57
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 58
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 59
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 60
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Scott L. Christensen
32780 White Oaks Trail
Beverly Hills, MI 48025
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 61
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
--------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Scott L. Christensen
---------------------------
Scott L. Christensen
7
<PAGE> 62
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 63
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Scott L. Christensen
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 64
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Daniel J. Buckley
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Daniel J. Buckley 8,523
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 65
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 66
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 67
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 68
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 69
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Daniel J. Buckley
22054 Harsdale Court
Farmington Hills, MI 48335
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 70
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
--------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Daniel J. Buckley
---------------------------
Daniel J. Buckley
7
<PAGE> 71
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 72
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Daniel J. Buckley
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 73
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: Paul G. Dugan
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Paul G. Dugan 5,682
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 74
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 75
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 76
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 77
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 78
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Paul G. Dugan
36090 Parklane Circle
Farmington Hills, MI 48024
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 79
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
-------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Paul G. Dugan
---------------------------
Paul G. Dugan
7
<PAGE> 80
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 81
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
Paul G. Dugan
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 82
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: John H. Wallanse
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
John H. Wallanse 2,841
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 83
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 84
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 85
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 86
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 87
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
John H. Wallanse
38384 Shoreline Drive
Mt. Clemens, MI 48045
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 88
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ John H. Wallanse
---------------------------
John H. Wallanse
7
<PAGE> 89
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 90
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
John H. Wallanse
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 91
EMPLOYEE STOCK OPTION AGREEMENT
January 17, 1995
To: David J. Malosh
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 11
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-2 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
David J. Malosh 2,841
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
<PAGE> 92
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided
in paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable
in accordance with the following schedule, if as of each such date the Grantee
is still employed by the Company or any of its Subsidiaries:
<TABLE>
<CAPTION>
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
<S> <C>
January 17, 1996 20%
January 17, 1997 40%
January 17, 1998 60%
January 17, 1999 80%
January 17, 2000 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred other
2
<PAGE> 93
than as a result of the death of such Grantee, testate or intestate, and the
restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article 8
of the Plan. The Board may (but shall not be required to) make any appropriate
adjustment to the terms of the Options to reflect any spin-off, spin-out or
other distribution of assets to shareholders or any acquisition of the
Company's stock or assets or
3
<PAGE> 94
other change which the Board determines to be similar, in its substantive
effect upon the Plan or the Options, to any of the changes expressly indicated
in this sentence, as provided in Article 8 of the Plan. In the event of any
adjustments described in the preceding two sentences, any and all new,
substituted, or additional securities or other property to which any Purchaser
is entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF JANUARY 17, 1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF JANUARY 17, 1995. A COPY
OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant
4
<PAGE> 95
or similar right, whether or not such conversion, right or option, warrant or
similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
12. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
14. 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 will
constitute one and the same Agreement.
5
<PAGE> 96
15. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
David J. Malosh
8044 St. Paul
Detroit, MI 48214
or at such other address as a party may designate by 10 days advance written
notice to each other party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
17. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
18. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your
6
<PAGE> 97
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
--------------------------
Allen J. Nesbitt, President
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ David J. Malosh
---------------------------
David J. Malosh
7
<PAGE> 98
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-2
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to
8
<PAGE> 99
hold the Securities for an indefinite period of time and to suffer a complete
loss on his investment, should that be the case.
Dated as of __________ __, _____.
Very truly yours,
____________________
David J. Malosh
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:___________________________
Allen J. Nesbitt, President
9
<PAGE> 100
EXHIBIT A
JANUARY 17, 1995, VOTING AGREEMENT
No. of
Shareholders Certificate No. Shares
- ------------ --------------- -------
Gregory Carey A-4 8,058
A-7 2,841 10,899
-------
Donald L. Elland A-5 28,815
Richard C. Kowalski A-6 25,000
Karl H. Hartig A-8 8,523
James J. Dewan A-9 8,523
Lawrence C. Jones A-10 8,523
Scott L. Christensen A-11 8,523
Daniel J. Buckley A-12 8,523
Paul G. Dugan A-13 5,682
John H. Wallanse A-14 2,841
David J. Malosh A-15 2,841
Allen J. Nesbitt Living
Trust dated December 7,
1994 A-17 440,654
<PAGE> 1
EXHIBIT 10.13
EMPLOYEE STOCK OPTION AGREEMENT
December 21, 1995
To: Gary L. Monroe
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the " Board") of Lason Holdings, Inc. (the
"Company"), or the committee (the "Committee") designated by the Board for the
purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan (the
"Plan"), hereby grants you (the "Grantee") a stock option (each an "Option"),
pursuant to the Plan, a copy of which is attached hereto. Certain capitalized
terms used in this agreement (the "Agreement") are defined in paragraph 12
hereof. Certain capitalized terms used in this Agreement which are not defined
herein have the meanings indicated for such terms in Section 10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and such
Grantee's permitted transferee as described in paragraph 3(a) below) (each such
person, a "Purchaser") to purchase up to the number of shares of the Company's
Class A-1 Common Stock, par value $.01 per share (the "Option Shares"),
specified below opposite such Grantee's name, at an option price of $1.00 per
share (the "Option Price"), subject to the terms and conditions of this
Agreement:
Grantee Number of Option Shares
------- -----------------------
Gary L. Monroe 68,181
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to the
following provisions:
(a) EXERCISABILITY. Each Option may be exercised and
Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior to
the time of the delivery of Option Shares, or, at the written request of such
Purchaser, the Committee may (but need not) permit payment to be made by (i)
delivery to the Company of outstanding Shares, (ii) retention by the Company of
one or more of such Option Shares or (iii) any combination of cash, check, such
Purchaser's delivery of outstanding Shares and retention by the Company of one
or more of such Option Shares. Option Shares
<PAGE> 2
acquired by Purchaser under this Agreement are hereinafter referred to as the
"Exercise Shares."
(b) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his Option to
purchase Option Shares to the extent that such Option has vested and become
exercisable with respect to such Option Shares. Except as otherwise provided in
paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable in
accordance with the following schedule, if as of each such date the Grantee is
still employed by the Company or any of its Subsidiaries:
Cumulative Percentage of
Option Shares Vested
Date and Exercisable
---- ---------------
September 19, 1995 33 1/3% (vested as of the date hereof)
September 19, 1996 33 1/3%
September 19, 1997 33 1/3%
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of a Sale of the Company
or an Initial Public Offering, each Option shall vest and all Unvested Shares
shall be come Vested Shares if, but only if, the Grantee thereof is employed by
the Company or any of its Subsidiaries on the date of such occurrence.
(c) PROCEDURE FOR EXERCISE. Subject to the vesting
limitations of paragraph 2(b) above, a Purchaser may exercise all or any
portion of his Option, so long as it is valid and outstanding, at any time and
from time to time prior to its termination by delivering written notice to the
Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign, pledge
or otherwise dispose of (a "Transfer") any interest in any Option with respect
to any Unvested Shares. Any Option with respect to any Vested Shares of the
Grantee shall not be Transferred
2
<PAGE> 3
other than as a result of the death of such Grantee, testate or intestate, and
the restrictions herein shall apply to any Transfer by any such permitted
transferee.
(b) The Company may assign its rights and delegate its
duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise Shares or
any interest therein except in accordance with the provisions of this Agreement
and paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer any
such shares (except pursuant to an effective registration statement under the
Securities Act) without first delivering to the Company an opinion of counsel
(reasonably acceptable in form and substance to the Company) that neither
registration nor qualification under the Securities Act and applicable state
securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to conform in
all respects with, and are subject to all applicable provisions of, the Plan,
which is incorporated herein by reference. Inconsistencies between this
Agreement and the Plan shall be resolved in accordance with the terms of the
Plan. By executing this Agreement, the Grantee acknowledges his receipt of the
Plan and agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral representations
or promises made to the Grantee prior to or after the date hereof, the Grantee
and the Company acknowledge that such Grantee's employment with the Company and
its Subsidiaries is and will continue to be subject to the willingness of each
to continue such employment and nothing confers any right or obligation on such
Grantee to continue in the employ of the Company or its Subsidiaries or shall
affect in any way such Grantee's right or the right of the Company or its
Subsidiaries to terminate such Grantee's employment at any time, for any
reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and proportionate
adjustments to the terms of the Options to reflect any stock dividend, stock
split, combination or exchange of shares, merger, consolidation or other change
in the capitalization of the Company which the Board determines to be similar,
in its substantive effect upon the Plan or the Options, to any of the changes
expressly indicated in this sentence, as provided in Article 8 of the Plan. The
Board may (but shall not be required to) make any appropriate adjustment to the
terms of the Options to reflect any spin-off, spin-out or other distribution of
assets to shareholders or any acquisition of the Company's stock or assets or
other change which the Board determines to be similar, in its substantive effect
upon the Plan or the Options, to any of the changes expressly indicated in this
sentence, as provided in Article 8 of the Plan. In the event of any adjustments
described in the preceding two sentences, any and all new, substituted, or
additional securities or other property to which any Purchaser is
3
<PAGE> 4
entitled by reason of his Option shall be immediately subject to such Option
and be included in the word "Option Shares" for all purposes of such Option
with the same force and effect as the Option Shares presently subject to such
Option. After each such event, the number of Option Shares and/or the Option
Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any Option Shares
subject to the provisions of this Agreement shall have endorsed thereon the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
AS OF DECEMBER 20,1995, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND
CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF DECEMBER 20, 1995. A
COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option
Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the Plan, the
Grantee's Option shall expire (a) with respect to Vested Shares, at 5:00 p.m.,
Chicago time, on the seventh anniversary of the date hereof and (b) with
respect to Unvested Shares, upon the termination of such Grantee's employment
with the Company and its Subsidiaries.
11. ANTI-DILUTION PROVISIONS. In the event that, prior to the
expiration of the Options by exercise or by the terms of this Agreement, the
Company shall issue Class A Common Stock (the "Issuance") to any person (except
upon an acquisition of a business or the assets of a business by the Company
where Class A Common Stock is issued as a component of the purchase
consideration or upon the exercise of an option granted by the Company),
Optionee shall have the right to purchase at the same price (the "Price") per
share as issued pursuant to the Issuance that amount of Class A Common Stock
which will maintain the percentage ownership interest in the Company which he
held immediately prior to the Issuance, assuming the exercise of all of
Optionee's Options.
The Company shall provide Optionee with 30 days' written notice of the
proposed Issuance and Optionee shall have 30 days thereafter to notify the
Company in writing
4
<PAGE> 5
of his intent to exercise the anti-dilution rights granted to him hereunder,
accompanied by payment in full for the shares purchased (the "Issuance
Shares"). Payment for such Issuance Shares may be in cash or by nonrecourse
promissory note payable when the Issuance Shares are sold and bearing interest
at the then effective applicable federal rate, secured by a pledge of the
Issuance Shares and the other shares underlying the Optionee's Options.
Optionee may not transfer the Issuance Shares except in accordance
with the provisions of this paragraph 11 and paragraph III of the Stockholders
Agreement. Optionee may not transfer the Issuance Shares (except pursuant to
an effective registration statement under the Securities Act) without first
delivering to the Company an opinion of counsel (reasonably acceptable in form
and substance to the Company) that neither registration nor qualification under
the Securities Act and applicable state securities laws is required in
connection with such transfer. Further, all Issuance Shares will contain a
legend substantially in the form set forth in paragraph 8 hereof.
As a condition precedent to issuance of the Issuance Shares, Optionee
shall provide the Company with whatever documents or assurances the Company
reasonably believes are necessary to satisfy all applicable federal and state
securities laws.
This paragraph 11 shall terminate upon the termination of this
Agreement, upon the occurrence of an Initial Public Offering or upon the Sale of
the Company.
12. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant or similar right, whether or not such
conversion, right or option, warrant or similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the
5
<PAGE> 6
Company's capital stock) or (ii) all or substantially all of the Company's
assets determined on a consolidated basis.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
13. FURTHER ACTIONS. The parties agree to execute such further
instruments and to take such further actions as may reasonably be required to
carry out the intent of this Agreement.
14. SEVERABILITY. Whenever possible, each provision of this
Agreement will 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 will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
15. 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 will
constitute one and the same Agreement.
16. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States Post Office, by registered or certified
mail with postage and fees prepaid, addressed, in the case of a Grantee, and,
in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, Michigan 48150
Attention: Allen J. Nesbitt, President
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Gary L. Monroe
1305 Stephenson Highway
Troy, Michigan 48084
6
<PAGE> 7
or at such other address as a party may designate by 10 days advance written
notice to each other party.
17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company and,
subject to the restrictions on transfer herein set forth, be binding upon
Grantee's heirs, executors, administrators, successors and assigns and inure to
the benefit of Grantee's heirs, executors, administrators, successors and
permitted assigns.
18. GOVERNING LAW. This Agreement and all documents contemplated
hereby, and all remedies in connection therewith and all questions or
transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
19. ENTIRE AGREEMENT. This Agreement and the Plan constitute the
entire understanding between the Grantee and the Company, and supersede all
other agreements, whether written or oral, with respect to the acquisition by
the Grantee of Common Stock from the Company pursuant to any option or option
agreement.
Please execute the extra copy of this Agreement in the space below and
return it to the Secretary of the Company to confirm your understanding and
acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Robert A. Yanover
-------------------------------
Robert A. Yanover
Its: Chairman of the Board
------------------------------
The undersigned hereby acknowledges having read this Agreement, the
Plan, and the other enclosures to this Agreement, and hereby agrees to be bound
by all provisions set forth herein and in the Plan.
GRANTEE
/s/ Gary L. Monroe
-----------------------------------
Gary L. Monroe
7
<PAGE> 8
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
28400 Schoolcraft Road
Livonia, Michigan 48150
Attention: Allen J. Nesbitt, President
Gentlemen:
In connection with the proposed purchase of shares of the Class A-1
Common Stock, par value $.01 per share (the "Securities"), of Lason Holdings,
Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing the
Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore discussed
the Company and its plans, operations and financial condition with its officers
and received all such information as he deems necessary and appropriate to
enable him to evaluate the financial risk inherent in making an investment in
the Securities of the Company, and the Purchaser further represents and
warrants that he has received satisfactory and complete information concerning
the business and financial condition of the Company in response to all
inquiries in respect thereof.
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<PAGE> 9
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated in
financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to hold the Securities for an indefinite period of
time and to suffer a complete loss on his investment, should that be the case.
Dated as of , .
------------- ------
Very truly yours,
/s/ Gary L. Monroe
--------------------------------
Gary L. Monroe
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:
---------------------------
Robert A. Yanover
Its: Chairman of the Board
--------------------------
9
<PAGE> 1
EXHIBIT 10.14
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT, effective as of the 7th day of August
1995, is made by and between Lason Holdings, Inc., a Delaware corporation,
hereinafter referred to as "Company," and Donald Gleklen, hereinafter referred
to as "Optionee":
WHEREAS, the Company's Board of Directors (hereinafter referred to as
the "Board") has determined that it would be to the advantage and best interest
of the Company and its shareholders to grant an option to Optionee in order to
attract and retain Optionee's services as a director of the Company.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
GRANT OF OPTION.
SECTION 1.1 - GRANT OF OPTION
Subject to the terms and conditions of this Agreement, the Company
hereby grants to Optionee the option to purchase (the "Option") up to 5,000
shares of its Class A-1 Common Stock, par value $.01 per share ("Class A-1
Common").
SECTION 1.2 - PURCHASE PRICE
The purchase price of the shares of stock covered by the Option shall
be one ($1.00) dollar per share without commission or other charge.
SECTION 1.3 - ADJUSTMENTS AND OPTIONS
In the event that the outstanding shares of the stock of the Company
subject to the Option are changed into or exchanged for a different number or
kind of shares of the Company or other securities of the Company, by reason of
recapitalization, reclassification, stock split-up, stock dividend, or a
combination of shares, the Board shall make an appropriate and equitable
adjustment in the number and kind of shares as to which the Option, or portions
thereof then unexercised shall be exercisable, to the end that after such event
the Optionee's proportionate interest shall be maintained as before the
occurrence of such event. Such adjustment in the Option shall be made without
change in the total price applicable to the unexercised portion of the Option
(except for any change in the aggregate price resulting from rounding- off of
share quantities or prices) and with any necessary corresponding adjustment in
the Option price per share. Any such adjustment made by the Board shall be
final and binding upon the Optionee, the Company, and all other interested
persons.
<PAGE> 2
ARTICLE II
PERIOD OF EXERCISABILITY
SECTION 2.1 - COMMENCEMENT OF EXERCISABILITY
The Option shall become exercisable in five (5) cumulative
installments, with the first installment becoming exercisable on the first
anniversary of the date of this Stock Option Agreement.
SECTION 2.2 - EXPIRATION OF OPTION
The Option may not be exercised to any extent after the first to occur
of the following events:
A) The expiration of ten (10) years from the date of
this Stock Option Agreement; or
B) The expiration of three (3) months from the date that
Optionee is no longer a Director of the Company; or
C) The effective date of either 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. At least ten (10) days prior to the effective date of such
merger, consolidation, exchange, acquisition, liquidation, or
dissolution, the Board shall give the Optionee notice of such event if
the Option has then neither been fully exercised nor become
unexercisable under this Section 2.2.
SECTION 2.3 - ACCELERATION OF EXERCISABILITY
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 be exercisable as to all the shares covered hereby during the ten
(10) days immediately preceding the effective date of such event
(notwithstanding that this Option may not yet have become fully exercisable
under Section 2.1; provided, however, that this acceleration of exercisability
shall not take place if the Option has become unexercisable under Section 2.2
prior to said effective date.
The Board may make such determinations and adopt such rules and
conditions as it, in
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<PAGE> 3
its absolute discretion, deems appropriate in connection with such acceleration
of exercisability, including, but not by way of limitation, provisions to
ensure that any such acceleration and resulting exercise shall be conditioned
upon the consummation of the contemplated corporate transaction.
ARTICLE III
EXERCISE OF OPTIONS
SECTION 3.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he may exercise the Option
or any portion thereof. After the death of the Optionee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 2.2, be exercised by his personal representative,
or by any person empowered to do so under the Optionee's will, or under the
then applicable laws of descent and distribution.
SECTION 3.2 - PARTIAL EXERCISE
Any exercisable portion of the Option, or the entire Option, if then
wholly exercisable, may be exercised in whole or in part at any time prior to
the time when the Option or portion thereof becomes unexercisable under Section
2.2; provided, however, that each partial exercise shall be for not less than
one thousand (1,000) shares.
SECTION 3.3. - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be exercised
solely by delivery to the Secretary of the Company or to the Secretary's office
of all of the following prior to the time the Option or such portion becomes
unexercisable under Section 2.2:
A) Notice in writing signed by the Optionee or the other
person then entitled to exercise the Option or portion stating that
the Option or portion is thereby exercised, such notice complying with
all applicable rules established by the Board; and
B) Full payment (in cash or by check) for the shares
with respect to which such Option or portion is exercised; and
C) A bona fide written representation and agreement, in
a form satisfactory to the Board, signed by the Optionee or other
person then entitled to exercise such Option or portion, stating that
(i) the shares of stock are being acquired for his own account
for investment, and without any present intention of distributing or
reselling such shares or any of them, except as may be permitted under
the Securities Act of 1933, as amended (the "Act"), and then applicable
rules and regulations thereunder, (ii) Optionee is sophisticated in
financial matters and is able to evaluate the risks and benefits of
his
3
<PAGE> 4
investment, (iii) Optionee is able to bear the economic risk of his
investment for an indefinite period of time, (iv) Optionee has had an
opportunity to ask questions and receive answers concerning this
Option and the Company, and (v) Optionee or other person then entitled
to exercise such Option or portion will indemnify the Company against
and hold it free and harmless from any loss, damage, expense, or
liability resulting to the Company if any sale or distribution of the
shares is contrary to the representation and agreement referred to
above. In addition, the Board may issue stop-transfer orders covering
the shares and shall include an appropriate legend on the stock
certificate referring to the provisions of this Subparagraph C and the
agreements herein.
D) In the event the Option or portion shall be exercised
pursuant to Section 3.1 by any person or persons other than the
Optionee, the appropriate proof of the right of such person or persons
to exercise the Option.
SECTION 3.4 - RIGHTS OF SHAREHOLDER
The holder of the Option shall not be nor have any of the rights or
privileges of a shareholder of the Company in respect to any shares purchasable
upon the exercise of any part of the Option unless and until certificates
representing such shares shall have been issued by the Company to such holder.
ARTICLE IV
SECTION 4.1 - OPTION NOT TRANSFERABLE
Neither the Option nor any interest or right therein, or part thereof,
shall be liable for the debts, contracts, or engagement of the Optionee, or
shall be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment, or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy, attachment,
garnishment, or any other legal or equitable proceedings (including
bankruptcy), and any intended disposition thereof shall be null and void and of
no effect; provided, however, that this Section 4.1 shall not prevent transfers
by will or by the applicable laws of descent and distribution.
SECTION 4.2 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option reserve
and keep available such number of shares of stock as will be sufficient to
satisfy the requirements of this Agreement.
SECTION 4.3 - NOTICES
Any notice to be given under the terms of this Agreement to the
Company shall be addressed to the Company in care of its Secretary and any
notice to be given to the Optionee
4
<PAGE> 5
shall be addressed to him at the address given beneath his signature hereto.
By notice hereby given pursuant to this Section 4.3, either party may hereafter
designate a different address for notices to be given to it or him. Any notice
which is required to be given to Optionee shall if Optionee is then deceased be
given to Optionee's personal representative if such representative has
previously informed the Company of his status and address by written notice
under this Section 4.3. Any notice shall have been deemed duly given when
enclosed in a properly sealed envelope, addressed as aforesaid, and deposited
(with postage prepaid) in a post office or a branch post office regularly
maintained by the United States Postal Service.
SECTION 4.4 - ENTIRE AGREEMENT
This Agreement contains the entire Agreement between the parties with
respect to the matters contemplated hereby and supersedes all prior and
contemporaneous agreements or understandings between the parties relating to
the subject matter hereof. This Agreement may not be modified or amended,
except in writing signed by the party against whom the enforcement of the
modification or amendment is sought.
SECTION 4.5 - COUNTERPARTS
This Agreement may be executed in separate counterparts each of which
is deemed to be an original and all of which taken together constitute one and
the same Agreement.
SECTION 4.6 - CHOICE OF LAW
The corporations law of the State of Delaware will govern all
questions concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, and interpretation
of this Agreement will be governed by the internal law and not the law of
conflicts of the State of Michigan.
(signatures begin on next page)
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
LASON HOLDINGS, INC.,
5
<PAGE> 6
A DELAWARE CORPORATION
By:/s/ Robert A. Yanover
-------------------------
Robert A. Yanover
Chairman of the Board
"OPTIONEE"
By:/s/ Donald Gleklen
-------------------------
Donald Gleklen
212 Jeffrey Lane
Newton Square, PA 19073
6
<PAGE> 1
EXHIBIT 10.15
EMPLOYEE STOCK OPTION AGREEMENT
June ___, 1996 but
Effective as of May 6, 1996
To: William J. Rauwerdink
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the "Board") of Lason Holdings, Inc.
(the "Company"), or the committee (the "Committee") designated by the Board for
the purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan
(the "Plan"), hereby grants you (the "Grantee") a stock option (each an
"Option"), pursuant to the Plan, a copy of which is attached hereto. Certain
capitalized terms used in this agreement (the "Agreement") are defined in
paragraph 11 hereof. Certain capitalized terms used in this Agreement which
are not defined herein have the meanings indicated for such terms in Section
10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and
such Grantee's permitted transferee as described in paragraph 3(a) below) (each
such person, a "Purchaser") to purchase up to the number of shares of the
Company's Class A-1 Common Stock, par value $.01 per share (the "Option
Shares"), specified below opposite such Grantee's name, at an option price of
$8.00 per share (the "Option Price"), subject to the terms and conditions of
this Agreement:
GRANTEE NUMBER OF OPTION SHARES
------- -----------------------
William J. Rauwerdink 22,000
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to
the following provisions:
(A) EXERCISABILITY. Each Option may be exercised
and Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
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<PAGE> 2
(B) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his
Option to purchase Option Shares to the extent that such Option has vested and
become exercisable with respect to such Option Shares. Except as otherwise
provided in Paragraph 2(b)(ii) and (iii) below, the Option Shares will vest and
become exercisable in accordance with the following schedule, if as of each
such date the Grantee is still employed by the Company or any of its
Subsidiaries:
CUMULATIVE PERCENTAGE OF
OPTION SHARES VESTED
DATE AND EXERCISABLE
------------ ------------------------
[S] [C]
May 6, 1997 20%
May 6, 1998 40%
May 6, 1999 60%
May 6, 2000 80%
May 6, 2001 100%
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of an Initial Public
Offering within one year from the effective date of this Agreement (i.e., May
6, 1996) the initial 20% of Option Shares shall vest and become exercisable on
the date of the Initial Public Offering. Thereafter, and notwithstanding the
provisions of Paragraph 2(b)(i) hereof the vesting date for the balance of
Grantee's Option Shares shall be the next four (4) anniversary dates of the
Initial Public Offering, notwithstanding anything set forth in the Plan to the
contrary.
(iii) Upon the occurrence of a Sale of the
Company, each Option shall vest and all Unvested Shares shall be come Vested
Shares if, but only if, the Grantee thereof is employed by the Company or any
of its Subsidiaries on the date of such occurrence.
(C) PROCEDURE FOR EXERCISE. Subject to the
vesting limitations of Paragraph 2(b) above, a Purchaser may exercise all or
any portion of his Option, so long as it is valid and outstanding, at any time
and from time to time prior to its termination by delivering written notice to
the Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
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<PAGE> 3
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign,
pledge or otherwise dispose of (a "Transfer") any interest in any Option with
respect to any Unvested Shares. Any Option with respect to any Vested Shares
of the Grantee shall not be Transferred other than as a result of the death of
such Grantee, testate or intestate, and the restrictions herein shall apply to
any Transfer by any such permitted transferee.
(b) The Company may assign its rights and
delegate its duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise
Shares or any interest therein except in accordance with the provisions of this
Agreement and Paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer
any such shares (except pursuant to an effective registration statement under
the Securities Act) without first delivering to the Company an opinion of
counsel (reasonably acceptable in form and substance to the Company) that
neither registration nor qualification under the Securities Act and applicable
state securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to
conform in all respects with, and are subject to all applicable provisions of,
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan, except as modified by Paragraph 2(b)(ii) of this Agreement. By
executing this Agreement, the Grantee acknowledges his receipt of the Plan and
agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral
representations or promises made to the Grantee prior to or after the date
hereof, the Grantee and the Company acknowledge that such Grantee's employment
with the Company and its Subsidiaries is and will continue to be subject to the
willingness of each to continue such employment and nothing confers any right
or obligation on such Grantee to continue in the employ of the Company or its
Subsidiaries or shall affect in any way such Grantee's right or the right of
the Company or its Subsidiaries to terminate such Grantee's employment at any
time, for any reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article
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<PAGE> 4
8 of the Plan. The Board may (but shall not be required to) make any
appropriate adjustment to the terms of the Options to reflect any spin- off,
spin-out or other distribution of assets to shareholders or any acquisition of
the Company's stock or assets or other change which the Board determines to be
similar, in its substantive effect upon the Plan or the Options, to any of the
changes expressly indicated in this sentence, as provided in Article 8 of the
Plan. In the event of any adjustments described in the preceding two
sentences, any and all new, substituted, or additional securities or other
property to which any Purchaser is entitled by reason of his Option shall be
immediately subject to such Option and be included in the word "Option Shares"
for all purposes of such Option with the same force and effect as the Option
Shares presently subject to such Option. After each such event, the number of
Option Shares and/or the Option Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any
Option Shares subject to the provisions of this Agreement shall have endorsed
thereon the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED AS OF __________________, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE
COMPANY AND CERTAIN EMPLOYEES OF THE COMPANY DATED AS OF MAY
6, 1996. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of
Option Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the
Plan, the Grantee's Option shall expire (a) with respect to Vested Shares, at
5:00 p.m., Chicago time, on the seventh anniversary of the date hereof and (b)
with respect to Unvested Shares, upon the termination of such Grantee's
employment with the Company and its Subsidiaries.
11. CONFIDENTIALITY/NON-COMPETITION. In consideration of
the Incentive Stock Options granted herein, Grantee agrees that while he is
employed by Lason Systems, Inc., a subsidiary of the Company ("Lason") and for
the eighteen (18) month period following the date
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<PAGE> 5
of employment, Grantee shall not, either directly or indirectly (whether as
sole proprietor, partner, consultant, venturer, member, stockholder, director,
officer, employee, or in any other capacity as principal or agent), own,
manage, operate, control, finance, or engage or participate in the ownership,
management, operation or control of, any person, firm, entity, limited
partnership, partnership, limited liability company, corporation, or similar
association which is engaged in any of the business activities of Lason and
which is located in any part of the United States or Canada in which Lason does
business.
Grantee further agrees that Grantee shall not, directly or indirectly,
at any time during such eighteen (18) month non-compete period:
(a) take any action that will cause the termination of a
business relationship between Lason and any customer or supplier of Lason; or
(b) solicit for employment or employ any person employed
in Lason's business.
At all times, Grantee shall keep secret and inviolate all
knowledge or information of a confidential nature, including, without
limitation, all unpublished matters relating to the business, assets, accounts,
books, records, customers and contracts of Lason which he may or hereafter come
to know as a result of his association with Lason.
Grantee acknowledges that if he violates this Agreement, he
will cause severe and irreparable injury to the business and goodwill of Lason,
which injury is not adequately compensable by money damages. Accordingly, in
the event of a breach (or threatened or attempted breach) of this Agreement,
Lason shall, in addition to any other rights and remedies, be entitled to
immediate appropriate injunctive relief or a decree of specific performance of
this Agreement, without the necessity of showing any irreparable injury or
special damages.
Grantee acknowledges that, due to his education and job skill,
his adherence to the terms of this confidentiality/non- competition provision
will not deprive him of the opportunity to obtain gainful employment with other
companies serving different product or geographic markets after the termination
of his employment with Lason.
Nothing herein shall be deemed to prevent Grantee from holding
less than five (5%) percent of the outstanding publicly-traded securities of
any person, firm, or corporation.
Notwithstanding anything to the contrary set forth herein or
otherwise, the covenants contained in this Paragraph 11 shall not be operative
in the event Lason elects to terminate Grantee's employment for its own
convenience and not for cause.
The provisions of this Paragraph 11 shall survive the
termination of this Agreement and Grantee's employment with Lason.
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<PAGE> 6
12. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant or similar right, whether or not such
conversion, right or option, warrant or similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
a Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis. The Sale of the Company does not include a sale of stock pursuant to an
Initial Public Offering.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
13. FURTHER ACTIONS. The parties agree to execute such
further instruments and to take such further actions as may reasonably be
required to carry out the intent of this Agreement.
14. SEVERABILITY. Whenever possible, each provision of
this Agreement will 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 will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
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<PAGE> 7
15. 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
will constitute one and the same Agreement.
16. NOTICES. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by registered or
certified mail with postage and fees prepaid, addressed, in the case of a
Grantee, and, in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
1350 Stephenson Highway
Troy, Michigan 48083
Attention: Gary L. Monroe, Chief Executive Officer
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
William J. Rauwerdink
3172 Interlaken
Orchard Lake, Michigan 48323
or at such other address as a party may designate by 10 days advance written
notice to each other party.
17. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company and, subject to the restrictions on transfer herein set forth, be
binding upon Grantee's heirs, executors, administrators, successors and assigns
and inure to the benefit of Grantee's heirs, executors, administrators,
successors and permitted assigns.
18. GOVERNING LAW. This Agreement and all documents
contemplated hereby, and all remedies in connection therewith and all questions
or transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
19. ENTIRE AGREEMENT. This Agreement and the Plan
constitute the entire understanding between the Grantee and the Company, and
supersede all other agreements,
7
<PAGE> 8
whether written or oral, with respect to the acquisition by the Grantee of
Common Stock from the Company pursuant to any option or option agreement.
Please execute the extra copy of this Agreement in the space
below and return it to the Secretary of the Company to confirm your
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By:
--------------------------------
Gary L. Monroe
Its: Chief Executive Officer
-------------------------------
THE UNDERSIGNED hereby acknowledges having read this
Agreement, the Plan, and the other enclosures to this Agreement, and hereby
agrees to be bound by all provisions set forth herein and in the Plan.
GRANTEE
---------------------------------
William J. Rauwerdink
8
<PAGE> 9
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
1305 Stephenson Highway
Troy, Michigan 48150
Attention: Gary L. Monroe, Chief Executive Officer
Gentlemen:
In connection with the proposed purchase of shares of the
Class A-1 Common Stock, par value $.01 per share (the "Securities"), of Lason
Holdings, Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing
the Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore
discussed the Company and its plans, operations and financial condition with
its officers and received all such information as he deems necessary and
appropriate to enable him to evaluate the financial risk inherent in making an
investment in the Securities of the Company, and the Purchaser further
represents and warrants that he has received satisfactory and complete
information concerning the business and financial condition of the Company in
response to all inquiries in respect thereof.
9
<PAGE> 10
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated
in financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to hold the Securities for an indefinite period of
time and to suffer a complete loss on his investment, should that be the case.
Dated as of ____________, _____.
Very truly yours,
William J. Rauwerdink
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:_______________________________
Gary L. Monroe
Its: Chief Executive Officer
10
<PAGE> 1
EXHIBIT 10.16
EMPLOYEE STOCK OPTION AGREEMENT
June ___, 1996 but
Effective as of July 1, 1996
To: Brian Jablonski
RE: INCENTIVE STOCK OPTIONS
The Board of Directors (the "Board") of Lason Holdings, Inc.
(the "Company"), or the committee (the "Committee") designated by the Board for
the purpose of administering the Lason Holdings, Inc. 1995 Stock Option Plan
(the "Plan"), hereby grants you (the "Grantee") a stock option (each an
"Option"), pursuant to the Plan, a copy of which is attached hereto. Certain
capitalized terms used in this agreement (the "Agreement") are defined in
paragraph 11 hereof. Certain capitalized terms used in this Agreement which
are not defined herein have the meanings indicated for such terms in Section
10.1 of the Plan.
1. STOCK OPTION. The Option entitles the Grantee (and
such Grantee's permitted transferee as described in paragraph 3(a) below) (each
such person, a "Purchaser") to purchase up to the number of shares of the
Company's Class A-1 Common Stock, par value $.01 per share (the "Option
Shares"), specified below opposite such Grantee's name, at an option price of
$8.00 per share (the "Option Price"), subject to the terms and conditions of
this Agreement:
GRANTEE NUMBER OF OPTION SHARES
Brian Jablonski 24,000
The Options are intended to be Incentive Stock Options.
2. ADDITIONAL TERMS. The Options are also subject to
the following provisions:
(A) EXERCISABILITY. Each Option may be exercised
and Option Shares may be purchased at any time and from time to time after the
execution of this Agreement, subject to the vesting limitations imposed by
paragraph 2(b) of this Agreement. The Option Price for Option Shares shall be
paid in full in cash or by check by the Purchaser of such Option Shares prior
to the time of the delivery of Option Shares, or, at the written request of
such Purchaser, the Committee may (but need not) permit payment to be made by
(i) delivery to the Company of outstanding Shares, (ii) retention by the
Company of one or more of such Option Shares or (iii) any combination of cash,
check, such Purchaser's delivery of outstanding Shares and retention by the
Company of one or more of such Option Shares. Option Shares acquired by
Purchaser under this Agreement are hereinafter referred to as the "Exercise
Shares."
1
<PAGE> 2
(B) VESTING/EXERCISABILITY.
(i) Purchaser may only exercise his
Option to purchase Option Shares to the extent that such Option has vested and
become exercisable with respect to such Option Shares. Except as otherwise
provided in Paragraph 2(b)(ii) and (iii) below, the Option Shares will vest and
become exercisable in accordance with the following schedule, if as of each
such date the Grantee is still employed by the Company or any of its
Subsidiaries:
<TABLE>
<CAPTION>
CUMULATIVE PERCENTAGE OF
OPTION SHARES VESTED
DATE AND EXERCISABLE
---------------- ------------------------
<S> <C>
July 1, 1997 20%
July 1, 1998 40%
July 1, 1999 60%
July 1, 2000 80%
July 1, 2001 100%
</TABLE>
Option Shares which have become vested and exercisable are referred to herein
as "Vested Shares" and all other Option Shares are referred to herein as
"Unvested Shares."
(ii) Upon the occurrence of an Initial Public
Offering within one year from the effective date of this Agreement (i.e., July
1, 1996) the initial 20% of Option Shares shall vest and become exercisable on
the date of the Initial Public Offering. Thereafter, and notwithstanding the
provisions of Paragraph 2(b)(i) hereof the vesting date for the balance of
Grantee's Option Shares shall be the next four (4) anniversary dates of the
Initial Public Offering, notwithstanding anything set forth in the Plan to the
contrary.
(iii) Upon the occurrence of a Sale of the
Company, each Option shall vest and all Unvested Shares shall be come Vested
Shares if, but only if, the Grantee thereof is employed by the Company or any
of its Subsidiaries on the date of such occurrence.
(C) PROCEDURE FOR EXERCISE. Subject to the
vesting limitations of Paragraph 2(b) above, a Purchaser may exercise all or
any portion of his Option, so long as it is valid and outstanding, at any time
and from time to time prior to its termination by delivering written notice to
the Company as provided in Section 6.4 of the Plan and written acknowledgement
substantially in the form of Exhibit A hereto that such Purchaser has read, and
has been afforded an opportunity to ask questions of the Company's management
regarding all financial and other information provided to him concerning the
Company, together with payment of the Option Price times the number of Option
Shares purchased. Subject to Section 6.7 of the Plan, at the time of exercise,
Purchaser will be entitled to review all financial and other information
regarding the Company it believes necessary to enable such Purchaser to make an
informed investment decision.
2
<PAGE> 3
3. TRANSFERABILITY OF THE OPTIONS.
(a) The Grantee shall not sell, transfer, assign,
pledge or otherwise dispose of (a "Transfer") any interest in any Option with
respect to any Unvested Shares. Any Option with respect to any Vested Shares
of the Grantee shall not be Transferred other than as a result of the death of
such Grantee, testate or intestate, and the restrictions herein shall apply to
any Transfer by any such permitted transferee.
(b) The Company may assign its rights and
delegate its duties under this Agreement.
4. TRANSFERABILITY OF EXERCISE SHARES.
(a) No Purchaser shall Transfer any Exercise
Shares or any interest therein except in accordance with the provisions of this
Agreement and Paragraph III of the Stockholders Agreement.
(b) No holder of any Exercise Shares may Transfer
any such shares (except pursuant to an effective registration statement under
the Securities Act) without first delivering to the Company an opinion of
counsel (reasonably acceptable in form and substance to the Company) that
neither registration nor qualification under the Securities Act and applicable
state securities laws is required in connection with such transfer.
5. CONFORMITY WITH PLAN. The Options are intended to
conform in all respects with, and are subject to all applicable provisions of,
the Plan, which is incorporated herein by reference. Inconsistencies between
this Agreement and the Plan shall be resolved in accordance with the terms of
the Plan, except as modified by Paragraph 2(b)(ii) of this Agreement. By
executing this Agreement, the Grantee acknowledges his receipt of the Plan and
agrees to be bound by all of other terms of the Plan.
6. EMPLOYMENT. Notwithstanding any contrary oral
representations or promises made to the Grantee prior to or after the date
hereof, the Grantee and the Company acknowledge that such Grantee's employment
with the Company and its Subsidiaries is and will continue to be subject to the
willingness of each to continue such employment and nothing confers any right
or obligation on such Grantee to continue in the employ of the Company or its
Subsidiaries or shall affect in any way such Grantee's right or the right of
the Company or its Subsidiaries to terminate such Grantee's employment at any
time, for any reason, with or without cause.
7. ADJUSTMENT. The Board shall make appropriate and
proportionate adjustments to the terms of the Options to reflect any stock
dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in the capitalization of the Company which the Board determines
to be similar, in its substantive effect upon the Plan or the Options, to any
of the changes expressly indicated in this sentence, as provided in Article
3
<PAGE> 4
8 of the Plan. The Board may (but shall not be required to) make any
appropriate adjustment to the terms of the Options to reflect any spin- off,
spin-out or other distribution of assets to shareholders or any acquisition of
the Company's stock or assets or other change which the Board determines to be
similar, in its substantive effect upon the Plan or the Options, to any of the
changes expressly indicated in this sentence, as provided in Article 8 of the
Plan. In the event of any adjustments described in the preceding two
sentences, any and all new, substituted, or additional securities or other
property to which any Purchaser is entitled by reason of his Option shall be
immediately subject to such Option and be included in the word "Option Shares"
for all purposes of such Option with the same force and effect as the Option
Shares presently subject to such Option. After each such event, the number of
Option Shares and/or the Option Price shall be appropriately adjusted.
8. SHARE LEGEND. All certificates representing any
Option Shares subject to the provisions of this Agreement shall have endorsed
thereon the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED AS OF __________________, HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN
EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET
FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE
COMPANY AND CERTAIN EMPLOYEES OF THE COMPANY DATED JUNE ___,
BUT EFFECTIVE AS OF JULY 1, 1996, 1996. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
9. INVESTMENT REPRESENTATIONS. Upon the purchase of
Option Shares hereunder, the Purchaser thereof shall execute and deliver to the
Company a letter, substantially in the form attached hereto as Exhibit A,
confirming such Purchaser's investment representations.
10. EXPIRATION. Subject to Sections 6.3 and 6.7 of the
Plan, the Grantee's Option shall expire (a) with respect to Vested Shares, at
5:00 p.m., Chicago time, on the seventh anniversary of the date hereof and (b)
with respect to Unvested Shares, upon the termination of such Grantee's
employment with the Company and its Subsidiaries.
11. CONFIDENTIALITY/NON-COMPETITION. In consideration of
the Incentive Stock Options granted herein, Grantee agrees that while he is
employed by Lason Systems, Inc., a
4
<PAGE> 5
subsidiary of the Company ("Lason") and for the eighteen (18) month period
following the date of employment, Grantee shall not, either directly or
indirectly (whether as sole proprietor, partner, consultant, venturer, member,
stockholder, director, officer, employee, or in any other capacity as principal
or agent), own, manage, operate, control, finance, or engage or participate in
the ownership, management, operation or control of, any person, firm, entity,
limited partnership, partnership, limited liability company, corporation, or
similar association which is engaged in any of the business activities of Lason
and which is located in any part of the United States or Canada in which Lason
does business.
Grantee further agrees that Grantee shall not, directly or indirectly,
at any time during such eighteen (18) month non-compete period:
(a) take any action that will cause the termination of a
business relationship between Lason and any customer or supplier of Lason; or
(b) solicit for employment or employ any person employed
in Lason's business.
At all times, Grantee shall keep secret and inviolate all
knowledge or information of a confidential nature, including, without
limitation, all unpublished matters relating to the business, assets, accounts,
books, records, customers and contracts of Lason which he may or hereafter come
to know as a result of his association with Lason.
Grantee acknowledges that if he violates this Agreement, he
will cause severe and irreparable injury to the business and goodwill of Lason,
which injury is not adequately compensable by money damages. Accordingly, in
the event of a breach (or threatened or attempted breach) of this Agreement,
Lason shall, in addition to any other rights and remedies, be entitled to
immediate appropriate injunctive relief or a decree of specific performance of
this Agreement, without the necessity of showing any irreparable injury or
special damages.
Grantee acknowledges that, due to his education and job skill,
his adherence to the terms of this confidentiality/non- competition provision
will not deprive him of the opportunity to obtain gainful employment with other
companies serving different product or geographic markets after the termination
of his employment with Lason.
Nothing herein shall be deemed to prevent Grantee from holding
less than five (5%) percent of the outstanding publicly-traded securities of
any person, firm, or corporation.
Notwithstanding anything to the contrary set forth herein or
otherwise, the covenants contained in this Paragraph 11 shall not be operative
in the event Lason elects to terminate Grantee's employment for its own
convenience and not for cause.
5
<PAGE> 6
The provisions of this Paragraph 11 shall survive the
termination of this Agreement and Grantee's employment with Lason.
12. DEFINITIONS.
"FULLY DILUTED BASIS" means, without duplication, (i) all
shares of Common Stock outstanding at the time of determination plus (ii) all
shares of Common Stock issuable upon conversion of any convertible securities
or the exercise of any option, warrant or similar right, whether or not such
conversion, right or option, warrant or similar right is then exercisable.
"INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a Fully Diluted Basis (a "5% Owner"), who is not
controlling, controlled by or under common control with the Company or any such
5% Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of such 5% Owner and/or such other
persons.
"INITIAL PUBLIC OFFERING" means the sale in an initial
underwritten public offering registered under the Securities Act (other than on
a Form S-8 or a similar form) of shares of the Company's Common Stock.
"SALE OF THE COMPANY" means the sale of the Company (by
merger, consolidation or sale of stock or assets) to an Independent Third Party
or group of Independent Third Parties pursuant to which such party or parties
acquire (i) capital stock of the Company possessing the voting power under
normal circumstances to elect a majority of the Board (whether by merger,
consolidation or sale or transfer of the Company's capital stock) or (ii) all
or substantially all of the Company's assets determined on a consolidated
basis. The Sale of the Company does not include a sale of stock pursuant to an
Initial Public Offering.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
dated as of the date hereof among the Company, Golder, Thoma, Cressey, Rauner
Fund IV, L.P., the Grantees, and certain other executives of the Company, as in
effect from time to time.
13. FURTHER ACTIONS. The parties agree to execute such
further instruments and to take such further actions as may reasonably be
required to carry out the intent of this Agreement.
14. SEVERABILITY. Whenever possible, each provision of
this Agreement will 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 will be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
6
<PAGE> 7
15. 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
will constitute one and the same Agreement.
16. NOTICES. Any notice required or permitted hereunder
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit in the United States Post Office, by registered or
certified mail with postage and fees prepaid, addressed, in the case of a
Grantee, and, in the case of the Company, to the respective addresses below:
Lason Holdings, Inc.
1350 Stephenson Highway
Troy, Michigan 48083
Attention: Gary L. Monroe, Chief Executive Officer
with a copy, which will not constitute
notice to the Company, to:
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Attention: Bruce V. Rauner
Elliot W. Maluth
Brian Jablonski
10 Misty Meadow Way
Fairport, New York 14450
or at such other address as a party may designate by 10 days advance written
notice to each other party.
17. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company and, subject to the restrictions on transfer herein set forth, be
binding upon Grantee's heirs, executors, administrators, successors and assigns
and inure to the benefit of Grantee's heirs, executors, administrators,
successors and permitted assigns.
18. GOVERNING LAW. This Agreement and all documents
contemplated hereby, and all remedies in connection therewith and all questions
or transactions relating thereto, shall be construed in accordance with and
governed by the laws of the State of Michigan.
19. ENTIRE AGREEMENT. This Agreement and the Plan
constitute the entire understanding between the Grantee and the Company, and
supersede all other agreements,
7
<PAGE> 8
whether written or oral, with respect to the acquisition by the Grantee of
Common Stock from the Company pursuant to any option or option agreement.
Please execute the extra copy of this Agreement in the space
below and return it to the Secretary of the Company to confirm your
understanding and acceptance of the agreements contained in this letter.
Very truly yours,
LASON HOLDINGS, INC.
By:
--------------------------------
Gary L. Monroe
Its: Chief Executive Officer
-------------------------------
THE UNDERSIGNED hereby acknowledges having read this
Agreement, the Plan, and the other enclosures to this Agreement, and hereby
agrees to be bound by all provisions set forth herein and in the Plan.
GRANTEE
---------------------------------
Brian Jablonski
8
<PAGE> 9
EXHIBIT A TO EMPLOYEE STOCK
OPTION AGREEMENT
FORM OF INVESTMENT LETTER
Lason Holdings, Inc.
1305 Stephenson Highway
Troy, Michigan 48150
Attention: Gary L. Monroe, Chief Executive Officer
Gentlemen:
In connection with the proposed purchase of shares of the
Class A-1 Common Stock, par value $.01 per share (the "Securities"), of Lason
Holdings, Inc., a Delaware corporation (the "Company"), by the undersigned (the
"Purchaser"), the Purchaser hereby agrees, represents and warrants as follows:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT.
The Purchaser represents and warrants that he is purchasing
the Securities solely for his own account for investment and not with a view to
sale or distribution of the Securities or any portion thereof and not with any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Securities or any portion thereof. The Purchaser also
represents that the entire legal and beneficial interest of the securities he
is purchasing is being purchased for, and will be held for the account of, the
Purchaser only and neither in whole nor in part for any other person.
2. INFORMATION CONCERNING COMPANY.
The Purchaser represents and warrants that he has heretofore
discussed the Company and its plans, operations and financial condition with
its officers and received all such information as he deems necessary and
appropriate to enable him to evaluate the financial risk inherent in making an
investment in the Securities of the Company, and the Purchaser further
represents and warrants that he has received satisfactory and complete
information concerning the business and financial condition of the Company in
response to all inquiries in respect thereof.
9
<PAGE> 10
3. ECONOMIC RISK.
The Purchaser represents and warrants that he is sophisticated
in financial matters and his able to evaluate the risks and benefits of the
investment in the Securities, he realizes that his purchase of the Securities
will be a highly speculative investment and that he is able, without impairing
his financial condition, to hold the Securities for an indefinite period of
time and to suffer a complete loss on his investment, should that be the case.
Dated as of ____________, _____.
Very truly yours,
Brian Jablonski
ACCEPTED AND AGREED TO:
LASON HOLDINGS, INC.
By:
------------------------------
Gary L. Monroe
Its: Chief Executive Officer
10
<PAGE> 1
EXHIBIT 10.17
To: Bob Yanover
From: Gary Monroe
Re: 1996 Bonus Program
Date: February 22, 1996
cc: Al Nesbitt, Rick Kowalski
(CONFIDENTIAL)
- Monroe, Nesbitt, Yanover bonuses will be based on total Lason
performance.
- Operating Managers in Troy will be based 100% on Troy NOC and
Managers in Livonia will be based 100% on Livonia NOC.
- The bonus will be earned and paid quarterly. There will NOT be any
carry-over from quarter to quarter.
- A bonus floor of 85% will be established, i.e. if quarterly
performance is more than 15% below plan, there will NOT be any bonus
for that quarter.
- Individual percentages for all participants will be established for
purposes of calculating actual bonuses.
<TABLE>
<CAPTION>
TROY LIVONIA TOTAL LASON
---- ------- -----------
TARGET TARGET TARGET
PARTICIPANT BONUS K$ PARTICIPANT BONUS K$ PARTICIPANT BONUS K$
- ----------- -------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C>
Hartig 55 Elland 90 Monroe 87
Dewan 65 Kowalski 80 Nesbitt 96
Jones 15 Buckley 55 Yanover 64
Wallanse 35 Dugan 30 Troy 260
Newman 50 Carey 40 Livonia 295
Malosh 40 --- Christensen 9
--- (Severance) ---
TOTAL BONUS 260 TOTAL BONUS 295 TOTAL BONUS 811 (1)
BONUS BASE 4,173 BONUS BASE 5,064 BONUS BASE 9,237 (2)
BONUS % .0623 BONUS % .0582 BONUS % .0878
</TABLE>
(1) Original Budget submitted was $946K.
(2) Total Bonus Base = Total NOC (Excludes Goodwill & Interest)
<PAGE> 2
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Rick Kowalski
FROM: Al Nesbitt
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$80,000.00. This amount is based on 100% achievement of Livonia's
budgeted net operating contribution of $ 5,269,309.00. Your monthly
bonus factor is .01518. Bonuses will be paid quarterly as in the past.
If, however, 85% of budgeted net operating contribution is not met for
the quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives for 1996.
Thanks for your support.
<PAGE> 3
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Don Elland
FROM: Al Nesbitt
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$90,000.00. This amount is based on 100% achievement of Livonia's
budgeted net operating contribution of $ 5,269,309.00. Your monthly
bonus factor is .01708. Bonuses will be paid quarterly as in the past.
If, however, 85% of budgeted net operating contribution is not met for
the quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives for 1996.
Thanks for your support.
<PAGE> 4
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Dan Buckley
FROM: Al Nesbitt
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$ 55,000.00. This amount is based on 100% achievement of Livonia's
budgeted net operating contribution of $ 5,269,309.00. Your monthly
bonus factor is .01044. Bonuses will be paid quarterly as in the past.
If, however, 85% of budgeted net operating contribution is not met for
the quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives for 1996.
Thanks for your support.
<PAGE> 5
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Paul Dugan
FROM: Al Nesbitt
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$ 30,000.00. This amount is based on 100% achievement of Livonia's
budgeted net operating contribution of $ 5,269,309.00. Your monthly
bonus factor is .00569. Bonuses will be paid quarterly as in the past.
If, however, 85% of budgeted net operating contribution is not met for
the quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives for 1996.
Thanks for your support.
<PAGE> 6
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Greg Carey
FROM: Al Nesbitt
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$ 40,000.00. This amount is based on 100% achievement of Livonia's
budgeted net operating contribution of $ 5,269,309.00. Your monthly
bonus factor is .00759. Bonuses will be paid quarterly as in the past.
If, however, 85% of budgeted net operating contribution is not met for
the quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives for 1996.
Thanks for your support.
<PAGE> 7
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Carey Newman
FROM: Gary Monroe
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$ 50,000.00. This amount is based on 100% achievement of Troy's
budgeted net operating contribution of $ 4,173,060.00. Your monthly
bonus factor is .01198. Bonuses will be paid quarterly as in the past.
If, however, 85% of budgeted net operating contribution is not met for
the quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives for 1996.
Thanks for your support.
<PAGE> 8
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Dave Malosh
FROM: Gary Monroe
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$40,000.00. This amount is based on 100% achievement of Troy's budgeted
net operating contribution of $ 4,173,060.00. Your monthly bonus
factor,is .00959. Bonuses will be paid quarterly as in the past. If,
however, 85% of budgeted net operating contribution is not met for the
quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives in 1996.
Thanks for your support.
<PAGE> 9
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Jim Dewan
FROM: Gary Monroe
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$65,000.00. This amount is based on 100% achievement of Troy's budgeted
net operating contribution of $ 4,173,060.00. Your monthly bonus factor
is .01558. Bonuses will be paid quarterly as in the past. If, however,
85% of budgeted net operating contribution is not met for the quarter,
there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives in 1996.
Thanks for your support.
<PAGE> 10
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Karl Hartig
FROM: Gary Monroe
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$55,000.00. This amount is based on 100% achievement of Troy's budgeted
net operating contribution of $ 4,173,060.00. Your monthly bonus factor
is .01318. Bonuses will be paid quarterly as in the past. If,
however, 85% of budgeted net operating contribution is not met for the
quarter, there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives in 1996.
Thanks for your support.
<PAGE> 11
[LASON SYSTEMS, INC. LETTERHEAD]
TO: John Wallanse
FROM: Gary Monroe
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$35,000.00. This amount is based on 100% achievement of Troy's budgeted
net operating contribution of $ 4,173,060.00. Your monthly bonus factor
is .00839. Bonuses will be paid quarterly as in the past. If, however,
85% of budgeted net operating contribution is not met for the quarter,
there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives in 1996.
Thanks for your support.
<PAGE> 12
[LASON SYSTEMS, INC. LETTERHEAD]
TO: Larry Jones
FROM: Gary Monroe
DATE: March 8, 1996
RE: 1996 Bonus Plan
I am pleased to inform you that your 1996 bonus has been targeted at
$15,000.00. This amount is based on 100% achievement of Troy's budgeted
net operating contribution of $ 4,173,060.00. Your monthly bonus factor
is .00360. Bonuses will be paid quarterly as in the past. If, however,
85% of budgeted net operating contribution is not met for the quarter,
there will not be any bonus paid or carried over.
Delivering quarterly results will be critical in establishing our
credibility in the marketplace as we move toward positioning ourselves
as a national public service company. We are well positioned to have a
great year. I'm confident that your continued strong efforts combined
with new services will allow us to meet our objectives in 1996.
Thanks for your support.
<PAGE> 1
EXHIBIT 10.20
LOAN AGREEMENT
BETWEEN
LASON SYSTEMS, INC.
AS BORROWER
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA,
AND CERTAIN OTHER LENDERS
AND
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
AS AGENT
$15,000,000 TERM LOAN
$10,000,000 REVOLVING LINE OF CREDIT
JANUARY 17, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
DEFINITIONS
<S> <C> <C>
1.1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2. Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.3. Singular/Plural. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1.4. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
TERM LOANS
2.1. Term Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.2. Term Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3. Repayment of Term Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE III
REVOLVING LOANS
3.1. Revolving Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.2. Revolving Credit Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
3.3. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.4. Commitment Reductions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
3.5. Revolving Line of Credit Facility Fee. . . . . . . . . . . . . . . . . . . . 31
ARTICLE IV
PROVISIONS APPLICABLE TO TERM LOANS
AND REVOLVING LOANS
4.1. Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.2. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
4.3. Requests for Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.4. Restrictions on Interest Rate Options . . . . . . . . . . . . . . . . . . . 32
4.5. Suspension of LIBOR Option . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.6. Payment Not at End of Interest Period. . . . . . . . . . . . . . . . . . . . 33
4.7. Default Rate; Post-Petition Interest . . . . . . . . . . . . . . . . . . . . 33
4.8. Increased Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.9. Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.10. Application of Principal Payments; Register;
Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.11. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
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<PAGE> 3
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
<TABLE>
<S> <C> <C>
5.1. Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5.2. Conditions of Initial Loans and Advances. . . . . . . . . . . . . . . . . . 38
5.2.1 Executed Loan Documents. . . . . . . . . . . . . . . . . . . . . . . 38
5.2.2 Closing Certificates; etc. . . . . . . . . . . . . . . . . . . . . . 39
5.2.3 Consents; No Adverse Change. . . . . . . . . . . . . . . . . . . . . 40
5.2.4 Financial Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 41
5.2.5 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.3. Conditions to All Loans and Advances. . . . . . . . . . . . . . . . . . . . 43
5.4. Waiver of Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
6.1. Corporate Organization and Power. . . . . . . . . . . . . . . . . . . . . . 44
6.2. Litigation; Government Regulation. . . . . . . . . . . . . . . . . . . . . . 44
6.3. Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
6.4. Enforceability of Documents; Compliance With
Other Instruments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.5. Governmental Authorization. . . . . . . . . . . . . . . . . . . . . . . . . 45
6.6. Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.7. Margin Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.8. Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.9. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.10. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.11. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.12. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
6.13. Trade Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.14. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.15. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.16. Outstanding Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.17. Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.18. Contracts; Labor Disputes. . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.19. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.20. Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.21. Stock of the Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.22. Asset Purchase Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE VII
AFFIRMATIVE COVENANTS
7.1. Financial and Business Information about the
Borrower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
7.2. Notice of Certain Events. . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.3. Corporate Existence and Maintenance of
Properties, Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
7.4. Payment of Indebtedness; Performance of Other
Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
7.5. Payment of Trade Accounts Payable, etc . . . . . . . . . . . . . . . . . . . 57
7.6. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
7.7. Maintenance of Books and Records; Inspection . . . . . . . . . . . . . . . . 58
7.8. Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.9. COBRA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.10. Motor Vehicle Titles . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.11. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.12. Compliance with Statutes, etc . . . . . . . . . . . . . . . . . . . . . . . 60
7.13. Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.14. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
7.15. Pro Forma Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE VIII
NEGATIVE COVENANTS
8.1. Merger and Dissolution. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.2. Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.3. Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.4. Liens and Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.5. Disposition of Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.6. Transactions With Related Persons. . . . . . . . . . . . . . . . . . . . . . 62
8.7. Restricted Investments. . . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.8. Restrictions on Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 62
8.9. Use of Available Retained Cash Flow . . . . . . . . . . . . . . . . . . . . 63
8.10. Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.11. Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 63
8.12. Funded Debt/Operating Cash Flow Ratio . . . . . . . . . . . . . . . . . . . 63
8.13. Free Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.14. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.15. Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
8.16. Subsidiaries or Partnerships . . . . . . . . . . . . . . . . . . . . . . . . 65
8.17. New Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.18. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.19. Issuance of Shares, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . 65
8.20. ERISA Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE X
RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
10.1. Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
10.2. Rights and Remedies Cumulative; Non-Waiver; etc . . . . . . . . . . . . . . 69
</TABLE>
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<PAGE> 5
<TABLE>
ARTICLE XI
PAYMENT OF EXPENSES
<S> <C> <C>
11.1. Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE XII
THE AGENT
12.1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
12.2. Nature of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.3. Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . 72
12.4. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
12.5. Lack of Reliance on the Agent . . . . . . . . . . . . . . . . . . . . . 73
12.6. Certain Rights of the Agent . . . . . . . . . . . . . . . . . . . . . . 75
12.7. Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
12.8. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.9. The Agent in its Individual Capacity . . . . . . . . . . . . . . . . . 76
12.10. Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
12.11. Successor Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
ARTICLE XIII
INTERCREDITOR PROVISIONS
13.1. Waiver of Default; Application of Payments
and Proceeds During Default . . . . . . . . . . . . . . . . . . . . . 77
13.2. Amendment of Loan Documents by Agent . . . . . . . . . . . . . . . . . 79
13.3. Invalidated Payments. . . . . . . . . . . . . . . . . . . . . . . . . . 80
13.4. Effect of Lender's Noncompliance . . . . . . . . . . . . . . . . . . . 80
13.5. Agreement to Cooperate . . . . . . . . . . . . . . . . . . . . . . . . 80
13.6. Independent Actions by Lenders; Application of
Payments Received other than through Agent . . . . . . . . . . . . . 80
ARTICLE XIV
ASSIGNMENT AND PARTICIPATION
14.1. Assignments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
14.2. Participants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
14.3. Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 82
ARTICLE XV
MISCELLANEOUS
15.1. Survival of Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 83
15.2. Governing Law; Waiver of Jury Trial. . . . . . . . . . . . . . . . . . 83
15.3. Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
15.4. Indemnification of the Agent and each Lender. . . . . . . . . . . . . . 87
15.5. Waivers by the Borrower. . . . . . . . . . . . . . . . . . . . . . . . 88
15.6. Assignment and Sale. . . . . . . . . . . . . . . . . . . . . . . . . . 88
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C> <C>
15.7. Knowledge of the Borrower. . . . . . . . . . . . . . . . . . . . . . . 89
15.8. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15.9. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15.10. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15.11. Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15.12. Conflict of Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15.13. Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15.14. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
15.15. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
ANNEXES
I Lenders
EXHIBITS
A Form of Term Note
B Form of Revolving Credit Notes
C Form of Interest Rate Election Notice
D Form of Borrowing Base Certificate
E Form of Covenant Compliance Certificate
SCHEDULES
1.1 Permitted Liens
6.9 Borrower Plans
6.15 Environmental Matters
6.19 Insurance
8.6 Transactions with Affiliates
</TABLE>
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<PAGE> 7
LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of January 17, 1995 (the
"Loan Agreement" or "Agreement"), is between
LASON SYSTEMS, INC., a Delaware corporation that will change
its name on the Closing Date (as defined below) from Lason Acquisition Corp. to
Lason Systems, Inc. (the "Borrower");
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national
banking association, and the other financial institutions that are now or
hereafter become parties hereto (collectively with First Union, the "Lenders");
and
FIRST UNION, as Agent for the Lenders to the extent
described in ARTICLE XII hereof (in such capacity, the "Agent").
RECITALS
A. The Borrower has requested that the Lenders make available
certain term loans in the aggregate principal amount of $15,000,000 and
revolving credit loans in the aggregate principal amount of up to $10,000,000.
The proceeds of such loans will be used by the Borrower to finance the asset
purchase referred to herein, to provide ongoing working capital, and for the
other purposes set forth herein.
B. The loans will be secured by a perfected first-priority lien
on and security interest in all assets now owned or hereafter acquired by the
Borrower, subject only to Permitted Liens (as defined below), a guaranty by
Lason Holdings, Inc., a Delaware corporation and sole shareholder of the
Borrower, and a pledge of the stock of the Borrower.
C. The Lenders are willing to make the Loans described
hereinabove subject to the terms and conditions set forth in this Loan
Agreement.
AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as set forth herein.
<PAGE> 8
ARTICLE I
DEFINITIONS
1.1. Defined Terms. For purposes of this Loan Agreement, in
addition to the terms defined elsewhere, the following terms shall have the
meanings set forth below:
"Account Debtor" shall mean any Person who is or who may become
obligated to the Borrower under or on account of an Account or Account
Receivable.
"Accounts" or "Accounts Receivable" shall have the meaning assigned
to such term in the Security Agreement.
"Acquisition" shall mean any acquisition, whether in a single
transaction or series of related transactions, by the Borrower or any one or
more Subsidiaries, or any combination thereof, of (i) all or a substantial part
of the assets, or a going business or division, of any Person, whether through
purchase of assets or securities, by merger or otherwise, or (ii) control of at
least a majority in voting power of the Stock of any Person.
"Acquisition Amount" shall mean, with respect to any Acquisition, the
sum (without duplication) of (i) the amount of cash paid by the Borrower and
its Subsidiaries in connection with such Acquisition; (ii) the fair market
value of all Stock or other ownership interests of the Borrower or any
Subsidiary issued or given in connection with such Acquisition; (iii) the
amount (determined by using the face amount or the amount payable at maturity,
whichever is greater) of all Indebtedness of the Borrower or any Subsidiary
(other than Current Liabilities) incurred, assumed or acquired in connection
with such Acquisition; (iv) the amount (determined by using the face amount or
the amount payable at maturity, whichever is greater) of all Current
Liabilities minus all Current Assets of the Borrower or any Subsidiary
incurred, assumed or acquired in connection with such Acquisition; (v) all
additional purchase price amounts in the form of earnouts and other contingent
obligations that should be reflected as liabilities on the financial statements
of the Borrower and its Subsidiaries in accordance with Generally Accepted
Accounting Principles; (vi) all amounts paid in respect of covenants not to
compete, consulting agreements and other affiliated contracts in connection
with such Acquisition; and (vii) the aggregate fair market value of all other
consideration given by the Borrower and its Subsidiaries in connection with
such Acquisition (excluding Stock or other securities of the Guarantor).
"Additional Acquisition" shall mean any Acquisition (other than a
Permitted Acquisition), so long as the assets or Stock so acquired are used to
conduct the same lines of business in which
-2-
<PAGE> 9
the Borrower is engaged as of the Closing Date or lines of business reasonably
related thereto; provided, however, that no Acquisition shall be an Additional
Acquisition unless (i) no Default or Event of Default exists at the time of
such Acquisition or would exist immediately after giving effect thereto, and
(ii) simultaneously with the completion of such Acquisition, the Agent, for the
benefit of the Lenders, shall have a perfected and first priority (except as to
Permitted Liens) Lien in the assets or Stock so acquired.
"Additional Capital Expenditures" shall mean Capital Expenditures in
excess of Permitted Capital Expenditures that are funded by Available Retained
Cash Flow as permitted by SECTION 8.9; provided, however, that no Additional
Capital Expenditure may be made at any time if a Default or Event of Default
exists at such time or would exist immediately after giving effect thereto.
"Advance" shall mean an advance of funds by a Lender to the Agent
pursuant to the Commitment of such Lender, to be disbursed by the Agent to the
Borrower as a Loan from such Lender.
"Affiliate" shall mean, as to any Person, each of the Persons (i)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with such Person; (ii) which
beneficially owns or holds 10% or more of the outstanding voting stock (or in
the case of a Person which is not a corporation, 10% or more of the equity
interest) of such Person; or (iii) 10% or more of the outstanding voting stock
(or in the case of a Person which is not a corporation, 10% or more of the
equity interest) of which is beneficially owned or held by such Person. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting stock, by contract or otherwise.
"Agent" shall mean First Union, as appointed in ARTICLE XII hereof,
and its successors and assigns as the "Agent" hereunder.
"Agreement" or "this Agreement" or "Loan Agreement" shall mean this
Loan Agreement and any amendments, modifications and supplements hereto, any
replacements, renewals, extensions and restatements hereof, and any substitutes
herefor, in whole or in part and all schedules and exhibits hereto, and shall
refer to this Agreement as the same may be in effect at the time such reference
becomes operative.
"Asset Purchase Agreement" shall mean the Asset Purchase Agreement
dated as of the date hereof, between the Borrower, as purchaser, Seller, as
seller, and the Robert A. Yanover Living Trust u/a/d May 11, 1982, Allen J.
Nesbitt, the Joseph Jonathan Yanover and Jennifer D. Yanover Irrevocable Trust
dated January 5,
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1993, Gregory Carey, Donald L. Elland and Richard C. Kowalski, as stockholders.
"Assignee" shall mean any Person, now or at any time hereafter, to
whom any Lender assigns any of its rights and obligations under this Loan
Agreement, and its successors and assigns as a "Lender" hereunder.
"Assignment and Acceptance" shall mean an Assignment and Acceptance
Agreement between a Lender and an Assignee, pursuant to which such Lender
assigns to such Assignee, and the Assignee accepts, all or a portion of such
Lender's rights and obligations under this Loan Agreement.
"Assignment of Deposit Accounts" shall mean the Assignment of Deposit
Accounts, dated as of the date hereof, between the Borrower and the Agent, and
consented to by Comerica Bank, pursuant to which the Borrower collaterally
assigns all deposit and other accounts maintained at Comerica Bank to the
Agent, for the benefit of the Lenders, as security for the Obligations.
"Available Retained Cash Flow" shall mean, for any fiscal year,
aggregate Retained Cash Flow for all prior fiscal years, minus the aggregate
Acquisition Amount for all Additional Acquisitions permitted by SECTION 8.9 and
made during all prior fiscal years, minus the aggregate amount of all
Additional Capital Expenditures incurred by the Borrower during all prior
fiscal years as permitted by Section 8.9.
"Bankruptcy Code" shall mean 11 U.S.C. Section Section 101 et seq.,
as amended, and any successor statute or statutes having substantially the same
function.
"Base Rate" shall mean, with respect to the Revolving Loans, the
Prime Rate plus .75 percentage point (i.e., 75 basis points) per annum, and
with respect to the Term Loans, the Prime Rate plus 1.00 percentage point
(i.e., 100 basis points) per annum. The Base Rate shall increase (up to but
never in excess of the maximum amount authorized by law) or decrease, as of the
opening of business on the effective date of any change in the Prime Rate, by
an amount equal to the amount of such change in the Prime Rate. In the event
First Union shall abolish or abandon the practice of announcing the Prime Rate
or should the same be unascertainable, the Agent, after consultation with the
Borrower, shall designate a comparable reference rate, which shall be deemed to
be the Base Rate under this Loan Agreement and the other Loan Documents.
"Base Rate Loan" shall mean, at any time, any outstanding Loan that
bears interest at such time at the Base Rate.
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"Borrowing Base" shall have the meaning assigned to such term in
SECTION 3.1(B).
"Borrowing Base Certificate" shall mean a fully completed certificate
in the form of EXHIBIT D to this Loan Agreement.
"Borrowing Date" shall have the meaning assigned to such term in
SECTION 3.1(C).
"Business Day" shall mean any day (other than a Saturday, Sunday or
legal holiday) on which commercial banks in Charlotte, North Carolina are open
for business, and with respect to any determination relevant to a LIBOR Loan or
any Swap Agreement, any such Business Day which is also a Eurodollar Business
Day.
"Capital Asset" shall mean any asset that would, in accordance with
Generally Accepted Accounting Principles, be required to be classified and
accounted for as a capital asset.
"Capital Expenditures" shall mean, for any period, the aggregate cost
(less the amount of any trade-in allowance included in such cost) of all
Capital Assets acquired by the Borrower and its Subsidiaries during such
period, including all amounts paid or payable with respect to any Capital Lease
during such period, minus proceeds received from the disposal of Capital Assets
during such period to the extent such disposal is in the ordinary course of
business and is otherwise permitted hereunder, all calculated on a consolidated
basis.
"Capital Lease" shall mean any lease of any property, real or
personal, that would, in accordance with Generally Accepted Accounting
Principles, be required to be classified and accounted for as a capital lease
on the balance sheet of the lessee.
"Capital Lease Obligation" shall mean, with respect to any Capital
Lease, the amount of the obligation of the lessee thereunder that would, in
accordance with Generally Accepted Accounting Principles, appear on a
consolidated balance sheet as a liability of such lessee in respect of such
Capital Lease.
"Cash Investments" shall mean (i) marketable direct obligations
issued or unconditionally fully guaranteed by the United States of America, or
issued by any agency of the United States of America and backed by the full
faith and credit of the United States of America, in each case maturing within
one year from the date of acquisition thereof; (ii) marketable direct
obligations issued by any state of the United States of America or any
political subdivision of any such state or any public instrumentality thereof,
in each case maturing within one year from the date of acquisition thereof and,
at the time of acquisition, having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc. (the "Rating
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Agencies"); (iii) repurchase obligations of any of the Lenders or their
Affiliates with a term not exceeding seven (7) days with respect to underlying
securities of the types described in clause (i) or (ii) above; (iv) variable
rate demand notes backed by letters of credit issued by any of the Lenders or
their Affiliates; (v) Eurodollar deposits in any of the Lenders or their
Affiliates; (vi) marketable commercial paper maturing no more than one year
from the date of creation thereof and, at the time of acquisition, having a
rating of at least A-1 or the equivalent thereof by Standard & Poor's
Corporation or at least P-1 or the equivalent thereof by Moody's Investors
Service, Inc.; and (vii) demand deposits, time deposits and certificates of
deposit that are insured by the Federal Deposit Insurance Corporation (the
"FDIC") or any successor instrumentality of the federal government of the
United States of America up to the applicable limit on insurance granted by the
FDIC or such other instrumentality with respect to such instruments (it being
understood that the amount invested in such instruments may not exceed the
limit on such insurance), mature within one year from the date of issuance
thereof and are issued by any bank or trust company organized under the laws of
the United States of America or any state thereof having capital, surplus and
undivided profits aggregating at least $500 million.
"Closing Date" shall mean the date referred to in SECTION 5.1 hereof.
"Collateral" shall mean and include all of the right, title and
interest of the Borrower and its Subsidiaries in and to all of their assets,
wherever located and whether now or hereafter existing or now owned or
hereafter acquired or arising, all issued and outstanding capital Stock of the
Borrower, and all other collateral directly or indirectly securing the
Obligations from time to time.
"Commitment" shall mean, for any Lender, such Lender's Term Loan
Commitment plus its Revolving Credit Commitment.
"Current Assets" shall mean, at any date, the aggregate of the
current assets of the Borrower and its Subsidiaries appearing on the asset side
of their consolidated balance sheet, as determined in accordance with Generally
Accepted Accounting Principles.
"Current Liabilities" shall mean, at any date, the aggregate of the
current liabilities of the Borrower and its Subsidiaries appearing on the
liability side of their consolidated balance sheet, as determined in accordance
with Generally Accepted Accounting Principles, plus, to the extent not
otherwise included in the calculation of such current liabilities, the current
portion of the outstanding principal balance of the Term Loans at such date,
minus, to the extent otherwise included in the calculation of
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such current liabilities, the principal balance outstanding under the Revolving
Loans at such date.
"Default" shall mean any event that, with the passage of time or
giving of notice or both, would constitute an Event of Default.
"Default Rate" shall mean, with respect to any Loan, an interest rate
per annum equal to the Elected Rate applicable to such Loan plus 2.00
percentage points (i.e., 200 basis points).
"Dollars" or "$" shall mean dollars of the United States of America.
"Elected Rate" shall mean the rate of interest with respect to a Loan
as selected by the Borrower pursuant to ARTICLE IV or as may apply as a result
of a conversion pursuant to SECTIONS 4.5, 4.7 or 4.8.
"Eligible Account Receivable" shall mean an Account created or
acquired by the Borrower in the ordinary course of its business that satisfies
and continues to satisfy the following requirements:
(a) The Account is a bona fide existing obligation of
the named Account Debtor arising from the sale and delivery of
materials, merchandise or the rendering of services to such Account
Debtor in the ordinary course of the Borrower's business, is actually
and absolutely owing to the Borrower and is not contingent for any
reason, and the Borrower has lawful and absolute title to such
Account Receivable and the unqualified right to assign and grant a
security interest therein to the Agent as Collateral;
(b) The subject materials, merchandise or products have
been shipped or delivered on open account to the named Account Debtor
on an absolute sale basis and not on consignment, on approval or on a
sale or return, bill-and-hold or guaranteed sale basis or subject to
any other repurchase or return agreement, and the subject goods have
not been returned and no notice has been received by the Borrower
that any goods will be returned; provided, however, that an Account
shall be deemed ineligible pursuant to this clause (b) only to the
extent of the portion of such goods that are returned or that are the
subject of such notice of return;
(c) The Account is not evidenced by chattel paper or an
instrument of any kind, unless such chattel paper or instrument is
duly endorsed to and is in the possession of the Agent;
(d) If the Account Debtor is located outside of the
United States (excluding its territories and possessions),
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<PAGE> 14
the Account is payable in the full amount of the face value of the
Account in Dollars and is supported by (i) an irrevocable letter of
credit issued by a financial institution satisfactory to the Agent,
and the letter of credit and all documents required to draw thereon
have been delivered to the Agent, or (ii) credit insurance that is
satisfactory to the Agent and has been assigned to the Agent for the
benefit of the Lenders;
(e) The Account is a valid, legally enforceable
obligation of the Account Debtor and no offset (including without
limitation discounts, counterclaims or contra accounts) or other
defense on the part of such Account Debtor or any claim on the part
of such Account Debtor denying liability thereunder has been asserted
and there is no basis for any such assertion; provided, however, that
if the Account Receivable is subject to any such offset, defense or
claim, or any Inventory related thereto has been returned, the
balance of such Account Receivable, after subtracting the maximum
amount of such offset, defense, claim, or return, will be an Eligible
Account Receivable if it represents a valid, uncontested and legally
enforceable obligation of the Account Debtor and meets all of the
other criteria for eligibility set forth herein;
(f) Except for Permitted Liens, the Account is not
subject to any lien or security interest whatsoever, and a currently
effective Financing Statement filed by the Agent against the Borrower
covering such Account Receivable is on file in all filing locations
in which such filing is necessary in order to perfect the Agent's
security interest therein;
(g) The Account, as to each unbilled Account, has not
remained unbilled for a period longer than thirty (30) days after
shipment of the related goods or performance of the related services
(as applicable) and, as to each billed Account, is due not more than
ninety (90) days after its invoice date, and has not remained unpaid
for a period of more than sixty (60) days from its due date;
(h) The Account Debtor is Solvent and not the subject of
any bankruptcy or insolvency proceeding of any kind, and the
creditworthiness of the Account Debtor is, in all other respects,
acceptable to the Agent, in its reasonable discretion, at the time in
question;
(i) The Account does not arise out of a transaction with
an employee, officer, agent, director, stockholder or other Affiliate
of the Borrower;
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(j) The Account is not due from a Account Debtor whose
total indebtedness to the Borrower on Accounts Receivable exceeds
twenty-five percent (25%) of the aggregate amount of all the
Borrower's Eligible Accounts Receivable; provided, however, that only
the portion of the Accounts due from such Account Debtor in excess of
twenty-five percent (25%) of the aggregate amount of all of the
Borrower's Eligible Accounts Receivable shall be ineligible by reason
of this clause (j); and provided, further, that the percentage
applicable under this clause (j) to Accounts due from General Motors
Corporation and any of its wholly-owned Subsidiaries shall be fifty
percent (50%), not 25%;
(k) The Account is not due from a Account Debtor whose
indebtedness to the Borrower on Accounts which are unpaid sixty (60)
days or more after the due date of the respective invoices exceeds
25% of such Account Debtor's total indebtedness to the Borrower;
(l) The Account does not arise out of a direct contract
with the United States of America, or any department, agency,
subdivision or instrumentality thereof, or if so, the Borrower has
complied with all requirements of the Federal Assignment of Claims
Act relative to the assignment of such Account Receivable to the
Agent;
(m) There are no material regulatory, administrative or
judicial obstacles to the Agent's or the Lenders' direct enforcement
of the Account against the Account Debtor or to the Agent's or the
Lenders' intervention in any enforcement action that might be brought
by the Borrower with respect thereto; and
(n) The Account Debtor is not located in the States of
New Jersey, Minnesota, Indiana or Connecticut or any other state
which requires that the Borrower, in order to sue any Person in such
state's courts, either (i) qualify to do business in such state or
(ii) file a report with the taxation department of such state, or, if
the Account Debtor is located in any such state, the Borrower has
either qualified as a foreign corporation authorized to transact
business in such state or has filed appropriate reports with the
taxation division for the then current year.
"Employee Plan" shall mean any "employee benefit plan" within the
meaning of Section 3(3) of ERISA maintained by the Borrower.
"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, rule, regulation, permit, license, approval, order, or
other legal requirement (including without limitation any subsequent enactment,
amendment or modification)
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relating to the protection of human health or the environment, including
without limitation any requirement pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of materials
that are or may constitute a threat to human health or the environment.
Without limiting the foregoing, each of the following is an Environmental Law:
the Comprehensive Environmental Response, Compensation, and Liability Act (42
U.S.C. Section 9601 et. seq.) ("CERCLA"), the Hazardous Material
Transportation Act (49 U.S.C. Section 1801 et. seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et. seq.) ("RCRA"), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et. seq.), the
Clean Air Act (42 U.S.C. Section 7401 et. seq.), the Toxic Substances Control
Act (15 U.S.C. Section 2601 et. seq.), the Safe Drinking Water Act (42 U.S.C.
Section 300, et. seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et. seq.) ("OSHA"), as such laws have been amended or
supplemented, and each similar federal, state and local statute, and each rule
and regulation promulgated under such federal, state and local laws.
"EPA" shall mean the United States Environmental Protection Agency.
"Equipment" shall have the meaning assigned to such term in the
Security Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and all rules and regulations from time to
time promulgated thereunder.
"ERISA Event" means (i) a Reportable Event with respect to a
Qualified Plan (as defined in SECTION 6.9); (ii) a withdrawal by the Borrower
or any of its ERISA Subsidiaries from a Qualified Plan subject to Section 4063
of ERISA during a plan year in which it was a substantial employer (as defined
in Section 4001(a)(2) of ERISA); (iii) a complete or partial withdrawal by the
Borrower or any ERISA Subsidiary from a Multiemployer Plan; (iv) the filing of
a notice of intent to terminate or the commencement of proceedings by the
Pension Benefit Guaranty Corporation to terminate a Qualified Plan or
Multiemployer Plan subject to Title IV of ERISA or the treatment of a plan
amendment to a Qualified Plan as a termination under Section 4041 or 4041A of
ERISA; (v) a failure to make required contributions to a Qualified Plan or
Multiemployer Plan; (vi) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Qualified Plan or
Multiemployer Plan; (vii) the imposition of any liability under Title IV of
ERISA to the Pension Benefit Guaranty Corporation, other than for premiums due
but not delinquent under Section 4007 of ERISA, upon the Borrower or any of its
ERISA Subsidiaries;
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(viii) an application for a funding waiver or an extension of any amortization
period pursuant to Section 412 of the Internal Revenue Code with respect to any
Qualified Plan; (ix) the Borrower or any of its ERISA Subsidiaries engages in
or otherwise becomes liable for a non-exempt prohibited transaction; or (x) a
violation of the applicable requirements of Section 404 or 405 of ERISA or the
exclusive benefit rule under Section 401(a) of the Internal Revenue Code by any
fiduciary with respect to any Qualified Plan for which the Borrower or any of
its ERISA Subsidiaries may be directly or indirectly liable.
"ERISA Subsidiary," as applied to any Person, shall mean any trade or
business (whether or not incorporated) which is a member of a group of which
that Person is a member and which is under common control with such Person
within the meaning of Sections 414(b) and (c) of the Internal Revenue Code.
"Eurodollar Business Day" shall mean a day on which commercial banks
are open for business (including dealings in foreign exchange and foreign
currency deposits in the London interbank market) in London, England.
"Event of Default" shall have the meaning specified in ARTICLE IX
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and all rules and regulations from time to time
promulgated thereunder
"Financial Statements" shall mean the annual financial statements of
the Seller for the periods ended December 31, 1993, December 31, 1992, and
December 31, 1991, and the interim financial statements for the period ended
November 30, 1994, copies of which are attached to the Asset Purchase
Agreement, and all financial statements of the Borrower and its Subsidiaries
that will be delivered by the Borrower to the Agent (for itself or for delivery
to any Lender) pursuant to this Agreement.
"Financing Statements" shall mean financing statements approved for
filing in accordance with the applicable adopted version of the Uniform
Commercial Code and all other titles, documents and certificates that the Agent
may require from the Borrower or its shareholders to describe and perfect the
security interests created hereunder or under the other Loan Documents, and all
amendments thereto and assignments thereof, in form and substance satisfactory
to the Agent.
"First Union" shall mean First Union National Bank of North Carolina,
a national banking association, and its successors and assigns.
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"Funded Debt" shall mean all Indebtedness for borrowed money of the
Borrower and its Subsidiaries on a consolidated basis that by its terms or by
the terms of any instrument or agreement relating thereto matures more than one
year from, or is renewable or extendable at the option of the debtor to a date
more than one year from, the date of creation thereof (including an option of
the debtor under a revolving credit or similar arrangement obligating the
lender or lenders to extend credit for a period of more than one year and
including Capital Lease Obligations), and includes any current maturities of
any such Indebtedness and any amounts outstanding under the Revolving Line of
Credit.
"GTCR" shall mean Golder, Thoma, Cressey, Rauner Fund IV, L.P., a
Delaware limited partnership and a principal shareholder of the Guarantor.
"General Intangibles" shall have the meaning assigned to such term in
the Security Agreement.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles, as recognized by the American Institute of
Certified Public Accountants, consistently applied and maintained on a
consistent basis for the Borrower and its Subsidiaries on a consolidated basis
throughout the period indicated and consistent with the financial practice of
the Seller prior to the date hereof and the Borrower after the date hereof;
provided, however, that, in the event that changes in Generally Accepted
Accounting Principles shall be mandated by the Financial Accounting Standards
Board, or any similar accounting body of comparable standing, or shall be
recommended by the Borrower's certified public accountants, to the extent that
such changes would modify such accounting terms or the interpretation or
computation thereof, such changes shall be followed in defining such accounting
terms only from and after the date this Agreement shall have been amended to
the extent necessary to reflect any such changes in the financial covenants and
other terms and conditions of this Agreement.
"Generally Accepted Auditing Standards" shall mean those standards
that are generally accepted auditing standards as approved and adopted by the
membership of the American Institute of Certified Public Accountants,
specifically the General Standards, Standards of Fieldwork and Standards of
Reporting.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any central bank thereof, any
municipal, local, city or county government, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
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"Guarantor" shall mean Lason Holdings, Inc., a Delaware corporation
and the holder and owner of all the issued and outstanding Stock of the
Borrower.
"Guarantor Pledge Agreement" shall mean the Guarantor Pledge
Agreement, dated as of the date hereof, between the Guarantor and the Agent,
for the benefit of the Lenders, in form and substance satisfactory to the
Lenders, pursuant to which the Guarantor pledges all the outstanding stock of
the Borrower as security for its guaranty obligations, together with any
amendments, modifications and supplements thereto, any replacements, renewals,
extensions and restatements thereof, and any substitutes therefor, in whole or
in part.
"Guaranty" shall mean the Guaranty Agreement, dated as of the date
hereof, between the Guarantor and the Agent, for the benefit of the Lenders, in
form and substance satisfactory to the Lenders, pursuant to which the Guarantor
has guaranteed payment and performance of the Obligations, together with any
amendments, modifications and supplements thereto, any replacements, renewals,
extensions and restatements thereof, and any substitutes therefor, in whole or
in part.
"Hazardous Substances" means any substance or material meeting any
one or more of the following criteria: (i) it is defined as a hazardous waste,
hazardous substance, pollutant, contaminant or toxic substance under any
Environmental Law; (ii) it is generally accepted to be infectious, radioactive
or mutagenic; (iii) its presence requires investigation or remediation under an
Environmental Law; (iv) it constitutes a danger, nuisance, trespass or health
or safety hazard to persons or property; or (v) without limiting the foregoing,
it is asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation,
petroleum hydrocarbons, petroleum derived substances or waste, crude oil,
nuclear fuel, natural gas or synthetic gas.
"Increased Costs" shall have the meaning assigned to such term in
SECTION 4.8.
"Indebtedness" shall mean, without duplication, all liabilities,
obligations and indebtedness of the Borrower and its Subsidiaries of any and
every kind and nature, including without limitation the Obligations,
obligations for borrowed money and all obligations to trade creditors, whether
heretofore, now or hereafter owing, arising, due or payable from the Borrower
or its Subsidiaries to any Person and howsoever evidenced, created, incurred,
acquired or owing, whether primary, secondary, direct, contingent, fixed or
otherwise and whether matured or unmatured. Without in any way limiting the
generality of the foregoing, Indebtedness specifically includes the following:
(i) all obligations or liabilities of any Person (to the extent that such
obligations or liabilities are recourse to the Borrower, any of its
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Subsidiaries or any of their properties) that are secured by any lien, claim,
encumbrance or security interest upon property owned by the Borrower, even
though the Borrower has not assumed or become liable for the payment thereof;
(ii) all obligations or liabilities created or arising under any Capital Lease
of real or personal property, or conditional sale or other title retention
agreement with respect to property used or acquired by the Borrower, even
though the rights and remedies of the lessor, seller or lender thereunder are
limited to repossession of such property; (iii) all unfunded pension fund
liabilities; and (iv) all obligations under any indemnification agreements,
guaranty agreements, letters of credit or other documents creating such
contingent liabilities. Notwithstanding anything to the contrary contained
herein, Indebtedness shall not include (1) the obligation of the Borrower to
make loans of up to $2,100,000 on the terms and subject to the conditions
specified in the Seller Credit Agreements or (2) the obligation of the Borrower
to repay any Deemed Loan (as defined in Section 1.1(b)(ii) of the Seller Credit
Agreements).
"Interest Expense" shall mean, for any period, total interest expense
of the Borrower and its Subsidiaries on a consolidated basis for such period
(including without limitation interest expense attributable to Capital Lease
Obligations), determined in accordance with Generally Accepted Accounting
Principles.
"Interest Period" shall mean, in the case of any LIBOR Loan, (i)
initially, the period commencing on the date such LIBOR Loan is made or on the
date of conversion of a Base Rate Loan to a LIBOR Loan and ending 1, 2 or 3
months thereafter, as selected by the Borrower for such Interest Period in the
related Interest Rate Election Notice given to the Agent, and (ii) thereafter,
if such LIBOR Loan is continued, a period commencing on the last day of the
immediately preceding Interest Period for such LIBOR Loan and ending 1, 2 or 3
months thereafter, as selected by the Borrower for such Interest Period in the
related Interest Rate Election Notice given to the Agent; provided, however,
that all of the foregoing provisions relating to Interest Periods with respect
to LIBOR Loans are subject to the following:
(1) If the Borrower shall fail to give an Interest Rate
Election Notice specifying the length of the Interest
Period for such Loan, then the Borrower shall be
deemed to have selected the Base Rate for such Loan;
(2) If any Interest Period otherwise would end on a day
that is not a Business Day, such Interest Period
shall be extended to the next succeeding Business
Day, unless such Business Day falls in another
calendar month, in which case such Interest Period
shall end on the next preceding Business Day;
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(3) Any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar
month at the end of such Interest Period) shall end
on the last Business Day of a calendar month; and
(4) The Borrower may not select any Interest Period that
ends after June 30, 2001.
"Interest Rate Election Notice" shall mean a duly completed notice
substantially in the form of EXHIBIT C, or such other substantially similar
form as the Agent may from time to time designate (by written notice to the
Borrower) for use by the Borrower in choosing the interest rate applicable to
the Loans as provided in this Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as the same may be amended from time to time.
"Inventory" shall have the meaning assigned to such term in the
Security Agreement.
"Investments" shall have the meaning assigned to such term in SECTION
8.7.
"Landlord Agreement" shall mean that certain agreement between the
Borrower, the Agent and MART Associates, a Michigan co-partnership, as lessor,
dated as of the date hereof, relating to the Borrower's leased facility known
as 28400 Schoolcraft Road, Livonia, Michigan, which agreement is recorded in
the office of the register of deeds or other appropriate office in the county
where such property is located.
"Lenders" shall mean First Union and the other financial institutions
now or hereafter parties to this Agreement, and their successors or assigns, in
their respective capacities as "Lenders" hereunder.
"LIBOR Loan" shall mean, at any time, any outstanding Loan that bears
interest at the LIBOR Rate at such time.
"LIBOR Rate" shall mean, for any Interest Period, an interest rate per
annum (rounded upwards, if necessary, to the next higher 1/100 of one
percentage point) obtained by dividing (i) the rate of interest determined by
Agent to be the rate for deposits in U.S. dollars for the applicable Interest
Period which appears on the Telerate Page 3750 at approximately 11:00 a.m.
London time, two (2) Eurodollar Business Days prior to the first date of the
applicable Interest Period, or if such rate is not available, the rate per
annum at which, in the opinion of Agent, U.S. Dollars in the amount of
$5,000,000 are being offered to leading reference banks for
-15-
<PAGE> 22
settlement in the London interbank market at approximately 11:00 a.m. London
time, two (2) Eurodollar Business Days prior to the first date of the
applicable Interest Period, by (ii) the percentage equal to one hundred percent
(expressed as a decimal fraction) minus the Reserve Requirement for such
Interest Period plus, with respect to Revolving Loans, 2.25 percentage points
(i.e., 225 basis points), and with respect to Term Loans, 2.5 percentage points
(i.e., 250 basis points). Notwithstanding the foregoing, with regard to any
LIBOR Loan covered by any Swap Agreement, the definition and calculation of
LIBOR Rate under this Loan Agreement shall be consistent with the definition
and calculation of LIBOR Rate pursuant to such Swap Agreement, and in the event
of any inconsistency between this Loan Agreement and such Swap Agreement, the
terms of the Swap Agreement shall control. The LIBOR Rate shall be adjusted as
of the first day of each Interest Period to reflect the LIBOR Rate for such
Interest Period.
"Lien" means any interest in property securing an obligation owed to,
or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including without
limitation the lien or security interest arising from a mortgage, encumbrance,
pledge, security agreement, conditional sale or trust receipt or a lease,
consignment or bailment for security purposes. The term "Lien" shall also
include reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and
encumbrances affecting property. For the purposes of this Agreement, the
Borrower or any of its Subsidiaries shall be deemed to be the owner of any
property which it has acquired or holds subject to a conditional sale
agreement, financing lease, or other arrangement pursuant to which title to the
property has been retained by or vested in some other Person for security
purposes.
"Loan Documents" shall mean and collectively refer to this Agreement,
the Notes, the Security Agreement, the Financing Statements, the Landlord
Agreement, the Assignment of Deposit Accounts, any Swap Agreement, the
Guaranty, the Guarantor Pledge Agreement, and any and all agreements,
instruments and documents, including without limitation notes, guaranties,
mortgages, deeds to secure debt, deeds of trust, chattel mortgages, pledges,
powers of attorney, consents, assignments, contracts, notices, security
agreements, lockbox agreements, trust account agreements and all other written
matters whether heretofore, now or hereafter executed by or in behalf of the
Borrower or its shareholders or delivered to the Agent or any Lender, with
respect to this Agreement or with respect to the transactions contemplated by
this Agreement, and in each case, together with any amendments, modifications
and supplements thereto, any replacements, renewals, extensions and
restatements thereof, and any substitutes therefor, in whole or in part.
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<PAGE> 23
"Loans" shall mean and collectively refer to the Term Loans made under
ARTICLE II hereof and the Revolving Loans made under the Revolving Line of
Credit referred to in ARTICLE III hereof.
"Material Adverse Effect" or "Material Adverse Change" shall mean a
material adverse effect upon, or a material adverse change in, any of (i) the
financial condition, operations, business, properties or prospects of the
Borrower and its Subsidiaries, taken as a whole; (ii) the ability of the
Borrower to perform under any Loan Document in any material respect or any
other material contract in any material respect to which it is a party; (iii)
the legality, validity or enforceability of any Loan Document; (iv) the
perfection or priority of the liens of the Agent granted under the Loan
Documents or the rights and remedies of the Agent or the Lenders under the Loan
Documents (other than a change resulting from any action or inaction by the
Agent or any of the Lenders); or (v) the condition or value of any material
portion of the Collateral.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which the Borrower is, or has been,
making or is required to make contributions.
"Net Cash Flow" shall mean, for any period, Net Income of the Borrower
and its Subsidiaries for such period, as determined on a consolidated basis and
in accordance with Generally Accepted Accounting Principles, plus accrued, but
unpaid, taxes, depreciation, amortization of intangible assets and other
non-cash charges reducing income (to the extent included in the calculation of
such Net Income); minus taxes actually paid during such period; minus the
excess, if any, of the Net Working Assets at the end of such period over the
Net Working Assets at the beginning of such period; plus the excess, if any, of
the Net Working Assets at the beginning of such period over the Net Working
Assets at the end of such period; minus any Permitted Capital Expenditures (but
not Additional Capital Expenditures) during the period; minus any principal
amounts paid or prepaid on the Term Loans pursuant to SECTIONS 2.3(a) and (b).
"Net Income" shall mean, for any period, the net income (or loss) of
the Borrower and its Subsidiaries on a consolidated basis for such period, as
determined in accordance with Generally Accepted Accounting Principles.
"Net Working Assets" shall mean the excess of Current Assets
(excluding cash and cash equivalents), at any date, over Current Liabilities
(excluding the current portion of any Funded Debt).
"Notes" shall mean the Term Notes and the Revolving Credit Notes.
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<PAGE> 24
"Notice of Borrowing" shall have the meaning assigned to such term in
SECTION 3.1(c).
"Obligations" shall mean and include (i) the Loans and all other
loans, advances, Indebtedness, liabilities, obligations, covenants and duties
owing, arising, due or payable from the Borrower to the Agent or any Lender of
any kind or nature, present or future, arising under this Agreement, the Notes
or the other Loan Documents, whether direct or indirect (including those
acquired by assignment), absolute or contingent, primary or secondary, due or
to become due, now existing or hereafter arising and however acquired; (ii) all
interest (including to the extent permitted by law, all post-petition
interest), charges, expenses, fees, attorneys' fees and any other sums payable
by the Borrower to the Agent or any Lender under this Agreement or any of the
other Loan Documents; and (iii) all Indebtedness, liabilities, obligations,
covenants and duties owing, arising, due or payable from the Borrower pursuant
to any Swap Agreement.
"Operating Cash Flow" shall mean, with respect to the Borrower and its
Subsidiaries on a consolidated basis for any period, Net Income for such
period, excluding any extraordinary or non-recurring gains or losses other than
proceeds of business interruption insurance, plus the sum of the following
expenses of the Borrower and its Subsidiaries for such period to the extent
taken into account in the calculation of such Net Income: (i) income and
franchise taxes; (ii) depreciation expense; (iii) amortization of intangible
assets and other non-cash charges reducing income; and (iv) Interest Expense.
For purposes of SECTIONS 8.11, 8.12 and 8.13 hereof, for the fiscal quarter
ending March 31, 1995, the Operating Cash Flow shall be the Operating Cash Flow
calculated for the period January 1, 1995 to March 31, 1995 (taking into
account the operations of the Seller from the period January 1, 1995, to the
Closing Date), multiplied by 4; for the two fiscal quarters ended June 30,
1995, Operating Cash Flow shall be the Operating Cash Flow for the period
January 1, 1995 to June 30, 1995 (taking into account the operations of the
Seller from the period January 1, 1995 to the Closing Date), multiplied by 2;
for the three fiscal quarters ended September 30, 1995, Operating Cash Flow
shall be the Operating Cash Flow for the period January 1, 1995 to September
30, 1995 (taking into account the operations of the Seller from the period
January 1, 1995 to the Closing Date), multiplied by 1.33; and for the four
fiscal quarters ended December 31, 1995, Operating Cash Flow shall be the
Operating Cash Flow for the period January 1, 1995 to December 31, 1995 (taking
into account the operations of the Seller from the period January 1, 1995 to
the Closing Date).
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
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<PAGE> 25
"Participant" shall mean any Person, now or at any time hereafter,
participating with the Lenders in the Loans to the Borrower pursuant to this
Agreement, and its successors and assigns as such a Participant.
"Pension Plan" shall mean any "employee pension benefit plan" within
the meaning of Section 3(2) of ERISA that is maintained by the Borrower (other
than any Multiemployer Plan that is subject to the provisions of Title IV of
ERISA).
"Permitted Acquisition" shall mean any Acquisition, so long as the
assets or Stock so acquired are used to conduct the same lines of business in
which the Borrower is engaged as of the Closing Date or lines of business
reasonably related thereto; provided, however, that no Acquisition shall be a
Permitted Acquisition unless (i) no Default or Event of Default exists at the
time of such Acquisition or would exist immediately after giving effect
thereto, and (ii) simultaneously with the completion of such Acquisition, the
Agent, for the benefit of the Lenders, shall have a perfected and first
priority (except as to Permitted Liens) Lien in the assets or Stock so
acquired.
"Permitted Amount" shall have the meaning set forth in SECTION 8.8
hereof.
"Permitted Capital Expenditures" shall mean Capital Expenditures
(excluding Additional Capital Expenditures) which do not exceed the following
sums: (i) during Borrower's fiscal year ending December 31, 1995, $1,200,000;
(ii) during Borrower's fiscal year ending December 31, 1996, $1,200,000; (iii)
during Borrower's fiscal year ending December 31, 1997, $1,400,000; (iv) during
Borrower's fiscal year ending December 31, 1998, $1,600,000; and (v) during
Borrower's fiscal year ending December 31, 1999 and each fiscal year
thereafter, $1,800,000; provided, however, that if Capital Expenditures
actually incurred in any fiscal year are less than the dollar limit stated for
such year in clauses (i) through (v) above, that difference may be carried
forward and added to the dollar limit stated above for the next, single
succeeding fiscal year.
"Permitted Fees and Expenses" shall mean documented transaction fees
and expenses in connection with the transactions contemplated under this
Agreement, including without limitation (i) the commitment fee and (ii)
reasonable documented legal and accounting fees, disbursements and other
out-of-pocket charges.
"Permitted Guarantees" shall mean guarantees incurred by the Borrower
or any of its Subsidiaries with respect to surety and appeal bonds and
performance bonds, and guarantees by reason of endorsement of checks and other
similar instruments in the ordinary course of business.
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<PAGE> 26
"Permitted Liens" shall mean any of the following liens securing any
Indebtedness of the Borrower on the property, real or personal, of the
Borrower, whether now owned or hereafter acquired:
(a) Liens granted to the Agent, for the benefit of the Lenders;
(b) Non-consensual liens imposed by any Requirement of Law in
favor of carriers, warehousemen, mechanics and materialmen incurred in the
ordinary course of business for sums not yet due and payable or being contested
in good faith by appropriate proceedings;
(c) Liens incurred in the ordinary course of business in
connection with worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of letters of
credit, bids, surety and appeal bonds, tenders, statutory obligations, leases
and contracts (other than for borrowed money) entered into in the ordinary
course of business, provided that all such liens in the aggregate have no
reasonable likelihood of causing a Material Adverse Effect;
(d) Liens for current taxes, assessments or other governmental
charges that are not delinquent or remain payable without any penalty or that
are being contested in good faith and with due diligence by appropriate
proceedings, provided that all such liens in the aggregate have no reasonable
likelihood of causing a Material Adverse Effect and, if reasonably requested by
the Agent, the Borrower has established reserves determined in accordance with
Generally Accepted Accounting Principles with respect thereto;
(e) Purchase money liens incurred in the purchase of Equipment
permitted under SECTION 8.10 hereof;
(f) Liens set forth on SCHEDULE 1.1 attached hereto;
(g) Easements, rights-of-way, restrictions and similar charges
and encumbrances not interfering with the conduct of the Borrower's business in
any manner and not having a reasonable likelihood of causing a Material Adverse
Effect;
(h) Any interest or title of a lessor under any Capital Lease or
operating lease which is not prohibited by this Agreement;
(i) Any lien, levy or assessment securing any item described in
SECTION 9.1(l) or any lien, levy or assessment described in SECTION 9.1(m)
hereof to the extent the 60-day period referenced in SECTION 9.1(l) or SECTION
9.1(m), as the case may be, has not expired;
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<PAGE> 27
(j) Set-off rights of banks, whether statutory or consensual;
and
(k) Any other liens or encumbrances as the Required Lenders may
approve in writing from time to time.
"Person" shall mean a corporation, an association, a joint venture, a
partnership, a limited liability company, an organization, a business, an
individual, a trust or a government or political subdivision thereof or any
government agency or any other legal entity.
"Plan" means any employee benefit or other plan established or
maintained or to which contributions have been made by the Borrower and which
is covered by Title IV of ERISA or to which the minimum funding standards of
Section 412 of the Code apply.
"Prime Rate" shall mean the per annum interest rate publicly announced
from time to time by First Union National Bank of North Carolina from its
principal office in Charlotte, North Carolina to be its prime rate (which rate
is one of several interest rate bases used by Lender), as that rate may change
from time to time with changes to occur on the date the Prime Rate changes.
Lender lends at rates both above and below the Prime Rate, and Borrower
acknowledges and agrees that the Prime Rate is not represented or intended to
be the lowest or most favorable rate of interest offered by Lender.
"Pro Forma Balance Sheets" shall mean the pro forma consolidated
balance sheets delivered pursuant to SECTIONS 5.2.4(b) and 7.15 hereof.
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or
(ii) Section 4975(c) of the Internal Revenue Code that is not exempt by reason
of Section 4975(c)(2) or 4975(d).
"Projections" shall mean the financial projections described in
SECTION 6.17.
"Reportable Event" shall mean a reportable event as defined in Section
4043(b) of ERISA (other than an event for which notice is waived under the
ERISA regulations).
"Required Lenders" shall mean, at any time, the Lenders holding
sixty-six and two-thirds percent (66 2/3%) or more of the outstanding Loans or,
if no Loans are then outstanding, the Lenders providing sixty-six and
two-thirds percent (66 2/3%) or more of the Total Commitment at such time.
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<PAGE> 28
"Requirement of Law" means, as to any Person, the charter, articles or
certificate of incorporation and bylaws or other organizational or governing
documents of such Person, and any statute, law, treaty, rule, regulation,
order, decree, writ, injunction or determination of any arbitrator or a court
or other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Reserve Requirement" for any Interest Period shall mean the reserve
percentage applicable two (2) Business Days before the first day of the
Interest Period (expressed as a decimal fraction and rounded upwards, if
necessary, to the next higher 1/100 of one percentage point) determined by
Lender to be in effect on such day, as provided by the Board of Governors of
the Federal Reserve System (or any successor governmental body), applied for
determining the maximum reserve requirements (including without limitation
basic, supplemental, marginal and emergency reserves) applicable to Lender
under Regulation D with respect to "Eurocurrency liabilities" as defined in
Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"Retained Cash Flow" shall mean, for any fiscal year of the Borrower
beginning with the year ending December 31, 1995, that portion of Net Cash Flow
from the preceding fiscal year which is not required to be used by the Borrower
to prepay the Term Loans pursuant to SECTION 2.3(c).
"Revolving Credit Commitment" shall mean, at any time for any Lender,
the amount set forth opposite such Lender's name on ANNEX I hereto under the
heading "Revolving Credit Commitment," as such amount may be adjusted from time
to time pursuant to the terms of this Agreement as set forth in the register
maintained by the Agent pursuant to SECTION 4.10(b).
"Revolving Credit Notes" shall mean the promissory notes of the
Borrower, dated the date hereof, in the form of EXHIBIT B attached hereto,
executed and delivered to the Lenders pursuant to ARTICLE III hereof,
evidencing the obligation of the Borrower to repay funds advanced pursuant to
the Revolving Credit Commitment of each Lender individually, and the Total
Revolving Credit Commitment in the aggregate, together with any amendments,
modifications and supplements thereto, any replacements, restatements, renewals
and extensions thereof, and any substitutes therefor, in whole or part.
"Revolving Line of Credit" shall mean the revolving line of credit
made available by the Lenders to the Borrower pursuant to ARTICLE III hereof.
"Revolving Loan Termination Date" shall mean the earliest of (i) June
30, 2001; (ii) the date of termination of the Lenders'
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<PAGE> 29
obligations to make Loans in accordance with SECTION 10.1(a) after the
occurrence of an Event of Default; (iii) such date of termination as is
mutually agreed in writing upon by the Lenders and the Borrower; (iv) the date
after all Obligations have been paid in full and the Lenders are no longer
obligated to make Advances or Revolving Loans hereunder; and (v) the date on
which the Total Revolving Credit Commitment has been reduced to zero pursuant
to SECTION 3.4 hereof.
"Revolving Loans" shall mean the Loans made by the Lenders to the
Borrower under the Revolving Line of Credit.
"Security Agreement" shall mean the Security Agreement, dated as of
the date hereof, between the Borrower and the Agent, for the benefit of the
Lenders, in form and substance satisfactory to the Lenders, together with any
amendments, modifications and supplements thereto, any replacements,
restatements, renewals and extensions thereof, and any substitutes therefor, in
whole or in part.
"Seller" means Lason Systems, Inc., a Michigan corporation,
substantially all of the assets of which are being purchased by the Borrower
pursuant to the Asset Purchase Agreement.
"Seller Credit Agreements" shall mean the various Credit Agreements,
dated as of the Closing Date, each between the Borrower, on the one hand, and
one of Robert A. Yanover, Allen J. Nesbitt, Gregory Carey, Donald L. Elland and
Richard C. Kowalski (and in certain circumstances, one or more related trusts),
on the other hand, in form and substance satisfactory to the Agent (without
giving effect to any amendment, modification, supplement, replacement,
restatement, renewal or extension thereof, or any substitute therefor, unless
approved in writing by the Agent).
"Stockholders Agreement" means the Stockholders Agreement, dated as of
the date hereof, among the Guarantor, GTCR, Robert A. Yanover, Robert A.
Yanover Living Trust u/a/d May 11, 1982, the Joseph Jonathan Yanover and
Jennifer D. Yanover Irrevocable Trust dated January 5, 1993, Allen J. Nesbitt,
the Allen J. Nesbitt Living Trust u/a/d December 7, 1994, Richard Kowalski,
Donald Elland and Greg Carey.
"Solvent" shall mean, as to any Person on any particular date, that
such Person (i) does not have unreasonably small capital to carry on its
business as now conducted and as presently proposed to be conducted; (ii) is
able to pay its debts as they become due in the ordinary course of business;
and (iii) has assets with a present fair saleable value (as a going concern or
otherwise) greater than its total stated liabilities and identified contingent
liabilities.
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<PAGE> 30
"Stock" shall mean all shares, options, interests or other equivalents
(howsoever designated) of or in a corporation or other entity, whether voting
or non-voting, including without limitation common stock, warrants, preferred
stock, convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the foregoing.
"Subsidiary" shall mean any corporation or other entity of which more
than fifty percent (50%) of the outstanding Stock having ordinary voting power
to elect a majority of the board of directors is at the time, directly or
indirectly, owned by any Person or one or more of its Subsidiaries
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency). When used without reference to a parent
corporation, the term "Subsidiary" shall be deemed to refer to a Subsidiary of
the Borrower.
"Swap Agreement" shall mean any interest rate swap agreement, hedging
agreement or similar arrangement (including without limitation any swap
agreement as defined in 11 U.S.C Section 101(55) or any successor statute)
between the Borrower and any of the Lenders (or any of their Affiliates), now
or hereafter existing, pursuant to which the Borrower obtains interest rate
protection for the Loans or any portion thereof.
"Term Loans" shall mean the Loans made by the Lenders to the Borrower
in the aggregate principal amount of $15,000,000 pursuant to SECTION 2.1
hereof.
"Term Loan Commitment" shall mean, at any time for any Lender, the
amount set forth opposite such Lender's name on ANNEX I hereto under the
heading "Term Loan Commitment," as such amount may be adjusted from time to
time pursuant to the terms of this Agreement as set forth in the register
maintained by the Agent pursuant to SECTION 4.10(b).
"Term Notes" shall mean the promissory notes of the Borrower, dated
the date hereof, in the form of EXHIBIT A attached hereto, executed and
delivered to the Lenders pursuant to SECTION 2.2 hereof, evidencing the
obligation of the Borrower to repay the funds advanced pursuant to the Term
Loan Commitment of each Lender individually, and the Total Term Loan Commitment
in the aggregate, together with any amendments, modifications and supplements
thereto, any replacements, restatements, renewals and extensions thereof, and
any substitutes therefor, in whole or in part.
"Total Commitment" shall mean, at any time, the sum of all Commitments
at such time.
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<PAGE> 31
"Total Revolving Credit Commitment" shall mean, at any time, the sum
of the Revolving Credit Commitments of each Lender at such time.
"Total Term Loan Commitment" shall mean, at any time, the sum of the
Term Loan Commitments of each Lender at such time.
"Uniform Commercial Code" shall mean the Uniform Commercial Code of
the State of North Carolina, as amended from time to time, unless in any
particular instance the Uniform Commercial Code of another state is applicable,
in which case it shall mean the Uniform Commercial Code of such state.
1.2. Accounting Terms. Any accounting terms used in this
Agreement that are not specifically defined shall have the meanings customarily
given them in accordance with Generally Accepted Accounting Principles.
1.3. Singular/Plural. Unless the context otherwise requires,
words in the singular include the plural and words in the plural include the
singular.
1.4. Other Terms. All other terms contained in this Agreement
shall, when the context so indicates, have the meanings provided for by the
Uniform Commercial Code of the State of North Carolina to the extent the same
are used or defined therein.
ARTICLE II
TERM LOANS
2.1. Term Loans. The Lenders hereby severally establish, on the
terms and conditions set forth in this Agreement and in reliance upon the
representations and warranties made hereunder, a term loan facility in the
aggregate principal amount of Fifteen Million Dollars ($15,000,000), from which
each Lender severally agrees to make its respective Term Loan in the amount of
its respective Term Loan Commitment. The Term Loans shall be evidenced by the
Term Notes, and the proceeds of the Term Loans shall be advanced to the
Borrower, upon satisfaction of the terms and conditions hereunder, on the
Closing Date.
2.2. Term Notes. On the Closing Date, the Borrower shall execute
and deliver to each Lender a Term Note to evidence such Lender's Term Loan.
Each Term Note shall (i) be payable to the order of the appropriate Lender and
be dated the Closing Date; (ii) be in the stated principal amount of such
Lender's Term Loan Commitment; and (iii) bear interest in accordance with the
applicable provisions of ARTICLE IV hereof.
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<PAGE> 32
2.3. Repayment of Term Loans.
(a) Payments; Dates. Unless due sooner pursuant to the
applicable provisions of ARTICLES IX and X, and subject to subsections (b) and
(c) below, the aggregate principal amount of the Term Loans shall be due and
payable and shall be repaid by the Borrower in twenty-six (26) installments on
the last Business Day of each fiscal quarter of the Borrower, beginning with
the fiscal quarter ending March 31, 1995, as follows:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDING QUARTERLY PAYMENT
--------------------- -----------------
<S> <C>
March 31, 1995 $ 375,000
June 30, 1995 375,000
September 30, 1995 375,000
December 31, 1995 375,000
March 31, 1996 500,000
June 30, 1996 500,000
September 30, 1996 500,000
December 31, 1996 500,000
March 31, 1997 500,000
June 30, 1997 500,000
September 30, 1997 500,000
December 31, 1997 500,000
March 31, 1998 625,000
June 30, 1998 625,000
September 30, 1998 625,000
December 31, 1998 625,000
March 31, 1999 625,000
June 30, 1999 625,000
September 30, 1999 625,000
December 31, 1999 625,000
March 31, 2000 625,000
June 30, 2000 625,000
September 30, 2000 625,000
December 31, 2000 625,000
March 31, 2001 1,000,000
June 30, 2001 1,000,000
The final maturity date of the Term Notes is June 30, 2001.
</TABLE>
(b) Optional Prepayments. The Borrower shall have the right at
any time, or from time to time, upon at least five (5) Business Days' prior
notice to the Agent, to prepay the Term Loans in whole or in part, without
premium or penalty; provided, however, that each partial prepayment shall be in
an aggregate principal amount of at least $250,000, and if greater, an integral
multiple thereof. Interest on any amount prepaid, accrued to the date of
prepayment, shall be paid on such date of prepayment. Fifty percent (50%) of
each prepayment of principal on the Term Loans pursuant to this subsection
shall be applied to scheduled principal payments in
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<PAGE> 33
inverse order of maturity, and the remaining fifty percent (50%) shall then be
applied on a pro rata basis against the remaining scheduled principal payments.
(c) Mandatory Prepayment of Term Loans. In addition to the
amortization required under subsection (a) above, the Borrower shall make a
mandatory prepayment of the Term Loans on an annual basis in an amount equal to
fifty percent (50%) of the Borrower's Net Cash Flow each fiscal year (or, if
less, the outstanding principal amount of the Term Loans), beginning with the
fiscal year ending December 31, 1995. Each payment under this subsection (C)
shall be made promptly after receipt of annual audited financial statements for
the fiscal year in question, and in no event later than ninety (90) days after
the end of such fiscal year. Each prepayment of principal on the Term Loans
pursuant to this subsection shall be applied to the scheduled principal
payments on the Term Loans in inverse order of maturity. With each prepayment
made under this subsection, the Borrower shall deliver to the Agent a
certificate of its President or Chief Financial Officer setting forth the
calculation of Net Cash Flow for the relevant annual period.
ARTICLE III
REVOLVING LOANS
3.1. Revolving Loans. (a) The Lenders hereby severally establish,
on the terms and conditions set forth in this Agreement and in reliance upon
the representations and warranties made hereunder, a Revolving Line of Credit
in favor of the Borrower in the aggregate principal amount of up to Ten Million
Dollars ($10,000,000), pursuant to which each Lender severally agrees to make
and remake one or more Revolving Loans to the Borrower, upon the terms and
conditions set forth in this ARTICLE III, from time to time on any Business Day
during the period from the date hereof through the Revolving Loan Termination
Date. Subject to the provisions of this Agreement, the Borrower may borrow,
repay (without penalty except for LIBOR breakage costs under SECTION 4.6) and
reborrow any amount of the Revolving Line of Credit; provided, however, that
the sum of the aggregate principal amount outstanding at any one time under the
Revolving Line of Credit may not exceed the lesser of (i) the Borrowing Base
(as defined below) at such time and (ii) the Total Revolving Credit Commitment
at such time; and provided, further, that the amount advanced by any Lender
hereunder at any time shall not exceed such Lender's Revolving Credit
Commitment at such time. Notwithstanding the provisions of the foregoing
sentence, on the Closing Date, the Borrower may not borrow under the Revolving
Line of Credit an amount greater than $6,000,000 or the Borrowing Base,
whichever is less.
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(b) As used herein, the term "Borrowing Base" shall mean at any
time the amount, as determined with reference to the Borrowing Base Certificate
most recently delivered by the Borrower to the Agent, equal to Eighty-Five
percent (85%) of the face amount of the Eligible Accounts Receivable of the
Borrower.
(c) Whenever the Borrower desires to borrow under the Revolving
Line of Credit, the Borrower shall give the Agent notice of each Base Rate Loan
to be made hereunder (which notice may be in writing or oral, and if oral,
shall be followed by written notice as soon as practicable) or, in the case of
a LIBOR Loan, the Borrower shall give the Agent at least three (3) Business
Days' prior notice of such LIBOR Loan. Each such notice (each a "Notice of
Borrowing") shall be irrevocable and shall specify (i) the aggregate principal
amount of the Revolving Loans to be made pursuant to such borrowing, and (ii)
the requested date of the borrowing (the "Borrowing Date") (which shall be a
Business Day) and shall include an Interest Rate Election Notice. Upon the
receipt of a Notice of Borrowing from the Borrower for a Revolving Loan, the
Agent shall notify each Lender promptly of such Notice of Borrowing.
The proceeds of all Advances will be made available by the Agent at
the office of the Agent specified in SECTION 15.3 by crediting the account of
the Borrower on the books of such office or pursuant to other instructions of
the Borrower as provided under subsection (D) below.
The settlement of the payment obligations of the Agent and each Lender
owing to each other under this Agreement and the Notes shall be conducted as
follows. As soon as reasonably practicable after the end of each week, the
Agent shall provide each Lender with a statement (the "Loan Statement"), in
form and detail reasonably acceptable to such Lender, specifying (i) the total
of all Advances and other amounts required by the terms of this Agreement to
have been made available or paid by such Lender to the Agent during such week;
(ii) the total of all amounts required by the terms of this Agreement to have
been distributed or paid by the Agent to such Lender during such week; and
(iii) such other information about the Loans, the Advances and the payments
thereof as such Lender and the Agent shall agree to include from time to time.
Any excess of such amounts owing to the Agent or a Lender, as the case may be,
as specified in the Loan Statement, shall be due and payable immediately by the
other, provided that the Lender shall have the right, described below,
subsequently to object to any amounts payable to the Agent. Interest owing to
a Lender shall be calculated based on the actual amount of the Loans funded by
such Lender, as such amount is adjusted from time to time hereafter pursuant to
each Loan Statement. The provisions of this subsection govern only the timing
of the payments and distributions owing by the Agent and the Lenders to each
other under this Agreement and
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the Notes, and nothing contained herein shall be deemed to modify, discharge or
otherwise affect those obligations in any fashion except as specifically
provided herein. Each Loan Statement shall be deemed conclusively accurate and
binding upon the Agent and a Lender unless the Agent or such Lender is notified
by the other to the contrary within thirty (30) days after such Lender's
receipt of such Loan Statement. Such notice shall be deemed an objection only
to those items specifically objected to therein.
(d) The Borrower hereby irrevocably authorizes the Agent to
disburse the proceeds of each Revolving Loan under this Agreement (i) in
accordance with the terms of any written instructions from the Borrower; (ii)
in accordance with telephone instructions from any of the Borrower's officers
or other Persons in each case designated from time to time by the Borrower;
(iii) to advance to the Lenders, pursuant to SECTION 4.9 hereof, principal,
interest, fees, costs and expenses payable hereunder; or (iv) to the Borrower's
controlled disbursement or depository accounts with its bank in an amount equal
to the sum necessary to cover checks or other items of payment drawn by the
Borrower upon such account and presented for payment, but in no event shall the
Agent, on behalf of the Lenders, be obligated to make Advances hereunder in
amounts necessary to cover any such checks or other items of payment presented
to the extent that the Borrower is not otherwise entitled to receive Advances
under the Revolving Line of Credit in such amounts from the Agent, on behalf of
the Lenders, pursuant to the terms hereof.
(e) Each request for an Advance under the Revolving Line of Credit
(other than pursuant to SECTION 4.9(c)), and each Advance made by a Lender for
the benefit of the Borrower, shall constitute a new certification by the
Borrower as of the date of such request or Advance (i) that the representations
and warranties of the Borrower contained in ARTICLE VI hereof and in the other
Loan Documents remain true and correct in all material respects as of such
date, except to the extent any such representation or warranty relates solely
to a prior date, and (ii) that, with respect to and after giving effect to such
Advance, no Default or Event of Default has occurred and is continuing as of
such date.
3.2. Revolving Credit Notes. On the Closing Date, the Borrower
shall execute and deliver to each Lender a Revolving Credit Note to evidence
such Lender's Revolving Loans. Each Revolving Credit Note shall (i) be payable
to the order of the appropriate Lender and be dated the Closing Date; (ii) be
in the stated principal amount of such Lender's Revolving Credit Commitment;
and (iii) bear interest in accordance with the applicable provisions of ARTICLE
IV hereof. The amount of principal owing on each Revolving Credit Note at any
given time shall be the aggregate amount of all Revolving Credit Loans made
under such Revolving Credit Note, less all payments of
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principal theretofore made by the Borrower and applied to such Revolving Credit
Note in accordance with the terms hereof.
3.3. Repayment. The Borrower shall repay the Revolving Credit
Notes:
(a) in full on the Revolving Loan Termination Date;
(b) in full upon the occurrence of any Event of Default and
acceleration of the Obligations by the Lenders pursuant to ARTICLE X hereof, or
upon the occurrence of an Event of Default under SECTIONS 9.1(i), (j) or (n)
and the resulting automatic acceleration of the Obligations pursuant to ARTICLE
X hereof; and
(c) (i) In part, immediately in the event that the total
principal amount outstanding at any time under the
Revolving Credit Notes exceeds the maximum amount
permitted under any of the conditions set forth in
SECTION 3.1(a) at such time, in the amount of such
excess;
(ii) In part, as may be required by the Agent pursuant to
any lockbox and depository account arrangement
required to be maintained pursuant to, and in
accordance with the provisions of, the Security
Agreement; and
(iii) In full or in part, to the extent permitted or
required by and in accordance with the provisions of
SECTION 7.6.
3.4. Commitment Reductions.
(a) Upon at least five (5) Business Days' prior notice to the
Agent, the Borrower may cause the Lenders to reduce ratably the unutilized
portion of the Total Revolving Credit Commitment in part in amounts of $250,000
or integral multiples thereof, or in whole; provided, however, that any such
reduction shall not reduce the Total Revolving Credit Commitment to an amount
less than the aggregate principal amount outstanding under the Revolving Line
of Credit.
(b) The Total Revolving Credit Commitment shall be reduced by the
amount of any payments on the Revolving Loans made pursuant to SECTION 7.6.
(c) Any reduction in the Total Revolving Credit Commitment shall,
on a pro rata basis, reduce each Lender's Revolving Credit Commitment. After
any such reduction: (i) the facility fees provided for in SECTION 3.5 shall be
calculated with respect to the reduced Total Revolving Credit Commitment, and
(ii) the Total
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Revolving Credit Commitment may not thereafter be increased without the prior
unanimous written consent of the Lenders.
3.5. Revolving Line of Credit Facility Fee. During the term of the
Revolving Line of Credit, the Borrower shall pay to the Agent, for the ratable
benefit of the Lenders, a facility fee at the rate of one-half of one percent
(.5%) per annum on the average daily undisbursed portion of the Revolving Line
of Credit during the preceding month. Such facility fee shall accrue from and
including the date hereof to and including the Revolving Loan Termination Date
and shall be payable on the last Business Day of each calendar month in
arrears, beginning with the month ending January 31, 1995.
ARTICLE IV
PROVISIONS APPLICABLE TO TERM LOANS
AND REVOLVING LOANS
4.1. Use of Proceeds. The proceeds of the Loans will be used by
the Borrower solely (i) to finance the purchase of substantially all of the
assets of Seller, and the repayment of obligations of the Seller assumed by the
Borrower, pursuant to the Asset Purchase Agreement; (ii) to finance Capital
Expenditures; (iii) to provide ongoing working capital of the Borrower; (iv) to
finance loans in the aggregate amount of up to $2.1 million by the Borrower
pursuant to the Seller Credit Agreements; and (v) to pay Permitted Fees and
Expenses.
4.2. Interest. (a) The Loans shall bear, and Borrower shall
pay, interest on the unpaid principal balance thereof at a rate equal to the
Elected Rate or Elected Rates as selected by Borrower in accordance herewith.
(b) Interest on the Loans shall be due and payable as follows:
(i) In respect of any Base Rate Loan, interest shall be payable
monthly in arrears on the last Business Day each month,
beginning with the month ending January 31, 1995;
(ii) In respect of any LIBOR Loan, interest shall be payable in
arrears on the last Business Day of the applicable Interest
Period; and
(iii) If any amount of the unpaid principal balance of any Loan
shall be due (whether by maturity, optional or mandatory
prepayment, acceleration or otherwise) (other than an
optional prepayment of the Revolving Loans), then all
interest accrued on such amount of unpaid
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principal shall be due and payable on the due date for such
unpaid amount of principal.
(c) Interest on the Loans shall be computed on the basis of a
360-day year and the actual number of days elapsed. Nothing contained in this
Agreement or in the Notes shall be deemed to establish or require the payment
of interest to Lender at a rate in excess of the maximum rate permitted by law.
In the event that the rate of interest required to be paid exceeds the maximum
rate permitted by law, the rate of interest required to be paid shall be
automatically reduced to the maximum rate permitted by law and any amounts
collected in excess of the permissible amount shall be deemed a prepayment of
principal on the Notes.
4.3. Requests for Loans. Borrower may elect (a) at any time to
request the initial advance of a Base Rate Loan or LIBOR Loan, (b) at any time
to convert a Loan which is a Base Rate Loan into a LIBOR Loan, or (c) at the
end of any Interest Period of a LIBOR Loan, to convert such LIBOR Loan into a
Base Rate Loan or to renew such LIBOR Loan for an additional Interest Period.
Except as set forth herein, Loans may be renewed or converted in whole or in
part. Each such election shall be made by delivery to Lender of an irrevocable
Interest Rate Election Notice substantially prior to 10:00 a.m. (Charlotte,
North Carolina, time) at least three (3) Business Days prior to the effective
date of the making or renewal of any LIBOR Loan and at least one (1) Business
Day prior to the effective date of the making or conversion of any Base Rate
Loan, specifying (x) the amount and type of loan, (y) the Interest Period, if a
LIBOR Loan, and (z) the date of the requested advance, conversion or renewal of
such Loan (which shall be the last day of the Interest Period in the case of a
conversion from a LIBOR Loan to a Base Rate Loan). If Lender shall not have
received a timely and fully completed Interest Rate Election Notice from
Borrower as of the time of the making of any Loan or upon the expiration of the
Interest Period for any LIBOR Loan, then Borrower shall be deemed to have
elected a Base Rate Loan.
4.4. Restrictions on Interest Rate Options. Notwithstanding
Borrower's right to elect interest rate options, (a) at any time prior to
January 17, 1996, LIBOR Loans must be at least $375,000 or any greater amount
in a multiple of $375,000, and as of January 17, 1996 and thereafter, LIBOR
Loans must be at least $500,000 or any greater amount in a multiple of
$500,000; (b) there shall be no more than two (2) LIBOR Loans outstanding at
any one time with respect to Term Loans and no more than two (2) LIBOR Loans
outstanding at any one time with respect to Revolving Loans; and (c) no LIBOR
Loan may be renewed or requested during the continuance of a Default or Event
of Default.
4.5. Suspension of LIBOR Option. Notwithstanding any provision
herein to the contrary, if, upon or prior to the determination of
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an interest rate for any LIBOR Loan for any Interest Period, the Agent
determines that quotations of interest rates for the relevant deposits are not
being provided by the relevant persons in the relevant amounts or for the
relevant maturities for purposes of determining the applicable LIBOR Rate, then
the Agent shall give Borrower prompt notice thereof, any outstanding request
for a LIBOR Loan shall be deemed a request for a Base Rate Loan, and so long as
such condition remains in effect, Lenders shall be under no obligation to make
such LIBOR Loan, but shall instead make a Base Rate Loan (subject to all
applicable terms and conditions hereof). Notwithstanding any other provision
in this Agreement, in the event that the Agent determines in good faith that it
is unlawful for a Lender (a) to honor its obligation to fund LIBOR Loans
hereunder, or (b) to maintain such LIBOR Loans hereunder, then the Agent shall
promptly notify Borrower thereof and, to the extent required by applicable law,
(x) such Lender's obligation to make LIBOR Loans shall be suspended until such
time as such Lender may again make and maintain LIBOR Loans, and (y) all of
Borrower's LIBOR Loans made by such Lender shall be converted into Base Rate
Loans on the last day of the then current Interest Periods for such LIBOR
Loans.
4.6. Payment Not at End of Interest Period. Borrower shall
immediately pay each Lender, on demand, the amount that shall compensate such
Lender for any actual loss incurred by such Lender as a result of (a) any
payment of a LIBOR Loan prior to the last day of the applicable Interest
Period, or (b) any failure by Borrower to borrow a LIBOR Loan on the effective
date specified in the relevant Interest Rate Election Notice. Such loss shall
be the amount, without duplication, reasonably determined by such Lender as the
excess, if any, of (A) the amount of interest that would have accrued to such
Lender on the amount so paid or not borrowed at a rate of interest equal to the
LIBOR Rate applicable to such LIBOR Loan for the period from the date of such
payment or failure to borrow to the last day (x) in the case of a payment prior
to the last day of the Interest Period, of the then current Interest Period, or
(y) in the case of such failure to borrow, of the Interest Period for such
LIBOR Loan that would have commenced on the date of such failure to borrow,
over (B) the amount that would have been realized by such Lender in reemploying
the funds received in prepayment or not advanced during the period referred to
above by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market.
4.7. Default Rate; Post-Petition Interest. During the
continuance of any Event of Default, at the option of the Required Lenders
without any required notice to Borrower, the aggregate principal amount of the
Loans, and to the full extent permitted by law, all interest accrued on the
Loans, shall bear interest at the Default Rate, and such default interest shall
be payable on demand. Upon the application of the Default Rate, all LIBOR
Loans then outstanding shall immediately and automatically be converted into
Base Rate
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Loans. To the fullest extent permitted by applicable law, interest shall
continue to accrue on the Notes after the filing by or against Borrower of any
petition seeking any relief in bankruptcy or under any act or law pertaining to
insolvency or debtor relief, whether state, federal or foreign.
4.8. Increased Costs. (a) If at any time after the date hereof
and from time to time, the adoption or modification of any applicable law, rule
or regulation regarding any Lender's required levels of reserves, insurance or
capital (including any allocation of capital requirements or conditions, but
excluding federal, state or local income or franchise tax liability), or any
interpretation or administration thereof by any Governmental Authority or
central bank charged with the interpretation, administration or compliance of
such Lender with any of such requirements, has or would have the effect of (i)
increasing any such Lender's costs relating to the Loans hereunder, or (ii)
reducing the yield or rate of return of such Lender on the Loans hereunder to a
level below that which such Lender could have achieved but for the adoption or
modification after the date hereof of any such requirements (such increases or
reductions collectively referred to as "Increased Costs"), the Borrower shall,
after receipt of any documented request by such Lender, and for as long as such
adopted or modified rule, law or regulation shall remain in effect, pay to such
Lender such additional amounts accruing after receipt of such notice as set
forth in a certificate from such Lender setting forth the calculation of the
increase in costs or reduction in yield or rate of return of such Lender. The
Lender's certificate shall constitute prima facie evidence of such Increased
Costs. Nothing herein contained shall be construed or so operate as to require
the Borrower to pay any interest, fees, costs or charges greater than is
permitted by applicable law.
(b) Without limiting, and without duplication of, the effect of
subsection (A) above, if at any time after the date hereof and from time to
time, by reason of any adoption or modification of any applicable federal,
state, local or foreign law, rule or regulation regarding such Lender's
required levels of reserves, insurance or capital (including any allocation of
capital requirements or conditions, but excluding federal, state or local
income or franchise tax liability), or similar requirements, or the
implementation of any such requirements previously adopted but not implemented
prior to the date hereof, or any interpretation or administration thereof by
any Governmental Authority charged with the interpretation, administration or
compliance of such Lender with any of such requirements, any Lender either (i)
incurs Increased Costs based on or measured by the excess above a specified
level of the amount of a category of deposits or other liabilities of such
Lender that includes deposits by reference to which the interest rate on LIBOR
Loans is determined as provided in this Agreement or a category of extensions
of credit or other
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assets of such Lender which includes LIBOR Loans, or (ii) becomes subject to
restrictions on the amount of such category of liabilities or assets which it
may hold, then, if such Lender so elects by notice to the Borrower, the
obligation of such Lender to make, and to convert Loans of any other type into,
LIBOR Loans hereunder shall be suspended until the date such regulatory change
ceases to be in effect, all LIBOR Loans outstanding from such Lender shall be
converted into Base Rate Loans as of the end of each then applicable Interest
Period, and such Lender shall advance all Loans to be made by it as Base Rate
Loans.
(c) Determinations by any Lender for purposes of this Section of
the effect of any regulatory change on its costs of making or maintaining any
Loans or on amounts receivable by it in respect of the Loans, and of the
additional amounts required to compensate such Lender in respect of any
Increased Costs, as shown in a certificate of the Lender setting forth such
Increased Costs, shall constitute prima facie evidence of such Increased Costs.
4.9. Payment. (a) All payments (including prepayments) by the
Borrower in respect of the Obligations shall be made in immediately available
funds to the Agent, for the account of the Agent or the Lenders, as provided
herein, at its offices at One First Union Center, CORP-8, Charlotte, North
Carolina 28288-0737, prior to 1:00 p.m., Charlotte time on the date payment is
due, or at such other place as is designated in writing by the Agent, by wire
transfer to First Union National Bank of North Carolina, Charlotte, North
Carolina, ABA Routing #053000219, to the credit of FUNBNC Charlotte, Account
Number 2070482789126, Re: Lason Systems, Inc., except as otherwise instructed
by the Agent. If any payment falls due on a day that is not a Business Day,
then such due date shall be extended to the next succeeding Business Day
(unless the provisions of clause (ii) of the definition of Interest Period are
applicable in which case such payment shall be due on the preceding Business
Day), and interest, to the extent applicable, shall continue to accrue and be
payable for such period of extension.
(b) All payments (including prepayments) made by the Borrower
hereunder (except for payments made to the Agent for its own account) shall be
distributed by the Agent to the Lenders in accordance with the provisions of
SECTION 3.1(c). Each Lender's pro rata share of such payment shall be based
upon the actual amount of the Obligations owed to such Lender to which such
payment is to be applied in accordance with SECTION 4.10. If a payment of
principal is received after 1:00 p.m., Charlotte time, such principal shall be
deemed to remain outstanding until the next succeeding Business Day, and
interest shall continue to accrue on such outstanding principal and shall be
payable for such period of extension.
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(c) The Borrower hereby irrevocably authorizes the Agent to
advance to the Lenders all principal, interest, fees, costs and expenses
payable by the Borrower hereunder by drawing such amounts under the Revolving
Line of Credit as of the respective due dates of such principal, interest,
fees, costs and expenses; provided, however, that the failure of the Agent so
to advance and pay any such amounts by drawing under the Revolving Line of
Credit will not affect the Borrower's obligation to pay such principal,
interest, fees, costs and expenses as and when due and payable.
4.10. Application of Principal Payments; Register; Pro Rata
Borrowings. (a) Except as otherwise specifically set forth in this Agreement,
all payments made by the Borrower shall be applied (i) first, to the payment of
amounts due under SECTION 4.6, (ii) second, to the payment of accrued and
unpaid fees (payable by Borrower pursuant to SECTIONS 3.5, 7.6(c), 11.1, 12.8
or 15.4 hereof or otherwise pursuant to the Loan Documents) and interest on the
Term Notes, (iii) third, to the payment of accrued and unpaid interest on the
Revolving Credit Notes, (iv) fourth, to the payment of unpaid principal on the
Term Notes, and (v) fifth, to the payment of unpaid principal on the Revolving
Credit Notes. Payments of principal on the Notes shall be applied to such
Loans outstanding as directed by the Borrower or, in the absence of any such
direction, shall be applied first to the payment of Base Rate Loans and second
to the payment of LIBOR Loans in the order of the soonest to mature. If there
is more than one LIBOR Loan maturing on any one day, then payment shall be
applied to the LIBOR Loan bearing the higher rate of interest. Notwithstanding
the foregoing, during the continuance of an Event of Default the Agent shall
apply all such payments to the Obligations in accordance with the provisions of
SECTION 13.1.
(b) The Agent shall maintain a register on which it will record
the Commitments from time to time of each Lender, the Advances made by each of
the Lenders, the Loans made to the Borrower and each repayment in respect of
the principal amount of the Loans of each Lender. Any such recordation shall
be conclusive absent manifest error.
(c) Each Lender will record on its internal records the amount
of each Advance made to the Agent, each Loan to the Borrower and each payment
in respect thereof. Failure to make any such recordation, or any error in such
recordation, shall not affect the Borrower's obligations in respect of the
Loans.
(d) All Revolving Loans and Term Loans under this Agreement
shall be funded by the Lenders pro rata on the basis of their Revolving Credit
Commitments and Term Loan Commitments, as the case may be, rounded to the
nearest penny.
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4.11. Taxes. Any and all payments by the Borrower hereunder or
under any of the Loan Documents shall be made, in accordance with the terms
hereof and thereof, free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto, excluding (i) any taxes imposed by
any jurisdiction other than the United States or any political subdivision
thereof; (ii) any taxes imposed by the United States or any political
subdivision thereof by means of withholding at the source; and (iii) any taxes
based upon or measured by net or gross income (including, without limitation,
any branch taxes and the Michigan Single Business Tax) and franchise taxes
imposed by the United States or any political subdivision thereof (all such
non- excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender, (w) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section), such Lender receives
an amount equal to the sum it would have received had no such deductions been
made; (x) the Borrower shall make the deduction; (y) the Borrower shall pay the
full amount deducted to the relevant taxing authority or other authority in
accordance with applicable law; and (z) the Borrower shall deliver to such
Lender evidence of such payment to the relevant taxation authority or other
authority. The Borrower agrees to indemnify the Agent and each Lender for the
full amount of Taxes paid by the Agent and any Lender (as the case may be) and
any liability (including penalties, interest and expenses, but only if such
penalties, interest and expenses are due to the Borrower's failure to indemnify
the Agent and any Lender within the time period set forth below) arising
therefrom or with respect thereto, whether or not such taxes were correctly or
legally asserted. This indemnification shall be made within thirty (30) days
from the date the Agent or any Lender makes written demand therefor. Without
prejudice to the survival of any other agreement of the Borrower hereunder, the
agreements and obligations of the Borrower contained in this Section shall
survive the payment in full of the principal and interest hereunder. If any
Lender subsequently receives a refund or credit in respect of any amount of Tax
for which such Lender has been indemnified or reimbursed by the Borrower, such
Lender shall remit to the Borrower the amount so refunded or credited.
ARTICLE V
CLOSING; CONDITIONS OF CLOSING AND BORROWING
5.1. Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of
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Robinson, Bradshaw & Hinson, P.A., 1900 Independence Center, 101 North Tryon
Street, Charlotte, North Carolina 28246, or at such other place as the parties
hereto shall mutually agree, at 10:00 a.m. on January 17, 1995, or at such
other time as the parties hereto shall mutually agree. The parties agree that
the Loans have been and shall be made in North Carolina and that the Loan
Documents were prepared and negotiated in North Carolina.
5.2. Conditions of Initial Loans and Advances. The obligation of
the Lenders to close this financing and to make the initial Loans under this
Agreement on the Closing Date are subject to the satisfaction of the following
conditions precedent:
5.2.1 Executed Loan Documents.
(a) Certain Documents. The following Loan Documents shall have
been duly authorized, executed and delivered to the Agent and each Lender by
the Borrower, shall be in full force and effect and no Default shall exist
thereunder:
(i) the Notes;
(ii) the Security Agreement;
(iii) the Financing Statements;
(iv) the Assignment of Deposit Accounts; and
(v) the Landlord Agreement.
(b) Financing Statements. All Financing Statements and all other
filings or recordations necessary to perfect the security interests of the
Agent in the Collateral shall have been filed, and the Agent shall have
received assurances in a form acceptable to the Agent that such security
interests constitute valid and perfected first-priority security interests
therein, subject only to Permitted Liens.
(c) Guaranty; Guarantor Pledge Agreement. The Guaranty and the
Guarantor Pledge Agreement (together with all certificates for the Stock being
pledged thereunder and duly executed undated stock powers for each such
certificate) shall have been duly authorized, executed and delivered to the
Agent and each Lender by the Guarantor, shall be in full force and effect and
no Default shall exist thereunder.
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5.2.2 Closing Certificates; etc.
(a) Certificate of the Borrower. The Agent and each Lender shall
have received a certificate dated as of the Closing Date from the president,
any vice president or the chief financial officer on behalf of the Borrower, in
form and substance satisfactory to the Agent, to the effect that: (i) all
representations and warranties of the Borrower contained in this Agreement and
the other Loan Documents are true, correct and complete as of the Closing Date;
(ii) the Borrower is not in violation of any of the covenants contained in this
Agreement and the other Loan Documents; (iii) after giving effect to the
transactions contemplated under this Agreement, no Default or Event of Default
has occurred and is continuing; and (iv) the Borrower has satisfied each of the
closing conditions set forth in this ARTICLE V.
(b) Secretaries' Certificates. The Agent and each Lender shall
have received a certificate dated as of the Closing Date of the secretary or an
assistant secretary of the Borrower and the Guarantor, in form and substance
satisfactory to the Agent, certifying: (i) that attached thereto is a copy of
the certificate of incorporation or other organizational documents and all
amendments thereto of such corporation, certified as of a recent date by the
appropriate Governmental Authority in its jurisdiction of organization, and
that such organizational documents have not been amended since such date; (ii)
that attached thereto is a true and complete copy of the bylaws (or equivalent
regulations) of such corporation as in effect on the date of such
certification; (iii) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors (or equivalent governing body) of
such corporation, authorizing the execution, delivery and performance of this
Agreement and the other Loan Documents, as applicable; and (iv) as to the
incumbency and genuineness of the signature of each officer of such corporation
executing this Agreement or any of the other Loan Documents.
(c) Certificates of Good Standing. The Agent and each Lender
shall have received certificates as of a recent date of the good standing of
the Borrower and the Guarantor under the laws of each such corporation's
jurisdiction of organization and each jurisdiction in which such corporations
are qualified to conduct business.
(d) Opinions of Counsel. The Agent and each Lender shall have
received the favorable opinion of: (i) the law firm of Seyburn, Kahn, Ginn et
al., as to matters of Michigan law, and the law firm of Kirkland & Ellis as to
matters of the General Corporation Law of the State of Delaware, each as
special counsel to the Borrower and the Guarantor, dated as of the Closing Date
and addressed to the Agent, for the benefit of the Agent and the Lenders, in
form and substance satisfactory to the Lenders.
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(e) UCC Search. The Agent and each Lender shall have received the
results of a UCC search of all filings made against the Borrower under the
Uniform Commercial Code as in effect in the states in which any assets of the
Borrower are located, indicating among other things that the Collateral is free
and clear of any liens or encumbrances except for Permitted Liens.
(f) Insurance. The Agent shall have received certificates of
insurance in form and substance satisfactory to the Agent upon the Collateral
and the business of the Borrower with the mortgagee, additional insured and
loss payable endorsements required by SECTION 7.8.
(g) Name Change. The Borrower shall have changed its name to
"Lason Systems, Inc.", by the filing of articles of amendment with the Delaware
Secretary of State, and the Agent shall have received satisfactory evidence of
such filing.
(h) Equipment List. The Agent shall have received a list of all
equipment owned by the Borrower as of the Closing Date with a purchase price of
more than $25,000 and all equipment under lease or lease contract by the
Borrower at of the Closing Date with a purchase price greater than $25,000, and
such list shall be in form and substance satisfactory to the Agent.
5.2.3 Consents; No Adverse Change.
(a) Governmental and Third Party Approvals. All necessary
approvals, authorizations and consents, if any be required, of any Person and
of all Governmental Authorities (including courts) having jurisdiction with
respect to the Collateral and the transactions contemplated by this Agreement
shall have been obtained, except where the failure to so obtain is not
reasonably expected to have a Material Adverse Effect.
(b) No Injunction, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened in writing or
proposed before any court or other Governmental Authority to enjoin, restrain
or prohibit, or to obtain substantial damages in respect of, or that is related
to or arises out of this Agreement or the consummation of the transactions
contemplated hereby or that, in the Required Lenders' discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
(c) No Material Adverse Change. From and after December 31, 1993,
there shall not have occurred any Material Adverse Change or any event,
condition or state of facts that could reasonably be expected to have a
Material Adverse Effect, other than as
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specifically contemplated by the transactions contemplated under this
Agreement.
(d) No Event of Default. No Default or Event of Default shall
have occurred and be continuing.
5.2.4 Financial Matters.
(a) Financial Statements. Each Lender shall have received from
the Borrower the Financial Statements of the Seller (which shall substantiate
that the earnings of Seller before depreciation, amortization, interest and
taxes exceed $5,000,000 for the nine (9) months ended September 30, 1994).
(b) Financial Condition Certificate. Each Lender shall have
received a certificate of the Borrower, in form and substance satisfactory to
the Lenders, executed by the chief financial officer on behalf of the Borrower,
that (i) attached thereto is an estimated balance sheet of the Borrower as of
January 10, 1995, giving pro forma effect to the transactions contemplated by
this Agreement and the Asset Purchase Agreement as if they had occurred on
November 30, 1994 (which estimated balance sheet consists of the balance sheet
of the Seller as of November 30, 1994, adjusted to reflect (A) the Borrower's
estimate of changes in the Seller's cash, accounts receivable, accumulated
depreciation, accounts payable, accrued expenses and long-term and short-term
indebtedness during the period from December 1, 1994 through December 31, 1994,
(B) the Borrower's estimate of changes in the Seller's cash, accounts
receivable, accounts payable, accrued expenses and long-term and short-term
indebtedness during the period from January 1, 1995 through January 10, 1995,
(C) the contributions to the Borrower's equity and incurrence of indebtedness
by the Borrower on the Closing Date, (D) the Seller's retention of its
short-term indebtedness, (E) the Borrower's assumption and repayment of the
Seller's long-term indebtedness, (F) the Borrower's estimate of the goodwill
associated with the Borrower's acquisition of the Seller's assets pursuant to
the Asset Purchase Agreement, (G) the making of the loans contemplated to be
made by the Borrower on the date hereof pursuant to the Seller Credit
Agreements), and (H) those Permitted Fees and Expenses to be paid by the
Borrower on the Closing Date; (ii) attached thereto are the Projections,
setting forth assumptions used in preparing the Projections and certifying to
the effect that the Projections represent the good faith opinion of the
Borrower based upon the facts and information available to the Borrower at the
time such projections were made as to the projected results of the Borrower's
operations and that the Borrower is not aware of any facts or information since
the time such projections were made that would alter such opinion; (iii) the
Borrower is Solvent; and (iv) the Borrower has not executed this Agreement or
any of the Loan Documents with the intent to hinder, delay or defraud
creditors.
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(c) Payment at Closing. The Borrower shall have paid to the Agent
the fees set forth in the commitment letter from First Union to the Borrower
dated December 7, 1994, and required to be paid at Closing.
(d) Taxes. All taxes, fees and other charges in connection with
the execution, delivery, recording, filing and registration of any of the Loan
Documents shall have been paid by the Borrower.
5.2.5 Miscellaneous.
(a) Disbursement Instructions. The Agent shall have received
written instructions from the Borrower to the Agent directing the payment of
any proceeds of Loans made under this Agreement that are to be paid on the
Closing Date.
(b) Asset Purchase Agreement; General Motors Service Contract.
The Agent and the Lenders shall have received: (i) a fully- executed copy of
the Asset Purchase Agreement, which shall be in form and substance satisfactory
to the Lenders, shall have been duly authorized, executed and delivered by the
parties thereto, and shall be in full force and effect with no default
thereunder, and (ii) a fully- executed copy of the General Motors Service
Contract between the Borrower (as the assignee of the Seller pursuant to the
Asset Purchase Agreement) and General Motors Corporation, which shall be in
form and substance satisfactory to the Lenders, shall have been duly
authorized, executed and delivered by the parties thereto, and shall be in full
force and effect with no default thereunder.
(c) Stockholders Agreement. The Agent and the Lenders shall have
received a fully-executed copy of the Stockholders Agreement, which shall be in
form and substance satisfactory to the Lenders.
(d) Equity Capital. The Agent and the Lenders shall have received
evidence that the Borrower has received a minimum of $10,000,000 of net cash
proceeds (prior to reimbursement by the Borrower of expenses and fees incurred
by GTCR in connection with this Agreement, such equity investment and the
transactions contemplated thereby) from the issuance of its common or preferred
Stock on terms and conditions satisfactory to the Agent.
(e) Field Examination. The Agent and the Lenders shall have
completed a one (1) or two (2) day field examination of the Borrower by its
internal consultants, the results of which shall be satisfactory to the
Lenders.
(f) Environmental Reports. The Agent and the Lenders shall have
received a copy of any reports prepared for GTCR by an environmental firm
addressing the Borrower's compliance with all relevant environmental
regulations and the environmental status of
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any owned properties, the results of which shall be satisfactory to the Agent.
(g) Incentive Plan. The Agent and the Lenders shall have received
a copy of the final management incentive plan outlining the bonus and
compensation agreement with Borrower's senior management, the terms of which
shall be satisfactory to the Agent.
(h) Proceedings and Documents. The Lenders shall have received
copies of all other documents (including pro-forma insurance policies of the
Borrower), certificates, opinions, instruments and other evidence as each may
reasonably request, in form and substance satisfactory to the Lenders, with
respect to the transactions contemplated by this Agreement and the taking of
all actions in connection therewith.
5.3. Conditions to All Loans and Advances. The obligation of the
Lenders to make any Loan hereunder (including any Loans made on the Closing
Date) is subject to the continued validity of all Loan Documents and the
satisfaction of the following conditions precedent on the relevant Borrowing
Date:
(a) Each of the representations and warranties made by the
Borrower contained in ARTICLE VI hereof and in the other Loan Documents shall
be true and correct in all material respects on and as of such Borrowing Date
with the same effect as if made on and as of the Borrowing Date, unless such
representation or warranty relates by its terms to a prior date;
(b) No Default or Event of Default shall have occurred and be
continuing on the Borrowing Date or would result from the Loans to be made on
such Borrowing Date; and
(c) With respect to each Revolving Loan, the Agent shall have
received a Notice of Borrowing and, with respect to each LIBOR Loan, an
Interest Rate Election Notice in accordance with SECTION 4.3.
5.4. Waiver of Conditions Precedent. If any Lender makes any Loan
or Advance hereunder prior to the fulfillment of any of the conditions
precedent set forth in SECTION 5.3, the making of such Loan or Advance shall
constitute only an extension of time for the fulfillment of such condition and
not a waiver thereof, and unless the Required Lenders indicate otherwise in
writing, the Borrower shall thereafter use its best efforts to fulfill each
such condition promptly. No failure by the Borrower to fulfill any such
condition precedent shall constitute a Default or an Event of Default
hereunder, except to the extent any such failure is continuing after the
expiration of any period within which such condition is specifically required
to be fulfilled.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement, to make
the Loans and to continue to make the Loans, the Borrower represents and
warrants to the Agent and each Lender as follows:
6.1. Corporate Organization and Power. The Borrower (a) is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware; (b) is qualified or licensed to do business and
is in good standing in every other jurisdiction where the nature of its
business or the ownership of its properties requires it to be so qualified or
licensed and where the failure of the Borrower to be so qualified or licensed
would have a Material Adverse Effect; (c) as of the date hereof, has no
Subsidiaries; (d) is not a partner in any partnership; and (e) has the full
corporate or other organizational power and authority and legal right to
execute and deliver the Loan Documents to which it is a party, to perform and
observe the terms and provisions thereof, to own and give a lien on and
security interest in the Collateral, and to engage in its business as presently
conducted. As of the Closing Date, the Borrower has not, during the preceding
five (5) years, been known as or used any other company, corporate, fictitious
or trade names.
6.2. Litigation; Government Regulation. There are no judgments,
injunctions or similar orders or decrees, and no actions, suits, investigations
or proceedings pending or, to the knowledge of the Borrower, threatened in
writing against or affecting the Borrower, its assets or its business, or that
question the validity of this Agreement or any of the Loan Documents, at law or
in equity before any court, arbitrator or Governmental Authority, that would,
if adversely determined, have a Material Adverse Effect, and the Borrower is
not in violation of or in default under any Requirement of Law where such
violation could have a Material Adverse Effect.
6.3. Taxes. The Borrower is not delinquent in the payment of any
taxes that have been levied or assessed by any Governmental Authority against
it or its assets unless such tax is being contested in good faith and by proper
proceedings and the Borrower has maintained adequate reserves with respect
thereto in accordance with Generally Accepted Accounting Principles. The
Borrower (a) has timely filed all tax returns that are required by law to be
filed, and has paid all taxes shown on said returns and all other assessments
or fees levied upon it or upon its properties to the extent that such taxes,
assessments or fees have become due, unless such tax, assessment or fee is
being contested in good faith and by proper proceedings and the Borrower has
maintained adequate reserves with respect thereto in accordance with Generally
Accepted Accounting Principles, and if not due, such taxes, assessments and
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fees have been adequately provided for and sufficient reserves therefor
established on its books of account and (b) is current with respect to payment
of all required withholding taxes, social security taxes and other similar
payroll taxes unless such tax is being contested in good faith and by proper
proceedings and the Borrower has maintained adequate reserves with respect
thereto in accordance with Generally Accepted Accounting Principles. No
material controversy in respect of income taxes is pending or, to the knowledge
of the Borrower, threatened in writing against the Borrower. The
representations and warranties set forth in this SECTION 6.3 shall not be
deemed to be breached by reason of the existence of matters in respect of which
the Borrower is indemnified pursuant to SECTION 7.2 of the Asset Purchase
Agreement.
6.4. Enforceability of Documents; Compliance With Other
Instruments. Each of the Loan Documents has been duly authorized by all
necessary corporate or other organizational action on the part of the
Borrower, has been validly executed and delivered by the Borrower and is the
legal, valid and binding obligation of Borrower, enforceable against the
Borrower in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally or by general equitable principles.
Borrower is not in default, in any manner that would have a Material Adverse
Effect, with respect to any indenture, loan agreement, mortgage or deed of
trust, lease, deed or similar agreement related to the borrowing of monies in
excess of $250,000 to which it is a party or by which it, or any of its
property, is bound. Neither the execution, delivery or performance of the Loan
Documents by the Borrower nor compliance by the Borrower therewith: (a)
conflicts or will conflict with or results or will result in any breach of, or
constitutes or will constitute with the passage of time or the giving of notice
or both, a default under the certificate of incorporation and bylaws of the
Borrower or a default which would have a Material Adverse Effect under, (i) any
Requirement of Law or (ii) any agreement or instrument to which the Borrower is
a party or by which it, or any of its property, is bound or (b) results or will
result in the creation or imposition of any lien, charge or encumbrance upon
the properties of the Borrower pursuant to any such agreement or instrument,
except for Permitted Liens.
6.5. Governmental Authorization. Except as have been obtained and
except as would not have a Material Adverse Effect, no authorization,
exemption, consent or approval of, notice to, or declaration or filing with,
any Governmental Authority is required for the valid execution, delivery and
performance by Borrower of the Loan Documents to which it is a party or the
consummation by the Borrower of the transactions contemplated thereby. Except
as would not have a Material Adverse Effect, Borrower has, and is in
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good standing with respect to, all material governmental approvals, permits,
certificates, inspections, consents and franchises necessary to continue to
conduct its business as heretofore conducted and to own or lease and operate
its respective properties as now owned, leased and operated by it. No such
approval, permit, certificate, consent or franchise contains any term,
provision, condition or limitation more burdensome in any material way than
such as are generally applicable to Persons engaged in the same or similar
business as Borrower.
6.6. Event of Default. No Default or Event of Default has occurred
and is continuing.
6.7. Margin Securities. Borrower owns no "margin stock" as such
term is defined in Regulation U, as amended, issued by the Board of Governors
of the Federal Reserve System. None of the proceeds of the Loans will be used,
directly or indirectly, for the purpose of purchasing or carrying any margin
stock or for the purpose of maintaining, reducing or retiring any Indebtedness
that was originally incurred to purchase or carry margin stock or for any other
purpose that might constitute the transactions contemplated herein a "purpose
credit" within the meaning of Regulation U, Regulation X or Regulation G or any
other regulations of the Board of Governors of the Federal Reserve System, as
in effect from time to time. None of the transactions contemplated by this
Agreement (including without limitation the use of the proceeds of the Loans)
has violated, will violate or will result in a violation of Sections 7, 13 or
14 of the Exchange Act.
6.8. Full Disclosure. (a) None of the Loan Documents, or any
statements, documents or certificates furnished to the Agent or any Lender by
or on behalf of Borrower, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements contained
therein or herein, in light of the circumstances under which they were made,
not misleading.
(b) There is no fact known to the Borrower that the Borrower has
not disclosed to the Agent or the Lenders in writing that reasonably could be
expected to result in a Material Adverse Effect.
6.9. ERISA.
(a) SCHEDULE 6.9 lists all Employee Plans and Pension Plans
("Borrower Plans") to be effected, maintained or sponsored by the Borrower as
of the Closing Date or to which Borrower is obligated to contribute as of the
Closing Date. Copies of such Borrower Plans or written descriptions thereof
provided to the Agent or the Lenders are true and complete in all material
respects.
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(b) Each such Borrower Plan is in compliance in all material
respects with the applicable provisions of ERISA, the Internal Revenue Code and
other federal or state law, including all requirements under the Internal
Revenue Code or ERISA for filing reports (which are true and correct in all
material respects as of the date filed), and benefits have been paid in
accordance with the provisions of each such Borrower Plan, except to the extent
that failure to so comply would not have a Material Adverse Effect.
(c) Each Borrower Plan intended to be qualified under Section
401 of the Internal Revenue Code ("Qualified Plan") is so qualified, and the
trusts created thereunder are, in the opinion of the Borrower, exempt from tax
under the provisions of Section 501 of the Internal Revenue Code, and to the
knowledge of the Borrower nothing has occurred that would cause the loss of
such qualification or tax-exempt status.
(d) Borrower has no outstanding liability under Title IV of
ERISA (other than for routine claims for benefits or PBGC premiums not yet due
and payable) with respect to any Plan maintained or sponsored by the Borrower
(as to which Borrower is or may be liable), nor with respect to any Plan to
which Borrower (wherein Borrower is or may be liable) contributes or is
obligated to contribute.
(e) None of the Qualified Plans subject to Title IV of ERISA has
any unfunded benefit liability (as to which Borrower is or may be liable).
(f) Except under the Borrower Plans disclosed in SCHEDULE 6.9,
no Employee Plan maintained or sponsored by Borrower provides medical or other
welfare benefits or extends coverage relating to such benefits beyond the date
of a participant's termination of employment with Borrower, except to the
extent required by Section 4980B of the Internal Revenue Code or applicable
state continuation coverage law. The Borrower has complied in all material
respects with the notice and continuation coverage requirements of Section
4980B of the Internal Revenue Code.
(g) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan maintained or sponsored by the Borrower or to
which the Borrower is obligated to contribute.
(h) There are no pending or, to the knowledge of the Borrower,
threatened claims, actions or lawsuits, other than routine claims for benefits
in the usual and ordinary course, asserted or instituted against (i) any
Borrower Plan maintained or sponsored by the Borrower or its assets, or (ii)
any fiduciary with respect to any Borrower Plan for which the Borrower may be
directly or indirectly liable, through indemnification obligations or
otherwise.
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(i) Borrower has not incurred and, to the knowledge of the
Borrower, does not reasonably expect to incur (i) any liability (and no event
has occurred that, with the giving of notice under Section 4219 of ERISA, would
result in such liability) under Section 4201 or 4243 of ERISA with respect to a
Multiemployer Plan or (ii) any liability under Title IV of ERISA (other than
premiums due and not delinquent under Section 4007 of ERISA) with respect to a
Plan.
(j) Borrower has not engaged, directly or indirectly, in a
non-exempt prohibited transaction (as defined in Section 4975 of the Internal
Revenue Code or Section 406 of ERISA) in connection with any Plan that has a
reasonable likelihood of having a Material Adverse Effect.
6.10. Financial Statements. To the knowledge of the Borrower, the
Financial Statements contain no material misstatement or omission and fairly
present the financial position, assets and liabilities of Seller for the
respective periods then ended. From and after December 31, 1993, through the
Closing Date, except for the transactions contemplated under this Agreement,
(a) there has been no Material Adverse Change, nor to the knowledge of the
Borrower is any Material Adverse Change threatened or reasonably likely to
occur, and (b) Borrower has not incurred any obligation or liability that would
be reasonably likely to have a Material Adverse Effect or entered into any
material contracts not specifically contemplated by this Agreement or not in
the ordinary course of business consistent with past practice of Seller. The
Pro Forma Balance Sheet described in SECTION 7.15, prepared by Coopers and
Lybrand, as delivered to the Lenders pursuant to SECTION 7.15 hereof, will
fairly present the assets and liabilities of the Borrower on a pro forma
consolidated basis after taking into account the consummation of the
transactions contemplated by this Agreement. Such Pro Forma Balance Sheet will
be prepared on behalf of the Borrower in accordance with Generally Accepted
Accounting Principles (subject to the absence of footnotes required by
Generally Accepted Accounting Principles and subject to year-end audit
adjustment) and will fairly present in all material respects the assets and
liabilities of the Borrower on a consolidated basis as of the Closing Date,
based on the assumptions set forth therein.
6.11. Solvency. The Borrower is Solvent and after giving effect
to the transactions contemplated under this Agreement, will be Solvent.
6.12. Use of Proceeds. The Borrower's use of the proceeds of any
Loans will be legal and proper corporate uses, and such uses will be consistent
with all applicable laws and statutes, as in effect from time to time.
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6.13. Trade Relations. To the knowledge of the Borrower, there
exists no actual or threatened termination, cancellation or limitation of, or
any adverse modification or change in, the business relationship of Borrower
with any customer or any group of customers whose purchases individually or in
the aggregate are material to the business of the Borrower, or with any
material supplier, and there exists no present condition or state of facts or
circumstances that would materially adversely affect the Borrower or its
business or prevent the Borrower from conducting its business after the
consummation of the transactions contemplated under this Agreement in
substantially the same manner in which it has heretofore been conducted.
6.14. Compliance With Laws. To the knowledge of the Borrower,
Borrower has duly complied in all material respects with, and the Collateral,
the business operations and leaseholds of Borrower are in material compliance
with, all Requirements of Law.
6.15. Environmental Matters. (a) Except as reflected in SCHEDULE
6.15 or as would not have a Material Adverse Effect, (i) no Hazardous Substance
is or has been generated, used, released, treated, disposed of or stored, or
otherwise located, in, on or under any real property owned, leased or operated
by the Borrower or any of its Subsidiaries or any portion thereof (the
"Realty") (unless such Hazardous Substance is necessary for the conduct of the
business of the Borrower and its Subsidiaries as it exists on the Closing Date
or any new business permitted under SECTION 8.17 hereunder), and no part of the
Realty or other property owned, leased or operated by the Borrower (now or, to
the Borrower's knowledge, in the past), including without limitation the soil
and groundwater located thereon and thereunder, has been contaminated by any
Hazardous Substance; (ii) none of the Realty has been the subject of an
environmental audit (except as contemplated by SECTION 5.2.5(f)) or assessment,
or remedial action; and (iv) to the best of the Borrower's knowledge, the
foregoing statements are true and correct with respect to all of the real
property adjoining any Realty or, if the foregoing statements are untrue in any
respect, any liability of the Borrower which may arise from such untruth is not
reasonably likely to result in a Material Adverse Effect.
(b) Except as set forth in SCHEDULE 6.15, to the best of the
Borrower's knowledge, no portion of any Realty has been used as or for a mine,
a landfill, a dump or other solid waste disposal facility, a gasoline service
station, or a petroleum products storage facility, and none of the Realty or
other property owned, leased or operated by the Borrower (now or in the past)
has, pursuant to any Environmental Law, been placed on the "National Priorities
List" or "CERCLIS List" (or any similar federal, state or local list) of sites
subject to possible environmental problems.
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(c) Except as set forth in SCHEDULE 6.15, there are no
underground storage tanks situated on any Realty and, to the best of the
knowledge of the Borrower, no other underground storage tanks have ever been
situated on any Realty.
(d) Except as set forth in SCHEDULE 6.15, all activities and
operations of the Borrower and its Subsidiaries meet all material requirements
of all applicable Environmental Laws; neither Borrower nor any of its
Subsidiaries has violated any Environmental Law in the past which would give
rise to a Material Adverse Effect; and the Realty has never been the site of a
violation of any Environmental Law which could give rise to a Material Adverse
Effect.
(e) Except as set forth on SCHEDULE 6.15, to the Borrower's
knowledge, neither Borrower nor any of its Subsidiaries has ever sent a
Hazardous Substance to a site which, pursuant to any Environmental Law, (1) has
been placed on the "National Priorities List" or "CERCLIS List" (or any similar
federal, state or local list) of sites subject to possible environmental
problems, or (2) which is subject to an active claim, an administrative order
or other request to take "response," "removal," "corrective" or "remedial"
action, as defined in any Environmental Law, or to pay for or contribute to the
costs of cleaning up the site, other than any such claim, order or request that
would not result in a Material Adverse Effect.
(f) As of the Closing Date, except as set forth on SCHEDULE
6.15, Borrower is not a party to any suit or proceeding and has not received
any notice from any Governmental Authority or other third party with respect to
a release or threat of release of any Hazardous Substance, or violation or
alleged violation of any Environmental Law, and has not received written notice
of any claim from any person or entity relating to property damage or to
personal injuries from exposure to any Hazardous Substance alleged to be caused
by the Borrower.
(g) Except as set forth on SCHEDULE 6.15, Borrower has timely
filed all reports required to be filed, has acquired all necessary
certificates, approvals and permits, and has generated and maintained all
required data, documentation and records required under all Environmental Laws,
in each case where failure to do so would have a Material Adverse Effect.
6.16. Outstanding Borrowings. As of the Closing Date, the Borrower
has no Indebtedness for borrowed money other than the Obligations and
Indebtedness secured by Permitted Liens.
6.17. Projections. Attached to the Financial Condition
Certificate delivered pursuant to SECTION 5.2.4(b) are projected financial
statements of the Borrower for the fiscal years ended
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December 31, 1994, 1995, 1996, 1997, 1998 and 1999 (the "Projections"). The
assumptions used in preparation of the Projections were reasonable when made.
Such Projections have been prepared by the chief financial officer of the
Borrower, and give effect to the transactions contemplated by this Agreement.
Such Projections have been prepared in good faith, have a reasonable basis on
the Closing Date, and on the Closing Date represented the good faith opinion of
the Borrower and senior management of the Borrower as to the projected results
of the operations of the Borrower. As of the date hereof, the estimates of
future performance and financial condition set forth in the Projections, taken
as a whole, are, in the good faith opinion of the senior management of the
Borrower, reasonably attainable, subject to the uncertainties and
approximations inherent in any projections. As of the date hereof, no material
events have occurred since the preparation of the Projections that would cause
the Projections, taken as a whole, not to be reasonably attainable, and
Borrower has, on the date hereof, no material obligations (whether accrued,
matured, absolute, actual, contingent or otherwise) that are not reflected in
the Projections.
6.18. Contracts; Labor Disputes. Borrower is not a party to any
contract or agreement, and is not subject to any charge, corporate restriction,
judgment, injunction, decree, rule, regulation or order of any court or
Governmental Authority, that has or could reasonably be expected to have a
Material Adverse Effect. Borrower is not a party to, and there is not pending
or, to the knowledge of the Borrower, threatened in writing, any labor dispute,
strike, lock-out, grievance, slowdown, work stoppage or walkout relating to any
labor contract to which Borrower is a party or otherwise subject, that has or
could reasonably be expected to have a Material Adverse Effect. Borrower has
complied with, and will continue to comply with, the provisions of the Fair
Labor Standards Act of 1938, as amended, and neither Borrower, nor any of its
officers, directors or employees, has committed any unfair labor practice, as
defined in the National Labor Relations Act of 1947, as amended, that has or
could reasonably be expected to have a Material Adverse Effect.
6.19. Insurance. SCHEDULE 6.19 accurately summarizes all
insurance policies or programs of the Borrower in effect as of the Closing
Date.
6.20. Investment Company. The Borrower is not an "investment
company" or "controlled by" an "investment company" within the meaning of the
Investment Company Act of 1940, as amended (the "1940 Act"); provided, however,
that, as used in this Agreement, the term "investment company" shall not mean a
Person that is excepted from the definition of the term "investment company"
pursuant to Section 3(c)(1) of the 1940 Act.
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6.21. Stock of the Borrower. All outstanding capital Stock of the
Borrower has been duly and validly authorized and issued, and all such
outstanding Stock is fully paid and nonassessable and held of record by the
Guarantor.
6.22. Asset Purchase Agreement. The transactions contemplated by
the Asset Purchase Agreement will close contemporaneously with the making of
the initial Loans, all material conditions to closing have been satisfied or
waived, and the Borrower will have fulfilled in all material respects all of
its obligations under the Asset Purchase Agreement (except obligations due to
be performed after the date hereof).
ARTICLE VII
AFFIRMATIVE COVENANTS
Until payment in full of the Obligations, the termination of the
Lenders' obligation to make Loans, and the expiration or cash settlement of any
Swap Agreements, the Borrower covenants and agrees that:
7.1. Financial and Business Information about the Borrower. The
Borrower shall deliver to the Agent (for delivery by the Agent to the Lenders):
(a) As soon as practicable and in any event within thirty (30)
days after the close of each month, beginning with the current month, an
unaudited consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the close of each such month and unaudited consolidated and
consolidating statements of income, retained earnings and cash flows for the
Borrower and its Subsidiaries for the month then ended and that portion of the
fiscal year then ended, all prepared in accordance with Generally Accepted
Accounting Principles for interim financial statements (subject to the absence
of notes required by Generally Accepted Accounting Principles and subject to
year-end audit adjustment) applied on a basis consistent with that of the
preceding month or containing disclosure of the effect on the financial
position or results of operations of any change in the application of
accounting principles and practices during the month, certified by the chief
executive officer or chief financial officer of the Borrower to be true and
accurate in all material respects;
(b) As soon as practicable and in any event within forty-five
(45) days after the close of each of fiscal quarter of the Borrower, beginning
with the current fiscal quarter, an unaudited consolidated and consolidating
balance sheet of the Borrower and its Subsidiaries as of the close of such
fiscal quarter and unaudited consolidated and consolidating statements of
income,
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retained earnings and cash flows for the Borrower and its Subsidiaries for the
fiscal quarter then ended and for that portion of the fiscal year then ended,
all in reasonable detail setting forth in comparative form the corresponding
figures for the preceding fiscal year, all prepared in accordance with
Generally Accepted Accounting Principles for interim financial statements
(subject to the absence of notes required by Generally Accepted Accounting
Principles and subject to year-end audit adjustment) applied on a basis
consistent with that of the preceding quarter or containing disclosure of the
effect on the financial position or results of operation of any change in the
application of accounting principles and practices during the quarter,
certified by the chief executive officer or chief financial officer of the
Borrower to be true and accurate in all material respects;
(c) As soon as practicable and in any event within ninety (90)
days after the close of each fiscal year of the Borrower, beginning with the
current fiscal year, an audited consolidated and consolidating balance sheet of
the Borrower and its Subsidiaries as of the close of such fiscal year and
audited consolidated and consolidating statements of income, retained earnings
and cash flows for the Borrower and its Subsidiaries for the fiscal year then
ended, including the notes to each, all in reasonable detail setting forth in
comparative form the corresponding figures for the preceding fiscal year,
prepared by Coopers & Lybrand or another nationally-recognized independent
certified public accountant in accordance with Generally Accepted Accounting
Principles applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial position or results of
operation of any change in the application of accounting principles and
practices during the year, accompanied by a report thereon by such certified
public accountant containing an opinion that is not qualified with respect to
scope limitations imposed by the Borrower or its Subsidiaries or with respect
to accounting principles followed by the Borrower or its Subsidiaries not in
accordance with Generally Accepted Accounting Principles;
(d) Concurrently with the delivery of the financial statements
described in subsection (c) above, a certificate addressed to the Agent and the
Lenders from the independent certified public accountant that in making its
audit of the financial statements of the Borrower and its Subsidiaries, it
obtained no knowledge of the occurrence or existence of any Default or Event of
Default, or a statement specifying the nature and period of existence of any
such Default or Event of Default disclosed by its audit; provided, however,
that such accountant shall not be liable to anyone by reason of its failure to
obtain knowledge of any Default or Event of Default that would not be disclosed
in the course of an audit conducted in accordance with Generally Accepted
Auditing Standards;
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(e) Concurrently with the delivery of the financial statements
described in subsections (a), (b) and (c) above, a certificate from the
Borrower's chief financial officer or chief executive officer certifying to the
Lenders that, to the best of such person's knowledge after appropriate inquiry
and, in the case of the delivery of the financial statements described in
subsections (b) and (c) above, after review of this Agreement, no Default or
Event of Default has occurred or specifying any such Default or Event of
Default, together with a financial covenant compliance worksheet, substantially
in the form of EXHIBIT E hereto, reflecting the computation of the financial
covenants set forth in ARTICLE VIII as of the end of the period covered by such
financial statements;
(f) As soon as practicable and in any event within thirty (30)
days after the close of each fiscal year of the Borrower, beginning with the
close of the current fiscal year, an annual operating budget and capital budget
and projected annual financial statements for the Borrower and its
Subsidiaries, consisting of consolidated and consolidating balance sheets,
statements of income and cash flows, accompanied by a certificate from the
Borrower's chief executive officer or chief financial officer to the effect
that the budgets and financial projections have been prepared in good faith and
are reasonable estimates of the financial condition and operations of the
Borrower and its Subsidiaries for such period;
(g) Within five (5) days after issuance, copies of each report,
document or other correspondence that Borrower shall from time to time render
to or file with any Governmental Authority (other than sales tax reports,
employee withholding reports, state tax reports, state and federal tax returns
and similar routine filings, reports or correspondence), and all press releases
issued by Borrower;
(h) Within five (5) days after Borrower's receipt thereof,
copies of any management letter or other communication from certified public
accountants, consulting report or any other similar business report management
may request of any Person other than an employee of the Borrower from time to
time, other than routine reports received in the ordinary course of business;
(i) Within fifteen (15) days after the end of each month, in
form and detail reasonably acceptable to the Agent, a consolidated and
consolidating aging of the Accounts Receivable of the Borrower and its
Subsidiaries as of the end of such month, certified by the chief financial
officer or the controller of the Borrower to be correct in all material
respects;
(j) Within fifteen (15) days after the end of each month, a
Borrowing Base Certificate as of the end of such month, certified
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by the chief financial officer or the controller of the Borrower to be correct;
and
(k) Upon the Agent's request, such other information about the
Collateral or the financial condition, operations and employee benefit plans of
the Borrower as the Agent may from time to time reasonably request.
7.2. Notice of Certain Events. The Borrower shall promptly, but
in no event later than five (5) days after obtaining knowledge thereof, give
oral notice (which notice shall be followed by written notice as soon as
practicable) to the Agent of:
(a) any litigation or proceeding brought against Borrower or any
of its Subsidiaries that could reasonably be expected to have a Material
Adverse Effect, whether or not the claim is considered by the Borrower to be
covered by insurance;
(b) any notice of a violation received by Borrower or any of its
Subsidiaries from any Governmental Authority that, if such violation were
established, could reasonably be expected to have a Material Adverse Effect;
(c) any labor controversy that has resulted in a strike or
slowdown or other work action that could reasonably be expected to have a
Material Adverse Effect;
(d) any judgment in excess of $250,000, or any attachment, lien,
levy or order that may be placed on or assessed against or threatened against
Borrower, any of its Subsidiaries or any of the Collateral, except for
Permitted Liens;
(e) any Default or Event of Default;
(f) any information relating to the filing by or against any
Account Debtor whose aggregate outstanding Accounts at such time exceed
$250,000 of any petition seeking liquidation, reorganization, arrangement or
readjustment of debts of such Account Debtor or for any other relief under the
Bankruptcy Code or under any act or law pertaining to insolvency or debtor
relief, whether state, federal or foreign;
(g) any material default or event of default under any agreement
or instrument to which the Borrower or any of its Subsidiaries is a party or by
which any of them or any of their property is bound, the termination of which
could reasonably be expected to have a Material Adverse Effect;
(h) any other matter that has resulted in a Material Adverse
Change; and
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(i) any delay or delays in the performance by the Borrower or
any of its Subsidiaries of any of its obligations to any of its Account Debtors
that would reasonably be expected to have a Material Adverse Effect.
7.3. Corporate Existence and Maintenance of Properties, Licenses.
The Borrower shall, and shall cause each of its Subsidiaries to:
(a) Maintain and preserve in full force and effect its corporate
existence, except as otherwise permitted by SECTION 8.1;
(b) Conduct its business in accordance with sound business
practices, keep its properties in good working order and condition (normal wear
and tear excepted), and from time to time make all needed repairs to, renewals
of or replacements of its properties (except to the extent that any of such
properties are obsolete or are being replaced) so that the efficiency of its
business operations shall be fully maintained and preserved; and
(c) File or cause to be filed in a timely manner all reports,
applications, estimates and licenses that shall be required by any Governmental
Authority and that, if not timely filed, could reasonably be expected to have a
Material Adverse Effect.
7.4. Payment of Indebtedness; Performance of Other Obligations.
The Borrower and its Subsidiaries shall pay all Indebtedness at maturity, all
lawful claims that the Borrower and its Subsidiaries are obligated to pay, that
are due and that, if unpaid, might by law become a lien upon property of the
Borrower or any of its Subsidiaries, and all other obligations in accordance
with customary trade practices, and comply with all Requirements of Law
applicable to the Collateral or any part thereof or to the operation of the
business of the Borrower and its Subsidiaries unless noncompliance is not
reasonably likely to result in a Material Adverse Effect; provided, however,
that the Borrower and its Subsidiaries may in good faith by appropriate
proceedings and with due diligence contest, or cause the contesting of, any
such Indebtedness (other than the Obligations), claims, obligations, acts,
rules, regulations, orders and directions that do not materially adversely
affect the value of the Collateral or the priority of the Agent's lien in the
Collateral and if the Borrower and its Subsidiaries establish and maintain
adequate reserves therefor in accordance with Generally Accepted Accounting
Principles. The Borrower and its Subsidiaries shall observe and remain in
compliance with all Requirements of Law to which they are subject and obtain
all licenses, permits, franchises or other governmental authorizations
necessary to the ownership of their properties or the conduct of their
businesses, and all covenants and conditions of all agreements and instruments
to which the Borrower or any of its Subsidiaries is a party, which failure to
comply or failure to obtain could reasonably be expected to have a Material
Adverse Effect.
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7.5. Payment of Trade Accounts Payable, etc. The Borrower and its
Subsidiaries shall pay all of their trade accounts when due, except to the
extent any such trade account is being contested in good faith and by proper
proceedings and the Borrower has maintained adequate reserves with respect
thereto in accordance with Generally Accepted Accounting Principles. Upon
request, the Borrower shall promptly deliver evidence reasonably satisfactory
to the Agent of such payment of trade accounts.
7.6. Insurance. (a) The Borrower and its Subsidiaries shall
maintain and pay for insurance upon all of their assets, including the
Collateral, wherever located, and all real property owned or leased by the
Borrower and its Subsidiaries, covering casualty, hazard, public liability,
product liability, business interruption, boiler, fidelity and such other
risks, and in such amounts and with such insurance companies as would be
carried by a reasonably prudent operator in a similar business (and in any
event in such amounts as shall be adequate to cover the Collateral), and
deliver certificates of such insurance to the Agent with satisfactory loss
payable endorsements naming the Agent as loss payee, additional insured and
mortgagee thereunder, as appropriate. The Borrower and its Subsidiaries shall
maintain and pay for insurance in such amounts, with such companies and in such
form as in effect on the Closing Date or as shall otherwise be reasonably
satisfactory to the Agent, insuring the Borrower and its Subsidiaries against
any claims, suits, losses or damages suffered by any Person on any property
owned or leased by the Borrower and its Subsidiaries, and against such other
casualties and contingencies as is customary in the business in which the
Borrower and its Subsidiaries are engaged, and deliver certified insurance
policies to the Agent with satisfactory endorsements naming the Agent as loss
payee and additional insured thereunder, as appropriate.
(b) Each such policy of insurance shall contain a standard loss
payee clause and shall require the insurer to give not less than thirty (30)
days' prior written notice to the Agent before any cancellation of the policies
for any reason whatsoever. The Borrower hereby directs all insurers under
policies of property and casualty insurance on the physical assets constituting
the Collateral to pay all proceeds payable thereunder in excess of $10,000
directly to the Agent. The Agent, on behalf of the Lenders, shall hold all
such proceeds for the account of the Borrower and its Subsidiaries. So long as
no Default or Event of Default has occurred and is continuing, the Agent shall,
at the Borrower's option, disburse such proceeds as payment for the purpose of
replacing or repairing destroyed or damaged assets, as and when required to be
paid and upon presentation of evidence satisfactory to the Agent of such
required payments and such other documents as the Agent may reasonably request,
or shall apply such proceeds in whole or in part as a prepayment of the Loans,
in such order as the Borrower may determine. Upon and during the
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continuance of any Event of Default, the Agent may, and at the direction of the
Required Lenders shall, apply such proceeds as a prepayment of the Term Loans
and, to the extent of any excess, as a prepayment of the Revolving Loans. The
Borrower hereby irrevocably makes, constitutes and appoints the Agent at all
times during the continuance of an Event of Default, its true and lawful
attorney (and agent-in-fact) for the purpose of making, settling and adjusting
claims under such policies of insurance, endorsing its name on any check,
draft, instrument or other item or payment for the proceeds of such policies of
insurance and for making all determinations and decisions with respect to such
policies of insurance.
(c) If the Borrower or any Subsidiary fails to obtain and maintain
any of the policies of insurance required to be maintained hereunder or to pay
any premium in whole or in part, the Agent may, without waiving or releasing
any obligation or Default by the Borrower hereunder, at the Borrower's expense,
but without any obligation to do so, procure such policies or pay such premiums
on behalf of the Lenders. All sums disbursed by the Agent, for the benefit of
the Lenders, including reasonable attorneys' fees, court costs, expenses and
other charges related thereto, shall be payable by the Borrower to the Agent on
demand and shall be additional Obligations under the Loan Agreement, secured by
the Collateral.
(d) The Borrower shall deliver to the Agent, promptly as rendered,
true copies of all claims and monthly reports made in any reporting forms to
insurance companies. Not less than 30 days prior to the expiration date of the
insurance policies required to be maintained by the Borrower, the Borrower
shall deliver to the Agent one or more certificates of insurance evidencing
renewal of the insurance coverage required hereunder plus such other evidence
of payment of premiums therefor as the Agent may request. As soon as
practicable after the Closing Date, the Borrower shall deliver to the Agent
certified copies of the original policies of all insurance on the Collateral.
(e) Upon the reasonable request of the Agent from time to time,
the Borrower shall deliver to the Agent evidence that the insurance required to
be maintained pursuant to this Agreement is in effect.
7.7. Maintenance of Books and Records; Inspection. The Borrower
shall maintain adequate books, accounts and records and prepare all financial
statements required under this Agreement in accordance with Generally Accepted
Accounting Principles. The Borrower shall permit any employee or
representative of the Agent or any Lender to visit and inspect any of the
properties of the Borrower to examine and audit the Borrower's books of
account, records, reports and other papers, to make copies and extracts
therefrom, and to discuss the affairs, finances and accounts of the Borrower
with its
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officers and, upon notice to the Borrower, its independent public accountants
(and by this provision the Borrower authorizes said accountants to discuss its
finances and affairs and to provide the Agent or any Lender with access to such
accountants' work papers), all at such reasonable times and as often as may be
reasonably requested.
7.8. Compliance with ERISA. The Borrower shall, and shall cause
its ERISA Subsidiaries to: (a) make timely payment of contributions required
to meet the minimum funding standards set forth in Section 302 or Title IV of
ERISA with respect to any Employee Plan; (b) not take any action or fail to
take action the result of which could be a material liability of the Borrower
to the Pension Benefit Guaranty Corporation or to a Multiemployer Plan, the
result of which would have a Material Adverse Effect; and (c) notify the Agent
as soon as practicable of any ERISA Event and of any additional act or
condition arising in connection with any Pension Plan that is reasonably
expected by the Borrower to constitute grounds for the termination thereof by
the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer such plan.
The Borrower shall not, and shall not permit its Subsidiaries to, participate
in any Prohibited Transaction that could subject the Borrower to any material
civil penalty under ERISA or material tax under the Internal Revenue Code.
7.9. COBRA. The Employee Plans of the Borrower and its ERISA
Subsidiaries shall be operated in such a manner that neither Borrower nor any
of its ERISA Subsidiaries will incur any material tax liability under Section
4980B of the Internal Revenue Code.
7.10. Motor Vehicle Titles. The Borrower shall deliver to the
Agent, promptly upon the Agent's request, certificates of title for each motor
vehicle or trailer owned by the Borrower, together with duly executed
applications for submission to the appropriate state authorities requesting the
reissuance of such titles with the Agent's lien noted thereon.
7.11. Payment of Taxes. The Borrower shall, and shall cause its
Subsidiaries to, pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, including, without limitation, taxes,
assessments, or charges or levies relating to their payroll tax liability or
income or profits, or upon any properties belonging to them, prior to the date
on which penalties would attach thereto, and all lawful claims (other than
claims secured by Permitted Liens) that, if unpaid, might become a lien or
charge upon any of their properties; provided, however, that the Borrower and
its Subsidiaries shall not be required to pay any such tax, assessment, charge,
levy or claim that is being contested in good faith and by proper proceedings
if the Borrower has maintained adequate reserves with respect thereto in
accordance with Generally
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Accepted Accounting Principles. The Borrower shall promptly notify the Agent
of any notice it or any Subsidiary receives from the Internal Revenue Service
or other taxing authority regarding such delinquent taxes and shall promptly
deliver a copy of such notice to the Agent.
7.12. Compliance with Statutes, etc. The Borrower and its
Subsidiaries shall comply in all material respects with all applicable
statutes, regulations and orders of, and all applicable restrictions imposed
by, all governmental bodies, domestic or foreign, in respect of the conduct of
their businesses and the ownership of their property (including applicable
Environmental Laws).
7.13. Name Change. The Borrower shall notify the Agent at least
thirty (30) days prior to the effective date of any change of its name, and
prior to such effective date the Borrower shall have executed any required
amended or new Financing Statements and other Loan Documents necessary to
maintain and continue the perfected security interest of the Agent, for the
benefit of the Lenders, in all of its Collateral and shall have taken such
other actions and executed such documents as the Agent shall reasonably
require. The Agent and each Lender hereby acknowledges that the Borrower shall
change its name, as of the Closing Date, to "Lason Systems, Inc."
7.14. Further Assurances. The Borrower shall make, execute,
endorse, acknowledge and deliver to the Agent and the Lenders any amendments,
restatements, modifications or supplements hereto and any other agreements,
instruments or documents, and take any and all such other actions, as may from
time to time be reasonably requested by the Agent or the Required Lenders to
effect, confirm or further assure or protect and preserve the interests, rights
and remedies of the Lenders and the Agent under this Agreement and the other
Loan Documents.
7.15. Pro Forma Balance Sheet. Within sixty (60) days after the
Closing Date, the Borrower shall deliver to the Agent (for delivery by the
Agent to the Lenders) a pro forma balance sheet of the Borrower as of the
Closing Date prepared by Coopers & Lybrand setting forth on a pro forma basis
the financial condition of the Borrower as of that date and reflecting on a pro
forma basis the effect (including the tax effect) of the transactions
contemplated by this Agreement, including assets, liabilities, and net worth in
the amounts represented to Lenders, including all material fees and expenses in
connection therewith.
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ARTICLE VIII
NEGATIVE COVENANTS
Until payment in full of the Obligations, the termination of the
Lenders' obligations to make Loans, and the expiration or cash settlement of
any Swap Agreements, the Borrower covenants and agrees that the Borrower will
not, and will not permit its Subsidiaries to:
8.1. Merger and Dissolution. Merge or consolidate with or into
any other Person, liquidate, wind up or dissolve, or sell, lease or dispose of,
in a single transaction or a series of related transactions, all or
substantially all of its assets; provided however, that any Subsidiary of the
Borrower may merge into another wholly-owned Subsidiary of the Borrower or the
Borrower so long as the survivor is a wholly- owned Subsidiary of the Borrower
or the Borrower.
8.2. Acquisitions. Consummate any Acquisition other than a
Permitted Acquisition or an Additional Acquisition permitted pursuant to
SECTION 8.9; provided, however, that (i) the aggregate Acquisition Amount for
all Permitted Acquisitions and Additional Acquisitions in any fiscal year may
not exceed $2,000,000 in any event.
8.3. Indebtedness. Directly or indirectly issue, assume, create,
incur or suffer to exist any Indebtedness except for: (i) the Obligations;
(ii) business expenses, trade accounts payable or accrued by the Borrower or
any of its Subsidiaries in the ordinary course of its businesses (provided that
the same shall be paid substantially when due or otherwise in accordance with
customary trade terms unless contested by appropriate proceedings), and other
obligations and liabilities other than for borrowed money incurred by the
Borrower or any of its Subsidiaries in the ordinary course of its businesses,
including Permitted Guaranties; (iii) Indebtedness secured by Permitted Liens;
(iv) Capital Lease Obligations to the extent the payments thereunder are
permitted under SECTION 8.10; and (v) Indebtedness under Swap Agreements that
are reasonably satisfactory in form and substance to the Required Lenders.
8.4. Liens and Encumbrances. Create, assume or suffer to exist
any Lien except Permitted Liens.
8.5. Disposition of Assets. Sell, lease (as lessor), transfer,
convey or otherwise dispose of any of its assets or property, including without
limitation the Collateral, other than (i) the sale of Inventory in the ordinary
course of business to the extent not prohibited by the Loan Documents; (ii) the
disposal of obsolete
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Equipment or the sale or trade-in of Equipment to finance the purchase of
replacement Equipment in the ordinary course of business; or (iii) the sale or
disposition of Investments expressly permitted to be held hereunder. To the
extent any Collateral is sold as permitted by this Section, such Collateral
shall be sold free and clear of the liens created by the Loan Documents, and
the Agent shall be authorized to take any actions that it deems appropriate in
order to effect the foregoing.
8.6. Transactions With Related Persons. Except as otherwise
permitted by SECTIONS 8.2, 8.3, 8.7 and 8.8, directly or indirectly make any
loan or advance to, or purchase, assume or guarantee any Indebtedness to or
from, or enter into any other transaction with, any of its officers, directors,
stockholders or Affiliates, or to or from any member of the immediate family of
any of its officers, directors, stockholders or Affiliates, or subcontract any
operations to any Affiliate, except for (i) travel, moving or other reasonable
expense advances and compensation payable to employees in the ordinary course
of business; (ii) transactions described on SCHEDULE 8.6 attached hereto,
without regard to any extension or renewal thereof except as permitted by
clause (III) of this SECTION 8.6; and (iii) transactions on arms length terms
entered into in the ordinary course of business in accordance with the past
practices of Seller.
8.7. Restricted Investments. Purchase, own, invest in or
otherwise acquire, directly or indirectly, any Stock, evidence of indebtedness,
or other obligation or security or any interest whatsoever in any other Person,
or make or permit to exist any loans, advances or extensions of credit to, or
any investment in cash or by delivery of property in, any Person (collectively,
"Investments"), except for: (i) Investments in Cash Investments; (ii) loans and
advances to employees for reasonable travel, moving and other reasonable
expenses in the ordinary course of business; (iii) prepaid expenses incurred in
the ordinary course of business; (iv) trade accounts receivable created in the
ordinary course of business; and (v) loans (exclusive of advances made pursuant
to clause (II) above) pursuant to the Seller Credit Agreements in the aggregate
principal amount not to exceed $2,100,000.
8.8. Restrictions on Dividends. Declare or pay any dividends
(other than dividends payable solely in its own Stock) upon any of its Stock,
or purchase, redeem, retire, or otherwise acquire, directly or indirectly, any
shares of its Stock or any option, warrant or other right to acquire shares of
its Stock, or make any distribution of cash, property or assets among the
holders of shares of its Stock; provided, however, that after the second
anniversary of the Closing Date, the Borrower may declare and pay cash
dividends and distributions on its Stock so long as, after giving effect
thereto, (i) there exists no Default or Event of Default, (ii) such cash
dividends and distributions do not exceed, in any fiscal year
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of the Borrower, the sum of (a) the lesser of (1) $1,200,000 and (2) ten
percent (10%) of the sum of the Unreturned Preferred Amount and the Unpaid
Yield (as such terms are defined in the Guarantor's certificate of
incorporation as in effect on the Closing Date (with such changes therein as
approved in writing by the Required Lenders)), payable by Guarantor as
dividends on its capital stock, and (b) such amounts not to exceed $250,000,
payable by Guarantor to GTCR or Golder, Thoma, Cressey, Rauner, Inc. as
management and administrative fees and expenses (the sum of the amounts
described in clauses (a) and (b) for any fiscal year being the "Permitted
Amount" for such fiscal year), minus the amount of all payments by the Borrower
during such fiscal year in respect of the principal amount of or accrued
interest on any "Deemed Loan" referred to in Section 1.1(b)(ii) of any Seller
Credit Agreement, and (iii) so long as the amounts paid pursuant to clause (ii)
of this Section are used by the Guarantor for the purposes so described.
8.9. Use of Available Retained Cash Flow. Make any Additional
Acquisition or any Additional Capital Expenditure in any fiscal year of the
Borrower if, after giving effect thereto, the aggregate Acquisition Amount of
all such Additional Acquisitions and the aggregate amount of all Additional
Capital Expenditures incurred during such fiscal year would exceed the lesser
of (i) Available Retained Cash Flow of the Borrower for such fiscal year or
(ii) $2,000,000.
8.10. Capital Expenditures. Make or incur any Capital Expenditure
if, after giving effect thereto, the aggregate amount of all Capital
Expenditures (other than any Additional Capital Expenditures) incurred during
any fiscal year of the Borrower (excluding any Capital Expenditures to the
extent involving the use of insurance proceeds to replace, rebuild or repair
damaged or destroyed assets or to the limits of applicable deductibles if no
insurance proceeds were received on account of such damage or destruction)
shall exceed the amount of Permitted Capital Expenditures for that fiscal year.
8.11. Interest Coverage Ratio. Permit the ratio of Operating Cash
Flow to Interest Expense to be less than (i) 3.00 to 1 as of March 31, 1995,
for the fiscal quarter then ended; (ii) 3.00 to 1 as of June 30, 1995, for the
two fiscal quarters then ended; (iii) 3.00 to 1 as of September 30, 1995, for
the three fiscal quarters then ended; and (iv) 3.00 to 1 as of the end of any
fiscal quarter thereafter, for the four fiscal quarters then ended.
8.12. Funded Debt/Operating Cash Flow Ratio. Permit the ratio of
Funded Debt as of any date specified below to Operating Cash Flow for the
corresponding period described below to be greater than: (i) 3.25 to 1 as of
March 31, 1995, for the fiscal quarter then ended; (ii) 3.25 to 1 as of June
30, 1995, for the two fiscal quarters then ended; (iii) 3.25 to 1 as of
September 30, 1995, for
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the three fiscal quarters then ended; (iv) 3.25 to 1 as of December 31, 1995,
for the four fiscal quarters then ended; (v) 3.00 to 1 as of the end of each
fiscal quarter in the 1996 fiscal year, for the four fiscal quarters then
ended; (vi) 2.75 to 1 as of the end of each fiscal quarter in the 1997 fiscal
year, for the four fiscal quarters then ended; (vii) 2.50 to 1 as of the end of
each fiscal quarter in the 1998 fiscal year, for the four fiscal quarters then
ended; and (viii) 2.00 to 1 as of the end of each fiscal quarter thereafter,
for the four fiscal quarters then ended.
8.13. Free Cash Flow. Permit Operating Cash Flow minus Capital
Expenditures to be less than: (i) $6,500,000 as of March 31, 1995, for the
fiscal quarter then ended; (ii) $6,750,000 as of June 30, 1995, for the two
fiscal quarters then ended; (iii) $7,000,000 as of September 30, 1995, for the
three fiscal quarters then ended; (iv) $7,000,000 for the four fiscal quarters
ending on December 31, 1995; (v) $7,000,000 for any period of four consecutive
fiscal quarters ending on any day thereafter through the last day of the fourth
fiscal quarter of the 1996 fiscal year; and (vi) $7,500,000 for any period of
four consecutive fiscal quarters ending on any day thereafter, in each case
calculated only as of the last day of a fiscal quarter.
8.14. Sale and Leaseback. Enter into any arrangement with any
Person providing for the leasing by the Borrower or any of its Subsidiaries of
any asset that has been sold or transferred by Borrower or any of its
Subsidiaries to such Person.
8.15. Hazardous Substances. (i) Violate any Environmental Law if
such violation could reasonably be expected to have a Material Adverse Effect;
or (ii) permit any Hazardous Substances to be brought onto any of any property
owned, leased or operated by the Borrower or any of its Subsidiaries (unless
such Hazardous Substance is necessary for the conduct of such Person's business
as it exists on the Closing Date or any new business permitted under SECTION
8.17 hereunder) where such presence could reasonably be expected to have a
Material Adverse Effect. If any Hazardous Substance is brought or found
thereon or therein, except as may be permitted above, Borrower shall perform,
or caused to be performed, all required environmental response, removal,
corrective and remedial actions in a diligent manner and in accordance with all
Environmental Laws. The Borrower shall promptly, after any officer of the
Borrower obtains knowledge of the occurrence thereof, give written notice to
the Agent of receipt of any written notice of violation or noncompliance, order
or request for information from any Governmental Authority with respect to any
Environmental Law, and shall promptly remedy any breach of any Environmental
Law by Borrower or any of its Subsidiaries. The Agent shall, upon reasonable
notice to the Borrower if no Event of Default has then occurred and is
continuing, have the right to enter upon any property owned, leased or operated
by Borrower or any of its
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Subsidiaries, or any part thereof (through its employees and/or agents), to
verify compliance by Borrower and its Subsidiaries with the terms of this
SECTION 8.15 and to conduct such environmental assessments and audits as Agent
shall deem advisable to facilitate such verification; provided, however,
BORROWER HEREBY ACKNOWLEDGES THAT ALL HAZARDOUS MATERIAL HANDLING PRACTICES AND
ENVIRONMENTAL PRACTICES AND PROCEDURES ARE THE SOLE RESPONSIBILITY OF THE
BORROWER, AND THE BORROWER HAS FULL DECISIONMAKING POWER WITH RESPECT THERETO
TO THE EXTENT CONSISTENT WITH THIS AGREEMENT. BORROWER FURTHER ACKNOWLEDGES
THAT NEITHER THE AGENT NOR ANY LENDER IS AN ENVIRONMENTAL CONSULTANT, ENGINEER,
INVESTIGATOR OR INSPECTOR OF ANY TYPE WHATSOEVER. IN NO EVENT SHALL ANY
INFORMATION OBTAINED FROM THE AGENT OR ANY LENDER OR THEIR RESPECTIVE AGENTS
PURSUANT TO THIS AGREEMENT OR ANY LOAN DOCUMENT CONCERNING THE ENVIRONMENTAL
CONDITION OF ANY PROPERTY OF THE BORROWER OR ANY SUBSIDIARY BE CONSIDERED BY
THE BORROWER OR ANY SUBSIDIARY (OR ANY OTHER RECIPIENT OF SAID INFORMATION) AS
CONSTITUTING LEGAL OR ENVIRONMENTAL CONSULTING, ENGINEERING, INVESTIGATING OR
INSPECTING ADVICE, AND NEITHER THE BORROWER NOR ANY OF ITS SUBSIDIARIES (NOR
ANY OTHER RECIPIENT OF SAID INFORMATION) SHALL RELY ON SAID INFORMATION. THE
RESPONSIBILITY FOR COMPLIANCE WITH ENVIRONMENTAL LAWS RESTS SOLELY WITH THE
BORROWER AND ITS SUBSIDIARIES.
8.16. Subsidiaries or Partnerships. Become a partner or joint
venturer in any partnership, limited liability company or joint venture, or
create or acquire any Subsidiary.
8.17. New Business. Engage in any business other than the
business in which it is currently engaged or a business reasonably related
thereto.
8.18. Fiscal Year. Change its fiscal year from a calendar year
unless (i) the Borrower gives the Agent written notice of its intention to
change such fiscal year at least sixty (60) days prior thereto, and (ii) the
Borrower, the Agent and the Lenders shall have amended this Agreement and the
other Loan Documents to make any changes in the financial covenants and other
terms and conditions of this Agreement, to the extent necessary in the Lenders'
reasonable determination to reflect the new fiscal year end.
8.19. Issuance of Shares, Etc. Issue, sell or otherwise dispose
of any shares of its Stock or other equity securities or any rights, warrants
or options to purchase or acquire any shares of its Stock or other equity
securities; provided, however, that the Borrower may issue additional shares of
its Stock to the Guarantor if, immediately upon issuance, such shares are
pledged to the Agent for the benefit of the Lenders pursuant to a pledge
agreement in form and substance satisfactory to the Agent.
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8.20. ERISA Benefit Plans. Implement or maintain any Title IV
Plan other than those listed on SCHEDULE 6.9.
8.21. Payments of Deemed Loans. Pay any amount in respect of the
principal amount of or accrued interest on any "Deemed Loan" referred to in
Section 1.1(b)(ii) of any Seller Credit Agreement; provided, however, that
after the second anniversary of the Closing Date, the Borrower may make any
such payment so long as, after giving effect to such payment, (i) there exists
no Default or Event of Default, and (ii) the amount of such payments does not
exceed, in any fiscal year, the Permitted Amount for such fiscal year, reduced
by the amount of all cash dividends and distributions made in such fiscal year
pursuant to SECTION 8.8(ii).
ARTICLE IX
EVENTS OF DEFAULT
9.1. Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) The Borrower fails to pay when due any principal, interest
or fees on the Obligations;
(b) The Borrower fails or neglects to observe, perform or comply
with any term, provision, condition or covenant contained in SECTIONS 7.1, 7.2,
7.3(a), or 7.6 (as to a lapse of insurance), or any of the Sections of ARTICLE
VIII of this Agreement;
(c) The Borrower fails or neglects to observe, perform or comply
with any term, provision, condition or covenant contained in this Loan
Agreement except those enumerated in subsections (a) or (b) above, and the same
is not cured to the Required Lenders' satisfaction within thirty (30) days
after the Borrower acquires knowledge thereof;
(d) If any representation or warranty made by or on behalf of
the Borrower in this Agreement, in the other Loan Documents or any certificate,
instrument or document delivered in connection therewith, or in any agreement
now existing or hereafter executed between the Borrower and the Agent or any
Lender in connection with this Agreement or the other Loan Documents, shall
prove to have been false or incorrect in any material respect at the time as of
which such representation or warranty was made;
(e) The occurrence of any event of default (after expiration of
any applicable grace or cure period) under any of the other Loan Documents;
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(f) The occurrence of any default or event of default on the
part of the Borrower (including specifically, but without limitation, defaults
due to non-payment) under the terms of any agreement, document or instrument
pursuant to which the Borrower has incurred any Indebtedness for money borrowed
in excess of $250,000, which default would permit acceleration of such
Indebtedness;
(g) The occurrence of any default or event of default on the
part of the Borrower under the terms of any agreement or contract, the
termination of which would have a Material Adverse Effect, if such default
results in the termination of such agreement or contract;
(h) The occurrence of any material uninsured damage to or
material uninsured loss, theft or destruction of any Collateral or other assets
of the Borrower, taken as a whole;
(i) The filing by the Borrower of any voluntary petition seeking
liquidation, reorganization, arrangement, readjustment of debts or for any
other relief under the Bankruptcy Code or under any other act or law pertaining
to insolvency or debtor relief, whether state, federal or foreign, now or
hereafter existing;
(j) The filing against the Borrower of any involuntary petition
seeking liquidation, reorganization, arrangement, readjustment of debts or for
any other relief under the Bankruptcy Code or under any other act or law
pertaining to insolvency or debtor relief, whether state, federal or foreign,
now or hereafter existing, which petition is not dismissed within sixty (60)
days of the date of filing;
(k) The Borrower ceases to be Solvent or is enjoined, restrained
or in any way prevented by court order from conducting all or any material part
of its business affairs;
(l) The entry of a judgment in an amount greater than $250,000
or the issuance of a warrant of attachment, execution or similar process
against the Borrower or any of its respective assets, which shall not be
dismissed, stayed, discharged or bonded within sixty (60) days;
(m) A notice of lien, levy or assessment in excess of $250,000
is filed of record with respect to all or any portion of the assets of the
Borrower by the United States, or any department, agency or instrumentality
thereof, or by any other Governmental Authority, including, without limitation,
a lien of the Pension Benefit Guaranty Corporation under Section 302(f) of
ERISA, or if any taxes or debts in excess of $250,000 owing at any time or
times hereafter to any one of them becomes a lien or encumbrance upon the
Collateral or any other assets of the Borrower in each case and the same is not
dismissed, released or discharged within sixty (60)
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days after the same becomes a lien or encumbrance or, in the case of ad valorem
taxes, prior to the last day when payment may be made without material penalty;
(n) A custodian, trustee, receiver or assignee for the benefit
of creditors is appointed or takes possession of all or any material portion of
the Collateral;
(o) The occurrence of any of the following events, if such event
reasonably could be expected to result in a Material Adverse Effect: (i) the
happening of a Reportable Event (which is not waived by the Pension Benefit
Guaranty Corporation) with respect to any Pension Plan; (ii) the termination of
any Pension Plan in a "distress termination" under the provisions of section
4041 of ERISA; (iii) the appointment of a trustee by an appropriate United
States District Court to administer any Pension Plan; (iv) the institution of
any proceedings by the Pension Benefit Guaranty Corporation to terminate any
Pension Plan or to appoint a trustee to administer any Pension Plan; and (v)
the failure of the Borrower to notify the Agent within five (5) days after
receipt by the Borrower or any ERISA Subsidiary of any notice of the
institution of any proceeding or any other actions that may result in the
termination of any Pension Plan;
(p) The Guaranty or the Guarantor Pledge Agreement shall for any
reason other than the satisfaction in full of all Obligations and termination
of this Agreement in accordance with its terms, cease to be in full force and
effect at any time or is declared to be null and void, or (ii) the Guarantor
denies that it has any further liability under the Guaranty or the Guarantor
Pledge Agreement or gives notice to such effect, and such denial or notice is
not revoked within one Business Day after the earlier of (A) receipt by the
Borrower of notice from the Agent or any Lender of such denial or notice or (B)
the Borrower becomes aware of such denial or notice being made or given, as the
case may be; or
(q) The acquisition of control of the Guarantor by any Person
other than GTCR. For purposes of this Event of Default, "control" means
ownership of a simple majority of the issued and outstanding voting Stock of
the Guarantor or the right to elect a majority of the board of directors of the
Guarantor by ownership of Stock, by contract or otherwise.
ARTICLE X
RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT
10.1. Rights and Remedies. Upon the occurrence and during the
continuance of any Event of Default:
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(a) Termination of Commitment. The Agent may, and at the
direction of the Required Lenders shall, terminate the Lenders' obligation to
make Loans hereunder. Upon the occurrence of an Event of Default pursuant to
SECTIONS 9.1(i), (j) or (n), the Lenders' obligation to make Loans hereunder
shall automatically be deemed terminated.
(b) Acceleration of Indebtedness. The Agent may, and at the
direction of the Required Lenders shall, declare all or any part of the
Obligations immediately due and payable, whereupon such Obligations shall
become immediately due and payable without presentment, demand, protest, notice
of intent to accelerate, notice or legal process of any kind, all of which are
hereby knowingly and expressly waived by the Borrower; provided, however, that
all Obligations shall automatically become due and payable upon the occurrence
of an Event of Default pursuant to SECTIONS 9.1(i), (j) or (n).
(c) Rights of Collection. The Agent may, and at the direction
of the Required Lenders shall, have the right to exercise all of its rights and
remedies under this Agreement, the other Loan Documents and applicable law, in
order to satisfy all of the Obligations.
(d) Right of Set-off. The Agent, on behalf of the Lenders (and
with their cooperation), may, and is hereby authorized by the Borrower, at any
time and from time to time during the continuance of any Event of Default, to
the fullest extent permitted by applicable laws, without advance notice to the
Borrower (any such notice being expressly waived by the Borrower), to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and any other Indebtedness at any time owing by any
Lender or any of its Affiliates to or for the credit or the account of the
Borrower against any or all of the Obligations of the Borrower now or hereafter
existing. The Agent agrees promptly to notify the Borrower after any such
set-off or application, provided that the failure to give such notice shall not
affect the validity of such set-off and application.
10.2. Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the Agent's and the Lenders' rights and remedies set forth in
this Agreement is not intended to be exhaustive and the exercise by the Agent
or any Lender of any right or remedy shall not preclude the exercise of any
other rights or remedies, all of which shall be cumulative, and shall be in
addition to any other right or remedy given hereunder, under the Loan Documents
or under any other agreement between the Borrower and the Agent or the Lenders
or that may now or hereafter exist in law or in equity or by suit or otherwise.
No delay or failure to take action on the part of the Agent or any Lender in
exercising any right, power or privilege shall operate as a waiver thereof, nor
shall any single or partial
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exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or
shall be construed to be a waiver of any Event of Default. No course of
dealing between the Borrower and the Agent or the Lenders or their agents or
employees shall be effective to change, modify or discharge any provision of
this Agreement or any of the Loan Documents or to constitute a waiver of any
Event of Default.
ARTICLE XI
PAYMENT OF EXPENSES
11.1. Fees and Expenses. Whether or not the transactions
contemplated by this Agreement shall be consummated, the Borrower shall be
obligated (without duplication of the obligations of the Borrower and Golder,
Thoma, Cressey, Rauner, Inc. under the commitment letter from First Union dated
December 7, 1994, and the accompanying fee and expense agreement):
(a) Fees and Expenses. To pay or reimburse the Agent upon
demand for all of its reasonable expenses (including, without limitation,
reasonable attorneys' fees) incurred or paid by the Agent (except salaries of
the Agent's regularly employed personnel) in connection with: (i) the
preparation, execution, delivery, interpretation, modification or amendment of
this Agreement or the other Loan Documents; (ii) the administration, monitoring
and reviewing of the Loans and the Collateral, including without limitation
reasonable out-of- pocket expenses for travel, meals, long-distance telephone,
wire transfer fees and facsimile transmission charges and copying; (iii) the
engagement of appraisers, examiners, environmental consultants, auditors or
similar Persons by the Agent during the continuance of any Event of Default or
upon the occurrence of any Material Adverse Effect to render opinions
concerning the Borrower's financial condition and the value of the Collateral;
(iv) any refinancing or restructuring of the credit arrangement provided under
this Loan Agreement in the nature of a "work- out" or in any insolvency or
bankruptcy proceeding; (v) during the continuance of any Event of Default, any
lawful attempt to inspect, verify, protect, collect, sell, liquidate or
otherwise dispose of the Collateral; and (vi) the filing and recording of all
documents required by the Agent to perfect the Agent's liens, on behalf of the
Lenders, in the Collateral. In addition, the Borrower shall pay to the Agent
on demand any and all reasonable out-of-pocket fees, costs and expenses that
the Agent or any Lender pays to a bank or other similar institution arising out
of or in connection with (x) the forwarding to the Borrower, or any other
Person on the Borrower's behalf, by the Agent of proceeds of the Loans made by
the Lenders to the Borrower pursuant to this Agreement, and (y) the depositing
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for collection by any Lender of any check or item of payment received or
delivered to any Lender on account of the Obligations and reimburse the Agent
and the Lenders, on demand, for any claims asserted by any bank in connection
with a depository account established at such bank for the deposit of proceeds
of the Collateral, or any returned or uncollected checks received by such bank
as proceeds of the Collateral. The Borrower also agrees to pay or reimburse
the Agent and each Lender upon demand for all of its reasonable out-of-pocket
expenses (including reasonable attorneys' fees) paid or incurred by the Agent
or any such Lender in connection with (i) any litigation, contest, dispute,
suit, proceeding or action (whether instituted by the Agent, the Lenders or any
of them, the Borrower or any other Person) in any way relating to the
Collateral, this Agreement or the other Loan Documents, or the Borrower's
affairs (other than a dispute solely between or among the Lenders and the
Agent) and (ii) any attempt to enforce any rights of the Agent or the Lenders
against the Borrower or any other Person that may be obligated to the Agent or
the Lenders by virtue of this Agreement or the other Loan Documents, including,
without limitation, the Account Debtors. The limitations set forth in the
preceding sentences shall apply only to the out-of-pocket expenses directly
incurred by the Agent or any Lender, it being understood that the Borrower
shall be responsible for the payment of filing and recording fees,
environmental assessments, accountants' reports and other items and services
specifically required in this Loan Agreement. References to "reasonable
attorneys' fees" in this Agreement and the other Loan Documents shall be read
without giving effect to any statutory presumption of reasonableness, including
but not limited to N.C. Gen. Stat. Section 6-21.2.
(b) Stamp Taxes. To pay and save the Agent and each Lender
harmless from and against any and all liability and loss with respect to or
resulting from the non-payment or delayed payment of any and all intangibles,
documentary stamp and other similar taxes, fees and excises, if any, including
any interest and penalties, that may be, or be determined to be, payable in
connection with the transactions contemplated by this Agreement or in any
modification hereof or thereof.
(c) Brokerage Fees. To hold the Agent and each Lender harmless
from and against any and all finder's or brokerage fees and commissions that
may be payable in connection with the transactions contemplated by this
Agreement other than any fees or commissions of finders or brokers engaged by
the Agent or any Lender.
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ARTICLE XII
THE AGENT
12.1. Appointment. The Lenders hereby designate and appoint First
Union as Agent to act as specified herein and in the other Loan Documents.
Each Lender hereby irrevocably authorizes, and each holder of any Note by the
acceptance of such Note shall be deemed irrevocably to authorize, the Agent to
take such action on the Lender's behalf under the provisions of this Agreement,
the other Loan Documents and any other instruments and agreements referred to
herein or therein and to exercise such powers and to perform such duties
hereunder and thereunder as are specifically delegated to or required of the
Agent by the terms hereof or thereof and such other powers as are reasonably
incidental thereto.
12.2. Nature of Duties. The Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement and in the
other Loan Documents. Neither the Agent nor any of its officers, directors,
employees or agents shall be liable to any of the Lenders for any action taken
or omitted by them as such hereunder or under any other Loan Document or in
connection herewith or therewith, unless caused by their gross negligence or
willful misconduct. The duties of the Agent shall be mechanical and
administrative in nature; the Agent shall not have by reason of this Agreement
or any Loan Document a fiduciary relationship in respect of any Lender; and
nothing in this Agreement or any Loan Document, expressed or implied, is
intended to or shall be so construed as to impose upon the Agent any functions,
responsibilities, duties, obligations or liabilities in respect of this
Agreement or any Loan Document except as expressly set forth herein.
12.3. Delegation of Duties. (a) It is the purpose of this
Agreement that there shall be no violation of any law of any jurisdiction
denying or restricting the right of banking corporations or associations to
transact business as agent in such jurisdiction. It is recognized that in case
of litigation relating to this Agreement or the other Loan Documents and in
particular in case of the enforcement thereof upon an Event of Default, or in
case the Agent deems that by reason of any present or future law of any
jurisdiction it may not exercise any of the powers, rights or remedies herein
or therein granted to the Agent or take any other action which may be desirable
or necessary in connection therewith, the Agent may appoint an additional
institution as a separate or additional agent, in which event each and every
remedy, power, right, claim, demand, cause of action, immunity, indemnity,
interest and lien expressed or intended by this Agreement or the other Loan
Documents to be exercised by or vested in or conveyed to the Agent with respect
thereto shall be exercisable by and vest in such separate or additional agent,
but only to the extent necessary
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to enable such separate or additional agent to exercise such powers, rights and
remedies, and every covenant and obligation necessary to the exercise thereof
by such separate or additional agent shall run to and be enforceable by it.
(b) If any conveyance or instrument in writing from the Lenders
is required by such separate or additional agent so appointed by the Agent to
more fully and certainly vest in and confirm to it such rights, powers, duties
and obligations, any and all such conveyances and instruments shall, on the
request of the Agent, be executed, acknowledged and delivered by the Lenders.
In case any such separate or additional agent or a successor shall become
incapable of acting, resign or be removed, all the rights, powers, duties and
obligations of such separate or additional agent, so far as permitted by law,
shall vest in and be exercised by the Agent until the appointment of a
successor to such separate or additional agent. Any such separate or
additional agent appointed by the Agent pursuant to this Section may be removed
by the Agent at any time, in which case all powers, rights and remedies vested
in such separate or additional agent shall again vest in the Agent as if no
such appointment of separate or additional agent had been made.
(c) The Agent may execute any of its duties under this Agreement
or any other Loan Documents by or through agents or attorneys- in-fact and
shall be entitled to rely on advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact that it selects
with reasonable care.
12.4. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder, except with respect to defaults in the payment of principal,
interest, and facility fees payable to the Agent for the account of the
Lenders, unless the Agent has received written notice from the Borrower or a
Lender describing such Default or Event of Default and stating that such notice
is a "notice of default." Each Lender shall promptly give the Agent such a
notice upon its actual knowledge of a Default or an Event of Default; provided,
however, that the failure of any Lenders to deliver such notice in the absence
of gross negligence or willful misconduct shall not affect the rights of such
Lenders hereunder or under the other Loan Documents. In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders.
12.5. Lack of Reliance on the Agent. (a) Each Lender expressly
acknowledges that neither the Agent nor any of its Affiliates nor any officer,
director, employee, agent or attorney-in-fact of any of them has made any
representation or warranty to it and that no
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act by the Agent hereinafter taken, including any review of the affairs of the
Borrower, shall be deemed to constitute any representation or warranty by the
Agent to any Lender.
(b) Each Lender represents to the Agent and the other Lenders
that it has, independently and without reliance upon the Agent and the other
Lenders and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
prospects, operations, property, financial and other conditions and
creditworthiness of the Borrower and its Subsidiaries and made its own decision
to enter into this Agreement and extend credit to the Borrower hereunder. Each
Lender also represents that it will, independently and without reliance upon
the Agent and the other Lenders and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Agreement, and to make such investigations as it deems necessary to inform
itself as to the business, prospects, operations, property, financial and other
condition and creditworthiness of the Borrower and its Subsidiaries.
(c) Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Agent hereunder or requested by
any Lender, the Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Lender with any credit or other
information concerning the business, prospects, operations, property, financial
and other condition or creditworthiness of the Borrower, its Subsidiaries or
any other Person that may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates,
whether before the making of the Loans or at any time or times thereafter.
(d) The Agent shall not be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any other Loan Document or in any document, certificate or other writing
delivered in connection herewith or therewith or for the execution,
collectability, priority or sufficiency of this Agreement or any other Loan
Document or the financial condition of the Borrower, its Subsidiaries or any
other Person, or be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any other Loan Document, or the financial condition of the
Borrower, its Subsidiaries or any other Person or the existence or possible
existence of any Default or Event of Default.
(e) The Agent shall be under no obligation or duty to take any
action under this Agreement or any other Loan Document if taking such action
(i) would subject the Agent to a tax in any jurisdiction where it is not then
subject to a tax or (ii) would
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require the Agent to qualify to do business in any jurisdiction where it is not
then so qualified, unless the Agent receives security or indemnity satisfactory
to it against such tax (or equivalent liability), or any liability resulting
from such qualification, in each case as results from the taking of such action
under this Agreement or any other Loan Document or (iii) would subject the
Agent to in personam jurisdiction in any locations where it is not then so
subject.
12.6. Certain Rights of the Agent. If the Agent shall request
instructions from the Lenders or the Required Lenders, as applicable, with
respect to any act or action (including failure to act) in connection with this
Agreement or any other Loan Document, the Agent shall be entitled to refrain
from such act or taking such action unless and until the Agent shall have
received instructions from the Lenders or the Required Lenders, as applicable;
and the Agent shall incur no liability to any Person by reason of so
refraining. The Agent shall be fully justified in failing or refusing to take
any action hereunder or under any Loan Document (i) if such action would, in
the reasonable opinion of the Agent, be contrary to law or the terms of this
Agreement or the other Loan Documents; (ii) if it shall not receive such advice
or concurrence of the Lenders or the Required Lenders as it reasonably deems
appropriate; or (iii) if it shall not first be indemnified to its satisfaction
by the Lenders requesting such action against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action. Without limiting the foregoing, no Lender shall have any right of
action whatsoever against the Agent as a result of the Agent's acting or
refraining from acting hereunder or under any other Loan Document in accordance
with the instructions of the Lenders or the Required Lenders, as the case may
be.
12.7. Reliance. (a) The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution,
notice, statement, consent, certificate, telex, teletype or telecopier message,
order or other documentary, teletransmission or telephone message believed by
it to be genuine and correct and to have been signed, sent or made by the
proper Person. The Agent may consult with legal counsel (including counsel for
the Borrower), independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.
(b) For purposes of determining compliance with the conditions
specified in ARTICLE V hereof applicable to any Loans made after the Closing
Date, each Lender shall be deemed to have consented to, approved or accepted or
to be satisfied with each document or other matter required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lenders,
unless an
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officer of the Agent responsible for the transactions contemplated by this
Agreement shall have received notice from such Lender prior to the initial
Loans hereunder specifying its objection thereto and either such objection
shall not have been withdrawn by notice to the Agent to that effect or such
Lender shall not have made available to the Agent such Lender's ratable portion
of such initial Loans.
12.8. Indemnification. To the extent the Agent is not reimbursed
by or on behalf of the Borrower as required by the terms of this Agreement, and
without limiting the obligation of the Borrower to do so, the Lenders shall
reimburse and indemnify the Agent, in proportion to their respective
Commitments under the Notes then held by each of them, for and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses (including attorneys' fees and expenses) or
disbursements of any kind or nature whatsoever which may at any time (including
at any time following the repayment of the Loans) be imposed on, incurred by or
asserted against the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, this Agreement, in performing its
duties hereunder or under any other Loan Document or in any way relating to or
arising out of this Agreement or any other Loan Document or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided, however, that no
Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements finally determined by a court of competent jurisdiction and not
subject to any appeal, to be the result of the Agent's gross negligence or
willful misconduct. The Lenders' obligations under this Section shall survive
the termination of this Agreement and the Lenders' obligation to make Revolving
Loans hereunder.
12.9. The Agent in its Individual Capacity. With respect to its
obligations to make Loans under this Agreement, and with respect to the Loans
made by it and the Notes issued to it, the Agent shall have the same rights and
powers as any other Lender or holder of a Note and may exercise the same as
though it were not performing the agency duties specified herein; and the term
"Lenders," "Required Lenders," "holders of Notes" or any similar terms shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, issue
letters of credit for the account of and generally engage in any kind of
banking, trust, financial advisory or other business with the Borrower as if it
were not the Agent performing the duties specified herein, and may accept fees
and other consideration from the Borrower for services in connection with
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this Agreement and otherwise without having to account for the same to the
Lenders.
12.10. Holders. The Agent may deem and treat the payee of any
Note as the owner thereof for all purposes hereof unless and until a written
notice of the assignment, transfer or endorsement thereof, as the case may be,
shall have been filed with the Agent. Any request, authority or consent of any
Person or entity who, at the time of making such request or giving such
authority or consent, is the holder of any Note shall be conclusive and binding
on any subsequent holder, transferee, assignee or endorsee, as the case may be,
of such Note or of any Notes issued in exchange therefor.
12.11. Successor Agent. The Agent may resign as Agent
hereunder and under the other Loan Documents at any time by giving ten (10)
Business Days' prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the appointment of a successor Agent as
provided hereinbelow. Upon any such notice of resignation, the Required
Lenders shall, and, so long as there is no Default or Event of Default
continuing, with the consent of the Borrower (which consent shall not be
unreasonably withheld), appoint from among the Lenders a successor Agent
hereunder or thereunder. If no successor Agent is appointed prior to the
expiration of the notice period for the resignation of the Agent, the Agent may
appoint, after consulting with the Lenders and the Borrower, a successor agent
from among the Lenders. Upon the written acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations under this Agreement. After any retiring Agent's
resignation hereunder as Agent, the provisions of this ARTICLE XII shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Agent under this Agreement.
ARTICLE XIII
INTERCREDITOR PROVISIONS
13.1. Waiver of Default; Application of Payments and Proceeds
During Default.
(a) Upon the Agent's obtaining actual knowledge of an Event of
Default, the Agent shall notify the Lenders of the existence and the nature of
such Event of Default and shall poll the Lenders to determine whether such
Event of Default should be waived. The Agent shall waive an Event of Default
on behalf of the Lenders only if directed to do so by the Required Lenders in
writing. During the continuance of an Event of Default, the Agent shall
promptly
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commence such enforcement proceedings and shall exercise such of its other
rights and remedies under this Agreement, the other Loan Documents and
applicable law as it deems appropriate (or as directed by the Required Lenders)
if the Agent is so directed in writing by the Required Lenders. Upon
commencement of enforcement proceedings or the exercise of any such rights and
remedies, the Required Lenders may direct the Agent to take action lawfully
available to the Agent under this Agreement and the other Loan Documents but,
unless the Agent shall first be indemnified to its satisfaction by the Lenders
requesting or acquiescing in any such action for any liability and material
expense that might result therefrom, the Agent shall not be required to, and
shall be fully justified in failing or refusing to, take any action that the
Agent in good faith believes is or may be contrary to law or to the terms of
the Loan Documents or may subject the Agent to liability.
(b) Upon the occurrence and during the continuance of an
Event of Default, the proceeds of any sale, disposition or other realization
upon all or any part of the Collateral (including any proceeds of Collateral)
payable to the Agent, for the benefit of the Lenders, and all payments made to
the Agent, for the benefit of the Lenders, under this Agreement, the Notes and
any of the other Loan Documents, shall be applied by the Agent in the following
order:
(i) First, to the payment in full of all reasonable costs
and expenses incurred by the Agent in connection with
the sale, disposition or other realization upon the
Collateral, including, without limitation, out-of-pocket
costs, court costs, attorneys' fees and all liabilities
and advances incurred by the Agent in connection
therewith, and all other fees, expenses and amounts due
hereunder to the Agent;
(ii) Second, to the payment in full of all reasonable costs
and expenses incurred by the Lenders in connection with
the sale, disposition or other realization upon the
Collateral, including, without limitation, out-of-pocket
costs, court costs, attorneys' fees and all liabilities
and advances incurred by the Lenders in connection
therewith, but only to the extent that such costs and
expenses are required to be paid under SECTIONS 11.1,
12.8 or 15.4;
(iii) Third, to the payment in full of all interest with
respect to the Obligations accrued and unpaid as of the
date of the Agent's receipt of such proceeds, pro rata
to each Lender based on the percentage that the amount
of such interest owed to such Lender bears to the
aggregate amount of such interest owed to all Lenders;
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(iv) Fourth, to the payment in full of all remaining
Obligations (including, without limitation, principal on
the Loans) outstanding and unpaid as of the date of the
Agent's receipt of such proceeds, pro rata to each
Lender based on the percentage that the amount of such
Obligations owed to such Lender bears to the aggregate
amount of such Obligations owed to all Lenders; and
(v) The balance, to the Borrower, or to other Persons as may
be required by law.
13.2. Amendment of Loan Documents by Agent. Except as
otherwise specifically set forth in this Agreement, the Agent is authorized to
consent to any amendment or modification of this Agreement or any other Loan
Document only if the Required Lenders consent, in writing, to such amendment or
modification; provided, however, that:
(a) any amendment to this Agreement entered into within 120
days of the Closing Date solely for the purpose of including one or more
additional Lenders (which Lenders shall be Persons otherwise permitted as
assignees hereunder), which shall not, in any event, change the aggregate
amount of the Commitments, shall require the consent only of the Borrower, the
Agent, each such additional Lender and each Lender the Term Loan Commitment
and/or Revolving Credit Commitment of which shall be reduced pursuant to such
amendment;
(b) no such amendment or modification shall, without the
consent of each Lender holding the Obligations affected thereby, (i) forgive or
release any of the Obligations or any obligations of any Person now or
hereafter primarily or contingently liable with respect to the Obligations;
(ii) extend the maturity or the time of payment of any of the Obligations;
(iii) reduce the rate of interest on the Loans or any fees relating to the
Commitments or the Loans;
(c) no such amendment or modification shall, without the
consent of all Lenders, (i) change the Commitment of any Lender; (ii) permit
the aggregate principal amount of the outstanding Revolving Loans at any time
to exceed the Total Revolving Credit Commitment; (iii) release in excess of
$1,000,000 of Collateral in any single transaction or series of related
transactions; (iv) change the definition of the term "Total Revolving Credit
Commitment"; (v) change the definition of the term "Required Lenders"; (vi)
change any provision in this Agreement that prohibits any action or omission on
the part of the Borrower or the Agent without the consent of each of the
Lenders; (vii) amend, modify or waive any provisions of SECTIONS 4.5, 4.6, 4.8,
4.11, or 15.4; (viii) consent to the assignment or transfer by the Borrower of
any of its rights and obligations under this Agreement or any
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obligations of any Person now or hereafter primarily or contingently liable
with respect to the Obligations; or (ix) change any provisions governing the
amounts or procedures for determining amounts to be disbursed by the Agent to
the Lenders upon payment by the Borrower; and
(d) no provision that affects the rights or duties of the
Agent under this Agreement may be amended without the prior written consent of
the Agent.
13.3. Invalidated Payments. If any amounts distributed by the
Agent to a Lender are subsequently returned or repaid by the Agent to the
Borrower or the representative or successor in interest of the Borrower,
whether by court order or by settlement approved by the Lender in question,
such Lender shall, promptly upon its receipt of notice thereof from the Agent,
pay the Agent such amount. If any such amounts are recovered by the Agent from
the Borrower or the representative or successor in interest of the Borrower,
the Agent shall redistribute such amounts to the Lenders on the same basis as
such amounts were originally distributed. The obligations of the Lenders and
the Agent under this Section shall survive the repayment of the Notes and the
termination of the Loan Documents given to secure the Notes.
13.4. Effect of Lender's Noncompliance. The failure of any
Lender to perform any of its obligations under this Loan Agreement or the other
Loan Documents, including, without limitation, the failure of a Lender to pay
to the Agent any amounts due to the Agent under this Agreement, shall not
relieve any other Lender of its obligations under this Loan Agreement or the
other Loan Documents.
13.5. Agreement to Cooperate. Each Lender agrees to cooperate
fully with each other Lender, to the end that the terms and provisions of the
Agreement may be promptly and fully carried out. Each Lender also agrees, from
time to time, to execute and deliver any and all other agreements, documents or
instruments and to take such other actions, all as may be reasonably necessary
or desirable, to effectuate the terms, provisions and the intent of this Loan
Agreement and the other Loan Documents.
13.6. Independent Actions by Lenders; Application of Payments
Received other than through Agent. Each Lender agrees that it shall not,
unless specifically requested to do so by the Agent, commence or cause to be
commenced against the Borrower any enforcement proceeding with respect to a
Note or this Loan Agreement. If, at any time or times hereafter, any Lender
shall receive by payment, foreclosure, setoff or otherwise, any payments with
respect to any Obligations except for any such proceeds or payments received by
such Lender in payment from the Agent pursuant to the terms of this Agreement,
or such Lender should receive an amount payable under this Agreement or the
Notes (including, without limitation, any voluntary payment,
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realization upon security, exercise of the right of setoff or banker's lien,
counterclaim or cross action, and enforcement of any right under the Loan
Documents), which represents a percentage of the total Obligations then owed
and due to such Lender that is greater than its pro rata share of such
Obligations, then such Lender shall promptly purchase for cash, without
recourse or warranty from the other Lenders, such participations in the Loans
made by them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess amount is thereafter recovered from such Lender, such
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but without interest.
ARTICLE XIV
ASSIGNMENT AND PARTICIPATION
14.1. Assignments. (a) With the prior written consent of the
Agent and the Borrower, such consent not to be unreasonably withheld, each
Lender may assign to one or more other Persons all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of the outstanding Loans and the Revolving Credit Commitment);
provided, however, that any assignment of a portion of the outstanding Loans
and the Revolving Credit Commitment to any entity that is not an Affiliate of
such Lender shall be (and any subsequent assignment by any such Affiliate shall
be) in minimum amounts of not less than $5,000,000. Upon the execution and
delivery to the Agent, for its acceptance, of an Assignment and Acceptance
Agreement in a form reasonably satisfactory to the Agent and the Required
Lenders (an "Assignment and Acceptance"), from and after the effective date
specified in such Assignment and Acceptance, (x) the Assignee thereunder shall
be deemed a party hereto and, to the extent that rights and obligations
(including any portion of any Loans or the Revolving Credit Commitment)
hereunder have been assigned to it pursuant to such Assignment and Acceptance,
shall have the rights and obligations of the assigning Lender hereunder with
respect thereto, including, without limitation, (1) the right to approve or
disapprove actions that, in accordance with the terms hereof, require the
approval of such Lender and (2) the right to enter into participation
agreements pursuant to SECTION 14.2, and, upon notice to the Borrower, the
right to receive copies of all documents and notices required to be sent by the
Borrower to the Lenders hereunder and (y) such assigning Lender shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of the Lenders' rights and
obligations under this Loan
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Agreement, such Lender shall cease to be a party hereto). The Borrower hereby
agrees to execute and deliver upon any such assignment a new note or notes in
favor of the Assignee, upon request by the Assignee, as replacement, in whole
or in part as applicable, for the Notes being exchanged pursuant to the
Assignment and Acceptance. Upon the acceptance by the Agent of any Assignment
and Acceptance, the Agent shall make appropriate entries upon the register to
be maintained by the Agent pursuant to SECTION 4.10 and ANNEX I to this
Agreement shall be deemed to be amended in accordance with such entries.
(b) Each Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Article,
disclose to the Assignee or Participant or proposed Assignee or Participant any
information relating to the Borrower furnished to such Lender by or on behalf
of the Borrower; provided, however, that prior to disclosing any such
information to an Assignee or Participant, such Lender shall have obtained from
such Assignee or Participant or proposed Assignee or Participant an agreement
(being in a form customary in the banking industry) that such Assignee or
Participant or proposed Assignee or Participant keep such information
confidential.
14.2. Participants. Each Lender in its sole discretion may
allow other Persons to participate with such Lender in the Loans extended to
the Borrower pursuant to this Agreement. With respect to any such
participation, the Participant shall not have any rights under this Agreement
or any of the other Loan Documents (the Participant's rights against the
granting Lender in respect of such participation to be those set forth in the
participation agreement), and all amounts payable by the Borrower hereunder
shall be determined as if such Lender had not sold such participation;
provided, that such Participant shall be considered to be a "Lender" for
purposes of SECTIONS 4.6, 4.8, 4.11 and 10.1(d), and shall be entitled to the
benefits of such Sections to the extent that such Lender selling such
participation would be entitled to such benefits if the participation had not
been entered into or sold. In the event that any Lender includes other
Participants herein at any time hereafter, the Borrower will execute any
necessary documents to effectuate the rights of the Participants and to
delineate the rights, powers and obligations of the Agent, such as the Lender
may reasonably require; provided that the same shall not increase the
obligations, or adversely affect the rights, of the Borrower under any Loan
Document in any material respect.
14.3. Security Interest. If a Participant shall at any time
participate with any Lender in making Loans hereunder or under any other
agreement between the Lenders and the Borrower, the Borrower hereby grants to
such Participant (in addition to any other rights that such Participant shall
have) and such Participant shall have and is hereby given a continuing lien and
security interest in any
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money, securities or other property of the Borrower in the custody or
possession of the Participant, including the right to set off, to the extent of
such Participant's participation in the Obligations of the Borrower to the
Lenders, as it would have if it were a direct lender to the Borrower.
ARTICLE XV
MISCELLANEOUS
15.1. Survival of Agreements. All agreements,
representations and warranties contained herein or made in writing by or on
behalf of the Borrower in connection with the transactions contemplated hereby
shall survive the execution and delivery of this Agreement and the other Loan
Documents. No termination or cancellation (regardless of cause or procedure)
of this Agreement shall in any way affect or impair the powers, obligations,
duties, rights and liabilities of the parties hereto in any way with respect to
(a) any transaction or event occurring prior to such termination or
cancellation, (b) the Collateral or (c) the Borrower's undertakings contained
(i) in SECTIONS 4.6, 4.8 and 4.11 of this Agreement, (ii) in this Agreement and
the other Loan Documents relating to indemnification (including but not limited
to SECTION 15.4), and all such undertakings, agreements, covenants, warranties
and representations shall survive such termination or cancellation until
payment in full of the Obligations. The Borrower further agrees that to the
extent the Borrower makes a payment or payments to the Agent or any Lender,
which payment or payments or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, receiver or any other party under any bankruptcy, insolvency or
similar state or federal law, common law or equitable cause, then, to the
extent of such payment or repayment, the Obligation or part thereof intended to
be satisfied shall be revived and continued in full force and effect as if such
payment had not been received by the Agent or such Lender.
15.2. Governing Law; Waiver of Jury Trial. (a) THIS AGREEMENT
HAS BEEN EXECUTED, DELIVERED AND ACCEPTED AT, AND SHALL BE DEEMED TO HAVE BEEN
MADE IN, NORTH CAROLINA AND SHALL BE INTERPRETED, AND THE RIGHTS AND
LIABILITIES OF THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH
CAROLINA. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE
BORROWER (AND THE AGENT AND EACH LENDER) HEREBY CONSENT TO THE NONEXCLUSIVE
JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR
ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH
CAROLINA, FOR ANY PROCEEDING TO WHICH THE BORROWER, THE AGENT OR ANY LENDER IS
A PARTY. TO THE EXTENT PERMITTED BY LAW, THE BORROWER WAIVES ANY OBJECTION
WHICH THE
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BORROWER MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING INSTITUTED IN ANY SUCH COURT
HEREUNDER OR UNDER ANY OF THE LOAN DOCUMENTS, OR ARISING OUT OF OR IN
CONNECTION WITH ANY OF THE LOAN DOCUMENTS, OR ANY OTHER PROCEEDING TO WHICH THE
AGENT OR ANY LENDER IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT
OF OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING OR STATEMENT
(WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, ANY LENDER OR THE BORROWER.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE AGENT OR ANY LENDER TO
SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION THAT HAS JURISDICTION OVER
THE BORROWER OR ITS PROPERTY.
(b) THE BORROWER AND, BY ITS ACCEPTANCE OF THE BENEFITS HEREOF, THE
AGENT AND EACH LENDER, HEREBY WAIVE, TO THE EXTENT PERMITTED BY APPLICABLE LAW,
THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, OR ANY PROCEEDING TO WHICH THE AGENT, ANY LENDER OR THE BORROWER IS
A PARTY WITH RESPECT HERETO OR THERETO, INCLUDING ANY ACTIONS BASED UPON,
ARISING OUT OF, OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, ANY LENDER OR THE
BORROWER. The scope of this waiver is intended to be all-encompassing of any
and all disputes that may be filed in any court and that relate to the subject
matter of this transaction, including, without limitation, contract claims,
tort claims, breach of duty claims and all other common law and statutory
claims. The Borrower and, by its acceptance of the benefits hereof, each of
the Agent and the Lenders, (i) acknowledges that this waiver is a material
inducement to enter into a business relationship, that it has relied on this
waiver in entering into this Agreement or accepting the benefits hereof, as the
case may be, and that it will continue to rely on this waiver in its related
future dealings with the other parties hereto, and (ii) further warrants and
represents that it has reviewed this waiver with its legal counsel and that,
based upon such review, it knowingly and voluntarily waives its jury trial
rights to the extent permitted by applicable law. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, MODIFICATIONS OR SUPPLEMENTS
TO OR RESTATEMENTS OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS. IN
THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
(c) IN THE EVENT THAT THE WAIVER OF JURY TRIAL HEREIN SHALL
BE DETERMINED TO BE INVALID OR UNENFORCEABLE AS A MATTER OF LAW WITH RESPECT TO
ANY PARTY, THE PROVISIONS OF THIS SECTION 15.2(c) SHALL APPLY. Upon demand of
any party hereto, whether made before or after institution of any judicial
proceeding, any dispute, claim or controversy arising out of, connected with or
relating to this Loan Agreement, the Notes and any other Loan Documents
("Disputes") between or among the parties, shall be
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resolved by binding arbitration as provided herein. Institution of a judicial
proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from Loan
Documents executed in the future, or claims concerning any aspect of the past,
present or future relationships arising out of or connected with the Loan
Documents.
Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Charlotte, North Carolina. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules
shall be applicable to claims of less than $1,000,000. All applicable statutes
of limitation shall apply to any Dispute. A judgment upon the award may be
entered in any court having jurisdiction.
The panel from which all arbitrators are selected shall be comprised
of licensed attorneys. The single arbitrator selected for expedited procedure
shall be a retired judge from the highest court of general jurisdiction, state
or federal, of the state where the hearing will be conducted. The arbitrators
shall be appointed as provided in the Arbitration Rules.
Notwithstanding the preceding binding arbitration provisions, the
Lenders, the Agent and the Borrower preserve, without diminution, certain
remedies that any party may employ or exercise freely, either alone, in
conjunction with or during a Dispute. Any party hereto shall have the right to
proceed in any court of proper jurisdiction or by self help to exercise or
prosecute the following remedies, as applicable: (i) all rights to foreclose
against any real or personal property or other security by exercising a power
of sale granted in the Loan Documents or under applicable law or by judicial
foreclosure and sale, including a proceeding to confirm the sale, (ii) all
rights of self help including peaceful occupation of real property and
collection of rents, set off and peaceful possession of personal property,
(iii) obtaining provisional or ancillary remedies including injunctive relief,
requestration, garnishment, attachment, appointment of a receiver and filing an
involuntary bankruptcy proceeding, and (iv) when applicable, a judgment by
confession of judgment. Preservation of these remedies does not limit the
power of an arbitrator to grant similar remedies that may be requested by a
party in a Dispute. Notwithstanding the foregoing, this arbitration provision
does not apply to disputes under or related to any Swap Agreement.
15.3. Notice. All notices and other communications hereunder
shall be in writing and shall be deemed to have been validly served, given or
delivered three (3) days after deposit in the United States mails with postage
prepaid, as certified or registered mail and addressed to the party to be
notified as follows:
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If to the Borrower: Lason Systems, Inc.
28400 Schoolcraft
Livonia, MI 48150
Attn: Mr. Robert A. Yanover
Mr. Allen J. Nesbitt
Telecopy: (313) 525-4619
with copies (which copies will not constitute notice to the Borrower)
to:
Mr. Bruce V. Rauner
Mr. Elliott W. Maluth
Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Telecopy: (312) 382-2201
and
Mr. John L. Kuehn
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Telecopy: (312) 861-2200
and
Mr. Laurence Deitch
Seyburn, Kahn, Ginn et. al
2000 Town Center, Suite 1500
Southfield, MI 48075
Telecopy: (810) 351-3550
If to the Agent: First Union National Bank
of North Carolina
Capital Markets Group, Corporate Finance
One First Union Center, TW-18
301 South College Street
Charlotte, North Carolina 28288-0737
Attn: Braxton B. Comer
Telecopy: (704) 374-3300
With copies (which copies will not constitute notice to the Agent)
to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street
Suite 1900
Charlotte, North Carolina 28246
Attn: Ken R. Bramlett, Jr.
Telecopy: (704) 378-4000
and, to each Lender, at the address given for such Lender on Annex I hereto, or
for each party hereto, to such other address as
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<PAGE> 93
such party may designate for itself by like notice. Notice also shall be
deemed to have been validly served, given or delivered on the date of delivery
to such party at such address, if notice is given or delivered by overnight
delivery service, hand, telex, telegram or facsimile transmitter (with
confirmed receipt).
15.4. Indemnification of the Agent and each Lender. From and at
all times after the date of this Agreement, and in addition to all of the
Agent's and Lenders' other rights and remedies against the Borrower, the
Borrower agrees to indemnify, defend and hold harmless the Agent, each Lender
and each director, officer, employee, agent, successor, assign and Affiliate of
the Agent and each Lender from and against the following (collectively
"Costs"): any and all claims (whether valid or not), losses, damages, actions,
suits, inquiries, investigations, administrative proceedings, judgments, liens,
liabilities, penalties, fines, amounts paid in settlement, requirements of
Governmental Authorities, punitive damages, interest, damages to natural
resources and other out-of-pocket costs and expenses of any kind or nature
whatsoever (including without limitation reasonable attorneys' fees and
expenses, court costs and fees, and consultant and expert witness fees and
expenses) arising in any manner, directly or indirectly, out of or by reason of
(a) the negotiation, preparation, execution or performance of this Agreement or
the other Loan Documents, or any transaction contemplated herein or therein,
whether or not the Agent, any Lender or any other party protected under the
indemnity agreement under this paragraph is a party to any action, proceeding
or suit in question, or the target of any inquiry or investigation in question;
provided, however, that no indemnified party shall have the right to be
indemnified hereunder for any liability resulting from the willful misconduct
or gross negligence of any indemnified party (as finally determined by a court
of competent jurisdiction or pursuant to arbitration as set forth in SECTION
15.2(c)), (b) any breach of any of the covenants, warranties or representations
of Borrower hereunder or under any other Loan Document, (c) any violation or
alleged violation of any Environmental Law, federal or state securities law,
common law, equitable requirement or other legal requirement by Borrower or
with respect to any property owned, leased or operated by Borrower (in the
past, currently or in the future), (d) any contamination, or threatened or
suspected contamination of any property (or any part thereof including without
limitation the soil and groundwater thereon and thereunder) owned, leased or
operated by Borrower (in the past, currently or in the future) by any Hazardous
Substance, and/or (e) any presence, generation, treatment, storage, disposal,
transport, movement, release, suspected release or threatened release of any
Hazardous Substance on, to or from any property (or any part thereof including
without limitation the soil and groundwater thereon and thereunder) owned,
leased or operated by Borrower (in the past, currently or in the future).
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<PAGE> 94
All of the foregoing Costs and obligations of Borrower shall be
additional Obligations hereunder secured by the Collateral. In the event the
Agent, any Lender or any other indemnified party shall suffer or incur any
Costs, the Borrower shall pay to the indemnified party the total of all such
Costs suffered or incurred by the party, and fulfill its other obligations
hereunder, on demand.
Without limiting the foregoing, the Borrower shall be obligated to
pay, on demand, the reasonable out-of-pocket costs of any investigation,
monitoring, assessment, enforcement, removal, remediation, restoration or other
response or corrective action undertaken by the Agent, any Lender or any other
indemnified party, or their respective agents, with respect to any property
owned, leased or operated by Borrower. In addition, the Borrower shall itself
undertake and carry out all necessary investigation, monitoring, assessment,
removal, remediation, response, restoration, corrective and other actions with
respect to the property owned, leased or operated by Borrower upon demand by
Agent if the Agent believes in good faith that any Environmental Law has been
breached. The Borrower's Obligations under this paragraph shall survive any
termination of or foreclosure under this Agreement or any other Loan Document.
It is expressly understood and agreed that the Obligations of
Borrower hereunder shall not be limited to any extent by the term of the Loans
and shall remain in full force and effect until terminated in accordance with
the terms hereof, notwithstanding any exculpatory provisions contained in the
Loan Documents, it being understood and agreed that the covenant of indemnity
hereunder is independent of and outside the scope of any exculpatory provision
of the Loan Documents.
15.5. Waivers by the Borrower. Except as otherwise expressly
provided for in this Agreement or the other Loan Documents, the Borrower hereby
knowingly waives, with respect to the Loans and the Loan Documents: (a)
presentment, demand and protest and notice of presentment, protest, default,
non-payment, maturity, intent to accelerate and all other notices; (b) notice
prior to taking possession or control of the Collateral or any bond or security
that might be required by any court prior to allowing the Agent or the Lenders
to exercise any of the Agent's or the Lenders' remedies under this Agreement or
the other Loan Documents; and (c) the benefit of all valuation, appraisement
and exemption laws.
15.6. Assignment and Sale. The Borrower may not sell, assign or
transfer this Agreement or any of the other Loan Documents or any portion
hereof or thereof, including without limitation the Borrower's rights, title,
interests, remedies, powers, and duties hereunder or thereunder.
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<PAGE> 95
15.7. Knowledge of the Borrower. When used in this Agreement or
any of the other Loan Documents, "knowledge" of the Borrower means actual or
constructive knowledge of the Borrower's directors or officers.
15.8. Amendment. This Agreement can be amended or changed only by
an instrument in writing executed by the Borrower, the Agent and (if and to the
extent required by SECTION 13.2) the Required Lenders.
15.9. Severability. To the extent any provision of this Agreement
is prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
15.10. Binding Effect. All of the terms of this Agreement and the
other Loan Documents, as the same may from time to time be amended, shall be
binding upon, inure to the benefit of and be enforceable by the respective
successors and assigns of the Borrower, the Agent and the Lenders. This
provision, however, shall not be deemed to modify SECTIONS 14.1 or 15.6 hereof.
15.11. Captions. The captions to the various sections and
subsections of this Agreement have been inserted for convenience only and shall
not limit or affect any of the terms hereof.
15.12. Conflict of Terms. The provisions of the annex, exhibits
and schedules hereto and the other Loan Documents and any schedule of Accounts
are incorporated in this Agreement by this reference thereto. Except as
otherwise provided in this Agreement and except as otherwise provided in the
other Loan Documents, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision of the other Loan Documents,
the provision contained in this Agreement shall control.
15.13. Injunctive Relief. The Borrower recognizes that in the
event it fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy of law may prove to be inadequate
relief to the Agent and the Lenders. The Borrower therefore agrees that the
Agent and the Lenders shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
15.14. Entire Agreement. THIS AGREEMENT AND THE DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED CONTEMPORANEOUSLY HEREWITH EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, VERBAL OR WRITTEN, INCLUDING THE
COMMITMENT LETTER DATED DECEMBER 7, 1994, RELATING TO THE SUBJECT MATTER
HEREOF.
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<PAGE> 96
THIS AGREEMENT, THE NOTES, THE OTHER LOAN DOCUMENTS AND THE INSTRUMENTS AND
DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
15.15. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all of
which shall together constitute one and the same instrument.
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<PAGE> 97
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed under seal in their corporate names by their duly authorized
corporate officers as of the date first above written.
LASON SYSTEMS, INC.
By: /s/ Allen J. Nesbitt
------------------------
Allen J. Nesbitt
President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Braxton B. Comer
------------------------
Braxton B. Comer
Vice President
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, AS AGENT
By: /s/ Braxton B. Comer
------------------------
Braxton B. Comer
Vice President
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<PAGE> 98
Annex I to Loan Agreement
Lason Systems, Inc.
First Union National Bank of North Carolina,
as Agent
$25,000,000 / January 17, 1995
ANNEX I
<TABLE>
<CAPTION>
Revolving Percentage
Term Loan Credit of Total
Name of Lender Commitment Commitment Commitment
- -------------- ---------- ---------- ----------
<S> <C> <C> <C>
First Union National $15,000,000 $10,000,000 100%
Bank of North Carolina
One First Union Center,
CORP-8
301 S. College Street
Charlotte, NC 28288
Attn: Braxton B. Comer
___________ ___________ ____
Total $15,000,000 $10,000,000 100%
</TABLE>
<PAGE> 99
Exhibit A to Loan Agreement
First Union National Bank
of North Carolina, as Agent
Lason Systems, Inc.
January 17, 1995 / $25,000,000
EXHIBIT A
Lason Systems, Inc.
Tax I.D. No. 38-3214742
TERM NOTE
$_____________ January 17, 1995
Charlotte, North Carolina
FOR VALUE RECEIVED, LASON SYSTEMS, INC., a Delaware corporation
(referred to as the "Borrower"), hereby promises to pay to the order of
____________________________________________ (the "Lender"), at the
offices of First Union National Bank of North Carolina, (the "Agent"), located
at Capital Markets Group, Corporate Finance, One First Union Center, TW18,
Charlotte, North Carolina 28288-0737 (or at such other place or places as the
Agent may designate) the principal sum of
__________________________________ ($_____________) under the terms and
conditions of that certain Loan Agreement dated as of the date hereof, between
the Borrower, the Lenders named therein, and First Union National Bank of North
Carolina as Agent as set forth therein (as the same may be amended, modified,
renewed, restated, extended or supplemented from time to time, the "Loan
Agreement"). The Borrower also promises to pay interest on the aggregate
unpaid principal amount of this Term Note at the applicable rate(s) provided in
the Loan Agreement.
This Term Note is one of the Term Notes issued to evidence the Term
Loans made pursuant to ARTICLE II of the Loan Agreement. The defined terms in
the Loan Agreement are used herein with the same meaning. All of the terms,
conditions and covenants of the Loan Agreement are expressly made a part of
this Term Note by reference in the same manner and with the same effect as if
set forth herein at length and any holder of this Term Note is entitled to the
benefits of and remedies provided in the Loan Agreement and any other
agreements by and between the Borrower, the Lenders and the Agent. All
provisions of this Term Note are qualified in their entirety by reference to
the Loan Agreement. Reference is made to the Loan Agreement for provisions
relating to the interest rate, maturity, payment, prepayment and acceleration
of this Term Note.
In the event of an acceleration of the maturity of this Term Note, this
Term Note, and all other Obligations of the Borrower,
<PAGE> 100
shall become immediately due and payable, without presentation, demand,
protest or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay, in addition to the principal
and interest, all costs of collection, including reasonable attorneys' fees.
This Term Note shall be governed by and construed in accordance with
the internal laws and judicial decisions of the State of North Carolina. The
Borrower hereby submits to the jurisdiction and venue of the federal and state
courts located in Mecklenburg County, North Carolina, although the Lender shall
not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be
executed under seal by its duly authorized corporate officers on the day and
year first above written.
LASON SYSTEMS, INC.
[CORPORATE SEAL] By: ____________________________
____________________________
______________President
ATTEST:
___________________
___________________
_________ Secretary
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<PAGE> 101
Exhibit B to Loan Agreement
First Union National Bank
of North Carolina, as Agent
Lason Systems, Inc.
January 17, 1995 / $25,000,000
EXHIBIT B
Lason Systems, Inc.
Tax I.D. No. 38-3214742
REVOLVING CREDIT NOTE
$_____________ January 17, 1995
Charlotte, North Carolina
FOR VALUE RECEIVED, LASON SYSTEMS, INC., a Delaware corporation
(referred to as the "Borrower"), hereby promises to pay to the order of
____________________________________________ (the "Lender"), at the
offices of First Union National Bank of North Carolina, (the "Agent"), located
at Capital Markets Group, Corporate Finance, One First Union Center, TW18,
Charlotte, North Carolina 28288-0737 (or at such other place or places as the
Agent may designate) the principal sum of
______________________________ ($_____________), or such lesser amount
as may constitute the unpaid principal amount of the Revolving Loans payable to
the Lender, under the terms and conditions of that certain Loan Agreement dated
as of the date hereof, between the Borrower, the Lenders named therein, and
First Union National Bank of North Carolina as Agent as set forth therein (as
the same may be amended, modified, renewed, restated, extended or supplemented
from time to time, the "Loan Agreement"). The Borrower also promises to pay
interest on the aggregate unpaid principal amount of this Revolving Credit Note
at the applicable rate(s) provided in the Loan Agreement.
This Revolving Credit Note is one of the Revolving Credit Notes issued
to evidence the Revolving Loans made pursuant to ARTICLE III of the Loan
Agreement. The defined terms in the Loan Agreement are used herein with the
same meaning. All of the terms, conditions and covenants of the Loan Agreement
are expressly made a part of this Revolving Credit Note by reference in the
same manner and with the same effect as if set forth herein at length and any
holder of this Revolving Credit Note is entitled to the benefits of and
remedies provided in the Loan Agreement and any other agreements by and between
the Borrower, the Lenders and the Agent. All provisions of this Revolving
Credit Note are qualified in their entirety by reference to the Loan
Agreements. Reference is made to the Loan Agreement for provisions relating to
the
<PAGE> 102
interest rate, maturity, payment, prepayment and acceleration of this Revolving
Credit Note.
In the event of an acceleration of the maturity of this Revolving
Credit Note, this Revolving Credit Note, and all other Obligations of the
Borrower, shall become immediately due and payable, without presentation,
demand, protest or notice of any kind, all of which are hereby waived by the
Borrower.
In the event this Revolving Credit Note is not paid when due at any
stated or accelerated maturity, the Borrower agrees to pay, in addition to the
principal and interest, all costs of collection, including reasonable
attorneys' fees.
This Revolving Credit Note shall be governed by and construed in
accordance with the internal laws and judicial decisions of the State of North
Carolina. The Borrower hereby submits to the jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina,
although the Lender shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note
to be executed under seal by its duly authorized corporate officers on the day
and year first above written.
LASON SYSTEMS, INC.
[CORPORATE SEAL] By: ___________________________
___________________________
______________ President
ATTEST:
____________________________
____________________________
_________ Secretary
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<PAGE> 1
EXHIBIT 10.21
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of January 17, 1995 (this "Security
Agreement" or this "Agreement"), is between
LASON SYSTEMS, INC. a Delaware corporation formerly known as Lason
Acquisition Corp. (the "Borrower"), and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association with its principal offices in Charlotte, North Carolina ("First
Union"), in its capacity as agent (the "Agent") for the Lenders (as that term
is defined in the Loan Agreement referred to below).
BACKGROUND STATEMENT
A. The Borrower, the Lenders and the Agent have entered into a
Loan Agreement dated as of the date hereof (together with any amendments,
modifications and supplements thereto, any replacements, renewals, extensions
and restatements thereof, and any substitutes therefor, in whole or in part,
the "Loan Agreement"), the provisions of which are hereby incorporated by
reference. Capitalized terms that are not defined herein shall have the
meanings assigned to such terms in the Loan Agreement.
B. Pursuant to the terms and conditions of the Loan Agreement,
the Lenders have agreed to make certain loans in the aggregate principal amount
of up to $25,000,000 (the "Loans") to the Borrower. The Loans are evidenced
by Notes (as defined in the Loan Agreement) in the aggregate principal amount
of up to $25,000,000.
C. To induce the Lenders to make the Loans pursuant to the Loan
Agreement and to secure the payment of the Obligations, as defined in the Loan
Agreement, the Borrower has agreed to grant to the Agent, for the benefit of
the Lenders, a security interest in the Collateral described herein on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower and the Agent, on behalf of Lenders, for themselves,
their successors and assigns, hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
1.1 Defined Terms. The following terms shall have the meanings
set forth below:
"Accounts" or "Accounts Receivable" means (i) all of the Borrower's
accounts, as defined in the Uniform Commercial Code, now owned or hereafter
acquired or arising, (ii) all of the Borrower's present or future accounts
receivable, rights to payment for goods sold or leased, or to be sold or to be
leased, or for services rendered or to be rendered, all present and future
receivables, book debts, notes, bills, drafts, acceptances, choses in action,
chattel paper, instruments and documents, (iii) all of the Borrower's rights,
remedies, security interests and liens in, to and in respect of Accounts
Receivable, present and future, including without limitation rights of stoppage
in transit, replevin, repossession and reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party, guaranties or other
contracts of suretyship with respect to any Account Receivable, deposits or
other security for the obligation of any debtor or obligor in any way obligated
on or in connection with any Account Receivable, (iv) all customer lists, books
and records, ledger and account cards, computer tapes, disks, printouts and
records, whether now in existence or hereafter created, relating to Accounts
Receivable, (v) to the extent permitted by applicable law, all of the
Borrower's right, title and interest, present and future, in, to and in respect
of all goods relating to, or which by sale have resulted in, Accounts
Receivable, including without limitation all goods described in invoices or
other documents or instruments with respect to, or otherwise representing or
evidencing, any Account Receivable, and all returned, reclaimed or repossessed
goods, and (vi) all proceeds, including insurance proceeds, of any of the
foregoing.
"Collateral" means and includes all of the Borrower's Accounts,
Accounts Receivable, Equipment, General Intangibles, Inventory and Other Assets
and all other similar articles of personal property of the Borrower, now or
hereafter acquired, held or received by, in transit to, or in the possession or
control of the Borrower, any substitutions or replacements thereof and any
proceeds, including insurance proceeds, thereof.
"Equipment" means all of the Borrower's equipment, as defined in the
Uniform Commercial Code, now owned or hereafter acquired, and includes, without
limitation, all machinery, equipment, motor vehicles, computer equipment and
software, printers, copying and data storage devices and other electronic
equipment, accessions, accessories, additions, parts, supplies, apparatus,
appliances,
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<PAGE> 3
fittings, furniture, office equipment and office furnishings of every kind and
description, wherever located and all proceeds, including insurance proceeds,
thereof.
"General Intangibles" means all general intangibles, as defined in the
Uniform Commercial Code, now existing or hereafter owned, acquired or arising,
in which the Borrower now has or hereafter acquires any rights, and all
contracts and contract rights (but excluding contracts of the Borrower that by
their express terms are void or voidable upon the pledge or assignment thereof,
unless consent has been obtained for the pledge or assignment thereof), causes
of action, inventions, designs, patents, patent applications, trademarks,
trademark registrations and applications, goodwill, goodwill associated with
trademarks, trade names, trade secrets, trade processes, copyrights, copyright
registrations and applications, licenses, permits, franchises, customer lists,
computer programs, all claims under guaranties, tax refund claims, rights and
claims against carriers and shippers, leases, claims under mechanics' and
materialmen's liens, claims under insurance policies, all rights to
indemnification or contribution, whether arising by contract or otherwise, and
all other intangible personal property of similar kind and nature, together
with any and all extensions, modifications, amendments and renewals, and all
proceeds, including insurance proceeds, thereof, as applicable.
"Inventory" means all of the Borrower's inventory, as defined in the
Uniform Commercial Code, wherever located, now owned or hereafter held or
acquired, and all goods manufactured, acquired or held for sale or lease, raw
materials, work-in-process, and finished goods or component materials, and all
supplies, goods, incidentals, office supplies, packaging materials and any and
all items used or consumed in the operation of the business of the Borrower or
that may contribute to finished products or to the sale, promotion and shipment
thereof, in which the Borrower now or at any time hereafter may have an
interest, whether or not the same is in transit or in the constructive, actual
or exclusive occupancy or possession of the Borrower or is held by the Borrower
or by others for the Borrower's account, and all proceeds, including insurance
proceeds, thereof.
"Other Assets" means all of the Borrower's personal property assets
now owned or hereafter acquired (including without limitation all amounts that
may be owing from time to time by any Lender or any of its affiliates to the
Borrower in any capacity, including without limitation any balance or share
belonging to the Borrower, or any deposit or other account with such Lender or
any of its Affiliates), except for the Accounts, the Accounts Receivable, the
Equipment, the General Intangibles and the Inventory and proceeds of such other
assets.
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<PAGE> 4
1.2 UCC Terms. All terms in this Security Agreement that are not
capitalized shall have the meanings provided by the Uniform Commercial Code to
the extent the same are used or defined therein.
ARTICLE II
CREATION OF SECURITY INTEREST
To secure the prompt payment and other performance of the Obligations,
the Borrower hereby grants to the Agent, for the benefit of the Lenders, a
continuing security interest in the Collateral.
ARTICLE III
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Borrower hereby represents, warrants and covenants as follows:
3.1 Ownership of Collateral. The Borrower has, and as to any
property acquired after the date hereof which constitutes Collateral, shall
have, good, indefeasible and merchantable title in fee simple (or its
equivalent under applicable law) to and ownership of the Collateral and shall
promptly provide evidence to the Agent of such ownership upon request.
3.2 Perfection. As to those assets for which perfection may be
accomplished by filing under the Uniform Commercial Code, the security
interests granted to the Agent hereunder, when properly perfected and continued
by filing in all jurisdictions set forth on EXHIBIT A attached hereto, shall
constitute at all times a valid and perfected security interest vested in the
Agent in and upon the Collateral located in the United States, in each case
enforceable against the Borrower and all third parties (except purchasers of
Borrower's Inventory in the ordinary course of business) in all relevant
jurisdictions and securing the payment of all Obligations purported to be
secured thereby. No Uniform Commercial Code financing statement that names
Borrower as debtor has been filed and is still in effect, other than Financing
Statements in favor of the Agent, on behalf of the Lenders, and Financing
Statements described in Schedule 1.1 of the Loan Agreement, and the Borrower
has not signed any financing statement or any security agreement which remains
effective on or after the Closing Date pursuant to which any secured party is
authorized to file any such financing statement.
3.3 Priority. Except for Permitted Liens, the Agent's security
interests in the Collateral are first-priority liens, are not and (assuming
timely filing of continuation statements as
-4-
<PAGE> 5
required) hereinafter shall not become subordinate or junior to the Liens of
any other person, including any Governmental Authority. Except for Permitted
Liens, the Borrower shall not grant a security interest in or permit a Lien
upon any of the Collateral to anyone except the Agent, for the benefit of the
Lenders.
3.4 Further Assurances. The Borrower shall execute and deliver to
the Agent concurrently with the execution of this Security Agreement, and at
any time or times hereafter at the request of the Agent, all assignments,
certificates of title, conveyances, assignment statements, Financing
Statements, renewal Financing Statements, security agreements, affidavits,
notices and all other agreements, instruments and documents (collectively,
"Other Documents"), and pay all connected costs, that the Agent may reasonably
request, in form and substance reasonably satisfactory to the Agent, and shall
take any and all other steps reasonably requested by the Agent in order to
perfect and maintain the security interests and liens granted herein and to
consummate fully all of the transactions contemplated by this Security
Agreement, including without limitation: (a) recording or filing such Financing
Statements and Other Documents as may from time to time be reasonably requested
by the Agent with such Governmental Authorities and other Persons as may be
necessary or advisable in order to perfect, establish, confirm and maintain the
security interests and liens created hereunder, and (b) defending the title of
the Borrower to the Collateral by means of negotiation with and, if necessary,
appropriate legal proceedings against, each and every party claiming an
interest therein contrary or adverse to the Borrower's title to same. The
Borrower hereby authorizes the Agent to file, at the Agent's election, a
carbon, photographic or other reproduction of this Agreement as a Financing
Statement, to the extent acceptable in the relevant jurisdictions.
3.5 Attorney-in-fact. The Borrower hereby irrevocably makes,
constitutes and appoints the Agent, its successors or assigns, as the true and
lawful attorneys of the Borrower with power to: (a) sign the name of the
Borrower on any Financing Statement, renewal Financing Statement, notice or
other similar document that in the Agent's opinion should be filed in order to
perfect or continue the perfection of the security interests granted by this
Security Agreement; (b) upon the occurrence and during the continuance of an
Event of Default, to act on the Borrower's behalf, at the Borrower's cost, in
obtaining any orders, consents, approvals, licenses or certificates required by
any Governmental Authority as a prerequisite to the transfer of the Borrower's
business, operations or facilities relating to any of the Collateral, to the
extent permitted by applicable law; and (c) upon the occurrence and during the
continuance of an Event of Default, to do all other things necessary to carry
out the provisions of this Security Agreement and the other Loan Documents,
specifically including without limitation those actions described in SECTION
5.5 hereof relating to the Accounts Receivable and Contracts. Neither
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<PAGE> 6
the Agent nor any Lender nor their attorneys and agents shall be liable for any
act or omission or for any error of judgment or mistake of fact in the exercise
of this power of attorney unless such act, omission, error or mistake shall
occur solely as a result of the gross negligence or willful misconduct of such
Person. This power, being coupled with an interest, is irrevocable so long as
any of the Obligations remain unpaid and any Lender's obligation to make
advances under any of the other Loan Documents has not terminated.
3.6 Principal Place of Business; Location of Collateral; Records.
The Borrower's federal employer identification number is set forth on EXHIBIT B
attached hereto. The chief executive office and principal place of business of
the Borrower as of the Closing Date is set forth on EXHIBIT B attached hereto.
Except as set forth on EXHIBIT B attached hereto, the Borrower has not, during
the preceding five (5) years, used any fictitious or trade name or any
corporate name other than its current corporate name as set forth on the first
page hereof and "Lason Acquisition Corp." The Borrower has possession and
control of all Collateral now in existence, except for any Inventory or
Equipment rented, leased, under conditional sale to or on demonstration to
parties other than Affiliates in the ordinary course of the Borrower's business
("Leased Goods"). EXHIBIT B also lists all places where the Borrower
maintains records relating to Accounts Receivable, including without limitation
records, ledger sheets, correspondence and invoice documents. Such records are
and hereafter shall be kept in appropriate containers in safe places and bear
and shall bear suitable legends identifying them. EXHIBIT B attached hereto
also lists all places where the Borrower maintains Inventory and/or Equipment,
indicates whether the premises are owned or leased by the Borrower and lists
the names and addresses of any landlords, warehousemen or other third parties
who own such premises. The Borrower enjoys peaceful and undisturbed possession
under all of its leases and all such leases are valid and existing and in full
force and effect. Upon request, the Borrower shall deliver copies of all such
leases to the Agent. Other than Leased Goods and the sale of Inventory in the
ordinary course of business to the extent permitted hereby or by the Loan
Agreement, the Borrower shall not store any Collateral or the records relating
thereto at any locations other than those identified on EXHIBIT B, and the
Borrower shall not move its executive office and principal place of business to
any location other than the location identified herein, unless in each case the
Borrower has first given to the Agent thirty (30) days' prior written notice of
such removal of Collateral or relocation, and if the Agent determines, in its
sole discretion, that it may not have a perfected first priority security
interest in any Collateral located or to be located at such new location, the
Borrower has delivered to the Agent such documents, instruments and Financing
Statements reasonably required by the Agent to perfect its first-priority
security interest (subject to Permitted Liens) therein.
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3.7 Right of Inspection. The Agent and each Lender shall, at all
times during normal business hours and upon reasonable notice, have full access
to and the right to audit the Borrower's books and records, make photocopies
thereof, and confirm and verify the existence and location of Collateral.
3.8 Reports. The Borrower shall furnish such reports, information
and data regarding the Collateral as the Agent shall reasonably request from
time to time.
3.9 Landlord and Bailee Waivers. Upon request by the Agent, the
Borrower shall use its best efforts to furnish and record, at the Borrower's
sole cost and expense, waivers by landlords and bailees of all liens with
respect to any Collateral that is or may be located upon premises of lessors
and bailees, such waivers to be in form and substance reasonably acceptable to
the Agent.
3.10 Disclosure of Security Interest. The Borrower shall make
appropriate entries upon its financial statements and books and records
disclosing the Agent's security interest in the Collateral.
ARTICLE IV
EQUIPMENT
Except for any unused or obsolete Equipment, the Borrower will keep
the Equipment in good repair (normal wear and tear excepted) and maintained in
a reasonable state of proper operating efficiency. The Borrower shall not
permit any such items to become a fixture to real estate or accessions to other
personal property.
ARTICLE V
ACCOUNTS RECEIVABLE
The Borrower warrants, represents and covenants as follows:
5.1 Representations and Warranties. Each Account Receivable
represents and will represent a bona fide sale and/or rendition of services by
the Borrower to customers of a kind ordinarily rendered in the ordinary course
of the Borrower's business, or the delivery of merchandise usually dealt in by
the Borrower in the ordinary course of its business, will have been invoiced in
writing to the obligor thereof, will be for a liquidated amount from a customer
competent to contract therefor maturing as stated in the invoice or other
supporting data covering such sale, and as of the date of its creation will not
be subject to any deduction, offset, counterclaim, lien or other condition
other than discounts and offsets customarily given by the Borrower in the
ordinary course of its business.
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5.2 Schedules of Accounts. The Agent and the Lenders may rely on
all statements or representations made by the Borrower on or with respect to
any schedule of Accounts Receivable delivered hereunder or under the Loan
Agreement, and, unless otherwise indicated in writing by the Borrower, each
Account listed on any schedule of Accounts will be genuine and in all respects
what it purports to be, will not be evidenced by an instrument or document, or
if so, will be evidenced only by one original instrument or document which has
been duly delivered to the Agent; will be for a liquidated amount maturing as
stated in any schedule of Accounts Receivable delivered to the Agent or the
Lenders; there are to the Borrower's knowledge no facts, events or occurrences
that would in any way impair the validity or enforcement thereof; the goods
giving rise thereto are not, and were not at the time of the sale thereof,
subject to any lien, claim, encumbrance or security interest except Permitted
Liens.
5.3 Prohibition Against Compromises, Extensions. Upon the
occurrence and during the continuance of an Event of Default, the Borrower upon
notice from the Agent shall not grant any extension of the time for payment of
any Account Receivable; compromise or settle any Account Receivable for less
than the full amount thereof; release, in whole or in part, any person or
property liable for the payment thereof; or allow any credit or discount
thereon (other than those discounts granted in the ordinary course of the
Borrower's business).
5.4 Verification of Accounts. Except during the existence of an
Event of Default when notice shall not be necessary, with prior telephonic
notice to the Borrower, any of the Agent's officers, employees, or agents shall
have the right, at any time or times hereafter, in the Agent's name or in the
name of the Borrower, to verify the validity, amount or any other matter
relating to any Accounts Receivable by mail, telephone, telegraph or otherwise.
5.5 Collection of Accounts; Contracts. The Borrower hereby
authorizes the Agent, and the Agent, for the benefit of the Lenders, shall have
the right at any time and from time to time during the existence of an Event of
Default, without notice to the Borrower, subject to any restrictions imposed by
applicable law, (a) to notify any or all Account Debtors to the Borrower that
the Agent, for the benefit of the Lenders, has a security interest in such
Collateral and direct all such Persons to make payments to the Agent or to a
lockbox designated by the Agent, on behalf of the Lenders, of all sums owing by
them to the Borrower; (b) to receive, endorse, assign and deliver, in the
Borrower's name or in the name of the Agent, all checks, notes, drafts and
other instruments relating to any Collateral, including receiving, opening and
properly disposing of all mail addressed to the Borrower concerning Accounts
Receivable and the Contracts; (c) to notify postal authorities to change the
address for delivery of mail to such
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address as the Agent may designate (provided, however, that, upon such
notification to postal authorities, all notices from the Agent or any Lender to
the Borrower under the Loan Documents shall be made by personal delivery); (d)
to sell or assign the Accounts Receivable and Contracts upon such terms as the
Agent may deem advisable; (e) to sign the Borrower's name on any invoice or
bill of lading relating to any account drafts against Account Debtors, on
schedules and assignments of Accounts Receivable, on notices of assignment, and
on verifications of Accounts and on notices to Account Debtors; and (f) to take
or bring at the Borrower's cost, in the Borrower's name or in the name of the
Agent, on behalf of the Lenders, all steps, actions and suits deemed by the
Agent necessary to effect collections of any Accounts Receivable and Contracts,
to settle, compromise or release in whole or in part any amounts owing on
Accounts Receivable and Contracts, to prosecute any action or proceeding with
respect to Accounts Receivable and Contracts, to extend the time of payment of
any and all Accounts Receivable and Contracts and to make allowances and
adjustments with respect thereto. The powers set forth in this SECTION 5.5,
being coupled with an interest, are irrevocable so long as any of the
Obligations remain unpaid and the Lenders' obligation to make Loans has not
terminated. In the exercise of the powers herein granted to the Agent, no
liability shall be asserted or enforced against the Agent, all such liability
being hereby expressly waived and released by the Borrower except for any
liability resulting solely from the willful misconduct or gross negligence of
the Agent. The Borrower hereby agrees to indemnify and hold the Agent free and
harmless from and against any and all liability, reasonable expense (including
reasonable attorneys' fees), cost, loss or damage which the Agent may incur by
reason of any act or omission of the Borrower with regard to any Account
Receivable or under any of the Contracts, and if the Agent incurs any
liability, expense, cost, loss or damage (except as may be incurred solely by
the Agent's willful misconduct or gross negligence) (i) with respect to any
Account Receivable or any Contract for which it is to be indemnified by the
Borrower as aforesaid, or (ii) by reason of, or in connection with, the good
faith exercise of the Agent's rights hereunder, the amount thereof, including
reasonable costs, expenses and attorneys' fees and expenses, shall become part
of the Obligations secured by the Collateral, payable on demand, and bear
interest at the Default Rate.
5.6 Lockbox/ACH Arrangement; Assignment of Lockbox Accounts. At
the written request of the Agent, the Borrower shall establish and maintain a
lockbox/ACH arrangement with the Agent, in accordance with this Section. The
Borrower has pledged to the Agent the account or accounts (the "Lockbox
Accounts") maintained in connection with any such lockbox/ACH arrangement with
the Agent pursuant to SECTION 5.7 below. The Borrower agrees to maintain the
lockbox/ACH arrangement and such Lockbox Accounts in full force and effect at
all times from and after a request of the Agent pursuant
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to this SECTION 5.6 during the term of this Agreement. At any time when the
lockbox/ACH arrangement is in effect pursuant to this SECTION 5.6, whenever the
Borrower shall receive any monies, checks, notes, drafts or any other items of
payment relating to, or proceeds of, the Collateral, the Borrower agrees with
the Agent and the Lenders as follows:
(i) The Borrower shall hold all such items of payment
separate from the other funds of the Borrower, and no later than the
first Business Day following the receipt thereof, the Borrower shall
deposit the same in the Lockbox Accounts or forward or cause to be
forwarded the same to the lockbox/ACH service for deposit in the
Lockbox Accounts;
(ii) So long as no Event of Default is continuing, the
Agent shall apply such funds from time to time first, to pay fees and
interest then payable with respect to the Obligations and second, to
pay principal on the Revolving Loans, and the Borrower hereby
authorizes the Agent to make all such repayments. So long as no Event
of Default is continuing, the Agent shall then invest or disburse to
the Borrower's operating accounts any funds held in the Lockbox
Account after payment of such fees, interest and principal amounts;
provided, however, that no item received by the Agent shall be
disbursed to the Borrower unless and until such item is actually
honored by the payee's depository bank and such collection is finally
credited to one of the Lockbox Accounts. Notwithstanding the
foregoing or anything else to the contrary contained herein, upon the
occurrence and during the continuance of an Event of Default, the
Agent shall have the right to hold all funds in the Lockbox Accounts
or to apply such funds from time to time in repayment of the
Obligations in accordance with the Loan Agreement, and the Borrower
hereby authorizes the Agent to hold such funds or to make all such
repayments.
(iii) For the purpose of computing interest hereunder, all
such items of payment shall be deemed applied by the Agent, for the
benefit of the Lenders, on account of the Obligations of the Borrower
two (2) calendar days after receipt of such items of payment at the
payment location designated pursuant to ARTICLE IV of the Loan
Agreement;
(iv) No such item received by the Agent shall constitute
payment to any of the Lenders or of the Revolving Loans unless and
until such item is actually honored by the payee's depository bank and
such collection is finally credited to the Agent's account.
Notwithstanding anything to the contrary herein, each such item of
payment shall, solely for purposes of determining the occurrence of an
Event of Default, be deemed received upon actual receipt by the Agent,
unless the same is subsequently dishonored for any reason whatsoever;
and
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(v) The Agent assumes no responsibility for such
lockbox/ACH service arrangement, including without limitation any
claim of accord and satisfaction or release with respect to deposits
made to the Lockbox Accounts.
5.7 Assignment of Lockbox Accounts.
(a) The Borrower hereby pledges, assigns, transfers and grants to
the Agent, for the benefit of the Lenders, a first priority lien on, and
security interest in, all of the Borrower's right, title and interest in and to
the Lockbox Accounts, together with all monies or proceeds due or to become due
thereunder, and any and all additional or renewed deposits to the Lockbox
Accounts, any and all sums due or to become due on any such deposits by way of
interest or otherwise (collectively, the "Deposits"). Such security interest
is given as collateral security for the prompt and complete payment when due
(whether upon demand, at the stated maturity, by acceleration or otherwise) and
performance of the Obligations. The Agent agrees that upon payment in full of
the Obligations the termination of the Lenders' Commitments, and the expiration
or cash settlement of any Swap Agreements, such assignment shall be terminated
and, upon the Borrower's written request, the Agent will deliver to the
Borrower a statement in writing that the Obligations have been satisfied and
that this assignment has been terminated.
(b) The Borrower hereby represents to the Agent that:
(i) Neither the Lockbox Accounts nor the Deposits have
heretofore been, and will not be, pledged, assigned,
transferred, encumbered or otherwise disposed of by
the Borrower, except in favor of the Agent for the
benefit of the Lenders and for Permitted Liens.
(ii) The Borrower shall, immediately upon the Agent's
request, execute and deliver such further instruments
and documents, and take all such actions, as the
Agent deems reasonably necessary to further evidence
and perform this assignment.
(c) The Borrower hereby irrevocably constitutes and appoints the
Agent its true and lawful attorney-in-fact with full and irrevocable power and
authority in the Borrower's place and stead and in the name of the Borrower or
in the name of the Agent or otherwise, from time to time, in the Agent's
discretion, for the purpose of carrying out the terms of this assignment, to
take any and all actions and to execute any and all instruments that may be
necessary to accomplish the purpose of this assignment. The Borrower hereby
gives the Agent the power and right during the existence of any Event of
Default, on behalf of the Borrower,
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without notice to or assent by the Borrower, to ask, demand, collect, receive
and give acquittances and receipts for any and all moneys in the Lockbox
Accounts and to apply such amounts to the Obligations. The Agent shall not be
required or obligated in any manner to make any demand or to make any inquiry
as to the nature or sufficiency of any payment received by the Agent or to
present or file any claim or to take any action to collect or enforce the
payment of any amounts that may have been assigned to the Agent or to which the
Agent may be entitled hereunder at any time or times. These powers of attorney
are powers coupled with an interest and shall be irrevocable so long as any of
the Obligations remain unpaid and the Lenders' obligation to make Loans has not
terminated.
ARTICLE VI
INVENTORY
6.1 Representations and Warranties. All of the Inventory is of
good and merchantable quality, free from material defects, and saleable or
useable in the ordinary course of business of the Borrower unless such defect
or condition is not reasonably expected to have a Material Adverse Effect.
6.2 Use of Inventory. Unless and until the privilege of the
Borrower to use the Inventory in the ordinary course of its business is revoked
by the Agent upon the occurrence and during the continuance of an Event of
Default hereunder, the Borrower may, in any lawful manner not inconsistent with
this Security Agreement or the other Loan Documents, process, use and, in the
ordinary course of business but not otherwise, sell its Inventory. Upon the
occurrence and during the continuance of an Event of Default hereunder, the
Agent shall have the right to revoke or suspend the Borrower's processing, sale
or other use of the Inventory.
6.3 Inspection of Inventory. The Agent shall have the right from
time to time hereafter upon reasonable notice during normal business hours to
inspect and test the Inventory, and the Borrower agrees to reimburse the Agent
for its reasonable out-of-pocket costs and expenses in so doing.
6.4 Safekeeping of Inventory. Prior to foreclosure or taking of
possession, neither the Agent nor any Lender shall be liable for or responsible
in any way for the safekeeping of the Inventory, or for any loss or damage
thereto or for any diminution in the value thereof, or for any act or default
of any carrier, warehouseman, or forwarding agency thereof, or other Person
whomsoever, but the same shall be at all times at the Borrower's risk. All
risk of loss, damage or destruction to the Inventory or any portion thereof
shall be borne by the Borrower while in its possession or control.
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ARTICLE VII
DEFAULT
7.1 Event of Default. Any one of the following events will
constitute an "Event of Default" hereunder:
(a) failure of the Borrower to observe, perform or comply
with any of the terms, provisions, conditions, covenants, warranties or
representations contained in this Security Agreement, which failure is not
cured to the satisfaction of the Agent within thirty (30) days after the
Borrower acquires knowledge thereof; or
(b) the occurrence of an Event of Default (as defined in the
Loan Agreement) other than an Event of Default described in the foregoing
subparagraph (a).
7.2 Rights and Remedies. The Agent shall have, in addition to any
other rights and remedies contained in this Security Agreement or in any other
Loan Documents, all the rights and remedies of a secured party under the
Uniform Commercial Code, and all other rights and remedies provided by law, all
of which shall be cumulative to the extent permitted by law. During the
existence of any Event of Default, the Agent shall have the right without
further notice to the Borrower to appropriate, take possession and control of,
set off and apply to the payment of any or all of the Obligations, any or all
Collateral, in such manner as the Agent shall in its sole discretion determine,
to enforce payment of the Accounts Receivable and the Contracts or any other
Collateral, to settle, compromise or release, in whole or in part, any amounts
owing on the Collateral, to prosecute any action, suit or proceeding with
respect to the Collateral, to extend the time of payment of any and all
Collateral, to make allowances and adjustments with respect thereto, to issue
credits in the name of the Borrower or the Agent, to sell, assign and deliver
the Collateral (or any part thereof), at public or private sale, at broker's
board, for cash, upon credit or otherwise, at the Agent's sole option and
discretion and the Agent or any Lender may bid or become purchaser at any such
sale, if public, free from any right of redemption, which is hereby expressly
waived. The Borrower agrees that the giving of ten (10) days' notice by the
Agent, sent by certified mail, return receipt requested, postage prepaid, to
the Borrower at the address set forth in the Loan Agreement for the receipt of
notices by the Borrower, designating the place and time of any public sale, or
of the time after which any private sale or other intended disposition of the
Collateral is to be made, shall be deemed to be reasonable notice thereof to
the Borrower and the Borrower waives any other notice with respect thereto.
The net cash proceeds resulting from the exercise of any of the foregoing
rights or remedies shall be applied by the Agent to the payment of the
Obligations, in such order as the Agent, for the benefit of Lenders, may elect,
and the Borrower shall remain liable to the
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<PAGE> 14
Agent and the Lenders for any deficiency, together with interest thereon at the
rates provided in the Loan Agreement, and the costs and expenses of collection
of such deficiency, including (to the extent permitted by law) without
limitation reasonable attorneys' fees, expenses and disbursements. The
balance, if any, remaining after payment in full of all of the Obligations
shall be paid, first, to the holder of any subordinate security interest in the
Collateral known to the Agent or the Lenders to whom the Agent or the Lenders
are obligated to make such payment, and then, to the Borrower, subject in all
cases to any duty of the Agent and the Lenders imposed by law.
7.3 Attorneys' Fees and Other Expenses. If at any time or times
hereafter, the Agent or any Lender employs counsel for advice with respect to
this Security Agreement or any other Loan Document, or to intervene, file a
petition, answer, motion or other pleading in any suit or proceeding relating
to this Security Agreement or any other Loan Document, or relating to any
Collateral, or to protect, take possession of, or liquidate any Collateral, or
to attempt to enforce any security interest or lien in any Collateral, or to
represent the Agent or any Lender in any pending or threatened litigation with
respect to the affairs of the Borrower in any way relating to any of the
Collateral or to the Obligations or to enforce any rights of the Agent or
Lenders or liabilities of the Borrower, any Account Debtor, or any other Person
who may be obligated to the Agent or Lenders by virtue of this Security
Agreement or any other Loan Document, then in any of such events, all of the
reasonable attorneys' fees arising from such services, and any reasonable
expenses, costs and charges relating thereto, including court costs and similar
expenses, shall, to the maximum extent permitted by law, become a part of the
Obligations secured by the Collateral, payable on demand.
7.4 Assembly of Collateral. Upon the occurrence and during the
continuance of an Event of Default, the Agent shall have the right to require
the Borrower to assemble the Collateral and make it reasonably available to the
Agent at one or more of the locations listed on EXHIBIT B, and to take
possession of the Collateral and to enter and remain upon the various premises
of the Borrower without cost or charge to the Agent, and to use the same,
together with materials, supplies, books and records of the Borrower for the
purpose of liquidating or collecting the Collateral, whether by foreclosure,
auction or otherwise. In addition, upon the occurrence and during the
continuance of an Event of Default, the Agent may remove from such premises the
Collateral and any records with respect thereto to the premises of the Agent or
any designated agent of the Agent for such time as the Agent may desire, in
order to collect or liquidate the Collateral effectively.
7.5 No Waiver. The Agent's failure at any time or times hereafter
to require strict performance by the Borrower of any of the
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provisions of this Security Agreement or any other Loan Document shall not
waive, affect or diminish any right of the Agent or any Lender at any time or
times hereafter to demand strict performance therewith and with respect to any
other of this Security Agreement or any other Loan Document, and any waiver of
any Event of Default shall not waive or affect any other Event of Default,
whether prior or subsequent thereto, and whether of the same or a different
type. None of the provisions of this Security Agreement or any other Loan
Document shall be deemed to have been waived by any act or knowledge of the
Agent or any Lender, their agents, officers or employees except by an
instrument in writing signed by an officer of the Agent or such Lender and
directed to the Borrower specifying such waiver.
7.6 Waiver by the Borrower. Except for the notices expressly
provided for herein, the Borrower waives any and all notices or demands that
the Borrower might be entitled to receive with respect to this Security
Agreement by virtue of any applicable statute or law, including without
limitation demand, presentment, protest, notice of protest, notice of default,
notice of intent to accelerate, release, compromise, settlement, extension or
renewal of all commercial paper, accounts, contract rights, instruments,
guaranties and otherwise, at any time held by the Agent on which the Borrower
may in any way be liable, notice of nonpayment at maturity of any and all
Accounts Receivable and notice of any action taken by the Agent unless
expressly required by this Security Agreement.
7.7 No Marshalling. The Collateral and all other collateral that
the Agent may at any time acquire from any other source or by a guaranty,
endorsement or property of any other Person, in connection with the Obligations
of the Borrower to the Lenders shall constitute collateral for all of the
Obligations, without apportionment or designation as to particular Obligations,
and all Obligations, howsoever and whensoever incurred, shall be secured by all
of the Collateral, howsoever and whensoever acquired, and the Agent shall have
the right, in the Agent's sole discretion, to determine whether to proceed
against the Collateral or such other property, guaranty or endorsement upon the
occurrence and during the continuance of an Event of Default, and the Agent
shall have the right, in the Agent's sole discretion, to determine which
rights, security, liens, security interests or remedies the Agent shall at any
time pursue, relinquish, subordinate or modify or to take any other action with
respect thereto, without in any way modifying or affecting any of them, any of
the Agent's or any Lender's rights or any of the Obligations. The Borrower
irrevocably waives the right to direct the application of any and all payments
that may be received by the Agent during the continuance of an Event of Default
and the Borrower does hereby irrevocably agree that, during the continuance of
an Event of Default, the Agent shall have the continuing exclusive right to
apply and reapply any and all such payments received in such manner
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as the Agent may deem advisable, notwithstanding any entry upon any of its
books and records.
ARTICLE VIII
MISCELLANEOUS
8.1 Binding Effect. This Security Agreement and all other
instruments and documents executed and delivered pursuant hereto or in
connection herewith shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
8.2 Governing Law. This Agreement shall be construed and
interpreted in accordance with the internal laws and judicial decisions of the
State of North Carolina without giving effect to the conflict of laws
principles thereof, except to the extent that matters of perfection and
validity of the security interests hereunder, or remedies hereunder, are
governed by the laws of a jurisdiction other than the State of North Carolina.
8.3 Survival of Agreement. All representations and warranties
of the Borrower and all obligations of the Borrower contained herein and in any
other Loan Document shall survive the execution and delivery of this Security
Agreement and all other Loan Documents.
8.4 Termination of Security Interest; Assignment. This Security
Agreement and the security interests in the Collateral created hereby will
terminate when all of the Obligations have been paid and finally discharged in
full, when the Lenders' obligation to make advances under the Loan Agreement
has been terminated, and when any and all Swap Agreements have expired or been
cash settled. In the event of a sale or assignment by the Agent or any Lender
of all or any of the Obligations held by it, the Agent or such Lender may
assign or transfer its rights and interest under this Security Agreement in
whole or in part to the purchaser or purchasers of such Obligations, whereupon
such purchaser or purchasers will become vested with all of the powers, rights
and responsibilities of the Agent or such Lender hereunder, and the Agent or
such Lender, as applicable, will thereafter be forever released and fully
discharged from any liability or responsibility hereunder with respect to the
rights, interest and responsibilities so assigned, other than liabilities
arising out of actions taken prior to the date of assignment. The Borrower may
not assign this Security Agreement without the express written consent of the
Agent.
Upon termination of this Agreement or upon any partial release of
Collateral to the Borrower, the Agent shall, upon the request of the Borrower,
promptly assign, transfer and deliver to the Borrower (without recourse,
without representation or warranty
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and on an "as is" basis) any such released Collateral that is in the possession
of the Agent or its subagents (to the extent not sold or otherwise applied
pursuant to the terms hereof), together with proper instruments (including
Uniform Commercial Code termination statements) acknowledging the termination
of this Agreement or the release of such Collateral, as applicable.
8.5 Notice. Except as otherwise provided herein, notice to the
Borrower or to the Agent shall be given or delivered in the manner set forth in
SECTION 15.3 of the Loan Agreement.
8.6 Severability. To the extent any provision of this Security
Agreement is prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Security Agreement.
8.7 Sub-Agent. Subject to the applicable provisions of the Loan
Agreement, the Agent may appoint a sub-agent to perform any and all of its
duties and obligations and to exercise all of its rights hereunder.
8.8 Captions. The captions to the sections of this Agreement
have been inserted for convenience only and shall not limit or modify any of
the terms hereof.
8.9 Counterparts. This Security Agreement may be executed in
two or more counterparts, which when assembled shall constitute one and the
same agreement.
8.10 Amendments. This Agreement may be amended, modified or
waived only by an instrument in writing signed by the Borrower and the Agent.
8.11 Collateral Agent. The Agent shall act in the capacity of
collateral agent for Lenders in accordance with its rights and duties set forth
in the Loan Agreement.
8.12 Conflict of Terms. The terms of this Agreement and the
terms of the Loan Agreement shall be construed and interpreted to the fullest
extent possible to give effect to all such terms. In the event of any conflict
between the terms of this Agreement and the Loan Agreement, the terms of the
Loan Agreement shall control.
8.13 No Third Party Rights Created. It is expressly intended,
understood and agreed that this Agreement is made and entered into for the sole
protection and benefit of the Borrower, the Agent and the Lenders, and their
respective successors and assigns (but in the case of assigns, only to the
extent permitted hereunder) and that no other Person or Persons shall have any
right
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at any time to action hereon or rights to the proceeds of the Loans evidenced
and secured by the Loan Documents.
8.14 No Joint Venture. The relationship between the Agent and
the Lenders, on the one hand, and the Borrower, on the other hand, is solely
that of lender, collateral agent and borrower, and nothing contained herein or
in any of the Loan Documents shall in any manner be construed as making any
such Persons partners, joint venturers or creating any other relationship other
than lender and borrower.
IN WITNESS WHEREOF, this Security Agreement has been executed under
seal as of the day and year first above written by the duly authorized officers
of the parties hereto.
LASON SYSTEMS, INC.
By: /s/ Allen J. Nesbitt
--------------------------
Name: Allen J. Nesbitt
--------------------
Title: President
-------------------
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, AS AGENT
By:/s/ Braxton B. Comer
------------------------------
Braxton B. Comer
Vice President
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<PAGE> 19
Exhibit A to Security Agreement
First Union National Bank
of North Carolina, as Agent
Lason Systems, Inc.
January 17, 1995 / $25,000,000
EXHIBIT A TO SECURITY AGREEMENT
JURISDICTIONS FOR UCC FILINGS
Delaware Secretary of State
Michigan Secretary of State
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<PAGE> 20
Exhibit B to Security Agreement
First Union National Bank
of North Carolina, as Agent
Lason Systems, Inc.
January 17, 1995 / $25,000,000
EXHIBIT B TO SECURITY AGREEMENT
PRINCIPAL PLACE OF BUSINESS; LOCATIONS OF COLLATERAL; FICTITIOUS NAMES
Borrower's Tax Identification Number
38-3214742
Borrower's Principal Place of Business/Executive Office
28400 Schoolcraft Rd.
Livonia, Michigan 48150
Fictitious and Trade Names Used in Last 5 Years
Diversitec Image Technology, Inc. (used in Michigan only)
Locations of Accounts Receivable Records
28400 Schoolcraft Rd.
Livonia, Michigan 48150
1305 Stephenson Highway
Troy, Michigan 48083
Locations of Inventory and Equipment
Description of Location Owned or Leased Lessor/Warehouseman
- ----------------------- --------------- -------------------
28400 Schoolcraft Rd. Leased MART Associates
Livonia, Michigan 48150
1305 Stephenson Highway Leased Uniroyal/Goodrich
Troy, Michigan 48083 Tire Company
(sub-lessor)
Prudential
Insurance Co. of
America (lessor)
300 Renaissance Center (Used with Ford Motor Facility
Detroit, Michigan 48243 permission)
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<PAGE> 21
31001 Schoolcraft Road Forest & Gargaro
Livonia, Michigan 48150 Investment Co.
38281 Schoolcraft Road Clayton Jerris
Livonia, MI 48150 and Simon Ash
4800 Fashion Square Blvd., Plaza North
Suite 445 Associates with
Saginaw, Michigan 48604 Diversitec Image
Technology
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<PAGE> 1
EXHIBIT 10.22
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of January 17, 1995 (the "Guaranty"),
is given by LASON HOLDINGS, INC., a Delaware corporation (the "Guarantor"); and
is extended to
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association
with its principal offices in Charlotte, North Carolina ("First Union"), in its
capacity as agent (the "Agent") for the Lenders as that term is defined in the
Loan Agreement referred to below, and the Lenders (the Agent and the Lenders,
together with successors and assigns, individually a "Guaranteed Party" and
collectively, the "Guaranteed Parties") for the benefit of
LASON SYSTEMS, INC., a Delaware corporation formerly known as Lason
Acquisition Corp. (the "Borrower").
RECITALS:
A. The Lenders have agreed to make certain loans in the aggregate
principal amount of up to $25,000,000 (the "Loans") to the Borrower pursuant to
a Loan Agreement dated as of the date hereof (as amended, modified, supplemented
or restated from time to time, the "Loan Agreement"), between the Borrower, the
Lenders and the Agent, the terms, conditions and provisions of which are
incorporated herein by reference. Capitalized terms that are not defined herein
shall have the meanings assigned to such terms in the Loan Agreement. The Loans
are evidenced by promissory notes dated as of the date hereof in the aggregate
principal amount of up to $25,000,000 (collectively, as amended, modified,
supplemented, substituted or restated from time to time, the "Notes").
B. The Borrower is a wholly-owned subsidiary of the Guarantor. The
Borrower and the Guarantor intend to operate as a single business enterprise.
Although they are separate corporate entities, and each is adequately
capitalized and maintains all corporate formalities, the Borrower and the
Guarantor operate under a shared business plan and with a combined effort.
C. The Lenders have required, as a condition to making the Loans,
among other things, that the Guarantor guarantee to the Guaranteed Parties the
payment of the Obligations, as defined in the Loan Agreement, including without
limitation all amounts due and payable under the Notes, and that such guaranty
be secured by a pledge by the Guarantor to the Agent, for the benefit of the
Lenders, of all of the issued and outstanding capital stock of the Borrower
pursuant to the terms of the Guarantor Pledge Agreement dated as of the date
hereof between the Borrower and the Agent (as amended, modified, supplemented or
restated from time to time, the
<PAGE> 2
"Pledge Agreement"). Without this Guaranty the Lenders would be unwilling to
make the Loans to the Borrower.
D. Because of the direct benefit to the Guarantor from the Loans to
the Borrower, the Guarantor agrees to guarantee to the Guaranteed Parties the
Obligations of the Borrower as set forth herein.
NOW, THEREFORE, in consideration of the Agent's and the Lenders' entering
into the Loan Agreement and making the Loans to the Borrower:
1. Guaranty of Payment. The Guarantor hereby irrevocably, absolutely
and unconditionally guarantees to the Guaranteed Parties the payment and
performance, when due, by stated maturity, acceleration or otherwise, of the
Obligations (as defined in the Loan Agreement). The obligations of the
Guarantor hereunder are referred to as the "Guaranty Obligations." The guaranty
of the Guarantor as set forth in this SECTION 1 is a guaranty of payment and not
of collection.
2. Subordination. Any Indebtedness of the Borrower to the Guarantor now
or hereafter existing, together with any interest thereon, including without
limitation any Indebtedness of the Borrower to the Guarantor in any proceeding
under the Bankruptcy Code, shall be, and such Indebtedness is hereby, deferred,
postponed and subordinated to the Obligations. As regards any such
Indebtedness, the Guarantor shall not, and shall not permit the Borrower to,
commit or allow the commission of any transfer, acceleration, forgiveness,
prepayment, modification, conversion or further subordination without the
express written consent of the Agent. If any such Indebtedness is or becomes
represented by any written instrument, such instrument shall forthwith be
endorsed and delivered to the Agent, for the benefit of the Lenders.
Notwithstanding the foregoing, the Borrower may make payments on any such
Indebtedness to the Guarantor provided no Default or Event of Default is in
existence at the time of any such payment or would result from such payment.
3. Release of Collateral, Parties Liable, etc. The Guarantor agrees that
the whole or any part of the security now or hereafter held for the Obligations
and the Guaranty Obligations may be exchanged, compromised, or surrendered from
time to time; that the Guaranteed Parties shall have no obligation to protect,
perfect, secure or insure any such security interests, liens or encumbrances now
or hereafter held for the Obligations or the Guaranty Obligations or the
properties subject thereto; that the time or place of payment of the Obligations
and the Guaranty Obligations may be changed or extended, in whole or in part, to
a time certain or otherwise, and may be renewed or accelerated, in whole or in
part; that the Borrower may be granted indulgences generally; that any of the
provisions of the Loan Agreement, the Notes, the other
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<PAGE> 3
Loan Documents, or any other documents executed in connection with this
transaction (other than this Guaranty Agreement and the Pledge Agreement), may
be modified, amended, supplemented, restated or waived; that any party
(including any co-Guarantor) liable for the payment thereof may be granted
indulgences or released; and that any deposit balance for the credit of the
Borrower, the Guarantor or any other party liable for the payment of the
Obligations or the Guaranty Obligations or liable upon any security therefor
may be released, in whole or in part, at, before and/or after the stated,
extended or accelerated maturity of the Obligations or the Guaranty
Obligations, all without notice to or further assent by the Guarantor, who
shall remain bound thereon, notwithstanding any such exchange, compromise,
surrender, extension, renewal, acceleration, modification, indulgence or
release.
4. Waiver of Rights. The Guarantor expressly waives: (a) notice of
acceptance of this Guaranty by the Guaranteed Parties and of all extensions of
credit to the Borrower by the Lenders; (b) presentment and demand for payment of
any of the Obligations or the Guaranty Obligations; (c) protest and notice of
dishonor or of default to the Guarantor or to any other party with respect to
the Obligations or the Guaranty Obligations or with respect to any security
therefor; (d) notice of the Guaranteed Parties' obtaining, amending,
substituting for, releasing, waiving or modifying any security interest, liens
or encumbrances now or hereafter securing the Obligations or the Guaranty
Obligations, or the Guaranteed Parties' subordinating, compromising, discharging
or releasing such security interests, liens or encumbrances; (e) to the extent
permitted by applicable law, all other notices to which the Guarantor might
otherwise be entitled; (f) any requirement that the Guaranteed Parties protect,
secure, perfect or insure any security interest, lien or other charge or
encumbrance on any property; (g) demand for payment under this Guaranty; and (h)
any right to assert against any Guaranteed Party, as a defense, counterclaim,
set-off, or cross-claim, any defense (legal or equitable), set-off, counterclaim
or claim that the Guarantor may now or hereafter have against any Guaranteed
Party or the Borrower, other than compulsory counterclaims. The Guarantor
waives the benefit of any statute of limitations affecting the Guarantor's
liability hereunder or the enforcement thereof.
5. Primary Liability of the Guarantor. The Guarantor agrees that this
Guaranty may be enforced by the Guaranteed Parties without the necessity at any
time of resorting to or exhausting any other security or collateral and without
the necessity at any time of having recourse to the Notes or any collateral now
or hereafter securing the Obligations, the Guaranty Obligations or otherwise,
and Guarantor hereby waives the right to require the Guaranteed Parties to
proceed against the Borrower or any co-Guarantor or to require the Guaranteed
Parties to pursue any other remedy or enforce any other right. Without limiting
the generality of the foregoing, the Guarantor hereby specifically waives the
benefits of N.C. Gen. Stat. Sections 26-7 through 26-9 inclusive. The
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<PAGE> 4
Guarantor further agrees that nothing contained herein shall prevent the
Guaranteed Parties from suing on the Notes or foreclosing their security
interest in or lien on any collateral now or hereafter securing the Obligations
or the Guaranty Obligations or from exercising any other rights available to
them under the Notes, the Loan Agreement, the other Loan Documents or any other
document or instrument executed in connection with the Obligations or the
Guaranty Obligations if neither the Borrower nor the Guarantor timely perform
thereunder, and the exercise of any of the aforesaid rights and the completion
of any foreclosure proceedings shall not constitute a discharge of any of the
Guarantor's Guaranty Obligations hereunder; it being the purpose and intent of
the Guarantor that the Guarantor's Guaranty Obligations shall be absolute,
independent and unconditional under any and all circumstances. Neither the
Guarantor's Guaranty Obligations under this Guaranty nor any remedy for the
enforcement thereof shall be impaired, modified, changed or released in any
manner whatsoever by an impairment, modification, change, release or limitation
of the liability of the Borrower or any co-Guarantor or by reason of the
Borrower's or any co- Guarantor's bankruptcy or insolvency. The Guarantor
acknowledges that the terms "Obligations" and "Guaranty Obligations" as used
herein include any payments made by the Borrower or the Guarantor to the
Guaranteed Parties and subsequently recovered by the Borrower or the Guarantor
or a trustee for either of them pursuant to the Borrower's or the Guarantor's
bankruptcy or insolvency.
6. Security. The Guaranty Obligations are secured by perfected and
first-priority security interests in the Pledged Collateral (as defined in the
Pledge Agreement). The Guarantor agrees that in the event the Guarantor fails
to pay its obligations hereunder when due and payable under this Guaranty, the
Agent and each of the Lenders shall have all the rights and remedies available
under the Pledge Agreement immediately and without further action by the Agent
or any Lender.
7. Attorneys' Fees and Costs of Collection. If at any time or times
hereafter the Agent or any other Guaranteed Party employs counsel to pursue
collection, to intervene, to sue for enforcement of the terms hereof or of the
Notes or other Loan Documents, or to file a petition, complaint, answer, motion
or other pleading in any suit or proceeding relating to this Guaranty, the
Pledge Agreement, the Notes or other Loan Documents, then in such event, all of
the reasonable attorneys' fees relating thereto shall be an additional liability
of the Guarantor to the Agent, payable on demand.
8. Term of Guaranty. This Guaranty shall continue in full force and
effect until the Obligations and Guaranty Obligations are fully paid, performed
and discharged, the Commitments of the Lenders under the Loan Agreement have
terminated, and any and all Swap Agreements have expired or have been cash
settled. This Guaranty covers the Obligations and the Guaranty Obligations
whether presently outstanding or arising subsequent to the date
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<PAGE> 5
hereof including all amounts advanced by the Lenders in stages or installments.
9. Representations and Warranties. As of the date hereof, the Guarantor
warrants and represents to the Guaranteed Parties as follows:
(a) The Guarantor is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization; the Guarantor has the full power, authority and legal right to
execute, deliver and perform this Guaranty; and this Guaranty has been duly and
validly authorized by all necessary corporate action and is binding upon and
enforceable against the Guarantor, its successors and assigns in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally or by general equitable principles or matters of public policy.
(b) There is no litigation, claim, action or proceeding pending or,
to the best knowledge of the Guarantor, threatened against the Guarantor that
would materially adversely affect the financial condition of the Guarantor or
its ability to fulfill its obligations hereunder.
(c) The execution, delivery and performance by the Guarantor of this
Guaranty, the Pledge Agreement and any other instrument executed by it in
connection herewith do not and will not (i) conflict with or result in any
breach of, or constitute with the passage of time or the giving of notice or
both, a default under, the certificate of incorporation or bylaws of the
Guarantor, any Requirement of Law, or any agreement to which the Guarantor is a
party or by which it or its properties is bound or (ii) result in the creation
or imposition of any Lien upon its properties, except for the lien created by
the Pledge Agreement.
(d) No authorization or consent of, or filing with, any Governmental
Authority is required for the execution, delivery and performance by the
Guarantor of this Guaranty.
(e) The Guarantor has timely paid all taxes and other charges levied
or assessed against it or its properties by any applicable Governmental
Authority unless such taxes or charges are being diligently contested by the
Guarantor by appropriate proceedings and the failure to pay such taxes and
charges timely does not materially and adversely affect the Guarantor. The
Guarantor has timely filed all tax returns required by law to be filed (or
extension requests with respect thereto have been filed and granted). To the
knowledge of the Guarantor, no material controversy in respect of taxes owed or
alleged to be owed by Guarantor is pending or threatened on the date hereof.
-5-
<PAGE> 6
(f) No event has occurred and is continuing that constitutes an Event
of Default hereunder or which, with the passage of time or giving of notice or
both, would constitute an Event of Default.
(g) Neither this Guaranty nor the Pledge Agreement contains any
untrue statement of a material fact or omits a material fact necessary to make
the statements contained therein or herein not misleading when taken as a whole.
(h) The Guarantor is Solvent, and will not, as a result of the
transactions contemplated hereby, cease to be Solvent.
(i) All outstanding capital stock of the Borrower is fully paid and
is held of record by the Guarantor.
10. Further Representations and Warranties. The Guarantor further
represents to the Guaranteed Parties that the Guarantor has knowledge of the
Borrower's financial condition and affairs and represents and agrees that the
Guarantor will keep so informed while this Guaranty is in force. The Guarantor
agrees that the Guaranteed Parties will have no obligation to investigate the
financial condition or affairs of the Borrower for the benefit of the Guarantor
or to advise the Guarantor of any fact respecting, or any change in, the
financial condition or affairs of the Borrower that might come to the knowledge
of any Guaranteed Party at any time, whether or not such Guaranteed Party knows
or believes or has reason to know or believe that any such fact or change is
unknown to the Guarantor or might (or does) materially increase the risk of the
Guarantor as guarantor or might (or would) affect the willingness of the
Guarantor to continue as guarantor with respect to the Obligations.
11. Affirmative Covenants. The Guarantor hereby agrees that, unless
the Agent and the Required Lenders consent otherwise in writing:
a. The Guarantor shall deliver, or cause to be delivered to the Agent
(for delivery by the Agent to the Lenders) such information about the Guarantor
as the Agent may from time to time reasonably request, to the extent that such
information is relevant to the performance of the Guarantor's Guaranty
Obligations hereunder.
b. The Guarantor shall promptly, but in no event later than five (5)
Business Days after Guarantor obtains knowledge thereof, give written notice to
the Agent of (i) any Event of Default hereunder or any event, which with the
passage of time or giving of notice or both, shall constitute an Event of
Default hereunder, and (ii) any material litigation or proceeding involving
claims against the Guarantor which are not covered by insurance and, if
requested by the Agent, the Guarantor shall maintain
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<PAGE> 7
reserves therefor in accordance with Generally Accepted Accounting Principles.
c. The Guarantor shall (i) maintain and preserve its corporate
existence and all material licenses, permits and franchises necessary to the
conduct of its business, (ii) conduct its business in an orderly and efficient
manner, (iii) keep its properties in good working order and condition (normal
wear and tear excepted), and (iv) timely file all reports, applications and
licenses required by Governmental Authorities.
d. The Guarantor shall pay all taxes, assessments and other
governmental charges when due and all other obligations in accordance with
customary trade practices, and shall comply with all acts, regulations and
orders of any Governmental Authority; provided, however, that the Guarantor may
in good faith by appropriate proceedings and with due diligence contest any such
indebtedness, taxes, assessments, governmental charges, acts, regulations and
orders so long as such matter does not materially adversely affect the
Guarantor, and so long as the Guarantor has established reserves with respect
thereto in accordance with the advice of its accountants. The Guarantor shall
also comply with and perform all agreements to which it is a party where failure
to comply would materially and adversely affect the Guarantor.
e. The Guarantor shall maintain adequate books, accounts and records,
and prepare all financial statements in accordance with Generally Accepted
Accounting Principles, consistently applied, and in compliance with the
regulations of Governmental Authorities. The Guarantor shall permit any
representative of the Agent or any Lender to visit and inspect any of the
properties and records of the Guarantor upon reasonable notice at such
reasonable times and as often as may be reasonably requested.
f. The Guarantor shall keep all of the properties owned or used by it
insured against loss or damage by fire, explosion and such other risks, and
shall maintain general liability insurance, against such casualties, risks and
contingencies, and in such amounts, as are customary for similarly situated and
properly managed businesses.
12. Negative Covenants.
Guarantor agrees that, unless the Agent and the Required Lenders otherwise
consent in writing, Guarantor will not:
a. Liquidate, wind up its affairs or dissolve, or enter into any
merger, share exchange, syndicate or other combination, unless, in the case of a
merger, the Guarantor is the surviving corporation of such merger.
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<PAGE> 8
b. Except as contemplated by the Pledge Agreement, sell, pledge,
hypothecate, or otherwise transfer any of the capital stock of the Borrower or
otherwise cease to hold full legal and beneficial title to such stock.
13. Events of Default The occurrence of any one or more of the
following events shall constitute an "Event of Default" hereunder:
a. The Guarantor fails to make any payment required hereunder
with respect to the Guaranty Obligations when such payment is due;
b. The Guarantor fails to comply with the terms of SECTION 11(B)
of this Guaranty;
c. The Guarantor fails or neglects to observe, perform or comply
with, on behalf of the Borrower and in accordance with the Guaranty Obligations,
any term, provision, condition or covenant contained in this Guaranty and not
described in SUBSECTIONS (A) or (B) above, and the same is not cured to the
Guaranteed Parties' reasonable satisfaction within thirty (30) days after
Guarantor acquires knowledge thereof;
d. Any representation or warranty made in writing by or on
behalf of the Guarantor in this Guaranty or in the Pledge Agreement in
connection herewith or therewith shall prove to have been false or incorrect in
any material respect at the time as of which such representation or warranty was
made;
e. The occurrence of any payment default, whether by acceleration or
otherwise, of any Indebtedness in excess of $250,000 of the Guarantor, or any
other default under any agreement giving rise to such Indebtedness if the effect
of the default is to cause the acceleration of or permit the acceleration of
such Indebtedness;
f. The entry of a judgment in excess of $250,000 or the issuance of a
warrant of attachment, execution or similar process or the creation of a
mechanics lien or other involuntary lien against the Guarantor or any of its
assets, which shall not be dismissed, discharged or bonded within sixty (60)
days or appealed from and stayed;
g. A notice of lien, levy or assessment is filed of record on all or
any portion the assets of the Guarantor in excess of $250,000 by any
Governmental Authority with respect to any claim owing by the Guarantor and
becoming a lien or encumbrance upon any asset of the Guarantor and either (i)
the same is not dismissed, released or discharged within sixty (60) days after
the same becomes a lien or encumbrance or, in the case of ad valorem taxes,
prior to the last day when payment may be made without penalty, or (ii) the
execution or other enforcement of the same and the claims
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<PAGE> 9
secured thereby are not effectively stayed and are not being actively contested
in good faith by appropriate proceedings;
h. The filing by the Guarantor of any voluntary petition seeking
liquidation, reorganization, arrangement, readjustment of debts or for any other
relief under any bankruptcy or similar act or law pertaining to insolvency or
debtor relief, now or hereafter existing;
i. The filing against the Guarantor of any involuntary petition
seeking liquidation, reorganization, arrangement, readjustment of debts or for
any other relief under the any bankruptcy law or other act or law pertaining to
insolvency or debtor relief, now or hereafter existing, which petition is not
dismissed within sixty (60) days of the date of filing;
j. A custodian, trustee, receiver or assignee for the benefit of
creditors is appointed or takes possession of the properties of the Guarantor in
an insolvency proceeding; or
k. The occurrence of an Event of Default (as defined in the Loan
Agreement).
14. Additional Liability of the Guarantor. If the Guarantor is or
becomes liable for any Indebtedness owing by the Borrower to any Guaranteed
Party by endorsement or otherwise, other than under this Guaranty, such
liability shall not be in any manner impaired or reduced hereby, but shall have
all and the same force and effect it would have had if this Guaranty had not
existed and the Guaranty Obligations shall not be in any manner impaired or
reduced thereby.
15. Cumulative Rights. All rights of the Guaranteed Parties hereunder
or otherwise arising under any documents executed in connection with or as
security for the Obligations and the Guaranty Obligations are separate and
cumulative and may be pursued separately, successively or concurrently, or not
pursued, without affecting or limiting any other right of the Guaranteed Parties
and without affecting or impairing the liability of the Guarantor.
16. Usury. Notwithstanding any other provisions herein contained, no
provision of this Guaranty shall require or permit the collection from the
Guarantor of interest in excess of the maximum rate or amount that the Guarantor
may be required or permitted to pay pursuant to any applicable law.
17. Multiple Counterparts; Captions; Severability. This Guaranty may
be executed in multiple counterparts, each of which shall be deemed an original
but all of which shall constitute but one and the same document. Captions are
for reference only and in no way limit the terms of this Guaranty. To the extent
any provision of this Guaranty is prohibited by or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the
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<PAGE> 10
remainder of such provision or the remaining provisions of this Guaranty.
18. Agent's Duty to Lenders. The Agent is serving as collateral agent
for the Lenders pursuant to the Loan Agreement. The rights and duties of the
Agent hereunder shall be exercised for the benefit of the Lenders and in
accordance with the duties of the Agent to the Lenders as set forth in the Loan
Agreement.
19. Agent and Lender Assigns. This Guaranty is intended for and shall
inure to the benefit of the Guaranteed Parties and each and every Person who
shall from time to time be or become the owner or holder of any of the
Obligations and the Guaranty Obligations, and each and every reference herein to
the "Agent," "Lenders" and "Guaranteed Parties" shall include and refer to each
and every successor or assignee of such Persons at any time holding or owning
any part of or interest in any part of the Obligations and the Guaranty
Obligations. This Guaranty shall be transferable with the same force and
effect, and to the same extent, that the Obligations and the Guaranty
Obligations are transferable, it being understood and stipulated that upon
assignment or transfer by any Guaranteed Party of any of the Obligations and the
Guaranty Obligations the legal holder or owner of the Obligations and the
Guaranty Obligations (or a part thereof or interest therein thus transferred or
assigned by such Guaranteed Party) shall (except as otherwise stipulated by the
Guaranteed Party in its assignment) have and may exercise all of the rights
granted to the Guaranteed Party under this Guaranty to the extent of that part
of or interest in the Obligations and the Guaranty Obligations thus assigned or
transferred to said Person. The Guarantor expressly waives notice of transfer
or assignment of the Obligations and the Guaranty Obligations, or any part
thereof, or of the rights of a Guaranteed Party hereunder. Failure to give
notice will not affect the liabilities of the Guarantor hereunder.
20. Application of Payments. The Agent may apply payments received by
it, for the account of the Lenders, from any source against that portion of the
Obligations and the Guaranty Obligations (principal, interest, court costs,
attorneys' fees or other) in such priority and fashion as it may deem
appropriate, subject to the Agent's obligations to the Lenders under the Loan
Agreement.
21. Notice. All notices and other communications hereunder shall be
in writing and shall be deemed to have been validly served, given or delivered
three (3) days after deposit in the United States mails with postage prepaid, as
certified or registered mail and addressed to the party to be notified as
follows:
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<PAGE> 11
If to the Guarantor: Lason Holdings, Inc.
29400 Schoolcraft
Livonia, MI 48150
Attn: Messrs. Robert A. Yanover and Allen
J. Nesbitt
Teleccopy: (313) 525-4619
with copies (which copies shall not constitute notice to the
Guarantor) to:
Mr. Elliott W. Maluth
Golder, Thoma, Cressey, Raunder, Inc.
6100 Sears Tower
Chicago, IL 60606-6402
Telecopy: (312) 382-2201
and
Mr. Laurence Deitch
Seyburn, Kahn, Ginn et al.
2000 Town Center, Suite 1500
Southfield, MI 48075
Telecopy: (810) 351-3550
and
Mr. John L. Kuehn
Kirkland & Ellis
200 East Randolph Drive
Chicago, IL 60601
Telecopy: (312) 861-2200
If to the Agent: First Union National Bank
of North Carolina
Corporate Finance Division
One First Union Center, CORP-8
301 South College Street
Charlotte, North Carolina 28288-0737
Attn: Braxton B. Comer
Telecopy: (704) 374-3300
with copies (which copies shall not constitute notice to the
Agent) to:
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street
1900 Independence Center
Charlotte, North Carolina 28246
Attn: Ken R. Bramlett, Jr.
Telecopy: (704) 378-4000
and, to each Lender, at the address given for such Lender on Annex I to the
Loan Agreement, or for each party hereto, to such other address as such party
may designate for itself by like
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<PAGE> 12
notice. Notice also shall be deemed to have been validly served, given or
delivered on the date of delivery to such party at such address, if notice is
given or delivered by overnight delivery service, hand, telex, telegram or
facsimile transmitter (with confirmed receipt).
22. No Waiver; Amendments. No delay on the part of the Agent, the
Lenders or of any holder of any of the Guaranty Obligations in exercising any of
its options, powers or rights, or partial or single exercise thereof, shall
constitute a waiver thereof. No amendment of any provision of this Guaranty
Agreement shall in any event be effective unless the same shall be in writing
and signed by the Agent, on behalf of the Lenders, and the Guarantor.
23. GOVERNING LAW; APPOINTMENT OF AGENT FOR SERVICE OF PROCESS;
CONSENT TO JURISDICTION. THIS GUARANTY HAS BEEN EXECUTED, DELIVERED AND
ACCEPTED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL
BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE GUARANTEED PARTIES AND THE
GUARANTORS DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, GUARANTOR HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY
FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH CAROLINA
FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER LOAN
DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY OR ANY OF THE
OTHER LOAN DOCUMENTS, OR ANY PROCEEDING TO WHICH ANY GUARANTEED PARTY OR
GUARANTOR IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN
CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF ANY GUARANTEED PARTY OR GUARANTOR. GUARANTOR
IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY
JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION
THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF ANY GUARANTEED PARTY OTHERWISE SO ENTITLED TO BRING ANY ACTION OR
PROCEEDING AGAINST ANY GUARANTOR IN THE COURTS OF ANY OTHER JURISDICTION.
24. WAIVER OF JURY TRIAL. THE GUARANTOR HEREBY WAIVES TRIAL BY JURY
TO THE EXTENT AND ON THE TERMS PROVIDED IN SECTIONS 15.2(b) AND (c) OF THE LOAN
AGREEMENT, WITH THE SAME FORCE AND EFFECT AS IF SUCH PROVISIONS OF THE LOAN
AGREEMENT WERE SET FORTH IN FULL HEREIN AND AS IF EACH REFERENCE IN SUCH
PROVISIONS TO BORROWER REFERRED TO THE GUARANTOR.
25. CONFLICT OF TERMS. The terms of this Guaranty Agreement and the
terms of the Loan Agreement shall be construed and
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<PAGE> 13
interpreted to the fullest extent possible to give effect to all such terms.
In the event of any conflict between the terms of this Guaranty Agreement and
the Loan Agreement, the terms of the Loan Agreement shall control.
IN WITNESS WHEREOF, the Guarantor has executed this Guaranty under seal as
of the day and year first above written.
LASON HOLDINGS, INC.,
a Delaware corporation
By: /s/ Allen J. Nesbitt
-----------------------
Name: Allen J. Nesbitt
Title: President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, as Agent
By: /s/ Braxton B. Comer
------------------------
Braxton B. Comer
Vice President
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<PAGE> 1
EXHIBIT 10.23
GUARANTOR PLEDGE AGREEMENT
THIS GUARANTOR PLEDGE AGREEMENT (this "Pledge Agreement"), dated as of
January 17, 1995, is made by LASON HOLDINGS, INC., a Delaware corporation (the
"Pledgor"), for the benefit of
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association with its principal offices in Charlotte, North Carolina ("First
Union"), in its capacity as agent (the "Agent") for the Lenders (as such term
is defined in the Loan Agreement referred to below).
RECITALS
A. Lason Systems, Inc., a Delaware corporation formerly known as
Lason Acquisition Corp. (the "Borrower"), the Lenders and the Agent entered
into a Loan Agreement dated as of the date hereof (as amended, modified,
renewed, supplemented, restated or replaced from time to time, the "Loan
Agreement"), pursuant to which the Lenders have agreed to extend loans
aggregating up to $25,000,000 to the Borrower. Capitalized terms that are not
defined herein shall have the meanings assigned to such terms in the Loan
Agreement.
B. The Pledgor is the owner of all of the issued and outstanding
capital stock of the Borrower.
C. As a condition to the making of Loans under the Loan
Agreement, the Lenders are requiring, among other things, that the Pledgor (i)
guarantee the Borrower's performance of its Obligations under the Loan
Agreement pursuant to a Guaranty Agreement dated as of the date hereof (the
"Guaranty") and (ii) secure the Pledgor's obligations under such Guaranty (the
"Guaranty Obligations") through a pledge of the Pledgor's stock in the Borrower
as provided herein.
D. The Pledgor will benefit from the extension of credit to the
Borrower under the Loan Agreement, which benefits are hereby acknowledged, and,
accordingly, has agreed to execute and deliver this Pledge Agreement.
STATEMENT OF AGREEMENT
NOW, THEREFORE, in consideration of the willingness of the
Lenders to enter into the Loan Agreement and to agree, subject to the terms and
conditions thereof, to make the Loans to the Borrower pursuant thereto, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Pledgor and the Agent, on behalf of the Lenders,
<PAGE> 2
hereby agree, for themselves, their successors and assigns, as follows:
1. PLEDGE. As collateral security for the full and timely
payment, performance and observance of the Guaranty Obligations, whether now
existing or hereafter arising, the Pledgor herewith deposits and pledges with
the Agent, for the benefit of the Lenders, in form transferable for delivery,
and grants to the Agent, for the benefit of the Lenders, a security interest in
all of the outstanding shares of capital stock of the Borrower owned by the
Pledgor (as more fully described on EXHIBIT A) and such additional property at
any time and from time to time receivable by the Pledgor or by the Agent
hereunder or otherwise distributed in respect of or in exchange for any or all
such shares (herein collectively referred to as the "Pledged Securities"),
together with any and all proceeds and products of any of the foregoing in
whatever form (the Pledged Securities and the proceeds and products thereof may
be referred to collectively as the "Pledged Collateral"). Notwithstanding
anything to the contrary contained herein, cash dividends received by Guarantor
with respect to the Pledged Securities shall not constitute Pledged Collateral
to the extent such cash dividends are permitted by the Loan Agreement.
2. REPRESENTATIONS AND WARRANTIES. The Pledgor represents,
warrants and covenants as follows:
a. The Pledged Securities are duly and validly issued, and upon
delivery hereunder, will be duly and validly pledged to the Agent, for the
benefit of the Lenders, in accordance with applicable law. The Pledgor agrees
to defend the Agent's and any Lender's right, title, lien and security interest
in and to the Pledged Collateral against the claims and demands of all persons
whomsoever.
b. The Pledgor has, and will have upon delivery hereunder, good
title to all of the Pledged Collateral, free and clear of all claims,
mortgages, pledges, liens, encumbrances and security interests of every nature
whatsoever, except those granted to the Agent, for the benefit of the Lenders,
herein and other Permitted Liens. The Pledgor agrees that it will not sell or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral without the prior written consent of the Agent or create or permit
to exist any lien on or security interest in any of the Pledged Collateral,
except for the security interest granted to the Agent, for the benefit of the
Lenders, under this Pledge Agreement.
c. No consent or approval of any governmental or regulatory
authority, or of any securities exchange, was or is necessary to the validity
of this pledge or for the exercise by the Agent, for the benefit of the
Lenders, of the voting or other rights provided for in this Pledge Agreement or
the remedies in respect of the Pledged Collateral pursuant to this Agreement,
except as may be
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<PAGE> 3
required in connection with the sale of the Pledged Securities upon foreclosure
by laws affecting the offering and sale of securities generally.
d. Upon delivery to the Agent, on behalf of the Lenders, of the
stock certificates evidencing the Pledged Securities, accompanied by properly
executed stock powers, the security interest and lien granted hereunder will
constitute a valid, perfected first priority security interest in and lien upon
the Pledged Collateral except for Permitted Liens.
e. EXHIBIT A sets forth the percentage ownership of the Pledgor
in the Borrower. There are no shareholders' agreements with respect to the
voting or transfer of any stock of the Borrower or with respect to the
Borrower's affairs or any shareholders' preemptive rights, rights of first
refusal or other similar rights with respect to the issuance of stock by the
Borrower.
3. EVENT OF DEFAULT. The occurrence of any one of the following
shall constitute an "Event of Default" hereunder: (a) an Event of Default as
defined in the Guaranty, or (b) the failure of the Pledgor to perform its
obligations hereunder if such failure is not cured to the Agent's satisfaction
within thirty (30) days after the Pledgor acquires knowledge thereof.
4. VOTING RIGHTS. So long as no Event of Default shall have
occurred and be continuing, the Pledgor shall be entitled to exercise the
voting power with respect to the Pledged Securities, but only in a manner
consistent with the terms hereof and of the Notes, the Loan Agreement and any
other agreement or instrument evidencing or relating to the Obligations or the
Guaranty Obligations, and for that purpose the Agent shall (if the Pledged
Securities shall be registered in the name of the Agent or its nominee) execute
or cause to be executed from time to time, at the expense of the Pledgor, such
proxies or other instruments in favor of the Pledgor, in such form and for such
purposes as reasonably required by the Pledgor and as shall be specified in a
written request therefor by the President or a Vice President of the Pledgor to
enable the Pledgor to exercise such voting power with respect to the Pledged
Securities.
5. VOTING RIGHTS UPON EVENT OF DEFAULT. During the existence of
an Event of Default, the Agent shall have the sole and absolute right, in
addition to any other rights herein contained, to exercise all voting power
with respect to the Pledged Securities, and in such event the Pledgor hereby
irrevocably appoints the Agent as the Pledgor's true and lawful proxy to vote
such shares in any manner that the Agent, for the benefit of the Lenders, deems
advisable for or against all matters that may be submitted to a vote of such
shareholders.
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<PAGE> 4
6. DIVIDENDS; DISTRIBUTIONS. During the existence of an Event of
Default, if any dividends or distributions of any kind are paid upon or with
respect to any of the Pledged Securities, such sum shall be paid over to the
Agent, for the benefit of the Lenders, to be held as additional collateral
hereunder. If, at any time, any stock dividend shall be declared on any of the
Pledged Securities, or any shares of stock or fractions thereof shall be issued
pursuant to any stock split involving any of the Pledged Securities, or any
distribution of capital shall be made on any of the Pledged Securities, or any
shares, obligations or other property shall be distributed upon or with respect
to the Pledged Securities pursuant to a recapitalization or reclassification of
the capital of the issuer thereof, or pursuant to the dissolution, liquidation
(in whole or in part), bankruptcy or reorganization of such issuer, or to the
merger or consolidation of such issuer with or into another corporation, then
in any such case the stock dividends, shares of stock or fractions thereof,
distributions of capital, obligations or other property so distributed shall be
delivered to the Agent, to be held by it as additional collateral hereunder,
and all of the same shall constitute Pledged Collateral for all purposes
hereof; and the Pledgor shall deliver to the Agent, for the benefit of the
Lenders, an amended EXHIBIT A hereto to reflect the additional Pledged
Securities delivered to the Agent. If any such dividends or distributions are
received by the Pledgor, they shall be received in trust by the Agent, for the
benefit of the Lenders, be segregated from the other property or funds of the
Pledgor, and shall be forthwith delivered to the Agent, for the benefit of the
Lenders, as Pledged Collateral in the same form as so received (with any
necessary endorsement).
During the existence of an Event of Default, any cash received and
retained by the Agent as additional collateral hereunder pursuant to the
foregoing provisions shall be held in an interest-bearing account for the
benefit of the Pledgor and may at any time and from time to time be applied (in
whole or in part) by the Agent, for the benefit of the Lenders, at its option
to the payment of the Guaranty Obligations.
7. TRANSFER UPON EVENT OF DEFAULT. During the existence of an
Event of Default, the Agent, on behalf of the Lenders, may, at its option and
without notice to the Pledgor, cause all or any of the Pledged Securities to be
transferred to or registered in its name or the name of its nominee or
nominees.
8. REMEDIES; SALE OF PLEDGED COLLATERAL. The Agent, on behalf of
the Lenders, shall have, in addition to the rights and remedies expressly
granted hereunder, all rights and remedies of a secured party under the Uniform
Commercial Code. During the existence of an Event of Default, the Agent, on
behalf of the Lenders, without obligation to resort to other security, shall
have the right at any time and from time to time to sell, resell, assign and
deliver, in its discretion, all or any of the Pledged
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<PAGE> 5
Collateral, in one or more parcels at the same or different times, and all
right, title and interest, claim and demand therein and right of redemption
thereof, on any securities exchange on which the Pledged Securities may be
listed, or at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices as the Agent may deem satisfactory, and
in connection therewith the Agent may grant options. If any of the Pledged
Collateral is sold by the Agent, for the benefit of the Lenders, upon credit or
for future delivery, the Agent shall not be liable for the failure of the
purchaser to purchase or pay for the same and, in the event of any such
failure, the Agent, for the benefit of the Lenders, may resell such Pledged
Collateral. In no event shall the Pledgor be credited with any part of the
proceeds of sale of any Pledged Collateral until cash payment of such sale has
actually been received by the Agent. Each purchaser at any sale effected by
the Agent, for the benefit of the Lenders, shall hold the property sold
absolutely, free from any claim or right of whatsoever kind, including any
equity or right of redemption of the Pledgor, and the Pledgor hereby
specifically waives all rights of redemption, stay or appraisal which it has or
may have under any rule of law or statute now existing or hereafter adopted.
No demand, advertisement or notice, all of which are hereby expressly waived by
the Pledgor, shall be required in connection with any sale or other disposition
of any part of the Pledged Collateral that threatens to decline speedily in
value or that is of a type customarily sold in a recognized market; otherwise,
the Agent shall give the Pledgor at least ten (10) days' prior notice of the
time and place of any public sale and of the time after which any private sale
or other disposition is to be made, which notice the Pledgor agrees is
reasonable, all other demand, advertisements and notices being hereby waived.
The Agent shall not be obligated to make any sale of Pledged Collateral if it
shall determine not to do so, regardless of the fact that notice of sale may
have been given. The Agent may, without notice or publication, adjourn any
public or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. Upon each private sale of Pledged Collateral of a type customarily
sold in a recognized market and upon each public sale, the Agent, the Lenders
or any holder of any of the Guaranty Obligations, may purchase all or any of
the Pledged Collateral being sold, free from any equity or right of redemption,
which is hereby waived and released by the Pledgor, and may make payment
therefor (by endorsement without recourse) of the Guaranty Obligations in lieu
of cash to the amount then due thereon, which the Pledgor hereby agrees to
accept. In the case of all sales of Pledged Collateral, public or private,
after all costs and expenses of every kind for sale or delivery, including
brokers' and reasonable attorneys' fees, shall be deducted from the proceeds of
the sale, the Agent, for the benefit of the Lenders, shall apply any residue to
the payment of the Guaranty Obligations. The balance, if any, remaining after
payment in full of all of the
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<PAGE> 6
Guaranty Obligations shall be paid to the Pledgor, subject to any duty of the
Agent and the Lenders imposed by law to the holder of any subordinate security
interest in the Pledged Securities known to the Agent or the Lenders.
9. PUBLIC SALE. The Pledgor acknowledges and agrees that any
public sale made pursuant to the terms of this Pledge Agreement may be effected
in any manner permitted under applicable law (including without limitation a
public sale of any or all of the Pledged Collateral, upon the giving of notice
to the Pledgor and no more than ten private investment firms in accordance with
SECTION 8 hereof and the posting of notice of such sale in the courthouse in
the county in which such sale is to be held and the publication of notice in
the Wall Street Journal and at least one newspaper of general circulation in
the locality where the sale is to be held) to a single purchaser who may be
required to agree, among other things, to acquire such Pledged Securities for
its own account for investment and not with a view toward the distribution or
resale thereof. The Pledgor agrees that the Agent, upon becoming entitled to
effect such a public sale in accordance with the terms hereof, may furnish
prospective purchasers with such information concerning the financial position
of the Pledgor as may be in the possession of the Agent. The Pledgor hereby
authorizes the Agent to take any other actions in connection with such public
sale to ensure compliance with all applicable laws, including without
limitation all federal and state securities laws, and agrees that such a public
sale made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
10. PRIVATE SALE. The Pledgor recognizes that the Agent, on
behalf of the Lenders, may in its discretion sell all or a part of the Pledged
Collateral in one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire such Pledged
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor agrees (i) that if the Agent
shall, pursuant to the terms of this Pledge Agreement, sell or cause the
Pledged Securities or any portion thereof to be sold at private sale, the Agent
shall have the right to rely upon the advice and opinion of any national
brokerage or investment firm having a seat on the New York Stock Exchange as to
the best manner in which to expose the Pledged Securities for sale and as to
the best price reasonably obtainable at the private sale thereof, and (ii) that
private sales made under the foregoing circumstances shall be deemed to have
been made in a commercially reasonable manner. The Pledgor waives any claims
against the Agent or any Lender arising by reason of the fact that the price at
which the Pledged Collateral may have been sold at any private sale effected by
the Agent was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Guaranty Obligations, even if
the Agent accepts the first offer received and does not offer the Pledged
Collateral to more than one offeree.
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<PAGE> 7
11. FURTHER ASSURANCES; WAIVERS. In furtherance of the exercise
by the Agent of the power of sale granted to it hereunder, the Pledgor agrees
that, upon request of the Agent and without expense to the Agent, the Pledgor
will, if deemed necessary by the Agent or its counsel in connection with any
sale, use its best efforts to obtain all necessary governmental approvals for
the offering and sale by the Agent of any capital stock or indebtedness subject
to this Pledge Agreement and proposed to be offered and sold by the Agent
pursuant hereto; provided, however, that the Pledgor shall have no obligation
to pay any expenses incurred by the Agent in connection with any public
offering of the Pledge Collateral, other than a public sale conducted in
accordance with SECTION 9 hereof. The Pledgor shall, at the Pledgor's expense,
do such further acts and things, and execute and deliver such agreements and
instruments, as the Agent or any Lender may at any time request in connection
with the administration or enforcement of this Pledge Agreement or related to
the Pledged Collateral or any part thereof or in order better to assure and
confirm unto the Agent and the Lenders their respective rights, powers and
remedies hereunder. To the extent that it lawfully may, the Pledgor agrees
that it will not invoke or utilize any law now or hereafter in force, including
without limitation any right to prior notice or judicial hearing in connection
with the Agent's taking possession or the Agent's disposition of any of the
Pledged Collateral and any appraisal, valuation, stay, extension, moratorium or
redemption law, which might cause delay in or impede the enforcement of the
rights of the Agent and the Lenders under this Pledge Agreement, or the
absolute sale of the whole or any part of the Pledged Collateral or the
possession thereof by any purchaser at any sale hereunder, and hereby waives
the benefit of all such laws. The Pledgor agrees that it will not interfere
with any right, power or remedy of the Agent or any Lender provided for in this
Agreement or now or hereafter existing at law or in equity or by statute or
otherwise, or the exercise or beginning of the exercise by the Agent or any
Lender of any one or more of such rights, powers or remedies. The Pledgor
hereby waives diligence, presentment, demand of payment, protest or notice with
respect to the Guaranty Obligations, and all other demands whatsoever. The
Pledgor further waives all notices of the existence, creation or incurring of
new or additional indebtedness, arising either from additional loans extended
to the Pledgor or otherwise.
12. CUMULATIVE REMEDIES. The remedies provided herein in favor of
the Agent, for the benefit of the Lenders, shall not be deemed exclusive, but
shall be cumulative, and shall be in addition to all other remedies in favor of
the Agent and any Lender existing at law or in equity.
13. POWER OF EXECUTION. During the existence of an Event of
Default, the Agent, for the benefit of the Lenders, shall have the right, for
and in the name, place and stead of the Pledgor, to
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<PAGE> 8
execute endorsements, assignments or other instruments of conveyance or
transfer with respect to all or any of the Pledged Collateral.
14. LIEN ABSOLUTE. All rights of the Agent and the Lenders
hereunder, and all obligations of the Pledgor hereunder, shall be absolute and
unconditional irrespective of:
a. any lack of validity or enforceability of the Notes, the Loan
Agreement or any other agreement or instrument governing or evidencing any of
the Obligations or the Guaranty Obligations;
b. any change in the time, manner or place of payment of, or in
any other term of, all or any part of the Obligations or the Guaranty
Obligations (including without limitation any increases or decreases in the
principal amount of or interest on the Obligations), or any other amendment or
waiver of or any consent to any departure from the Notes, the Loan Agreement,
or any other agreement or instrument governing or evidencing any of the
Obligations or the Guaranty Obligations;
c. any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations or the Guaranty
Obligations; or
d. any other circumstance that might otherwise constitute a
defense available to, or a discharge of, the Pledgor in respect of the
Obligations, the Guaranty Obligations, the Guaranty or this Pledge Agreement.
15. CARE OF PLEDGED COLLATERAL. Neither the Agent nor any Lender
shall have any duty as to the collection or protection of the Pledged
Collateral or any income thereon or as to the preservation of any rights
pertaining thereto, beyond the safe custody of any Pledged Collateral actually
in its possession. Neither the Agent nor any Lender shall have any
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, redemptions, offers, tenders or other
matters relative to any Pledged Collateral, whether or not the Agent or any
such Lender has or is deemed to have knowledge of such matters, or (ii) taking
any necessary steps to preserve rights against any parties with respect to any
Pledged Collateral. The Pledgor releases the Agent and each Lender from any
claims, causes of action and demands at any time arising out of or with respect
to this Pledge Agreement, the Pledged Collateral or any actions taken or
omitted to be taken by the Agent, for the benefit of the Lenders with respect
thereto, and the Pledgor hereby agrees to hold the Agent and each Lender
harmless from and with respect to any and all such claims, causes of action and
demands other than those resulting from the gross negligence or willful
misconduct of the Agent or any Lender.
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<PAGE> 9
16. AGENT APPOINTED ATTORNEY-IN-FACT. Upon the occurrence and
during the continuance of any Event of Default, the Pledgor hereby appoints the
Agent, for the benefit of the Lenders, or the Agent's designees, successors or
assigns as the Pledgor's attorney-in-fact for the purpose of carrying out the
provisions of this Pledge Agreement and taking any action and executing any
instrument that the Agent, for the benefit of the Lenders, may deem necessary
or advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, the Agent shall have the right and power to
receive, endorse and collect all checks and other orders for the payment of
money made payable to the Pledgor representing any interest or dividend or
other distribution payable in respect of the Pledged Collateral that the Agent,
for the benefit of the Lenders, is entitled to receive hereunder or any part
thereof and to give full discharge for the same, and, upon the occurrence and
during the continuance of an Event of Default, to arrange for the transfer of
all or any part of the Pledged Collateral on the books of the issuer or issuers
of the Pledged Securities to the name of the Agent or the Agent's nominee.
17. NO WAIVER; AMENDMENTS. No delay on the part of the Agent, the
Lenders or of any holder of any of the Guaranty Obligations in exercising any
of its options, powers or rights, or partial or single exercise thereof, shall
constitute a waiver thereof. No amendment of any provision of this Pledge
Agreement shall in any event be effective unless the same shall be in writing
and signed by the Agent and the Pledgor.
18. EXPENSES. The Pledgor agrees to pay the Agent or any Lender,
upon its demand, all of such Agent's or Lender's reasonable out- of-pocket
expenses (including its reasonable attorneys' fees) incurred in connection with
the administration or enforcement of this Pledge Agreement, the care and
custody of the Pledged Collateral (or any part thereof), and the sale or
collection of the Pledged Collateral (or any part thereof). If the Pledgor
fails to do any act or thing which the Pledgor has covenanted to do hereunder,
or if any representation or warranty on the part of the Pledgor contained
herein is breached in any material respect, the Agent, on behalf of the
Lenders, may (but shall not be obligated to) do the same or cause it to be
done, or remedy any such breach, and there shall be added to the liabilities of
the Pledgor hereunder the cost or expense to the Agent in so doing, and any and
all amounts expended by the Agent in taking any such action shall be repayable
to the Agent, for the benefit of the Lenders, by the Pledgor on demand by the
Agent.
19. NOTICE. All notices and other communications given to or made
upon any party hereto in connection with this Pledge Agreement shall be given
in accordance with the provisions for notice in the Guaranty.
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<PAGE> 10
20. CAPTIONS. The captions to the various sections of this Pledge
Agreement have been inserted for convenience only and shall not limit or affect
the terms hereof.
21. SEVERABILITY. If for any reason any provision or provisions
hereof are determined to be invalid or contrary to any existing or future law,
such invalidity shall not impair the operation of or affect those portions of
this Agreement that are valid.
22. COUNTERPARTS. This Pledge Agreement may be executed in any
number of counterparts, which shall, collectively and separately, constitute
but one and the same agreement.
23. GOVERNING LAW. THIS PLEDGE AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE AGENT AND THE LENDERS AND THE PLEDGOR HEREUNDER SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS AND JUDICIAL
DECISIONS OF THE STATE OF NORTH CAROLINA APPLICABLE TO CONTRACTS EXECUTED AND
TO BE PERFORMED IN SUCH STATE (WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES),
CANNOT BE CHANGED ORALLY AND SHALL BIND AND INURE TO THE BENEFIT OF THE
PLEDGOR, THE AGENT AND THE LENDERS AND THEIR RESPECTIVE HEIRS, SUCCESSORS AND
ASSIGNS.
24. TERMINATION; ASSIGNMENT. This Pledge Agreement and the
security interests in the Pledged Collateral created hereby will terminate when
all of the Guaranty Obligations have been paid and finally discharged in full,
when the Lenders' obligation to make advances under the Loan Agreement has been
terminated, and when any and all Swap Agreements have expired or been cash
settled. In the event of a sale or assignment by the Agent or any Lender of
all or any of the Guaranty Obligations held by it, the Agent or such Lender may
assign or transfer its rights and interest under this Pledge Agreement in whole
or in part to the purchaser or purchasers of such Guaranty Obligations,
whereupon such purchaser or purchasers will become vested with all of the
powers, rights and responsibilities of the Agent or such Lender hereunder, and
the Agent or such Lender, as applicable, will thereafter be forever released
and fully discharged from any liability or responsibility hereunder with
respect to the rights, interest and responsibilities so assigned, other than
liabilities arising out of actions taken prior to the date of assignment.
Upon termination of this Pledge Agreement or upon any partial release
of Pledged Collateral to the Pledgor, the Agent shall, upon the request of the
Pledgor, promptly assign, transfer and deliver to the Pledgor (without
recourse, without representation or warranty and on an "as is" basis), any such
released Pledged Collateral that is in the possession of the Agent or its
subagents (to the extent not sold or otherwise applied pursuant to the terms
hereof), together with proper instruments (including Uniform Commercial Code
termination statements) acknowledging the
10
<PAGE> 11
termination of this Pledge Agreement or the release of such Pledged Collateral,
as applicable.
25. CONFLICT OF TERMS. The terms of this Pledge Agreement and the
terms of the Loan Agreement shall be construed and interpreted to the fullest
extent possible to give effect to all such terms. In the event of any conflict
between the terms of this Pledge Agreement and the Loan Agreement, the terms of
the Loan Agreement shall control.
IN WITNESS WHEREOF, the Pledgor has caused this Pledge Agreement to be
duly executed under seal as of the day and year first above written.
LASON HOLDINGS, INC.
By: /s/ Allen J. Nesbitt
-----------------------
Name: Allen J. Nesbitt
Title: President
Accepted by:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, AS AGENT
By:/s/ Braxton B. Comer
-------------------------
Braxton B. Comer
Vice President
11
<PAGE> 12
The undersigned corporation joins in the execution of this Pledge
Agreement to represent and warrant to the Agent and the Lenders that EXHIBIT A
attached hereto accurately and completely describes the equity ownership of
such corporation, and the stock certificates representing such equity
ownership, and to covenant to the Agent and the Lenders that no further
securities of such corporation (whether stock, warrants, options or otherwise),
or stock certificates, shall be issued during the term of this Pledge Agreement
without the Agent's prior written consent. To the extent that it lawfully may,
the undersigned corporation agrees that it will not invoke or utilize any law
now or hereafter in force, including without limitation any right to prior
notice or judicial hearing in connection with the Agent's taking possession or
the Agent's disposition of any of the Pledged Collateral and any appraisal,
valuation, stay, extension, moratorium or redemption law, which might cause
delay in or impede the enforcement of the rights of the Agent and the Lenders
under this Pledge Agreement, or the absolute sale of the whole or any part of
the Pledged Collateral or the possession thereof by any purchaser at any sale
hereunder, and hereby waives the benefit of all such laws. The undersigned
corporation agrees that it will not interfere with any right, power and remedy
of the Agent or any Lender provided for in this Pledge Agreement or now or
hereafter existing at law or in equity or by statute or otherwise, or the
exercise or beginning of the exercise by the Agent or any Lender of any one or
more of such rights, powers or remedies.
LASON SYSTEMS, INC.
By:/s/ Allen J. Nesbitt
------------------------
Allen J. Nesbitt
------------------------
____________ President
<PAGE> 13
Exhibit A to Pledge Agreement
First Union National Bank
of North Carolina, as Agent
Lason Systems, Inc.
January 17, 1995 / $25,000,000
_________________________________
EXHIBIT A
<TABLE>
<CAPTION>
Name of Class of Number of Percentage of Certificate
Issuer Stock Shares Outstanding Shares Number
------ ----- ------ ------------------ ------
<S> <C> <C> <C> <C>
Lason Systems, Inc. Common 1,000 100% 1
</TABLE>
<PAGE> 1
EXHIBIT 10.24
FIRST AMENDMENT TO LOAN AGREEMENT
THIS FIRST AMENDMENT dated as of March 25, 1996 (this "Amendment"), is made
and entered into by and between
LASON SYSTEMS, INC., a Delaware corporation with its principal offices in
Livonia, Michigan (the "Borrower");
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association
with its principal offices in Charlotte, North Carolina ("First Union"), and the
other financial institutions that are now or hereafter become parties to the
Loan Agreement as hereinafter defined (collectively, the "Lenders"); and
FIRST UNION, as Agent for the Lenders to the extent described in ARTICLE
XII of the Loan Agreement (in such capacity, the "Agent").
RECITALS
A. The Borrower, the Lenders, and the Agent entered into a Loan Agreement
dated as of January 17, 1995 (together with all amendments and modifications
thereto, the "Loan Agreement"). All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Loan Agreement.
B. Pursuant to the Loan Agreement and the other Loan Documents, the
Lenders have made Term Loans to the Borrower in the principal amount of
$15,000,000 and have made a Revolving Line of Credit available to the Borrower
in the maximum principal amount of the lesser of (i) $10,000,000 or (ii) the
Borrowing Base.
C. The Borrower has informed the Agent and Lenders that it desires to
purchase approximately 65% of the Stock of Delaware Legal Copy, Inc., a Delaware
corporation ("DLC"). The Borrower desires to Borrow funds under the Revolving
Line of Credit for payment of the purchase price of the Stock of DLC (the "DLC
Acquisition").
D. The Borrower has requested that the Agent and the Lenders (i) waive the
Borrowing Base limitation for Revolving Loans, (ii) waive compliance with
certain other covenants in the Loan Agreement, and (iii) permit a borrowing
under the Revolving Line of Credit for purposes of the Acquisition.
E. The Borrower, the Lenders, and the Agent desire to amend the Loan
Agreement hereby in order to permit the borrowing and Acquisition, all upon the
terms and conditions and subject to the limitations set forth herein.
<PAGE> 2
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders, and the
Agent hereby agree as follows:
ARTICLE I
AMENDMENT
1.1. Section 2.3(c) - Mandatory Prepayment of Term Loans. Section 2.3(c)
of the Loan Agreement is amended by adding the following at the end of such
section:
Notwithstanding the foregoing, with respect to the mandatory
prepayment of the Term Loans due no later than March 30, 1996, the
Borrower may make such mandatory prepayment by no later than May 15,
1996.
1.2. Section 3.1 - Revolving Loans. Section 3.1 of the Loan Agreement is
amended by adding the following new subsection (f) at the end of such section:
(f) Notwithstanding the foregoing provisions of this Section 3.1,
upon the closing of the Amendment, the Borrower may, without regard to
the Borrowing Base limitation but subject to the other terms and
conditions of the Loan Agreement and the Amendment, borrow the full
amount of the Total Revolving Credit Commitment; provided that at no
time may the aggregate principal amount outstanding under the
Revolving Line of Credit exceed the Total Revolving Credit Commitment.
Such borrowings shall constitute Base Rate Loans under the Revolving
Line of Credit. The Borrower agrees that on May 15, 1996, the
Borrowing Base limitations hereof shall be reinstated in all respects
and that it will repay to the Lenders all amounts by which the
Revolving Loans outstanding at that time exceed the Borrowing Base.
1.3. Section 4.1 - Use of Proceeds. Section 4.1 of the Loan Agreement is
amended to allow the borrowing of up to $1,500,000 under the Revolving Credit
Facility for the purpose of the Acquisition by the Borrower of the DLC Stock.
1.4. Section 8.2 - Acquisitions. Section 8.2 of the Loan Agreement is
amended to allow the DLC Acquisition upon the terms set forth in this Amendment,
provided that the amount of such Acquisition shall
-2-
<PAGE> 3
be counted towards the limit on all Acquisitions as stated in Section 8.2 of
the Loan Agreement.
ARTICLE II
WAIVERS
2.1. Section 8.10 - Capital Expenditures. The Agent and the Lenders
hereby waive, solely to the extent expressly provided herein, the Event of
Default caused by a violation of Section 8.10 of the Loan Agreement and
resulting from the Borrower making Capital Expenditures during the fiscal year
ended December 31, 1995 that exceed the Permitted Capital Expenditures for such
period by an amount that is less than $200,000.
2.2. Section 8.13 - Free Cash Flow. The Agent and the Lenders hereby
waive, solely to the extent expressly provided herein, the Event of Default
caused by a violation of Section 8.13 of the Loan Agreement and resulting from
the Borrower failing to have Operating Cash Flow minus Capital Expenditures of
at least $7,000,000 for the four fiscal quarters ended December 31, 1995;
provided, however that the Borrower's Operating Cash Flow minus Capital
Expenditures for such period must exceed $6,100,000.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
3.1. Effectiveness of Loan Agreement and Loan Documents. The Loan
Agreement and other Loan Documents are in full force and effect and shall remain
in full force and effect following the execution of this Amendment.
3.2. Compliance with Loan Agreement and Loan Documents. The Borrower is in
compliance with all terms and provisions set forth in the Loan Agreement to be
observed or performed, except as permitted or waived by the express terms of
this Amendment.
3.3. Representations in Loan Agreement. The representations and warranties
of the Borrower set forth in the Loan Agreement, except for those relating to a
specific date other than the date hereof, are true and correct in all material
respects on and as of the date hereof as if made on and as of the date hereof.
3.4. No Event of Default. No Event of Default, nor any event that upon
notice, lapse of time or both would become an Event of Default
-3-
<PAGE> 4
is continuing other than those, if any, expressly waived by this Amendment.
3.5. Security Agreement and Financing Statements. The Borrower shall cause
DLC to grant to the Agent, on behalf of the Lenders, a first priority security
interest in all of the assets of DLC, including the execution and filing of all
Financing Statements and all other filings or recordations necessary to perfect
the security interests of the Agent in such collateral, by a date not later than
May 15, 1996.
ARTICLE IV
CONDITIONS PRECEDENT
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
4.1. Borrower Pledge Agreement. The Borrower shall have executed and
delivered to the Agent, for the benefit of the Lenders, a Pledge Agreement
pursuant to which the Borrower shall pledge and deliver to the Agent the Stock
of DLC acquired in the DLC Acquisition.
4.2. Guarantor Acknowledgement and Consent. The Guarantor shall have
executed and delivered to the Agent, for the benefit of the Lenders, an
acknowledgement and consent to this Amendment in form and substance satisfactory
to the Agent, including, without limitation an acknowledgement that the Guaranty
Agreement is in full force and effect and shall remain in full force and effect
following the execution of this Amendment.
4.3. Officer's Certificate. The Agent shall have received a certificate of
the Chief Executive Officer of the Borrower in form and substance reasonably
satisfactory to the Agent.
4.4. Secretary's Certificate. The Agent shall have received a certificate
of the Assistant Secretary of the Borrower certifying (i) that the charter,
articles or certificate of incorporation or other organizational documents of
the Borrower and the bylaws (or equivalent regulations) of the Borrower have not
been amended since the date of the Loan Agreement; (ii) that attached thereto is
a true and complete copy of resolutions adopted by the Board of Directors of the
Borrower authorizing the execution, delivery and performance of this Amendment;
and (iii) as to the incumbency and genuineness of the signature of each officer
of the Borrower executing this Amendment or any of the other Loan Documents, as
applicable.
-4-
<PAGE> 5
4.5. Payment of Fees. The Agent and each Lender shall have received the
fees relating to this Amendment as expressly agreed between the Borrower and the
Agent.
ARTICLE V
GENERAL
5.1. Full Force and Effect. As expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof, and no change or modification in any of the terms thereof
except as specifically set forth herein has been effected. As used in the Loan
Agreement, "hereinafter," "hereto," "hereof," and words of similar import shall,
unless the context otherwise requires, mean the Loan Agreement as amended by
this Amendment.
5.2. Applicable Law. This Amendment shall be governed by and construed in
accordance with the internal laws and judicial decisions of the State of North
Carolina.
5.3. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
5.4. Expenses. The Borrower agrees to pay all out-of-pocket expenses
incurred by the Lenders in connection with the preparation, execution and
delivery of this Amendment, including, without limitation, all reasonable
attorneys' fees.
5.5. Further Assurance. The Borrower shall execute and deliver to the
Lenders such documents, certificates and opinions as the Lender may reasonably
request to effect the amendment contemplated by this Amendment.
5.6. Headings. The headings of this Amendment are for the purposes of
reference only and shall not affect the construction of this Amendment.
5.7. Valid Amendment. The parties acknowledge that this Amendment complies
in all respects with SECTION 15.8 of the Loan Agreement, which sets forth the
requirements for amendments thereto.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the Borrower, the Lenders, and the Agent have executed
this Amendment as of the date hereof.
LASON SYSTEMS, INC.
[CORPORATE SEAL] /s/ Gary L. Monroe
-----------------------
Gary L. Monroe,
Chief Executive Officer
ATTEST:
/s/ Laurence B. Deitch
- -------------------------
Laurence B. Deitch,
Assistant Secretary
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/ Henry R. Biedrzycki
-----------------------
Title: Vice President
---------------------
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT
By: /s/ Henry R. Biedrzycki
-----------------------
Title: Vice President
--------------------
-6-
<PAGE> 7
ACKNOWLEDGMENT AND CONSENT OF LASON HOLDINGS, INC.
First Union National Bank March 25, 1996
of North Carolina, as Agent
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0735
Re: FIRST AMENDMENT TO LOAN AGREEMENT, DATED AS OF THE
DATE HEREOF BY AND BETWEEN LASON SYSTEMS, INC. (THE
"BORROWER") AND FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT, AND VARIOUS LENDERS
(COLLECTIVELY, THE "LENDERS")
Ladies and Gentlemen:
Lason Holdings, Inc. (the "Guarantor") has executed the Guaranty Agreement
and the Guarantor Pledge Agreement, each dated as of January 17, 1995, in favor
of the Lenders and for the benefit of the Borrower, guaranteeing the Borrower's
obligations under a Loan Agreement dated January 17, 1995 by and among the
Borrower, the Agent and the Lenders (the "Loan Agreement").
The Guarantor hereby acknowledges that the Borrower and the Lenders have
amended the Loan Agreement by a First Amendment dated as of the date hereof (the
"Amendment"). The agreements of the Guarantor made herein are to induce the
Lenders to continue and to amend the Loan Agreement, and the Guarantor
acknowledges that the Lenders would not amend the Loan Agreement in the absence
of the agreements of the Guarantor contained herein.
The Guarantor hereby irrevocably approves of and consents to the Amendment
and all other Loan Documents contemplated thereby, agrees that its obligations
under the Guaranty and the Guarantor Pledge Agreement shall not be diminished as
a result of the execution of the Amendment, and ratifies and confirms (i) that
its obligations under the Guaranty shall include a guarantee of the payment of
the Obligations (as defined in the Loan Agreement) of the Borrower, subject to
all of the qualifications and limitations set forth therein, (ii) that such
guarantee shall be secured by the Agent's security interest in the collateral
granted under the Guarantor Pledge Agreement, including without limitation the
Stock of the Borrower, and (iii) that the Guaranty and the Guarantor Pledge
Agreement shall remain in full force and effect.
Capitalized terms not defined herein shall have the meanings assigned to
such terms in the Loan Agreement.
<PAGE> 8
This letter has been delivered in the State of North Carolina, and the
agreements contained herein shall be governed by the internal laws of the State
of North Carolina, without regard to the choice of law principles thereof. The
agreements contained herein shall be effective as of the date hereof.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Gary L. Monroe
-------------------------
Title: CEO
----------------------
<PAGE> 1
EXHIBIT 10.25
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT dated as of May 15, 1996 (this "Amendment"), is
made and entered into by and between
LASON SYSTEMS, INC., a Delaware corporation with its principal offices
in Livonia, Michigan (the "Borrower");
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association with its principal offices in Charlotte, North Carolina ("First
Union"), and the other financial institutions that are now or hereafter become
parties to the Loan Agreement as hereinafter defined (collectively, the
"Lenders"); and
FIRST UNION, as Agent for the Lenders to the extent described in
ARTICLE XII of the Loan Agreement (in such capacity, the "Agent").
RECITALS
A. The Borrower, the Lenders, and the Agent entered into a Loan
Agreement dated as of January 17, 1995 (together with all amendments and
modifications thereto, the "Loan Agreement"). All capitalized terms not
otherwise defined herein shall have the meanings set forth in the Loan
Agreement.
B. Pursuant to the Loan Agreement and the other Loan Documents,
the Lenders have made Term Loans to the Borrower in the principal amount of
$15,000,000 and have made a Revolving Line of Credit available to the Borrower
in the maximum principal amount of the lesser of (i) $10,000,000 or (ii) the
Borrowing Base.
C. The Borrower, the Lenders, and the Agent entered into a First
Amendment to Loan Agreement dated as of March 25, 1996 (the "First Amendment")
to waive the Borrowing Base limitation with respect to the Revolving Loans
until May 15, 1996.
D. The Borrower has requested that the Agent and the Lenders
extend the waiver of the Borrowing Base limitation for Revolving Loans to and
including May 31, 1996.
E. The Borrower, the Lenders, and the Agent desire to amend the
Loan Agreement hereby in order to extend the waiver of the Borrowing Base
limitation for Revolving Loans to and including May 31, 1996.
<PAGE> 2
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders, and
the Agent hereby agree as follows:
ARTICLE I
AMENDMENT
1.1. Section 3.1 - Revolving Loans. Section 3.1(f) of the Loan
Agreement, as amended by the First Amendment, is amended by deleting the final
sentence of the subsection and substituting the following in its place:
The Borrower agrees that on May 31, 1996, the Borrowing Base
limitations hereof shall be reinstated in all respects and
that it will repay to the Lenders all amounts by which the
Revolving Loans outstanding at that time exceed the Borrowing
Base.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
2.1. Effectiveness of Loan Agreement and Loan Documents. The Loan
Agreement and other Loan Documents are in full force and effect and shall
remain in full force and effect following the execution of this Amendment.
2.2. Compliance with Loan Agreement and Loan Documents. The
Borrower is in compliance with all terms and provisions set forth in the Loan
Agreement to be observed or performed, except as permitted or waived by the
express terms of this Amendment.
2.3. Representations in Loan Agreement. The representations and
warranties of the Borrower set forth in the Loan Agreement, except for those
relating to a specific date other than the date hereof, are true and correct in
all material respects on and as of the date hereof as if made on and as of the
date hereof.
2.4. No Event of Default. No Event of Default, nor any event that
upon notice, lapse of time or both would become an Event of Default is
continuing other than those, if any, expressly waived by this Amendment.
-2-
<PAGE> 3
ARTICLE III
CONDITIONS PRECEDENT
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
3.1. Guarantor Acknowledgement and Consent. The Guarantor shall
have executed and delivered to the Agent, for the benefit of the Lenders, an
acknowledgement and consent to this Amendment in form and substance
satisfactory to the Agent, including, without limitation an acknowledgement
that the Guaranty Agreement is in full force and effect and shall remain in
full force and effect following the execution of this Amendment.
3.2. Officer's Certificate. The Agent shall have received a
certificate of the Chief Executive Officer of the Borrower in form and
substance reasonably satisfactory to the Agent.
3.3. Secretary's Certificate. The Agent shall have received a
certificate of the Assistant Secretary of the Borrower certifying (i) that the
charter, articles or certificate of incorporation or other organizational
documents of the Borrower and the bylaws (or equivalent regulations) of the
Borrower have not been amended since the date of the Loan Agreement; (ii) that
attached thereto is a true and complete copy of resolutions adopted by the
Board of Directors of the Borrower authorizing the execution, delivery and
performance of this Amendment; and (iii) as to the incumbency and genuineness
of the signature of each officer of the Borrower executing this Amendment or
any of the other Loan Documents, as applicable.
3.4. Payment of Fees. The Agent and each Lender shall have
received the fees relating to this Amendment as expressly agreed between the
Borrower and the Agent.
ARTICLE IV
GENERAL
4.1. Full Force and Effect. As expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof, and no change or modification in any of the terms thereof
except as specifically set forth herein has been effected. As used in the Loan
Agreement, "hereinafter," "hereto," "hereof," and words of similar import
shall, unless the context otherwise requires, mean the Loan Agreement as
amended by this Amendment.
-3-
<PAGE> 4
4.2. Applicable Law. This Amendment shall be governed by and
construed in accordance with the internal laws and judicial decisions of the
State of North Carolina.
4.3. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
4.4. Expenses. The Borrower agrees to pay all out-of-pocket
expenses incurred by the Lenders in connection with the preparation, execution
and delivery of this Amendment, including, without limitation, all reasonable
attorneys' fees.
4.5. Further Assurance. The Borrower shall execute and deliver to
the Lenders such documents, certificates and opinions as the Lender may
reasonably request to effect the amendment contemplated by this Amendment.
4.6. Headings. The headings of this Amendment are for the purposes
of reference only and shall not affect the construction of this Amendment.
4.7. Valid Amendment. The parties acknowledge that this Amendment
complies in all respects with SECTION 15.8 of the Loan Agreement, which sets
forth the requirements for amendments thereto.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the Borrower, the Lenders, and the Agent have
executed this Amendment as of the date hereof.
LASON SYSTEMS, INC.
[CORPORATE SEAL]
/s/ Gary L. Monroe
-------------------------
Gary L. Monroe,
Chief Executive Officer
ATTEST:
/s/ Laurence B. Deitch
- ----------------------
Laurence B. Deitch,
Assistant Secretary
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: ______________________________
Title:_____________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT
By: ______________________________
Title:_____________________________
-5-
<PAGE> 6
ACKNOWLEDGMENT AND CONSENT OF LASON HOLDINGS, INC.
First Union National Bank May 15, 1996
of North Carolina, as Agent
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0735
Re: SECOND AMENDMENT TO LOAN AGREEMENT, DATED AS OF THE
DATE HEREOF BY AND BETWEEN LASON SYSTEMS, INC. (THE
"BORROWER") AND FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT, AND VARIOUS LENDERS
(COLLECTIVELY, THE "LENDERS")
Ladies and Gentlemen:
Lason Holdings, Inc. (the "Guarantor") has executed the Guaranty
Agreement and the Guarantor Pledge Agreement, each dated as of January 17,
1995, in favor of the Lenders and for the benefit of the Borrower, guaranteeing
the Borrower's obligations under a Loan Agreement dated January 17, 1995 by and
among the Borrower, the Agent and the Lenders (the "Loan Agreement").
The Guarantor hereby acknowledges that the Borrower and the Lenders
have amended the Loan Agreement by a Second Amendment dated as of the date
hereof (the "Amendment"). The agreements of the Guarantor made herein are to
induce the Lenders to continue and to amend the Loan Agreement, and the
Guarantor acknowledges that the Lenders would not amend the Loan Agreement in
the absence of the agreements of the Guarantor contained herein.
The Guarantor hereby irrevocably approves of and consents to the
Amendment and all other Loan Documents contemplated thereby, agrees that its
obligations under the Guaranty and the Guarantor Pledge Agreement shall not be
diminished as a result of the execution of the Amendment, and ratifies and
confirms (i) that its obligations under the Guaranty shall include a guarantee
of the payment of the Obligations (as defined in the Loan Agreement) of the
Borrower, subject to all of the qualifications and limitations set forth
therein, (ii) that such guarantee shall be secured by the Agent's security
interest in the collateral granted under the Guarantor Pledge Agreement,
including without limitation the Stock of the Borrower, and (iii) that the
Guaranty and the Guarantor Pledge Agreement shall remain in full force and
effect.
Capitalized terms not defined herein shall have the meanings assigned
to such terms in the Loan Agreement.
<PAGE> 7
This letter has been delivered in the State of North Carolina, and the
agreements contained herein shall be governed by the internal laws of the State
of North Carolina, without regard to the choice of law principles thereof. The
agreements contained herein shall be effective as of the date hereof.
Very truly yours,
LASON HOLDINGS, INC.
By: /s/ Gary L. Monroe
---------------------
Title: CEO
------------------
<PAGE> 1
EXHIBIT 10.26
THIRD AMENDMENT TO LOAN AGREEMENT
THIS THIRD AMENDMENT dated as of July ___, 1996 (this "Amendment"), is
made and entered into by and between
LASON SYSTEMS, INC., a Delaware corporation with its principal offices
in Livonia, Michigan (the "Borrower");
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association with its principal offices in Charlotte, North Carolina ("First
Union"), and the other financial institutions that are now or hereafter become
parties to the Loan Agreement as hereinafter defined (collectively, the
"Lenders"); and
FIRST UNION, as Agent for the Lenders to the extent described in
ARTICLE XII of the Loan Agreement (in such capacity, the "Agent").
RECITALS
A. The Borrower, the Lenders, and the Agent entered into a Loan
Agreement dated as of January 17, 1995 (together with all amendments and
modifications thereto, the "Loan Agreement"). All capitalized terms not
otherwise defined herein shall have the meanings set forth in the Loan
Agreement.
B. Pursuant to the Loan Agreement and the other Loan Documents,
the Lenders have made Term Loans to the Borrower in the principal amount of
$15,000,000 and have made a Revolving Line of Credit available to the Borrower
in the maximum principal amount of the lesser of (i) $10,000,000 or (ii) the
Borrowing Base.
C. The Borrower has requested that the Agent and the Lenders
provide an additional revolving credit facility in the maximum principal amount
of $10,000,000 (the "Acquisition Revolving Credit Facility") for the purpose of
funding and refunding certain Acquisitions by the Borrower and to repay
outstanding amounts borrowed under the Revolving Line of Credit.
D. The Borrower, the Lenders, and the Agent desire to amend the
Loan Agreement hereby in order to provide for the Acquisition Revolving Credit
Facility, upon the terms and conditions and subject to the limitations set
forth herein.
STATEMENT OF AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders, and
the Agent hereby agree as follows:
<PAGE> 2
ARTICLE I
AMENDMENT
1.1. Section 1.1 - Definitions. Section 1.1 of the Loan Agreement is
amended by amending or adding certain definitions as provided below:
(a) A new term, "Acquisition Revolving Credit Commitment," is
added as follows:
"Acquisition Revolving Credit Commitment" shall mean, at any
time for any Lender, the amount set forth opposite such
Lender's name on ANNEX I hereto under the heading "Acquisition
Revolving Credit Commitment," as such amount may be adjusted
from time to time pursuant to the terms of this Agreement as
set forth in the register maintained by the Agent pursuant to
SECTION 4.10(B).
(b) A new term, "Acquisition Revolving Credit Notes," is added as
follows:
"Acquisition Revolving Credit Notes" shall mean the promissory
notes of the Borrower, dated as of July ___, 1996.
(c) A new term, "Acquisition Revolving Line of Credit," is added
as follows:
"Acquisition Revolving Line of Credit" shall mean the line of
credit made available by the Lenders to the Borrower pursuant
to ARTICLE IIIA hereof.
(d) A new term, "Acquisition Revolving Loans," is added as
follows:
"Acquisition Revolving Loans" shall mean the revolving line of
credit made available by the Lenders to the Borrower pursuant
to ARTICLE IIIA hereof.
(e) A new term, "Acquisition Revolving Loan Termination Date," is
added as follows:
"Acquisition Revolving Loan Termination Date" shall mean the
earliest of (i) June 30, 2001; (ii) the date of termination
of the Lenders' obligations to make Loans in accordance with
SECTION 10.1(A) after the occurrence of an Event of Default;
(iii) such date of termination as is mutually agreed in
writing upon by the Lenders and the Borrower; (iv) the date
after all Obligations have been
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paid in full and the Lenders are no longer obligated to make
Advances or Revolving Loans hereunder; and (v) the date on
which the Total Acquisition Revolving Credit Commitment has
been reduced to zero pursuant to SECTION 3A.3 hereof.
(f) The definition of "Base Rate" is deleted in its entirety and
the following is substituted in its place:
"Base Rate" shall mean, with respect to the Revolving Loans,
the Prime Rate plus .75 percentage point (i.e., 75 basis
points) per annum, with respect to the Term Loans, the Prime
Rate plus 1.00 percentage point (i.e., 100 basis points) per
annum, and with respect to the Acquisition Revolving Loans,
the Prime Rate plus 1.00 percentage point (i.e., 100 basis
points) per annum. The Base Rate shall increase (up to but
never in excess of the maximum amount authorized by law) or
decrease, as of the opening of business on the effective date
of any change in the Prime Rate, by an amount equal to the
amount of such change in the Prime Rate. In the event First
Union shall abolish or abandon the practice of announcing the
Prime Rate or should the same be unascertainable, the Agent,
after consultation with the Borrower, shall designate a
comparable reference rate, which shall be deemed to be the
Base Rate under this Loan Agreement and the other Loan
Documents.
(g) The definition of "Commitment" is deleted in its entirety and
the following is substituted in its place:
"Commitment" shall mean, for any Lender, such Lender's Term
Loan Commitment plus its Revolving Credit Commitment plus its
Acquisition Revolving Credit Commitment.
(h) The definition of "Current Liabilities" is amended by adding
the following to the end of such definition:
", minus, to the extent otherwise included in the calculation
of such current liabilities, the principal balance of the
Acquisition Revolving Loans outstanding at such date."
(i) A new term "EBITDA," is added as follows:
"EBITDA" means, for any period, Net Income for such period
plus the sum of interest expense, taxes, depreciation and
amortization, all for such period.
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(j) A new term, "Equity Offering" is added as follows:
"Equity Offering" shall mean an initial public offering of
Stock of the Borrower in a minimum amount of $35,000,000.
(k) The definition of "Funded Debt" is amended by adding the
following at the end of such definition: "and the Acquisition
Revolving Loans."
(l) The definition of "LIBOR Rate" is deleted in its entirety and
the following is substituted in its place:
"LIBOR Rate" shall mean, for any Interest Period, an interest
rate per annum (rounded upwards, if necessary, to the next
higher 1/100 of one percentage point) obtained by dividing (i)
the rate of interest determined by Agent to be the rate for
deposits in U.S. dollars for the applicable Interest Period
which appears on the Telerate Page 3750 at approximately 11:00
a.m. London time, two (2) Eurodollar Business Days prior to
the first date of the applicable Interest Period, or if such
rate is not available, the rate per annum at which, in the
opinion of Agent, U.S. Dollars in the amount of $5,000,000 are
being offered to leading reference banks for settlement in the
London interbank market at approximately 11:00 a.m. London
time, two (2) Eurodollar Business Days prior to the first date
of the applicable Interest Period, by (ii) the percentage
equal to one hundred percent (expressed as a decimal fraction)
minus the Reserve Requirement for such Interest Period plus,
with respect to Revolving Loans, 2.25 percentage points (i.e.,
225 basis points), with respect to Term Loans, 2.5 percentage
points (i.e., 250 basis points), and with respect to
Acquisition Revolving Loans, 2.50 percentage points (i.e., 250
basis points). Notwithstanding the foregoing, with regard to
any LIBOR Loan covered by any Swap Agreement, the definition
and calculation of LIBOR Rate under this Loan Agreement shall
be consistent with the definition and calculation of LIBOR
Rate pursuant to such Swap Agreement, and in the event of any
inconsistency between this Loan Agreement and such Swap
Agreement, the terms of the Swap Agreement shall control. The
LIBOR Rate shall be adjusted as of the first day of each
Interest Period to reflect the LIBOR Rate for such Interest
Period.
(m) The definition of "Loans" is deleted in its entirety and the
following is substituted in its place:
"Loans" shall mean and collectively refer to the Term Loans
made under ARTICLE II hereof, the Revolving Loans
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made under the Revolving Line of Credit referred to in ARTICLE
III hereof, and the Acquisition Revolving Loans referred to in
ARTICLE IIIA hereof.
(n) The definition of "Notes" is deleted in its entirety and the
following is substituted in its place:
"Notes" shall mean the Term Notes, the Revolving Credit Notes,
and the Acquisition Revolving Credit Notes.
(o) "Pro Forma Adjusted EBITDA" means, on any date of
determination, EBITDA for the period of twelve (12)
consecutive calendar months ending on, or immediately prior
to, such date of determination, calculated on a pro forma
basis to include as of the first day of such period any
Permitted Acquisition. For the purposes hereof, Pro Forma
Adjusted EBITDA shall be subject to adjustment in a manner
satisfactory to the Agent and the Required Lenders based on:
(i) the operating expenses of each acquired Person and/or the
assets acquired in connection with the related Permitted
Acquisition, as applicable, and any related revenues; and (ii)
the expenses and obligations incurred in connection with any
Permitted Acquisition.
(p) A new term, "Total Acquisition Revolving Credit Commitment,"
is added as follows:
"Total Acquisition Revolving Credit Commitment" shall mean, at
any time, the sum of the Acquisition Revolving Credit
Commitments of all the Lenders at such time.
1.2. Schedule 1.1. Schedule 1.1 is hereby amended by adding the
UCC-1 Financing Statements as set out in Annex A attached hereto.
1.3. Article IIIA - Acquisition Revolving Credit Loans. A new
Article IIIA is hereby added after Article III as follows:
ARTICLE IIIA
ACQUISITION REVOLVING CREDIT LOANS
3A.1 Acquisition Revolving Loans. (a) The Lenders hereby
severally establish, on the terms and conditions set forth in this Agreement
and in reliance upon the representations and warranties made hereunder, an
Acquisition Revolving Line of Credit in favor of the Borrower in the aggregate
principal amount of up to Ten Million Dollars ($10,000,000), pursuant to which
each Lender severally agrees to make and remake one or more Revolving Loans to
the Borrower, upon the terms and conditions set forth in this ARTICLE IIIA,
from time to time on any Business Day during the
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period from the date hereof through December 31, 1996 (the "Conversion Date").
Subject to the provisions of this Agreement, the Borrower may borrow, repay
(without penalty except for LIBOR breakage costs under SECTION 4.6) and
reborrow any amount of the Acquisition Revolving Line of Credit.
(b) Whenever the Borrower desires to borrow under the Acquisition
Revolving Line of Credit, the Borrower shall give the Agent notice of each Base
Rate Loan to be made hereunder (which notice may be in writing or oral, and if
oral, shall be followed by written notice as soon as practicable) or, in the
case of a LIBOR Loan, the Borrower shall give the Agent at least three (3)
Business Days' prior notice of such LIBOR Loan. Each such notice (each a
"Notice of Borrowing") shall be irrevocable and shall specify (i) the aggregate
principal amount of the Acquisition Revolving Loans to be made pursuant to such
borrowing, and (ii) the requested date of the borrowing (the "Borrowing Date")
(which shall be a Business Day) and shall include an Interest Rate Election
Notice. Upon the receipt of a Notice of Borrowing from the Borrower for an
Acquisition Revolving Loan, the Agent shall notify each Lender promptly of such
Notice of Borrowing.
The proceeds of all Advances will be made available by the Agent at
the office of the Agent specified in SECTION 15.3 by crediting the account of
the Borrower on the books of such office or pursuant to other instructions of
the Borrower as provided under subsection (C) below.
The settlement of the payment obligations of the Agent and each Lender
owing to each other under this Agreement and the Notes shall be conducted as
follows. As soon as reasonably practicable after the end of each week, the
Agent shall provide each Lender with a statement (the "Loan Statement"), in
form and detail reasonably acceptable to such Lender, specifying (i) the total
of all Advances and other amounts required by the terms of this Agreement to
have been made available or paid by such Lender to the Agent during such week;
(ii) the total of all amounts required by the terms of this Agreement to have
been distributed or paid by the Agent to such Lender during such week; and
(iii) such other information about the Loans, the Advances and the payments
thereof as such Lender and the Agent shall agree to include from time to time.
Any excess of such amounts owing to the Agent or a Lender, as the case may be,
as specified in the Loan Statement, shall be due and payable immediately by the
other, provided that the Lender shall have the right, described below,
subsequently to object to any amounts payable to the Agent. Interest owing to
a Lender shall be calculated based on the actual amount of the Loans funded by
such Lender, as such amount is adjusted from time to time hereafter pursuant to
each Loan Statement. The provisions of this subsection govern only the timing
of the payments and distributions owing by the Agent and the Lenders to each
other under this Agreement and
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the Notes, and nothing contained herein shall be deemed to modify, discharge or
otherwise affect those obligations in any fashion except as specifically
provided herein. Each Loan Statement shall be deemed conclusively accurate and
binding upon the Agent and a Lender unless the Agent or such Lender is notified
by the other to the contrary within thirty (30) days after such Lender's
receipt of such Loan Statement. Such notice shall be deemed an objection only
to those items specifically objected to therein.
(c) The Borrower hereby irrevocably authorizes the Agent to
disburse the proceeds of each Acquisition Revolving Loan under this Agreement
(i) in accordance with the terms of any written instructions from the
Borrower; (ii) in accordance with telephone instructions from any of the
Borrower's officers or other Persons in each case designated from time to time
by the Borrower; (iii) to advance to the Lenders, pursuant to SECTION 4.9
hereof, principal, interest, fees, costs and expenses payable hereunder; or
(iv) to the Borrower's controlled disbursement or depository accounts with its
bank in an amount equal to the sum necessary to cover checks or other items of
payment drawn by the Borrower upon such account and presented for payment, but
in no event shall the Agent, on behalf of the Lenders, be obligated to make
Advances hereunder in amounts necessary to cover any such checks or other items
of payment presented to the extent that the Borrower is not otherwise entitled
to receive Advances under the Acquisition Revolving Line of Credit in such
amounts from the Agent, on behalf of the Lenders, pursuant to the terms hereof.
(d) Each request for an Advance under the Acquisition Revolving
Line of Credit (other than pursuant to SECTION 4.9(C)), and each Advance made
by a Lender for the benefit of the Borrower, shall constitute a new
certification by the Borrower as of the date of such request or Advance (i)
that the representations and warranties of the Borrower contained in ARTICLE VI
hereof and in the other Loan Documents remain true and correct in all material
respects as of such date, except to the extent any such representation or
warranty relates solely to a prior date, and (ii) that, with respect to and
after giving effect to such Advance, no Default or Event of Default has
occurred and is continuing as of such date.
3A.2 Repayment. The Borrower shall repay the Acquisition Revolving
Credit Notes:
(i) in full on the Acquisition Revolving Loan Termination Date;
(ii) in full upon receipt by the Borrower of proceeds from any
Equity Offering;
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(iii) in full upon the occurrence of any Event of Default and acceleration
of the Obligations by the Lenders pursuant to ARTICLE X hereof, or upon the
occurrence of an Event of Default under SECTIONS 9.1(I), (J) or (N) and the
resulting automatic acceleration of the Obligations pursuant to ARTICLE X
hereof; and
(iv) (i) In part, immediately in the event that the total
principal amount outstanding at any time under the
Acquisition Revolving Credit Notes exceeds the
maximum amount permitted under any of the conditions
set forth in SECTION 3A.1(A) at such time, in the
amount of such excess;
(ii) In part, as may be required by the Agent pursuant to
any lockbox and depository account arrangement
required to be maintained pursuant to, and in
accordance with the provisions of, the Security
Agreement; and
(iii) In full or in part, to the extent permitted or
required by and in accordance with the provisions of
SECTION 7.6.
(iv) In the following amounts quarterly in arrears on the
last Business Day of each fiscal quarter of the
Borrower, expressed as a percentage of the
outstanding principal amount under the Acquisition
Revolving Credit Notes at the Conversion Date:
<TABLE>
<CAPTION>
Year % quarterly
---- -----------
<S> <C>
1997 3%
1998 4%
1999 5%
2000 6%
2001 (1st quarter) 7%
</TABLE>
3A.3 Commitment Reductions.
(i) Upon at least five (5) Business Days' prior notice to the
Agent, the Borrower may cause the Lenders to reduce ratably the unutilized
portion of the Total Acquisition Revolving Credit Commitment in part in amounts
of $500,000 or integral multiples thereof, or in whole; provided, however, that
any such reduction shall not reduce the Total Acquisition Revolving Credit
Commitment to an amount less than the aggregate principal amount outstanding
under the Revolving Line of Credit.
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(ii) The Total Acquisition Revolving Credit Commitment shall be
reduced by the amount of any payments on the Revolving Loans made pursuant to
SECTION 7.6.
(iii) Any reduction in the Total Acquisition Revolving Credit
Commitment shall, on a pro rata basis, reduce each Lender's Acquisition
Revolving Credit Commitment. After any such reduction: (i) the facility fees
provided for in SECTION 3A.4 shall be calculated with respect to the reduced
Total Acquisition Revolving Credit Commitment, and (ii) the Total Acquisition
Revolving Credit Commitment may not thereafter be increased without the prior
unanimous written consent of the Lenders.
3A.4 Acquisition Revolving Line of Credit Facility Fee. During the
term of the Acquisition Revolving Line of Credit, the Borrower shall pay to the
Agent, for the ratable benefit of the Lenders, a facility fee at the rate of
one-half of one percent (.5%) per annum on the average daily undisbursed
portion of the Acquisition Revolving Line of Credit during the preceding month.
Such facility fee shall accrue from and including the date hereof to and
including the Acquisition Revolving Loan Termination Date and shall be payable
on the last Business Day of each calendar month in arrears, beginning with the
month ending July 31, 1996.
3A.5 Optional Prepayments. The Borrower shall have the right to
prepay the Acquisition Revolving Loans, in whole or in part, upon written
notice to the Agent prior to 1:00 p.m., Charlotte, North Carolina local time,
at least five Business Days prior to each intended prepayment of any
Acquisition Revolving Loans. Each partial prepayment shall be in an aggregate
principal amount of no less than $250,000 or an integral multiple thereof, plus
interest accrued through the date of prepayment. Further, if the prepayment of
any Acquisition Revolving Loan that is a LIBOR Loan occurs on a date other than
the last day of an Interest Period applicable thereto, the Borrower shall pay
each Lender the compensation provided for in SECTION 4.6. Each notice pursuant
to this SECTION 3A.5 shall specify (i) the proposed date of such prepayment and
(ii) the aggregate principal amount of Acquisition Revolving Loans to be
prepaid (and, in the case of LIBOR Loans, the specific LIBOR Loan pursuant to
which made) and shall be irrevocable and shall bind the Borrower to make such
prepayment on the terms specified therein. Amounts prepaid under this section
may be reborrowed, subject to the terms and conditions of this Agreement.
3A.6 Mandatory Prepayments. In the event of an Equity Offering,
the Borrower shall, after application of proceeds from such public offering as
provided in SECTION 3A.2(II) hereof:
(a) apply the proceeds of the Equity Offering to payments of amounts
as set out in SECTION 4.10(A), subsections (i), (ii), (iii) and (v), in that
order; and
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(b) apply any proceeds of the Equity Offering remaining after payments
made pursuant to (a) above to the remaining installments of the Term Loan (to
be applied to the scheduled principal payments in inverse order of maturity),
and then to the reduction of the Revolving Line of Credit Commitments.
1.4. Section 4.1 - Use of Proceeds. Section 4.1 of the Loan
Agreement is hereby amended by adding the following at the end of such section:
provided, however, that the proceeds of the Acquisition Revolving
Loans shall be used for the purpose of the Acquisition of Stock of
Information & Image Technology of America, Inc. ("IITA"), Great Lakes
Micrographics Corporation ("GLMC"), or Micro Pro, Inc. and its
affiliated company, M.P. Services, Inc. (collectively, "Micro Pro") or
like kind companies in the document imaging and reprographic
industries with comparable financial characteristics as the Borrower
and the Agent may agree, to refinance the purchase of Delaware Legal
Copy, Inc., and to pay fees and expenses related to such acquisitions.
1.5. Section 4.10 - Application of Principal Payments; Register;
Pro Rata Borrowings. Section 4.10(a) of the Loan Agreement is hereby amended
by deleting such subsection in its entirety and substituting the following in
its place:
(i) Except as otherwise specifically set forth in this
Agreement, all payments made by the Borrower shall be applied (i) first, to the
payment of amounts due under SECTION 4.6, (ii) second, to the payment of
accrued and unpaid fees (payable by Borrower pursuant to SECTIONS 3.5, 7.6(C),
11.1, 12.8 or 15.4 hereof or otherwise pursuant to the Loan Documents) and
interest on the Term Notes, (iii) third, to the payment of accrued and unpaid
interest on the Acquisition Revolving Credit Notes, (iv) fourth, to the payment
of accrued and unpaid interest on the Revolving Credit Notes, (v) fifth, to the
payment of unpaid principal on the Term Notes, and (vi) sixth, to the payment
of unpaid principal on the Revolving Credit Notes. Payments of principal on
the Notes shall be applied to such Loans outstanding as directed by the
Borrower or, in the absence of any such direction, shall be applied first to
the payment of Base Rate Loans and second to the payment of LIBOR Loans in the
order of the soonest to mature. If there is more than one LIBOR Loan maturing
on any one day, then payment shall be applied to the LIBOR Loan bearing the
higher rate of interest. Notwithstanding the foregoing, during the continuance
of an Event of Default the Agent shall apply all such payments to the
Obligations in accordance with the provisions of SECTION 13.1.
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1.6. Section 5.3(c) - Conditions to All Loans and Advances.
Section 5.3(c) is amended by deleting such section in its entirety and
substituting the following in its place:
(c) With respect to each Revolving Loan and each Acquisition
Revolving Loan, the Agent shall have received a Notice of
Borrowing and, with respect to each LIBOR Loan, and Interest
Rate Election Notice in accordance with SECTION 4.3.
(d) With respect to each Acquisition Revolving Loan, the Agent
shall have received a copy of any due diligence reports
prepared for the Borrower or for GTCR by any outside audit or
consulting group with respect to the Acquisition to be funded
by such Acquisition Revolving Loan.
(e) With respect to each Acquisition Revolving Loan, the Borrower
shall have executed and filed all Financing Statements and all
other filings or recordations necessary to perfect the
security interests of the Agent in the Acquisition funded by
such Acquisition Revolving Loan.
(f) With respect to each Acquisition Revolving Loan, the Borrower
shall have executed and delivered to the Agent all subsidiary
pledge agreements, stock certificates and stock powers, and
guarantor security agreements and all other documents
necessary to perfect the security interests of the Agent in
the Acquisition funded by such Acquisition Revolving Loan.
(g) With respect to each Acquisition Revolving Loan, the Borrower
shall have executed and delivered to the Agent a certificate
demonstrating and certifying the Borrower's compliance, before
and after the Acquisition funded by such Acquisition Revolving
Loan, with all covenants in the Loan Agreement, certifying
that no defaults exist under the Loan Agreement or will occur
as a result of the Acquisition to be funded by such
Acquisition Revolving Loan, attaching a signed acquisition
agreement for such Acquisition, and attaching a certificate of
good standing for the acquired entity issued within thirty
(30) days of the Acquisition by the Secretary of State of the
state of organization of such acquired entity.
1.7. Section 7.16 - Additional Equity Investment. A new section
7.16 is hereby added as follows:
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7.16. Additional Equity Investment. The Borrower shall cause
its shareholders to invest additional equity in the Borrower on or
before March 31, 1997 (the "Equity Investment Date"), in an amount, if
any, necessary to cause the ratio of Funded Debt to Pro Forma Adjusted
EBITDA to be no greater than 2.75 to 1.0 for the four fiscal quarters
ending on March 31, 1997. For purposes of this ratio, Funded Debt
shall mean Funded Debt plus contingent payments that may become due
under stock purchase agreements for the succeeding twelve (12) months
after the Equity Investment Date.
1.8. Section 8.2 - Acquisitions. Section 8.2 of the Loan Agreement is
amended by deleting the section in its entirety and substituting the following
in its place:
8.2. Acquisitions. Consummate any Acquisition other than a
Permitted Acquisition or an Additional Acquisition permitted pursuant
to SECTION 8.9 or the; provided, however, that the aggregate
Acquisition Amount for all Permitted Acquisitions and Additional
Acquisitions in any fiscal year may not exceed $2,000,000 in any
event, and provided further that Acquisitions funded by the
Acquisition Revolving Loans as provided in SECTION 4.1 hereof shall
not be included in the foregoing proviso.
1.9. Section 8.8 - Restrictions on Dividends. Section 8.8 of the
Loan Agreement is hereby amended by deleting the section in it entirety and
substituting the following in its place:
8.8. Restrictions on Dividends. Declare or pay any dividends
(other than dividends payable solely in its own Stock) upon any of its Stock,
or purchase, redeem, retire, or otherwise acquire, directly or indirectly, any
shares of its Stock or any option, warrant or other right to acquire shares of
its Stock, or make any distribution of cash, property or assets among the
holders of shares of its Stock; provided, however, that beginning in the fiscal
quarter of the Borrower following Borrower's receipt of proceeds from the
Equity Offering, the Borrower may declare and pay cash dividends and
distributions on its Stock so long as, after giving effect thereto, (i) there
exists no Default or Event of Default, (ii) such cash dividends and
distributions do not exceed, in any fiscal year of the Borrower, the sum of (A)
the lesser of (1) $1,200,000 and (2) ten percent (10%) of the sum of the
Unreturned Preferred Amount and the Unpaid Yield (as such terms are defined in
the Guarantor's certificate of incorporation as in effect on the Closing Date
(with such changes therein as approved in writing by the Required Lenders)),
payable by Guarantor as dividends on its capital stock, and (B) such amounts
not to exceed $250,000, payable by Guarantor to GTCR or Golder, Thoma, Cressey,
Rauner, Inc. as management and administrative fees and expenses (the sum of the
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amounts described in clauses (A) and (B) for any fiscal year being the
"Permitted Amount" for such fiscal year), minus the amount of all payments by
the Borrower during such fiscal year in respect of the principal amount of or
accrued interest on any "Deemed Loan" referred to in Section 1.1(b)(ii) of any
Seller Credit Agreement, and (iii) so long as the amounts paid pursuant to
clause (II) of this Section are used by the Guarantor for the purposes so
described; provided further, however, that proceeds of the Equity Offering
after application as provided in SECTION 3A.2(II) may be used to repurchase
preferred stock of the Borrower currently held by GTCR.
1.10. Section 8.12 - Funded Debt/Operating Cash Flow Ratio. Section
8.12, subpart (v) is amended by deleting such subpart in its entirety and
substituting the following in its place:
3.25 as of March 31, 1996, 3.50 as of September 30, 1996, for the two
fiscal quarters then ended, and 3.00 as of December 31, 1996
1.11. Section 14.1 - Assignments. Section 14.1 of the Loan
Agreement is amended by adding the following at the end of the first sentence:
and provided further, however, that any assignment of a portion of the
outstanding Acquisition Revolving Loans to any entity that is not an
Affiliate of such Lender shall be (and any subsequent assignment by
any such assignee) in minimum amounts of not less than $2,500,000.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
The Borrower hereby represents and warrants that:
2.1. Effectiveness of Loan Agreement and Loan Documents. The Loan
Agreement and other Loan Documents are in full force and effect and shall
remain in full force and effect following the execution of this Amendment.
2.2. Compliance with Loan Agreement and Loan Documents. The
Borrower is in compliance with all terms and provisions set forth in the Loan
Agreement to be observed or performed, except as permitted or waived by the
express terms of this Amendment.
2.3. Representations in Loan Agreement. The representations and
warranties of the Borrower set forth in the Loan Agreement, except for those
relating to a specific date other than the date hereof,
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are true and correct in all material respects on and as of the date hereof as
if made on and as of the date hereof.
2.4. No Event of Default. No Event of Default, nor any event that
upon notice, lapse of time or both would become an Event of Default is
continuing other than those, if any, expressly waived by this Amendment.
2.5. Projections. Within sixty (60) days after the date hereof,
the Borrower shall deliver projected financial statements of the Borrower for
the fiscal years ended December 31, 1997, 1998, 1999, and 2000, prepared by
management of the Borrower in form and substance satisfactory to the Agent.
ARTICLE III
CONDITIONS PRECEDENT
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
3.1. Acquisition Revolving Credit Notes. On the Closing Date, the
Borrower shall execute and deliver to each Lender an Acquisition Revolving
Credit Note to evidence such Lender's Acquisition Revolving Credit Loans. Each
Acquisition Revolving Credit Note shall (i) be payable to the order of the
appropriate Lender and be dated the Closing Date; (ii) be in the stated
principal amount of such Lender's Acquisition Revolving Credit Commitment; and
(iii) bear interest in accordance with the applicable provisions of ARTICLE IV
hereof. The amount of principal owing on each Acquisition Revolving Credit
Note at any given time shall be the aggregate amount of all Acquisition
Revolving Credit Loans made under such Acquisition Revolving Credit Note, less
all payments of principal theretofore made by the Borrower and applied to such
Acquisition Revolving Credit Note in accordance with the terms hereof.
3.2. Confirmation of Guarantee. The Guarantor shall have executed
and delivered to the Agent, for the benefit of the Lenders, an acknowledgement
and consent to this Amendment in form and substance satisfactory to the Agent,
including, without limitation an acknowledgement that the Guaranty Agreement is
in full force and effect and shall remain in full force and effect following
the execution of this Amendment.
3.3. Officer's Certificate. The Agent shall have received a
certificate of the Chief Executive Officer of the Borrower in form and
substance reasonably satisfactory to the Agent.
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3.4. Secretary's Certificate. The Agent shall have received a
certificate of the Assistant Secretary of the Borrower certifying (i) that the
charter, articles or certificate of incorporation or other organizational
documents of the Borrower and the bylaws (or equivalent regulations) of the
Borrower have not been amended since the date of the Loan Agreement; (ii) that
attached thereto is a true and complete copy of resolutions adopted by the
Board of Directors of the Borrower authorizing the execution, delivery and
performance of this Amendment; and (iii) as to the incumbency and genuineness
of the signature of each officer of the Borrower executing this Amendment or
any of the other Loan Documents, as applicable.
3.5. Support Agreement. The Borrower shall have delivered the
Support Agreement executed by Lason Holdings, Inc., Robert A. Yanover, Allen
J. Nesbitt, and GTCR.
3.6. Other Documents. Any other documents, including legal
opinions, reasonably requested by the Agent.
3.7. Borrower Pledge Agreement. The Borrower shall have executed
and delivered to the Agent, for the benefit of the Lenders, a Pledge Agreement
pursuant to which the Borrower shall pledge and deliver to the Agent the Stock
acquired with the proceeds of the Acquisition Revolving Credit Loans.
3.8. Governmental and Third Party Approvals. All necessary
approvals, authorizations and consents, if any be required, of any Person and
of all Governmental Authorities (including courts) having jurisdiction with
respect to the Collateral and the transactions contemplated by this Agreement
shall have been obtained, except where the failure to so obtain is not
reasonably expected to have a Material Adverse Effect.
3.9. No Material Adverse Change. From and after December 31, 1996,
there shall not have occurred any Material Adverse Change or any event,
condition or state of facts that could reasonably be expected to have a
Material Adverse Effect, other than as specifically contemplated by the
transactions contemplated under this Agreement.
3.10. No Pending or Threatened Litigation. There shall not be any
material pending or threatened litigation, bankruptcy or insolvency,
injunction, order or claim with respect to the Borrower or the Acquisition of
IITA, GLMC, or Micro Pro.
3.11. Payment of Fees. The Agent and each Lender shall have
received the fees relating to this Amendment as expressly agreed between the
Borrower and the Agent.
-15-
<PAGE> 16
ARTICLE IV
GENERAL
4.1. Full Force and Effect. As expressly amended hereby, the Loan
Agreement shall continue in full force and effect in accordance with the
provisions thereof, and no change or modification in any of the terms thereof
except as specifically set forth herein has been effected. As used in the Loan
Agreement, "hereinafter," "hereto," "hereof," and words of similar import
shall, unless the context otherwise requires, mean the Loan Agreement as
amended by this Amendment.
4.2. Applicable Law. This Amendment shall be governed by and
construed in accordance with the internal laws and judicial decisions of the
State of North Carolina.
4.3. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original, but all of which when
taken together shall constitute but one instrument.
4.4. Expenses. The Borrower agrees to pay all out-of-pocket
expenses incurred by the Lenders in connection with the preparation, execution
and delivery of this Amendment, including, without limitation, all reasonable
attorneys' fees.
4.5. Further Assurance. The Borrower shall execute and deliver to
the Lenders such documents, certificates and opinions as the Lender may
reasonably request to effect the amendment contemplated by this Amendment.
4.6. Headings. The headings of this Amendment are for the purposes
of reference only and shall not affect the construction of this Amendment.
4.7. Valid Amendment. The parties acknowledge that this Amendment
complies in all respects with SECTION 15.8 of the Loan Agreement, which sets
forth the requirements for amendments thereto.
[This remainder of this page intentionally left blank.
Signatures begin on the next page.]
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<PAGE> 17
IN WITNESS WHEREOF, the Borrower, the Lenders, and the Agent have
executed this Amendment as of the date hereof.
LASON SYSTEMS, INC.
[CORPORATE SEAL] ___________________________________
Gary L. Monroe,
Chief Executive Officer
ATTEST:
____________________
Laurence B. Deitch,
Assistant Secretary
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: ______________________________
Title:_____________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, AS AGENT
By: ______________________________
Title:_____________________________
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<PAGE> 18
ANNEX A
(ADDITIONAL PERMITTED LIENS)
<TABLE>
<CAPTION>
Secured Party Collateral
- ------------- ----------
<S> <C>
1) Capital Vantage Leasing, DP 100MM + Reconditioned
Grand Rapids, Michigan Manifest SN# 613362
and Omni 246 Report
(Subsidiary: Great Lakes Printer SN# A012060257
Micrographics Corporation)
2) Ameritech Credit Corp. Telecommunications and data equipment and all
Rolling Meadows, Illinois other equipment provided to Lessee under Equipment
Lease No. 001-0006372-000 dated 4/24/94 including
Subsidiary: Great Lakes without limitation, the following: NEC
Micrographics Corporation) Professional Level "Digital Hybrid System"
3) Community First Bank Equipment including (but not limited to) Cannon
Jacksonville, Florida 7500 Facsimile Machine and Xerox Copier 5322
(Subsidiary: Information & Image
Technology of America, Inc.)
4) Community First Bank Equipment including (but not limited to) nine
Jacksonville, Florida filmstrips M-PL Recorders
(Subsidiary: Information & Image
Technology of America, Inc.)
5) Trans Leasing International 1 - Compaq Pro lines Pentium 5/75 Desktop Station
Northbrook, Illinois 60062 Intel Pentium 75 MH2 Processor, 8 MB RAM, 1.44
Floppy Drive, 420 MB Hard Drive, Quad Speed CD/ROM
(Subsidiary: Delaware Legal Drive, Windows/DOS/Mouse Bundle, 1 - Compaq Pro
Copy, Inc.) Lines Pentium 5/120 Desktop Station
Intel Pentium 120 MHZ Processor
8MB RAM, 1.44 Floppy Drive,
1.08 GB Hard Drive, Quad Speed CD/ROM Drive,
Windows/DOS/Mouse Bundle (QTY - 2)
2 - 8MB RAM upgrade for Compaq Pro Linea
2 - Compaq 14" SUGA Monitors
1 - HP Laserjet 4SI printer (QTY - 2)
1 Less Data Trends Discount
6) Eastman-Kodak Company(1) Accounts Receivable and Inventories
Rochester, New York
(Subsidiary: Great Lakes
Micrographics Corporation)
</TABLE>
____________________
(1) Notwithstanding anything to the contrary set forth herein or otherwise, the
accounts subject to this lien shall not be a permitted lien for the purpose of
the definition of "Eligible Accounts Receivable".
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<PAGE> 19
ACKNOWLEDGMENT AND CONSENT OF LASON HOLDINGS, INC.
First Union National Bank ___________, 1996
of North Carolina, as Agent
One First Union Center
301 South College Street
Charlotte, North Carolina 28288-0735
Re: THIRD AMENDMENT TO LOAN AGREEMENT, DATED AS OF THE DATE HEREOF
BY AND BETWEEN LASON SYSTEMS, INC. (THE "BORROWER") AND FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, AS AGENT, AND VARIOUS LENDERS (COLLECTIVELY, THE
"LENDERS")
Ladies and Gentlemen:
Lason Holdings, Inc. (the "Guarantor") has executed the Guaranty
Agreement and the Guarantor Pledge Agreement, each dated as of January 17,
1995, in favor of the Lenders and for the benefit of the Borrower, guaranteeing
the Borrower's obligations under a Loan Agreement dated January 17, 1995 by and
among the Borrower, the Agent and the Lenders (together with all amendments,
supplements and restatements thereof, the "Loan Agreement").
The Guarantor hereby acknowledges that the Borrower and the Lenders
have amended the Loan Agreement by a Third Amendment dated as of the date
hereof (the "Amendment"). The agreements of the Guarantor made herein are to
induce the Lenders to continue and to amend the Loan Agreement, and the
Guarantor acknowledges that the Lenders would not amend the Loan Agreement in
the absence of the agreements of the Guarantor contained herein.
The Guarantor hereby irrevocably approves of and consents to the
Amendment and all other Loan Documents contemplated thereby, agrees that its
obligations under the Guaranty and the Guarantor Pledge Agreement shall not be
diminished as a result of the execution of the Amendment, and ratifies and
confirms (i) that its obligations under the Guaranty shall include a guarantee
of the payment of the Obligations (as defined in the Loan Agreement) of the
Borrower, subject to all of the qualifications and limitations set forth
therein, (ii) that such guarantee shall be secured by the Agent's security
interest in the collateral granted under the Guarantor Pledge Agreement,
including without limitation the Stock of the Borrower, and (iii) that the
Guaranty and the Guarantor Pledge Agreement shall remain in full force and
effect.
Capitalized terms not defined herein shall have the meanings assigned
to such terms in the Loan Agreement.
This letter has been delivered in the State of North Carolina, and the
agreements contained herein shall be governed by the internal laws of the State
of North Carolina, without regard to the choice of law principles thereof. The
agreements contained herein shall be effective as of the date hereof.
Very truly yours,
LASON HOLDINGS, INC.
By: ________________________________
Title: _____________________________
<PAGE> 20
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, LASON SYSTEMS, INC., a Delaware corporation,
hereby sells, assigns and transfers unto ________________________ _____ shares
of the ________________ stock, _________ par value per share, of
_________________________, a _________________ corporation, standing in the
name of Lason Systems, Inc. on the books of said _________________________
represented by Certificate No. _____ herewith 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: _____________
LASON SYSTEMS, INC.
By: _______________________________
Gary L. Monroe,
Chief Executive Officer
<PAGE> 1
EXHIBIT 10.27
LEASE AGREEMENT
This lease made and entered into this 3rd day of September, 1985, by
and between MART ASSOCIATES, a Michigan co-partnership, whose address is 43243
W. Eight Mile Road, Northville, Michigan 48167 ("Landlord"), and LASON SYSTEMS,
INC., a Michigan corporation, whose address is 28400 Schoolcraft, Livonia,
Michigan 48150 ("Tenant").
ARTICLE I
GRANT AND TERM
1.1 Premises. Witnesseth, that Landlord, for and in consideration
of the covenants hereinafter contained and made on the part of the Tenant does
hereby demise and lease to the Tenant, the land and buildings known as 28400
Schoolcraft, Livonia, Michigan 48150, together with all Landlord's easements
and appurtenances in adjoining and adjacent land, highways, roads, streets,
lanes, whether public or private, reasonably required for the installation,
maintenance, operation and service of sewer, water,, gas, power and other
utility lines and for driveways and approaches to and from abutting highways
for the use and benefit of the above-described parcel of real estate (the
"leased premises").
1.2 Term. To have and to hold the leased premises for and during the
full term of five (5) years which shall commence on October 1, 1985.
<PAGE> 2
ARTICLE II
RENT
2.l Base Rent.
(a) Tenant shall pay to Landlord as rent for the leased
premises the sum of Ten Thousand Five Hundred ($10,500,00) Dollars in advance
on the 1st day of each month during the term of this lease.
(b) Rent shall be payable at the place designated in this
lease for service of notice upon Landlord, or at such other place as Landlord
may designate in writing.
(c) "Lease year", as herein used, shall mean each twelve
(12) month period beginning with the first day of the term of this lease and
each yearly anniversary thereof, provided the commencement of the term of this
lease is on the 1st day of the month. If the term of this lease commenced on
any day other than the 1st day of the month, then the "lease year" or any
period subsequent to the last "lease year" within the term of this lease shall
be adjusted with respect to percentage rent or any other matters provided in
this lease in which the lease year is a factor.
2.2 Real Estate Taxes.
(a) Tenant further covenants and agrees to pay as additional
rent all taxes and assessments, general
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<PAGE> 3
and special, ordinary and extraordinary and all interest, penalties, levies,
opening fees, service charges and rates, and all other impositions of every
kind and nature whatsoever, which may be levied, assessed or charged from and
after the commencement date and during the continuation of said term, against
the leased premises or any part thereof, or upon the leasehold interest hereby
created, all of which said taxes, assessments, interest, penalties, charges and
rates, and all other impositions, shall be paid by Tenant in the name of
Landlord within thirty (30) days after the same shall become due and payable,
excepting federal, state, county or city income taxes now imposed or which may
hereafter be imposed on the rentals accruing under the terms hereof.
Should the State of Michigan or any political
subdivision thereof or any governmental authority having jurisdiction thereover
impose a tax and/or assessment (other than an income or francise tax) upon or
against the rentals payable hereunder by Tenant to Landlord, either by way of
substitution for the taxes and assessments levied or assessed against such land
and such building, or in addition thereto, such tax and/or assessment shall be
deemed to constitute a tax and/or assessment against such land and improvements
for the purpose of this Section 2.2.
(b) Tenant covenants and agrees to deliver to Landlord from
time to time upon request, at the place
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<PAGE> 4
where the rent herein shall from time to time be payable, copies of receipts
showing payment of said taxes, assessments and other impositions, within thirty
(30) days after the respective payments evidenced thereby.
In the case of the failure, neglect or refusal of
Tenant to pay such taxes, assessments, interest, penalties, levies, service
charges, rates and other impositions, Landlord shall have the option if the
default of Tenant is allowed to continue for thirty (30) days after notice from
Landlord, to terminate this lease, in which case this lease shall absolutely
cease and terminate, or to pay said defaulted amounts for and at the expense of
Tenant and to add the amount of any such payments together with interest to
rentals next becoming due. Tenant may, however, defer the payment of any such
amounts so long as the validity thereof shall be contested by Tenant in good
faith and by a proper legal proceeding; provided, however, that neither the
leased premises nor the lien of such tax, assessment or other charges shall be
meanwhile advertised for sale because of such nonpayment, and provided further
that Tenant shall provide Landlord with a surety bond or other security
satisfactory to Landlord protecting Landlord and the leased premises from any
default in the payment of such amount and against any loss, damage or penalties
arising therefrom; Landlord will cooperate with Tenant in any such contest, but
Tenant shall hold Landlord harmless from any expense or liability as
consequence thereof.
- 4 -
<PAGE> 5
(c) On the date rent is required to last be paid under
Section 2.1 hereof, Tenant shall pay to Landlord, or Landlord shall pay to
Tenant (as the case may be) all prepaid taxes prorated as of the delivery of
possession of the leased premises to Landlord based upon the due date of the
appropriate taxing authorities.
2.3 Additional Rent. Tenant shall pay as additional rent any
money and charges required to be paid pursuant to the terms of this lease
agreement, whether or not the same may be designated "additional rent". If
such amounts or charges are not paid at the time provided in this lease, they
shall nevertheless, if not paid when due, be collectible as additional rent
with the next installment of rent thereafter falling due hereunder, but nothing
herein contained shall be deemed to suspend or delay the payment of any amount
of money or charge at the time the same becomes due and payable hereunder, or
limit any other remedy of Landlord.
2.4 Past Due Rent. If Tenant shall fail to pay, when the same is
due and payable, any rent or any additional rent, such unpaid amounts shall
bear interest from the due date thereof to the date of payment at the rate of
twelve (12%) percent per annum.
ARTICLE III
USE OF PREMISES
3.1 Use of Premises. It is understood and agreed that the leased
premises shall be used and occupied
- 5 -
<PAGE> 6
only by Tenant for the operation of its direct mail business as presently
conducted by it and for other purposes with the consent of Landlord. Tenant
shall operate one hundred (100%) percent of the leased premises during the
entire term of this lease, unless prevented from doing so by causes beyond
Tenant's control, and conduct its business at all times in a high-class and
reputable manner. Tenant shall promptly comply with all laws, ordinances and
lawful orders and regulations affecting the premises hereby leased, and the
cleanliness, safety, occupation and use of same.
3.2 Care of Premises. Tenant shall not perform any acts or carry
on any practices which may injure the building. Tenant shall keep the leased
premises clean and free from rubbish and dirt at all times, and shall store all
trash and garbage within the leased premises and arrange for the regular
pick-up of such trash and garbage at Tenant's expense.
ARTICLE IV
UTILITIES
4.1 Utilities. Tenant shall arrange for all utility services to
the leased premises, and Tenant shall promptly pay for all water and sewer
facilities, gas and electricity and all other utility services consumed by it
on the leased premises.
- 6 -
<PAGE> 7
ARTICLE V
MAINTENANCE OF LEASED PREMISES
5.1 Tenant's Obligation of Maintenance. Landlord shall not be
required to make any improvements or repairs of any kind upon the leased
premises. The leased premises shall at all times be kept in good order,
condition, replacement and repair by Tenant, and shall also be kept in a clean,
sanitary and safe condition in accordance with the laws of the State of
Michigan, and in accordance with all directions, rules and regulations of the
health officer, fire marshall, building inspector or other proper officers of
the governmental agencies having jurisdiction, at the sole cost and expense of
Tenant, and Tenant shall comply with all requirements of law, ordinance and
otherwise touching said premises. Tenant shall permit no waste, damage or
injury to said premises, and Tenant shall at its own cost and expense replace
any glass windows and doors in the premises which may be broken. At the
expiration of the tenancy created hereunder, Tenant shall surrender the leased
premises in good condition, reasonable wear and tear, loss by fire or other
unavoidable casualty excepted.
5.2 Abuse of Plumbing, Walls, Etc. The plumbing facilities shall
not be used for any other purpose than that for which they are constructed, and
no foreign substance of any kind shall be thrown therein, and the expense of
any breakage, stoppage or damage resulting from a violation of this provision
shall be borne by Tenant, who shall, or whose
- 7 -
<PAGE> 8
employees, agents, invitees or licensees shall have caused it. The Tenant, its
employees or agents, shall not alter or deface any walls, ceilings, partitions,
floors, wood, stone or iron work without Landlord's written consent being first
obtained.
ARTICLE VI
ALTERATIONS
6.1 Alterations.
(a) Tenant may not make any alterations of any kind
except upon Landlord's prior consent.
(b) All alterations, additions, improvements and
fixtures, other than trade fixtures, which may be made or installed by either
of the parties hereto upon the leased premises and which in any manner are
attached to the floors, walls or ceilings shall be the property of Landlord and
at the termination of this lease shall remain upon and be surrendered with the
leased premises as a part thereof, without disturbance, molestation or injury.
ARTICLE VII
INSURANCE AND INDEMNITY
7.1 Covenant to Hold Harmless. Landlord shall be defended and
held harmless by Tenant from any liability for damages to any person or any
property in or upon the leased premises, including the person and property of
Tenant, and its employees and all persons on the leased
- 8 -
<PAGE> 9
premises, at its or their invitation or with their consent. All property kept,
stored or maintained in the leased premises shall be so kept, stored or
maintained at the risk of Tenant only. Tenant shall not suffer or give cause
for the filing of any lien against the leased premises.
7.2 Tenant's Obligation to Carry Public Liability Insurance.
Tenant shall, during the entire term hereof, keep in full force and effect a
policy of public liability insurance with respect to the leased premises and the
business operated by Tenant in the leased premises, in which both Landlord and
Tenant shall be named as parties covered thereby, or which provides equivalent
protection to and is approved by Landlord, and which the limits of liability
shall be not less than Five Hundred Thousand ($500,000) Dollars per person and
One Million ($1,000,000) Dollars for each accident or occurrence for bodily
injury and Fifty Thousand ($50,000) Dollars for property damage. Tenant shall
furnish Landlord with a certificate or certificates of insurance, or other
acceptable evidence that such insurance is in force at all times during the term
hereof.
7.3 Fire Insurance and Restoration. Tenant shall at all times
during the term of this lease carry fire and extended coverage insurance on the
building and all the improvements and fixtures in, on or affixed to the
building upon the leased premises for the full replacement value of said
building and improvements, with insurance companies
- 9 -
<PAGE> 10
satisfactory to Landlord, and shall deliver to Landlord a certificate of
insurance as evidence thereof. No cancellation shall be effective until at
least thirty (30) days after receipt by Landlord and Landlord's mortgagee of
written notice thereof. Such insurance shall protect Landlord and Tenant and
the leased premises against fire, casualty, sprinkler leakage (if any) and
against any other damage or loss covered by the "all risks" form of fire and
extended coverage insurance available in the State of Michigan. Any loss shall
be paid notwithstanding any act or negligence of Landlord or Tenant. All
proceeds payable under such insurance shall be payable to Landlord to repair
and restore the buildings and permanent improvements of the leased premises.
There shall be no rental abatement as a result of damage or destruction to the
leased premises.
In case Tenant shall at any time neglect to insure or
keep the building upon the leased premises as herein provided, Landlord may, at
its election, procure or renew such insurance and add the amount paid
therefore, plus interest, to the next rent thereafter falling due under this
lease pursuant to Article XII hereof. Tenant shall send to Landlord evidence
that all premiums have been paid.
Tenant hereby releases and discharges Landlord and
any partner, agent, employee and representative of Landlord from any liability
whatsoever hereafter arising from loss, damage or injury to Tenant's property
or to any
- 10 -
<PAGE> 11
other property upon the leased premises caused by fire or any other casualty
and, in addition from any other damage for which Tenant is insured or required
to be insured hereunder.
In the event the building shall be partially or
totally destroyed by fire or other casualty during the term of the lease, the
building shall be expeditiously repaired and restored to its original condition
at the expense of Tenant (the Landlord hereby agreeing to apply insurance
proceeds received by it because of loss up to a maximum of the amount actually
received but not in excess thereof), and Tenant shall complete such restoration
and repair not later than six (6) months after such damage or destruction,
subject to strikes, acts of God or other acts caused beyond Tenant's control;
provided, however, that if damage by fire occurs during the last three (3)
years of the term of this lease, Tenant may elect to declare the lease
terminated, but shall immediately raze the damaged portions of the building and
integrate the land area thereunder with the remainder of the parking lot and
common facilities, and all insurance proceeds therefore shall be the property
of Landlord, except an amount necessary to cover the cost of razing the
building and integrating the land area.
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<PAGE> 12
ARTICLE VIII
ASSIGNMENT AND SUBLETTING
8.1 Assignment and Subletting. Tenant shall not assign or in any
manner transfer this lease or any estate or interest therein without the
previous written consent of Landlord, or sublet or allow concessionaries upon
the leased premises or any part or parts thereof or allow anyone to come in
with, through or under it without like consent. Consent by Landlord to one
or more assignments of this lease or to one or more sublettings of said
premises shall not operate to exhaust Landlord's rights under this Article.
ARTICLE IX
ACCESS TO PREMISES
9.1 Right of Entry by Landlord. Landlord shall have the right to
enter upon the leased premises at all reasonable hours for the purpose of
inspecting the same, or of making repairs, additions or alteration to the
leased premises. If Landlord deems any repairs required to be made by Tenant
necessary, it may demand that Tenant make the same forthwith, and if Tenant
refuses or neglects to commence such repairs and complete the same with
reasonable dispatch, Landlord may make or cause such repairs to be made and
shall not be responsible to Tenant for any loss or damage that may accrue to
its stock or business by reason thereof, and if Landlord makes or causes such
repairs to be made, Tenant
- 12 -
<PAGE> 13
shall, on demand, pay Landlord the cost thereof with interest at ten (10%)
percent per annum, and if it shall default in such payment, Landlord shall have
the remedies provided in Section 12.1 hereof.
9.2 Landlord's Right to Exhibit Premises. For a period commencing
ninety (90) days prior to the termination of this lease, Landlord may have
reasonable access to the leased premises for the purpose of exhibiting the same
to the prospective tenants.
ARTICLE X
EMINENT DOMAIN
10.1 Total Condemnation. If the title of the leased premises shall
be taken by any public authority under the power of eminent domain, then the
term of this lease shall cease as of the day such public authority has the
right to possession, and the rent shall be paid up to that day with a
proportionate refund by Landlord of such rent as may have been paid in
advance.
10.2 Partial Condemnation. If less than the whole, but more than
thirty (30%) percent of the leased premises are taken under the power of
eminent domain, Landlord and Tenant shall each have the right to terminate this
lease upon ten (10) days' prior written notice to the other, and in such event,
such termination shall be effective upon the day the right to possession of the
leased premises shall be required for public use. Such notice shall be
- 13 -
<PAGE> 14
given within thirty (30) days after such taking for public use. In the event
(i) neither party hereto shall elect to terminate this lease; or (ii) less than
thirty (30%) percent of the leased premises are so taken, Landlord shall, at
its own cost and expense, make all necessary repairs and alterations to the
leased premises, not including the installation of Tenant's fixtures, furniture
and equipment, which shall be Tenant's responsibility; provided, however, that
in no event shall Landlord be required to expend any amount in excess of the
Condemnation Award received by it for such purposes. In the event this lease
shall not be terminated, all of the terms herein provided shall continue in
effect, except that the monthly minimum rent shall be reduced by the ratio
equal to that which the Landlord's award (not expended in repairing or altering
the leased premises) bears to the original Landlord's aggregate investment of
the leased premises.
10.3 Landlord's and Tenant's Damages. All damages awarded for such
taking under the power of eminent domain, whether for the whole or a part of
the leased premises, shall belong to and be the property of Landlord, whether
such damages shall be awarded as compensation for diminution in value to the
leasehold or to the fee of the premises; provided, however, that Landlord shall
not be entitled to the award made to Tenant for loss of business, depreciation
to and cost of removal of stock and trade fixtures, and
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<PAGE> 15
Tenant shall be entitled to that portion, if any, of the Landlord's award
allocated to the unamortized cost (on a straight-line basis through the
expiration of this lease) of the improvements, if any, constructed on the
leased premises by Tenant.
ARTICLE XI
BANKRUPTCY OR INSOLVENCY
11.1 Tenant's Interest Not Transferable. Neither this lease, nor
any estate thereby created, shall pass to any trustee or receiver or assignee
for the benefit of creditors or otherwise by operation of law.
11.2 Landlord's Option to Terminate. In the event the estate
created hereby shall be taken in execution or by other process of law, or if
Tenant or any guarantor of Tenant's obligations hereunder (hereinafter referred
to a "guarantor") shall be adjudicated insolvent or bankrupt pursuant to the
provisions of any state or federal insolvency or bankruptcy act, or if a
receiver or trustee of the property of Tenant or guarantor shall be appointed
by reason of Tenant's or guarantor's insolvency or inability to pay its debts,
or if any assignment shall be made of Tenant's or guarantor's property for the
benefit of creditors, then and in any such event, Landlord may at its option
terminate this lease and all rights of Tenant hereunder, by giving to Tenant
notice in writing of the election of Landlord to so terminate.
- 15 -
<PAGE> 16
11.3 Tenant's Obligation to Avoid Creditor's Proceedings. Neither
Tenant nor guarantor shall cause or give cause for the institution of legal
proceedings seeking to have Tenant or guarantor adjudicated bankrupt;
reorganized or rearranged under the bankruptcy laws of the United States and
shall not cause or give cause for the appointment of a trustee or receiver for
Tenant's or guarantor's assets and shall not make any assignment for the
benefit of creditors, or become or be adjudicated insolvent. The allowance of
any petition under the bankruptcy law, or the appointment of a trustee or
receiver of Tenant or guarantor of its assets, shall be conclusive evidence
that Tenant or guarantor caused or gave cause therefore, unless such allowance
of the petition, or the appointment of a trustee or receiver, is vacated
within thirty (30) days after such allowance or appointment. Any act described
in this Section 11.3 shall be deemed a material breach of Tenant's obligation
hereunder, and upon such breach by Tenant, Landlord may at its option and in
addition to any other remedy available to Landlord, terminate this lease and
all rights of Tenant hereunder, by furnishing to Tenant notice in writing of
the election of Landlord to so terminate.
ARTICLE XII
DEFAULT OF THE TENANT
12.1 Right to Re-Enter. In the event of any failure of Tenant to
pay any rental due hereunder within ten (10) days after the same shall be due,
or any failure to
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<PAGE> 17
perform any other of the terms, conditions or covenants of this lease to be
observed or performed by Tenant for more than thirty (30) days after written
notice of such default shall have been mailed to Tenant, or if Tenant or
guarantor shall become bankrupt or insolvent, or file any debtor proceedings,
or take or have taken against Tenant or guarantor in any court pursuant to any
statute either of the United States or any state, a petition in bankruptcy or
insolvency or for reorganization or for the appointment of a -receiver or
trustee of all or a portion of Tenant's or guarantor's property or if Tenant or
guarantor makes an assignment for the benefit of creditors, or petitions for or
enters into an arrangement, or if Tenant shall abandon the leased-premises, or
suffer this lease to be taken under any writ of execution, then Landlord,
besides other rights or remedies it may have, shall have the immediate right of
re-entry and may remove all persons and property from the leased premises and
such property may be removed and stored in a public warehouse or elsewhere at
the cost of, and for the account of Tenant, all without service of notice or
resort to legal process and without being deemed guilty of trespass, or
becoming liable for any loss or damage which may be occasioned thereby.
12.2 Right to Relet. Should Landlord elect to re-enter, as herein
provided, or should it take possession pursuant to legal proceedings or
pursuant to any notice provided for by law, it may either terminate this lease
or
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<PAGE> 18
it may from time to time without terminating this lease make such alterations
and repairs as may be necessary in order to relet the leased premises and relet
said premises or any part thereof for such term or terms (which may be for a
term extending beyond the term of this lease) and at such rental or rentals and
upon such other terms and conditions as Landlord in its sole discretion may
deem advisable; upon each such reletting all rentals received by Landlord from
such reletting shall be applied, first, to the payment of any indebtedness
other than rent due hereunder from Tenant to Landlord; second, to the payment
of any costs and expenses of such letting, including brokerage fees and
attorneys' fees and of costs of such alterations and repairs; third, to the
payment of rent due and unpaid hereunder, and the residue, if any, shall be
held by Landlord and applied in payment of future rent as the same may become
due and payable hereunder. If such rentals received from such reletting during
any month be less than that to be paid during that month by Tenant hereunder,
or if Landlord does not relet the leased premises, Tenant shall pay any such
rental deficiency to Landlord. Such deficiency shall be calculated and paid
monthly. No such re-entry or taking possession of said premises by Landlord
shall be construed as an election on its part to terminate this lease unless a
written notice of such intention be given to Tenant or unless the termination
thereof be decreed by a court of competent jurisdiction.
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<PAGE> 19
Notwithstanding any such reletting without termination, Landlord may at any
time thereafter elect to terminate this lease for such previous breach. Should
Landlord at any time terminate this lease for any breach, in addition to any
other remedies it may have, it may recover from Tenant all damages it may incur
by reason of such breach, including the cost of recovering, the leased
premises, reasonable attorneys' fees incidental thereof, and including the
worth at the time of such termination of the excess, if any, of the amount of
rent and charges equivalent to rent reserved in this lease for the remainder of
the stated term over the then reasonable rental value of the leased premises
for the remainder of the stated term, all of which amounts shall be immediately
due and payable by Tenant hereunder.
12.3 Legal Expenses. If suit shall be brought for recovery of
possession of the leased premises for the recovery of rent or any other amount
due under the provisions of this lease or because of the breach of any other
covenant herein contained on the part of Tenant to be kept or performed, and a
breach shall be established, Tenant shall pay to Landlord all expenses incurred
therefore, including a reasonable attorneys' fee.
12.4 Curing of Tenant's Default by Landlord. Notwithstanding
anything herein contained to the contrary, if Tenant shall be in default in the
performance of any of the terms or provisions of this lease and if Landlord
shall
- 19 -
<PAGE> 20
give to Tenant notice in writing of such default specifying the nature thereof,
and if Tenant shall fail to commence to cure such default within thirty (30)
days after the date of such notice or immediately if such default requires
emergency action, and diligently prosecute such curing, Landlord may, in
addition to its other legal and equitable remedies, cure such default for the
account of and at the cost and expense of Tenant, and the sums so expended by
Landlord shall be deemed to be additional rent and shall be paid by Tenant on
the day when rent shall next become due and payable.
ARTICLE XIII
TENANT'S PROPERTY
13.1 Taxes on Leasehold. Tenant shall be responsible for and shall
pay before delinquency all municipal, county or state taxes assessed during the
term of this lease against any leasehold interest or personal property of any
kind, owned by or placed in, upon or about the leased premises by Tenant.
13.2 Notice by Tenant. Tenant shall give immediate notice to
Landlord in case of fire or accident in the leased premises or in the building
of which the premises are a part, or of defects therein or in any fixtures of
equipment.
ARTICLE XIV
QUIET ENJOYMENT
14.1 Landlord's Covenant. Upon payment by Tenant of the rents
herein provided, and upon the observance and
- 20 -
<PAGE> 21
performance of all the covenants, terms and conditions on Tenant's part to be
observed and performed, Tenant shall peaceably and quietly hold and enjoy the
leased premises for the term hereof without hindrance or interruption by
Landlord or any other person or persons lawfully or equitably claiming by,
through or under the Landlord; subject, nevertheless, to the terms and
conditions of this lease.
ARTICLE XV
HOLDING OVER, SUCCESSORS
15.1 Holding Over. Any holding over after the expiration of the
term hereof with or without the consent of Landlord shall be construed to be a
tenancy from month to month at the rate of one hundred fifty (150%) percent of
the rents herein specified (prorated on a monthly basis) and shall otherwise be
on the terms and conditions herein specified, so far as applicable.
15.2 Successors. All rights and liabilities herein gives to, or
imposed upon, the respective parties hereto shall extend to and bind the
several respective heirs, executors, administrators, successors and assigns of
the said parties, and if there shall be more than one tenant they shall all be
bound jointly and severally by the terms, covenants and agreements herein. No
rights, however, shall inure to the benefit of any assignee of Tenant unless
the assignment to such assignee has been approved by Landlord in writing as
provided in Section 8.1 hereof.
- 21 -
<PAGE> 22
ARTICLE XVI
SALE OR TRANSFER OF LEASED PREMISES
16.1 Sale or Transfer of Leased Premises. Upon any sale or
transfer, including any transfer by operation of law, of the leased premises by
Landlord, Landlord shall be relieved from all subsequent obligations and
liabilities under this lease, provided that such purchaser or transferee
(except a transferee by operation of law) shall expressly assume in writing all
obligations and liabilities of Landlord hereunder.
ARTICLE XVII
NET LEASE
17.1 Net Lease. The purpose and intent of this lease is that the
rental provided for in Article II hereof shall be an absolutely net return to
Landlord and shall continue unreduced and unabated throughout the entire term
of this lease; that all taxes, insurance and charges of every kind and nature
in connection with the replacement, repair, maintenance, upkeep, preservation
and use of the leased premises and the building throughout the term of this
lease shall be the burden of and paid by Tenant, excepting any federal, state,
county or city income taxes now imposed or which may hereafter be imposed on
the rentals accruing to Landlord hereunder.
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<PAGE> 23
ARTICLE XVIII
RIGHT TO MORTGAGE
18.1 Landlord's Mortgage. The Landlord reserves the right to
subject and subordinate this lease at all times to the lien of any mortgage or
mortgages now or hereafter placed upon the Landlord's interest in the said
premises and on the land and buildings of which the said premises are a part or
upon any buildings hereafter placed upon the land of which the leased premises
form a part, and the Tenant covenants and agrees to execute and deliver upon
demand such further instrument or instruments subordinating this lease to the
lien of any such mortgage or mortgages as shall be desired by the Landlord and
any mortgagees or proposed mortgagees and hereby irrevocably appoints the
Landlord the attorney-in-fact of the Tenant to execute and deliver any such
instrument or instruments for and in the name of the Tenant.
ARTICLE XIX
MISCELLANEOUS
19.1 Waiver. One or more waivers of any covenant or condition by
Landlord shall not be construed as a waiver of a subsequent breach of the same
covenant or condition, and the consent or approval by Landlord to or of any act
by Tenant requiring Landlord's consent or approval to or of any subsequent
similar act by Tenant.
- 23 -
<PAGE> 24
19.2 Notices. Whenever under this lease a provision is made for
notice of any kind, it shall be deemed sufficient notice and service thereof if
such notice to Tenant is in writing, addressed to Tenant at the last known post
office address of Tenant or at the leased premises and sent by registered mail
or certified mail with postage prepaid, and if such notice to Landlord is in
writing, addressed to Landlord at the address shown above, and sent by
registered mail or certified mail with postage prepaid.
19.3 Construction. Nothing contained herein shall be deemed or
construed by the parties hereto, nor by any third party as creating the
relationship of principal and agent or of partnership or of joint venture
between the parties hereto, it being understood and agreed that neither the
method of computation of rent, nor any other provision contained herein, nor
any acts of the parties herein shall be deemed to create any relationship
between the parties hereto other than the relationship of Landlord and Tenant.
Whenever herein the singular number is used, the same shall include the plural,
and the masculine gender shall include the feminine and neuter genders. If any
language is stricken or deleted from this lease, such language shall be deemed
never to have appeared herein and no other implication shall be drawn
therefrom.
19.4 Consent Not Unreasonably Withheld. Landlord shall not
unreasonably withhold its written consent, when
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<PAGE> 25
Tenant is required to obtain such consent by the terms of this lease.
19.5 Accord and Satisfaction. No payment by Tenant or receipt by
Landlord of a lesser amount than the monthly rent herein stipulated shall be
deemed to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement on any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction, and Landlord shall
accept such check or payment without prejudice to Landlord's right to recover
the balance of such rent or pursue any other remedy provided in this lease.
19.6 Captions and Section Numbers. The captions, section numbers,
article numbers and index appearing in this lease are inserted only as a matter
of convenience and in no way define, limit, construe or describe the scope or
intent of such sections or articles of this lease nor in any way affect this
lease.
19.7 Partial Invalidity. If any term, covenant or condition of this
lease or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this lease, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby and each term, covenant or condition of this lease shall be
valid and be enforced to the fullest extent permitted by law.
- 25 -
<PAGE> 26
19.8 Recording. Tenant shall not record this lease without the
written consent of Landlord. Landlord and Tenant shall each, at the request of
the other, execute a short form lease in recordable form which shall omit all
monetary terms hereof, which may be recorded.
19.9 Liens. In the event a mechanics lien shall be filed against
the leased premises or Tenant's interest therein as a result of any repairs or
alterations made by Tenant, Tenant shall, within ten (10) days after receiving
notice of such lien, discharge such lien either by payment of the indebtedness
due the mechanics lien claimant or by filing a bond (as provided by statute) as
security therefore. In the event Tenant shall fail to discharges such lien,
Landlord shall have the right to procure such discharge by filing such bond,
and Tenant shall pay the cost of such bond to Landlord as additional rent upon
the first day that rent shall be due thereafter.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
the day and year first above written.
WITNESS: LANDLORD:
MART ASSOCIATES
a Michigan co-partnership
By: Robert A. Yanover
- ----------------------- --------------------------
Robert A. Yanover
Its: Managing Partner
TENANT:
LASON SYSTEMS, INC.,
a Michigan corporation
By: Allen J. Nesbitt
- ----------------------- --------------------------
Allen J. Nesbitt
Its: President
- 26 -
<PAGE> 27
FIRST AMENDMENT TO LEASE AGREEMENT
BETWEEN MART ASSOCIATES AND LASON SYSTEMS, INC.
DATED SEPTEMBER 3, 1985
The above referenced lease is amended as follows:
1. The term of lease referenced in Paragraph 1.2 is hereby
extended for an additional three (3) years and shall now expire September 30,
1993.
2. All of the terms and conditions, including monthly rent, shall
remain unchanged.
LANDLORD:
MART ASSOCIATES
a Michigan co-partnership
By: Robert A. Yanover
---------------------------
Robert A. Yanover
Its: Managing Partner
TENANT:
LASON SYSTEMS, INC.
a Michigan corporation
By: Allen J. Nesbitt
---------------------------
Allen J. Nesbitt
Its: President
Dated: 6-26-90
--------------------
27
<PAGE> 28
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease ("Second Amendment") is made this 6th
day of January, 1995, by and between MART ASSOCIATES, a Michigan
co-partnership, whose address is 2000 Town Center, Suite 2270, Southfield,
Michigan 48075 ("Landlord") and Lason Systems, Inc., a Michigan corporation,
whose address is 28400 Schoolcraft, Livonia, Michigan 48150 ("Tenant").
R E C I T A L S:
Landlord and Tenant entered into a Lease dated September 3, 1985, as
amended by First Amendment to Lease dated June 26, 1990, pursuant to which
Tenant occupies the land and buildings known as 28400 Schoolcraft, Livonia,
Michigan 48150. (The aforesaid Lease and First Amendment to Lease are
hereinafter collectively referred to as the "Lease").
At this time, Tenant desires to extend the expiration of the term of
the Lease from January 1, 1995 to December 31, 1997 and to provide an option to
renew same.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. AMENDMENT TO PARAGRAPH 1.2. Paragraph 1.2 of the Lease is hereby
amended and restated, in its entirety, as follows:
1.2 Term. To have and to hold the Leased Premises for and
during the full term of three (3) years which shall commence
effective as of January 1, 1995 and terminate on December 31,
1997.
2. OPTION TO RENEW. Upon the expiration of the term of this Lease,
Tenant shall have the option to renew this Lease for one (1) additional term of
three (3) years on the following terms and conditions:
A. Tenant shall give to Landlord written notice of its
exercise of such option no later than nine (9) months
before the expiration of the term of this Lease;
B. This Lease shall be in full force and effect at the
time such notice is given and Tenant shall not be in
default hereunder at the time any such notice is
given; and
1
<PAGE> 29
C. Except as specifically modified by this Paragraph,
all of the terms and conditions of this Lease shall
remain in full force and effect during the option
period, except that there shall be no further option
to renew or extend the term of this Lease after such
option term.
3. NOTICES. All notices or other communications to be given or
delivered under or by reason of the provisions of this Lease shall be in
writing and shall be deemed to have been given when delivered personally to the
recipient, sent to the recipient by reputable express courier service (charges
prepaid), or mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices and other communications
will be sent to the Landlord and Tenant at the addresses indicated below:
If to the Landlord: MART ASSOCIATES
2000 Town Center, Suite 2270
Southfield, Michigan 48075
Attention: Allen J. Nesbitt
Partner
If to Tenant: Lason Systems, Inc.
28400 Schoolcraft Road
Livonia, Michigan 48150
Attention: Allen J. Nesbitt,
President
With a copy to: Golder, Thoma, Cressey, Rauner, Inc.
6100 Sears Tower
Chicago, Illinois 60606-6402
Attention: Elliot W. Maluth
4. RATIFICATION. Except as specifically modified by this Second
Amendment, all of the terms and conditions of the Lease are hereby ratified and
confirmed by Landlord and Tenant as being in full force and effect.
5. BINDING EFFECT. This Second Amendment shall be binding upon, and
the benefits hereof shall inure to, the parties hereto and their respective
successors and assigns.
THIS SECOND AMENDMENT has been executed as of the date and year first
set forth above.
2
<PAGE> 30
LANDLORD: TENANT:
MART ASSOCIATES, a Michigan LASON SYSTEMS, INC.
co-partnership a Michigan corporation
By: Allen J. Nesbitt By: Allen J. Nesbitt
-------------------------- --------------------------
Allen J. Nesbitt, Partner Allen J. Nesbitt
President
3
<PAGE> 1
EXHIBIT 10.28
LEASE AGREEMENT
BETWEEN
KENSINGTON CENTER, INC.
AND
LASON SYSTEMS, INC.
Dated: August 3, 1995
<PAGE> 2
KENSINGTON CENTER
LEASE AGREEMENT
WITH
LASON SYSTEMS, INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
SECTION PAGE
- --------------------------------------------------------------------------------------------
<S> <C> <C>
l. Description of Premises............................................................. 1
2. Term and rent ...................................................................... 1
3. Taxes and Assessments as Additional Rent............................................ 3
4. Utilities and Minimum Heat ......................................................... 4
5. Insurance obligations as Additional Rent ........................................... 4
6. Waiver of Subrogation............................................................... 5
7. Operating Expenditures as Additional Rent........................................... 5
8. Default in Payment, Expenditure, Reimbursement or
Obtaining of Insurance ............................................................. 8
9. Condition of Premises at Time of Lease ............................................. 8
10. Use, Occupancy ..................................................................... 8
11. Destruction or Damage .............................................................. 9
12. Repairs and Maintenance ............................................................ 10
13. Alterations ........................................................................ 10
14. Care of Premises ................................................................... 11
15. Advertising Display ................................................................ 12
16. Compliance ......................................................................... 13
17. Non-Liability ...................................................................... 13
18. Assignment ......................................................................... 13
19. Bankruptcy and Insolvency .......................................................... 15
20. Subordination and Attornment ....................................................... 15
21. Eminent Domain ..................................................................... 16
22. Access to Premises ................................................................. 17
23. Default, Re-Entry and Right to Relet and All
Breaches Material .................................................................. 18
24. Landlord's Lien ................................................................... 22
25. Trial by Jury Waived ............................................................... 22
26. Attorney's Fees .................................................................... 22
27, Quiet Enjoyment .................................................................... 22
28, Re-Renting ......................................................................... 22
29. Holding over ....................................................................... 23
30. Delay of Possession ................................................................ 23
31. Regulatory Control; Requirements of Tenant ......................................... 23
32. Burglar Alarm System .............................................................. 23
33. Discharge of Liens ................................................................. 23
34, Liability of Landlord .............................................................. 24
35. Security Deposit ................................................................... 24
36. Guaranty ........................................................................... 25
37. Corporate Authority ................................................................ 25
38. Miscellaneous Provisions ........................................................... 26
39. Additional Provisions .............................................................. 28
40. Options to Extend .................................................................. 30
41. Tenant's Environmental Protection .................................................. 30
</TABLE>
<PAGE> 3
SCHEDULE OF EXHIBITS
--------------------
A-1 - Leased Premises
A-2 - Kensington Center (including common areas)
B - Parking Arrangements
B-1 - Location Of Parking Areas
C - Landlord's Prepossession Buildout
D - Tenant's Buildout Without Landlord's Assistance
E - Tenant's Buildout With Landlord's Assistance
<PAGE> 4
KENSINGTON CENTER, INC.
LIVONIA, MICHIGAN
LEASE AGREEMENT
THIS LEASE AGREEMENT made this 3rd day of August, 1995, by and between
KENSINGTON CENTER, INC., a Michigan corporation, whose address for the payment
of rent is Drawer #641374, P.O. Box 64000, Detroit, Michigan 48264-1374, and
whose mailing address for notices and general correspondence is 377 Amelia
Street, Plymouth, Michigan 48170 (hereinafter "Landlord"), and LASON SYSTEMS,
INC. a Delaware corporation whose address is 28400 Schoolcraft Road, Livonia,
Michigan 48150 (hereinafter "Tenant").
SECTION 1. DESCRIPTION OF PREMISES.
Landlord, in consideration of the rents to be paid and the covenants and
agreements to be performed by Tenant, does hereby lease unto Tenant the
following described premises situated in the City of Livonia, Wayne County,
Michigan, to-wit, a portion of an office-warehouse building, commonly known as
the Kensington Center, located at 38000 Amrhein Road, Livonia, Michigan 48151,
with Tenant's space consisting of approximately 56,000 square feet hereinafter
called the "Premises." In addition to the use of the demised Premises, subject
to the terms and conditions in this Lease, Tenant shall have the right to use
areas outside Tenant's space, shared with other tenants in Kensington Center,
said space being generally referred to as the "common areas." Tenant's Premises
and the common areas are depicted on Exhibit A-1 and A-2, attached.
SECTION 2. TERM AND RENT.
The term of this Lease shall be sixty (60) months from and after the first
(1st) day of the month following the Delivery Date (as defined in Section
39(A)1 of this Lease, fully to be completed and ended, Tenant yielding and
paying during the continuance of this Lease unto Landlord for rent of said
Premises for said term, the sums reflected in the following table:
Lease Base Annual Annual Monthly Base Taxes, Insurance &
Year Per Sq. Ft. Base Rent Rent Operating Expenditures
- ----- ----------- --------- ------------ ----------------------
1 - 5 4.25 $238,000 $19,833 [Minimum floors: see
next page]
Said rent shall be payable in monthly installments in advance, upon the 1st day
of each and every month beginning the 1st day of the month following the
Delivery Date, as follows: Base monthly rent plus a pro rata share of taxes,
insurance and Operating Expenditures, as hereinafter provided; except, however,
the first months' rent shall be paid upon execution hereof. Tenant's "PRO RATA
Share" in this Lease shall mean 15.8%, i.e., Tenant's stipulated proportionate
share of the rentable space of the Kensington Center (i.e., 56,000/354,400).
Further, such space as is available for use and occupancy prior to the Delivery
Date (as well as the fractional month, if any, prior to the beginning of the
Term) shall be invoiced on a pro rata basis.
<PAGE> 5
It is the purpose and intent of Landlord and Tenant that this Lease shall yield
the rent specified, wholly net, to Landlord, and that all costs, expenses and
obligations relating to the Premises which may arise or become due during the
term of this Lease shall be paid by Tenant.
Tenant shall be responsible during the term of this Lease for its PRO RATA
Share of amounts of the "Minimum Floors" and periodic increases in them with
respect to the following categories:
Category Item Minimum Floor Amounts
- ------------- ---------------------
Taxes $ .38
Insurance $ .10
Operating Expenditures $ .17
---------
Total $ .65
=========
The Total of the Minimum Floor Amounts shall not be increased in 1995, and,
thereafter, the Total of the Minimum Floor Amounts shall not increase by more
than seven and one-half percent (7.5%) from the amount applicable in the
immediately preceding lease year.
Descriptions of the above categories are detailed in Sections 3, 5 and 7 of
this Agreement. The base rents recited in Section 2, do not include taxes,
insurance or Operating Expenditures. Taxes, insurance and Operating
Expenditures shall be additional rent as the amounts and new floors are
established.
In the event the Minimum Floor Amount increases (based on actual costs) for any
category (with timing varying based on invoicing dates) from one period to the
next, the Floor for that category shall be re-established at a new minimum
level and subsequent monthly invoices shall include the appropriate increase.
Upon a new Minimum Floor Amount being established, that amount shall become the
permanent Minimum Floor Amount for that category. Tenant shall, upon
reasonable notice, be entitled to audit Landlord's records with respect to
taxes, insurance, and Operating Expenditures to verify the propriety of any
increases.
Hereinafter, PRO RATA Share obligations and annual increases shall be relevant
only as the then effective Minimum Floor Amount in particular categories are
exceeded. Said amounts shall be treated as additional rent, payable within
thirty (30) days after receipt of the invoice for same.
Tenant hereby hires the Premises for the said term as above-mentioned and
covenants independently of any other covenants or conditions, express or
implied, to pay, or cause to be paid unto Landlord at the dates and times above
mentioned, the base rent, additional rent, and other sums payable or required
to be paid to Landlord under this Lease (collectively referred to as "rent"),
without notice or demand and without offset or deduction of any kind.
Except as expressly set forth in this Lease, including as provided in Section
11 (DESTRUCTION OR DAMAGE), Section 21 (EMINENT DOMAIN) or Section 30 (DELAY OF
POSSESSION), no taking
2
<PAGE> 6
of, destruction of, or damage to the Premises or any part thereof by fire or
any other casualty or default by Landlord shall permit Tenant to surrender this
Lease or shall relieve Tenant from its liability to pay the sums payable under
this Lease; nor shall Tenant be released from any of its other obligations
under this Lease. Except as expressly set forth in this Lease, Tenant waives
any rights now or hereafter conferred upon it by statute or otherwise to quit
or surrender this Lease or the Premises or any part thereof, or to any
suspension, diminution, abatement or reduction of rent on account of any such
destruction or damage, or default.
SECTION 3. TAXES AND ASSESSMENTS AS ADDITIONAL RENT.
Landlord shall be responsible for the payment of real estate taxes and
assessments incident to the Premises. Tenant shall pay to Landlord as
additional rent, Tenant's PRO RATA Share of such taxes and assessments, whether
general or special, and during the term or any extension hereof, which are
assessed or levied by any governmental or public authority upon the land and
building of which the Premises are a part. Said taxes and assessments shall be
treated as "paid in advance" on the "due date" basis. Should the State of
Michigan or political subdivision thereof, or any governmental authority having
jurisdiction thereover, impose a tax and/or assessment upon or against the
rentals payable hereunder by Tenant to Landlord, either by way of substitution
for the taxes and assessments levied or assessed against such land and such
buildings, or in addition thereto, such tax and/or assessment shall be deemed
to constitute a tax and/or assessment against such land and improvements for
the purposes of this Section 3. Taxes and assessments for the first and last
year of the original term of the Lease or any extended term or period of
holding over, as the case may be, shall be prorated over the period to which
they apply between Landlord and Tenant so that Tenant will be responsible for
only its PRO RATA Share of the pro rata amounts of any such tax or assessment
attributable to the period during which Tenant has possession of the Premises.
The so-called "due-date" method of proration shall be used with taxes and
assessments being treated as "paid in advance" (i.e., 12/1-11/30 for the
"winter taxes", and 7/1-6/30 for the "summer taxes").
Notwithstanding the foregoing, the following shall not be included in taxes:
(i) any income, inheritance, estate, succession, transfer, gift, franchise,
corporation, income or profit taxes that are or may be imposed upon Landlord or
the portion paid by tenants as a separate charge on the value of the leasehold
improvements; and (ii) any penalties or interest incurred as a result of
Landlord's negligence, inability or unwillingness to make payments when due.
Any assessments for capital improvements will be paid over the longest
permitted time (or at least charged to Tenant on that basis).
Tenant shall be responsible for its own personal property taxes
which are directly billed by the City of Livonia.
3
<PAGE> 7
SECTION 4. UTILITIES AND MINIMUM HEAT.
Tenant will pay all charges made against the Premises for gas, water,
heat and electricity during the continuance of this Lease, as the same shall
become due. Unless said charges are separately metered and billed to the
Premises, Tenant shall promptly pay its proportionate share (based on its
square footage as a percentage of the total Kensington Center square footage
served by the relevant utility service not separately metered) upon invoice
from Landlord.
Tenant shall use reasonable efforts to maintain a minimum temperature of 45
degrees (Fahrenheit) to protect the wet sprinkler system.
SECTION 5. INSURANCE OBLIGATIONS AS ADDITIONAL RENT.
(A) PRO RATA SHARE OF HAZARD INSURANCE. Landlord shall keep the buildings
constituting the Kensington Center insured against damage or destruction by
fire and the perils commonly covered under the "all-risk" insurance to the
extent of the replacement value thereof. Tenant shall be responsible for its
PRO RATA Share of the cost of such insurance. Landlord, using its reasonable
discretion, shall be responsible for determining the amount and kind of
all-risk extended coverage and other insurance to be maintained, subject to
Tenant's additional obligation to pay any increases particularly attributable
to the nature of its business.
(B) PRO RATA SHARE OF LIABILITY INSURANCE. Further, Tenant shall be
responsible for its PRO RATA Share of the cost of comprehensive general
liability insurance carried on the Kensington Center buildings and land on
which the demised Premises are a part with public liability and property damage
in the amount of Two Million Dollars ($2,000,000) for damage resulting to one
person and Four Million Dollars ($4,000,000) for damage resulting from one
casualty, and One Million Dollars ($1,000,000) property damage insurance
(including diminution of adjoining property values) resulting from any one
occurrence. Tenant shall be responsible for its PRO RATA Share (or its share
based on premiums paid based on rent paid by Tenant, if more appropriate,
depending on the method of charging premiums by the insurance underwriter) of
the cost of loss of rent insurance carried or to be carried by Landlord.
(C) INDEMNIFICATION. Except for damage or injury caused by or arising out
of the negligence or misconduct of Landlord or its employees, agents, or
contractors, Tenant agrees to indemnify and hold harmless Landlord from any
liability for damages to any property, injury, or death of any person in, on or
about the Premises from the acts or omissions of Tenant or its employees,
agents, or contractors. The foregoing indemnity obligation of Tenant shall
include attorney's fees, investigation costs and all other costs and expenses
incurred by Landlord from the first notice that any claim or demand is to be
made or may be made. The provisions of this section shall survive the
termination of
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this Lease with respect to any damage, injury or death occurring
prior to such termination.
(D) TENANT'S LIABILITY COVERAGE NAMING LANDLORD. Tenant will procure and
keep in effect at the onset and during the term of this Lease a comprehensive
general liability insurance policy, with public liability and property damage
in the sum of Two Million Dollars ($2,000,000.00) for damage resulting to one
person and Four Million Dollars ($4,000,000.00) for damage resulting from one
casualty, and One Million ($1,000,000.00) Dollars property damage insurance
(including diminution of adjoining property values) resulting from any one
occurrence. Such policy shall be endorsed, so as to provide that Landlord will
be given fifteen (15) days advance written notice of any cancellation, material
change or reduction of insurance coverage under such policy.
At all times, all policies shall be written in amounts and by insurers carrying
a rating of Best A+ or better licensed to do business in the State of Michigan.
Landlord shall be on such policy as an additional insured.
(E) CERTIFICATES AND ENDORSEMENTS. Within ten (10) days after Landlord's
request, a Certificate of Issuance providing evidence of the required coverage
of all policies required shall be deposited with Landlord, and Tenant covenants
to do so prior to Tenant taking possession, or as soon thereafter as possible
and at any renewal or anniversary dates, or change of insurance company or
material remedies under Section 23 hereof, and Landlord shall do the same for
Tenant. Tenant shall request its insurance carrier to forward said certificate
directly to Landlord, and, if not received by Landlord, Tenant shall procure it
for Landlord. Such policies shall be endorsed so as to provide that Landlord
will be given fifteen (15) days advance written notice by registered or
certified mail of any cancellation, material change, or reduction of insurance
coverage under such policies.
SECTION 6. WAIVER OF SUBROGATION.
Each party hereby waives, releases, and discharges the other from all right of
recovery against it by subrogation for any loss from liability for damages to
any person or property in, on or about the Premises for any cause whatsoever
wherein the releasing party is protected from such loss by insurance. Each
party warrants that it has informed its insurance carrier of this Waiver of
Subrogation provision.
SECTION 7. OPERATING EXPENDITURES AS ADDITIONAL RENT.
(A) PRO RATA OPERATING EXPENDITURES. Tenant shall pay, as additional
rent, as hereinafter provided, its PRO RATA Share of the cost of operation of
Kensington Center ("Operating Expenditures") These charges shall be in addition
to charges for taxes and insurance otherwise called for herein, During any part
of the term hereof which shall be less than a full calendar
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year, any Operating Expenditures shall be prorated on a daily basis between the
parties to the end that Tenant shall only pay operating costs attributable to
the portion of the calendar year occurring within the term of this Lease.
Operating Expenditures to be paid by Landlord and, in turn, billed to Tenant on
a PRO RATA basis shall include, by way of example, but not limitation, the
following: the costs of repair, replacement, and operation of common area
lighting, common area electrical service, parking lots, driveways, entryways
and dock areas, roof (repair, but not replacement), the sprinkler system, fire
system, and pump room equipment, the sprinkler and fire alarm and security
systems, water and sewer systems, fences, signage, all equipment (including
maintenance and movable), and all landscaping, and other similar costs.
Further, painting, window washing, all cleaning, rubbish removal, security
services, if any, snow removal, and utility service requirements shall be
included, along with ordinance, code, and regulatory agency requirements,
safety related requirements (including those reflected in the Standard Safety
Regulations, if any, subsequently adopted for Kensington Center), and other
costs, charges, and expenses which would be appropriate to operate and maintain
a first class facility. Additionally, an administration fee of fifteen per
cent (15%) per annum of the foregoing Operating Expenditures shall be
includible in the Operating Expenditure category. The parties agree that
Operating Expenditures shall include all costs except those involving
replacement of the roof and exterior walls (excluding windows and doors),
single business taxes of Landlord, real estate broker commissions, and
replacement and maintenance reimbursed by proceeds of insurance, the costs of
which shall be the responsibility of Landlord. Tenant shall be responsible for
Tenant finishes.
Notwithstanding the foregoing, the following shall not be included within
"Operating Expenditures":
1. The costs of repairs and general maintenance due to casualty or
condemnation which are paid by proceeds of insurance, by Tenant or by
other third parties;
2. The cost of providing or performing improvements, work or repairs not
the requirement of Landlord pursuant to another Tenant's Lease, to or
within any portion of the premises of any other tenants in Kensington
Center;
3. Costs, including permit, license and inspection costs, incurred in
renovating or improving vacant space at Kensington Center;
4. Attorney's fees, leasing commission, advertising expenses and other
costs and expenses incurred in connection with the leasing of space at
Kensington Center;
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5. Attorney's fees, accountants' fees and other costs and expenses
incurred in connection with disputes with present tenants or other
occupants of Kensington Center (not including disputes, the resolution
of which would directly benefit all tenants in Kensington Center);
6. Amounts paid or incurred by Landlord to affiliates in excess of the
prevailing market rate for services materials and/or supplies
furnished to Kensington Center;
7. All items and services for which Tenant or any other tenant of
Kensington Center reimburses Landlord, including costs of excess or
additional services provided to any tenant that are directly billed to
such tenant;
8. Landlord's general corporate overhead, administrative expenses or
management fees of any kind other than the fifteen percent (15%)
administrative fee as expressly set forth in this Section;
9. The cost of clean-up of any hazardous substances which Landlord has
placed in or on Kensington Center or the Premises or which any Tenant
has placed in or on Kensington Center or the Premises;
10. Costs and expenses arising from claims made by any tenant of Landlord
or any other third party arising from Landlord's or other tenant's
breach of this or such tenant's Lease, negligence or misconduct; and
11. Interest, principal, points and fees on debt or amortization on any
mortgage or mortgages or any other debt instrument encumbering this
Lease or Kensington Center.
(B) DIRECT TENANT EXPENSES. A reasonable fee for management services, not
to exceed two percent (2%) of the rental called for herein, shall be charged to
Tenant, This fee will be determined by Tenant's rent and not be prorated by
space as are other Operating Expenditures.
(C) INVOICE FOR ADDITIONAL RENT. Landlord shall mail to Tenant an invoice
for, or shall include on its regular invoices, taxes, insurance, Operating
Expenditures and other rent, and Tenant shall pay such charges within thirty
(30) days following the receipt of such invoice. All such amounts shall be
treated as additional rent in addition to the base rent.
(D) CONTESTED AMOUNTS. In the event any invoice under this Lease is
contested or Tenant reasonably requests verification, the invoice shall
nevertheless be due and payable (except in the case of any obvious mistake) in
accordance with the terms of this Lease. Landlord shall promptly attend to any
request for verification or dispute resolution, Any overcharge shall be
promptly rebated.
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SECTION 8. DEFAULT IN PAYMENT, EXPENDITURE, REIMBURSEMENT OR OBTAINING OF
INSURANCE.
If Tenant shall fail to make any payment, expenditure or reimbursement (other
than rent) required to be paid or expended by Tenant under the terms of this
Lease, Landlord may, after notice to Tenant and a ten (10) day opportunity to
cure, at its option, make such payment or expenditure; or, if Tenant should
fail to procure, maintain, or deposit the policies of insurance required under
the terms of this Lease, Landlord may, after notice to Tenant and a ten (10)
day opportunity to cure, at its option obtain such insurance. Any such
payments, expenditures or costs of insurance expended by Landlord shall be
payable as additional rent to Landlord by Tenant on the next ensuing rent
day together with interest at fifteen (15%) percent per annum from the date of
such payment or expenditure by Landlord and on default in such payment,
Landlord shall have the same remedies as on default in payment of the rent.
SECTION 9. CONDITION OF PREMISES AT TIME OF LEASE.
(A) ACCEPTANCE. Tenant further acknowledges that it has examined the
Premises prior to the making of this Lease, and knows the condition thereof,
and that no representations as to the condition or state of repairs thereof
have been made by Landlord, or its agent, which are not herein expressed, and
Tenant hereby accepts the Premises in their present condition at the date of
the execution of this Lease, subject to satisfactory completion of Landlord's
construction obligations as set forth in Section 39.
(B) RETURN. Tenant shall, upon vacating the Premises, return the Premises
to Landlord clean and free of rubbish and debris in as good condition as when
taken with such property and improvements as shall remain Landlord's property
having been properly maintained, reasonable wear and tear excepted.
SECTION 10. USE, OCCUPANCY.
(A) USE AND OCCUPANCY. It is understood and agreed between the parties
hereto that the Premises shall be used and occupied only for mail sorting,
mailing of literature, computer programming, data processing, warehousing,
reproduction graphics, offset printing, and related activities and for no other
purpose or purposes without the written consent of Landlord, and that Tenant
will not use, occupy or operate the Premises for any purpose in violation of
the law, municipal ordinance or regulation. No yellow or red label goods or
hazardous, toxic, or potentially environmentally impairing materials shall be
stored on the Premises, except for materials that are used in the business
conducted by Tenant which materials shall be used, stored, and disposed of in
compliance with applicable laws. Any breach of the provisions of this Section
10 shall, after notice to Tenant and a ten (10) day opportunity to cure,
constitute a default under this Lease, Landlord may at its option terminate
this Lease forthwith and re-enter and repossess the Premises.
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(B) REQUIRED OCCUPANCY RESTRICTIONS. In the event any building facilities
constructed by Tenant, conditions created by Tenant, or activities undertaken
by Tenant result in Landlord's insurance examiner, city official, fire
marshall, or environmental authority requiring changes, Tenant shall be
responsible to make such changes. Further, Tenant shall abide by any
reasonable standard safety regulations as are published by Landlord for the
entire Kensington Center ("Standard Safety Requirements"), provided they are
mailed or delivered to Tenant. Such Standard Safety Regulations, published and
revised from time to time to develop the minimum requirements for health and
safety equipment and systems for tenants in Kensington Center, will outline,
among other things, smoke detector and fire alarm requirements, material
storage and aisle requirements, and other safety related matters. Tenant shall
abide by the requirements of the Standard Safety Regulations, and upon its
failure to do so, Landlord may, after thirty (30) days written notice to
Tenant, take the necessary steps to achieve compliance within the Premises and
shall invoice Tenant for the cost, including a contractor's fee of 15% of such
compliance cost.
(C) OUTSIDE STORAGE. Tenant shall not store anything outside or erect any
outside structures for storage, nor shall it erect any aerial or use the roof
for any purpose without prior written consent of Landlord, which consent may be
later revoked at Landlord's sole discretion, if required by a governmental
authority or insurance underwriter.
(D) ENVIRONMENTAL VIGILANCE. In addition to Tenant's duty to observe legal
and good business practices relating to the environment, Tenant shall be
vigilant with respect to environmental practices on neighboring properties.
Tenant shall use reasonable efforts to notify Landlord or the proper
authorities of any activity that may adversely affect the Premises, including
its soil, ground water, surface water, or air.
SECTION 11. DESTRUCTION OR DAMAGE.
(A) DAMAGE. In the event the Premises or any portion of the building
necessary for Tenant's occupancy are damaged by fire, earthquake, act of God,
the elements or other casualty, Landlord shall forthwith repair the same if
such repairs can, in Landlord's opinion, be completed within one hundred twenty
(120) days of the casualty. This Lease shall remain in full force and effect
except that an abatement of the base rent and additional rent shall be allowed
Tenant for such part of its Premises as shall be rendered unusable by Tenant in
the conduct of its business during the time such part is so unusable. If such
repairs cannot, in Landlord's opinion, be made within one hundred twenty (120)
days of the casualty, Landlord may elect, upon notice to Tenant within thirty
(30) days after the date of such fire or other casualty, to repair or restore
such damage, in which event this Lease shall continue in full force and effect,
but the base rent and additional rent shall be partially abated
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as provided herein. If Landlord elects not to make such repairs, this Lease
shall terminate as of the date of such election by Landlord.
(B) SHARING OF REPAIR COSTS. If the demised Premises are to be repaired
hereunder, Landlord shall repair at its costs any injury or damage to the
structural and mechanical elements of the building itself and building standard
tenant improvements in the Premises as set forth on Exhibit C. Tenant shall
perform and pay the cost of repairing any other improvement in the Premises and
shall be responsible for carrying such casualty insurance as it deems
appropriate with respect to such other Tenant improvements.
(C) TOTAL DESTRUCTION. A total destruction of the entire Premises
(including the roof and outer and demising walls) shall automatically terminate
this Lease.
SECTION 12. REPAIRS AND MAINTENANCE.
Tenant, at its own expense, shall maintain, in good condition and repair
consistent with local practices prevailing in the area and in compliance with
all applicable governmental regulations, the Premises, and all improvements,
additions or alterations therein and at the expiration of the term yield and
deliver up the same in like condition as when taken, reasonable wear and tear
excepted. Tenant shall be responsible for the repair and maintenance of: the
floor, windows and glass, all doors, docks, dock levelers, all mechanical
systems (heating, ventilating, and air conditioning systems), plumbing,
electrical, lighting, and other facilities within its Premises. Further, Tenant
shall be responsible for damage to either side of its external walls, internal
sidewalls and columns, ceiling, sprinkler system, etc., including, but not
limited to, damage caused by truck or other moving vehicle and vandalism to the
extent caused by Tenant, its employees, agents, contractors or licensees. All
major repairs shall be done only by contractors approved by Landlord in
accordance with plans and specifications approved in writing by Landlord.
Failure to obtain Landlord's consent with respect to major repairs shall result
in the right of Landlord to rebuild, correct, or remove items to which Landlord
objects, all at Tenant's expense including a 15% contractor's fee payable to
Landlord.
SECTION 13. ALTERATIONS.
(A) TENANT'S ALTERATIONS. Tenant shall not make any alterations, additions
or improvements to the Premises which cost in the aggregate in excess of Fifty
Thousand Dollars ($50,000) in any twelve (12) month period without Landlord's
written consent, which shall not be unreasonably withheld, and work shall be by
contractors approved by Landlord. All alterations, additions or improvements
made by either of the parties hereto upon the Premises, except movable office
furniture and trade fixtures put in at the expense of Tenant, shall be the
property of Landlord, and, unless otherwise directed by Landlord, shall remain
upon and be surrendered with the Premises at the termination of this
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Lease, without molestation or injury. For items removed by Tenant, at
expiration of the term, Tenant shall repair everything so as to yield and
deliver up Premises in the same condition as when taken, reasonable wear and
tear excepted.
(B) CONSTRUCTION BY LANDLORD. All alterations, additions and improvements
shall be performed by contractors approved by Landlord, and subject to
conditions specified by Landlord in accordance with drawings, plans, and
specifications submitted by Tenant, Except as set forth in Section 39(A) of
this Lease, if any such alterations, additions or improvements to the Premises
consented to by Landlord shall be made by Landlord for Tenant's account, Tenant
shall reimburse Landlord the cost thereof (including a reasonable charge for
Landlord's overhead related thereto) as the work proceeds within thirty (30)
days after receipt of statements therefor. All such alterations, additions and
improvements shall become the property of Landlord upon their installation
and/or completion and shall remain on the Premises upon the expiration or
termination of this Lease without compensation to Tenant unless Landlord elects
by notice to Tenant (unless Tenant shall have obtained a written waiver of such
right of Landlord) to have Tenant move the same, in which event Tenant shall
promptly restore the demised Premises to their condition prior to the
installation of such alterations, additions and improvements.
(C) FAILURE TO OBTAIN CONSENT. Failure to obtain Landlord's consent, where
required, shall result in the right of Landlord to rebuild, correct or remove
items to which Landlord objects, all at Tenant's expense including a 15%
contractor's fee payable to Landlord.
SECTION 14. CARE OF PREMISES.
(A) PARKING. Landlord shall maintain all parking areas, together with the
necessary access roads and driveways servicing Kensington Center. Landlord
hereby grants to Tenant and Tenant's employees, agents, customers and invitees
the right, during the term hereof, to use, in common with others entitled to
the use thereof, the appropriate common areas. Landlord shall operate, manage
and maintain during the term of this Lease, all common areas. The manner in
which such areas and facilities shall be maintained and the expenditures
therefor shall be consistent with local practices prevailing in the area, and
the use of such areas and facilities shall be subject to such regulations as
Landlord shall make from time to time. Tenant agrees to direct its employees,
agents, customers, and invitees to park in such areas as may be designated by
Landlord for such parking. Tenant's area shall be that area containing seventy
(70) spaces depicted and described on Exhibit B subject to landscaping and
other improvements which Landlord determines shall be located therein. No
designation of a parking area for Tenant shall give Tenant a continuing or
exclusive right to such space, but rather Landlord in its reasonable discretion
may redesignate by location said area from time to time, whether or not
adjacent to Tenant's Premises, provided it is comparable in proximity to the
Premises.
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(B) OTHER. Tenant shall not perform any acts or carry on any practices
which may injure the Premises or buildings in Kensington Center and shall keep
the Premises (including adjoining walkways, porches, steps, and entrance ways
allocated to it) clean and free from rubbish, dirt, snow and ice (except
Landlord shall keep the parking and dock areas free of snow, in accordance with
customary practice for like-kind facilities in the area, unless prevented by
Tenant's vehicles) at all times. Tenant shall keep areas used by it, its
various guests, invitees, agents, and employees free of ice. Landlord shall not
be liable to Tenant for any "slip and fall" or similar kinds of claims from
Tenant's agents, employees, guests, and invitees from areas Tenant is
responsible to maintain, and Tenant shall be obliged to rectify any conditions
which may lead to such a claim, and it shall indemnify, through insurance or
otherwise, Landlord against a recovery, as well as the cost of defense,
including reasonable attorney fees, on account of such a claim. It is further
agreed that in the event Tenant shall not comply with these provisions,
Landlord may have rubbish, dirt, snow and ice removed, in which case Tenant
agrees to pay all reasonable charges. Further, in the event snow is not removed
from the parking lot satisfactorily to Tenant, Tenant shall notify Landlord to
allow Landlord to correct the condition.
Outside trash receptacle arrangements or installations shall require Landlord's
approval. Landlord shall have the right, at its sole discretion, to decline or
approve outside trash receptacle arrangements, and may take any corrective
action, including removal, of any unapproved installations. Said charges shall
be paid to Landlord by Tenant within thirty (30) days after a bill is presented
to it, and Landlord shall have the same rights as is provided in Section 8 of
this Lease in the event of Tenant's failure to pay.
(C) TENANT'S FAILURE TO PROVIDE CARE. In the event Tenant fails to abide
by the requirements to care for the Premises within thirty (30) days after
notice from Landlord (or sooner if required by emergency), Landlord shall have
the absolute right to undertake the required activity and to invoice Tenant for
the cost plus a fifteen per cent (15%) contractor's fee.
SECTION 15. ADVERTISING DISPLAY.
It is further agreed that all signs and advertising displayed in and about the
Premises shall be such only as advertise the business carried on upon said
Premises, and that Landlord shall control the character and size thereof, and
that no sign shall be displayed excepting such as shall be approved in writing
by Landlord, and that no awning shall be installed or used on the exterior of
said building unless approved in writing by Landlord. Further, Tenant shall be
responsible for the cost of a standard tenant sign obtained and installed by
Landlord. Other promotional devices, including, but not limited to, flags,
banners, and the like must be approved by Landlord, which shall be revocable
only if required by governmental authority.
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SECTION 16. COMPLIANCE.
Tenant shall, at its own expense by Landlord, promptly comply with all laws,
statutes, ordinances and governmental rules and with regulations or requirements
of any board of fire underwriters or other similar body, Landlord's insurance
underwriter, with any occupancy certificate or directive issued pursuant to any
law, as well as the provisions of all recorded documents affecting the
condition, use or occupancy of the Premises, In the event Tenant fails to
comply, within thirty (30) days after notice from Landlord or sooner if required
by law or emergency, Landlord shall have the absolute right to undertake the
required action and to invoice Tenant for the cost plus a fifteen percent (15%)
contractor's fee.
SECTION 17. NON-LIABILITY.
Except to the extend caused by or resulting from the gross negligence or
misconduct of Landlord or its employees, agents, contractors or licensees or
Landlord's failure to comply with applicable laws, Landlord shall not be
responsible or liable to Tenant or Tenant's agents or employees for the
following: (a) any loss or damage that may be occasioned by or through the acts
or omissions of persons occupying adjoining Premises or any part of the
Premises adjacent to or connected with the demised Premises or any part of the
building of which the Premises are a part; (b) for any loss or damage resulting
to Tenant or its property from burst, stopped or leaking water, gas, sewer or
steam pipes; (c) for any loss or damage resulting to Tenant or its property
from the failure to have or failure to maintain security systems, locks, fire
alarms, sprinkler and fire systems, security alarms or security patrols or
services employed by Landlord or Tenant for the security of the Premises; (d)
loss or interruption in electrical, gas, or water service to the Premises; or
(e) for any damage or loss to Tenant, Tenant's employees or business, or for
any damage or loss to property within the demised Premises. This shall include
but not be limited to any damage or loss for business interruption, loss of
profits, spoilage or deterioration of perishable or non-durable items, or
interference with contract.
In the event of any sale or transfer (including any transfer by operation of
law) of the demised Premises, Landlord (and any subsequent owner of the demised
Premises making such a transfer) shall as of the date of the transfer be
relieved from any and all obligations and liabilities accruing under this Lease
subsequent to the date of transfer, and Tenant agrees to attorn to such
subsequent owner(s), provided the transferee assumes the liabilities of
Landlord hereunder.
SECTION 18. ASSIGNMENT.
Tenant covenants not to assign or transfer this Lease or hypothecate or mortgage
the same or sublet the Premises or any part thereof without the written consent
of Landlord. Any assignment, transfer, hypothecation, mortgage or subletting
without said written consent shall give Landlord the right to terminate this
Lease and to re-enter and repossess the Premises.
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Notwithstanding anything to the contrary set forth in this Lease, Tenant may,
without the consent of Landlord, assign this Lease or sublet all or any portion
of the Premises to: (i) any parent, subsidiary or affiliate of Tenant; (ii) any
entity resulting from the consolidation or merger of Tenant into or with any
other entity; (iii) any person or entity acquiring all of Tenant's stock or all
or substantially all of Tenant's physical assets; provided, however, that in
any event, the assignee or sublessee shall assume the obligations of Tenant
hereunder by a written agreement, the form and substance of which is reasonably
satisfactory to Landlord and Tenant shall remain liable for all obligations
under this Lease. As used herein, the expression "affiliate" means a person or
business entity, corporation or otherwise, that directly or indirectly, through
one or more intermediaries, controls or is controlled by, or is under common
control with Tenant. The word "control" means the right and power, direct or
indirect, to direct or cause the direction of the management and policies of
the ownership or voting securities, by contract or otherwise.
No subletting, assignment or transfer shall release Tenant of Tenant's
obligation or alter the primary liability of Tenant to pay the rent and to
perform all other obligations to be performed by Tenant hereunder. The
acceptance of rent by Landlord from any other person shall not be deemed to be
a waiver by Landlord of any provision hereof. Consent by Landlord to one
assignment or subletting shall not be deemed consent to any subsequent
assignment or subletting. In the event of default of any of the terms hereof,
Landlord may proceed directly against Tenant without the necessity of
exhausting remedies against such assignee or successor. Landlord may consent
to subsequent assignments or subletting of this Lease or amendments or
modifications to this Lease with assignees of Tenant, without notifying Tenant,
or any successor of Tenant, and without obtaining its or their consent thereto
and such action shall not relieve Tenant of liability under this Lease.
In the event Tenant shall receive Landlord's written consent to sublet a
portion or all of the Premises, or assign this Lease, all of the sums or other
economic consideration received by Tenant as a result of such subletting,
granting of an assignment whether denominated rentals or otherwise, under the
sublease or assignment, which exceed in the aggregate, the total sums which
Tenant is obligated to pay Landlord under this Lease (prorated to reflect
obligations allocable to that portion of the Premises subject to such sublease)
shall be payable to Landlord as additional rent under this Lease without
affecting or reducing any other obligation of Tenant hereunder.
In the event Tenant shall assign this Lease or subject the Premises or request
the consent of Landlord to any assignment or subletting or if Tenant shall
request the consent of Landlord for any act that Tenant proposes to do, then
Tenant shall reimburse Landlord for its attorney fees and processing fees
incurred in connection herewith. If Tenant fails to reimburse the aforesaid
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fees on the next ensuing rent day, Landlord shall have the same
remedies as on default in payment of the net rent.
The foregoing provisions shall apply to any holding company or other party
which directly or indirectly holds or controls Tenant as though it were the
Tenant itself.
Landlord's rights to assign this Lease are and shall remain unqualified. Upon
any sale of the Premises, Landlord shall thereupon be entirely freed of all
obligations of Landlord hereunder accruing subsequent to the date of transfer
and shall not be subject to any liability resulting from any act or omission or
event occurring after such conveyance, except that any covenant or obligation
of Landlord hereunder affecting land owned by Landlord shall continue for its
term during such ownership, but no longer.
SECTION 19. BANKRUPTCY AND INSOLVENCY.
(A) TENANT'S INTEREST NOT TRANSFERABLE WITHOUT LANDLORD'S CONSENT.
Neither Tenant's interest in this Lease, nor any lesser interest of Tenant
therein, nor any estate of Tenant thereby created, shall pass to any trustee,
receiver, assignee for the benefit of creditors, debtor in possession or other
entity, or otherwise by operation of law, unless Landlord, in writing,
affirmatively approves such transfer to such trustee, receiver, assignee, debtor
in possession or other entity. No acceptance of rent or other payments by
Landlord from any such trustee, receiver, assignee, debtor in possession or
other entity shall be deemed to have waived, nor shall it waive, Landlord's
right to terminate the Lease if Tenant's estate or interest therein passes, by
operation of law, to any such trustee, receiver, assignee, debtor in possession
or other entity.
(B) OBLIGATIONS OF TRANSFEREE IN THE EVENT LANDLORD CONSENTS TO TRANSFER.
If Landlord affirmatively consents in writing to the transfer of Tenant's
interest under this Lease or the estate of Tenant created thereby, or any lesser
interest of Tenant therein, to any trustee, receiver, assignee for the benefit
of creditors, debtor in possession or other entity (hereinafter collectively
referred to as the "Transferee"), the Transferee shall be obligated to perform
all of the terms, covenants and conditions of this Lease to be performed by
Tenant and shall be required to pay rent and other charges at the rate
stipulated herein. The parties further agree that the rent and other charges
stipulated herein are a reasonable measure of the value of the Premises and must
be paid by the Transferee, whether or not the Transferee is in physical
possession and operation of the Premises.
SECTION 20. SUBORDINATION AND ATTORNMENT.
Landlord reserves the right to subject and subordinate this Lease at all times
to the lien of any mortgage or mortgages now or hereafter placed upon Landlord's
interest in the land, buildings or any part of the Premises, or upon any
buildings hereafter
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placed upon the land which is a part of the Premises. Tenant covenants and
agrees to execute and deliver within fourteen (14) days after demand such other
instrument(s), including estoppel certificates, providing for subordination of
this Lease to the lien of any such mortgage or mortgages, non-disturbance and
attornment, in reasonable form and substance as shall be desired by Landlord,
provided such instrument states that Tenant shall not be disturbed with respect
to its occupancy of the Premises as long as Tenant is not in default hereunder.
Upon Landlord's request, Tenant shall certify in writing:
(A) That Tenant has accepted the Premises, and the commencement date of the
Lease.
(B) Whether the Lease has been changed, modified or amended, and whether
the Lease is in full force and effect and free from any default by either party.
If the Lease has been changed, modified or amended or is in default, Tenant
shall certify as to the date and nature of said change, modification, amendment
or default.
(C) Whether Tenant has made advancements for or on behalf of Landlord for
which it has the right to deduct from or offset against the future rentals as of
the date of certification.
(D) Whether Tenant has paid rent for more than the current month during
which certification is made.
(E) Those matters as may be reasonably requested by Landlord.
SECTION 21. EMINENT DOMAIN.
If the whole of the Premises shall be taken by any public authority under the
power of eminent domain, then the term of this Lease shall cease as of the day
possession shall be taken by such public authority and the rent shall be paid to
that day. If less than the whole, but more than twenty-five (25%) per cent of
the Premises or the parking area shall be taken under eminent domain, either
party shall have the right to terminate this Lease and declare the same null and
void by notice in writing delivered to the other party within ten (10) days
after such taking; provided, however, that to the extent the taking involves the
parking area, Tenant shall not have the right to terminate this Lease if, within
ten (10) days after the taking, Landlord provides parking facilities abutting
the Premises which contain substantially the same number of parking spaces as
the area lost by eminent domain. If neither party elects to terminate this
Lease, Tenant shall continue in possession of the remainder of the Premises, and
all of the terms of this Lease shall continue in full operative force and
effect, except that the base rent and additional rent shall be reduced in
proportion to the value of the Premises taken, and Landlord, at its own cost and
expense, shall make all repairs or alterations to the building necessary to
constitute the remaining Premises a complete architectural
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unit. All damages awarded for any taking under the power of eminent domain,
whether for the whole or a part of the Premises, shall belong to and be the
property of Landlord whether such damages shall be awarded as compensation for
diminution in value to the leasehold or to the fee of the Premises; provided,
however, that Landlord shall not be entitled to the award made to Tenant for
loss of business or removal of furniture, fixtures and other equipment
installed on the Premises by Tenant.
Notwithstanding the foregoing, Landlord shall permit Tenant to seek from the
appropriate governmental authorities a condemnation award in respect of the
unamortized cost of Tenant's betterments and improvements, Tenant's moving and
relocation expenses, the value of Tenant's trade fixtures, the loss of Tenant's
leasehold estate (i.e., bargain value of the Lease), and any other compensation
as provided to, or allowed to, a tenant under applicable federal, state or
local laws.
SECTION 22. ACCESS TO PREMISES.
After twenty-four (24) hour prior notice (or sooner if emergency) Landlord
shall have the right to enter upon the Premises at all hours for the purpose of
inspecting the same. If Landlord alone deems any repairs are necessary, it
shall give notice to Tenant to make the same and if Tenant refuses or neglects
to commence such repairs within a reasonable time not more than thirty (30)
days thereafter, and complete the same with reasonable dispatch, Landlord may
make or cause to be made such repairs and shall not be responsible to Tenant
for any loss or damage that may accrue to its stock or business by reason
thereof, and if Landlord makes or causes to be made such repairs Landlord shall
have the rights provided in section 8 of this Lease.
After twenty-four (24) hour prior notice (except in the case of an emergency)
Landlord may enter the Premises to install or repair pipes, wires and other
appliances or make any inspections or repairs deemed by Landlord essential to
the use and occupancy of other parts of Kensington Center.
Tenant shall cooperate with Landlord and/or its contractor(s) with respect to
all alterations and additions to the Premises or the building and grounds
generally, whether or not such construction is for the benefit of Tenant's
Premises or those of other tenants. Landlord and its contractors shall attempt
to minimize disruption of the demised Premises.
Landlord shall make installations and repairs to the Premises only during
reasonable hours and after twenty-four (24) hours prior notice to Tenant except
in the case of emergencies. Landlord's right to enter the Premises to make
repairs shall extend only to repairs which Landlord is required to make in
accordance with applicable legal requirements or otherwise in accordance with
this Lease. In connection with the exercise if any of these rights, Landlord
shall, to the extent practicable, not interfere with the operation of Tenant's
business and shall attempt to complete all repairs during non-business
hours.
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SECTION 23. DEFAULT, RE-ENTRY AND RIGHT TO RELET, AND ALL BREACHES MATERIAL.
(A) EVENTS OF DEFAULT. Each of the following events (hereinafter referred
to as "Event of Default") shall be a default hereunder by Tenant and a breach
of this Lease, and, in such event(s), Landlord shall have its rights and
remedies. An Event of Default shall occur:
1. NONPAYMENT OF RENT. If Tenant shall fail to pay base rent, additional
rent, and/or other sums required to be paid to Landlord under this Lease within
seven (7) days after notice.
2. PROHIBITED TRANSFERS. If Tenant shall assign, transfer or encumber this
Lease, sublet or permit the use of the Premises by others, except in a manner
permitted in Section 18.
3. BANKRUPTCY OR INSOLVENCY. If Tenant shall voluntarily file a
petition for bankruptcy (or fail to obtain the discharge of an involuntary
petition within ninety (90) days after filing), make any general assignment for
the benefit of creditors, or voluntarily or involuntarily take, or attempt to
take, any action which subjects it to any existing or future insolvency,
receiver or bankruptcy act, or becomes insolvent at any time or develops a
negative net worth.
Tenant or any trustee, receiver, or assignee for the benefit of
creditors, or debtor-in-possession or other entity shall be obligated to give
Landlord immediate notice of the filing of any such insolvency or proceeding.
4. APPOINTMENT OF RECEIVER OF TRUSTEE. If a receiver or trustee shall be
appointed for, or to take possession of, all or any part of the property of
Tenant or Tenant's leasehold interest or Tenant's guarantor, if any.
5. ABANDONMENT/VACATION. If the Premises are abandoned or vacated by
Tenant (i.e., Tenant fails to maintain a business presence in the Premises for
more than thirty (30) consecutive days and Landlord, after reasonable efforts
is unable to determine that Tenant has an intention to return).
6. ATTACHMENT/EXECUTION. If there is any attachment, execution or other
judicial seizure of all or a substantial part of the assets of Tenant or
Tenant's leasehold, where such attachment, execution or seizure is not
discharged within thirty (30) days.
7. ESTATE OF TENANT TRANSFERRED. If the estate or interest of Tenant be
transferred or passed to, or devolve upon, any other person or corporation by
operation of law or otherwise, except as permitted in Section 18.
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8. CHRONIC LATE PAYMENT. If Tenant's rental payments are received more
than five (5) days after the due date more than six (6) times during the term of
the Lease.
9. FAILURE TO FURNISH FINANCIAL INFORMATION. if Tenant shall fail to
furnish the Financial Information described in Section 38(M) herein within ten
(10) days after notice.
10. CONTAMINATION OF ENVIRONMENT. If there shall occur, through the acts or
omissions of Tenant, its employees, agents, or contractors, any material
violations of the Relevant Environmental Laws, including CERCLA, affecting the
property, which are not corrected or for which corrective action is not
commenced and diligently pursued within ten (10) days after such notice.
"Relevant Environmental Laws" shall include, but is not limited to:
(a) The Comprehensive Environmental Response, Compensation and
Liability act, 42 U.S.C. Section 9601, et. seq.; the Superfund Amendments and
Reauthorization Act, Public Law 99-499, 100, Stat. 1613; the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et. seq.; the National
Environmental Policy Act, 42 U.S.C. Section 4321; the Safe Drinking Water Act,
42 U.S.C. Section 300(f), et. seq.; the Toxic Substances Control Act, 15 U.S.C.
Section 2601, et. seq.; the Hazardous Materials Transportation Act, 49 U.S.C.
Section 18801. et. seq.; the Federal Water Pollution Control Act, 33 U.S.C.
Section 1251, et. seq.; the Clean Air Act, 42 U.S.C. Section 7401 et. seq.; and
the regulations promulgated in connection therewith; and
(b) Any state and local laws and regulations pertaining to hazardous
wastes, hazardous substances, toxic substances, hazardous materials and/or
asbestos. "Hazardous wastes" as referred to herein shall mean any of the
following as defined by the relevant environmental laws: solid wastes, toxic or
hazardous substances, wastes, or contaminants, including, without limitation,
polychlorinated byphenols (PCBs), solvents, paint containing lead, discharges of
sewage or effluent.
11. OTHER DEFAULT. If Tenant shall be in default of any of the other terms,
covenants or conditions of this Lease and such default shall continue after
receipt of written notice thereof from Landlord to Tenant and is not fully cured
within the period of time set forth in this Lease, and, if no period of time is
set forth, then within thirty (30) days from date of mailing or facsimile
transmission of such notice.
(B) REMEDIES ON DEFAULT. After giving of the required notice and
expiration of the applicable cure period, Landlord may treat the occurrence of
any one or more of the Events of Default as a breach of this Lease and thereupon
at its option may, without notice or demand of any kind to Tenant or any other
person (except as provided in this Lease), have any other or more of the
following described remedies in addition to all other rights and remedies
provided at law or in equity (all of which
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rights and remedies of Landlord shall be cumulative and none of which shall
exclude any other right or remedy allowed at law or in equity):
1. Landlord may terminate this Lease and the term created hereby, in which
event Landlord may forthwith repossess the Leased Premises and be entitled to
recover forthwith as damages any sum of money and damages then owed by Tenant to
Landlord including those described in Section 23(C).
2. Landlord at any time after an uncured Event of Default, at Landlord's
sole option, may give to Tenant a notice of termination of this Lease, and in
the event such notice is given, this Lease shall come to an end and expire
(whether or not the term shall have commenced) upon such notice, but Tenant
shall remain liable for damages as provided in this Section.
3. Upon obtaining a writ of restitution, Landlord may immediately or at
any time after the Event of Default or after the date upon which this Lease
shall expire, re-enter the Leased Premises or any part thereof, in accordance
with the writ of restitution, either by summary proceedings or by any other
applicable action or proceeding, and may repossess the Premises and remove any
and all of Tenant's property and effects from the Premises.
In re-entering the Premises subsequently to obtaining a writ of
restitution, it shall be lawful for Landlord, its attorneys, heirs,
representatives and assigns, to repossess the Premises and remove and put out
Tenant and each and every occupant, remove all property from the Premises and
store the same in a public warehouse or elsewhere at the cost of, and for the
account of Tenant, and hold the Premises as hereinafter provided, and without
being deemed guilty of trespass, or becoming liable for any loss or damage which
may be occasioned thereby, Tenant agreeing that no such re-entry or taking
possession of the Premises by Landlord shall be construed as an election on
Landlord's part to terminate this Lease, such right however, being continuously
reserved by Landlord.
4. Either with or without terminating this Lease, Landlord may relet the
whole or any part of the Leased Premises from time to time, either in the name
of Landlord or otherwise, to such tenant or tenants, for such term or terms
ending before, on or after the expiration date, at such rental or rentals and
upon such other conditions, which may include concessions and free rent periods,
as Landlord, it its sole discretion, may determine. Landlord may make such
repairs, replacements, alterations, additions, improvements, decorations and
other physical changes in and to the Premises, as reasonably necessary in
connection with any such reletting or proposed reletting, without relieving
Tenant of any liability therefore or otherwise affecting any liability under
this Lease. If Landlord shall fail to relet the Premises or if the Premises are
relet and a sufficient sum shall not be realized from such reletting after
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paying all of the costs and expenses of such decorations, repairs, changes,
alterations and additions, all reasonable expenses including legal fees
incurred by Landlord, and all expenses of such reletting, including without
limiting the generality thereof, all reasonable commissions incurred due to
each such reletting and of the collection of rent accruing therefrom to satisfy
the rent provided for in this Lease to be paid, and all reasonable attorney
fees, costs and expenses incurred by Landlord, then Tenant shall pay to
Landlord as damages a sum equal to the amount of the base rent and additional
rent for such period or periods, or, if the Premises have been relet, Tenant
shall satisfy and pay any such deficiency in base rent and/or additional rent
upon demand therefor from time to time, and Tenant agrees that Landlord may
file suit to recover any sums falling due under the terms of this Section from
time to time and that no recovery of any portion due Landlord hereunder shall
be any defense to any subsequent action brought for any amount not theretofore
reduced to judgment in favor of Landlord.
5. Landlord shall have the right to recover all rental and all other
amounts payable to Tenant hereunder as they become due (unless and until
Landlord has terminated this Lease) and all other incidental and consequential
damages incurred by Landlord of whatsoever kind or nature, including without
limiting the generality thereof, all reasonable attorney fees incurred as a
result of an Event of Default.
6. The remedies provided for in this Lease are cumulative and in addition
to any other remedies available to Landlord at law or in equity by statute or
otherwise.
(C) PRESENT VALUE OF ALL RENTAL UPON TERMINATION. Upon termination of this
Lease by Landlord pursuant to this Section 23, Landlord shall be entitled to
recover from Tenant as liquidated damages the aggregate of: (a) the worth at
the time of termination of the unpaid rental which had been earned at the time
of termination; (b) the worth at the time of termination of the amount by which
the unpaid rental which would have been earned for the balance of the term of
this Lease after the time of termination exceeds the reasonable rental value of
the Leased Premises for such period; and (c) the unamortized cost of Tenant
improvements paid for by Landlord prorated over the period from the date of the
improvement(s) to the expiration date of the Lease period in effect at the date
of the Event of Default which lead to termination. The "worth at the time of
termination" of the amount referred to in clause (b) above is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of
Chicago at the time of award, plus one (1%) percent. Further, the term "unpaid
rental" as used in this paragraph shall include all base rent and increases
thereto and additional rent, as these terms are defined in this Lease.
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(D) ALL BREACHES MATERIAL. All provisions of this Lease shall be deemed
MATERIAL, and any breach thereof shall be deemed a material breach.
(E) MITIGATION OF DAMAGES. Notwithstanding anything to the contrary
contained in this Lease, Landlord shall have the duty and obligation to
mitigate, in its reasonable best effort, any and all damages that may or shall
be caused or suffered by virtue of a default under, or violations of any of the
terms and provisions of, this Lease.
SECTION 24. LANDLORD'S LIEN. THIS SECTION INTENTIONALLY OMITTED
SECTION 25. TRIAL BY JURY WAIVED.
Landlord or Tenant hereby waive trial by jury in any action, proceeding, or
counterclaim or third party claim brought by Landlord or Tenant against the
other on any matter whatsoever arising out of or in any way connected with this
Lease; the relationship of Landlord to Tenant; the use or occupancy of the
Premises by Tenant or any person claiming through or under Tenant; any claim of
injury or damage; and any emergency or other statutory remedy. If Landlord
commences any summary or other proceeding for nonpayment of rent or the
recovery of possession of the Premises, Tenant shall not interpose any
counterclaim or third party claim of whatever nature or description in any such
proceeding, unless the failure to raise the same would constitute a waiver
thereof, and in such instance the parties agree that the counterclaim or third
party claim shall be tried separately and independently from the right to
possession issue and that the counterclaim shall not prevent or impede
Landlord's right to summarily regain possession of the Premises.
SECTION 26. ATTORNEY'S FEES.
In the event of any suit, action or proceeding at law or in equity by either of
the parties hereto against the other by reason of any matter or thing arising
out of this Lease, the prevailing party shall recover from the other its costs
including reasonable attorneys' fees for the maintenance or defense of said
action, suit or proceeding.
SECTION 27. QUIET ENJOYMENT.
Landlord covenants that Tenant, on payment of all of its monetary obligations
hereunder and performing all the covenants and conditions hereunder, shall and
may peacefully and quietly have, hold and enjoy the Premises for the term
aforesaid.
SECTION 28. RE-RENTING.
Tenant hereby agrees that for a period commencing through three hundred
sixty-five (365) days prior to the termination of this Lease, after reasonable
notice, Landlord may show the Premises to prospective tenants, and three
hundred sixty-five (365) days prior to the termination of this Lease, may
display in and about said Premises and in the windows thereof, the usual and
ordinary "TO RENT" signs.
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SECTION 29. HOLDING OVER.
If Tenant remains in possession of the Premises after expiration or termination
of this Lease without a new Lease agreement reduced to writing and duly
executed, Tenant shall be deemed to be occupying the Premises only as a tenant
from month to month, subject to all of the covenants, agreements and conditions
of this Lease, insofar as the same shall be applicable to a month to month
tenancy cancelable by either party upon thirty (30) days' written notice to the
other.
SECTION 30. DELAY OF POSSESSION.
It is understood that if Tenant shall be unable to enter into and occupy the
Premises at the time provided, by reason of the said Premises not being ready
for occupancy, or by reason of holding over of any previous occupants of
Premises, or as a result of any cause or reason, Landlord shall not be liable
in damages to Tenant therefor, but during the period Tenant shall be unable to
occupy said Premises as hereinbefore provided, the rental therefor shall be
abated and Landlord is to be the sole judge as to when the Premises are ready
for occupancy. No such delay shall affect the validity of the Lease, but rather
shall delay the commencement date of the Lease correspondingly, with the term
remaining the same.
SECTION 31. REGULATORY CONTROL; REQUIREMENTS OF TENANT. Landlord agrees to
permit such modification of the structure or Tenant's procedures as may be
required by 0.S.H.A., Landlord's insurance examiner, local fire officials, or
State of Michigan statutes or department requirements and/or the environmental
control agencies regulating any manner of discharges into the air or grounds.
However, the manner in which these modifications are to be made, if major or
structural, must be approved, beforehand, by Landlord in writing. Tenant also
agrees to maintain the Premises in compliance with all applicable regulations
of OHSA, the EPA, the DNR, and other appropriate federal, state and/or local
governmental agencies as their requirements are published and enforced from
time to time. The cost of the foregoing shall be borne by Tenant, only if such
compliance is required due to the particular manner in which Tenant uses the
Premises. In the event Tenant fails to comply, Landlord may make the necessary
changes and shall have the absolute right to invoice Tenant for the cost, plus
a 15% contractor's fee, only is Tenant is responsible for compliance as
aforesaid.
SECTION 32. BURGLAR ALARM SYSTEM.
Any burglar alarm system or other protective system requiring modification of
the Premises shall be installed only with Landlord's written consent.
SECTION 33. DISCHARGE OF LIENS.
Tenant shall not do or suffer anything to be done whereby the land and building
of which the Premises are a part may be encumbered by any liens of mechanics,
laborers, or materialmen, chattel mortgages or any other liens and shall
whenever and as often as any such liens are filed against the said land and
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building purporting to be for labor or material furnished or to be furnished to
Tenant, discharge the same of record within thirty (30) days after the date of
filing by payment, bonding or otherwise, as provided by law. Tenant shall hold
harmless Landlord from any liability, claim or damages resulting therefrom,
including reasonable attorney's fees.
SECTION 34. LIABILITY OF LANDLORD.
If Tenant shall recover a money judgment against Landlord concerning any matter
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord to Tenant, the use or occupancy of the Premises,
building or land by Tenant or any person claiming through or under Tenant or
concerning any claim of injury or damage, such judgment shall be satisfied: (i)
out of the proceeds of such insurance as Landlord maintains to cover such
losses; or (ii) from the proceeds of sale received upon execution of such
judgment and levy thereon against the right, title and interest of Landlord in
the land and building of which the Premises are a part as the same may then be
encumbered; or (iii) out of the rents received by Landlord and neither Landlord
nor if Landlord be a partnership, any of the partners comprising such
partnership shall be liable for any deficiency, and in no event shall Tenant
have any right to levy execution against any property of Landlord other than
its interest in the building and land as herein before expressly provided. In
the event of the sale or other transfer of Landlord's right, title and interest
in the Premises, the building or the land, Landlord shall be released from all
previous liabilities and obligations hereunder.
No personal liability is assumed by or shall at any time arise or be asserted
against Landlord or any of the officers or directors of Landlord, or against
Landlord's predecessor Starkweather Holding Company, or its partners, or
against their respective successors or assigns on account of this Lease or
transactions or occurrences related to the tenancy, either express or implied,
and all such personal liability is hereby expressly waived and released by
Tenant on behalf of Tenant and all persons claiming by, through or under Tenant
to the extent permitted by law, and recourse hereunder, if any, by Tenant or
Tenant's successors or assigns, shall be limited as provided in this section.
In the event Landlord or any successor owner of the Premises shall sell or
convey the Premises, all liabilities and obligations on the part of the
original Landlord or such successor owner under this Lease accruing thereafter
shall terminate, and thereupon all such liabilities and obligations shall be
binding upon the new owner.
SECTION 35. SECURITY DEPOSIT.
(A) AMOUNT AND PURPOSE. Landlord hereby acknowledges receipt of the sum
of Nineteen Thousand Eight Hundred Thirty-Three & 33/100 ($19,833.33) Dollars
from Tenant. Said deposit shall be held by Landlord as security for the
faithful performance by Tenant of the terms, covenants, provisions and
conditions of this Lease. It is agreed that in the event Tenant defaults in
respect to any of the terms, covenants, provisions
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and conditions of this Lease, including, but not limited to, the payment of
rent, Landlord may, but in no event shall Landlord be required to use, apply or
retain the whole or any part of the security so deposited to the extent
required for the payment of any rent or any other sum as to which Tenant is in
default or any sum which Landlord may expend or may be required to expend,
including reasonable attorney fees, by reason of Tenant's default, in respect
to any of the terms of this Lease. Said security deposit, if not applied as
provided herein, is to be returned in full to Tenant upon expiration or earlier
termination by agreement of the parties of the Lease and Tenant's vacating of
the Premises, after inspection of same by Landlord. Landlord shall not be
obliged to keep the said security as a separate fund, but may commingle the
said security with other funds of Landlord.
(B) TRANSFER AND INTEGRITY OF DEPOSIT. In the event of a sale of the
building or lease of the land on which it stands, subject to this Lease,
Landlord shall have the right to transfer the security deposit to the vendee or
lessee and Landlord shall be considered released by Tenant from all liability
for the return of such security and Tenant shall look solely to the successor
Landlord for the return of the said security provided such successor provides
Tenant with satisfactory evidence that it has assumed Landlord's obligations
hereunder to return the security deposit, and it is agreed that this shall apply
to every transfer or assignment made of the security to another Landlord. The
security deposited under this Lease shall not be mortgaged, assigned or
encumbered by Tenant without the written consent of Landlord and any attempt to
do so shall be void. In the event of any rightful and permitted assignment of
this Lease, the said security deposit shall be deemed to be held by Landlord as
a deposit made by the assignee and Landlord shall have no further liability with
respect to the return of said security deposit to the assignor. Any mortgagee of
Landlord shall be relieved and released from any obligation to return such
security in the event such mortgagee comes into possession of the leased
Premises by reason of foreclosure of its mortgage or any proceeding in lieu
thereof.
SECTION 36. GUARANTY. THIS SECTION INTENTIONALLY OMITTED
SECTION 37. CORPORATE AUTHORITY.
If either party signs as a corporation, each person executing this Lease does
hereby covenant and warrant that such party is fully authorized and an existing
corporation, that such party has been and is qualified to do business in
Michigan, that the corporation has full right and authority to enter into this
Lease, and that each person signing on behalf of the corporation is authorized
to do so. Such party shall furnish such customary evidence of corporate
authority as the other may reasonably request.
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SECTION 38. MISCELLANEOUS PROVISIONS.
(A) Binding Effect. The covenants, conditions and agreements made and
entered into by the parties hereto are declared binding on their respective
heirs, successors, representatives and assigns.
(B) Governing Law. This Lease shall be governed by and construed and
enforced under the laws of the State of Michigan and within its jurisdiction.
(C) Section Headings. The Section headings as herein used are for
convenience of reference only and in no way define, limit or describe the scope
or intent of any provision of this Lease.
(D) Partial Invalidity. If any term, covenant or condition of this Lease
or the application thereof to any person or circumstances shall, to any extent,
be invalid or unenforceable, the remainder of this Lease, or the application
of such term, covenant or condition to persons or circumstances other than
those to which it is held invalid or unenforceable, shall not be affected
thereby and each term, covenant or condition of this Lease shall be valid and
be enforced to the fullest extent permitted by law,
(E) Remedies Not Exclusive. It is agreed that each and every one of the
rights, remedies and benefits provided by this Lease shall be cumulative, and
shall not be exclusive of any other of said rights, remedies and benefits, or
of any other rights, remedies and benefits allowed by law or equity.
(F) Waiver. The waiver of Landlord of any agreement, condition or provision
herein contained shall not be deemed to be a waiver of any subsequent breach of
the same or any other agreement, condition or provision herein contained, nor
shall any custom or practice which may grow upon between the parties in the
administration of the terms hereof be construed to waive or to lessen the right
of Landlord to insist upon the performance by Tenant of the terms hereof in
strict accordance with said terms.
(G) Accord and Satisfaction. No payment by Tenant or receipt by Landlord
of a lesser amount than the monthly rental herein stipulated shall be deemed to
be other than on account of the earliest stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and Landlord may accept
such a check or payment without prejudice to Landlord's right to recover the
balance of such rent or pursue any other remedy in this Lease provided.
(H) Notices. Unless otherwise provided, whenever under this Lease a
provision is made for notice of any kind it shall be deemed sufficient notice
and service thereof if such notice to Tenant is in writing addressed to Tenant
at the address set forth in this Lease and deposited in the mail with
postage prepaid,
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certified mail, return receipt requested, and, for notice to Landlord, in
writing addressed to the last known post office address of Landlord and
deposited in the mail with postage prepaid, certified mail, return receipt
requested. Notices need to be sent to only one Tenant where Tenant is more than
one person. Copies of notices to Tenant shall be sent to its attorney Laurence
B. Deitch of Seyburn, Kahn, Ginn, Bess, Howard & Deitch, P.C., 2000 Town Center,
Suite 1500, Southfield, Michigan 48075, telephone: (810) 353-7620, facsimile:
(810) 353-3727, and receipt by either Tenant or its attorney shall constitute
satisfactory provision of notice.
(I) Late Charges. If the payment of the rental, additional rental, taxes,
assessments, insurance or any other charge or obligation of Tenant shall not be
made on or prior to the date set forth herein, or within ten (10) days
thereafter, Tenant agrees to pay a late charge in the amount of five percent
(5%) of the unpaid amount and an additional five percent (5%) of the unpaid
amount for each additional month, or fraction thereof, it is delinquent. Said
late charges shall accrue from the date upon which said rent shall become due
and said late charge shall be considered by the parties hereto as liquidated
damages for Tenant's failure to make prompt payment and the late charges that
accrue in any month shall be payable on the first day of the following month.
Any failure by Landlord to insist upon the strict performance by Tenant of
Tenants obligation to pay late charges shall not constitute a waiver by Landlord
of its right to enforce the provisions of this subsection and any incidents
thereafter occurring, nor shall acceptance of late charges be deemed to extend
the time of payment of any sums due and payable to Landlord by Tenant. This
monthly late fee shall accrue for every month during which Tenant is in default
and throughout any period during which Landlord must relet the Premises.
(J) Force Majeure. In the event that Landlord shall be delayed, hindered
or prevented from the performance of any act required hereunder by reason of
strikes, lock-outs, labor troubles, inability to procure materials, supplies, or
utilities, failure of power, restrictive governmental laws or regulations,
riots, insurrection, the act, failure to act or default of any other party, war
or other reason beyond the control of Landlord, then performance of such act
shall be excused for the period of the delay and the period of performance of
said act shall be extended for a period equivalent to the period of such delay.
(K) Entire Agreement. This Lease supersedes any and all other agreements,
either oral or in writing, among the parties hereto with respect to the subject
matter hereof.
(L) Receipt of Payment and Notices. All payments (including but not
limited to monthly rental payments), and notices required to be given to
Landlord or Tenant under this Lease shall be considered made only upon actual
receipt by the intended recipient.
27
<PAGE> 31
(M) Tenant's Financial Information. Upon the execution of this Lease by
Tenant and within ninety (90) days after each of Tenant's fiscal years, Tenant
shall furnish Landlord with financial statements (including, without
limitation, operating statements including an annual profit and loss statement)
reflecting Tenant's current financial condition, and written evidence of then
current ownership of controlling interests in Tenant and in any entities which
directly or indirectly control Tenant (which written evidence shall include,
without limitation, the names of all existing shareholders and partners, as
applicable, of record and their respective ownership interests as of the date
of such writing), which financial statements and written evidence shall be
certified as being true and correct by the chief financial officer or the chief
executive officer or partner of Tenant, any and all of which is referred to as
the Financial Information. Landlord shall maintain all such information on a
confidential basis to be used only for purposes related to this Lease and
assessment of Landlord's rights hereunder.
(N) Modification. No change or modification of this Lease shall be valid
unless the same be in writing and signed by all of the parties hereto. No
waiver of any provisions of this Lease shall be valid unless in writing and
signed by the person or party against whom charged,
(O) Brokerage. Landlord shall pay and satisfy all commissions arising
from the execution and delivery of this Lease and the transactions contemplated
hereby and shall indemnify and hold Tenant harmless from and against all loss,
liability and damages arising out of claims against Landlord for brokerage or
other commissions relative to this Lease,
SECTION 39. ADDITIONAL PROVISIONS.
(A) PREPOSSESSION BUILDOUT.
1. Prior to the commencement of Tenant's obligations hereunder, Landlord
shall, at Landlord's own cost and expense, construct or install in the Premises
the improvements to be constructed or installed by Landlord according to the
provisions of Exhibit "C", Landlord's Buildout, attached and incorporated;
provided, however, that Landlord shall not be required to incur overtime costs
and expenses in performing such construction and/or installation. The Premises
shall be deemed completed and possession delivered to Tenant when Landlord has
substantially completed its improvements (special-order items excepted),
subject only to completion of construction details, decorations and mechanical
adjustments which do not materially-interfere with Tenant's use of the
Premises, and further subject to Tenant being responsible for its own
contracted work and equipment. Tenant shall accept the Premises upon notice
from Landlord that such improvements have been so completed, which notice shall
include a certificate furnished by Landlord's architect certifying the date of
substantial completion of all of the space (the "Delivery' Date"). Such
certificate shall be conclusive and binding of that
28
<PAGE> 32
fact and date upon Landlord and Tenant. Landlord shall attempt to advise
Tenant of the anticipated date of completion at least thirty (30) days prior to
completion, but failure to give such notice shall not constitute a default by
Landlord.
2. Tenant shall notify Landlord in writing in reasonable detail of any
defects or condition not in accordance with Landlord's obligations under this
Section 39(A), if any, within thirty (30) days of the Delivery Date, and failing
giving such notice, Tenant shall be deemed for all purposes to have accepted
the Premises in their existing condition as of Delivery Date. Provided Landlord
concurs with Tenant's contentions as identified in the notice, Landlord shall,
within ten (10) business days after Landlord's inspection of the Premises after
receipt of Tenant's notice, begin correction of any work not performed or
completed according to this Section, and shall not be entitled to Tenant's
business caused by such Landlord's work.
3. Tenant shall construct or install other work and improvements to the
Premises not required of Landlord, which items are set forth on Exhibit D
Tenant's Buildout Without Landlord's Assistance, at Tenant's sole cost and
expense.
4. Tenant's Buildout With Landlord's Assistance. Upon Landlord's agreed
upon determination of the cost of Tenant's Buildout With Landlord's Assistance
described on Exhibit E, based on an itemized statement of actual costs,
including Landlord's own fifteen percent (15%) fee or a general contractor's or
construction manager's fee, or as otherwise agreed on Exhibit E, incurred (paid
or contracted) for said Buildout, whether or not managed by Landlord, Tenant
shall pay said cost in the following manner:
a. Fifty percent (50%) by check upon presentation of an
invoice after completion of such improvements; and
b. The balance plus interest at eight percent (8%) per annum
in the form of additional rent with the amount amortized
over the sixty (60) month lease term without penalty for
prepayment.
5. Tenant's Access. In addition, prior to the Delivery Date, Tenant shall
be permitted access to the Premises for purposes of moving in its equipment and
constructing the improvements to be accomplished by Tenant, provided such
activities shall not unreasonably interfere with the work to be performed by
Landlord. Further, upon receipt of a Temporary Certificate of Occupancy,
Landlord shall permit the use and occupancy of such portions of the Premises as
are complete, in which case rent will begin on such pro rata portion as is
delivered.
29
<PAGE> 33
SECTION 40. OPTIONS TO EXTEND.
(A) OPTION PERIOD.
So long as Tenant is not in default, and further
provided it exercises an election by personally delivering to Landlord or
mailing, certified mail, return receipt requested, a written Notice of
Election, Tenant shall be entitled to extend the term by an additional term of
sixty (60) months. The Notice of Election to exercise the option shall be
provided to the Landlord not less than twelve (12) months prior to the
expiration of the then current term. The Notice of Election shall be dated and
shall contain an acknowledgement copy for return to Tenant signed by Landlord.
(B) RENT DURING OPTION PERIOD.
During the option term, the terms and conditions of
this Lease shall be continued as though the option term is a mere extension of
the original Lease except the base rent shall be $4.93 per square foot.
Taxes, insurance, and Operating Expenditures will be subject to normal
Taxes, adjustments as provided herein throughout the Option Period.
41. TENANT'S ENVIRONMENTAL PROTECTION.
Landlord shall not cause or permit to occur (excluding acts of Tenant or other
tenants of Kensington Center and their respective agents, employees and
contractors): (i) any violation of any present or future federal, state or
local law, ordinance or regulation related to environmental conditions in or
about Kensington Center, including, but not limited to, improvements or
alterations made to Kensington Center at any time by Landlord, its agents or
contractors, or (ii) the use, generation, release, manufacture, refining,
production, processing, storage or disposal of any "Hazardous Wastes" (as
defined in Section 23(A)10 of this Lease) in or about Kensington Center, or the
transportation to or from Kensington Center of any Hazardous Wastes (save and
except reasonable quantities of normal cleaning and janitorial products, all of
which shall be stored, used, and disposed of by Landlord, at its expense, shall
comply with all "Relevant Environmental Laws" (as defined in Section 23(A)10 of
this Lease. Landlord shall indemnify, defend and hold harmless Tenant and its
employees from and against all fines, suits, claims, actions, damages,
liabilities, costs and expenses (including attorney's and consultant's fees)
asserted against or sustained by any such person or entity and arising out of
or in any way connected with Landlord's failure to comply with its obligations
under this Section, which obligations shall survive the expiration or
termination of this Lease.
30
<PAGE> 34
IN WITNESS WHEREOF, the parties hereby execute this Lease.
WITNESSED: KENSINGTON CENTER, INC.
"LANDLORD"
/s/ By: /s/ John Allman
- ------------------------ ----------------------
John Allman
Its: President
LASON SYSTEMS, INC.
"TENANT"
/s/ Annette Gorney By: /s/ Robert A. Yanover
- ------------------------ ----------------------
Annette Gorney
Its: Robert A. Yanover C.O.B.
STATE OF MICHIGAN )
)SS.
COUNTY OF WAYNE )
The foregoing instrument was acknowledged before me this 3rd day of
August, 1995, by John M. Allman, known to me to be the President of Kensington
Center, Inc., a Michigan corporation, and who acknowledged that he executed the
same on behalf of the corporation, pursuant to authority of its Board of
Directors.
/s/ Beverly L. Jordan
--------------------------------
Notary Public, State of Michigan
Wayne County
My Commission Expires: Mar. 31, 1999
-------------
STATE OF MICHIGAN )
)SS.
COUNTY OF OAKLAND )
The foregoing instrument was acknowledged before me this 2nd day of August,
1995, Robert A. Yanover as the Chairman of the Board of Lason Systems, Inc.,
a Michigan corporation, the Tenant, and who acknowledged that he executed the
same on behalf of the corporation, pursuant to the authority of its Board of
Directors.
ANNETTE GORNEY /s/ Annette Gorney
Notary Public, Oakland County, MI --------------------------------
My Commission Expires July 5, 1999 Notary Public, State of Michigan
Oakland County
My Commission Expires: __________
31
<PAGE> 35
EXHIBIT A-1
[LEASE PLAN KENSINGTON CENTER]
<PAGE> 36
EXHIBIT A-2
[SITE PLAN KENSINGTON CENTER]
<PAGE> 37
KENSINGTON CENTER
LIVONIA, MICHIGAN
LEASE AGREEMENT
EXHIBIT B
Parking arrangements for seventy (70) vehicles shall be as follows:
Parking will be located in the following areas:
A. Attached Exhibit B-1 indicates Tenant's parking area of approximately
20,000 square feet located on the west side of building #4.
Modifications to be provided by Landlord, at Landlord's sole
cost and expense, prior to the Delivery Date include: (i) paving
to accommodate (53) spaces; (ii) all spaces will be marked with yellow
striping; (iii) parking spaces located in front of building #4 will be
constructed with island buffers to protect parked automobiles from
anticipated truck traffic, as shown on attached Exhibit B-1; and (iv)
soft landscaping look.
Tenant shall be permitted to mark such area with signage indicating
that such parking area is for Lason employees only, which signage shall
be subject to Landlord's approval.
B. Attached Exhibit B-1 indicates Tenant's parking area of approximately
4,000 square feet located on the west side of building #1 located
approximately 100 yards south of building #4.
Modifications to be provided by Landlord, at Landlord's sole cost and
expense, prior to the Delivery Date include: (i) paving to accommodate
(17) spaces; and (ii) all spaces will be marked with yellow striping.
Tenant shall be permitted to mark such area with signage indicating
that such parking area is for Lason employees only, which signage shall
be subject to Landlord's approval.
THE SPACES DEDICATED TO TENANT SHALL BE FOR TENANT'S EXCLUSIVE USE, AND TENANT
SHALL NOT USE OTHER AREAS FOR ITS PARKING, IN ADDITION TO THE FOREGOING,
PARKING IS SUBJECT TO SECTION "14 A" OF THE LEASE.
<PAGE> 38
EXHIBIT B-1
[TOTAL PARKING SPACES PROVIDED FOR LASON SYSTEMS, INC. = 70 CARS]
<PAGE> 39
KENSINGTON CENTER
LIVONIA, MICHIGAN
LEASE AGREEMENT
EXHIBIT C
LANDLORD'S PREPOSSESSION BUILDOUT
(TO BE DONE AT LANDLORD'S SOLE COST AND EXPENSE)
BUILDING #3 * Small shipping office (10" x 10")
* 200 AMP, 480 volts of electricals
* Remove Yellow Striping and seal floors
(with slight gloss)
BUILDING #4 * Not to exceed 3,200 square feet
OFFICE SPACE - Vestibule
Pass thru window
Door to enter Buidling #3
- Windows located on west wall of office to
accommodate proposed offices and future offices
- Conference room 14' x 18'
- 2 private offices 10' x 12'
- 1 private office 12' x 15'
- Men and Women lavatories
- Suspended ceiling
- Air conditioning & Carpeting
COMPUTER/PRINT ROOM
* Approximately 4,500 square feet enclosed with
block walls and painted
LUNCH AREA
* Open area 15' x 30' railed off, and including counter
and sink
* Electrical outlets for vending machines, garbage
disposal
PRODUCTION AREA
* Men's and Women's lavatory
* Remove striping and seal floors (slight gloss)
* Upgrade lighting to accommodate proper lighting for
the production equipment
* Paint shop walls
* Up to 1,000 AMPS, 480 volts of electrical service per
Lason Systems requirements
<PAGE> 40
PAGE TWO
KENSINGTON CENTER
LIVONIA, MICHIGAN
LEASE AGREEMENT
EXHIBIT C
LANDLORD'S PREPOSSESSION BUILDOUT
(TO BE DONE AT LANDLORD'S SOLE COST AND EXPENSE)
General
* Additional exterior lighting at building entrance
* Construct a block wall in building #4 between area
assigned to Lason and area assigned to existing tenant
* Construct new opening in existing masonry wall in
building #4
* Install necessary thermostats to control the ceiling
heaters to operate independently in each building
THE WORK SET FORT ON EXHIBIT "C" IS TO BE CONSTRUCTED BY LANDLORD IN
ACCORDANCE WITH THOSE PLANS PREPARED BY MANDELL BILOVUS & ASSOCIATES, P.C.
DATED JUNE 26 , 1995, AS SAME MAY BE SUBSEQUENTLY MODIFIED TO REFLECT THE
RELOCATION OF THE COMPUTER ROOM DOOR, RECONFIGURATION 0F THE LAVATORY LAYOUTS
AND OTHER NON-MATERIAL CHANGES.
<PAGE> 41
KENSINGTON CENTER
LIVONIA, MICHIGAN
LEASE AGREEMENT
EXHIBIT D
TENANT'S BUILD OUT WITHOUT LANDLORD'S ASSISTANCE
The following improvements to be completed in the Premises shall be contracted
for (in accordance with provisions of the Lease) by Tenant and paid for by
Tenant at its sole cost and expense:
1. Tenant will supply and install the floor in the computer
room at its cost and expense and payment shall be made
promptly by Tenant to its contractors.
2. Install electrical wiring to areas of building #3 and #4
to service the production equipment.
<PAGE> 42
KENSINGTON CENTER
LIVONIA, MICHIGAN
LEASE AGREEMENT
EXHIBIT E
TENANT'S BUILDOUT WITH LANDLORD'S ASSISTANCE
The following improvements shall be determined by Tenant and contracted through
or with contractors approved by, Landlord with the cost borne by Tenant in
accordance with section 39 (A)4 of the Lease, i.e., 50% down and 50% amortized
over five (5) years at 8% and added to the rent as additional rent:
1. Upgrades and embellishments over building standards, (which
building standards are to be provided by Landlord and are
reflected on Exhibit C).
2. New ceilings, lighting and other embellishments to Landlord's work
pertaining to the computer/print room.
3. Install air conditioning to the computer room/print room and
production area.
For purposes of performing the work set forth on Exhibit "D" and/or Exhibit
"E", Landlord approves Tenant's use of the following contractors:
1.) Hearthside Heating and Cooling (HVAC)
2.) Bill Hatz (electrical)
3.) Building Repair (construction)
<PAGE> 1
EXHIBIT 10.29
I.P. 1152
LEASE FOR SINGLE-TENANT BUILDING
------------------------------
LANDLORD: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
TENANT: LASON SYSTEMS, INC,
PREMISES: 1305 Stephenson Highway
Troy, Michigan
<PAGE> 2
TABLE OF CONTENTS
PAGE
I. BASIC TERMS .....................................................
1.01 Basic Terms ............................................. 1
1.02 Effect of Reference to Basic Terms ...................... 2
II. GRANT AND TERM ..................................................
2.01 ......................................................... 2
2.02 ......................................................... 2
2.03 ......................................................... 2
III. RENT ............................................................
3.01 Base Rent ............................................... 2
3.02 Real Estate Taxes ....................................... 3
3.03 Heating, Ventilation and Air Conditioning Maintenance ... 3
3.04 Payment of Additional Rent .............................. 3
3.05 Service Charge .......................................... 3
IV. USE ............................................................
4.01 .......................................................... 4
V. LAWS AND ORDINANCES .............................................
5.01 Compliance with Laws and Ordinances ..................... 4
5.02 Tenant's Right to Contest ............................... 4
5.03 Licenses and Permits .................................... 4
VI. UTILITIES AND SERVICES ..........................................
6.01 ......................................................... 5
VII. QUIET ENJOYMENT .................................................
7.01 ......................................................... 5
VIII. ASSIGNMENT AND SUBLETTING .......................................
8.01 ......................................................... 5
8.02 ......................................................... 5
8.03 ......................................................... 6
IX. DAMAGE OR DESTRUCTION ...........................................
9.01 ......................................................... 6
9.02 ......................................................... 6
X. LANDLORD'S RIGHTS ...............................................
10.01 ......................................................... 7
XI. HOLDING OVER ....................................................
11.01 ......................................................... 7
XII. SIGNS AND ADVERTISEMENTS ........................................
12.01 ......................................................... 8
XIII. MORTGAGE AND TRANSFER; ESTOPPEL CERTIFICATES ....................
13.01 ......................................................... 8
13.02 ......................................................... 8
XIV. EMINENT DOMAIN ..................................................
14.01 ......................................................... 8
XV. LANDLORD'S INABILITY TO PERFORM .................................
15.01 ......................................................... 9
<PAGE> 3
PAGE
XVI. COMPLETION AND ACCEPTANCE OF PREMISES; MAINTENANCE AND REPAIR ...
16.01 Completion and Acceptance .............................. 9
16.02 Maintenance and Repair by Tenant ....................... 9
XVII. ALTERATIONS AND ADDITIONS; MECHANICS' LIENS .....................
17.01 Alterations and Additions .............................. 10
17.02 Mechanics' Liens ....................................... 10
XVIII. INSURANCE .......................................................
18.01 Public Liability, Property Damage Insurance ............ 10
18.02 Fire and Extended Coverage Insurance ................... 11
18.03 Indemnification of Landlord ............................ 11
XIX. USE OF EXTERIOR AREAS ...........................................
19.01 ........................................................ 12
XX. DEFAULT AND REMEDIES ............................................
20.01 ........................................................ 12
20.02 Landlord's Right to Cure ............................... 13
20.03 Remedies Cumulative .................................... 13
20.04 No Waiver .............................................. 13
20.05 No Reinstatement ....................................... 13
20.06 Default Under Other Leases ............................. 13
20.07 Bankruptcy ............................................. 14
XXI. DEFINITION OF LANDLORD ..........................................
21.01 Landlord Means Owner ................................... 14
XXII. NOTICES ........................................................
22.01 ........................................................ 14
XXIII. SECURITY DEPOSIT ................................................
23.01 ........................................................ 14
XXIV. MISCELLANEOUS ...................................................
24.01 Persons Bound .......................................... 14
24.02 Partial Invalidity ..................................... 15
24.03 Captions ............................................... 15
24.04 No Option .............................................. 15
24.05 Brokers ................................................ 15
24.06 Applicable Law ......................................... 15
24.07 Waiver of Jury ......................................... 15
24.08 Allocation of Rent ..................................... 15
24.09 Limitation of Liability ................................ 16Y
XXV. ENTIRE AGREEMENT ................................................
25.01 ........................................................ 16
XXVI. EXHIBITS ........................................................
26.01 ........................................................ 16
XXVII. RIDER ........................................................
27.01 ........................................................ 16
PERSONAL GUARANTY OF LEASE .............................................. 17
EXHIBIT D
RULES AND REGULATIONS ........................................... 19
<PAGE> 4
LEASE FOR SINGLE-TENANT BUILDING
THIS LEASE, made as of the _____ day of ______, 1992, by and between
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey
corporation, hereinafter called "Landlord" and LASON SYSTEMS, INC.,
a Michigan corporation, hereinafter called "Tenant";
ARTICLE I 1.01 (A) ADDRESS OF LANDLORD:
BASIC The Prudential Insurance Company of America
TERMS
Suite 2280
Southfield, MI 48075-1155
or such other address as may from time to time be designated by
Landlord in writing.
(B) ADDRESS OF TENANT:
1305 Stephenson Highway
Troy, Michigan 48083
or such other address as may from time to time be designated by
Tenant in writing.
(C) PREMISES: The parcel(s) of real property, together with the
Building and improvements thereon located, the legal description of
which is set forth on Exhibit "A" attached hereto (also hereinafter
referred to as the "Project").
(D) BUILDING: The Building located upon the Premises, the common
address of which is 1305 Stephenson Highway, Troy, Michigan 48083.
INTENTIONALLY OMITTED.
(F) TERM: The period of time commencing January 1, 1996 and expiring
December 31, 1996, unless sooner terminated as set forth herein.
(G) RENT: All sums, moneys or payments required to be paid by Tenant
to Landlord pursuant to this Lease.
(H) BASE RENT: $ 251,717.50 for the Term payable as follows:
1. $ 251,717.50 per annum ($20,976.46 per month) for the period
from 1/1/96 through 12/31/96;
-1-
<PAGE> 5
2. $___________ per annum ($____________ per month) for
the period from _________ through _________;
3. $___________ per annum ($____________ per month) for
the period from _________ through _________.
(I) SECURITY DEPOSIT: $20,976.46, to be paid one hundred eighty
(180) days before the commencement date of this Lease as is
specified in Sub-Paragraph F of this Article I.
(J) PERMITTED USES:
office, warehouse, duplicating and reproduction services,
micrographics and uses ancillary thereto.
(K) BROKER(S):
Hanzl, Kepic & VanLokeren, Inc. and Schostak Brothers &
Company, Inc.
(L) GUARANTOR(S): None. Notwithstanding the foregoing, prior to
the commencement date of this Lease, as is specified in
Sub-Paragraph F of this Article I, Tenant shall submit its most
recent financial statement to Landlord. In the event that such
financial statement indicates that there has been a material,
adverse change in Tenant's financial condition from its condition
as shown in the financial statement submitted to Landlord prior
to Landlord approving Tenant subleasing the premises from the
Uniroyal Goodrich Tire Company effective July 1, 1992, then, and
in that event, this Lease shall be, jointly and severally,
guaranteed by Robert A. Yanover and Allen J. Nesbitt, whose
financial statements must be acceptable to Landlord.
(M) EXHIBITS: A. Legal Description of Premises
B. Plans and Specifications INTENTIONALLY
OMITTED.
C. Restrictive Covenants
D. Rules and Regulations
1.02 EFFECT OF REFERENCE TO BASIC TERMS: Each reference in
this Lease to any of the basic terms contained in Section 1.01
shall be construed to incorporate into such reference all of
the definitions set forth in Section 1.01.
Article II 2.01 In consideration of the rents, covenants, agreements
Grant And and conditions hereinafter provided to be paid, kept, performed
Term and observed, Landlord leases to Tenant and Tenant hereby hires
from Landlord the Premises described in Section 1.01(C),
subject to the restrictive covenants as shown on Exhibit "C"
attached hereto and made a part hereof.
2.02 Tenant shall have and hold the Premises for and during
the Term described in Section 1.01(F), subject to the payment
of the Rent and to the full and timely performance by Tenant of
the covenants and conditions hereinafter set forth.
2.03 In the event Tenant takes possession of the Premises
prior to the beginning of the Term hereof with Landlord's
consent, all the provisions of this Lease shall be in full
force and effect upon Tenant's so taking possession.
Article III 3.01 BASE RENT. Tenant covenants to pay without notice,
Rent deduction, setoff or abatement to Landlord the Base Rent
specified in Section 1.01(H) in lawful money of the United
States in equal consecutive monthly installments in advance on
the first day of each month during the Lease Term. Rent for
any partial month shall be prorated on a per diem basis. Rent
shall be payable to Landlord at Landlord's address specified in
Section 1.01(A) or
-2-
<PAGE> 6
at such other place as Landlord may designate from time to time
in writing. Tenant shall pay the first full month's Base Rent
upon execution of this Lease.
3.02 REAL ESTATE TAXES. During the Term, including any
extension or holding over thereof, Tenant shall pay, as
additional rent, the amount of all Real Estate Taxes levied
against the Premises and provide Landlord with proof of payment
before the attachment of any penalty. Said amount shall be paid
in monthly installments pursuant to Landlord's reasonable
estimates of the amounts thereof. When the actual amount
payable by the Tenant for the period has been determined on the
basis of actual tax bills, the amount shall be adjusted between
Landlord and Tenant.
"Real Estate Taxes" shall mean: (a) all ad valorem real estate
taxes, assessments, levies, impositions or charges on the
Premises (adjusted after protest or litigation, if any) for any
part of the Term of this Lease, exclusive of penalties, (b) any
taxes which shall be levied in lieu of any such ad valorem real
estate taxes, (c) any special assessments for benefits on or to
the Premises paid in annual installments by Landlord, (d)
occupational taxes or excise taxes levied on rentals derived
from the operation of the Premises or the privilege of leasing
property, and (e) the expense of protesting, negotiating or
contesting the amount or validity of any such taxes, charges or
assessments, such expense to be applicable to the period of the
item contested, protested or negotiated.
If the Term of the Lease shall end during a tax calendar year
("tax calendar year" shall mean each annual period for which ad
valorem real estate taxes are assessed and levied) of which part
only is included in the Term hereof, the amount of such
additional rent shall be prorated on a per diem basis and shall
be paid on or before the last day of the Term. If the Term ends
in any tax calendar year before the amount to be payable by
Tenant has been determined under the provisions of this Section,
an amount payable for the portion of the Term during the tax
calendar year shall be reasonably estimated by Landlord and the
estimated amount shall be promptly paid by Tenant. As soon as
the amount properly payable by Tenant for the partial period has
finally been determined, the amount shall be adjusted between
Landlord and Tenant. In the event that Tenant shall fail to
meet its obligation to pay real estate taxes as aforesaid then,
and in that event, it shall be obligated to, thereafter, pay
such real estate taxes in monthly installments pursuant to
Landlord's reasonable estimates of the amounts thereof. When
the actual amount payable by the Tenant for the period has been
determined on the basis of actual tax bills, the amount shall be
adjusted between Landlord and Tenant. Any and all amounts to
paid by Tenant shall be held in an interest-bearing account by
Landlord with interest for the benefit of Tenant.
3.03 HEATING, VENTILATION AND AIR CONDITIONING MAINTENANCE.
*See Page 3A
3.04 PAYMENT OF ADDITIONAL RENT. Any additional rent payable
by Tenant under this Lease shall be due and payable ten (10)
days after billing by Landlord.
3.05 SERVICE CHARGE. Tenant's failure to make any monetary
payment required of Tenant hereunder within ten (10) days of the
due date therefor shall result in the imposition of a service
charge for such late payment
-3-
<PAGE> 7
During the Term, Tenant shall be responsible for the regular maintenance of the
heating, ventilation and air conditioning system for the Premises as more fully
described in Section 16.02 hereof. Tenant shall provide Landlord with
quarterly inspection reports and proof of filter changes and coil cleaning from
its contractor when and as deemed necessary by such contractor. If Landlord is
not satisfied that regular maintenance is being performed as determined in the
exercise of its reasonable judgment then, and in that event, Landlord may,
following written notice to Tenant, enter into service and maintenance
agreements for the heating, ventilation and air-conditioning systems as more
fully described in Section 16.02. In such event, Tenant shall pay to Landlord,
as additional rent, Landlord's cost and expense of such maintenance service
agreements and repairs to the heating, ventilation and air-conditioning
equipment and contracts servicing the Premises.
-3A-
<PAGE> 8
in the amount of one percent (1%) of the amount due.
In addition, any sum not paid within thirty (30) days of the
due date therefor shall bear interest at the "Prime Rate" of
interest charged by NBD Bank, N.A., plus three percent (3%) per
annum (or such lesser percentage as may be the maximum amount
permitted by law) from the date due until paid.
Article IV 4.01 The Premises hereby leased shall be used by Tenant only
Use for the purposes set forth in Section 1.01(J) above and for no
other purposes. Tenant shall not use or permit the use of the
Premises in any manner that will tend to create waste or a
nuisance, shall keep all its mechanical apparatus free
of noise and vibration which may be transmitted beyond the
confines of the Premises and shall not cause or permit
objectionable odors to emanate or to be dispelled from the
Premises. Tenant shall observe and comply, and shall cause its
subtenants, assignees, invitees, employees, contractors, and
agents to observe and comply, with the Rules and Regulations
set forth in Exhibit "D" attached hereto, and with such
reasonable modifications and additions thereto as Landlord may
make from time to time. Landlord shall not be liable for
failure of any person to obey the Rules and Regulations.
Landlord shall not be obligated to enforce the Rules and
Regulations against any person, and the failure of Landlord to
enforce any such Rules and Regulations shall not constitute a
waiver thereof or relieve Tenant from compliance therewith,
provided, however, that Landlord shall not enforce such Rules
and Regulations in a manner which unreasonably interferes with
Tenant's use of the Premises.
Article V 5.01 COMPLIANCE WITH LAWS AND ORDINANCES. Tenant shall comply
Laws and with all federal, state and municipal laws, ordinances and
Ordinances regulations and all covenants, conditions and restrictions of
record applicable to Tenant's use or occupancy of the Premises.
Without limiting the foregoing, Tenant shall not cause, nor
permit, any hazardous or toxic substances to be brought upon,
produced, stored, used, discharged or disposed of in, on or
about the Premises without the prior written consent of
Landlord, and then only in compliance with all applicable
environmental laws, except for de minimis amounts of hazardous
materials lawfully and carefully used in connection with its
operation of its business in the Premises. Tenant shall
indemnify and hold Landlord harmless from any and all costs or
expenses whatsoever (including attorney fees) in connection with
its use of any such hazardous materials.
5.02 TENANT'S RIGHT TO CONTEST. Tenant shall have the right to
contest, by appropriate legal proceedings, and by counsel
acceptable to Landlord, without cost or expense to Landlord, the
validity of any law, ordinance, or regulation of the nature
herein referred to, and if, by the terms of any such law,
ordinance, or regulation, compliance therewith and legally be
held in abeyance without subjecting Tenant or Landlord to any
liability for failure so to comply therewith. Tenant may
postpone compliance therewith until the final determination of
any such proceedings, provided that all such proceedings shall
be prosecuted with all due diligence and dispatch.
5.03 LICENSES AND PERMITS. During the Term, Tenant shall
obtain any necessary licenses or permits to conduct or operate
its business in and upon the Premises which are required by any
applicable governmental body or agency having jurisdiction over
the Premises and shall pay the fee or charge imposed for
issuance of such license or permit. Tenant shall renew any such
licenses or permits in accordance with the rules, codes,
statutes or ordinances requiring such licenses or permits.
Tenant covenants during the Term to conduct or operate only the
business for which it is licensed
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<PAGE> 9
and, in the event of a change in the nature of its business or
operation, to obtain any necessary new or additional licenses or
permits. Tenant shall at its sole cost and expense comply with
all requirements and perform all necessary action required under
such rules, codes, statutes or ordinances for the issuance of
such permits or licenses.
Article VI 6.01 Tenant shall contract in its own name and timely pay for
Utilities all charges for electricity, gas, water, fuel, sewer charges,
And Services telephone, trash hauling, snow removal, and any other services
or utilities used in, servicing or assessed against the
Premises, unless otherwise herein expressly provided.
Article VII 7.01 Landlord covenants that Tenant, on paying the Rent
Quiet Enjoyment herein provided and keeping, performing and observing the
covenants, agreements and conditions herein required of Tenant,
shall peaceably and quietly hold and enjoy the Premises for the
Term aforesaid, subject, however, to the terms of this Lease.
Article VIII 8.01 Tenant shall not, without the prior written consent of
Assignment Landlord: (i) assign, convey, mortgage or otherwise transfer
And Subletting this Lease or any interest hereunder, or sublease the Premises,
or any part thereof, whether voluntarily or by operation of law;
or (ii) permit the use of the Premises by any person other than
Tenant and its employees. Any such transfer, sublease or use
described in the preceding sentence (a "Transfer")
occurring without the prior written consent of Landlord shall
be void and of no effect. Landlord's consent to any Transfer
shall not constitute a waiver of Landlord's right to withhold
its consent to any future Transfer. Landlord's consent to any
Transfer or acceptance of rent from any party other than Tenant
shall not release Tenant from any covenant or obligation under
this Lease. Landlord may require as a condition to its consent
to any assignment of this Lease that the assignee execute an
instrument in which such assignee assumes the obligations of
Tenant hereunder. For purposes of this paragraph, the transfer
(whether direct or indirect) of all or a majority of the
capital stock in a corporate Tenant (other than the shares of
the capital stock of a corporate Tenant whose stock is publicly
traded) or the merger, consolidation or reorganization of such
Tenant or the transfer of all or any general partnership
interest in any partnership Tenant shall be considered a
Transfer.
8.02 If Tenant desires the consent of Landlord to a Transfer,
Tenant shall submit to Landlord, at least thirty (30) days prior
to the proposed effective date of the Transfer, a
written notice which includes such information as Landlord may
require about the proposed Transfer and transferee. If
Landlord does not terminate this Lease, in whole or in part,
pursuant to Section 8.03, Landlord shall not unreasonably
withhold its consent to any assignment or sublease. Landlord
shall not be deemed to have unreasonably withheld its consent
if, in the judgment of Landlord: (i) the transferee is of a
character or engaged in a business which is not in keeping with
the standards or criteria used by Landlord in leasing the
Premises; (ii) the financial condition of the transferee is
such that it may not be able to perform its obligations in
connection with this Lease; (iii) the purpose for which the
transferee intends to use the Premises or portion thereof is in
violation of the terms of this Lease or the lease of any other
tenant in the Building, if any; (iv) the transferee is a
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<PAGE> 10
tenant of or negotiating for space in the Project; (v) Tenant
is in default under this Lease; (vi) such a Transfer would
violate any term, condition, covenant, or agreement of the
Landlord involving the Building, the Project or any other
tenant's lease within the Project; or (vii) any other basis
which Landlord reasonably deems appropriate. If Landlord
wrongfully withholds its consent to any Transfer, Tenant's sole
and exclusive remedy therefor shall be to seek specific
performance of Landlord's obligation to consent to such
Transfer. In the event that Landlord does not either reject a
proposed transfer within such thirty (30) day period or
terminate this Lease as provided in Section 8.03, the proposed
Transfer shall be deemed approved.
8.03 Landlord shall have the right to terminate this Lease as
to that portion of the Premises covered by a Transfer. Landlord
may exercise such right to terminate by giving notice to Tenant
at any time within thirty (30) days after the date on
which Tenant has furnished to Landlord all of the items
required under Section 8.02 above. If Landlord exercises such
right to terminate, Landlord shall be entitled to recover
possession of, and Tenant shall surrender such portion of, the
Premises (with appropriate demising partitions erected at the
expense of Tenant) on the later of (i) the effective date of
the proposed Transfer, or (ii) sixty (60) days after the date
of Landlord's notice of termination. In the event Landlord
exercises such right to terminate, Landlord shall have the
right to enter into a lease with the proposed transferee
without incurring any liability to Tenant on account thereof.
If Landlord consents to any Transfer, Tenant shall pay to
Landlord all rent and other consideration received by Tenant in
excess of the Rent paid by Tenant hereunder for the portion of
the Premises so transferred. Such rent shall be paid as and
when received by Tenant. In addition, Tenant shall pay to
Landlord any attorneys' fees and expenses incurred by Landlord
in connection with any proposed Transfer, whether or not
Landlord consents to such Transfer.
Article IX 9.01 If the Premises or the Building or any part thereof is so
Damage Or damaged by fire or other casualty, cause or condition whatsoever
Destruction as to be substantially untenantable (which, as used herein,
means damage to at least 50% of the Building) and Landlord shall
determine not to restore same, Landlord may, by written notice
to Tenant given within sixty (60) days after such damage,
terminate this Lease as of the date of the damage. If this
Lease is not terminated as above provided and if the Premises
are made partially or wholly untenantable as aforesaid,
Landlord, at its expense, shall restore the same with reasonable
promptness to the condition in which Landlord furnished the
Premises to Tenant at the commencement of the Term as to those
items that were provided at Landlord's expense without any
reimbursement by Tenant. Landlord shall be under no obligation
to restore any alterations, improvements or additions to the
Premises made by Tenant or paid for by Tenant, including, but
not limited to, any of the initial tenant finish done or paid
for by Tenant or any subsequent changes, alterations or
additions made by Tenant.
9.02 If, as a result of fire or other casualty, cause or
condition whatsoever the Premises are made partially or wholly
untenantable and, if Landlord has not given the sixty (60) day
notice above provided for and fails within one hundred twenty
(120) days after such damage occurs to eliminate substantial
interference with Tenant's use of the Premises or substantially
to restore same, Tenant may terminate this Lease as of the end
of said one hundred twenty (120) days by notice to Landlord
given not
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<PAGE> 11
later than five (5) days after expiration of said one
hundred twenty (120) day period. If the Premises are
rendered totally untenantable but this Lease is not
terminated, Rent shall abate from the date of the fire or
other relevant cause or condition until the Premises are
ready for occupancy and reasonably accessible to Tenant. If
a portion of the Premises is untenantable, Rent shall abate
in the proportion which the approximate area of the damaged
portion bears to the total area of the Premises from the
date of the fire or other relevant cause or condition until
the damaged portion is ready for occupancy and reasonably
accessible to Tenant; and this Lease shall continue in full
force and effect for the balance of the Term. In all cases,
due allowance shall be made for reasonable delay caused by
adjustment of insurance loss, strikes, labor difficulties or
any cause beyond Landlord's reasonable control. For the
purposes of this Lease, the Premises shall be considered
tenantable so long as and to the extent that the Premises
are occupied. In any event, Tenant shall be responsible for
the removal, or restoration, when applicable, of all its
damaged property and debris from the Premises, upon request
by Landlord or reimburse Landlord for the cost of removal.
Article X 10.01 Landlord reserves the following rights:
Landlord's
Rights (a) To change the name of the Building or the
Project without notice or liability to Tenant;
(b)
(c) To exhibit the Premises to others and to
display 'For Lease' signs on the Premises
during the last six (6) months of the Term or
any extension thereof;
(d) To remove abandoned or unlicensed vehicles and
vehicles that are interfering with the use of
the parking lot and to charge Tenant for the
expense of removing vehicles; and
(e) To take any and all measures, including making
inspection, repairs, alterations, additions and
improvements to the Premises or to the Project
as may be necessary or desirable for the
operation, safety, protection or preservation
of the Premises or the Project or of Landlord's
interest therein, or as may be necessary or
desirable in the operation of the Premises or
the Project. Any such inspection shall be done
at Landlord's expense unless any needed repairs
or maintenance are included in Article 16.02 or
are caused by the negligence of Tenant in which
event Tenant shall be responsible for the cost
of same.
Landlord may enter upon the Premises at any reasonable
time upon reasonable notice except in case of emergency
for the purpose of exercising any or all of the foregoing
rights hereby reserved without being deemed guilty of an
eviction or disturbance of Tenant's use or possession and
without being liable in any manner to Tenant.
Article XI 11.01 In the event of a holding over by Tenant after
Holding Over expiration or termination of this Lease without the
consent in writing of Landlord. Tenant shall be deemed a
tenant at sufferance and shall pay rent for such
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<PAGE> 12
occupancy at the rate of one hundred fifty (150%) percent of the
last current Rent (including base and additional rent), prorated
for the entire holdover period, plus all attorneys' fees and
expenses incurred by Landlord in enforcing its rights hereunder,
plus any other damages occasioned by such holding over. Except as
otherwise agreed, any holding over with the written consent of
Landlord shall constitute Tenant a month-to-month tenant.
Article XII 12.01 Tenant shall not put upon nor permit to be put upon any
Signs And part of the Premises, the Building or the Project, any signs,
Advertisements billboards or advertisements whatever in any location or any
form without the prior written consent of Landlord.
Article XIII 13.01 Landlord shall have the right to transfer, mortgage,
Mortgage And pledge or otherwise encumber, assign and convey, in whole
Transfer; or in part, the Premises, the Building, the Project, this
Estoppel Lease, and all or any part of the rights now or thereafter
Certificates existing and all rents and amounts payable to Landlord under
the provisions hereof. Nothing herein contained shall limit
or restrict any such rights, and the rights of the Tenant under
this Lease shall be subject and subordinate to all instruments
executed and to be executed in connection with the exercise of
any such rights, including, but not limited to, the lien of any
mortgage, deed of trust, or security agreement now or hereafter
placed upon Landlord's interest in the Premises. This paragraph
shall be self-operative. However, Tenant covenants and agrees to
execute and deliver upon demand such further instruments
subordinating this Lease to the lien of any such mortgage, deed
of trust or security agreement as shall be requested by the
Landlord and/or mortgagee or proposed mortgagee or holder of any
security agreement.
13.02 Upon Landlord's written request, Tenant shall execute,
acknowledge and deliver to Landlord a written statement
certifying: (i) that none of the terms or provisions of this
Lease have been changed (or if they have been changed, stating
how they have been changed); (ii) that this Lease has not been
cancelled or terminated; (iii) the last date of payment of Rent
and other charges and the time period covered by such payment;
(iv) that Landlord is not in default under this Lease (or, if
Landlord is claimed to be in default, stating why); and (v) such
other matters as may be reasonably required by Landlord or the
holder of a mortgage, deed of trust or lien to which the Property
is or becomes subject. Tenant shall deliver such statement to
Landlord within ten (10) days after Landlord's request. Any such
statement by Tenant may be given by Landlord to any prospective
purchaser or lender. Such purchaser or lender may rely
conclusively upon such statement as true and correct. If Tenant
does not deliver such statement to Landlord within such ten (10)
day period, Landlord, and any propsective purchaser or lender,
may conclusively presume and rely upon the following facts: (i)
that the terms and provisions of this Lease have not been changed
except as otherwise represented by Landlord; (ii) that this Lease
has not been cancelled or terminated except as otherwise
represented by Landlord; (iii) that not more than one month's
Rent or other charges have been paid in advance; and (iv) that
Landlord is not in default under the Lease. In such event,
Tenant shall be estopped from denying the truth of such facts.
Article XIV 14.01 If the Premises or such substantial part thereof as
reasonably
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Eminent renders the remainder unfit for the intended uses shall be taken
Domain by any competent authority under the power of eminent domain
or be acquired for any public or quasi-public use or purpose,
the Term of this Lease shall cease and terminate upon the date
when the possession of said Premises or the part thereof so
taken shall be required for such use or purpose and without
apportionment of the award and Tenant shall have no claim
against Landlord for the value of any unexpired Term of this
Lease. If any condemnation proceeding shall be instituted in
which it is sought to take any part of the Building or to change
the grade of any street or alley adjacent to the Building and
such taking or change of grade makes it necessary or desirable
to remodel the Building to conform to the changed grade,
Landlord shall have the right to terminate this Lease after
having given written notice of termination to Tenant not less
than ninety (90) days prior to the date of termination
designated in the notice. In either of said events, rent at the
then current rate shall be apportioned as of the date of the
termination. No money or other consideration shall be payable by
the Landlord to the Tenant for the right of termination and the
Tenant shall have no right to share in the condemnation award or
in any judgment for damages caused by the taking or the change
of grade. Nothing in this paragraph shall preclude an award
being made to Tenant for loss of business or depreciation to and
cost removal of equipment or fixtures.
Article XV 15.01 If, by reason of inability to obtain and utilize labor,
Landlord's materials or supplies; circumstances directly or indirectly the
Inability result of a state of war or national or local emergency; any
To Perform laws, rules, orders, regulations or requirements of any
governmental authority now or hereafter in force; strikes or
riots; accident in, damage to or the making of repairs,
replacements, or improvements to the Premises or any of the
equipment thereof; or by reason of any other cause beyond the
reasonable control of Landlord, Landlord shall be unable to
perform or shall be delayed in the performance of any covenant
to supply any service, such nonperformance or delay in
performance shall not render Landlord liable in any respect for
damages to either person or property, constitute a total or
partial eviction, constructive or otherwise, work an abatement
of rent or relieve Tenant from the fulfillment of any covenant
or agreement contained in this Lease.
Article XVI INTENTIONALLY OMITTED.
Completion
And Accep-
tance;
Maintenance
And Repair
16.02 MAINTENANCE AND REPAIR BY TENANT. Tenant shall be
responsible for all maintenance and repair to the Premises of
whatsoever kind or nature that is not hereinafter set forth
specifically as the obligation of Landlord. Tenant shall take
good care of the Premises and fixtures, and keep them in good
repair and free from filth, overloading, danger of fire
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<PAGE> 14
or any pest or nuisance, and repair any damage or breakage
done by Tenant or Tenant's agents, employees or invitees,
including damage done to the Building by Tenant's equipment
or installations. Tenant shall be responsible for the
repair and replacement of all glass and plate glass on the
Premises. Tenant shall furnish and pay for the upkeep,
maintenance, repair and periodic servicing of the heating,
ventilation and air conditioning system servicing the
Premises, except that Landlord, at Landlord's option, may
elect to enter into a service contract for the heating,
ventilation and air conditioning equipment for periodic
inspection of such equipment and if Landlord so elects,
Tenant shall pay as additional rent the cost and expense of
the service and inspection provided pursuant to such
contract in the event that Tenant does not perform in
accordance with Section 3.03 hereof. At the end of the Term
of this Lease or any extension or renewal thereof, Tenant
shall quit and surrender the Premises broom clean in as good
condition as when received by Tenant, normal wear and tear
excepted. In the event Tenant fails to maintain the
Premises as provided for herein. Landlord shall have the
right, but not the obligation, to perform such maintenance
as is required of Tenant, in which event Tenant shall
promptly reimburse Landlord for its costs in providing such
maintenance or repairs together with a ten percent (10%)
charge for Landlord's overhead. There shall be no overhead
charge in connection with the servicing of the heating, air
conditioning and ventilation equipment if Landlord has
elected to provide such service under this Section.
Notwithstanding anything to the contrary set forth herein,
prior to the commencement of the Term, Landlord will have
the roof surveyed and if found to need repair will make same
at its sole cost and expense. From and after the
commencement of the Term, Tenant shall be responsible for
the maintenance and repair of the roof.
Article XVII 17.01 ALTERATIONS AND ADDITIONS. Tenant shall not make any
Alterations alterations, improvements, or additions to the Premises
And without the prior written consent and approval of plans
Additions: therefor by Landlord. Alterations, improvements or
Mechanics' Liens additions so made upon the Premises, except moveable
furniture and equipment placed in the Premises at the
expense of Tenant, shall be and become the property of
Landlord and shall remain upon and be surrendered with the
Premises as a part thereof at the termination of this Lease,
without disturbance, molestation, injury or damage, unless
Landlord elects to require Tenant to remove such
alterations or improvements from the Premises. In the
event damage to the Premises shall be caused by moving said
furniture and equipment in or out of the Premises, said
damage shall be promptly repaired at the cost of Tenant.
17.02 MECHANICS' LIENS. Tenant shall not cause nor permit
any mechanics' liens or other liens, to be placed upon the
Premises and in case of the filing of any such lien or
claim therefor, Tenant shall promptly discharge same;
provided, however, that Tenant shall have the right to
contest the validity or amount of any such lien upon its
prior posting of security with Landlord, which security,
in Landlord's sole judgment, must be adequate to pay and
discharge any such lien in full plus Landlord's reasonable
estimate of its legal fees. Tenant agrees to pay all legal
fees and other costs incurred by Landlord because of the
placement upon the Premises or Project of any mechanics' or
other liens attributable to Tenant.
Article XVIII 18.01 PUBLIC LIABILITY, PROPERTY DAMAGE INSURANCE. Tenant
Insurance covenants and agrees to maintain on the Premises at all
times during the Term of this Lease, or any extension or
any renewal thereof, a policy or policies of comprehensive
public liability and property damage insurance, which
policy or policies shall be issued by one or more insurance
carriers acceptable
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<PAGE> 15
to Landlord, and which shall provide coverage of not less than
One Million Dollars ($1,000,000) for each injury or death to a
person and Three Million Dollars ($3,000,000) for each
occurrence, and, in case of property damage, not less than One
Million Dollars ($1,000,000) for any one occurrence, and, in
addition, which shall insure against any and all liability for
which Tenant is responsible hereunder. Such policy or policies
shall name Landlord and its managing agent as additional
insureds, shall contain a clause pursuant to which the insurance
carrier or carriers waive all rights of subrogation against the
Landlord with respect to losses payable under such policy or
policies, and shall provide that it (or they) may not be
cancelled or materially changed without at least thirty (30)
days prior written notice to Landlord and Tenant. Prior to the
commencement of the Term and from time to time, Tenant shall
furnish Landlord with certificates evidencing such insurance.
18.02 FIRE AND EXTENDED COVERAGE INSURANCE. Tenant shall,
throughout the Term of this Lease, or any extension or any
renewal thereof, maintain or reimburse Landlord as additional
rent for the maintenance of fire and extended coverage insurance
on the Building and other improvements located on the Premises
with insurance carrier(s) acceptable to Landlord, and in such
amounts and with such deductibles as Landlord shall determine.
Such insurance shall contain a clause pursuant to which the
insurance carrier or carriers waive all rights of subrogation
against the Landlord, or the Tenant, as the case may be, with
respect to losses payable under such policy or policies. Prior
to the commencement of the Term and from time to time Tenant
shall furnish Landlord with certificates evidencing such
insurance.
18.03 INDEMNIFICATION OF LANDLORD. Tenant shall indemnify and
defend Landlord, its employees and agents and save them
harmless from and against any and all loss (including loss of
rents payable by Tenant) and against all claims, actions,
damages, liability and expenses in connection with loss of
life, bodily and personal injury or damage arising from any
occurrence in, upon or at the Premises or any part thereof, or
occasioned wholly or in part by any act or omission of Tenant,
its agents, contractors, employees, servants, licensees,
concessionaires or invitees or by anyone permitted to be on the
Premises by Tenant. Tenant assumes all risks of and Landlord,
its employees and agents shall not be liable for injury to
person or damage to property resulting from the condition of the
Premises or from the bursting or leaking of any and all
pipes, utility lines, connections, or air conditioning or
heating equipment in, on or about the Premises, or from water,
rain or snow which may leak into, issue or flow from any part
of the Building. Tenant agrees, at all times, to indemnify and
hold Landlord, its employees and agents harmless from and
against all actions, claims, demands, costs, damages or
expenses of any kind which may be brought or made against
them or which they may pay or incur by reason of Tenant's
occupancy of the Premises or its negligent performance of or
failure to perform any of its obligations under this Lease. In
case Landlord or its employees or agents shall, without fault
on their part, be made a party to any litigation commenced by
or against Tenant, then Tenant shall indemnify, defend and hold
them harmless and shall pay all costs, expenses and reasonable
attorneys' fees incurred or paid by them in connection with
such litigation. Notwithstanding anything to the contrary set
forth herein, Tenant's indemnification shall not extend to
causes of action arising solely because of the gross negligence
or international acts of Landlord, its agents, contractors or
employees.
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<PAGE> 16
Article XIX 19.01 Tenant shall not use any part of the Building exterior
Use Of for outside storage, including the storage of crates, pallets
Exterior or racks. Tenant shall place all trash and garbage in enclosed
Areas metal containers to be located as directed by Landlord. No
trucks or trailers, loaded or empty, shall be parked about the
Building, except in front of the docks on the concrete apron
provided for such purposes. Tenant shall cause all
automobiles to be parked only in those portions of the parking
areas designated for that purpose by Landlord, and Tenant shall
neither park nor permit parking of automobiles or any other
vehicles on any street or driveway without the prior written
consent of Landlord. In addition, Tenant shall neither park
nor permit parking of automobiles or any other vehicles
overnight anywhere about the Building's parking areas without
the prior written consent of Landlord.
Article XX 20.01 In the event:
Default And
Remedies (a) Tenant shall at any time fail to pay any item of Rent when
due and following the expiration of a five (5) day grace
period; or
(b) Tenant shall fail to keep, perform, or observe any other
covenant, agreement, condition or undertaking hereunder and
shall fail to remedy such default within fifteen (15) days
after written notice thereof from Landlord provided,
however, that if the covenant, agreement, condition or
undertaking to be performed by Tenant is of such a nature
that the same cannot reasonably be performed within such
fifteen (15) day period, such default shall be deemed
to have been cured if Tenant commences such performance
within said fifteen (15) day period and thereafter
diligently undertakes to complete the same within thirty
(30) days; or
(c) The Premises shall be vacated by Tenant for any period with
Tenant failing to pay the Rent reserved hereunder or
otherwise complying with the terms and conditions of this
Lease; or
(d) Any voluntary or involuntary proceedings are filed by or
against Tenant or any guarantor of this Lease under any
bankruptcy, insolvency or similar laws, and, in the
case of any involuntary proceedings, are not dismissed
within thirty (30) days of filing.
Landlord shall have the right, without further notice to or demand, to re-enter
and take exclusive possession of the Premises, with or without force or legal
process, and to refuse to allow Tenant to enter the same or have possession
thereof; to change the locks on the doors to the Premises; to take possession
of any furniture or other property in or upon the Premises (Tenant hereby
waiving the benefit of all exemptions by law); to sell the same at public or
private sale without notice and apply the proceeds thereof to the costs of
sale, payment of damages and payment of the rent due under this Lease; all
without being liable to Tenant for any damages or to any prosecution therefor,
and
(i) As agent of Tenant, to relet the Premises or any part
thereof for the balance of the Term or for a shorter or longer
term and receive the rents therefor, applying them first to the
payment of the expense of such reletting and, second, to the
payment of damages suffered to the Premises and Rent due and to
become due under this Lease, Tenant remaining liable for and
hereby agreeing to pay Landlord any deficiency; or
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<PAGE> 17
(ii) To cancel and terminate the remaining term of this
Lease, re-enter and take possession of the Premises free of this
Lease and thereafter this Lease shall be null and void and the
Rent in such case shall be apportioned and paid on and up to the
date of such entry. Thereafter both parties shall be released
and relieved from and of any and all obligations thereafter to
accrue hereunder. Tenant shall be liable for all loss and
damage resulting from such breach or default; or
(iii) To treat such default as an anticipatory breach of
this Lease and, as liquidated damages for such default, be
entitled to the difference, if any, between the sum which, at
the time of such termination for anticipatory breach represents
the then present worth (computed at seven percent (7%) per year)
of the excess aggregate Rent (including additional rent) payable
hereunder which would have accrued over the balance of the Lease
Term (including extensions) had such term not been prematurely
terminated, over the aggregate market rental value of the
Premises over the Term (including extensions) that the Lease
would have run had it not been prematurely terminated.
20.02 LANDLORD'S RIGHT TO CURE. Landlord may, but shall not be
obligated to, cure any default by Tenant (specifically
including, but not by way of limitation, Tenant's failure to
obtain insurance, make repairs, or satisfy lien claims); and
whenever Landlord so elects, all costs and expenses paid by
Landlord in curing such default, including reasonable attorney's
fees, shall be so much additional rent due on demand, together
with interest at the highest rate then payable by Tenant in the
state in which the Premises are located, or in the absence of
such a maximum rate, at the rate of eighteen percent (18%) per
annum, from the date of the advance to the date of repayment by
Tenant to Landlord.
20.03 REMEDIES CUMULATIVE. All rights and remedies provided in
this Lease for Landlord's protection shall be cumulative and in
addition to any other rights and remedies provided by law.
Landlord shall be entitled to recover from Tenant its reasonable
attorneys' fees incurred in enforcing its rights hereunder.
20.04 NO WAIVER. No waiver by Landlord of a breach or default
by Tenant under the terms and conditions of this Lease shall be
construed to be a waiver of any subsequent breach or default,
nor of any other term or condition of this Lease, and the
failure of the Landlord to assert any breach or to declare a
default by Tenant shall not be construed to constitute a waiver
thereof so long as such breach or default continues unremedied.
20.05 NO REINSTATEMENT. No receipt of money by Landlord from
Tenant after the expiration or termination of this Lease or
after the service of any notice or after the commencement of any
suit, or after final judgment for possession of the Premises,
shall reinstate, continue or extend the Term of this Lease nor
affect any such notice, demand or suit.
20.06 DEFAULT UNDER OTHER LEASES. A default under this Lease
shall, at Landlord's option, be deemed a default under any other
leases between Landlord and Tenant for space in the Project.
Likewise, a default under
-13-
<PAGE> 18
any other such lease between Landlord and Tenant shall, at
Landlord's option, be deemed a default under this lease.
20.07 BANKRUPTCY. If Tenant becomes bankrupt, the bankruptcy
trustee shall not have the right to assume or assign this Lease
unless the trustee complies with all requirements of the United
States Bankruptcy Code; and Landlord expressly reserves all of
its rights, claims, and remedies thereunder.
Article XXI 21.01 The term "Landlord" as used in this Lease, so far as
Definition of covenants or obligations on the part of Landlord are concerned,
Landlord shall be limited to mean and include only the owner or owners at
the time in question of the fee of the Premises, and in the
event of any transfer or transfers of the title to such fee,
Landlord herein named (and in case of any subsequent transfers
or conveyances, the then grantor) shall be automatically freed
and relieved, from and after the date of such transfer or
conveyance, of all liability as respects the performance of any
covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed; provided that any funds
in the hands of such Landlord or the then grantor at the time of
such transfer, in which Tenant has an interest, shall be turned
over to the grantee, and any amount then due and payable to
Tenant by Landlord or the then grantor under any provisions of
this Lease, shall be paid to Tenant.
Article XXII 22.01 Except as otherwise herein provided, whenever by the
Notices terms of this Lease notice shall or may be given either to
Landlord or to Tenant, such notices shall be in writing and
shall be deemed to have been properly served if hand-delivered
or sent by overnight or by certified mail, return receipt
requested, postage prepaid, at the addresses set forth at
Section 1.01(A) and (B) above. The date of such hand-delivery
or mailing shall be deemed the date of service.
Article XXIII 23.01 One hundred eighty (180) days prior to the commencement
Security date of this Lease as specified in Section 1.01(F) Tenant shall
Deposits deposit with Landlord the sum set forth in Section 1.01(I) as
security for the performance by Tenant of every covenant and
condition of this Lease. Said deposit may be commingled with
other funds of Landlord and shall bear no interest. If Tenant
shall default with respect to any covenant or condition of this
Lease, Landlord may apply the whole or any part of such security
deposit to the payment of any sum in default or any sum which
Landlord may be required to spend by reason of Tenant's default,
in which event Tenant shall re-deposit with Landlord within five
(5) days of demand therefor, the amount so applied. This
includes, but is not limited to, applying the security deposit
first to any restoration and/or cleanup costs necessary over and
above normal wear and tear of the Premises. It is understood
that the security deposit is not to be considered as the last
month's rent under this Lease. Should Tenant comply with all of
the covenants and conditions of this Lease, the security deposit
or any balance thereof shall be returned to Tenant within thirty
(30) days of the expiration of the Term hereof or of Tenant's
surrender of possession of the Premises, whichever is later.
Article XXIV 24.01 PERSONS BOUND. The agreements, covenants and conditions
Miscellaneous of this Lease shall be binding upon and inure to the benefit of
the heirs, legal representatives, successors and assigns of each
of the parties hereto,
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<PAGE> 19
except that no assignment, encumbrance or subletting by Tenant,
unless permitted by the provisions of this Lease, shall vest any
right in the assignee, encumbrancer or subtenant of Tenant. If
there be more than one Tenant herein named, the provisions of
this Lease shall be applicable to and binding upon such Tenants
jointly and severally, as well as their heirs, legal
representatives, successors and assigns.
24.02 PARTIAL INVALIDITY. If any terms, covenant, condition or
provision of this Lease or the application thereof to any person
or circumstance shall, to any extent be invalid, unenforceable
or violate a party's legal rights, then such term, covenant,
condition or provision shall be deemed to be null and void and
unenforceable, however, all other provisions of this Lease, or
the application of such term or provision to persons or
circumstances other than those to which are held invalid,
unenforceable or violative of legal rights, shall not be
affected thereby, and each and every other term, condition,
covenant and provision of this Lease shall be valid and be
enforced to the fullest extent permitted by law.
24.03 CAPTIONS. The headings and captions used throughout this
Lease are for convenience and reference only and shall in no way
be held to explain, modify, amplify, or aid in the
interpretation, construction or meaning of any provisions in
this Lease. The words "Landlord" and "Tenant" wherever used in
this Lease shall be construed to mean plural where necessary,
and the necessary grammatical changes required to make the
provisions hereof apply either to corporations, partnerships, or
individuals, men or women, shall in all cases be assumed as
though in each case fully expressed.
24.04 NO OPTION. Submission of this instrument for examination
constitutes neither a reservation of nor option for the
Premises. The instrument does not become effective as a lease
or otherwise until execution and delivery by both Landlord and
Tenant.
24.05 BROKERS. Tenant represents that it has dealt directly
only with the individuals and/or firms set forth at Section
1.01(K) above, as broker or brokers in connection with this
Lease, and that Tenant knows of no other broker who negotiated
this Lease or is entitled to any commission in connection
therewith. Tenant agrees to indemnify, defend and hold
Landlord, its successors and assigns and their respective agents
and employees, harmless from and against any commissions or
claims of any other broker or brokers in connection with this
Lease.
24.06 APPLICABLE LAW. This Lease and all matters pertinent
thereto shall be construed and enforced in accordance with the
laws of Michigan.
24.07 WAIVER OF JURY. Landlord and Tenant agree that, to the
extent permitted by law, each shall and hereby does waive trial
by jury in any action, proceeding or counterclaim brought by
either against the other on any matter whatsoever arising out of
or in any way connected with this Lease.
24.08 ALLOCATION OF RENT. Landlord and Tenant agree that no
portion of the Base Rent paid by Tenant during the portion of
the Term of this Lease occurring after the expiration of any
period during which such rent was
-15-
<PAGE> 20
abated shall be allocated by Landlord or Tenant
for income tax purposes to such rent abatement period, nor
is such rent intended by the parties to be allocable
for income tax purposes to any abatement period.
24.09 LIMITATION OF LIABILITY. Any liability of Landlord
under this Lease shall be limited solely to its interest
in the Premises, and in no event shall any personal
liability be asserted against Landlord in connection with
this Lease nor shall any recourse be had to any other
property or assets of Landlord.
ARTICLE XXV 25.01 This Lease contains the entire agreement between the
ENTIRE parties hereto and may not be modified except by a written
AGREEMENT instrument executed by the parties hereto.
ARTICLE XXVI 26.01 Reference is made to the Exhibits set forth in
EXHIBITS Section 1.01(M) above, which exhibits are attached hereto
and incorporated herein by reference.
ARTICLE XXVII 27.01 A Rider consisting of ---- pages, with paragraphs
RIDER numbered 27.02 through 27.---- consecutively, is attached
hereto and made part hereof.
IN WITNESS WHEREOF, the parties have signed triplicate
counterparts hereof as of the date and year hereinabove set
forth.
TENANT: LANDLORD:
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA,
LASON SYSTEMS, INC. a New Jersey corporation
--------------------------------
By: Robert A. Yanover By: TRERICE/TOSTO MANAGEMENT
----------------------------- COMPANY, a Michigan
corporation, Managing
Agent
Name: Robert A. Yanover
------------------------
Title: Chairman of the Board By:
----------------------- -------------------------
Name:
--------------------
Title: President
-------------------
-16-
<PAGE> 21
Form of
Personal Guaranty Of Lease
Property Number I.P. 1152
In consideration of and as an inducement to Landlord to enter into that
certain Lease dated ("Lease") between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA ("Landlord") and ("Tenant") in
reliance on this guaranty, , ("Guarantor") hereby
unconditionally guarantees the due and punctual payment of all Rent,
both Basic and Additional, if any (as defined in the Lease), and all
other sums due (including interest and penalties) and to be paid by
Tenant pursuant to the Lease and the performance by Tenant of all the
terms, conditions, covenants and agreements of the Lease, and Guarantor
agrees to pay all of Landlord's costs, expenses and reasonable
attorneys' fees incurred in enforcing the covenants and agreements of
Tenant in the Lease or incurred by Landlord in enforcing this guaranty.
Guarantor waives notice of the acceptance of this agreement,
presentment, protest, notice of protest and any and all demands for
performance or any and all notices of non-performance which might
otherwise be a condition precedent to the liability of Guarantor
hereunder, and Guarantor covenants and agrees that Landlord may proceed
directly against Guarantor, without first proceeding or making claim or
exhausting any remedy against Tenant or pursuing any particular remedy
or remedies available to Landlord.
Guarantor covenants and agrees that, without releasing, diminishing or
otherwise affecting the liability of Guarantor hereunder or the
performance of any obligation contained herein, and without affecting
the rights of Landlord. Landlord may, at any time and from time to
time, and without notice to or further consent of Guarantor: (a) make
any agreement extending or reducing the Term of the Lease or otherwise
altering the terms of payment of all or any part of the Rent' or
granting any indulgences with respect thereto, or modifying or
otherwise dealing with the Lease; (b) exercise or refrain from
exercising or waiving any right Landlord might have; (c) accept
security of any kind from Tenant; (d) consent to any assignment or
subletting in accordance with the Lease by Tenant, its successors and
assigns, made with or without notice to Guarantor; and (e) consent to a
changed or different use of the Premises (as defined in the Lease).
Guarantor agrees that in the event of any one of the following: (a)
Tenant shall become insolvent or shall be adjudicated as bankrupt; (b)
Tenant shall file a petition for reorganization, arrangement or similar
relief under any present or future provision of the Bankruptcy Code; (c)
such a petition filed by creditors of Tenant shall be approved by a
court; (d) Tenant shall seek a judicial readjustment of the rights of
its creditors under any present or future federal or state law; or (e) a
receiver of all or part of its property and assets is appointed by any
state or federal court, and in any such proceeding the Lease shall be
terminated or rejected or the obligations of Tenant thereunder shall be
modified, then Guarantor will immediately pay to Landlord, or its
successors or assigns (i) an amount equal to all Rent accrued to the
date of such termination, rejection or modification, plus (ii) an amount
equal to the then cash value of all Rent which would have been payable
under the Lease for the unexpired portion of the term thereby demised,
less the then cash rental value of the Premises for such unexpired
portion of the term, together with interest on the
-17-
<PAGE> 22
amounts designated (i) and (ii) above at the highest rate then payable in the
state in which the Premises are located or, in the absence of such a maximum
rate, at the rate of eighteen percent (18%) per annum from the date of such
termination, rejection or modification to the date of payment.
Neither Guarantor's obligation to make payment in accordance with the terms of
this agreement nor any remedy for the enforcement thereof shall be impaired,
modified, changed, released or limited in any manner whatsoever by any
impairment, modification, change, release or limitation of the liability of
Tenant or its estate in bankruptcy or of any remedy for the enforcement thereof
resulting from the operation of any present or future provision of the national
Bankruptcy Act or from the decision of any court.
This Guaranty of Lease shall be binding upon the successors and assigns of the
Guarantor and inure to the benefit of the successors and assigns of the
Landlord (including any assignee of the Lease, which may be assigned as
additional security for a loan).
IN WITNESS WHEREOF, Guarantor has caused this Agreement to be executed
and notarized this _______ day of ______________________________, 19 ______.
____________________________________
Name: ______________________________
STATE OF MICHIGAN )
) ss:
COUNTY OF )
The foregoing instrument was acknowledged before me the ______ day of
_____________________, 19 ____ by __________________________, the ____________
_______________ of _________________________, & _____________________________.
WITNESS my hand and official seal.
____________________________________
Notary Public, County, Michigan
My Commission Expires:______________
-18-
<PAGE> 23
EXHIBIT D
RULES AND REGULATIONS
(1) Tenant shall neither place unsightly objects against glass partitions or
doors, nor cover any glass window or door with an interior sign or
signs.
(2) Blinds, shades, awnings, window ventilators and other similar equipment
visible from outside of the Building shall be installed by Tenant only
in accordance with the prior written approval of Landlord.
(3) Tenant shall not use any space in the Premises for living quarters,
whether temporary or permanent.
(4) Tenant shall not use any part of the Building exterior for outside
storage, including the storage of crates, pallets or racks.
(5) Tenant shall not keep inflammables, such as gasoline, kerosene, naphtha
and benzine, or explosives, or any other articles of an intrinsically
dangerous nature on the Premises without the prior written consent of
Landlord.
(6) Tenant shall place all trash and garbage in containers to be located as
directed by Landlord. If excess trash accumulates, Tenant shall arrange
for special pickup.
(7) All loading and unloading of goods shall be done only at such times in
the areas and through the entrances designated for such purpose by
Landlord. All vehicles shall use driveways in accordance with designated
traffic patterns.
(8) Tenant shall have full responsibility for protecting the Premises and
the property located therein from theft and robbery, and shall keep all
doors, windows and transoms securely fastened when not in use.
(9) Tenant shall keep the Premises free and clear from rodents, bugs and
vermin, and will, at Tenant's sole cost and expense, use exterminating
services when so requested by Landlord.
(10) Tenant shall keep the Building at a temperature sufficiently high to
prevent freezing of water in pipes and fixtures.
(11) The outside areas of the Premises shall be kept clean by the Tenant, and
the Tenant shall not place or permit any obstructions, merchandise or
machines of any kind in such areas.
-19-
<PAGE> 24
(12) No trucks or trailers, loaded or empty, shall be parked about the
Building, except in front of the docks on the concrete apron provided
for such purposes. Tenant shall cause all automobiles to be parked only
in those portions of the parking areas designed for that purpose by
Landlord, and Tenant shall neither park nor permit parking of
automobiles or any other vehicles on any street or driveway without the
prior written consent of Landlord. In addition, Tenant shall neither
park nor permit parking of automobiles or any other vehicles overnight
about the Building's parking areas without the prior written consent of
Landlord.
-20-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
Lason Systems, Inc.
Delaware Legal Copy, Inc.
Information & Image Technology of America, Inc.
Great Lakes Micrographics Corporation
Micro-Pro, Inc.
MP Services, Inc.
<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 6, 1996, on our audit of
the consolidated financial statements and financial statement schedule of Lason
Holdings, 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 caption
"Experts."
Coopers & Lybrand L.L.P.
Detroit, Michigan
August 8, 1996
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
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0
0
<OTHER-SE> 11,088
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