<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 17, 1998
REGISTRATION NO. 333-60143
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LASON, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7398 38-3214743
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
</TABLE>
1305 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
TELEPHONE: (248) 597-5800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GARY L. MONROE
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
1305 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
TELEPHONE: (248) 597-5800
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
<TABLE>
<S> <C>
LAURENCE B. DEITCH JEFFREY M. STEIN
FRED B. GREEN KING & SPALDING
SEYBURN, KAHN, GINN, 191 PEACHTREE STREET
BESS, DEITCH AND SERLIN, P.C. ATLANTA, GEORGIA 30303
2000 TOWN CENTER, SUITE 1500 (404) 572-4729
SOUTHFIELD, MICHIGAN 48075
(248) 353-7620
</TABLE>
------------------------
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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
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 17, 1998
PROSPECTUS
- --------------------------------------------------------------------------------
3,500,000 Shares
LASON LOGO
COMMON STOCK
- --------------------------------------------------------------------------------
Of the 3,500,000 shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering"), 2,700,000 shares are being sold by
Lason, Inc. ("Lason" or the "Company") and 800,000 shares are being sold by
certain stockholders of the Company (the "Selling Stockholders"). The Company
will not receive any of the proceeds from the sale of shares of Common Stock by
the Selling Stockholders. See "Principal and Selling Stockholders."
The Common Stock is included for quotation in The Nasdaq Stock Market's National
Market (the "Nasdaq National Market") under the symbol "LSON." On July 28, 1998,
the last reported sales price for the Common Stock on the Nasdaq National Market
was $51.438 per share. See "Price Range of Common Stock."
SEE "RISK FACTORS" ON PAGES 8 TO 13 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share......................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
Total(3).......................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several 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
$750,000.
(3) The Company and certain Selling Stockholders have granted the Underwriters
30-day over-allotment options to purchase up to 525,000 additional shares of
Common Stock on the same terms and conditions as set forth above. If all
such additional shares are purchased by the Underwriters, the total Price to
Public will be $ , the total Underwriting Discounts and Commissions
will be $ , the total Proceeds to Company will be $ and
the total Proceeds to Selling Stockholders will be $ . See
"Underwriting."
- --------------------------------------------------------------------------------
The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made through the facilities of the Depository Trust Company, New York, New
York, on or about August , 1998.
PRUDENTIAL SECURITIES INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY
JEFFERIES & COMPANY, INC.
PAINEWEBBER INCORPORATED
August , 1998 THE ROBINSON-HUMPHREY COMPANY
<PAGE> 3
LASON LOGO
"THE INFORMATION MANAGEMENT COMPANY"
<TABLE>
<S><C>
IMAGE AND DATA CAPTURE
- Electronic Conversion Services [Picture of several of the Company's
- Micrographic Conversion Services employees at computer workstations]
- High Volume, Quick-Turn Reprographics
- On-Site Facilities Management
- Digital Graphics
DATA MANAGEMENT
- Electronic Document Storage and Retrieval [Picture of multiple computer terminals]
- Database Management Services
- Internet-Based Services
OUTPUT PROCESSING
- Digital Communication Services [Picture of multiple computer terminals]
(Priority Gram(TM), PROXYGRAM(TM) and
fax, electronic distribution, print and mail)
- Print On Demand Solutions
</TABLE>
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS (AND SELLING GROUP
MEMBERS, IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M
UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
PURCHASES OF THE COMMON STOCK TO STABILIZE ITS MARKET PRICE, PURCHASES OF THE
COMMON STOCK TO COVER SOME OR ALL OF A SHORT POSITION IN THE COMMON STOCK
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including the consolidated financial statements of the Company and
the 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") and the financial statements of
Consolidated Reprographics, a California corporation ("Consolidated
Reprographics"), and the notes thereto, appearing elsewhere in this Prospectus.
As used in this Prospectus, unless the context otherwise requires, the terms
"Lason" and the "Company" refer to Lason, Inc. and include Lason, Inc. and all
of its subsidiaries and its and their respective predecessors and subsidiaries.
The information set forth herein, unless otherwise indicated, assumes that the
Underwriters' over-allotment options will not be exercised.
THE COMPANY
Lason provides integrated information outsourcing for image and data
capture, data management and output processing services. 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
necessary to meet the growing and increasingly complex information management
requirements of its customers. The Company primarily serves customers in the
manufacturing, healthcare, financial services and professional services
industries. The Company's core competencies in input processing, data management
and output processing enable it to provide a broad range of services across a
wide range of media types and allow customers to fulfill their information
management outsourcing needs with a single vendor. The Company's strategy has
been to offer a wide range of services across a broad geographic area to its
customers and to use technologically advanced solutions to expand its service
offerings. The Company's net revenues have increased from $31.2 million in 1993
to $120.3 million in 1997, representing a compound annual growth rate ("CAGR")
of 40.2% over this five year period. The Company's diluted earnings per share
have increased from $0.33 in 1995 to $0.90 in 1997, representing a CAGR of 65.1%
over this three year period. The Company's net revenues increased 103.5% to
$109.2 million for the six months ended June 30, 1998, as compared with the same
period in 1997. The Company's diluted earnings per share increased 40.5% to
$0.59 for the six months ended June 30, 1998, as compared to the same period in
1997. Currently, the Company employs more than 3,900 people, has operations in
25 states and Mexico and provides services to over 3,500 customers at 55 Lason
multi-functional imaging centers and over 90 facility management sites located
on customers' premises.
The Company completed its initial public offering in October 1996 and a
secondary public offering in August 1997. Since its secondary public offering,
the Company has:
- Completed 13 acquisitions of information management companies which
had aggregate 1997 revenues of approximately $151.0 million;
- Achieved significant internal revenue growth, generating net
revenues in the six months ended June 30, 1998 that were
approximately 18% higher than those achieved in the six months ended
June 30, 1997, excluding the results of companies acquired after
June 30, 1997;
- Increased the geographic presence of its operations from 15 states
to 25 states and Mexico;
- Introduced Corporate ID, a proprietary Internet-based software
application that allows corporate customers to manage the
procurement of corporate identification materials, enhanced the
capabilities of Visions computer output to laser disk (COLD) and
continued the expansion of its branding strategy by increasing its
emphasis on products such as Document Express (print on demand),
Priority Gram(TM) and PROXYGRAM(TM); and
- Increased the availability under its Credit Agreement (as defined
herein) up to a maximum of $200 million.
3
<PAGE> 5
Lason's information management service offerings can be divided into the
areas of image and data capture, data management and output processing. The
Company's image and data capture services include the scanning and conversion of
documents from a variety of input media to a digital format. The Company also
provides traditional microfilm and microfiche services as well as on-site
facility management services. The Company's data management services include
electronic document storage and retrieval, database management and
Internet-based services, as well as list manipulation, sorting services and
information search solutions so that customers' data can be customized and
updated for specific target market mailings. The Company's Internet-based
services include its recent offering, Corporate ID, a proprietary software
application that allows corporate customers to manage the procurement of
corporate identification materials. The Company's output processing services
include print on demand, business communications and statement processing
services. The Company's newest output processing service offering, 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, proxy solicitations and letters to
consumers and other target audiences by fax, electronic distribution, print and
mail. The Company also provides customized processing services for over 500
collection agencies located throughout the United States.
Lason believes that companies will continue to increase their use of
outsourced information management services. 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. To manage large volumes of
documents efficiently, a customer would be required to make significant
investments in equipment, processes and technology which may only be fully
utilized occasionally. Through outsourcing, companies can avoid these
investments, as well as the risks of obsolescence that arise from rapid changes
in information management technology. As companies continue 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 large
volumes of documents efficiently. In addition, the Company believes that
customers will seek a single vendor capable of furnishing all or many of their
information management needs rather than relying on multiple vendors with
varying areas of expertise.
The information management industry is highly fragmented, consisting of a
large number of small companies providing limited service offerings. An
important element of the Company's growth strategy is to selectively make
acquisitions of companies with complementary technologies or customer bases to
consolidate its position as a provider of comprehensive information management
services across a broad geographic area.
In addition to acquisitions, a key component of the Company's growth
strategy is to continue to grow internally. The Company believes its internal
growth of approximately 18% for the six months ended June 30, 1998, compared
with the same period in 1997, is in part attributable to comprehensive marketing
programs it has implemented to facilitate the cross-selling of additional
services to its customers. The Company's goal is to become a national, single
source provider of image and data capture, data management and output processing
services for customers in its targeted industries. To achieve this goal, the
Company will continue 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 their information management services
from one source;
- Facilitate the cross-selling of additional services to customers
through its comprehensive marketing program and develop national
brand recognition for the quality and scope of Lason's services;
4
<PAGE> 6
- Make selective acquisitions to broaden its geographic reach,
customer base, management expertise and technological capabilities
and to attain economies of scale in purchasing and facility
utilization;
- Continue to develop additional high value-added applications, such
as Document Express (print on demand), digital imaging services,
Visions computer output to laser disk (COLD) and Corporate ID,
within its core service offerings; and
- Continue to 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.
RECENT ACQUISITIONS
In 1998, the Company expanded its efforts to target larger, regional
platform acquisitions in addition to tuck-in acquisitions. The Company has
completed three such larger platform acquisitions in 1998 with aggregate 1997
revenues of $81.0 million. The Company believes that expanding its acquisition
program to include larger regional platform acquisitions enables the Company to
broaden the range of services it provides to its customers, expand into new
geographic areas and increase its customer base, cross-selling opportunities and
operating leverage.
Consolidated Reprographics
On July 29, 1998, the Company acquired all of the outstanding shares of
capital stock of Consolidated Reprographics for a purchase price of $41.0
million, plus additional earn-out payments which are contingent upon achieving
certain operating income targets (the "Consolidated Reprographics Acquisition").
Consolidated Reprographics, headquartered in Irvine, California, has five
locations in the southern California market and individual facilities in Arizona
and Nevada. Consolidated Reprographics provides digital imaging, reprographics
and document management, as well as facilities management at over 30 customer
sites. For the twelve months ended May 31, 1998, Consolidated Reprographics had
net revenues of $28.9 million. The Consolidated Reprographics Acquisition
significantly expanded the Company's management capabilities, product offerings,
customer base and geographic presence in the California market.
Racom
On February 24, 1998, the Company acquired Racom Corporation and its
affiliates ("Racom") by acquiring all of the outstanding shares of capital stock
of its parent, Southern Microfilm Associates, Inc., for a purchase price of
$26.0 million, plus additional earn-out payments which are contingent upon
achieving certain operating income targets (the "Racom Acquisition"). Racom,
headquartered in New Orleans, Louisiana, has 16 imaging centers located in eight
states, primarily in the southwestern United States. Racom provides image
conversion services, facilities management and various systems integration and
support activities. For the twelve months ended December 31, 1997, Racom had net
revenues of $24.8 million. The Racom Acquisition added operations in Arizona,
Colorado, Louisiana, Nevada, New Mexico, Texas and Utah, and expanded the
Company's operations in Florida.
API
On March 5, 1998, the Company acquired substantially all of the assets of
API Systems, Inc. ("API") for a purchase price of $25.3 million and the
assumption of certain liabilities, plus additional earn-out payments which are
contingent upon achieving certain operating income targets (the "API
Acquisition"). API, headquartered in New York City, provides business
communications services primarily to the financial and commercial industries in
Connecticut, New Jersey, New York and Pennsylvania. For the twelve months ended
December 31, 1997, API had net revenues of $30.1 million. The API Acquisition,
combined with the Company's existing New York-based Churchill Communications
operation, provides the Company with a significant output processing presence in
the New York metropolitan market.
5
<PAGE> 7
THE OFFERING
Common Stock Offered by the Company....... 2,700,000 shares
Common Stock Offered by the Selling
Stockholders.............................. 800,000 shares
Common Stock to be Outstanding after the
Offering(1)............................... 14,955,849 shares
Use of Proceeds by the Company............ To repay indebtedness under the
Company's credit agreement (the
"Credit Agreement"), which has
been incurred principally to
finance acquisitions, and for
general corporate purposes,
including future acquisitions. See
"Use of Proceeds."
Nasdaq National Market Symbol............. LSON
- -------------------------
(1) Excludes, as of July 28, 1998, an aggregate of 1,590,560 shares of Common
Stock reserved for issuance under the Company's stock incentive plans, of
which options for 1,363,028 shares are currently outstanding with a weighted
average exercise price of $27.40 per share. See "Management-Stock Option
Plans."
RISK FACTORS
Investors should consider the risk factors involved in connection with an
investment in the Common Stock and the impact from various events that could
adversely affect the Company's business. See "Risk Factors."
6
<PAGE> 8
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
1995 1996 1997 1997(1) 1997 1998 1998(1)
---- ---- ---- ----------- ---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues, net of postage.......... $ 46,605 $ 69,937 $120,337 $248,267 $ 53,658 $109,202 $157,696
Cost of revenues.................. 31,227 47,587 80,846 167,725 37,147 70,325 101,298
-------- -------- -------- -------- -------- -------- --------
Gross profit...................... 15,378 22,350 39,491 80,542 16,511 38,877 56,398
Selling, general and
administrative
expenses........................ 9,406 12,699 21,364 49,975 8,493 22,536 34,507
Compensatory stock option
expense......................... 308 936 221 221 109 138 138
Amortization of intangibles....... 817 1,121 2,477 6,108 1,041 2,283 3,475
-------- -------- -------- -------- -------- -------- --------
Income from operations............ 4,847 7,594 15,429 24,238 6,868 13,920 18,278
Net interest expense.............. 1,694 1,760 1,249 621 740 2,176 548
-------- -------- -------- -------- -------- -------- --------
Income before income taxes........ 3,153 5,834 14,180 23,617 6,128 11,744 17,730
Provision for income taxes........ 1,139 2,103 5,110 9,451 2,250 4,438 7,158
-------- -------- -------- -------- -------- -------- --------
Net income........................ $ 2,014 $ 3,731 $ 9,070 $ 14,166 $ 3,878 $ 7,306 $ 10,572
======== ======== ======== ======== ======== ======== ========
Earnings per share:
Basic........................... $ 0.35 $ 0.59 $ 0.93 $ 1.14 $ 0.44 $ 0.63 $ 0.74
-------- -------- -------- -------- -------- -------- --------
Diluted......................... $ 0.33 $ 0.55 $ 0.90 $ 1.07 $ 0.42 $ 0.59 $ 0.70
======== ======== ======== ======== ======== ======== ========
Weighted average number of common
and common equivalent shares
outstanding:
Basic........................... 5,692 6,361 9,704 12,432 8,782 11,630 14,333
Diluted......................... 6,192 6,764 10,035 13,256 9,139 12,287 15,209
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
---------------------------------------
AS
ACTUAL PRO FORMA(2) ADJUSTED(3)
------ ------------ -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $ 55,178 $ 57,867 $ 57,867
Total assets.............................................. 279,304 337,801 337,801
Long-term debt, less current portion...................... 96,400 145,097 13,216
Total stockholders' equity................................ 141,603 141,872 273,753
</TABLE>
- -------------------------
(1) Gives effect to the acquisitions completed in 1998 (the "1998
Acquisitions"), the sale of 2,700,000 shares of Common Stock offered by the
Company hereby and the application of the estimated net proceeds therefrom
as if each had occurred as of January 1, 1997. See "Use of Proceeds" and Pro
Forma Financial Information.
(2) Gives effect to the acquisitions completed after June 30, 1998 (the "Post
June 1998 Acquisitions") as if each had occurred as of June 30, 1998. See
Pro Forma Financial Information.
(3) Gives effect to the Post June 1998 Acquisitions, the sale of 2,700,000
shares of Common Stock offered by the Company hereby and the application of
the estimated net proceeds therefrom as if each had occurred as of June 30,
1998. See "Use of Proceeds" and Pro Forma Financial Information.
7
<PAGE> 9
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this Prospectus,
in connection with an investment in the Common Stock offered hereby.
This Prospectus contains statements which constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
words "expect," "believe," "goal," "plan," "intend," "estimate" and similar
expressions and variations thereof used in this Prospectus are intended to
specifically identify forward-looking statements. Those statements appear in a
number of places in this Prospectus and include statements regarding the intent,
belief or current expectations of the Company, its directors or its officers
with respect to, among other things: (i) potential acquisitions and the
successful integration of such acquisitions; (ii) the use of the proceeds of the
Offering; (iii) the Company's financing plans; (iv) trends affecting the
Company's financial condition or results of operations; (v) the Company's growth
strategy and operating strategy; (vi) trends in the Company's markets; (vii)
trends in the Company's customer base; and (viii) the declaration and payment of
dividends. Prospective investors are cautioned that any such forward looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected in the forward looking statements as a result of various factors. The
accompanying information contained in this Prospectus, including without
limitation the information set forth under the headings "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and "Business," identifies important factors that could cause such
differences. The Company undertakes no obligation to publicly update or revise
forward looking statements made in this Prospectus to reflect events or
circumstances after the date of this Prospectus or to reflect the occurrence of
unanticipated events.
RISKS OF ACQUISITIONS AND FAILURE TO INTEGRATE ACQUIRED BUSINESSES. One of
the Company's principal strategies is to increase its revenues and the markets
it serves through the acquisition of complementary businesses. There can be no
assurance that the Company will be able to identify and acquire attractive
acquisition candidates, profitably manage such acquired companies or
successfully integrate such acquired companies into the Company without
substantial costs, delays or other problems. Acquisitions may involve a number
of special risks, including, but not limited to, adverse short-term effects on
the Company's reported financial condition or results of operations, diversion
of management's attention, dependence on retention, hiring and training of key
personnel, risks associated with unanticipated problems or liabilities, and
amortization or impairment of intangible assets, created or acquired, some or
all of which could have a material adverse effect on the Company's business,
financial condition or results of operations. In addition, the issuance of
Common Stock by the Company in connection with acquisitions may be dilutive to
the holders of the Common Stock. The Company occasionally experiences
competition in the pursuit of its acquisition candidates. Such competition may
result in an increase in the valuations received by candidates in this industry
and, consequently, may affect the prices the Company must pay for these
acquisitions. In addition, there can be no assurance that companies acquired in
the future will be profitable at the time of acquisition, that the companies
recently acquired or acquired in the future will achieve sales and profitability
justifying the Company's investment therein or that the Company will recognize
the synergies expected from such acquisitions. The failure to generate
profitability or to obtain any anticipated synergies from such acquired
businesses could have a material adverse effect on the Company's businesses,
financial condition or results of operations. See "Business -- Acquisition
Strategy."
RELIANCE ON MAJOR CUSTOMERS; RISK OF CUSTOMER LABOR INTERRUPTIONS. For the
years ended December 31, 1995, 1996 and 1997 and for the six months ended June
30, 1998, General Motors Corporation accounted for 48.6%, 32.0%, 16.8% and 9.3%,
respectively; Ford Motor Company accounted for 11.8%, 19.0%, 13.9% and 14.3%,
respectively; and Chrysler Corporation accounted for 4.6%, 5.5%, 1.8% and 1.4%,
respectively, of the Company's net revenues. For the six months ended June 30,
1998, on a pro forma basis after giving effect to the 1998 Acquisitions, General
Motors Corporation accounted for 6.4%; Ford Motor Company accounted for 9.9%;
and Chrysler Corporation accounted for 1.0%, of the Company's net revenues.
General declines in the automotive industry could cause a reduction in demand by
such customers
8
<PAGE> 10
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."
Several of the Company's key customers have large numbers of employees
employed under collective bargaining agreements with the United Automobile,
Aerospace and Agricultural Implement Workers of America (the "UAW"). The
Company's business, results of operations and financial condition were not
materially adversely affected by the recent strike by the UAW against General
Motors Corporation, as many of the services the Company performs for General
Motors support future product planning, credit, legal and other aspects of
General Motors' business which do not correlate directly with the number of
vehicles produced. The failure of General Motors Corporation, Ford Motor Company
or Chrysler Corporation to maintain harmonious relationships with the UAW,
however, 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.
COMPETITION IN THE COMPANY'S MARKETS. The markets in which the Company's
businesses compete 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 image and data capture, data management or output processing 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 IKON Office
Solutions, Inc., Pitney Bowes Management Services, Inc. (a subsidiary of Pitney
Bowes Inc.) and Xerox Document Services, a business group of Xerox Corporation,
with respect to its image and data capture services; DataPlex, Inc., F.Y.I.
Incorporated, IKON Office Solutions, Inc. and ImageMax, Inc. with respect to its
data management services; and Xerox Document Services, Diversified Data &
Communications, Inc. and Vestcom International, Inc. with respect to its output
processing services. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures will not have a material adverse effect on the Company's business,
financial condition or results of operations.
EFFECT OF POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS;
SEASONALITY. The Company has experienced, and in the future may experience,
significant quarter to quarter fluctuations in its results of operations.
Quarterly results of operations may fluctuate as a result of a variety of
factors, including, but not limited to, the size and timing of customer
contracts, changes in customer budgets, variations in the cost of paper, the
size and timing of acquisitions, the integration of acquired businesses into the
Company's operations, the number and timing of new hires, the demand for the
Company's services, disruptions in the businesses of the Company's customers,
the timing of the introduction of new services and service enhancements by the
Company or its competitors, 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 generally are
lower during the third and fourth quarters of the year. 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 or 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 -- Results of Operations -- Selected Quarterly Information."
POTENTIAL LIABILITY FOR UNAUTHORIZED DISCLOSURE OF CONFIDENTIAL
INFORMATION. A substantial portion of the Company's business involves the
handling of documents containing confidential and other sensitive information.
Although the Company has established procedures intended to eliminate any
unauthorized
9
<PAGE> 11
disclosure of confidential information and, in some cases, has contractually
limited its potential liability for unauthorized disclosure of such information,
there can be no assurance that unauthorized disclosures will not result in
liability to the Company. It is possible that such liabilities could have a
material adverse effect on the Company's business, financial condition or
results of operations.
RISK OF BUSINESS INTERRUPTIONS AND DEPENDENCE ON SINGLE FACILITIES FOR
CERTAIN SERVICES. The Company believes that its success to date has been, and
future results of operations will be, dependent in large part upon its ability
to provide prompt and efficient services to its customers. Certain of the
Company's operations are performed at a single location and are dependent on
continuous computer, electrical and telephone service. As a result, any
disruption of the Company's day-to-day operations could have a material adverse
effect upon the Company. There can be no assurance that a fire, flood,
earthquake, power loss, phone service loss or other disaster affecting one or
more of the Company's facilities would not disable these functions. Any
significant damage to any such facility or other failure that causes significant
interruptions in the Company's operations may not be covered by insurance and
could have a material adverse effect on the Company's business, financial
condition or results of operations. See "Business -- Facilities."
SIGNIFICANT INTANGIBLE ASSETS. As of June 30, 1998, the Company had $156.2
million of intangible assets, representing 55.9% of the Company's total assets,
consisting primarily of goodwill ($197.5 million or 58.5% on a pro forma basis
after giving effect to the Post June 1998 Acquisitions, the Offering and the
application of the estimated net proceeds therefrom, as if each had occurred on
June 30, 1998). Under terms of certain of the purchase agreements, shares of
Common Stock and/or cash are being held in escrow to indemnify the Company if
contingencies set forth in such purchase agreements occur within specified time
periods ranging from 12 to 24 months from the respective dates of acquisition.
With respect to the acquisitions the Company has completed to date, the cash and
Common Stock held in escrow aggregated approximately $19.4 million. In addition,
certain of the purchase agreements provide for an increase to the purchase price
if operating income of the acquired business exceeds targeted levels. The
maximum amount of additional purchase price which may be recorded should such
targets be achieved for acquisitions the Company has completed to date is
approximately $63.2 million. All of the purchase price contingencies, if any,
will be recorded as an adjustment to the purchase price when the related
contingency is resolved. The Company will incur non-cash charges as a result of
amortization of such intangible assets over their lives. If the value of any
such asset is impaired, the Company could incur a significant non-cash charge in
the period of such impairment, and the market price of the Common Stock could be
adversely affected when the Company reports any such charges. In addition, in
the event of a sale or liquidation of the Company or its assets, there can be no
assurance that the value of such intangible assets would be recovered.
IMPORTANCE OF CONTINUED DEVELOPMENT OF NEW SERVICES. The introduction of
competing services incorporating new technologies or the emergence of new
technical standards could render some or all of the Company's services
unmarketable. The Company believes that its future success depends on its
ability to enhance its current services and develop new services that address
the increasingly sophisticated needs of its customers. The failure of the
Company to develop and introduce enhancements and new services in a timely and
cost-effective manner in response to changing technologies or customer
requirements could have a material adverse effect on the Company's business,
financial condition or results of operations.
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 contracts, trade secrets
and confidentiality agreements 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 costs to, and diversion
of efforts by, the Company. There can be no assurance that the Company would
prevail in any such litigation. Any inability of the Company to protect its
proprietary rights could have a material adverse effect on the Company's
business, financial condition or results of operations.
10
<PAGE> 12
In addition, there can be no assurance that third parties will not assert
claims against the Company alleging that the Company's systems or services
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 generally does not have employment agreements
providing for a definite term of employment with its executive officers or key
employees and does not maintain key man life insurance covering any of its
executive officers or key employees. See "Management."
FLUCTUATIONS IN PAPER PRICES. The price of paper increased significantly
during 1995 and may increase in the future. The Company has not been able to
structure its pricing with all of its customers to reflect increases in paper
prices. There can be no assurance that the price of paper will not change in the
future. Any significant increase in the price of paper that cannot be passed on
to customers could have a material adverse effect on the Company's business,
financial condition or results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Inflation."
RISK OF INADEQUATE FINANCING FOR FUTURE ACQUISITIONS. The Company currently
finances acquisitions, and intends to finance future acquisitions, by using cash
from operations, by issuing shares of Common Stock and through borrowings under
the Company's 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. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."
YEAR 2000 COMPLIANCE. The Company uses a significant number of computer
software programs and operating systems in its internal operations. To the
extent that these software applications contain a source code that is unable to
interpret appropriately the upcoming calendar year 2000, some level of
modification or even possible replacement of such source code or applications
will be necessary. The Company is currently modifying, replacing and/or
upgrading its computer software programs and operating systems to make them
"Year 2000" compliant and intends to complete its "Year 2000" compliance program
in the second quarter of 1999. The Company anticipates that its expenditures for
"Year 2000" compliance will not be material. However, there can be no assurance
that the Company will not incur unanticipated costs or systems interruptions
which could have a material adverse effect on the Company's business, financial
condition or results of operations. In addition, there can be no assurance that
the failure by the Company's customers or suppliers to be "Year 2000" compliant
will not have a material adverse effect on the Company's business, financial
condition or results of operations.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Upon completion of
the Offering, the Company will have outstanding 14,955,849 shares of Common
Stock (15,360,849 shares if the Underwriters' over-allotment options are
exercised in full), of which the 3,500,000 shares sold in the Offering
(4,025,000 shares if the Underwriters' over-allotment options are exercised in
full) and the 7,918,400 shares sold in the Company's initial public offering
completed in October 1996 and the Company's secondary offering completed in
August 1997 and the approximately 290,000 shares exercised and sold pursuant to
employee stock options 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
11
<PAGE> 13
("Rule 144"). The remaining 3,247,449 shares (the "Restricted Shares") are
subject to certain restrictions described below. Holders of 2,118,935 of the
Restricted Shares will be eligible to sell a portion of such shares pursuant to
Rule 144, subject to the manner of sale, volume, notice and information
requirements of Rule 144. Notwithstanding the eligibility of certain shares to
be sold following the completion of the Offering, such shares are subject to
certain additional restrictions on transfer pursuant to certain agreements
described below. See "Shares Eligible for Future Sale."
The Company and its executive officers and directors and the Selling
Stockholders have agreed that they will not, directly or indirectly, offer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or any securities convertible into, or exercisable
or exchangeable for, Common Stock or other capital stock of the Company, or any
right to purchase or acquire Common Stock or other capital stock of the Company,
for a period of 90 days after the date of this Prospectus (the "Lock-Up
Period"), without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, except for bona fide gifts or
transfers effected by such stockholders other than on any securities exchange or
in the over-the-counter market to donees or transferees that agree to be bound
by such agreements (the "Lock-Up Agreements"). Prudential Securities
Incorporated may, in its sole discretion, at any time and without notice,
release all or any portion of the shares subject to such Lock-Up Agreements. See
"Shares Eligible for Future Sale" and "Underwriting."
The Company has filed a Form S-8 registration statement under the
Securities Act to register all shares of Common Stock issuable pursuant to the
Company's 1995 Stock Option Plan. The Company will file a Form S-8 Registration
Statement under the Securities Act to register all shares of Common Stock
issuable pursuant to the Company's 1998 Equity Participation Plan following
completion of the Offering. Shares covered by these registration statements are
or will be eligible for sale in the public markets, subject to the Lock-Up
Agreements. See "Management" and "Shares Eligible for Future Sale."
In connection with the formation of the Company, the Company, certain of
its stockholders, including Golder, Thoma, Cressey, Rauner Fund IV, L.P. ("GTCR
Fund IV") and certain members of the Company's management, entered into a
Registration Agreement dated as of January 17, 1995 (the "Registration
Agreement"). Upon the completion of the Offering, pursuant to the Registration
Agreement, such stockholders and their transferees, who will hold in the
aggregate 839,229 (724,979 if the Underwriters' over-allotment options are
exercised in full) 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 Lock-Up Period. The Company is not
obligated, however to effect a demand registration within six months after the
effective date of the Offering. 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 rights and the perception
that sales of Common Stock could occur thereunder could adversely effect the
prevailing market price of the Common Stock and could impair the Company's
future ability to raise capital through the sale of its equity securities. See
"Certain Relationships and Related Transactions -- Registration Agreement" and
"Shares Eligible for Future Sale."
The Company is unable to predict the effect, if any, that future sales of
shares, or the availability of 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 affect the market price of the Common Stock and could impair the
Company's future ability to obtain capital through offerings of equity
securities. See "Principal and Selling Stockholders," "Shares Eligible for
Future Sale" and "Underwriting."
Following the Offering the Company may issue Common Stock from time to time
in connection with (i) achievement of earn-out targets in certain prior
acquisitions and (ii) future acquisitions of stock or assets of other companies.
Securities issued in such transactions may be exempt from registration under the
Securities Act.
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER, BY-LAW AND STATUTORY
PROVISIONS. The Company's Amended and Restated Certificate of Incorporation and
By-Laws provide for a classified board of directors, restrict the
12
<PAGE> 14
ability of stockholders to call special meetings or take stockholder action by
written consent, contain advance notice requirements for stockholder proposals
and nominations and contain 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 is also subject to provisions of
the Delaware General Corporation Law that restrict the Company from engaging in
certain business combinations with a person who, together with affiliates and
associates, owns 15% or more of the Common Stock (an "Interested Stockholder")
for three years after the person becomes an Interested Stockholder, unless
certain conditions are met or the business combination is approved by the Board
and/or the Company's stockholders in a prescribed manner. These provisions also
could render more difficult or discourage a merger, tender offer or other
similar transaction. The Board has adopted 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" and "Principal and Selling Stockholders."
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 affected 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."
POSSIBLE VOLATILITY OF STOCK PRICE. The market price for the Company's
shares may fluctuate based on the Company's operating results or in response to
material announcements by the Company or significant customers or competitors of
the Company, changes in the economic or other conditions impacting the Company's
targeted customer segments or changes in general economic conditions. 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.
13
<PAGE> 15
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, a
Director of and consultant to the Company and then the Vice President of 3PM,
and Robert A. Yanover, a Director of the Company and the founder of 3PM. Annual
revenues at the time of the buyout were approximately $1.0 million, primarily
from small, direct mail projects.
Currently, the Company employs more than 3,900 people, has operations in 25
states and Mexico and provides services to over 3,500 customers at 55 Lason
multi-functional imaging centers and over 90 facility management sites located
on customers' premises. For the year ended December 31, 1997, and the six months
ended June 30, 1998, the Company had net revenues of $120.3 million and $109.2
million, respectively.
In January 1995, the founders recapitalized the Predecessor (the
"Recapitalization") by selling substantially all of its assets to Lason
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Lason, Inc., which was then named Lason Holdings, Inc. In August 1996, Lason
Holdings, Inc. changed its name to Lason, Inc. After the acquisition, Lason
Acquisition Corp. changed its name to Lason Systems, Inc. and continued the
business operation of the Predecessor. Shortly thereafter, the Company appointed
Gary L. Monroe, the former President of Kodak Imaging Services, Inc., a leading
international imaging business, as Chief Executive Officer of the Company. As
part of the Recapitalization, GTCR Fund IV became the majority stockholder of
the Company. Messrs. Yanover and Nesbitt retained a major stock ownership
interest in the Company and continue to be active on the Board of Directors. See
"Principal and Selling Stockholders" and "Management."
Lason, Inc. was incorporated in Delaware in January 1995. The Company's
principal executive office is located at 1305 Stephenson Highway, Troy, Michigan
48083, and its telephone number is (248) 597-5800. The Company's Internet
address is http://www.lason.com.
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<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,700,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$131.9 million ($151.8 million if the Underwriters' over-allotment option with
the Company is exercised in full) after deducting underwriting discounts and
commissions and estimated Offering expenses payable by the Company. The Company
will not receive any of the proceeds from the sale of shares of Common Stock
offered by the Selling Stockholders.
The Company intends to use a portion of the net proceeds to repay all of
its outstanding indebtedness under the Credit Agreement. As of August 11, 1998,
the balance outstanding under the Credit Agreement was approximately $147.9
million, which accrued interest at an annual weighted average interest rate of
7.0% at August 11, 1998. All advances under the Credit Agreement, together with
accrued and unpaid interest, are required to be repaid on June 29, 2003. The
amounts outstanding under the Credit Agreement were used primarily to finance
acquisitions. See "Business -- Acquisition Strategy" and "Management Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Credit Agreement." Any remaining net proceeds will be used
for general corporate purposes, including future acquisitions.
Pending application of the net proceeds as described above, the net
proceeds will be invested in short-term, interest bearing investment grade or
government securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock has been included for quotation in the Nasdaq
National Market under the symbol LSON since the Company's initial public
offering in October 1996. The following table sets forth for each period
indicated the high and low sales prices for the Common Stock as reported by the
Nasdaq National Market:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
FISCAL 1996:
Fourth Quarter (from October 9, 1996)..................... $24.125 $14.000
FISCAL 1997:
First Quarter............................................. $25.500 $17.750
Second Quarter............................................ 28.125 16.000
Third Quarter............................................. 29.375 23.375
Fourth Quarter............................................ 30.125 23.125
FISCAL 1998:................................................
First Quarter............................................. $38.750 $25.125
Second Quarter............................................ 54.500 35.500
Third Quarter (through August 14, 1998)................... 58.500 44.750
</TABLE>
On July 28, 1998, the last reported sales price of the Common Stock on the
Nasdaq National Market was $51.438 per share, and there were approximately 84
holders of record of the Common Stock.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the Common
Stock. The Company currently intends to retain any earnings to finance
operations and expansion and, therefore, does not anticipate declaring or 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 Company's Credit Agreement does not permit the
payment of dividends without the consent of the lenders.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1998: (i) on an actual basis; (ii) on a pro forma basis to give effect to
the Post June 1998 Acquisitions; and (iii) on such pro forma basis as adjusted
to give effect to the sale of the 2,700,000 shares of Common Stock offered by
the Company hereby and the application of the estimated net proceeds therefrom.
See "Use of Proceeds." This table should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Pro Forma Financial Information and Consolidated Financial
Statements appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1998
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
<S> <C> <C> <C>
Short-term debt............................................. $ -- $ 48 $ 48
======== ======== ========
Long-term debt, less current portion(1)..................... $ 96,400 145,097 13,216
Stockholder's 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; 12,118,514, 12,255,849 and 14,955,849
shares issued and outstanding, of which 403,519,
564,241 and 564,241 shares are held in escrow (Actual,
Pro Forma and As Adjusted, respectively)(2)............ 117 117 144
Additional paid-in capital.................................. 120,102 120,371 252,225
Retained earnings........................................... 21,384 21,384 21,384
-------- -------- --------
Total stockholders' equity................................ 141,603 141,872 273,753
-------- -------- --------
Total capitalization.............................. $238,003 $287,017 $287,017
======== ======== ========
</TABLE>
- -------------------------
(1) Includes borrowings under the Company's Credit Agreement, under which the
Company currently may borrow up to a maximum of $200 million.
(2) Excludes, as of July 29, 1998, an aggregate of 1,590,560 shares of Common
Stock reserved for issuance under the Company's stock incentive plans, of
which options for 1,363,028 shares are currently outstanding with a weighted
average exercise price of $27.40 per share. See "Management -- Stock Options
Plan."
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth the selected consolidated financial data of
the Company and the Predecessor. The selected consolidated financial data for
the Company as of December 31, 1996 and 1997 and for the years ended December
31, 1995, 1996 and 1997 are derived from the audited consolidated financial
statements included elsewhere in this Prospectus. The selected financial data
for the Company and the Predecessor as of December 31, 1993, 1994 and 1995 and
for the years ended December 31, 1993 and 1994 have been derived from the
audited financial statements of the Company and the Predecessor. The selected
consolidated financial data for the Company as of June 30, 1998 and for the six
months ended June 30, 1997 and 1998 have been derived from the unaudited
consolidated financial statements included elsewhere in this Prospectus. In the
opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary to fairly present the data for such periods are included.
Data for the six months ended June 30, 1998 are 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 other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------- --------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
HISTORICAL PRO FORMA
---------------------------------------------------- AS ADJUSTED
1993 1994 1995 1996 1997 1997(1)
---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues, net of
postage................. $ 31,151 $ 41,151 $ 46,605 $ 69,937 $120,337 $248,267
Cost of revenues.......... 20,684 27,238 31,227 47,587 80,846 167,725
-------- -------- -------- -------- -------- --------
Gross profit.............. 10,467 13,913 15,378 22,350 39,491 80,542
Selling, general and
administrative
expenses................ 6,980 8,377 9,406 12,699 21,364 49,975
Compensatory stock option
expense................. -- -- 308 936 221 221
Amortization of
intangibles............. 163 266 817 1,121 2,477 6,108
-------- -------- -------- -------- -------- --------
Income from operations.... 3,324 5,270 4,847 7,594 15,429 24,238
Net interest expense...... 105 164 1,694 1,760 1,249 621
-------- -------- -------- -------- -------- --------
Income before income
taxes................... 3,219 5,106 3,153 5,834 14,180 23,617
Provision for income
taxes(2)................ -- -- 1,139 2,103 5,110 9,451
-------- -------- -------- -------- -------- --------
Net income(2)............. $ 3,219 $ 5,106 $ 2,014 $ 3,731 $ 9,070 $ 14,166
======== ======== ======== ======== ======== ========
Earnings per share:
Basic(3)................ $ 0.35 $ 0.59 $ 0.93 $ 1.14
======== ======== ======== ========
Diluted(3).............. $ 0.33 $ 0.55 $ 0.90 $ 1.07
======== ======== ======== ========
Weighted average number of
common and common
equivalent shares
outstanding:
Basic................... 5,692 6,361 9,704 12,432
Diluted................. 6,192 6,764 10,035 13,256
<CAPTION>
COMPANY
---------------------------------
SIX MONTHS ENDED
JUNE 30,
---------------------------------
HISTORICAL PRO FORMA
------------------- AS ADJUSTED
1997 1998 1998(1)
---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues, net of
postage................. $ 53,658 $109,202 $157,696
Cost of revenues.......... 37,147 70,325 101,298
-------- -------- --------
Gross profit.............. 16,511 38,877 56,398
Selling, general and
administrative
expenses................ 8,493 22,536 34,507
Compensatory stock option
expense................. 109 138 138
Amortization of
intangibles............. 1,041 2,283 3,475
-------- -------- --------
Income from operations.... 6,868 13,920 18,278
Net interest expense...... 740 2,176 548
-------- -------- --------
Income before income
taxes................... 6,128 11,744 17,730
Provision for income
taxes(2)................ 2,250 4,438 7,158
-------- -------- --------
Net income(2)............. $ 3,878 $ 7,306 $ 10,572
======== ======== ========
Earnings per share:
Basic(3)................ $ 0.44 $ 0.63 $ 0.74
======== ======== ========
Diluted(3).............. $ 0.42 $ 0.59 $ 0.70
======== ======== ========
Weighted average number of
common and common
equivalent shares
outstanding:
Basic................... 8,782 11,630 14,333
Diluted................. 9,139 12,287 15,209
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- --------------------------------------------------------------------------
DECEMBER 31, JUNE 30, 1998
------------------------------------------------ ----------------------------------------
HISTORICAL
------------------------------------------------ PRO PRO FORMA
1993 1994 1995 1996 1997 ACTUAL FORMA(4) AS ADJUSTED(5)
---- ---- ---- ---- ---- ------ -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital............. $ 3,307 $ 3,218 $ 5,141 $16,653 $ 31,337 $ 55,178 $ 57,867 $ 57,867
Total assets................ 13,877 15,692 37,309 78,546 177,899 279,304 337,801 337,801
Long-term debt, less current
portion................... 320 261 18,777 4,101 13,550 96,400 145,097 13,216
Total stockholders'
equity.................... 6,567 6,623 9,214 57,006 131,545 141,603 141,872 273,753
</TABLE>
- -------------------------
(Footnotes on next page)
17
<PAGE> 19
(1) Gives effect to the 1998 Acquisitions, the sale of 2,700,000 shares of
Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom as if each had occurred as of January 1,
1997. See "Use of Proceeds" and Pro Forma Financial Information.
(2) From its inception to January 17, 1995, the Company was an S corporation
and, accordingly, was not subject to federal income taxes.
(3) Earnings per share are not presented for the Predecessor as such information
is not representative of the current capital structure of the Company.
(4) Gives effect to the Post June 1998 Acquisitions as if each had occurred as
of June 30, 1998. See Pro Forma Financial Information.
(5) Gives effect to the Post June 1998 Acquisitions, the sale of 2,700,000
shares of Common Stock offered by the Company hereby and the application of
the estimated net proceeds therefrom as if each had occurred as of June 30,
1998. See "Use of Proceeds" and Pro Forma Financial Information.
18
<PAGE> 20
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, the Pro Forma Financial
Information and the other related financial information included in this
Prospectus. The discussion in this section of the Prospectus contains
forward-looking statements that involve risks and uncertainties. When used in
this document, the words "anticipate," "believe," "estimate," and "expect" and
similar expressions generally are intended to identify forward-looking
statements. 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
Lason provides integrated information outsourcing for image and data
capture, data management and output processing services. 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
necessary to meet the growing and increasingly complex information management
requirements of its customers. The Company primarily serves customers in the
manufacturing, healthcare, financial services and professional services
industries. The Company's core competencies in input processing, data management
and output processing enable it to provide a broad range of services across a
wide range of media types and allow customers to fulfill their information
management outsourcing needs with a single vendor.
The Company's strategy has been to offer a wide range of services across a
broad geographic area to its customers and to use technologically advanced
solutions to expand its service offerings. The Company's net revenues have
increased from $31.2 million in 1993 to $120.3 million in 1997, representing a
CAGR of 40.2% over this five year period. The Company's diluted earnings per
share have increased from $0.33 in 1995 to $0.90 in 1997, representing a CAGR of
65.1% over this three year period. The Company's net revenues increased 103.5%
to $109.2 million for the six months ended June 30, 1998, as compared with the
six months ended June 30, 1997. The Company's diluted earnings per share have
increased 40.5% to $0.59 for the six month period ended June 30, 1998, as
compared to the same period in 1997.
The Company's revenues are generally recorded when services are provided.
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, costs of paper products and related supplies,
and building and equipment expenses. Selling, general and administrative
expenses include expenses incurred in connection with acquisitions, wages and
related benefits associated with the Company's executive and middle management,
marketing and selling activities (principally wages and related costs) and
financial and other administrative expenses.
19
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net revenues represented by certain items in the Company's Statements of
Income and Pro Forma Financial Information:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 SIX MONTHS ENDED JUNE 30,
-------------------------------------- ---------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
1995 1996 1997 1997(1) 1997 1998 1998(1)
---- ---- ---- ----------- ---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues, net of postage................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................ 67.0 68.0 67.2 67.6 69.2 64.4 64.2
----- ----- ----- ----- ----- ----- -----
Gross profit............................ 33.0 32.0 32.8 32.4 30.8 35.6 35.8
Selling, general and administrative
expenses.............................. 20.2 18.2 17.8 20.1 15.8 20.6 21.9
----- ----- ----- ----- ----- ----- -----
Compensatory stock option expense....... 0.7 1.3 0.2 0.1 0.2 0.1 0.1
Amortization of intangibles............. 1.8 1.6 2.1 2.4 2.0 2.1 2.2
----- ----- ----- ----- ----- ----- -----
Income from operations.................. 10.4 10.9 12.8 9.8 12.8 12.8 11.6
Net interest expense.................... 3.6 2.5 1.0 0.3 1.4 2.0 0.3
----- ----- ----- ----- ----- ----- -----
Income before income taxes.............. 6.8 8.3 11.8 9.5 11.4 10.8 11.3
Provision for income taxes.............. 2.4 3.0 3.8 3.8 4.2 4.1 4.6
----- ----- ----- ----- ----- ----- -----
Net income.............................. 4.3% 5.3% 7.5% 5.7% 7.2% 6.7% 6.7%
===== ===== ===== ===== ===== ===== =====
</TABLE>
- -------------------------
(1) Gives effect to the 1998 Acquisitions, the sale of 2,700,000 shares of
Common Stock offered by the Company hereby and the application of the
estimated net proceeds therefrom as if each had occurred as of January 1,
1997. See Pro Forma Financial Information.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
Net Revenues. Net revenues increased from $53.7 million in the six months
ended June 30, 1997 to $109.2 million in the comparable 1998 period, an increase
of $55.5 million or 103.5%. Of this increase, $47.7 million was due to
acquisitions and $7.8 million was due to growth in the Company's existing
business. The internal growth was primarily the result of a higher image and
data capture and data management revenue, partially offset by the effects of
certain discontinued services.
Gross Profit. Gross profit increased from $16.5 million in the six months
ended June 30, 1997 to $38.9 million in the comparable 1998 period, an increase
of $22.4 million or 135.5%. The increase was primarily due to an increase in net
revenues and the Company's product mix. Gross profit as a percentage of net
revenues increased from 30.8% for the six months ended June 30, 1997 to 35.6% in
the 1998 comparable period.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $8.5 million for the six months ended
June 30, 1997 to $22.5 million in the comparable 1998 period, an increase of
$14.0 million or 164.7%. As a percentage of the Company's net revenues, selling,
general and administrative expenses increased from 15.8% for the six months
ended June 30, 1997 to 20.6% in the comparable 1998 period. Approximately $9.1
million of the increase was due to selling, general and administrative expenses
of acquired companies. The remaining increase was primarily due to increased
compensation and other corporate overhead expenses associated with managing a
larger consolidated organization.
Amortization of Intangibles. Amortization of intangibles increased from
$1.0 million for the six months ended June 30, 1997 to $2.3 million in the
comparable 1998 period, an increase of $1.3 million or 119.3%. The increase was
primarily due to the increase in goodwill related to business acquisitions
completed during 1998.
Net Interest Expense. Net interest expense increased from $740,000 in the
six months ended June 30, 1997 to $2.2 million in the comparable 1998 period, an
increase of $1.4 million or 197.3%. The increase was
20
<PAGE> 22
primarily due to higher average borrowing balances resulting from borrowings
used to fund business acquisitions.
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
Net Revenues. From 1996 to 1997, net revenues increased from $69.9 million
to $120.3 million, an increase of $50.4 million or 72.1%. Of this increase,
$39.3 million was due to acquisitions and $11.1 million was due to growth in the
Company's existing businesses. The internal growth was primarily the result of
an $8.5 million increase in output processing revenues, a $2.0 million increase
in Visions computer output laser to disk (COLD) services and a $3.0 million
increase in Document Express print on demand services. Those increases were
partially offset by lower revenue related to the effects of certain discontinued
services.
Gross Profit. From 1996 to 1997, gross profit increased from $22.4 million
to $39.5 million, an increase of $17.1 million or 76.7%. The increase was
primarily due to an increase in net revenues and the Company's product mix.
Gross profit as a percentage of net consolidated revenues was 32.8% for the year
ended December 31, 1997 compared to 32.0% in 1996.
Selling, General and Administrative Expenses. From 1996 to 1997, selling,
general and administrative expenses increased from $12.7 million to $21.4
million, an increase of $8.6 million or 68.2%. Selling, general and
administrative expenses as a percentage of consolidated net revenues was 17.6%
in 1997 versus 17.7% in 1996. The increase was primarily due to expenses
incurred by acquired companies.
Compensatory Stock Option Expense. From 1996 to 1997, compensatory stock
option expense decreased from $936,000 to $221,000, a decrease of $715,000 or
76.4%. The provisions of certain stock option agreements included the immediate
vesting of those options on the effective date of the Company's initial public
offering. Accordingly, the Company recorded a non-cash expense of $653,000
during the fourth quarter of 1996 to record the compensation expenses associated
with the immediate vesting of those stock options.
Amortization of Intangibles. From 1996 to 1997, amortization of intangibles
increased from $1.1 million to $2.5 million, an increase of $1.4 million or
121.0%. The increase was primarily due to the increase in goodwill related to
business acquisitions.
Net Interest Expense. From 1996 to 1997, interest expense decreased from
$l.8 million to $1.2 million, a decrease of $0.6 million or 29.0%. The decrease
was primarily due to lower average borrowings in 1997 compared to 1996.
YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED DECEMBER 31, 1995
Net Revenues. From 1995 to 1996, net revenues increased from $46.6 million
to $69.9 million, an increase of $23.3 million or 50.0%. The $23.3 million
increase in net revenues included $14.8 million of net revenues related to
businesses acquired during 1996 and $8.5 million principally due to sales growth
in the Company's existing businesses. The breakdown of the $8.5 million in sales
growth from existing businesses and the percentage period over period growth
were as follows: business communications, $5.0 million (71.0%); digital imaging,
$2.2 million (53.0%) and collection letter processing, $1.3 million (24.0%).
Gross Profit. From 1995 to 1996, gross profit increased from $15.4 million
to $22.4 million, an increase of $7.0 million or 45.5%. The increase was
primarily due to an increase in net revenues, partially offset by lower gross
profit margins for businesses acquired in 1996. Gross profit as a percentage of
net revenues was 32.0% for the year ended December 31, 1996 versus 33.0% in
1995.
Selling, General and Administrative Expenses. From 1995 to 1996, selling,
general and administrative expenses increased from $9.4 million to $12.7
million, an increase of $3.2 million or 34.3%. Of this increase, $2.4 million
was attributable to businesses acquired during 1996, $400,000 was due to an
increase in administrative expenses primarily resulting from the hiring of
several key executives in late 1995 and in the first three quarters of 1996, and
$500,000 was due to an increase in advertising, sales commissions and other
selling expenses, related to the higher sales volumes. Selling, general and
administrative expenses as a
21
<PAGE> 23
percentage of net revenues was 18.1% in 1996 versus 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.
Compensatory Stock Option Expense. From 1995 to 1996, compensatory stock
option expense increased from $308,000 to $936,000, an increase of $628,000 or
203.8%. The provisions of certain stock option agreements included the immediate
vesting of those options on the effective date of the Company's initial public
offering of Common Stock. Accordingly, the Company recorded a non-cash expense
of $653,000 during the fourth quarter of 1996 to record the compensation
associated with the immediate vesting of those stock options.
Amortization of Intangibles. From 1995 to 1996, amortization of intangibles
increased from $817,000 to $1.1 million, an increase of $283,000 or 37.2%. The
increase was primarily due to amortization of goodwill recorded as a result of
businesses acquired during 1996.
SELECTED QUARTERLY INFORMATION
The following tables set forth certain unaudited quarterly financial data
of the Company for each of the ten quarters beginning January 1, 1996 and ended
June 30, 1998. The information for each of these quarters is prepared on the
same basis as the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus and include, in the opinion of management, all
adjustments (consisting of normal recurring adjustments) necessary to fairly
present the data for such periods. The information in the following tables is
not necessarily indicative of future results. See "Risk Factors -- Effect of
Potential Fluctuations in Quarterly Operating Results; Seasonality." The tables
should be read in conjunction with the Consolidated Financial Statements of the
Company and the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1996 1996 1996 1996 1997 1997 1997
-------- -------- --------- -------- -------- -------- ---------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues................. $13,005 $14,084 $20,659 $22,189 $26,236 $27,422 $30,608
Cost of revenues............. 8,659 9,037 14,754 15,137 18,147 19,000 20,238
Gross profit................. 4,346 5,047 5,905 7,052 8,089 8,422 10,370
Selling, general and
administrative expenses.... 2,514 2,777 3,500 3,908 4,349 4,144 5,748
Income from operations....... 1,576 1,986 1,919 2,113 3,206 3,662 3,900
<CAPTION>
QUARTER ENDED
------------------------------
DEC. 31, MAR. 31, JUNE 30,
1997 1998 1998
-------- -------- --------
(UNAUDITED, IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues................. $36,071 $46,566 $ 62,636
Cost of revenues............. 23,461 29,811 40,514
Gross profit................. 12,610 16,755 22,122
Selling, general and
administrative expenses.... 7,123 9,778 12,758
Income from operations....... 4,661 5,942 7,978
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1996 1996 1996 1996 1997 1997 1997 1997
-------- -------- --------- -------- -------- -------- --------- --------
(UNAUDITED)
<S> <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%
Cost of revenues.................. 66.6 64.2 71.4 68.2 69.2 69.3 66.1 65.0
Gross profit...................... 33.4 35.8 28.6 31.8 30.8 30.7 33.6 35.0
Selling, general and
administrative expenses......... 19.3 19.7 16.9 17.6 16.6 15.1 18.8 19.7
Income from operations............ 12.1 14.1 9.3 9.5 12.2 13.3 12.7 12.9
<CAPTION>
QUARTER ENDED
-------------------
MAR. 31, JUNE 30,
1998 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF INCOME DATA AS A
PERCENTAGE OF NET REVENUES:
Net revenues...................... 100.0% 100.0%
Cost of revenues.................. 64.0 64.7
Gross profit...................... 36.0 35.3
Selling, general and
administrative expenses......... 21.0 20.4
Income from operations............ 12.8 12.7
</TABLE>
The Company's results of operations 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 and the timing and magnitude of costs related to such acquisitions.
See "Risk Factors -- Effect of Potential Fluctuations in Quarterly Operating
Results; Seasonality" and "-- Fluctuations in Paper Prices."
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operations and acquisitions through a
combination of cash flow from operations, bank borrowings and the issuance of
shares of Common Stock.
22
<PAGE> 24
OPERATING ACTIVITIES
Cash provided by operating activities was $1.3 million for the year ended
December 31, 1995, compared to cash used in operating activities of $2.1 million
for the year ended December 31, 1996 and cash provided by operating activities
of $3.4 million in 1997. The increase in operating cash flows in 1997 versus
1996 was primarily the result of higher net income, an increase in net revenue
without a corresponding increase in accounts receivable, and an increase in
accrued expenses and other liabilities. The decrease in operating cash flows in
1996 versus 1995 was primarily due to lower accrued expenses and other
liabilities, which more than offset the increase in net income.
Cash used by operating activities totaled $4.5 million for the six months
ended June 30, 1998 compared to cash provided by operating activities of $1.2
million for the comparable period of 1997. The decrease in operating cash flows
in 1998 is primarily due to the effects of increased accounts receivable
balances, increased prepaid expenses, and lower customer deposits and other
current liabilities.
INVESTING ACTIVITIES
Cash flows used in investing activities totaled $1.8 million, $21.7
million, $68.3 million and $74.7 million for the years ended December 31, 1995,
1996, 1997 and the six months ended June 30, 1998, respectively. These cash
flows have been used primarily to fund the acquisition of businesses and to
invest in capital equipment. Cash used for acquisitions totaled $1.4 million,
$17.1 million, $57.3 million and $65.7 million for the years ended December 31,
1995, 1996, 1997 and the six months ended June 30, 1998, respectively. Cash used
for capital equipment and software development activities totaled $1.1 million,
$4.6 million, $11.8 million and $9.0 million for the years ended December 31,
1995, 1996, 1997 and the six months ended June 30, 1998. Investments in capital
equipment for 1997 included $3.5 million, for previously leased equipment. In
addition, investments in capital equipment and software development activities
for 1997 and the six months ended June 30, 1998 included $1.4 million and $1.3
million, respectively, for the development and implementation of computer
software primarily to support the Company's national information processing
needs. The Company expects that these projects and related costs will continue
as it pursues its acquisition strategy.
FINANCING ACTIVITIES
Cash provided by financing activities was $67.7 million in 1997 compared to
$23.8 million in 1996. In August 1997, the Company completed a secondary public
offering of 2,457,620 shares of Common Stock for net proceeds of $58.0 million,
after deducting underwriting discounts and other offering expenses. The net
proceeds were used to repay debt outstanding under the Company's Credit
Agreement and for general corporate purposes. In October 1996, the Company
completed an initial public offering of 3,450,000 shares of Common Stock for net
proceeds of $53.0 million, after deducting underwriting discounts and other
offering expenses. The net proceeds were primarily used to repay amounts then
outstanding under the Company's Credit Agreement and to redeem shares of Common
Stock held by the Company's largest shareholder. Cash flows provided by
financing activities totaled $76.9 million for the six months ended June 30,
1998 and largely consisted of borrowings under the Company's Credit Agreement.
During the first quarter of 1998, the Company repaid $6.2 million of short-term
promissory notes relating to certain business acquisitions the Company completed
in the fourth quarter of 1997.
CREDIT AGREEMENT
The Company's Credit Agreement provides for revolving credit loans up to a
maximum of $200 million. Borrowings are expected to be used to finance
additional acquisitions of businesses, working capital, capital expenditures and
for other corporate purposes. Borrowings under the Credit Agreement are
collateralized by substantially all of the Company's assets. The Company is not
required to make principal payments prior to 2003. Interest on amounts
outstanding is calculated based on interest rates determined at the time of
borrowing. Borrowings bear interest at either LIBOR plus an applicable margin
(6.94% as of August 12, 1998) or a base percentage rate plus an applicable
margin (8.50% as of August 12, 1998) at the Company's election at the time of
borrowing. The Credit Agreement contains restrictions on the acquisition of
stock or assets, dispositions of assets, incurrence of other liabilities,
minimum requirements for cash flow and certain
23
<PAGE> 25
financial ratios. As of August 11, 1998, $147.9 million was outstanding under
the Credit Agreement. See Pro Forma Financial Information and Note 4 to the
Notes to the Consolidated Financial Statements of the Company.
The Company will use a portion of the net proceeds of the Offering to repay
all of its outstanding indebtedness under the Credit Agreement.
RECENT ACQUISITIONS
The Company's liquidity and capital resources have been significantly
affected by acquisitions and, given the Company's acquisition strategy, may be
significantly affected by acquisitions for the foreseeable future. To capitalize
on the information management industry consolidation opportunity, the Company
has adopted a more active acquisition strategy. See "Summary -- Recent
Acquisitions" and "Business -- Acquisition Strategy." Since June 1995, the
Company has acquired 28 companies. The Company has to date financed its
acquisitions with borrowings under the Credit Agreement, with shares of its
Common Stock and with cash from operations. Borrowings for acquisitions during
1997 and the first six months of 1998 totaled $55.0 million and $65.7 million,
respectively. In addition, the Company borrowed $34.9 million in July 1998 to
fund the acquisition of Consolidated Reprographics.
FUTURE CAPITAL NEEDS
The Company's liquidity and capital resources have been significantly
affected by acquisitions of businesses and, given the Company's acquisition
strategy, may be significantly affected for the foreseeable future. To date, the
Company has financed its acquisitions with borrowings under its Credit
Agreement, shares of its Common Stock and cash from operations.
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 its existing and any future credit agreements and possible
issuance of shares of its Common Stock, will be sufficient to meet debt service
requirements, make possible future acquisitions and fund capital expenditures in
the future. 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.
YEAR 2000 COMPLIANCE
The Company uses a significant number of computer software programs and
operating systems in its internal operations. To the extent that these software
applications contain a source code that is unable to interpret appropriately the
upcoming calendar year 2000, some level of modification or even possible
replacement of such source code or applications will be necessary. The Company
is currently modifying, replacing and/or upgrading its computer software
programs and operating systems to make them "Year 2000" compliant and intends to
complete its "Year 2000" compliance program in the second quarter of 1999. The
Company anticipates that its expenditures for "Year 2000" compliance will not be
material. However, there can be no assurance that the Company will not incur
unanticipated costs or systems interruptions which could have a material adverse
effect on the Company's business, financial condition or results of operations.
In addition, there can be no assurance that the failure by the Company's
customers or suppliers to be "Year 2000" compliant will not have a material
adverse effect on the Company's business, financial condition or results of
operations.
INFLATION
Certain of the Company's expenses, such as wages and benefits, occupancy
costs and equipment repair and replacement, are subject to normal inflation.
Supplies, such as paper and related products, can be subject to significant
price fluctuations. The Company has not been able to structure its pricing with
all of its customers to reflect increases in paper prices. Although the Company
to date has been able to substantially offset any such cost increases through
increased operating efficiencies, there can be no assurance that the Company
will be able to offset any future cost increases through similar efficiencies or
increased charges for its products and services.
24
<PAGE> 26
BUSINESS
Lason provides integrated information outsourcing for image and data
capture, data management and output processing services. 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
necessary to meet the growing and increasingly complex information management
requirements of its customers. The Company primarily serves customers in the
manufacturing, healthcare, financial services and professional services
industries. The Company's core competencies in input processing, data management
and output processing enable it to provide a broad range of services across a
wide range of media types and allow customers to fulfill their information
management outsourcing needs with a single vendor. The Company's strategy has
been to offer a wide range of services across a broad geographic area to its
customers and to use technologically advanced solutions to expand its service
offerings. The Company's net revenues have increased from $31.2 million in 1993
to $120.3 million in 1997, representing a CAGR of 40.2% over this five year
period. The Company's diluted earnings per share have increased from $0.33 in
1995 to $0.90 in 1997, representing a CAGR of 65.1% over this three year period.
The Company's net revenues increased 103.5% to $109.2 million for the six months
ended June 30, 1998, as compared with the same period in 1997. The Company's
diluted earnings per share increased 40.5% to $0.59 for the six month period
ended June 30, 1998, as compared to the same period in 1997. Currently, the
Company employs more than 3,900 people, has operations in 25 states and Mexico
and provides services to over 3,500 customers at 55 Lason multi-functional
imaging centers and over 90 facility management sites located on customers'
premises.
The Company completed its initial public offering in October 1996 and a
secondary public offering in August 1997. Since its secondary public offering,
the Company has:
- Completed 13 acquisitions of information management companies which
had aggregate 1997 revenues of approximately $151.0 million;
- Achieved significant internal revenue growth, generating net
revenues in the six months ended June 30, 1998 that were
approximately 18% higher than those achieved in the six months ended
June 30, 1997, excluding the results of companies acquired after
June 30, 1997;
- Increased the geographic presence of its operations from 15 states
to 25 states and Mexico;
- Introduced Corporate ID, a proprietary Internet-based software
application that allows corporate customers to manage the
procurement of corporate identification materials, enhanced the
capabilities of Visions computer output to laser disk (COLD) and
continued expansion of its branding strategy by increasing its
emphasis on products such as Document Express (print on demand),
Priority Gram and PROXYGRAM; and
- Increased the availability under its Credit Agreement up to a
maximum of $200 million.
Lason's information management service offerings can be divided into the
areas of image and data capture, data management and output processing. The
Company's image and data capture services include the scanning and conversion of
documents from a variety of input media to a digital format. The Company also
provides traditional microfilm and microfiche services as well as on-site
facility management services. The Company's data management services include
electronic document storage and retrieval, database management and
Internet-based services, as well as list manipulation, sorting services and
information search solutions so that customers' data can be customized and
updated for specific target market mailings. The Company's Internet-based
services include its latest offering, Corporate ID, a proprietary software
application that allows corporate customers to manage the procurement of
corporate identification materials. The Company's output processing services
include print on demand, business communications and statement processing
services. The Company's newest output processing service offering, 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 provides customers
with rapid, reliable and cost-effective methods for making large-scale
distributions of statements, reports, proxy solicitations and letters to
consumers and other target audiences by fax, electronic distribution,
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print and mail. The Company also provides customized processing services for
over 500 collection agencies located throughout the United States.
MARKET AND INDUSTRY OVERVIEW
The Company believes the market for its services is growing due to a
variety of factors including: (i) continuing advancements in computer,
networking, facsimile, printing and other technologies which have greatly
facilitated the production and distribution of documents; (ii) government
regulations that require lengthy document retention periods and rapid
accessibility for many types of records; (iii) increased customer expectations
of low cost access to records on short notice at different locations; and (iv)
an increasingly litigious society, necessitating access to relevant documents
and records for extended periods. In addition, the Company's customer base of
manufacturers, 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 information 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.
Lason believes that companies will continue to increase their use of
outsourced information management services. To manage complex or large volumes
of documents efficiently, a customer would be required to make significant
investments in equipment, processes and technology which may only be fully
utilized occasionally. Through outsourcing, companies can avoid these
investments, as well as the risks of obsolescence that arise from rapid changes
in information management technology. As companies continue to focus on their
core competencies and maximize asset utilization, they are increasingly turning
to outside parties who have the technological expertise, service focus,
quick-turn capacity and full range of capabilities necessary to manage complex
or large volumes of documents efficiently. In addition, the Company believes
that customers will seek a single vendor capable of furnishing all or many of
their information management needs rather than relying on multiple vendors with
varying areas of expertise.
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 information management industry is highly fragmented, consisting of a
large number of small companies providing limited service offerings. The Company
believes that many of the small businesses with which it competes lack the
capital for expansion, cannot keep abreast of rapidly changing technologies,
lack the ability to manage large, complex projects, lack effective marketing
programs and are unable to meet the needs of large, geographically dispersed
customers. As a result of these barriers to continued growth, the Company
believes that many owners of such smaller firms will be receptive to being
acquired by the Company. 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 any
potential growth of the Company.
BUSINESS STRATEGY
The Company's goal is to become a national, single source provider of image
and data capture, data management and output processing services for customers
in its targeted industries. To achieve this goal, the Company will continue 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 information management services from
one source. The Company's broad range of services and its significant
investment in technology and capacity enable it to compete successfully for
large, complex projects on a national basis. The Company intends to focus
on obtaining additional business by offering its
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full service capabilities to firms now being serviced by several document
management service companies with a limited range of service offerings and
geographic presence thereby enabling customers to consolidate various
vendor relationships into a single relationship with the Company.
Facilitate the cross-selling of additional services to customers
through its comprehensive marketing program and develop national brand
recognition for the quality and scope of Lason's services. The Company has
leveraged its existing customer relationships to sell its customers the
full range of its information 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
information 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 making Lason more attractive as a
potential acquiror.
Make selective acquisitions to further broaden its geographic reach,
customer base, management expertise and technological capabilities and to
attain economies of scale in purchasing and facility utilization. The
Company's strategy is to continue to serve as a consolidator of the highly
fragmented information management services industry. In order to expand its
geographic presence across the United States, broaden its customer base and
attain economies of scale in purchasing and facility utilization, the
Company intends to acquire additional companies with attractive,
complementary customer bases or technologies. The Company seeks to increase
the utilization of its existing and acquired assets through the
cross-selling of additional services through acquired companies.
Continue to develop additional high value-added applications, such as
Document Express (print on demand), digital imaging services, Visions
computer output to laser disk (COLD) and Corporate ID, 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
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;
digital imaging services, which involve the conversion of paper or film
documents to digital information through optical scanners; Visions computer
output to laser disk (COLD), which writes computer output files to an
optical disk; and Corporate ID, which allows customers to order business
cards via the Internet. By developing these applications, the Company has
enabled its customers to capture, store and process information more
efficiently.
Continue to 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 information 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 technologies 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's acquisition strategy is to selectively make acquisitions of
companies that: (i) have proven operating track records and strong customer
franchises that could benefit from Lason's technology and broad product and
service offerings; (ii) have solid management teams that will join and remain
with Lason's management team after the acquisition; (iii) have an existing
presence in the Company's core
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competencies to build economies of scale through volume purchasing and facility
utilization; (iv) expand the Company's customer base and thereby increase its
cross-selling opportunities; and (v) broaden the Company's geographic reach.
Since June 1995, the Company has acquired 28 companies involved in records
management, duplication, conversion services, facilities management, item
processing and research, micrographics, litigation support document management
services, electronic sorting of mass mailings, proxy solicitations, and mail
creation and distribution. As a result, the Company believes it has developed a
formula for successfully integrating acquired companies into its financial,
purchasing and operating systems. The Company's long-term strategy is to
establish a network of regional hubs, each capable of providing the full range
of services now provided by the Company's Detroit-area facilities. To implement
this strategy, the Company expanded its efforts to target larger, regional
platform acquisitions in 1998, in addition to tuck-in acquisitions. The Company
believes that expanding its acquisition program to include larger regional
platform acquisitions enables the Company to broaden the range of services it
provides to its customers, expand into new geographic areas and increase its
customer base, cross-selling opportunities and operating leverage. The Company's
three recent platform acquisitions of Consolidated Reprographics, Racom and API
reflect the implementation of this long-term strategy.
Since its secondary public offering in August 1997, the Company has
completed the following principal acquisitions:
<TABLE>
<CAPTION>
DATE OF
COMPANY ACQUISITION SERVICE PROVIDED LOCATIONS
------- ----------- ---------------- ---------
<S> <C> <C> <C>
Consolidated Reprographics............. July 1998 Image and data capture AZ, CA, NV
Boyle Associates, Inc. ................ July 1998 Image and data capture MA, NH
Input Service International, Inc. ..... July 1998 Image and data capture and GA
data management
Document Production TX
Services, Inc. ........................ June 1998 Image and data capture
Litigation Reprographics and Support LA
Services, Inc. ........................ June 1998 Image and data capture
Strategy Manufacturing, Inc. .......... June 1998 Output processing CA
Quality Mailing Service, Inc. ......... May 1998 Data management and output MI
processing
API ................................... March 1998 Output processing NY
Racom.................................. March 1998 Image and data capture AZ, CO,
FL,
LA, NV,
NM,
OK, TX, UT
J.L. Blodgett Associates, Inc. ........ February 1998 Image and data capture Mexico, UT
Litigation Solutions, Inc. ............ December 1997 Image and data capture IL
VIP Imaging, Inc. ..................... November 1997 Output processing CA
Spectrum Document Services, Inc. ...... November 1997 Image and data capture OH
</TABLE>
PRODUCTS AND SERVICES
The Company's strategy is to offer a broad range of information management
services across a wide variety of media types and formats, thereby permitting
customers to consolidate their information management outsourcing needs with a
single vendor. This broad range of information management services and
capabilities enables the Company to provide integrated solutions to its
customers' complex information management needs. Although there is significant
overlap, the Company's service offerings generally can be divided into the areas
of image and data capture, data management and output processing services.
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IMAGE AND DATA CAPTURE
The Company provides a broad range of image and data capture services that
enable it to meet its customers' information management outsourcing needs,
including electronic conversion services, micrographic conversion services, high
volume and quick-turn reprographics, on-site facilities management and digital
graphics. 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, aperture card and hardcopy, including engineering drawings. Image and data
capture represented approximately 49.2%, 47.7%, 41.4%, and 48.2% of the
Company's consolidated net revenues for the years ended December 31, 1995, 1996,
1997 and the six months ended June 30, 1998, respectively.
Electronic Conversion Services. A company implementing a document storage
and retrieval ("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 OCR technology, into electronically recognizable text. The
Company'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 Conversion Services. The Company 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.
High Volume, Quick-Turn Reprographics. The Company through its imaging
centers provides high volume, quick-turn reprographics services 24 hours a day,
seven days a week. 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 as Document Express (print on demand)
services and performing overnight and peak demand reprographics services for the
Company's on-site facilities management customers.
On-Site Facilities Management. The Company can equip, staff and manage most
aspects of a customer's information management needs at a customer's facility.
In addition to copying and printing, Company 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 information
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. Currently, 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
over 90 facilities.
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
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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.
DATA MANAGEMENT
Data management services include electronic document storage and retrieval,
database management and web-based services. Data management services represented
approximately 6.2%, 9.9%, 11.8% and 15.5% of the Company's consolidated net
revenues for the years ended December 31, 1995, 1996 and 1997, and the six
months ended June 30, 1998, respectively.
Electronic Document Storage and Retrieval. The Company has developed a
flexible electronic DSR system, called Visions, that enables Lason's customers
to obtain the benefits of electronic document storage and retrieval without
developing and purchasing their own DSR system. By using Visions, customers can
access large volumes of documents immediately 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 Visions system enables it to
store and index a customer's digital documents whether the document was
converted to digital format from paper format or was originally produced in
digital format. 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 Visions to enable its employees to retrieve particular invoices from
the millions of invoices the customer has stored on the system. Traditionally,
such invoices were written to microfilm and stored in file cabinets. Without a
system such as Visions, accessing and retrieving such invoices was a time
consuming, manual operation. An additional key feature of Visions permits its
storage capacity to be incrementally increased through the addition of modular
storage units.
Database Management Services. The Company's sophisticated database
management systems support data manipulation, item sorting and information
search solutions so that various customers' lists can be customized and updated
for specific target markets and targeted mailings. These database capabilities
save customers money while increasing response rates. These services are
typically offered in conjunction with other services the Company provides.
Internet-Based Services. The Company's Corporate ID system allows customers
and their employees to utilize the Internet to manage and control the
procurement of corporate identification materials. Corporate ID provides fully
automated ordering, approval, tracking, manufacturing, fulfillment and reporting
to all of a customer's designated employees to ensure that all corporate
materials ordered conform to organizational guidelines.
OUTPUT PROCESSING
The Company offers a variety of output processing services to its customers
which enables them to cost-effectively produce and distribute large volumes of
customized documents on short notice. Output processing represented
approximately 44.6%, 42.4%, 46.8% and 36.3% of consolidated net revenues for the
years ended December 31, 1995, 1996 and 1997 and for the six months ended June
30, 1998, respectively.
Digital Communication Services. Lason's customers benefit from outsourcing
their high volume communications needs to the Company through improved
turn-around time, reduced production constraints and the flexibility and
benefits provided by using the latest software and mail handling processes.
- Priority Gram. The Company's Priority Gram is a nationally
recognized product which numerous large volume mailers have found to be an
effective mode of communication in a variety of applications. Among these
customers are firms involved in debt collection. The Company works with
leading software vendors to provide credit institutions with an effective
system of debt collection communications.
- PROXYGRAM. The Company's PROXYGRAM serves the time sensitive proxy
solicitation sector of the financial services market. PROXYGRAMs solicit,
collect, report and validate shareholders'
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<PAGE> 32
proxy votes while providing flexibility to shareholders and cost savings
and greater shareholder participation to customers. Outgoing messages to
shareholders contain instructions on how to vote shares by a toll-free
telephone call using a confidential identification number to assure
shareholder verification and validity.
- Fax, Electronic Distribution, Print and Mail. The Company's business
communication services provide customers with rapid, reliable and
cost-effective methods for making large-scale distributions of statements,
reports and letters to customers and other target audiences by fax,
electronic distribution, print and mail. The Company develops customized
programs for its customers to support event driven response requirements,
such as product recall and credit card solicitation campaigns. For example,
the Company currently provides declination letter and incomplete
application letter processing with respect to credit card applications for
a leading credit card company. Such letters can be generated on a daily
basis as the status of the customer's application file requires. By
combining volumes of 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. Each customer
enjoys the maximum postal discounts allowed for First Class Mail regardless
of the volume of mail sent by that customer. The Company can incorporate
these savings in quotes to customers on its services.
Print on Demand Solutions. The Document Express (print on demand) system
enables customers to cost-effectively produce and distribute large volumes of a
document on 24-hour 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 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 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 runs
the risk that it will find itself with a costly inventory of outdated and
useless documents. In addition, the flexibility of the Document Express system
provides customers with 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 shorter product life cycles and increased
product variation.
Customers frequently use the 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 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 robotics systems, uses the Document Express system to produce the
customized product manuals and technical documentation that accompany each of
its customized robotics applications.
INTEGRATED SOLUTIONS
The Company's wide range of image and data capture, data management and
output processing services and its experienced staff of image and information
management professionals enable the Company to provide integrated solutions to
customers' information management outsourcing needs. The following situations
represent instances in which the Company's various services have been provided
to its customers on an integrated basis.
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 lawsuit to request
documents gathered in support of the litigation by the other party. A large
manufacturer
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<PAGE> 33
involved in hundreds of product liability lawsuits 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 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 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 Document Express system not
only ensures that every page is properly printed, but also provides such
features as automatically printing identifying information (such as Bates
numbers) on each page, printing confidential watermarks and automatically
shrinking oversized documents to fit on standard-sized pages.
The Company has used both its electronic document conversion and high
volume, quick-turn 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 ten 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 hard copies 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 by using 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 over 3,500 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 largest customers
include Bank of Boston, Blue Cross/Blue Shield, Cummins Engine Company, Inc.,
First Chicago NBD Corporation, Ford Motor Company, General Electric Company,
General Motors Corporation, NationsBank, Sears Roebuck and Co., Shell Oil
Company and Trans Union.
Historically, a majority of the Company's revenues has been from the major
domestic automobile manufacturers. The three major domestic automobile
manufacturers accounted for 65.0%, 56.5%, 32.5% and 25.0% of the Company's
consolidated net revenues for the years ended December 31, 1995, 1996, 1997 and
for the six months ended June 30, 1998, respectively. Other than General Motors
Corporation and Ford Motor Company, which accounted for 16.8% and 13.9% of the
Company's consolidated net revenues, respectively, no customer accounted for
more than 10.0% of the Company's net revenues for the year ended December 31,
1997. For the six months ended June 30, 1998, on a pro forma basis after giving
effect to the 1998 Acquisitions, General Motors Corporation accounted for 6.4%,
Ford Motor Company accounted for 9.9%, and Chrysler Corporation accounted for
1.0% of the Company's net revenues. See "Risk Factors -- Reliance on Major
Customers; Risk of Customer Labor Interruptions."
SALES AND MARKETING
The Company's sales efforts are handled primarily through its in-house
direct sales staff of approximately 160 employees located in 25 states. In
addition to its direct sales force, the Company continues to build a team of
executive-level account managers who focus on large, national organizations
requiring a coordinated sales presence for multiple service offerings. The
Company's executive office includes marketing staff personnel who develop brand
awareness, provide collateral sales materials and assist in implementing
strategic marketing
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initiatives. The Company markets its products and services through marketing
relationships with value-added resellers, including Canon Inc., Minolta, Danka
Business Systems PLC and Eastman Kodak Company. The Company assists customers
through full-time customer service representatives. Sales representatives and
service representatives are assigned to each major customer project.
Historically, the Company's sales representatives have focused their
efforts on specific service offerings. The Company has maintained this
product-focused expertise, which it continues to augment through cross-sell
training and professional development programs. Additionally, the Company is
increasing its focus on solution selling for the entire range of its product and
service offerings in key vertical, or industry-specific, markets. The Company's
sales approach emphasizes application knowledge, solution selling,
cross-selling, relationship development and high levels of customer service. The
Company intends to maintain executive-level account managers to handle large
accounts requiring expertise and coordination across the Company's entire range
of product and service offerings and locations.
COMPETITION
The markets in which the Company's businesses compete are highly
competitive. A significant source of competition is the in-house document
handling capabilities of the Company's target customer base. There can be no
assurance that these businesses will outsource more of their image and data
capture, data management or output processing 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,
some of 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 IKON Office Solutions, Inc., Pitney Bowes
Management Services, Inc. (a subsidiary of Pitney Bowes Inc.) and Xerox Document
Services, a business group of Xerox Corporation, with respect to its image and
data capture services; DataPlex, Inc., F.Y.I. Incorporated, IKON Office
Solutions, Inc. and ImageMax, Inc. with respect to its data management services;
and Xerox Document Services, Diversified Data & Communications and Vestcom
International, Inc. with respect to its output processing 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.
The Company believes that the principal competitive factors in image and
data capture, data management and output processing services include quality,
accuracy, reliability and security of service, reputation, ease of use, customer
support and service, industry 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 contracts,
trade secrets and confidentiality agreements 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 does not believe that any of its systems or services infringe
on the proprietary rights of third parties. Any infringement claims, whether
with or without merit, can be time consuming and expensive to defend or may
require the Company to enter into royalty or licensing agreements or cease the
allegedly infringing activities. The failure to obtain such royalty agreements,
if required, and the Company's involvement in such litigation could have a
material adverse effect on the Company's business, financial condition and
results of operations.
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FACILITIES
The Company has 55 locations in 25 states and Mexico totaling in the
aggregate approximately 975,000 square feet. With the exception of one facility,
all of these facilities are leased by the Company.
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.
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 aware of any environmental conditions relating to
present or past waste generation at its 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 29, 1998, the Company had more than 3,900 employees. Included in
the total number of employees are approximately 350 part-time employees. 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> 36
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the Company's
directors and executive officers as of August 14, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gary L. Monroe............................ 44 Chairman of the Board, President and Chief
Executive Officer, Director
William J. Rauwerdink..................... 48 Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
Brian E. Jablonski........................ 42 Executive Vice President of Strategic
Marketing and Sales
John R. Messinger......................... 40 Executive Vice President and President of
the Imaging Services Group
Cary W. Newman............................ 37 Executive Vice President and President of
the Business Communications Group
Fariborz Ghadar........................... 51 Director
Donald M. Gleklen......................... 61 Director
Allen J. Nesbitt.......................... 51 Director
Joseph P. Nolan........................... 33 Director
Bruce V. Rauner........................... 42 Director
Robert A. Yanover......................... 62 Director
</TABLE>
Gary L. Monroe has served as Chairman of the Board of the Company since
April 1998, as President of the Company since April 1997, 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 is also a director of Esquire
Communication Ltd., a publicly traded company focused on the consolidation of
the court reporting industry.
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. Mr.
Rauwerdink is a certified public accountant. Mr. Rauwerdink is a director of
Mercy Health Services, Inc., a non-profit multistate health care services
organization. See "-- Certain Legal Proceedings."
Brian E. Jablonski has served as Executive Vice President of Strategic
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.
John R. Messinger has served as an officer of the Company since he joined
the Company in July 1997 and is currently an Executive Vice President and
President of the Company's Imaging Services Group. From November 1995 to July
1997, Mr. Messinger served as President and director of Image Conversion
Services, Inc. From 1983 to November 1995, Mr. Messinger served in various
positions with Anacomp Inc., including Group President, Regional Vice President
and District Manager.
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<PAGE> 37
Cary W. Newman has served as an officer of the Company since he joined the
Company in January 1996 and is currently an Executive Vice President and
President of the Business Communications Group. From April 1993 to January 1996,
Mr. Newman served as a Vice President and General Manager of National
Reproductions Corp.
Fariborz Ghadar has served as a Director of the Company since January 1997.
Dr. Ghadar has served as the Merrill Lynch William A. Schreyer Chair of Global
Management, Policies and Planning and Director of the Center for Global Business
Study at the Pennsylvania State University Smeal College of Business
Administration since August 1994. From September 1992 to June 1994, Dr. Ghadar
was Professor and Chairman of the International Business Department at the
George Washington School of Business and Public Management. Dr. Ghadar is also
Chairman of the Intrados/International Management Group, a Washington-based
business, offering executive development programs and strategic assessment
services.
Donald M. Gleklen has served as a Director of the Company since August
1995. Mr. Gleklen has served as Chairman and Chief Executive Officer of
Intelihealth, Inc., a provider of healthcare information to consumers, since
July 1996, as President of the Maine Merchant Bank since October 1997 and as
Vice Chairman of the Maine Merchant Bank since March 1998. He was President of
Jocard Financial Services, Inc. from February 1995 to December 1997. From March
1994 to February 1995, Mr. Gleklen served as the special counsel to Robert J.
Brobyn & Associates, Attorneys 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 Nutramax Products, Inc., NewWest Eyeworks, Inc. and Home
Health Corporation of America.
Allen J. Nesbitt has served as a Director of the Company and its
predecessor since its inception. Mr. Nesbitt served as President of the Company
from its inception until his retirement in April 1997. From 1977 to 1985, Mr.
Nesbitt served as Vice President of 3PM, Inc.
Joseph P. Nolan has served as a Director of the Company since July 1996.
Mr. Nolan is a principal of GTCR Golder Rauner, LLC and has been a principal of
Golder, Thoma, Cressey, Rauner, Inc. ("GTCR") since February 1994. GTCR is a
general partner of GTCR Fund IV. From May 1990 to January 1994, Mr. Nolan was
Vice President Corporate Finance at Dean Witter Reynolds Inc. Mr. Nolan is also
a director of Province Healthcare, Inc. and Esquire Communications Ltd.
Bruce V. Rauner has served as a Director of the Company since January 1995.
Mr. Rauner is a managing principal of GTCR Golder Rauner, LLC and has been a
principal of GTCR since 1981. Mr. Rauner is also a director of Coinmach Laundry
Corporation, Metamor Worldwide, Inc., Polymer Group, Inc., Province Healthcare,
Inc. and Esquire Communications Ltd.
Robert A. Yanover served as Chairman of the Board of the Company and its
predecessor, from the inception of the Company until April 1998. Mr. Yanover has
served as a director of the Company and its predecessor since its inception. Mr.
Yanover also serves as President of Computer Leasing Company of Michigan, Inc.
See "Certain Relationships and Related Transactions -- Certain Affiliate
Transactions." Mr. Yanover is the founder and former president of 3PM, Inc.
The Board currently consists of seven 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 are elected to serve for
three-year terms or until their successors are duly elected and qualified.
Messrs. Nolan, Nesbitt and Ghadar are members of the class whose term expires in
2001, Messrs. Yanover and Gleklen are members of the class whose term expires in
1999, and Messrs. Monroe and Rauner are members of the class whose term expires
in 2000. 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. There are three committees of the Board: the
Compensation Committee, the Option Committee and the Audit Committee. The
Compensation Committee, which is comprised of Messrs. Gleklen and Rauner,
determines the Company's executive compensation policies, including the
salaries, compensation and benefits of executive officers and employees of the
Company. The Option Committee, which is comprised of Messrs. Gleklen, Nolan and
Rauner, is responsible for administer-
36
<PAGE> 38
ing and granting options in accordance with the Company's 1995 Stock Option Plan
and 1998 Equity Participation Plan. The Audit Committee, which is comprised of
Messrs. Gleklen, Nolan and Yanover, among other duties, selects the Company's
independent accountants and is primarily responsible for approving the services
performed by the Company's independent accountants and for reviewing and
evaluating the Company's accounting policies and its system of internal
accounting controls.
EXECUTIVE COMPENSATION
The following table shows, as to the Chief Executive Officer and as to each
of the other two most highly compensated executive officers whose salary plus
bonus exceeded $100,000 during the last fiscal year, information concerning
compensation paid for services to the Company in all capacities during the last
three fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------------------------------
AWARDS PAYOUTS
----------------------- ----------------------
OTHER RESTRICTED SECURITIES ALL OTHER
NAME AND ANNUAL STOCK UNDERLYING LTIP COMPENSATION
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) COMPENSATION AWARD OPTIONS(#) PAYOUTS (3)
------------------ ---- --------- -------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gary L. Monroe................... 1997 $190,866 $21,875 -- -- -- -- $11,866
Chairman of the Board, 1996 175,000 65,945 -- -- 20,000 -- 3,243
President and Chief 1995 46,723 -- -- -- 170,452 -- 40,000
Executive Officer
William J. Rauwerdink............ 1997 $139,049 $16,875 -- -- -- -- $ 2,437
Executive Vice President, 1996 85,673 11,670 -- -- 70,000 -- 232
Chief Financial Officer, 1995 -- -- -- -- -- -- --
Treasurer and Secretary
Brian E. Jablonski............... 1997 $139,049 $16,875 -- -- -- -- $ 2,309
Executive Vice President of 1996 64,904 -- -- -- 75,000 -- 50,102
Strategic Marketing and Sales 1995 -- -- -- -- -- -- --
</TABLE>
- -------------------------
(1) Salary includes amounts deferred, if any, pursuant to the Company's 401(k)
plan.
(2) Includes bonus amounts earned in the prior fiscal year by the executive
officers.
(3) "All Other Compensation" for 1997 is comprised of: (i) contributions made by
the Company to the accounts of (or accrued by the Company on behalf) of each
of the named officers under the Company's 401(k) Plan as follows: Mr. Monroe
$3,166; Mr. Rauwerdink $2,118; and Mr. Jablonski $2,118; (ii) premiums paid
for excess life insurance as follows: Mr. Monroe $204; Mr. Rauwerdink $319;
and Mr. Jablonski $191.
OPTION GRANTS IN FISCAL YEAR 1997
There were no individual grants of stock options made during 1997 to any
executive officer named in the Summary Compensation Table.
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<PAGE> 39
AGGREGATE OPTION EXERCISES IN 1997 AND 1997 YEAR END OPTION VALUES
The following table sets forth, for each of the executive officers named in
the Summary Compensation Table above who hold options, certain information
regarding the exercise of stock options during the year ended December 31, 1997
and the value of options held at year end:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT YEAR-END YEAR-END(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gary L. Monroe................ 38,090 $912,014 136,362/16,000 $3,510,746/$158,000
William J. Rauwerdink......... -- -- 17,668/41,332 $373,223/$805,602
Brian E. Jablonski............ 4,800 $104,640 26,202/43,998 $573,085/$868,100
</TABLE>
- -------------------------
(1) Market value of underlying securities at exercise date or year end, as the
case may be, less the exercise price.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
Mr. Monroe. The Company and Mr. Monroe are parties to an employment
agreement which expires August 7, 1999 (the "Monroe Employment Agreement"). 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. In June 1997, Mr. Monroe's annual salary was
increased to $200,000. Commencing August 7, 1998, Mr. Monroe's annual salary was
increased to $220,000. 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 payable for the greater of one year or
the remaining term of the agreement.
Mr. Rauwerdink. On April 30, 1996, the Company made a written offer of
employment to Mr. Rauwerdink, which Mr. Rauwerdink accepted. Pursuant to the
offer, the Company 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 and agreed to
provide him severance payments equal to 90 days salary and bonus if the Company
were to terminate his employment without cause. In October 1997, Mr.
Rauwerdink's salary was increased to $148,500.
Mr. Jablonski. On June 12, 1996, the Company made a written offer of
employment to Mr. Jablonski, which Mr. Jablonski accepted. Pursuant to the
offer, the Company 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. In October 1997, Mr. Jablonski's salary was increased to
$148,500.
All Employee Stock Option Agreements that the Company has entered into with
each of Messrs. Monroe, Rauwerdink and Jablonski provide that all unvested stock
options granted to each such executive will vest and become exercisable upon
consummation of a sale of the Company if the executive is employed by the
Company on the date of such sale.
The Company entered into a Stock Option Agreement with Mr. Gleklen, a
director of the Company, on August 7, 1995 under which Mr. Gleklen was granted
an option to purchase 12,500 shares of the Company's Common Stock for a price of
$0.40 per share. One-fifth of the shares covered by the option vest and become
exercisable on each of the first five anniversaries of the grant date. The
Option expires on the earlier to occur
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<PAGE> 40
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 option agreement. Notwithstanding the foregoing, all shares
covered by the option agreement 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 expiration of his current
term as a director in 1999.
The Company entered into a Stock Option Agreement with Dr. Ghadar, a
director of the Company, on January 15, 1997, under which Dr. Ghadar was granted
an option to purchase 5,000 shares of the Company's Common Stock for a price of
$19.75 per share. One-fifth of the shares covered by the option vest and become
exercisable on each of the first five anniversaries of the grant date if Mr.
Ghadar is still a director of the Company on such dates. Notwithstanding the
foregoing, all unvested options granted to Dr. Ghadar vest and become
exercisable upon the consummation of a sale of the Company if Dr. Ghadar is
still a director of the Company on such date. The option expires on January 15,
2004.
STOCK OPTION PLANS
1995 Stock Option Plan. The Company's 1995 Stock Option Plan (the "1995
Stock Option Plan") was adopted by the Board and approved by the Company's
stockholders in 1995. The 1995 Stock Option Plan is administered by a committee
(the "Option Committee") composed of non-management members of the Board who are
appointed by the Board. The Option Committee currently consists of Messrs.
Gleklen, Nolan and Rauner. The Option Committee selects certain key persons,
which may include directors of the Company, to be participants of the Plan (the
"Participants") and determines the terms and conditions of the options. The 1995
Stock Option Plan provides for the issuance of options to Participants, covering
1,000,000 shares of Common Stock, subject to certain adjustments reflecting
changes in the Company's capitalization.
Options granted or to be granted under the 1995 Stock Option Plan may be
either incentive stock options ("ISOs") or such other forms of non-qualified
stock options 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 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. 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 may not amend the 1995 Stock Option Plan to cause any outstanding ISOs
to no longer qualify as ISOs. In addition, the Board may 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.
1998 Equity Participation Plan. The Company's 1998 Equity Participation
Plan (the "1998 Plan") was adopted by the Board and approved by the Company's
stockholders in 1998. The 1998 Plan provides for the issuance of options and
restricted stock to participants, covering 900,000 shares of Common Stock,
subject to certain adjustments reflecting changes in the Company's
capitalization. Officers, consultants and employees and non-employee directors
are eligible to participate in the 1998 Plan. The 1998 Plan is administered by
the Option Committee; provided that the Company's Board of Directors, acting by
a majority of its members in office, administers the 1998 Plan with respect to
awards of options or restricted stock granted to non-employee directors. The
maximum number of shares of Common Stock which may be subject to a stock option
and/or restricted stock award under the 1998 Plan to any individual in any
calendar year shall not exceed 250,000 shares of Common Stock.
Options granted or to be granted under the 1998 Plan may either be ISO's or
non-statutory stock options ("NSOs"). The Option Committee or the Board of
Directors, as applicable, will determine whether stock options are to be ISOs or
NSOs and whether such stock options are to qualify as performance-based
39
<PAGE> 41
compensation as described in Section 162(m)(4)(C) of the Code. The option
exercise price for each share covered by the option may be less than the fair
market value of a share of Common Stock on the date of grant; however, in the
case of ISOs or in the case of a grant to the Chief Executive Officer and the
four other highest compensated executive officers, the price shall be no less
than 100% of the fair market value of a share of Common Stock at the time such
option is granted. The term of an option shall be determined by the Option
Committee provided, however, that, in the case of the ISOs, the term will not be
more than 10 years from the date the ISO is granted. The period during which the
right to exercise an option in whole or in part vests will be set by the Option
Committee.
Restricted stock may be awarded to any participant whom the Option
Committee or the Board of Directors, as applicable, determines should receive
such an award. The Option Committee or the Board of Directors, as applicable,
may determine the purchase price, if any, and other terms and conditions
applicable to the restricted stock. The Option Committee or the Board of
Directors, as applicable, may impose such conditions on the issuance of the
restricted stock as deemed appropriate. The Option Committee will determine
whether such stock options are to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code. The shares of restricted stock
may be placed into escrow by the Option Committee or the Board of Directors, as
applicable, and held until all the restrictions imposed under the restricted
stock agreement have been satisfied or removed.
The Board and the Option Committee generally have the power and authority
to amend the 1998 Plan at any time without the approval of the Company's
stockholders, provided that, without the approval of the Company's stockholders,
the Board or the Option Committee may not amend the 1998 Plan to increase the
limits of the maximum number of shares to be awarded any individual or alter or
impair the rights or obligations under any award previously made. On May 29,
1998, the Option Committee awarded Messrs. Monroe, Rauwerdink, Jablonski,
Messinger and Newman options for 200,000, 100,000, 40,000, 70,000 and 40,000
shares of Common Stock at an exercise price of $40.50 per share.
401(K) PLAN
Lason sponsors a 401(k) profit-sharing plan and trust (the "401(k) Plan").
Each employee who is at least 21 years of age or older who has worked for the
Company for 12 months and performed 1,000 "Hours of Service" (as such term is
defined in the 401(k) Plan), or has an adjusted service date with the equivalent
or greater term of service, is eligible to participate in the 401(k) Plan.
Eligible participants may contribute not less than 2% and up to 15% of their
pretax compensation to the 401(k) Plan. The 401(k) Plan is contributory, and the
Company, at its discretion, can match up to 33% of eligible participant
contributions not to exceed 9% of the participant's earnings. The Company's
matching contributions for the years ended December 31, 1995, 1996 and 1997
totaled approximately $172,000, $201,000 and $337,000, respectively.
1997 MANAGEMENT BONUS PLAN
The Company established a Management Bonus Plan for the 1997 fiscal year
(the "1997 Bonus Plan"). Participants in the 1997 Bonus Plan were selected by
the Company's President and Chief Executive Officer. Each participant in the
1997 Bonus Plan was 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 was principally involved exceeded a predetermined
financial target with respect to a quarter. If 85% or more of the target was
obtained for a quarter, a pro rata portion of the bonus was payable, and if less
than 85% of the target was obtained, no bonus was payable with respect to that
quarter. Bonuses that were not obtained in any quarter were not carried over to
any subsequent quarter. For the year ended December 31, 1997, Messrs. Monroe,
Rauwerdink and Jablonski were awarded bonuses of $21,875, $16,875 and $16,875,
respectively. Bonuses aggregating $201,207 were awarded to all eligible
participants under the 1997 Bonus Plan.
DIRECTORS' COMPENSATION
Each director who is not an employee of the Company receives $1,000 for
attendance at each meeting of the Board and for each committee meeting attended
on a day other than a Board meeting. Directors are
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<PAGE> 42
reimbursed for out-of-pocket expenses incurred in connection with attending
meetings. Directors may also be awarded options pursuant to the 1995 Stock
Option Plan and the 1998 Equity Participation Plan. See "-- Stock Option
Plans -- 1995 Stock Option Plan" and "-- 1998 Equity Participation Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
For the year ended December 31, 1997, compensation of executive officers of
the Company was determined by the Board, which included Messrs. Monroe and
Yanover, who each abstained on voting with respect to compensation for himself.
The 1995 Stock Option Plan and the 1998 Equity Participation Plan are
administered by the Option Committee comprised of Messrs. Gleklen, Nolan and
Rauner.
CERTAIN LEGAL PROCEEDINGS
On December 11, 1995, Mr. Rauwerdink consented to the entry of an order
enjoining him from violating certain antifraud and tender offer provisions of
the federal securities laws. The order required him to give up profits and pay
penalties and interest totaling approximately $225,000. He neither admitted nor
denied the allegations made in the proceeding.
The proceeding involved the rollover of certain funds from a former
employer's profit sharing plan. The investment directions made in connection
with the rollover into Mr. Rauwerdink's 401(k) account at his new employer
specified that the investment of such funds be made 50% in the stock of his
employer and 50% in other investments (which was identical to the allocation he
made at the time he began his employment with respect to other investments in
his 401(k) account) and resulted in the purchase of shares of common stock of
the new employer at a time when it was alleged that the employer was engaged in
merger negotiations. The shares purchased in the rollover transaction
constituted approximately 8% of Mr. Rauwerdink's total holdings in his new
employer's common stock.
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<PAGE> 43
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 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 ( the "Recapitalization"). In connection with the
Recapitalization, the J. Yanover Trust, the R. Yanover Trust, and the Nesbitt
Trust (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 and the Nesbitt
Trust purchased 66,074, 402,987 and 469,064 shares, respectively, of the
Company's Class A-1 Common Stock for a price of $1.00 per share, and GTCR Fund
IV and the Company entered into a Purchase Agreement dated January 17, 1995 (the
"GTCR Purchase Agreement") pursuant to which GTCR Fund IV purchased 1,000,001
shares of the Company's Class B Common Stock for an aggregate purchase price of
$10.0 million.
SELLER CREDIT AGREEMENTS
In connection with the Recapitalization, Lason Systems entered into 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 and (ii)
Mr. Nesbitt and the Nesbitt Trust, pursuant to which Lason Systems loaned
$609,778 and $609,791 (each, a "Loan") to Messrs. Yanover and Nesbitt (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. Under the Seller Credit Agreements, each Borrower was 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 and
Nesbitt under their respective Seller Credit Agreements were secured by a pledge
of 469,061 and 469,064 shares of Class A-1 Common Stock owned by such Borrower
and its affiliates. Except for limited circumstances, Lason's sole recourse
against each Borrower for the amount of the Loan to such Borrower was to the
shares of Common Stock pledged with respect to such Seller Credit Agreement.
During the year ended December 31, 1996, the largest aggregate amount of
indebtedness outstanding of Messrs. Yanover and Nesbitt (including interest) to
the Company was $649,141 and $649,155, respectively. Of these respective
amounts, prior to the end of 1996, Messrs. Yanover and Nesbitt paid 50% to the
Company and the Company forgave the other 50%, so that no indebtedness of
Messrs. Yanover and Nesbitt was outstanding at December 31, 1996.
REGISTRATION AGREEMENT
In connection with the Recapitalization, the Company and the Designated
Stockholders, GTCR Fund IV, Mr. Yanover and Mr. Nesbitt (the "1995
Stockholders") entered into the Registration Agreement. Pursuant to the
Registration Agreement, the 1995 Stockholders and their transferees, who upon
the completion of the Offering will hold in the aggregate 3,161,562 shares of
Common Stock, are entitled to certain registration rights. The holders of at
least a majority of the shares of Common Stock held by the GTCR Fund IV (the
"GTCR Registrable Shares") and the holders of at least a majority of the shares
of Common Stock held 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, 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
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<PAGE> 44
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
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).
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 43.3% of
Mart and is its managing partner. Mr. Nesbitt owns 33.3% of Mart and is one of
its partners. For the years ended December 31, 1995, 1996 and 1997, the Company
paid $191,100, $191,100, $150,150, 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 50.0%
of Computer Leasing and serves as its president. For the years ended December
31, 1995, 1996 and 1997, the Company paid $57,100, $184,390 and $116,500,
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, 1995, 1996 and 1997, and for the six months ended June 30, 1998,
the Company paid Hatteras $980,500, $1,425,358, $1,700,000 and $1,352,135,
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 $75,200, $76,859, $48,960,
respectively, for the years ended December 31, 1995, 1996 and 1997. Such
services were sold at the Company's then current prices. Also effective December
1, 1997, the Company sold certain assets to Hatteras at their fair market value,
as determined by management, for $570,412, payable $350,000 at closing, with the
balance of $220,412 to be paid (together with interest at 8.0% per annum),
$125,000 on December 31, 1998 and $95,412 on December 31, 1999. The Company
purchased the assets in July 1996 for approximately $387,000.
The Company contracts temporary employment services from Unlimited Staffing
Solutions, Inc., a company which is owned by the wife of Mr. Newman. The Company
paid $2,905, $735,000 and $797,000 for the years ended December 31, 1995, 1996
and 1997, respectively, for such services.
Messrs. Monroe, Rauwerdink, Messinger, Newman and Jablonski, executive
officers of the Company, are indebted to the Company in principal amounts of
$650,000, $325,000, $227,500, $130,000 and $130,000, respectively, pursuant to
the terms of ten-year secured promissory notes dated June 5, 1998, which provide
for extensions of credit up to maximum principal amounts of $2,600,000,
$1,300,000, $910,000, $520,000 and $520,000, respectively. The notes provide
that funds may be advanced under the notes on the date of execution and on each
of the three anniversary dates thereafter and/or upon the occurrence of a
"change in control" of the Company, as defined in the Company's 1998 Equity
Participation Plan, which occurs prior to the fourth anniversary of the notes;
provided that the price per share of the Company's Common Stock at all such
times that credit is extended under the notes exceeds $27.50 per share. The
notes are secured by each executive officer's unexercised stock options granted
on May 29, 1998, and any of the Company's Common Stock acquired upon exercise of
such options; provided that some of such collateral may be released under
certain circumstances if the notes are adequately secured after such release of
collateral, and all of such collateral is to be released, in any event, upon the
fourth anniversary of each note if it is not in default and has not matured. All
advances under a note will be forgiven in the event of a change in control of
the Company; provided that the note is not in default and has not matured prior
to such change in control event. Interest accrues under
43
<PAGE> 45
each note at the applicable federal rate, as in effect on June 5, 1998, and as
it may change on each anniversary of the note.
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. Additional transactions of the nature described above may take place
in the ordinary course of business.
THE RECAPITALIZATION
Immediately prior to the Company's initial public offering of Common Stock
on October 9, 1996, 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,
was converted into one share of Common Stock, and each share of Class B Common
Stock, all of which was held by GTCR Fund IV, was converted into approximately
1.3 shares of Common Stock. Each share of Common Stock was then split into 2.5
shares of Common Stock. Concurrent with the consummation of its initial public
offering of Common Stock, the Company used a portion of the proceeds of such
offering to redeem 692,047 shares of Common Stock owned by GTCR Fund IV at an
aggregate price of approximately $11.8 million. GTCR Fund IV acquired its
interest in the Company in January 1995 for $10.0 million, or approximately
$3.13 per share of Common Stock.
44
<PAGE> 46
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of August 14, 1998 by (i) each person who is
known by the Company to own beneficially more than 5% of the outstanding Common
Stock, (ii) each current executive officer and director of the Company, (iii)
each of the Selling Stockholders, and (iv) all executive 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 shares of Common Stock shown as beneficially owned by it or him.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
THE OFFERING(1) THE OFFERING(1)
------------------- SHARES -------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
PRINCIPAL STOCKHOLDERS
GTCR Fund IV(2).................................. 766,959 6.3% 450,000 316,959 2.1%
Dresdner RCM Global Investors, LLC(3)............ 829,300 6.8 0 829,300 5.5
EXECUTIVE OFFICERS AND DIRECTORS
Gary L. Monroe(4)................................ 111,362 * 25,000 86,362 *
William J. Rauwerdink(4)......................... 33,337 * 0 33,337 *
John R. Messinger(4)............................. 30,659 * 0 30,659 *
Brian E. Jablonski(4)............................ 39,004 * 20,000 19,004 *
Cary W. Newman(4)................................ 37,000 * 10,000 27,000 *
Fariborz Ghadar(5)............................... 1,000 * 0 1,000 *
Donald M. Gleklen(6)............................. 12,500 * 0 12,500 *
Allen J. Nesbitt(7).............................. 351,790 2.9 100,000 251,790 1.7
Joseph P. Nolan(2)............................... 5,009 * 0 5,009 *
Bruce V. Rauner(2)............................... -- * 0 0 *
Robert A. Yanover(8)............................. 301,183 2.5 124,500 176,683 1.2
-------
EXECUTIVE OFFICERS AND DIRECTORS AS A GROUP
All Executive Officers and Directors as a group
(11 persons)(9)................................ 1,689,803 13.5 279,500 889,803 5.9%
-------
OTHER SELLING STOCKHOLDERS
The Joseph Jonathan Yanover and Jennifer D.
Yanover Irrevocable Trust dated January 5, 1993
(the "J and J Trust").......................... 164,297 1.3% 70,500 93,797 *
-------
800,000
=======
</TABLE>
- -------------------------
* Indicates less than 1%.
(1) The number of shares of Common Stock outstanding before the Offering is
12,255,849, and the number of shares of Common Stock outstanding after the
Offering is 14,955,849 (15,360,849 if the Underwriters' over-allotment
options are exercised in full). Shares of Common Stock subject to options
that are exercisable within 60 days after the date of the Offering are
deemed beneficially owned by the person holding such options for the purpose
of computing the percentage ownership of such person but are not treated as
outstanding for the purpose of computing the percentage of any other person.
If the Underwriters' over-allotment options are exercised in full, GTCR Fund
IV, Mr. Monroe, Mr. Jablonski, Mr. Newman, Mr. Nesbitt, Mr. Yanover and the
J and J Trust, have agreed to sell up to 109,250, 3,750, 2,000, 0, 0, 5,000
and 0 shares of Common Stock, respectively.
(2) Includes 766,959 shares of Common Stock held by GTCR Fund IV, of which GTCR
IV, L.P. is the general partner. Each of Messrs. Rauner and Nolan is a
principal of Golder, Thoma, Cressey, Rauner, Inc., the general partner of
GTCR IV, L.P., and therefore may be deemed to share investment and voting
control over the shares of Common Stock held by GTCR Fund IV. Each of
Messrs. Rauner and Nolan disclaims beneficial ownership of the shares of
Common Stock owned by GTCR Fund IV. The address of each of these holders is
6100 Sears Tower, Chicago, Illinois 60606.
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<PAGE> 47
(3) RCM Limited, L.P., a California limited partnership, is the Managing Agent
of Dresdner RCM Global Investors LLC ("Dresdner RCM"). RCM General
Corporation, a California corporation is the General Partner of RCM Limited
L.P. The address of Dresdner RCM is Four Embarcadero Center, San Francisco,
California 94111. Dresdner Bank AG, an international banking organization
headquartered in Frankfurt, Germany, is the parent of its wholly-owned
subsidiary, Dresdner RCM. The address of Dresdner Bank is Jurgen-Ponto-Platz
1, 60301 Frankfurt, Germany.
(4) Includes 111,362, 23,337, 3,000, 39,004, and 32,000 shares of Messrs.
Monroe, Rauwerdink, Messinger, Jablonski and Newman, respectively, issuable
upon exercise of options. The address of Messrs. Monroe, Rauwerdink,
Messinger, Jablonski and Newman is 1305 Stephenson Highway, Troy, Michigan
48083.
(5) Includes 1,000 shares of Common Stock issuable upon the exercise of options.
The address of this holder is 555 Orlando Avenue, State College,
Pennsylvania 16803.
(6) Includes 7,500 shares of Common Stock issuable upon the exercise of options.
The address of this director is 212 Jeffrey Lane, Newtown Square,
Pennsylvania 19073.
(7) Includes 351,790 shares of Common Stock held by the Allen J. Nesbitt Living
Trust dated December 7, 1994. The address of this holder is 48847
Meadowcourt, Plymouth, Michigan 48170.
(8) Includes 301,183 shares of Common Stock held by Yanover Associates Limited
Partnership. The address of this holder is 133 Quayside Drive, Jupiter,
Florida 33477.
(9) Includes the shares of Common Stock described in footnotes (2), (4), (5),
(6), (7) and (8) above.
46
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
GENERAL MATTERS
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, and 5,000,000 shares of preferred stock, par value $0.01 per
share (the "Preferred Stock"). As of July 28, 1998, there were 12,255,849 shares
of Common Stock outstanding and 84 holders of record. No shares of Preferred
Stock are outstanding. 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
and by the provisions of applicable law.
COMMON STOCK
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." The shares of Common Stock are not redeemable or convertible, and the
holders thereof will have no preemptive rights 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. The Common Stock is currently included for quotation in the Nasdaq
National Market under the trading symbol "LSON."
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, financing 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 provides that the
Board will be divided into three classes, with each class, after a transitional
period, serving for three years, and one class being elected each year. A
majority of the remaining directors then in office, though less than a quorum,
or the sole remaining director, will be empowered to fill any vacancy on the
Board which arises during the term of a director or as a result of a newly
created directorship. The provision for a classified Board may be amended,
altered or repealed only upon the affirmative vote of the holders of at least
80% of the outstanding shares of the voting stock of the Company. The
classification of the Board may discourage a third party from making a tender
offer or otherwise attempting to gain control of the Company and may have the
effect of maintaining the incumbency of the Board.
The Amended and Restated Certificate of Incorporation requires 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
47
<PAGE> 49
Certificate of Incorporation and Bylaws require that special meetings of the
stockholders of the Company be called only by the affirmative vote of at least
two members of the Board or by certain officers. These provisions may not be
amended, altered or repealed without the affirmative vote of at least 80% of the
outstanding shares of the voting stock of the Company.
The Bylaws 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 120 days nor more than 150 days prior to the first
anniversary of the annual meeting for the preceding year. The Bylaws also
specify certain requirements for a stockholder's notice to be in proper written
form. These provisions restrict the ability of stockholders to bring matters
before the stockholders or to make nominations for directors at meetings of
stockholders. These provisions may not be amended, altered or repealed by the
stockholders without the affirmative vote of at least 80% of the outstanding
shares of the voting stock of the Company.
The Company is 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.
For purposes of the Delaware General Corporation Law, 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 -- Anti-Takeover Effect of
Certain Charter, By-Law and Statutory Provisions."
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Amended and Restated Certificate of Incorporation limits the liability
of directors to the fullest extent permitted by the Delaware General Corporation
Law. This provision may not be amended, altered or repealed without the
affirmative vote of at least 80% of the outstanding shares of the voting stock
of the Company. In addition, the By-Laws provide that the Company shall
indemnify directors and officers of the Company to the fullest extent permitted
by such law. This provision may not be amended, altered or repealed by the
stockholders without the affirmative vote of at least 80% of the outstanding
shares of the voting stock of the Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is The First Chicago
Trust Company.
48
<PAGE> 50
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have 14,955,849 shares of
Common Stock outstanding. Of these shares, the 3,500,000 shares offered hereby
(4,025,000 if the Underwriters' over-allotment options are exercised in full),
the 7,918,400 shares sold in the Company's initial public offering and its
secondary public offering in August 1997 and the approximately 290,000 shares
exercised and sold pursuant to employee stock options, will be freely tradeable
without restriction or further registration under the Securities Act unless
purchased by "affiliates" of the Company as that term is defined in Rule 144
under the Securities Act. The remaining 3,247,449 shares outstanding are
Restricted Shares, as follows: (i) 798,100 shares held by "affiliates" whom have
already held their shares for more than one year; (ii) 1,320,835 shares held by
non-affiliates whom have already held their shares for more than one year; and
(iii) 1,128,514 shares held by non-affiliates who have not held their shares for
more than one year. In addition, 1,590,560 shares of Common Stock are reserved
under the Company's 1995 Stock Option Plan and 1998 Equity Participation Plan
for the exercise of stock options granted by the Company, of which options to
purchase approximately 1,363,028 shares have been granted under such plans.
The Restricted Shares may not be sold unless they are registered under the
Securities Act or are sold pursuant to an exemption from registration, such as
the exemption provided by Rule 144. Rule 144 imposes certain restrictions and
limitations on resale. In general, under Rule 144 as currently in effect, any
affiliate of the Company or any person (or persons whose shares are aggregated
in accordance with the Rule), who has beneficially owned Restricted Shares for
at least one year would be entitled to sell, within any three-month period, a
number of such shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 149,558 shares after the
Offering), or the reported average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Shares under Rule 144 are
also subject to certain manner of sale restrictions and notice requirements and
to the availability of current public information concerning the Company. A
person (or persons whose shares are aggregated) who is not an "affiliate" of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned such shares for at least two years, is currently entitled to
sell such shares under Rule 144(k) without regard to the availability of current
public information, volume limitations, manner of sales provisions or notice
requirements. 798,100 Restricted Shares held by affiliates are eligible for sale
in the public market pursuant to Rule 144, but are subject to the "Lock-Up"
Agreements. Currently 2,118,935 Restricted Shares may be sold pursuant to Rule
144.
The Company, its executive officers and directors and the Selling
Stockholders have agreed that they will not, directly or indirectly, officer,
sell, offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale, contract
of sale, pledge, grant of any option to purchase or other sale or disposition)
of any shares of Common Stock or any other securities convertible into, or
exercisable or exchangeable for, Common Stock or other capital stock of the
Company or any right to purchase or acquire Common Stock or other capital stock
of the Company, for a period of 90 days after the date of this Prospectus,
without the prior written consent of Prudential Securities Incorporated, on
behalf of the Underwriters, except for bona fide gifts or transfers effected by
such stockholders other than on any securities exchange or in the
over-the-counter market to donees or transferees that agree to be bound by such
agreements. Prudential Securities Incorporated may, in its sole discretion, at
any time and without notice, release all or any portion of the shares subject to
such Lock-Up Agreements.
Sales of substantial amounts of Common Stock, or the perception that such
sale could occur, could adversely affect market prices for the Common Stock and
could impair the Company's future ability to obtain capital through offerings of
equity securities.
In connection with the Recapitalization, the Company and the 1995
Stockholders entered into the Registration Agreement. Upon the completion of the
Offering, pursuant to the Registration Agreement, the 1995 Stockholders and
their transferees, who will hold in the aggregate 839,229 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 period
ending 90 days after the date of this Prospectus. Such rights could be used to
force the Company to file a registration statement with respect to the Common
Stock owned
49
<PAGE> 51
by such persons. The existence of the Registration Agreement and the perception
that sales of Common Stock could occur thereunder could adversely affect the
market price of the Common Stock and could impair the Company's ability to raise
capital through the sale of equity securities. See "Recent Acquisitions" and
"Certain Relationships and Related Transactions -- Registration Agreement."
50
<PAGE> 52
UNDERWRITING
The underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated, BancAmerica Robertson Stephens, William Blair &
Company, L.L.C., Jefferies & Company, Inc., PaineWebber Incorporated and The
Robinson-Humphrey Company, LLC are acting as representatives (the
"Representatives"), have severally agreed, subject to the terms and conditions
contained in the Underwriting Agreement, to purchase from the Company and the
Selling Stockholders the number of shares of Common Stock set forth below
opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated..........................
BancAmerica Robertson Stephens..............................
William Blair & Company, L.L.C. ............................
Jefferies & Company, Inc. ..................................
PaineWebber Incorporated ...................................
The Robinson-Humphrey Company, LLC..........................
---------
Total....................................................... 3,500,000
=========
</TABLE>
The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all the shares of Common Stock offered
hereby if any are purchased.
The Underwriters, through their Representatives, have advised the Company
and the Selling Stockholders that they propose to offer the Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of $ per
share to certain other dealers. After the Offering, the public offering price
and the concessions may be changed by the Representatives.
The Company and certain of the Selling Stockholders have granted the
Underwriters options, exercisable for 30 days from the date of this Prospectus,
to purchase up to 525,000 additional shares of Common Stock at the public
offering price, less underwriting discounts and commissions, as set forth on the
cover page of this Prospectus. The Underwriters may exercise such options solely
for the purpose of covering over-allotments incurred in the sale of the shares
of Common Stock offered hereby. To the extent such options are exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to 3,500,000.
The Company, its executive officers and directors and the Selling
Stockholders have agreed not to, directly or indirectly, offer, sell, offer to
sell, contact to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of any option to purchase or other sale or disposition) of any shares of
Common Stock or other capital stock or any securities convertible into, or
exercisable or exchangeable for, Common Stock or other capital stock of the
Company or any right to purchase or acquire Common Stock or other capital stock
of the Company, for a period of 90 days after the date of this Prospectus
without the prior written consent of Prudential Securities Incorporated, on
behalf of the Underwriters, other than pursuant to the exercise of currently
outstanding stock options and except for bona fide gifts or transfers effected
by such stockholders other than on any securities exchange or in the
over-the-counter market to donees or transferees that agree to be bound by such
agreements. Prudential Securities Incorporated may, in its sole discretion, at
any time and without notice, release all or any portion of the shares subject to
such agreements.
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<PAGE> 53
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.
In connection with this Offering, certain Underwriters (and selling group
members, if any) or their respective affiliates who are qualified market makers
on the Nasdaq National Market may engage in passive market making transactions
in the Common Stock of the Company on the Nasdaq National Market in accordance
with Rule 103 of Regulation M under the Exchange Act during the business day
prior to the pricing of the Offering before the commencement of offers and sales
of Common Stock. Passive market makers must comply with applicable volume and
price limitations and must be identified as such. In general, a passive market
maker must display its bid at a price not in excess of the highest independent
bid for such security; if all independent bids are lowered below the passive
market maker's bid, however, such bid must then be lowered when certain purchase
limits are exceeded.
In connection with the Offering, certain Underwriters (and selling group
members, if any) and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with the Offering than
they are committed to purchase from the Company and the Selling Stockholders,
and in such case may purchase Common Stock in the open market following
completion of the Offering to cover all or a portion of such short position. The
Underwriters may also cover all or a portion of such short position, up to
525,000 shares of Common Stock, by exercising the Underwriters' over-allotment
options referred to previously. In addition, Prudential Securities Incorporated,
on behalf of the Underwriters, may impose "penalty bids" under contractual
arrangements with the Underwriters whereby it may reclaim from an Underwriter
(or any dealer participating in the Offering) for the account of the other
Underwriters, the selling concession with respect to Common Stock that is
distributed in the Offering but subsequently purchased for the account of the
Underwriters in the open market. Any of the transactions described in this
paragraph may result in the maintenance of the price of the Common Stock at a
level above that which might otherwise prevail in the open market. None of the
transactions described in this paragraph are required and, if they are
undertaken, then they may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of Common
Stock offered by the Company and the Selling Stockholders will be passed upon by
Seyburn, Kahn, Ginn, Bess, Deitch and Serlin, P.C., Southfield, Michigan.
Laurence B. Deitch, a shareholder of Seyburn, Kahn, Ginn, Bess, Deitch and
Serlin, P.C., owns 1,000 shares of the Company's Common Stock. Certain legal
matters will be passed on for the Underwriters by King & Spalding, Atlanta,
Georgia.
EXPERTS
The consolidated balance sheets as of December 31, 1997 and 1996 and the
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997 of the Company
appearing in this Prospectus and Registration Statement have been audited by
PricewaterhouseCoopers LLP, independent accountants, as set forth in their
report appearing elsewhere herein and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing. The
financial statements of Consolidated Reprographics for the fiscal year ended
August 31, 1997 appearing in this Prospectus and Registration Statement have
been audited by PricewaterhouseCoopers LLP, independent accountants, as set
forth in their report appearing elsewhere herein and are included in reliance
upon such report given upon the authority of such firm as experts in accounting
and auditing.
52
<PAGE> 54
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, files reports, proxy statements and other
information with the Commission.
The Company has filed with the Commission a Registration Statement of Form
S-1 (herein, together with all amendments, exhibits and schedules, referred to
as the "Registration Statement"), under the Securities Act, with respect to the
Common Stock offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement for further information with respect to the Company and
the Common Stock offered hereby. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and in each such
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement. Each such statement is qualified in its entirety by
such reference.
Reports and other information filed by the Company with the Commission and
copies of the Registration Statement can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and are also available for inspection and
copying at the following regional offices of the Commission: 7 World Trade
Center, Suite 1300, New York, New York 10048; and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material also may be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates,
and through the Commission's Internet address at "http://www.sec.gov."
53
<PAGE> 55
INDEX TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION, FINANCIAL STATEMENTS
AND CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LASON, INC. UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
Unaudited Pro Forma Condensed Consolidated Financial
Information............................................ F-2
Unaudited Pro Forma Condensed Consolidated Balance Sheets
as of June 30, 1998.................................... F-3
Unaudited Pro Forma Condensed Consolidated Statements of
Income for the Six Months ended June 30, 1998.......... F-4
Unaudited Pro Forma Condensed Consolidated Statements of
Income for the Year ended December 31, 1997............ F-5
Notes to Unaudited Pro Forma Condensed Consolidated
Financial Information.................................. F-6
LASON, INC.
Report of Independent Accountants......................... F-9
Consolidated Balance Sheets as of December 31, 1996 and
1997
and June 30, 1998 (Unaudited).......................... F-10
Consolidated Statements of Income for the years ended
December 31, 1995, 1996 and 1997 and for the six months
ended June 30, 1997 and 1998 (Unaudited)............... F-11
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1996 and 1997 and for
the six months ended June 30, 1998 (Unaudited)......... F-12
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997 and for the six months
ended June 30, 1997 and 1998 (Unaudited)............... F-13
Notes to Consolidated Financial Statements................ F-14
CONSOLIDATED REPROGRAPHICS
Report of Independent Accountants......................... F-24
Balance Sheets as of August 31, 1997 and May 31, 1998
(Unaudited)............................................ F-25
Statement of Operations for the year ended August 31, 1997
and for the nine months ended May 31, 1997 and 1998
(Unaudited)............................................ F-26
Statement of Shareholders' Equity for the year ended
August 31, 1997 and for the nine months ended May 31,
1998 (Unaudited)....................................... F-27
Statements of Cash Flows for the year ended August 31,
1997 and for the nine months ended May 31, 1997 and
1998 (Unaudited)....................................... F-28
Notes to Financial Statements............................. F-30
</TABLE>
F-1
<PAGE> 56
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,
Inc. (the "Company") as of June 30, 1998 and the balance sheet as of May 31,
1998 of Consolidated Reprographics and gives effect to (i) such acquisition, and
(ii) the application of the net proceeds from the sale of 2,700,000 shares of
common stock offered by the Company hereby (the "Offering") at an assumed
offering price per share of $51.438 (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,
1998. The following unaudited pro forma condensed consolidated statements of
income for the six months ended June 30, 1998 and for the year ended December
31, 1997 give effect to each of the above transactions and to the 1998
Acquisitions (See "Notes to the Unaudited Pro Forma Condensed Consolidated
Financial Information") as if each had occurred as of January 1, 1997. 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 of Lason and the Notes thereto and the
financial statements of Consolidated Reprographics 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, 1997 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> 57
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO FORMA ADJUSTMENTS
CONSOLIDATED OTHER FOR AS ADJUSTED FOR THE
LASON REPROGRAPHICS(1) ACQUISITIONS ACQUISITIONS FOR ACQUISITIONS OFFERING
----- ---------------- ------------ ------------ ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets.................. $ 85,894 $ 6,540 $3,182 $ 1,295C $ 96,911 $
Property and equipment, net..... 37,189 4,171 1,374 42,734
Intangible assets, net.......... 156,221 353 -- 40,944A 197,518
Other assets.................... -- 283 355 638
-------- ------- ------ ------- -------- ----------
Total assets.............. $279,304 $11,347 $4,911 $42,239 $337,801 $ --
======== ======= ====== ======= ======== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current portion, long-term
debt.......................... $ -- $ 1,443 $1,460 $(2,855)A $ 48
Other current liabilities....... 30,716 3,567 2,207 2,506A 38,996
-------- ------- ------ ------- -------- ----------
Total current
liabilities............. 30,716 5,010 3,667 (349) 39,044
Long-term debt, less current
portion....................... 96,400 4,334 481 43,882A,D 145,097 $ (131,881)B
Other liabilities............... 10,585 1,060 143 11,788
-------- ------- ------ ------- -------- ----------
Total liabilities......... 137,701 10,404 4,291 43,533 195,929 (131,881)
Common stock.................... 117 20 106 (126)A 117 27B
Preferred stock................. -- -- -- -- -- --
Additional paid in capital...... 120,102 -- 1 268A 120,371 131,854B
Retained earnings............... 21,384 923 513 (1,436)A 21,384
-------- ------- ------ ------- -------- ----------
Total stockholders'
equity.................. 141,603 943 620 (1,294) 141,872 131,881
-------- ------- ------ ------- -------- ----------
Total liabilities and
stockholders' equity.... $279,304 $11,347 $4,911 $42,239 $337,801 $ --
======== ======= ====== ======= ======== ==========
<CAPTION>
PRO FORMA AS
ADJUSTED FOR
ACQUISITIONS
AND THE
OFFERING
------------
<S> <C>
ASSETS
Current assets.................. $ 96,911
Property and equipment, net..... 42,734
Intangible assets, net.......... 197,518
Other assets.................... 638
--------
Total assets.............. $337,801
========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current portion, long-term
debt.......................... $ 48
Other current liabilities....... 38,996
--------
Total current
liabilities............. 39,044
Long-term debt, less current
portion....................... 13,216
Other liabilities............... 11,788
--------
Total liabilities......... 64,048
Common stock.................... 144
Preferred stock................. --
Additional paid in capital...... 252,225
Retained earnings............... 21,384
--------
Total stockholders'
equity.................. 273,753
--------
Total liabilities and
stockholders' equity.... $337,801
========
</TABLE>
- -------------------------
(1) Balance Sheet as of May 31, 1998, as Consolidated Reprographics has an
August 31 fiscal year end.
The accompanying Notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
F-3
<PAGE> 58
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
CONSOLIDATED COMPLETED AS ADJUSTED
LASON REPROGRAPHICS ACQUISITIONS ADJUSTMENTS LASON
----- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues, net of postage.............. $109,202 $22,390 $26,104 $157,696
Cost of revenues...................... 70,325 15,242 15,731 101,298
-------- ------- ------- --------
Gross profit..................... 38,877 7,148 10,373 56,398
Selling, general and administrative
expenses............................ 22,536 3,652 9,048 $ (729)H 34,507
Compensatory stock option expense..... 138 -- -- 138
Amortization of intangibles........... 2,283 95 8 1,089 E 3,475
-------- ------- ------- ------ --------
Income from operations........... 13,920 3,401 1,317 (360) 18,278
Net interest expense............. 2,176 531 394 (2,553)F 548
-------- ------- ------- ------ --------
Income before provision for income
taxes............................... 11,744 2,870 923 2,193 17,730
Provision for income taxes............ 4,438 1,229 25 1,466 G 7,158
-------- ------- ------- ------ --------
Pro forma net income.................. $ 7,306 $ 1,641 $ 898 $ 727 $ 10,572
======== ======= ======= ====== ========
Pro forma earnings per share:
Basic............................ I $ 0.74
========
Diluted.......................... I $ 0.70
========
Proforma weighted average common
shares and dilutive securities:
Basic............................ I 14,333
--------
Diluted.......................... I 15,209
--------
</TABLE>
The accompanying Notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
F-4
<PAGE> 59
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PROFORMA
CONSOLIDATED COMPLETED AS ADJUSTED
LASON REPROGRAPHICS ACQUISITIONS ADJUSTMENTS LASON
----- ------------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues, net of postage............. $120,337 $25,377 $102,553 $248,267
Cost of revenues..................... 80,846 17,804 69,075 167,725
-------- ------- -------- --------
Gross profit....................... 39,491 7,573 33,478 80,542
Selling, general and administrative
expenses........................... 21,364 3,876 28,318 $(3,583)H 49,975
Compensatory stock option expense.... 221 -- -- 221
Amortization of intangibles.......... 2,477 407 23 3,201 E 6,108
-------- ------- -------- ------- --------
Income from operations............. 15,429 3,290 5,137 382 24,238
Net interest expense................. 1,249 534 1,126 (2,288)F 621
-------- ------- -------- ------- --------
Income before provision for income
taxes.............................. 14,180 2,756 4,011 2,670 23,617
Provision for income taxes........... 5,110 1,146 409 2,786 G 9,451
-------- ------- -------- ------- --------
Net income........................... $ 9,070 $ 1,610 $ 3,602 $ (116) $ 14,166
======== ======= ======== ======= ========
Pro forma earnings per share:
Basic.............................. I $ 1.14
========
Diluted............................ I $ 1.07
========
Pro forma weighted average common
shares
and dilutive securities:
Basic.............................. I 12,432
--------
Diluted............................ I 13,256
--------
</TABLE>
The accompanying Notes are an integral part of these unaudited pro forma
condensed consolidated financial statements.
F-5
<PAGE> 60
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
The unaudited pro forma condensed consolidated financial statements include
the financial information of thirteen companies acquired during the period from
January 1, 1998 through July 29, 1998. The most significant of these
acquisitions are as follows:
In February 1998 the Company acquired Racom Corporation and its affiliates
by acquiring 100% of the outstanding common stock of its parent, Southern
Microfilm Associates, Inc. ("Racom") for $20.9 million in cash and 188,382
shares of the Company's Common Stock valued at approximately $5.1 million. The
shares of common stock are being held in escrow as collateral to indemnify the
Company if contingencies set forth in the purchase agreement occur within 12
months from the date of acquisition.
In March 1998, the Company acquired substantially all of the assets of API
Systems, Inc. ("API") for $21.5 million in cash and 117,702 shares of the
Company's Common Stock valued at approximately $3.8 million. Substantially all
of the shares of common stock are being held in escrow as collateral to
indemnify the Company if contingencies set forth in the purchase agreement occur
within 12 months from the date of acquisition.
In May 1998, the Company acquired 100% of the outstanding common stock of
Quality Mailing Services, Inc. ("QMS") for $3.8 million in cash and 2,799 shares
of the Company's Common Stock valued at approximately $111,000.
In June 1998, the Company acquired substantially all of the assets of
Strategy Manufacturing, Inc. ("SMI") for $3.6 million in cash and 17,431 shares
of the Company's Common Stock valued at approximately $700,000. Of the cash
purchase price, $250,000 is being held in escrow to indemnify the Company if
contingencies set forth in the purchase agreement occur within 12 months from
the date of acquisition.
Also in June 1998, the Company acquired 100% of the outstanding common
stock of Litigation Reprographics & Support Services, Inc. ("Litigation
Reprographics") for $3.7 million in cash and 16,124 shares of the Company's
Common Stock valued at approximately $658,000. All of the shares of Common Stock
issued in connection with the acquisition of Litigation Reprographics are being
held in escrow to indemnify the Company if contingencies set forth in the
purchase agreement occur within 12 months from the date of acquisition.
Also in June 1998, the Company acquired 100% of the outstanding common
stock of Document Production Services, Inc. ("Document Production") for $2.1
million in cash and 12,070 shares of the Company's Common Stock valued at
approximately $523,000. All of the shares of Common Stock issued in connection
with the acquisition of Document Production are being held in escrow to
indemnify the Company if contingencies set forth in the purchase agreement occur
within 24 months from the date of acquisition.
In July 1998, the Company purchased 100% of the outstanding common stock of
Consolidated Reprographics for $34.9 million in cash and 112,044 shares of the
Company's Common Stock valued at approximately $6.1 million. All of the shares
of Common Stock issued in connection with the acquisition of Consolidated
Reprographics are being held in escrow to indemnify the Company if contingencies
set forth in the purchase agreement occur within 18 months from the date of
acquisition.
Cash and shares issued in connection with purchase price contingencies, if
any, will be recorded as an adjustment of the purchase price when the related
contingency is resolved. In addition, certain of the purchase agreements provide
for increased purchase price if operating income exceeds a targeted level. For
the 1998 acquisitions listed above, the maximum amount of additional purchase
price which may be recorded should such targets be achieved is $59.4 million.
BALANCE SHEET
The excess of the purchase price and liabilities assumed over the estimated
fair value of the net assets acquired for each acquisition has been allocated to
tangible and intangible assets based on Lason's estimate of
F-6
<PAGE> 61
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
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.
Acquisitions completed subsequent to June 30, 1998:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
Estimated fair value of the net assets acquired............. $17,193
Allocation of the purchase price in excess of acquired
assets:
Goodwill.................................................. 40,944
-------
58,137
Plus: Liabilities assumed................................... 11,725
-------
Total purchase price........................................ $69,862
=======
</TABLE>
The acquisitions completed subsequent to June 30, 1998 were financed using
approximately $44.7 million of borrowings under the Company's credit agreements,
and $7.4 million from the issuance of shares of Common Stock, $7.1 million of
which is being held in escrow.
The accompanying unaudited pro forma condensed consolidated balance sheet
as of June 30, 1998 has been prepared as if the acquisitions consummated
subsequent to June 30, 1998 had all been completed as of June 30, 1998 and
includes the following adjustments:
(A) A pro forma adjustment has been made to:
- Record goodwill related to the acquisitions;
- Reflect the repayment of the existing borrowings of the acquired
companies with proceeds from the Company's Credit Agreement;
- Record the additional debt related to the acquisitions;
- Present the issuance of 4,807 shares of Common Stock valued at
approximately $269,000 related to the acquisitions;
- Eliminate the historical equity balances; and
- Record additional estimated costs of acquisition.
(B) A pro forma adjustment has been recorded to present the
application of the net proceeds of the Offering assuming underwriters
discounts and commissions and additional offering expenses of $7.0 million.
(C) A pro forma adjustment has been recorded for refundable income
taxes related to available tax deductions resulting from the exercise of
Consolidated Reprographics employee stock options prior to the acquisition
of Consolidated Reprographics.
(D) A pro forma adjustment has been recorded to eliminate a $3.7
million note payable to a former shareholder of Consolidated Reprographics
that was not assumed by Lason in the acquisition.
STATEMENT OF INCOME
The accompanying unaudited pro forma condensed consolidated statements of
income for the six months ended June 30, 1998 and for the year ended December
31, 1997 presents the results of operations as though each acquisition had been
consummated on January 1, 1997. All acquired companies, except Consolidated
F-7
<PAGE> 62
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION -- CONTINUED
Reprographics and Racom, had a December 31 fiscal year end. Consolidated
Reprographics' year end was August 31 and Racom's was June 30. Accordingly,
Consolidated Reprographics' results of operations have been adjusted and are
included for the 12 months ended November 30, 1997 and for the six months ended
May 31, 1998. Also Racom's results of operations have been adjusted and are
included for the 12 months ended December 31, 1997 and the six months ended June
30, 1998.
The accompanying unaudited pro forma condensed consolidated statements of
income for the six months ended June 30, 1998 and the year ended December 31,
1997 have been prepared by combining historical results of operations for the
Company and, where applicable, the acquired companies for such respective
periods and include the following adjustments:
(E) Adjustments for the six months ended June 30, 1998 and for the
year ended December 31, 1997 have been made to increase amortization
expense by $1.1 million and $3.2 million, respectively, related to the
purchase price allocated primarily to goodwill, as if the acquisitions had
occurred January 1, 1997. Goodwill is amortized over 30 years.
(F) Adjustments for the six months ended June 30, 1998 and for the
year ended December 31, 1997 have been made to eliminate interest expense
of $2.6 million and $2.3 million respectively, on debt retired using a
portion of the estimated net proceeds of $131.9 million.
(G) Certain of the acquired companies 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 acquired
companies were subjected to federal and state income taxes for the periods
presented based on the statutory tax rate then in effect. Additionally the
pro forma adjustments have been tax effected at a 35.0% federal statutory
rate.
(H) Adjustments for the six months ended June 30, 1998 and for the
year ended December 31, 1997 have been made to reduce selling, general and
administrative expenses by approximately $729,000 and $3.6 million,
respectively, to eliminate certain compensation expenses to former
S-Corporation shareholders that would not have been incurred had the
acquisitions occurred as of January 1, 1997. Such compensation reductions
are based on signed employment agreements. Additional cost savings that the
Company expects to realize through the integration of the acquisitions into
Lason's operations have not been included.
(I) Pro forma basic earnings per share is computed by dividing pro
forma net income by the weighted average common shares outstanding. Pro
forma diluted earnings per share is computed by dividing net income by the
weighted average common shares outstanding plus the diluted share of
contingently issuable shares and stock options.
The pro forma weighted average common shares presented as outstanding at
January 1, 1997, include the 2,700,000 shares of Common Stock being sold by the
Company in the Offering and the 521,346 shares of Common Stock issued in
consideration with respect to the acquisition of Racom, API, QMS, SMI,
Litigation Reprographics, Document Production and Consolidated Reprographics.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------- -----------------
<S> <C> <C>
Pro forma basic shares outstanding...................... 14,333,387 12,432,250
========== ==========
Pro forma diluted shares outstanding.................... 15,209,023 13,256,272
========== ==========
</TABLE>
F-8
<PAGE> 63
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Lason, Inc.
We have audited the consolidated financial statements and the financial
statement schedule of Lason, Inc. (the "Company") and subsidiaries. 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 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lason, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, 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 16, 1998
F-9
<PAGE> 64
LASON, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- JUNE 30,
1996 1997 1998
---- ---- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.................................. $ 79 $ 2,925 $ 690
Accounts receivable (net).................................. 24,546 43,815 65,026
Supplies................................................... 2,273 3,964 6,467
Prepaid expenses and other................................. 3,940 8,946 13,711
-------- -------- --------
Total current assets.................................. 30,838 59,650 85,894
Computer equipment and software............................ 2,735 5,489 8,103
Production and office equipment............................ 5,416 18,171 30,009
Leasehold improvements..................................... 1,010 2,460 3,356
Other...................................................... 644 902 2,632
-------- -------- --------
9,805 27,022 44,100
Less: Accumulated depreciation........................... (2,184) (4,447) (6,911)
-------- -------- --------
Net property and equipment............................... 7,621 22,575 37,189
Deferred income taxes...................................... 2,571 1,034 --
Goodwill (net of accumulated amortization of $1,482, $3,660
and $5,806 at December 31, 1996, December 31, 1997 and
June 30, 1998, respectively)............................. 35,911 89,895 148,536
Other intangibles (net of accumulated amortization of $274,
$573 and $710 at December 31, 1996, December 31, 1997 and
June 30, 1998, respectively)............................. 1,605 4,745 7,685
-------- -------- --------
TOTAL ASSETS..................................... $ 78,546 $177,899 $279,304
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses........................................... $ 4,199 $ 6,984 $ 8,611
Accounts payable........................................... 4,751 6,590 8,632
Notes payable.............................................. -- 6,462 218
Customer deposits.......................................... 3,706 2,810 4,829
Deferred income taxes...................................... 1,529 1,753 1,812
Other...................................................... -- 3,714 6,614
-------- -------- --------
Total current liabilities............................. 14,185 28,313 30,716
Revolving credit line borrowings........................... 4,101 13,550 96,400
Deferred Income taxes...................................... -- -- 902
Other liabilities.......................................... 2,194 3,431 9,683
-------- -------- --------
TOTAL LIABILITIES................................ 20,480 45,294 137,701
-------- -------- --------
Common stock with a put option............................. 1,060 1,060 --
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 20,000,000 shares authorized,
8,610,246, 11,637,246 and 12,118,514 shares issued and
outstanding.............................................. 86 115 117
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued and outstanding.................. -- -- --
Additional paid-in capital................................. 51,912 117,352 120,102
Retained earnings.......................................... 5,008 14,078 21,384
-------- -------- --------
TOTAL STOCKHOLDERS' EQUITY............................ 57,006 131,545 141,603
-------- -------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY....... $ 78,546 $177,899 $279,304
======== ======== ========
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-10
<PAGE> 65
LASON, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------- ------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues, net of postage of $20,672, $29,672,
$42,444, $21,412 and $27,888 for the year
ended December 31, 1995, 1996, 1997, and
the six months ended June 30, 1997 and
1998, respectively......................... $46,605 $69,937 $120,337 $53,658 $109,202
Cost of revenues............................. 31,227 47,587 80,846 37,147 70,325
------- ------- -------- ------- --------
Gross profit............................... 15,378 22,350 39,491 16,511 38,877
Selling, general and administrative
expenses................................... 9,406 12,699 21,364 8,439 22,536
Compensatory stock option expense............ 308 936 221 109 138
Amortization of intangibles.................. 817 1,121 2,477 1,041 2,283
------- ------- -------- ------- --------
Income from operations..................... 4,847 7,594 15,429 6,868 13,920
Net interest expense......................... 1,694 1,760 1,249 740 2,176
------- ------- -------- ------- --------
Income before income taxes................. 3,153 5,834 14,180 6,128 11,744
Provision for income taxes................... 1,139 2,103 5,110 2,250 4,438
------- ------- -------- ------- --------
Net income................................. $ 2,014 $ 3,731 $ 9,070 3,878 7,306
======= ======= ======== ======= ========
Basic earnings per share..................... $ 0.35 $ 0.59 $ 0.93 $ 0.44 $ 0.63
======= ======= ======== ======= ========
Diluted earnings per share................... $ 0.33 $ 0.55 $ 0.90 $ 0.42 $ 0.59
======= ======= ======== ======= ========
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-11
<PAGE> 66
LASON, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
AND THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN LOANS TO RETAINED
SHARES AMOUNT CAPITAL STOCKHOLDERS EARNINGS TOTAL
------ ------ ---------- ------------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balances January 1, 1995.......... 5,692,040 $ 57 $ 8,135 $(1,300) $ -- $ 6,892
Net income........................ -- -- -- -- 2,014 2,014
Compensatory stock option
expense......................... -- -- 308 -- -- 308
Forgiveness of stockholder
loans........................... -- -- -- 44 (44) --
---------- ---- -------- ------- ------- --------
Balances at December 31, 1995..... 5,692,040 57 8,443 (1,256) 1,970 9,214
Net income........................ -- -- -- -- 3,731 3,731
Issuance of shares of common
stock........................... 3,450,000 35 52,979 -- -- 53,014
Redemption of shares of common
stock........................... (692,047) (7) (11,758) -- -- (11,765)
Issuance of shares of common stock
for acquisitions................ 136,465 1 1,260 -- -- 1,261
Employee stock options
exercised....................... 23,788 -- 52 -- -- 52
Increase in stockholder loans..... -- -- -- (65) -- (65)
Compensatory stock option
expense......................... -- -- 936 -- -- 936
Repayment of stockholder loans.... -- -- -- 628 -- 628
Forgiveness of stockholder
loans........................... -- -- -- 693 (693) --
---------- ---- -------- ------- ------- --------
Balances at December 31, 1996..... 8,610,246 86 51,912 -- 5,008 57,006
Net income........................ -- -- -- -- 9,070 9,070
Issuance of shares of common
stock........................... 2,457,620 25 58,044 -- -- 58,069
Compensatory stock option
expense......................... -- -- 221 -- -- 221
Issuance of shares of common stock
for acquisitions................ 338,250 2 6,046 -- -- 6,048
Employee stock options
exercised....................... 231,524 2 1,129 -- -- 1,131
---------- ---- -------- ------- ------- --------
Balances at December 31, 1997..... 11,637,640 115 117,352 -- 14,078 131,545
Net income........................ -- -- -- -- 7,306 7,306
Compensatory stock option
expense......................... -- -- 138 -- -- 138
Employee stock options
exercised....................... 54,640 -- 305 -- -- 305
Issuance of shares of common stock
for acquisitions................ 426,234 2 3,338 -- -- 3,340
Other............................. -- -- (1,031) -- -- (1,031)
---------- ---- -------- ------- ------- --------
Balances at June 30, 1998......... 12,118,514 117 120,102 $ -- 21,384 141,603
========== ==== ======== ======= ======= ========
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-12
<PAGE> 67
LASON, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1995 1996 1997 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income...................................... $ 2,014 $ 3,731 $ 9,070 $ 3,878 $ 7,306
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................. 1,817 2,327 4,941 2,078 4,747
Compensatory stock option expense............. 308 936 221 109 138
(Gain) loss on disposal of fixed assets....... 23 (20) (256) (4) --
Deferred income taxes......................... 781 1,119 1,761 (40) 855
Changes in operating assets and liabilities net
of effects from acquisitions:
Accounts receivable........................... (2,695) (9,282) (7,120) (42) (9,246)
Supplies...................................... (384) (562) (1,119) (241) (504)
Prepaid expenses and other.................... (698) (3,019) (3,571) (611) (4,355)
Accounts payable.............................. 397 (174) (1,073) (1,169) (1,264)
Customer deposits............................. (31) 2,792 (896) (1,091) 1,054
Accrued expenses and other liabilities........ (277) 69 1,478 (1,685) (3,209)
-------- --------- --------- -------- ---------
Cash flows provided (used) by operating
activities.................................... 1,255 (2,083) 3,436 1,182 (4,478)
-------- --------- --------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisition of businesses, net of
cash acquired................................. (1,430) (17,137) (57,274) (19,226) (65,747)
Additions to fixed assets and software
development costs............................. (1,126) (4,611) (11,799) (3,837) (9,002)
Proceeds from sales of fixed assets............. 713 54 820 164 55
-------- --------- --------- -------- ---------
Net cash used in investing activities......... (1,843) (21,694) (68,253) (22,899) (74,694)
-------- --------- --------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit.......... 35,883 112,199 137,793 63,343 331,700
Repayments on revolving line of credit.......... (34,607) (115,375) (128,344) (40,044) (248,850)
Net proceeds from issuance of shares of common
stock......................................... -- 53,014 58,069 -- --
Proceeds from exercise of employee stock
options....................................... -- -- 145 66 305
Repayments of notes payable..................... -- -- -- -- (6,218)
Borrowings on acquisition credit facility....... -- 17,312 -- -- --
Repayments on acquisition credit facility....... -- (17,312) -- -- --
Principal payments on long-term debt............ (1,500) (13,500) -- -- --
Redemption of shares of common stock............ -- (11,765) -- -- --
Proceeds from settlement of shareholder loans... -- 628 -- -- --
Principal payments on lease liabilities and
other debt.................................... -- (1,448) -- -- --
-------- --------- --------- -------- ---------
Net cash provided (used) by financing
activities.................................. (224) 23,753 67,663 23,365 76,937
-------- --------- --------- -------- ---------
Net increase (decrease) in cash and
equivalents................................... (812) (24) 2,846 1,648 (2,235)
Cash and cash equivalents at beginning of
period........................................ 915 103 79 79 2,925
-------- --------- --------- -------- ---------
Cash and cash equivalents at end of period...... $ 103 $ 79 $ 2,925 1,727 690
======== ========= ========= ======== =========
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest.................................... $ 1,329 $ 2,141 $ 1,139
Income taxes................................ 1,000 1,617 3,693
</TABLE>
The accompanying Notes are an integral part of the consolidated financial
statements.
F-13
<PAGE> 68
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND CAPITALIZATION
Lason, Inc. (together with it's subsidiaries, the "Company"), a Delaware
corporation, was incorporated on January 5, 1995. The Company's initial 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 capital to Lason
Acquisition Corporation, a non-operating wholly-owned 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") and provide working capital. Subsequent to the acquisition,
Lason Acquisition Corporation changed its name to Lason Systems, Inc. ("Lason")
and continued the business operations of the Predecessor. Prior to the
acquisition, three shareholders collectively acquired 93.8 percent of the Class
A-1 common stock which represented a 46.9 percent aggregate interest of all
outstanding classes of common stock in Lason at the time. The continuing
shareholders' residual interest in the Company was recorded at historical cost
resulting in an $8.6 million reduction in goodwill and stockholders' equity.
In the fourth quarter of 1996, the Company completed an initial public
offering ("IPO") of 3,450,000 shares of common stock, for net proceeds of
approximately $53.0 million, after deducting underwriting discounts and other
offering expenses. Approximately $41.2 million of the net proceeds was used to
repay outstanding debt under the Company's credit agreement and approximately
$11.8 million was used to redeem 692,047 shares of common stock held by the
Company's largest shareholder. In August 1997, the Company completed a secondary
offering of shares of common stock. See Note 5.
In connection with and immediately prior to the consummation of the IPO,
each share of Class A common stock was converted into one share of common stock,
each share of Class B common stock was converted into approximately 1.3 shares
of common stock, and the Company's Board of Directors approved a 2.5 for 1
common stock split. The Company's 1995 consolidated financial statements have
been restated for this recapitalization. The authorized capital stock of the
Company now consists of 20,000,000 shares of common stock, par value $0.01 per
share and 5,000,000 shares of preferred stock, par value $0.01 per share.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS 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, data base management,
and direct mailing, among others. The Company primarily serves customers in the
manufacturing, financial services, healthcare and professional services
industries.
Transactions with various divisions of one domestic automotive manufacturer
accounted for approximately 49 percent, 32 percent and 17 percent of the
Company's consolidated net revenues for the years ended December 31, 1995, 1996
and 1997, respectively. Receivables from that customer were approximately $7.2
million, and $2.6 million as of December 31, 1996 and 1997, respectively.
Transactions with various divisions of another domestic automotive manufacturer
totaled approximately 12 percent, 19 percent and 14 percent of the Company's
consolidated net revenues for the years ended December 31, 1995, 1996 and 1997,
respectively. In addition, the Company had receivables outstanding from this
second customer of approximately $3.8 million and $7.1 million as of December
31, 1996 and 1997, respectively.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany transactions have
been eliminated in consolidation. 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 at the date of the
F-14
<PAGE> 69
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
consolidated financial statements and the reported amounts of revenues and
expenses during the periods presented. Actual results could differ from those
estimates. Certain amounts in the prior year consolidated financial statements
have been reclassified to conform with the current year presentation.
REVENUE RECOGNITION
Revenues are recorded when the services are provided. Revenues are
presented in the consolidated statements of income net of postage because the
cost of such postage is passed through to the customer.
CASH EQUIVALENTS
The company classifies as cash and cash equivalents amounts on deposit with
banks and cash invested temporarily in various instruments with maturities of
three months or less at the time of purchase.
SUPPLIES
Supplies are valued at cost, which approximates market, with cost
determined using the first-in, first-out method.
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.
Assets placed in service prior to January 1, 1996, are depreciated using an
accelerated method over the estimated useful lives of the assets which range
from 5 to 7 years. Assets placed in service after December 31, 1995, are
depreciated using a straight-line method over the estimated lives of the related
assets which range from 5 to 15 years.
INTANGIBLE ASSETS
Goodwill is amortized using a straight-line method over 30 years.
Covenants-not-to-compete are amortized using a straight-line method over the
term of the agreement, generally 4 years. Deferred financing costs are amortized
using the interest method over the term of the associated credit agreement.
The Company capitalizes direct internal and external costs associated with
the development of technological systems, primarily computer software, to meet
the needs of its customers. Such costs, which are included in other intangible
assets, are amortized using a straight-line method over the lesser of five years
or the economic life of the related services. In addition, the Company
capitalizes certain direct internal and external costs associated with upgrading
and enhancing its information systems to support its national information
processing needs. Capitalization of such costs begins when the preliminary
planning stage for each project is completed and management has formally
authorized its funding, and ends when the project is substantially complete.
These costs are amortized using a straight-line method over five years. Research
and development costs and other computer software and hardware maintenance costs
are charged to expense as incurred.
Annually, the Company evaluates the carrying value of intangibles to
determine if there has been an impairment in value. The methodology used for
this evaluation includes a review of annual operating performance, along with a
review of anticipated results for future years. The Company determined that
there had been no impairment in the net carrying amount of intangibles as of
December 31, 1997.
F-15
<PAGE> 70
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards ("SFAS") 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 available to the Company,
the carrying value of debt approximated fair value as of December 31, 1996 and
1997.
EARNINGS PER SHARE
SFAS No. 128, "Earnings Per Share", was issued in March 1997 and is
effective for financial statements issued after December 15, 1997. This
Statement establishes standards for computing and presenting earnings per share
("EPS") and supersedes Accounting Principles Board Opinion No. 15 and its
related interpretations. The Statement replaces the presentation of primary EPS
with a presentation of basic EPS. Basic EPS excludes dilution, whereas diluted
EPS includes the potential dilution that could occur if securities or other
contracts to issue shares of common stock were to be exercised or converted into
shares of common stock. All prior period EPS amounts have been restated to
reflect the provisions of SFAS No. 128.
Basic earnings per share are computed by dividing net income available to
common shareholders by the weighted average common shares outstanding. The 1995
and 1996 basic earnings per share amounts are based on the weighted average
number of common shares outstanding, retroactively adjusted for the effect of a
2.5 for 1 common stock split effective October 15, 1996 (see Note 1).
The following table presents a reconciliation of the numerator (income
applicable to common shareholders) and denominator (weighted average common
shares outstanding) for the basic and diluted earnings per share calculations
for the years ended December 31, 1995, 1996 and 1997 (in thousands, except per
share amounts).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
1995 1996 1997
----------------------- ----------------------- -----------------------
NET PER NET PER NET PER
INCOME SHARES SHARE INCOME SHARES SHARE INCOME SHARES SHARE
------ ------ ----- ------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EPS........................ $2,014 5,692 $0.35 $3,731 6,361 $0.59 $9,070 9,704 $0.93
EFFECT OF DILUTIVE SECURITIES
Contingently issuable shares of
common stock................... -- -- -- -- -- -- -- 24 --
Potential shares of common stock
from stock options
outstanding.................... -- 500 -- -- 403 -- -- 307 --
------ ----- ----- ------ ----- ----- ------ ------ -----
DILUTED EPS...................... $2,014 6,192 $0.33 $3,731 6,764 $0.55 $9,070 10,035 $0.90
====== ===== ===== ====== ===== ===== ====== ====== =====
</TABLE>
The weighted average common shares and common share equivalents outstanding
used to compute the dilutive effect of common stock options outstanding was
computed using the treasury stock method prescribed by SFAS No. 128. EPS
calculations include, as outstanding to the date of redemption (October 15,
1996), 692,047 shares of common stock which would have been sold at the initial
offering price of $17.00 per share to fund the redemption of such common stock
owned by the former Class B shareholders.
F-16
<PAGE> 71
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
3. ACQUISITIONS
From June 1995 through December 31, 1997, the Company, through certain of
its subsidiaries, completed the acquisition of either substantially all of the
assets or a controlling stock ownership interest in a substantial number of
companies. Acquisitions completed in 1997 included the following:
In January 1997, Lason acquired all of the outstanding common stock of
Churchill Communications Corporation for $7.5 million in cash and 72,499 shares
of the Company's common stock valued at approximately $1.5 million.
In March 1997, Lason acquired all of the outstanding common stock of
Automated Enterprises, Inc. ("AEI") for $5.9 million in cash and 31,008 shares
of the Company's common stock valued at approximately $655,000. The stock
purchase agreement provides for an additional payment to the selling shareholder
if AEI's financial performance for the year ended December 31, 1997 and the year
ending December 31, 1998 exceed specified targets. Under terms of the agreement,
the selling shareholder can require the Company to accelerate the payment of
$1.6 million in full payment of the Company's additional payment obligation.
In July 1997, Lason acquired all of the outstanding common stock of Image
Conversion Systems, Inc. ("ICS") for approximately $18.9 million in cash and
47,441 shares of the Company's common stock valued at approximately $1.1
million. Of the total cash payment, approximately $10.5 million was used to
repay the outstanding debt of ICS and approximately $8.4 million was paid to the
selling shareholders.
The shares of common stock issued in connection with the acquisition of ICS
are (i) being held in escrow as collateral to indemnify the Company if
contingencies set forth in the purchase agreement occur within twelve months
from the date of the acquisition, and (ii) subject to forfeiture if ICS does not
achieve targeted operating income in 1997 and in 1998. Further, if the operating
income of ICS for such periods exceeds a targeted level, the purchase price may
be increased by up to approximately $3.0 million.
In November 1997, Lason acquired all of the common stock of Spectrum
Document Services, Inc. ("Spectrum") for $481,000 in cash, a $2.7 million
short-term promissory note due January 10, 1998 and a $300,000 promissory note,
due January 10, 1999. The payment of the $300,000 promissory note is contingent
on Spectrum generating a targeted operating cash flow for the twelve month
period ending October 31, 1998.
Also in November 1997, Lason acquired substantially all of the assets of
VIP Imaging Inc. ("VIP") for $14.5 million in cash and 147,260 shares of the
Company's common stock valued at approximately $4.0 million. With respect to the
cash portion of the purchase price, $250,000 is being held in escrow and will be
increased or decreased on a dollar-for-dollar basis to the extent net working
capital, as defined by the asset purchase agreement, as of the closing date
exceeds or falls below $4.756 million. With respect to the shares of common
stock issued in connection with the VIP acquisition, 36,815 of such shares are
being held in escrow as collateral to indemnify the Company if contingencies set
forth in the purchase agreement occur. In addition, the purchase price may be
increased up to $1.0 million if certain earnings and sales targets are met in
the first 13-month period and subsequent 12-month period following the closing
date of the acquisition.
Also during 1997 the Company, through certain of its subsidiaries, acquired
all of the common stock of Alpha Imaging, Inc.; Alpha Micro Graphics Supply,
Inc.; Premier Copy Group, Inc.; Corporate Copies, Inc.; American Micro-Image,
Inc.; Tri-City Micrographics, Inc.; Litigation Solutions, Inc.; and Data
Reduction Inc.; and substantially all of the assets of Florida Data Bank, Inc.
and Image Data Corporation, for an aggregate purchase price of approximately
$13.0 million consisting of $8.7 million in cash, $3.4 million of short-term
promissory notes due January 5, 1998 and 37,607 shares of the Company's common
stock valued at approximately $891,000.
All purchase price contingencies, if any, will be recorded as an adjustment
to the purchase price when the contingency is resolved.
F-17
<PAGE> 72
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Generally, shares of common stock issued or to be issued in connection with
the acquisitions, are subject to lock-up agreements ranging from twelve to
twenty-four months. The lock-up agreements restrict the owners' ability to sell
the shares of common stock.
Each of the acquisitions was accounted for as a purchase. The results of
operations for the year ended December 31, 1997 include the results of
operations for each of the acquired companies since the date of their respective
acquisition.
The aggregate purchase price for the acquisitions completed for the year
ended December 31, 1997, excluding liabilities assumed and including common
stock held in escrow, was approximately $71.0 million. The purchase price was
allocated to the assets acquired and liabilities assumed based on the related
fair values at the date of acquisition. The excess of the aggregate purchase
price over the fair values of assets acquired and liabilities assumed has been
allocated to goodwill and is being amortized on a straight-line method over 30
years.
In conjunction with these acquisitions, liabilities assumed and other
non-cash consideration was as follows (in thousands):
<TABLE>
<S> <C>
Fair value of assets acquired............................... $ 23,500
Goodwill.................................................... 54,329
Cash paid in consideration for companies acquired........... (55,891)
Stock issued in consideration for companies acquired........ (6,048)
Promissory notes issued in consideration for companies
acquired.................................................. (6,085)
--------
Liabilities assumed......................................... $ 9,805
========
</TABLE>
The following table summarizes pro forma unaudited results of operations as
if each of the acquisitions completed during 1997 had occurred at the beginning
of each year presented (in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997
---- ----
(UNAUDITED)
<S> <C> <C>
Revenues............................................. $127,924 $159,374
Income before income taxes........................... 10,487 15,187
Net income........................................... 6,280 9,486
Basic earnings per share............................. $ 0.95 $ 0.96
Diluted earnings per share........................... 0.88 0.93
</TABLE>
4. LONG-TERM DEBT
Lason has a credit agreement with a bank group providing for revolving
credit loans up to $80 million. Borrowings will be used to finance additional
acquisitions of businesses, working capital, capital expenditures and for other
corporate purposes. Borrowings under the credit agreement are collateralized by
substantially all of Lason's assets. Lason is not required to make principal
payments prior to 2001, the term of the loan. Interest on amounts outstanding is
calculated based on interest rates determined at the time of borrowing.
Borrowings bear interest at rates ranging from LIBOR plus a maximum of 2.25% to
a base percentage rate plus a maximum of 1.25%, depending on the Company's
leverage ratio. The credit agreement contains covenants which, among other
things, place restrictions on the acquisition and disposal of assets, payment of
dividends and incurrence of liabilities and sets minimum requirements for free
cash flow and certain financial ratios. As of December 31, 1997, the loan
agreement prohibits Lason from advancing funds or paying dividends to the
Company. Borrowings outstanding under the credit agreement totaled $4.1 million
and $13.6 million as of December 31, 1996 and 1997, respectively.
F-18
<PAGE> 73
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
As of December 31, 1997, Lason was in violation of certain non-financial
covenants. In February 1998, Lason obtained waivers of such non-financial
covenant violations.
5. STOCKHOLDERS' EQUITY
In August 1997, the Company completed a secondary offering of 2,457,620
shares of common stock for net proceeds of approximately $58.0 million, after
deducting underwriting discounts and other offering expenses. The net proceeds
were used to repay debt outstanding under the Company's credit agreement and for
general corporate purposes.
In connection with the transaction described in Note 1, Lason loaned
certain shareholders, who were also shareholders in the Predecessor,
approximately $1.3 million in 1995 which was used to pay their tax liability
resulting from the sale of the assets of the Predecessor. In conjunction with
the completion of the IPO in 1996, 50 percent of the then outstanding amounts of
the shareholder loans were forgiven by the Company and charged to retained
earnings. At the same time, the remaining 50 percent of shareholder loans
outstanding were repaid to the Company, along with the related accrued interest
to the date of settlement.
As of December 31, 1997, 86,691 shares of Common Stock are reflected as
outstanding on the consolidated balance sheet and are held in escrow as
collateral to indemnify the Company if contingencies set forth in certain
acquisition purchase agreements occur.
6. INCOME TAXES
The Company and its qualifying subsidiaries file a consolidated Federal
income tax return. The Federal income tax provision is computed on the
consolidated taxable income of the Company and those subsidiaries.
The components of the consolidated income tax provision are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Current provision
Federal.......................................... $ 358 $ 972 $3,011
State............................................ -- 12 338
------ ------ ------
Total current provision............................ $ 358 $ 984 $3,349
====== ====== ======
Deferred provision
Federal.......................................... $ 781 $1,092 $1,684
State............................................ -- 27 77
------ ------ ------
Total deferred provision........................... $ 781 $1,119 $1,761
====== ====== ======
Total income tax provision......................... $1,139 $2,103 $5,110
====== ====== ======
</TABLE>
F-19
<PAGE> 74
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Deferred income taxes represent the net tax effects of temporary
differences between the carrying value amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax return
purposes. Significant components of the Company's deferred Federal income tax
assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
---- ----
<S> <C> <C>
Deferred tax assets related to:
Goodwill.................................................. $2,624 $2,317
Depreciation.............................................. 63 --
Compensatory stock option expense......................... 435 361
Allowance for doubtful accounts........................... 54 146
Covenant-not-to-compete amortization...................... 30 43
Other..................................................... -- 7
------ ------
Total deferred tax assets................................. $3,206 $2,874
====== ======
Deferred tax liabilities related to:
Prepaid expenses.......................................... $ 787 $1,059
Goodwill.................................................. 486 965
Supplies.................................................. 795 840
Depreciation.............................................. -- 418
Capitalized software development costs.................... 96 284
Other..................................................... -- 27
------ ------
Total deferred tax liabilities............................ $2,164 $3,593
====== ======
</TABLE>
The difference between the Company's statutory Federal income tax rate and
its effective Federal income tax rate of 36.1 percent, 35.6 percent and 35.7
percent for the years ended December 31, 1995, 1996 and 1997, respectively,
results primarily from travel and entertainment expenses and certain goodwill
amortization that is not deductible for Federal income tax purposes.
7. STOCK OPTION PLAN
SFAS No. 123 "Accounting for Stock Based Compensation" was issued in
October 1995 and was effective for fiscal years beginning after December 15,
1995. That standard requires significantly more disclosure regarding employee
stock options and encourages companies to recognize compensation expense for
stock-based awards based on the fair value of such awards on the date of grant.
Alternatively, companies may continue to account for such transactions under
Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued
to Employees", provided that disclosures are made regarding the net income and
earnings per share impact as if the value recognition and measurement criteria
of SFAS No. 123 had been adopted. The Company has elected to continue to account
for employee stock options under APB No. 25.
The Company's 1995 stock option plan was adopted by the Board of Directors
and approved by the Company's shareholders in January 1995. A committee composed
of non-employee members of the Board of Directors determines which key employees
will participate in the Plan. Under the Plan, the Company may grant up to
1,000,000 shares of common stock.
For certain options granted during 1996 and 1995, the exercise price was
less than the fair value of the Company's stock on the date of grant and,
accordingly, compensation expense is recognized over the vesting period for such
difference. For certain other options granted in 1997 and 1996, the exercise
price equaled the market price on the date of grant and, therefore, no
compensation expense was recognized. Options generally
F-20
<PAGE> 75
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
vest over a period which ranges from 3 to 5 years from the date of grant and
each option's maximum term is generally 7 years from the grant date.
The provisions of certain stock option agreements provided for immediate
vesting of those options on the effective date of the IPO. Accordingly, the
Company recorded a non-cash expense of $653,000 during the fourth quarter of
1996 to recognize the compensation associated with the immediate vesting of
those stock options. Total compensation expense recorded for the years ended
December 31, 1995, 1996 and 1997 was approximately $308,000, $936,000 and
$221,000, respectively.
Had compensation expense for the Company's stock option plan been
determined based on the fair value at the grant dates for awards, consistent
with the provisions of SFAS No. 123, the Company's net income and earnings per
share would have been reduced to the pro forma amounts as follows (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net income
As reported......................................... $2,014 $3,731 $9,070
Pro forma........................................... 1,957 3,582 8,159
Basic earnings per share
As reported......................................... $ 0.35 $ 0.59 $ 0.93
Pro forma........................................... 0.32 0.56 0.84
Diluted earnings per share
As reported......................................... $ 0.33 $ 0.55 $ 0.90
Pro forma........................................... 0.32 0.53 0.81
</TABLE>
For purposes of computing the pro forma amounts above, the fair value of
each option granted was estimated using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for grants in 1995, 1996
and 1997, respectively: dividend yield of 0.0 percent for all three years;
expected volatility of 74 percent for 1995 and 1996 and 59 percent for 1997;
risk free interest rates of 6.39 percent, 5.98 percent and 6.12 percent,
respectively; and expected lives of 2.43 years, 4.02 years and 4.17 years,
respectively.
A summary of the status of the Company's stock option plan is as follows
for each of the years ended December 31:
<TABLE>
<CAPTION>
1995 1996 1997
-------------------------- -------------------------- ---------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------ ---------------- ------ ---------------- ------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year... -- $ -- 419,326 $ 0.40 755,243 $ 5.33
Granted
Price = fair
value............ -- -- 210,500 16.75 167,996 23.66
Price < fair
value............ 419,326 0.40 166,250 2.40 -- --
Exercised............. -- -- (23,788) 0.40 (231,524) 0.66
Canceled.............. -- -- (17,045) 0.40 (28,397) 16.90
------- ------- --------
Outstanding at end of
year................ 419,326 $0.40 755,243 $ 5.33 663,318 $11.14
======= ======= ========
Options exercisable at
end of year......... 56,818 388,765 262,413
Weighted-average fair
value of options
granted during
year................ $2.51 $8.95 $12.00
</TABLE>
F-21
<PAGE> 76
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The following table summarizes information about stock options outstanding
as of December 31, 1997:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-AVERAGE NUMBER
RANGES OF OUTSTANDING REMAINING WEIGHTED-AVERAGE EXERCISABLE WEIGHTED-AVERAGE
EXERCISE PRICE AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/97 EXERCISE PRICE
- --------------- ------------ ---------------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
$ 0.40 - $ 3.19 212,672 5.16 $ 0.40 187,172 $ 0.40
3.20 - 16.74 112,950 5.48 4.37 33,241 4.00
16.75 - 17.74 182,500 5.96 16.75 36,500 16.75
17.75 - 28.25 155,196 6.53 24.18 5,500 19.85
------- -------
663,318 5.75 $11.14 262,413 $ 3.54
======= ==== ====== ======= ======
</TABLE>
8. EMPLOYEE BENEFIT PLAN
The Company has 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 or, has an adjusted service
date with the equivalent or greater term 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 compensation 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 match contribution for the years ended December 31, 1995, 1996,
and 1997 totaled approximately $172,000, $201,000, $337,000, respectively.
9. LEASE COMMITMENTS
The Company has various operating lease agreements related primarily to
equipment and buildings. As of December 31, 1997, future minimum rental payments
required under noncancelable operating leases with initial or remaining lease
terms in excess of one year are as follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 6,418
1999........................................................ 4,914
2000........................................................ 3,681
2001........................................................ 2,283
2002........................................................ 1,141
-------
Total....................................................... $18,437
=======
</TABLE>
In addition, the Company has a number of equipment leases that are on a
month-to-month basis.
Total rent expense for the years ended December 31, 1995, 1996 and 1997 was
approximately $5.2 million, $6.4 million and $9.2 million, respectively.
10. RELATED PARTY TRANSACTIONS
The Company purchases printing services from a company owned by the wife of
its former president and a principal shareholder of the Company. For the years
ended December 31, 1995, 1996 and 1997 the Company paid approximately $981,000,
$1.4 million and $1.7 million, for such printing services. As of December 31,
1996 and 1997, $114,389 and $103,800 was due to that company, respectively, for
printing services, and is included in accounts payable in the consolidated
balance sheets. In December 1997, the Company sold certain assets to this
company and recognized a gain on the sale of approximately $183,000.
The Company leases property and a building from a general partnership in
which the Company's Chairman is the managing partner. Another principal
shareholder of the Company owns 33.33 percent of such
F-22
<PAGE> 77
LASON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONCLUDED
partnership and is one of its partners. The Company paid $191,100, $191,100 and
$150,150 in rent to that partnership for the years ended December 31, 1995, 1996
and 1997, respectively.
The Company leases certain equipment from a company in which the Company's
Chairman is a 50 percent owner and its president. For the years ended December
31, 1995, 1996 and 1997 the Company paid $57,100, $184,390 and $116,500,
respectively, in rent for such operating leases.
The Company contracts temporary employment services from a company which is
owned by the wife of a senior member of management. The Company paid $2,905,
$735,670 and $797,000 for the years ended December 31, 1995, 1996 and 1997,
respectively, for such services.
The Company believes that all the above transactions were on terms that
were reasonable and competitive. Additional transactions of the nature described
may take place in the ordinary course of business in the future.
11. COMMITMENTS AND CONTINGENCIES
Various claims have been made against the Company 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.
12. SUBSEQUENT EVENTS
During the first quarter of 1998, the Company, through certain of its
subsidiaries, acquired either substantially all of the assets or 100% of the
common stock of several companies for an aggregate purchase price, excluding
liabilities assumed, of approximately $54.7 million, consisting of $45.3 million
in cash, funded by bank borrowings, and 320,359 shares of the Company's common
stock valued at approximately $9.4 million.
F-23
<PAGE> 78
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Consolidated Reprographics:
In our opinion, the accompanying balance sheet and the related statements
of operations, shareholders' equity, and of cash flows present fairly, in all
material respects, the financial position of Consolidated Reprographics at
August 31, 1997, and the results of its operations and its cash flows for the
period then ended, in conformity with generally accepted accounting principles.
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 of these statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Detroit, Michigan
July 17, 1998
F-24
<PAGE> 79
CONSOLIDATED REPROGRAPHICS
BALANCE SHEET
AS OF AUGUST 31, 1997 AND MAY 31, 1998
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1997 1998
---------- -------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 495,108 $ 862,768
Accounts receivable, net of allowance of $280,597 and
$360,220 as of August 31, 1997 and May 31, 1998,
respectively............................................ 3,413,426 4,554,151
Supplies, net of reserve of $34,448 and $143,038 as of
August 31, 1997 and May 31, 1998, respectively.......... 632,263 534,073
Prepaid expenses and other................................ 417,371 334,243
Deferred income tax assets................................ 197,410 254,473
----------- -----------
Total current assets.................................... 5,155,578 6,539,708
Related party note receivable, net of current portion....... 148,927 143,694
Property and equipment, at cost:
Reprographic equipment.................................... 6,193,577 8,102,247
Computer and office equipment............................. 1,731,902 1,821,447
Leasehold improvements.................................... 1,026,414 1,125,782
Automobiles............................................... 108,332 30,000
Construction in progress.................................. 399,833 38,706
----------- -----------
9,460,058 11,118,182
Less accumulated depreciation and amortization.......... 6,878,834 6,947,289
----------- -----------
2,581,224 4,170,893
----------- -----------
Other assets:
Goodwill, net of accumulated amortization of $156,019 and
$197,318 as of August 31, 1997 and May 31, 1998,
respectively............................................ 394,637 353,337
Deferred charges.......................................... 270,759 58,876
Deposits and other........................................ 52,272 50,798
Deferred income tax assets................................ 23,157 29,390
----------- -----------
740,825 492,401
----------- -----------
$ 8,626,554 $11,346,696
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 1,421,064 $ 1,821,308
Accrued liabilities:
Salaries, wages and accrued vacation.................... 411,844 374,426
Other accrued liabilities............................... 839,385 1,372,191
Current portion of long-term debt......................... 1,411,058 1,443,107
----------- -----------
Total current liabilities............................... 4,083,351 5,011,032
----------- -----------
Long-term debt, net of current portion...................... 4,094,415 4,333,665
Other liabilities........................................... 1,146,869 1,059,354
Commitments and contingencies............................... -- --
Shareholders' equity:
Capital stock:
Redeemable preferred stock, no par value: authorized,
issued and outstanding, 200 shares..................... 180 180
Common stock, no par value: authorized, 50,000 shares;
issued and outstanding, 1,025 shares................... 19,575 19,575
Retained earnings......................................... (717,836) 922,890
----------- -----------
Total shareholders' equity.............................. (698,081) 942,645
----------- -----------
$ 8,626,554 $11,346,696
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-25
<PAGE> 80
CONSOLIDATED REPROGRAPHICS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1997 AND
FOR THE NINE MONTHS ENDED MAY 31, 1997 AND 1998
<TABLE>
<CAPTION>
MAY 31,
AUGUST 31, -------------------------
1997 1997 1998
---------- ---- ----
(UNAUDITED)
-----------
<S> <C> <C> <C>
Net sales............................................. $24,504,172 $17,953,666 $22,390,217
Cost of sales......................................... 17,382,245 12,724,423 15,241,757
----------- ----------- -----------
Gross profit..................................... 7,121,927 5,229,243 7,148,460
Operating expenses:
Marketing and selling............................... 1,970,087 1,413,282 1,698,899
General and administrative.......................... 1,750,912 1,447,231 1,803,392
Amortization expense................................ 407,066 305,299 245,299
----------- ----------- -----------
Total operating expense.......................... 4,128,065 3,165,812 3,747,590
----------- ----------- -----------
Income from operations........................... 2,993,862 2,063,431 3,400,870
----------- ----------- -----------
Other expense:
Interest expense.................................... 659,820 506,180 480,124
Other income and expense, net....................... 2,413 6,314 50,263
----------- ----------- -----------
662,233 512,494 530,387
----------- ----------- -----------
Income before provision for income taxes......... 2,331,629 1,550,937 2,870,483
Provision for income taxes............................ 1,050,036 728,577 1,229,757
----------- ----------- -----------
Net income....................................... $ 1,281,593 $ 822,360 $ 1,640,726
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-26
<PAGE> 81
CONSOLIDATED REPROGRAPHICS
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED AUGUST 31, 1997 AND
FOR THE NINE MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
REDEEMABLE
PREFERRED STOCK COMMON STOCK
---------------- ----------------- RETAINED
SHARES AMOUNT SHARES AMOUNT EARNINGS TOTAL
------ ------ ------ ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, September 1, 1996.......... 200 $180 1,025 $19,575 $(1,999,429) $(1,979,674)
Net income.......................... 1,281,593 1,281,593
--- ---- ----- ------- ----------- -----------
Balance, August 31, 1997............ 200 180 1,025 19,575 (717,836) (698,081)
Net income (unaudited).............. 1,640,726 1,640,726
--- ---- ----- ------- ----------- -----------
Balance, May 31, 1998 (unaudited)... 200 $180 1,025 $19,575 $ 922,890 $ 942,645
=== ==== ===== ======= =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-27
<PAGE> 82
CONSOLIDATED REPROGRAPHICS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 1997 AND FOR THE NINE MONTHS ENDED MAY 31, 1997
AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MAY 31,
AUGUST 31, -------------------------
1997 1997 1998
---------- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 1,281,593 $ 822,360 $ 1,640,726
Depreciation and amortization....................... 1,489,165 934,850 1,334,356
Deferred income taxes............................... 26,938 33,238 (57,063)
Loss on disposal of assets.......................... 10,878 16,628 63,824
Changes in assets and liabilities
Increase in receivables.......................... (607,384) (722,740) (1,141,725)
(Increase) decrease in supplies.................. (172,082) (46,137) 98,190
(Increase) decrease in deposits and other
assets......................................... (77,540) (108,526) 337,785
Increase in accounts payable..................... 420,310 208,060 400,244
Increase in accrued liabilities.................. 39,774 239,209 407,873
----------- ----------- -----------
Net cash provided by operating activities........ 2,411,652 1,376,942 3,084,210
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of equipment..................... 19,649 15,109 27,872
Purchase of machinery and equipment................. (1,183,011) (465,078) (2,943,219)
Purchase of leasehold improvements.................. (203,953) (198,510) (72,502)
----------- ----------- -----------
Net cash used in investing activities............ (1,367,315) (648,479) (2,987,849)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from long-term debt........................ 629,047 591,725 1,602,394
Repayment of long-term debt......................... (1,627,218) (1,405,625) (1,331,095)
----------- ----------- -----------
Net cash provided by (used in) financing
activities..................................... (998,171) (813,900) 271,299
----------- ----------- -----------
Net increase (decrease) in cash....................... 46,166 (85,437) 367,660
Cash, beginning of period............................. 448,942 448,942 495,108
----------- ----------- -----------
Cash, end of year..................................... $ 495,108 $ 363,505 $ 862,768
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest......................................... $ 548,773
===========
Income taxes paid, net........................... $ 1,069,033
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-28
<PAGE> 83
CONSOLIDATED REPROGRAPHICS
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. COMPANY OPERATIONS AND ORGANIZATION: Consolidated Reprographics (the
"Company") is a California corporation, incorporated on April 1, 1969. The
Company provides reprographic and related services in Southern California and
Nevada.
B. CONCENTRATION OF CREDIT RISK: The Company grants credit to its
customers, primarily architects, engineers, contractors and the technology
sector on terms consistent with industry standards. Over 90 percent of the
Company's sales come from the Southern California area.
The Company maintains its cash balances in one financial institution. The
balances are insured by the Federal Deposit Insurance Corporation up to
$100,000. At August 31, 1997 the Company's uninsured cash balances totaled
$395,108.
C. REVENUE RECOGNITION: Revenues are recorded when the services are
provided.
D. SUPPLIES: Inventory consists of materials, primarily paper, used in
production and is valued at cost, which approximates market, as determined by
the first-in, first-out method.
E. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost.
Depreciation is computed using the straight-line and double-declining balance
methods over the estimated useful lives of the assets as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES
---------
<S> <C>
Reprographic equipment...................................... 5 years
Computer equipment.......................................... 5 years
Leasehold improvements...................................... 7 years
Auto and truck.............................................. 5 years
</TABLE>
Total depreciation expense for the period ended August 31, 1997 was
$1,082,099. Adjustments of the asset and related accumulated depreciation
accounts are made for retirements of property and equipment with the resulting
gain.
F. INTANGIBLES: The Company amortizes goodwill on a straight line basis
over 10 years. The goodwill is reduced for the tax benefits of realized acquired
net operating loss carryforwards that were not recorded as a deferred tax asset
at the date of acquisition due to the uncertainty of realization. Additionally,
noncompete covenants are amortized on a straight line basis over 2 to 5 years.
Amortization expense for the period ended August 31, 1997 was $407,066.
G. INCOME TAXES: Deferred income tax assets and liabilities are computed
annually for differences between the financial reporting basis and tax basis of
assets and liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
H. USE OF ESTIMATES: 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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
I. STATEMENT OF CASH FLOWS: For purposes of the statement of cash flows,
the Company considers all highly liquid investment instruments with an original
maturity of three months or less to be cash equivalents.
F-29
<PAGE> 84
CONSOLIDATED REPROGRAPHICS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
J. FAIR VALUE OF FINANCIAL INSTRUMENTS: Due to the short-term nature of the
Company's financial instruments, other than debt, fair values do not materially
differ from their carrying values. Based on the borrowing rates available to the
Company, the carrying value of debt approximated fair value as of August 31,
1997.
K. IMPAIRMENT OF LONG-LIVED ASSETS: The Company reviews it property and
equipment, certain identifiable intangibles and goodwill for possible
impairment. As of August 31, 1997, no impairment reserve was deemed necessary.
2. EMPLOYEE BENEFIT PLAN
Effective March 3, 1997, the Company amended its profit sharing plan and
trust. The plan is now a 401(k) plan. The Company has discretionary matching
contribution equal to a uniform percentage of the amount of salary reduction
deferred. For the period ended August 31, 1997, the employer match portion was
$47,276. As of August 31, 1997, the entire amount of the company match remained
unpaid.
3. LONG-TERM DEBT
Notes and contracts comprising long-term debt are as follows:
<TABLE>
<CAPTION>
AUGUST 31,
1997
----------
<S> <C>
Line of credit, maximum $1,000,000, collateralized by all
company assets, principal due January 15, 1998, plus
interest payable monthly at the bank's reference rate plus
.75 percent (9.25 percent at August 31, 1997)............. $ 500,000
Contract payable, unsecured, quarterly principal payments of
$25,000, maturing December 31, 1998 (subordinated to line
of credit, secured note payable and note payable,
shareholder).............................................. 150,000
Note payable, collateralized by all company assets, payable
in equal monthly installments of $7,222, plus interest
payable at the bank's reference rate plus 1.25 percent
(9.75 percent at August 31, 1997)......................... 36,111
Note payable, unsecured, noninterest bearing, payable on
demand.................................................... 200,000
Note payable, unsecured, quarterly principal payments of
$10,000, plus interest payable quarterly at 10 percent,
maturing December 31, 1999 (subordinated to line of
credit, secured note payable and note payable,
shareholder).............................................. 100,000
Contract payable, unsecured, quarterly principal payments of
$16,667, maturing December 31, 1997 (subordinated to line
of credit, secured note payable and note payable,
shareholder).............................................. 33,333
Note payable, shareholder, collateralized by all company
assets, monthly principal payments of $55,269 (including
10 percent interest), maturing July 1, 2006 (subordinated
to line of credit and secured note payable)............... 3,880,420
Various capital leases, collateralized by equipment, payable
in monthly payments, including stated interest rates
ranging from 6.9 percent to 22.5 percent (the majority
have stated rates of 10.0 percent or less), with various
maturity dates through the year ended June 1, 2001........ 605,609
----------
5,505,473
Less current portion........................................ 1,411,058
----------
Long-term debt, net of current portion................. $4,094,415
==========
</TABLE>
F-30
<PAGE> 85
CONSOLIDATED REPROGRAPHICS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
Maturities of long-term debt (excluding capital leases, see Note 4) as of
August 31, 1997, are as follows:
<TABLE>
<S> <C>
Year ending August 31:
1998...................................................... $1,172,475
1999...................................................... 405,698
2000...................................................... 368,755
2001...................................................... 385,275
2002...................................................... 425,618
Thereafter................................................ 2,142,043
----------
Total.................................................. $4,899,864
==========
</TABLE>
As of August 31, 1997, the Company's line of credit requires the
maintenance of certain financial ratios. The covenants include a minimum current
ratio of not less than .95, total debt to tangible net worth of not greater than
2.1 and an earnings before interest, taxes, depreciation and amortization
("EBITDA") coverage ratio of not less than 1.75. The Company is in compliance
with the covenants as of August 31, 1997.
4. LEASES
The Company rents certain equipment under operating leases. Rent expense
for the period August 31, 1997 was $1,197,180.
The following schedule presents the Company's minimum future lease payments
as of August 31, 1997:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- -------
<S> <C> <C>
Year ending August 31:
1998...................................................... $1,042,632 $238,582
1999...................................................... 751,544 200,336
2000...................................................... 495,328 166,691
2001...................................................... 403,927 --
2002...................................................... 320,880 --
Thereafter................................................ 460,605 --
---------- --------
Total.................................................. $3,474,916 $605,609
========== ========
</TABLE>
The following represents the cost and accumulated amortization of assets
under capital leases as of August 31, 1997:
<TABLE>
<S> <C>
Original cost of assets..................................... $1,185,993
Accumulated amortization.................................... (739,795)
----------
Net cost of assets under capitalized leases............... $ 446,198
==========
</TABLE>
5. RELATED PARTY TRANSACTIONS
The Company rents its headquarters facility from shareholders of the
Company. The rent expense on the facility was $124,397 for the period August 31,
1997.
During the fiscal year ended 1997, the Company held a note receivable from
two shareholders. The outstanding balance on the note was $154,711 on August 31,
1997. The Company received payments of $5,289 for the fiscal year ended 1997.
The note is due August 1, 2012. Principal payments are due monthly and bear
interest at 9 percent.
F-31
<PAGE> 86
CONSOLIDATED REPROGRAPHICS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The Company is party to a consulting agreement and covenant-not-to-compete
with a shareholder, as detailed in Note 8.
6. INCOME TAXES
Income tax expense for the period ended August 31, 1997, consists of the
following:
<TABLE>
<S> <C>
Current income tax provision:
Federal................................................... $ 771,712
State..................................................... 251,386
----------
Total current income tax provision..................... 1,023,098
----------
Deferred tax provision:
Federal................................................... 40,368
State..................................................... (13,430)
Total deferred tax provision........................... 26,938
----------
Total income tax provision............................. $1,050,036
==========
</TABLE>
At August 31, 1997, the Company has approximately $130,609 of net operating
loss carryforwards available to reduce future taxable income which expire August
31, 2009. The tax benefit, if realized for tax return purposes, will be recorded
as an adjustment of goodwill.
Differences between the Company's statutory federal income tax rate and its
effective tax rate of 35 percent results primarily from travel and entertainment
and certain goodwill amortization not deductible for federal income taxes.
Deferred tax asset results primarily from vacation expense that cannot be
deducted for tax purposes in the current year, overhead costs capitalized in
accordance with tax laws, a bad debt reserve and discount reserve for book
purposes and the use of accelerated methods of depreciation for tax purposes.
<TABLE>
<CAPTION>
AUGUST 31,
1997
----------
<S> <C>
Deferred taxes:
Bad debt.................................................. $121,499
Net operating loss carryforward........................... 44,407
Depreciation.............................................. 14,951
Vacation.................................................. 34,383
Other..................................................... 5,327
--------
Net deferred tax asset............................ $220,567
========
</TABLE>
7. STOCK OPTIONS
Statement of Financial Accounting Standards No. 123 "Accounting for Stock
Based Compensation" (SFAS No. 123) was issued in October 1995 and was effective
for fiscal years beginning after December 15, 1995. That standard requires
certain disclosures regarding stock based awards to employees and encourages
companies to recognize compensation expense based on the fair value of such
awards on the date of grant. Alternatively, companies may continue to account
for such transactions under Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" (APB No. 25) The Company has elected
to continue to account for employee stock options under APB No. 25.
Stock options were granted to four employees and officers of the Company by
the majority shareholder. The exercise price equalled fair value at the date of
grant, therefore no compensation expense was recognized.
F-32
<PAGE> 87
CONSOLIDATED REPROGRAPHICS
NOTES TO FINANCIAL STATEMENTS -- CONTINUED
The options vest at the end of fifteen years. The stock option agreements
provide for accelerated vesting in the instance of an initial public offering of
the Company's stock or the sale of more the fifty percent of the Company's
stock.
Had compensation expense for the employee stock options been determined
based on the fair value at the grant dates of the awards consistent with the
provisions of SFAS No. 123, the Company's net income would have been reduced to
the pro forma amounts as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
AUGUST 31, 1997
------------------
<S> <C>
Net income
as reported............................................... $1,281,593
Pro forma................................................. 1,253,780
</TABLE>
For purposes of computing the pro forma amounts above, the fair value of
each option granted was estimated using a minimum value formula using the
following weighted average assumptions for grants in 1996 and 1997, dividend
yield 0.0 percent for both years, risk free interest rates of 6.87 percent and
6.49 percent, respectively. The weighted average remaining expected life is 10
years. A summary of the status of the Company's stock option plan is as follows:
<TABLE>
<CAPTION>
SHARES EXERCISE PRICE
------ ---------------
<S> <C> <C>
Outstanding at beginning of the year........................ 82 $9,756
Granted..................................................... 25 9,756
Exercised................................................... --
---
Outstanding at end of year.................................. 107
===
</TABLE>
8. STOCK REPURCHASE, MAJORITY SHAREHOLDER
On July 1, 1996, pursuant to a stock redemption agreement, the Company
purchased 2,392 shares from the majority shareholder and his spouse. An employee
of the Company also purchased 75 shares from the majority shareholder and his
spouse. The remaining shareholders executed and delivered guaranties and stock
pledge agreements to the sellers. The Company also authorized and issued 200
shares of preferred stock to the former majority shareholders in exchange for
their remaining 200 shares of common stock in accordance with the stock
redemption agreement.
The Company purchased the shares by executing and signing a secured note
payable in the amount of $4,182,265 (see Note 3) to the majority shareholder and
his spouse. Additionally, the Company provided for a cash down payment by
obtaining a line of credit in the amount of $1,000,000 (see Note 3).
In connection with the stock repurchase, the Company agreed to pay to the
former stockholder a total of $2,137,200 in equal monthly and bi-monthly
payments ending in July 2006. A portion of this consideration was allocated to a
non-compete agreement. The present value of this liability using an effective
interest rate of 9.0 % is $1,160,951 as of August 31, 1997 which is recorded in
other liabilities.
Pursuant to the stock redemption agreement, the Company amended its
Articles of Incorporation in July 1996 to reflect the authorization of 200
shares of preferred stock. Preferred shareholders shall not participate in
dividends and have no voting rights. Preferred stock can be converted to common
stock in the event of a public offering. Preferred stock is redeemable at the
earlier of either the sale of 50 percent or more of the Company to someone other
than a current shareholder or January 1, 2007. Upon liquidation, dissolution or
the winding-up of the Company, preferred shareholders will be paid before common
shareholders.
There were no stock repurchases for the year ended August 31, 1997.
F-33
<PAGE> 88
CONSOLIDATED REPROGRAPHICS
NOTES TO FINANCIAL STATEMENTS -- CONCLUDED
9. STOCK REPURCHASE, MINORITY SHAREHOLDER
During the fiscal year ended August 31, 1996, the Company completed the
purchase of 267 common shares from a minority shareholder.
10. SUBSEQUENT EVENTS
Effective April 1, 1998, the Company amended its debt covenants to allow
them to purchase up to $3,550,000 of fixed assets a year.
On July 29, 1998, Lason, Inc. acquired all of the common stock of the
Company.
F-34
<PAGE> 89
SCHEDULE I
LASON, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
---- ----
<S> <C> <C>
ASSETS
Investment in subsidiaries.................................. $56,573 $131,184
Deferred tax asset.......................................... 433 361
------- --------
Total assets........................................... $57,006 $131,545
======= ========
LIABILITIES
Total liabilities........................................... -- --
STOCKHOLDERS' EQUITY
Common stock................................................ $ 86 $ 115
Additional paid in capital.................................. 51,986 117,498
Retained earnings........................................... 4,934 13,932
------- --------
Total stockholders' equity............................. 57,006 131,545
------- --------
Total liabilities and stockholders' equity............. $57,006 $131,545
======= ========
</TABLE>
S-1
<PAGE> 90
SCHEDULE I
LASON, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCOME STATEMENTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
REVENUE..................................................... $ -- $ -- $ --
OPERATING EXPENSES
Compensatory stock option expense........................... 308 936 221
------ ------ ------
Operating loss.............................................. (308) (936) (221)
Equity in net income of subsidiaries........................ 2,217 4,339 9,219
------ ------ ------
Income before taxes......................................... 1,909 3,403 8,998
Income tax benefit.......................................... (105) (328) (72)
------ ------ ------
Net Income................................................ $2,014 $3,731 $9,070
====== ====== ======
</TABLE>
S-2
<PAGE> 91
SCHEDULE I
LASON, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
NET CASH USED IN OPERATING ACTIVITIES....................... $ -- $ -- $ --
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary.................................... (10,900) (41,236) (65,248)
-------- -------- --------
Net cash used in investing activities....................... (10,900) (41,236) (65,248)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of shares of common stock.......................... 10,900 53,001 65,248
Redemption of shares of common stock........................ -- (11,765) --
-------- -------- --------
Net cash provided by financing activities................... 10,900 41,236 65,248
-------- -------- --------
Change in cash.............................................. -- -- --
Cash at beginning of year................................... -- -- --
Cash at end of year......................................... $ -- $ -- $ --
======== ======== ========
</TABLE>
S-3
<PAGE> 92
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS, OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 8
The Company............................... 14
Use of Proceeds........................... 15
Price Range of Common Stock............... 15
Dividend Policy........................... 15
Capitalization............................ 16
Selected Consolidated Financial Data...... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 19
Business.................................. 25
Management................................ 35
Certain Relationships and Related
Transactions............................ 42
Principal and Selling Stockholders........ 45
Description of Capital Stock.............. 47
Shares Eligible for Future Sale........... 49
Underwriting.............................. 51
Legal Matters............................. 52
Experts................................... 52
Available Information..................... 53
Index to Consolidated Financial
Statements.............................. F-1
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
3,500,000 Shares
LASON LOGO
Common Stock
------------------------
PROSPECTUS
------------------------
PRUDENTIAL SECURITIES INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY
JEFFERIES & COMPANY, INC.
PAINEWEBBER INCORPORATED
THE ROBINSON-HUMPHREY COMPANY
August , 1998
------------------------------------------------------------
------------------------------------------------------------
<PAGE> 93
PART II -- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a statement of estimated expenses, none of which shall be
borne by the Selling Stockholders and all of which shall be paid solely by the
Company, of the issuance and distribution of the securities being registered
other than underwriting compensation. All amounts are estimates except the
Securities and Exchange Commission registration fee, the National Association of
Securities Dealers, Inc. fee and the Nasdaq National Market fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 61,447
National Association of Securities Dealers, Inc. fee........ 21,330
Nasdaq National Market fee.................................. 17,500
Blue sky fees and expenses (including attorneys' fees and
expenses)................................................. 10,000
Printing and engraving expenses............................. 200,000
Transfer agent and registrar's fees and expenses............ 5,000
Accounting fees and expenses................................ 150,000
Legal fees and expenses..................................... 200,000
Miscellaneous expenses...................................... 84,723
--------
Total..................................................... $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware.
Section 145 of the General Corporation Law of the State of Delaware ("Section
145") provides that a Delaware corporation may indemnify any persons who are, or
are threatened to be made, parties to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation), by
reason of the fact that such person was an officer, director, employee or agent
of another corporation or enterprise. The indemnity may include expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action
or proceeding, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action, had no reasonable cause to believe that his
conduct was illegal. A Delaware corporation may indemnify any persons who are,
or are threatened to be made, a party to any threatened, pending or completed
action or suit by or in the right of the corporation by reason of the fact that
such person was a director, officer, employee or agent of such corporation, or
is or was serving at the request of such corporation as a director, officer,
employee or agent of another corporation or enterprise. The indemnity may
include expenses (including attorneys' fees) actually and reasonably incurred by
such person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the corporation's best interests, except that no
indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses which
such officer or director has actually and reasonably incurred. Pursuant to
Section 145, the Company may purchase insurance on behalf of its present and
former directors and officers against any liability asserted against or incurred
by them in such capacity or arising out of their status as such, including
liabilities under the Securities Act.
The Company's Amended and Restated Certificate of Incorporation and By-Laws
provide for the indemnification of directors and officers of the Company to the
fullest extent permitted by Section 145.
In that regard, the Amended and Restated Certificate of Incorporation and
By-Laws provide that the Company shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, administrative or
investigative
II-1
<PAGE> 94
(other than action by or in the right of the corporation) by reason of the fact
that he is or was a director or officer of the Company, or is or was serving at
the request of the Company as a director, officer or member of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of such
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. Indemnification in
connection with an action or suit by or in the right of such corporation to
procure a judgment in its favor is limited to payment of expenses (including
attorneys' fees) actually and reasonably incurred in connection with the defense
or settlement of such an action or suit except that no such indemnification may
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the performance
of his duty to the indemnifying corporation unless and only to the extent that
the Court of Chancery of Delaware or the court in which such action or suit was
brought shall determine that, despite the adjudication of liability but in
consideration of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The following securities of the Company were sold by the Company within the
past three years without registration:
On February 26, 1996, the Company issued 4,262 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 4,262 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 4,262 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 2,718, 10,872, 3,433, 8,153, 5,433,
8,153, 18,530, 5,528 and 8,894 shares of 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., 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 $46,217,
$184,828, $92,361, $138,611, $92,361, $138,612, $315,018, $100,783, and
$151,210, respectively, in connection with the acquisition by the Company of
Information and Image Technology of America, Inc.
On July 17, 1996, the Company issued 31,176 of 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.
On January 31, 1997, the Company issued to Mark Roter 72,499 shares of
Common Stock in payment of a portion of the purchase price in stock equal to
$1,500,000 in connection with the acquisition by the Company of Churchill
Communications Corporation.
On February 5, 1997, the Company issued to the Arnold E. Good Living Trust,
Ronald C. Browder, Jr., the Marvin M. Good Living Trust and to Ronald C. Browder
Jr. and Jennifer M. Browder, 17, 10, 7,124 and 4,366 shares of Common Stock in
payment of a portion of the purchase price in stock equal to $350, $206,
II-2
<PAGE> 95
$146,754 and $89,940, respectively, in connection with the acquisition by the
Company of Alpha Imaging, Inc. and Alpha Micro Graphics Supply, Inc.
On March 27, 1997, the Company issued to the Jerry and Mary Owen Family
Limited Partnership, 31,008 shares of Common Stock in payment of a portion of
the purchase price in stock equal to $654,894 in connection with the acquisition
by the Company of Automated Enterprises, Inc.
On June 27, 1997, the Company issued to Louis J. Civale, Jr. and to John
Civale, 2,672 and 1,781 shares of Common Stock in payment of a portion of the
purchase price in stock equal to $63,059 and $42,032, respectively, in
connection with the acquisition of American Micro Image, Inc.
On July 29, 1997, the Company issued to John R. Messinger, Michael Riley,
Daniel Bailey, John E. Hendricks, Donald Ferling, Geoffrey Gitelson, Mario
Disantis, John Elder, Sheryl Hehn, Glen Dedering, Peter Goodrich and Thomas
Joyce, 21,272, 8,598, 8,598, 3,512, 1,037, 1,060, 1,060, 1,020, 563, 202, 124,
and 395 shares of Common Stock in payment of a portion of the purchase price of
stock equal to $521,169, $210,661, $210,661, $86,041, $25,406, $25,982, $25,982,
$24,970, $13,804, $4,958, $3,034 and $9,679, respectively, in connection with
the acquisition of Image Conversion Systems, Inc. ("ICS"). In May 1998, as
additional consideration for their shares, certain of the ICS shareholders
received an additional 14,954 shares of the Company's Common Stock valued at
$400,000 upon achievement of certain target levels of operations.
On October 15, 1997, the Company issued to Anthony Giammara 1,267 shares of
Common Stock in payment of a portion of the purchase price in stock equal to
$34,977 in connection with the acquisition of the assets of Image Data Co., Inc.
On November 25, 1997, the Company issued to The Valdez Family Trust and The
Lou Lee Family Trust 73,630 and 73,630 shares, respectively, of Common Stock in
payment of a portion of the purchase price in stock equal to $499,993 and
$499,993, respectively, in connection with the acquisition of the assets of VIP
Litho, Inc.
On December 10, 1997, the Company issued to Robert Dowling 13,634 shares of
Common Stock in payment of a portion of the purchase price in stock equal to
$391,978 in connection with the acquisition of Litigation Solutions, Inc.
On December 11, 1997, the Company issued to Florida Data Bank, Inc. 4,869
shares of Common Stock in payment of a portion of the purchase price in stock
equal to $139,984 in connection with the acquisition of the assets of Florida
Data Bank, Inc.
On or about January 5, 1998, the Company issued to Thomas N. Taube, Jr.
4,302 shares of Common Stock in payment of a portion of the purchase price in
stock equal to $119,945 in connection with the acquisition of T.N. Taube
Corporation.
On February 5, 1998, the Company issued to Bruce A. Duff 40,000 shares of
Common Stock in payment of a portion of the purchase price in stock equal to
$1,000,000 in connection with the acquisition by the Company of the remaining
35% of the outstanding shares of Delaware Legal Copy, Inc. ("Delaware Legal").
On May 29, 1998, the Company issued Mr. Duff, as additional consideration for
his shares of Delaware Legal, 2,497 shares of the Company's Common Stock, valued
at $66,670 upon achievement of certain target levels of operation.
On February 25, 1998, the Company issued to Aleck S. Kogan and Yana Kogan
8,833 shares of Common Stock in payment of a portion of the purchase price in
stock equal to $280,000 in connection with substantially all of the assets of
Professional Copy Service, a sole proprietorship.
On February 27, 1998, the Company issued to J.L. Blodgett Associates, Inc.
5,442 shares of Common Stock in payment of a portion of the purchase price in
stock equal to $159,995 in connection with the purchase of the assets of J.L.
Blodgett Associates, Inc.
On March 2, 1998, the Company issued to Robert J. Rathe, Jr., Stuart Rathe
and Brain Rathe 62,794, 62,794 and 62,794 shares, respectively, of Common Stock
in payment of a portion of the purchase price in
II-3
<PAGE> 96
stock equal to $1,733,312, $1,733,312 and $1,733,312, respectively, in
connection with the acquisition of Southern Microfilm Associates, Inc.
On March 5, 1998, the Company issued to Steven Fruchter, Philip Fruchter,
Laurence Braun and The Edward Andrews Group 38,057, 38,057, 38,057 and 3,531
shares, respectively, of Common Stock in payment of a portion of the purchase
price in stock equal to $1,212,496, $1,212,496, $1,212,496 and $112,498,
respectively, in connection with the purchase of the assets of API Systems, Inc.
On May 27, 1998, the Company issued to Craig Erlich 2,797 shares of Common
Stock in payment of a portion of the purchase price in stock equal to $110,980
in connection with the acquisition of Quality Mailing Service, Inc.
On June 3, 1998, the Company issued to SHC Distribution Corporation 17,431
shares of Common Stock in payment of a portion of the purchase price in stock
equal to $699,964 in connection with the acquisition of Strategy Manufacturing,
Inc.
On June 10, 1998, the Company issued to Robert Wurtzel and Sean Cummings
8,062 and 8,062 shares, respectively, of Common Stock in payment of a portion of
the purchase price in stock equal to $328,880 and $328,880, respectively, in
connection with the acquisition of Litigation Reprographics and Support
Services, Inc.
On June 15, 1998, the Company issued to Scott E. Shaeffer, D. Bobbitt Noel,
Jr., Daniel A. Hyde, Carrie Welsh, P. Ferguson McNeil, Kent W. Robinson and
Dixon Montague 10,863, 101, 201, 201, 201, 201 and 302 shares, respectively, of
Common Stock in payment of a portion of the purchase price in stock equal to
$470,694, $4,376, $8,709, $8,709, $8,709, $8,709 and $13,086, respectively, in
connection with the acquisition of Document Production Services, Inc.
On July 1, 1998, the Company issued to Albert H. Wiggins, Jr. 14,420 shares
of Common Stock in payment of a portion of the purchase price in stock equal to
$711,086 in connection with the acquisition of Input Service International, Inc.
On July 10, 1998, the Company issued to John E. and Michelle L. Krui and
Dale E. Bussa 3,036 and 337 shares, respectively, of Common Stock in payment of
a portion of the purchase price in stock equal to $161,933 and $17,975,
respectively, in connection with the acquisition of Microfilm Systems, Inc.
On July 13, 1998, the Company issued to Richard J. Boyle, Sr., Richard J.
Boyle, Jr., Thomas M. Boyle and George Yankopoulos 4,889, 1,252, 1,252 and 105
shares, respectively, of Common Stock in payment of a portion of the purchase
price in stock equal to $260,767, $66,779, $66,779 and $5,600, respectively, in
connection with the acquisition of Boyle Associates, Inc.
On July 29, 1998, the Company issued to Arthur G. Lundeen, Mark W. Sipes,
Richard C. French, James M. Chamberlain, Philip B. Siegel, Eric Hazell and
Charles Lauderdale 58,657, 17,142, 12,908, 11,979, 6,196, 2,581 and 2,581
shares, respectively, of Common Stock in payment of a portion of the purchase
price in stock equal to $3,219,539, $940,882, $708,488, $657,498, $340,083,
$141,665 and $141,665, respectively, in connection with the acquisition of
Consolidated Reprographics.
The issuance of securities described in the 24 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 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.(1)
2.2 Asset Purchase Agreement dated December 28, 1995 by and
among Lason Systems, Inc. and Mail-Away Corporation.(1)
</TABLE>
II-4
<PAGE> 97
<TABLE>
<C> <S>
2.3 Asset Purchase Agreement dated February 1, 1996 by and among
Lason Systems, Inc. and Diversified Support Services,
Inc.(1)
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).(1)
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).(1)
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).(1)
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).(1)
2.8 Stock Purchase Agreement with respect to the acquisition of
National Reproductions Corp. dated August 6, 1996 by and
among Lason Systems, Inc. and the Shareholders (as defined
therein).(1)
2.9 Agreement of Purchase and Sale of Stock with respect to the
acquisition of Image Conversion Systems, Inc. dated July 17,
1997.(6)
2.10 Asset Purchase Agreement with respect to the VIP
Acquisition.(9)
2.11 Stock Purchase Agreement with respect to the Racom
Acquisition.(10)
2.12 Asset Purchase Agreement with respect to the API
Acquisition.(11)
2.13 Agreement for the Purchase and Sale of Stock dated July 24,
1998 by and among Lason, Inc., Consolidated Reprographics
and the Shareholders, as defined therein.**
3.1 Form of Amended and Restated Certificate of Incorporation of
the Company.(1)
3.2 Form of Revised Amended and Restated By-Laws.(2)
4.1 Form of certificate representing Common Stock of the
Company.(1)
4.2 Second Amended and Restated Credit Agreement dated as of
June 29, 1998 among the Company, the Lenders named therein
(the "Lenders"), First Union National Bank, as Agent,
Comerica Bank and NBD Bank, as Co-Agents.**
4.3 Second Amended and Restated Pledge Agreement dated as of
June 29, 1998 by the Company in Favor of First Union
National Bank, as agent for the Lenders.**
4.4 Second Amended and Restated Pledge and Security Agreement
dated as of June 29, 1998 by certain subsidiaries of the
Company in favor of First Union National Bank.**
4.5 Second Amended and Restated Subsidiary Guaranty Agreement
dated June 29, 1998 by certain subsidiaries of the Company
in favor of the Lenders and First Union National Bank, as
agent.**
5.1 Opinion of Seyburn, Kahn, Ginn, Bess, Deitch and Serlin,
P.C. 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.(1)
10.2 Purchase Agreement dated January 17, 1995 by and between the
Company and GTCR Fund IV.(1)
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.(1)
10.4 Stockholders Agreement dated January 17, 1995 by and among
the Company and certain of its stockholders.(1)
10.5 Registration Agreement dated January 17, 1995 by and among
the Company and the 1995 Stockholders.(1)
10.6 Credit Agreement dated January 17, 1995 by and among Lason
Acquisition Corp., the J. Yanover Trust, the R. Yanover
Trust and Mr. Yanover.(1)
10.7 Credit Agreement dated January 17, 1995 by and among Lason
Acquisition Corp., the Nesbitt Trust and Mr. Nesbitt.(1)
10.8 Employment Agreement between Lason Systems, Inc. and Gary
Monroe.(1)
10.9 Offer of employment dated April 30, 1996 from Lason Systems,
Inc. to Mr. Rauwerdink.(1)
10.10 Offer of employment dated June 12, 1996 from Lason Systems,
Inc. to Mr. Jablonski.(1)
10.11 1995 Stock Option Plan of the Company.(1)
</TABLE>
II-5
<PAGE> 98
<TABLE>
<C> <S>
10.12 Employee Stock Option Agreements dated January 17, 1995 by and among the Company and each of Donald L.
Elland, Richard C. Kowalski, Gregory C. 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.(1)
10.13 Employee Stock Option Agreement dated December 21, 1995 by and between the Company and Mr. Monroe.(1)
10.14 Stock Option Agreement dated August 7, 1995 by and between the Company and Mr. Gleklen.(1)
10.15 Employee Stock Option Agreement by and between the Company and Mr. Rauwerdink.(1)
10.16 Employee Stock Option Agreement by and between the Company and Mr. Jablonski.(1)
10.17 1996 Lason Management Bonus Plan.(1)
10.18 Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust.(1)
10.19 Amendments to Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust.(1)
10.20 Lease Agreement dated as of September 3, 1985 by and between Lason Systems, Inc. and Mart Associates as
amended.(1)
10.21 Lease Agreement dated August 3, 1995 by and between Lason Systems, Inc. and Kensington Center, Inc.(1)
10.22 Lease Agreement by and between Lason Systems, Inc. and The Prudential Insurance Company of America.(1)
10.23 First Amendment to Lease dated as of July 26, 1996, by and between Kensington Center, Inc. and Lason
Systems, Inc.(1)
10.24 Form of Recapitalization Agreement among the Company and certain of its stockholders, including Plan of
Recapitalization.(1)
10.25 Form of Termination Agreement between Lason Systems, Inc. and each of the Borrowers.(1)
10.26 Form of Redemption Agreement between the Company and Golder Thoma, Cressey, Rauner Fund IV, L.P.(1)
10.27 Amendment to Employee Stock Option Agreement by and between the Company and Mr. Gleklen.(1)
10.28 Agreement of Purchase and Sale of Stock with respect to Churchill Acquisition.(3)
10.29 Employee Stock Option Agreement by and between the Company and Mr. Rauwerdink dated December 17, 1996.(4)
10.30 Employee Stock Option Agreement by and between the Company and Mr. Jablonski dated December 17, 1996.(4)
10.31 Employee Stock Option Agreement by and between the Company and Mr. Monroe dated December 17, 1996.(5)
10.32 Employee Stock Option Agreement by and between the Company and Mr. Ghadar dated January 15, 1997.(5)
10.33 Amendment to Stock Option Agreement between the Company and William J. Rauwerdink dated October 7,
1997.(8)
10.34 Amendment to Stock Option Agreement between the Company and Brian E. Jablonski dated October 7, 1997.(8)
10.35 Employment Agreement between Image Conversion Systems and John R. Messinger dated July 29, 1997.(12)
10.36 Stock Option Agreement between Lason, Inc. and John R. Messinger dated July 29, 1997.(12)
10.37 Stock Option Agreement between Lason, Inc. and Cary W. Newman dated December 14, 1995.(12)
10.38 Stock Option Agreement between Lason, Inc. and Cary W. Newman dated December 17, 1996.(12)
10.39 Form of Secured Promissory Note dated June 5, 1998 issued by each of Messrs. Monroe, Rauwerdink,
Messinger, Newman and Jablonski in favor of the Company.**
10.40 Form of Pledge and Security Agreement dated June 5, 1998 between the Company and each of Messrs. Monroe,
Rauwerdink, Messinger, Newman and Jablonski for the Secured Promissory Notes described in Exhibit 10.39.**
10.41 Letter Agreement between Gary L. Monroe and the Company dated July 29, 1998 amending and extending
Employment Agreement.**
</TABLE>
II-6
<PAGE> 99
<TABLE>
.4210 Letter Agreement between John R. Messinger and the Company dated March 25, 1998 amending the
Employment Agreement.(13)
<C> <S>
21.1 Subsidiaries of the Company.+
23.1 Consent of PricewaterhouseCoopers LLP +
23.2 Consent of PricewaterhouseCoopers LLP +
23.3 Consent of Seyburn, Kahn, Ginn, Bess, Deitch and Serlin, P.C. (included in opinion filed as
Exhibit 5.1)+
24.1 Powers of Attorney.**
</TABLE>
- -------------------------
+ filed herewith
** Filed with initial filing of this registration statement.
(1) Incorporated herein by reference to registrant's Form S-1 filed on October
7, 1996, Commission File No. 333-09799.
(2) Incorporated herein by reference to registrant's Form 10-Q filed on May 15,
1997, Commission File No. 0-21407.
(3) Incorporated herein by reference to registrant's Form 8-K filed on February
18, 1997, Commission File No. 0-21407.
(4) Incorporated herein by reference to registrant's Form S-8 filed on December
23, 1996, Commission File No. 333-18551.
(5) Incorporated herein by reference to registrant's Form 10-K filed on
March 31, 1997, Commission File No. 0-21407.
(6) Incorporated herein by reference to registrant's Form 8-K filed on
August 4, 1997, Commission File No. 0-21407.
(7) Incorporated herein by reference to registrant's Form S-1 filed on August
15, 1997.
(8) Incorporated herein by reference to registrant's Form 10-Q filed on
November 15, 1997, Commission File No. 0-21407.
(9) Incorporated herein by reference to registrant's Form 8-K filed on December
10, 1997, Commission File No. 0-21407.
(10) Incorporated herein by reference to registrant's Form 8-K filed on March
17, 1998, Commission File No. 0-21407.
(11) Incorporated herein by reference to registrant's Form 8-K filed on March
20, 1998, Commission File No. 0-21407.
(12) Incorporated herein by reference to registrant's Form 10-Q filed on May 15,
1998, Commission File No. 0-21407.
(13) Incorporated herein by reference to registrant's Form 10-Q filed on August
14, 1998.
(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.
II-7
<PAGE> 100
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-8
<PAGE> 101
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused Amendment No. 1 to 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 17, 1998.
LASON, INC.
By: /s/ WILLIAM J. RAUWERDINK
------------------------------------
WILLIAM J. RAUWERDINK
Executive Vice President, Chief
Financial Officer, Treasurer &
Secretary
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, Amendment No. 1
to this Registration Statement has been signed on August 17, 1998, by the
following persons in the capacities indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
* Chairman of the Board, President Chief Executive
- ------------------------------------------ Officer (Principal Executive Officer) and Director
Gary L. Monroe
/s/ WILLIAM J. RAUWERDINK Executive Vice President, Chief Financial Officer,
- ------------------------------------------ Treasurer and Secretary (Principal Financial and
William J. Rauwerdink Accounting Officer)
* Director
- ------------------------------------------
Fariborz Ghadar
* Director
- ------------------------------------------
Donald M. Gleklen
* Director
- ------------------------------------------
Allen J. Nesbitt
* Director
- ------------------------------------------
Joseph P. Nolan
* Director
- ------------------------------------------
Bruce V. Rauner
* Director
- ------------------------------------------
Robert A. Yanover
</TABLE>
*By: /s/ WILLIAM J. RAUWERDINK
---------------------------------
William J. Rauwerdink
Attorney-in-fact
II-9
<PAGE> 102
EXHIBIT INDEX
<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.(1)
2.2 Asset Purchase Agreement dated December 28, 1995 by and
among Lason Systems, Inc. and Mail-Away Corporation.(1)
2.3 Asset Purchase Agreement dated February 1, 1996 by and among
Lason Systems, Inc. and Diversified Support Services,
Inc.(1)
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).(1)
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).(1)
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).(1)
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).(1)
2.8 Stock Purchase Agreement with respect to the acquisition of
National Reproductions Corp. dated August 6, 1996 by and
among Lason Systems, Inc. and the Shareholders (as defined
therein).(1)
2.9 Agreement of Purchase and Sale of Stock with respect to the
acquisition of Image Conversion Systems, Inc. dated July 17,
1997.(6)
2.10 Asset Purchase Agreement with respect to the VIP
Acquisition.(9)
2.11 Stock Purchase Agreement with respect to the Racom
Acquisition.(10)
2.12 Asset Purchase Agreement with respect to the API
Acquisition.(11)
2.13 Agreement for the Purchase and Sale of Stock dated July 24,
1998 by and among Lason, Inc., Consolidated Reprographics
and the Shareholders, as defined therein.+
3.1 Form of Amended and Restated Certificate of Incorporation of
the Company.(1)
3.2 Form of Revised Amended and Restated By-Laws.(2)
4.1 Form of certificate representing Common Stock of the
Company.(1)
4.2 Second Amended and Restated Credit Agreement dated as of
June 29, 1998 among the Company, the Lenders named therein
(the "Lenders"), First Union National Bank, as Agent,
Comerica Bank and NBD Bank, as Co-Agents.**
4.3 Second Amended and Restated Pledge Agreement dated as of
June 29, 1998 by the Company in Favor of First Union
National Bank, as agent for the Lenders.**
4.4 Second Amended and Restated Pledge and Security Agreement
dated as of June 29, 1998 by certain subsidiaries of the
Company in favor of First Union National Bank.**
4.5 Second Amended and Restated Subsidiary Guaranty Agreement
dated June 29, 1998 by certain subsidiaries of the Company
in favor of the Lenders and First Union National Bank, as
agent.**
5.1 Opinion of Seyburn, Kahn, Ginn, Bess, Deitch and Serlin,
P.C. 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.(1)
10.2 Purchase Agreement dated January 17, 1995 by and between the
Company and GTCR Fund IV.(1)
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.(1)
10.4 Stockholders Agreement dated January 17, 1995 by and among
the Company and certain of its stockholders.(1)
10.5 Registration Agreement dated January 17, 1995 by and among
the Company and the 1995 Stockholders.(1)
</TABLE>
<PAGE> 103
<TABLE>
<C> <S>
10.6 Credit Agreement dated January 17, 1995 by and among Lason
Acquisition Corp., the J. Yanover Trust, the R. Yanover
Trust and Mr. Yanover.(1)
10.7 Credit Agreement dated January 17, 1995 by and among Lason
Acquisition Corp., the Nesbitt Trust and Mr. Nesbitt.(1)
10.8 Employment Agreement between Lason Systems, Inc. and Gary
Monroe.(1)
10.9 Offer of employment dated April 30, 1996 from Lason Systems,
Inc. to Mr. Rauwerdink.(1)
10.10 Offer of employment dated June 12, 1996 from Lason Systems,
Inc. to Mr. Jablonski.(1)
10.11 1995 Stock Option Plan of the Company.(1)
10.12 Employee Stock Option Agreements dated January 17, 1995 by
and among the Company and each of Donald L. Elland, Richard
C. Kowalski, Gregory C. 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.(1)
10.13 Employee Stock Option Agreement dated December 21, 1995 by
and between the Company and Mr. Monroe.(1)
10.14 Stock Option Agreement dated August 7, 1995 by and between
the Company and Mr. Gleklen.(1)
10.15 Employee Stock Option Agreement by and between the Company
and Mr. Rauwerdink.(1)
10.16 Employee Stock Option Agreement by and between the Company
and Mr. Jablonski.(1)
10.17 1996 Lason Management Bonus Plan.(1)
10.18 Lason Systems, Inc. 401(k) Profit Sharing Plan & Trust.(1)
10.19 Amendments to Lason Systems, Inc. 401(k) Profit Sharing Plan
& Trust.(1)
10.20 Lease Agreement dated as of September 3, 1985 by and between
Lason Systems, Inc. and Mart Associates as amended.(1)
10.21 Lease Agreement dated August 3, 1995 by and between Lason
Systems, Inc. and Kensington Center, Inc.(1)
10.22 Lease Agreement by and between Lason Systems, Inc. and The
Prudential Insurance Company of America.(1)
10.23 First Amendment to Lease dated as of July 26, 1996, by and
between Kensington Center, Inc. and Lason Systems, Inc.(1)
10.24 Form of Recapitalization Agreement among the Company and
certain of its stockholders, including Plan of
Recapitalization.(1)
10.25 Form of Termination Agreement between Lason Systems, Inc.
and each of the Borrowers.(1)
10.26 Form of Redemption Agreement between the Company and Golder
Thoma, Cressey, Rauner Fund IV, L.P.(1)
10.27 Amendment to Employee Stock Option Agreement by and between
the Company and Mr. Gleklen.(1)
10.28 Agreement of Purchase and Sale of Stock with respect to
Churchill Acquisition.(3)
10.29 Employee Stock Option Agreement by and between the Company
and Mr. Rauwerdink dated December 17, 1996.(4)
10.30 Employee Stock Option Agreement by and between the Company
and Mr. Jablonski dated December 17, 1996.(4)
10.31 Employee Stock Option Agreement by and between the Company
and Mr. Monroe dated December 17, 1996.(5)
10.32 Employee Stock Option Agreement by and between the Company
and Mr. Ghadar dated January 15, 1997.(5)
10.33 Amendment to Stock Option Agreement between the Company and
William J. Rauwerdink dated October 7, 1997.(8)
10.34 Amendment to Stock Option Agreement between the Company and
Brian E. Jablonski dated October 7, 1997.(8)
10.35 Employment Agreement between Image Conversion Systems and
John R. Messinger dated July 29, 1997.(12)
10.36 Stock Option Agreement between Lason, Inc. and John R.
Messinger dated July 29, 1997.(12)
10.37 Stock Option Agreement between Lason, Inc. and Cary W.
Newman dated December 14, 1995.(12)
10.38 Stock Option Agreement between Lason, Inc. and Cary W.
Newman dated December 17, 1996.(12)
</TABLE>
<PAGE> 104
<TABLE>
<C> <S>
10.39 Form of Secured Promissory Note dated June 5, 1998 issued by each of Messrs. Monroe, Rauwerdink,
Messinger, Newman and Jablonski in favor of the Company.**
10.40 Form of Pledge and Security Agreement dated June 5, 1998 between the Company and each of Messrs. Monroe,
Rauwerdink, Messinger, Newman and Jablonski for the Secured Promissory Notes described in Exhibit 10.39.**
10.41 Letter Agreement between Gary L. Monroe and the Company dated July 29, 1998 amending and extending
Employment Agreement.**
10.42 Letter Agreement between John R. Messinger and the Company dated March 25, 1998 amending this Employment
Agreement(13)
21.1 Subsidiaries of the Company +
23.1 Consent of PricewaterhouseCoopers LLP +
23.2 Consent of PricewaterhouseCoopers LLP +
23.3 Consent of Seyburn, Kahn, Ginn, Bess, Deitch and Serlin, P.C. (included in opinion filed as Exhibit 5.1)+
24.1 Powers of Attorney (included on signature page included in Part II).**
</TABLE>
- -------------------------
+ filed herewith
** Filed with the initial filing of this Registration Statement.
(1) Incorporated herein by reference to registrant's Form S-1 filed on October
7, 1996, Commission File No. 333-09799.
(2) Incorporated herein by reference to registrant's Form 10-Q filed on May 15,
1997, Commission File No. 0-21407.
(3) Incorporated herein by reference to registrant's Form 8-K filed on February
18, 1997, Commission File No. 0-21407.
(4) Incorporated herein by reference to registrant's Form S-8 filed on December
23, 1996, Commission File No. 333-18551.
(5) Incorporated herein by reference to registrant's Form 10-K filed on
March 31, 1997, Commission File No. 0-21407.
(6) Incorporated herein by reference to registrant's Form 8-K filed on
August 4, 1997, Commission File No. 0-21407.
(7) Incorporated herein by reference to registrant's Form S-1 filed on August
15, 1997.
(8) Incorporated herein by reference to registrant's Form 10-Q filed on
November 15, 1997, Commission File No. 0-21407.
(9) Incorporated herein by reference to registrant's Form 8-K filed on December
10, 1997, Commission File No. 0-21407.
(10) Incorporated herein by reference to registrant's Form 8-K filed on March
17, 1998, Commission File No. 0-21407.
(11) Incorporated herein by reference to registrant's Form 8-K filed on March
20, 1998, Commission File No. 0-21407.
(12) Incorporated herein by reference to registrant's Form 10-Q filed on May 15,
1998, Commission File No. 0-21407.
(13) Incorporated herein by reference to registrant's Form 10-Q filed on August
14, 1998.
<PAGE> 1
EXHIBIT 1.1
LASON, INC.
3,500,000 Shares(1)
Common Stock
UNDERWRITING AGREEMENT
August __, 1998
PRUDENTIAL SECURITIES INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY, L.L.C.
JEFFERIES & COMPANY, INC.
PAINEWEBBER INCORPORATED
THE ROBINSON-HUMPHREY COMPANY LLC
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
Lason, Inc., a Delaware corporation (the "Company"), and the selling
securityholders named in Schedule 2 hereto (each a "Selling Securityholder" and
together the "Selling Securityholders") hereby confirm their agreement with the
several underwriters named in Schedule 1 hereto (the "Underwriters"), for whom
you have been duly authorized to act as representatives (in such capacities, the
"Representatives"), as set forth below. If you are the only Underwriters, all
references herein to the Representatives shall be deemed to be to the
Underwriters.
1. Securities. Subject to the terms and conditions herein contained,
the Company and the Selling Securityholders propose severally to sell to the
several Underwriters an aggregate of
- --------------------
(1) Plus an option to purchase from the Company and the Selling
Securityholders up to 525,000 additional shares to cover
over-allotments.
<PAGE> 2
3,500,000 shares (the "Firm Securities") of the Company's common stock, par
value $0.01 per share ("Common Stock") of which 2,700,000 shares will be issued
and sold by the Company (the "Company's Firm Securities") and 800,000 shares
will be sold by the Selling Securityholders (the "Selling Securityholders' Firm
Securities"). Of the Selling Securityholders' Firm Securities, each Selling
Securityholder will sell the number of shares listed opposite its name on
Schedule 2 hereto. The Company and the Selling Securityholders also propose
severally to sell to the several Underwriters not more than 525,000 additional
shares of Common Stock if requested by the Underwriters as provided in Section 3
of this Agreement, of which not more than ______ shares would be issued and sold
by the Company and not more than _______ shares would be sold by the Selling
Securityholders in the amounts listed on Schedule 2 hereto. Any and all shares
of Common Stock to be purchased by the Underwriters pursuant to such options are
referred to herein as the "Option Securities," and the Firm Securities and any
Option Securities are collectively referred to herein as the "Securities."
2. Representations and Warranties of the Company and the Selling
Securityholders.
(a) The Company represents and warrants to, and agrees with,
each of the several Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-60143)
with respect to the Securities, including a prospectus subject to
completion, has been filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder
(the "Act"), and one or more amendments to such registration statement
may have been so filed. After the execution of this Agreement, the
Company will file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the
Commission to be effective under the Act, either (A) if the Company
relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Securities, that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b)
under the Act or (B) if the Company does not rely on Rule 434 under the
Act, a prospectus in the form most recently included in an amendment to
such registration statement (or, if no such amendment shall have been
filed, in such registration statement), with such changes or insertions
as are required by Rule 430A under the Act or permitted by Rule 424(b)
under the Act, and in the case of either clause (i)(A) or (i)(B) of
this sentence as have been provided to and approved by the
Representatives prior to the execution of this Agreement, or (ii) if
such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Act, an amendment
to such registration statement, including a form of prospectus, a copy
of which amendment has been furnished to and approved by the
Representatives prior to the execution of this Agreement. The Company
may also file a related registration statement with the Commission
pursuant to Rule 462(b) under the Act for the purpose of registering
certain additional Securities, which registration shall be effective
upon filing with the Commission. As used in this Agreement, the term
"Original
2
<PAGE> 3
Registration Statement" means the registration statement initially
filed relating to the Securities, as amended at the time when it was or
is declared effective, including all financial schedules and exhibits
thereto and including any information omitted therefrom pursuant to
Rule 430A under the Act and included in the Prospectus (as hereinafter
defined); the term "Rule 462(b) Registration Statement" means any
registration statement filed with the Commission pursuant to Rule
462(b) under the Act (including the Registration Statement and any
Preliminary Prospectus or Prospectus incorporated therein at the time
such Registration Statement becomes effective); the term "Registration
Statement" includes both the Original Registration Statement and any
Rule 462(b) Registration Statement; the term "Preliminary Prospectus"
means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Registration
Statement or any amendment thereto at the time it was or is declared
effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act,
the Term Sheet relating to the Securities that is
first filed pursuant to Rule 424(b)(7) under the Act,
together with the Preliminary Prospectus identified
therein that such Term Sheet supplements;
(B) if the Company does not rely on Rule 434 under
the Act, the prospectus first filed with the
Commission pursuant to Rule 424(b) under the Act; or
(C) if the Company does not rely on Rule 434 under
the Act and if no prospectus is required to be filed
pursuant to Rule 424(b) under the Act, the prospectus
included in the Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies
the requirements of Rule 434 under the Act. Any reference herein to the
"date" of a Prospectus that includes a Term Sheet shall mean the date
of such Term Sheet.
(ii) The Commission has not issued any order preventing or
suspending use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with the Commission it (A) contained all
statements required to be stated therein in accordance with, and
complied in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder and (B) did not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
When the Registration Statement or any amendment thereto was or is
declared effective, it (A) contained or will contain all statements
required to be stated therein in accordance with, and complied or will
comply in all material respects with the requirements of, the Act and
the rules and regulations of the Commission thereunder and (B) did not
or will not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading. When the Prospectus or any Term Sheet that is a part
thereof or any amendment or supplement to the Prospectus is filed with
the Commission pursuant to Rule 424(b) (or,
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<PAGE> 4
if the Prospectus or part thereof or such amendment or supplement is
not required to be so filed, when the Registration Statement or the
amendment thereto containing such amendment or supplement to the
Prospectus was or is declared effective) and on the Firm Closing Date
and any Option Closing Date (both as hereinafter defined), the
Prospectus, as amended or supplemented at any such time, (A) contained
or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Act and the rules and regulations of the
Commission thereunder and (B) did not or will not include any untrue
statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (ii) do not apply to statements or
omissions made in any Preliminary Prospectus, the Registration
Statement or any amendment thereto or the Prospectus or any amendment
or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through the
Representatives specifically for use therein.
(iii) If the Company has elected to rely on Rule 462(b) and
the Rule 462(b) Registration Statement has not been declared effective
(A) the Company has filed a Rule 462(b) Registration Statement in
compliance with and that is effective upon filing pursuant to Rule
462(b) and has received confirmation of its receipt and (B) the Company
has given irrevocable instructions for transmission of the applicable
filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 promulgated under
the Act or the Commission has received payment of such filing fee.
(iv) The Company and each of its subsidiaries have been duly
incorporated and are validly existing as corporations in good standing
under the laws of their respective jurisdictions of incorporation and
are duly qualified to transact business as foreign corporations and are
in good standing under the laws of all other jurisdictions where the
ownership or leasing of their respective properties or the conduct of
their respective businesses requires such qualification, except where
the failure to be so qualified would not have a material adverse effect
on the condition (financial or otherwise), business prospects, net
worth or the results of operations of the Company and its subsidiaries,
taken as a whole (a "Material Adverse Effect").
(v) The Company and each of its subsidiaries have full power
(corporate and other) to own or lease their respective properties and
conduct their respective businesses as described in the Registration
Statement and the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus; and the Company has full power
(corporate and other) to enter into this Agreement and to carry out all
the terms and provisions hereof to be carried out by it.
(vi) The issued shares of capital stock of each of the
Company's subsidiaries have been duly authorized and validly issued,
are fully paid and nonassessable and, except as
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<PAGE> 5
disclosed in the Registration Statement, the Prospectus or any Exhibit
to the Registration Statement, are owned beneficially by the Company
free and clear of any security interests, liens, encumbrances, equities
or claims. The Company does not own or control, directly or indirectly,
any corporation, association or other entity required to be listed in
Exhibit 21.1 to the Registration Statement other than those listed in
Exhibit 21.1. All references in this Agreement to "subsidiaries" refer
to the entities listed in Exhibit 21.1.
(vii) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus. All of the
issued shares of capital stock of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. The Firm
Securities and the Option Securities have been duly authorized and at
the Firm Closing Date or the related Option Closing Date (as the case
may be), after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable. No holders of outstanding shares
of capital stock of the Company are entitled as such to any preemptive
or other rights to subscribe for any of the Securities, and no holder
of securities of the Company, other than a holder of Rule 144(k)
securities, has any right to require the Company to register the offer
or sale of any securities owned by such holder under the Act in the
public offering contemplated by this Agreement which has not expired by
reason of lapse of time, been fully exercised or waived.
(viii) The capital stock of the Company conforms to the
description thereof contained in the Prospectus or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus.
(ix) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there are no outstanding (A) securities or obligations of
the Company or any of its subsidiaries convertible into or exchangeable
for any capital stock of the Company or any such subsidiary, (B)
warrants, rights or options to subscribe for or purchase from the
Company or any such subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (C)
obligations of the Company or any such subsidiary to issue any shares
of capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
(x) The consolidated financial statements and schedules of the
Company and its consolidated subsidiaries included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) fairly present the
financial position of the Company and its consolidated subsidiaries and
the results of operations and changes in financial condition as of the
dates and periods therein specified. Such financial statements and
schedules have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods
involved (except as otherwise noted therein). The unaudited pro forma
consolidated financial data in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and the summaries of those unaudited pro forma
consolidated financial statements contained in the Prospectus (or, if
the Prospectus is not in existence, the most
5
<PAGE> 6
recent Preliminary Prospectus) together with the related notes thereto,
included in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
include all adjustments necessary to present fairly the pro forma
consolidated financial data at the dates and for the periods indicated,
and all assumptions used in preparing such pro forma consolidated
financial data are reasonable. The selected financial data set forth
under the caption "Selected Consolidated Financial Data" in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) fairly present, on the basis stated in the
Prospectus (or such Preliminary Prospectus), the information included
therein.
(xi) PricewaterhouseCoopers LLP, who have certified certain
financial statements of the Company and its consolidated subsidiaries
and delivered their report with respect to the audited consolidated
financial statements and schedules included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), are independent
public accountants as required by the Act and the applicable rules and
regulations thereunder.
(xii) The execution and delivery of this Agreement have been
duly authorized by the Company and this Agreement has been duly
executed and delivered by the Company, and is the valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(xiii) No legal or governmental proceedings are pending to
which the Company or any of its subsidiaries is a party or to which the
property of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the
Prospectus and are not described therein (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), and no such
proceedings have, to the Company's knowledge, been threatened against
the Company or any of its subsidiaries or with respect to any of their
respective properties; and no contract or other document is required to
be described, in all material respects, in the Registration Statement
or the Prospectus or to be filed as an exhibit to the Registration
Statement that is not described therein (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) or filed as
required.
(xiv) The issuance, offering and sale of the Securities to the
Underwriters by the Company pursuant to this Agreement, the compliance
by the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (A)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained, such as may be required under state securities or
blue sky laws and, if the registration statement
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<PAGE> 7
filed with respect to the Securities (as amended) is not effective
under the Act as of the time of execution hereof, such as may be
required (and shall be obtained as provided in this Agreement) under
the Act, or (B) conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of their
respective properties are bound, or the charter documents or by-laws of
the Company or any of its subsidiaries, or any statute or any judgment,
decree, order, rule or regulation of any court or other governmental
authority or any arbitrator applicable to the Company or any of its
subsidiaries, which breach, violation or default would result in a
Material Adverse Effect.
(xv) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus, neither the Company nor any of its subsidiaries has
sustained any material loss or interference with their respective
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding and there has not been
any material adverse change, or any development involving a prospective
material adverse change, in the condition (financial or otherwise),
management, business prospects, net worth, or results of the operations
of the Company or any of its subsidiaries, except in each case as
described in or contemplated by the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus.
(xvi) No labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the Company's knowledge, is
threatened or imminent that could result in a Material Adverse Effect,
except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus).
(xvii) Except as disclosed in the Registration Statement, the
Prospectus or an Exhibit to the Registration Statement, (A) the Company
and each of its subsidiaries have good and marketable title to all
items of real property and marketable title to all items of tangible
personal property owned by each of them, in each case free and clear of
any security interests, liens, encumbrances, equities, claims and other
defects, except which do not materially and adversely affect the value
of such property and do not interfere with the use made or proposed to
be made of such property by the Company or any of its subsidiaries, and
(B) any real property and buildings held under lease by the Company and
each of its subsidiaries are held under valid, subsisting and
enforceable leases, with such exceptions as are not material and do not
interfere with the use made or proposed to be made of such property and
buildings by the Company or any of its subsidiaries, in each case
except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus). Except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), the agreements to which the Company or any of
its subsidiaries is a party described in the
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<PAGE> 8
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) are valid agreements, enforceable by the
Company and its subsidiaries (as applicable), except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles, and, to the knowledge of the Company, the other contracting
party or parties thereto are not in material breach or material default
under any of such agreements.
(xviii) The Company and each of its subsidiaries own or
possess, or can acquire on reasonable terms, all material patents,
patent applications, trademarks, service marks, trade names, licenses,
copyrights and proprietary or other confidential information currently
employed by them in connection with their respective businesses; the
expiration of any patents, trademarks, service marks, trade names,
licenses, or copyrights would not have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries taken as a
whole; and neither the Company nor any of its subsidiaries has received
any notice of, or has any reasonable belief that its use constitutes, a
material infringement of or conflict with asserted rights of any third
party with respect to any of the foregoing which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect, except as described
in or contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(xix) No default exists on the part of the Company or any of
its subsidiaries and no event has occurred which, with notice or lapse
of time or both, would constitute a default on the part of the Company
or any of its subsidiaries in the due performance and observance of any
material term, covenant or condition of any indenture, mortgage, deed
of trust, lease, services and support agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of their
respective properties are bound or may be affected in any material
adverse respect with regard to the property, business or operations of
the Company or any of its subsidiaries, taken as a whole.
(xx) The Company and its subsidiaries maintain insurance with
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are ordinary and customary in the business
in which it is engaged; neither the Company nor any of its subsidiaries
has been refused any insurance coverage sought or applied for; and
neither the Company nor any of its subsidiaries has any reason to
believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a Material Adverse Effect,
except as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus).
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<PAGE> 9
(xxi) The Company and each of its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any of
its subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would result in a Material
Adverse Effect, except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(xxii) The Company has in the past conducted, and intends in
the future to conduct, its operations in a manner that will not subject
it to registration as an investment company under the Investment
Company Act of 1940, as amended.
(xxiii) The Company and each of its subsidiaries have filed
all foreign, federal, state and local tax returns that are required to
be filed or has requested extensions thereof (except in any case in
which the failure so to file would not have a Material Adverse Effect
and have paid all taxes required to be paid by them and any other
assessment, fine or penalty levied against them, to the extent that any
of the foregoing is due and payable, except for any such assessment,
fine or penalty that is currently being contested in good faith or as
described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
(xxiv) Neither the Company nor any of its subsidiaries is in
violation of any federal or state law or regulation relating to (A) the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants or to the storage, handling or transportation of hazardous
or toxic material ("Environmental Laws") or (B) occupational safety and
health and the Company and each of its subsidiaries have received all
permits, licenses or other approvals required of them under applicable
federal and state occupational safety and health and Environmental Laws
and regulations to conduct their respective businesses, and the Company
and each of its subsidiaries is in compliance with all terms and
conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, result in a Material Adverse Effect, except
as described in or contemplated by the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus). Neither the Company nor any of its subsidiaries have any
pending or, to the Company's knowledge, threatened Environmental Law or
occupational safety and health claims against it nor are there
circumstances with respect to any property or operations of the Company
or any of its subsidiaries that could reasonably be anticipated to form
the basis of an Environmental Law or occupational safety and health
claim against the Company or any of its subsidiaries which, singly or
in the aggregate, would result in a Material Adverse Effect, except as
described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus).
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<PAGE> 10
(xxv) The capital or operating expenditures required for
clean-up, closure of properties or compliance relating to Environmental
Laws or any permit, license or approval, any related constraints on
operating activities and any potential liabilities to third parties
would not, singly or in the aggregate, have a Material Adverse Effect.
(xxvi) Each certificate signed by any officer of the Company
and delivered to the Representatives or counsel for the Underwriters
pursuant to this Agreement shall be deemed to be a representation and
warranty by the Company to each underwriter as to the matters covered
thereby.
(xxvii) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (A)
transactions are executed in accordance with management's general or
specific authorizations; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability;
(C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability
for assets is compared with the existing assets at reasonable intervals
and appropriate action is taken with respect to any differences.
(xxviii) The Company has not, directly or indirectly, (A)
taken any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Securities or (B) since
the filing of the Registration Statement (x) sold, bid for, purchased,
or paid anyone any compensation for soliciting purchases of, the
Securities or (y) paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company
(except for the sale of Securities by the Selling Securityholders under
this Agreement).
(xxix) The Company has not distributed and, prior to the later
of (I) the Closing Date and (ii) the completion of the distribution of
the Securities, will not distribute any offering material in connection
with the offering and sale of the Securities other than the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
other materials, if any, permitted by the Act.
(b) Each Selling Securityholder (except for GTCR Fund IV)
severally represents and warrants to, and agrees with, each of the several
Underwriters that:
(i) Such Selling Securityholder has full power (partnership
trust or other) to enter into this Agreement and to sell, assign,
transfer and deliver to the Underwriters the Securities to be sold by
such Selling Securityholder hereunder in accordance with the terms of
this Agreement; the execution and delivery of this Agreement have been
duly authorized by all necessary actions of such Selling
Securityholder (partnership, trust or other, as applicable);
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<PAGE> 11
and this Agreement has been duly executed and delivered by or on behalf
of such Selling Securityholder.
(ii) Such Selling Securityholder has duly executed and
delivered a power of attorney and custody agreement (with respect to
such Selling Securityholder, the "Power of Attorney" and the "Custody
Agreement," respectively), each in the form heretofore delivered to the
Representatives, appointing Gary L. Monroe and William J. Rauwerdink as
such Selling Securityholder's attorney-in-fact (the "Attorney-in-Fact")
each with authority to execute, deliver and perform this Agreement on
behalf of such Selling Securityholder and appointing Lason, Inc., as
custodian thereunder (the "Custodian"). Certificates in negotiable
form, endorsed in blank or accompanied by blank stock powers duly
executed, with signatures appropriately guaranteed, representing the
Securities to be sold by such Selling Securityholder hereunder have
been deposited with the Custodian pursuant to the Custody Agreement for
the purpose of delivery pursuant to this Agreement. Such Selling
Securityholder has full power (partnership, trust or other, as
applicable) to enter into the Custody Agreement and the Power of
Attorney and to perform his obligations under the Custody Agreement.
The Custody Agreement and the Power of Attorney have been duly executed
and delivered by such Selling Securityholder and, assuming due
authorization, execution and delivery by the Custodian, are the legal,
valid, binding and enforceable instruments of such Selling
Securityholder, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors' rights generally or by
general equitable principles. Such Selling Securityholder agrees that
each of the Securities represented by the certificates on deposit with
the Custodian is subject to the interests of the Underwriters
hereunder, that the arrangements made for such custody, the appointment
of the Attorney-in-Fact and the right, power and authority of the
Attorney-in-Fact to execute and deliver this Agreement, to agree on the
price at which the Securities (including such Selling Securityholder's
Securities) are to be sold to the Underwriters, and to carry out the
terms of this Agreement, are to that extent irrevocable and that the
obligations of such Selling Securityholder hereunder shall not be
terminated, except as provided in this Agreement or the Custody
Agreement, by any act of such Selling Securityholder, by operation of
law or otherwise, whether in the case of any individual Selling
Securityholder by the death or incapacity of such Selling
Securityholder, in the case of a trust or estate by the death of the
trustee or trustees or the executor or executors or the termination of
such trust or estate, or in the case of a partnership Selling
Securityholder by its liquidation or dissolution or by the occurrence
of any other event. If any individual Selling Securityholder, trustee
or executor should die or become incapacitated or any such trust should
be terminated, or if any corporate or partnership Selling
Securityholder shall liquidate or dissolve, or if any other event
should occur, before the delivery of such Securities hereunder, the
certificates for such Securities deposited with the Custodian shall be
delivered by the Custodian in accordance with the respective terms and
conditions of this Agreement as if such death, incapacity, termination,
liquidation or dissolution or other event had not occurred, regardless
of whether or not the Custodian or the Attorney-in-Fact shall have
received notice thereof.
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<PAGE> 12
(iii) Such Selling Securityholder is the lawful owner of the
Securities to be sold by such Selling Securityholder hereunder and upon
sale and delivery of, and payment for, such Securities, as provided
herein, such Selling Securityholder will convey good and marketable
title to such Securities, free and clear of any security interests,
liens, encumbrances, equities, claims or other defects.
(iv) Such Selling Securityholder has not, directly or
indirectly, (A) taken any action designed to cause or result in, or
that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or (B) since the filing of the Registration Statement (x)
sold, bid for, purchased, or paid anyone any compensation for
soliciting purchases of, the Securities or (y) paid or agreed to pay to
any person any compensation for soliciting another to purchase any
other securities of the Company (except for the sale of Securities by
the Selling Securityholders under this Agreement).
(v) Such Selling Securityholder has reviewed the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and the Registration Statement, and the information
regarding such Selling Securityholder set forth therein under the
captions "Management," "Principal and Selling Stockholders" and
"Certain Relationships and Related Transactions" is complete and
accurate.
(vi) The Selling Securityholders have not distributed and,
prior to the later of (A) the Firm Closing Date and (B) the completion
of the distribution of the Securities, will not distribute any offering
material in connection with the offering and sale of the Securities
other than the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any supplement or amendment
thereto, or any materials, if any permitted by the Act.
(vii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Internal Revenue Code
of 1986, as amended, with respect to the transactions herein
contemplated, such Selling Securityholder agrees to deliver to the
Representatives prior to or on the Firm Closing Date a properly
completed and executed United States Treasury Department Form W-8 or
W-9 (or other applicable form or statement specified by the Treasury
Department regulations in lieu thereof).
(viii) The sale by such Selling Securityholder of Securities
pursuant hereto is not prompted by any adverse information concerning
the Company that is not set forth in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(ix) The sale of the Securities to the Underwriters by such
Selling Securityholder pursuant to this Agreement, the compliance by
such Selling Securityholder with the other provisions of this Agreement
and the Custody Agreement and the consummation of the other
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<PAGE> 13
transactions herein contemplated do not (A) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as has been obtained, such as the
registration under blue sky laws and with the NASD and, if the
registration statement filed with respect to the Securities (as
amended) is not effective under the Act as of the time of execution
hereof, such as may be required (and shall be obtained as provided in
this Agreement) under the Act and the Exchange Act, or (B) conflict
with or result in a breach or violation of any of the material terms
and provisions of, or constitute a default under any indenture,
mortgage, deed of trust, lease or other agreement or instrument to
which such Selling Securityholder is a party or by which such Selling
Securityholder or any of such Selling Securityholder's properties are
bound, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator applicable to such Selling Securityholder.
(x) All information furnished by or on behalf of such Selling
Securityholder relating to such Selling Securityholder and the Selling
Securityholders' Securities that is contained in the representations
and warranties of such Selling Securityholder in such Selling
Securityholder's Power of Attorney or Custody Agreement or set forth in
the Registration Statement or the Prospectus is, and at the time the
Registration Statement became or becomes, as the case may be, effective
and at all times subsequent thereto up to and on the Closing Date, and
on any later date on which Option Securities are to be purchased, was
or will be, true, correct and complete, and does not, and at the time
the Registration Statement became or becomes, as the case may be,
effective and at all times subsequent thereto up to and on the Closing
Date, and on any later date on which Option Securities are to be
purchased, will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make such information not misleading.
(xi) Such Selling Securityholder will comply with all
agreements and satisfy all conditions on its part to be complied with
or satisfied pursuant to this Agreement on or prior to the Closing
Date, or any later date on which Option Securities are to be purchased,
as the case may be, and will advise one of its Attorneys and Prudential
Securities Incorporated prior to the Closing Date, or such later date
on which Option Securities are to be purchased, as the case may be, if
any statement to be made on behalf of such Selling Securityholder in
the certificate contemplated by Section 7(h) would be inaccurate if
made as of the Closing Date, or such later date on which Option
Securities are to be purchased, as the case may be.
(xii) Such Selling Securityholder does not have, or has waived
prior to the date hereof, any preemptive right, co-sale right or right
of first refusal or other similar right to purchase any of the
Securities that are to be sold by the Company or any of the other
Selling Securityholders to the Underwriters pursuant to this Agreement;
such Selling Securityholder does not have, or has waived prior to the
date hereof, any registration right or other similar
right to participate in the offering made by the Prospectus, other than
such rights of participation as have been satisfied by the
participation of such Selling Securityholder in the transactions to
which this Agreement relates in accordance with the terms of this
Agreement;
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<PAGE> 14
and such Selling Securityholder does not own any warrants, options or
similar rights to acquire, and does not have any right or arrangement
to acquire, any capital stock, rights, warrants, options or other
securities from the Company, other than options issued pursuant to the
Company's presently authorized 1995 Stock Option Plan and the 1998
Equity Participation Plan (the "Stock Option Plans").
(xiii) In addition to the other representations and warranties
set forth in this Section 2(b), each Selling Securityholder, acting
severally and not jointly, further represents and warrants that (A), to
his or its knowledge, the representations and warranties of the Company
set forth in Section 2(a) hereof are true and correct and (B) each
Preliminary Prospectus, as of its date, has not included any untrue
statement of a material fact or omitted to state a material fact
necessary to make the statements therein not misleading; and at the
time the Registration Statement became or becomes, as the case may be,
effective, on the Closing Date and on any later date on which Option
Securities are to be purchased hereunder, neither the Registration
Statement nor the Prospectus, nor any amendment or supplement thereto,
included or will include any untrue statement of a material fact or
omitted or will omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided,
however, that none of the representations and warranties contained in
this subsection (xii) shall apply to information contained in or
omitted from the Registration Statement or the Prospectus or any such
amendment or supplement thereto in reliance upon, and in conformity
with, information furnished to the Company by any Underwriter
specifically for inclusion therein.
(c) GTCR Fund IV represents and warrants to, and agrees with,
each of the several Underwriters that:
(i) GTCR Fund IV has full power (corporate and other) to enter
into this Agreement and to sell, assign, transfer and deliver to the
Underwriters the Securities to be sold by GTCR Fund IV hereunder in
accordance with the terms of this Agreement; the execution and delivery
of this Agreement have been duly authorized by all necessary actions of
GTCR Fund IV (corporate and other); and this Agreement has been duly
executed and delivered by or on behalf of GTCR Fund IV.
(ii) GTCR Fund IV has duly executed and delivered a power of
attorney and custody agreement (with respect to GTCR Fund IV, the
"Power of Attorney" and the "Custody Agreement," respectively), each in
the form heretofore delivered to the Representatives, appointing Gary
L. Monroe and William J. Rauwerdink as GTCR Fund IV's attorney-in-fact
(the "Attorney-in-Fact") each with authority to execute, deliver and
perform this Agreement on behalf of GTCR Fund IV and appointing Lason,
Inc., as custodian thereunder (the "Custodian"). Certificates in
negotiable form, endorsed in blank or accompanied by blank stock powers
duly executed, with signatures appropriately guaranteed, representing
the Securities to be sold by GTCR Fund IV hereunder have been deposited
with
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<PAGE> 15
the Custodian pursuant to the Custody Agreement for the purpose of
delivery pursuant to this Agreement. GTCR Fund IV has full power
(corporate and other) to enter into the Custody Agreement and the Power
of Attorney and to perform his obligations under the Custody Agreement.
The Custody Agreement and the Power of Attorney have been duly executed
and delivered by GTCR Fund IV and, assuming due authorization,
execution and delivery by the Custodian, are the legal, valid, binding
and enforceable instruments of GTCR Fund IV, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights and remedies of creditors generally and subject as
to enforceability, to general principles of equity (regardless of
whether applied in a court of equity or law) and to any limitations
under applicable law and considerations of public policy which relate
to indemnification and contribution provisions. GTCR Fund IV agrees
that each of the Securities represented by the certificates on deposit
with the Custodian is subject to the interests of the Underwriters
hereunder, that the arrangements made for such custody, the appointment
of the Attorney-in-Fact and the right, power and authority of the
Attorney-in- Fact to execute and deliver this Agreement, to agree on
the price at which the Securities (including GTCR Fund IV's Securities)
are to be sold to the Underwriters, and to carry out the terms of this
Agreement, are to that extent irrevocable and that the obligations of
GTCR Fund IV hereunder shall not be terminated, except as provided in
this Agreement or the Custody Agreement, by any act of GTCR Fund IV, by
operation of law or otherwise, whether by its liquidation or
dissolution or by the occurrence of any other event. If GTCR Fund IV
shall liquidate or dissolve, or if any other event should occur, before
the delivery of such Securities hereunder, the certificates for such
Securities deposited with the Custodian shall be delivered by the
Custodian in accordance with the respective terms and conditions of
this Agreement as if such termination, liquidation or dissolution or
other event had not occurred, regardless of whether or not the
Custodian or the Attorney-in-Fact shall have received notice thereof.
(iii) GTCR Fund IV is the lawful owner of the Securities to be
sold by GTCR Fund IV hereunder and upon sale and delivery of, and
payment for, such Securities, as provided herein, GTCR Fund IV will
convey good and marketable title to such Securities, free and clear of
any security interests, liens, encumbrances, equities, claims or other
defects.
(iv) GTCR Fund IV has not, directly or indirectly, (A) taken
any action designed to cause or result in, or that has constituted or
which might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Securities or (B) since the filing of the
Registration Statement (x) sold, bid for, purchased, or paid anyone any
compensation for soliciting purchases of, the Securities or (y) paid or
agreed to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of
Securities by GTCR Fund IV under this Agreement).
(v) The information furnished by or on behalf of GTCR Fund IV
relating to GTCR Fund IV and the Securities being sold hereunder by it
included in the Registration
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<PAGE> 16
Statement and the Prospectus does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make such information not misleading.
(vi) GTCR Fund IV has not distributed and, prior to the later
of (A) the Firm Closing Date and (B) the completion of the distribution
of the Securities, will not distribute any offering material in
connection with the offering and sale of the Securities other than the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any supplement or amendment thereto, or
any materials, if any permitted by the Act.
(vii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Internal Revenue Code
of 1986, as amended, with respect to the transactions herein
contemplated, GTCR Fund IV agrees to deliver to the Representatives
prior to or on the Firm Closing Date a properly completed and executed
United States Treasury Department Form W-8 or W-9 (or other applicable
form or statement specified by the Treasury Department regulations in
lieu thereof).
(viii) The sale by GTCR Fund IV of Securities pursuant hereto
is not prompted by any material adverse information concerning the
Company that is not set forth in the Registration Statement or the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(ix) The sale of the Securities to the Underwriters by such
Selling Securityholder pursuant to this Agreement, the compliance by
such Selling Securityholder with the other provisions of this Agreement
and the Custody Agreement and the consummation by GTCR Fund IV of the
other transactions herein contemplated do not (A) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except with the NASD and, if the registration
statement filed with respect to the Securities (as amended) is not
effective under the Act as of the time of execution hereof, such as may
be required (and shall be obtained as provided in this Agreement) under
the Act and the Exchange Act, or (B) conflict with or result in a
material breach or violation of any of the material terms and
provisions of, or constitute a default under any indenture, mortgage,
deed of trust, lease or other agreement or instrument to which GTCR
Fund IV is a party or by which GTCR Fund IV or any of GTCR Fund IV's
properties are bound, or the charter documents or bylaws of GTCR Fund
IV, or any statute (other than as described in the Prospectus (or if
the Prospectus is not in existence, the most recent Preliminary
Prospectus) or any judgment, decree, order, rule or regulation of any
court or other governmental authority or any arbitrator applicable to
GTCR Fund IV.
(x) GTCR Fund IV will comply with all agreements and satisfy
all conditions on its part to be complied with or satisfied pursuant to
this Agreement on or prior to the Closing
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<PAGE> 17
Date, or any later date on which Option Securities are to be purchased,
as the case may be, and will advise one of its Attorneys-in-Fact and
Prudential Securities Incorporated prior to the Closing Date, or such
later date on which Option Securities are to be purchased, as the case
may be, if any statement to be made on behalf of such Selling
Securityholder in the certificate contemplated by Section 7(h) would be
inaccurate if made as of the Closing Date, or such later date on which
Option Securities are to be purchased, as the case may be.
(xi) GTCR Fund IV does not have, or has waived prior to the
date hereof, any preemptive right, co-sale right or right of first
refusal or other similar right to purchase any of the Securities that
are to be sold by the Company or any of the other Selling
Securityholders to the Underwriters pursuant to this Agreement; GTCR
Fund IV does not have, or has waived prior to the date hereof, any
registration right or other similar right to participate in the
offering made by the Prospectus, other than such rights of
participation as have been satisfied by the participation of GTCR Fund
IV in the transactions to which this Agreement relates in accordance
with the terms of this Agreement; and GTCR Fund IV does not own any
warrants, options or similar rights to acquire, and does not have any
right or arrangement to acquire, any capital stock, rights, warrants,
options or other securities from the Company, other than options issued
pursuant to the Company's presently authorized Stock Option Plans.
3. Purchase, Sale and Delivery of the Securities.
(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to, and each of the Selling
Securityholders, severally and not jointly, agrees to sell to, each of the
Underwriters, and each of the Underwriters, severally and not jointly, agrees to
purchase from the Company and the Selling Securityholders at a purchase price of
$_____ per share, the number of Firm Securities set forth opposite the name of
such Underwriter in Schedule 1 hereto. One or more certificates in definitive
form for the Firm Securities that the several Underwriters have agreed to
purchase hereunder, and in such denomination or denominations and registered in
such name or names as the Representatives request upon notice to the Company and
the Selling Securityholders at least 48 hours prior to the Firm Closing Date,
shall be delivered by or on behalf of the Company and the Selling
Securityholders to the Representatives for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by wire transfer in same-day funds (the "Wired Funds")
to the order of the Company and the Selling Securityholders, as their interests
may appear. Such delivery of and payment for the Firm Securities shall be made
at the offices of King & Spalding, 191 Peachtree Street, Atlanta, Georgia, 30303
at 9:30 A.M., New York City time, on ______ __, 1998; or at such other place,
time or date as the Representatives and the Company may agree upon or as the
Representatives may determine pursuant to Section 9 hereof, such time and date
of delivery against payment being herein referred to as the "Firm Closing Date."
The Company and the Selling Securityholders will make such certificate or
certificates for the Firm Securities and the Option Securities, as the case may
be, available for checking and packaging by the Representatives at the offices
in New York, New York
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<PAGE> 18
of the Company's transfer agent or registrar or of Prudential Securities
Incorporated at least 24 hours prior to the Firm Closing Date or the Option
Closing Date, as the case may be.
(b) For the purpose of covering any over-allotments in connection with
the distribution and sale of the Firm Securities as contemplated by the
Prospectus, the Company and the Selling Securityholders hereby grant to the
several Underwriters options to purchase, severally and not jointly, the Option
Securities. The purchase price to be paid for any Option Securities shall be the
same price per share as the price per share for the Firm Securities set forth
above in paragraph (a) of this Section 3. The options granted hereby may be
exercised as to all or any part of the Option Securities from time to time
within thirty days after the date of the Prospectus (or, if such 30th day shall
be a Saturday or Sunday or a holiday, on the next business day thereafter when
the New York Stock Exchange is open for trading). The Underwriters shall not be
under any obligation to purchase any of the Option Securities prior to the
exercise of such options. The Representatives may from time to time exercise the
options granted hereby by giving notice in writing or by telephone (confirmed in
writing) to the Company, the Attorneys-in-Fact for the Selling Securityholders
and GTCR Fund IV setting forth the aggregate number of Option Securities as to
which the several Underwriters are then exercising the options and the date and
time for delivery of and payment for such Option Securities. Any such date of
delivery shall be determined by the Representatives but shall not be earlier
than two business days or later than five business days after such exercise of
the options and, in any event, shall not be earlier than the Firm Closing Date.
The time and date set forth in such notice, or such other time on such other
date as the Representatives and the Company may agree upon or as the
Representatives may determine pursuant to Section 9 hereof, is herein called the
"Option Closing Date" with respect to such Option Securities. Upon exercise of
the options as provided herein, the Company and the Selling Securityholders
shall become obligated to sell to each of the several Underwriters, and, subject
to the terms and conditions herein set forth, each of the Underwriters
(severally and not jointly) shall become obligated to purchase from the Company
and the Selling Securityholders, the same percentage of the total number of the
Option Securities as to which the several Underwriters are then exercising the
options as such Underwriter is obligated to purchase of the aggregate number of
Firm Securities, as adjusted by the Representatives in such manner as they deem
advisable to avoid fractional shares. If the options are exercised as to all or
any portion of the Option Securities, one or more certificates in definitive
form for such Option Securities, and payment therefor, shall be delivered on the
related Option Closing Date in the manner, and upon the terms and conditions,
set forth in paragraph (a) of this Section 3 with respect to the sale of the
Firm Securities, except that reference therein to the Firm Securities and the
Firm Closing Date shall be deemed, for purposes of this paragraph (b), to refer
to such Option Securities and Option Closing Date, respectively.
(c) The Company and each of the Selling Securityholders hereby
acknowledge that the wire transfer by or on behalf of the Underwriters of the
purchase price for any Securities does not constitute closing of a purchase and
sale of the Securities. Only execution and delivery of a receipt for Securities
by the Underwriters indicates completion of the closing of a purchase of the
Securities from the Company and the Selling Securityholders. Furthermore, in the
event that the Underwriters wire funds to the Company and the Selling
Securityholders prior to the completion of the closing of
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<PAGE> 19
a purchase of the Securities, the Company and the Selling Securityholders hereby
acknowledge that until the Underwriters execute and deliver a receipt for the
Securities, by facsimile or otherwise, the Company and the Selling
Securityholders will not be entitled to the Wired Funds and shall return the
Wired Funds to the Underwriters as soon as practicable (by wire transfer of
same-day funds) upon demand. In the event that the closing of a purchase of the
Securities is not completed and the Wired Funds are not returned by the Company
and the Selling Securityholders to the Underwriters on the same day the Wired
Funds were received by the Company and the Selling Securityholders, the Company
and each of the Selling Securityholders agree to reimburse the Underwriters for
each day the Wired Funds are not returned, in same-day funds, interest on the
amount of the Wired Funds representing the Underwriters' cost of financing as
reasonably determined by Prudential Securities Incorporated.
(d) It is understood that any of you, individually and not as one
of the Representatives, may (but shall not be obligated to) make payment on
behalf of any Underwriter or Underwriters for any of the Securities to be
purchased by such Underwriter or Underwriters. No such payment shall relieve
such Underwriter or Underwriters from any of its or their obligations
hereunder.
4. Offering by the Underwriters. Upon your authorization of the
release of the Firm Securities, the several Underwriters propose to offer the
Firm Securities for sale to the public upon the terms set forth in the
Prospectus.
5. Covenants of the Company and the Selling Securityholders.
(a) The Company covenants and agrees with each of the Underwriters
that:
(i) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto to become effective as
promptly as possible. If required, the Company will file the Prospectus
or any Term Sheet that constitutes a part thereof and any amendment or
supplement thereto with the Commission in the manner and within the
time period required by Rules 434 and 424(b) under the Act. During any
time when a prospectus relating to the Securities is required to be
delivered under the Act, the Company (A) will comply with all
requirements imposed upon it by the Act and the rules and regulations
of the Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Securities in accordance
with the provisions hereof and of the Prospectus, as then amended or
supplemented, and (B) will not file with the Commission the Prospectus,
Term Sheet or the amendment referred to in the second sentence of
Section 2(a)(i) hereof, any amendment or supplement to such Prospectus,
Term Sheet or any amendment to the Registration Statement or any Rule
462(b) Registration Statement of which the Representatives shall not
previously have been advised and furnished with a copy for a reasonable
period of time prior to the proposed filing and as to which filing the
Representatives shall not have given their consent.
The Company will prepare and file with the Commission, in accordance
with the rules and regulations of the Commission, promptly upon request
by the Representatives or counsel for
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<PAGE> 20
the Underwriters, any amendments to the Registration Statement or any
Rule 462(b) Registration Statement or amendments or supplements to the
Prospectus that may be necessary or advisable in connection with the
distribution of the Securities by the several Underwriters, and will
use its best efforts to cause any such amendment to the Registration
Statement to be declared effective by the Commission as promptly as
possible. The Company will advise the Representatives, promptly after
receiving notice thereof, of the time when the Registration Statement
or any amendment thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed and
will provide evidence satisfactory to the Representatives of each such
filing or effectiveness.
(ii) The Company will advise the Representatives, promptly
after receiving notice or obtaining knowledge thereof, of (A) the
issuance by the Commission of any stop order suspending the
effectiveness of the Original Registration Statement or any Rule 462(b)
Registration Statement or any amendment thereto or any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, (B) the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction, (C) the institution, threatening or contemplation of any
proceeding for any such purpose or (D) any request made by the
Commission for amending the Original Registration Statement or any Rule
462(b) Registration Statement, for amending or supplementing the
Prospectus or for additional information. The Company will use its best
efforts to prevent the issuance of any such stop order and, if any such
stop order is issued, to obtain the withdrawal thereof as promptly as
possible.
(iii) The Company will arrange for the qualification of the
Securities for offering and sale under the securities or blue sky laws
of such jurisdictions as the Representatives may designate and will
continue such qualifications in effect for as long as may be necessary
to complete the distribution of the Securities, provided, however, that
in connection therewith the Company shall not be required to qualify as
a foreign corporation or to execute a general consent to service of
process in any jurisdiction.
(iv) If, at any time prior to the later of (A) the final date
when a prospectus relating to the Securities is required to be
delivered under the Act or (B) the Option Closing Date, any event
occurs as a result of which the Prospectus, as then amended or
supplemented, would include any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if for any other reason it is necessary at any time
to amend or supplement the Prospectus to comply with the Act or the
rules or regulations of the Commission thereunder, the Company will
promptly notify the Representatives thereof and, subject to Section
5(a) hereof, will prepare and file with the Commission, at the
Company's expense, an amendment to the Registration Statement or an
amendment or supplement to the Prospectus that corrects such statement
or omission or effects such compliance.
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<PAGE> 21
(v) The Company will, without charge, provide (A) to the
Representatives and to counsel for the Underwriters as many signed
copies of the registration statement originally filed with respect to
the Securities and each amendment thereto and any Rule 462(b)
Registration Statement (in each case including exhibits thereto) as the
Representatives and counsel to the Underwriters may reasonably request,
(B) to each other Underwriter, a conformed copy of such Registration
Statement and any Rule 462(b) Registration Statement and each amendment
thereto, certified by the Secretary of the Company to be true and
complete copies thereof as filed with the Commission by electronic
transmission, (in each case without exhibits thereto) and (C) so long
as a prospectus relating to the Securities is required to be delivered
under the Act, as many copies of each Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request; without limiting the
application of clause (C) of this sentence, the Company, not later than
(1) 6:00 P.M., New York City time, on the date of determination of the
public offering price, if such determination occurred at or prior to
10:00 A.M., New York City time, on such date or (2) 2:00 PM, New York
City time, on the business day following the date of determination of
the public offering price, if such determination occurred after 10:00
A.M., New York City time, on such date, will deliver to the
Underwriters, without charge, as many copies of the Prospectus and any
amendment or supplement thereto as the Representatives may reasonably
request for purposes of confirming orders that are expected to settle
on the Firm Closing Date.
(vi) The Company, as soon as practicable, will make generally
available to its securityholders and to the Representatives an earnings
statement of the Company that satisfies the provisions of Section 11(a)
of the Act and Rule 158 thereunder.
(vii) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus.
(viii) The Company will not, directly or indirectly, without
the prior written consent of Prudential Securities Incorporated, on
behalf of the Underwriters, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose
(or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of any option to purchase or other sale or disposition) of any
shares of Common Stock or any securities convertible into, or
exercisable or exchangeable for, Common Stock or other capital stock of
the Company or any right to purchase or acquire Common Stock or other
capital stock of the Company for a period of 90 days after the date
hereof, except (A) as otherwise pursuant to this Agreement, (B) for
issuances pursuant to the exercise of employee and affiliated
professional stock options outstanding on the date hereof, issuances
pursuant to the exercise of stock options granted hereafter pursuant to
the Stock Option Plans so long as such options are not exercised within
90 days after the date hereof, and except that the Company may file
registration statements at any time after the date hereof related to
the resale of such shares of the Company's Common Stock issued pursuant
to the Stock Option Plans, (C) issuances pursuant to the exercise of
warrants outstanding on the date hereof, (D) in connection with
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<PAGE> 22
acquisitions by the Company, provided that any Common Stock so issued
shall not be transferable by the recipient thereof for a period of 90
days after the date hereof or (E) for Common Stock to be issued
pursuant to earnouts in already completed acquisitions by the Company.
(ix) The Company will not, directly or indirectly, (A) take
any action designed to cause or to result in, or that has constituted
or which might reasonably be expected to constitute, the stabilization
or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Securities or (B) (x) sell, bid
for, purchase, or pay anyone any compensation for soliciting purchases
of, the Securities or (y) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company except for the sale of Securities by the Selling
Securityholders under this Agreement.
(x) The Company, during the period when the Prospectus is
required to be delivered under the Act or the Exchange Act, will file
all documents required to be filed with the Commission pursuant to
Section 13, 14 or 15 of the Exchange Act within the time periods
required by the Exchange Act and the rules and regulations thereunder.
(xi) The Company will cause the Securities to be duly included
for quotation in The Nasdaq Stock Market's National Market (the "Nasdaq
National Market") prior to the Firm Closing Date. The Company will use
it best efforts to ensure that the Securities remain included for
quotation in the Nasdaq National Market following the Firm Closing
Date.
(xii) During a period of three years from the effective date
of the Registration Statement, the Company will furnish to you and,
upon request, to each of the other Underwriters, without charge, (A)
copies of all reports or other communications (financial or other)
furnished to securityholders, (B) as soon as they are available, copies
of any reports and financial statements furnished to or filed with the
Commission or any national securities exchange, and (C) such additional
publicly available information concerning the business and financial
condition of the Company, if any, as you may reasonably request.
(xiii) If at any time during the 25-day period after the
Registration Statement becomes effective or the period prior to the
Option Closing Date, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion
the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus), the
Company will, after notice from you advising the Company to the effect
set forth above, forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement
reasonably satisfactory to both parties, responding to or commenting on
such rumor, publication or event.
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<PAGE> 23
(xiv) If the Company elects to rely on Rule 462(b), the
Company shall both file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees
in accordance with Rule 111 promulgated under the Act by the earlier of
(i) 10:00 P.M. New York City time on the date of this Agreement and
(ii) the time confirmations are sent or given, as specified by Rule
462(b)(2).
(xv) The Company will obtain the agreements described in
Section 7(h) hereof prior to the Firm Closing Date.
(b) Each Selling Securityholder covenants and agrees with each of
the Underwriters that:
(i) Such Selling Securityholder will not, directly or
indirectly, (A) take any action designed to cause or to result in, or
that has constituted or which might reasonably be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Securities or (B) (x) sell, bid for, purchase, or pay anyone any
compensation for soliciting purchases of, the Securities or (y) pay or
agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company (except for the sale of
Securities by the Selling Securityholder under this Agreement).
(ii) Such Selling Securityholder will not, directly or
indirectly, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, offer, sell, offer to
sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or any securities
convertible into, or exercisable or exchangeable for, Common Stock or
other capital stock of the Company or any right to purchase or acquire
Common Stock or other capital stock of the Company for a period of 90
days after the date hereof, except pursuant to this Agreement;
provided, however, that the such Selling Securityholders may make bona
fide gifts or transfers effected other than on any securities exchange
or in the over-the-counter market to donees or transferees who agree to
be bound by the restrictions described in this paragraph 5(b)(ii) and
GTCR Fund IV may make distributions of Common Stock to its partners as
long as its partners continue to be bound by such restrictions. If the
Firm Closing Date has not occurred by September 30, 1998, the
agreements contained in this Section 5(b)(ii) shall be of no further
force or effect.
6. Expenses. The Company will pay all costs and expenses incident to
the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 12 hereof, including all costs and expenses incident to (a) the printing
or other production of documents with respect to the transactions, including any
costs of printing the registration statement originally filed with respect to
the Securities and any amendment thereto, any Rule 462(b) Registration
Statement, any Preliminary Prospectus and the Prospectus and any
23
<PAGE> 24
amendment or supplement thereto, this Agreement and any blue sky memoranda, (b)
all arrangements relating to the delivery to the Underwriters of copies of the
foregoing documents, (c) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Company, (d)
preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Securities, including transfer agent's and registrar's fees and
the Custodian's fees, (e) the qualification of the Securities under state
securities and blue sky laws, including filing fees and fees and disbursements
of counsel for the Underwriters relating thereto, provided that the filing fees
and fees disbursements of Underwriters' counsel in connection with the National
Association of Security Dealer's filings and blue sky qualifications shall not
exceed $31,300, (f) the filing fees of the Commission and the National
Association of Securities Dealers, Inc. relating to the Securities, (g) any
quotation of the Securities in the Nasdaq National Market, (h) the expenses of
the Company in connection with any meetings with prospective investors in the
Securities and (i) advertising relating to the offering of the Securities. To
the extent, if at all, that any of the Selling Securityholders engage special
legal counsel to represent them in connection with this offering, other than
counsel to the Company, the fees and expenses of such counsel shall be borne by
such Selling Securityholders. Any transfer taxes imposed on the sale of the
Securities to the several Underwriters will be paid by the Company and the
Selling Securityholders pro rata. If the sale of the Securities provided for
herein is not consummated because any condition to the obligations of the
Underwriters set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 12(a) hereof or because of any
failure, refusal or inability on the part of the Company or any Selling
Securityholder to perform all obligations and satisfy all conditions on its part
to be performed or satisfied hereunder other than by reason of a default by any
of the Underwriters, the Company will reimburse the Underwriters severally upon
demand for all out-of-pocket expenses (including Underwriters' counsel fees and
disbursements) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities. The Company shall not in any event
be liable to any of the Underwriters for the loss of anticipated profits from
the transactions covered by this Agreement.
7. Conditions of the Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Securities shall be
subject, in the Representatives' sole discretion, to the accuracy of the
representations and warranties of the Company and the Selling Securityholders
contained herein as of the date hereof and as of the Firm Closing Date, as if
made on and as of the Firm Closing Date, to the accuracy of the statements of
the Company's officers and the Selling Securityholders made pursuant to the
provisions hereof, to the performance by the Company and the Selling
Securityholders of their respective covenants and agreements hereunder and to
the following additional conditions:
(a) If the Registration Statement or any amendment thereto filed prior
to the Firm Closing Date has not been declared effective as of the time of
execution hereof, the Registration Statement or such amendment and, if the
Company has elected to rely upon Rule 462(b), the Rule 462(b) Registration
Statement shall have been declared effective not later than the earlier of (i)
11:00 A.M., New York City time, on the date on which the amendment to the
registration statement originally filed with respect to the Securities or to the
Registration Statement, as the case may be, containing
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information regarding the initial public offering price of the Securities has
been filed with the Commission and (ii) the time confirmations are sent or given
as specified by Rule 462(b)(2) or, with respect to the Registration Statement,
such later time and date as shall have been consented to by the Representatives;
if required, the Prospectus or any Term Sheet that constitutes a part thereof
and any amendment or supplement thereto shall have been filed with the
Commission in the manner and within the time period required by Rules 434 and
424(b) under the Act; no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened or, to the
knowledge of the Company or the Representatives, shall be contemplated by the
Commission; and the Company shall have complied with any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise).
(b) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Seyburn, Kahn, Ginn, Bess, Deitch and Serlin, P.C. counsel for
the Company and the Selling Securityholders (except for GTCR Fund IV), to the
effect that:
(i) the Company and each of its subsidiaries (the
"Subsidiaries") have been duly incorporated and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation and are duly qualified to transact
business as foreign corporations and are in good standing under the
laws of all other jurisdictions where the ownership or leasing of their
respective properties or the conduct of their respective businesses
requires such qualification, except where the failure to be so
qualified would not have a Material Adverse Effect;
(ii) the Company and each of the Subsidiaries have corporate
power to own or lease their respective properties and conduct their
respective businesses as described in the Registration Statement and
the Prospectus, and the Company has corporate power to enter into this
Agreement and to carry out all the terms and provisions hereof to be
carried out by it;
(iii) the issued shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully
paid and nonassessable and, to such counsel's knowledge, except as
disclosed in the Registration Statement, Prospectus or in an Exhibit to
the Registration Statement, are owned beneficially by the Company free
and clear of any perfected security interests or, to the best knowledge
of such counsel, any other security interests, liens, encumbrances,
equities or claims;
(iv) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued shares
of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable, have been issued
in compliance with all applicable federal and state securities laws
and, to such counsel's knowledge, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or
purchase securities; the Firm Securities have been duly authorized by
all
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<PAGE> 26
necessary corporate action of the Company and, when issued and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable; the
Securities have been duly included for trading in the Nasdaq National
Market; to such counsel's knowledge, no holders of outstanding shares
of capital stock of the Company are entitled as such to any preemptive
or other rights to subscribe for any of the Securities; and, to such
counsel's knowledge, no holder of securities of the Company, other than
a holder of Rule 144(k) securities, has the right to require the
Company to register the offer or sale of any securities owned by such
holder under the Act in the public offering contemplated by this
Agreement which has not expired by reason of lapse of time, been fully
exercised or waived;
(v) the statements set forth under the heading "Description of
Capital Stock" in the Prospectus, insofar as such statements purport to
summarize certain provisions of the capital stock of the Company,
provide a fair summary of such provisions; and the statements set forth
under the heading "Certain Relationships and Related Transactions" in
the Prospectus, insofar as such statements constitute a summary of the
legal matters, documents or proceedings referred to therein, provide a
fair summary of such legal matters, documents and proceedings;
(vi) the execution and delivery of this Agreement have been
duly authorized by all necessary corporate action of the Company and
this Agreement has been duly executed and delivered by the Company;
(vii) To such counsel's knowledge, (A) no legal or
governmental proceedings are pending to which the Company or any of the
Subsidiaries is a party or to which the property of the Company or any
of the Subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein,
and, to the best knowledge of such counsel, no such proceedings have
been threatened against the Company or any of the Subsidiaries or with
respect to any of their respective properties and (B) no contract or
other document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein or filed as
required;
(viii) the issuance, offering and sale of the Securities to
the Underwriters by the Company pursuant to this Agreement, the
compliance by the Company with the other provisions of this Agreement
and the consummation of the other transactions herein contemplated do
not (A) require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained and such as may be required under state securities
or blue sky laws, or (B) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or other
agreement or instrument, known to such counsel, to which the Company or
any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries or any of their respective properties are bound, or
the
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<PAGE> 27
charter documents or by-laws of the Company or any of the
Subsidiaries, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator known to such counsel and applicable to the Company or
Subsidiaries;
(ix) the Registration Statement is effective under the Act;
any required filing of the Prospectus, or any Term Sheet that
constitutes a part thereof, pursuant to Rules 434 and 424(b) has been
made in the manner and within the time period required by Rules 434 and
424(b); and no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to
the best knowledge of such counsel, are contemplated by the Commission;
and
(x) the Registration Statement originally filed with respect
to the Securities and each amendment thereto, any Rule 462(b)
Registration Statement and the Prospectus (in each case, other than the
financial statements and other financial information contained therein,
as to which such counsel need express no opinion) comply as to form in
all material respects with the applicable requirements of the Act and
the rules and regulations of the Commission thereunder.
(xi) to the best knowledge of such counsel, the Company and
each of its subsidiaries possess all certificates, authorizations and
permits issued by the appropriate federal, state or foreign regulatory
authorities necessary to conduct their respective businesses, and, to
the best knowledge of such counsel, the Company has not received any
notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit which, singly or in
the aggregate, if the subject of an unfavorable decision, ruling or
finding, would result in a Material Adverse Effect, except as
described in or contemplated by the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus);
(xii) the Company is not an "investment company" under the
Investment Company Act of 1940, as amended;
(xiii) to the best knowledge of such counsel, except as
disclosed in the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), there are no
outstanding (A) securities or obligations of the Company convertible
into or exchangeable for any capital stock of the Company, (B)
warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations, or (C) obligations of the Company to issue
any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.
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<PAGE> 28
(xiv) if the Company elects to rely on Rule 434, the
Prospectus is not "materially different", as such term is used in Rule
434, from the prospectus included in the Registration Statement at the
time of its effectiveness or an effective post-effective amendment
thereto (including such information that is permitted to be omitted
pursuant to Rule 430A).
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' counsel and the independent
certified accountants of the Company, at which such conferences the contents of
the Registration Statement and Prospectus and related matters were discussed,
and although they have not verified the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, nothing
has come to the attention of such counsel which leads them to believe that, at
the time the Registration Statement became effective and at all times subsequent
thereto up to and on the Closing Date and on any later date on which Option
Shares are to be purchased, the Registration Statement and any amendment or
supplement thereto, when the Registration Statement and any amendment or
supplement thereto became effective or was filed with the Commission (other than
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment), contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the Closing Date or any later date on
which the Option Shares are to be purchased, as the case may be, the
Registration Statement, the Prospectus and any amendment or supplement thereto
contained any untrue statement of a material fact or omitted to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials.
References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion.
(c) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Seyburn, Kahn, Ginn, Bess, Deitch and Serlin, P.C. counsel for
the Selling Securityholders (except for GTCR Fund IV), to the effect that:
(i) each Selling Securityholder has full power (partnership,
trust or other) to enter into this Agreement, the Custody Agreement and
the Power of Attorney and to sell, assign, transfer and deliver to the
Underwriters the Securities to be sold by such Selling Securityholder
hereunder in accordance with the terms of this Agreement, and to
perform his or its obligations under the Custody Agreement; the
execution and delivery of this Agreement, the Custody Agreement and the
Power of Attorney have been duly authorized by all necessary action
(partnership, trust or other) of each Selling Securityholder; this
Agreement, the Custody Agreement and the Power of Attorney have been
executed and delivered by such Selling Securityholder; this Agreement
and, assuming due authorization,
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<PAGE> 29
execution and delivery by the Custodian, the Custody Agreement and the
Power of Attorney, are the legal, valid, binding and enforceable
instruments of such Selling Securityholder, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding in
equity or at law) and to any limitations under applicable law and
considerations of public policy which relate to indemnification and
contribution provisions;
(ii) the delivery by such Selling Securityholder to the
Underwriters of certificates for the Securities being sold hereunder by
such Selling Securityholder against payment therefor as provided
herein, will convey good and marketable title to such Securities to the
several Underwriters, free and clear of any security interests, liens,
encumbrances, equities, claims or other defects; and
(iii) The sale of the Securities to the Underwriters by such
Selling Securityholder pursuant to this Agreement, the compliance by
such Selling Securityholder with the other provisions of this Agreement
and the Custody Agreement and the consummation of the other
transactions herein contemplated do not (A) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as has been obtained, and except
such as may be required for registration under state securities or blue
sky laws and, if the registration statement filed with respect to the
Securities (as amended) is not effective under the Act as of the time
of execution hereof, such as may be required (and shall be obtained as
provided in this Agreement) under the Act and the Exchange Act, or (B)
to such counsel's knowledge conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under any indenture, mortgage, deed of trust, lease or other
agreement or instrument to which such Selling Securityholder is a party
or by which such Selling Securityholder or any of such Selling
Securityholder's properties are bound, or any statute or any judgment,
decree, order, rule or regulation known to such counsel of any court or
other governmental authority or any arbitrator applicable to such
Selling Securityholder.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on
certificates of the Selling Securityholders, responsible officers of
the Company and public officials.
References to the Registration Statement and the Prospectus in
this paragraph (c) shall include any amendment or supplement thereto at
the date of such opinion.
(d) The Representatives shall have received an opinion, dated the Firm
Closing Date, of Kirkland & Ellis counsel for GTCR Fund IV, to the effect that:
(i) GTCR Fund IV has full power and authority (corporate or
other) to enter into this Agreement, the Custody Agreement and the
Power of Attorney and to sell, assign,
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<PAGE> 30
transfer and deliver to the Underwriters the Securities to be sold by
GTCR Fund IV hereunder in accordance with the terms of this Agreement,
and to perform its obligations under the Custody Agreement; the
execution and delivery of this Agreement, the Custody Agreement and the
Power of Attorney have been duly authorized by all necessary action
(partnership, trust or other) of GTCR Fund IV; this Agreement, the
Custody Agreement and the Power of Attorney have been executed and
delivered by GTCR Fund IV; this Agreement and, assuming due
authorization, execution and delivery by the Custodian, the Custody
Agreement and the Power of Attorney, are the legal, valid, binding and
enforceable instruments of GTCR Fund IV, subject to the effects of
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the rights and remedies of creditors generally and subject as
to enforceability, to general principles of equity (regardless of
whether applied in a court of equity or law) and to any limitations
under applicable law and considerations of public policy which relate
to indemnification and contribution provisions;
(ii) To such counsel's knowledge, no consent, approval,
authorization or order of the Commission under the Act is required to
be obtained by GTCR Fund IV for the consummation by GTCR Fund IV of the
transactions contemplated by this Agreement, the Custody Agreement or
the Power of Attorney in connection with the Securities to be sold by
GTCR Fund IV under this Agreement, except such as have been obtained;
and
(iii) the delivery by GTCR Fund IV to the Underwriters of
certificates for the Securities being sold hereunder by GTCR Fund IV
against payment therefor as provided herein, will convey good and
marketable title to such Securities to the several Underwriters, free
and clear of any security interests, liens, encumbrances, equities,
claims or other defects.
In rendering any such opinion, such counsel may rely, as to
matters of fact, to the extent such counsel deems proper, on
certificates of the Selling Securityholders, responsible officers of
the Company and public officials.
References to the Registration Statement and the Prospectus in
this paragraph (d) shall include any amendment or supplement thereto at
the date of such opinion.
(e) The Representatives shall have received an opinion, dated the Firm
Closing Date, of King & Spalding, counsel for the Underwriters, with respect to
the issuance and sale of the Firm Securities, the Registration Statement and the
Prospectus, and such other related matters as the Representatives may reasonably
require, and the Company shall have furnished to such counsel such documents as
they may reasonably request for the purpose of enabling them to pass upon such
matters.
(f) The Representatives shall have received from PricewaterhouseCoopers
LLP a letter or letters dated, respectively, the date hereof and the Firm
Closing Date, in form and substance satisfactory to the Representatives, to the
effect that:
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(i) they are independent accountants with respect to the
Company and Consolidated Reprographics within the meaning of the Act
and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited consolidated financial
statements and schedules of the Company and Consolidated Reprographics
included in the Registration Statement and the Prospectus comply in
form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations;
(iii) on the basis of their limited review in accordance with
standards established by the American Institute of Certified Public
Accountants of any interim unaudited consolidated financial statements
of the Company, Consolidated Reprographics and their subsidiaries
included in the Registration Statement and the Prospectus, and a
reading of the latest available interim unaudited consolidated
financial statements of the Company, Consolidated Reprographics and
their subsidiaries, carrying out certain specified procedures (which do
not constitute an examination made in accordance with generally
accepted auditing standards) that would not necessarily reveal matters
of significance with respect to the comments set forth in this
paragraph (iii), a reading of the minute books of the stockholders, the
board of directors and any committees thereof of the Company and
Consolidated Reprographics, officials of the Company and Consolidated
Reprographics, and inquiries of certain officials of the Company and
Consolidated Reprographics who have responsibility for financial and
accounting matters, nothing came to their attention that caused them to
believe that:
(A) the unaudited consolidated financial statements
of the Company, Consolidated Reprographics and their
subsidiaries included in the Registration Statement and the
Prospectus do not comply in form in all material respects with
the applicable accounting requirements of the Act and the
related published rules and regulations thereunder or are not
in conformity with generally accepted accounting principles
applied on a basis substantially consistent with that of the
audited consolidated financial statements included in the
Registration Statement and the Prospectus;
(B) at a specific date not more than five business
days prior to the date of such letter, there was any change in
long-term debt of the Company or Consolidated Reprographics or
any decreases in net current assets or stockholders' equity of
the Company or Consolidated Reprographics, in each case
compared with amounts shown on the June 30, 1998 unaudited
consolidated balance sheet included in the Registration
Statement and the Prospectus, or for the period from June 30,
1998 to such specified date there were any decreases, as
compared with the prior comparable period, in net revenues,
income before income taxes or net income of the Company or
Consolidated Reprographics, except in all instances for
changes, decreases or increases set forth in such letter;
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(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts, percentages and
financial information that are derived from the general accounting
records of the Company, Consolidated Reprographics and their
subsidiaries and are included in the Registration Statement and the
Prospectus, and have compared such amounts, percentages and financial
information with such records of the Company, Consolidated
Reprographics and their subsidiaries and with information derived from
such records and have found them to be in agreement, excluding any
questions of legal interpretation; and
(v) on the basis of a reading of the unaudited pro forma
consolidated financial data included in the Registration Statement and
the Prospectus, carrying out certain specified procedures that would
not necessarily reveal matters of significance with respect to the
comments set forth in this paragraph (v), inquiries of certain
officials of the Company, Consolidated Reprographics and their
subsidiaries who have responsibility for financial and accounting
matters and proving the arithmetic accuracy of the application of the
pro forma adjustments to the historical amounts in the unaudited pro
forma financial data, nothing came to their attention that caused them
to believe that the unaudited pro forma consolidated financial data do
not comply in form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the pro
forma adjustments have not been properly applied to the historical
amounts in the compilation of such data.
In the event that the letters referred to above set forth any
such changes, decreases or increases, it shall be a further condition
to the obligations of the Underwriters that (A) such letters shall be
accompanied by a written explanation from the Company and Consolidated
Reprographics as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (B) such
changes, decreases or increases do not, in the sole judgment of the
Representatives, make it impractical or inadvisable to proceed with the
purchase and delivery of the Securities as contemplated by the
Registration Statement, as amended as of the date hereof.
References to the Registration Statement and the Prospectus in
this paragraph (f) with respect to either letter referred to above
shall include any amendment or supplement thereto at the date of such
letter.
(g) The Representatives shall have received a certificate, dated
the Firm Closing Date, of the principal executive officer and the principal
financial or accounting officer of the Company to the effect that:
(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the Firm Closing
Date; the Registration Statement, as amended as of the Firm Closing
Date, does not include any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein not
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<PAGE> 33
misleading, and the Prospectus, as amended or supplemented as of the
Firm Closing Date, does not include any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; and the Company has performed all covenants
and agreements and satisfied all conditions on its part to be performed
or satisfied at or prior to the Firm Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued, and no
proceedings for that purpose have been instituted or threatened or, to
the best of the Company's knowledge, are contemplated by the
Commission; and
(iii) subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
neither the Company nor any of its subsidiaries has sustained any
material loss or interference with its businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or not
covered by insurance, or from any labor dispute or any legal or
governmental proceeding, and there has not been any Material Adverse
Effect, or any development involving a prospective Material Adverse
Effect, except in each case as described in or contemplated by the
Prospectus (exclusive of any amendment or supplement thereto).
(h) The Representatives shall have received a certificate from each
Selling Securityholder, dated the Firm Closing Date, to the effect that:
(i) the representations and warranties of such Selling
Securityholder in this Agreement are true and correct as if made on and
as of the Firm Closing Date;
(ii) such Selling Securityholder has performed all covenants
and agreements on his or its part to be performed or satisfied at or
prior to the Firm Closing Date.
(i) The Representatives shall have received from (i) each person
who is a director or officer of the Company and (ii) each Selling
Securityholder, an agreement to the effect that unless the Firm Closing Date
shall not have occurred by September 30, 1998, such person or entity will not,
directly or indirectly, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, offer, sell, offer to
sell, contract to sell, pledge, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of any option to purchase or other sale or disposition) of any
shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, Common Stock or other capital stock of the Company or any
right to purchase or acquire Common Stock or other capital stock of the Company
for a period of 90 days after the date of this Agreement, except for bona fide
gifts or transfers effected by such stockholders other than on any securities
exchange or in the over-the-counter market to donees or transferees that agree
to be bound by similar agreements, and except that GTCR Fund IV may make
distributions of Common Stock to its partners.
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(j) On or before the Firm Closing Date, the Representatives and counsel
for the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company.
(k) Prior to the commencement of the offering of the Securities, the
Securities shall have been included for trading in the Nasdaq National Market.
All opinions, certificates, letters and documents delivered pursuant to
this Agreement will comply with the provisions hereof only if they are
reasonably satisfactory in all material respects to the Representatives and
counsel for the Underwriters. The Company shall furnish to the Representatives
such conformed copies of such opinions, certificates, letters and documents in
such quantities as the Representatives and counsel for the Underwriters shall
reasonably request.
The respective obligations of the several Underwriters to purchase and
pay for any Option Securities shall be subject, in their discretion, to each of
the foregoing conditions to purchase the Firm Securities, except that all
references to the Firm Securities and the Firm Closing Date shall be deemed to
refer to such Option Securities and the related Option Closing Date,
respectively.
8. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any
losses, claims, damages or liabilities, joint or several, to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by
the Company in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by the
Company or based upon written information furnished by or on behalf of
the Company filed in any jurisdiction in order to qualify the
Securities under the securities or blue sky laws thereof or filed with
the Commission or any securities association or securities exchange
(each an "Application"),
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or
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<PAGE> 35
supplement thereto, or any Application a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials provided or
prepared by the Company used in connection with the marketing of the
Securities, including without limitation, slides, videos, films and
tape recordings,
and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred
by such Underwriter or such controlling person in connection with
investigating, defending against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out
of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement or any
amendment thereto, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto or any Application in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein;
and provided, further, that the Company will not be liable to any
Underwriter or any person controlling such Underwriter with respect to
any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such loss, claim,
damage or liability purchased Securities from such Underwriter but was
not sent or given a copy of the Prospectus (as amended or supplemented)
at or prior to the written confirmation of the sale of such Securities
to such person in any case where such delivery of the Prospectus (as
amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(a)(iv) or 5(a)(v) of this
Agreement. This indemnity agreement will be in addition to any
liability which the Company may otherwise have. The Company will not,
without the prior written consent of the Underwriter or Underwriters
purchasing, in the aggregate, more than fifty percent of the
Securities, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification may be sought hereunder (whether or
not any such Underwriter or any person who controls any such
Underwriter within the meaning of Section 15 of the Act or Section 20
of the Exchange Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Underwriters and such controlling
persons from all liability arising out of such claim, action, suit or
proceeding.
(b) Subject to subsection (g) of this Section, each Selling
Securityholder (except for GTCR Fund IV) severally and not jointly agrees to
indemnify and hold harmless each Underwriter and each person who controls any
Underwriter within the meaning of Section 15 of the Act against any such losses,
claims, damages or liabilities to which such Underwriter or any such controlling
35
<PAGE> 36
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon:
(i) any untrue statement or alleged untrue statement made by
such Selling Securityholder in Section 2 of this Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or
(iii) the omission or the alleged omission to state therein a
material fact required to be stated in the Registration Statement or
any amendment thereto, any Preliminary Prospectus, the Prospectus or
any amendment or supplement thereto, or any Application or necessary to
make the statements therein not misleading,
and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred
by such Underwriter or such controlling person in connection with
investigating, defending against or appearing as a third-party witness
in connection with any such loss, claim, damage, liability or action;
provided, however, that the Selling Securityholders will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or
any Application in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through the
Representatives specifically for use therein; and provided, further,
that the Selling Securityholders will not be liable to any Underwriter
or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if
the person asserting any such loss, claim, damage or liability
purchased Securities from such Underwriter but was not sent or given a
copy of the Prospectus (as amended or supplemented) at or prior to the
written confirmation of the sale of such Securities to such person in
any case where such delivery of the Prospectus (as amended or
supplemented) is required by the Act, unless such failure to deliver
the Prospectus (as amended or supplemented) was a result of
noncompliance by the Company with Section 5(a)(iv) or 5(a)(v) of this
Agreement ; provided, further, however, that in the case of (ii) and
(iii) above, to the extent and only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in reliance upon and in conformity with written information
furnished to the Company by such Selling Securityholder. This indemnity
agreement will be in addition to any liability which the Selling
Securityholders may otherwise have. The Selling Securityholders will
not, without the prior written consent of the Underwriters purchasing
greater than fifty percent of the Securities, settle or compromise or
consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification
may be
36
<PAGE> 37
sought hereunder (whether or not such Underwriter or any person who
controls such Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of the Underwriters and each such
controlling person from all liability arising out of such claim,
action, suit or proceeding.
(c) Subject to subsection (g) of this Section, GTCR Fund IV agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or Section
20 of the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject under the Act or otherwise, in each case to the extent, but only
to the extent that such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement made by GTCR Fund IV in Section 2(c) of this Agreement (other
than paragraph (vi) of such Section 2(c), which shall not survive the Firm
Closing Date or any Option Closing Date, as the case may be) and will reimburse,
as incurred, each Underwriter and each such controlling person for any legal or
other expenses reasonably incurred by such Underwriter or such controlling
person in connection with investigating, defending against or appearing as a
third-party witness in connection with any such loss, claim damage, liability or
action; provided, however, that GTCR Fund IV will not be liable to any
Underwriter or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus or the
Prospectus that is corrected in the Prospectus (or any amendment or supplement
thereto) if the person asserting any such loss, claim, damage or liability
purchased Securities from such Underwriter but was not sent or given a copy of
the Prospectus (as amended or supplemented), other than documents incorporated
by reference therein, at or prior to the written confirmation of the sale of
such Securities to such person in any case where such delivery of the Prospectus
(as amended or supplemented) is required by the Act, unless such failure to
deliver the Prospectus (as amended, or supplemented) was a result of
noncompliance by the Company with Sections 5(a)(iv) or 5(a)(v) of this
Agreement. This indemnity agreement will be in addition to any liability which
GTCR Fund IV may otherwise have. GTCR Fund IV will not, without the prior
written consent of the Underwriter or Underwriters purchasing, in the aggregate,
more than fifty percent (50%) of the Securities, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder (whether
or not such Underwriter or any person who controls any such Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of all of the
Underwriters and such controlling persons from all liability arising out of such
claim, action, suit or proceeding.
(d) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement, each Selling Securityholder, the
Attorney-in-Fact and each person, if any, who controls the Company or any
Selling Securityholder within the meaning of Section 15 of the Act or Section 20
of the Exchange Act against any losses, claims, damages or liabilities to which
the Company, any such
37
<PAGE> 38
director or officer of the Company, such Selling Securityholder or any such
controlling person of the Company or such Selling Securityholder may become
subject under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or any
Application or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto, or any Application necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein; and, subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company or any such director, officer
or controlling person or such Selling Securityholder in connection with
investigating or defending any such loss, claim, damage, liability or any action
in respect thereof. This indemnity agreement will be in addition to any
liability which such Underwriter may otherwise have. The Representatives will
not, without the prior written consent of the Company or the Selling
Securityholders, as applicable, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder, unless such
settlement, compromise or consent includes an unconditional release of the
Company and its officers and directors and the Selling Securityholders from all
liability arising out of such claim, action, suit or proceeding.
(e) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 8. In case any such action is brought against any indemnified party, and
it notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party;
provided, however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional to
those available to the indemnifying party, the indemnifying party shall not have
the right to direct the defense of such action on behalf of such indemnified
party or parties and such indemnified party or parties shall have the right to
select separate counsel to defend such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof and approval by such
indemnified party of counsel appointed to defend such action, the indemnifying
party will not be liable to such indemnified party under this Section 8 for any
legal or other expenses, other than reasonable costs of investigation,
38
<PAGE> 39
subsequently incurred by such indemnified party in connection with the defense
thereof, unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that in connection with such action the indemnifying party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but substantially
similar actions in the same jurisdiction arising out of the same general
allegations or circumstances, designated by the Representatives in the case of
paragraph (a) of this Section 8, representing the indemnified parties under such
paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party; provided, that such consent will not be unreasonably
withheld.
(f) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 8 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Securityholders on the one hand and the Underwriters on the other shall be
deemed to be in the same proportion as the total proceeds from the offering
(before deducting expenses) received by the Company and the Selling
Securityholders bear to the total underwriting discounts and commissions
received by the Underwriters. The relative fault of the parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, the Selling
Securityholders or the Underwriters, the parties' relative intents, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Company, the Selling Securityholders and the Underwriters
agree that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to above
in this paragraph (f). Notwithstanding any other provision of this paragraph
(f), no Underwriter shall be obligated to make contributions hereunder that in
the aggregate exceed the total public offering price of the Securities purchased
by
39
<PAGE> 40
such Underwriter under this Agreement, less the aggregate amount of any
damages that such Underwriter has otherwise been required to pay in respect of
the same or any substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute hereunder are
several in proportion to their respective underwriting obligations and not
joint, and contributions among Underwriters shall be governed by the provisions
of the Prudential Securities Incorporated Master Agreement Among Underwriters.
For purposes of this paragraph (f), each person, if any, who controls an
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company or any
Selling Securityholder within the meaning of Section 15 of the Act or Section 20
of the Exchange Act, shall have the same rights to contribution as the Company
or such Selling Securityholder, as the case may be.
(g) The liability of each Selling Securityholder under the
representations and warranties contained in Sections 2 and 3 hereof and under
the indemnity and contribution agreements contained in the provisions of this
Section 8 shall be limited to an amount equal to the public offering price of
the Securities to be sold by such Selling Securityholder to the Underwriters
minus the amount of the underwriting discounts and commissions paid thereon to
the Underwriters by such Selling Securityholder.
9. Default of Underwriters. If one or more Underwriters default in
their obligations to purchase Firm Securities or Option Securities hereunder and
the aggregate number of such Securities that such defaulting Underwriter or
Underwriters agreed but failed to purchase is ten percent or less of the
aggregate number of Firm Securities or Option Securities to be purchased by all
of the Underwriters at such time hereunder, the other Underwriters may make
arrangements satisfactory to the Representatives for the purchase of such
Securities by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives), but if no such arrangements are
made by the Firm Closing Date or the related Option Closing Date, as the case
may be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or Option
Securities that such defaulting Underwriter or Underwriters agreed but failed to
purchase. If one or more Underwriters so default with respect to an aggregate
number of Securities that is more than ten percent of the aggregate number of
Firm Securities or Option Securities, as the case may be, to be purchased by all
of the Underwriters at such time hereunder, and if arrangements satisfactory to
the Representatives are not made within 36 hours after such default for the
purchase by other persons (who may include one or more of the non-defaulting
Underwriters, including the Representatives) of the Securities with respect to
which such default occurs, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company other than as provided
in Section 10 hereof if the default is with respect to the Firm Closing Date and
without liability for the Option Shares if such default is with respect to the
Option Closing Date. In the event of any default by one or more Underwriters as
described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the
40
<PAGE> 41
Option Closing Date, as the case may be, established as provided in Section 3
hereof for not more than seven business days in order that any necessary changes
may be made in the arrangements or documents for the purchase and delivery of
the Firm Securities or Option Securities, as the case may be. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 9. Nothing herein shall relieve any defaulting
Underwriter from liability for its default.
10. Default by Selling Securityholders. If on the Firm Closing Date or
Option Closing Date, as the case may be, any Selling Securityholder fails to
sell the Selling Securityholders' Firm Securities or Option Securities, as the
case may be, which such Selling Securityholder has agreed to sell on such date
as set forth herein, the Company agrees that it will sell that number of shares
of Common Stock to the Underwriters which represents the Selling
Securityholders' Firm Securities or Option Securities which such Selling
Securityholder has failed to so sell, or such lesser number as may be requested
by you.
11. Survival. The respective representations, warranties, agreements,
covenants, indemnities and other statements of the Company and its officers, the
Selling Securityholders and the several Underwriters set forth in this Agreement
or made by or on behalf of them, respectively, pursuant to this Agreement shall
remain in full force and effect, regardless of (i) any investigation made by or
on behalf of the Company, any of its officers or directors, any Selling
Securityholders, any Underwriter or any controlling person referred to in
Section 8 hereof and (ii) delivery of and payment for the Securities. The
respective agreements, covenants, indemnities and other statements set forth in
Sections 6 and 8 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.
12. Termination.
(a) This Agreement may be terminated with respect to the Firm
Securities or any Option Securities in the sole discretion of the
Representatives by notice to the Company or the Selling Securityholders given
prior to the Firm Closing Date or the related Option Closing Date, respectively,
in the event that the Company or the Selling Securityholder shall have failed,
refused or been unable to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior thereto or, if at or
prior to the Firm Closing Date or such Option Closing Date, respectively,
(i) the Company or any of its subsidiaries shall have, in the
sole judgment of the Representatives, sustained any material loss or
interference with their respective businesses or properties from fire,
flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any labor dispute or any legal or governmental
proceeding or there shall have been any material adverse change, or any
development involving a prospective Material Adverse Effect, except in
each case as described in or contemplated by the Prospectus (exclusive
of any amendment or supplement thereto);
41
<PAGE> 42
(ii) trading in the Common Stock shall have been suspended by
the Commission or the Nasdaq National Market;
(iii) trading in securities generally on the New York Stock
Exchange or in the Nasdaq National Market shall have been suspended or
minimum or maximum prices shall have been established on any such
exchange or market system;
(iv) a banking moratorium shall have been declared by New York
or United States authorities; or
(v) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any other calamity or crisis or
material adverse change in general economic, political or financial
conditions having an effect on the United States financial markets
that, in the sole judgment of the Representatives, makes it impractical
or inadvisable to proceed with the public offering or the delivery of
the Securities as contemplated by the Registration Statement, as
amended as of the date hereof.
(b) Termination of this Agreement pursuant to this Section 12 shall be
without liability of any party to any other party except as provided in Section
11 hereof.
13. Information Supplied by Underwriters. The statements set forth in
the last paragraph on the front cover page and in the first and third paragraphs
under the heading "Underwriting" in any Preliminary Prospectus or the Prospectus
(to the extent such statements relate to the Underwriters) constitute the only
information furnished by any Underwriter through the Representatives to the
Company for the purposes of Sections 2(a)(ii) and 8 hereof. The Underwriters
confirm that such statements (to such extent) are correct.
14. Notices. All communications hereunder shall be in writing and, if
sent to any of the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Prudential Securities
Incorporated, One New York Plaza, New York, New York 10292, Attention: Equity
Transactions Group; if sent to the Company, shall be delivered or sent by mail,
telex or facsimile transmission and confirmed in writing to the Company at 1305
Stephenson Highway, Troy, Michigan 48083, Attention: Gary L. Monroe, with a copy
to Seyburn, Kahn, Ginn, Bess, Deitch and Serlin, P.C., 2000 Town Center, Suite
1500, Southfield, Michigan 48075, Attention: Laurence B. Deitch, Esq.; if sent
to the Selling Securityholders shall be delivered or sent by mail, telex or
facsimile transmission and confirmed in writing to Gary L. Monroe and William J.
Rauwerdink, as Attorney-in-Fact c/o the Company at 1305 Stephenson Highway,
Troy, Michigan 48083, with a copy to Seyburn, Kahn, Ginn, Bess, Deitch and
Serlin, P.C., 2000 Town Center, Suite 1500, Southfield, Michigan 48075,
Attention: Laurence B. Deitch, Esq..
15. Successors. This Agreement shall inure to the benefit of and shall
be binding upon the several Underwriters, the Company, the Selling
Securityholders and their respective successors
42
<PAGE> 43
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained, this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company and the Selling Securityholders contained in Section 8 of this
Agreement shall also be for the benefit of any person or persons who control any
Underwriter within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Underwriters contained in Section 8
of this Agreement shall also be for the benefit of the directors of the Company,
the officers of the Company who have signed the Registration Statement and any
person or persons who control the Company or the Selling Securityholders within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act. No
purchaser of Securities from any Underwriter shall be deemed a successor because
of such purchase.
16. Applicable Law. The validity and interpretation of this Agreement,
and the terms and conditions set forth herein, shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.
17. Consent to Jurisdiction and Service of Process. All judicial
proceedings arising out of or relating to this Agreement may be brought in any
state or federal court of competent jurisdiction in the State of New York, and
by execution and delivery of this Agreement, each Selling Securityholder accepts
for itself and in connection with its properties, generally and unconditionally,
the nonexclusive jurisdiction of the aforesaid courts and waives any defense of
forum non conveniens and irrevocably agrees to be bound by any judgment rendered
thereby in connection with this Agreement. The Selling Shareholder designates
and appoints Gary L. Monroe, and such other persons as may hereafter be selected
by the Selling Shareholder irrevocably agreeing in writing to so serve, as its
agent to receive on its behalf service of all process in any such proceedings in
any such court, such service being hereby acknowledged by the Selling
Shareholder to be effective and binding service in every respect. A copy of any
such process so served shall be mailed by registered mail to the Selling
Securityholder at its address provided in Section 13 hereof; provided, however,
that, unless otherwise provided by applicable law, any failure to mail such copy
shall not affect the validity of service of such process. If any agent appointed
by the Selling Shareholder refuses to accept service, the Selling Shareholder
hereby agrees that service of process sufficient for personal jurisdiction in
any action against the Selling Shareholder in the State of New York may be made
by registered or certified mail, return receipt requested, to the Selling
Shareholder at its address provided in Section 13 hereof, and the Selling
Shareholder hereby acknowledges that such service shall be effective and binding
in every respect. Nothing herein shall affect the right to serve process
in any other manner permitted by law or shall limit the right of any Underwriter
to bring proceedings against the Selling Shareholder in the courts of any other
jurisdiction.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
43
<PAGE> 44
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute an agreement binding the Company, each
Selling Securityholder and each of the several Underwriters.
Very truly yours,
LASON, INC.
By:
----------------------------------------------
Gary L. Monroe
President and Chief Executive Officer
SELLING SECURITYHOLDERS
By:
----------------------------------------------
Gary L. Monroe, as attorney-in-fact
for the Selling Securityholders listed
in Schedule 2 attached hereto
The foregoing Agreement
is hereby confirmed and
accepted as of the date
first above written.
PRUDENTIAL SECURITIES INCORPORATED
BANCAMERICA ROBERTSON STEPHENS
WILLIAM BLAIR & COMPANY, L.L.C.
JEFFERIES & COMPANY, INC.
PAINEWEBBER INCORPORATED
THE ROBINSON-HUMPHREY COMPANY LLC
By: PRUDENTIAL SECURITIES INCORPORATED
By:
----------------------------------
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
<PAGE> 45
SCHEDULE 1
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Firm
Securities to
Underwriter be Purchased
- ----------- ------------
<S> <C>
Prudential Securities Incorporated.............................
BancAmerica Robertson Stephens.................................
William Blair & Company, L.L.C.................................
Jefferies & Company, Inc.......................................
PaineWebber Incorporated.......................................
The Robinson-Humphrey Company LLC..............................
--------
Total..................................................========
</TABLE>
<PAGE> 46
SCHEDULE 2
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
Number of Firm Maximum
Securities to Number of Option
Selling Securityholders be Sold Securities to be Sold
- ----------------------- -------------- ---------------------
<S> <C> <C>
----------- ------------
Total............... =========== ============
</TABLE>
<PAGE> 1
EXHIBIT 5.1
[SEYBURN, KAHN, GINN, BESS, DEITCH AND SERLIN LETTERHEAD]
August 17, 1998
Lason, Inc.
1305 Stephenson Highway
Troy, Michigan 48083
Re: Lason, Inc.
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as counsel to Lason, Inc., a Delaware corporation (the
"Company"), in connection with the proposed registration of up to 4,025,000
shares of the Company's Common Stock, par value $.01 per share (the "Shares")
which includes 525,000 shares subject to the Underwriters' over-allotment
options, pursuant to the Registration Statement on Form S-1 filed with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Act") (such Registration Statement, as amended or
supplemented and together with any other registration statement referred to in
this sentence, is hereinafter referred to as the "Registration Statement"). This
opinion also relates to any registration statement in connection with this
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Act and the term "Shares" as used herein also includes any additional shares of
the Company's Common Stock registered pursuant to such subsequently filed
registration statement.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary for the purposes of this
opinion, including (i) the Amended and Restated Certificate of Incorporation and
Bylaws of the Company, (ii) minutes and records of the corporate proceedings of
the Company with respect to the Shares, (iii) the Registration Statement and the
exhibits thereto, (iv) the form of underwriting agreement (the "Underwriting
Agreement") to be entered into among the Company, Prudential Securities
Incorporated, BancAmerica Roberston Stephens, William Blair & Company, Jefferies
& Company, Inc., PaineWebber Incorporated and the Robinson-Humphrey Company, and
(v) such other documents and instruments as we have deemed necessary for
purposes of the opinions contained herein.
<PAGE> 2
Lason, Inc.
Page 2
For purposes of this opinion, we have assumed the authenticity of the
documents submitted to us as originals, the conformity to the originals of all
documents submitted to us as copies and the authenticity of the originals of all
documents submitted to us as copies. We have also assumed the genuineness of the
signatures of the persons signing all documents in connection with which this
opinion is rendered, the authority of such persons signing on behalf of the
parties thereto and the due authorization, execution and delivery of all
documents by the parties thereto other than the Company. As to any facts
material to the opinions expressed herein which we have not independently
established or verified, we have relied upon statements and representations of
officers and other representatives of the Company and others.
Our opinion expressed below is subject to the qualifications that we
express no opinion as to the applicability of, compliance with, or effect of any
laws except the General Corporation Law of the State of Delaware (the "DGCL")
and the federal laws of the United States of America.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we are of the opinion
that the Shares have been duly authorized for issuance and, upon (i)
effectiveness under the Act of the Registration Statement and (ii) payment for
the Shares in accordance with the terms of the Underwriting Agreement and
issuance in accordance therewith, the Shares will be validly issued, fully paid
and non-assessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Act or the rules and
regulations of the Commission.
This opinion is limited to the specific issues addressed herein, and no
opinion may be inferred or implied beyond that expressly stated herein. We
assume no obligation to revise or supplement this opinion should the current
DGCL or the current federal law of the United States be changed by legislative
action, judicial decision or otherwise.
This opinion is furnished to you solely for your benefit to be used by
you in connection with the filing of the Registration Statement and is not to be
used, circulated, quoted or otherwise relied upon by any other person or by you
for any other purpose.
Very truly yours,
SEYBURN, KAHN, GINN, BESS, DEITCH
AND SERLIN, P.C.
/s/ SEYBURN, KAHN, GINN, BESS, DEITCH
AND SERLIN, P.C.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
Lason Systems, Inc., a Delaware corporation
Lason Services, Inc., a Delaware corporation
Lason International, Inc., a Delaware corporation
Micro-Pro, Inc., a New York corporation
J.L. Blodgett Mexico S. de R.L. de C.V., a Mexican limited liability
company
<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 16, 1998 on our audits of the consolidated financial
statements and financial statement schedule of Lason, Inc. We also consent to
the reference to our firm under the caption "Experts" and "Selected Consolidated
Financial Data."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
August 17, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
of our report dated July 17, 1998 on our audit of the financial statements of
Consolidated Reprographics. We also consent to the reference to our firm under
the caption "Experts" and "Selected Consolidated Financial Data."
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
August 17, 1998
