<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
--------------- ----------------
COMMISSION FILE NUMBER: 000-21407
LASON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 38-3214743
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
1305 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
(Address of principal executive offices including zip code)
TELEPHONE: (248) 597-5800
(Registrant's telephone number, including area code)
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of May 13, 1999, 15,524,763 shares of Common Stock, $.01 par value were
outstanding.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of March 31, 1999
(Unaudited) and December 31, 1998......................... 2
Condensed Consolidated Statements of Income (Unaudited),
Three Months Ended March 31, 1999 and 1998................ 3
Condensed Consolidated Statements of Cash Flows (Unaudited),
Three Months Ended March 31, 1999 and 1998................ 4
Notes to Condensed Consolidated Financial Statements
(Unaudited)................................................. 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk................................................. 11
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds........... 12
Item 6. Exhibits and Reports on Form 8-K.................... 12
Signatures.................................................. 15
</TABLE>
1
<PAGE> 3
LASON, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARES)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 2,187 $ 1,315
Accounts receivable (net)................................... 99,953 86,073
Supplies.................................................... 10,125 10,144
Prepaid expenses and other.................................. 20,859 16,383
-------- --------
Total current assets................................... 133,124 113,915
Property and equipment (net)................................ 68,886 61,665
Intangible assets (net)..................................... 303,525 252,400
Employee loans receivable................................... 1,668 1,698
Other....................................................... 5,133 2,007
-------- --------
Total assets........................................... $512,336 $431,685
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses............................................ 23,911 14,819
Accounts payable............................................ 19,318 17,332
Notes payable............................................... 266 18,906
Customer deposits........................................... 4,687 6,015
Deferred income taxes....................................... 1,866 918
Other....................................................... 5,524 8,410
-------- --------
Total current liabilities.............................. 55,572 66,400
Revolving credit line borrowings............................ 137,000 59,000
Deferred income taxes....................................... 3,281 2,101
Convertible debentures...................................... 3,034 1,169
Other....................................................... 20,604 18,077
-------- --------
Total liabilities...................................... 219,491 146,747
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; 20,000,000 shares authorized,
15,508,063 shares and 15,378,375 shares issued and
outstanding, 782,758 and 686,865 shares held in escrow.... 146 146
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued and outstanding................... -- --
Additional paid-in capital.................................. 253,598 252,479
Retained earnings........................................... 39,101 32,313
-------- --------
Total stockholders' equity............................. 292,845 284,938
-------- --------
Total liabilities and stockholders' equity............. $512,336 $431,685
======== ========
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
2
<PAGE> 4
LASON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998
---- ----
<S> <C> <C>
Revenues, net of postage.................................... $106,162 $46,566
Cost of revenues............................................ 68,278 29,811
-------- -------
Gross Profit........................................... 37,884 16,755
Selling, general and administrative expenses................ 21,851 9,778
Compensatory stock option expense........................... 72 69
Amortization of intangibles................................. 2,559 966
-------- -------
Income from operations................................. 13,402 5,942
Net interest expense........................................ 2,131 646
-------- -------
Income before income taxes............................. 11,271 5,296
Provision for income taxes.................................. 4,483 1,830
-------- -------
Net income............................................. $ 6,788 $ 3,466
======== =======
Basic earnings per share.................................... $ 0.46 $ 0.30
======== =======
Diluted earnings per share.................................. $ 0.43 $ 0.29
======== =======
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
3
<PAGE> 5
LASON, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES................. $ 3,395 $ 2,084
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisition of businesses, net of cash
acquired.................................................. (54,368) (47,610)
Additions to property and equipment......................... (7,066) (4,250)
-------- --------
Net cash used in investing activities.................. (61,434) (51,860)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on revolving line of credit...................... 109,400 131,250
Repayments on revolving line of credit...................... (31,400) (76,500)
Repayments of notes payable................................. (18,640) (6,218)
Repayment on lease liabilities and other debt............... (800) --
Proceeds from exercise of employee stock options............ 408 141
Other, net.................................................. (57) --
-------- --------
Net cash provided by financing activities.............. 58,911 48,673
-------- --------
Net increase (decrease) in cash and cash equivalents........ 872 (1,103)
Cash and cash equivalents at beginning of period............ 1,315 2,925
-------- --------
Cash and cash equivalents at end of period.................. $ 2,187 $ 1,822
======== ========
</TABLE>
The accompanying Notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Lason, Inc. (together with its subsidiaries, the "Company") have been prepared
in conformity with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, such interim financial statements do not include
all of the information and footnotes required by generally accepted accounting
principles for complete consolidated financial statements.
In the opinion of management, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included. The operating results for the three month period ended March 31, 1999
are not necessarily indicative of the results to be expected for the year ending
December 31, 1999.
For further information, refer to the consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 filed with the Securities and Exchange Commission on
March 31, 1999.
Certain reclassifications have been made to the consolidated financial
statements for 1998 to conform to the 1999 presentation.
As the Company has agreed to acquire M-R Group plc (see Note 2), a company
listed on the London Stock Exchange, the Company has, as required by the United
Kingdom Panel on Takeovers and Mergers, included in this Form 10-Q the
information required for the half yearly report of a listed company on the
London Stock Exchange (comprised in Chapter 12, paragraphs 12.46 to 12.59
inclusive of the United Kingdom Listing Rules).
NOTE 2. ACQUISITIONS
In the three month period ended March 31, 1999, the Company completed
several acquisitions, the most significant of which were Vetri Systems, Inc. and
its affiliate Vetri Software India, Ltd., Bonner & Moore Computing Company, a
division of Bonner & Moore Associates, Inc., the Texas division of Compex Legal
Services, MSI Digital & Imaging Solutions, Inc., and Cover-All Computer Holdings
Company and its affiliates.
Aggregate consideration for all acquisitions completed in the three month
period ended March 31, 1999 excluding liabilities assumed was approximately
$56.6 million consisting of approximately $49.3 million in cash, 95,894 shares
of the Company's common stock valued at approximately $5.4 million and
debentures convertible into 32,532 shares of the Company's common stock valued
at approximately $1.9 million at the date of acquisition.
All of the shares of common stock issued in connection with the
acquisitions and $1.4 million in cash are being held in escrow to indemnify the
Company if contingencies set forth in the respective purchase agreements occur
during periods ranging from twelve to twenty-four months from the date of
acquisition. In addition, certain of the purchase agreements provide for
increased purchase price if operating income exceeds a targeted level. For the
acquisitions completed in the first quarter of 1999, the maximum amount of
additional purchase price which may be recorded, over a period of eighteen to
thirty-six months from the date of acquisition, should such targets be achieved,
is approximately $65.2 million. Purchase price contingencies, if any, will be
recorded as an adjustment of the purchase price when the related contingency is
resolved.
Each of the acquisitions was accounted for as a purchase. The results of
operations for the three months ended March 31, 1999 include the results of
operations for each of the acquired companies since the date of their respective
acquisition.
The purchase price for the acquisitions completed during the three months
ended March 31, 1999 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
5
<PAGE> 7
assumed has been allocated to goodwill and is being amortized on a straight-line
method over 30 years. The allocation of the excess purchase price is based on
preliminary estimates and assumptions, and is subject to revision upon final
determination of the fair market value of the net assets acquired. Management
does not expect the final allocations to differ materially from the preliminary
estimates.
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............................... $ 14,294
Goodwill.................................................... 44,246
Cash and common stock held in escrow........................ 6,858
Net cash paid in consideration for companies acquired....... (47,601)
Common stock issued in consideration for companies
acquired.................................................. ( 5,374)
Convertible debentures issued in consideration for companies
acquired.................................................. ( 1,865)
--------
Liabilities assumed......................................... $ 10,558
========
</TABLE>
The following table summarizes pro forma unaudited results of operations as
if each of the acquisitions completed during the first quarter of 1999 had
occurred at the beginning of the periods presented (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1999 1998
---- ----
<S> <C> <C>
Revenues.................................................. $111,955 $62,761
Income before income taxes................................ 11,350 6,666
Net income................................................ 6,835 4,288
Basic earnings per share.................................. $ 0.46 $ 0.37
Diluted earnings per share................................ $ 0.43 $ 0.35
</TABLE>
On March 25, 1999, the Company reached an agreement on the terms of a
merger with M-R Group plc ("M-R Group"). M-R Group is a leading document and
data management company headquartered in the United Kingdom. Under terms of the
agreement, as revised on May 13, 1999, M-R Group shareholders would receive
5.376 new shares of the Company's common stock for every 100 M-R Group shares
held. Completion of the transaction is subject to certain conditions including
approval by M-R Group shareholders. The merger is expected to be treated as a
"pooling of interests" for accounting purposes and will be valued at
approximately $133.1 million.
In April and May 1999, the Company completed the acquisitions of MSCI, Inc.
and Crest Information Technologies, Inc., respectively, for aggregate
consideration of $22.7 million consisting of approximately $19.9 million in cash
and 61,060 shares of the Company's common stock valued at approximately $2.8
million.
NOTE 3. LONG-TERM DEBT
Lason Systems, Inc. ("Lason"), a wholly-owned subsidiary of the Company,
has a credit agreement with a bank group providing for revolving credit loans up
to $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. Lason 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 rates ranging from LIBOR plus an applicable margin (5.96% as of
March 31, 1999) to a base percentage rate plus an applicable margin (7.75% as of
March 31, 1999), at the Company's election at the time of borrowing. The credit
agreement contains restrictions on the acquisition of stock or assets, payment
of dividends, disposal of assets, incurrence of other liabilities, and has
minimum requirements for cash flow and certain financial ratios.
6
<PAGE> 8
NOTE 4. EARNINGS PER SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" was effective for financial statements issued after December 15, 1997.
This Statement established standards for computing and presenting earnings per
share ("EPS") and superseded Accounting Principles Board Opinion No. 15 and its
related interpretations.
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 three months ended March 31, 1999 and 1998 (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
--------------------------- ---------------------------
WEIGHTED WEIGHTED
NET AVERAGE PER NET AVERAGE PER
INCOME SHARES SHARE INCOME SHARES SHARE
------ -------- ----- ------ -------- -----
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS................................... $6,788 14,705 $0.46 $3,466 11,608 $0.30
EFFECT OF DILUTIVE SECURITIES
Contingently issuable shares of common
stock..................................... -- 766 -- -- 221 --
Potential shares of common stock from
debentures and stock options
outstanding............................... -- 436 -- -- 296 --
------ ------ ------ ------
DILUTED EPS................................. $6,788 15,907 $0.43 $3,466 12,125 $0.29
====== ====== ====== ======
</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.
NOTE 5. SEGMENT AND RELATED INFORMATION
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information" was issued in June 1997 and is effective for financial statements
issued after December 15, 1998. The statement requires the Company to report
certain information about its operating segments.
For years prior to 1998, the Company was managed as one operating segment.
Beginning in 1998, the Company's reportable segments consist of groups of
business units that are organized geographically. Each of the Company's six
geographic regions in the United States has a separate management team and
infrastructure, and offers different combinations of the Company's services. The
Company evaluates the performance of its operating segments based on income
before income taxes and net corporate interest expense. Inter-segment sales and
transfers are not significant.
The following table presents summarized financial information for the
Company's reportable segments for the three months ended March 31, 1999 and 1998
(in thousands). The "Other" column includes corporate related items, results of
insignificant operations and, as it relates to segment profit (loss), income and
expenses not allocated to reportable segments.
<TABLE>
<CAPTION>
MIDWEST CENTRAL NORTHEAST SOUTHEAST SOUTHWEST WEST OTHER TOTAL
------- ------- --------- --------- --------- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1999
Revenues............. $ 3,455 $28,933 $20,320 $10,906 $17,191 $20,821 $ 4,536 $106,162
Segment profit
(loss)............. 349 2,729 2,944 1,720 3,946 2,882 (3,299) 11,271
Total assets......... 63,423 98,092 69,235 41,016 65,568 95,040 79,962 512,336
1998
Revenues............. 3,182 20,468 7,855 5,008 3,397 6,628 28 46,566
Segment profit
(loss)............. 816 2,251 1,673 480 1,009 1,419 (2,352) 5,296
Total assets......... 29,774 57,956 45,758 20,538 28,442 23,102 34,967 240,537
</TABLE>
7
<PAGE> 9
The following table presents the details of "Other" segment profit (loss)
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1999 1998
---- ----
<S> <C> <C>
Net corporate interest expense.............................. $(1,765) $ (622)
Corporate expenses not allocated to operating segments...... (2,070) (1,244)
Amortization of intangibles not allocated to operating
segments.................................................. (264) (417)
Compensatory stock option expense........................... (72) (69)
Other....................................................... 872 --
------- -------
Total.................................................. $(3,299) $(2,352)
======= =======
</TABLE>
The following table presents the details of "Other" total assets (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------
1999 1998
---- ----
<S> <C> <C>
Net goodwill not allocated to operating segments............ $43,491 $27,739
Net other intangible assets not allocated to operating
segments.................................................. 8,096 3,591
Other corporate assets not allocated to operating
segments.................................................. 28,375 3,637
------- -------
Total.................................................. $79,962 $34,967
======= =======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Those statements include
statements regarding the intent, belief or current expectations of the Company
and its management. Prospective investors are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
a number of risks and uncertainties, and that actual results could differ
materially from those indicated by such forward-looking statements. Among the
important factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are: (i) the assimilation of
acquisitions, (ii) the management of the Company's growth and expansion, (iii)
dependence on major customers, or on key personnel, (iv) development by
competitors of new or superior products or services, or entry into the market of
new competitors, (v) fluctuations in paper prices, (vi) integrity and
reliability of the Company's data, (vii) volatility of the Company's stock
price, (viii) changes in the business services outsourcing industry, (ix)
significance of intangible assets, (x) changes related to compensatory stock
options and (xi) other risks identified from time to time in the Company's
reports and registration statements filed with the Securities and Exchange
Commission.
OVERVIEW
In the three month period ended March 31, 1999, the Company completed
several acquisitions, the most significant of which were Vetri Systems, Inc. and
its affiliate Vetri Software India, Ltd., Bonner & Moore Computing Company, a
division of Bonner & Moore Associates, Inc., the Texas division of Compex Legal
Services, MSI Digital & Imaging Solutions, Inc., and Cover-All Computer Holdings
Company and its affiliates. In April and May 1999, the Company completed the
acquisitions of MSCI, Inc. and Crest Information Technologies, Inc.,
respectively.
On March 25, 1999, the Company reached an agreement on the terms of a
merger with M-R Group plc ("M-R Group"). M-R Group is a leading document and
data management company headquartered in the United Kingdom. Under terms of the
agreement, as revised on May 13, 1999, M-R Group shareholders would receive
5.376 new shares of the Company's common stock for every 100 M-R Group shares
held. Completion of the transaction is subject to certain conditions including
approval by M-R Group shareholders. The merger
8
<PAGE> 10
is expected to be treated as a "pooling of interests" for accounting purposes
and will be valued at approximately $133.1 million.
As the Company has agreed to acquire M-R Group plc, a company listed on the
London Stock Exchange, the Company has, as required by the United Kingdom Panel
on Takeovers and Mergers, included in this Form 10-Q the information required
for the half yearly report of a listed company on the London Stock Exchange
(comprised in Chapter 12, paragraphs 12.46 to 12.59 inclusive of the United
Kingdom Listing Rules).
Although management anticipates that the Company will continue to acquire
complementary businesses in the future, there can be no assurance that the
Company will be able to identify and acquire attractive acquisition candidates,
profitably manage such acquired companies or successfully integrate such
acquired companies into the Company without substantial costs, delays or other
problems. In addition, there can be no assurance that any companies acquired in
the future will be profitable at the time of acquisition or will achieve sales
and profitability justifying the Company's investment therein or that the
Company will recognize the synergies expected from such acquisitions.
RESULTS OF OPERATIONS -- THREE MONTHS ENDED MARCH 31, 1999 COMPARED WITH THREE
MONTHS ENDED MARCH 31, 1998
Consolidated net revenues increased 128% to $106.2 million for the three
months ended March 31, 1999 from $46.6 million for the comparable 1998 period.
Approximately $48.5 million of the increase was due to acquisitions and
approximately $11.1 million was due to growth in Company's existing businesses.
The majority of the internal growth came from an increase in image and data
capture revenues of $9.9 million.
Gross profit increased to $37.9 million for the three months ended March
31, 1999 from $16.8 million for the 1998 first quarter. The increase in gross
profit was largely due to an increase in net revenues and the Company's service
mix. Gross profit as a percentage of net revenues was 36% for both of the
quarters ended March 31, 1999 and 1998.
Selling, general and administrative expenses were $21.9 million in the 1999
first quarter compared to $9.8 million in the comparable period of 1998.
Approximately $7.8 million of the increase was selling, general and
administrative expenses of acquired companies. The remaining increase was due to
personnel, systems and other corporate expenses associated with managing a
larger consolidated organization. Selling, general and administrative expenses
as a percentage of net revenues were 21% for both of the quarters ended March
31, 1999 and 1998.
Amortization of intangibles increased to $2.6 million for the three months
ended March 31, 1999 from $966,000 for the comparable 1998 period primarily due
to an increase in goodwill related to business acquisitions.
Net interest expense was $2.1 million for the 1999 first quarter compared
to $646,000 for the comparable 1998 period. The increase in net interest expense
is primarily due to larger average borrowing balances resulting from borrowings
used to fund business acquisitions.
Provision for income taxes as a percentage of pre-tax income was 40% for
the three months ended March 31, 1999 versus 35% for the 1998 first quarter
primarily due to a substantial portion of goodwill amortization expense that is
not deductible for federal income tax purposes.
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.
Cash provided by operating activities was $3.4 million for the three months
ended March 31, 1999, compared with $2.1 million for the comparable period of
1998. The increase in operating cash flows in 1999 is primarily due to increased
net income, accounts payable and other liabilities, offset by the effects of
increased accounts receivable and prepaid and other asset balances, and
decreased customer deposits. Included in cash
9
<PAGE> 11
out flows for operations during the first quarter of 1999 is an increase in
prepaid and other current assets of approximately $4.5 million attributable
primarily the prepayment of postage and certain taxes.
Cash flows used in investing activities totaled $61.4 million and $51.9
million for the three months ended March 31, 1999 and 1998, respectively, and
was used primarily to fund the acquisition of businesses and to invest in
capital assets. Cash used for acquisitions was approximately $54.3 million and
$47.6 million for the three months ended March 31, 1999 and 1998, respectively.
Cash used to invest in capital equipment and software development activities
totaled $7.1 million for the first quarter of 1999, as compared to $4.3 million
for the comparable quarter of 1998. During the first three months of 1999 and
1998, the Company invested approximately $1.5 million and $1.4 million,
respectively, in the development and implementation of computer software
primarily to support the Company's national information processing needs. These
projects and related costs will continue as the Company pursues its acquisition
strategy.
Cash flows provided by financing activities totaled $58.9 million in the
three months ended March 31, 1999, compared to $48.7 million for the comparable
period of 1998, and largely consisted of borrowings on the Company's revolving
line of credit which were used primarily to fund business acquisitions.
Additionally, during the first quarter of 1999 and 1998, the Company repaid
promissory notes in the amount of $18.6 million and $6.2 million, respectively,
relating to business acquisitions in the fourth quarter of 1998 and 1997,
respectively.
Credit Agreement Borrowings
Lason has a credit agreement with a bank group providing for revolving
credit loans up to $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. Lason 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 rates ranging from LIBOR plus an
applicable margin (5.94% as of May 13, 1999) to a base percentage rate plus an
applicable margin (7.75% as of May 13, 1999), depending on the Company's
leverage ratio. The credit agreement contains restrictions on the acquisition of
stock or assets, payment of dividends, disposal of assets, incurrence of other
liabilities, and has minimum requirements for cash flow and certain financial
ratios. As of May 13, 1999, $165.0 million was borrowed under the credit
agreement.
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 the credit
agreement, with shares of its common stock and with 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
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 program applications will be necessary. In
addition, the Company may experience significant adverse business interruptions
if significant customers and/or suppliers are not prepared for the year 2000.
10
<PAGE> 12
The Company has a standing committee consisting of key management personnel
to address the year 2000 issue. The Company has surveyed its customers and
suppliers identifying those that are most critical to the operations of the
Company. Currently, meetings are being scheduled between such entities and
Company personnel to gain a clear understanding of the year 2000 readiness and
any potential impact on the Company. Remediation and contingencies are being
implemented based upon these meetings, which are expected to be completed by
July 30, 1999.
The Company is currently modifying its computer software programs and
operating systems to make each significant system and program "Year 2000
Compliant". As of March 31, 1999, the Company has incurred approximately $1.5
million in connection with its year 2000 compliance program and anticipates that
it will incur an additional estimated $1.5 million to complete the program.
Although the Company has not yet completed its year 2000 remediation, it
does not anticipate a material year 2000 business interruption due to the nature
of its operating systems, and the customers and suppliers with which it
transacts business. 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 failure of the Company's
critical 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. In addition, there can be no assurance that businesses
acquired in the future will not incur unanticipated costs or systems
interruption, which could have an 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. 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.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to the General Instructions to Item 305 of Regulation S-K, the
quantitative and qualitative disclosures called for by Item 3 of Part I of Form
10-Q and Item 305 of Regulation S-K do not require additional disclosure by the
Company because of the short-term nature of its financial instruments and its
minimal foreign currency exchange exposure in the first quarter of 1999.
Accordingly, such disclosures have been omitted from this Form 10-Q. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Credit Agreement Borrowings".
11
<PAGE> 13
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In the first quarter of 1999, in connection with the acquisition of the
shares or assets of various companies and as partial payment of the purchase
price, the Company issued 133,394 shares of its Common Stock valued at
$7,399,101.50. The shares were issued at prices ranging from $54.00 to $56.53.
In February 1999, the Company issued 7,896 shares of its Common Stock at a
price per share of $60.17 to a shareholder of a company it had previously
acquired as additional consideration for the achievement of certain target
levels of financial performance after the acquisition.
In March 1999, in connection with the acquisition of the outstanding shares
of a company and as partial payment of the purchase price, the Company issued
$1,865,000 of debentures convertible into 32,532 shares of the Company's Common
Stock at a price of $57.32 per share. The convertible debentures mature in March
2001, but may be converted into shares of the Company's Common Stock at any time
after March 2000.
The issuance of the securities described in the three prior paragraphs was
exempt from registration under the Securities Act of 1933 by virtue of Section
4(2) thereof as transactions not involving a public offering.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
<TABLE>
<C> <S>
2.3 Asset Purchase Agreement dated February 1, 1996 between
Lason and Diversified Support Services, Inc.(1)
2.4 Agreement of Purchase and Sale of Stock dated March 25, 1996
between Lason and Delaware Legal Copy, Inc. (as defined
therein).(1)
2.5 Agreement of Purchase and Sale of Stock dated July 17, 1996
between Lason and Information & Image Technology of America,
Inc.(1)
2.6 Agreement of Purchase and Sale of Stock dated July 17, 1996
between Lason and Great Lakes Micrographics.(1)
2.7 Stock Purchase Agreement dated July 24, 1996 between Lason
and Micro-Pro, Inc. and MP Services, Inc.(1)
2.8 Stock Purchase Agreement dated August 6, 1996 between Lason
and National Reproductions.(1).
2.9 Agreement of Purchase and Sale of Stock dated July 17, 1997
between Lason and Image Conversion Systems, Inc.(2)
2.10 Asset Purchase Agreement dated November 25, 1997 between
Lason and VIP Imaging, Inc.(3)
2.11 Stock Purchase Agreement dated February 12, 1998 between
Lason and Racom.(4)
2.12 Asset Purchase Agreement dated March 5, 1998 between Lason
and API Systems, Inc.(5)
2.13 Agreement for the Purchase and Sale of Stock dated July 24,
1998 between Lason and Consolidated Reprographics.(6)
2.14 Agreement of Purchase and Sale of Stock dated January 31,
1997 between Lason and Churchill Communications.(7)
2.15 Transaction Agreement between Lason and M-R Group plc dated
March 25, 1999.+
2.16 Amendment Agreement between Lason and M-R Group plc dated
April 30, 1999.+
2.17 Amendment Agreement between Lason and M-R Group plc dated
May 13, 1999.+
3.1 Form of Amended and Restated Certificate of Incorporation of
the Company.(1)
3.2 Form of Revised Amended and Restated Bylaws.(8)
4.1 Form of Certificate representing Common Stock of the
Company.(1)
</TABLE>
12
<PAGE> 14
<TABLE>
<C> <S>
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.(6)
4.3 Second Amended and Restated Pledge Agreement dated as of
June 29, 1998 by certain subsidiaries of the Company in
favor of First Union National Bank, as agent for the
Lenders.(6)
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 the Lenders and First Union National
Bank.(6)
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.(6)
10.5 Registration Agreement dated January 17, 1995 by and among
the Company and the 1995 Stockholders.(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)
10.14 Stock Option Agreement dated August 7, 1995 by and between
the Company and Mr. Gleklen.(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)
10.27 Amendment to Employee Stock Option Agreement by and between
the Company and Mr. Gleklen.(1)
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.(6)
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.(6)
10.41 Letter Agreement between Gary L. Monroe and the Company
dated July 29, 1998 amending and extending Employment
Agreement.(6)
10.42 1998 Equity Participation Plan of Lason, Inc.(9)
10.43 Employment Agreement of John R. Messinger dated April 27,
1999.+
27.1 Financial Data Schedule.+
</TABLE>
- -------------------------
+ Filed herewith.
(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 8-K filed on August 4,
1997, Commission File No. 0-21407.
13
<PAGE> 15
(3) Incorporated herein by reference to registrant's Form 8-K filed on December
10, 1997, Commission File No. 0-21407.
(4) Incorporated herein by reference to registrant's Form 8-K filed on March 17,
1998, Commission File No. 0-21407.
(5) Incorporated herein by reference to registrant's Form 8-K filed on March 20,
1998, Commission File No. 0-21407.
(6) Incorporated herein by reference to registrant's Form S-1 filed on July 30,
1998, Commission File No. 333-60143.
(7) Incorporated herein by reference to registrant's Form 8-K filed on February
18, 1997, Commission File No. 0-21407.
(8) Incorporated herein by reference to registrant's Form 10-Q filed on May 15,
1998, Commission File No. 0-21407.
(9) Incorporated herein by reference to registrant's 1998 proxy statement,
Appendix A, filed on April 28, 1998, Commission File No. 0-21407.
b. Reports on Form 8-K
The Company filed an 8-K on January 22, 1999 announcing the appointment of
John R. Messinger as President and Chief Operating Officer.
14
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LASON, INC.
--------------------------------------
(Registrant)
/s/ WILLIAM J. RAUWERDINK
--------------------------------------
Executive Vice President and
Chief Financial Officer
May 17, 1999
(Date)
15
<PAGE> 17
EXHIBIT INDEX
2.3 Asset Purchase Agreement dated February 1, 1996 between Lason and
Diversified Support Services, Inc. (1)
2.4 Agreement of Purchase and Sale of Stock dated March 25, 1996 between
Lason and Delaware Legal Copy, Inc. (as defined therein). (1)
2.5 Agreement of Purchase and Sale of Stock dated July 17, 1996 between
Lason and Information & Image Technology of America, Inc. (1)
2.6 Agreement of Purchase and Sale of Stock dated July 17, 1996 between
Lason and Great Lakes Micrographics. (1)
2.7 Stock Purchase Agreement dated July 24, 1996 between Lason and
Micro-Pro, Inc. and MP Services, Inc. (1)
2.8 Stock Purchase Agreement dated August 6, 1996 between Lason and
National Reproductions. (1).
2.9 Agreement of Purchase and Sale of Stock dated July 17, 1997 between
Lason and Image Conversion Systems, Inc. (2)
2.10 Asset Purchase Agreement dated November 25, 1997 between Lason and VIP
Imaging, Inc. (3)
2.11 Stock Purchase Agreement dated February 12, 1998 between Lason and
Racom. (4)
2.12 Asset Purchase Agreement dated March 5, 1998 between Lason and API
Systems, Inc. (5)
2.13 Agreement for the Purchase and Sale of Stock dated July 24, 1998
between Lason and Consolidated Reprographics. (6)
2.14 Agreement of Purchase and Sale of Stock dated January 31, 1997 between
Lason and Churchill Communications. (7)
2.15 Transaction Agreement between Lason and M-R Group plc dated March 25,
1999.+
2.16 Amendment Agreement between Lason and M-R Group plc dated April
30, 1999.+
2.17 Amendment Agreement between Lason and M-R Group plc dated May 13,
1999.+
3.1 Form of Amended and Restated Certificate of Incorporation of the
Company. (1)
3.2 Form of Revised Amended and Restated Bylaws. (8)
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.
(6)
<PAGE> 18
4.3 Second Amended and Restated Pledge Agreement dated as of June 29, 1998
by certain subsidiaries of the Company in favor of First Union National
Bank, as agent for the Lenders. (6)
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 the
Lenders and First Union National Bank. (6)
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. (6)
10.5 Registration Agreement dated January 17, 1995 by and among the Company
and the 1995 Stockholders. (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)
10.14 Stock Option Agreement dated August 7, 1995 by and between the Company
and Mr. Gleklen. (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)
10.27 Amendment to Employee Stock Option Agreement by and between the Company
and Mr. Gleklen. (1)
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. (6)
<PAGE> 19
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.
(6)
10.41 Letter Agreement between Gary L. Monroe and the Company dated July 29,
1998 amending and extending Employment Agreement. (6)
10.42 1998 Equity Participation Plan of Lason, Inc. (9)
10.43 Employment Agreement of John R. Messinger dated April 27, 1999.+
27.1 Financial Data Schedule.+
- ----------------------------------------------
+ Filed herewith.
(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 8-K filed on
August 4, 1997, Commission File No. 0-21407.
(3) Incorporated herein by reference to registrant's Form 8-K filed on
December 10, 1997, Commission File No. 0-21407.
(4) Incorporated herein by reference to registrant's Form 8-K filed on
March 17, 1998, Commission File No. 0-21407.
(5) Incorporated herein by reference to registrant's Form 8-K filed on
March 20, 1998, Commission File No. 0-21407.
(6) Incorporated herein by reference to registrant's Form S-1 filed on July
30, 1998, Commission File No. 333-60143.
(7) Incorporated herein by reference to registrant's Form 8-K filed on
February 18, 1997, Commission File No. 0-21407.
(8) Incorporated herein by reference to registrant's Form 10-Q filed on May
15, 1998, Commission File No. 0-21407.
(9) Incorporated herein by reference to registrant's 1998 proxy statement,
Appendix A, filed on April 28, 1998, Commission File No. 0-21407.
<PAGE> 1
EXHIBIT 2.15
DATED 25 MARCH, 1999
TRANSACTION AGREEMENT
BETWEEN
LASON, INC.
AND
M-R GROUP PLC
<PAGE> 2
TRANSACTION AGREEMENT
This Agreement is made 25 March, 1999 between:
(1) Lason, Inc. of 1305 Stephenson Highway, Troy, Michigan USA,
48083 ("Lason"); and
(2) M-R Group plc of 47-58 Bastwick Street, London, England, EC1V
3PS ("M-R").
WHEREAS:
(A) As at the date hereof Lason has acquired 441 M-R Shares.
(B) The Boards of directors of Lason and M-R have reached
agreement on terms of the proposed acquisition of the entire
issued and to be issued share capital of M-R by Lason (the
"Acquisition").
(C) It is proposed that the Acquisition will be effected by means
of a scheme of arrangement of M-R under Section 425 of the
Companies Act.
IT IS HEREBY AGREED:
1. DEFINITIONS AND COMMENCEMENT
1.1 In this Agreement (including the Recitals and the
Schedules);
"Acquisition" has the meaning ascribed thereto in Recital B;
"Business Day" means a day (excluding Saturdays and public
holidays) on which banks are open for business in London;
"Circular" means the circular to be issued by M-R to M-R
shareholders pursuant to Section 426 of the Companies Act and
the Code setting out details of the Acquisition and the Scheme
of Arrangement, certain information about M-R and Lason and
containing notices of the Meetings;
"Code" means the City Code on Takeovers and Mergers;
"Companies Act" means the Companies Act 1985 of Great Britain,
as amended;
"Conditions" means the conditions to the implementation of the
Scheme of Arrangement and the Acquisition set out in Appendix
1 of the Press Announcement;
1
<PAGE> 3
"Consideration Common Stock" means Lason Common Stock to be
issued to M-R shareholders as consideration under the Scheme
of Arrangement;
"Court Meeting" has the meaning ascribed thereto in Clause
2.2(a);
"Effective Date" means the date on which the Scheme of
Arrangement becomes effective in accordance with Section
138(2) and Section 425(3) Companies Act;
"ESOP" means the M-R Employees' Share Ownership Plan Trust;
"Extraordinary General Meeting" means the extraordinary
general meeting of M-R shareholders to be held for the
purpose, inter alia, of passing any resolution which may be
required to implement the Scheme of Arrangement;
"Final Court Order" means the order of the High Court
sanctioning the Scheme of Arrangement under Section 425 of the
Companies Act and confirming any cancellation of the share
capital of M-R in connection therewith under Section 137 of
the Companies Act;
"Final Hearing" means the hearing of the High Court at which
the Final Court Order is granted;
"High Court" means the High Court of Justice of England and
Wales;
"Independent Competing Offer" has the meaning given thereto in
Clause 7.1(b)(v) hereof;
"Lason Common Stock" means shares of common stock of US$0.01
par value each in the capital of Lason;
"Lason Group" means Lason, its Subsidiaries and its Subsidiary
undertakings;
"London Stock Exchange" means the London Stock Exchange
Limited;
"Meetings" means the Court Meeting and the Extraordinary
General Meeting;
"M-R Group" means M-R, its subsidiaries and its subsidiary
undertakings;
"M-R Shares" means the ordinary shares of 10 pence each in the
capital of M-R;
"NASDAQ National Market" means the National Market System on
which Lason Common Stock is listed and traded;
2
<PAGE> 4
"New M-R Shares" means the ordinary shares of 10 pence each in
the capital of M-R to be allotted and issued to Lason pursuant
to the Scheme of Arrangement;
"Offer" has the meaning given thereto in the Code;
"Press Announcement" means the joint press announcement to be
issued by Lason and M-R in the form attached hereto at
Schedule 1;
"Panel" means The Panel on Takeovers and Mergers;
"Relevant Authority" means any government, government
department or governmental, quasi-governmental, supranational,
statutory, regulatory, administrative or investigative body,
authority (including any national or supranational anti-trust
or merger control authorities), court, trade agency,
association, institution or professional or environmental body
or any other person or body whatsoever in any relevant
jurisdiction;
"Resolutions" means the resolution to be proposed at the Court
Meeting and the resolutions to be proposed at the
Extraordinary General Meeting;
"Scheme of Arrangement" means the proposed scheme of
arrangement under Section 425 of the Companies Act to be set
out in the Circular on the terms described in the Press
Announcement with any modification, addition or condition
approved or imposed by the High Court and approved by Lason
and M-R;
"Share Option Schemes" means The Microfilm Repographics Share
Option Scheme, The M-R Group P.C. 1997 Number 1 Executive
Share Option Scheme and The M-R Group P.C. 1997 Number 2
Executive Share Option Scheme;
"Subsidiary" has the meaning given the Companies Act and
Subsidiaries shall be construed accordingly;
"Subsidiary undertaking" has the meaning given in the
Companies Act and Subsidiary undertakings shall be construed
accordingly;
"wider Lason Group" means Lason and its subsidiary
undertakings and any other undertakings in which Lason and
such undertakings (aggregating their interests) have a
substantial interest and for these purposes "substantial
interest" means a direct or indirect interest in 20 per cent.
or more of the equity capital of an undertaking; and
"wider M-R Group" means M-R and its subsidiary undertakings
and any other undertakings in which M-R and such undertakings
(aggregating their interests) have
3
<PAGE> 5
a substantial interest and for these purposes "substantial
interest" means a direct or indirect interest in 20 per cent.
or more of the equity capital of an undertaking.
1.2 In this Agreement and the Schedules:
(a) reference to any statute or statutory
provision includes a reference to that
statute or statutory provision as amended,
extended or re-enacted and to any
regulation, order, instrument or subordinate
legislation under the relevant statute or
statutory provision;
(b) reference to the singular includes a
reference to the plural and vice versa;
(c) reference to any clause, sub-clause or
schedule is to a clause, subclause or
schedule (as the case may be) of or to this
agreement;
(d) reference to any gender includes a reference
to all other genders;
(e) references to persons include bodies
corporate, unincorporated associations and
partnerships and any reference to any party
who is an individual is also deemed to
include their respective legal personal
representative(s);
(f) references to documents in the agreed form
are to documents in the form of the draft
agreed between the parties and initialed by
the parties for the purposes of
identification; and
(g) all of the Schedules to this Agreement
constitute an integral part hereof.
2. SCHEME OF ARRANGEMENT
2.1 Each of Lason and M-R agrees to use all reasonable
endeavours to achieve satisfaction of each of the
Conditions in a manner which is consistent with the
timetable set out in Schedule 2. Furthermore each of
Lason and M-R agrees to use all reasonable endeavours
to ensure that the Scheme of Arrangement involves a
reduction of share capital of M-R.
2.2 Without prejudice to the generality of Clause 2.1
hereof, M-R agrees to use all reasonable endeavours
to take the steps set out in (a), (b) (c), (d) and
(e) below in order to implement the Scheme
Arrangement in accordance with the timetable set out
in Schedule 2 hereto:
4
<PAGE> 6
(a) petition the High Court for an order that a
meeting of the shareholders of M-R (or, if
necessary, meetings of different classes of
shareholders of M-R) be convened under
Section 425 of the Companies Act for the
purpose of approving the Scheme of
Arrangement (the "Court Meeting");
(b) prepare the Circular in accordance with
Section 426 of the Companies Act and the
Code;
(c) instruct its registrars to dispatch to M-R
shareholders notices (in form and substance
reasonably satisfactory to Lason) convening
the Court Meeting (subject to obtaining the
requisite court order referred to in Clause
2.2(a) above) and the Extraordinary General
meeting;
(d) upon the Scheme of Arrangement and any
reduction in the share capital being
approved by the requisite vote of M-R
shareholders at the Meetings, seek the
sanction or approval of the High Court to
the Scheme of Arrangement under Section 425
of the Companies Act and the confirmation of
the High Court of any reduction of the share
capital of M-R under Section 137 of the
Companies Act;
(e) appear by Counsel on the hearing of the
petition referred to in Section 2.2(a) above
and undertake to the High Court to be bound
thereby and to execute or do, or procure to
be executed or done, all such documents,
acts or things as may be necessary or
desirable to be executed or done by it or on
its behalf for the purpose of giving effect
to the Scheme of Arrangement; and
(f) amend the Articles of Association of M-R to
ensure that shares in M- R issued after the
record date for the Scheme of Arrangement
are automatically converted into Lason
shares.
2.3 Without prejudice to the generality of Clause 2.1
hereof, Lason agrees to use all reasonable endeavours
to take the steps set out in (a), (b) and (c) below
in order to implement the Scheme of Arrangement in
accordance with the timetable set out in Schedule 2
hereto;
(a) ensure that the Consideration Common Stock
is:
(i) duly authorised by all necessary
corporate action of Lason;
(ii) validly issued by Lason;
5
<PAGE> 7
(iii) fully paid and nonassessable;
(iv) not "restricted securities" within
the meaning of Rule 144 under the US
Securities Act of 1933 and is freely
transferable except for shares
issued to person that are
"affiliates" of M-R or Lason (within
the meaning of Rule 145 under the US
Securities Act of 1933, and/or in
the Securities and Exchange
Commission Accounting Series
Releases 130 and 135);
(v) with respect to shares issued to
persons that are "affiliates" of M-R
or Lason (within the meaning
described in clause (iv) above),
freely transferable except to the
extent of the restrictions provided
in the letter agreements entered
into by such affiliates with Lason
and dated the date hereof; and
(vi) approved for listing on the NASDAQ
National Market;
(b) if Lason shareholder consent is required to
the Acquisition and the issue of
Consideration Common Stock, convene a
meeting of Lason shareholders on 27 May, or
shortly thereafter, to seek such approval;
and
(c) appear by Counsel on the hearing of the
petition referred to in Section 2.2(a) above
and undertake to the High Court to be bound
thereby and to execute or do, or procure to
be executed or done, all such documents,
acts or things as may be necessary or
desirable to be executed or done by it or on
its behalf for the purpose of giving effect
to the Scheme of Arrangement.
3. REPRESENTATIONS AND WARRANTIES OF M-R
M-R hereby represents and warrants to Lason as follows:
(a) M-R is a company limited by shares which is
duly incorporated and registered under the
laws of England and Wales. M-R has all
requisite corporate authority to own, lease,
and operate its properties and to carry on
its business as now being conducted. Its
authorised capital is (pound)7,200,000
divided into 72,000,000 M-R Shares of which
55,821,926 are issued and fully paid up and
options to subscribe for or acquire no more
than 4,386,616 M-R Shares are outstanding;
(b) Each Subsidiary and Subsidiary undertaking
for M-R is a corporation or partnership duly
organized, validly existing and in good
standing
6
<PAGE> 8
(where applicable) under the laws of the
jurisdiction of its incorporation or
organization, and has all requisite
corporate or partnership power and authority
to own, lease and operate its properties and
to carry on its business as now being
conducted;
(c) M-R has the corporate power and corporate
authority to execute and deliver this
Agreement and to perform its obligations
hereunder. This execution, delivery and
performance of this Agreement and the
consummation of the transactions
contemplated hereby have been duly
authorized and approved by the Board of
directors of M-R. This Agreement has been
duly executed and delivered by, and
constitutes a valid and binding obligation
of, M-R enforceable against M-R in
accordance with its terms (except as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting
creditors' rights generally or by the
principles governing the availability of
equitable remedies). The execution, delivery
and performance of this Agreement by M-R and
the consummation of the transactions
contemplated hereby do not and will not
conflict with or result in a breach of any
provisions of the Articles of Association or
Memorandum of Association of M-R or the
charter or by-laws or similar documents with
different names of any Subsidiary of M-R;
and
(d) To the best of M-R's knowledge there has not
been any action taken by M-R or any member
of the wider M-R Group that would prevent
the transactions contemplated by this
Agreement and the Scheme of Arrangement from
being accounted for as a
pooling-of-interests under generally
accepted accounting principles of the United
States.
4. REPRESENTATIONS AND WARRANTIES OF LASON
Lason hereby represents and warrants to M-R as follows:
(a) Lason is a company duly organised, validly
existing, and in good standing under the
laws of the state of Delaware. Lason has all
requisite corporate authority to own, lease,
and operate its properties and to carry on
its business as now being conducted;
(b) Each Subsidiary and Subsidiary undertaking
of Lason is a corporation or partnership
duly organized, validly existing and in good
standing (where applicable) under the laws
of the jurisdiction of its incorporation or
organization, and has all requisite
corporate or
7
<PAGE> 9
partnership power and authority to own,
lease and operate its properties and to
carry on its business as now being
conducted;
(c) Lason has the corporate power and corporate
authority to execute and deliver this
Agreement and to perform its obligations
hereunder. This execution, delivery and
performance of this Agreement and the
consummation of the transactions
contemplated hereby have been duly
authorized and approved by the Board of
directors of Lason. This Agreement has been
duly executed and delivery by, and
constitutes a valid and binding obligation
of, Lason enforceable against Lason in
accordance with its terms (except as
enforceability may be limited by applicable
bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting
creditors' rights generally or by the
principles governing the availability of
equitable remedies). The execution, delivery
and performance of this Agreement by Lason
and the consummation of the transactions
contemplated hereby do not and will not
conflict with or result in a breach of any
provisions of the charter or by-laws of
Lason or the charter or by-laws or similar
documents with different names of any
Subsidiary of Lason; and
(d) To the best of Lason's knowledge there has
not been any action taken by Lason or any
member of the wider Lason Group that would
prevent the transactions contemplated by
this Agreement and the Scheme of Arrangement
from being accounted for as a
pooling-of-interests under generally
accepted accounting principles of the United
States.
5. SHARE OPTION SCHEMES
5.1 M-R and Lason undertake that an explanatory letter in
agreed terms will be sent to holders of options under
the Share Option Schemes explaining their
entitlement, where appropriate, to exercise their
options.
5.2 M-R and Lason undertake to use reasonable endeavors
to implement arrangements in accordance with the
attached document in the agreed form.
5.3 Lason shall use all reasonable endeavors to prepare
and file with the SEC a registration statement on
Form S-8 or other appropriate form with respect to
Consideration Common Stock received pursuant to the
Share Option Schemes and to maintain effectiveness of
such registration statement or registration
statements covering such Share Option Schemes (and
maintain the current status of the prospectus
contained therein) for so long as options under such
Share Option Schemes remain outstanding.
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<PAGE> 10
6. ADDITIONAL AGREEMENTS
6.1 As soon as practicable after the date hereof, Lason
and M-R will cooperate in the preparation and filing
of all materials (including, without limitation, (a)
the application for tax clearances under Section 707
Income and Corporation Taxes Act 1988 and Section 136
and 138 Taxation of Chargeable Gains Tax Act 1992;
(b) the Hart-Scott-Rodino filing and the notification
to the Office of Fair Trading; and (c) the Form 8-K
required to be filed by Lason with the U.S.
Securities and Exchange Commission) which are
required to be filed in connection with the
Acquisition and the Conditions.
6.2 Each of Lason and M-R agrees to do or procure to be
done all such further acts and things as the other
may from time to time reasonably require for the
purpose of giving to the other the full benefit of
this Agreement. M-R further agrees to permit Lason to
carry out such due diligence in respect of M-R and
the wider M-R Group as Lason reasonably requests
during the period which is 2 Business Days prior to
the Final Hearing.
6.3 From the date hereof, M-R undertakes and agrees to
instruct its auditors, Deloitte & Touche, to commence
the preparation of consolidated audited financial
statements for the M-R Group prepared in accordance
with generally accepted accounting principles in the
United States for the years ended 30 June, 1996, 30
June, 1997 and 30 June, 1998 and unaudited for the
nine months ended 31 March, 1999 and will procure
that Deloitte & Touche consent in writing to all such
accounts being filed with the US Securities and
Exchange Commission on Form 8-K. M-R shall procure
that such financial statements are provided to Lason
and its advisers by no later than 15 July, 1999.
Lason undertakes to use all reasonable endeavors to
publish a set of financial statements for the period
ending 30 September, 1999 as soon as reasonably
practicable and in any event by 15 November, 1999.
6.4 As from the date hereof and prior to the Effective
Date, each of the parties hereto agrees to consult
with the other concerning the content of any press or
other public statement to be made or issued in
connection with the Acquisition or this Agreement.
Notwithstanding the foregoing, neither party shall be
prevented from publicly disclosing any information to
the extent required by a court order or pursuant to
the rules and regulations of a government agency or
body or the rules and regulations of the NASDAQ
National Market or the London Stock Exchange, in any
case having jurisdiction over the disclosing party,
or pursuant to the rules of the Code or the
requirements of the Panel.
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<PAGE> 11
6.5 Each of the parties agrees to use its best efforts to
cause the transactions contemplated by this Agreement
and the Scheme of Arrangement to qualify for
pooling-of-interests accounting treatment under
generally accepted accounting principles of the
United States and to cooperate with Lason and its
advisers in connection therewith. M-R agrees that it
will not take a position on its tax returns or
elsewhere, nor take any action or fail to take any
action, that is or would be inconsistent with the
treatment of the transactions contemplated by this
Agreement and the Scheme of Arrangement as
transactions in respect of which Section 338 of the
Internal Revenue Code of the Untied States may be
elected (provided that nothing herein will require
M-R to take any unlawful action).
6.6 To the fullest extent permitted by law, the Code, the
requirements of the Panel and in order to allow the
directors of M-R to act in accordance with their
fiduciary duties, M-R undertakes and agrees that as
from the date of this Agreement, it will not, and it
will procure that its directors, senior management
and advisers do not, initiate contact with any third
party (or, for the avoidance of doubt, initiate any
further contact with any third party with whom they
have previously spoken prior to the date this
Agreement becomes effective) in order to solicit an
Offer for M-R.
6.7 M-R undertakes and agrees to procure that:
(a) all the non-executive directors on the board
of directors of M-R shall resign from the
board of directors of M-R, such resignations
to take effect after the Scheme of
Arrangement becomes effective; and
(b) Gary Monroe and William Rauwerdink shall be
appointed to the board of directors of M-R
with effect from the time when the Scheme of
Arrangement becomes effective.
6.8 M-R covenants, undertakes and agrees with Lason that
as from the date of this Agreement to the Effective
Date, it will carry on its business, and will procure
that all other members of the wider M-R Group carry
on their respective businesses, only in the usual,
regular and ordinary manner and consistent with past
practice.
6.9 Lason covenants, undertakes and agrees with M-R that
as from the date of this Agreement to the Effective
Date, it will carry on its business, and will procure
that all other members of the wider Lason Group carry
on their respective businesses, only in the usual,
regular and ordinary manner and consistent with past
practice.
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<PAGE> 12
6.10 As from the date hereof, M-R undertakes to use its
reasonable endeavors to ensure that key management
remain with M-R.
6.11 After the Scheme of Arrangement is effective Lason
will procure either that M-R's directors and officers
insurance cover is maintained or a suitable
alternative is provided.
6.12 Lason will deliver to M-R copies of Affiliate letters
signed by its Affiliates in relation to the
Acquisition.
6.13 M-R will deliver to Lason copies of Affiliate letters
signed by its Affiliates in relation to the
Acquisition.
7. CONDITIONS
7.1 The office copy of the court order sanctioning the
Scheme of Arrangement will only be delivered for
registration to the Registrar of Companies for
England and Wales if the Conditions have been
satisfied or, where applicable, waived. At the Final
Hearing each party will instruct its Counsel to
advise the High Court whether or not the conditions
have been satisfied or (where applicable) waived and
Lason agrees to observe the provisions of note 2 to
Rule 13 of the Code.
7.2 If at any time any party hereto becomes aware of a
matter that could reasonably be expected to prevent a
Condition being satisfied, it shall immediately
inform the other party hereto.
8. TERMINATION
8.1 This Agreement may be terminated (but without
affecting Lason's rights under Clause 8.2) at any
time prior to the Effective Date:
(a) by mutual written consent of M-R and Lason;
(b) by written notice given by either M-R or
Lason to the other party hereto in the
following circumstances:
(i) if Conditions A.(a) or A.(b) are not
satisfied;
(ii) if an y Relevant Authority shall
have taken any action which would
make the Acquisition or its
implementation void, illegal or
unenforceable and such action taken
by such body shall have become final
and nonappealable;
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<PAGE> 13
(iii) if the Effective Date shall not have
occurred by 31 August, 1999 for any
reason provided, however, that the
right to terminate this Agreement
shall not be available to either
party if its action or failure to
act in accordance with this
Agreement has been a principal cause
of or resulted in the failure of the
Effective Date to occur on or before
such date and such action or failure
to act constitutes a breach of this
Agreement; or
(iv) if a written Offer from a third
party has been received by the board
of directors of M-R which is of a
value in excess of the value of the
Acquisition or which comprises
consideration which is determined by
the independent financial adviser to
M-R to exceed the value of the
Acquisition (an "Independent
Competing Offer");
(c) by written notice given by Lason to M-R in
the event of a failure of any of Conditions
B.(d), B.(e), B.(f), B.(g) or B.(h) but in
the last case only if the letter from
Deloitte & Touche is not forthcoming in
circumstances where the Panel have ruled
that they are prepared to allow such
Condition to be invoked.
8.2 M-R shall promptly pay, or cause to be paid, to Lason
a fee of(pound)885,000 in the following
circumstances:
(a) if the Transaction Agreement is terminated
by Lason in the circumstances set out in
Clause 8.1(c) above; or
(b) Completing Offer or otherwise withdraw or
modify their approval or recommendation of
the Acquisition in a manner adverse to
Lason, or if the Scheme of Arrangement is
not approved or does not become effective as
a result of a matter which constitutes a
breach by M-R of Clause 2.2, in each case
otherwise than as a result of a material
adverse change to the trading position of
Lason (other than one affecting its industry
as a whole) or the average closing price
quoted on NASDAQ for 5 consecutive trading
days being less than $40.41 for the Lason
Common Stock; or
(c) if a third party announces an intention to
acquire shares in M-R or make an offer in
the future for M-R prior to the date of
termination of this Agreement, and if an
offer from such party or a related party for
M-R is recommended within 6 months of
termination of this Agreement pursuant to
Clause 8.1(b)(i) or (iii) above.
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<PAGE> 14
9. NOTICES
9.1 Any notice or other written communication given under
or in connection with this Agreement may be delivered
personally or sent by overnight courier or by
facsimile.
9.2 The address for service of any party shall be its
address stated in this Agreement or, if any other
address for service has previously been notified in
writing to the server, to the address so notified.
9.3 Any such notice or other written communication shall
be deemed to have been served:
(a) if personally delivered, at the time of
delivery,
(b) if sent by overnight courier, on the
following Business Day; and
(c) if sent by facsimile message, at the time of
transmission (if sent during normal business
hours, that is 9.30 to 17.30 local time) in
the place from which it was sent or (if not
sent during such normal business hours) at
the beginning of the same Business Day in
the place from which it was sent if sent
before 9.30 a.m. local time or at the
beginning of the next Business Day in the
place from which it was sent if sent after
17.30 local time.
10. MISCELLANEOUS
10.1 Neither party may assign the benefit of this
Agreement without the prior written consent of the
other.
10.2 No term or provision of this Agreement shall be
varied or modified by any prior or subsequent
statement, conduct or act of any party, except that
hereafter the parties may amend this Agreement only
by letter or written instrument signed by each of the
parties.
10.3 The headings to the clauses and any underlining in
this Agreement and in the Schedules are for ease of
reference only and shall not form any part of this
Agreement for the purposes of construction.
10.4 Each of Lason and M-R shall and shall use all
reasonable endeavors to procure that any other
necessary party shall execute and do all such
documents acts and things as may reasonably be
required on or subsequent to the Scheme of
Arrangement becoming effective by Lason for securing
to
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<PAGE> 15
or vesting in Lason or M-R the legal and beneficial
ownership of the New M- R Shares.
10.5 This Agreement may be entered into in any number of
counterparts and by the parties to it on separate
counterparts, each of which when so executed and
delivered shall be an original, but all the
counterparts shall together constitute one and the
same instrument.
10.6 If at any time any term or provision in this
Agreement shall be held to be illegal, invalid or
unenforceable, in whole or in part, under any rule or
law or enactment, such term or provision or part
shall to that extent be deemed not to form part of
this Agreement, but the enforceability of the
remainder of this Agreement shall not be affected.
10.7 This Agreement (together with any documents referred
to herein and the confidentiality agreement dated 8
February, 1999 and the amendment thereto dated 17
March) contain the whole and only agreement between
the parties in relation to the Acquisition and
supersede and extinguish any prior agreements, draft
agreements, undertakings, representations,
warranties, promises, assurances, understandings or
arrangements of any nature whatsoever (both oral and
written) ("Pre-contractual Arrangements"). Each party
acknowledges that in entering into this Agreement it
is not relying on any Pre-contractual Arrangement
which is not set out in this Agreement. No party
shall have any right of action against any other
party to this Agreement arising out of or in
connection with any Pre-contractual Arrangement
(except in the case of fraud) except to the extent
repeated in this Agreement.
11. LAW AND JURISDICTION
This Agreement shall be governed by, construed and take effect
in accordance with English law and the courts of England shall
have exclusive jurisdiction to settle any claim, dispute or
matter of difference which may arise out of or in connection
with this Agreement or the legal relationships established by
this Agreement.
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<PAGE> 16
IN WITNESS WHEREOF, Lason and M-R have caused this Agreement
to be duly executed as of the day and year first above written.
LASON
By: /S/ Maureen M. Giammara
-----------------------------
Name: Maureen M. Giammara
Title: Corporate Counsel
M-R
By: /S/ Colin Haylock
-----------------------------
Name: Colin Haylock
Title: Executive Chairman
15
<PAGE> 1
EXHIBIT 2.16
AMENDMENT AGREEMENT
This Amendment Agreement is entered into the 30th day of April 1999
between:
(1) M-R Group plc ("M-R"); and
(2) Lason, Inc. ("Lason").
WHEREAS:
(A) M-R and Lason entered into a transaction agreement on 25
March, 1999 (the "Transaction Agreement").
(B) The parties have agreed to amend the Transaction Agreement as
set forth below.
IT IS AGREED:
1. Capitalised terms used but not otherwise defined in this
Amendment Agreement shall have the meanings given to them in
the Transaction Agreement.
2. Each of the parties hereto agrees that with effect from the
date hereof the Transaction Agreement shall be amended as
follows:
(a) Clause 8.1 of the Transaction Agreement shall be
amended by the insertion of the following
sub-paragraph as Clause 8.1(d):
"by written notice given by M-R to Lason if on the
date of the hearing of the originating summons
(which, for the avoidance of doubt, is currently
scheduled for 13 May, 1999) the Directors of M-R
conclude in their reasonable opinion, after having
consulted with M-R's financial advisers, that they
cannot recommend the Acquisition to M-R's
shareholders."
(b) Clause 8.2(b) of the Transaction Agreement shall be
deleted in its entirety; and
(c) Clause 2(c) shall be renumbered as Clause 8.2(b) and
shall be amended by the insertion of the following
words after the words "Clause 8.1(b)(i) or (iii)
above":
"or Clause 8.1(d) above"
(d) Schedule 2 to the Transaction Agreement shall be
replaced in its entirety by the attached Schedule.
3. Except as expressly amended hereby, the Transaction Agreement
shall remain in full force and effect in accordance with its
terms.
4. This Agreement shall be governed by and construed in
accordance with English law.
<PAGE> 2
IN WITNESS WHEREOF, Lason and M-R have caused this Amendment Agreement
to be duly executed as of the day and year first above written.
LASON M-R
By: /S/ Gary L. Monroe By: /S/ Colin Haylock
---------------------------- -------------------------
Name: Gary L. Monroe Name: Colin Haylock
Title: Chairman and Title: Executive Chairman
Chief Executive Officer
<PAGE> 1
EXHIBIT 2.17
AMENDMENT AGREEMENT
This Amendment Agreement is entered into this 13th day of May 1999 between:
(1) M-R Group plc ("M-R"); and
(2) Lason, Inc. ("Lason").
WHEREAS:
(A) M-R and Lason entered into a transaction agreement 25 March, 1999 (the
"Transaction Agreement").
(B) The parties entered into an amendment agreement to the Transaction
Agreement on 30 April, 1999 (the "Amendment Agreement").
(C) The parties have agreed to further amend the Transaction Agreement as
set out below.
IT IS AGREED:
1. Capitalised terms used but not otherwise defined in this Amendment
Agreement shall have the meanings given to them in the Transaction
Agreement.
2. Each of the parties hereto agrees that the number of shares of Lason
Common Stock to be issued to M-R Shareholders as consideration under
the Scheme has been varied from that specified in the Press
Announcement to the following:
for every 100 M-R Shares 5.376 new Lason Common Stock
and so in proportion for any other number of M-R Shares held.
3. Except as expressly amended hereby, the Transaction Agreement, as
amended by the Amendment Agreement, shall remain in full force and
effect in accordance with its terms.
4. This Agreement shall be governed by and construed in accordance with
English law.
IN WITNESS WHEREOF, Lason and M-R have caused this Amendment Agreement to be
duly executed as of the day and year first above written.
LASON M-R GROUP PLC
By: /s/ William J. Rauwerdink By: /s/ Colin Haylock
------------------------------------ ----------------------------
Name: William J. Rauwerdink Name: Colin Haylock
Title: Executive Vice President, CFO Title: Executive Chairman
Secretary and Treasurer
<PAGE> 1
EXHIBIT 10.43
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made this 27th day of April, 1999, but
effective as of February 1, 1999 (the "Effective Date"), between LASON SYSTEMS,
INC., a Delaware corporation, the address of which is 1305 Stephenson Highway,
Troy, Michigan 48084 ("Corporation"), and JOHN R. MESSINGER, whose address is
3598 Charlwood, Rochester Hills, Michigan 48306 ("Employee").
R E C I T A L S:
Corporation is engaged in the business of providing a wide
range of document management, records management and business communication
services. Employee is experienced in running all aspects of such business.
The parties are desirous of entering into a contract of
employment on the terms and conditions set forth below.
THEREFORE, the parties agree as follows:
1. ENGAGEMENT OF EMPLOYEE. Corporation hereby employs Employee
for the term of this Agreement as set forth in Paragraph 4 hereof and, during
the term of this Agreement, Employee agrees to provide the following services to
Corporation on the terms contained in this Agreement. Employee shall hold the
title of President and Chief Operating Officer and shall be responsible for
providing the services customarily required of a Chief Operating Officer
including, but not limited to, direction of Corporation's day-to-day operations,
general supervision of all subordinate officers, employees and agents of
Corporation, and general supervision of its sales and marketing activities.
Employee shall also serve as President and Chief Operating Officer of
Corporation's parent, Lason, Inc. and may also serve as President and Chief
Operating Officer of other affiliates. Employee shall devote his full time and
attention to discharging the duties of his position and shall report to
Corporation's Chairman of the Board and Chief Executive Officer, Gary L. Monroe.
2. BASE COMPENSATION.
A. BASE SALARY. Corporation shall pay to
Employee a base salary of One Hundred
Seventy Five ($175,000.00) Dollars per
calendar year; subject to review on the
first anniversary of the Effective Date.
Such base salary shall be paid in equal
bi-weekly installments (less appropriate and
necessary withholdings for employment
taxes), commencing on Corporation's next
regular pay day and continuing on the same
day of every other week thereafter during
the term of this Agreement.
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<PAGE> 2
B. BONUS. Predicated on Corporation's
performance, Employee shall be entitled to
an annual bonus of a minimum of 50% of the
base salary set forth in Section 2(A) above.
The amount of the bonus shall be determined
by Corporation's Chairman of the Board.
C. BENEFITS. Employee shall have the right to
receive or participate in any fringe
benefits, including, but not limited to,
personal days, group term life insurance
programs, disability insurance programs,
medical expense reimbursement plans,
flexible benefit plans, so-called qualified
"pension or profit sharing plans," and other
reasonable and customary fringe benefits
which may from time-to-time be made
available by Corporation's Board of
Directors (and further subject to any
applicable eligibility requirements of each
such program). Further Employee shall be
entitled to an automobile allowance and
other similar benefits as determined by
Corporation's Chairman of the Board.
3. TERM AND SEVERANCE.
The term of this Agreement shall be for two (2) years from and
after the Effective Date of this Agreement.
In the event that Employee is terminated during the term of
this Agreement with or without cause or in the event that he resigns because of
a material change in the scope of his duties then, and in that event, Employee
shall be entitled to receive severance pay in an amount equal to his base salary
plus his actual bonus for the preceding year or an average of all bonuses paid
to him during the preceding years of his employment with Corporation, whichever
is greater. Such severance pay shall be paid for the unexpired term of this
Agreement or 12 months, whichever is greater. Additionally, in the event that
Employee is terminated without cause then, and in that event, Corporation shall
immediately pay $16,000 to Employee to reimburse him for the cost of his golf
club initiation fee. Notwithstanding anything to the contrary set forth herein
or otherwise, in no event shall Employee be entitled to receive severance pay or
the golf club initiation reimbursement discussed above in the event that he
voluntarily resigns his position for any reason other than a material change in
the scope of his duties.
4. NON-COMPETITION/CONFIDENTIALITY. In consideration of the
compensation described in this Agreement, Employee agrees that while he is
employed by Corporation and for the two (2) year period following the conclusion
of his employment with Corporation (the "Non-Compete Period"), Employee shall
not, either directly or indirectly (and whether or not for compensation), work
for, be employed by, own, participate or engage in, or have any interest in, any
person, firm, entity, partnership, limited partnership, limited liability
company, corporation or business (whether as an employee, owner, partner,
member, shareholder, officer, director, agent, creditor, consultant or in any
capacity which calls for the rendering of personal services, advice, acts of
management, operation or control) that engages in activities in any of the
counties in any of the states in which Corporation or any of its affiliates (the
"Lason Group") transacts business which are substantially the same as or
competitive with the activities engaged in by the Lason Group including
2
<PAGE> 3
but not limited to the following: document management, records management and
business communications including, but not limited to, photocopying, imaging,
scanning and conversion and related services ancillary to all of the foregoing
and outgrowths thereof (the "Business"), so long as the Lason Group (or any
successor) shall, directly or indirectly, be engaged in the Business in any such
county. The foregoing shall not, however, be deemed to prevent Employee from
owning in the aggregate up to 5% of the securities of any corporation the shares
of which are traded on a securities exchange or in the over-the-counter market.
Employee further agrees that he shall not, directly or
indirectly, at any time during the Non-Compete Period: (i) divert or attempt to
divert from the Lason Group any business of any kind in which the Lason Group is
engaged; (ii) take any action that causes the termination of a business
relationship between the Lason Group and any customer or supplier of the Lason
Group; or (iii) induce or attempt to induce any person who is an employee of the
Lason Group to leave the employ of the Lason Group.
During the term of this Agreement and the Non-Compete Period,
Employee shall keep secret and inviolate and shall not divulge, communicate, use
to the detriment of the Lason Group or for the benefit of any other person or
persons or misuse in any way any knowledge or information of a confidential
nature, including, without limitation, all trade secrets, information, computer
programs, technical data, customer lists and unpublished matters relating to the
business, assets, accounts, books, records, customers and contracts of the Lason
Group which he may or hereafter come to know as a result of his association with
and which is unique to the Lason Group ("Confidential Information"). Information
shall not be considered Confidential Information if: (i) the information is
known by or subsequently becomes generally available to the public through no
fault or breach on the part of Employee; (ii) the information is independently
developed by Employee without the use of any Confidential Information; or (iii)
the Employee rightfully obtains the information after the term of this Agreement
from a third party that has the right to disclose it. Employee may disclose
Confidential Information if required by any judicial or governmental request,
requirement or order; provided that Employee will take reasonable steps to give
the Lason Group sufficient prior notice in order to contest such request,
requirement or order.
Employee has had knowledge of the affairs, trade secrets,
customers, potential customers and other proprietary information of the Lason
Group, and Employee acknowledges and agrees that compliance with the covenants
set forth in this Paragraph 5 is necessary for the protection of the business,
goodwill and other proprietary interests of the Lason Group and that any
violation of this Agreement will cause severe and irreparable injury to the
business, goodwill and proprietary interests of the Lason Group, which injury is
not compensable by money damages. Accordingly, in the event of a breach (or
threatened or attempted breach) of this Paragraph 5, the Lason Group and any
successor shall, in addition to any other rights and remedies, be entitled to
immediate appropriate injunctive relief or a decree of specific performance,
without the necessity of showing any irreparable injury or special damages.
If, in any judicial proceeding, a court shall refuse to
enforce any of the covenants included herein, then said unenforceable
covenant(s) shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining
3
<PAGE> 4
separate covenants to be enforced. It is the intent and agreement of Corporation
and Employee that these covenants be given the maximum force, effect and
application permissible under law.
The provisions of this Paragraph 5 shall survive the
termination of this Agreement.
5. MISCELLANEOUS. Employee shall not assign his rights and
obligations hereunder. Subject to the foregoing, all of the terms and conditions
of this Agreement shall be binding upon and shall inure to the benefit of the
heirs, successors, administrators, legal representatives and assigns, as the
case may be, of the parties hereto.
6. PARTIAL INVALIDITY. If any provision of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable
in any manner, the remaining provisions of this Agreement shall nonetheless
continue in full force and effect without being impaired or invalidated in any
way. In addition, if any provision of this Agreement may be modified by a court
of competent jurisdiction such that it may be enforced, then that provision
shall be so modified and as modified shall be fully enforced.
7. ENTIRE AGREEMENT. This Agreement contains the entire
understanding of the parties hereto with respect to the subject matter contained
herein, supersedes all prior and contemporaneous agreements, understandings and
negotiations, and any and all employment agreement(s) between Corporation and
Employee dated prior to the date hereof; and no evidence of prior or
contemporaneous agreements, understandings and negotiations shall govern or be
used to construe or modify this Agreement. Except as provided in this Agreement,
no modification or alteration hereof shall be deemed effective unless in writing
and signed by the parties hereto. Neither this Agreement nor any of its
provisions may be changed, waived, or discharged orally, but only by an
instrument duly signed by the party against which enforcement of the change,
waiver, or discharge is sought.
8. NOTICES. All notices, demands, and requests required or
permitted to be given under the provisions of this Agreement shall be in writing
and shall be deemed given (a) when personally delivered or sent by facsimile
transmission to the party to be given the notice or other communication or (b)
on the business day following the day such notice or other communication is sent
by overnight courier to the addresses set forth above or at such other address
as either party may designate from time to time by appropriate notice to the
other.
9. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
10. HEADINGS. The headings in this Agreement are for reference
only and shall not limit or otherwise affect any of the terms or provisions
hereof.
11. COUNTERPARTS. This Agreement may be executed in two (2) or
more counterparts, each of which shall be considered an original, but all of
which together shall constitute one and the same instrument.
4
<PAGE> 5
THIS AGREEMENT was executed as of date and year first set forth above.
"CORPORATION"
LASON SYSTEMS, INC., A DELAWARE
CORPORATION
By: /s/ Gary L. Monroe
--------------------------------------
Gary L. Monroe
Its: Chairman of the Board and Chief
Executive Officer
"EMPLOYEE"
/s/ John R. Messinger
-----------------------------------------
John R. Messinger
5
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,187
<SECURITIES> 0
<RECEIVABLES> 99,953
<ALLOWANCES> 0
<INVENTORY> 10,125
<CURRENT-ASSETS> 133,124
<PP&E> 81,017
<DEPRECIATION> 12,131
<TOTAL-ASSETS> 512,336
<CURRENT-LIABILITIES> 55,572
<BONDS> 0
0
0
<COMMON> 146
<OTHER-SE> 292,699
<TOTAL-LIABILITY-AND-EQUITY> 512,336
<SALES> 106,162
<TOTAL-REVENUES> 106,162
<CGS> 68,278
<TOTAL-COSTS> 68,278
<OTHER-EXPENSES> 24,482
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,131
<INCOME-PRETAX> 11,271
<INCOME-TAX> 4,483
<INCOME-CONTINUING> 6,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,788
<EPS-PRIMARY> 0.46
<EPS-DILUTED> 0.43
</TABLE>
