SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
IMAGEMAX, INC.
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
________________________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
1) Title of each class of securities to which transaction applies:
_____________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
_____________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
_____________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_____________________________________________________________________________
/_/ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the form or schedule
and the date of its filing.
1) Amount previously paid: _________________________________________________
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3) Filing party: ___________________________________________________________
4) Date filed: _____________________________________________________________
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*Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE>
IMAGEMAX, INC.
1100 EAST HECTOR STREET
SUITE 396
CONSHOHOCKEN, PA 19428
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
ImageMax, Inc. to be held on Wednesday, December 8, 1999 at 10:00 a.m, local
time, at The Lee Park Building, Main Auditorium, 1100 East Hector Street,
Conshohocken, Pennsylvania.
The proposals for the annual meeting relate to:
1. The election of two (2) directors to our board of directors;
2. The approval of our 1997 Incentive Plan; and
3. The approval of an amendment to our 1997 Incentive Plan to increase
the number of shares of common stock available for awards under the
plan.
Our Annual Report on Form 10-K, as amended, for the year ended December 31,
1998 and our Quarterly Reports on Form 10-Q for the quarters ended March 31,
1999 and June 30, 1999 accompany the proxy statement enclosed with this letter.
We look forward to seeing you at the annual meeting. Whether or not you are
planning to attend, we urge you to return the enclosed proxy at your earliest
convenience.
Sincerely,
/s/ David C. Carney
--------------------------------
David C. Carney
Chairman of the Board of Directors
<PAGE>
IMAGEMAX, INC.
1100 EAST HECTOR STREET
SUITE 396
CONSHOHOCKEN, PA 19428
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 8, 1999
------------------------
To the Shareholders of
ImageMax, Inc.:
The annual meeting of shareholders of ImageMax, Inc. will be held at The
Lee Park Building, Main Auditorium, 1100 East Hector Street, Conshohocken,
Pennsylvania on Wednesday, December 8, 1999 at 10:00 a.m., local time, for the
following purposes:
1. To elect two Class II directors to serve until the 2002 annual
meeting of shareholders;
2. To approve our 1997 Incentive Plan;
3. To approve an amendment to our 1997 Incentive Plan to increase the
number of shares of stock available for awards under the plan; and
4. To transact any other business as may properly be brought before
the annual meeting.
Any action may be taken on the foregoing matters at the annual meeting on
the date specified above, or on any date or dates to which the annual meeting
may be adjourned.
The board of directors has fixed the close of business on November 4, 1999
as the record date for determining the shareholders entitled to notice of and to
vote at the annual meeting and at any adjournments or postponements of the
annual meeting. Only shareholders of record of our common stock at the close of
business on that date will be entitled to notice of and to vote at the annual
meeting and at any adjournments or postponements of the annual meeting.
Your attention is directed to the accompanying proxy statement for
information regarding each proposal to be made at the annual meeting. Copies of
our Annual Report on Form 10-K, as amended, for the year ended December 31, 1998
and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999 are enclosed with this proxy statement.
All shareholders are cordially invited to attend the annual meeting.
Whether or not you plan to attend the annual meeting, we urge you to complete
and sign the enclosed proxy, and return it promptly to us. At any time prior to
their being voted, proxies are revocable by delivering written notice to us in
accordance with the instructions set forth in the proxy statement or by voting
at the annual meeting in person.
SHAREHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE ASKED TO VOTE,
SIGN, DATE AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED SELF-ADDRESSED
ENVELOPE, WHICH DOES NOT REQUIRE ANY POSTAGE IF MAILED IN THE UNITED STATES.
By order of the Board of Directors
/s/ Andrew R. Bacas
-------------------------------
Andrew R. Bacas
Secretary and Acting Chief Executive
Officer
November 8, 1999
Conshohocken, Pennsylvania
<PAGE>
IMAGEMAX, INC.
1100 EAST HECTOR STREET
SUITE 396
CONSHOHOCKEN, PA 19428
------------------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 8, 1999
------------------------
PROXY STATEMENT
This proxy statement has been prepared and is being distributed in
connection with the solicitation by the board of directors of ImageMax, Inc. of
proxies in the enclosed form for use at our annual meeting of shareholders to be
held on Wednesday, December 8, 1999, at 10:00 a.m., local time, at The Lee Park
Building, Main Auditorium, 1100 East Hector Street, Conshohocken, Pennsylvania,
and any adjournments or postponements of the annual meeting.
VOTING AND REVOCABILITY OF PROXIES
Shareholders of record as of the close of business on November 4, 1999,
which date is sometimes referred to in this proxy statement as the "record
date," will be entitled to vote at the annual meeting and any adjournment of the
annual meeting. As of the record date, 6,621,316 shares of our common stock were
outstanding and entitled to one vote each. Execution of a proxy will not in any
way affect your right to attend the annual meeting and vote in person. Any
shareholder submitting a proxy has the right to revoke it at any time before it
is exercised by another instrument or transmission revoking it or by filing with
the Secretary of ImageMax a properly created proxy bearing a later date.
Shares represented by properly executed proxies for which no instructions
are received will be voted "for" all the nominees identified below under
"Proposal No. 1 -- Election of Class II Directors," "for" the ratification of
the 1997 Incentive Plan identified below under "Proposal No. 2 -- Ratification
of 1997 Incentive Plan" and "for" the amendment of the 1997 Incentive Plan
identified below under "Proposal No. 3 -- Amendment of 1997 Incentive Plan." The
persons named as proxies are either officers or directors of ImageMax.
The presence, in person or by proxy, of shareholders entitled to cast at
least a majority of the votes that all shareholders are entitled to cast on a
particular matter to be acted upon at the annual meeting, will constitute a
quorum for the purposes of consideration and action on such matter. Abstentions
and broker non-votes are each included in the number of shares present at the
annual meeting for purposes of establishing a quorum. The two nominees receiving
the two highest numbers of votes cast at the annual meeting will be elected
Class II directors. For all other proposals, the affirmative vote of the holders
of a majority of shares of common stock voted, in person or by proxy, at the
annual meeting is required. If any other matter should be presented at the
annual meeting upon which it is proper to take a vote, shares represented by all
proxies received will be voted with respect to those matters in accordance with
the judgment of the persons named as proxies.
This proxy statement and the accompanying materials were first sent to you
on or about November 8, 1999.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 4, 1999, certain information
with regard to beneficial ownership, as determined in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended, of
outstanding shares of our common stock by (1) each person, entity or group known
by us to beneficially own five percent (5%) or more of the outstanding shares of
our common stock, (2) each director and director nominee individually, (3) our
Chief Executive Officer and our four most highly compensated executive officers
other than the Chief Executive Officer for the fiscal year ended December 31,
1998, collectively referred to in this proxy statement as "named executive
officers," and (4) all directors and current executive officers as a group.
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES PERCENTAGE OF CLASS
NAME AND ADDRESS OF OF COMMON STOCK OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
- - ------------------- ---------------------- ---------------------
<S> <C> <C>
Bruce M. Gillis..................................................... 431,452(2) 6.4%
331 Aubrey Road
Wynnewood, PA 19096
Andrew R. Bacas..................................................... 238,526(3) 3.5%
c/o ImageMax, Inc.
1100 E. Hector Street
Conshohocken, PA 19428
Rex Lamb............................................................ 229,188(4) 3.4%
c/o ImageMax, Inc.
5001 Rentworth Court
Lincoln, NE 68516
Mitchell J. Taube................................................... 203,237(5) 3.0%
c/o ImageMax, Inc.
5 Schuman Road
Millwood, NY 10546
S. David Model (6).................................................. 65,195 *
P.O. Box 677
Granby, CT 06035
James D. Brown (7).................................................. 47,645 *
318 Hathaway Lane
Wynnewood, PA 19096
Richard D. Moseley.................................................. 43,109(8) *
7103 Sherman Street
Philadelphia, PA 19119
Dr. Steven N. Kaplan................................................ 23,825(9) *
c/o The University of Chicago
Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER OF SHARES PERCENTAGE OF CLASS
NAME AND ADDRESS OF OF COMMON STOCK OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED
- - ------------------- ---------------------- ---------------------
<S> <C> <C>
Lewis E. Hatch, Jr.................................................. 13,667(10) *
16 West Lakes Drive
St. Simon's Island, GA 31522
Lennox K. Black..................................................... 10,333(5) *
c/o Teleflex Incorporated
630 West Germantown Pike
Suite 461
Plymouth Meeting, PA 19462
David C. Carney..................................................... 10,333(11) *
c/o ImageMax, Inc.
1100 E. Hector Street
Conshohocken, PA 19428
All executive officers and directors as a group
(8 persons)....................................................... 733,109(12) 11.0%
</TABLE>
- - ------------------
* Less than 1% of the outstanding Common Stock.
(1) As used in this table, "beneficial ownership" means the sole or shared
power to vote or direct the voting of a security, or the sole or shared
investment power with respect to a security, which means the power to
dispose, or direct the disposition, of a security. A person is deemed as of
any date to have beneficial ownership of any security that such person has
the right to acquire within 60 days after such date.
(2) Includes 100,000 shares issuable upon the exercise of stock options granted
which are exercisable at $12.00 per share within 60 days of November 4,
1999 and expire on December 31, 2002. Mr. Gillis resigned from his
employment with us as of September 18, 1998.
(3) Includes 10,000 shares issuable upon the exercise of stock options granted
which are exercisable at $2.375 per share within 60 days of November 4,
1999. Excludes 20,000 shares issuable at $2.375 per share upon the exercise
of stock options granted October 1, 1998, which are not exercisable within
60 days of November 4, 1999.
(4) Includes 5,000 shares issuable upon the exercise of stock options granted
which are exercisable at $2.375 per share within 60 days of November 4,
1999. Excludes 10,000 shares issuable at $2.375 per share upon the exercise
of stock options granted October 1, 1998, which are not exercisable within
60 days of November 4, 1999.
(5) Includes 3,333 shares issuable upon the exercise of stock options granted
which are exercisable at $2.375 per share within 60 days of November 4,
1999. Excludes 6,667 shares issuable at $2.375 per share upon the exercise
of stock options granted October 1, 1998, which are not exercisable within
60 days of November 4, 1999.
(6) Mr. Model resigned from his employment with us as of November 9, 1998.
(7) Mr. Brown resigned from his employment with us as of April 30, 1999.
(8) Includes 16,667 shares issuable upon the exercise of stock options granted
which are exercisable at $12.00 per share within 60 days of November 4,
1999. Excludes 33,333 shares issuable at $12.00 per share upon the exercise
of stock options granted October 1, 1998, which are not exercisable within
60 days of November 4, 1999. All of Mr. Moseley's options expire on April
15, 2003. Mr. Moseley resigned from his employment with us as of September
28, 1998.
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<PAGE>
(9) Includes 3,333 shares issuable upon the exercise of stock options granted
which are exercisable at $2.375 per share within 60 days of November 4,
1999. Excludes 6,667 shares issuable at $2.375 per share upon the exercise
of stock options granted October 1, 1998, which are not exercisable within
60 days of November 4, 1999.
(10) Includes 6,667 shares issuable upon the exercise of stock options granted
which are exercisable at $2.375 per share within 60 days of November 4,
1999. Excludes 13,333 shares issuable at $2.375 per share upon the exercise
of stock options granted October 1, 1998, which are not exercisable within
60 days of November 4, 1999.
(11) Includes 3,333 shares issuable upon the exercise of stock options granted
which are exercisable at $2.375 per share within 60 days of November 4,
1999. Excludes 6,667 and 58,000 shares, respectively, issuable at $2.375
and $1.75 per share upon the exercise of stock options granted October 1,
1998 and June 29, 1999, which are not exercisable within 60 days of
November 4, 1999.
(12) Excludes 131,334 shares issuable upon the exercise of stock options granted
which are not exercisable within 60 days of November 4, 1999.
4
<PAGE>
PROPOSAL NO. 1 -- ELECTION OF CLASS II DIRECTORS
Our board of directors is divided into three classes of directors with each
director serving a three-year term. Each year, only one class of directors is
subject to a shareholder vote. Two Class II directors will be elected at the
annual meeting, each to a three-year term. Class I members presently are
Mitchell J. Taube and David C. Carney. Class II members presently are Andrew R.
Bacas, John E. Semasko and Lewis E. Hatch, Jr. and Class III members presently
are Rex Lamb, Steven N. Kaplan and Lennox K. Black. Members of Class I and Class
III of the board of directors are not standing for election and their terms
expire in 2001 and 2000, respectively.
Andrew R. Bacas and Lewis E. Hatch, Jr. are the nominees for election to
the board of directors at the annual meeting, each to serve until the annual
meeting of shareholders in 2002 and until his successor is elected and
qualified. On November 4, 1999, the board of directors voted to reduce the
number of seats on the board of directors from nine to seven, such reduction to
be effective as of the date of the 1999 annual meeting of shareholders. The
members of the board of directors believe that a smaller board of directors will
increase the effectiveness, efficiency and focus of the board of directors. This
action will eliminate the vacant board seat that resulted from Bruce M. Gillis'
resignation and the seat currently occupied by John E. Semasko, a Class II
member of the board of directors, who is not standing for re-election.
The affirmative vote of a plurality of shares of the common stock present
or represented by proxy at the annual meeting and entitled to vote is required
for the election of the Class II nominees. In case any of the nominees should
become unavailable for election, for any reason not presently known or
contemplated, the persons named on the proxy will have discretionary authority
to vote pursuant to the proxy for a substitute.
The following table sets forth the name, age, term of office and principal
occupation of each director, including the nominees.
<TABLE>
<CAPTION>
NAME AGE SINCE PRINCIPAL OCCUPATION
- - ---- --- ----- --------------------
<S> <C> <C> <C>
David C. Carney..................... 62 1997 Chairman of the Board of Directors
Andrew R. Bacas..................... 41 1996 Acting Chief Executive Officer, Vice Chairman of the Board
of Directors and Secretary
Lennox K. Black..................... 69 1997 Director
Lewis E. Hatch, Jr.................. 73 1997 Director
Steven N. Kaplan.................... 39 1997 Director
Rex Lamb............................ 40 1997 Executive Vice President -- Marketing and Corporate
Development, Business Unit Manager and Director
Mitchell J. Taube................... 42 1998 Legal Services Manager, Business Unit Manager and Director
</TABLE>
DAVID C. CARNEY became a director of ImageMax in December 1997 and has
served as Chairman of the Board of Directors since May 1999. Mr. Carney was the
Executive Vice President of Jefferson Health System, a health care organization,
from 1996 to April 1999. From 1991 to 1995, Mr. Carney served as the Chief
Financial Officer of CoreStates Financial Corp. From 1980 to 1991, he served as
the Philadelphia area managing partner of Ernst & Young LLP. Mr. Carney
currently serves as a director of Radian Group, Inc. and AAA Mid-Atlantic &
Keystone Insurance Companies. Mr. Carney has an undergraduate degree from Temple
University and is a graduate of the Advanced Management Program at the Harvard
Business School.
ANDREW R. BACAS has been serving as our Acting Chief Executive Officer
since September 1998. He is also one of our founders and has been a director
since our inception. Mr. Bacas joined GBL Capital Corporation, an investment
company, in May 1997 and began serving as our Senior Vice President -- Corporate
Development from August 1997 to September 1998, when he became our
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Acting Chief Executive Officer. From 1992 to May 1997, Mr. Bacas was an
associate and later a Vice President -- Corporate Finance of Simmons & Company
International, an investment bank to the international oil service and equipment
industry. From 1991 to 1992, Mr. Bacas was a financial analyst for the Upstream
Business Unit at Exxon Company, USA. From 1984 to 1991, Mr. Bacas was a Naval
Flight Officer in the United States Navy. Mr. Bacas has an undergraduate degree
in Engineering from Yale University and an MBA from the Wharton School of the
University of Pennsylvania.
LENNOX K. BLACK became a director of ImageMax in December 1997. Mr. Black
has been the Chairman of Teleflex Incorporated, a diversified manufacturer of
automotive, marine, industrial, aerospace and medical products, since 1982 and
served as its Chief Executive Officer from 1982 to 1995. Mr. Black currently
serves as a director of Quaker Chemical Corporation, The Pep Boys -- Manny Moe &
Jack and the Penn Virginia Corporation. Mr. Black has an undergraduate degree in
Economics from McGill University.
LEWIS E. HATCH, JR. became a director of ImageMax in December 1997 and
served as Chairman of the Board of Directors from September 1998 to May 1999.
Mr. Hatch is the retired former Chairman and Chief Operating Officer of Rusch
International, an international medical device manufacturer. Mr. Hatch is a
director of Park-Ohio Industries, Inc. Mr. Hatch has an undergraduate degree
from Ursinus College.
STEVEN N. KAPLAN became a director of ImageMax in December 1997. Dr. Kaplan
is the Neubauer Professor of Entrepreneurship and Finance at the University of
Chicago Graduate School of Business. Dr. Kaplan joined the faculty of the
University of Chicago originally in 1988 as an Assistant Professor. Previously,
Dr. Kaplan was an associate at Booz Allen Hamilton, Inc. and an analyst with
Kidder Peabody and Company. Dr. Kaplan holds an A.B. degree in Applied
Mathematics, an A.M. and a Ph.D. in Business Economics from Harvard University.
REX LAMB was appointed to the position of Executive Vice President --
Marketing and Corporate Development in May 1999. Mr. Lamb has managed our
Lincoln, Nebraska business unit and has served as a director since December
1997. Mr. Lamb founded DocuTech, Inc., a document management services company,
in 1991 and served as its President from inception until its acquisition by us
in December 1997. Mr. Lamb co-founded DocuTech Data Systems, Inc., a provider of
open-architecture document-scanning software products, in 1994 and served as its
President since inception until its acquisition by us in December 1997. Mr. Lamb
has an undergraduate degree in Education from the University of Nebraska.
MITCHELL J. TAUBE was appointed to the position of Legal Services Manager
in May 1999. Mr. Taube has managed our Millwood, New York business unit since
December 1997 and has served as a director since June 1998. Mr. Taube is a
director of Briarcliff Manor Education Foundation and currently serves on the
Service Company Executive Committee of the Association for Information and Image
Management International. Mr. Taube has an undergraduate degree and an MBA from
Hofstra University.
During 1998, our board of directors met 11 times. There was no incumbent
who, during the last full fiscal year, attended in person or by phone fewer than
75% of those board of directors meetings.
COMMITTEES OF THE BOARD
The board of directors established its compensation committee and audit
committee in 1998.
The compensation committee of the board of directors, subject to the
approval of the board of directors, determines the compensation of our executive
officers and oversees the administration of executive compensation programs. The
compensation committee is composed of Mr. Black and Dr. Kaplan.
The audit committee recommends outside accountants, reviews the results and
scope of the annual audit, the services provided by our independent auditors and
the recommendations of the auditors with respect to our accounting systems and
controls. The audit committee is presently composed of
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Mr. Carney, Mr. Hatch and John E. Semasko. Representatives of our independent
auditing firm, Arthur Andersen LLP, met with Mr. Carney and Mr. Hatch on March
16, 1999 and reviewed their examination of our financial statements for the year
ended December 31, 1998.
COMPENSATION OF DIRECTORS
Directors are reimbursed for travel expenses incurred for each board of
directors and committee meeting attended in person. Under our 1997 Incentive
Plan, we granted to nonemployee directors in 1998 nonqualified stock options for
60,000 shares of common stock at an exercise price of $2.375 per share,
representing 20,000 options to Mr. Hatch and 10,000 options each to Messrs.
Black, Carney, Gillis and Kaplan, and nonqualified stock options for 10,000
shares of common stock at an exercise price of $1.75 per share to Mr. Carney.
These options vest in equal annual installments over three years, but become
fully exercisable in the event of a change of control, as defined in the plan.
In April 1999, 10,000 of these options were canceled as a result of Mr. Gillis'
resignation from the board of directors.
In 1998, 20,000 options granted to each of Messrs. Black, Carney, Hatch and
Kaplan in 1997, at an exercise price of $12.00 per share, were canceled.
In September 1998 and June 1999, respectively, we entered into consulting
arrangements with Mr. Hatch and Mr. Carney. For a description of these
consulting arrangements, see "Certain Relationships and Related Transactions --
Consulting Arrangements" found on page 20 of this proxy statement.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE DIRECTORS
NOMINEES IN PROPOSAL NO. 1
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<PAGE>
PROPOSAL NO. 2 -- RATIFICATION OF 1997 INCENTIVE PLAN
In 1997, our board of directors adopted the ImageMax 1997 Incentive Plan.
The purpose of the plan is to offer certain of our employees, associates and
directors equity interests in ImageMax, options to acquire equity interests in
ImageMax and other performance-based incentive awards, thereby attracting,
retaining and motivating such persons, and strengthening the mutuality of
interest between these persons and our shareholders. The summary of our 1997
incentive plan provided below is qualified in its entirety by the provisions
contained in the 1997 Incentive Plan, a copy of which is attached to the proxy
statement as Annex A.
A public company is generally not entitled to deduct compensation in excess
of $1,000,000 paid to its chief executive officer and four other most highly
compensated officers for whom disclosure is required to be reported in certain
Securities Exchange Act of 1934 filings. However, conditioned upon shareholder
approval and certain other requirements, there is an exception under Section
162(m) of the Internal Revenue Code, and its regulations, permitting a deduction
for certain performance-based compensation arrangements. Stock options or other
stock appreciation rights generally are considered to be performance-based
compensation, because the amount of compensation is tied to an increase in the
issuing company's stock price.
Our 1997 Incentive Plan is a performance-based compensation arrangement
that meets the shareholder approval requirement, and certain other requirements,
entitling us to deduct performance-based compensation in excess of $1,000,000
for each executive officer described above, under section 162(m) of the Internal
Revenue Code. However, because of the proposed modification to the plan
described under "Proposal No. 3 -- Amendment of 1997 Incentive Plan," we will
retain the right to this deduction only if the plan is once again approved by
shareholders. In any event, we are required under section 162(m) to seek
re-approval of the plan within approximately three years following the initial
public offering.
It is possible, depending on the price of our common stock, that a gain on
stock options or other stock appreciation rights could cause an individual's
taxable compensation to exceed $1,000,000. Accordingly, we are seeking
shareholder approval of the plan at this time in order to retain the favorable
tax treatment to which we are already entitled by virtue of prior shareholder
approval. The plan will remain in effect even if it is not ratified under this
proposal. Without ratification, however, we will not be able to take advantage
of the exception under Section 162(m) as described above.
DESCRIPTION OF THE 1997 INCENTIVE PLAN
The plan provides for the award of up to 600,000 shares of our common stock
to its employees, directors, consultants and other individuals who perform
services for us. If our shareholders approve the amendment to the plan described
in Proposal No. 3 of this proxy statement, the plan will be amended to provide
for the award of up to 1,600,000 shares of our common stock.
The compensation committee of the board of directors administers the plan.
Under the terms of the plan, the compensation committee is required to be
composed of two or more directors. The compensation committee has the authority
to interpret the plan and to determine and designate the persons to whom options
or awards will be made and the terms, conditions and restrictions applicable to
each option or award such as the price, any restriction or limitation, any
vesting schedule or acceleration of option or awards, and any forfeiture
restrictions.
The plan contains provisions for granting various stock-based awards,
including incentive stock options, as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, nonqualified stock options, restricted stock,
performance shares and performance units, as further described below. The term
of the plan is 10 years, subject to earlier termination or amendment, but
options and other rights may remain exercisable after the plan expires or is
terminated.
The board of directors, generally, may amend, alter or discontinue the plan
at any time during its term. However, such amendment, alteration or
discontinuation may not impair the rights of a participant regarding an award
that has been previously granted to the participant without the
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<PAGE>
participant's consent. In addition, the board of directors must obtain the
approval of a majority of the votes cast at a duly held shareholder meeting at
which a quorum of shareholders is present, in person or by proxy, for an
amendment within one year of its adoption by the board of directors to:
o increase the total number of shares of our common stock reserved for the
purposes of the plan;
o change the persons or class of persons eligible to participate in the
plan; or
o extend the maximum option term under the plan.
Except with respect to awards of stock options to outside directors, as
described above, the compensation committee has the power to select award
recipients and their allotments and to determine the price, term and vesting
schedule for awards granted. While there are no predetermined performance
formulas, measures or other specific criteria used to determine recipients of
awards under the plan, awards are based generally upon consideration of the
grantee's position and responsibilities, the nature of services provided to us,
the value of the services to us, the present and potential contribution of the
grantee to our success, the anticipated number of years of service remaining and
other factors that the board of directors or the compensation committee may deem
relevant.
Stock Options. The plan provides for the grant of incentive stock options
to our employees. The plan also provides for the grant of nonqualified stock
options to our employees, directors, and consultants and other individuals who
perform services for us but are not employed by us. The exercise price of any
incentive stock option granted under the plan may not be less than 100% of the
fair market value of our common stock on the date of grant and 110% of fair
market value in the case of an option holder who owns 10% or more of our
outstanding shares of common stock. Options granted under the plan may be
exercised for cash or in exchange for shares of common stock owned by the option
holder having a fair market value on the date of exercise equal to the option
exercise price. The aggregate fair market value, determined on the date of
grant, of the shares with respect to which incentive stock options are
exercisable for the first time by an employee during any calendar year may not
exceed $100,000. Any option that does not meet the requirements or limits
applicable to incentive stock options is treated as a nonqualified stock option.
Under the plan, each option is exercisable for the full amount or for any
part of the shares subject to option at such intervals or in such installments
as the compensation committee determines at the time it grants the option.
However, no option is exercisable with respect to any shares of common stock
later than ten years after the date of the grant of the option or five years
after the date of grant of the option in the case of an incentive stock option
granted to a 10% owner. All options are nontransferable by the optionee, except
upon death. The shares subject to expired options or terminated options which
remain unexercised become available for future grants.
If an optionee ceases to be employed by, or to render services to, us for
any reason other than death, disability or termination for cause, any option
exercisable on the date of such termination generally may be exercised for a
period of 90 days from the date of such termination or until the expiration of
the stated term of the option, whichever period is shorter, or until a time
specified by us. In the event of termination of employment or service by reason
of death or disability, any option exercisable at the date of such termination
generally may be exercised for a period of one year from the date of termination
or until the expiration of the stated term of the option, whichever period is
shorter. If a participant's employment or service is terminated for cause, any
option not exercised prior to the date of such termination shall be immediately
canceled. In the event of a change of control of our company, as defined in the
plan, the plan provides that all outstanding options will become immediately
exercisable, and also provides for the cancellation of options and a cash
payment to the holders of the canceled options upon the occurrence of certain of
the events constituting a change in control.
Restricted Stock. "Restricted stock" are shares of our common stock
granted to an employee for no cash consideration, which will be forfeited to us
if the grantee ceases to be an employee of ours during a restriction period
specified by the compensation committee at the time it grants the restricted
stock. In the event of death or disability, the restrictions will lapse with
respect to that percentage of
9
<PAGE>
restricted stock held by the grantee that is equal to the percentage of the
restriction period that had elapsed as of the date of death or commencement of
disability. In the event of a change of control of our company, all restrictions
on shares of restricted stock will lapse. Shares of restricted stock that are
forfeited become available for future grants.
Performance Shares. A "performance share" is an award of the right to
receive stock at the end of a specified period upon the attainment of
performance goals specified by the compensation committee at the time of grant.
Performance shares generally will be forfeited if the grantee ceases to be an
employee of ours during the performance period for any reason other than death
or disability. In the event of death or disability, the participant or his or
her estate will be entitled to receive, at the expiration of the performance
period, a percentage of his or her performance shares equal to the percentage of
the performance period that had elapsed at the time of death or commencement of
disability, provided that the compensation committee determines that the
applicable performance goals have been met. In the event of a change of control
of our company, all conditions applicable to each performance share award will
terminate, and a share certificate or share certificates evidencing shares
subject to the share award may be issued and delivered to the participant, at
the board of directors' discretion. Performance shares that are forfeited or not
delivered to the grantee become available for future grants.
Performance Units. A "performance unit" is an award of the right to
receive cash at the end of a specified period upon the attainment of performance
goals specified by the compensation committee at the time of the grant. The
amount payable under a performance unit is equal to the increase in value of a
unit from the date of award to the date of attainment of the performance goals.
Performance units generally will be forfeited if the grantee ceases to be an
employee of ours during the performance period for any reason other than death
or disability. In the event of death or disability, the grantee or his or her
estate will be entitled to receive, at the expiration of the performance period,
a cash payment for a percentage of his or her performance units equal to the
percentage of the performance period that elapsed at the time of death or
commencement of disability, provided that the compensation committee determines
that the applicable performance goals have been met. In the event of a change of
control of our company, all conditions applicable to the performance units will
terminate and a cash payment for the full amount of the performance units will
be made to the grantee.
Other Awards. The plan provides for the issuance of "share appreciation
rights" and long-term performance awards, alone or in addition to other awards
under the plan. These awards may be made at times determined by the compensation
committee and on terms that the compensation committee shall determine. Under a
share appreciation right, a participant in the plan is entitled to receive, in
either cash and/or shares, an amount equal to the excess of the fair market
value of the underlying shares on the exercise date over the fair market value
of the underlying shares as of the date the share appreciation right was
granted. Under a long-term performance award, the board will determine a
performance period during which, if certain goals are met, the participant will
be awarded cash or shares.
FEDERAL INCOME TAX MATTERS
The rules governing the tax treatment of awards under the plan are complex.
Therefore, the description of the federal income tax consequences set forth
below is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their applications may vary in individual circumstances.
Finally, the tax consequences under applicable state and local income tax laws
may not be the same as under the federal income tax laws.
Non-Qualified Stock Options. In general, a participant will not recognize
income on the grant of a non-qualified stock option. Upon exercise of a
non-qualified stock option, the participant will recognize ordinary income equal
to the excess of the fair market value of the shares on the date of exercise
over the exercise price of the option, unless the shares received are shares of
restricted stock, in which case, unless the exercising participant elects to
recognize such income, the income
10
<PAGE>
recognition is deferred until the restrictions lapse or the restricted stock
becomes transferable. We will generally be entitled to a compensation deduction
in the same amount and at the same time as the participant recognizes ordinary
income, and will comply with applicable withholding requirements with respect to
such compensation. There are no tax consequences to a participant or to us if a
non-qualified stock option lapses before it is exercised or forfeited.
Incentive Stock Options. In general, a participant will not recognize
income on the grant or exercise of an incentive stock option. Upon exercise, the
excess, if any, of the fair market value over the exercise price will be an item
of adjustment for purposes of the participant's alternative minimum tax.
If a participant holds shares acquired upon the exercise of an incentive
stock option for more than two years after the date of grant and one year after
the date of exercise, the participant will recognize, upon a subsequent sale of
the shares, the excess, if any, of the sales proceeds over the exercise price as
long-term capital gain. We will not be entitled to a deduction. If the
participant disposes of the shares before the incentive stock option holding
periods referred to immediately above lapse, the participant will recognize
ordinary income in an amount equal to the difference between the exercise price
and the fair market value of a share on the date the option is exercised, or the
amount of gain recognized on the sale, if less. The amount recognized as
ordinary income is added to the participant's basis in the shares. We will be
entitled to a deduction equal to the amount of any ordinary income so
recognized. The participant will recognize as capital gain an amount equal to
the difference between the sales proceeds and the participant's basis in the
shares. If the shares are not held for the incentive stock option holding
periods and the amount realized upon sale is less than the exercise price, such
difference will be a capital loss to the participant. There are no tax
consequences to a participant or to us if an incentive stock option lapses
before it is exercised or forfeited.
Share Exchanges. In general, if previously owned shares are used to pay
the exercise price of options, the participant's tax basis and holding period of
such previously owned shares will be carried over to the equal number of shares
received on exercise. The fair market value of any additional shares received
upon the exercise of an option will be recognized by the participant as ordinary
income. The tax basis of the additional shares will be equal, in the aggregate,
to the ordinary income recognized by the participant. However, if the previously
owned shares had been acquired on the exercise of an incentive stock option and
the holding period requirement for those shares was not satisfied at the time
they were used to exercise an option, such use would constitute a disposition of
such previously owned shares resulting in the recognition of ordinary income as
described above.
Restricted Stock. Unless the participant elects to recognize income at the
time of an award of restricted stock, a participant will not recognize taxable
income until the shares or restricted stock are no longer subject to a
substantial risk of forfeiture or become transferable. In either event, the
participant will recognize ordinary income equal to the excess of the fair
market value of the shares at grant if an election is made, or at the time the
restrictions lapse or are removed, and any amount paid for such shares. If the
participant makes an election with the Internal Revenue Service within 30 days
after the award is made, the participant may recognize ordinary income, if any,
in an amount described above in the year the award was granted. We will
generally be entitled to a deduction in the same amount and in the same year as
the recipient of restricted stock recognizes income. We will comply with all
applicable withholding requirements with respect to such income.
Dividends or distributions received by a participant on restricted stock
during the restriction period are taxable to the participant as ordinary
compensation income and will be deductible by us unless the election described
above is made, rendering dividends or distributions taxable as dividends, and
nondeductible by us.
Performance Shares. At the end of a performance period, the participant
will recognize ordinary income in an amount equal to the fair market value of
the shares received. We will generally be entitled to a compensation deduction
in the same amount and at the same time as the recipient of a performance share
award recognizes ordinary income, and will comply with applicable withholding
requirements with respect to the compensation.
11
<PAGE>
Performance Units. At the end of a performance period, the participant
will recognize ordinary income in an amount equal to the cash received on such
date. We will generally be entitled to a compensation deduction in the same
amount and at the same time as the recipient of a performance unit award
recognizes ordinary income, and will comply with applicable withholding
requirements with respect to the compensation.
Share Appreciation Rights. Upon exercise of a share appreciation right,
the participant will recognize ordinary income in an amount equal to the cash or
the fair market value of the shares received on the exercise date. We will
generally be entitled to a compensation deduction in the same amount and at the
same time that the participant holding a share appreciation right recognizes
ordinary income, and will comply with applicable withholding requirements with
respect to such compensation.
Long-Term Performance Awards. A participant receiving a long-term
performance award will recognize ordinary income when an award is paid, at which
time the participant will recognize income in an amount equal to the amount of
cash received or the fair market value of shares received in payment. We will
generally be entitled to a corresponding deduction at such time, and will comply
with applicable withholding requirements with respect to the award. If
restricted stock is used in payment of a long-term performance award, the
participant's federal income tax consequences will be as described above under
"Restricted Stock."
OPTIONS GRANTED UNDER THE 1997 INCENTIVE PLAN
The table below sets forth the number of shares of our common stock
underlying options granted under the plan prior to the date of this proxy
statement to (1) the named executive officers who hold options, (2) our current
executive officers as a group, (3) our current nonemployee directors as a group,
(4) the director nominees and (5) our employees, including current officers who
are not executive officers, as a group. In the aggregate, 150,000 options are
outstanding having an exercise price of $12.00 per share of common stock,
127,000 options are outstanding having an exercise price of $2.375 per share of
common stock, 130,000 are outstanding having an exercise price of $2.1875 per
share of common stock and 58,000 are outstanding having an exercise price of
$1.75 per share of common stock. These options vest in equal installments over
three years beginning on the date upon which they were granted. The closing
price of our common stock on November 4, 1999 as reported by the OTC Bulletin
Board was $1.937 per share.
1997 INCENTIVE PLAN
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
NAME UNDERLYING OPTIONS
- - ---- ----------------------
<S> <C>
Bruce M. Gillis............................................................... 100,000
Richard D. Moseley............................................................ 50,000
Andrew R. Bacas............................................................... 30,000
All current executive officers as a group..................................... 42,000
All current nonemployee directors as a group.................................. 108,000
Lewis E. Hatch, Jr. -- director nominee....................................... 20,000
All employees, including all current officers who are not executive officers,
as a group.................................................................. 165,000
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" PROPOSAL NO. 2
12
<PAGE>
PROPOSAL NO. 3 -- AMENDMENT OF 1997 INCENTIVE PLAN
On November 28, 1997, the board of directors adopted the 1997 Incentive
Plan for employees, associates and directors. As of November 4, 1999, we have
granted options to purchase 465,000 shares, or 77.5%, of the 600,000 shares of
common stock currently reserved for issuance under the plan.
On November 4, 1999, our board of directors adopted, subject to shareholder
approval at the annual meeting, an amendment to the plan which increases the
total number of shares of common stock authorized for issuance under the plan
from 600,000 to 1,600,000.
In unanimously recommending the approval of this increase to the full board
of directors, the compensation committee of the board of directors, comprised of
Mr. Black and Dr. Kaplan, both non-employee directors, reviewed its projected
impact on us and our shareholders. Among other things, the compensation
committee considered the following:
o Of the options to purchase 600,000 shares of our common stock that are
currently outstanding, options to purchase 150,000 of these shares have
an exercise price of $12.00 per share and are held by former executives
of ImageMax;
o Additional option shares may be needed for the future recruitment of
suitable management talent;
o Greater reliance on options may lessen the need to make cash bonus
payments in future years, thus conserving cash for reinvestment in
ImageMax; and
o Employment agreements with several key managers expire in 2000 and new
option grants may make it possible for us to negotiate retention packages
with these managers that could be more favorable to us.
We believe that our growth and long-term success depend in large part upon
attracting, retaining and motivating key personnel, and that such retention and
motivation can be achieved in part through the grant of stock options. We also
believe that stock options can play an important role in our success by
encouraging and enabling the directors, officers and other employees of ImageMax
- - -- upon whose judgement, initiative and efforts we depend -- to acquire a
proprietary interest in ImageMax's long-term performance. We anticipate that
providing these persons with a direct stake in ImageMax will ensure a closer
identification of the interests of the participants in the plan with those of
ImageMax, thereby stimulating the efforts of these participants to promote our
future success and strengthen their desire to remain with us as directors and
employees. We believe that the proposed increase in the number of shares
issuable under the plan will help us accomplish these goals and will keep our
equity incentive compensation in line with that of other companies comparable to
us.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE
"FOR" PROPOSAL NO. 3
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<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes the compensation of the named executive
officers for the last two fiscal years.
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------------ -------
--------------------------------- RESTRICTED SECURITIES LTIP
OTHER ANNUAL STOCK UNDERLYING PAYOUTS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION AWARD(S) OPTIONS(#) ($)
- - --------------------------- ---- -------- ----- ------------ ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Bruce M. Gillis ................ 1998(1) $143,846 -- $ 721(2) -- -- --
Former Chairman and 1997(3) 83,333 -- -- -- 100,000 --
Chief Executive Officer
S. David Model ................. 1998(4) $128,077 -- $1,010(2) -- -- --
Former President and 1997(5) 56,250 -- -- -- -- --
Chief Operating Officer
Andrew R. Bacas (6) ............ 1998 $119,077(7) -- $ 788(2) -- 30,000 --
Acting Chief 1997(3) 54,167 -- -- -- -- --
Executive Officer
James D. Brown (8) ............. 1998 $126,000 -- -- -- -- --
Former SVP and 1997(5) 48,750 -- -- -- -- --
Chief Financial Officer
Richard D. Moseley ............. 1998(9) $ 58,917 -- -- -- 50,000 --
Former Chief 1997 -- -- -- -- -- --
Information Officer
<CAPTION>
ALL OTHER
NAME AND PRINCIPAL POSITION COMPENSATION
- - -------------------------------- ------------
<S> <C>
Bruce M. Gillis ................ --
Former Chairman and --
Chief Executive Officer
S. David Model ................. --
Former President and --
Chief Operating Officer
Andrew R. Bacas (6) ............ --
Acting Chief --
Executive Officer
James D. Brown (8) ............. --
Former SVP and --
Chief Financial Officer
Richard D. Moseley ............. --
Former Chief --
Information Officer
</TABLE>
- - ------------------
(1) For the period January 1, 1998 to September 18, 1998. Mr. Gillis resigned
from his employment with us as of September 18, 1998.
(2) Represents contributions to our 401(k) plan made by us on behalf of such
person.
(3) For the period August 18, 1997 to December 31, 1997.
(4) For the period January 1, 1998 to November 9, 1998. Mr. Model resigned from
his employment with us as of November 9, 1998.
(5) For the period August 1, 1997 to December 31, 1997.
(6) As of September 19, 1998, Mr. Bacas was appointed the position of Acting
Chief Executive Officer. Previous to that date, Mr. Bacas held the position
of Senior Vice President-Corporate Development.
(7) Upon assuming the position of Acting Chief Executive Officer, Mr. Bacas
voluntarily reduced his annual salary under his employment agreement with us
to $100,000 per year.
(8) Mr. Brown entered into a separation agreement with us pursuant to which he
resigned from his employment with us effective as of April 30, 1999. We
appointed Mark P. Glassman to the position of Chief Financial Officer,
effective as of May 1, 1999.
(9) For the period April 15, 1998 to September 28, 1998. Mr. Moseley resigned
from his employment with us as of September 28, 1998.
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<PAGE>
STOCK OPTION GRANTS
Under our 1997 Incentive Plan, nonqualified stock options for an aggregate
of 80,000 shares of common stock were granted in 1998 to the named executive
officers, the recipients of which are listed in the table below. These grants
vest in equal annual installments over three years, but become fully exercisable
in the event of a change in control, as defined in the plan.
"Potential Realizable Value" of each grant, as set forth in the table
below, is calculated assuming that the market price of the underlying security
appreciates at annualized rates of 5% and 10% over the five-year term of the
option. The result of these calculations are based on rates set forth by the
Securities and Exchange Commission and are not necessarily intended to forecast
possible future appreciation of the price of our common stock.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
NUMBER OF % OF TOTAL APPRECIATION FOR
SECURITIES OPTIONS OPTION TERM (5
UNDERLYING GRANTED TO EXERCISE YEARS)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ---------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Andrew R. Bacas.................... 30,000 8.60% 2.375 10/01/2003 19,685 43,499
Richard D. Moseley................. 50,000 14.33% 12.00 12/08/2002 165,769 366,306
</TABLE>
In 1998, a total of 150,000 options granted to the named executive officers
in 1997 at an exercise price of $12.00, were canceled.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
The table below shows option exercises in 1998 by the named executive
officers holding options and year-end amounts of shares of common stock
underlying outstanding options.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Bruce M. Gillis.................. -- -- 100,000/-0- $ --
Andrew R. Bacas.................. -- -- -0-/30,000 --
Richard D. Moseley............... -- -- 16,667/33,333 --
</TABLE>
Options granted to Mr. Gillis in 1997 and to Mr. Moseley in April 1998 were
at an exercise price equal to our initial public offering price per share of
$12.00. Options granted to Mr. Gillis became fully exercisable in September 1998
under the terms of his separation agreement. One-third of the options granted to
Mr. Moseley became exercisable in December 1998. No options granted to Mr. Bacas
were exercisable during 1998. Based on a closing price of $2.00 on the Nasdaq
National Market on December 31, 1998, there is no value ascribed to the
exercisable or unexercisable options at that date.
EMPLOYMENT AGREEMENTS
We entered into employment agreements with Messrs. Gillis, Model, Bacas and
Brown in August 1997 and with Mr. Moseley in April 1998. The employment
agreement for Mr. Bacas expires on December 31, 2000. The employment agreements
for Messrs. Gillis, Model, Moseley and Brown terminated pursuant to their
separation agreements as described below.
We entered into separation agreements with Messrs. Gillis and Moseley,
separately, in September 1998, with Mr. Model in November 1998 and with Mr.
Brown in April 1999. Under these agreements, Mr. Gillis resigned as Chairman and
Chief Executive Officer, Mr. Moseley resigned as Chief Information Officer, Mr.
Model resigned as President and Chief Operating Officer and Mr. Brown resigned
as Senior Vice President -- Finance and Chief Financial Officer. Mr. Gillis
remained a
15
<PAGE>
member of the board of directors until his resignation on April 12, 1999. In
connection with Mr. Gillis' resignation as our Chief Executive Officer, our
board of directors appointed Andrew R. Bacas as its Vice Chairman and Acting
Chief Executive Officer.
Under the terms of the separation agreements, we have paid or are obligated
to make severance payments to each party as follows: Mr. Gillis, $300,000 over
12 months in three equal installments in September 1998, March 1999 and
September 1999; Mr. Model, $225,000 over 18 months in equal bi-weekly
installments from November 1998 to May 2000; Mr. Moseley, $130,000 over 12
months from September 1998 to September 1999, of which $65,000 was paid in 1998;
and Mr. Brown, $130,000 over 12 months in equal bi-weekly installments from May
1999 to April 2000. The separation agreements also provide, among other things,
that certain expenses be paid by us, including relocation expenses of up to
$35,000 for each person and outplacement services of up to $15,000 for Mr.
Moseley.
Mr. Bacas serves as Acting Chief Executive Officer and previously served as
Senior Vice President -- Corporate Development, each position at a base annual
salary of $130,000. Until April 30, 1999, Mr. Brown served as Senior Vice
President -- Chief Financial Officer at a base annual salary of $130,000. At the
discretion of the board of directors, the base annual salary of each is subject
to increases periodically, and each such officer may receive an annual bonus.
Each of the employment agreements provides for customary benefits including
life, health and disability insurance, 401(k) plan participation and a car
allowance. Each of the employment agreements further provides that if the
employee is terminated without cause, he is entitled to severance pay of between
six months' and one year's base salary and benefits. In the event the employee
is terminated in connection with a change of control, as defined in the
employment agreement, he is entitled to receive 18 months' base salary and
benefits.
In connection with the separation agreements and employment agreements,
should a change in control occur within certain specified periods, these
agreements provide, among other things, that we make aggregate payments to the
executive officers of up to $1,110,000. The periods specified expire at various
dates through December 31, 2000. Should a change of control occur after December
31, 2000, we are not obligated to make any payments under these agreements.
16
<PAGE>
COMPENSATION COMMITTEE REPORT
The compensation committee of the board of directors, subject to the
approval of the board of directors, determines the compensation of our executive
officers and oversees the administration of executive compensation programs. The
compensation committee is composed of Mr. Black and Mr. Kaplan, each of whom is
an independent, nonemployee director.
EXECUTIVE COMPENSATION POLICIES AND PROGRAMS
Our executive compensation programs are designed to attract and retain
highly qualified executives and to motivate them to maximize shareholder returns
by achieving aggressive goals. The programs link each executive's compensation
directly to performance. A significant portion of each executive's compensation
is dependent upon the appreciation of our common stock and meeting financial
goals and other individual performance objectives.
There are three basic components to this "pay for performance" system: base
pay; annual incentive bonus; and long-term, equity-based incentive compensation,
primarily in the form of stock and/or stock options. Each component is evaluated
in the context of competitive conditions. In determining competitive
compensation levels, we consider information from several sources, including
compensation for comparably sized companies and companies in a similar stage of
development. Since our market for executive talent extends beyond the document
management industry, the compensation committee considers data for companies in
other industries.
Base pay. Base pay is designed to be competitive within 20% above or below
median salary levels at other similarly situated companies for equivalent
positions. The executive's actual salary, relative to this competitive
framework, varies based on individual performance and the executive's skills,
experience and background.
Annual incentive bonus. Given our operating performance, no incentive
bonuses were paid in 1998. For 1999, award levels, like the base salary levels,
will be set with reference to competitive conditions and are intended to
motivate our executives by providing substantial bonus payments for the
achievement of aggressive goals. The actual amounts paid will be determined by
performance based on two factors: our financial performance, measured against
objectives established for net income, cash flow, productivity increases,
revenue growth and shareholder returns; and the individual executive's
performance against other specific management objectives, such as building
operational systems and developing organizational capability. Financial and
management objectives are given equal weight in determining bonus payments. The
types and relative importance of specific financial and other business
objectives varied among our executives depending on their positions and the
particular operations or functions for which they were responsible.
Long-term equity-based incentive compensation. The long-term equity-based
compensation program is tied directly to shareholder return. The executive is
rewarded if the shareholders receive the benefit of appreciation in the price of
the common stock. To date under the program, long-term incentive compensation
consists of stock option grants, which vest over a three-year period. It is
anticipated that we will periodically grant new awards to provide continuing
incentives for future performance, without regard to the number of outstanding
awards.
The principal purpose of the long-term incentive compensation program is to
encourage our executives to enhance the value of our company, and hence, the
price of the common stock and the shareholders' return. This component of the
compensation system, through extended vesting, also is designed to create an
incentive for the individual to remain with us.
Policy with respect to Internal Revenue Code Section 162(m). In 1993, the
Internal Revenue Code of 1986 was amended to add Section 162(m). Section 162(m)
and the regulations thereunder place a limit of $1,000,000 on the amount of
compensation that may be deducted by us in any year with respect to some of our
most highly compensated officers. Section 162(m) does not, however, disallow a
deduction for qualified "performance-based compensation," the material terms of
which are disclosed to and approved by shareholders. We intend, to the extent
practicable, to preserve the
17
<PAGE>
deductibility under the Internal Revenue Code of compensation paid to our
executive officers while maintaining compensation programs to attract and retain
highly qualified executives in a competitive environment. Accordingly,
compensation paid under our 1997 Incentive Plan is generally deductible,
although certain compensation paid to some executives may not be deductible.
ANNUAL REVIEWS
It is anticipated that each year, the compensation committee will review
the executive compensation policies with respect to the linkage between
executive compensation and the creation of shareholder value, as well as the
competitiveness of the programs. The compensation committee will determine what
changes, if any, are appropriate in the compensation programs. In conducting
these annual reviews, the compensation committee will consider information
provided by our Chief Executive Officer and may use surveys and reports prepared
by independent compensation consultants. The compensation committee will also
periodically review the levels of ownership in shares and share-equivalents of
the common stock for executive officers to assure that they maintain ownership
positions that properly motivate performance.
The compensation committee will annually review, with our Chief Executive
Officer, the individual performance of the other executive officers and the
Chief Executive Officer's recommendations with respect to the appropriate
compensation awards. Subject to the authorization of the board of directors, the
compensation committee approves salary actions and determines the amount of
annual bonus and the number of long-term, equity-based awards for each executive
officer. The compensation committee also reviews with the Chief Executive
Officer, the financial and other objectives for the senior executives and other
officers for the upcoming year.
In 1998, awards to executive officers reflected, on one hand, our limited
operating history and, on the other, the need to attract and retain appropriate
executives in the initial stages of our development.
CHIEF EXECUTIVE OFFICER
Prior to his resignation in September 1998, Mr. Gillis served as our Chief
Executive Officer since our inception in November 1996. We and Mr. Gillis
initially entered into an employment agreement in August, 1997, expiring on
December 31, 2002, pursuant to which Mr. Gillis would receive a minimum annual
base salary of $200,000, subject to increases periodically at the discretion of
the board of directors, and the grant of options, among other things. Prior to
our initial public offering and the creation of the compensation committee, the
board of directors granted Mr. Gillis 100,000 stock options that, under the
terms of the separation agreement between us and Mr. Gillis, fully vested as of
the date of the separation agreement. The original grant was made to provide a
stock-based incentive to Mr. Gillis for future performance. No other incentive
compensation was awarded to Mr. Gillis.
Mr. Bacas serves as Acting Chief Executive Officer and has served in such
capacity since September 1998. We and Mr. Bacas entered into an employment
agreement in August 1997, expiring on December 31, 2000, pursuant to which Mr.
Bacas would receive a base salary of $130,000, subject to increases periodically
at the discretion of the board of directors, and the grant of options, among
other things, in his capacity as Senior Vice President -- Corporate Development.
Upon assuming the Acting Chief Executive Officer position, the terms of the
employment agreement were not modified. In October 1998, the board of directors
granted Mr. Bacas 30,000 stock options. The grant was made to provide a
stock-based incentive to Mr. Bacas for future performance. No incentive
compensation was awarded to Mr. Bacas.
Members of the compensation committee:
Lennox K. Black, Chairman
Steven N. Kaplan
18
<PAGE>
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
Set forth below is a line graph comparing the cumulative total shareholder
return on our common stock, based on its market price, with the cumulative total
return, assuming dividend reinvestment, of the common stock of the companies
comprising the S&P 500 Index and the common stock issued by companies in a peer
group we selected for the period from December 4, 1997 to December 31, 1998. The
peer group consists of FYI, Inc., IKON Office Solutions, Inc., Lason, Inc. and
Vestcom International, Inc. The companies included in the peer group were
selected primarily because they were publicly-held companies with a substantial
operations in the document management services industry.
COMPARISON OF 13 MONTH CUMULATIVE TOTAL RETURN*
AMONG IMAGEMAX, INC., THE S & P 500 INDEX
AND A PEER GROUP
*$100 INVESTED ON 12/4/97 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
[In the printed version there is a line graph
with the following plot points depicted]
<TABLE>
<CAPTION>
CUMULATIVE TOTAL RETURN
-------------------------------------------------
12/4/97 12/97 3/98 6/98 9/98 12/98
------- ----- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
ImageMax, Inc.................................................. $ 100 $ 84 $ 50 $ 47 $ 20 $ 17
Peer Group..................................................... $ 100 $ 91 $110 $ 60 $ 39 $ 46
S&P 500........................................................ $ 100 $ 100 $114 $117 $106 $ 128
</TABLE>
19
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING ARRANGEMENTS
In September 1998, we entered into a consulting arrangement with Mr. Hatch
whereby Mr. Hatch provided consulting services to us for a fee of $6,000 per
month. This arrangement provided that Mr. Hatch assist us in a variety of
financial and operating matters, including our negotiations with our bank and
various operating procedures. In 1998, we paid $18,000 to Mr. Hatch under this
arrangement. Our arrangement with Mr. Hatch ended as of April 30, 1999.
In June 1999, we entered into a consulting arrangement with Mr. Carney,
effective through his tenure as Chairman of the board of directors, whereby Mr.
Carney provides consulting services to us for a fee of $3,000 per month. We also
granted Mr. Carney 48,000 options at an exercise price of $1.75 per share,
vesting over three years, to purchase our common stock. This arrangement
provides that Mr. Carney assist us in a variety of financial and operating
matters, including our negotiations with our bank and various operating
procedures.
FUTURE TRANSACTIONS
We have adopted a policy that we will not enter into any material
transaction in which a director or officer has a direct or indirect financial
interest, unless the transaction is determined by our board of directors to be
fair as to us or is approved by a majority of our disinterested directors or by
our shareholders, as provided for under Pennsylvania law.
APPOINTMENT OF ACCOUNTANTS
The board of directors has appointed the firm of Arthur Andersen LLP, which
served as our independent auditors for the last fiscal year, as its independent
auditors for the year ending December 31, 1999. One or more representatives of
Arthur Andersen LLP are expected to be present at the annual meeting, who will
have the opportunity to make a statement if so desired and will be available to
respond to appropriate questions.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
our executive officers and directors and persons who own more than ten percent
(10%) of our common stock to file initial reports of ownership and reports of
change of ownership with the Securities and Exchange Commission. Executive
officers and directors are required by Securities and Exchange Commission
regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to us, we believe
that, during the preceding year, Mr. Semasko was late in filing one Section 16
report (Form 4) for four transactions completed in August 1998 and that Messrs.
Bacas and Lamb, separately, were late in filing one Section 16 report (Form 4)
relating to one transaction completed in November 1998. In addition, Mr. Taube
did not timely file a Section 16 report (Form 3) upon becoming a director of
ImageMax in June 1998.
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SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
We intend to mail next year's proxy statement to our shareholders on or
about April 30, 2000. Any shareholder proposal intended to be presented at 2000
our annual meeting of shareholders under Rule 14a-8 promulgated under the
Securities Exchange Act of 1934, as amended, must be received by us at our
office in Conshohocken, Pennsylvania on or before January 31, 1999 in order to
be considered for inclusion in our proxy statement and form of proxy relating to
that annual meeting.
On May 21, 1998, the Securities and Exchange Commission adopted an
amendment to Rule 14a-4(c)(1), as promulgated under the Securities Exchange Act
of 1934. The amendment to Rule 14a-4(c)(1) governs the use of our discretionary
proxy voting authority regarding a shareholder proposal which the shareholder
has not sought to include in our proxy statement. The amendment provides that if
a proponent of a proposal fails to notify us at least 45 days prior to the month
and day of mailing of the prior year's proxy statement, or any date specified in
an advance notice provision, then the proxies will be allowed to use their
discretionary voting authority when the proposal is raised at the annual
meeting, without any discussion of the matter in the proxy statement.
With respect to our 2000 annual meeting of shareholders, if we are not
provided notice of a shareholder proposal, which the shareholder has not
previously sought to include in our proxy statement under Rule 14a-8 by March
15, 2000, the proxies will be allowed to use their discretionary authority as
outlined above.
21
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OTHER MATTERS
The board of directors does not intend to bring any matters before the
annual meeting, other than as stated in this proxy statement, and is not aware
that any other matters will be presented for action at the annual meeting. If
any other matters come before the annual meeting, the persons named in the
enclosed proxy will vote the proxy with respect to those matters, in accordance
with their best judgment, under the discretionary authority granted by the
proxy.
The cost of preparing, assembling, mailing and soliciting the proxies will
be borne by us. In addition to the use of the mails, proxies may be solicited by
our regular employees, either personally or by telephone. We do not expect to
pay any compensation for the solicitation of proxies, but may reimburse brokers
and other persons holding shares in their names or in the names of nominees for
expenses in sending proxy materials to beneficial owners and obtaining proxies
from those owners.
We will furnish without charge to any shareholder, upon written or oral
request, a copy of our Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 1998 and other documents filed pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. Requests for
any of those documents should be addressed to Mark P. Glassman -- Chief
Financial Officer of ImageMax, Inc., 1100 East Hector Street, Suite 396,
Conshohocken, Pennsylvania 19428, telephone number (610) 832-2111.
All properly executed proxies delivered pursuant to this solicitation and
not revoked will be voted at the annual meeting in accordance with the
directions given. In voting by proxy in regard to the election of Class II
directors to serve until the 2002 annual meeting of shareholders, shareholders
may vote in favor of all nominees or withhold their votes as to all nominees or
withhold their votes as to specific nominees. With respect to other items to be
voted upon, shareholders may vote in favor of the item or against the item or
may abstain from voting. Shareholders should specify their choices on the
enclosed proxy. If no specific instructions are given with respect to the
matters to be acted upon, and the proxy is returned properly executed, then the
shares represented by the proxy will be voted "for" the election of all Class II
nominees, "for" the proposal to ratify the 1997 Incentive Plan and "for" the
proposal to ratify the amendment of the 1997 Incentive Plan.
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED IF IT IS MAILED IN THE UNITED STATES.
IMAGEMAX, INC.
/s/ Andrew R. Bacas
-------------------------------
Andrew R. Bacas
Secretary and Acting Chief Executive
Officer
22
<PAGE>
ANNEX A
IMAGEMAX, INC.
1997 INCENTIVE PLAN
SECTION 1. Purpose; Definitions. The purpose of the ImageMax, Inc. 1997
Incentive Plan (the "Plan") is to offer to certain employees, Associates and
Directors of ImageMax, Inc. (the "Company"), a Pennsylvania corporation and its
subsidiaries, equity interests in the Company, options to acquire equity
interests in the Company, and other performance-based incentive awards, thereby
attracting, retaining and motivating such persons, and strengthening the
mutuality of interests between such persons and the Company's shareholders.
For purposes of the Plan, the following initially capitalized words and
phrases shall be defined as set forth below, unless the context clearly requires
a different meaning:
a. "Affiliate" means, with respect to a person or entity, a person that
directly or indirectly controls, or is controlled by, or is under common control
with such person or entity.
b. "Associate" means a consultant, contractor or other provider of services
to the Company.
c. "Board" means the Board of Directors of the Company, as constituted from
time to time.
d. "Cause" occurs when the Participant, as determined by the Board:
(i) has engaged in any type of disloyalty to the Company, including
without limitation, fraud, embezzlement, theft, or dishonesty in the course
of his employment or engagement, or has otherwise breached any fiduciary
duty owed to the Company;
(ii) has been convicted of a felony;
(iii) has disclosed trade secrets or confidential information of the
Company; or
(iv) has breached any agreement with or duty to the Company in respect
of confidentiality, non-disclosure, non-competition or otherwise.
e. "Change of Control" means:
(i) the acquisition in one or more transactions by any "Person" (as
the term person is used for purposes of Sections 13(d) or 14(d) of the
Exchange Act) of "Beneficial ownership" (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of twenty-five percent (25%) or more of
the combined voting power of the Company's then outstanding voting
securities (the "Voting Securities"), provided that for purposes of this
clause (i) Voting Securities acquired directly from the Company by any
Person shall be excluded from the determination of such Person's Beneficial
Ownership of Voting Securities (but such Voting Securities shall be
included in the calculation of the total number of Voting Securities then
outstanding); or
(ii) approval by shareholders of the Company of:
(A) a merger, reorganization or consolidation involving the Company
if the shareholders of the Company immediately before such merger,
reorganization or consolidation do not or will not own directly or
indirectly immediately following such merger, reorganization or
consolidation, more than fifty percent (50%) of the combined voting
power of the outstanding voting securities of the company resulting from
or surviving such merger, reorganization or consolidation in
substantially the same proportion as their ownership of the Voting
Securities outstanding immediately before such merger, reorganization or
consolidation; or
(B) a complete liquidation or dissolution of the Company;
(C) an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or
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(iii) acceptance by shareholders of the Company of shares in a share
exchange if the shareholders of the Company immediately before such share
exchange do not or will not own directly or indirectly immediately
following such share exchange more than fifty percent (50%) of the combined
voting power of the outstanding voting securities of the entity resulting
from or surviving such share exchange in substantially the same proportion
as their ownership of the Voting Securities outstanding immediately before
such share exchange.
f. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
g. "Committee" shall mean the Committee appointed by the Board in
accordance with Section 2 of the Plan, if one is appointed, in which event in
connection with this Plan, the Committee shall possess all of the power and
authority of, and shall be authorized to take any and all actions required to be
taken hereunder by, and make any and all determinations required to be taken
hereunder by, the Board.
h. "Director" means a member of the Board.
i. "Disability" shall mean a disability of an employee or a Director which
renders such employee or Director unable to perform the full extent of his
duties and responsibilities by reason of his illness or incapacity which would
entitle that employee or Director to receive Social Security Disability Income
under the Social Security Act, as amended, and the regulations promulgated
thereunder. "Disabled" shall mean having a Disability. The determination of
whether a Participant is Disabled shall be made by the Board, whose
determination shall be conclusive; provided that,
(i) if a Participant is bound by the terms of an employment agreement
between the Participant and the Company, whether the Participant is
"Disabled" for purposes of the Plan shall be determined in accordance with
the procedures set forth in said employment agreement, if such procedures
are therein provided; and
(ii) a Participant bound by such an employment agreement shall not be
determined to be Disabled under the Plan any earlier than he would be
determined to be disabled under his employment agreement.
j. "Exchange Act" means the Securities Exchange Act of 1934, as amended.
k. "Fair Market Value" means, as of any date: (i) the closing price of the
Shares as reported on the principal nationally recognized stock exchange on
which the Shares are traded on such date, or if no Share prices are reported on
such date, the closing price of the Shares on the next preceding date on which
there were reported Share prices; or (ii) if the Shares are not listed or
admitted to unlisted trading privileges on a nationally recognized stock
exchange, the closing price of the Shares as reported by The NASDAQ Stock Market
on such date, or if no Share prices are reported on such date, the closing price
of the Shares on the next preceding date on which there were reported Share
prices; or (3) if the Shares are not listed or admitted to unlisted trading
privileges on a nationally recognized stock exchange or traded on The NASDAQ
Stock Market, then the Fair Market Value shall be determined by the Board acting
in its discretion, which determination shall be conclusive.
l. "Incentive Stock Option" means any Option intended to be and designated
as an "Incentive Stock Option" within the meaning of Section 422 of the Code.
m. "Long-Term Performance Award" or "Long-Term Award" means an award made
pursuant to Section 8 hereof that is payable in cash and/or Shares (including
Restricted Stock, Performance Shares and Performance Units) in accordance with
the terms of the grant, based on Company, business unit and/or individual
performance, in each case as determined by the Committee and as set forth in the
grant letter.
n. "Non-Employee Director" shall have the meaning set forth in Rule
16b-3(b)(3) promulgated by the Securities and Exchange Commission under the
Exchange Act, or any successor definition adopted by the Securities and Exchange
Commission; provided, however, that the Board or the
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Committee may, in its sole discretion, substitute the definition of "outside
director" provided in the regulations under Section 162(m) of the Code in place
of the definition of Non-Employee Director contained in the Exchange Act.
o. "Non-Qualified Stock Option" means any Option that is not an Incentive
Stock Option.
p. "Participant" means an employee, Director, or Associate of the Company
or a Subsidiary to whom an award is granted pursuant to the Plan.
q. "Performance Share" means an award made pursuant to Section 9 hereof of
the right to receive Shares at the end of a specified performance period.
r. "Performance Unit" means an award made pursuant to Section 10 hereof of
the right to receive cash at the end of a specified performance period.
s. "Restricted Stock" means an award of Shares that is subject to
restrictions pursuant to Section 7 hereof.
t. "Retirement" means termination of the employment of a Participant with
the Company, an Affiliate (including parent) or a Subsidiary other than (i) a
termination effected at the direction of the Company or parent (whether or not
the Company effects such termination for Cause), (ii) termination on account of
Disability, or (iii) termination on account of death. With respect to a Director
who is not also an employee of the Company, Retirement shall occur at such time
as the individual ceases to be a Director.
u. "Rules" means Section 16 of the Exchange Act and the regulations
promulgated thereunder.
v. "SAR" means a share appreciation right granted under the Plan and
described in Section 6 hereof.
w. "Securities Broker" means a registered securities broker acceptable to
the Company who agrees to effect the cashless exercise of an Option pursuant to
Section 5(l) hereof.
x. "Share" means a share of stock of the Company, subject to substitution
or adjustment as provided in Section 3(c) hereof.
y. "Stock Option" or "Option" means any option to purchase Shares
(including Restricted Stock, if the Committee so determines) granted pursuant to
Section 5 hereof.
z. "Subsidiary" means, in respect of the Company or parent, a subsidiary
company, whether now or hereafter existing, as defined in Sections 424(f) and
(g) of the Code.
SECTION 2. Administration. The Plan shall be administered by the Board.
The Board may at any time by a unanimous vote, with each member voting, appoint
a Committee consisting of not less than two Directors to administer the Plan on
behalf of the Board, subject to such terms and conditions as the Board may
prescribe. Members of the Committee shall serve for such period of time as the
Board may determine. Members of the Board or the Committee who are eligible for
awards or have been granted awards may vote on any matters affecting the
administration of the Plan or any awards pursuant to the Plan, except that no
such member shall act upon an award to himself or herself, but any such member
may be counted in determining the existence of a quorum at any meeting of the
Board or Committee during which action is taken with respect to an award to
himself or herself.
If a Committee is appointed, all references to actions to be taken by the
Board in the administration of the Plan shall be construed as references to the
Committee.
From time to time the Board may increase the size of the Committee and
appoint additional members thereto (provided such new members are Non-Employee
Directors), remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies however caused, or remove all members of
the Committee and thereafter directly administer the Plan.
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The Board shall have full authority to grant to eligible persons under
Section 4: (i) Options, (ii) SARs, (iii) Restricted Stock, (iv) Long-Term
Performance Awards, (v) Performance Shares and/or (vi) Performance Units. In
particular, the Board shall have the authority:
a. to select the persons to whom Options, SARs, Restricted Stock, Long-Term
Performance Awards, Performance Shares and Performance Units may from time to
time be granted hereunder;
b. to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, SARs, Restricted Stock, Long-Term Performance
Awards, Performance Shares and Performance Units, or any combination thereof,
are to be granted hereunder;
c. to determine the number of Shares, if any, to be covered by each such
award granted hereunder;
d. to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder, including, but not limited to, the
Share price and any restriction or limitation, any vesting provisions, or any
vesting acceleration or forfeiture waiver regarding any Option or other award
and/or the Shares relating thereto, or the length of the period following
termination of employment of any Participant during which any Option or SAR may
be exercised (which, in the case of an Incentive Stock Option, shall be no
longer than one year in the case of the termination of employment of a
Participant by reason of death or Disability, or three months in the case of the
termination of employment of a Participant for any reason other than death or
Disability), based on such factors as the Board shall determine, in its sole
discretion;
e. to determine whether and under what circumstances an Option may be
exercised without a payment of cash under Section 5(l); and
f. to determine whether, to what extent and under what circumstances Shares
and other amounts payable with respect to an award under the Plan may be
deferred either automatically or at the election of the Participant.
The Board shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable; to interpret the terms and provisions of the
Plan and any award issued under the Plan (and any agreements relating thereto);
to amend the terms of any agreement relating to any award issued under the Plan,
provided that the Participant consents to such amendment; and to otherwise
supervise the administration of the Plan. The Board may correct any defect,
supply any omission or reconcile any inconsistency in the Plan or in any award
granted in the manner and to the extent it shall deem necessary to carry out the
intent of the Plan.
All decisions made by the Board pursuant to the provisions of the Plan
shall be final and binding on all persons, including the Company and
Participants. No member of the Board shall be liable for any good faith
determination, act or failure to act in connection with the Plan or any award
made under the Plan.
SECTION 3. Shares Subject to the Plan.
a. Shares Subject to the Plan. The Shares to be subject or related to
awards under the Plan shall be authorized and unissued Shares of the Company,
whether or not previously issued and subsequently acquired by the Company. The
maximum number of Shares that may be the subject of awards under the Plan is
600,000, or such lesser amount as the Board shall determine, and the Company
shall reserve for the purposes of the Plan, out of its authorized and unissued
Shares, such number of Shares. Notwithstanding the foregoing, no individual
shall receive, over the term of the Plan, awards for more than an aggregate of
150,000 Shares, or SARs with respect to such Shares, authorized for grant under
the Plan.
b. Effect of the Expiration or Termination of Awards. If and to the extent
that an award made under the Plan expires, terminates or is canceled or
forfeited for any reason without having been
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exercised in full, the Shares associated with the expired, terminated, canceled
or forfeited portion of the award shall again become available for award under
the Plan.
c. Other Adjustment. In the event of any merger, reorganization,
consolidation, recapitalization, Share distribution or dividend, Share split or
combination, or other change in entity structure affecting the Shares, such
substitution or adjustment shall be made in the aggregate number, type and
issuer of the securities reserved for issuance under the Plan, in the number and
Option price of securities subject to outstanding Options granted under the Plan
and in the number and price of securities subject to other awards made under the
Plan, as may be determined to be appropriate by the Board in its sole
discretion, provided that the number of securities subject to any award shall
always be a whole number. The Board, in its sole discretion, shall make
appropriate equitable anti-dilution adjustments to the number of
then-outstanding SARs, and to the Fair Market Value upon which the value of such
SARs is based.
SECTION 4. Eligibility. Employees, Directors and Associates of the Company
or its Subsidiaries are eligible to be granted awards under the Plan. Directors
who are not employees of the Company or a Subsidiary are eligible to be granted
awards under the Plan, but are not eligible to be granted Incentive Stock
Options.
SECTION 5. Options. Options granted under the Plan may be of two types:
(i) Incentive Stock Options or (ii) Non-Qualified Stock Options. Options may be
granted alone, in addition to or in tandem with other awards granted under the
Plan. Any Option granted under the Plan shall be in such form as the Board may
from time to time approve.
The Board shall have the authority to grant any Participant eligible under
Section 4 Incentive Stock Options, Non-Qualified Stock Options, or both types of
Options (in each case with or without SARs). To the extent that any Option does
not qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option.
Options granted under the Plan shall be subject to the following terms and
conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board shall deem appropriate;
provided, however, that the provisions of Option awards need to be the same with
respect to each Participant:
a. Option Price. The exercise price per Share purchasable under a
Non-Qualified Stock Option shall be determined by the Board. The exercise price
per Share purchasable under an Incentive Stock Option shall be 100% of the Fair
Market Value of the Share on the date of the grant. However, any Incentive Stock
Option granted to any Participant who, at the time the Option is granted, owns
more than 10% of the voting power of all classes of shares of the Company or of
a Subsidiary shall have an exercise price per Share of not less than 110% of
Fair Market Value per Share on the date of the grant.
b. Option Term. The term of each Option shall be fixed by the Board, but
no Option shall be exercisable more than ten years after the date the Option is
granted. However, any Incentive Stock Option granted to any Participant who, at
the time such Option is granted, owns more than 10% of the voting power of all
classes of shares of the Company or of a Subsidiary may not have a term of more
than five years. No Option may be exercised by any person after expiration of
the term of the Option.
c. Exercisability. Options shall vest and be exercisable at such time or
times and subject to such terms and conditions as shall be determined by the
Board at the time of grant. If the Board provides, in its discretion, that any
Option is exercisable only in installments, the Board may waive such installment
exercise provisions at any time at or after grant, in whole or in part, based on
such factors as the Board shall determine, in its sole discretion.
d. Method of Exercise. Subject to the exercise provisions under Section
5(c) and the termination provisions set forth in Sections 5(f) through (i),
Options may be exercised in whole or in part at any time and from time to time
during the term of the Option, by giving written notice of exercise to the
Company specifying the number of Shares to be purchased. Such notice shall be
accompanied by payment in full of the purchase price, either by certified or
bank check, or such other instrument as the
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Board may accept. As determined by the Board, in its sole discretion, at or
after grant, payment in full or in part of the exercise price of an Option may
be made in the form of unrestricted Stock based on the Fair Market Value of the
Shares on the date the Option is exercised; provided, however, that, in the case
of an Incentive Stock Option, the right to make a payment in the form of already
owned Shares may be authorized only at the time the Option is granted.
No Shares shall be issued upon exercise of an Option until full payment
therefor has been made. A Participant shall not have the right to distributions
or dividends or any other rights of a shareholder with respect to Shares subject
to the Option until the Participant has given written notice of exercise, has
paid in full for such Shares, and, if requested, has given the representation
described in Section 13(a) hereof.
e. Non-transferability of Options. No Option shall be transferable by the
Participant otherwise than by will or by the laws of descent and distribution,
and all Options shall be exercisable, during the Participant's lifetime, only by
the Participant or, in the event of his Disability, by his personal
representative.
f. Termination by Reason of Death. Subject to Section 5(i), if a
Participant's service with the Company or any Subsidiary terminates by reason of
death, any Option held by such Participant may thereafter be exercised, to the
extent then exercisable or on such accelerated basis as the Board may determine
at or after grant, by the legal representative of the estate or by the legatee
of the Participant under the will of the Participant, for a period expiring (i)
at such time as may be specified by the Board at or after the time of grant, or
(ii) if not specified by the Board, then one year from the date of death, or
(iii) if sooner than the applicable period specified under (i) or (ii) above,
then upon the expiration of the stated term of such Option.
g. Termination by Reason of Disability. Subject to Section 5(i), if an
Participant's service with the Company or any Subsidiary terminates by reason of
Disability, any Option held by such Participant may thereafter be exercised by
the Participant or his personal representative, to the extent it was exercisable
at the time of termination, or on such accelerated basis as the Board may
determine at or after grant, for a period expiring (i) at such time as may be
specified by the Board at or after the time of grant, or (ii) if not specified
by the Board, then one year from the date of termination of service, or (iii) if
sooner than the applicable period specified under (i) or (ii) above, then upon
the expiration of the stated term of such Option.
h. Termination for Cause. If the Participant's employment is terminated
for Cause, any Option held by such Participant shall immediately expire.
i. Other Termination. Subject to Section 5(i), if a Participant's service
with the Company or any Subsidiary terminates for any reason other than death or
Disability, any Option held by such Participant may thereafter be exercised by
the Participant, to the extent it was exercisable at the time of such
termination or on such accelerated basis as the Board may determine at or after
the time of grant, for a period expiring (i) at such time as may be specified by
the Board at or after the time of grant, or (ii) if not specified by the Board,
then ninety (90) days from the date of termination of service, or (iii) if
sooner than the applicable period specified under (i) or (ii) above, then upon
the expiration of the stated term of such Option.
j. Change of Control. In the event of a Change of Control, the Board may,
in its sole discretion, cause all outstanding Options to immediately become
fully exercisable.
k. Incentive Stock Option Limitations. To the extent required for
"incentive stock option" status under Section 422 of the Code, the aggregate
Fair Market Value (determined as of the time of grant) of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
the Participant during any calendar year under the Plan and/or any other plan of
the Company or any Subsidiary shall not exceed $100,000. For purposes of
applying the foregoing limitation, Incentive Stock Options shall be taken into
account in the order granted.
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<PAGE>
l. Cashless Exercise. The Company may, in the sole discretion of the
Board, cooperate in a "cashless exercise" of an Option. The cashless exercise
shall be effected by the Participant delivering to the Securities Broker
instructions to sell a sufficient number of Shares to cover the costs and
expenses associated therewith.
SECTION 6. Share Appreciation Rights.
a. Grant. SARs may be granted alone ("Stand-Alone SARs") or in conjunction
with all or part of any Option granted under the Plan ("Tandem SARs"). In the
case of a Non-Qualified Stock Option, a Tandem SAR may be granted either at or
after the time of the grant of such Option. In the case of an Incentive Stock
Option, a Tandem SAR may be granted only at the time of the grant of such
Option.
b. Exercise.
(i) Tandem SARs. A Tandem SAR or applicable portion thereof shall
terminate and no longer be exercisable upon the termination or exercise of
the related Option or portion thereof, except that, unless otherwise
determined by the Board, in its sole discretion at the time of grant, a
Tandem SAR granted with respect to less than the full number of Shares
covered by a related Option shall be reduced only after such related Option
is exercised or otherwise terminated with respect to the number of Shares
not covered by the Tandem SAR.
A Tandem SAR may be exercised by a Participant by surrendering the
applicable portion of the related Option, only at such time or times and to
the extent that the Option to which such Tandem SAR relates shall be
exercisable in accordance with the provisions of Section 5 and this Section
6. Options which have been so surrendered, in whole or in part, shall no
longer be exercisable to the extent the related Tandem SARs have been
exercised.
Upon the exercise of a Tandem SAR, a Participant shall be entitled to
receive, upon surrender to the Company of all (or a portion) of an Option
in exchange for cash and/or Shares, an amount equal to the excess of (A)
the Fair Market Value, as of the date such Option (or such portion thereof)
is surrendered, of the Shares covered by such Option (or such portion
thereof) over (B) the aggregate exercise price of such Option (or such
portion thereof).
Upon the exercise of a Tandem SAR, the Option or part thereof to which
such Tandem SAR is related, shall be deemed to have been exercised for the
purpose of the limitation set forth in Section 3 of the Plan on the number
of Shares to be issued under the Plan, but only to the extent of the number
of Shares issued under the Tandem SAR at the time of exercise based on the
value of the Tandem SAR at such time.
A Tandem SAR may be exercised only if and when the Fair Market Value
of the Shares subject to the Option exceeds the exercise price of such
Option.
(ii) Stand-Alone SARs. A Stand-Alone SAR may be exercised by a
Participant giving notice of intent to exercise to the Company, provided
that all or a portion of such Stand-Alone SAR shall have become vested and
exercisable as of the date of exercise.
Upon the exercise of a Stand-Alone SAR, a Participant shall be
entitled to receive, in either cash and/or Shares, an amount equal to the
excess, if any, of (A) the Fair Market Value, as of the date such SAR (or
portion of such SAR) is exercised, of the Shares covered by such SAR (or
portion of such SAR) over (B) the Fair Market Value of the Shares covered
by such SAR (or a portion of such SAR ) as of the date such SAR (or a
portion of such SAR) was granted.
c. Terms and Conditions. SARs shall be subject to such terms and
conditions, not inconsistent with the provisions of the Plan, as shall be
determined from time to time by the Board, in its sole discretion; provided,
however, that the provisions of SAR awards need not be the same with respect to
each Participant. Such terms and conditions include the following:
(i) Non-Transferability. No SAR shall be transferable by the
Participant otherwise than by will or by the laws of descent and
distribution and all SARs shall be exercisable, during the
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<PAGE>
Participant's lifetime, only by the Participant or, in the event of his
Disability, by his personal representative.
(ii) Term of SAR. The term of each SAR shall be fixed by the Board,
provided that the term of a Tandem SAR shall be determined by the terms of
the applicable Option, and provided further that the term of a Stand-Alone
SAR shall be ten (10) years, unless another term is specified by the Board.
(iii) Exercisability. SARs shall vest and be exercisable at such time
or times and subject to such terms and conditions as shall be determined by
the Board at the time of grant, provided that the term of a Tandem SAR
shall be determined by the terms of the applicable Option. A Participant
shall not have any rights as a shareholder with respect to any SAR.
(iv) Termination of Employment. Unless otherwise specified in the
terms of an award, SARs shall be subject to the terms of Sections 5(f)-(i)
with respect to exercise upon termination of employment.
(v) Change of Control. In the event of a Change of Control, the Board
may, in its sole discretion, cause all outstanding SARs to immediately
become fully exercisable.
SECTION 7. Restricted Stock.
a. Administration. Restricted Stock may be issued either alone or in
addition to other awards granted under the Plan. The Board shall determine the
persons to whom, and the time or times at which, grants of Restricted Stock will
be made, the number of Shares to be awarded, the price (if any) to be paid by
the recipient of Restricted Stock, the time or times within which such awards
may be subject to forfeiture, and all other conditions of the awards.
The Board may condition the vesting of Restricted Stock upon the attainment
of specified performance goals or such other factors as the Board may determine,
in its sole discretion, at the time of the award.
The provisions of Restricted Stock awards need not be the same with respect
to each Participant.
b. Awards and Certificates. The prospective recipient of a Restricted
Stock award shall not have any rights with respect to such award, unless and
until such recipient has executed an agreement evidencing the award and has
delivered a fully executed copy thereof to the Company, and has otherwise
complied with the applicable terms and conditions of such award. The purchase
price for Restricted Stock may be zero.
Each Participant receiving a Restricted Stock award shall be issued a share
certificate in respect of such Restricted Stock. Such certificate shall be
registered in the name of such Participant, and shall bear an appropriate legend
referring to the terms, conditions, and restrictions applicable to such award,
substantially in the following form:
"The transferability of this certificate and the shares represented
hereby are subject to the terms and conditions (including forfeiture) of
the ImageMax, Inc. 1997 Incentive Plan and an Agreement entered into
between the registered owner and ImageMax, Inc. Copies of such Plan and
Agreement are on file in the principal offices of ImageMax, Inc. and will
be made available to any Shareholder without charge upon request to the
Secretary of the Company."
The Board shall require that the share certificates evidencing Restricted
Stock be held in custody by the Company until the restrictions thereon shall
have lapsed, and that, as a condition of any Restricted Stock award, the
Participant shall have delivered to the Company a share power, endorsed in
blank, relating to the Shares covered by such award.
c. Restrictions and Conditions. The Restricted Stock awarded pursuant to
this Section 7 shall be subject to the following restrictions and conditions:
(i) During a period set by the Board commencing with the date of such
award (the "Restriction Period"), the Participant shall not be permitted to
sell, transfer, pledge, assign or
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<PAGE>
otherwise encumber Restricted Stock awarded under the Plan. The Board, in
its sole discretion, may provide for the lapse of such restrictions in
installments and may accelerate or waive such restrictions in whole or in
part, based on service, performance and/or such other factors or criteria
as the Board may determine, in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i),
once the Participant has been issued a certificate or certificates for
Restricted Stock, the Participant shall have, with respect to the
Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the Shares, and the right to receive any cash
distributions or dividends. The Board, in its sole discretion, as
determined at the time of award, may permit or require the payment of cash
distributions or dividends to be deferred and, if the Board so determines,
reinvested in additional Restricted Stock to the extent Shares are
available under Section 3 of the Plan.
(iii) Subject to the applicable provisions of the award agreement and
this Section 7, upon termination of a Participant's service with the
Company for reasons other than death or Disability during the Restriction
Period, all Restricted Stock still subject to restriction shall be
forfeited by the Participant. Subject to the provisions of the Plan, the
Board, in its sole discretion, may provide for the lapse of such
restrictions in installments and may waive such restrictions, in whole or
in part, at any time, based on such factors as the Board shall deem
appropriate in its sole discretion. Upon the death or Disability of a
Participant during the Restriction Period, restrictions will lapse with
respect to a percentage of the Restricted Stock award granted to the
Participant that is equal to the percentage of the Restriction Period that
has elapsed as of the date of death or the date on which such Disability
commenced (as determined by the Board in its sole discretion), and a share
certificate or share certificates representing such Shares, without bearing
the restrictive legend described in Section 7(b), shall be delivered by the
Company to the Participant or the Participant's estate, as the case may be,
in exchange for the share certificate or share certificates that contain
such restrictive legend.
(iv) In the event of hardship or other special circumstances of a
Participant whose service with the Company is involuntarily terminated
(other than for Cause), the Board may, in its sole discretion, waive in
whole or in part any or all remaining restrictions with respect to such
Participant's Restricted Stock, based on such factors as the Board may deem
appropriate.
(v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period, the
certificates for such Shares, without bearing the restrictive legend
described in Section 7(b), shall be promptly delivered by the Company to
the Participant, in exchange for the share certificate or share
certificates that contain such restrictive legend.
(vi) In the event of a Change of Control, the Board, in its sole
discretion, may cause all Restricted Stock remaining subject to forfeiture
to immediately cease to be subject to forfeiture and a share certificate or
shares certificates representing such Shares, without bearing the
restrictive legend described in Section 7(b), shall be issued by the
Company and delivered to the Participant, in exchange for the share
certificate or share certificates that contain such restrictive legend.
SECTION 8. Long-Term Performance Awards.
a. Awards and Administration. Long-Term Performance Awards may be awarded
either alone or in addition to other awards granted under the Plan. Prior to
award of a Long-Term Performance Award, the Board shall determine the nature,
length and starting date of the performance period (the "performance period")
for each Long-Term Performance Award. Performance periods may overlap and
Participants may participate simultaneously with respect to Long-Term
Performance Awards that are subject to different performance periods and/or
different performance factors and criteria. Prior to award of a Long-Term
Performance Award, the Board shall determine the performance objectives to be
used in awarding Long-Term Performance Awards and determine the extent to which
such Long-Term Performance Awards have been earned. Performance objectives may
vary from Participant to
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<PAGE>
Participant and between groups of Participants and shall be based upon such
Company, business unit and/or individual performance factors and criteria as the
Board may deem appropriate, including, but not limited to, earnings per Share or
return on equity.
At the beginning of each performance period, the Board shall determine for
each Long-Term Performance Award subject to such performance period the range of
dollar values or number of Shares to be awarded to the Participant at the end of
the performance period if and to the extent that the relevant measure(s) of
performance for such Long-Term Performance Award is (are) met. Such dollar
values or number of Shares may be fixed or may vary in accordance with such
performance and/or other criteria as may be specified by the Board, in its sole
discretion.
b. Adjustment of Awards. In the event of special or unusual events or
circumstances affecting the application of one or more performance objectives to
a Long-Term Performance Award, the Board may revise the performance objectives
and/or underlying factors and criteria applicable to the Long-Term Performance
Awards affected, to the extent deemed appropriate by the Board, in its sole
discretion, to avoid unintended windfalls or hardship.
c. Termination of Service. Unless otherwise provided in the applicable
award agreements, if a Participant terminates service with the Company during a
performance period because of death, Disability or Retirement, such Participant
(or his estate) shall be entitled to a payment with respect to each outstanding
Long-Term Performance Award at the end of the applicable performance period:
(i) based, to the extent relevant under the terms of the award, upon
the Participant's performance for the portion of such performance period
ending on the date of termination and the performance of the applicable
business unit(s) for the entire performance period, and
(ii) pro-rated, where deemed appropriate by the Board, for the portion
of the performance period during which the Participant was employed by or
served on the Board of the Company, all as determined by the Board, in its
sole discretion.
However, the Board may provide for an earlier payment in settlement of such
award in such amount and under such terms and conditions as the Board deems
appropriate, in its sole discretion.
Except as otherwise determined by the Board, if a Participant terminates
service with the Company during a performance period for any other reason, then
such Participant shall not be entitled to any payment with respect to the
Long-Term Performance Awards subject to such performance period, unless the
Board shall otherwise determine, in its sole discretion.
In the event of a Change of Control, the Board may, in its sole discretion,
cause all conditions applicable to a Long-Term Performance Award to immediately
terminate and a share certificate or share certificates representing Shares
subject to such award, or cash, as the case may be, to be issued and/or
delivered to the Participant.
d. Form of Payment. The earned portion of a Long-Term Performance Award
may be paid currently or on a deferred basis, together with such interest or
earnings equivalent as may be determined by the Board, in its sole discretion.
Payment shall be made in the form of cash or whole Shares, including Restricted
Stock, either in a lump sum payment or in annual installments commencing as soon
as practicable after the end of the relevant performance period, all as the
Board shall determine at or after grant. If and to the extent a Long-Term
Performance Award is payable in Shares and the full amount of such value is not
paid in Shares, then the Shares representing the portion of the value of the
Long-Term Performance Award not paid in Shares shall again become available for
award under the Plan, subject to Section 3(b). A Participant whose Long-Term
Performance Award is payable in Shares or Restricted Stock shall not have any
rights as a shareholder until such share certificate or share certificates have
been issued to such Participant, and, if requested, the Participant has given
the representation described in Section 13(a) hereof. Prior to any payment, the
Board shall certify that all of the performance goals or other material terms of
the award have been met.
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<PAGE>
SECTION 9. Performance Shares.
a. Awards and Administration. The Board shall determine the persons to
whom and the time or times at which Performance Shares shall be awarded, the
number of Performance Shares to be awarded to any such person, the duration of
the period (the "performance period") during which, and the conditions under
which, receipt of the Shares will be deferred, and the other terms and
conditions of the award in addition to those set forth below.
The Board may condition the receipt of Shares pursuant to a Performance
Share award upon the attainment of specified performance goals or such other
factors or criteria as the Board shall determine, in its sole discretion.
The provisions of Performance Share awards need not be the same with
respect to each Participant, and such awards to individual Participants need not
be the same in subsequent years.
b. Terms and Conditions. Performance Shares awarded pursuant to this
Section 9 shall be subject to the following terms and conditions and such other
terms and conditions, not inconsistent with the terms of this Plan, as the Board
shall deem desirable:
(i) Conditions. The Board, in its sole discretion, shall specify the
performance period during which, and the conditions under which, the
receipt of Shares covered by the Performance Share award will be deferred.
(ii) Share Certificate. At the expiration of the performance period,
if the Board, in its sole discretion, determines that the conditions
specified in the Performance Share agreement have been satisfied, a share
certificate or share certificates evidencing the number of Shares covered
by the Performance Share award shall be issued and delivered to the
Participant. A Participant shall not be deemed to be the holder of Shares,
or to have the rights of a holder of Shares, with respect to the
Performance Shares unless and until a share certificate or share
certificates evidencing such Shares are issued to such Participant.
(iii) Death, Disability or Retirement. Subject to the provisions of
the Plan, if a Participant terminates service with the Company during a
performance period because of death, Disability or Retirement, such
Participant (or his estate) shall be entitled to receive, at the expiration
of the performance period, a percentage of Performance Shares that is equal
to the percentage of the performance period that had elapsed as of the date
of termination, provided that the Board, in its sole discretion, determines
that the conditions specified in the Performance Share agreement have been
satisfied. In such event, a share certificate or share certificates
evidencing such Shares shall be issued and delivered to the Participant or
the Participant's estate, as the case may be.
(iv) Termination of Service. Unless otherwise determined by the Board
at the time of grant, the Performance Shares will be forfeited upon a
termination of service during the performance period for any reason other
than death, Disability or Retirement.
(v) Change of Control. In the event of a Change of Control, the Board
may, in its sole discretion, cause all conditions applicable to the
Performance Shares to immediately terminate and a share certificate or
share certificates evidencing Shares subject to the Share award to be
issued and delivered to the Participant.
SECTION 10. Performance Units.
a. Awards and Administration. The Board shall determine the persons to
whom and the time or times at which Performance Units shall be awarded, the
number of Performance Units to be awarded to any such person, the duration of
the period (the "performance period") during which, and the conditions under
which, a Participant's right to Performance Units will be vested, the ability of
Participants to defer the receipt of payment of such Performance Units, and the
other terms and conditions of the award in addition to those set forth below.
A Performance Unit shall have a dollar value, which shall be set from time
to time by the Board.
The Board may condition the vesting of Performance Units upon the
attainment of specified performance goals or such other factors or criteria as
the Board shall determine, in its sole discretion.
The provisions of Performance Unit awards need not be the same with respect
to each Participant, and such awards to individual Participants need not be the
same in subsequent years.
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<PAGE>
b. Terms and Conditions. Performance Units awarded pursuant to this
Section 10 shall be subject to the following terms and conditions and such other
terms and conditions, not inconsistent with the terms of this Plan, as the Board
shall deem desirable:
(i) Conditions. The Board, in its sole discretion, shall specify the
performance period during which, and the conditions under which, the
Participant's right to Performance Units will be vested.
(ii) Vesting. At the expiration of the performance period, the Board,
in its sole discretion, shall determine the extent to which the performance
goals have been achieved, and the percentage of the Performance Units of
each Participant that have vested.
(iii) Death, Disability or Retirement. Subject to the provisions of
this Plan, if a Participant terminates service with the Company during a
performance period because of death, Disability or Retirement, such
Participant (or the Participant's estate) shall be entitled to receive, at
the expiration of the performance period, a cash distribution equal to the
value of a percentage of Performance Units that is equal to the percentage
of the performance period that had elapsed as of the date of termination,
provided that the Board, in its sole discretion, determines that the
conditions specified in the Performance Unit agreement have been satisfied,
and payment thereof shall be made to the Participant or the Participant's
estate, as the case may be.
(iv) Termination of Service. Unless otherwise determined by the Board
at the time of grant, the Performance Units will be forfeited upon a
termination of service during the performance period for any reason other
than death, Disability or Retirement.
(v) Change of Control. In the event of a Change of Control, the Board
may, in its sole discretion, cause all conditions applicable to Performance
Units to immediately terminate and cash representing the full amount of
such award to be paid to the Participant.
SECTION 11. Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would impair the rights of a Participant
with respect to an Option, SAR, Restricted Stock, Long-Term Performance Award,
Performance Share or Performance Unit which has been granted under the Plan,
without the Participant's consent, or which, without the approval of such
amendment within one year (365 days) of its adoption by the Board, by a majority
of the votes cast at a duly held shareholder meeting at which a quorum
representing a majority of the Company's outstanding voting shares is present
(either in person or by proxy), would:
a. except as expressly provided in the Plan, increase the total number of
Shares reserved for the purposes of the Plan;
b. change the persons or class of persons eligible to participate in the
Plan; or
c. extend the maximum Option term under Section 5(b) of the Plan.
The Board may substitute new Options for previously granted Options,
including previously granted Options having higher exercise prices.
Subject to the above provisions, the Board shall have broad authority to
amend the Plan to take into account changes in applicable tax laws and
accounting rules, as well as other developments.
SECTION 12. Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive and deferred compensation. With respect to any
payments not yet made to a Participant by the Company, nothing contained herein
shall give any such Participant any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Board may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Shares or payments in lieu of Shares or with respect
to awards hereunder.
SECTION 13. General Provisions.
a. The Board may require each person acquiring Shares or a Share-based
award under the Plan to represent to and agree with the Company in writing that
the Participant is acquiring the Shares or Share-based award for investment
purposes and without a view to distribution thereof and as to such other matters
as the Board believes are appropriate to ensure compliance with applicable
Federal and state securities laws. The certificate evidencing such award and any
securities issued pursuant thereto
A-12
<PAGE>
may include any legend which the Board deems appropriate to reflect any
restrictions on transfer and compliance with securities laws.
All certificates for Shares or other securities delivered under the Plan
shall be subject to such share-transfer orders and other restrictions as the
Board may deem advisable under the rules, regulations, and other requirements of
the Securities Act of 1933, as amended, the Exchange Act, any stock exchange
upon which the Shares are then listed, and any other applicable Federal or state
securities laws, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
b. Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to shareholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
c. The adoption of the Plan shall not confer upon any employee of the
Company or a Subsidiary any right to continued employment with the Company or
such Subsidiary, nor shall it interfere in any way with the right of the Company
or such Subsidiary to terminate the employment of any of its employees at any
time.
d. No later than the date as of which an amount first becomes includable in
the gross income of the Participant for Federal income tax purposes with respect
to any award under the Plan, the Participant shall pay to the Company, or make
arrangements satisfactory to the Board regarding the payment, of any Federal,
state or local taxes of any kind required by law to be withheld with respect to
such amount. Unless otherwise determined by the Board, the minimum required
withholding obligations may be settled with Shares, including Shares that are
part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
Participant.
e. At the time of grant of an award under the Plan, the Board may provide
that the Shares received as a result of such grant shall be subject to a right
of first refusal, pursuant to which the Participant shall be required to offer
to the Company any Shares that the Participant wishes to sell, with the price
being the then Fair Market Value of the Shares, subject to such other terms and
conditions as the Board may specify at the time of grant.
f. The reinvestment of distributions or dividends in additional Restricted
Stock (or in other types of Plan awards) at the time of any distribution or
dividend payment shall only be permissible if sufficient Shares are available
under Section 3 of the Plan for such reinvestment (taking into account then
outstanding Options and other Plan awards).
g. The Board shall establish such procedures as it deems appropriate for a
Participant to designate a beneficiary to whom any amounts payable in the event
of the Participant's death are to be paid.
h. The Plan and all awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania.
SECTION 14. Effective Date of Plan. This Plan shall become effective on
the date that it is adopted by the Board; provided, however, that it shall not
be an Incentive Stock Option Plan if it is not approved, within one year (365
days) of its adoption by the Board, by a majority of the votes cast at a duly
held shareholder meeting at which a quorum representing a majority of Company's
outstanding voting shares is present, either in person or by proxy. The Board
may make awards hereunder prior to approval of the Plan; provided, however, that
any and all Incentive Stock Options so awarded automatically shall be converted
into Non-Qualified Stock Options if the Plan is not approved by shareholders
within 365 days of its adoption.
SECTION 15. Term of Plan. No Option, SAR, Restricted Stock, Long-Term
Performance Award, Performance Share or Performance Unit shall be granted
pursuant to the Plan on or after the tenth (10th) anniversary of the date of
shareholder approval of the Plan, but awards granted prior to such tenth (10th)
anniversary may extend beyond that date.
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IMAGEMAX, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints Andrew R.
Bacas and Mark P. Glassman, or any of them acting individually, as the proxy of
the undersigned, with full power of substitution, to vote, as indicated below
and in their discretion upon such other matters as may properly come before the
annual meeting, all shares which the undersigned would be entitled to vote at
our annual meeting to be held at 10:00 A.M., Eastern Daylight time, December 8,
1999 at The Lee Park Building, Main Auditorium, 1100 East Hector Street,
Conshohocken, Pennsylvania 19428, and at any adjournment or postponement
thereof.
1. ELECTION OF DIRECTORS
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for all nominees listed below
</TABLE>
<TABLE>
<S> <C>
Nominees: For a three-year term expiring at the 2002 Annual Meeting of Shareholders:
Andrew R. Bacas and Lewis E. Hatch, Jr.
(INSTRUCTION: To withhold authority to vote for any nominee(s), write the name(s) of such nominee(s) on the line
below.)
</TABLE>
- - --------------------------------------------------------------------------------
2. RATIFICATION OF 1997 INCENTIVE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
- - --------------------------------------------------------------------------------
3. RATIFICATION OF AMENDMENT OF 1997 INCENTIVE PLAN:
/ / FOR / / AGAINST / / ABSTAIN
(Please date and sign your Proxy on the reverse side and return it promptly)
<PAGE>
This proxy is solicited on behalf of the board of directors. UNLESS
OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF ALL NOMINEES
FOR DIRECTOR LISTED ON THE REVERSE SIDE HEREOF, "FOR" THE PROPOSAL TO RATIFY
1997 INCENTIVE PLAN AND "FOR" THE PROPOSAL TO RATIFY THE AMENDMENT OF 1997
INCENTIVE PLAN. This proxy also delegates discretionary authority with respect
to any other business which may properly come before the annual meeting or any
adjournment or postponement thereof.
The undersigned hereby acknowledges receipt of the notice of annual meeting
and proxy statement.
Date: ______________________ , 1999
___________________________________
Signature of Shareholder
___________________________________
Signature of Shareholder
NOTE: PLEASE SIGN THIS PROXY
EXACTLY AS NAME(S) APPEAR ON YOUR
STOCK CERTIFICATE. WHEN SIGNING AS
ATTORNEY-IN-FACT, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE ADD YOUR TITLE AS SUCH, AND
IF SIGNER IS A CORPORATION, PLEASE
SIGN WITH FULL CORPORATE NAME BY A
DULY AUTHORIZED OFFICER OR OFFICERS
AND AFFIX THE CORPORATE SEAL. WHERE
STOCK IS ISSUED IN THE NAME OF TWO
(2) OR MORE PERSONS, ALL SUCH
PERSONS SHOULD SIGN.
