SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _________ to _________
Commission File Number 0-23077
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IMAGEMAX, INC.
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(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2865585
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1100 E. Hector Street, Suite 396
Conshohocken, Pennsylvania 19428
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(Address of principal executive offices (Zip Code)
Registrant's telephone number, including area code: (610) 832-2111
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value per share
------------------------------------
(Title of class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in Part III of this Form 10-K/A or any amendment
to this Form 10-K/A. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $7,899,782 as of April 13, 1999.
On April 13, 1999 the Registrant had outstanding 6,591,065 shares of Common
Stock, no par value.
DOCUMENTS INCORPORATED BY REFERENCE
In accordance with instruction G(3) to Form 10-K, the Registrant is
amending its Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1999 to provide information required under Part III
thereof.
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TABLE OF CONTENTS
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Item Page
- ---- ----
PART III................................................................................ 1
Item 10. Directors and Executive Officers of Registrant ......................... 1
Item 11. Executive Compensation ................................................. 4
Item 12. Security Ownership of Certain Beneficial Owners and Management.......... 10
Item 13. Certain Relationships and Related Transactions ......................... 12
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........ 13
</TABLE>
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PART III.
Item 10. Directors and Executive Officers of Registrant
The Board of Directors is divided into three classes of directors with each
director serving a three-year term. Information regarding the Company's
executive officers and certain key employees who are not directors is set forth
in Item 4(a) of the Company's Annual Report on Form 10-K previously filed with
the Securities and Exchange Commission.
The following table sets forth the name, age, period of service and
principal occupation of each director.
<TABLE>
<CAPTION>
NAME AGE SINCE PRINCIPAL OCCUPATION
- ---- --- ----- --------------------
<S> <C> <C> <C>
Lewis E. Hatch, Jr. 72 1997 Chairman of the Board of Directors(2)(4)
Andrew R. Bacas+ 40 1996 Acting Chief Executive Officer, Vice Chairman of the
Board of Directors and Secretary(2)
Lennox K. Black 68 1997 Director(3)(5)
David C. Carney 61 1997 Director(1)(4)
Bruce M. Gillis* 42 1996 Director
Steven N. Kaplan 38 1997 Director(3)(5)
Rex Lamb 40 1997 Business Unit Manager, Group Leader and Director(3)
John E. Semasko 53 1997 Business Unit Manager, Group Leader and Director(2)(4)
Mitchell J. Taube 42 N/A Business Unit Manager, Group Leader and Director(1)
</TABLE>
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(1) Class I director to serve until the 2001 annual meeting of the Company's
shareholders.
(2) Class II director to serve until the 1999 annual meeting of the Company's
shareholders.
(3) Class III director to serve until the 2000 annual meeting of the Company's
shareholders.
(4) Member of the Audit Committee.
(5) Member of the Compensation Committee.
+ A description of Mr. Bacas's background and biological information is set
forth in Item 4(a) of the Company's Annual Report on Form 10-K previously
filed with the Securities and Exchange Commission.
* Mr. Gillis resigned as a director of the Company effective April 12, 1999.
LEWIS E. HATCH, JR. became a director of the Company in December 1997 and
has served as Chairman of the Board of Directors since September 1998. 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 Teleflex Incorporated and Park-Ohio Industries, Inc. Mr. Hatch has
an undergraduate degree from Ursinus College.
LENNOX K. BLACK became a director of the Company in December 1997. Mr.
Black has been the Chairman of Teleflex Incorporated, a diversified manufacturer
of automotive, marine, industrial, aerospace and
<PAGE>
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, Pep Boys and the Penn Virginia Corporation. Mr. Black has an
undergraduate degree in Economics from McGill University.
DAVID C. CARNEY became a director of the Company in December 1997. Mr.
Carney has been an Executive Vice President of Jefferson Health System, a health
care organization, since 1996. From 1991 to 1995, Mr. Carney served as the Chief
Financial Officer of CoreStates Financial Corporation. Mr. Carney currently
serves as a director of CMAC Investment Corporation, AAA Mid-Atlantic & Keystone
Insurance Companies and the World Affairs Council. Mr. Carney has an
undergraduate degree from Temple University and is a graduate of the Advanced
Management Program at the Harvard Business School.
BRUCE M. GILLIS is a founder of the Company and served as Chief Executive
Officer and Chairman of the Board of Directors from its inception in November
1996 until his resignation as Chief Executive Officer and Chairman in September
1998. Mr. Gillis remained a member of the Board of Directors until his
resignation therefrom in April, 1999.
STEVEN N. KAPLAN became a director of the Company in December 1997. Mr.
Kaplan is the Leon Carroll Marshall Professor of 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 Ph.D. in Business Economics from Harvard University.
REX LAMB has managed the Company's Lincoln, Nebraska business unit and has
served as a director of the Company 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 the Company 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 the Company in December 1997.
Mr. Lamb is the Group Leader for the Lincoln, NE, Syracuse, NY and Minnetonka,
MN business units. Mr. Lamb has an undergraduate degree in Education from the
University of Nebraska.
JOHN E. SEMASKO has been a director of the Company since December 1997. Mr.
Semasko acquired Oregon Mico-Imaging, Inc., a document management services
company, in 1975 and served as its President from its inception until its
acquisition by the Company in December 1997. Mr. Semasko is the Group Leader for
the Eugene, OR, Hayward, CA and Tempe, AZ business units. Mr. Semasko has an
undergraduate degree in Forestry from Rutgers University.
MITCHELL J. TAUBE has managed the Company's Millwood, New York business
unit since December 1997 and has served as a director of the Company 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 is the Group
Leader for the Millwood, NY and Philadelphia, PA business units. Mr. Taube has
an undergraduate degree and an MBA from Hofstra University.
During 1998, there was no incumbent who, during the last full fiscal year,
attended in person or by phone fewer than 75% of the meetings of the Board of
Directors.
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 the Company's
executive officers and oversees the administration of executive compensation
programs. The Compensation Committee is composed of two independent, nonemployee
directors.
The Audit Committee recommends outside accountants, reviews the results and
scope of the annual audit, the services provided by the Company's independent
auditors and the recommendations of the auditors with respect to the Company's
accounting systems and controls. The Audit Committee is composed of one employee
director and two independent, nonemployee directors. Representatives of the
Company's independent auditing firm, Arthur Andersen LLP, met with the two
independent director members of the Audit Committee on March 16, 1999 and
reviewed their examination of the Company's financial statements for the year
ended December 31, 1998.
2
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Compensation of Directors
Directors are reimbursed for travel expenses incurred for each board and
committee meeting attended in person. Pursuant to the Company's 1997 Incentive
Stock Option Plan (the "1997 Incentive Plan"), nonqualified stock options
(options that are not incentive stock options) for 60,000 shares of Common Stock
were granted in 1998 to nonemployee directors (representing 20,000 to Mr. Hatch
and 10,000 each to Messrs. Black, Carney, Gillis and Kaplan) at an exercise
price of $2.375 per share. 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 1997 Incentive Plan. In April 1999, 10,000 of these options
were cancelled as a result of Mr. Gillis' resignation from the Board of
Directors.
In 1998, a total of 60,000 options granted to nonemployee directors
(representing 20,000 each to Messrs. Black, Carney and Kaplan) in 1997 (at an
exercise price of $12.00 per share) were cancelled.
3
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Item 11. Executive Compensation
The following Summary Compensation Table summarizes the compensation of the
Chief Executive Officer and the four other executive officers of the Company for
1998 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Summary Compensation Table
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Annual Compensation Long Term Compensation
---------------------------------------------- ---------------------------------------------------
Awards Payouts
Other -------------------------- --------------------
Annual Restricted Securities LTIP All other
Name and Principal Compen- Stock Underlying Payouts Compen-
Position Year Salary Bonus sation Award(s) Options(#) ($) sation
- ------------------ ---- ------ ----- ------ -------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bruce M. Gillis 1998(1) $143,846 -- $ 721(2) -- -- -- --
Former Chairman 1997(3) 83,333 -- -- 100,000 -- --
and Chief Executive
Officer
S. David Model 1998(4) $128,077 -- 1,010(2) -- -- -- --
Former President 1997(5) 56,250 -- -- -- -- -- --
and Chief Operating
Officer
Andrew R. Bacas(6) 1998 $119,077 -- 788(2) -- 30,000 -- --
Acting Chief 1997(3) 54,167 -- -- -- -- -- --
Executive Officer
James D. Brown(7) 1998 $126,000 -- -- -- -- -- --
Former Senior Vice 1997(5) 48,750 -- -- -- -- -- --
President and
Chief Financial Officer
Richard D. Moseley 1998(8) $58,917 -- -- -- -- -- --
Former Chief 1997 -- -- -- -- -- -- --
Information Officer
</TABLE>
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(1) For the period January 1, 1998 to September 18, 1998. Mr. Gillis resigned
from his employment with the Company as of September 18, 1998.
(2) Represents contributions to the Company's 401(k) plan made by the Company
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 the Company as of November 9, 1998.
(5) For the period August 1, 1997 to December 31, 1997.
(6) As of September 19, 1999, Mr. Bacas was appointed to the position of Acting
Chief Executive Officer. Previous to that date, Mr. Bacas held the position
of Senior Vice President-Corporate Development.
(7) Mr. Brown entered into a separation agreement with the Company pursuant to
which he resigned from his employment with the Company effective as of
April 30, 1999. The Company has appointed Mark P. Glassman to the position
of Chief Financial Officer of the Company, effective as of May 1, 1999.
(8) For the period April 15, 1998 to September 28, 1998. Mr. Moseley resigned
from his employment with the Company as of September 28, 1998.
4
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Stock Option Grants
Pursuant to the 1997 Incentive Plan, nonqualified stock options for 80,000
shares of Common Stock were granted in 1998 to the Named Executive Officers.
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 1997
Incentive Plan. The table below shows option grants in 1998 to the Named
Executive Officers.
<TABLE>
<CAPTION>
Options Granted in the Last Fiscal Year
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Name Underlying Granted to Exercise Option Term (5 years)(1)
- ---- Options Employees in Price Expiration -----------------------------
Granted Fiscal Year ($/share) Date 5% 10%
---------- ------------ --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Bruce M. Gillis -- 0.00% $ -- N/A $ -- $ --
S. David Model -- 0.00% -- N/A -- --
Andrew R. Bacas 30,000 9.12% 2.375 10/01/2003 19,685 43,499
James D. Brown -- 0.00% -- N/A -- --
Richard D. Moseley 50,000 15.20% 12.00 12/08/2002 165,769 366,306
</TABLE>
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(1) "Potential Realizable Value" of each grant 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 the Company's Common Stock.
In 1998, a total of 187,500 options granted to the Named Executive Officers
in 1997 (at an exercise price of $12.00) were cancelled.
5
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Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The table below shows option exercises by the Named Executive Officers in
1998 and year-end amounts of shares of Common Stock underlying outstanding
options.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at FY-End (#) at FY-End ($)(1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ---------------------- --------------------
<S> <C> <C> <C> <C>
Bruce M. Gillis -- -- 100,000/-0- $ --
S. David Model -- -- -- --
Andrew R. Bacas -- -- -0-/30,000 --
James D. Brown -- -- -- --
Richard D. Moseley -- -- 16,667/33,333 --
</TABLE>
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(1) Based on the closing price of $2.00 on the Nasdaq National Market on
December 31, 1998.
Options granted to Mr. Gillis in 1997 and to Mr. Moseley in April 1998 were
at an exercise price equal to the Company's initial public offering price 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. Options granted to Mr. Bacas
first become exercisable on October 1, 1999. 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
The Company 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 and Moseley terminated pursuant to their
separation agreements as described below. In addition, Mr. Brown's employment
agreement terminated effective as of April 30, 1999 pursuant to the terms of
his separation agreement also described below.
The Company entered into separation agreements with Messrs. Gillis and
Moseley, separately, in September 1998 and with Mr. Model in November 1998.
Under these agreements, Mr. Gillis resigned as Chairman and Chief Executive
Officer, Mr. Moseley resigned as Chief Information Officer and Mr. Model
resigned as President and Chief Operating Officer. Mr. Gillis remained a member
of the Board of Directors until his resignation therefrom on April 12, 1999. In
connection with Mr. Gillis' resignation as the Company's Chief Executive
Officer, the Company's Board of Directors appointed Andrew R. Bacas as its Vice
Chairman and Acting Chief Executive Officer and elected Lewis E. Hatch, Jr. as
its Chairman. In addition, in April 1999, the Company entered into a separation
agreement with Mr. Brown, whereby Mr. Brown resigned from his position as Senior
Vice President - Finance and Chief Financial Officer, effective as of April 30,
1999.
Under the terms of the separation agreements, the Company is obligated to
make severance payments to each party as follows: Mr. Brown, $130,000 over 12
months in equal bi-weekly installments from May 1999 to
6
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April 2000; 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; and Mr.
Moseley, $130,000 over 12 months, of which $65,000 was paid in 1998, with the
remaining $65,000 to be paid over six months in equal monthly installments from
March 1999 to September 1999. The separation agreements also provide, among
other things, that certain expenses be paid by the Company, including relocation
expenses of up to $35,000 and outplacement services of up to $15,000 for
Mr. Moseley.
Mr. Bacas serves as the Company's Acting Chief Executive Officer and
previously served as its 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 Mr. Bacas is subject to increases periodically, and Mr. Bacas 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 therein), 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, as defined, occur within certain specified periods,
these agreements provide, among other things, that the Company 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 beyond this date, the Company is not obligated to make any payments under
these agreements.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Compensation
Committee"), subject to the approval of the Board of Directors, determines the
compensation of the Company's executive officers and oversees the administration
of executive compensation programs. The Compensation Committee is composed of
two independent, nonemployee directors.
Executive Compensation Policies and Programs
The Company's 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 the 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 stock and/or stock options). Each component is evaluated in the
context of competitive conditions. In determining competitive compensation
levels, the Company considers information from several sources, including
compensation for comparably sized companies and companies in a similar stage of
development. Since the Company's 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 the operating performance of the Company, 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 the Company's 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:
7
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the Company's 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 the Company's
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 the Company 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 the Company's executives to enhance the value of the 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 the Company.
Policy with respect to Internal Revenue Code Section 162(m). In 1993, the
Internal Revenue Code of 1986 (the "Code") 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 the Company in any year with
respect to certain of the Company's 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. The Company intends, to the extent practicable, to preserve the
deductibility under the Code of compensation paid to its executive officers
while maintaining compensation programs to attract and retain highly qualified
executives in a competitive environment. Accordingly, compensation paid under
the Company's 1997 Incentive Plan is generally deductible, although certain
compensation paid to some executives may not be deductible.
Compensation in 1998
In September 1998, in connection with an evaluation of the Company's
operating performance and impending restructuring program, the Compensation
Committee reviewed each component of executive compensation and how such
compensation would provide incentives to the executive officers of the Company.
This review was performed in light of, among other things, Mr. Gillis'
resignation as Chief Executive Officer and Mr. Moseley's resignation as Chief
Information Officer. The Compensation Committee determined that no base salary
changes or bonus awards to executive officers were warranted, but that an
equity-based incentive for Mr. Bacas was appropriate in connection with his
appointment as Acting Chief Executive Officer. The equity-based incentive was a
grant of stock options for 30,000 shares of Common Stock under the 1997
Incentive Plan at an exercise price of $2.375. In connection with this grant,
Mr. Bacas voluntarily incurred, with the consent of the Compensation Committee,
a base annual salary reduction from $130,000 to $100,000, which remained in
effect through December 31, 1998.
8
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Chief Executive Officer
Prior to his resignation in September 1998, Mr. Gillis served as the
Company's Chief Executive Officer since the Company's inception in November
1996. The Company and Mr. Gillis initially entered into an employment agreement
in August, 1997, expiring on December 31, 2002, pursuant to which Mr. Gillis
received 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 the Company's initial public offering and
prior to 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 the Company 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. The Company and Mr. Bacas entered into an
employment agreement in August 1997, expiring on December 31, 2000, pursuant to
which Mr. Bacas receives 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, originally in his capacity as Senior Vice President
- - Corporate Development and presently as Acting Chief Executive Officer. 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 other incentive
compensation was awarded to Mr. Bacas.
Members of the Compensation Committee:
Lennox K. Black, Chairman
Steven N. Kaplan
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with cumulative total return (assuming dividend reinvestment) of common
stock listed on the NASDAQ Stock Market and common stock issued by companies in
a peer group selected by the Company for the period from December 4, 1997 to
December 31, 1998. The peer group consists of the following companies: 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.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
Research Data Group Peer Group Total Return Worksheet
Imagemax Inc (IMAG)
<TABLE>
<CAPTION>
12/4/97
% Peer Group
Weighted Cumulative Total Return Market Cap
Peer Group Cumulative Total Return ------------------------------------------------- ------------
(Weighted Average by Market Value) 12/4/97 12/97 3/98 6/98 9/98 12/98 12/31/98
- ---------------------------------- ------- ----- ---- ---- ---- ----- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peer Group Weighted Average: 100 91 110 60 39 46 100%
2,147
F Y I Inc FYII 100 102 121 126 108 141 14.46%
Ikon Office Solutions Inc IKN 100 89 110 46 23 27 45.37%
Lason Inc LSON 100 92 131 189 177 202 36.38%
Vestcom Intl Inc VESC 100 110 51 45 45 44 3.79%
</TABLE>
9
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Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of April 13, 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 the Company's Common Stock by (i) each person known by the
Company to beneficially own five percent (5%) or more of the outstanding shares
of the Company's Common Stock, (ii) each director and Named Executive Officer
individually, and (iii) all executive officers and directors of the Company as a
group:
<TABLE>
<CAPTION>
Total Number of Shares Percentage of Class of
Name and Address of of Common Stock Common Stock
Beneficial Owner Beneficially Owned(1) Beneficially Owned(1)
- ------------------- ---------------------- ----------------------
<S> <C> <C>
William Blair and Company LLC 731,096(2) 10.9%
222 West Adams Street
Chicago, IL 60606
Bruce M. Gillis 395,448(3) 5.9%
331 Aubrey Road
Wynnewood, PA 19096
Andrew R. Bacas 227,526(4) 3.4%
c/o ImageMax, Inc.
1100 E. Hector Street
Conshohocken, PA 19428
Rex Lamb 224,188(5) 3.3%
c/o ImageMax, Inc.
5001 Rentworth Court
Lincoln, NE 68516
Mitchell J. Taube 199,904(6) 3.0%
c/o ImageMax, Inc.
5 Schuman Road
Millwood, NY 10546
John E. Semasko 157,054(6) 2.3%
c/o ImageMax, Inc.
1790 West 11th Avenue
Eugene, OR 97402
S. David Model 60,288 *
21 Roundhill Road
Granby, CT 06035
</TABLE>
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<TABLE>
<CAPTION>
Total Number of Shares Percentage of Class of
Name and Address of of Common Stock Common Stock
Beneficial Owner Beneficially Owned(1) Beneficially Owned(1)
- ------------------- ---------------------- ----------------------
<S> <C> <C>
James D. Brown 49,145 *
c/o ImageMax, Inc.
1100 E. Hector Street
Conshohocken, PA 19428
Richard D. Moseley 43,109(7) *
7103 Sherman Street
Philadelphia, PA 19119
Dr. Steven N. Kaplan 26,859(8) *
c/o The University of Chicago
Graduate School of Business
1101 East 58th Street
Chicago, IL 60637
Lennox K. Black 17,000(6) *
c/o Teleflex Incorporated
630 West Germantown Pike
Suite 461
Plymouth Meeting, PA 19462
Lewis E. Hatch, Jr. 7,000(9) *
16 West Lakes Drive
St. Simon's Island, GA 31522
David C. Carney 7,000(6) *
c/o Jefferson Health System
259 Radnor-Chester Road
Suite 290
Radnor, PA 19087
All Executive Officers 916,676(10) 13.7%
and Directors as
a Group (9 persons)
</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 (i.e., 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. Percentage ownership is based
upon 6,714,399 shares of Common Stock as of April 13, 1999.
(2) Includes 450,904 shares over which William Blair and Company LLC has
dispositive power only.
(3) Includes 100,000 shares issuable upon the exercise of stock options granted
which are exercisable at $12.00 per share as of April 13, 1999.
11
<PAGE>
(4) Excludes 30,000 shares issuable upon the exercise of stock options granted
on October 1, 1998 which are not exercisable within 60 days of April 30,
1998.
(5) Excludes 15,000 shares issuable upon exercise of stock options granted on
October 1, 1998 which are not exercisable within 60 days of April 30, 1998.
(6) Excludes 10,000 shares issuable upon exercise of stock options granted on
October 1, 1998 which are not exercisable within 60 days of April 30, 1998.
(7) Includes 16,667 shares issuable upon the exercise of stock options which
are exercisable at $12.00 per share within 60 days of April 30, 1999.
Excludes 33,333 shares issuable upon the exercise of stock options granted
April 15, 1998 which are not exercisable within 60 dates of April 30, 1999.
(8) Includes 6,667 shares issuable upon the exercise of stock options which are
exercisable at $12.00 per share as of April 30, 1999. Excludes 13,333 and
10,000 shares, respectively, issuable upon the exercise of stock options
granted December 9, 1997 and October 1, 1998 which are not exercisable
within 60 days of April 30, 1999.
(9) Excludes 20,000 shares issuable upon the exercise of stock options granted
October 1, 1998 which are not exercisable within 60 days of April 30, 1999
(10) Excludes 108,333 shares issuable upon the exercise of stock options granted
which are not exercisable within 60 days of April 30, 1999.
Item 13. Certain Relationships and Related Transactions
Consulting Arrangement
In September 1998, the Company entered into a consulting arrangement with
Mr. Hatch, whereby Mr. Hatch provides consulting services to the Company for a
fee of $6,000 per month. This arrangement provides that Mr. Hatch assist the
Company in a variety of financial and operating matters, including the Company's
negotiations with its banks and various operating procedures. In 1998, the
Company paid $18,000 to Mr. Hatch under this arrangement.
Future Transactions
The Company has adopted a policy that it will not enter into any material
transaction in which a Company director or officer has a direct or indirect
financial interest, unless the transaction is determined by the Company's Board
of Directors to be fair as to the Company or is approved by a majority of the
Company's disinterested directors or by the Company's shareholders, as provided
for under Pennsylvania law.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and persons who own more than ten percent (10%)
of the Company's 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 the Company with copies of all Section 16(a) forms they
file. Based solely on a review of the copies of such forms furnished to it, the
Company believes 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 file a Form 3 upon becoming a director of the
Company in June 1998.
12
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)1. Financial Statements
See Index to the Consolidated Financial Statements which begin on page
F-1 of the Company's Annual Report on Form 10-K filed on March 31, 1999.
2. Financial Statement Schedules
See Schedule II - Valuation and Qualifying Accounts on page F-23 of the
Company's Annual Report on Form 10-K filed on March 31, 1999.
3. Exhibits
DESCRIPTION
2.1* Agreement and Plan of Reorganization dated September 9, 1997, by
and among the Company, DocuTech Data Systems, Inc., and Rex Lamb
and Mark Creglow (including escrow agreement).
2.2* Asset Purchase Agreement dated September 9, 1997 by and among
the Company Rex Lamb and Vicki Lamb (including escrow
agreement).
2.3* Agreement and Plan of Reorganization dated September 9, 1997, by
and among the Company, Utz Medical Enterprises, Inc., and David
C. Utz, Jr. (including escrow agreement).
2.4* Agreement and Plan of Reorganization dated September 9, 1997 by
and among Jane Semasko and John Semasko, Oregon Micro-Imaging,
Inc. and the Company (including escrow agreement).
2.5* Asset Purchase Agreement dated September 9, 1997 by and among
Spaulding Company, Inc., Semco Industries, Inc., and the Company
(including escrow agreement).
2.6* Asset Purchase Agreement dated September 9, 1997 by and among
Total Information Management Corporation and the Company
(including escrow agreement).
2.7* Stock Purchase Agreement dated September 9, 1997 by and among
Ovidio Pugnale, Image Memory Systems, Inc. and the Company
(including escrow agreement).
2.8* Agreement and Plan of Reorganization dated September 9, 1997, by
and among the Company, International Data Services of New York,
Inc., and Mitchell J. Taube and Ellen F. Rothschild-Taube
(including escrow agreement).
2.9* Stock Purchase Agreement dated September 9, 1997 by and among
David Crowder, TPS Micrographics, Inc. and the Company
(including escrow agreement).
13
<PAGE>
2.10* Agreement and Plan of Reorganization dated September 11, 1997 by
and among the Company, Image and Information Solutions, Inc. and
Gary Blackwelder (including escrow agreement).
2.11* Agreement and Plan of Reorganization dated September 9, 1997 by
and among Madeline Solomon, David C. Yezbak, CodaLex
Microfilming Corporation and the Company (including escrow
agreement).
2.12* Asset Purchase Agreement dated September 9, 1997 by and among
Imaging Information Industries, Inc., Gerald P. Gorman, Theodore
J. Solomon, Jr., Charles P. Yezbak, III, David C. Yezbak and the
Company (including escrow agreement).
2.13* Agreement and Plan of Reorganization dated September 9, 1997 by
and among Gerald P. Gorman, Theodore J. Solomon, Theodore J.
Solomon, Jr., Charles P. Yezbak, III, David C. Yezbak, Laser
Graphics Systems & Services, Inc. and the Company (including
escrow agreement).
2.14* Asset Purchase Agreement dated September 9, 1997 by and among
DataLink Corporation, Judith E. DeMott, Geri E. Davidson and the
Company (including escrow agreement).
2.15 Asset Purchase Agreement, dated January 23, 1998, by and among
Integrated Information Services, L.L.C., Pettibone, L.L.C and
Heisley Holding, L.L.C. and ImageMax, Inc. (incorporated by
reference to Exhibit 2.1 of the Company's 8-K filed February 3,
1998).
2.16 Asset Purchase Agreement, dated February 9, 1998, by and among
Document Management Group Inc., Theron Robinson and ImageMax,
Inc. (incorporated by reference to Exhibit 2.1 of the Company's
8-K filed on February 24, 1998).
2.17 Asset Purchase Agreement, dated February 9, 1998, by and among
Image-Tec, Inc., Theron Robinson and Robert Robinson and
ImageMax, Inc. (incorporated by reference to Exhibit 2.2 of the
Company's 8-K filed on February 24, 1998).
3.1* Amended and Restated Articles of Incorporation of the Company.
3.2* Amended and Restated Bylaws of the Company.
4.1* Specimen Stock Certificate.
4.2* Shareholders Agreement between the Company and certain of its
shareholders dated November 19, 1996.
4.3* Amendment No. 1 to Shareholders Agreement dated November 19,
1996.
4.4* Form of Joinder to Shareholders Agreement executed by Bruce M.
Gillis, Sands Point Partners I, Wilblairco Associates, Osage
Venture Partners, Steven N. Kaplan, Brian K. Bergeron, James M.
Liebhardt, G. Stuart Livingston, III, Richard D. Moseley, David
C. Utz, Jr., Bruce M. Gillis, Custodian for Claire Solomon
Gillis, Bruce M. Gillis, Custodian for Katherine Tessa Solomon
Gillis, S. David Model, Andrew R. Bacas, David C. Yezbak,
Theodore J. Solomon, Walter F. Gilbert, Carmen DiMatteo, Patrick
M. D'Agostino, David L. Crowder, James D. Brown and Mary M.
Brown, JTWROS, Mitchell S. Taube and Ellen F. Rothschild-Taube,
JTWROS, John Semasko and Jane Semasko, JTWROS, Wolfe F. Model
and Renate H. Model.
14
<PAGE>
10.1*+ 1997 Incentive Plan.
10.2*+ 1997 Employee Stock Purchase Plan.
10.3*+ Management Agreement between GBL Capital Corporation and the
Company dated November 27, 1996.
10.4*+ Employment Agreement between the Company and Bruce M. Gillis
dated as of August 1, 1997.
10.5*+ Employment Agreement between the Company and James D. Brown
dated as of August 18, 1997.
10.6*+ Employment Agreement between the Company and S. David Model
dated as of August 18, 1997.
10.7*+ Employment Agreement between the Company and Andrew R. Bacas
dated as of August 1, 1997.
10.8+ Employment Agreement between the Company and John E. Semasko
dated as of September 9, 1997 (incorporated by reference to
Exhibit No. 10.8 of the Company's Form 10-K filed March 31,
1998, File No. 0-23077)
10.9+ Employment Agreement between the Company and Rex Lamb dated as
of September 9, 1997 (incorporated by reference to Exhibit No.
10.9 of the Company's Form 10-K filed March 31, 1998, File No.
0-23077).
10.10* Lease Agreement dated March 26, 1996 by and between Marlyn D.
Schwarz and Rex Lamb d/b/a DocuTech.
10.11* Lease Agreement dated February 24, 1992 by and between Marlyn
Schwarz d/b/a Old Cheney Plaza and Rex Lamb d/b/a DocuTech.
10.12* Lease Agreement dated September 1, 1994 by and between Jonstar
Realty Corporation and Spaulding Company, Inc. (renewed May 27,
1997).
10.13 [Intentionally left blank]
10.14* Lease dated September 1, 1995 by and between Robert S. Greer and
Elvera A. Greer and American Micro-Med Corporation.
10.15* Lease dated February 8, 1994 and Lease Rider dated as of
February 1, 1994 by and between Oporto Development Corp. and
International Data Services of New York, Inc.
10.16* Amendment of Lease dated June 6, 1996 between East Cobb Land
Development and Investment Co., L.P. and Imaging Information
Industries/David Yezbak, extended by letter dated July 16, 1997.
10.17 [Intentionally left blank]
10.18* Lease dated January 10, 1996 by and between FinancialEnterprises
III and TPS Imaging Solutions, Inc.
10.19* Lease Agreement dated March 31, 1995 by and between Technical
Publications Service, Inc. and TPS Micrographics, Inc.
15
<PAGE>
10.20* Standard Industrial Commercial MultiTenant Lease-Gross dated
June 20, 1994 by and between Northgate Assembly of God, North
Sacramento, d/b/a Arena Christian Center and Total Information
Management Corporation.
10.21* Lease dated January 26, 1981 and Extension of Lease dated
October, 1992 by and between Trader Vic's Food Products and
Total Information Management Corporation.
10.22* Standard Industrial Lease dated September 24, 1991 by and
between Charles F. Coss, Viola B. Coss, Tracey C. Quinn, John
Coss, Peter B. Coss, Elizabeth Coss, Tracey C. Quinn as Trustee
for Geoffrey C. Quinn and Elizabeth Coss, as Trustee for Caitlin
N. Shay and Total Information Management Corporation extended by
letter dated October 18, 1996 from James Bunker to Peter Coss.
10.23* Lease dated January 1, 1993 between CSX Transportation, Inc. and
American Micro-Med Corporation.
10.24* Lease and Service Agreement dated September 4, 1997 and two
Addendums dated October 15, 1997 between American Executive
Centers, Inc. and the Company.
10.25 Credit Agreement by and among the Company and Subsidiaries and
CoreStates Bank, N.A., for itself and as Agent, and any other
Banks becoming Party, dated as of March 30, 1998.
10.26 Amendment No. 1 to Credit Agreement by and among the Company and
Subsidiaries and First Union National Bank (successor by merger
to CoreStates Bank, N.A.), for itself and as Agent, and any
other Banks becoming Party, dated as of March 30, 1998
(incorporated by reference to Exhibit 10.25 of the Company's
Form 10-K filed March 31, 1998, File no. 0-23077).
10.27 Amendment No. 2 to Credit Agreement by and among the Company and
Subsidiaries and First Union National Bank (successor by merger
to CoreStates Bank, N.A.), for itself and as Agent, and any
other Banks becoming Party, dated as of November 16, 1998.
10.28 Master Demand Note, dated January 20, 1998, payable to First
Union National Bank (successor by merger to CoreStates Bank,
N.A.) (incorporated by reference to Exhibit No. 10.1 of the
Company's Form 8-K filed February 4, 1998, File No. 0-23077)
10.29 Security Agreement, dated January 20, 1998, between First Union
National Bank (successor by merger to CoreStates Bank, N.A.) and
the Company (incorporated by reference to Exhibit 10.2 of the
Company's Form 8-K filed on February 3, 1998).
10.30** Forbearance Agreement dated March 29, 1999 by and among the
Company, First Union National Bank (successor by merger to
CoreStates Bank, N.A.) and Commerce Bank, N.A.
10.31+** Amendment No. 1 dated as of October 1, 1998 to Employment
Agreement between the Company and James D. Brown dated as of
August 18, 1997.
10.32+** Separation Agreement by and between Bruce M. Gillis and the
Company dated September 18, 1998.
10.33+** Separation Agreement by and between Richard D. Moseley and the
Company dated September 30, 1998.
16
<PAGE>
10.34+** Separation Agreement by and between David Model and the Company
dated November 9, 1998.
10.35+ Separation Agreement by and between James D. Brown and the
Company dated as of April 30, 1999.
21** Subsidiaries.
23.1** Consent of Independent Public Accountants.
27** Financial Data Schedule (in electronic format only).
- ----------
* Incorporated by reference to the designated exhibit of the Company's
Registration Statement on Form S-1 filed on September 12, 1997, as amended
(file number 333-35567).
+ Management contract or compensatory plan or arrangement.
** Incorporated by reference to the designated exhibit of the Company's Annual
Report on Form 10-K filed March 31, 1999 (file number 0-23077).
(b) Reports on Form 8-K.
None.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMAGEMAX, INC.
Dated: April 30, 1999 By: /s/ Andrew R. Bacas
-----------------------
Andrew R. Bacas
Chief Executive Officer
18
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT ("Agreement") is made by and between James D.
Brown ("Brown"), together with each and every dependent, heir, agent, executor,
legal representative, successor and assign of Brown, and ImageMax, Inc., a
Pennsylvania corporation ("Parent"), and its subsidiaries (the Parent and its
subsidiaries are collectively referred to as the "Company"), together with each
and every of their predecessors, successors (by merger or otherwise), assigns,
parents, subsidiaries, affiliates, divisions, directors, officers, employees,
attorneys, accountants and agents, whether past, present or former.
WHEREAS, Brown and the Company have agreed that he should resign his
employment with the Company; and
WHEREAS, Brown and the Parent, on its own behalf and on behalf of each
Company, desire to set forth herein their entire understanding and agreement
regarding such resignation.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth, each of Brown and the Parent, on its own behalf and on behalf of each
Company, acting of his and its own free will, and intending to be legally and
irrevocably bound hereby, agree as follows:
1. Resignation. Brown hereby resigns all employment, Board of Director and
other positions with the Company, effective on April 30, 1999. Except as
otherwise set forth herein, the Employment Agreement between the Parent and
Brown dated August 18, 1997 (the "Employment Agreement"), and the Term of the
Employment Agreement (as that term is used therein), shall terminate as of April
30, 1999.
2. Payments.
(a) Severance. The Company agrees to pay Brown the sum of One Hundred
Thirty Thousand Dollars ($130,000), subject to all applicable federal, state and
local tax (the "Severance Payment"), to be paid by check in 24 equal payments
commencing on May 1, 1999 and continuing on the first and fifteenth days of each
calendar month thereafter until April 30, 2000, when the last payment will be
due. Notwithstanding the foregoing, any unpaid portion of the severance payment
shall be paid to Brown by the Parent or the Successor Entity (as defined below),
as the case may be, upon the completion of a Change of Control or Sale of the
Parent (each as defined below).
<PAGE>
(b) Expense Reimbursement. The Company agrees to reimburse Brown in
accordance with its existing business practices for his reasonable business
expenses related to the Company on or prior to April 30, 1999 which have not yet
been reimbursed (the "Non-Reimbursed Expenses"). Within thirty (30) days of the
execution hereof, Brown agrees to submit to the chief accounting officer of the
Company the appropriate expense reports reflecting such expenses. Once such
reports are processed, the Company will promptly reimburse Brown for the
Non-Reimbursed Expenses.
(c) Change of Control. In addition to the Severance Payment, upon the
completion of a Sale of the Parent or a Change of Control (each as defined
below) prior to December 31, 2000, the Parent or the successor to all or
substantially all of the Parent's assets, capital stock or business (the
"Successor Entity"), as the case may be, shall pay to Brown by check the sum of
Three Hundred Twenty-Five Thousand Dollars ($325,000), subject to all applicable
federal, state and local tax. For purposes of this Agreement: (i) a "Change of
Control" means the sale, transfer, assignment or other disposition (including by
merger or consolidation) by stockholders of the Parent, in one transaction or a
series of related transactions, of more than fifty percent (50%) of the voting
power represented by the then outstanding stock of the Parent to one or more
Persons, other than (A) any such sales, transfers, assignments or other
dispositions by such stockholders to their respective Affiliates or (B) any such
transaction effected primarily to reincorporate the Parent in another
jurisdiction; (ii) "Affiliate" means, with respect to any stockholder of the
Parent, (W) any Person directly or indirectly controlling, controlled by or
under common control with such stockholder, (X) any Person owning or controlling
ten percent (10%) or more of the outstanding voting securities of such
stockholder, (Y) any officer, director or general partner of such stockholder,
or (Z) any Person who is an officer, director, general partner, trustee or
holder of ten percent (10%) or more of the outstanding voting securities of any
Person described in clauses (W) through (Y) of this sentence; (iii) "Person"
means an individual, partnership, corporation, joint venture, association,
trust, unincorporated association, other entity or association; and (iv) "Sale
of the Parent" means a sale, transfer, assignment or other disposition
(including by merger or consolidation) of all of the outstanding stock of the
Parent, or of all or substantially all of the assets of the Parent, or a
liquidation or dissolution of the Parent; provided, however, that a "Sale of the
Parent" shall not include the consummation of a public offering of common stock
of the Parent pursuant to a registration statement or any transaction effected
primarily to reincorporate the Parent in another jurisdiction. The potential
acquisition of preferred stock and warrants by Pierce Leahy Corp. contemplated
in that certain Letter of Intent dated March 11, 1999 by and between Pierce
Leahy Corp. and the Company shall not be considered a Change of Control or Sale
of the Company for the purposes of this Agreement.
(d) Consulting Arrangement. The Company may retain Brown as a consultant
for assistance in certain operations of the Company. The Company shall pay Brown
for such consulting services, and Brown hereby agrees to accept, as compensation
a per diem rate of five-hundred dollars ($500). Such accrued consulting fees
shall; (i) be payable in cash upon closing of any transaction or financing that
does not meet the definition above of a "change of control transaction" on or
before December 31, 2000; or (ii) if said transaction qualifies as a change of
control transaction, such accrued fees shall be credited against the payment due
Brown in 2 (c) above. In addition, the
-2-
<PAGE>
Company shall reimburse Brown for reasonable travel expenses incurred in
connection with the performance of such consulting services, to the extent
consistent with the Company's general expense reimbursement policy as may be in
effect from time to time. Either Brown or the Company may terminate such
consulting arrangement at any time by the giving of notice to the other party,
at which time no further amounts (except accrued consulting fees and
reimbursable expenses) shall be payable to Brown.
3. Benefits Continuation. For the period May 1, 1999 to April 30, 2000, the
Company will provide Brown and his family full coverage under the Company group
medical plan subject to the requirements of the medical plan, and any other
Company employee benefits Brown is eligible for on the date hereof. Brown agrees
to pay directly or to the Company for the medical coverage an amount equal to
any required employee contribution to the medical plan premium. Brown's
statutory rights under COBRA to continue participation in the Company's group
medical coverage for a period of up to eighteen (18) months, at his own cost,
shall begin on May 1, 2000. The Company's obligation to continue medical
coverage will cease if Brown becomes eligible to participate in a comparable
medical plan with a new employer. In that case, Brown agrees to immediately
provide written notification of that fact to the Vice President of Human
Resources of the Company and the (acting) Chief Executive Officer of the
Company. If the Company is unable to continue medical coverage under its group
medical plan as required by this paragraph 3 due to requirements of such plan,
the Company shall pay to Brown an amount equal to the cost of premiums which the
Company would have incurred had it not been prohibited from providing such
coverage.
4. Return of Company Property. Brown agrees to return to the Company,
within five (5) business days of the execution of this Agreement, all Company
property in his possession or control. Brown further agrees that he will not
make, retain or remove any copies of any of the foregoing.
5. Mutual Release of Claims. Brown hereby completely remises, releases,
relinquishes, waives and forever discharges the Company, together with each and
every of their predecessors, successors (by merger or otherwise), assigns,
parents, subsidiaries, affiliates, divisions, directors, officers, employees,
attorneys, accountants and agents, whether past, present or former of and from
all manner of actions, causes of action, suits, debts, dues, accounts, bonds,
covenants, contracts, agreements, judgments, claims, liabilities and demands
whatsoever, in law or in equity, known or unknown, in tort, contract, by
statute, negligence (whether by contribution or indemnification) or any other
basis for relief, compensatory, punitive or other damages, expenses (including
attorneys' fees), reimbursements or costs of any kind which Brown ever had, now
has or may have, for or by reason of any cause, matter or thing whatsoever,
arising out of or in any way related to the Company or his employment with the
Company, his membership on any Board of Directors of the Company or the
termination of that employment or membership; provided, however, that nothing
contained herein shall release the Company from its obligations under this
Agreement, the Parent's registration rights obligations arising out of the
Shareholders'
-3-
<PAGE>
Agreement dated as of November 19, 1996, as amended (the "Shareholders'
Agreement"), and the Company's obligations to indemnify Brown from acts and
omissions as a director and officer of the Company to the fullest extent
permissible by law. Brown agrees that he has executed this Release on his own
behalf, and also on behalf of his dependents, heirs, agents, executors, legal
representatives, successors and assigns. This Release includes, but is not
limited to, a release of any rights or claims he may have for, or pursuant to,
the Pennsylvania Wage Payment and Collection Law or any other state or local
wage payment statute, the Age Discrimination in Employment Act (ADEA), Title VII
of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act
(ADA), the Employee Retirement Income Security Act of 1974, as amended, (ERISA),
any other federal, state or local laws or regulations prohibiting employment
discrimination, breach of any express or implied contract, wrongful termination
or any other tort claims, including claims for attorneys' fees, whether based on
common law or otherwise. Brown understands, however, that by signing this
Release, he does not waive rights to: (a) any claims arising under any
applicable worker's compensation laws; (b) any claims which the law states may
not be waived; or (c) his vested rights, if any, under the Company's 401(k)
plan, in effect as of the date of this Agreement.
The Parent, on its own behalf and on behalf of each Company, hereby
completely remises, releases, relinquishes, waives and forever discharges Brown
and his dependents, heirs, agents, executors, legal representatives, successors
and assigns, of and from all manner of actions, causes of action, suits, debts,
dues, accounts, bonds, covenants, contracts, agreements, judgments, claims,
liabilities and demands whatsoever, in law or equity, known or unknown, in tort,
contract, by statute, negligence (whether by contribution or indemnification) or
any other basis for relief, compensatory, punitive or other damages, expenses
(including attorney's fees), reimbursements or costs of any kind which the
Company ever had, now has or may have, for or by reason of any cause, matter or
thing whatsoever, arising out of or in any way related to the Company or his
employment with the Company, his membership on any Boards of Directors of the
Company or the termination of that employment and membership; provided however,
that nothing contained herein shall release Brown from: (i) his obligations
under this Agreement; (ii) his obligations under Sections 6 (confidentiality), 7
(ownership of proprietary information) and 20 (specific performance) of the
Employment Agreement; and (iii) his obligations under Section 8
(non-competition) of the Employment Agreement (as amended and restated in
paragraph 6 of this Agreement). The Parent agrees that it has executed this
Release on its own behalf and on behalf of each Company, and also on behalf of
each and every of their predecessors, successors (by merger or otherwise),
assigns, parents, subsidiaries, affiliates, divisions, directors, officers,
employees, attorneys, accountants and agents, whether past, present or former.
6. Amendment and Restatement of Covenant Not to Compete in Employment
Agreement. Section 8 of the Employment Agreement is hereby amended and restated
as follows:
-4-
<PAGE>
"8. Covenant Not to Compete. The Employee shall not, until April 30, 2000
(the "Restricted Period"), do any of the following directly or indirectly
without the prior written consent of the Parent:
(a) compete with the Company or any of its respective affiliates or
subsidiaries, or any of their respective successors or assigns, whether now
existing or hereafter created or acquired (collectively, the "Related
Companies"), in any document management business conducted during the Term or,
as of April 30, 1999, contemplated to be conducted (as has been determined by
the Board) or in any other business conducted by the Company in which the
Employee is or has been actively engaged (the "Restricted Business") within any
geographic area located within the United States of America, its possessions or
territories (the "Restricted Area");
(b) become interested (whether as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant or otherwise) in any
person, firm, corporation, association or other entity that competes, with the
Related Companies in the Restricted Business within the Restricted Area; if such
interest would constitute a violation of Section 8(a) hereof; provided, however,
that nothing contained in this Section 8(b) shall prohibit Employee from owning,
as a passive investor, not more than five percent (5%) of the outstanding
securities of any class of any publicly-traded securities of any publicly held
company listed on a well-recognized national securities exchange or on an
interdealer quotation system of the National Association of Securities Dealers,
Inc.
(c) influence or attempt to influence any supplier, customer or
potential customer of the Company or any of the Related Companies to terminate
or modify any written or oral agreement or course of dealing with the Company or
the Related Companies; or
(d) influence or attempt to influence any person (other than a family
member) to either (i) terminate or modify his employment, consulting, agency,
distributorship or other arrangement with the Company or any of the Related
Companies, or (ii) employ or retain, or arrange to have any other person or
entity employ or retain, any person who has been employed or retained by the
Company or any of the Related Companies as an employee, consultant, agent or
distributor of the Company or the Related Companies at any time during the one
year period immediately preceding April 30, 1999.
7. Non-Defamation. Each party agrees not to intentionally defame the other
with respect to matters arising prior to the date of the execution of this
Agreement.
8. Arbitration of Disputes Under this Agreement. The parties agree that any
and all disputes arising out of the performance or breach of this Agreement or
any promise or covenant herein shall be resolved by submission to final and
binding arbitration by a panel of three arbitrators in Philadelphia,
Pennsylvania, under, and in accordance with, the Individual
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<PAGE>
Employment Rules and Procedures of the American Arbitration Association. In any
such proceeding, the prevailing party shall be entitled to an award of
reasonable attorneys' fees, cost and expenses.
9. Governing Law; Enforcement. This Agreement shall be governed by and
construed and enforced under the laws of the Commonwealth of Pennsylvania. All
remedies at law and equity shall be available for the enforcement of this
Agreement incorporated by reference herein. This Agreement may be pleaded as a
full bar to the enforcement of any claim in any way related to or arising out of
Brown's employment or other positions with the Company and/or the termination
thereof.
10. Review and Counsel. Brown understands that he may take up to twenty-one
(21) days to consider this Agreement, its benefits, and its consequences. He
acknowledges that he has been advised that he should seek the advice of an
attorney before signing this Agreement, and that has had an adequate opportunity
to do so. Brown also understands that he will have seven (7) days after signing
this Agreement to revoke it and that it will not become effective and
enforceable until this revocation period has expired. Brown further understands
that the Company is not obligated under this Agreement until at least 10 days
after receipt by the Company of the fully executed original of this Agreement.
11. Contractual Effect. The parties understand and acknowledge that the
terms of this Agreement are contractual and not a mere recital. Consequently,
they expressly consent that this Agreement shall be given full force and effect
according to each and all of its express terms and provisions, and that it shall
be binding upon the respective parties as well as their dependents, heirs,
executors, legal representatives, successors and assigns.
12. Notices. All notices, requests, payments, acknowledgments and other
communications hereunder to a party shall be in writing and shall be deemed to
have been duly given when delivered by hand, deposited with a recognized
overnight courier for next day delivery or telecopied to such party at his or
its address set forth below or such other address as such party may specify by
notice to the other party hereto.
If to Brown, to:
James D. Brown
318 Hathaway Lane
Wynnewood, PA 19096
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<PAGE>
If to the Company, to:
ImageMax, Inc.
1100 Hector Street
Suite 396
Conshohocken, PA 19428
Attention: Chairman
13. Entire Agreement; Etc. This Agreement represents the entire
understanding of the parties hereto with reference to the subject matters hereof
and supersedes any and all other oral or written agreements heretofore or
contemporaneously made.
14. Headings. The descriptive headings of the Paragraphs of this Agreement
are inserted for convenience only, do not constitute a part of this Agreement
and shall not affect in any way the meaning or interpretation of this Agreement.
15. Counterparts and Facsimile Signatures. This Agreement may be delivered
by telecopied signatures and executed in several counterparts, each of which
shall be deemed to be an original, and all of which together shall be deemed to
be one and the same instrument.
[blank to end of page]
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<PAGE>
16. Severability. If any term, provision, covenant or restriction contained
in this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void, unenforceable or against public or regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
IN WITNESS WHEREOF, Brown and the Parent, on its own behalf and on behalf
of each Company, each acknowledge that they are acting of their own free will,
that they have had a sufficient opportunity to read and review the terms of this
Agreement, they have each received the advice of their respective counsel with
respect hereto, and that they have voluntarily caused the execution of this
Agreement and by reference herein as of the day and year set forth below.
/s/ James D. Brown
- ---------------------------------- Witness: /s/ Jennifer J. Buckingham
James D. Brown --------------------------
Jennifer J. Buckingham
Date: April 16, 1999
On behalf of IMAGEMAX, INC.:
By: /s/ Lewis E. Hatch, Jr.
------------------------------
Name: Lewis E. Hatch, Jr.
By: /s/ Andrew Bacas
------------------------------
Name: Andrew Bacas
Date: April 16, 1999
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