SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
OR
[ ] 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
----------------------
IMAGEMAX, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2865585
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
455 Pennsylvania Avenue, Suite 128
Fort Washington, Pennsylvania 19034
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(215) 628-3600
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 the number of shares outstanding of each of the issuer's classes of
common stock as of May 8, 2000:
Common Stock, no par value 6,649,016
-------------------------- ----------------
Class Number of Shares
<PAGE>
IMAGEMAX, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Operations............................... 1
Consolidated Balance Sheets......................................... 2
Consolidated Statements of Cash Flows............................... 3
Notes to Consolidated Financial Statements.......................... 4
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 8
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K............................... 11
SIGNATURES.................................................................. 12
<PAGE>
IMAGEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in thousands except per share amounts)
Three Months
Ended March 31,
---------------------
2000 1999
------- --------
Revenues:
Services ....................................... $12,121 $ 12,512
Products ....................................... 2,572 2,970
------- --------
14,693 15,482
------- --------
Cost of revenues:
Services ....................................... 7,227 7,442
Products ....................................... 1,541 1,851
Depreciation ................................... 460 426
------- --------
9,228 9,719
------- --------
Gross profit ................................ 5,465 5,763
Selling and administrative expenses ................. 4,012 4,397
Amortization of intangibles ......................... 450 449
Restructuring costs ................................. -- 827
------- --------
Operating income ............................ 1,003 90
Interest expense .................................... 589 532
------- --------
Income (loss) before income taxes ........... 414 (442)
Income tax provision ................................ -- --
------- --------
Net income (loss) ................................... $ 414 $ (442)
======= ========
Basic and diluted net income (loss) per share ....... $ 0.06 $ (0.07)
======= ========
Shares used in computing basic and diluted net income
(loss) per share ............................... 6,634 6,498
======= ========
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
IMAGEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands except share amounts)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .................................. $ 2,040 $ 1,719
Accounts receivable, net of allowance for doubtful
accounts of $392 and $392 as of March 31, 2000 and
December 31, 1999, respectively ........................ 10,221 9,412
Inventories ................................................ 2,222 2,031
Prepaid expenses and other ................................. 835 838
-------- --------
Total current assets ................................... 15,318 14,000
Property, plant and equipment, net ............................ 5,347 5,642
Intangibles, primarily goodwill, net .......................... 44,015 44,448
Other assets .................................................. 493 275
-------- --------
$ 65,173 $ 64,365
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long-term debt ...... $ 13,302 $ 18,627
Accounts payable ........................................... 2,747 2,967
Accrued expenses ........................................... 3,904 4,021
Deferred revenue ........................................... 1,707 1,666
-------- --------
Total current liabilities .............................. 21,660 27,281
-------- --------
Long-term debt ................................................ 6,414 970
-------- --------
Other long-term liabilities ................................... 38 41
-------- --------
Shareholders' equity:
Preferred stock, no par value, 10,000,000 shares
authorized, none issued ................................ -- --
Common stock, no par value, 40,000,000 shares authorized,
6,649,016 and 6,633,681 shares issued and outstanding
as of March 31, 2000 and December 31, 1999, respectively 53,411 52,837
Accumulated deficit ........................................ (16,350) (16,764)
-------- --------
Total shareholders' equity ............................. 37,061 36,073
-------- --------
$ 65,173 $ 64,365
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
IMAGEMAX, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months
Ended March 31,
---------------------
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................... $ 414 $ (442)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities-
Depreciation and amortization .................................. 910 875
Amortization of deferred financing costs ....................... 13 --
Amortization of imputed interest ............................... 5 --
Changes in operating assets and liabilities, excluding effect of
the Southeast Group divestiture-
Accounts receivable, net ................................... (809) 1,497
Inventories ................................................ (191) 136
Prepaid expenses and other ................................. 3 (6)
Other assets ............................................... -- (17)
Accounts payable ........................................... (220) (368)
Accrued expenses ........................................... (134) (620)
Deferred revenue ........................................... 41 (815)
------- -------
Net cash provided by operating activities .............. 32 240
------- -------
Cash flows from investing activities:
Purchases of property and equipment ................................. (165) (203)
Proceeds from Southeast Group divestiture ........................... -- 563
------- -------
Net cash provided by (used in) investing activities .... (165) 360
------- -------
Cash flows from financing activities:
Net borrowings (repayments) under line of credit .................... (5,300) (563)
Proceeds of subordinated debt transaction ........................... 6,000 --
Payment of deferred financing costs ................................. (231) (100)
Proceeds from issuance of common stock .............................. 21 34
Principal payments on debt and capital lease
obligations .................................................... (36) (191)
------- -------
Net cash provided by (used in) financing activities .... 454 (820)
------- -------
Net increase (decrease) in cash and cash equivalents ................... 321 (220)
Cash and cash equivalents, beginning of period ......................... 1,719 736
------- -------
Cash and cash equivalents, end of period ............................... $ 2,040 $ 516
======= =======
Supplemental disclosures of cash flow information:
Cash paid for:
Interest ....................................................... $ 558 $ 536
======= =======
Income taxes ................................................... $ 37 $ 13
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
IMAGEMAX, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BACKGROUND AND BASIS OF PRESENTATION:
ImageMax, Inc. ("ImageMax") was founded in November 1996 to become a
leading, national single source provider of integrated document management
solutions. On December 4, 1997, ImageMax sold 3,100,000 shares of its common
stock in an initial public offering (the "Offering") at $12 per share, which
raised net proceeds to ImageMax of $30.5 million, net of offering costs of $6.7
million. Concurrent with the Offering, ImageMax began material operations with
the acquisition of 14 document management services companies. During 1998,
ImageMax acquired 13 additional document management services companies. These
acquisitions were accounted for using the purchase method of accounting.
Pursuant to a management and operational reorganization, the Company sold
operations in three locations (Charlotte, NC; Cayce, SC; and Cleveland, TN--the
"Southeast Group") in December 1998 and January 1999 and decided to close its
Indianapolis, IN business unit in March 1999. The Company currently operates 14
business units in 15 states.
The accompanying unaudited consolidated financial statements include the
accounts of ImageMax and its subsidiaries (the "Company"). All material
intercompany balances and transactions have been eliminated in consolidation.
These financial statements have been prepared in conformity with principles of
accounting applicable to a going concern. These principles contemplate the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has incurred significant operating losses since
inception, and as of March 31, 2000, had an accumulated deficit of $16.4
million. In addition, as more fully described in Note 5, ImageMax is in default
of its credit facility with its banks under which it had borrowings of $13.2
million as of March 31, 2000. The Company has executed an interim forbearance
agreement with the banks as described in Note 5. Management is currently in
discussions with various banks concerning a refinancing of the Company's debt.
If the Company is not able to favorably restructure its financing in a timely
manner or if it continues to incur significant operating losses, the Company may
not be able to sustain its operations and continue as a going concern. The
consolidated balance sheet as of December 31, 1999 has been derived from the
Company's consolidated financial statements that have been audited by the
Company's independent public accountants. The Company's independent public
accountants, Arthur Andersen LLP, have stated in their audit report included in
the Company's Annual Report on Form 10-K for the year ending December 31, 1999
that the events of default under the Company's credit facility raise substantial
doubt about the Company's ability to continue as a going concern.
The unaudited financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information
pursuant to rules and regulations of the Securities and Exchange Commission.
Accordingly, unaudited interim financial statements such as those in this report
allow certain information and footnotes required by generally accepted
accounting principles for year end financial statements to be excluded. The
Company believes all adjustments necessary for a fair presentation of these
interim financial statements have been included and are of a normal and
recurring nature. Interim results are not necessarily indicative of results for
a full year. These interim financial statements should be read in conjunction
with the Company's pro forma and historical financial statements and notes
thereto included in its Annual Report on Form 10-K for the year ending
December 31, 1999.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
There were no changes in the accounting policies of the Company during the
periods presented. For a description of these policies, refer to Note 2 of Notes
to Consolidated Financial Statements of ImageMax, Inc. and Subsidiaries included
in the Company's Annual Report on Form 10-K for the year ending December 31,
1999.
3. ACQUISITIONS AND DIVESTITURES:
In January 1999, the Company completed its divestiture of the Southeast
Group with the sale of the Cayce, SC and Cleveland, TN business units. Revenues
and operating losses, respectively, of the former Southeast Group amounted to
$113,000 and $15,000 for the three months ended March 31, 1999.
In March 1999, management decided to close the Company's underperforming
Indianapolis, IN business unit. The closing of this business unit was
substantially completed in May 1999. As of March 31, 1999, the Company recorded
a loss relating to the
4
<PAGE>
3. ACQUISITIONS AND DIVESTITURES (Continued):
closing of $557,000, primarily a write off in related goodwill of $300,000,
severance payments and lease termination costs. Revenues and operating losses,
respectively, of the former Indianapolis operation amounted to $379,000 and
$330,000 for the three months ended March 31, 1999.
The following unaudited pro forma information compares the actual results
of the Company's operations for the three months ended March 31, 2000 with the
results for the three months ended March 31, 1999 excluding the results of the
former Southeast Group and Indianapolis operations:
Three Months
Ended March 31,
----------------------------
Actual Pro forma
2000 1999
----------- -----------
Total revenue ................................. $14,693,000 $14,990,000
Operating income .............................. $ 1,003,000 $ 463,000
Net income (loss) ............................. $ 414,000 $ (96,000)
Basic and diluted net income (loss) per share.. $ 0.06 $ (0.02)
The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations, or the
results that may occur in the future.
4. RESTRUCTURING COSTS:
For the three months ended March 31, 1999, the Company recorded a
restructuring charge of $827,000, primarily related to the closing of the
Indianapolis business unit and executive severance payments. As of March 31,
2000 and December 31, 1999, respectively, accrued restructuring charges
(classified as accrued expenses) amounted to $150,000 and $263,000, of which
$114,000 and $196,000 related to severance payments with the remaining amount
attributable primarily to lease termination costs. During the three months ended
March 31, 2000, the Company paid $113,000 of accrued restructuring charges, of
which $82,000 related to severance payments with the remaining $31,000
attributable to lease termination costs.
5. LINE OF CREDIT AND LONG-TERM OBLIGATIONS:
On March 30, 1998, the Company entered into a credit facility (as amended
the "Credit Facility"), providing a revolving line of credit of $30 million in
borrowings with First Union National Bank (successor by merger to Corestates
Bank, N.A.) and Commerce Bank, N.A. (together, the "Banks"). This agreement was
substantially amended in November 1998 as described below. Under the initial
terms of the Credit Facility, the Company could borrow up to $25 million to
finance future acquisitions and up to $5 million for working capital purposes.
Prior to amendment, borrowings under the facility bore interest at LIBOR or
prime plus an applicable margin at the option of the Company. In addition to
interest and other customary fees, the Company was obligated to remit a fee
ranging from 0.2% to 0.375% per year on unused commitments. The Credit Facility
is secured by substantially all of the assets of the Company. The Credit
Facility is subject to certain financial covenants which pertain to criteria
such as minimum levels of cash flow, ratio of debt to cash flow, and ratio of
fixed charges to cash flow. Prior to amendment, borrowing under the Credit
Facility was contingent upon the Company meeting certain financial ratios and
other criteria.
An amendment to the Credit Facility dated November 16, 1998 amended certain
financial covenants for future periods, reduced the amount available under the
Credit Facility to the amount ($20.1 million) outstanding on November 6, 1998,
changed the maturity date to December 1, 1999 from December 31, 2002, required a
$5.0 million principal repayment or commitments therefor by December 31, 1998,
required all borrowings to bear a rate of prime plus an applicable margin and
changed other provisions. As of December 31, 1998, the Company was in default of
certain financial and other covenants under the amended Credit Facility,
including cash flow ratios and the requirement for a $5.0 million principal
repayment or commitments therefor. On March 29, 1999, the Company entered into a
forbearance agreement with the Banks (the "Forbearance Agreement"). Pursuant to
the Forbearance Agreement, the banks agreed to forbear from exercising their
rights and remedies with respect to all existing defaults under the Credit
Facility until the earlier of June 30, 1999 or the occurrence of a default under
the Forbearance Agreement or an additional default under the Credit Facility. On
June 30, 1999, the Forbearance Agreement expired. On September 30, 1999, the
Company entered into an interim forbearance agreement (the "Interim Agreement")
with the Banks. On February 15, 2000, the Company amended its Interim Agreement
dated September 30, 1999 (the "Amended Interim Agreement").
Under the terms of the Amended Interim Agreement, the amount available
under the Credit Facility was reduced to $13.2 million. The outstanding amount
under the Credit Facility bears interest at the prime rate plus two percent (2%)
per annum (effective rate of 11.0% as of March 31, 2000).
5
<PAGE>
5. LINE OF CREDIT AND LONG-TERM OBLIGATIONS (Continued):
The Company has continued its discussions with various banks concerning the
refinancing of its debt (see Note 1).
During the three months ended March 31, 2000, the Company made $5,300,000
in principal repayments under the Credit Facility from proceeds received from
the subordinated debt financing (see Note 10) and cash provided by operations.
All of the Company's indebtedness under the Credit Facility is classified
as short-term debt.
In connection with the acquisition of certain businesses, the Company
assumed debt of approximately $600,000 (net of repayments from proceeds from the
Offering), representing notes payable, capital lease obligations and other
indebtedness. As of March 31, 2000, $61,000 was outstanding under this
indebtedness.
In April 1999, the Company executed a $900,000 mortgage loan with a lender
relating to a Company-owned property that houses a business unit operation. The
Company received $869,000 in proceeds, net of closing costs, from the
transaction. In July 1999, the $869,000 was applied to the balance of the Credit
Facility. Interest on the loan is at the greater of 8.50% or the U.S. Treasury
rate plus 375 basis points (9.59 % at March 31, 2000). The loan carries a
ten-year term (maturing May 2009), is secured by the mortgaged property, and
requires equal monthly repayments of principal and interest of $10,000.
6. INCOME TAXES:
As of March 31, 2000, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $6.7 million. The net operating
loss carryforward differs from the accumulated deficit principally due to
differences in the recognition of certain expenses for financial and income tax
reporting purposes, as well as the nondeductibility of special compensation,
acquired research and development charges, losses on the sale of business units
and goodwill amoritization. As of March 31, 2000, a valuation allowance was
established for the Company's tax benefit based upon the uncertainty of the
realizability of the associated deferred tax asset given the Company's losses to
date under the guidelines set forth in Statement of Financial Accounting
Standards ("SFAS") No. 109.
7. EARNINGS PER SHARE:
The Company has presented net income (loss) per share pursuant to SFAS No.
128, "Earnings Per Share", which requires dual presentation of basic and diluted
earnings per share. Basic earnings per share ("Basic EPS") is computed by
dividing the net income (loss) for the period by the weighted average number of
shares of common stock outstanding for the period. Diluted earnings per share
("Diluted EPS") is computed by dividing net income (loss) for the period by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the period. For both periods presented, common stock
equivalents are not included, as their effect is antidilutive and, as such,
Basic EPS and Diluted EPS are the same.
8. INTANGIBLE ASSETS:
The Company continually evaluates whether events or circumstances have
occurred that indicate that the remaining useful lives of intangibles assets
should be revised or that the remaining balance of such assets may not be
recoverable. When the Company concludes it is necessary to evaluate its long-
lived assets, including intangibles, for impairment, the Company will use an
estimate of the related undiscounted cash flow as the basis to determine whether
impairment has occurred. If such a determination indicates an impairment loss
has occurred, the Company will utilize the valuation method which measures fair
value based on the best information available under the circumstances. As of
March 31, 2000, the Company believes that no revisions of the remaining useful
lives or write-downs of intangible assets are required.
9. COMPREHENSIVE INCOME:
The Company has reviewed SFAS No. 130 and has determined that for the
quarters ended March 31, 2000 and 1999, no items meeting the definition of
comprehensive income as specified in SFAS No. 130 existed in the consolidated
financial statements. As such, no disclosure is necessary to comply with SFAS
No. 130.
10. CONVERTIBLE DEBT FINANCING:
On February 15, 2000, the Company completed a $6 million financing
transaction involving the sale of convertible subordinated notes (the "Notes")
and warrants (the "Warrants") to TDH III, L.P. ("TDH"), Dime Capital Partners,
Inc. and Robert E. Drury (the "Investors") (see Note 5). The proceeds of this
financing were used to repay $5 million of senior bank debt and provide
6
<PAGE>
10. CONVERTIBLE DEBT FINANCING (Continued):
working capital for the Company. Additionally, J.B. Doherty, the managing
general partner of TDH, and Mr. Drury joined the Company's Board of Directors.
The Notes are due and payable upon the fourth anniversary of the date of
issuance and accrue interest at nine percent (9%) payable semi-annually. The
Company cannot voluntarily prepay the Notes. The Notes are initially convertible
into the Company's common stock, no par value, at $3.50 per share, which price
may be adjusted downward if, under certain circumstances, the holders thereof
convert the Notes prior to the third anniversary of the date of issuance. The
Company also issued Warrants to the Investors to purchase an additional
1,800,000 shares of common stock of the Company (subject to downward adjustment
under certain circumstances) at $3.50 per share. The Warrants are exercisable
beginning the later of (i) one year from the date of issuance or (ii) the
conversion of the Notes into common stock. The Warrants expire five years from
the date of issuance. The estimated fair value of the Warrants of $553,000 has
been recorded as an increase to shareholders' equity and a related reduction in
the carrying amount of the Notes. The Company will amortize the $553,000 over
the four year term of the Notes.
Simultaneous with this investment, the Company amended its Interim
Agreement with the Banks who are parties to the Credit Facility. Pursuant to the
Amended Interim Agreement, the Banks have agreed to forbear from exercising
their rights and remedies with respect to all existing defaults under the Credit
Facility until June 30, 2000 or the occurrence of a default under the Amended
Interim Agreement or any additional default under the Credit Facility.
Under the terms of the Amended Interim Agreement, the Company was required
to pay to the Banks $5 million from the proceeds of investment discussed above,
reducing the outstanding principal balance thereof to $13.4 million. Principal
repayments of $50,000 and $125,000 were due and paid on February 15 and March 1.
Principal repayments of $150,000, $250,000 and $300,000 are due April 1, May 1
and June 1, 2000, respectively, with all remaining sums payable on June 30,
2000. The Amended Interim Agreement also (i) prohibits the Company from making
capital expenditures in excess of $250,000 for the quarter ending March 31, 2000
and $500,000 for the quarter ending June 30, 2000, in each case determined on a
non-cumulative basis; (ii) requires that the Company maintain a minimum
stockholders' equity, together with the Notes, of $42 million; (iii) prohibits
the Company from declaring or paying any dividends; and (iv) prohibits the
Company from incurring any additional indebtedness in excess of $10,000 without
the permission of the Banks.
7
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, this Report on Form
10-Q contains certain forward-looking statements that involve substantial risks
and uncertainties. When used in this Report, the words "anticipate," "believe,"
"estimate," "expect", "intend", and similar expressions, as they relate to the
Company or its management, are intended to identify such forward-looking
statements. The Company's actual results, performance, or achievements could
differ materially from the results expressed in, or implied by, these
forward-looking statements. Factors that could cause or contribute to such
differences include those set forth in "Business--Risk Factors" as disclosed in
the Company's Annual Report on Form 10-K for the year ending December 31, 1999
and other ImageMax filings with the Securities and Exchange Commission, and
risks associated with the results of the continuing operations of ImageMax.
Accordingly, there is no assurance that the results in the forward-looking
statements will be achieved.
The Company's revenues consist of service revenues, which are recognized as
the related services are rendered, and product revenues, which are recognized
when the products are shipped to clients. Service revenues are primarily derived
from media conversion, storage and retrieval, imaging and indexing of documents,
and the service of imaging and micrographic equipment sold. Product revenues are
derived from equipment sales and software sales and support. Cost of revenues
consists principally of the costs of products sold and wages and related
benefits, supplies, facilities and equipment expenses associated with providing
the Company's services. Selling and administrative ("S&A") expenses include
salaries and related benefits associated with the Company's executive and senior
management, marketing and selling activities (principally salaries and related
costs), and financial and other administrative expenses.
Historical Results of Operations
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
Total revenues. For the three months ended March 31, 2000, total revenues
decreased $0.8 million, or 5.1%, as compared to the corresponding period in
1999. This decrease was due to a product revenue decrease of 15.2% and a service
revenue decrease of 2.6%. For the three months ended March 31, 2000, service
revenue and product revenue, respectively, comprised 82.5% and 17.5% of total
revenues, as compared to 80.8% and 19.2% in the corresponding period in 1999.
The decrease in total revenues was comprised of $0.5 million attributable
to the sale of the Southeast Group units and volume declines related to the
closing of the Indianapolis business unit. The remaining decrease of $0.3
million was comprised of a decrease of $0.4 million in product revenue offset by
an increase of $0.1 million in service revenue as the Company moves to a higher
service revenue mix which generally retains higher gross profit margins.
Gross profit. For the three months ended March 31, 2000, gross profit
decreased by $0.3 million, or 5.2%, as compared to the corresponding period in
1999. Excluding results of the former Southeast Group and Indianapolis
operations, gross profit decreased $0.4 million, primarily due to volume
decreases in software sales which typically carry a higher gross profit
percentage.
Selling and administrative expenses. For the three months ended March 31,
2000, S&A expenses decreased by $0.4 million, or 8.8%, as compared to the
corresponding period in 1999. This decrease resulted from: (1) a decrease of
$0.4 million in business unit S&A expenses; (2) a decrease of $0.3 million
attributable to the divestiture of the former Southeast Group and closing of the
Indianapolis operations; and (3) an offsetting increase of $0.3 million in
corporate expenses. The increase in corporate expenses relates to an accrual for
incentive compensation. Excluding the results of the Southeast Group and
Indianapolis operations, business unit S&A decreased $0.4 million, primarily due
to decreased sales costs related to an increased service revenue mix.
Restructuring costs. For the three months ended March 31, 1999, the Company
recorded a restructuring charge of $0.8 million, primarily attributable to the
closing of the Indianapolis unit (totaling $0.6 million, including a write-off
of related goodwill of $0.3 million , severance payments, and lease termination
costs) and executive severance payments.
Operating income. For the three months ended March 31, 2000, operating
income increased by $0.9 million, or 1,014%, as compared to the corresponding
period in 1999. Excluding the impact of restructuring costs, operating income
increased $0.1 million, or 9.4%. This increase resulted from: (1) an increase of
$0.4 million attributable to the divestiture of the former Southeast Group and
closing of the Indianapolis operations; and (2) an offsetting decrease of $0.3
million attributable to increased corporate expenses. The decrease attributable
to corporate expenses relates to an accrual for incentive compensation.
8
<PAGE>
Interest expense. For the three months ended March 31, 2000, interest
expense amounted to $0.6 million, including $0.1 million relating to bank fees
under the Interim Agreement and Amended Interim Agreement, as compared to
interest expense of $0.5 million in the corresponding period in 1999, including
$0.1 million relating to bank fees under the Forbearance Agreement. The increase
relates to higher interest rates on the borrowings under the Credit Facility for
the three months ended March 31, 2000 as opposed to the three months ended March
31, 1999, and interest attributable to a mortgage on one of the Company's
facilities beginning in April 1999.
Liquidity and Capital Resources
As of March 31, 2000 and December 31, 1999, respectively, the Company had
cash and cash equivalents of $2.0 million and $1.7 million, and a working
capital deficit of $6.3 million and $13.3 million. The working capital deficits
as of March 31, 2000 and December 31, 1999, respectively, were due to the
classification of borrowings under the Credit Facility of $13.2 million and
$18.5 million as current liabilities as a result of the Company being in default
of certain financial and other covenants, as described below. The Company has
entered into the Amended Interim Agreement pursuant to which the Company has
agreed to make scheduled repayments of principal through June 1, 2000 and repay
the entire principal on or before June 30, 2000. Although the Company is
generating positive cash flow from operations, to continue its operations
through the next 12 months, the Company will need additional financing from
sources other than funds received through operations to meet these obligations.
To that end, the Company is in discussions with various banks and other third
parties concerning the possibility of refinancing the Company's debt. There can
be no assurance that the Company will be able to refinance its debt in a timely
manner.
For the three months ended March 31, 2000 net cash provided by operating
activities amounted to $27,000; net cash used in investing activities amounted
to $0.2 million; and net cash provided by financing activities amounted to $0.5
million.
Net cash provided by operating activities primarily represents significant
earnings before amortization and depreciation which were largely offset by an
increase in accounts receivable, payments to vendors and a reduction in accrued
expenses, including bank fees and the payment of severance and other expenses
relating to the Company's restructuring charges.
Net cash used in investing activities represents the Company's investments
in capital equipment and technology. For the three months ended March 31, 2000,
the Company made capital expenditures of $0.2 million, principally production
equipment, computer hardware, and delivery vehicles.
Net cash provided by financing activities represents the $6.0 million
proceeds of the subordinated debt transaction on February 15, 2000, largely
offset by the repayment of borrowings under the Credit Facility of $5.3 million,
and payment of $0.2 million related to debt financing costs. The funds used to
repay borrowings under the Credit Facility were derived from the subordinated
debt transaction and cash provided by operations.
On March 30, 1998, the Company entered into the Credit Facility, providing
a revolving line of credit of $30 million in borrowings with the Banks. This
agreement was substantially amended in November 1998 as described below. Under
the initial terms of the Credit Facility, the Company could borrow up to $25
million to finance future acquisitions and up to $5 million for working capital
purposes. Prior to amendment, borrowings under the facility bore interest at
LIBOR or prime plus an applicable margin at the option of the Company. In
addition to interest and other customary fees, the Company was obligated to
remit a fee ranging from 0.2% to 0.375% per year on unused commitments. The
Credit Facility is secured by substantially all of the assets of the Company.
The Credit Facility is subject to certain financial covenants which pertain to
criteria such as minimum levels of cash flow, ratio of debt to cash flow, and
ratio of fixed charges to cash flow. Prior to amendment, borrowing under the
Credit Facility was contingent upon the Company meeting certain financial ratios
and other criteria.
An amendment to the Credit Facility dated November 16, 1998 amended certain
financial covenants for future periods, reduced the amount available under the
Credit Facility to the amount ($20.1 million) outstanding on November 6, 1998,
changed the maturity date to December 1, 1999 from December 31, 2002, required a
$5.0 million principal repayment or commitments therefor by December 31, 1998,
required all borrowings to bear a rate of prime plus an applicable margin and
changed other provisions. As of December 31, 1998, the Company was in default of
certain financial and other covenants under the amended Credit Facility,
including cash flow ratios and the requirement for a $5.0 million principal
repayment or commitments therefor. On March 29, 1999, the Company entered into
the Forbearance Agreement with the Banks. Pursuant to the Forbearance Agreement,
the banks agreed to forbear from exercising their rights and remedies with
respect to all existing defaults under the Credit Facility until the earlier of
June 30, 1999 or the occurrence of a default under the Forbearance Agreement or
an additional default under the Credit Facility. On June 30, 1999, the
Forbearance Agreement expired. On September 30, 1999, the Company entered into
the Interim Agreement with the Banks. On February 15, 2000, the Company amended
its Interim Agreement dated September 30, 1999. Simultaneously on February 15,
2000, the Company completed a $6 million financing transaction involving the
sale of the Notes with the Warrants to TDH, Dime Capital Partners, Inc. and
Robert E. Drury (see below). Pursuant to the Amended Interim
9
<PAGE>
Agreement, the banks have agreed to forbear from exercising their rights and
remedies with respect to all existing defaults under the Credit Facility until
the earlier of June 30, 2000 or the occurrence of a default under the Amended
Interim Agreement or any additional default under the Credit Facility.
The proceeds of the financing on February 15, 2000 were used to repay $5
million of senior bank debt and provide working capital for the Company.
Additionally, J.B. Doherty, the managing general partner of TDH, and Mr. Drury
joined the Company's Board of Directors.
The Notes are due and payable upon the fourth anniversary of the date of
issuance and accrue interest at nine percent (9%) payable semi-annually. The
Company cannot voluntarily prepay the Notes. The Notes are initially convertible
into the Company's common stock, no par value, at $3.50 per share, which price
may be adjusted downward if, under certain circumstances, the holders thereof
convert the Notes prior to the third anniversary of the date of issuance. The
Company also issued Warrants to the Investors to purchase an additional
1,800,000 shares of common stock of the Company (subject to downward adjustment
under certain circumstances) at $3.50 per share. The Warrants are exercisable
beginning the later of (i) one year from the date of issuance or (ii) the
conversion of the Notes into common stock. The Warrants expire five years from
the date of issuance. The estimated fair value of the Warrants of $553,000 has
been recorded as an increase to shareholders' equity and a related reduction in
the carrying amount of the Notes. The Company will amortize the $553,000 over
the four year term of the Notes.
Under the terms of the Amended Interim Agreement, the Company was required
to pay to the Banks $5 million from the proceeds of investment discussed above,
reducing the outstanding principal balance thereof to $13.4 million. Principal
repayments of $50,000 and $125,000 were due and paid on February 15 and March 1.
Principal repayments of $150,000, $250,000 and $300,000 are due April 1, May 1
and June 1, 2000, respectively, with all remaining sums payable on June 30,
2000. The Amended Interim Agreement also (i) prohibits the Company from making
capital expenditures in excess of $250,000 for the quarter ending March 31, 2000
and $500,000 for the quarter ending June 30, 2000, in each case determined on a
non-cumulative basis; (ii) requires that the Company maintain a minimum
stockholders' equity, together with the Notes, of $42 million; (iii) prohibits
the Company from declaring or paying any dividends; and (iv) prohibits the
Company from incurring any additional indebtedness in excess of $10,000 without
the permission of the Banks.
During the three months ended March 31, 2000, the Company made $5,300,000
in principal repayments under the Credit Facility from proceeds received from
the subordinated debt financing and cash provided by operations.
The Company has halted its acquisition program, but continues to
selectively invest in equipment and technology to meet the needs of its
operations and to improve its operating efficiency.
Year 2000 Compliance
Throughout 1999, the Company performed an inventory of exposures of its
internal systems and identified operational steps necessary to deal with
exposure to Year 2000 related problems. Remediation for all identified exposures
to the Company's internal systems and equipment was implemented prior to
December 31, 1999. The Company also conducted Year 2000 compliance testing on
certain of its proprietary software products licensed to clients in accordance
with standards promulgated by the British Standards Institute and provided
upgraded versions of its non-compliant products to all clients. The Company has
not encountered any significant Year 2000 problems in 2000. The total cost of
the Year 2000 project incurred through March 31, 2000 did not have a material
effect on the results of operations. In 2000, the Company will continue to
monitor critical systems and equipment. The Company does not expect costs
related to Year 2000 efforts in 2000 to have a material effect on its results of
operations.
10
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
A. Exhibits:
10.43+ Employment Agreement by and between the Company and Mark P.
Glassman dated as of April 1, 2000.
10.44+ Employment Agreement by and between the Company and Blair Hayes
dated as of April 1, 2000.
10.45+ Employment Agreement by and between the Company and Rex Lamb
dated as of April 1, 2000.
10.46+ Employment Agreement by and between the Company and Mitchell J.
Taube dated as of April 1, 2000.
27 Financial Data Schedule (filed in electronic format only.)
- ----------
+ Management contract or compensatory plan or arrangement.
B. Reports on Form 8-K:
None.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
IMAGEMAX, INC.
BY: /S/ ANDREW R. BACAS May 15, 2000
-------------------------- ------------
Andrew R. Bacas Date
Acting Chief Executive Officer
BY: /S/ MARK P. GLASSMAN May 15, 2000
---------------------------------------------------- ------------
Mark P. Glassman Date
Chief Financial Officer and Principal Accounting Officer
12
Exhibit 10.43
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 1st day of April, 2000 by and
between Mark P. Glassman a resident of Pennsylvania, (the "Employee"), and
ImageMax, Inc., a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania (the "Company").
WHEREAS, the Company and Employee previously entered into an Employment
Agreement dated as of May, 1999; and
WHEREAS, the Company desires to continue to employ Employee and Employee
desires to continue to be employed by the Company for a period of time in the
future upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to the
terms and conditions set forth herein, agree as follows:
1. Employment and Term. The Company hereby employs and continues to
employ Employee and Employee hereby accepts employment with the Company, as
Chief Financial Officer and Treasurer (the "Position") for a period commencing
on the date hereof and continuing until December 31, 2002, subject to early
termination pursuant to the provisions of Section 9 hereof (the "Initial Term")
and as may be extended from time to time by mutual consent of Employer and
Employee. The Initial Term of employment and any renewal periods hereunder,
subject to the provisions of Section 9 hereof, are hereinafter referred to as
the "Term."
2. Duties. During the Term, Employee shall serve the Company faithfully
and to the best of his ability and shall devote his full time, attention,
skill and efforts to the performance of the duties required by or appropriate
for his Position. Employee agrees to assume such duties and responsibilities as
may be customarily incident to such position, and as may be reasonably assigned
to Employee from time to time by the Chief Operating Officer of the Company, if
any, and otherwise by the Chief Executive Officer. Employee shall report,
throughout the Term, to the Chief Operating Officer of the Company, if any, and
otherwise to the Chief Executive Officer. Employee shall perform his duties from
the Company's office in Fort Washington, Pennsylvania, but shall travel to the
extent reasonably necessary to perform the duties hereunder. If the employee is
required to travel internationally (excluding North America), it shall be in
business class.
3. Other Business Activities. During the Term, Employee will not, without
the prior written consent of the Company, directly or indirectly engage in any
other business activities or pursuits whatsoever, except such activities in
connection with any charitable or civic activities, personal investments and
serving as an executor, trustee or in other similar fiduciary
<PAGE>
capacity as do not interfere with his performance of his responsibilities
and obligations pursuant to this Agreement.
4. Compensation.
4.1 The Company shall pay Employee, and Employee hereby agrees to
accept, as compensation for all services rendered hereunder and for
Employee's covenant not to compete as provided for in Section 8 hereof, a base
salary at the annual rate of One Hundred Fifty Thousand Dollars ($150,000) (as
the same may hereafter be increased, the "Base Salary"), which shall continue as
such for the remainder of the Term unless otherwise increased pursuant to this
Section 4 of this Agreement. The Base Salary shall be inclusive of all
applicable income, social security and other taxes and charges which are
required by law to be withheld by the Company or which are requested to be
withheld by Employee, and which shall be withheld and paid in accordance with
the Company's normal payroll practice for its similarly situated employees from
time to time in effect. Increases in the Base Salary may be granted from time to
time at the sole discretion of the Company. In addition to the Base Salary, the
Company shall pay Employee, within thirty (30) days after receipt of the final
audit for each fiscal year, a bonus (the "Bonus") in the same manner as for
similarly situated employees. Such Bonus shall be based on the guidelines
established by the Company in advance of each fiscal year under the Company's
formal incentive compensation plan, including, but not limited to, the results
of the Company's operations, achievement of business unit targets, if
applicable, and individual performance as compared to specific management
objectives set prior to each fiscal year. Payment of any Bonus upon termination
of Employee shall be paid in accordance with Section 9 hereof.
4.2 In addition to the foregoing Section 4.1, the Company shall grant
to the Employee an incentive stock option (the "Option") to purchase
seventy five thousand (75,000) shares of Common Stock, no par value, of the
Company ("Common Stock"). The Option shall be an incentive stock option. The
Option shall be subject to and in accordance with the provisions of the 1997
Incentive Plan of the Company, as amended (the "Plan") and shall vest in
accordance with the terms set forth in the Incentive Stock Option Agreement
between the Company and the Employee dated as of February 15, 2000. In addition
to the Option, the Company may grant to the Employee additional stock options
under the Plan as determined by the Compensation Committee of the Board from
time to time in its sole discretion.
5. Benefits and Expenses. Except as otherwise provided in this Agreement
or in Schedule A attached hereto, the Employee shall be entitled to (i) all
standard benefits for executive level vice-presidents of the Company and (ii)
those benefits set forth on Schedule A hereto (collectively, "Benefits").
6. Confidentiality. Employee recognizes and acknowledges that the
Proprietary Information (as hereinafter defined) is a valuable, special and
unique asset of the Business of the Company. As a result, both during the Term
and thereafter, Employee shall not, without the prior written consent of the
Company, for any reason, either directly or indirectly, divulge to any
third-party or use for his own benefit, or for any purpose other than the
exclusive
-2-
<PAGE>
benefit of the Company, any confidential, proprietary, business and technical
information or trade secrets of the Company or of any subsidiary or affiliate
of the Company ("Proprietary Information") revealed, obtained or
developed in the course of his employment with the Company. Nothing herein
contained shall restrict Employee's ability to make such disclosures as may be
necessary or appropriate to the effective and efficient discharge of the duties
required by or appropriate for his Position or as such disclosures may be
required by law; and further provided, that nothing herein contained shall
restrict Employee from divulging or using for his own benefit or for any other
purpose any Proprietary Information that is readily available to the general
public so long as such information did not become available to the general
public as a direct or indirect result of Employee's breach of this Section 6.
Failure by the Company to mark any of the Proprietary Information as
confidential or proprietary shall not affect its status as Proprietary
Information under the terms of this Agreement.
7. Property.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the
Company. During the Term, Employee shall not remove from the Company's offices
or premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for his Position and, in the event that such
materials or property are removed, all of the foregoing shall be returned to
their proper files or places of safekeeping as promptly as possible after the
removal shall serve its specific purpose. Employee shall not make, retain,
remove and/or distribute any copies of any of the foregoing for any reason
whatsoever except as may be necessary in the discharge of his assigned duties
and shall not divulge to any third person the nature of and/or contents of any
of the foregoing or of any other oral or written information to which he may
have access or with which for any reason he may become familiar, except as
disclosure shall be necessary in the performance of his duties or as otherwise
permitted pursuant to Section 6 hereof; and upon the termination of his
employment with the Company, he shall leave with or return to the Company all
originals and copies of the foregoing then in his possession, whether prepared
by Employee or by others.
(b) (i) Employee agrees that all right, title and interest in
and to any innovations, designs, systems, analyses, ideas for marketing
programs, and all copyrights, patents, trademarks and trade names, or similar
intangible personal property which have been or are developed or created in
whole or in part by Employee (1) at any time and at any place while the Employee
is employed by Company and which, in the case of any or all of the foregoing,
are related to and used in connection with the Business of the Company, (2) as a
result of tasks assigned to Employee by the Company, or (3) from the use of
premises or personal property (whether tangible or intangible) owned, leased or
contracted for by the Company (collectively, the "Intellectual Property"), shall
be and remain forever the sole and exclusive property of the Company. The
Employee shall promptly disclose to the Company all Intellectual Property, and
the Employee shall have no claim for additional compensation for the
Intellectual Property.
-3-
<PAGE>
(ii) The Employee acknowledges that all the Intellectual
Property that is copyrightable shall be considered a work made for hire
under United States Copyright Law. To the extent that any copyrightable
Intellectual Property may not be considered a work made for hire under the
applicable provisions of the United States Copyright Law, or to the extent that,
notwithstanding the foregoing provisions, the Employee may retain an interest in
any Intellectual Property that is not copyrightable, the Employee hereby
irrevocably assigns and transfers to the Company any and all right, title, or
interest that the Employee may have in the Intellectual Property under
copyright, patent, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further
consideration. The Company shall be entitled to obtain and hold in its own name
all copyrights, patents, trade secrets, and trademarks with respect thereto.
(iii) Employee further agrees to reveal promptly all
information relating to the same to an appropriate officer of the Company
and to cooperate with the Company and execute such documents as may be necessary
or appropriate (1) in the event that the Company desires to seek copyright,
patent or trademark protection, or other analogous protection, thereafter
relating to the Intellectual Property, and when such protection is obtained, to
renew and restore the same, or (2) to defend any opposition proceedings in
respect of obtaining and maintaining such copyright, patent or trademark
protection, or other analogous protection.
(iv) In the event the Company is unable after reasonable
effort to secure Employee's signature on any of the documents referenced in
Section 7(b)(iii) hereof, whether because of Employee's physical or mental
incapacity or for any other reason whatsoever, Employee hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as Employee's agent and attorney-in-fact, to act for and in his behalf and stead
to execute and file any such documents and to do all other lawfully permitted
acts to further the prosecution and issuance of any such copyright, patent or
trademark protection, or other analogous protection, with the same legal force
and effect as if executed by Employee.
8. Noncompetition.
8.1 Covenant Not to Compete. The Employee shall not, during the Term,
including any extensions of the Term, and during the Restricted Period, as
hereinafter defined, do any of the following directly or indirectly without the
prior written consent of the Company:
(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 the date of this Agreement, contemplated to be conducted during the Term
of this Agreement (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");
-4-
<PAGE>
(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; 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
prospective 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 the termination of Employee's employment
hereunder.
8.2 Restricted Period. Other than as specifically provided in this
Section 8.2, the Restricted Period shall begin on the date of the termination of
this Agreement and shall continue for a period of twelve (12) months thereafter,
provided, however, that if this Agreement is not renewed upon the expiration of
the Initial Term, the Restricted Period shall begin on the date of such
expiration and shall continue for a period of six (6) months thereafter.
8.3 Forfeiture of Options. Notwithstanding any other provision of
this Agreement, any unexercised stock options or unvested stock award shall
become nonexercisable and shall be forfeited if the Employee is terminated
pursuant to Section 8.1 hereof.
9. Termination. Employee's employment hereunder may be terminated during
the Term upon the occurrence of any one of the events described in this Section
9. Upon termination, Employee shall be entitled only to such compensation and
benefits as described in this Section 9.
9.1 Termination for Disability.
(a) In the event of the disability of the Employee such that
Employee is unable to perform his duties and responsibilities hereunder to the
full extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than one hundred twenty (120) consecutive days
or more than one hundred eighty (180) days, in the aggregate, during any seven
hundred thirty (730) day period ("Disability"), Employee's employment hereunder
may be terminated by the Company by notice to Employee pursuant to a
determination by the Chief Executive Officer.
-5-
<PAGE>
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.1(a), Employee will be entitled to receive all
accrued and unpaid (as of the date of such termination) Base Salary, Benefits,
Earned Bonus (as defined in the Plan) and other forms of compensation and
benefits payable or provided in accordance with the terms of any then existing
compensation or benefit plan or arrangement ("Other Compensation"), including
payment prescribed under any disability or life insurance plan or arrangement in
which he is a participant or to which he is a party as an employee of the
Company. Except as specifically set forth in this Section 9.1(b), the Company
shall have no liability or obligation to Employee for compensation or benefits
hereunder by reason of such termination.
(c) For purposes of this Section 9.1, except as hereinafter
provided, the determination as to whether Employee is Disabled shall be made by
a licensed physician selected by Employee and shall be based upon a full
physical examination and good faith opinion by such physician. In the event that
the Chief Executive Officer disagrees with such physician's conclusion, the
Chief Executive Officer may require that Employee submit to a full physical
examination by another licensed physician selected by Employee and approved by
the Company. If the two opinions shall be inconsistent, a third opinion shall be
obtained after full physical examination by a third licensed physician selected
by Employee and approved by the Company. The majority of the three opinions
shall be conclusive.
9.2 Termination by Death. In the event that Employee dies during the
Term, Employee's employment hereunder shall be terminated thereby and the
Company shall pay to Employee's executors, legal representatives or
administrators an amount equal to the accrued and unpaid portion of his Base
Salary, Benefits, Earned Bonus and Other Compensation through the end of the
month in which he dies. Except as specifically set forth in this Section 9.2,
the Company shall have no liability or obligation hereunder to Employee's
executors, legal representatives, administrators, heirs or assigns or any other
person claiming under or through him by reason of Employee's death, except that
Employee's executors, legal representatives or administrators will be entitled
to receive the payment prescribed under any death or disability benefits plan in
which he is a participant as an employee of the Company, and to exercise any
rights afforded under any compensation or benefit plan then in effect.
9.3 Termination By Company for Cause.
(a) The Company may terminate Employee's employment hereunder
at any time for "cause" upon written notice to Employee based upon a good faith
determination by the Chief Executive Officer. The good-faith nature of the
determination shall not in and of itself mean that "cause" exists. For purposes
of this Agreement, "cause" shall mean: (i) any material breach by Employee of
any of his obligations under Section 6, 7, or 8 of this Agreement, if not cured
within 30 days notice from the company, (ii) gross incompetence in the
performance by Employee of the duties required by or appropriate for his
Position, if not cured within thirty (30) days notice from the Company, (iii) a
material violation, that is not cured within 30 days notice from the company, of
the Company's employee policies, as may be
-6-
<PAGE>
amended from time to time, or (iv) other conduct of Employee involving any type
of willful misconduct with respect to the Company, including without limitation
fraud, embezzlement, theft or proven dishonesty in the course of his employment
or conviction of a felony.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.3(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base Salary,
Benefits and Other Compensation. All Base Salary and Benefits shall cease at the
time of such termination, subject to the terms of any benefit or compensation
plan then in force and applicable to Employee. Except as specifically set forth
in this Section 9.3, the Company shall have no liability or obligation hereunder
by reason of such termination.
9.4 Termination By Company Without Cause.
(a) The Company may terminate Employee's employment hereunder
at any time, for any reason, without cause, effective upon the date designated
by the Company upon fifteen (15) days notice to Employee.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.4(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base Salary,
Benefits, Earned Bonus and Other Compensation, plus continuation of the then
current Base Salary and Benefits (including vesting of options and other
Benefits) for a period of twelve (12) months thereafter. Except as specifically
set forth in this Section 9.4, the Company shall have no liability or obligation
hereunder by reason of such termination.
9.5 Termination By Employee
(a) Employee may terminate Employee's employment hereunder upon
sixty (60) days notice of the termination of his employment hereunder pursuant
to this Section 9.5(a) (the date the Employee gives such notice shall be herein
referred to as the "Request Date"). Notwithstanding the foregoing, upon receipt
by the Company of such written notice of termination, the Company in its sole
discretion, may deem such termination effective immediately (the "Accelerated
Termination Date"). In the event the parties mutually agree to an alternative
date of termination, that date shall be considered the Request Date.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.5(a) hereof, Employee shall be entitled to
receive all accrued but unpaid (as of the earlier of the Request Date or the
Accelerated Termination Date), Base Salary and Benefits. If the Company does not
terminate the Employee immediately upon receipt of the termination notice and
Employee performs his duties in a satisfactory manner, as determined in the sole
discretion of the Company, until the Request Date, Employee shall also be
entitled to an amount equal to one month's Base Salary (in effect at such time).
In addition, in the event of a termination of Employee's employment pursuant to
Section 9.5(a) at the end of the Term upon sixty days (60) prior written notice
and upon the satisfactory completion, in the sole discretion of
-7-
<PAGE>
the Company, of Employee's duties during the 60-day period after receipt of such
termination notice, Employee shall be entitled to receive an amount equal to one
month's Base Salary (in effect at such time) multiplied by the number of the
complete 12-month periods of ImageMax service (whether or not pursuant to this
Agreement) completed prior to giving notice of termination. Except as
specifically set forth in this Section 9.5(b), all Base Salary, Benefits and
Bonuses shall cease at the time of such termination, subject to the terms of any
benefit or compensation plan then in force and applicable to Employee. Except as
specifically set forth in this Section 9.5, the Company shall have no liability
or obligation hereunder by reason of such termination.
9.6 Sale of Company/Change of Control.
(a) If there is a Sale of the Company or a Change of Control
during the Term, then the Company or the successor to all or substantially all
of the Company's assets, capital stock or business (the "Successor Entity"), as
the case may be, must offer Employee employment pursuant to a written contract
offer (the "Offer") within five (5) days of such Sale of the Company or Change
of Control. Employee shall, within fifteen (15) days after receipt of such
Offer, either (i) accept the terms of the Offer, such acceptance indicated by
return of a copy of the Offer duly executed, (ii) elect in writing, provided to
the Company or the Successor Entity, as the case may be, to remain employed
under this Agreement for the remainder of the Term, or (iii) elect to terminate
Employee's employment hereunder upon sixty (60) days prior notice, such
termination to be effective at the expiration of said sixty (60) day period, or
sooner, if desired by the Company or the Successor Entity.
(b) For purposes of this Agreement, a "Change of Control" means
either (i) the sale, transfer, assignment or other disposition by stockholders
of the Company, in one transaction or a series of related transactions, of more
than thirty percent (30%) of either the outstanding shares of common stock or
the combined voting power represented by the Company's then outstanding voting
securities entitled to vote generally or the approval by the stockholders of the
Company of a reorganization, merger or consolidation, in each case, with respect
to which persons who were stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than fifty percent (50%) of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated
company's then outstanding securities, in a liquidation or dissolution of
Company or of the sale of all or substantially all of Company's assets, other
than (A) any such sales, transfers, assignments or other dispositions by such
stockholders to their respective Affiliates, (B) any such transaction effected
primarily to reincorporate the Company in another jurisdiction or (C) any
transaction in connection with the simultaneous acquisition of document
management companies and the initial public offering of the common stock of the
Company or its affiliate; or (ii) a majority of members of the Company's Board
of Directors is replaced during any 12-month period by directors whose
appointment or election is not advised by a majority of the members of the
Company's Board of Directors prior to the date of the appointment or election.
-8-
<PAGE>
(c) For purposes of this Agreement, "Affiliate" means, with
respect to any stockholder of the Company, (i) any Person directly or indirectly
controlling, controlled by or under common control with such stockholder, (ii)
any Person owning or controlling ten percent (10%) or more of the outstanding
voting securities of such stockholder, (iii) any officer, director or general
partner of such stockholder, or (iv) 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 (i) through
(iv) of this paragraph (c).
(d) For purposes of this Agreement, "Person" means an
individual, partnership, corporation, joint venture, association, trust,
unincorporated association, other entity or association.
(e) For purposes of this Agreement, a "Sale of the Company"
means a sale, transfer, assignment or other disposition (including by merger or
consolidation), of all of the outstanding stock of the Company, or of all or
substantially all of the assets of the Company, a liquidation or dissolution of
the Company. A "Sale of the Company" shall not include the consummation of a
public offering of Common Stock of the Company or its affiliate pursuant to a
registration statement or any transaction effected primarily to reincorporate
the Company in another jurisdiction.
(f) In the event of termination of Employee's employment
hereunder pursuant to clause (iii) in paragraph (a) above, Employee shall be
entitled to receive all accrued but unpaid (as of the effective date of such
termination) Base Salary, Benefits and Earned Bonus and Other Compensation. In
addition, in such case Employee shall be entitled to receive Base Salary and
Benefits for the twelve (12) months following the effective date of such
termination (the "Additional Amount"). At his sole option, Employee may receive
the Additional Amount paid either (i) monthly for twelve (12) months, or (ii) in
one payment on the effective date of such termination, in which case the value
of the Benefits otherwise payable will be monetized, and such payment of the
Additional Amount will be discounted at the then current Federal Short Term Rate
as defined in the Internal Revenue Code of 1986, as amended.
(g) In the event Employee chooses to continue employment
hereunder pursuant to clause (i) or (ii) in paragraph (a) above and Employee's
employment is thereafter terminated prior to the expiration of the Term for any
reason other than Death, Disability or termination pursuant to clause (iii) in
paragraph (a) above, Employee shall be entitled to receive all the benefits and
compensation referred to in paragraph (f) above. In the event Employee chooses
to continue employment hereunder pursuant to clause (ii) in paragraph (a) above,
at the expiration of the Term, Employee shall be entitled to receive an amount
equal to two months' Base Salary (in effect at such time) multiplied by the
number of complete 12-month periods of service completed prior to such
termination
(h) If this Agreement is assumed by any Successor Entity, any
payments set forth herein shall be the obligation of such Successor Entity.
Except as specifically set forth in this Agreement, (i) all Base Salary,
Benefits and Bonuses shall cease at the time of such termination, subject to the
terms of any benefit or compensation plans then in force and
-9-
<PAGE>
applicable to Employee, and (ii) the Company shall have no liability or
obligation hereunder by reason of such termination.
(i) If the Successor Entity fails to make the Offer, Employee
shall be entitled to receive all of the benefits and compensation referred to in
paragraph (f) above.
9.7 Severance Upon Expiration of the Initial Term. If this Agreement
is not renewed by the parties upon the expiration of the Initial Term, Employee
shall be entitled to receive all accrued but unpaid (as of the effective date of
such termination) Base Salary, Benefits, Earned Bonus and Other Compensation,
plus continuation of the then current Base Salary and Benefits (including
vesting of options and other Benefits) for a period of six (6) months
thereafter. Except as specifically set forth in this Section 9.7, the Company
shall have no liability or obligation hereunder by reason of such termination.
10. Other Agreements. Employee represents and warrants to the Company
that:
(a) There are no restrictions, agreements or understandings
whatsoever to which Employee is a party which would prevent or make unlawful
Employee's execution of this Agreement or Employee's employment hereunder, or
which is or would be inconsistent or in conflict with this Agreement or
Employee's employment hereunder, or would prevent, limit or impair in any way
the performance by Employee of his obligations hereunder,
(b) That Employee's execution of this Agreement and Employee's
employment hereunder shall not constitute a breach of any contract, agreement or
understanding, oral or written, to which Employee is a party or by which
Employee is bound, and
(c) That Employee is free to execute this Agreement and to enter
into the employ of the Company pursuant to the provisions set forth herein.
(d) In the event that they are still in effect, that Employee
shall disclose the existence and terms of the restrictive covenants set forth in
this Agreement to any employer that the Employee may work for during the term of
this Agreement (which employment is not hereby authorized) or after the
termination of the Employee's employment at the Company.
11. Survival of Provisions. The provisions of this Agreement set forth
in Sections 6, 7, 8, 9, 21 and 22 hereof shall survive the termination of
Employee's employment hereunder.
12. Indemnification. The Company shall indemnify the Employee from and
against any and all losses, costs, damages or expenses the Employee may sustain
by reason of his
-10-
<PAGE>
employment hereunder in the same manner and to the same extent as the executive
officers of the Company.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and Employee and their respective successors,
executors, administrators, heirs and/or permitted assigns; provided, however,
that neither Employee nor the Company may make any assignments of this Agreement
or any interest herein, by operation of law or otherwise, without the prior
written consent of the other party hereto, except that, without such consent,
the Company may assign this Agreement to an Affiliate or any successor to all or
substantially all of its assets and business by means of liquidation,
dissolution, merger, consolidation, transfer of assets, or otherwise, provided
that such successor assumes in writing all of the obligations of the Company
under this Agreement, subject, however, to Employee's rights as to termination
as provided in Section 9.6 hereof.
14. Notice. Any notice or communication required or permitted under this
Agreement shall be made in writing and sent by certified or registered mail,
return receipt requested, addressed as follows:
If to Employee:
Mark Glassman
ImageMax, Inc.
455 Pennsylvania Avenue, Suite 128
Fort Washington, Pennsylvania 19034
If to Company:
Mark Glassman
ImageMax, Inc.
455 Pennsylvania Avenue, Suite 128
Fort Washington, Pennsylvania 19034
or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above.
15. Entire Agreement; Amendments. This Agreement contains the entire
agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions,
agreements and understandings of every nature between the parties hereto
relating to the employment of Employee with the Company. This Agreement
specifically supersedes the Employment Agreement between the Company and
Employee dated May, 1999. This Agreement may not be changed or modified, except
by an agreement in writing signed by each of the parties hereto.
-11-
<PAGE>
16. Waiver. The waiver of the breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
18. Invalidity. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity of any other provision of this Agreement, and such
provision(s) shall be deemed modified to the extent necessary to make it
enforceable.
19. Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
20. Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and legal
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or day which is a holiday in Philadelphia, Pennsylvania, then
such final day shall be deemed to be the next day which is not a Saturday,
Sunday or legal holiday.
21. Specific Enforcement; Extension of Period.
(a) Employee acknowledges that the restrictions contained in
Sections 6, 7, and 8 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such restrictions.
Employee also acknowledges that any breach by him of Sections 6, 7, or 8 hereof
will cause continuing and irreparable injury to the Company for which monetary
damages would not be an adequate remedy. The Employee shall not, in any action
or proceeding to enforce any of the provisions of this Agreement, assert the
claim or defense that an adequate remedy at law exists. In the event of such
breach by Employee, the Company shall have the right to enforce the provisions
of Sections 6, 7, and 8 of this Agreement by seeking injunctive or other relief
in any court, and this Agreement shall not in any way limit remedies of law or
in equity otherwise available to the Company. If an action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover, in addition to any other relief, reasonable
attorneys' fees, costs and disbursements. In the event that the provisions of
Sections 6, 7, or 8 hereof should ever be adjudicated to exceed the time,
geographic, or other limitations permitted by applicable law in any applicable
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, or other limitations permitted by applicable
law.
(b) In the event that Employee shall be in breach of any of the
restrictions contained in Section 8 hereof, then the Restricted Period shall be
extended for a period of time equal to the period of time that Employee is in
breach of such restriction.
-12-
<PAGE>
22. Arbitration. In the event that the parties are unable to resolve any
disputes arising hereunder, such dispute shall be submitted for a binding
determination by a neutral third party designated by the President of the
Philadelphia office of the American Arbitration Association.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed the day and year first written above.
IMAGEMAX, INC.
By:____________________________________
Name:____________________________
Title:_____________________________
---------------------------------------
Mark P. Glassman
-14-
<PAGE>
SCHEDULE A
1. Life Insurance. Company will provide Employee, at no expense to the
Employee, life insurance coverage in an amount equal to three (3) times
Employee's initial Base Salary.
2. Vacation. The Employee shall be entitled to twenty (20) days per year of
paid vacation.
3. Business Travel Accident Insurance. Company will provide Employee, at no
expense to the Employee, business travel accident insurance coverage in an
amount equal to six (6) times Employee's base salary through either: (i) a
group policy covering similarly situated employees, or (ii) a policy
specific to Employee, depending on the cost and availability of coverage.
B-1
Exhibit 10.44
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 1st day of April, 2000 by and
between Blair Hayes, a resident of Colorado, (the "Employee"), and ImageMax,
Inc., a corporation organized and existing under the laws of the Commonwealth of
Pennsylvania (the "Company").
WHEREAS, the Company and Employee previously entered into an Employment
Agreement dated as of April 19, 1999; and
WHEREAS, the Company desires to continue to employ Employee and Employee
desires to continue to be employed by the Company for a period of time in the
future upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to the
terms and conditions set forth herein, agree as follows:
1. Employment and Term. The Company hereby employs and continues to employ
Employee and Employee hereby accepts employment with the Company, as Executive
President and Chief Operating Officer (the "Position") for a period commencing
on the date hereof and continuing until December 31, 2002, subject to early
termination pursuant to the provisions of Section 9 hereof (the "Initial Term")
and as may be extended from time to time by mutual consent of Employer and
Employee. The Initial Term of employment and any renewal periods hereunder,
subject to the provisions of Section 9 hereof, are hereinafter referred to as
the "Term."
2. Duties. During the Term, Employee shall serve the Company faithfully and
to the best of his ability and shall devote his full time, attention, skill and
efforts to the performance of the duties required by or appropriate for his
Position. Employee agrees to assume such duties and responsibilities as may be
customarily incident to such position, and as may be reasonably assigned to
Employee from time to time by the Chief Operating Officer of the Company, if
any, and otherwise by the Chief Executive Officer. Employee shall report,
throughout the Term, to the Chief Operating Officer of the Company, if any, and
otherwise to the Chief Executive Officer. Employee shall perform his duties from
the Company's office in [_________________], but shall travel to the extent
reasonably necessary to perform the duties hereunder. If the employee is
required to travel internationally (excluding North America), it shall be in
business class.
3. Other Business Activities. During the Term, Employee will not, without
the prior written consent of the Company, directly or indirectly engage in any
other business activities or pursuits whatsoever, except such activities in
connection with any charitable or civic activities, personal investments and
serving as an executor, trustee or in other similar fiduciary
<PAGE>
capacity as do not interfere with his performance of his responsibilities and
obligations pursuant to this Agreement.
4. Compensation.
4.1 The Company shall pay Employee, and Employee hereby agrees to accept,
as compensation for all services rendered hereunder and for Employee's covenant
not to compete as provided for in Section 8 hereof, a base salary at the annual
rate of One Seventy Five Thousand Dollars ($175,000) (as the same may hereafter
be increased, the "Base Salary"), which shall continue as such for the remainder
of the Term unless otherwise increased pursuant to this Section 4 of this
Agreement. The Base Salary shall be inclusive of all applicable income, social
security and other taxes and charges which are required by law to be withheld by
the Company or which are requested to be withheld by Employee, and which shall
be withheld and paid in accordance with the Company's normal payroll practice
for its similarly situated employees from time to time in effect. Increases in
the Base Salary may be granted from time to time at the sole discretion of the
Company. In addition to the Base Salary, the Company shall pay Employee, within
thirty (30) days after receipt of the final audit for each fiscal year, a bonus
(the "Bonus") in the same manner as for similarly situated employees. Such Bonus
shall be based on the guidelines established by the Company in advance of each
fiscal year under the Company's formal incentive compensation plan, including,
but not limited to, the results of the Company's operations, achievement of
business unit targets, if applicable, and individual performance as compared to
specific management objectives set prior to each fiscal year. Payment of any
Bonus upon termination of Employee shall be paid in accordance with Section 9
hereof.
4.2 In addition to the foregoing Section 4.1, the Company shall grant to
the Employee an incentive stock option (the "Option") to purchase one hundred
thousand (100,000) shares of Common Stock, no par value, of the Company ("Common
Stock"). The Option shall be an incentive stock option. The Option shall be
subject to and in accordance with the provisions of the 1997 Incentive Plan of
the Company, as amended (the "Plan") and shall vest in accordance with the terms
set forth in the Incentive Stock Option Agreement between the Company and the
Employee dated as of February 15, 2000. In addition to the Option, the Company
may grant to the Employee additional stock options under the Plan as determined
by the Compensation Committee of the Board from time to time in its sole
discretion.
5. Benefits and Expenses. Except as otherwise provided in this Agreement or
in Schedule A attached hereto, the Employee shall be entitled to (i) all
standard benefits for executive level vice-presidents of the Company and (ii)
those benefits set forth on Schedule A hereto (collectively, "Benefits").
6. Confidentiality. Employee recognizes and acknowledges that the
Proprietary Information (as hereinafter defined) is a valuable, special and
unique asset of the Business of the Company. As a result, both during the Term
and thereafter, Employee shall not, without the prior written consent of the
Company, for any reason, either directly or indirectly, divulge to any
third-party or use for his own benefit, or for any purpose other than the
exclusive benefit of the Company, any confidential, proprietary, business and
technical information or trade
2
<PAGE>
secrets of the Company or of any subsidiary or affiliate of the Company
("Proprietary Information") revealed, obtained or developed in the course of his
employment with the Company. Nothing herein contained shall restrict Employee's
ability to make such disclosures as may be necessary or appropriate to the
effective and efficient discharge of the duties required by or appropriate for
his Position or as such disclosures may be required by law; and further
provided, that nothing herein contained shall restrict Employee from divulging
or using for his own benefit or for any other purpose any Proprietary
Information that is readily available to the general public so long as such
information did not become available to the general public as a direct or
indirect result of Employee's breach of this Section 6. Failure by the Company
to mark any of the Proprietary Information as confidential or proprietary shall
not affect its status as Proprietary Information under the terms of this
Agreement.
7. Property.
(a) All right, title and interest in and to Proprietary Information shall
be and remain the sole and exclusive property of the Company. During the Term,
Employee shall not remove from the Company's offices or premises any documents,
records, notebooks, files, correspondence, reports, memoranda or similar
materials of or containing Proprietary Information, or other materials or
property of any kind belonging to the Company unless necessary or appropriate in
accordance with the duties and responsibilities required by or appropriate for
his Position and, in the event that such materials or property are removed, all
of the foregoing shall be returned to their proper files or places of
safekeeping as promptly as possible after the removal shall serve its specific
purpose. Employee shall not make, retain, remove and/or distribute any copies of
any of the foregoing for any reason whatsoever except as may be necessary in the
discharge of his assigned duties and shall not divulge to any third person the
nature of and/or contents of any of the foregoing or of any other oral or
written information to which he may have access or with which for any reason he
may become familiar, except as disclosure shall be necessary in the performance
of his duties or as otherwise permitted pursuant to Section 6 hereof; and upon
the termination of his employment with the Company, he shall leave with or
return to the Company all originals and copies of the foregoing then in his
possession, whether prepared by Employee or by others.
(b) (i) Employee agrees that all right, title and interest in and to any
innovations, designs, systems, analyses, ideas for marketing programs, and all
copyrights, patents, trademarks and trade names, or similar intangible personal
property which have been or are developed or created in whole or in part by
Employee (1) at any time and at any place while the Employee is employed by
Company and which, in the case of any or all of the foregoing, are related to
and used in connection with the Business of the Company, (2) as a result of
tasks assigned to Employee by the Company, or (3) from the use of premises or
personal property (whether tangible or intangible) owned, leased or contracted
for by the Company (collectively, the "Intellectual Property"), shall be and
remain forever the sole and exclusive property of the Company. The Employee
shall promptly disclose to the Company all Intellectual Property, and the
Employee shall have no claim for additional compensation for the Intellectual
Property.
3
<PAGE>
(ii) The Employee acknowledges that all the Intellectual Property that
is copyrightable shall be considered a work made for hire under United
States Copyright Law. To the extent that any copyrightable Intellectual
Property may not be considered a work made for hire under the applicable
provisions of the United States Copyright Law, or to the extent that,
notwithstanding the foregoing provisions, the Employee may retain an
interest in any Intellectual Property that is not copyrightable, the
Employee hereby irrevocably assigns and transfers to the Company any and
all right, title, or interest that the Employee may have in the
Intellectual Property under copyright, patent, trade secret and trademark
law, in perpetuity or for the longest period otherwise permitted by law,
without the necessity of further consideration. The Company shall be
entitled to obtain and hold in its own name all copyrights, patents, trade
secrets, and trademarks with respect thereto.
(iii) Employee further agrees to reveal promptly all information
relating to the same to an appropriate officer of the Company and to
cooperate with the Company and execute such documents as may be necessary
or appropriate (1) in the event that the Company desires to seek copyright,
patent or trademark protection, or other analogous protection, thereafter
relating to the Intellectual Property, and when such protection is
obtained, to renew and restore the same, or (2) to defend any opposition
proceedings in respect of obtaining and maintaining such copyright, patent
or trademark protection, or other analogous protection.
(iv) In the event the Company is unable after reasonable effort to
secure Employee's signature on any of the documents referenced in Section
7(b)(iii) hereof, whether because of Employee's physical or mental
incapacity or for any other reason whatsoever, Employee hereby irrevocably
designates and appoints the Company and its duly authorized officers and
agents as Employee's agent and attorney-in-fact, to act for and in his
behalf and stead to execute and file any such documents and to do all other
lawfully permitted acts to further the prosecution and issuance of any such
copyright, patent or trademark protection, or other analogous protection,
with the same legal force and effect as if executed by Employee.
8. Noncompetition.
8.1 Covenant Not to Compete. The Employee shall not, during the Term,
including any extensions of the Term, and during the Restricted Period, as
hereinafter defined, do any of the following directly or indirectly without the
prior written consent of the Company:
(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 the date of this Agreement, contemplated to be conducted during
the Term of this Agreement (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");
4
<PAGE>
(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; 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
prospective 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 the termination
of Employee's employment hereunder.
8.2 Restricted Period. Other than as specifically provided in this Section
8.2, the Restricted Period shall begin on the date of the termination of this
Agreement and shall continue for a period of twelve (12) months thereafter,
provided, however, that if this Agreement is not renewed upon the expiration of
the Initial Term, the Restricted Period shall begin on the date of such
expiration and shall continue for a period of six (6) months thereafter.
8.3 Forfeiture of Options. Notwithstanding any other provision of this
Agreement, any unexercised stock options or unvested stock award shall become
nonexercisable and shall be forfeited if the Employee is terminated pursuant to
Section 8.1 hereof.
9. Termination. Employee's employment hereunder may be terminated during
the Term upon the occurrence of any one of the events described in this Section
9. Upon termination, Employee shall be entitled only to such compensation and
benefits as described in this Section 9.
9.1 Termination for Disability.
(a) In the event of the disability of the Employee such that Employee
is unable to perform his duties and responsibilities hereunder to the full
extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than one hundred twenty (120) consecutive
days or more than one hundred eighty (180) days, in the aggregate, during
any seven hundred thirty (730) day period ("Disability"), Employee's
employment hereunder may be terminated by the Company by notice to Employee
pursuant to a determination by the Chief Executive Officer.
5
<PAGE>
(b) In the event of a termination of Employee's employment hereunder
pursuant to Section 9.1(a), Employee will be entitled to receive all
accrued and unpaid (as of the date of such termination) Base Salary,
Benefits, Earned Bonus (as defined in the Plan) and other forms of
compensation and benefits payable or provided in accordance with the terms
of any then existing compensation or benefit plan or arrangement ("Other
Compensation"), including payment prescribed under any disability or life
insurance plan or arrangement in which he is a participant or to which he
is a party as an employee of the Company. Except as specifically set forth
in this Section 9.1(b), the Company shall have no liability or obligation
to Employee for compensation or benefits hereunder by reason of such
termination.
(c) For purposes of this Section 9.1, except as hereinafter provided,
the determination as to whether Employee is Disabled shall be made by a
licensed physician selected by Employee and shall be based upon a full
physical examination and good faith opinion by such physician. In the event
that the Chief Executive Officer disagrees with such physician's
conclusion, the Chief Executive Officer may require that Employee submit to
a full physical examination by another licensed physician selected by
Employee and approved by the Company. If the two opinions shall be
inconsistent, a third opinion shall be obtained after full physical
examination by a third licensed physician selected by Employee and approved
by the Company. The majority of the three opinions shall be conclusive.
9.2 Termination by Death. In the event that Employee dies during the Term,
Employee's employment hereunder shall be terminated thereby and the Company
shall pay to Employee's executors, legal representatives or administrators an
amount equal to the accrued and unpaid portion of his Base Salary, Benefits,
Earned Bonus and Other Compensation through the end of the month in which he
dies. Except as specifically set forth in this Section 9.2, the Company shall
have no liability or obligation hereunder to Employee's executors, legal
representatives, administrators, heirs or assigns or any other person claiming
under or through him by reason of Employee's death, except that Employee's
executors, legal representatives or administrators will be entitled to receive
the payment prescribed under any death or disability benefits plan in which he
is a participant as an employee of the Company, and to exercise any rights
afforded under any compensation or benefit plan then in effect.
9.3 Termination By Company for Cause.
(a) The Company may terminate Employee's employment hereunder at any
time for "cause" upon written notice to Employee based upon a good faith
determination by the Chief Executive Officer. The good-faith nature of the
determination shall not in and of itself mean that "cause" exists. For
purposes of this Agreement, "cause" shall mean: (i) any material breach by
Employee of any of his obligations under Section 6, 7, or 8 of this
Agreement, if not cured within 30 days notice from the company, (ii) gross
incompetence in the performance by Employee of the duties required by or
appropriate for his Position, if not cured within thirty (30) days notice
from the Company, (iii) a material violation, that is not cured within 30
days notice from the company, of the Company's employee policies, as may be
6
<PAGE>
amended from time to time, or (iv) other conduct of Employee involving any
type of willful misconduct with respect to the Company, including without
limitation fraud, embezzlement, theft or proven dishonesty in the course of
his employment or conviction of a felony.
(b) In the event of a termination of Employee's employment hereunder
pursuant to Section 9.3(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base
Salary, Benefits and Other Compensation. All Base Salary and Benefits shall
cease at the time of such termination, subject to the terms of any benefit
or compensation plan then in force and applicable to Employee. Except as
specifically set forth in this Section 9.3, the Company shall have no
liability or obligation hereunder by reason of such termination.
9.4 Termination By Company Without Cause.
(a) The Company may terminate Employee's employment hereunder at any
time, for any reason, without cause, effective upon the date designated by
the Company upon fifteen (15) days notice to Employee.
(b) In the event of a termination of Employee's employment hereunder
pursuant to Section 9.4(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base
Salary, Benefits, Earned Bonus and Other Compensation, plus continuation of
the then current Base Salary and Benefits (including vesting of options and
other Benefits) for a period of twelve (12) months thereafter. Except as
specifically set forth in this Section 9.4, the Company shall have no
liability or obligation hereunder by reason of such termination.
9.5 Termination By Employee
(a) Employee may terminate Employee's employment hereunder upon sixty
(60) days notice of the termination of his employment hereunder pursuant to
this Section 9.5(a) (the date the Employee gives such notice shall be
herein referred to as the "Request Date"). Notwithstanding the foregoing,
upon receipt by the Company of such written notice of termination, the
Company in its sole discretion, may deem such termination effective
immediately (the "Accelerated Termination Date"). In the event the parties
mutually agree to an alternative date of termination, that date shall be
considered the Request Date.
(b) In the event of a termination of Employee's employment hereunder
pursuant to Section 9.5(a) hereof, Employee shall be entitled to receive
all accrued but unpaid (as of the earlier of the Request Date or the
Accelerated Termination Date), Base Salary and Benefits. If the Company
does not terminate the Employee immediately upon receipt of the termination
notice and Employee performs his duties in a satisfactory manner, as
determined in the sole discretion of the Company, until the Request Date,
Employee shall also be entitled to an amount equal to one month's Base
Salary (in effect at such time). In addition, in the event of a termination
of Employee's employment pursuant to Section 9.5(a) at the end of the Term
upon sixty days (60) prior written notice and upon the satisfactory
completion, in the sole discretion of
7
<PAGE>
the Company, of Employee's duties during the 60-day period after receipt of
such termination notice, Employee shall be entitled to receive an amount
equal to one month's Base Salary (in effect at such time) multiplied by the
number of the complete 12-month periods of ImageMax service (whether or not
pursuant to this Agreement) completed prior to giving notice of
termination. Except as specifically set forth in this Section 9.5(b), all
Base Salary, Benefits and Bonuses shall cease at the time of such
termination, subject to the terms of any benefit or compensation plan then
in force and applicable to Employee. Except as specifically set forth in
this Section 9.5, the Company shall have no liability or obligation
hereunder by reason of such termination.
9.6 Sale of Company/Change of Control.
(a) If there is a Sale of the Company or a Change of Control during
the Term, then the Company or the successor to all or substantially all of
the Company's assets, capital stock or business (the "Successor Entity"),
as the case may be, must offer Employee employment pursuant to a written
contract offer (the "Offer") within five (5) days of such Sale of the
Company or Change of Control. Employee shall, within fifteen (15) days
after receipt of such Offer, either (i) accept the terms of the Offer, such
acceptance indicated by return of a copy of the Offer duly executed, (ii)
elect in writing, provided to the Company or the Successor Entity, as the
case may be, to remain employed under this Agreement for the remainder of
the Term, or (iii) elect to terminate Employee's employment hereunder upon
sixty (60) days prior notice, such termination to be effective at the
expiration of said sixty (60) day period, or sooner, if desired by the
Company or the Successor Entity.
(b) For purposes of this Agreement, a "Change of Control" means either
(i) the sale, transfer, assignment or other disposition by stockholders of
the Company, in one transaction or a series of related transactions, of
more than thirty percent (30%) of either the outstanding shares of common
stock or the combined voting power represented by the Company's then
outstanding voting securities entitled to vote generally or the approval by
the stockholders of the Company of a reorganization, merger or
consolidation, in each case, with respect to which persons who were
stockholders of the Company immediately prior to such reorganization,
merger or consolidation do not, immediately thereafter, own more than fifty
percent (50%) of the combined voting power entitled to vote generally in
the election of directors of the reorganized, merged or consolidated
company's then outstanding securities, in a liquidation or dissolution of
Company or of the sale of all or substantially all of Company's assets,
other than (A) any such sales, transfers, assignments or other dispositions
by such stockholders to their respective Affiliates, (B) any such
transaction effected primarily to reincorporate the Company in another
jurisdiction or (C) any transaction in connection with the simultaneous
acquisition of document management companies and the initial public
offering of the common stock of the Company or its affiliate; or (ii) a
majority of members of the Company's Board of Directors is replaced during
any 12-month period by directors whose appointment or election is not
advised by a majority of the members of the Company's Board of Directors
prior to the date of the appointment or election.
8
<PAGE>
(c) For purposes of this Agreement, "Affiliate" means, with respect to
any stockholder of the Company, (i) any Person directly or indirectly
controlling, controlled by or under common control with such stockholder,
(ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting securities of such stockholder, (iii) any officer,
director or general partner of such stockholder, or (iv) 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 (i) through (iv) of this paragraph (c).
(d) For purposes of this Agreement, "Person" means an individual,
partnership, corporation, joint venture, association, trust, unincorporated
association, other entity or association.
(e) For purposes of this Agreement, a "Sale of the Company" means a
sale, transfer, assignment or other disposition (including by merger or
consolidation), of all of the outstanding stock of the Company, or of all
or substantially all of the assets of the Company, a liquidation or
dissolution of the Company. A "Sale of the Company" shall not include the
consummation of a public offering of Common Stock of the Company or its
affiliate pursuant to a registration statement or any transaction effected
primarily to reincorporate the Company in another jurisdiction.
(f) In the event of termination of Employee's employment hereunder
pursuant to clause (iii) in paragraph (a) above, Employee shall be entitled
to receive all accrued but unpaid (as of the effective date of such
termination) Base Salary, Benefits and Earned Bonus and Other Compensation.
In addition, in such case Employee shall be entitled to receive Base Salary
and Benefits for the twelve (12) months following the effective date of
such termination (the "Additional Amount"). At his sole option, Employee
may receive the Additional Amount paid either (i) monthly for twelve (12)
months, or (ii) in one payment on the effective date of such termination,
in which case the value of the Benefits otherwise payable will be
monetized, and such payment of the Additional Amount will be discounted at
the then current Federal Short Term Rate as defined in the Internal Revenue
Code of 1986, as amended.
(g) In the event Employee chooses to continue employment hereunder
pursuant to clause (i) or (ii) in paragraph (a) above and Employee's
employment is thereafter terminated prior to the expiration of the Term for
any reason other than Death, Disability or termination pursuant to clause
(iii) in paragraph (a) above, Employee shall be entitled to receive all the
benefits and compensation referred to in paragraph (f) above. In the event
Employee chooses to continue employment hereunder pursuant to clause (ii)
in paragraph (a) above, at the expiration of the Term, Employee shall be
entitled to receive an amount equal to two months' Base Salary (in effect
at such time) multiplied by the number of complete 12-month periods of
service completed prior to such termination
(h) If this Agreement is assumed by any Successor Entity, any payments
set forth herein shall be the obligation of such Successor Entity. Except
as specifically set forth in this Agreement, (i) all Base Salary, Benefits
and Bonuses shall cease at the time of such termination, subject to the
terms of any benefit or compensation plans then in force and
9
<PAGE>
applicable to Employee, and (ii) the Company shall have no liability
or obligation hereunder by reason of such termination.
(i) If the Successor Entity fails to make the Offer, Employee shall be
entitled to receive all of the benefits and compensation referred to in
paragraph (f) above.
9.7 Severance Upon Expiration of the Initial Term. If this Agreement is not
renewed by the parties upon the expiration of the Initial Term, Employee shall
be entitled to receive all accrued but unpaid (as of the effective date of such
termination) Base Salary, Benefits, Earned Bonus and Other Compensation, plus
continuation of the then current Base Salary and Benefits (including vesting of
options and other Benefits) for a period of six (6) months thereafter. Except as
specifically set forth in this Section 9.7, the Company shall have no liability
or obligation hereunder by reason of such termination.
10. Other Agreements. Employee represents and warrants to the Company that:
(a) There are no restrictions, agreements or understandings whatsoever
to which Employee is a party which would prevent or make unlawful
Employee's execution of this Agreement or Employee's employment hereunder,
or which is or would be inconsistent or in conflict with this Agreement or
Employee's employment hereunder, or would prevent, limit or impair in any
way the performance by Employee of his obligations hereunder,
(b) That Employee's execution of this Agreement and Employee's
employment hereunder shall not constitute a breach of any contract,
agreement or understanding, oral or written, to which Employee is a party
or by which Employee is bound, and
(c) That Employee is free to execute this Agreement and to enter into
the employ of the Company pursuant to the provisions set forth herein.
(d) In the event that they are still in effect, that Employee shall
disclose the existence and terms of the restrictive covenants set forth in
this Agreement to any employer that the Employee may work for during the
term of this Agreement (which employment is not hereby authorized) or after
the termination of the Employee's employment at the Company.
11. Survival of Provisions. The provisions of this Agreement set forth in
Sections 6, 7, 8, 9, 21 and 22 hereof shall survive the termination of
Employee's employment hereunder.
12. Indemnification. The Company shall indemnify the Employee from and
against any and all losses, costs, damages or expenses the Employee may sustain
by reason of his
10
<PAGE>
employment hereunder in the same manner and to the same extent as the executive
officers of the Company.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and Employee and their respective successors,
executors, administrators, heirs and/or permitted assigns; provided, however,
that neither Employee nor the Company may make any assignments of this Agreement
or any interest herein, by operation of law or otherwise, without the prior
written consent of the other party hereto, except that, without such consent,
the Company may assign this Agreement to an Affiliate or any successor to all or
substantially all of its assets and business by means of liquidation,
dissolution, merger, consolidation, transfer of assets, or otherwise, provided
that such successor assumes in writing all of the obligations of the Company
under this Agreement, subject, however, to Employee's rights as to termination
as provided in Section 9.6 hereof.
14. Notice. Any notice or communication required or permitted under this
Agreement shall be made in writing and sent by certified or registered mail,
return receipt requested, addressed as follows:
If to Employee:
Blair Hayes
[Address]
If to Company:
Mark Glassman
ImageMax, Inc.
455 Pennsylvania Avenue, Suite 128
Fort Washington, Pennsylvania 19034
or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above.
15. Entire Agreement; Amendments. This Agreement contains the entire
agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions,
agreements and understandings of every nature between the parties hereto
relating to the employment of Employee with the Company. This Agreement
specifically supersedes the Employment Agreement between the Company and
Employee dated April 19, 1999. This Agreement may not be changed or modified,
except by an agreement in writing signed by each of the parties hereto.
16. Waiver. The waiver of the breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
11
<PAGE>
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
18. Invalidity. In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
the validity of any other provision of this Agreement, and such provision(s)
shall be deemed modified to the extent necessary to make it enforceable.
19. Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
20. Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and legal
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or day which is a holiday in Philadelphia, Pennsylvania, then
such final day shall be deemed to be the next day which is not a Saturday,
Sunday or legal holiday.
21. Specific Enforcement; Extension of Period.
(a) Employee acknowledges that the restrictions contained in Sections
6, 7, and 8 hereof are reasonable and necessary to protect the legitimate
interests of the Company and its affiliates and that the Company would not
have entered into this Agreement in the absence of such restrictions.
Employee also acknowledges that any breach by him of Sections 6, 7, or 8
hereof will cause continuing and irreparable injury to the Company for
which monetary damages would not be an adequate remedy. The Employee shall
not, in any action or proceeding to enforce any of the provisions of this
Agreement, assert the claim or defense that an adequate remedy at law
exists. In the event of such breach by Employee, the Company shall have the
right to enforce the provisions of Sections 6, 7, and 8 of this Agreement
by seeking injunctive or other relief in any court, and this Agreement
shall not in any way limit remedies of law or in equity otherwise available
to the Company. If an action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled to recover, in addition to any other relief, reasonable attorneys'
fees, costs and disbursements. In the event that the provisions of Sections
6, 7, or 8 hereof should ever be adjudicated to exceed the time,
geographic, or other limitations permitted by applicable law in any
applicable jurisdiction, then such provisions shall be deemed reformed in
such jurisdiction to the maximum time, geographic, or other limitations
permitted by applicable law.
(b) In the event that Employee shall be in breach of any of the
restrictions contained in Section 8 hereof, then the Restricted Period
shall be extended for a period of time equal to the period of time that
Employee is in breach of such restriction.
22. Arbitration. In the event that the parties are unable to resolve any
disputes arising hereunder, such dispute shall be submitted for a binding
determination by a neutral third
12
<PAGE>
party designated by the President of the Philadelphia office of the American
Arbitration Association.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the day and year first written above.
IMAGEMAX, INC.
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
----------------------------------------
Blair Hayes
14
<PAGE>
SCHEDULE A
1. Life Insurance. Company will provide Employee, at no expense to the
Employee, life insurance coverage in an amount equal to three (3) times
Employee's initial Base Salary.
2. Vacation. The Employee shall be entitled to twenty (20) days per year of
paid vacation.
3. Business Travel Accident Insurance. Company will provide Employee, at no
expense to the Employee, business travel accident insurance coverage in an
amount equal to six (6) times Employee's base salary through either: (i) a
group policy covering similarly situated employees, or (ii) a policy
specific to Employee, depending on the cost and availability of coverage.
Exhibit 10.45
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 1st day of April, 2000 by and
between Rex Lamb a resident of Nebraska, (the "Employee"), and ImageMax, Inc., a
corporation organized and existing under the laws of the Commonwealth of
Pennsylvania (the "Company").
WHEREAS, the Company and Employee previously entered into an Employment
Agreement dated as of December 9, 1997; and
WHEREAS, the Company desires to continue to employ Employee and Employee
desires to continue to be employed by the Company for a period of time in the
future upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to the
terms and conditions set forth herein, agree as follows:
1. Employment and Term. The Company hereby employs and continues to employ
Employee and Employee hereby accepts employment with the Company, as Executive
Vice President and Chief Technology Officer (the "Position") for a period
commencing on the date hereof and continuing until December 31, 2002, subject to
early termination pursuant to the provisions of Section 9 hereof (the "Initial
Term") and as may be extended from time to time by mutual consent of Employer
and Employee. The Initial Term of employment and any renewal periods hereunder,
subject to the provisions of Section 9 hereof, are hereinafter referred to as
the "Term."
2. Duties. During the Term, Employee shall serve the Company faithfully and
to the best of his ability and shall devote his full time, attention, skill and
efforts to the performance of the duties required by or appropriate for his
Position. Employee agrees to assume such duties and responsibilities as may be
customarily incident to such position, and as may be reasonably assigned to
Employee from time to time by the Chief Operating Officer of the Company, if
any, and otherwise by the Chief Executive Officer. Employee shall report,
throughout the Term, to the Chief Operating Officer of the Company, if any, and
otherwise to the Chief Executive Officer. Employee shall perform his duties from
the Company's office in Lincoln, Nebraska, but shall travel to the extent
reasonably necessary to perform the duties hereunder. If the employee is
required to travel internationally (excluding North America), it shall be in
business class.
3. Other Business Activities. During the Term, Employee will not, without
the prior written consent of the Company, directly or indirectly engage in any
other business activities or pursuits whatsoever, except such activities in
connection with any charitable or civic activities, personal investments and
serving as an executor, trustee or in other similar fiduciary
<PAGE>
capacity as do not interfere with his performance of his responsibilities and
obligations pursuant to this Agreement.
4. Compensation.
4.1 The Company shall pay Employee, and Employee hereby agrees to
accept, as compensation for all services rendered hereunder and for Employee's
covenant not to compete as provided for in Section 8 hereof, a base salary at
the annual rate of One Hundred Fifty Thousand Dollars ($150,000) (as the same
may hereafter be increased, the "Base Salary"), which shall continue as such for
the remainder of the Term unless otherwise increased pursuant to this Section 4
of this Agreement. The Base Salary shall be inclusive of all applicable income,
social security and other taxes and charges which are required by law to be
withheld by the Company or which are requested to be withheld by Employee, and
which shall be withheld and paid in accordance with the Company's normal payroll
practice for its similarly situated employees from time to time in effect.
Increases in the Base Salary may be granted from time to time at the sole
discretion of the Company. In addition to the Base Salary, the Company shall pay
Employee, within thirty (30) days after receipt of the final audit for each
fiscal year, a bonus (the "Bonus") in the same manner as for similarly situated
employees. Such Bonus shall be based on the guidelines established by the
Company in advance of each fiscal year under the Company's formal incentive
compensation plan, including, but not limited to, the results of the Company's
operations, achievement of business unit targets, if applicable, and individual
performance as compared to specific management objectives set prior to each
fiscal year. Payment of any Bonus upon termination of Employee shall be paid in
accordance with Section 9 hereof.
4.2 In addition to the foregoing Section 4.1, the Company shall grant
to the Employee an incentive stock option (the "Option") to purchase seventy
five thousand (75,000) shares of Common Stock, no par value, of the Company
("Common Stock"). The Option shall be an incentive stock option. The Option
shall be subject to and in accordance with the provisions of the 1997 Incentive
Plan of the Company, as amended (the "Plan") and shall vest in accordance with
the terms set forth in the Incentive Stock Option Agreement between the Company
and the Employee dated as of February 15, 2000. In addition to the Option, the
Company may grant to the Employee additional stock options under the Plan as
determined by the Compensation Committee of the Board from time to time in its
sole discretion.
5. Benefits and Expenses. Except as otherwise provided in this Agreement or
in Schedule A attached hereto, the Employee shall be entitled to (i) all
standard benefits for executive level vice-presidents of the Company and (ii)
those benefits set forth on Schedule A hereto (collectively, "Benefits").
6. Confidentiality. Employee recognizes and acknowledges that the
Proprietary Information (as hereinafter defined) is a valuable, special and
unique asset of the Business of the Company. As a result, both during the Term
and thereafter, Employee shall not, without the prior written consent of the
Company, for any reason, either directly or indirectly, divulge to any
third-party or use for his own benefit, or for any purpose other than the
exclusive
-2-
<PAGE>
benefit of the Company, any confidential, proprietary, business and technical
information or trade secrets of the Company or of any subsidiary or affiliate of
the Company ("Proprietary Information") revealed, obtained or developed in the
course of his employment with the Company. Nothing herein contained shall
restrict Employee's ability to make such disclosures as may be necessary or
appropriate to the effective and efficient discharge of the duties required by
or appropriate for his Position or as such disclosures may be required by law;
and further provided, that nothing herein contained shall restrict Employee from
divulging or using for his own benefit or for any other purpose any Proprietary
Information that is readily available to the general public so long as such
information did not become available to the general public as a direct or
indirect result of Employee's breach of this Section 6. Failure by the Company
to mark any of the Proprietary Information as confidential or proprietary shall
not affect its status as Proprietary Information under the terms of this
Agreement.
7. Property.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, Employee shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for his Position and, in the event that such
materials or property are removed, all of the foregoing shall be returned to
their proper files or places of safekeeping as promptly as possible after the
removal shall serve its specific purpose. Employee shall not make, retain,
remove and/or distribute any copies of any of the foregoing for any reason
whatsoever except as may be necessary in the discharge of his assigned duties
and shall not divulge to any third person the nature of and/or contents of any
of the foregoing or of any other oral or written information to which he may
have access or with which for any reason he may become familiar, except as
disclosure shall be necessary in the performance of his duties or as otherwise
permitted pursuant to Section 6 hereof; and upon the termination of his
employment with the Company, he shall leave with or return to the Company all
originals and copies of the foregoing then in his possession, whether prepared
by Employee or by others.
(b) (i) Employee agrees that all right, title and interest in and
to any innovations, designs, systems, analyses, ideas for marketing programs,
and all copyrights, patents, trademarks and trade names, or similar intangible
personal property which have been or are developed or created in whole or in
part by Employee (1) at any time and at any place while the Employee is employed
by Company and which, in the case of any or all of the foregoing, are related to
and used in connection with the Business of the Company, (2) as a result of
tasks assigned to Employee by the Company, or (3) from the use of premises or
personal property (whether tangible or intangible) owned, leased or contracted
for by the Company (collectively, the "Intellectual Property"), shall be and
remain forever the sole and exclusive property of the Company. The Employee
shall promptly disclose to the Company all Intellectual Property, and the
Employee shall have no claim for additional compensation for the Intellectual
Property.
-3-
<PAGE>
(ii) The Employee acknowledges that all the Intellectual
Property that is copyrightable shall be considered a work made for hire under
United States Copyright Law. To the extent that any copyrightable Intellectual
Property may not be considered a work made for hire under the applicable
provisions of the United States Copyright Law, or to the extent that,
notwithstanding the foregoing provisions, the Employee may retain an interest in
any Intellectual Property that is not copyrightable, the Employee hereby
irrevocably assigns and transfers to the Company any and all right, title, or
interest that the Employee may have in the Intellectual Property under
copyright, patent, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further
consideration. The Company shall be entitled to obtain and hold in its own name
all copyrights, patents, trade secrets, and trademarks with respect thereto.
(iii) Employee further agrees to reveal promptly all
information relating to the same to an appropriate officer of the Company and to
cooperate with the Company and execute such documents as may be necessary or
appropriate (1) in the event that the Company desires to seek copyright, patent
or trademark protection, or other analogous protection, thereafter relating to
the Intellectual Property, and when such protection is obtained, to renew and
restore the same, or (2) to defend any opposition proceedings in respect of
obtaining and maintaining such copyright, patent or trademark protection, or
other analogous protection.
(iv) In the event the Company is unable after reasonable
effort to secure Employee's signature on any of the documents referenced in
Section 7(b)(iii) hereof, whether because of Employee's physical or mental
incapacity or for any other reason whatsoever, Employee hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as Employee's agent and attorney-in-fact, to act for and in his behalf and stead
to execute and file any such documents and to do all other lawfully permitted
acts to further the prosecution and issuance of any such copyright, patent or
trademark protection, or other analogous protection, with the same legal force
and effect as if executed by Employee.
8. Noncompetition.
8.1 Covenant Not to Compete. The Employee shall not, during the Term,
including any extensions of the Term, and during the Restricted Period, as
hereinafter defined, do any of the following directly or indirectly without the
prior written consent of the Company:
(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 the date of this Agreement, contemplated to be conducted during the Term
of this Agreement (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");
-4-
<PAGE>
(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; 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
prospective 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 the termination of Employee's employment
hereunder.
8.2 Restricted Period. Other than as specifically provided in this
Section 8.2, the Restricted Period shall begin on the date of the termination of
this Agreement and shall continue for a period of twelve (12) months thereafter,
provided, however, that if this Agreement is not renewed upon the expiration of
the Initial Term, the Restricted Period shall begin on the date of such
expiration and shall continue for a period of six (6) months thereafter.
8.3 Forfeiture of Options. Notwithstanding any other provision of this
Agreement, any unexercised stock options or unvested stock award shall become
nonexercisable and shall be forfeited if the Employee is terminated pursuant to
Section 8.1 hereof.
9. Termination. Employee's employment hereunder may be terminated during
the Term upon the occurrence of any one of the events described in this Section
9. Upon termination, Employee shall be entitled only to such compensation and
benefits as described in this Section 9.
9.1 Termination for Disability.
(a) In the event of the disability of the Employee such that
Employee is unable to perform his duties and responsibilities hereunder to the
full extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than one hundred twenty (120) consecutive days
or more than one hundred eighty (180) days, in the aggregate, during any seven
hundred thirty (730) day period ("Disability"), Employee's employment hereunder
may be terminated by the Company by notice to Employee pursuant to a
determination by the Chief Executive Officer.
-5-
<PAGE>
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.1(a), Employee will be entitled to receive all
accrued and unpaid (as of the date of such termination) Base Salary, Benefits,
Earned Bonus (as defined in the Plan) and other forms of compensation and
benefits payable or provided in accordance with the terms of any then existing
compensation or benefit plan or arrangement ("Other Compensation"), including
payment prescribed under any disability or life insurance plan or arrangement in
which he is a participant or to which he is a party as an employee of the
Company. Except as specifically set forth in this Section 9.1(b), the Company
shall have no liability or obligation to Employee for compensation or benefits
hereunder by reason of such termination.
(c) For purposes of this Section 9.1, except as hereinafter
provided, the determination as to whether Employee is Disabled shall be made by
a licensed physician selected by Employee and shall be based upon a full
physical examination and good faith opinion by such physician. In the event that
the Chief Executive Officer disagrees with such physician's conclusion, the
Chief Executive Officer may require that Employee submit to a full physical
examination by another licensed physician selected by Employee and approved by
the Company. If the two opinions shall be inconsistent, a third opinion shall be
obtained after full physical examination by a third licensed physician selected
by Employee and approved by the Company. The majority of the three opinions
shall be conclusive.
9.2 Termination by Death. In the event that Employee dies during the
Term, Employee's employment hereunder shall be terminated thereby and the
Company shall pay to Employee's executors, legal representatives or
administrators an amount equal to the accrued and unpaid portion of his Base
Salary, Benefits, Earned Bonus and Other Compensation through the end of the
month in which he dies. Except as specifically set forth in this Section 9.2,
the Company shall have no liability or obligation hereunder to Employee's
executors, legal representatives, administrators, heirs or assigns or any other
person claiming under or through him by reason of Employee's death, except that
Employee's executors, legal representatives or administrators will be entitled
to receive the payment prescribed under any death or disability benefits plan in
which he is a participant as an employee of the Company, and to exercise any
rights afforded under any compensation or benefit plan then in effect.
9.3 Termination By Company for Cause.
(a) The Company may terminate Employee's employment hereunder at
any time for "cause" upon written notice to Employee based upon a good faith
determination by the Chief Executive Officer. The good-faith nature of the
determination shall not in and of itself mean that "cause" exists. For purposes
of this Agreement, "cause" shall mean: (i) any material breach by Employee of
any of his obligations under Section 6, 7, or 8 of this Agreement, if not cured
within 30 days notice from the company, (ii) gross incompetence in the
performance by Employee of the duties required by or appropriate for his
Position, if not cured within thirty (30) days notice from the Company, (iii) a
material violation, that is not cured within 30 days notice from the company, of
the Company's employee policies, as may be
-6-
<PAGE>
amended from time to time, or (iv) other conduct of Employee involving any type
of willful misconduct with respect to the Company, including without limitation
fraud, embezzlement, theft or proven dishonesty in the course of his employment
or conviction of a felony.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.3(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base Salary,
Benefits and Other Compensation. All Base Salary and Benefits shall cease at the
time of such termination, subject to the terms of any benefit or compensation
plan then in force and applicable to Employee. Except as specifically set forth
in this Section 9.3, the Company shall have no liability or obligation hereunder
by reason of such termination.
9.4 Termination By Company Without Cause.
(a) The Company may terminate Employee's employment hereunder at
any time, for any reason, without cause, effective upon the date designated by
the Company upon fifteen (15) days notice to Employee.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.4(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base Salary,
Benefits, Earned Bonus and Other Compensation, plus continuation of the then
current Base Salary and Benefits (including vesting of options and other
Benefits) for a period of twelve (12) months thereafter. Except as specifically
set forth in this Section 9.4, the Company shall have no liability or obligation
hereunder by reason of such termination.
9.5 Termination By Employee
(a) Employee may terminate Employee's employment hereunder upon
sixty (60) days notice of the termination of his employment hereunder pursuant
to this Section 9.5(a) (the date the Employee gives such notice shall be herein
referred to as the "Request Date"). Notwithstanding the foregoing, upon receipt
by the Company of such written notice of termination, the Company in its sole
discretion, may deem such termination effective immediately (the "Accelerated
Termination Date"). In the event the parties mutually agree to an alternative
date of termination, that date shall be considered the Request Date.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.5(a) hereof, Employee shall be entitled to
receive all accrued but unpaid (as of the earlier of the Request Date or the
Accelerated Termination Date), Base Salary and Benefits. If the Company does not
terminate the Employee immediately upon receipt of the termination notice and
Employee performs his duties in a satisfactory manner, as determined in the sole
discretion of the Company, until the Request Date, Employee shall also be
entitled to an amount equal to one month's Base Salary (in effect at such time).
In addition, in the event of a termination of Employee's employment pursuant to
Section 9.5(a) at the end of the Term upon sixty days (60) prior written notice
and upon the satisfactory completion, in the sole discretion of
-7-
<PAGE>
the Company, of Employee's duties during the 60-day period after receipt of such
termination notice, Employee shall be entitled to receive an amount equal to one
month's Base Salary (in effect at such time) multiplied by the number of the
complete 12-month periods of ImageMax service (whether or not pursuant to this
Agreement) completed prior to giving notice of termination. Except as
specifically set forth in this Section 9.5(b), all Base Salary, Benefits and
Bonuses shall cease at the time of such termination, subject to the terms of any
benefit or compensation plan then in force and applicable to Employee. Except as
specifically set forth in this Section 9.5, the Company shall have no liability
or obligation hereunder by reason of such termination.
9.6 Sale of Company/Change of Control.
(a) If there is a Sale of the Company or a Change of Control
during the Term, then the Company or the successor to all or substantially all
of the Company's assets, capital stock or business (the "Successor Entity"), as
the case may be, must offer Employee employment pursuant to a written contract
offer (the "Offer") within five (5) days of such Sale of the Company or Change
of Control. Employee shall, within fifteen (15) days after receipt of such
Offer, either (i) accept the terms of the Offer, such acceptance indicated by
return of a copy of the Offer duly executed, (ii) elect in writing, provided to
the Company or the Successor Entity, as the case may be, to remain employed
under this Agreement for the remainder of the Term, or (iii) elect to terminate
Employee's employment hereunder upon sixty (60) days prior notice, such
termination to be effective at the expiration of said sixty (60) day period, or
sooner, if desired by the Company or the Successor Entity.
(b) For purposes of this Agreement, a "Change of Control" means
either (i) the sale, transfer, assignment or other disposition by stockholders
of the Company, in one transaction or a series of related transactions, of more
than thirty percent (30%) of either the outstanding shares of common stock or
the combined voting power represented by the Company's then outstanding voting
securities entitled to vote generally or the approval by the stockholders of the
Company of a reorganization, merger or consolidation, in each case, with respect
to which persons who were stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than fifty percent (50%) of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated
company's then outstanding securities, in a liquidation or dissolution of
Company or of the sale of all or substantially all of Company's assets, other
than (A) any such sales, transfers, assignments or other dispositions by such
stockholders to their respective Affiliates, (B) any such transaction effected
primarily to reincorporate the Company in another jurisdiction or (C) any
transaction in connection with the simultaneous acquisition of document
management companies and the initial public offering of the common stock of the
Company or its affiliate; or (ii) a majority of members of the Company's Board
of Directors is replaced during any 12-month period by directors whose
appointment or election is not advised by a majority of the members of the
Company's Board of Directors prior to the date of the appointment or election.
-8-
<PAGE>
(c) For purposes of this Agreement, "Affiliate" means, with
respect to any stockholder of the Company, (i) any Person directly or indirectly
controlling, controlled by or under common control with such stockholder, (ii)
any Person owning or controlling ten percent (10%) or more of the outstanding
voting securities of such stockholder, (iii) any officer, director or general
partner of such stockholder, or (iv) 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 (i) through
(iv) of this paragraph (c).
(d) For purposes of this Agreement, "Person" means an individual,
partnership, corporation, joint venture, association, trust, unincorporated
association, other entity or association.
(e) For purposes of this Agreement, a "Sale of the Company" means
a sale, transfer, assignment or other disposition (including by merger or
consolidation), of all of the outstanding stock of the Company, or of all or
substantially all of the assets of the Company, a liquidation or dissolution of
the Company. A "Sale of the Company" shall not include the consummation of a
public offering of Common Stock of the Company or its affiliate pursuant to a
registration statement or any transaction effected primarily to reincorporate
the Company in another jurisdiction.
(f) In the event of termination of Employee's employment
hereunder pursuant to clause (iii) in paragraph (a) above, Employee shall be
entitled to receive all accrued but unpaid (as of the effective date of such
termination) Base Salary, Benefits and Earned Bonus and Other Compensation. In
addition, in such case Employee shall be entitled to receive Base Salary and
Benefits for the twelve (12) months following the effective date of such
termination (the "Additional Amount"). At his sole option, Employee may receive
the Additional Amount paid either (i) monthly for twelve (12) months, or (ii) in
one payment on the effective date of such termination, in which case the value
of the Benefits otherwise payable will be monetized, and such payment of the
Additional Amount will be discounted at the then current Federal Short Term Rate
as defined in the Internal Revenue Code of 1986, as amended.
(g) In the event Employee chooses to continue employment
hereunder pursuant to clause (i) or (ii) in paragraph (a) above and Employee's
employment is thereafter terminated prior to the expiration of the Term for any
reason other than Death, Disability or termination pursuant to clause (iii) in
paragraph (a) above, Employee shall be entitled to receive all the benefits and
compensation referred to in paragraph (f) above. In the event Employee chooses
to continue employment hereunder pursuant to clause (ii) in paragraph (a) above,
at the expiration of the Term, Employee shall be entitled to receive an amount
equal to two months' Base Salary (in effect at such time) multiplied by the
number of complete 12-month periods of service completed prior to such
termination
(h) If this Agreement is assumed by any Successor Entity, any
payments set forth herein shall be the obligation of such Successor Entity.
Except as specifically set forth in this Agreement, (i) all Base Salary,
Benefits and Bonuses shall cease at the time of such termination, subject to the
terms of any benefit or compensation plans then in force and
-9-
<PAGE>
applicable to Employee, and (ii) the Company shall have no liability or
obligation hereunder by reason of such termination.
(i) If the Successor Entity fails to make the Offer, Employee
shall be entitled to receive all of the benefits and compensation referred to in
paragraph (f) above.
9.7 Severance Upon Expiration of the Initial Term. If this Agreement
is not renewed by the parties upon the expiration of the Initial Term, Employee
shall be entitled to receive all accrued but unpaid (as of the effective date of
such termination) Base Salary, Benefits, Earned Bonus and Other Compensation,
plus continuation of the then current Base Salary and Benefits (including
vesting of options and other Benefits) for a period of six (6) months
thereafter. Except as specifically set forth in this Section 9.7, the Company
shall have no liability or obligation hereunder by reason of such termination.
10. Other Agreements. Employee represents and warrants to the Company that:
(a) There are no restrictions, agreements or understandings
whatsoever to which Employee is a party which would prevent or make unlawful
Employee's execution of this Agreement or Employee's employment hereunder, or
which is or would be inconsistent or in conflict with this Agreement or
Employee's employment hereunder, or would prevent, limit or impair in any way
the performance by Employee of his obligations hereunder,
(b) That Employee's execution of this Agreement and Employee's
employment hereunder shall not constitute a breach of any contract, agreement or
understanding, oral or written, to which Employee is a party or by which
Employee is bound, and
(c) That Employee is free to execute this Agreement and to enter
into the employ of the Company pursuant to the provisions set forth herein.
(d) In the event that they are still in effect, that Employee
shall disclose the existence and terms of the restrictive covenants set forth in
this Agreement to any employer that the Employee may work for during the term of
this Agreement (which employment is not hereby authorized) or after the
termination of the Employee's employment at the Company.
11. Survival of Provisions. The provisions of this Agreement set forth in
Sections 6, 7, 8, 9, 21 and 22 hereof shall survive the termination of
Employee's employment hereunder.
12. Indemnification. The Company shall indemnify the Employee from and
against any and all losses, costs, damages or expenses the Employee may sustain
by reason of his
-10-
<PAGE>
employment hereunder in the same manner and to the same extent as the executive
officers of the Company.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and Employee and their respective successors,
executors, administrators, heirs and/or permitted assigns; provided, however,
that neither Employee nor the Company may make any assignments of this Agreement
or any interest herein, by operation of law or otherwise, without the prior
written consent of the other party hereto, except that, without such consent,
the Company may assign this Agreement to an Affiliate or any successor to all or
substantially all of its assets and business by means of liquidation,
dissolution, merger, consolidation, transfer of assets, or otherwise, provided
that such successor assumes in writing all of the obligations of the Company
under this Agreement, subject, however, to Employee's rights as to termination
as provided in Section 9.6 hereof.
14. Notice. Any notice or communication required or permitted under this
Agreement shall be made in writing and sent by certified or registered mail,
return receipt requested, addressed as follows:
If to Employee:
Rex Lamb
[Address]
If to Company:
Mark Glassman
ImageMax, Inc.
455 Pennsylvania Avenue, Suite 128
Fort Washington, Pennsylvania 19034
or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above.
15. Entire Agreement; Amendments. This Agreement contains the entire
agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions,
agreements and understandings of every nature between the parties hereto
relating to the employment of Employee with the Company. This Agreement
specifically supersedes the Employment Agreement between the Company and
Employee dated December 9, 1997. This Agreement does not supersede any provision
of the Purchase and Sale Agreement by and between Company and Employee dated as
of December 9, 1997, including any noncompetition agreement set forth therein.
This Agreement may not be changed or modified, except by an agreement in writing
signed by each of the parties hereto.
-11-
<PAGE>
16. Waiver. The waiver of the breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
18. Invalidity. In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
the validity of any other provision of this Agreement, and such provision(s)
shall be deemed modified to the extent necessary to make it enforceable.
19. Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
20. Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and legal
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or day which is a holiday in Philadelphia, Pennsylvania, then
such final day shall be deemed to be the next day which is not a Saturday,
Sunday or legal holiday.
21. Specific Enforcement; Extension of Period.
(a) Employee acknowledges that the restrictions contained in
Sections 6, 7, and 8 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such restrictions.
Employee also acknowledges that any breach by him of Sections 6, 7, or 8 hereof
will cause continuing and irreparable injury to the Company for which monetary
damages would not be an adequate remedy. The Employee shall not, in any action
or proceeding to enforce any of the provisions of this Agreement, assert the
claim or defense that an adequate remedy at law exists. In the event of such
breach by Employee, the Company shall have the right to enforce the provisions
of Sections 6, 7, and 8 of this Agreement by seeking injunctive or other relief
in any court, and this Agreement shall not in any way limit remedies of law or
in equity otherwise available to the Company. If an action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover, in addition to any other relief, reasonable
attorneys' fees, costs and disbursements. In the event that the provisions of
Sections 6, 7, or 8 hereof should ever be adjudicated to exceed the time,
geographic, or other limitations permitted by applicable law in any applicable
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, or other limitations permitted by applicable
law.
(b) In the event that Employee shall be in breach of any of the
restrictions contained in Section 8 hereof, then the Restricted Period shall be
extended for a period of time equal to the period of time that Employee is in
breach of such restriction.
-12-
<PAGE>
22. Arbitration. In the event that the parties are unable to resolve any
disputes arising hereunder, such dispute shall be submitted for a binding
determination by a neutral third party designated by the President of the
Philadelphia office of the American Arbitration Association.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the day and year first written above.
IMAGEMAX, INC.
By:
-----------------------------------
Name:
-------------------------
Title:
------------------------
--------------------------------------
Rex Lamb
-14-
<PAGE>
SCHEDULE A
1. Life Insurance. Company will provide Employee, at no expense to the
Employee, life insurance coverage in an amount equal to three (3) times
Employee's initial Base Salary.
2. Vacation. The Employee shall be entitled to twenty (20) days per year of
paid vacation.
3. Business Travel Accident Insurance. Company will provide Employee, at no
expense to the Employee, business travel accident insurance coverage in an
amount equal to six (6) times Employee's base salary through either: (i) a
group policy covering similarly situated employees, or (ii) a policy
specific to Employee, depending on the cost and availability of coverage.
B-1
Exhibit 10.46
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made as of the 1st day of April, 2000 by and
between Mitchell J. Taube a resident of New York, (the "Employee"), and
ImageMax, Inc., a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania (the "Company").
WHEREAS, the Company and Employee previously entered into an Employment
Agreement dated as of December 9, 1997; and
WHEREAS, the Company desires to continue to employ Employee and Employee
desires to continue to be employed by the Company for a period of time in the
future upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to the
terms and conditions set forth herein, agree as follows:
1. Employment and Term. The Company hereby employs and continues to employ
Employee and Employee hereby accepts employment with the Company, as Executive
Vice President Marketing and Sales Development (the "Position") for a period
commencing on the date hereof and continuing until December 31, 2002, subject to
early termination pursuant to the provisions of Section 9 hereof (the "Initial
Term") and as may be extended from time to time by mutual consent of Employer
and Employee. The Initial Term of employment and any renewal periods hereunder,
subject to the provisions of Section 9 hereof, are hereinafter referred to as
the "Term."
2. Duties. During the Term, Employee shall serve the Company faithfully and
to the best of his ability and shall devote his full time, attention, skill and
efforts to the performance of the duties required by or appropriate for his
Position. Employee agrees to assume such duties and responsibilities as may be
customarily incident to such position, and as may be reasonably assigned to
Employee from time to time by the Chief Operating Officer of the Company, if
any, and otherwise by the Chief Executive Officer. Employee shall report,
throughout the Term, to the Chief Operating Officer of the Company, if any, and
otherwise to the Chief Executive Officer. Employee shall perform his duties from
the Company's office in Westchester County, New York, but shall travel to the
extent reasonably necessary to perform the duties hereunder. If the employee is
required to travel internationally (excluding North America), it shall be in
business class.
3. Other Business Activities. During the Term, Employee will not, without
the prior written consent of the Company, directly or indirectly engage in any
other business activities or pursuits whatsoever, except such activities in
connection with any charitable or civic
<PAGE>
activities, personal investments and serving as an executor, trustee or in other
similar fiduciary capacity as do not interfere with his performance of his
responsibilities and obligations pursuant to this Agreement.
4. Compensation.
4.1 The Company shall pay Employee, and Employee hereby agrees to
accept, as compensation for all services rendered hereunder and for Employee's
covenant not to compete as provided for in Section 8 hereof, a base salary at
the annual rate of one hundred fifty thousand dollars ($150,000) (as the same
may hereafter be increased, the "Base Salary"), which shall continue as such for
the remainder of the Term unless otherwise increased pursuant to this Section 4
of this Agreement. The Base Salary shall be inclusive of all applicable income,
social security and other taxes and charges which are required by law to be
withheld by the Company or which are requested to be withheld by Employee, and
which shall be withheld and paid in accordance with the Company's normal payroll
practice for its similarly situated employees from time to time in effect.
Increases in the Base Salary may be granted from time to time at the sole
discretion of the Company. In addition to the Base Salary, the Company shall pay
Employee, within thirty (30) days after receipt of the final audit for each
fiscal year, a bonus (the "Bonus") in the same manner as for similarly situated
employees. Such Bonus shall be based on the guidelines established by the
Company in advance of each fiscal year under the Company's formal incentive
compensation plan, including, but not limited to, the results of the Company's
operations, achievement of business unit targets, if applicable, and individual
performance as compared to specific management objectives set prior to each
fiscal year. Payment of any Bonus upon termination of Employee shall be paid in
accordance with Section 9 hereof.
4.2 In addition to the foregoing Section 4.1, the Company shall grant
to the Employee an incentive stock option (the "Option") to purchase seventy
five thousand (75,000) shares of Common Stock, no par value, of the Company
("Common Stock"). The Option shall be an incentive stock option. The Option
shall be subject to and in accordance with the provisions of the 1997 Incentive
Plan of the Company, as amended (the "Plan") and shall vest in accordance with
the terms set forth in the Incentive Stock Option Agreement between the Company
and the Employee dated as of February 15, 2000. In addition to the Option, the
Company may grant to the Employee additional stock options under the Plan as
determined by the Compensation Committee of the Board from time to time in its
sole discretion.
5. Benefits and Expenses. Except as otherwise provided in this Agreement or
in Schedule A attached hereto, the Employee shall be entitled to (i) all
standard benefits for executive level vice-presidents of the Company and (ii)
those benefits set forth on Schedule A hereto (collectively, "Benefits").
6. Confidentiality. Employee recognizes and acknowledges that the
Proprietary Information (as hereinafter defined) is a valuable, special and
unique asset of the Business of the Company. As a result, both during the Term
and thereafter, Employee shall not, without the prior written consent of the
Company, for any reason, either directly or indirectly, divulge to any
third-party or use for his own benefit, or for any purpose other than the
exclusive
-2-
<PAGE>
benefit of the Company, any confidential, proprietary, business and technical
information or trade secrets of the Company or of any subsidiary or affiliate of
the Company ("Proprietary Information") revealed, obtained or developed in the
course of his employment with the Company. Nothing herein contained shall
restrict Employee's ability to make such disclosures as may be necessary or
appropriate to the effective and efficient discharge of the duties required by
or appropriate for his Position or as such disclosures may be required by law;
and further provided, that nothing herein contained shall restrict Employee from
divulging or using for his own benefit or for any other purpose any Proprietary
Information that is readily available to the general public so long as such
information did not become available to the general public as a direct or
indirect result of Employee's breach of this Section 6. Failure by the Company
to mark any of the Proprietary Information as confidential or proprietary shall
not affect its status as Proprietary Information under the terms of this
Agreement.
7. Property.
(a) All right, title and interest in and to Proprietary
Information shall be and remain the sole and exclusive property of the Company.
During the Term, Employee shall not remove from the Company's offices or
premises any documents, records, notebooks, files, correspondence, reports,
memoranda or similar materials of or containing Proprietary Information, or
other materials or property of any kind belonging to the Company unless
necessary or appropriate in accordance with the duties and responsibilities
required by or appropriate for his Position and, in the event that such
materials or property are removed, all of the foregoing shall be returned to
their proper files or places of safekeeping as promptly as possible after the
removal shall serve its specific purpose. Employee shall not make, retain,
remove and/or distribute any copies of any of the foregoing for any reason
whatsoever except as may be necessary in the discharge of his assigned duties
and shall not divulge to any third person the nature of and/or contents of any
of the foregoing or of any other oral or written information to which he may
have access or with which for any reason he may become familiar, except as
disclosure shall be necessary in the performance of his duties or as otherwise
permitted pursuant to Section 6 hereof; and upon the termination of his
employment with the Company, he shall leave with or return to the Company all
originals and copies of the foregoing then in his possession, whether prepared
by Employee or by others.
(b) (i) Employee agrees that all right, title and interest in and
to any innovations, designs, systems, analyses, ideas for marketing programs,
and all copyrights, patents, trademarks and trade names, or similar intangible
personal property which have been or are developed or created in whole or in
part by Employee (1) at any time and at any place while the Employee is employed
by Company and which, in the case of any or all of the foregoing, are related to
and used in connection with the Business of the Company, (2) as a result of
tasks assigned to Employee by the Company, or (3) from the use of premises or
personal property (whether tangible or intangible) owned, leased or contracted
for by the Company (collectively, the "Intellectual Property"), shall be and
remain forever the sole and exclusive property of the Company. The Employee
shall promptly disclose to the Company all Intellectual Property, and the
Employee shall have no claim for additional compensation for the Intellectual
Property.
-3-
<PAGE>
(ii) The Employee acknowledges that all the Intellectual
Property that is copyrightable shall be considered a work made for hire under
United States Copyright Law. To the extent that any copyrightable Intellectual
Property may not be considered a work made for hire under the applicable
provisions of the United States Copyright Law, or to the extent that,
notwithstanding the foregoing provisions, the Employee may retain an interest in
any Intellectual Property that is not copyrightable, the Employee hereby
irrevocably assigns and transfers to the Company any and all right, title, or
interest that the Employee may have in the Intellectual Property under
copyright, patent, trade secret and trademark law, in perpetuity or for the
longest period otherwise permitted by law, without the necessity of further
consideration. The Company shall be entitled to obtain and hold in its own name
all copyrights, patents, trade secrets, and trademarks with respect thereto.
(iii) Employee further agrees to reveal promptly all
information relating to the same to an appropriate officer of the Company and to
cooperate with the Company and execute such documents as may be necessary or
appropriate (1) in the event that the Company desires to seek copyright, patent
or trademark protection, or other analogous protection, thereafter relating to
the Intellectual Property, and when such protection is obtained, to renew and
restore the same, or (2) to defend any opposition proceedings in respect of
obtaining and maintaining such copyright, patent or trademark protection, or
other analogous protection.
(iv) In the event the Company is unable after reasonable
effort to secure Employee's signature on any of the documents referenced in
Section 7(b)(iii) hereof, whether because of Employee's physical or mental
incapacity or for any other reason whatsoever, Employee hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as Employee's agent and attorney-in-fact, to act for and in his behalf and stead
to execute and file any such documents and to do all other lawfully permitted
acts to further the prosecution and issuance of any such copyright, patent or
trademark protection, or other analogous protection, with the same legal force
and effect as if executed by Employee.
8. Noncompetition.
8.1 Covenant Not to Compete. The Employee shall not, during the Term,
including any extensions of the Term, and during the Restricted Period, as
hereinafter defined, do any of the following directly or indirectly without the
prior written consent of the Company:
(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 the date of this Agreement, contemplated to be conducted during the Term
of this Agreement (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");
-4-
<PAGE>
(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; 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
prospective 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 the termination of Employee's employment
hereunder.
8.2 Restricted Period. Other than as specifically provided in this
Section 8.2, the Restricted Period shall begin on the date of the termination of
this Agreement and shall continue for a period of twelve (12) months thereafter,
provided, however, that if this Agreement is not renewed upon the expiration of
the Initial Term, the Restricted Period shall begin on the date of such
expiration and shall continue for a period of six (6) months thereafter.
8.3 Forfeiture of Options. Notwithstanding any other provision of this
Agreement, any unexercised stock options or unvested stock award shall become
nonexercisable and shall be forfeited if the Employee is terminated pursuant to
Section 8.1 hereof.
9. Termination. Employee's employment hereunder may be terminated during
the Term upon the occurrence of any one of the events described in this Section
9. Upon termination, Employee shall be entitled only to such compensation and
benefits as described in this Section 9.
9.1 Termination for Disability.
(a) In the event of the disability of the Employee such that
Employee is unable to perform his duties and responsibilities hereunder to the
full extent required by this Agreement by reasons of illness, injury or
incapacity for a period of more than one hundred twenty (120) consecutive days
or more than one hundred eighty (180) days, in the aggregate, during any seven
hundred thirty (730) day period ("Disability"), Employee's employment hereunder
may be terminated by the Company by notice to Employee pursuant to a
determination by the Chief Executive Officer.
-5-
<PAGE>
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.1(a), Employee will be entitled to receive all
accrued and unpaid (as of the date of such termination) Base Salary, Benefits,
Earned Bonus (as defined in the Plan) and other forms of compensation and
benefits payable or provided in accordance with the terms of any then existing
compensation or benefit plan or arrangement ("Other Compensation"), including
payment prescribed under any disability or life insurance plan or arrangement in
which he is a participant or to which he is a party as an employee of the
Company. Except as specifically set forth in this Section 9.1(b), the Company
shall have no liability or obligation to Employee for compensation or benefits
hereunder by reason of such termination.
(c) For purposes of this Section 9.1, except as hereinafter
provided, the determination as to whether Employee is Disabled shall be made by
a licensed physician selected by Employee and shall be based upon a full
physical examination and good faith opinion by such physician. In the event that
the Chief Executive Officer disagrees with such physician's conclusion, the
Chief Executive Officer may require that Employee submit to a full physical
examination by another licensed physician selected by Employee and approved by
the Company. If the two opinions shall be inconsistent, a third opinion shall be
obtained after full physical examination by a third licensed physician selected
by Employee and approved by the Company. The majority of the three opinions
shall be conclusive.
9.2 Termination by Death. In the event that Employee dies during the
Term, Employee's employment hereunder shall be terminated thereby and the
Company shall pay to Employee's executors, legal representatives or
administrators an amount equal to the accrued and unpaid portion of his Base
Salary, Benefits, Earned Bonus and Other Compensation through the end of the
month in which he dies. Except as specifically set forth in this Section 9.2,
the Company shall have no liability or obligation hereunder to Employee's
executors, legal representatives, administrators, heirs or assigns or any other
person claiming under or through him by reason of Employee's death, except that
Employee's executors, legal representatives or administrators will be entitled
to receive the payment prescribed under any death or disability benefits plan in
which he is a participant as an employee of the Company, and to exercise any
rights afforded under any compensation or benefit plan then in effect.
9.3 Termination By Company for Cause.
(a) The Company may terminate Employee's employment hereunder at
any time for "cause" upon written notice to Employee based upon a good faith
determination by the Chief Executive Officer. The good-faith nature of the
determination shall not in and of itself mean that "cause" exists. For purposes
of this Agreement, "cause" shall mean: (i) any material breach by Employee of
any of his obligations under Section 6, 7, or 8 of this Agreement, if not cured
within 30 days notice from the company, (ii) gross incompetence in the
performance by Employee of the duties required by or appropriate for his
Position, if not cured within thirty (30) days notice from the Company, (iii) a
material violation, that is not cured within 30 days notice from the company, of
the Company's employee policies, as may be
-6-
<PAGE>
amended from time to time, or (iv) other conduct of Employee involving any type
of willful misconduct with respect to the Company, including without limitation
fraud, embezzlement, theft or proven dishonesty in the course of his employment
or conviction of a felony.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.3(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base Salary,
Benefits and Other Compensation. All Base Salary and Benefits shall cease at the
time of such termination, subject to the terms of any benefit or compensation
plan then in force and applicable to Employee. Except as specifically set forth
in this Section 9.3, the Company shall have no liability or obligation hereunder
by reason of such termination.
9.4 Termination By Company Without Cause.
(a) The Company may terminate Employee's employment hereunder at
any time, for any reason, without cause, effective upon the date designated by
the Company upon fifteen (15) days notice to Employee.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.4(a), Employee shall be entitled to receive all
accrued but unpaid (as of the effective date of such termination) Base Salary,
Benefits, Earned Bonus and Other Compensation, plus continuation of the then
current Base Salary and Benefits (including vesting of options and other
Benefits) for a period of twelve (12) months thereafter. Except as specifically
set forth in this Section 9.4, the Company shall have no liability or obligation
hereunder by reason of such termination.
9.5 Termination By Employee
(a) Employee may terminate Employee's employment hereunder upon
sixty (60) days notice of the termination of his employment hereunder pursuant
to this Section 9.5(a) (the date the Employee gives such notice shall be herein
referred to as the "Request Date"). Notwithstanding the foregoing, upon receipt
by the Company of such written notice of termination, the Company in its sole
discretion, may deem such termination effective immediately (the "Accelerated
Termination Date"). In the event the parties mutually agree to an alternative
date of termination, that date shall be considered the Request Date.
(b) In the event of a termination of Employee's employment
hereunder pursuant to Section 9.5(a) hereof, Employee shall be entitled to
receive all accrued but unpaid (as of the earlier of the Request Date or the
Accelerated Termination Date), Base Salary and Benefits. If the Company does not
terminate the Employee immediately upon receipt of the termination notice and
Employee performs his duties in a satisfactory manner, as determined in the sole
discretion of the Company, until the Request Date, Employee shall also be
entitled to an amount equal to one month's Base Salary (in effect at such time).
In addition, in the event of a termination of Employee's employment pursuant to
Section 9.5(a) at the end of the Term upon sixty days (60) prior written notice
and upon the satisfactory completion, in the sole discretion of
-7-
<PAGE>
the Company, of Employee's duties during the 60-day period after receipt of such
termination notice, Employee shall be entitled to receive an amount equal to one
month's Base Salary (in effect at such time) multiplied by the number of the
complete 12-month periods of ImageMax service (whether or not pursuant to this
Agreement) completed prior to giving notice of termination. Except as
specifically set forth in this Section 9.5(b), all Base Salary, Benefits and
Bonuses shall cease at the time of such termination, subject to the terms of any
benefit or compensation plan then in force and applicable to Employee. Except as
specifically set forth in this Section 9.5, the Company shall have no liability
or obligation hereunder by reason of such termination.
9.6 Sale of Company/Change of Control.
(a) If there is a Sale of the Company or a Change of Control
during the Term, then the Company or the successor to all or substantially all
of the Company's assets, capital stock or business (the "Successor Entity"), as
the case may be, must offer Employee employment pursuant to a written contract
offer (the "Offer") within five (5) days of such Sale of the Company or Change
of Control. Employee shall, within fifteen (15) days after receipt of such
Offer, either (i) accept the terms of the Offer, such acceptance indicated by
return of a copy of the Offer duly executed, (ii) elect in writing, provided to
the Company or the Successor Entity, as the case may be, to remain employed
under this Agreement for the remainder of the Term, or (iii) elect to terminate
Employee's employment hereunder upon sixty (60) days prior notice, such
termination to be effective at the expiration of said sixty (60) day period, or
sooner, if desired by the Company or the Successor Entity.
(b) For purposes of this Agreement, a "Change of Control" means
either (i) the sale, transfer, assignment or other disposition by stockholders
of the Company, in one transaction or a series of related transactions, of more
than thirty percent (30%) of either the outstanding shares of common stock or
the combined voting power represented by the Company's then outstanding voting
securities entitled to vote generally or the approval by the stockholders of the
Company of a reorganization, merger or consolidation, in each case, with respect
to which persons who were stockholders of the Company immediately prior to such
reorganization, merger or consolidation do not, immediately thereafter, own more
than fifty percent (50%) of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated
company's then outstanding securities, in a liquidation or dissolution of
Company or of the sale of all or substantially all of Company's assets, other
than (A) any such sales, transfers, assignments or other dispositions by such
stockholders to their respective Affiliates, (B) any such transaction effected
primarily to reincorporate the Company in another jurisdiction or (C) any
transaction in connection with the simultaneous acquisition of document
management companies and the initial public offering of the common stock of the
Company or its affiliate; or (ii) a majority of members of the Company's Board
of Directors is replaced during any 12-month period by directors whose
appointment or election is not advised by a majority of the members of the
Company's Board of Directors prior to the date of the appointment or election.
-8-
<PAGE>
(c) For purposes of this Agreement, "Affiliate" means, with
respect to any stockholder of the Company, (i) any Person directly or indirectly
controlling, controlled by or under common control with such stockholder, (ii)
any Person owning or controlling ten percent (10%) or more of the outstanding
voting securities of such stockholder, (iii) any officer, director or general
partner of such stockholder, or (iv) 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 (i) through
(iv) of this paragraph (c).
(d) For purposes of this Agreement, "Person" means an individual,
partnership, corporation, joint venture, association, trust, unincorporated
association, other entity or association.
(e) For purposes of this Agreement, a "Sale of the Company" means
a sale, transfer, assignment or other disposition (including by merger or
consolidation), of all of the outstanding stock of the Company, or of all or
substantially all of the assets of the Company, a liquidation or dissolution of
the Company. A "Sale of the Company" shall not include the consummation of a
public offering of Common Stock of the Company or its affiliate pursuant to a
registration statement or any transaction effected primarily to reincorporate
the Company in another jurisdiction.
(f) In the event of termination of Employee's employment
hereunder pursuant to clause (iii) in paragraph (a) above, Employee shall be
entitled to receive all accrued but unpaid (as of the effective date of such
termination) Base Salary, Benefits and Earned Bonus and Other Compensation. In
addition, in such case Employee shall be entitled to receive Base Salary and
Benefits for the twelve (12) months following the effective date of such
termination (the "Additional Amount"). At his sole option, Employee may receive
the Additional Amount paid either (i) monthly for twelve (12) months, or (ii) in
one payment on the effective date of such termination, in which case the value
of the Benefits otherwise payable will be monetized, and such payment of the
Additional Amount will be discounted at the then current Federal Short Term Rate
as defined in the Internal Revenue Code of 1986, as amended.
(g) In the event Employee chooses to continue employment
hereunder pursuant to clause (i) or (ii) in paragraph (a) above and Employee's
employment is thereafter terminated prior to the expiration of the Term for any
reason other than Death, Disability or termination pursuant to clause (iii) in
paragraph (a) above, Employee shall be entitled to receive all the benefits and
compensation referred to in paragraph (f) above. In the event Employee chooses
to continue employment hereunder pursuant to clause (ii) in paragraph (a) above,
at the expiration of the Term, Employee shall be entitled to receive an amount
equal to two months' Base Salary (in effect at such time) multiplied by the
number of complete 12-month periods of service completed prior to such
termination
(h) If this Agreement is assumed by any Successor Entity, any
payments set forth herein shall be the obligation of such Successor Entity.
Except as specifically set forth in this Agreement, (i) all Base Salary,
Benefits and Bonuses shall cease at the time of such termination, subject to the
terms of any benefit or compensation plans then in force and
-9-
<PAGE>
applicable to Employee, and (ii) the Company shall have no liability or
obligation hereunder by reason of such termination.
(i) If the Successor Entity fails to make the Offer, Employee
shall be entitled to receive all of the benefits and compensation referred to in
paragraph (f) above.
9.7 Severance Upon Expiration of the Initial Term. If this Agreement
is not renewed by the parties upon the expiration of the Initial Term, Employee
shall be entitled to receive all accrued but unpaid (as of the effective date of
such termination) Base Salary, Benefits, Earned Bonus and Other Compensation,
plus continuation of the then current Base Salary and Benefits (including
vesting of options and other Benefits) for a period of six (6) months
thereafter. Except as specifically set forth in this Section 9.7, the Company
shall have no liability or obligation hereunder by reason of such termination.
10. Other Agreements. Employee represents and warrants to the Company that:
(a) There are no restrictions, agreements or understandings
whatsoever to which Employee is a party which would prevent or make unlawful
Employee's execution of this Agreement or Employee's employment hereunder, or
which is or would be inconsistent or in conflict with this Agreement or
Employee's employment hereunder, or would prevent, limit or impair in any way
the performance by Employee of his obligations hereunder,
(b) That Employee's execution of this Agreement and Employee's
employment hereunder shall not constitute a breach of any contract, agreement or
understanding, oral or written, to which Employee is a party or by which
Employee is bound, and
(c) That Employee is free to execute this Agreement and to enter
into the employ of the Company pursuant to the provisions set forth herein.
(d) In the event that they are still in effect, that Employee
shall disclose the existence and terms of the restrictive covenants set forth in
this Agreement to any employer that the Employee may work for during the term of
this Agreement (which employment is not hereby authorized) or after the
termination of the Employee's employment at the Company.
11. Survival of Provisions. The provisions of this Agreement set forth in
Sections 6, 7, 8, 9, 21 and 22 hereof shall survive the termination of
Employee's employment hereunder.
12. Indemnification. The Company shall indemnify the Employee from and
against any and all losses, costs, damages or expenses the Employee may sustain
by reason of his
-10-
<PAGE>
employment hereunder in the same manner and to the same extent as the executive
officers of the Company.
13. Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the Company and Employee and their respective successors,
executors, administrators, heirs and/or permitted assigns; provided, however,
that neither Employee nor the Company may make any assignments of this Agreement
or any interest herein, by operation of law or otherwise, without the prior
written consent of the other party hereto, except that, without such consent,
the Company may assign this Agreement to an Affiliate or any successor to all or
substantially all of its assets and business by means of liquidation,
dissolution, merger, consolidation, transfer of assets, or otherwise, provided
that such successor assumes in writing all of the obligations of the Company
under this Agreement, subject, however, to Employee's rights as to termination
as provided in Section 9.6 hereof.
14. Notice. Any notice or communication required or permitted under this
Agreement shall be made in writing and sent by certified or registered mail,
return receipt requested, addressed as follows:
If to Employee:
Mitch Taube
[Address]
If to Company:
Mark Glassman
ImageMax, Inc.
455 Pennsylvania Avenue, Suite 128
Fort Washington, Pennsylvania 19034
or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above.
15. Entire Agreement; Amendments. This Agreement contains the entire
agreement and understanding of the parties hereto relating to the subject matter
hereof, and merges and supersedes all prior and contemporaneous discussions,
agreements and understandings of every nature between the parties hereto
relating to the employment of Employee with the Company. This Agreement
specifically supersedes the Employment Agreement between the Company and
Employee dated December 9, 1997. This Agreement does not supersede any provision
of the [Purchase and Sale Agreement] by and between Company and Employee dated
as of December 9, 1997, including any noncompetition agreement set forth
therein. This Agreement may not be changed or modified, except by an agreement
in writing signed by each of the parties hereto.
-11-
<PAGE>
16. Waiver. The waiver of the breach of any term or provision of this
Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement.
17. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
18. Invalidity. In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
the validity of any other provision of this Agreement, and such provision(s)
shall be deemed modified to the extent necessary to make it enforceable.
19. Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
20. Number of Days. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays, Sundays and legal
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or day which is a holiday in Philadelphia, Pennsylvania, then
such final day shall be deemed to be the next day which is not a Saturday,
Sunday or legal holiday.
21. Specific Enforcement; Extension of Period.
(a) Employee acknowledges that the restrictions contained in
Sections 6, 7, and 8 hereof are reasonable and necessary to protect the
legitimate interests of the Company and its affiliates and that the Company
would not have entered into this Agreement in the absence of such restrictions.
Employee also acknowledges that any breach by him of Sections 6, 7, or 8 hereof
will cause continuing and irreparable injury to the Company for which monetary
damages would not be an adequate remedy. The Employee shall not, in any action
or proceeding to enforce any of the provisions of this Agreement, assert the
claim or defense that an adequate remedy at law exists. In the event of such
breach by Employee, the Company shall have the right to enforce the provisions
of Sections 6, 7, and 8 of this Agreement by seeking injunctive or other relief
in any court, and this Agreement shall not in any way limit remedies of law or
in equity otherwise available to the Company. If an action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to recover, in addition to any other relief, reasonable
attorneys' fees, costs and disbursements. In the event that the provisions of
Sections 6, 7, or 8 hereof should ever be adjudicated to exceed the time,
geographic, or other limitations permitted by applicable law in any applicable
jurisdiction, then such provisions shall be deemed reformed in such jurisdiction
to the maximum time, geographic, or other limitations permitted by applicable
law.
(b) In the event that Employee shall be in breach of any of the
restrictions contained in Section 8 hereof, then the Restricted Period shall be
extended for a period of time equal to the period of time that Employee is in
breach of such restriction.
-12-
<PAGE>
22. Arbitration. In the event that the parties are unable to resolve any
disputes arising hereunder, such dispute shall be submitted for a binding
determination by a neutral third party designated by the President of the
Philadelphia office of the American Arbitration Association.
23. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall be deemed to be one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
the day and year first written above.
IMAGEMAX, INC.
By:
--------------------------------------
Name:
---------------------------
Title:
--------------------------
----------------------------------------
Mitchell J. Taube
-14-
<PAGE>
SCHEDULE A
1. Life Insurance. Company will provide Employee, at no expense to the
Employee, life insurance coverage in an amount equal to three (3) times
Employee's initial Base Salary.
2. Vacation. The Employee shall be entitled to twenty (20) days per year of
paid vacation.
3. Business Travel Accident Insurance. Company will provide Employee, at no
expense to the Employee, business travel accident insurance coverage in an
amount equal to six (6) times Employee's base salary through either: (i) a
group policy covering similarly situated employees, or (ii) a policy
specific to Employee, depending on the cost and availability of coverage.
B-1
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 2,040 516
<SECURITIES> 0 0
<RECEIVABLES> 10,221 10,304
<ALLOWANCES> 392 385
<INVENTORY> 2,222 2,049
<CURRENT-ASSETS> 15,318 13,484
<PP&E> 9,157 8,804
<DEPRECIATION> 3,810 1,991
<TOTAL-ASSETS> 65,173 66,804
<CURRENT-LIABILITIES> 21,660 30,257
<BONDS> 0 0
0 0
0 0
<COMMON> 53,411 52,764
<OTHER-SE> (16,350) (16,435)
<TOTAL-LIABILITY-AND-EQUITY> 65,173 66,804
<SALES> 2,572 2,970
<TOTAL-REVENUES> 14,693 15,482
<CGS> 1,541 1,851
<TOTAL-COSTS> 9,228 9,719
<OTHER-EXPENSES> 4,462 4,846
<LOSS-PROVISION> 0 827
<INTEREST-EXPENSE> 589 532
<INCOME-PRETAX> 414 (442)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 414 (442)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 414 (442)
<EPS-BASIC> 0.06 (0.07)
<EPS-DILUTED> 0.06 (0.07)
</TABLE>
