-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LgL3XceS1lTY/feIBcwaX8BXOuPN+lZlZy9q20evkBolE9z12+/i8Y3P1Zg+uvzv I8PojHT06c+yOw4LBJ0caA== 0000950115-99-000647.txt : 19990503 0000950115-99-000647.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950115-99-000647 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990430 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMAGEMAX INC CENTRAL INDEX KEY: 0001046032 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 232865585 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-23077 FILM NUMBER: 99607976 BUSINESS ADDRESS: STREET 1: 1100 EAST HECTOR STREET STREET 2: SUITE 396 CITY: CONSHOHOCKEN STATE: PA ZIP: 19428 BUSINESS PHONE: 6108322111 MAIL ADDRESS: STREET 1: 1100 EAST HECTOR STREET STREET 2: SUITE 396 CITY: CONSHOHOCKEN STATE: PA ZIP: 19428 10-K405/A 1 AMENDED ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From _________ to _________ Commission File Number 0-23077 ------- 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.) 1100 E. Hector Street, Suite 396 Conshohocken, Pennsylvania 19428 --------------------------------------- ---------- (Address of principal executive offices (Zip Code) Registrant's telephone number, including area code: (610) 832-2111 -------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, no par value per share ------------------------------------ (Title of class) Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in Part III of this Form 10-K/A or any amendment to this Form 10-K/A. [ ] The aggregate market value of the voting stock held by non-affiliates of the Registrant was $7,899,782 as of April 13, 1999. On April 13, 1999 the Registrant had outstanding 6,591,065 shares of Common Stock, no par value. DOCUMENTS INCORPORATED BY REFERENCE In accordance with instruction G(3) to Form 10-K, the Registrant is amending its Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1999 to provide information required under Part III thereof.
TABLE OF CONTENTS Item Page - ---- ---- PART III................................................................................ 1 Item 10. Directors and Executive Officers of Registrant ......................... 1 Item 11. Executive Compensation ................................................. 4 Item 12. Security Ownership of Certain Beneficial Owners and Management.......... 10 Item 13. Certain Relationships and Related Transactions ......................... 12 PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K ........ 13
PART III. Item 10. Directors and Executive Officers of Registrant The Board of Directors is divided into three classes of directors with each director serving a three-year term. Information regarding the Company's executive officers and certain key employees who are not directors is set forth in Item 4(a) of the Company's Annual Report on Form 10-K previously filed with the Securities and Exchange Commission. The following table sets forth the name, age, period of service and principal occupation of each director.
NAME AGE SINCE PRINCIPAL OCCUPATION - ---- --- ----- -------------------- Lewis E. Hatch, Jr. 72 1997 Chairman of the Board of Directors(2)(4) Andrew R. Bacas+ 40 1996 Acting Chief Executive Officer, Vice Chairman of the Board of Directors and Secretary(2) Lennox K. Black 68 1997 Director(3)(5) David C. Carney 61 1997 Director(1)(4) Bruce M. Gillis* 42 1996 Director Steven N. Kaplan 38 1997 Director(3)(5) Rex Lamb 40 1997 Business Unit Manager, Group Leader and Director(3) John E. Semasko 53 1997 Business Unit Manager, Group Leader and Director(2)(4) Mitchell J. Taube 42 N/A Business Unit Manager, Group Leader and Director(1)
- ---------- (1) Class I director to serve until the 2001 annual meeting of the Company's shareholders. (2) Class II director to serve until the 1999 annual meeting of the Company's shareholders. (3) Class III director to serve until the 2000 annual meeting of the Company's shareholders. (4) Member of the Audit Committee. (5) Member of the Compensation Committee. + A description of Mr. Bacas's background and biological information is set forth in Item 4(a) of the Company's Annual Report on Form 10-K previously filed with the Securities and Exchange Commission. * Mr. Gillis resigned as a director of the Company effective April 12, 1999. LEWIS E. HATCH, JR. became a director of the Company in December 1997 and has served as Chairman of the Board of Directors since September 1998. Mr. Hatch is the retired former Chairman and Chief Operating Officer of Rusch International, an international medical device manufacturer. Mr. Hatch is a director of Teleflex Incorporated and Park-Ohio Industries, Inc. Mr. Hatch has an undergraduate degree from Ursinus College. LENNOX K. BLACK became a director of the Company in December 1997. Mr. Black has been the Chairman of Teleflex Incorporated, a diversified manufacturer of automotive, marine, industrial, aerospace and medical products, since 1982 and served as its Chief Executive Officer from 1982 to 1995. Mr. Black currently serves as a director of Quaker Chemical Corporation, Pep Boys and the Penn Virginia Corporation. Mr. Black has an undergraduate degree in Economics from McGill University. DAVID C. CARNEY became a director of the Company in December 1997. Mr. Carney has been an Executive Vice President of Jefferson Health System, a health care organization, since 1996. From 1991 to 1995, Mr. Carney served as the Chief Financial Officer of CoreStates Financial Corporation. Mr. Carney currently serves as a director of CMAC Investment Corporation, AAA Mid-Atlantic & Keystone Insurance Companies and the World Affairs Council. Mr. Carney has an undergraduate degree from Temple University and is a graduate of the Advanced Management Program at the Harvard Business School. BRUCE M. GILLIS is a founder of the Company and served as Chief Executive Officer and Chairman of the Board of Directors from its inception in November 1996 until his resignation as Chief Executive Officer and Chairman in September 1998. Mr. Gillis remained a member of the Board of Directors until his resignation therefrom in April, 1999. STEVEN N. KAPLAN became a director of the Company in December 1997. Mr. Kaplan is the Leon Carroll Marshall Professor of Finance at the University of Chicago Graduate School of Business. Dr. Kaplan joined the faculty of the University of Chicago originally in 1988 as an Assistant Professor. Previously, Dr. Kaplan was an associate at Booz Allen Hamilton, Inc. and an analyst with Kidder Peabody and Company. Dr. Kaplan holds an A.B. degree in Applied Mathematics, an A.M. and Ph.D. in Business Economics from Harvard University. REX LAMB has managed the Company's Lincoln, Nebraska business unit and has served as a director of the Company since December 1997. Mr. Lamb founded DocuTech, Inc., a document management services company, in 1991 and served as its President from inception until its acquisition by the Company in December 1997. Mr. Lamb co-founded DocuTech Data Systems, Inc., a provider of open-architecture document-scanning software products, in 1994 and served as its President since inception until its acquisition by the Company in December 1997. Mr. Lamb is the Group Leader for the Lincoln, NE, Syracuse, NY and Minnetonka, MN business units. Mr. Lamb has an undergraduate degree in Education from the University of Nebraska. JOHN E. SEMASKO has been a director of the Company since December 1997. Mr. Semasko acquired Oregon Mico-Imaging, Inc., a document management services company, in 1975 and served as its President from its inception until its acquisition by the Company in December 1997. Mr. Semasko is the Group Leader for the Eugene, OR, Hayward, CA and Tempe, AZ business units. Mr. Semasko has an undergraduate degree in Forestry from Rutgers University. MITCHELL J. TAUBE has managed the Company's Millwood, New York business unit since December 1997 and has served as a director of the Company since June 1998. Mr. Taube is a director of Briarcliff Manor Education Foundation and currently serves on the Service Company Executive Committee of the Association for Information and Image Management International. Mr. Taube is the Group Leader for the Millwood, NY and Philadelphia, PA business units. Mr. Taube has an undergraduate degree and an MBA from Hofstra University. During 1998, there was no incumbent who, during the last full fiscal year, attended in person or by phone fewer than 75% of the meetings of the Board of Directors. Committees of the Board The Board of Directors established its Compensation Committee and Audit Committee in 1998. The Compensation Committee of the Board of Directors, subject to the approval of the Board of Directors, determines the compensation of the Company's executive officers and oversees the administration of executive compensation programs. The Compensation Committee is composed of two independent, nonemployee directors. The Audit Committee recommends outside accountants, reviews the results and scope of the annual audit, the services provided by the Company's independent auditors and the recommendations of the auditors with respect to the Company's accounting systems and controls. The Audit Committee is composed of one employee director and two independent, nonemployee directors. Representatives of the Company's independent auditing firm, Arthur Andersen LLP, met with the two independent director members of the Audit Committee on March 16, 1999 and reviewed their examination of the Company's financial statements for the year ended December 31, 1998. 2 Compensation of Directors Directors are reimbursed for travel expenses incurred for each board and committee meeting attended in person. Pursuant to the Company's 1997 Incentive Stock Option Plan (the "1997 Incentive Plan"), nonqualified stock options (options that are not incentive stock options) for 60,000 shares of Common Stock were granted in 1998 to nonemployee directors (representing 20,000 to Mr. Hatch and 10,000 each to Messrs. Black, Carney, Gillis and Kaplan) at an exercise price of $2.375 per share. These options vest in equal annual installments over three years, but become fully exercisable in the event of a change of control, as defined in the 1997 Incentive Plan. In April 1999, 10,000 of these options were cancelled as a result of Mr. Gillis' resignation from the Board of Directors. In 1998, a total of 60,000 options granted to nonemployee directors (representing 20,000 each to Messrs. Black, Carney and Kaplan) in 1997 (at an exercise price of $12.00 per share) were cancelled. 3 Item 11. Executive Compensation The following Summary Compensation Table summarizes the compensation of the Chief Executive Officer and the four other executive officers of the Company for 1998 (the "Named Executive Officers").
Summary Compensation Table - ---------------------------------------------------------------------------------------------------------------------------------- Annual Compensation Long Term Compensation ---------------------------------------------- --------------------------------------------------- Awards Payouts Other -------------------------- -------------------- Annual Restricted Securities LTIP All other Name and Principal Compen- Stock Underlying Payouts Compen- Position Year Salary Bonus sation Award(s) Options(#) ($) sation - ------------------ ---- ------ ----- ------ -------- ---------- ----- ------ Bruce M. Gillis 1998(1) $143,846 -- $ 721(2) -- -- -- -- Former Chairman 1997(3) 83,333 -- -- 100,000 -- -- and Chief Executive Officer S. David Model 1998(4) $128,077 -- 1,010(2) -- -- -- -- Former President 1997(5) 56,250 -- -- -- -- -- -- and Chief Operating Officer Andrew R. Bacas(6) 1998 $119,077 -- 788(2) -- 30,000 -- -- Acting Chief 1997(3) 54,167 -- -- -- -- -- -- Executive Officer James D. Brown(7) 1998 $126,000 -- -- -- -- -- -- Former Senior Vice 1997(5) 48,750 -- -- -- -- -- -- President and Chief Financial Officer Richard D. Moseley 1998(8) $58,917 -- -- -- -- -- -- Former Chief 1997 -- -- -- -- -- -- -- Information Officer
- ---------- (1) For the period January 1, 1998 to September 18, 1998. Mr. Gillis resigned from his employment with the Company as of September 18, 1998. (2) Represents contributions to the Company's 401(k) plan made by the Company on behalf of such person. (3) For the period August 18, 1997 to December 31, 1997. (4) For the period January 1, 1998 to November 9, 1998. Mr. Model resigned from his employment with the Company as of November 9, 1998. (5) For the period August 1, 1997 to December 31, 1997. (6) As of September 19, 1999, Mr. Bacas was appointed to the position of Acting Chief Executive Officer. Previous to that date, Mr. Bacas held the position of Senior Vice President-Corporate Development. (7) Mr. Brown entered into a separation agreement with the Company pursuant to which he resigned from his employment with the Company effective as of April 30, 1999. The Company has appointed Mark P. Glassman to the position of Chief Financial Officer of the Company, effective as of May 1, 1999. (8) For the period April 15, 1998 to September 28, 1998. Mr. Moseley resigned from his employment with the Company as of September 28, 1998. 4 Stock Option Grants Pursuant to the 1997 Incentive Plan, nonqualified stock options for 80,000 shares of Common Stock were granted in 1998 to the Named Executive Officers. These grants vest in equal annual installments over three years, but become fully exercisable in the event of a change in control, as defined in the 1997 Incentive Plan. The table below shows option grants in 1998 to the Named Executive Officers.
Options Granted in the Last Fiscal Year Potential Realizable Value at Number of % of Total Assumed Annual Rates of Securities Options Stock Price Appreciation for Name Underlying Granted to Exercise Option Term (5 years)(1) - ---- Options Employees in Price Expiration ----------------------------- Granted Fiscal Year ($/share) Date 5% 10% ---------- ------------ --------- ---------- -------- -------- Bruce M. Gillis -- 0.00% $ -- N/A $ -- $ -- S. David Model -- 0.00% -- N/A -- -- Andrew R. Bacas 30,000 9.12% 2.375 10/01/2003 19,685 43,499 James D. Brown -- 0.00% -- N/A -- -- Richard D. Moseley 50,000 15.20% 12.00 12/08/2002 165,769 366,306
- ---------- (1) "Potential Realizable Value" of each grant is calculated assuming that the market price of the underlying security appreciates at annualized rates of 5% and 10% over the five-year term of the option. The result of these calculations are based on rates set forth by the Securities and Exchange Commission and are not necessarily intended to forecast possible future appreciation of the price of the Company's Common Stock. In 1998, a total of 187,500 options granted to the Named Executive Officers in 1997 (at an exercise price of $12.00) were cancelled. 5 Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values The table below shows option exercises by the Named Executive Officers in 1998 and year-end amounts of shares of Common Stock underlying outstanding options.
Number of Securities Value of Unexercised Underlying Unexercised In-the-Money Options Options at FY-End (#) at FY-End ($)(1) Shares Acquired Value Exercisable/ Exercisable/ Name on Exercise (#) Realized ($) Unexercisable Unexercisable - ---- --------------- ------------ ---------------------- -------------------- Bruce M. Gillis -- -- 100,000/-0- $ -- S. David Model -- -- -- -- Andrew R. Bacas -- -- -0-/30,000 -- James D. Brown -- -- -- -- Richard D. Moseley -- -- 16,667/33,333 --
- ---------- (1) Based on the closing price of $2.00 on the Nasdaq National Market on December 31, 1998. Options granted to Mr. Gillis in 1997 and to Mr. Moseley in April 1998 were at an exercise price equal to the Company's initial public offering price of $12.00. Options granted to Mr. Gillis became fully exercisable in September 1998 under the terms of his separation agreement. One-third of the options granted to Mr. Moseley became exercisable in December 1998. Options granted to Mr. Bacas first become exercisable on October 1, 1999. Based on a closing price of $2.00 on the Nasdaq National Market on December 31, 1998, there is no value ascribed to the exercisable or unexercisable options at that date. Employment Agreements The Company entered into employment agreements with Messrs. Gillis, Model, Bacas and Brown in August 1997 and with Mr. Moseley in April 1998. The employment agreement for Mr. Bacas expires on December 31, 2000. The employment agreements for Messrs. Gillis, Model and Moseley terminated pursuant to their separation agreements as described below. In addition, Mr. Brown's employment agreement terminated effective as of April 30, 1999 pursuant to the terms of his separation agreement also described below. The Company entered into separation agreements with Messrs. Gillis and Moseley, separately, in September 1998 and with Mr. Model in November 1998. Under these agreements, Mr. Gillis resigned as Chairman and Chief Executive Officer, Mr. Moseley resigned as Chief Information Officer and Mr. Model resigned as President and Chief Operating Officer. Mr. Gillis remained a member of the Board of Directors until his resignation therefrom on April 12, 1999. In connection with Mr. Gillis' resignation as the Company's Chief Executive Officer, the Company's Board of Directors appointed Andrew R. Bacas as its Vice Chairman and Acting Chief Executive Officer and elected Lewis E. Hatch, Jr. as its Chairman. In addition, in April 1999, the Company entered into a separation agreement with Mr. Brown, whereby Mr. Brown resigned from his position as Senior Vice President - Finance and Chief Financial Officer, effective as of April 30, 1999. Under the terms of the separation agreements, the Company is obligated to make severance payments to each party as follows: Mr. Brown, $130,000 over 12 months in equal bi-weekly installments from May 1999 to 6 April 2000; Mr. Gillis, $300,000 over 12 months in three equal installments in September 1998, March 1999 and September 1999; Mr. Model, $225,000 over 18 months in equal bi-weekly installments from November 1998 to May 2000; and Mr. Moseley, $130,000 over 12 months, of which $65,000 was paid in 1998, with the remaining $65,000 to be paid over six months in equal monthly installments from March 1999 to September 1999. The separation agreements also provide, among other things, that certain expenses be paid by the Company, including relocation expenses of up to $35,000 and outplacement services of up to $15,000 for Mr. Moseley. Mr. Bacas serves as the Company's Acting Chief Executive Officer and previously served as its Senior Vice President Corporate Development, each position at a base annual salary of $130,000. Until April 30, 1999, Mr. Brown served as Senior Vice President - Chief Financial Officer at a base annual salary of $130,000. At the discretion of the Board of Directors, the base annual salary of Mr. Bacas is subject to increases periodically, and Mr. Bacas may receive an annual bonus. Each of the employment agreements provides for customary benefits including life, health and disability insurance, 401(k) plan participation and a car allowance. Each of the employment agreements further provides that if the employee is terminated without cause, he is entitled to severance pay of between six months' and one year's base salary and benefits. In the event the employee is terminated in connection with a change of control (as defined therein), he is entitled to receive 18 months' base salary and benefits. In connection with the separation agreements and employment agreements, should a change in control, as defined, occur within certain specified periods, these agreements provide, among other things, that the Company make aggregate payments to the executive officers of up to $1,110,000. The periods specified expire at various dates through December 31, 2000. Should a change of control occur beyond this date, the Company is not obligated to make any payments under these agreements. COMPENSATION COMMITTEE REPORT The Compensation Committee of the Board of Directors (the "Compensation Committee"), subject to the approval of the Board of Directors, determines the compensation of the Company's executive officers and oversees the administration of executive compensation programs. The Compensation Committee is composed of two independent, nonemployee directors. Executive Compensation Policies and Programs The Company's executive compensation programs are designed to attract and retain highly qualified executives and to motivate them to maximize shareholder returns by achieving aggressive goals. The programs link each executive's compensation directly to performance. A significant portion of each executive's compensation is dependent upon the appreciation of the Common Stock and meeting financial goals and other individual performance objectives. There are three basic components to this "pay for performance" system: base pay; annual incentive bonus; and long-term, equity-based incentive compensation (primarily stock and/or stock options). Each component is evaluated in the context of competitive conditions. In determining competitive compensation levels, the Company considers information from several sources, including compensation for comparably sized companies and companies in a similar stage of development. Since the Company's market for executive talent extends beyond the document management industry, the Compensation Committee considers data for companies in other industries. Base pay. Base pay is designed to be competitive within 20% above or below median salary levels at other similarly situated companies for equivalent positions. The executive's actual salary, relative to this competitive framework, varies based on individual performance and the executive's skills, experience and background. Annual incentive bonus. Given the operating performance of the Company, no incentive bonuses were paid in 1998. For 1999, award levels, like the base salary levels, will be set with reference to competitive conditions and are intended to motivate the Company's executives by providing substantial bonus payments for the achievement of aggressive goals. The actual amounts paid will be determined by performance based on two factors: 7 the Company's financial performance, measured against objectives established for net income, cash flow, productivity increases, revenue growth and shareholder returns; and the individual executive's performance against other specific management objectives, such as building operational systems and developing organizational capability. Financial and management objectives are given equal weight in determining bonus payments. The types and relative importance of specific financial and other business objectives varied among the Company's executives depending on their positions and the particular operations or functions for which they were responsible. Long-term equity-based incentive compensation. The long-term equity-based compensation program is tied directly to shareholder return. The executive is rewarded if the shareholders receive the benefit of appreciation in the price of the Common Stock. To date under the program, long-term incentive compensation consists of stock option grants, which vest over a three-year period. It is anticipated the Company will periodically grant new awards to provide continuing incentives for future performance, without regard to the number of outstanding awards. The principal purpose of the long-term incentive compensation program is to encourage the Company's executives to enhance the value of the Company, and hence, the price of the Common Stock and the shareholders' return. This component of the compensation system (through extended vesting) also is designed to create an incentive for the individual to remain with the Company. Policy with respect to Internal Revenue Code Section 162(m). In 1993, the Internal Revenue Code of 1986 (the "Code") was amended to add Section 162(m). Section 162(m) and the regulations thereunder place a limit of $1,000,000 on the amount of compensation that may be deducted by the Company in any year with respect to certain of the Company's most highly compensated officers. Section 162(m) does not, however, disallow a deduction for qualified "performance-based compensation," the material terms of which are disclosed to and approved by shareholders. The Company intends, to the extent practicable, to preserve the deductibility under the Code of compensation paid to its executive officers while maintaining compensation programs to attract and retain highly qualified executives in a competitive environment. Accordingly, compensation paid under the Company's 1997 Incentive Plan is generally deductible, although certain compensation paid to some executives may not be deductible. Compensation in 1998 In September 1998, in connection with an evaluation of the Company's operating performance and impending restructuring program, the Compensation Committee reviewed each component of executive compensation and how such compensation would provide incentives to the executive officers of the Company. This review was performed in light of, among other things, Mr. Gillis' resignation as Chief Executive Officer and Mr. Moseley's resignation as Chief Information Officer. The Compensation Committee determined that no base salary changes or bonus awards to executive officers were warranted, but that an equity-based incentive for Mr. Bacas was appropriate in connection with his appointment as Acting Chief Executive Officer. The equity-based incentive was a grant of stock options for 30,000 shares of Common Stock under the 1997 Incentive Plan at an exercise price of $2.375. In connection with this grant, Mr. Bacas voluntarily incurred, with the consent of the Compensation Committee, a base annual salary reduction from $130,000 to $100,000, which remained in effect through December 31, 1998. 8 Chief Executive Officer Prior to his resignation in September 1998, Mr. Gillis served as the Company's Chief Executive Officer since the Company's inception in November 1996. The Company and Mr. Gillis initially entered into an employment agreement in August, 1997, expiring on December 31, 2002, pursuant to which Mr. Gillis received a minimum annual base salary of $200,000 (subject to increases periodically at the discretion of the Board of Directors) and the grant of options, among other things. Prior to the Company's initial public offering and prior to the creation of the Compensation Committee, the Board of Directors granted Mr. Gillis 100,000 stock options that, under the terms of the separation agreement between the Company and Mr. Gillis, fully vested as of the date of the separation agreement. The original grant was made to provide a stock-based incentive to Mr. Gillis for future performance. No other incentive compensation was awarded to Mr. Gillis. Mr. Bacas serves as Acting Chief Executive Officer and has served in such capacity since September 1998. The Company and Mr. Bacas entered into an employment agreement in August 1997, expiring on December 31, 2000, pursuant to which Mr. Bacas receives a base salary of $130,000 (subject to increases periodically at the discretion of the Board of Directors) and the grant of options, among other things, originally in his capacity as Senior Vice President - - Corporate Development and presently as Acting Chief Executive Officer. Upon assuming the Acting Chief Executive Officer position, the terms of the employment agreement were not modified. In October 1998, the Board of Directors granted Mr. Bacas 30,000 stock options. The grant was made to provide a stock-based incentive to Mr. Bacas for future performance. No other incentive compensation was awarded to Mr. Bacas. Members of the Compensation Committee: Lennox K. Black, Chairman Steven N. Kaplan Set forth below is a line graph comparing the cumulative total shareholder return on the Company's Common Stock, based on the market price of the Common Stock, with cumulative total return (assuming dividend reinvestment) of common stock listed on the NASDAQ Stock Market and common stock issued by companies in a peer group selected by the Company for the period from December 4, 1997 to December 31, 1998. The peer group consists of the following companies: FYI, Inc., IKON Office Solutions, Inc., Lason, Inc., and Vestcom International, Inc. The companies included in the peer group were selected primarily because they were publicly-held companies with a substantial operations in the document management services industry. [GRAPHIC] In the printed version of the document, a line graph appears which depicts the following plot points: Research Data Group Peer Group Total Return Worksheet Imagemax Inc (IMAG)
12/4/97 % Peer Group Weighted Cumulative Total Return Market Cap Peer Group Cumulative Total Return ------------------------------------------------- ------------ (Weighted Average by Market Value) 12/4/97 12/97 3/98 6/98 9/98 12/98 12/31/98 - ---------------------------------- ------- ----- ---- ---- ---- ----- ------------ Peer Group Weighted Average: 100 91 110 60 39 46 100% 2,147 F Y I Inc FYII 100 102 121 126 108 141 14.46% Ikon Office Solutions Inc IKN 100 89 110 46 23 27 45.37% Lason Inc LSON 100 92 131 189 177 202 36.38% Vestcom Intl Inc VESC 100 110 51 45 45 44 3.79%
9 Item 12. Security Ownership of Certain Beneficial Owners and Management The following table sets forth, as of April 13, 1999 certain information with regard to beneficial ownership (as determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of outstanding shares of the Company's Common Stock by (i) each person known by the Company to beneficially own five percent (5%) or more of the outstanding shares of the Company's Common Stock, (ii) each director and Named Executive Officer individually, and (iii) all executive officers and directors of the Company as a group:
Total Number of Shares Percentage of Class of Name and Address of of Common Stock Common Stock Beneficial Owner Beneficially Owned(1) Beneficially Owned(1) - ------------------- ---------------------- ---------------------- William Blair and Company LLC 731,096(2) 10.9% 222 West Adams Street Chicago, IL 60606 Bruce M. Gillis 395,448(3) 5.9% 331 Aubrey Road Wynnewood, PA 19096 Andrew R. Bacas 227,526(4) 3.4% c/o ImageMax, Inc. 1100 E. Hector Street Conshohocken, PA 19428 Rex Lamb 224,188(5) 3.3% c/o ImageMax, Inc. 5001 Rentworth Court Lincoln, NE 68516 Mitchell J. Taube 199,904(6) 3.0% c/o ImageMax, Inc. 5 Schuman Road Millwood, NY 10546 John E. Semasko 157,054(6) 2.3% c/o ImageMax, Inc. 1790 West 11th Avenue Eugene, OR 97402 S. David Model 60,288 * 21 Roundhill Road Granby, CT 06035
10
Total Number of Shares Percentage of Class of Name and Address of of Common Stock Common Stock Beneficial Owner Beneficially Owned(1) Beneficially Owned(1) - ------------------- ---------------------- ---------------------- James D. Brown 49,145 * c/o ImageMax, Inc. 1100 E. Hector Street Conshohocken, PA 19428 Richard D. Moseley 43,109(7) * 7103 Sherman Street Philadelphia, PA 19119 Dr. Steven N. Kaplan 26,859(8) * c/o The University of Chicago Graduate School of Business 1101 East 58th Street Chicago, IL 60637 Lennox K. Black 17,000(6) * c/o Teleflex Incorporated 630 West Germantown Pike Suite 461 Plymouth Meeting, PA 19462 Lewis E. Hatch, Jr. 7,000(9) * 16 West Lakes Drive St. Simon's Island, GA 31522 David C. Carney 7,000(6) * c/o Jefferson Health System 259 Radnor-Chester Road Suite 290 Radnor, PA 19087 All Executive Officers 916,676(10) 13.7% and Directors as a Group (9 persons)
- ---------- * Less than 1% of the outstanding Common Stock. (1) As used in this table, "beneficial ownership" means the sole or shared power to vote or direct the voting of a security, or the sole or shared investment power with respect to a security (i.e., the power to dispose, or direct the disposition, of a security). A person is deemed as of any date to have beneficial ownership of any security that such person has the right to acquire within 60 days after such date. Percentage ownership is based upon 6,714,399 shares of Common Stock as of April 13, 1999. (2) Includes 450,904 shares over which William Blair and Company LLC has dispositive power only. (3) Includes 100,000 shares issuable upon the exercise of stock options granted which are exercisable at $12.00 per share as of April 13, 1999. 11 (4) Excludes 30,000 shares issuable upon the exercise of stock options granted on October 1, 1998 which are not exercisable within 60 days of April 30, 1998. (5) Excludes 15,000 shares issuable upon exercise of stock options granted on October 1, 1998 which are not exercisable within 60 days of April 30, 1998. (6) Excludes 10,000 shares issuable upon exercise of stock options granted on October 1, 1998 which are not exercisable within 60 days of April 30, 1998. (7) Includes 16,667 shares issuable upon the exercise of stock options which are exercisable at $12.00 per share within 60 days of April 30, 1999. Excludes 33,333 shares issuable upon the exercise of stock options granted April 15, 1998 which are not exercisable within 60 dates of April 30, 1999. (8) Includes 6,667 shares issuable upon the exercise of stock options which are exercisable at $12.00 per share as of April 30, 1999. Excludes 13,333 and 10,000 shares, respectively, issuable upon the exercise of stock options granted December 9, 1997 and October 1, 1998 which are not exercisable within 60 days of April 30, 1999. (9) Excludes 20,000 shares issuable upon the exercise of stock options granted October 1, 1998 which are not exercisable within 60 days of April 30, 1999 (10) Excludes 108,333 shares issuable upon the exercise of stock options granted which are not exercisable within 60 days of April 30, 1999. Item 13. Certain Relationships and Related Transactions Consulting Arrangement In September 1998, the Company entered into a consulting arrangement with Mr. Hatch, whereby Mr. Hatch provides consulting services to the Company for a fee of $6,000 per month. This arrangement provides that Mr. Hatch assist the Company in a variety of financial and operating matters, including the Company's negotiations with its banks and various operating procedures. In 1998, the Company paid $18,000 to Mr. Hatch under this arrangement. Future Transactions The Company has adopted a policy that it will not enter into any material transaction in which a Company director or officer has a direct or indirect financial interest, unless the transaction is determined by the Company's Board of Directors to be fair as to the Company or is approved by a majority of the Company's disinterested directors or by the Company's shareholders, as provided for under Pennsylvania law. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers and directors and persons who own more than ten percent (10%) of the Company's Common Stock to file initial reports of ownership and reports of change of ownership with the Securities and Exchange Commission. Executive officers and directors are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms they file. Based solely on a review of the copies of such forms furnished to it, the Company believes that, during the preceding year, Mr. Semasko was late in filing one section 16 report (Form 4) for four transactions completed in August 1998 and that Messrs. Bacas and Lamb, separately, were late in filing one section 16 report (Form 4) relating to one transaction completed in November 1998. In addition, Mr. Taube did not file a Form 3 upon becoming a director of the Company in June 1998. 12 PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a)1. Financial Statements See Index to the Consolidated Financial Statements which begin on page F-1 of the Company's Annual Report on Form 10-K filed on March 31, 1999. 2. Financial Statement Schedules See Schedule II - Valuation and Qualifying Accounts on page F-23 of the Company's Annual Report on Form 10-K filed on March 31, 1999. 3. Exhibits DESCRIPTION 2.1* Agreement and Plan of Reorganization dated September 9, 1997, by and among the Company, DocuTech Data Systems, Inc., and Rex Lamb and Mark Creglow (including escrow agreement). 2.2* Asset Purchase Agreement dated September 9, 1997 by and among the Company Rex Lamb and Vicki Lamb (including escrow agreement). 2.3* Agreement and Plan of Reorganization dated September 9, 1997, by and among the Company, Utz Medical Enterprises, Inc., and David C. Utz, Jr. (including escrow agreement). 2.4* Agreement and Plan of Reorganization dated September 9, 1997 by and among Jane Semasko and John Semasko, Oregon Micro-Imaging, Inc. and the Company (including escrow agreement). 2.5* Asset Purchase Agreement dated September 9, 1997 by and among Spaulding Company, Inc., Semco Industries, Inc., and the Company (including escrow agreement). 2.6* Asset Purchase Agreement dated September 9, 1997 by and among Total Information Management Corporation and the Company (including escrow agreement). 2.7* Stock Purchase Agreement dated September 9, 1997 by and among Ovidio Pugnale, Image Memory Systems, Inc. and the Company (including escrow agreement). 2.8* Agreement and Plan of Reorganization dated September 9, 1997, by and among the Company, International Data Services of New York, Inc., and Mitchell J. Taube and Ellen F. Rothschild-Taube (including escrow agreement). 2.9* Stock Purchase Agreement dated September 9, 1997 by and among David Crowder, TPS Micrographics, Inc. and the Company (including escrow agreement). 13 2.10* Agreement and Plan of Reorganization dated September 11, 1997 by and among the Company, Image and Information Solutions, Inc. and Gary Blackwelder (including escrow agreement). 2.11* Agreement and Plan of Reorganization dated September 9, 1997 by and among Madeline Solomon, David C. Yezbak, CodaLex Microfilming Corporation and the Company (including escrow agreement). 2.12* Asset Purchase Agreement dated September 9, 1997 by and among Imaging Information Industries, Inc., Gerald P. Gorman, Theodore J. Solomon, Jr., Charles P. Yezbak, III, David C. Yezbak and the Company (including escrow agreement). 2.13* Agreement and Plan of Reorganization dated September 9, 1997 by and among Gerald P. Gorman, Theodore J. Solomon, Theodore J. Solomon, Jr., Charles P. Yezbak, III, David C. Yezbak, Laser Graphics Systems & Services, Inc. and the Company (including escrow agreement). 2.14* Asset Purchase Agreement dated September 9, 1997 by and among DataLink Corporation, Judith E. DeMott, Geri E. Davidson and the Company (including escrow agreement). 2.15 Asset Purchase Agreement, dated January 23, 1998, by and among Integrated Information Services, L.L.C., Pettibone, L.L.C and Heisley Holding, L.L.C. and ImageMax, Inc. (incorporated by reference to Exhibit 2.1 of the Company's 8-K filed February 3, 1998). 2.16 Asset Purchase Agreement, dated February 9, 1998, by and among Document Management Group Inc., Theron Robinson and ImageMax, Inc. (incorporated by reference to Exhibit 2.1 of the Company's 8-K filed on February 24, 1998). 2.17 Asset Purchase Agreement, dated February 9, 1998, by and among Image-Tec, Inc., Theron Robinson and Robert Robinson and ImageMax, Inc. (incorporated by reference to Exhibit 2.2 of the Company's 8-K filed on February 24, 1998). 3.1* Amended and Restated Articles of Incorporation of the Company. 3.2* Amended and Restated Bylaws of the Company. 4.1* Specimen Stock Certificate. 4.2* Shareholders Agreement between the Company and certain of its shareholders dated November 19, 1996. 4.3* Amendment No. 1 to Shareholders Agreement dated November 19, 1996. 4.4* Form of Joinder to Shareholders Agreement executed by Bruce M. Gillis, Sands Point Partners I, Wilblairco Associates, Osage Venture Partners, Steven N. Kaplan, Brian K. Bergeron, James M. Liebhardt, G. Stuart Livingston, III, Richard D. Moseley, David C. Utz, Jr., Bruce M. Gillis, Custodian for Claire Solomon Gillis, Bruce M. Gillis, Custodian for Katherine Tessa Solomon Gillis, S. David Model, Andrew R. Bacas, David C. Yezbak, Theodore J. Solomon, Walter F. Gilbert, Carmen DiMatteo, Patrick M. D'Agostino, David L. Crowder, James D. Brown and Mary M. Brown, JTWROS, Mitchell S. Taube and Ellen F. Rothschild-Taube, JTWROS, John Semasko and Jane Semasko, JTWROS, Wolfe F. Model and Renate H. Model. 14 10.1*+ 1997 Incentive Plan. 10.2*+ 1997 Employee Stock Purchase Plan. 10.3*+ Management Agreement between GBL Capital Corporation and the Company dated November 27, 1996. 10.4*+ Employment Agreement between the Company and Bruce M. Gillis dated as of August 1, 1997. 10.5*+ Employment Agreement between the Company and James D. Brown dated as of August 18, 1997. 10.6*+ Employment Agreement between the Company and S. David Model dated as of August 18, 1997. 10.7*+ Employment Agreement between the Company and Andrew R. Bacas dated as of August 1, 1997. 10.8+ Employment Agreement between the Company and John E. Semasko dated as of September 9, 1997 (incorporated by reference to Exhibit No. 10.8 of the Company's Form 10-K filed March 31, 1998, File No. 0-23077) 10.9+ Employment Agreement between the Company and Rex Lamb dated as of September 9, 1997 (incorporated by reference to Exhibit No. 10.9 of the Company's Form 10-K filed March 31, 1998, File No. 0-23077). 10.10* Lease Agreement dated March 26, 1996 by and between Marlyn D. Schwarz and Rex Lamb d/b/a DocuTech. 10.11* Lease Agreement dated February 24, 1992 by and between Marlyn Schwarz d/b/a Old Cheney Plaza and Rex Lamb d/b/a DocuTech. 10.12* Lease Agreement dated September 1, 1994 by and between Jonstar Realty Corporation and Spaulding Company, Inc. (renewed May 27, 1997). 10.13 [Intentionally left blank] 10.14* Lease dated September 1, 1995 by and between Robert S. Greer and Elvera A. Greer and American Micro-Med Corporation. 10.15* Lease dated February 8, 1994 and Lease Rider dated as of February 1, 1994 by and between Oporto Development Corp. and International Data Services of New York, Inc. 10.16* Amendment of Lease dated June 6, 1996 between East Cobb Land Development and Investment Co., L.P. and Imaging Information Industries/David Yezbak, extended by letter dated July 16, 1997. 10.17 [Intentionally left blank] 10.18* Lease dated January 10, 1996 by and between FinancialEnterprises III and TPS Imaging Solutions, Inc. 10.19* Lease Agreement dated March 31, 1995 by and between Technical Publications Service, Inc. and TPS Micrographics, Inc. 15 10.20* Standard Industrial Commercial MultiTenant Lease-Gross dated June 20, 1994 by and between Northgate Assembly of God, North Sacramento, d/b/a Arena Christian Center and Total Information Management Corporation. 10.21* Lease dated January 26, 1981 and Extension of Lease dated October, 1992 by and between Trader Vic's Food Products and Total Information Management Corporation. 10.22* Standard Industrial Lease dated September 24, 1991 by and between Charles F. Coss, Viola B. Coss, Tracey C. Quinn, John Coss, Peter B. Coss, Elizabeth Coss, Tracey C. Quinn as Trustee for Geoffrey C. Quinn and Elizabeth Coss, as Trustee for Caitlin N. Shay and Total Information Management Corporation extended by letter dated October 18, 1996 from James Bunker to Peter Coss. 10.23* Lease dated January 1, 1993 between CSX Transportation, Inc. and American Micro-Med Corporation. 10.24* Lease and Service Agreement dated September 4, 1997 and two Addendums dated October 15, 1997 between American Executive Centers, Inc. and the Company. 10.25 Credit Agreement by and among the Company and Subsidiaries and CoreStates Bank, N.A., for itself and as Agent, and any other Banks becoming Party, dated as of March 30, 1998. 10.26 Amendment No. 1 to Credit Agreement by and among the Company and Subsidiaries and First Union National Bank (successor by merger to CoreStates Bank, N.A.), for itself and as Agent, and any other Banks becoming Party, dated as of March 30, 1998 (incorporated by reference to Exhibit 10.25 of the Company's Form 10-K filed March 31, 1998, File no. 0-23077). 10.27 Amendment No. 2 to Credit Agreement by and among the Company and Subsidiaries and First Union National Bank (successor by merger to CoreStates Bank, N.A.), for itself and as Agent, and any other Banks becoming Party, dated as of November 16, 1998. 10.28 Master Demand Note, dated January 20, 1998, payable to First Union National Bank (successor by merger to CoreStates Bank, N.A.) (incorporated by reference to Exhibit No. 10.1 of the Company's Form 8-K filed February 4, 1998, File No. 0-23077) 10.29 Security Agreement, dated January 20, 1998, between First Union National Bank (successor by merger to CoreStates Bank, N.A.) and the Company (incorporated by reference to Exhibit 10.2 of the Company's Form 8-K filed on February 3, 1998). 10.30** Forbearance Agreement dated March 29, 1999 by and among the Company, First Union National Bank (successor by merger to CoreStates Bank, N.A.) and Commerce Bank, N.A. 10.31+** Amendment No. 1 dated as of October 1, 1998 to Employment Agreement between the Company and James D. Brown dated as of August 18, 1997. 10.32+** Separation Agreement by and between Bruce M. Gillis and the Company dated September 18, 1998. 10.33+** Separation Agreement by and between Richard D. Moseley and the Company dated September 30, 1998. 16 10.34+** Separation Agreement by and between David Model and the Company dated November 9, 1998. 10.35+ Separation Agreement by and between James D. Brown and the Company dated as of April 30, 1999. 21** Subsidiaries. 23.1** Consent of Independent Public Accountants. 27** Financial Data Schedule (in electronic format only). - ---------- * Incorporated by reference to the designated exhibit of the Company's Registration Statement on Form S-1 filed on September 12, 1997, as amended (file number 333-35567). + Management contract or compensatory plan or arrangement. ** Incorporated by reference to the designated exhibit of the Company's Annual Report on Form 10-K filed March 31, 1999 (file number 0-23077). (b) Reports on Form 8-K. None. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IMAGEMAX, INC. Dated: April 30, 1999 By: /s/ Andrew R. Bacas ----------------------- Andrew R. Bacas Chief Executive Officer 18 EX-10.35 2 SEPARATION AGREEMENT SEPARATION AGREEMENT THIS SEPARATION AGREEMENT ("Agreement") is made by and between James D. Brown ("Brown"), together with each and every dependent, heir, agent, executor, legal representative, successor and assign of Brown, and ImageMax, Inc., a Pennsylvania corporation ("Parent"), and its subsidiaries (the Parent and its subsidiaries are collectively referred to as the "Company"), together with each and every of their predecessors, successors (by merger or otherwise), assigns, parents, subsidiaries, affiliates, divisions, directors, officers, employees, attorneys, accountants and agents, whether past, present or former. WHEREAS, Brown and the Company have agreed that he should resign his employment with the Company; and WHEREAS, Brown and the Parent, on its own behalf and on behalf of each Company, desire to set forth herein their entire understanding and agreement regarding such resignation. NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth, each of Brown and the Parent, on its own behalf and on behalf of each Company, acting of his and its own free will, and intending to be legally and irrevocably bound hereby, agree as follows: 1. Resignation. Brown hereby resigns all employment, Board of Director and other positions with the Company, effective on April 30, 1999. Except as otherwise set forth herein, the Employment Agreement between the Parent and Brown dated August 18, 1997 (the "Employment Agreement"), and the Term of the Employment Agreement (as that term is used therein), shall terminate as of April 30, 1999. 2. Payments. (a) Severance. The Company agrees to pay Brown the sum of One Hundred Thirty Thousand Dollars ($130,000), subject to all applicable federal, state and local tax (the "Severance Payment"), to be paid by check in 24 equal payments commencing on May 1, 1999 and continuing on the first and fifteenth days of each calendar month thereafter until April 30, 2000, when the last payment will be due. Notwithstanding the foregoing, any unpaid portion of the severance payment shall be paid to Brown by the Parent or the Successor Entity (as defined below), as the case may be, upon the completion of a Change of Control or Sale of the Parent (each as defined below). (b) Expense Reimbursement. The Company agrees to reimburse Brown in accordance with its existing business practices for his reasonable business expenses related to the Company on or prior to April 30, 1999 which have not yet been reimbursed (the "Non-Reimbursed Expenses"). Within thirty (30) days of the execution hereof, Brown agrees to submit to the chief accounting officer of the Company the appropriate expense reports reflecting such expenses. Once such reports are processed, the Company will promptly reimburse Brown for the Non-Reimbursed Expenses. (c) Change of Control. In addition to the Severance Payment, upon the completion of a Sale of the Parent or a Change of Control (each as defined below) prior to December 31, 2000, the Parent or the successor to all or substantially all of the Parent's assets, capital stock or business (the "Successor Entity"), as the case may be, shall pay to Brown by check the sum of Three Hundred Twenty-Five Thousand Dollars ($325,000), subject to all applicable federal, state and local tax. For purposes of this Agreement: (i) a "Change of Control" means the sale, transfer, assignment or other disposition (including by merger or consolidation) by stockholders of the Parent, in one transaction or a series of related transactions, of more than fifty percent (50%) of the voting power represented by the then outstanding stock of the Parent to one or more Persons, other than (A) any such sales, transfers, assignments or other dispositions by such stockholders to their respective Affiliates or (B) any such transaction effected primarily to reincorporate the Parent in another jurisdiction; (ii) "Affiliate" means, with respect to any stockholder of the Parent, (W) any Person directly or indirectly controlling, controlled by or under common control with such stockholder, (X) any Person owning or controlling ten percent (10%) or more of the outstanding voting securities of such stockholder, (Y) any officer, director or general partner of such stockholder, or (Z) any Person who is an officer, director, general partner, trustee or holder of ten percent (10%) or more of the outstanding voting securities of any Person described in clauses (W) through (Y) of this sentence; (iii) "Person" means an individual, partnership, corporation, joint venture, association, trust, unincorporated association, other entity or association; and (iv) "Sale of the Parent" means a sale, transfer, assignment or other disposition (including by merger or consolidation) of all of the outstanding stock of the Parent, or of all or substantially all of the assets of the Parent, or a liquidation or dissolution of the Parent; provided, however, that a "Sale of the Parent" shall not include the consummation of a public offering of common stock of the Parent pursuant to a registration statement or any transaction effected primarily to reincorporate the Parent in another jurisdiction. The potential acquisition of preferred stock and warrants by Pierce Leahy Corp. contemplated in that certain Letter of Intent dated March 11, 1999 by and between Pierce Leahy Corp. and the Company shall not be considered a Change of Control or Sale of the Company for the purposes of this Agreement. (d) Consulting Arrangement. The Company may retain Brown as a consultant for assistance in certain operations of the Company. The Company shall pay Brown for such consulting services, and Brown hereby agrees to accept, as compensation a per diem rate of five-hundred dollars ($500). Such accrued consulting fees shall; (i) be payable in cash upon closing of any transaction or financing that does not meet the definition above of a "change of control transaction" on or before December 31, 2000; or (ii) if said transaction qualifies as a change of control transaction, such accrued fees shall be credited against the payment due Brown in 2 (c) above. In addition, the -2- Company shall reimburse Brown for reasonable travel expenses incurred in connection with the performance of such consulting services, to the extent consistent with the Company's general expense reimbursement policy as may be in effect from time to time. Either Brown or the Company may terminate such consulting arrangement at any time by the giving of notice to the other party, at which time no further amounts (except accrued consulting fees and reimbursable expenses) shall be payable to Brown. 3. Benefits Continuation. For the period May 1, 1999 to April 30, 2000, the Company will provide Brown and his family full coverage under the Company group medical plan subject to the requirements of the medical plan, and any other Company employee benefits Brown is eligible for on the date hereof. Brown agrees to pay directly or to the Company for the medical coverage an amount equal to any required employee contribution to the medical plan premium. Brown's statutory rights under COBRA to continue participation in the Company's group medical coverage for a period of up to eighteen (18) months, at his own cost, shall begin on May 1, 2000. The Company's obligation to continue medical coverage will cease if Brown becomes eligible to participate in a comparable medical plan with a new employer. In that case, Brown agrees to immediately provide written notification of that fact to the Vice President of Human Resources of the Company and the (acting) Chief Executive Officer of the Company. If the Company is unable to continue medical coverage under its group medical plan as required by this paragraph 3 due to requirements of such plan, the Company shall pay to Brown an amount equal to the cost of premiums which the Company would have incurred had it not been prohibited from providing such coverage. 4. Return of Company Property. Brown agrees to return to the Company, within five (5) business days of the execution of this Agreement, all Company property in his possession or control. Brown further agrees that he will not make, retain or remove any copies of any of the foregoing. 5. Mutual Release of Claims. Brown hereby completely remises, releases, relinquishes, waives and forever discharges the Company, together with each and every of their predecessors, successors (by merger or otherwise), assigns, parents, subsidiaries, affiliates, divisions, directors, officers, employees, attorneys, accountants and agents, whether past, present or former of and from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims, liabilities and demands whatsoever, in law or in equity, known or unknown, in tort, contract, by statute, negligence (whether by contribution or indemnification) or any other basis for relief, compensatory, punitive or other damages, expenses (including attorneys' fees), reimbursements or costs of any kind which Brown ever had, now has or may have, for or by reason of any cause, matter or thing whatsoever, arising out of or in any way related to the Company or his employment with the Company, his membership on any Board of Directors of the Company or the termination of that employment or membership; provided, however, that nothing contained herein shall release the Company from its obligations under this Agreement, the Parent's registration rights obligations arising out of the Shareholders' -3- Agreement dated as of November 19, 1996, as amended (the "Shareholders' Agreement"), and the Company's obligations to indemnify Brown from acts and omissions as a director and officer of the Company to the fullest extent permissible by law. Brown agrees that he has executed this Release on his own behalf, and also on behalf of his dependents, heirs, agents, executors, legal representatives, successors and assigns. This Release includes, but is not limited to, a release of any rights or claims he may have for, or pursuant to, the Pennsylvania Wage Payment and Collection Law or any other state or local wage payment statute, the Age Discrimination in Employment Act (ADEA), Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act (ADA), the Employee Retirement Income Security Act of 1974, as amended, (ERISA), any other federal, state or local laws or regulations prohibiting employment discrimination, breach of any express or implied contract, wrongful termination or any other tort claims, including claims for attorneys' fees, whether based on common law or otherwise. Brown understands, however, that by signing this Release, he does not waive rights to: (a) any claims arising under any applicable worker's compensation laws; (b) any claims which the law states may not be waived; or (c) his vested rights, if any, under the Company's 401(k) plan, in effect as of the date of this Agreement. The Parent, on its own behalf and on behalf of each Company, hereby completely remises, releases, relinquishes, waives and forever discharges Brown and his dependents, heirs, agents, executors, legal representatives, successors and assigns, of and from all manner of actions, causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, claims, liabilities and demands whatsoever, in law or equity, known or unknown, in tort, contract, by statute, negligence (whether by contribution or indemnification) or any other basis for relief, compensatory, punitive or other damages, expenses (including attorney's fees), reimbursements or costs of any kind which the Company ever had, now has or may have, for or by reason of any cause, matter or thing whatsoever, arising out of or in any way related to the Company or his employment with the Company, his membership on any Boards of Directors of the Company or the termination of that employment and membership; provided however, that nothing contained herein shall release Brown from: (i) his obligations under this Agreement; (ii) his obligations under Sections 6 (confidentiality), 7 (ownership of proprietary information) and 20 (specific performance) of the Employment Agreement; and (iii) his obligations under Section 8 (non-competition) of the Employment Agreement (as amended and restated in paragraph 6 of this Agreement). The Parent agrees that it has executed this Release on its own behalf and on behalf of each Company, and also on behalf of each and every of their predecessors, successors (by merger or otherwise), assigns, parents, subsidiaries, affiliates, divisions, directors, officers, employees, attorneys, accountants and agents, whether past, present or former. 6. Amendment and Restatement of Covenant Not to Compete in Employment Agreement. Section 8 of the Employment Agreement is hereby amended and restated as follows: -4- "8. Covenant Not to Compete. The Employee shall not, until April 30, 2000 (the "Restricted Period"), do any of the following directly or indirectly without the prior written consent of the Parent: (a) compete with the Company or any of its respective affiliates or subsidiaries, or any of their respective successors or assigns, whether now existing or hereafter created or acquired (collectively, the "Related Companies"), in any document management business conducted during the Term or, as of April 30, 1999, contemplated to be conducted (as has been determined by the Board) or in any other business conducted by the Company in which the Employee is or has been actively engaged (the "Restricted Business") within any geographic area located within the United States of America, its possessions or territories (the "Restricted Area"); (b) become interested (whether as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) in any person, firm, corporation, association or other entity that competes, with the Related Companies in the Restricted Business within the Restricted Area; if such interest would constitute a violation of Section 8(a) hereof; provided, however, that nothing contained in this Section 8(b) shall prohibit Employee from owning, as a passive investor, not more than five percent (5%) of the outstanding securities of any class of any publicly-traded securities of any publicly held company listed on a well-recognized national securities exchange or on an interdealer quotation system of the National Association of Securities Dealers, Inc. (c) influence or attempt to influence any supplier, customer or potential customer of the Company or any of the Related Companies to terminate or modify any written or oral agreement or course of dealing with the Company or the Related Companies; or (d) influence or attempt to influence any person (other than a family member) to either (i) terminate or modify his employment, consulting, agency, distributorship or other arrangement with the Company or any of the Related Companies, or (ii) employ or retain, or arrange to have any other person or entity employ or retain, any person who has been employed or retained by the Company or any of the Related Companies as an employee, consultant, agent or distributor of the Company or the Related Companies at any time during the one year period immediately preceding April 30, 1999. 7. Non-Defamation. Each party agrees not to intentionally defame the other with respect to matters arising prior to the date of the execution of this Agreement. 8. Arbitration of Disputes Under this Agreement. The parties agree that any and all disputes arising out of the performance or breach of this Agreement or any promise or covenant herein shall be resolved by submission to final and binding arbitration by a panel of three arbitrators in Philadelphia, Pennsylvania, under, and in accordance with, the Individual -5- Employment Rules and Procedures of the American Arbitration Association. In any such proceeding, the prevailing party shall be entitled to an award of reasonable attorneys' fees, cost and expenses. 9. Governing Law; Enforcement. This Agreement shall be governed by and construed and enforced under the laws of the Commonwealth of Pennsylvania. All remedies at law and equity shall be available for the enforcement of this Agreement incorporated by reference herein. This Agreement may be pleaded as a full bar to the enforcement of any claim in any way related to or arising out of Brown's employment or other positions with the Company and/or the termination thereof. 10. Review and Counsel. Brown understands that he may take up to twenty-one (21) days to consider this Agreement, its benefits, and its consequences. He acknowledges that he has been advised that he should seek the advice of an attorney before signing this Agreement, and that has had an adequate opportunity to do so. Brown also understands that he will have seven (7) days after signing this Agreement to revoke it and that it will not become effective and enforceable until this revocation period has expired. Brown further understands that the Company is not obligated under this Agreement until at least 10 days after receipt by the Company of the fully executed original of this Agreement. 11. Contractual Effect. The parties understand and acknowledge that the terms of this Agreement are contractual and not a mere recital. Consequently, they expressly consent that this Agreement shall be given full force and effect according to each and all of its express terms and provisions, and that it shall be binding upon the respective parties as well as their dependents, heirs, executors, legal representatives, successors and assigns. 12. Notices. All notices, requests, payments, acknowledgments and other communications hereunder to a party shall be in writing and shall be deemed to have been duly given when delivered by hand, deposited with a recognized overnight courier for next day delivery or telecopied to such party at his or its address set forth below or such other address as such party may specify by notice to the other party hereto. If to Brown, to: James D. Brown 318 Hathaway Lane Wynnewood, PA 19096 -6- If to the Company, to: ImageMax, Inc. 1100 Hector Street Suite 396 Conshohocken, PA 19428 Attention: Chairman 13. Entire Agreement; Etc. This Agreement represents the entire understanding of the parties hereto with reference to the subject matters hereof and supersedes any and all other oral or written agreements heretofore or contemporaneously made. 14. Headings. The descriptive headings of the Paragraphs of this Agreement are inserted for convenience only, do not constitute a part of this Agreement and shall not affect in any way the meaning or interpretation of this Agreement. 15. Counterparts and Facsimile Signatures. This Agreement may be delivered by telecopied signatures and executed in several counterparts, each of which shall be deemed to be an original, and all of which together shall be deemed to be one and the same instrument. [blank to end of page] -7- 16. Severability. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void, unenforceable or against public or regulatory policy, the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. IN WITNESS WHEREOF, Brown and the Parent, on its own behalf and on behalf of each Company, each acknowledge that they are acting of their own free will, that they have had a sufficient opportunity to read and review the terms of this Agreement, they have each received the advice of their respective counsel with respect hereto, and that they have voluntarily caused the execution of this Agreement and by reference herein as of the day and year set forth below. /s/ James D. Brown - ---------------------------------- Witness: /s/ Jennifer J. Buckingham James D. Brown -------------------------- Jennifer J. Buckingham Date: April 16, 1999 On behalf of IMAGEMAX, INC.: By: /s/ Lewis E. Hatch, Jr. ------------------------------ Name: Lewis E. Hatch, Jr. By: /s/ Andrew Bacas ------------------------------ Name: Andrew Bacas Date: April 16, 1999 -8- -----END PRIVACY-ENHANCED MESSAGE-----