MANAGEMENT AGREEMENT
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This Agreement is entered into as of this 27th day of November, 1996,
by and among DOCUNET INC., a Pennsylvania corporation ("DocuNet") and GBL
CAPITAL CORP., a Pennsylvania corporation ("Manager").
W I T N E S S E T H:
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WHEREAS, DocuNet is currently evaluating several transactions with
entities in the Document Management industry (each a "Founding Entity") whereby
DocuNet would acquire such entities, the purchase price of which would be
financed by an initial public offering (the "IPO") of DocuNet's common stock
(the "Project").
WHEREAS, DocuNet wishes to obtain the benefits of Manager's expertise
in the field of business management by contracting with Manager for certain
duties in the management of DocuNet, subject to the terms and provisions of this
Agreement, and Manager agrees to provide such management services to DocuNet in
consideration of the fees and other compensation herein set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and of other good and valuable consideration, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND ACCEPTANCE; SERVICES; AUTHORITY
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1.1. Appointment and Acceptance. DocuNet hereby engages Manager to
manage the daily business operations of DocuNet in accordance with this
Agreement, including but not limited to, providing the services further
described in this Article 1, and Manager hereby accepts such engagement on the
terms and conditions herein contained.
1.2. Services. Manager shall be responsible for all decisions and
actions of DocuNet not specifically reserved for the Board of Directors of
DocuNet (the "Board") in DocuNet's bylaws. The decisions and actions for which
Manager shall be responsible shall include, without limitation:
(a) Leading efforts to recruit Founding Entities in the Project.
(b) Negotiate and execute any and all transactions in connection
with the Project, including preparing the acquisition
agreements with the Founding Entities and the registration
statement in connection with a proposed IPO.
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(c) Perform and manage due diligence activities in connection
with the Project and make recommendations to the Board
concerning whether or not DocuNet should consummate a
particular transaction with a prospective founder.
(d) Select a financing partner in connection with the Project
and secure a commitment letter for a line of credit with
such financing partner.
(e) Manage all searches for executive personnel or outside
directors of DocuNet, except for a Chief Executive Officer
search which will be conducted by the Board, if necessary.
(f) Manage the IPO.
(g) Manage the budget and the financial books of DocuNet.
(h) Perform all other day-to-day management activities of
DocuNet.
The decisions and actions reserved for the Board are more specifically
set forth in DocuNet's By-Laws, as existing on the date hereof and as may be
amended hereinafter. Manager shall use its reasonable efforts to act in
DocuNet's interest at all times.
1.3. Actions Reserved for Board. Notwithstanding the forgoing Section
1.2, the Board shall retain control of each transaction with a prospective
Founding Entity by: (1) retaining authority to approve each Founding Entity's
participation in the Project; (2) setting guidelines for the maximum total
consideration which may be paid to a Founding Entity or an affiliate thereof in
connection with the Project; (3) approving or rejecting Manager's recommendation
for which auditors, counsel, and underwriters shall be used in the IPO; and (4)
determining where DocuNet's corporate headquarters will be located.
1.4. Authority. Except as expressly limited hereby, Manager shall have
all powers and authorities as may be necessary or convenient in connection with
the discharge of Manager's duties and obligations hereunder. Such powers and
authorities may be amended in writing from time to time by DocuNet, as mutually
agreed to and accepted by Manager in writing.
ARTICLE 2
TERM
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Subject to Article 9 of this Agreement, the term of this Agreement
shall commence on the date hereof and shall continue thereafter until March 31,
1997 (the "Initial Term"). Thereafter, this Agreement shall automatically be
extended and continue for a period of
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one (1) year terminating on March 31, 1998 (the "Option Term"), unless written
notice of cancellation is given by either party to the other by no later than
February 28, 1997.
ARTICLE 3
COMPENSATION; EXPENSES
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3.1. Management Fee. In addition to the amount DocuNet is specifically
obligated to pay or reimburse to Manager related to approved costs and
expenditures as described below, commencing as of November 16, 1996, DocuNet
shall pay to Manager the sum of Five Thousand Dollars ($5,000) and thereafter
until this Agreement is terminated the sum of Ten Thousand Dollars ($10,000) on
the first day of each month until Xxxxxx Xxxxx, a principal of Manager, begins
full-time (at least 35 hours per week) employment by DocuNet (estimated for the
purposes hereof to be after March 1, 1997), at which time such monthly fee shall
be increased to the sum of Twenty-five Thousand Dollars ($25,000).
3.2. Success Fee. Subject to Article 5 of this Agreement, upon the
closing of an IPO, DocuNet shall pay to Manager the sum of Five Hundred Thousand
Dollars ($500,000) (the "Success Fee").
3.3. Expenses. All out-of-pocket expenses incurred by Manager in
connection with its performance under this Agreement, including, without
limitation, expenses for travel, meetings, communications, legal fees in
connection with preparation of this Agreement, office services and supplies,
shall be reimbursed by DocuNet within one week after DocuNet is notified of such
expenses.
ARTICLE 4
BOARD COMPENSATION
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In the event this Agreement is terminated and either Xx. Xxxxx X.
Xxxxxx or Xx. Xxxxxx X. Xxxxx is a member of the Board but is not an employee of
DocuNet (such person referred to as a "Non-Employee Director"), such
Non-Employee Director shall be compensated for his service as a member of the
Board in a similar manner as any other non-employee director of DocuNet.
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ARTICLE 5
TITLES
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5.1. Xxxxx X. Xxxxxx. Upon the execution of this Agreement, Xx. Xxxxxx
shall be appointed the Chairman and Chief Executive Officer of DocuNet until
such time as he may be replaced in either capacity by the Board.
5.2. Xxxxxx X. Xxxxx. Upon becoming employed full-time (at least 35
hours per week) by DocuNet, Xx. Xxxxx shall be appointed the Senior Vice
President - Business Development for DocuNet until such time as he may be
replaced in such capacity by the Board.
ARTICLE 6
TERMINATION
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6.1. Termination Upon Default. If either party defaults in the
observance or performance of any material obligation provided in this Agreement
and such default continues for thirty (30) days after written notice thereof
from the aggrieved party, the aggrieved party may at its option terminate this
Agreement by written notice to the other party. If Manager is the party in
default and DocuNet terminates this Agreement in accord with the immediately
preceding sentence, Manager shall have the right to sell and DocuNet shall
purchase, if demanded by Manager, the number of shares of capital stock of
DocuNet owned by Manager and its affiliates (the "Manager's Shares") at the fair
market value of Manager's Shares on the date of termination, such value to be
determined by independent appraisal or such other method as is mutually
agreeable.
6.2. Other Termination. In the event that either party desires to
terminate this Agreement but the other party is not in material default
hereunder, the following provisions shall apply:
(a) During the Initial Term, neither party shall have the
right to terminate this Agreement.
(b) During the Option Term, upon thirty (30) days written
notice, Manager shall have the right to terminate this Agreement and upon
termination (i) Manager shall forfeit its right to the Success Fee (as defined
in Article 3 herein) and the Severance Fee (as defined in Article 6.2(c) herein)
and (ii) DocuNet shall have the right to purchase and Manager shall, if demanded
by DocuNet, sell all of Manager's Shares on the date of termination at the price
per share equal to the fair market value of Manager's Shares on the date of
termination, such value to be determined by independent appraisal or such other
method as is mutually agreeable.
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(c) During the Option Term, DocuNet shall have the right
to immediately terminate this Agreement and upon termination DocuNet shall pay
Manager the sum of One Hundred Thousand Dollars ($100,000) in severance fees
(the "Severance Fee"). In addition, Article 3 of this Agreement pertaining to
the Success Fee shall survive upon such termination.
6.3. All Terminations. Upon termination of this Agreement for any
reason, Manager shall deliver to DocuNet the following, all of which shall be
delivered to DocuNet promptly upon termination hereof or as soon thereafter as
is reasonably practicable:
(a) A final accounting, reflecting receipts and
disbursements in connection with the management of DocuNet.
(b) All records, contracts, leases, unpaid bills and
other papers or documents which pertain to DocuNet, including, but not limited
to, all original documents.
ARTICLE 7
INSURANCE; INDEMNIFICATION
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7.1. DocuNet's Indemnity. DocuNet agrees to indemnify and save Manager
harmless in respect of any action, cause of action, suit, debt, claim, or demand
whatsoever (including, but not limited to attorneys' fees, charges, costs and
expenses) brought or asserted by any third person whomsoever, at law or in
equity, in connection with the performance by Manager of any and all of its
obligations under this Agreement, which indemnity shall continue notwithstanding
the termination of this Agreement with respect to any act or occurrence
preceding such termination. Should any claims, demands, suits or other legal
proceedings be made or instituted by any person against DocuNet which arise out
of any of the matters relating to this Agreement, Manager shall give DocuNet all
pertinent information and reasonable assistance in the defense or other
disposition thereof.
7.2. Insurance. DocuNet agrees to provide director and officer
liability insurance for all of Manager's affiliates which are elected to
DocuNet's Board of Directors or appointed as an officer of DocuNet subsequent to
the closing of the IPO.
ARTICLE 8
MANAGER'S LIABILITY
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8.1. Manager shall not, in the performance of this Agreement, except as
provided herein, be liable to DocuNet for any act, omission, or negligence of
any agent or employee of DocuNet, except if such agent or employee is under the
supervision of Manager.
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8.2. Notwithstanding any other provisions of this Agreement, in no
event shall DocuNet make any claim against Manager, or its affiliates or
subsidiaries, on account of any alleged errors in judgment made in good faith
and in accordance with a good faith interpretation of this Agreement.
ARTICLE 9
RELATIONSHIP
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Manager shall at all times be an independent contractor and not the
employee of DocuNet. Manager, however, shall have the right and power to
contract with third parties for, on behalf of, or in the name of DocuNet or
otherwise to bind DocuNet. Except as expressly provided herein to the contrary,
DocuNet agrees to be responsible and shall reimburse Manager for all costs,
expenses, and disbursements properly incurred by Manager in providing services
to DocuNet.
ARTICLE 10
ASSIGNABILITY
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Neither party shall assign this Agreement or any rights or
duties hereunder without the prior written consent of the other party. Manager
may delegate certain of its duties to its employees, agents and contractors as
contemplated by this Agreement.
ARTICLE 11
NOTICES
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Any notice provided in or permitted under this Agreement shall be made
in writing and may be given or served by (i) delivering the same in person to
the party to be notified, (ii) depositing the same in the mail, postage prepaid,
registered or certified with return receipt requested, and addressed to the
party to be notified at the address herein specified. If notice is deposited in
the mail pursuant to (ii) of this Article 11, it shall be deemed received on the
third business day after it is so deposited. Notice given in any other manner
shall be deemed received only if and when actually received by the party to be
notified. For the purpose of notice, the address of the parties shall be, until
changed as hereinafter provided for, as follows:
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If to Manager:
GBL Capital Corp.
000 Xxxxxx'x Xxxx Xxxx
Xxxxxxxxx, XX 00000
If to DocuNet:
DocuNet Inc.
000 Xxxxxx'x Xxxx Xxxx
Xxxxxxxxx, XX 00000
with a copy to:
Pepper, Xxxxxxxx & Xxxxxxx
3000 Two Xxxxx Square
00xx xxx Xxxx Xxxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxx, Esquire
The parties shall have the right from time to time and at any time to change
their respective addresses and each shall have the right to specify as its
address any other address by at least fifteen (15) days' prior written notice to
the other party.
ARTICLE 12
MISCELLANEOUS
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12.1. Except as otherwise herein provided, no amendments, additions or
deletions of this Agreement shall be effective unless approved by the parties in
writing.
12.2. 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.
12.3. 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. To be effective, any waiver must be in
writing executed by the party intended to be bound thereby.
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12.4. 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.
12.5. Notwithstanding anything to the contrary herein, this Agreement
shall be binding upon and inure to the benefit of DocuNet, its successors and/or
assigns, and shall be binding upon and inure to the benefit of Manager and its
successors and/or assigns.
12.6. This Agreement shall be construed, interpreted and applied in
accordance with, and shall be governed by, the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
DOCUNET INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Executive
Officer
GBL CAPITAL CORP.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: President
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