LASON INC
EX-10.4 EMPLOYMENT AGREEMENT - MICHAEL H. RILEY
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>8
<FILENAME>k72397aexv10w4.txt
<DESCRIPTION>EX-10.4 EMPLOYMENT AGREEMENT - MICHAEL H. RILEY
<TEXT>
<PAGE>
                                                                    EXHIBIT 10.4

                              EMPLOYMENT AGREEMENT

         This Employment Agreement (the "Agreement") by and between Lason
Systems, Inc., a Delaware corporation (the "Company"), and Michael H. Riley
("Employee") is hereby entered into and effective as of August 9, 2002. This
Agreement hereby supersedes any other employment agreements or understandings,
written or oral, between the Company and Employee, except for the terms and
allocations approved by the Board of Directors, as of the Effective Date,
related to the Company's Executive Management Incentive Plan.

                                    RECITALS

         The following is a recital of the fact underlying this Agreement:

         As of the date of this Agreement, the Company is engaged primarily in
the business of providing document and information management outsourcing
solutions.

         Employee is employed hereunder by the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
has and will continue to become familiar with and aware of information as to the
Company's customers' specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable goodwill of the Company. In consideration for Employee's promises
herein, the Company agrees to provide Employee with such confidential
information; in return, Employee recognizes and acknowledges that such
information must be maintained in confidence, and to further such protection
agrees to the provisions of Section 3 of this Agreement.

         Therefore, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby agreed
as follows:

                                   AGREEMENTS

         1. Employment and Duties.

         (a) The Company hereby employs Employee as Executive Vice President of
Imaging Services & Products. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of an Executive Vice
President of Imaging Services & Products and will report directly to the
President and Chief Executive Officer of the Company. Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
Section 1(b), agrees to devote his working time, attention and efforts to
promote and further the business of the Company.

         (b) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage except to the extent that such activity (i) does not
interfere with Employee's duties and responsibilities hereunder and (ii) does
not violate Section 3 hereof. The foregoing limitations shall not be construed
as prohibiting Employee from (A) serving on the boards of directors of other
companies or (B) making personal investments in such form or manner as will
neither require his services, other than to a minimal extent, in the operation
or affairs of the companies or enterprises in which such investments are made
nor violate the terms of Section 3 hereof.

         2. Compensation. For all services rendered by Employee, the Company
shall compensate Employee as follows:

         (a) Base Salary. The base salary payable to Employee shall be
$245,000.00 per year, payable on a regular basis in accordance with the
Company's standard payroll procedures but not less than bi-weekly. On at least
an annual basis, the Board of Directors of the Company (the "Board") will review
Employee's performance and may, by a majority vote of the


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Board or by a duly constituted committee thereof, make increases to such base
salary if, in its discretion, any such increase is warranted.

         (b) Incentive Bonus Plan. Employee shall be eligible for a bonus
opportunity of up to 30% of his annual base salary in accordance with the
Company's Incentive Bonus Plan as modified from time to time, payable in cash.
The bonus payment and the Company's targeted performance shall be determined and
approved by the Board or the compensation committee thereof.

         (c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:

                  (i) Payment for coverage for Employee and his dependent family
         members under health, hospitalization, disability, dental, life and
         other insurance plans in accordance with terms and conditions of the
         Company's current benefit plans as same may be modified from time to
         time, and not less favorable than the benefits provided to other
         Company executives.

                  (ii) Reimbursement for all business travel and other
         out-of-pocket expenses reasonably incurred by Employee in the
         performance of his services pursuant to this Agreement. All
         reimbursable expenses shall be appropriately documented in reasonable
         detail by Employee upon submission of any request for reimbursement,
         and in a format and manner consistent with the Company's expense
         reporting policy.

                  (iii) Three (3) weeks paid vacation for each year during the
         period of employment or such greater amount as may be afforded officers
         and key employees generally under the Company's policies in effect from
         time to time (prorated for any year in which Employee is employed for
         less than the full year).

                  (iv) An automobile allowance in the amount of $500.00 per
         month.

                  (v) The Company shall provide Employee with other executive
         perquisites as may be available to or deemed appropriate for Employee
         by the Board and participation in all other Company-wide employee
         benefits as available from time to time.

                  (vi) Participation in the Company's 401(k) Plan and
         Non-Qualified Plan.

                  (vii) The Company shall reimburse Employee up to $ 4,000.00
         per year for expenditures on health costs (excluding insurance premiums
         paid by the Company in accordance with Section 2(c)(i) above),
         insurance, financial planning or tax planning benefits (or similar
         benefits, or such other benefits at the discretion of the Company) or
         club dues, all as selected by Employee.

         3. Non-Competition Agreement.

         (a) Subject to Sections 5(d) and (f) and Section 12, Employee will not,
during the period of his employment by or with the Company, and for a period of
two (2) years immediately following the termination of his employment with the
Company, for any reason whatsoever directly or indirectly, for himself or on
behalf of or in conjunction with any other person, company, partnership,
corporation, business or entity of whatever nature:

                  (i) engage, as an officer, director, shareholder, owner,
         partner, joint venturer, or in a managerial capacity, whether as an
         employee, independent Contractor, consultant or advisor, or as a sales
         representative, in any business selling any products or services in
         direct competition with the Company, within 100 miles of (i) the
         principal executive offices of the Company or (ii) any place to which
         the Company provides products or services or in which the Company
         (including the subsidiaries thereof) is in the process of initiating
         business operations during the term of this covenant (the "Territory");


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                  (ii)  call upon any person who is, at that time, within the
         Territory, an employee of the Company (including the subsidiaries
         thereof) in a managerial capacity for the purpose or with the intent of
         enticing such employee away from or out of the employ of the Company
         (including the subsidiaries thereof), provided that Employee shall be
         permitted to call upon and hire any member of his immediate family;

                  (iii)  call upon any person or entity which is, at that time,
         or which has been, within one (1) year prior to that time, a customer
         of the Company (including the subsidiaries thereof within the Territory
         for the purpose of soliciting or selling products or services in direct
         competition with the Company within the Territory;

                  (iv)  disclose customers, whether in existence or proposed, of
         the Company (or the subsidiaries thereof) to any person, firm,
         partnership, corporation or business for any reason or purpose
         whatsoever.

         As used in Section 3(a), references to the business, customers,
Territory, etc. of the Company refer to the status of the Company prior to any
Change in Control (i.e., such breadth of business, customers, Territory, etc.
shall not automatically be expanded to include those of a successor to the
Company resulting from a Change in Control). Notwithstanding the above, the
foregoing covenant shall not be deemed to prohibit Employee from acquiring as an
investment not more than three percent (3%) of the capital stock of a competing
business, whose stock is traded on a national securities exchange or
over-the-counter.

         (b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
covenant may be enforced by the Company in the event of breach by him by
injunctions and restraining orders without the necessity of posting any bond
therefor.

         (c) In the course of Employee's employment with the Company, Employee
will become exposed to certain of the Company's confidential information and
business relationships, which the above covenants are designed to protect. It is
agreed by the parties that the foregoing covenants in this Section 3 impose a
reasonable restraint on Employee in light of the activities and business of the
Company (including the Company's subsidiaries) on the date of the execution of
this Agreement and the current plans of the Company (including the Company's
subsidiaries); but it is also the intent of the Company and Employee that such
covenants be construed and enforced in accordance with the changing activities,
business and locations of the Company (including the Company's subsidiaries)
throughout the term of this covenant, whether before or after the date of
termination of the employment of Employee, subject to the following paragraph.
For example, if, during the term of this Agreement, the Company (including the
Company's subsidiaries) engages in new and different activities, enters a new
business or established new locations for its current activities or business in
addition to or other than the activities or business enumerated under the
Recitals above or the locations currently established therefor, then Employee
will be precluded from soliciting the customers or employees of such new
activities or business or from such new location and from directly competing
with such new business within 100 miles of its then-established operating
location(s) through the term of this covenant.

         It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company (including the
Company's subsidiaries), or similar activities or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this Section 3, and in any event such new business, activities or location are
not in violation of this Section 3 or of Employee's obligations under this
Section 3, if any, Employee shall not be chargeable with a violation of this
Section 3 of the Company (including the Company's subsidiaries) shall thereafter
enter the same, similar or a competitive (i) business, (ii) course of activities
or (iii) location, as applicable.

         (d) The covenants in this Section 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties


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that such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed to such extent.

         (e) All of the covenants in this Section 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of two (2) years following Employee's employment set
forth at the beginning of this Section 3, during which the agreements and
covenants of Employee made in this Section 3 shall be effective, shall be
computed by excluding from such computation any time during which Employee is in
violation of any provision of this Section 3.


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         4. Place of Performance.

         (a) Employee's place of employment is the Company's headquarters in
Troy, Michigan. Employee understands that he may be requested by the Board to
relocate from his present residence to another geographic location in order to
more efficiently carry out his duties and responsibilities under this Agreement
or as part of a promotion or other increase in duties and responsibilities. In
the event that Employee is requested to relocate and agrees to do so, the
Company will pay all relocation costs to move Employee, his immediate family and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur, as a result of any payment hereunder, to the extent any
relocation costs are not deductible for tax purposes. The general intent of the
foregoing is that Employee shall not personally bear any out-of-pocket cost as a
result of the relocation, with an understanding that Employee will use his best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of the Company and the personal life of Employee and his family.

         (b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "good cause"
for termination of this Agreement under the terms of Section 5(c).

         5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue through December 31, 2005 (the
"Initial Term"), unless terminated sooner as herein provided. Either the Company
or Employee shall have the option of renewing this Agreement for an additional
three (3) year term following the Initial Term provided that with the terms and
conditions of such extended employment are mutually agreed upon by the Company
and Employee not less than sixty (60) days prior to the expiration of the
Initial Term. This Agreement and Employee's employment may be terminated in any
one of the following ways:

         (a) Death. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.

         (b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume his fulltime duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished the
Company with a written statement from a qualified doctor to such effect and
provided, further, that, at the Company's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by the Company who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated as a result of
Employee's disability, Employee shall receive from the Company, in a lump-sum
payment due within ten (10) days of the effective date of termination, the base
salary at the rate then in effect for whatever time period is remaining under
the Term of this Agreement or for one (1) year, whichever amount is greater.

         (c) Good Cause. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of the written notice of same) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's dishonesty, fraud
or misconduct with respect to the business or affairs of the Company which
materially and adversely affects the operations or reputation of the Company;
(4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse or
illegal drug abuse by Employee.


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In the event of a termination for good cause, as enumerated above, Employee
shall have no right to any severance compensation.

         (d) Without Cause. At any time after the commencement of employment,
the Company may, without cause, terminate this Agreement and Employee's
employment, effective thirty (30) days after written notice is provided to the
Employee. Should Employee be terminated by the Company without cause, Employee
shall receive from the Company, in a lump-sum payment ("Severance Pay") due on
the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the term of this Agreement or for
one (1) year, whichever amount is greater. Further, any termination without
cause by the Company shall operate to shorten the period set forth in Section
3(a) and during which the terms of Section 3 apply to one (1) year from the date
of termination of employment.

         (e) Change in Control. Refer to Section 12 below.

         (f) Termination by Employee for Good Reason. Employee may terminate his
employment hereunder for "Good Reason." As used herein, "'Good Reason" shall
mean the continuance of any of the following after ten (10) days' prior written
notice by Employee to the Company, specifying the basis for such Employee's.
having Good Reason to terminate this Agreement:

                  (i) the assignment to Employee of any duties materially and
         adversely inconsistent with Employee's position as specified in Section
         I hereof (or such other position to which he may be promoted),
         including status, offices, responsibilities or persons to whom Employee
         reports as contemplated under Section I of this Agreement, or any other
         action by the Company which results in a material and adverse change in
         such position, status, offices, titles or responsibilities;

                  (ii)  Employee's removal from, or failure to be reappointed or
         reelected to, Employee's position under this Agreement, except as
         contemplated by Sections 5(a), (b), (c) and (e); or

                  (iii)  any other material breach of this Agreement by the
         Company that is not cured within the ten (10) day time period set forth
         in Section 5(f) above, including the failure to pay Employee on a
         timely basis the amounts to which he is entitled under this Agreement.

         In the event of any termination by the Employee for Good Reason, as
determined by a court of competent jurisdiction or pursuant to the provisions of
Section 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. In addition, Employee shall be entitled to
receive Severance Pay equivalent to the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
one (1) year, whichever amount is greater. Further, none of the provisions of
Section 3 shall apply in the event this Agreement is terminated by Employee for
Good Reason.

         (g) Termination by Employee Without Good Reason. If Employee resigns or
otherwise terminates his employment without Good Reason pursuant to Section
5(f), Employee shall receive no severance compensation.

Upon termination of this Agreement for any reason provided in clauses (a)
through (g) above, Employee shall be entitled to receive all compensation earned
and all benefits, vested and reimbursements due through the effective date of
termination. Additional compensation subsequent to such a termination of this
Agreement, if any, will be due and payable to Employee only to the extent and in
the manner expressly provided above or in Section 16. Except as otherwise
provided in this Section 5, all other rights and obligations of the Company and
Employee under this Agreement shall cease as of the effective date of
termination of this Agreement; however, the Company's obligations under Section
9 herein and Employee's obligations under Sections 3, 6, 7, 8 and 10 herein
shall survive such termination in accordance with their terms.


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         6. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Employee by or on behalf of the Company (including
the Company's subsidiaries) or its representatives, vendors or customers which
pertain to the business of the Company (including the Company's subsidiaries)
shall be and remain the property of the Company and be subject at all times to
its discretion and control. Likewise, all correspondence, reports, records,
charts, advertising materials and other similar data pertaining to the business,
activities or future plans of the Company (including the Company's subsidiaries)
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.

         7. Inventions. Employee shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company (including the Company's subsidiaries) and which
Employee conceives as a result of his employment by the Company. Employee hereby
assigns and agrees to assign all his interests therein to the Company or its
nominee. Whenever requested to do so by the Company, Employee shall execute any
and all applications, assignments or other instruments that the Company shall
deem necessary to apply for and obtain letters patent of the United States or
any foreign country or to otherwise protect the Company's interest therein.

         8. Trade Secrets. Employee agrees that he will not, during or after the
term of this Agreement with the Company, disclose the specific terms of the
Company's (including the Company's subsidiaries) relationships or agreements
with its significant vendors or customers or any other significant and material
trade secret of the Company (including the Company's subsidiaries), whether in
existence or proposed, to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever, except as is disclosed in the ordinary
course of business.

         9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Employee), by reason of the fact that he is or was either performing
services under this Agreement or performing services prior to the date of this
Agreement as an employee of the Company], then the Company shall indemnify
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and the Company are made a
party to the same third-party action, complaint, suit or proceeding, the Company
agrees to engage competent legal representation, and Employee agrees to use the
same representation, provided that if counsel selected by the Company shall have
a conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company for errors or omissions made in
good faith where Employee has not exhibited gross, willful and wanton negligence
and misconduct or performed criminal and fraudulent acts which materially damage
the business of the Company.

         10. No Prior Agreements. Employee hereby represents and warrants to the
Company that the execution of this Agreement by Employee and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of an non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.

         11. Assignment; Binding Effect. Employee understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement and the
Company, agrees not to assign all or any portion of its obligations under this
Agreement (other than to a successor as a result of a Change in Control).
Subject to the preceding two (2) sentences and the express provisions of Section
12 below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.


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12. Change in Control.

         (a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder.

         (b) In the event of a pending Change in Control wherein the Employee
has not received written notice at least fifteen (15) business days prior to the
anticipated closing date of the transaction giving rise to the Change in Control
from the successor to all or a substantial portion of the Company's business
and/or assets that such successor is willing as of the closing to assume and
agree to perform the Company's obligations under this Agreement in the same
manner and to the same extent that the Company is hereby required to perform,
such Change in Control shall be deemed to be a termination of this Agreement by
the company and the amount of the lump-sum severance payment due to Employee
shall be three (3) times the sum of Employee's annual salary in effect
immediately prior to the Change in Control and the non-competition provisions of
Section 3 shall not apply whatsoever. Payment shall be made either at closing of
the transaction if notice is served at least five (5) days before closing or
within ten (10) days of Employee's written notice.

         (c) In any Change in Control situation in which Employee has received
written notice from the successor to the Company that such pending successor is
willing to assume the Company's obligations hereunder or Employee receives
notice after (or within 15 business days prior to) the Change in Control that
Employee is being terminated, Employee may nonetheless, at his sole discretion,
elect to terminate this Agreement by providing written notice to the Company at
any time prior to closing of the transaction and up to two (2) years after the
closing of the transaction giving rise to the Change in Control. In such case,
the amount of the lump-sum severance payment due to Employee shall be three (3)
times the sum of Employee's annual salary in effect immediately prior to the
Change in Control and the non-competition provisions of Section 3 shall all
apply. Payment shall be made either at closing if notice is served at least five
(5) days before closing or within ten (10) days of written notice by Employee.

         (d) For purposes of applying Section 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
later of the closing date of the transaction giving rise to the Change in
Control or Employee's notice as described above, and all compensation,
reimbursements and lump-sum payments due Employee must be paid in full by the
Company at such time. Further, Employee will be given sufficient time in order
to comply with the Securities and Exchange Commission's regulations to elect
whether to exercise and sell all or any of his vested options to purchase Common
Stock of the Company, including any options with accelerated vesting under the
provisions of the Company's stock option or similar plan, as amended or any
warrants, such that he may convert the options or warrants to shares of Common
Stock of the Company at or prior to the closing of the transaction giving rise
to the Change in Control, if he so desires.

         (e) A "Change in Control" shall be deemed to have occurred if:

                  (i) any person, other than the Company or an employee benefit
         plan of the Company, acquires directly or indirectly the Beneficial
         Ownership (as defined in Section 13(d) of the Securities Exchange Act
         of 1934, as amended) of any voting security of the Company and
         immediately after such acquisition such person is, directly or
         indirectly, the Beneficial Owner of voting securities representing 20%
         or more of the total voting power of all of the then-outstanding voting
         securities of the Company;

                  (ii)  the individuals (A) who, as of the Effective Date of the
         Company's Plan of Re-Organization, constitute the Board of Directors of
         the Company (the "Original Directors") or (B) who thereafter are
         elected to the Board of Directors of the Company and whose election, or
         nomination for election, to the Board of Directors of the Company was
         approved by a vote of at least two-thirds (2/3) of the Original
         Directors then still in office (such directors becoming "Additional
         Original Directors" immediately following their election) or (C) who
         are elected to the Board of Directors of the Company and whose
         election, or nomination for election, to the Board of Directors of the
         Company was approved by a vote of at least two-thirds (2/3) of the
         Original Directors and Additional Original Directors then still in
         office (such directors also becoming "Additional Original Directors"


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         immediately following their election), cease for any reason to
         constitute a majority of the members of the Board of Directors of the
         Company;

                  (iii)  the consummation of a merger, consolidation,
         recapitalization or reorganization of the Company, a reverse stock
         split of outstanding voting securities of the Company, or consummation
         of any such transaction if stockholder approval is not sought or
         obtained, other than any such transaction which would result in at
         least 75% of the total voting power represented by the voting
         securities of the surviving entity outstanding immediately after such
         transaction being Beneficially Owned by holders of at least 75% of the
         outstanding voting securities of the Company immediately prior to the
         transaction, with the voting power of each such continuing holder
         relative to other such continuing holders not substantially altered in
         the transaction; or

                  (iv)  the consummation of a complete liquidation of the
         Company or an agreement for the sale or disposition by the Company of
         all or a substantial portion of the Company's assets (i.e., 33-1/3% or
         more of the total assets, revenue, EBITDA, or operating income of the
         Company (including the Company's subsidiaries)).

         (f) Continuation of Benefits.

                  (i) Following the termination of the Executive's employment
         in connection with a Change in Control (as contemplated by Section
         12(b) or 12(c) of this Agreement) (a "Change in Control Termination")
         and until the earlier of (A) one (1) year following such Change in
         Control Termination or (B) the date on which the Executive becomes
         employed by a new employer (other than to the successor to the Company
         following such Change in Control), the Company shall, at its expense,
         provide the Executive with medical, dental, life insurance, disability
         and accidental death and dismemberment benefits ("Insurance Benefits")
         at the highest level provided to the Executive immediately prior to the
         Change in Control; provided, however, if the Executive becomes employed
         by a new employer that maintains Insurance Benefits that either (x) do
         not cover the Executive with respect to a pre-existing condition that
         was covered under the Company's Insurance Benefits, or (y) do not cover
         the Executive for a designated waiting period, or (z) do not provide
         for a certain benefit, the Executive's coverage under the Company's
         Insurance Benefits shall continue (with respect to such area of
         non-coverage described in (x), (y) or (z), as applicable), without
         limitation, until the earlier of the end of the applicable period of
         non-coverage under the new employer's Insurance Benefits or the third
         anniversary of the Change in Control.

                  (ii)  The Company shall reimburse all reasonable expenses
         incurred by the Executive for reasonable office and secretarial
         expenses and for reasonable professional outplacement services by
         qualified consultants selected by the Executive for up to 1 year after
         a Change in Control Termination.

                  (iii)  The Executive shall not be required to seek other
         employment following a Change in Control Termination and any
         compensation earned from other employment shall not reduce the amounts
         otherwise payable under this Agreement.

         (g) If any portion of the severance benefits, Change in Control
benefits or any other payment under this Agreement, or under any other agreement
with; or plan of the Company, including but not limited to stock options,
warrants and other long-term incentives (in the aggregate "Total Payments")
would be subject to the excise tax imposed by Section 4999 of the Code, as
amended (or any similar tax that may hereafter be imposed) or any interest or
penalties with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to is the
"Excise Tax"), then Employee shall be entitled to receive from the Company an
additional payment (the "Gross-up Payment") (i.e., in addition to such other
severance benefits, Change in Control benefits or any other payments under this
Agreement) in an amount such that the net amount of Total Payments and Gross-up
Payment retained by the Employee, after the calculation and deduction of all
Excise Tax on the Total Payments and all federal, state and local income tax,
employment tax and Excise Tax on the Gross-up Payment, shall be equal to the
Total Payments.


                                       9
<PAGE>


         For purposes of this Section Employee's applicable Federal, state and
local taxes shall be computed at the maximum marginal rates, taking into account
the effect of any loss of personal exemptions resulting from receipt of the
Gross-Up Payment.

         All determinations required to be made under this Section 12, including
whether a Gross-Up Payment is required under this Section, and the assumptions
to be used in determining the Gross-Up Payment, shall be made by the Company's
current independent accounting firm, or such other firm as the Company may
designate in writing prior to a Change in Control (the "Accounting Firm"), which
shall provide detailed supporting calculations both to the Company and Employee
within twenty business days of the receipt of notice from Employee that there
will likely be a Change in Control, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or
auditor for the party effecting the Change in Control or is otherwise
unavailable, Employee (together with all other employees with comparable
appointment rights in their respective employment agreements such that all such
employees may collectively select a single accounting firm) may appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm with respect to
such determinations described above shall be home solely by the Company.

         Employee agrees (unless requested otherwise by the Company) to use
reasonable efforts to contest in good faith any subsequent determination by the
Internal Revenue Service that Employee owes an amount of Excise Tax greater than
the amount determined pursuant to this Section; provided, that Employee shall be
entitled to reimbursement by the Company (on an after tax basis) of all fees and
expenses reasonably incurred by Employee in contesting such determination. In
the event the Internal Revenue Service or any court of competent jurisdiction
determines that Employee owes an amount of Excise Tax that is greater than the
amount previously taken into account and paid under this Agreement (such
additional Excise Tax being the "Additional Excise Tax"), the Company shall
promptly pay to Employee the amount of such shortfall. In the case of any
payment that the Company is required to make to Employee pursuant to the
preceding sentence (a "Later Payment"), the Company shall also pay to Employee
an additional amount such that after payment by Employee of all of Employee's
applicable Federal, state and local taxes, including any interest and penalties
assessed by any taxing authority, on the Later Payment, Employee will retain
from the Later Payment an amount equal to the Additional Excise Tax, which
Employee shall use to pay the Additional Excise Tax.

         (h) In the event of a Change in Control, the Company shall require that
the ultimate parent entity (or if no parent entity, the acquiring entity itself)
of any entity that acquires control (through ownership of securities or assets,
consistent with the definitional triggers of a Change in Control set forth
above) of the Company in connection with such Change in Control assume or
guaranty the Company's obligations under Sections 12(f) and 12(g) of this
Agreement.

         13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Company or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between the
Company and Employee and of all the terms of this Agreement, and it cannot be
varied, contradicted or supplemented by evidence of any prior or contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.

         14. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:

To the Company:     Lason Systems, Inc.
                    1305 Stephenson Highway
                    Troy, Michigan 48083
                    Attn: President and CEO


                                       10
<PAGE>


with a copy to:     Laurence B. Deitch
                    Bodman, Longley & Dahling LLP
                    100 Renaissance Center
                    34th Floor
                    Detroit, Michigan 48243

To Employee:        Michael H. Riley
                    P.O. Box 3005
                    Rancho Santa Fe, California  92067

         Notice shall be deemed given and effective three (3) days after the
deposit in the U.S. mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this Section 14.

         15. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
Section headings herein are for reference purposes only and are not intended in
any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.

         16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement or Employee's employment shall be settled
exclusively by arbitration, conducted before a panel of three (3) arbitrators
sitting in the Detroit, Michigan metropolitan area, in accordance with the rules
of the American Arbitration Association then in effect. The arbitrators shall
not have the authority to add to, detract from, or modify any provision hereof
nor to award punitive damages to any injured party. The arbitrators shall have
the authority to order back-pay, severance compensation, vesting of options (or
cash compensation in lieu of vesting of options), reimbursement of costs,
including those incurred to enforce this Agreement, and interest thereon in the
event the arbitrators determine that Employee was terminated without disability
or good cause, as defined in Sections 5(b) and 5(c), respectively, or that the
Company has otherwise materially breached this Agreement. A decision by a
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The costs of
any arbitration proceeding shall be borne by the party or parties not prevailing
in such proceeding as determined by the arbitrators. This Section shall survive
any termination of this Agreement.


                                       11
<PAGE>



         17. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Michigan.


                                 COMPANY:

                                 Lason Systems, Inc.

                                 By: /s/ Ronald D. Risher
                                     ------------------------------------------
                                                 Ronald D. Risher
                                     Its: President and Chief Executive Officer

                                 EMPLOYEE:

                                 /s/ Michael H. Riley
                                 ----------------------------------------------
                                 MICHAEL H. RILEY



                                       12


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