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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________.
Commission File No. 0-20747
IMAGEMATRIX CORPORATION
-----------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1313108
(State or jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
400 S. COLORADO BLVD. - SUITE 500, DENVER, COLORADO 80222
(Address of principal executive offices) (Zip code)
(303) 399-3700
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 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
---- ----
The small business issuer had 4,922,834 shares of common stock outstanding as of
May 9, 1997.
Transitional Small Business Disclosure Format:
Yes No X
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ITEM 1 FINANCIAL STATEMENTS
IMAGEMATRIX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
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Revenue:
System sales $1,226 $ 797
Service contracts and other 118 110
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Total revenue 1,344 907
Cost of revenue:
Cost of system sales 586 711
Cost of service contracts and other 102 49
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Total cost of revenue 688 760
Gross profit 656 147
Selling, general and administrative expenses 1,208 577
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Operating loss (552) (430)
Other income (expense):
Interest - (85)
Other nonoperating 4 (7)
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Net loss $ (548) $ (522)
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Net loss per common share $(0.11) $(0.15)
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Common shares used in computing net loss per share 4,880 3,575
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See notes to consolidated financial statements.
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IMAGEMATRIX CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
MARCH 31,
1997
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ASSETS
Current assets
Cash and cash equivalents $ 162
Accounts receivable, net of allowance of $7 577
Unbilled revenues 698
Inventory 57
Prepaid expenses and other current assets 145
-----------
Total current assets 1,639
Property and equipment, at cost, less accumulated depreciation
and amortization of $226 518
Software development costs, net of accumulated amortization
of $166 249
Other assets, net of accumulated amortization of $53 48
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TOTAL ASSETS $ 2,454
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 900
Deferred revenue 65
Other current liabilities 180
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Total current liabilities 1,145
Stockholders' equity
Preferred stock, no par value, 5,000,000 shares authorized,
no shares issued or outstanding -
Common stock, no par value, 20,000,000 shares authorized,
4,922,834 shares issued and outstanding 5,604
Deferred compensation, net of accumulated amortization of $62 (37)
Accumulated deficit (4,258)
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Total stockholders' equity 1,309
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,454
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See notes to consolidated financial statements.
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IMAGEMATRIX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
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OPERATING ACTIVITIES
Net loss $(548) $(522)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 103 51
Changes in operating assets and liabilities:
Accounts receivable (254) 433
Unbilled revenues (396) (170)
Inventory 68 95
Prepaid expenses and other current assets (18) (57)
Accounts payable and accrued expenses 410 5
Deferred revenue and other current liabilities 33 43
Software development costs - (70)
Other assets 10 (163)
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NET CASH USED BY OPERATING ACTIVITIES (592) (355)
INVESTING ACTIVITIES
Purchases of computer equipment and furniture (35) (128)
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NET CASH USED BY INVESTING ACTIVITIES (35) (128)
FINANCING ACTIVITIES
Issuance of common stock, net of offering costs of $36 465 -
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NET CASH PROVIDED BY FINANCING ACTVITIES 465 -
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Net decrease in cash and cash equivalents (162) (483)
Cash and cash equivalents at beginning of period 324 550
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 162 $ 67
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See notes to consolidated financial statements.
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IMAGEMATRIX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
These statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Form 10-KSB/A for the year ended
December 31, 1996. The accompanying financial statements have been prepared in
accordance with generally accepted auditing standards and in the opinion of the
Company's management, such financial statements include all adjustments
necessary to summarize fairly the Company's financial position and results of
operations. All adjustments made to the interim financial statements presented
are of a normal, recurring nature. The results of operations for the first
quarter ended March 31, 1997, may not be indicative of results that may be
expected for the year ending December 31, 1997.
NOTE 2 SUBSEQUENT EVENT
On April 14, 1997, the Company sold 3,300,000 shares of non-voting, Series A
Preferred Stock (Preferred Stock) for gross proceeds of $3,300,000. In
connection with the sale, the Company agreed to pay commissions of $330,000 and
issue warrants to purchase 1,550,000 shares of Common Stock to certain placement
agents. Of the 1,550,000 warrants, 1,050,000 are exercisable at $2.25 per share
and 500,000 are exercisable at $3.00 per share. All such warrants may be
exercised for a period of three years from the date of grant. The Preferred
Stock yields a 7% dividend, which the Company can elect to pay in cash or Common
Stock. The Preferred Stock can be converted into Common Stock at the lesser of
$2.25 per share or 75% of the average closing price for the previous eight
trading days prior to conversion.
NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Software Development Costs
The Company recognizes software and system development expenses at the time of
occurrence for all software and system conceptual design, writing, programming,
and production prior to a Beta-site test at a customer site. Once a product has
been installed at a customer Beta-site and functionality and conceptual design
has been proved, the Company capitalizes all expenses associated with the
development of that software until general release to the public. If upon
review of the costs incurred during the period from initial Beta-site testing
until general release to the public the Company determines that the costs
incurred were immaterial, such costs will be expensed in that period.
NOTE 4 SALE OF COMMON STOCK
In January 1997, the Company sold 257,000 shares of Common Stock at a price of
$1.95 per share. Net proceeds to the Company, relating to this transaction
totaled $465,000.
NOTE 5 IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings Per Share, which is required to be adopted for periods ending
after December 15, 1997. At that time, the Company will be required to change
the method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The expected impact of
Statement No. 128 on these quarters is not expected to be material.
5
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
ImageMatrix Corporation (the Company), was incorporated in July 1995. The
Company designs, sells and installs document imaging and work flow systems which
improve productivity and customer service for health maintenance organizations
(HMOs), health insurance companies, third-party administrators (TPAs), workers
compensation organizations, dental providers and preferred provider
organizations. These organizations are collectively known as Managed Care
Organizations (MCOs). The Company's imaging systems integrate the Company's
proprietary software as well as components manufactured by third party imaging
software, hardware and peripheral vendors. The Company has developed a suite of
software products including, CaptureMatrix TM, ClaimMatrix TM and ServiceMatrix
TM. CaptureMatrix TM is a document capture, storage and retrieval system.
ClaimMatrix TM performs imaging-based workflow claims processing.
ServiceMatrix TM is anticipated to be released in June 1997 and will enable
customer service departments to resolve customer inquiries in a rapid, cost-
efficient manner. Installation of the first ClaimMatrixTM system was
successfully completed in October 1996. The second ClaimMatrix TM system
entered the installation stage in December 1996 and that installation will be
complete in second quarter 1997.
In June 1996, the Company raised $6,247,000, net of offering costs, from its
initial public offering of 1,400,000 units consisting of 1,400,000 shares of
Common Stock and warrants to purchase 750,000 shares of Common Stock. In
January 1997, the Company raised $465,000, net of offering costs, from the sale
of 257,000 shares of its Common Stock. During April and May 1997, the Company
raised $3,300,000 from the sale of Series A, non-voting Preferred Stock.
RESULTS OF OPERATIONS
Total revenue for the three months ended March 31, 1997, increased 48.2% or
$437,000 to $1,344,000 over the first quarter 1996 amount of $907,000. Revenue
from system sales increased $429,000 or 53.8% when compared to the 1996 period.
First quarter 1997 revenue from service contracts and other of $118,000 remained
relatively unchanged from the $110,000 reported in 1996. The increase in total
revenue and revenue from system sales is the result of additional customers in
1997. During the last half of 1996, the Company's sales and marketing efforts
were focused primarily on sales of the Company's proprietary software into the
MCO industry. The increase in customers during first quarter 1997 is the direct
result of these efforts. The revenue derived from sales to the MCO industry was
$1,202,000 during the three months ended March 31, 1997 compared to $180,000 in
the 1996 period. This increase of $1,022,000 or 568% was offset by a decline in
sales into other industries due to the shift in sales focus during 1996.
Gross profit increased from $147,000 for the three month period ended March 31,
1996 to $656,000 for the comparable period in 1997. The increase of $509,000 is
primarily the result of the additional sales of the Company's proprietary
software.
Gross margin (gross profit as a percent of sales) improved to 48.8% for first
quarter 1997 from 16.2% in first quarter 1996. The improvement is attributable
to the increase in sales of the Company's proprietary software, which has a
gross margin of approximately 75%.
First quarter 1997 selling, general and administrative costs increased
significantly over those reported in first quarter 1996 from $577,000 in first
quarter 1996 to $1,208,000 in first quarter 1997. Contributing to the growth is
the expansion of the sales force and costs associated with related office space,
additional administrative personnel and increased marketing efforts over the
levels experienced during 1996.
Interest expense was reduced to zero for first quarter 1997 due to the repayment
of the debt that was outstanding during the first half of 1996.
6
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LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is generated from both internal and external sources and
is used to fund short-term working capital needs. Internally generated
liquidity is measured by operating cash flow as discussed below and working
capital. At March 31, 1997, working capital was $494,000. In addition, the
Company received gross proceeds of $3,300,000 in April and May 1997 from the
sale of 3,300,000 shares of non-voting, Series A Preferred Stock (Preferred
Stock). The Company believes that the cash generated from the sale of the
Preferred Stock and its $2,000,000 line of credit (whereby the Company is
allowed to borrow up to 80% of approved accounts receivable balances) is
sufficient to finance its short-term working capital needs for fiscal year 1997.
The Company's long-term capital requirements will depend on many factors,
including, but not limited to, product revenues from operations, working capital
requirements, research and development expenses and capital expenditures. The
Company's market development efforts are still relatively young and changes in
the anticipated business development of the Company which extend the Company's
time to achieve profitability could cause the Company to issue debt, additional
equity or a combination thereof. There can be no assurance that additional
financing will be available, or, if available, the terms of such financing will
be favorable to the Company or its shareholders without substantial dilution of
their ownership rights. If adequate funds are not available, or are not
available on terms acceptable to the Company, the Company may be required to
curtail its operations significantly, forego market opportunities, or obtain
funds through arrangements with strategic partners or others that may require
the Company to relinquish material rights to certain of its technologies or
potential markets.
Net cash used in operating activities during the first quarter 1997 was
$592,000. Contributing to this usage was the loss experienced during first
quarter, as well as increases in accounts receivable and unbilled revenue
balances resulting from the increased sales volume experienced during first
quarter 1997. These increases were offset in part by the increase in accounts
payable. The usage of cash by operations was partially offset by an increase in
cash related to the sale of 257,000 shares of Common Stock during January 1997.
"SAFE HARBOR" STATEMENT UNDER PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements contained in this report which are not historical facts are
forward-looking statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those set forth in or
implied by forward-looking statements, including, but not limited to, the risk
that the market for imaging-based claims processing may not develop as expected,
the degree of success of the Company's market initiatives, expansion of sales in
the MCO industry, the success of the Company in forecasting demand for the
ClaimMatrix(TM) system, the success of the Company in increasing ClaimMatrix(TM)
system sales as a percentage of overall revenues to increase gross profit
margins and decrease general, administration and sales costs as a percentage of
overall gross profit, the risk that the long length of the Company's sales cycle
could delay revenues, and those risks and uncertainties discussed more
completely in the Company's Form SB-2 registration statement and its Form 10-
KSB/A for the year ended December 31, 1996.
7
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
(b) On May 8, 1997, the Company sold 3,300,000 shares of non-voting, Series
A Preferred Stock ("Preferred Stock") for gross proceeds of $3,300,000 pursuant
to an agreement dated April 14, 1997 (the "Private Placement"). The Preferred
Stock yields a 7% dividend, which the Company can elect to pay in cash or Common
Stock. The Preferred Stock can be converted into Common Stock at the lesser of
$2.25 per share or 75% of the average closing price for the previous eight
trading days prior to conversion.
The holders of the Preferred Stock are entitled to a liquidation preference
of $1.00 per share, plus any accrued but unpaid dividends thereon, and are
thereafter entitled to receive on a pro-rata basis with holders of Common Stock
(based, in the case of the Preferred Stock, on the number of shares of Common
Stock into which such Preferred Stock is then convertible), the remaining funds
and assets of the Company available for distribution to its shareholders. The
7% dividend on the Preferred Stock is payable in preference and priority to any
payment of any cash dividend on Common Stock or any other shares of capital
stock of the Company other than the Preferred Stock, on a quarterly basis. Such
dividends shall accrue and be payable whether or not paid or declared, and shall
be cumulative so that if at any time such dividends on the Preferred Stock shall
not have been paid the deficiency shall be fully paid and set apart for payment
before any dividend shall be earned or set apart for any other shares of capital
stock of the Company and before any purchase or acquisition of any other shares
of capital stock of the Company is made by the Company, except the repurchase of
the shares of capital stock of the Company from employees of the Company upon
termination of employment.
(c) On May 8, 1997, in the Private Placement referred to in Part II, Item
(b) of this report, the Company issued 3,300,000 shares of Series A Convertible
Preferred Stock to 15 accredited investors (14 United States residents and one
resident of England), for an aggregate purchase price of $3,300,000. In
connection with the Private Placement, the Company paid commissions of $330,000
and issued warrants to purchase 1,550,000 shares of Common Stock to certain
placement agents. Of the 1,550,000 warrants, 1,050,000 are exercisable at $2.25
per share (Warrant "A") and 500,000 are exercisable at $3.00 per share (Warrant
"B"). All such warrants may be exercised for a period of three years from the
date of grant.
The Company believes this transaction was private in nature and was exempt from
the registration requirements of Section 5 of the Securities Act by virtue of
the exemptions provided by Regulation D and Regulation S of the Securities Act.
ITEM 5. OTHER INFORMATION
On May 8, 1997, as a part of the Private Placement referred to in Part II,
Item 2(b) of this report, the Company issued 1,055,000 shares of Series A
Convertible Preferred Stock to an accredited investor who is a resident of
England, for an aggregate purchase price of US$1,055,000. A proportional amount
of the commissions and warrants issued in connection with the Private Placement
were paid and issued in respect of the shares of Preferred Stock issued to such
investor. See Part II, Item 2(c) of this report, incorporated by reference
hereby.
The Company believes this transaction was private in nature and was exempt from
the registration requirements of Section 5 of the Securities Act by virtue of
the exemption provided by Regulation S of the Securities Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
3.1 Amended and Restated Articles of Incorporation. (1).
3.2 Bylaws of Registrant. (1).
3.3 Articles of Amendment to Articles of Incorporation creating Series A
Convertible Preferred Stock.
4.1 Form of Certificate for Shares of Common Stock. (1).
4.2 Form of Warrant Agreement and Redeemable Warrant. (1).
4.3 Form of Stock Purchase Warrant A.
4.4 Form of Stock Purchase Warrant B.
10.1 Employment Agreement dated December 29, 1995 by and between
ImageMatrix Corporation and Gerald E. Henderson. (1).
10.2 Severance Agreement dated December 29, 1995 by and between
ImageMatrix Corporation and Dennis C. Hefter. (1).
10.3 Letter Agreement dated December 21, 1995 by and between ImageMatrix
Corporation and Blair W. McNea. (1).
10.4 ImageMatrix Corporation Founders and Consultants Stock Option Plan.
(1).
10.5 ImageMatrix Corporation 1996 Stock Option Plan. (1).
10.6 ImageMatrix Corporation Stock Option Plan for Non-Employee
Directors.( (1).
10.7 Asset Purchase Agreement dated August 30, 1995 by and among
Documatrix Acquisition Corporation, Random Access, Inc. and Gerald E.
Henderson. (1).
10.8 Authorized Reseller Agreement dated February 21, 1996 by and between
ImageMatrix Corporation and Optika Imaging Systems, Inc. (1).
10.9 Reseller Agreement dated January 8, 1996 by and between ImageMatrix
Corporation and FileNet Corporation. (1).
10.10 Asset Purchase Agreement dated February 15, 1995 by and among Random
Access, Inc., Documatrix Corporation and Gerald E. Henderson. (1).
8
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10.11 Change in Terms Agreement dated December 27, 1995 by and among
Bank One Colorado, N.A., Gerald E. Henderson, Carolyn Lee Henderson
and Documatrix Corporation, as amended by Change in Terms Agreement
dated February 29, 1996 by and among Bank One Colorado, N.A., Gerald
E. Henderson, Carolyn Lee Henderson, Documatrix Corporation and
ImageMatrix Corporation. (1).
10.12 Form of Securities Purchase Agreement, dated April 14, 1997.
11 Statement Re Computation of Earnings Per Share
27 Financial Data Schedule
(1) Incorporated by reference from same exhibit to the Registrant's
Registration Statement on Form SB-2 (File No. 333-1990).
(b) Reports on Form 8-K
One report on Form 8-K was filed on January 16, 1997, relating to
the sales of equity securities pursuant to Regulation S. No
financial statements were filed with this report.
9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IMAGEMATRIX CORPORATION
Date: May 14, 1997 By: /s/ Gerald E. Henderson
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Gerald E. Henderson, President and Chief
Executive Officer
(Principal Executive Officer)
Date: May 14, 1997 By: /s/ Blair W. McNea
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Blair McNea, Chief Financial Officer, Vice
President Business Development, Treasurer,
Secretary (Principal Financial and
Accounting Officer)
10
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EXHIBIT 3.3
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
IMAGEMATRIX CORPORATION
ImageMatrix Corporation (hereinafter called the "Corporation"), organized
and existing under and by virtue of the Colorado Business Corporation Act of the
State of Colorado, does hereby certify as follows:
By written consent of the Board of Directors of the Corporation, a
resolution was duly adopted, pursuant to Section 7-108-202 of the Colorado
Business Corporation Act of the State of Colorado, setting forth an amendment
to the Articles of Incorporation of the Corporation which determines the
preferences, limitations and relative rights of a new class of preferred stock.
The amendment was duly adopted by the Board of Directors pursuant to Section 7-
106-102. The resolution setting forth the amendment is as follows:
RESOLVED: That pursuant to the authority vested in the Board of Directors of
- -------- this Corporation by Article II of its Articles of Incorporation, a
series of Preferred Stock of the Corporation be and it hereby is
created, and the designation and relative rights and preferences of
the shares of such series, and the limitations or restrictions
thereof, are as follows:
C. SERIES A CONVERTIBLE PREFERRED STOCK
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Three Million Three Hundred Thousand (3,300,000) shares of the authorized
and unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock") with the rights,
preferences, powers, privileges and restrictions, qualifications and limitations
set forth below:
1. Dividends. The holders of the Series A Preferred Stock shall be
---------
entitled to receive, out of any funds legally available therefor, dividends
which will accrue on the outstanding principal amounts of the Series A Preferred
Stock at the rate of seven percent (7%) (the "Dividend Rate") of the purchase
price per annum, payable in preference and priority to any payment of any cash
dividend on Common Stock or any other shares of capital stock of the Corporation
other than the Series A Preferred Stock, on a quarterly basis. Such dividends
shall accrue, shall be payable, and shall be deemed to accrue from day to day
whether or not paid on or declared, and shall be cumulative so that if at any
time such dividends on the Series A Preferred Stock shall not have been paid,
and set apart for payment, the deficiency shall be fully paid on and set apart
for payment before any dividend shall be earned or set apart for any other
shares of capital stock of the Corporation and before any purchase or
acquisition of any other shares of capital stock of the Corporation is made by
the Corporation, except the repurchase of the shares
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of capital stock of the Corporation from employees of this Corporation upon
termination of employment. The Dividend Rate shall be increased to eighteen
percent (18%) in the event a registration statement is not filed with the U.S.
Securities and Exchange Commission to register the Common Stock underlying the
Series A Preferred Stock without sixty (60) days of the closing of the
Securities Purchase Agreement, as hereinafter defined, or if such registration
is not effective within ninety (90) days thereafter. At the option of the
Corporation, dividends payable pursuant to this Paragraph may be paid in shares
of the Corporation's Common Stock, at the valuation set forth in Paragraph 4(a)
hereof.
2. Liquidation, Dissolution or Winding Up.
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In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, each holder ("Holder") of shares of Series A
Preferred Stock then outstanding shall be entitled to receive the amount of
$1.00 per share, as adjusted for any stock splits, combinations or other similar
recapitalizations affecting such shares, plus any accrued but unpaid dividends
thereon, and shall then be entitled to receive on a pro-rata basis with holders
of common stock (based, in the case of the Series A Preferred Stock, on the
number of shares of Common Stock into which such convertible securities are then
convertible), the remaining funds and assets of the Corporation available for
distribution to its stockholders.
3. Voting. The Series A Preferred Stock shall be nonvoting.
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4. Optional Conversion. The Holders of the Series A Preferred Stock
-------------------
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall be
----------------
convertible, at the option of the Holder thereof, at any time and from time to
time, into such number of fully paid and nonassessable shares of Common Stock as
is determined by dividing the number of shares of Series A Preferred Stock plus
accrued but unpaid dividends, by the lower of (i) $2.25 per share or (ii) 75% of
the average closing bid price of the Company's Common Stock on the Nasdaq
SmallCap Market (or such other stock exchange, quotation service or over the
counter market on which the Common Stock may be traded) for the eight (8)
trading days prior to Conversion (the "Conversion Price"). The Conversion
Price, and the rate at which shares of Series A Preferred Stock may be converted
into shares of Common Stock, shall be subject to adjustment as provided below.
(b) Fractional Shares. No fractional shares of Common Stock will be
-----------------
issued in connection with the Conversion hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor in an amount
determined in such reasonable manner as may be prescribed by the Board of
Directors of the Company.
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(c) Mechanics of Conversion.
-----------------------
(i) In order for a Holder of Series A Preferred Stock to convert
shares of Series A Preferred Stock into shares of Common Stock, such holder
shall deliver by telecopy or otherwise, a written request to convert Holder's
Series A Preferred Stock into Common Stock ("Conversion Notice") in the form
attached hereto as Exhibit A to the Company at its principal office to the
attention of Blair McNea, Secretary and Gerald E. Henderson, President, and
Holder shall deliver to Blair McNea at the Company as soon as practicable
thereafter, the original Conversion Notice and the original certificates for the
Series A Preferred Stock. At its expense, the Company shall within five (5)
business days of its receipt of the original Conversion Notice and the original
certificates for the Series A Preferred Stock, issue and deliver to the Holder
at the Company's principal office, or such other place designated by the Holder,
a certificate ("Certificate") evidence the issuance of such Common Stock to
which the Holder is entitled upon such Conversion, together with any cash
amounts payable in lieu of the issuance of a fraction of a share of Common
Stock.
(ii) Provided that Holder delivers the original Conversion Notice
and the original Series A Preferred Stock Certificates within two (2) business
days of the initial delivery of the Conversion Notice to the Company by telecopy
or otherwise, as provided above, Conversion shall be deemed to be effective on
the date of such initial delivery of the Conversion Notice. Otherwise,
Conversion shall be deemed to be effective on the date the Company receives the
original Conversion Notice and the original certificates for the Series A
Preferred Stock. Thereafter, the Holder shall be treated for all purposes as the
record holder of such securities as of the date of conversion. Any shares of
Series A Preferred Stock so converted shall be retired and canceled and shall
not be reissued, and the Corporation may from time to time take such appropriate
action as may be necessary to reduce the authorized Series A Preferred Stock
accordingly. Under certain circumstances, the Company shall be obligated to make
a late payment to Holder as set forth in Section 5.03 of the Securities Purchase
Agreement between the Company and the purchasers of the Series A Preferred Stock
(the "Securities Purchase Agreement").
(iii) The Corporation shall at all times when the Series A
Preferred Stock is outstanding, reserve and keep available out of its authorized
but unissued stock, for the purpose of effecting the conversion of the Series A
Preferred Stock, such number of its duly authorized shares of Common Stock (not
less than 5,000,000 shares, as such number may be adjusted as a result of stock
splits, stock dividends, and similar events) as shall from time to time be
sufficient to effect the conversion of all outstanding Series A Preferred Stock.
Before taking any action which would cause an adjustment reducing the Conversion
Price below the then par value of the shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, the Corporation will take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue fully paid and nonassessable
shares of Common Stock at such adjusted Conversion Price.
-3-
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(iv) No Holder shall have a right to convert any Series A
Preferred Stock of the Company so long as and to the extent that at the time of
such conversion, such conversion or exercise would cause the Holder then to be
the "beneficial owner" of five percent (5%) or more of the Company's then
outstanding Common Stock. For the purpose hereof, the term "beneficial owner"
shall have the meaning ascribed to it in Section 13(d) of the Securities
Exchange Act of 1934. The opinion of legal counsel to each Holder, in form and
substance satisfactory to the Company and the Company's counsel, shall prevail
in all matters relating to the amount of such Holder's beneficial ownership.
(d) Adjustment of Conversion Price and Redemption Trigger Price.
------------------------------------------------------------
The number and kind of securities issuable upon conversion of the
Series A Preferred Stock and the Conversion Price (as well as the Redemption
Trigger Price) shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(i) Reclassification or Merger. In case of any reclassification
--------------------------
or change of outstanding securities of the shares of the Company's Common Stock
issuable upon conversion of the Series A Preferred Stock (other than a change in
par value, or from par value to no par value, or from no par value to par value)
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon conversion of the Series A Preferred
Stock), or in case of any sale of all or substantially all of the assets of the
Company, the Company shall as condition precedent to such transaction, provide a
new class of Preferred Stock with terms as stated herein, but providing that the
Holder of the Series A Preferred Stock shall have the right to exchange each
share of Holder's Series A Preferred Stock for a share of such new class of
Preferred Stock (the "New Class"), and upon such exchange to have the right to
receive, upon conversion of the shares of the New Class, proportionately
equivalent shares of Common Stock, other securities, money and property. Shares
of the New Class shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided in this section
4(d). The provisions of this section 4(d) shall similarly apply to successive
reclassifications, changes, mergers and sales of assets.
(ii) Subdivision or Combination of Shares. If the Company at any
-------------------------------------
time while the Series A Preferred Stock remains outstanding shall subdivide or
combine its Common Stock, the Conversion Price and the Redemption Trigger Price
shall be proportionately decreased in the case of a subdivision or increased in
the case of a combination.
(iii) Stock Dividends. If the Company at any time while the
---------------
Series A Preferred Stock is outstanding shall pay a dividend with respect to
Common Stock payable in, or make any other distribution with respect to Common
Stock (except any distribution specifically provided for in the foregoing
sections 4(d)(i) and 4(d)(ii) of, Common Stock, then the
-4-
<PAGE>
Conversion Price and the Redemption Trigger Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Conversion
Price or the Redemption Trigger Price, as the case may be, in effect immediately
prior to such date of determination by a fraction (a) the numerator of which
shall be the total number of shares of Common Stock outstanding immediately
prior to such dividend or distribution, and (b) the denominator of which shall
be the total number of shares of Common Stock outstanding immediately after such
dividend or distribution.
(e) Notice of Adjustments.
---------------------
Whenever the Conversion Price and the Redemption Trigger Price
shall be adjusted pursuant to paragraph 4(d) hereof, the Company shall make a
certificate signed by its chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant Price or Prices
after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed by first class mail, postage prepaid, to Holder.
5. Redemption by the Company.
-------------------------
(a) If the Company receives a request to convert all or any
portion of the shares of Series A Preferred Stock and the Conversion Price is
less than $1.50 per share (the "125% Redemption Trigger Price"), the Company
shall have the right to decline to convert some or all of the Series A Preferred
Stock for which Conversion is attempted and instead redeem such portion by
payment of 125% (the "Redemption Amount") of (i) the purchase price paid by
Holder thereof and (ii) accrued but unpaid dividends on such portion. In such
events, the Company shall notify the Holder, no later than three (3) business
days after the attempted Conversion, of the Company's intent to effect such
redemption. At its expense, the Company shall, no later than three (3) business
days thereafter, issue and deliver to the Holder at the Company's principal
office or at such other place designated by the Holder, the Redemption Amount by
a bank draft for immediately available funds. Under certain circumstances, the
Company shall be obligated to make a late delivery payment to Holder as set
forth in Section 5.03 of the Securities Purchase Agreement.
(b) If the shares of the Company's Common Stock underlying the
Series A Preferred Stock have not been registered by the first anniversary of
the Securities Purchase Agreement, then at any time thereafter any Holder may,
by notice to the Company require the Company to redeem up to Holder's pro rata
portion (based on the portion of the Preferred Stock he then owns) of 2,000,000
shares of the Series A Preferred Stock. Such shares shall be redeemed for cash
equal to 125% (the "Non-Approval Redemption Amount")of (i) the price paid by
Holder thereof and (ii) and accrued but unpaid dividends on such portion and
payment of such amount shall be made within three (3) business days after the
date of such notice.
-5-
<PAGE>
6. Notice of Certain Actions. In the event that the Company shall
--------------------------
propose at any time:
(a) to declare any dividend or distribution upon any class or series
of its stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(b) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights;
(c) to effect any reclassification or recapitalization of its Common
Stock outstanding involving a change in the Common Stock; or
(d) to merge or consolidate with or into any other corporation, or
sell, lease or convey all or substantially all its assets or property, or to
liquidate, dissolve or wind up, whether voluntary or involuntary;
then in connection with each such event, the Company shall send to Holder:
(i) at least 10 days prior written notice of the date on which a
record shall be taken for such dividend, distribution or subscription rights
(and specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote in respect of the matters referred to
in (i) and (ii) above;
(ii) in the case of the matters referred to in (iii) and (iv)
above, at least 10 days prior written notice of the date for the determination
of shareholders entitled to vote thereon (and specifying the date on which the
holders of Common Stock shares shall be entitled to exchange their Common Stock
for securities or other property deliverable upon the occurrence of such event);
and
(iii) prompt notice of any material change in the terms of the
transaction described in (a) through (d) above.
7. Issuance of Additional Securities, etc. For so long as any shares of
---------------------------------------
Series A Preferred Stock are outstanding, without the written consent or
affirmative vote of the holders of a majority of the then outstanding Series A
Preferred Stock, given in writing or by vote at a meeting, the Corporation shall
not:
(a) increase the authorized amount of Series A Preferred Stock or
increase the authorized amount of any additional class or series of shares of
stock, unless the same is subordinate to the rights and preferences of the
Series A Preferred Stock; or
-6-
<PAGE>
(b) authorize or issue any convertible debt or any additional class
or series of shares of stock unless the same is subordinate to the rights and
preferences of the Series A Preferred Stock; or
(c) amend its Articles of Incorporation or Bylaws in any manner which
would impair the rights or interests of the holders of shares of Series A
Preferred Stock or amend, alter or repeal in any respect the rights,
preferences, privileges and other terms and conditions of the Series A Preferred
Stock, except for a reduction in the authorized number of shares of Series A
Preferred Stock to not less than the number then outstanding.
ATTEST: IMAGEMATRIX CORPORATION
By: /s/ Blair W. McNea By: /s/ Gerald E. Henderson
_____________________ _______________________________
Secretary Gerald E. Henderson, President
-7-
<PAGE>
EXHIBIT 4.3
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAW.
THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN EXEMPTION THEREFROM.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
Void after 5:00 P.M., Denver, Colorado Right to Purchase ______ Shares
Time, on April __, 2000. of the Common Stock of ImageMatrix
Corporation.
IMAGEMATRIX CORPORATION
STOCK PURCHASE WARRANT A
IMAGEMATRIX CORPORATION, a Colorado corporation (the "Company"), hereby
certifies that for value received, _________________________, or assigns
("Holder"), is entitled to purchase, subject to the terms and conditions
hereinafter set forth, an aggregate of ______ fully paid and nonassessable
shares ("Shares") of the Common Stock of the Company ("Common Stock"), at a
price of $2.25 per share. The number of Shares to be received upon the exercise
of this Warrant and the price to be paid for a Share may be adjusted from time
to time as hereinafter set forth. The exercise price of a Share in effect at any
time and as adjusted from time to time is hereinafter referred to as the
"Warrant Price."
1. Term. Subject to the limitations provided in the Securities Purchase
----
Agreement dated April __, 1997 by and among the Company and certain purchasers
(the "Securities Purchase Agreement"), the purchase right represented by this
Warrant is exercisable, in whole or in part, at any time and from time to time
from the date hereof through April __, 2000. The Company shall have no
obligation to furnish any further notice of the expiration date of this Warrant
to Holder before expiration date.
2. Method of Exercise; Payment; Issuance of New Warrant.
----------------------------------------------------
(a) Subject to paragraph 1 hereof, Holder may exercise the purchase
right represented by this Warrant, in whole or in part, by delivering to the
principal office of the Company to the attention of Blair McNea, Secretary and
Gerald E. Henderson, President, by telecopy or otherwise, a notice of exercise
("Exercise Notice") in the form attached hereto as
<PAGE>
Exhibit A, duly executed, and within a reasonable time after such delivery, by
delivering to Blair McNea at the Company the original Exercise Notice, this
Warrant, and payment to the Company, by check, of an amount equal to the then
applicable Warrant Price per share multiplied by the number of Shares then being
purchased. At its expense, the Company shall within five (5) business days after
its receipt of the original Exercise Notice, this Warrant and payment, issue and
deliver to the Holder at the Company's principal office, or at such other place
designated by Holder, a certificate evidencing the issuance of those Shares to
which Holder is entitled pursuant to the terms hereunder. If this Warrant is not
fully exercised, a new Warrant representing the portion of the Shares with
respect to which this Warrant shall not have been exercised shall be issued to
Holder within thirty (30) days.
(b) Provided that Holder delivers the original Conversion Notice,
this Warrant and payment within two (2) business days of the initial delivery of
the Exercise Notice to the Company by telecopy or otherwise, exercise shall be
deemed to be effective on the date the Exercise Notice is first received by the
Company by telecopy or otherwise, as described in (a) above. Otherwise, exercise
shall be effective on the date the Company receives the original Exercise
Notice, this Warrant and payments. Upon the effective date of exercise, the
Holder shall be deemed to be the holder of record of the Shares, notwithstanding
that the certificate representing the Shares shall not then be actually
delivered to such Holder or that such Shares are not then set forth on the stock
transfer books of the Company. The Company shall be obligated to make late
payment to Holder under the circumstances set forth in Section 5.03 of the
Securities Purchase Agreement.
(c) No Holder shall have a right to exercise this Warrant so long as
and to the extent that at the time of such exercise, such exercise would cause
the Holder then to be the "beneficial owner" of five percent (5%) or more of the
Company's then outstanding Common Stock. For purposes hereof, the term
"beneficial owner" shall have the meaning ascribed to it in Section 13(d) of the
Securities Exchange Act of 1934. The opinion of legal counsel to each Holder,
in form and substance satisfactory to the Company and the Company's counsel,
shall prevail in all matters relating to the amount of such Holder's beneficial
ownership.
3. Stock Fully Paid; Reservation of Shares. All Shares which may be
----------------------------------------
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. During the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of the issuance upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
-------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
2
<PAGE>
(a) Reclassification or Merger. In case of any reclassification or
--------------------------
change of outstanding securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or in case of any merger of the Company with or
into another corporation, other than a merger, with another corporation in which
the Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company shall, as condition precedent to such transaction,
execute a new Warrant or cause such successor or purchasing corporation, as the
case may be, to execute a new Warrant, providing that Holder shall have the
right to exercise such new Warrant and upon such exercise to receive, in lieu of
each share of the Company's Common Stock theretofore issuable upon exercise of
this Warrant, the kind and amount of shares of stock, other securities, money
and property receivable upon such reclassification, change or merger by the
holder of one share of the Company's Common Stock. Such new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph 4. The provisions
of this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and sales of assets.
(b) Subdivision or Combination of Shares. If the Company at anytime
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Warrant Price shall be proportionately decreased in the
case of a subdivision or increased in the case of a combination.
(c) Stock Dividends. If the Company at any time while this Warrant
---------------
is outstanding and unexpired shall pay a dividend with respect to Common Stock
payable in, or make any other distribution with respect to Common Stock (except
any distribution specifically provided for in the foregoing subparagraphs (a)
and (b)) of, Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Common
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common outstanding
immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
-------------------------------
Warrant Price, the number of Shares of Common Stock purchasable hereunder shall
be adjusted, to the nearest whole share, to the product obtained by multiplying
the number of Shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
5. Notice of Adjustments. Whenever any Warrant Price shall be adjusted
---------------------
pursuant
3
<PAGE>
to paragraph 4 hereof, the Company shall make a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price or Prices after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed by first
class mail, postage prepaid, to Holder.
6. Notice of Certain Actions. In the event that the Company shall
-------------------------
propose at anytime:
(i) to declare any dividend or distribution upon any class or series
of its stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of any class
or series of its stock any additional shares of stock of any class or series or
other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other corporation, or
sell, lease or convey all or substantially all its assets or property, or to
liquidate, dissolve or wind up, whether voluntary or involuntary;
then in connection with each such event, the Company shall send to Holder:
(1) at least 10 days prior written notice of the date on which
a record shall be taken for such dividend, distribution or subscription rights
(and specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote in respect of the matters referred to
in (i) and (ii) above;
(2) in the case of the matters referred to in (iii) and (iv)
above, at least 10 days prior written notice of the date for the determination
of shareholders entitled to vote thereon (and specifying the date on which the
holders of Common Stock shares shall be entitled to exchange their Common Stock
for securities or other property deliverable upon the occurrence of such event);
and
(3) prompt notice of any material change in the terms of the
transaction described in (i) through (iv) above.
7. Fractional Shares. No fractional shares of Common will be issued in
-----------------
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefore in an amount determined in such
reasonable manner as may be prescribed by
4
<PAGE>
the board of directors of the Company.
8. Compliance with Securities Act; Non-Transferability of Warrant;
---------------------------------------------------------------
Disposition of Shares of Common.
-------------------------------
(a) Compliance with Securities Act. By acceptance hereof, Holder
------------------------------
agrees that this Warrant and the shares of Common Stock to be issued upon
exercise hereof are being acquired for investment and that Holder will not
offer, sell or otherwise dispose of this Warrant or the Shares except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act"). In the absence of registration of the Shares
(including but not limited to registration pursuant to the Securities Purchase
Agreement under which the Warrant was purchased from the Company), upon exercise
of this Warrant, Holder shall confirm in writing, in the form attached hereto as
Exhibit B, that the shares of Common Stock so purchased are being acquired for
investment and not with a view toward distribution or resale. In addition,
Holder shall provide such additional information regarding Holder's financial
and investment background as the Company may reasonably request. All shares of
Common Stock issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped or imprinted with a legend in substantially the following
form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY AND WITHOUT REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, IF ANY, OR PURSUANT TO EXEMPTIONS
THEREFROM.
9. Rights of Shareholders. Holder shall not be entitled to vote or
----------------------
receive dividends and shall not be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose. Nothing contained herein shall be construed to
confer upon Holder, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
10. Registration Rights. The Shares obtained upon exercise of this
-------------------
Warrant shall have the registration rights, obligations and restrictions set
forth in the Securities Purchase Agreement. The term "Registrable Securities" in
such Securities Purchase Agreement shall include the Common Stock obtained upon
exercise of this Warrant.
5
<PAGE>
11. Governing Law. The terms and conditions of this Warrant shall be
-------------
governed by and construed in accordance with Colorado law.
12. Miscellaneous. The headings in this Warrant are for purposes of
-------------
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the Company and the registered holder hereof. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given to such party at its address or telecopy
number contained in the Company's records or such other address or telecopy
number as such party may hereafter specify in writing to the Company at such
address for that purpose, or, if to the Company, to 400 S. Colorado Boulevard,
Suite 500, Denver CO 80303, telecopy number 303/399-1554, attention Blair McNea,
Secretary. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such message is transmitted to the telecopy
number contained in the Company's records or such other number as a party may
specify in writing to the Company at such address, or (ii) if given by any other
means, the earlier. of (x) when delivered by hand to the address contained in
the Company's record or such other address as a party may specify in writing to
the Company at such address or (y) five business days after the mailing of such
notice by certified mail.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in
its name by the signature or facsimile signature of its President, or by one of
its Vice Presidents, and has caused its corporate seal to be hereto affixed and
attested by the signature or facsimile signature of its Secretary on and as of
April __, 1997.
ATTEST: IMAGEMATRIX CORPORATION
By:
__________________________ _________________________________
Blair McNea, Secretary Gerald E. Henderson, President
[SEAL]
6
<PAGE>
EXHIBIT 4.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR ANY STATE SECURITIES LAW.
THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR AN EXEMPTION THEREFROM.
THIS WARRANT MAY NOT BE EXERCISED EXCEPT IN COMPLIANCE WITH ALL APPLICABLE
FEDERAL AND STATE SECURITIES LAWS TO THE REASONABLE SATISFACTION OF THE COMPANY
AND LEGAL COUNSEL FOR THE COMPANY.
Void after 5:00 P.M., Denver, Colorado Right to Purchase _____ Shares
Time, on April __, 2000. of the Common Stock of ImageMatrix
Corporation.
IMAGEMATRIX CORPORATION
STOCK PURCHASE WARRANT B
IMAGEMATRIX CORPORATION, a Colorado corporation (the "Company"), hereby
certifies that for value received, _________________________________________, or
assigns ("Holder"), is entitled to purchase, subject to the terms and conditions
hereinafter set forth, an aggregate of _____ fully paid and nonassessable shares
("Shares") of the Common Stock of the Company ("Common Stock"), at a price of
$3.00 per share. The number of Shares to be received upon the exercise of this
Warrant and the price to be paid for a Share may be adjusted from time to time
as hereinafter set forth. The exercise price of a Share in effect at any time
and as adjusted from time to time is hereinafter referred to as the "Warrant
Price."
1. Term. Subject to the limitations provided in the Securities Purchase
----
Agreement dated April __, 1997 by and among the Company and certain purchasers
(the "Securities Purchase Agreement"), the purchase right represented by this
Warrant is exercisable, in whole or in part, at any time and from time to time
from the date hereof through April __, 2000. The Company shall have no
obligation to furnish any further notice of the expiration date of this Warrant
to Holder before expiration date.
2. Method of Exercise; Payment; Issuance of New Warrant.
----------------------------------------------------
(a) Subject to paragraph 1 hereof, Holder may exercise the purchase
right represented by this Warrant, in whole or in part, by delivering to the
principal office of the Company to the attention of Blair McNea, Secretary and
Gerald E. Henderson, President, by telecopy or otherwise, a notice of exercise
("Exercise Notice") in the form attached hereto as Exhibit A, duly executed, and
within a reasonable time after such delivery, by delivering to Blair
<PAGE>
McNea at the Company the original Exercise Notice, this Warrant, and payment to
the Company, by check, of an amount equal to the then applicable Warrant Price
per share multiplied by the number of Shares then being purchased. At its
expense, the Company shall within five (5) business days after its receipt of
the original Exercise Notice, this Warrant and payment, issue and deliver to the
Holder at the Company's principal office, or at such other place designated by
Holder, a certificate evidencing the issuance of those Shares to which Holder is
entitled pursuant to the terms hereunder. If this Warrant is not fully
exercised, a new Warrant representing the portion of the Shares with respect to
which this Warrant shall not have been exercised shall be issued to Holder
within thirty (30) days.
(b) Provided that Holder delivers the original Conversion Notice, this
Warrant and payment within two (2) business days of the initial delivery of the
Exercise Notice to the Company by telecopy or otherwise, exercise shall be
deemed to be effective on the date the Exercise Notice is first received by the
Company by telecopy or otherwise, as described in (a) above. Otherwise,
exercise shall be effective on the date the Company receives the original
Exercise Notice, this Warrant and payments. Upon the effective date of
exercise, the Holder shall be deemed to be the holder of record of the Shares,
notwithstanding that the certificate representing the Shares shall not then be
actually delivered to such Holder or that such Shares are not then set forth on
the stock transfer books of the Company. The Company shall be obligated to make
late payment to Holder under the circumstances set forth in Section 5.03 of the
Securities Purchase Agreement.
(c) No Holder shall have a right to exercise this Warrant so long as
and to the extent that at the time of such exercise, such exercise would cause
the Holder then to be the "beneficial owner" of five percent (5%) or more of the
Company's then outstanding Common Stock. For purposes hereof, the term
"beneficial owner" shall have the meaning ascribed to it in Section 13(d) of the
Securities Exchange Act of 1934. The opinion of legal counsel to each Holder,
in form and substance satisfactory to the Company and the Company's counsel,
shall prevail in all matters relating to the amount of such Holder's beneficial
ownership.
3. Stock Fully Paid; Reservation of Shares. All Shares which may be
----------------------------------------
issued upon the exercise of the rights represented by this Warrant will, upon
issuance, be fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. During the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized, and reserved for the purpose of the issuance upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
-------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or
--------------------------
change of
2
<PAGE>
outstanding securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or in case of any merger of the Company with or into
another corporation, other than a merger, with another corporation in which the
Company is a continuing corporation and which does not result in any
reclassification or change of outstanding securities issuable upon exercise of
this Warrant), or in case of any sale of all or substantially all of the assets
of the Company, the Company shall, as condition precedent to such transaction,
execute a new Warrant or cause such successor or purchasing corporation, as the
case may be, to execute a new Warrant, providing that Holder shall have the
right to exercise such new Warrant and upon such exercise to receive, in lieu of
each share of the Company's Common Stock theretofore issuable upon exercise of
this Warrant, the kind and amount of shares of stock, other securities, money
and property receivable upon such reclassification, change or merger by the
holder of one share of the Company's Common Stock. Such new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this paragraph 4. The provisions
of this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and sales of assets.
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its Common Stock, the Warrant Price shall be proportionately decreased in the
case of a subdivision or increased in the case of a combination.
(c) Stock Dividends. If the Company at any time while this Warrant is
---------------
outstanding and unexpired shall pay a dividend with respect to Common Stock
payable in, or make any other distribution with respect to Common Stock (except
any distribution specifically provided for in the foregoing subparagraphs (a)
and (b)) of, Common Stock, then the Warrant Price shall be adjusted, from and
after the date of determination of shareholders entitled to receive such
dividend or distribution, to that price determined by multiplying the Warrant
Price in effect immediately prior to such date of determination by a fraction
(a) the numerator of which shall be the total number of shares of Common
outstanding immediately prior to such dividend or distribution, and (b) the
denominator of which shall be the total number of shares of Common outstanding
immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price, the number of Shares of Common Stock purchasable hereunder shall
be adjusted, to the nearest whole share, to the product obtained by multiplying
the number of Shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
5. Notice of Adjustments. Whenever any Warrant Price shall be adjusted
---------------------
pursuant to paragraph 4 hereof, the Company shall make a certificate signed by
its chief financial officer setting forth, in reasonable detail, the event
requiring the adjustment, the amount of the
3
<PAGE>
adjustment, the method by which such adjustment was calculated, and the Warrant
Price or Prices after giving effect to such adjustment, and shall cause copies
of such certificate to be mailed by first class mail, postage prepaid, to
Holder.
6. Notice of Certain Actions. In the event that the Company shall propose
-------------------------
at any time:
(i) to declare any dividend or distribution upon any class or series
of its stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other corporation, or
sell, lease or convey all or substantially all its assets or property, or to
liquidate, dissolve or wind up, whether voluntary or involuntary;
then in connection with each such event, the Company shall send to Holder:
(1) at least 10 days prior written notice of the date on which a
record shall be taken for such dividend, distribution or subscription rights
(and specifying the date on which the holders of Common Stock shall be entitled
thereto) or for determining rights to vote in respect of the matters referred to
in (i) and (ii) above;
(2) in the case of the matters referred to in (iii) and (iv)
above, at least 10 days prior written notice of the date for the determination
of shareholders entitled to vote thereon (and specifying the date on which the
holders of Common Stock shares shall be entitled to exchange their Common Stock
for securities or other property deliverable upon the occurrence of such event);
and
(3) prompt notice of any material change in the terms of the
transaction described in (i) through (iv) above.
7. Fractional Shares. No fractional shares of Common will be issued in
-----------------
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment therefore in an amount determined in such
reasonable manner as may be prescribed by the board of directors of the Company.
8. Compliance with Securities Act; Non-Transferability of Warrant;
---------------------------------------------------------------
Disposition of Shares of Common.
- -------------------------------
4
<PAGE>
(a) Compliance with Securities Act. By acceptance hereof, Holder
------------------------------
agrees that this Warrant and the shares of Common Stock to be issued upon
exercise hereof are being acquired for investment and that Holder will not
offer, sell or otherwise dispose of this Warrant or the Shares except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Act"). In the absence of registration of the Shares
(including but not limited to registration pursuant to the Securities Purchase
Agreement under which the Warrant was purchased from the Company), upon exercise
of this Warrant, Holder shall confirm in writing, in the form attached hereto as
Exhibit B, that the shares of Common Stock so purchased are being acquired for
investment and not with a view toward distribution or resale. In addition,
Holder shall provide such additional information regarding Holder's financial
and investment background as the Company may reasonably request. All shares of
Common Stock issued upon exercise of this Warrant (unless registered under the
Act) shall be stamped or imprinted with a legend in substantially the following
form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"). NO SALE OR DISPOSITION MAY BE EFFECTED WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMPANY AND WITHOUT REGISTRATION UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, IF ANY, OR PURSUANT TO EXEMPTIONS
THEREFROM.
9. Rights of Shareholders. Holder shall not be entitled to vote or
----------------------
receive dividends and shall not be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose. Nothing contained herein shall be construed to
confer upon Holder, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance, or otherwise) or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until the
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein.
10. Registration Rights. The Shares obtained upon exercise of this
-------------------
Warrant shall have the registration rights, obligations and restrictions set
forth in the Securities Purchase Agreement. The term "Registrable Securities" in
such Securities Purchase Agreement shall include the Common Stock obtained upon
exercise of this Warrant.
11. Governing Law. The terms and conditions of this Warrant shall be
-------------
governed by and construed in accordance with Colorado law.
5
<PAGE>
12. Miscellaneous. The headings in this Warrant are for purposes of
-------------
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally but only by an instrument in writing signed by
the Company and the registered holder hereof. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given to such party at its address or telecopy
number contained in the Company's records or such other address or telecopy
number as such party may hereafter specify in writing to the Company at such
address for that purpose, or, if to the Company, to 400 S. Colorado Boulevard,
Suite 500, Denver CO 80303, telecopy number 303/399-1554, attention Blair McNea,
Secretary. Each such notice, request or other communication shall be effective
(i) if given by telecopy, when such message is transmitted to the telecopy
number contained in the Company's records or such other number as a party may
specify in writing to the Company at such address, or (ii) if given by any other
means, the earlier. of (x) when delivered by hand to the address contained in
the Company's record or such other address as a party may specify in writing to
the Company at such address or (y) five business days after the mailing of such
notice by certified mail.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed in
its name by the signature or facsimile signature of its President, or by one of
its Vice Presidents, and has caused its corporate seal to be hereto affixed and
attested by the signature or facsimile signature of its Secretary on and as of
April __, 1997.
ATTEST: IMAGEMATRIX CORPORATION
____________________________ By:______________________________
Blair McNea, Secretary Gerald E. Henderson, President
[SEAL]
6
<PAGE>
EXHIBIT 10.12
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement") dated as of April 14,
1997, by and among ImageMatrix Corporation, a Colorado corporation (the
"Company"), and the entities and individuals listed on Schedule 1 hereto (the
----------
"Purchasers").
WHEREAS, the Company is in need of working capital; and
WHEREAS, pursuant to this Agreement, the Purchasers wish to provide
such capital by purchasing convertible preferred stock (the "Series A Preferred
Stock") to be issued by the Company in Units, each consisting of 30,000 shares
of Series A Preferred Stock (a "Unit"); and
WHEREAS, the Company will sell 110 Units, consisting of an aggregate of
3,300,000 shares of Series A Preferred Stock for gross proceeds of $3,300,000;
and
WHEREAS, because all of the Purchasers are "accredited investors" as
defined by Rule 501(a) of Regulation D under the Securities Act of 1933, as
amended (the"Act"), the transaction will be exempt from registration under the
Act;
NOW, THEREFORE, in consideration of the aforesaid and the mutual
promises hereinafter made, the parties hereto agree as follows:
1. PURCHASE OF SECURITIES.
1.01 Sale of Units.
-------------
a. Subject to the terms and conditions hereof, on the Closing
Date (as hereinafter defined) the Company agrees to issue and sell, and each
Purchaser set forth on Schedule 1 to this Agreement agrees severally but not
----------
jointly to purchase, the number of Units set forth opposite such Purchaser's
name on Schedule 1 in column 2, for the aggregate purchase price set forth on
----------
Schedule 1 in column 3.
- ----------
b. If the Registration Statement referred to in Section 6 below
is not declared effective by the Securities and Exchange Commission by the first
anniversary date of the Closing Date hereof, any shares of Series A Preferred
Stock, or portions thereof, which have not then been converted by any Purchaser,
shall be redeemed by the Company at the option of such Purchaser as provided in
the Certificate of Amendment attached hereto as Exhibit A (the "Non-approval
---------
Redemption Amount").
<PAGE>
1.02 Closing Date; Delivery. The closing of the issuance and sale of
----------------------
the 110 Units hereunder will be held at the offices of Chrisman, Bynum &
Johnson, P.C. on April 14, 1997, or at such other time and place as to which
the Company and the Purchasers may agree (the "Closing Date"). On the Closing
Date, the Purchasers severally but not jointly will deliver by wire transfer in
immediately available funds the purchase price and the Company will issue and
deliver certificates for the Series A Preferred Stock to the Purchasers as set
forth in Schedule 1.
----------
1.03 Payment of Commission. The Company has agreed, pursuant to a
---------------------
letter agreement dated April 1, 1997, as amended on April 7, 1997, to pay to
Neidiger, Tucker, Bruner, Inc. ("NTB") a commission for the sale of all Units
sold hereunder in the amount of six percent (6%) of the gross proceeds received
by the Company and to grant 50,000 Class A Warrants to purchase the Company's no
par value common stock ("Common Stock") to NTB. The Company has also agreed to
pay a four percent (4%) finder's fee to Mueller Trading Company on the gross
proceeds and to grant 1,000,000 Class A Warrants and 500,000 Class B Warrants to
purchase the Company's Common Stock to Mueller Trading Company. The terms and
provisions of the Class A and Class B Warrants shall be as set forth on Exhibits
--------
B and C, respectively. Warrants may be exercised by the registered holders
- -------
thereof for a period of three years from the Closing Date. Class A Warrants
shall be exercisable at a price of $2.25 per share. Class B Warrants shall be
exercisable at a price of $3.00 per share. Warrants may not be redeemed by the
Company. Holders of Warrants have registration rights with respect to the Common
Stock issuable upon exercise of the Warrants as set forth in Section 6.01.
Notwithstanding the failure of any Warrant to recite any of the terms of this
Agreement applicable to such Warrants, all of such terms shall be binding upon
and inure to the benefit of all Holders of Warrants. The Company has not agreed
to pay, or to cause the other to pay, any commissions, finders fee or
compensation on account of the Transaction other than as recited herein.
1.04 Description of Series A Preferred Stock The relative rights,
---------------------------------------
preferences, restrictions and other provisions relating to the Preferred Stock
shall be as set forth in the Certificate of Amendment attached hereto as Exhibit
-------
A. Notwithstanding the failure of any certificate for the Series A Preferred
- -
Stock to recite any of the terms of this Agreement applicable to such shares,
all of such terms shall be binding upon and inure to the benefit of all holders
of the Series A Preferred Stock.
1.05 Antidilution Provisions. The Series A Preferred Stock and the
-----------------------
Warrants are subject to customary antidilution provisions as set forth in such
instruments.
2. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser
hereby represents and warrants as to himself, herself or itself as follows:
2.01 Purchaser is acquiring the Units for investment only and not with
a view to or for resale or distribution of any part thereof, and with no present
intention of selling,
2
<PAGE>
granting participation in, or otherwise distributing the same except pursuant to
the registration rights granted by Section 6 hereof.
2.02 Purchaser is an "accredited investor" as defined in Rule 501(a)
of Regulation D under the Securities Act of 1933, as amended (the "Act") and has
executed an Accredited Investor Statement in the form attached hereto as Exhibit
-------
D. Purchaser has such knowledge and experience in business and financial matters
- -
as to be capable of evaluating the risks and merits of an investment in the
Series A Preferred Stock and Warrants and has sufficient financial resources to
bear the economic risks thereof (including possible complete loss of such
investment) for an indefinite period of time. Purchaser has full and free
access to the Company's books, financial statements, records, contracts,
documents and other information concerning the Company and has been afforded an
opportunity to ask questions of the Company's officers, employees, agents,
accountants and representatives concerning the Company's business, operations,
financial condition, assets, liabilities and other relevant matters, and has
been given all such information as has been requested, in order to evaluate the
merits and risks of the investment in the Units. Upon request, Purchaser will
provide the Company with access to Purchaser's tax, financial and other records
as are reasonably necessary under the circumstances to confirm that Purchaser is
an accredited investor within the meaning of Rule 501(a) of Regulation D under
the Act.
2.03 Each purchaser understands that:
a. The Series A Preferred Stock and the Warrants included in
the Units are "restricted securities" within the meaning of Rule 144 under the
Act.
b. The Series A Preferred Stock and the Warrants are not
being registered with the Securities and Exchange Commission and therefore must
be held until they are subsequently registered under the Act and any applicable
state or foreign securities laws (pursuant to Section 6 hereof or otherwise)
unless an exemption from registration is available; provided, however, that
--------
Purchasers have the registration rights set forth in Section 6 for the shares of
Common Stock issuable upon conversion of the Series A Preferred Stock and
exercise of the Warrants.
c. The exemption from registration under Rule 144 will not be
available for one year from the date of acquisition of the Series A Preferred
Stock and Warrants, and even then may not be available unless (A) a public
trading market still exists for the Common Stock at that time, (B) adequate
information concerning the Company is then publicly available, and (C) the sale
complies with the other terms and conditions of Rule 144.
2.04 Each Purchaser acknowledges and agrees that it shall have, no
right to convert any Series A Preferred Stock or exercise any Warrants to
purchase the Common Stock of the Company so long as and to the extent that at
the time of such conversion or exercise, such
3
<PAGE>
conversion or exercise would cause the Purchaser then to be the "beneficial
owner" of five percent (5%) or more of the Company's then outstanding common
stock. For the purpose hereof, the term "beneficial owner" shall have the
meaning ascribed to it in Section 13(d) of the Securities Exchange Act of 1934.
The opinion of legal counsel to each Purchaser, in form and substance
satisfactory to the Company and the Company's counsel, shall prevail in all
matters relating to the amount of such Purchaser's beneficial ownership.
2.05 [THIS SECTION INTENTIONALLY OMITTED]
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
3.01 Organization and Good Standing. The Company is a corporation,
------------------------------
duly organized, validly existing, and in good standing under the laws of the
State of Colorado and has all requisite corporate power and authority to own and
lease its properties and conduct its business as it is now being conducted. The
Company is not required to be qualified to do business as a foreign corporation
in any jurisdiction in which it is not qualified and where a failure to be
qualified would have a material adverse effect on the Company.
3.02 Capitalization Structure.
------------------------
a. As of the date of this Agreement, the Company's authorized
capital stock consists of 5,000,000 shares of undesignated Preferred Stock and
20,000,000 shares of Common Stock, no par value, of which no shares of Preferred
Stock and 4,922,834 shares of Common Stock are issued and outstanding. The
rights, preferences and privileges of the capital stock are as set forth in the
Articles of Incorporation and Bylaws of the Company. As of the date of this
Agreement, all issued and outstanding shares of Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights and there is no outstanding subscription, option, warrant, call, right,
agreement, commitment, understanding, or arrangement relating to the issuance,
sale, delivery, transfer or redemption of the Company's capital stock
4
<PAGE>
other than, in the case of Common Stock, in each case as of April 4, 1997, the
shares, options and warrants listed in Exhibit E, attached hereto.
---------
b. The Company has reserved 3,300,000 shares of Series A
Preferred Stock and 5,000,000 shares of authorized but unissued Common Stock for
the issuance of the Series A Preferred Stock, the conversion of Series A
Preferred Stock and the exercise of Warrants hereunder. All of the shares of
the Company's Common Stock issuable upon conversion of the Series A Preferred
Stock and exercise of the Warrants have been duly authorized by all necessary
corporate action and will be when issued in accordance with the terms of the
Series A Preferred Stock and Warrants, validly issued, fully paid and
nonassessable and free of preemptive rights, other than those restrictions
imposed by the Company's Articles of Incorporation and Bylaws.
3.03 Authority; No Conflict; Required Filings.
----------------------------------------
a. The Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated by
this Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable in accordance with its terms.
b. The execution and delivery of this Agreement by the Company
and the consummation of the transactions contemplated by this Agreement will not
(i) conflict with or result in any violation or breach of any provision of the
Articles of Incorporation or Bylaws of the Company; (ii) result in any violation
or breach of, or constitute a default or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of any benefit under any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease contract or other agreement, instrument or obligation to which the Company
is a party or by which it or any of its properties or assets may be bound; or
(iii) conflict with or violate any permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its properties or assets, except in the case of (ii)
and (iii) for any such violation, breaches, defaults, termination, cancellation,
accelerations, or conflicts which would not, in the aggregate, have or result in
a material adverse effect on the Company or impair the ability of the Company to
consummate the transactions contemplated by this Agreement.
c. No consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity, is required
by or with respect to the Company in connection with the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
5
<PAGE>
3.04 SEC Filings; Financial Statements.
----------------------------------
a. The Company has timely filed and made available to
Purchasers all forms, reports and documents required to be filed by the Company
with the Commission since June 4, 1996 (collectively, the "ImageMatrix SEC
Reports"). The ImageMatrix SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or if amended or superseded by a filing prior to the date of this Agreement,
then on the date of such filing) contain any untrue statement of a material fact
or omit to state a material fact required to be stated in such ImageMatrix SEC
Reports or necessary in order to make the statements in such ImageMatrix SEC
Reports, in the light of the circumstances under which they were made, not
misleading.
b. Each of the financial statements (including, in each case,
any related notes) contained in the ImageMatrix SEC Reports, including any
ImageMatrix SEC Reports filed after the date of this Agreement until the Closing
Date, complied or will comply, as of their respective dates, in all material
respects, with all applicable accounting requirements and the published rules
and regulations of the Commission with respect thereto, was or will be prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved and fairly presented or will
present the consolidated financial position of the Company as at the respective
dates and the results of its operations and cash flows for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which were not or are not
expected to be material in amount.
3.05 Litigation. Except as described in the ImageMatrix SEC Reports,
----------
there is no action, suit or proceeding, claim, arbitration or investigation
pending or, to the best of the Company's knowledge, threatened against the
Company which would, in the aggregate, have a material adverse effect on the
Company or impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
3.06 Brokers and Finders. No broker, trader or investment banker is
-------------------
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Company except for the commissions described in Section 1.03.
4. [THIS SECTION INTENTIONALLY OMITTED]
5. COVENANTS OF THE COMPANY.
6
<PAGE>
5.01 The Company covenants and agrees that, so long as any Series A
Preferred Stock or Warrants shall be outstanding:
a. Maintenance of office. The Company will maintain an office
---------------------
or agency in such place in the United States of America as the Company may
designate in writing to the registered holders of Series A Preferred Stock and
Warrants, where the Series A Preferred Stock and Warrants may be presented for
registration or transfer and for exchange as their terms may provide, where
notices and demands to or upon the Company in respect of its Series A Preferred
Stock and Warrants may be served.
b. Corporate Existence. The Company will do or cause to be
-------------------
done all things necessary and lawful to preserve and keep in full force and
effect its corporate existence, rights and franchises.
c. Maintenance of Property. The Company will at all times
-----------------------
maintain and keep, or cause to be maintained and kept, in good repair, working
order and condition all significant properties of the Company used in the
conduct of the business of the Company.
d. Notice of Default. If any one or more events which
-----------------
constitute a default under either the Series A Preferred Stock or Warrants, in
accordance with their terms, or if the holder of any Series A Preferred Stock or
Warrants shall take any other action permitted upon the occurrence of any such
default, the Company shall, immediately after it becomes aware that any such
event has occurred or that such demand has been made or that any such action has
been taken, give notice to all holders of the Series A Preferred Stock and
Warrants, specifying the nature of such event or of such demand or action, as
the case may be.
5.02 Additional Regulation D or Regulation S Offerings. The Company
-------------------------------------------------
agrees that it shall not, without the approval of all of the holders of Series A
Preferred Stock and Warrants issued hereunder, (a) make an unregistered offering
of shares of its Common Stock or of securities convertible into such Common
Stock pursuant to Regulation D under the Act or otherwise, pursuant to which
registration rights are granted to the purchasers in such an offering, or (b)
make an offering of securities pursuant to Regulation S under the Act, in either
case until 270 days after the Closing Date.
5.03 Notice of Conversion of Series A Preferred Stock or Exercise of
---------------------------------------------------------------
Warrants; Payment for Late Delivery of Shares or Late Redemptions.
- -----------------------------------------------------------------
a. If the Holder of a share of Series A Preferred Stock or a
Warrant delivers to the principal office of the Company to the attention of
Blair McNea, Secretary and Gerald E. Henderson, President (a) a copy of the
Conversion Notice or Notice of Exercise, respectively, by telecopy (telecopy
number 303/399-1554) and (b) within two business days thereafter, the Series A
Preferred Stock Certificate and original Conversion Notice or the Warrant
7
<PAGE>
Price and the original Notice of Exercise, and; (c) the Company fails to deliver
to the Holder the Certificate representing the shares of Common Stock due upon
such conversion or exercise within five (5) business days (the "Five-Day
Period") after receiving the original Conversion Notice and Series A Preferred
Stock or the Original Notice of Exercise and the Warrant Price, then the Company
will pay the Holder the amount described in Section 5.03 d. below, which amount
shall begin to accrue on the first day after the expiration of the Five-Day
Period; provided, however, that if the Company has given notice of redemption of
--------
the Series A Preferred Stock, as defined in the Series A Preferred Stock
Certificate of Amendment, the Company shall not be obligated to pay the amount
for late delivery described in this Section.
b. [Intentionally omitted.]
c. If payment by the Company of any 125% Redemption Amount or
the Non-approval Redemption Amount as defined in the Series A Preferred Stock
Certificate of Amendment is not made within the period provided for such
payment, the Company shall pay to the Holder the late payment set forth in
Section 5.03 d. below which amount shall begin to accrue on the first day after
the expiration of such period.
d. The late payment shall be $1,000 per day for each $100,000
in Series A Preferred Stock converted or redeemed or each 10,000 Warrants
exercised (proportionately adjusted for greater or lesser amounts) for the first
of five (5) days and $500 per day thereafter continuing until the stock
certificate is delivered to Holder.
e. The late payment provided by this Section 5.03 shall be in
addition to, and not lieu of, the rights or remedies of the Purchasers or the
Holders under the Series A Preferred Stock, the Warrants or this Agreement or
which are otherwise available under law.
6. REGISTRATION RIGHTS.
6.01 a. Registration. The Company represents that it will become
------------
eligible for use of Form S-3 on June 5, 1997, and shall file within sixty (60)
days after the Closing Date a registration statement or such form covering all
of the Registrable Securities with the Commission and shall use its best efforts
to have such registration statement declared effective by the Commission (a
"Registration") within ninety (90) days after receipt of the filing with the
Commission. "Registrable Securities", for purposes of this Agreement, means the
shares of Common Stock underlying the Series A Preferred Stock and the Class A
and Class B Warrants. The Registration shall be for 5,000,000 shares of Common
Stock, and the Company further, will register on such form such additional
shares of Common Stock as may be necessary to register all of the Common Stock
into which the Series A Preferred Stock is converted and underlying the Class A
and Class B Warrants.
8
<PAGE>
b. Selection of Underwriter(s). The Purchaser(s) shall have
---------------------------
sole discretion to select the underwriter(s), if any, to manage the sale of
Registrable Securities pursuant to such Registration under this Section 6.01.
c. Effective Registration Statement. A Registration requested
--------------------------------
pursuant to this Section 6.01 will be deemed to have been effected as soon as it
has become effective; provided, however, that if the offering of Registrable
--------
Securities pursuant to such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court within 135 days after it has become effective, such Registration
will be deemed not to have been effected. If any such stop order or injunction
is rescinded, the effective periods required by this Agreement shall continue
upon such rescission and be extended by the number of days by which such stop
order reduced the effective period.
6.02 Registration Procedures. It shall be a condition precedent to
-----------------------
the obligations of the Company and any underwriter(s) to take any action
pursuant to this Section 6 that the Selling Holders in any Registration shall
furnish to the Company such information regarding them, the Registrable
Securities held by them, the intended method of disposition of such Registrable
Securities, and such agreements regarding indemnification, disposition of such
securities and the other matters referred to in this Section 6 as the Company
shall reasonably request. With respect to any Registration pursuant to this
Section 6, the Company shall, as expeditiously as practicable:
a. Prepare a Form S-3 registration statement (or the Company if
is not eligible to use a Form S-3, then another appropriate form prescribed by
the Commission) and file it with the Commission within sixty (60) days after the
Closing Date and any necessary amendments thereto covering the Registrable
Securities of the Selling Holders and use its best efforts to cause such
registration statement to become effective within ninety (90) days after filing
with the Commission;
b. Prepare and file with the Commission such amendments and
post effective amendments to such registration statement and any documents
required to be incorporated by reference therein as may be necessary to keep the
registration statement effective for a period of three (3) years (or such
shorter period which will terminate when there are no longer any Warrants
outstanding hereunder or when all Registrable Securities covered by such
registration statement have been sold or withdrawn, but not prior to the
expiration of the time period referred to in Section 4(3) of the Act and Rule
174 thereunder, if applicable) cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act (or any successor rule);
c. Furnish to such Selling Holder, without charge, at least one
conformed copy of the registration statement and any post-effective amendments
thereto, upon request, and a reasonable number of copies of the final prospectus
and any preliminary
9
<PAGE>
prospectuses and any amendments or supplements thereto, and any exhibit or
documents incorporated therein by reference;
d. Immediately notify such Selling Holder, at any time when a
prospectus relating thereto is required to be delivered under the Act, when the
Company becomes aware of any event which causes the prospectus to contain any
untrue statement of material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made not misleading and, as promptly as practicable thereafter, prepare and file
and attach a supplement or amendment to such prospectus correcting same;
e. Use its best efforts to cause all securities included in
such registration statement to be listed, by the date of the first sale of
securities pursuant to such registration statement, on the Nasdaq SmallCap
System;
f. Make generally available to Selling Holders an earnings
statement satisfying the provisions of Section 11(a) of the Act no later than 90
days after the end of the Company's fiscal year next ending after the effective
date of the registration statement;
g. Make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the earliest
possible moment;
h. As promptly as practicable after filing with the Commission
of any subsequently filed document which is incorporated by reference into a
registration statement (such as a Form 10-QSB), deliver a reasonable number of
copies of such document to such Selling Holder;
i. Prior to the date on which the registration statement is
declared effective, use its best efforts to register or qualify the securities
covered by the registration statement for offer and sale under the securities or
blue sky laws of each state of the United States as such Selling Holder or
underwriter(s), may reasonably request and to keep each such registration or
qualification effective, including through new filings, or amendments or
renewals, during the period such registration statement is required to be kept
effective and to do any and all other acts or things necessary or advisable to
enable the disposition in all such jurisdictions of the Registrable Securities
covered by the applicable registration statement;
j. Enter into such customary agreements (including an
underwriting agreement in customary form) and take such other actions
customarily taken by registrants as sellers of a majority of such Registrable
Securities or the underwriter(s), if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
10
<PAGE>
k. Obtain a "cold comfort" letter or letters from the Company's
independent public accountants in customary form as may reasonably be requested;
l. Make available for inspection by any Selling Holder holding
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such Selling Holder or any such underwriter, all pertinent financial and
other records, pertinent corporate documents and properties of the Company, and
supply all information reasonably requested by any such Selling Holder,
underwriter, attorney, accountant or agent in connection with such registration
statement;
m. Cooperate with such Selling Holder and the underwriter(s),
if any, to facilitate the timely preparation and delivery of certificates (not
bearing any restrictive legends) representing the Shares to be sold under the
registration statement, enable such securities to be in such denominations and
registered in such names as the Selling Holder or the underwriter(s), if any,
may request; and
n. Use its best efforts to cause the Shares covered by the
registration statement to be registered with or approved by such other
governmental agencies or authorities within the United States, including,
without limitation, the National Association of Securities Dealers, Inc., as may
be necessary to enable the seller or sellers thereof or the underwriter(s), if
any, to consummate the disposition of such Registrable Securities.
The Selling Holders, upon receipt of any notice from the Company of
any event of the kind described in paragraph (d) of this Section 6.02, will
forthwith discontinue disposition of the Shares until the Selling Holders'
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (d) of this Section 6.02 or until they are advised in writing (the
"Advice") by the Company that the use of the prospectus may be resumed, and have
received copies of any additional or supplemental filings which are incorporated
by reference in the prospectus. In the event the Company shall give any such
notice, the time periods mentioned in paragraph (b) of this Section 6.02 shall
be extended by the number of days during the period from and including any date
of the giving of such notice to and including the date when each seller of
securities covered by such registration statement shall have received the copies
of the supplemented or amended prospectus contemplated by paragraph (d) of this
Section 6.02 hereof or the Advice.
6.03 Blackout Periods.
----------------
a. At any time when a registration statement effected pursuant
to Section 6.01 relating to Registrable Securities is effective, upon written
notice from the Company to the Selling Holders that either:
11
<PAGE>
(i) the Company has determined to engage in a publicly
registered offering of its Common Stock and has been advised in writing (with a
copy to the Selling Holders) by a nationally recognized independent investment
banking firm selected by the Company that, in such firm's opinion, the Selling
Holders' sale of Registrable Securities pursuant to the registration statement
would adversely affect such immediately planned Company offering (a "Transaction
Blackout"), provided, however, there may not be more than one Transaction
--------
Blackout in any 365 day period; or
(ii) the Company determines in the good faith judgment of
legal counsel to the Company that the cessation of the Selling Holders' sale of
Registrable Securities pursuant to the registration statement is mandated by law
(an "Information Blackout"), then Selling Holders shall suspend sales of
Registrable Securities pursuant to such registration statement until the earlier
of:
(A) in the case of a Transaction Blackout, the earliest
of (i) thirty (30) days after the beginning of such Transaction Blackout, (ii)
the termination of any "blackout" period required by the underwriters to be
applicable to the Selling Holders, if any, in connection with such Company
offering, (iii) promptly after abandonment of such Company offering, or, in the
case of an Information Blackout, the earlier of (iv) the date upon which the
cessation of such sales would, in the opinion of the Company's legal counsel, no
longer be mandated by law, or (v) thirty (30) days after the beginning of such
Information Blackout; or
(B) such time as the Company notifies the Selling
Holders that sales pursuant to such registration statement may be resumed (the
number of days from such suspension of sales of the Selling Holders until the
day when such sales may be resumed hereunder is hereinafter called a "Sales
Blackout Period"); provided, that the Company may not impose a Sales Blackout
--------
Period during the 120 day period immediately following the date on which a
registration statement effected pursuant to Section 6.01 first became effective.
b. If there is a Transaction Blackout or an Information
Blackout, the time periods set forth in Section 6.02(b) shall be extended for a
number of days equal to the number of days in the Sales Blackout Period.
6.04 Registration Expenses. In the case of any Registration, the
------------ --------
Company shall bear all of the costs and expenses of such Registration
(including, without limitation, the expenses of preparing any registration
statement, Commission and state "blue sky" filing, registration and
qualification fees, the cost of providing any legal opinion or "cold comfort"
letters reasonably requested by the Selling Holders and printing costs);
provided, however, that the Company shall not be responsible for legal fees or
- --------
expense of counsel for any of the Selling Holders, or for any
12
<PAGE>
underwriter's discounts or commissions that are attributable to the Registrable
Securities of a Selling Holder.
6.05 Indemnification and Contribution.
--------------------------------
a. Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless each Selling Holder, its officers, directors and
agents and each person who controls (within the meaning of the Act, and the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) such Selling
Holder, including, without limitation, any general partner or manager of any
thereof, against all losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus in
which such Selling Holder is participating or in any document incorporated by
reference therein or any omission or alleged omission to state therein a
material fact necessary to make the statement therein (in the case of the
prospectus or any preliminary prospectus, in light of the circumstances under
which they were made) not misleading, except insofar as the same are caused by,
based upon or contained in any information with respect to such Selling Holder
furnished in writing to the Company by such Selling Holder expressly for use
therein; provided, however, that the foregoing indemnity agreement with respect
--------
to any preliminary prospectus shall not inure to the benefit of any Selling
Holder from whom the person asserting such loss, claim, damage or liability
purchased the securities if it is determined that it was the responsibility of
such Selling Holder to provide such person with a current copy of the prospectus
and such current copy of the prospectus would have cured such loss, claim,
damage or liability. The Company will also indemnify underwriters (as such term
is defined in the Act), their officers and directors and each person who
controls such persons (within the meaning of the Act) to the same extent as
provided above with respect to the indemnification of the Selling Holders.
b. Indemnification by the Selling Holders. In connection with
---------------------------------------
any Registration in which a Selling Holder is participating, such Selling Holder
will furnish to the Company in writing such information and affidavits with
respect to such Selling Holder as the Company reasonably requests for use in
connection with any registration statement or prospectus and agrees to indemnify
and hold harmless the Company, its directors, officers and agents and each
person who controls (within the meaning of the Act and the Exchange Act) the
Company against any losses, claims, damages, liabilities and expenses arising
out of or based upon any untrue statement of a material fact or any omission to
state a material fact necessary to make the statements in the registration
statement or prospectus or preliminary prospectus (in the case of the prospectus
or preliminary prospectus, in light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information or affidavit such Selling
Holder furnished to the Company by such Selling Holder expressly for use therein
provided, however, that the amount recoverable by the Company from any Selling
- --------
Holder under this indemnification provision shall not exceed the amount of net
proceeds received by the Selling Holder from the sale of Registrable Securities
13
<PAGE>
hereunder; and provided, further, that the indemnity agreement contained in this
--------
Section 6.05 shall not apply to amounts paid in settlement of any loss, claim,
damage, liability or action arising pursuant to late registration under Section
6 if such settlement is effected without the consent of the Selling Holder
(which consent shall not be unreasonably withheld). Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
the Company or any of the prospective sellers, or any of their respective
affiliates, directors, officers or controlling persons and shall survive the
transfer of such securities by such seller.
c. Conduct of Indemnification Proceedings. Any person entitled
--------------------------------------
to indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest may exist between such indemnified and indemnifying party, permit the
indemnifying party to assume the defense of such claim, jointly with any other
indemnifying party similarly notified to the extent it may elect, with counsel
reasonably satisfactory to the indemnified party. The failure to so notify the
indemnifying party shall relieve the indemnifying party from any liability
hereunder with respect to the action to the extent that such failure materially
prejudices the indemnifying party; provided, however, that any such failure
--------
shall not relieve the indemnifying party from any other liability which it may
have to any other party. Whether or not such defense is assumed by the
indemnifying party, the indemnifying party will not be subject to any liability
for any settlement made without its consent (but such consent will not be
unreasonably withheld). No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim obligation. An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such, claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be obligated to pay the reasonable fees and expenses of
such additional counsel or counsels.
d. Contribution. If for any reason the indemnification
------------
provided for in the preceding paragraphs (a) and (b) of this Section 6.05 is
unavailable to an indemnified party as contemplated by the preceding paragraphs
(a) and (b) of this Section 6.05 for any reason, then the indemnifying party
shall contribute to the amount paid or payable by the indemnified party as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnified party and the indemnifying party, but also the relative fault of the
indemnified party and the indemnifying party, as well as any other relevant
equitable considerations. Notwithstanding the foregoing, if the indemnifying
party is a Selling Holder, any contribution pursuant to this Section 6.05(d)
shall be several and not joint, and shall be limited to the amount of net
proceeds received by such Selling Holder from the sale of Registrable Securities
hereunder.
14
<PAGE>
e. Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding subdivisions of this Section 6.05 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation or governmental
authority other than the Act.
6.06 Exchange Act Reports. The Company agrees that at all times after
--------------------
it has filed a registration statement pursuant to the requirements of the Act
relating to any class of equity securities of the Company, it will use its best
efforts to file in a timely manner all reports required to be filed by it
pursuant to the Exchange Act to the extent the Company is required to file such
reports. Upon request of a Selling Holder, the Company will furnish the
requesting Selling Holder with such information as may be necessary to enable
such Selling Holder to effect sales pursuant to Rule 144A. Notwithstanding the
foregoing, the Company may register any class of its equity securities under
Section 12 of the Exchange Act or suspend its duty to file reports with respect
to any class of its securities pursuant to Section 15(d) of the Exchange Act if
it is then permitted to do so pursuant to the Exchange Act and rules and
regulations thereunder.
6.07 Participation in Registrations. No Selling Holder may
------------------------------
participate in any Registration hereunder unless such Selling Holder (a) agrees
to sell the Selling Holder's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, underwriting agreements and other documents customarily required under
the terms of such underwriting arrangements.
6.08 Remedies. In addition to all other remedies which shall be
--------
available under law or under any other provisions of this Agreement, each
Selling Holder shall have the right and remedy to have the provisions of this
Section specifically enforced by any court having jurisdiction in the event that
the Company breaches such provisions, and the Company shall reimburse such
Selling Holder for the reasonable costs of the expenses for counsel for such
Purchaser incurred in connection with such proceeding.
7. MISCELLANEOUS
-------------
7.01 Notices. All notices, requests and other communications to any
--------
party hereunder shall be in writing (including facsimile or similar writing) and
shall be given to such party at its address or facsimile number set forth on the
signature pages hereof or such other address or facsimile number as such party
may hereafter specify in writing to the Secretary of the Company for the purpose
by notice to the party sending such communication. Each such notice, request or
other communication shall be effective (i) if given by facsimile, when such
message is transmitted to the number set forth on such signature pages or such
other number as a party may specify in writing to the Secretary of the Company
or (ii) if given by any other means, the earlier of (x) when delivered by hand
to the address set forth on such signature pages or such other
15
<PAGE>
address as a party may specify in writing to the Secretary of the Company or (y)
five business days after the mailing of such notice by certified mail. If more
than one Purchaser specified the same address for such notices, then a single
notice to such address shall be deemed to be notice to all Purchasers at that
address.
7.02 Binding Effect; Benefit. This Agreement shall be binding upon
------------------------
and inure to the benefit of the parties to this Agreement and their respective
successors and permitted assigns, nothing in this Agreement, express or implied,
is intended or shall be construed to any person other than the parties to this
Agreement or their respective successors or assigns any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein provided, however, that nothing herein shall be construed to
--------
preclude the assignment by Purchasers hereunder in connection with their resale
of Warrants Series A Preferred Stock purchased hereunder, of the rights
attendant thereto, including but not limited to the registration rights for
Registrable Securities, subject only to compliance with applicable securities
laws. This Agreement constitutes the entire agreement and understanding, and
supersedes and terminates all prior agreements and understandings, both oral and
written, between the parties hereto relating to the subject matter hereof.
7.03 Waiver. Any party hereto may, without binding any other party,
------
by written notice to another party (a) extend the time for the performance of
any of the obligations or other actions of such other party under this
Agreement; (b) waive compliance with any of the conditions or covenants of such
other party contained in this Agreement; and (c) waive or modify performance of
any of the obligations of such other party under this Agreement. Except as
provided in the preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party bringing such action of
compliance with any representations, warranties, covenants or agreements
contained herein. Neither the waiver by any party hereto of a breach of any
provision hereof or any preceding or succeeding breach nor the failure by any
party to exercise any right or privilege hereunder shall be deemed a waiver of
such party's rights or privileges hereunder nor shall it be deemed a waiver of
such party's rights to exercise the same at any subsequent time or times
hereunder.
7.04 Amendment. This Agreement may be amended, modified or
---------
supplemented only by a written instrument executed by all of the parties hereto
(including transferees of Purchasers).
7.05 Assignability Neither this Agreement nor any right, remedy,
-------------
obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or any Purchaser except as otherwise
contemplated hereunder and except that the right of Purchasers may be assigned
as provided herein.
16
<PAGE>
7.06 Arbitration. Except as provided below, any and all disputes
-----------
arising under or related to this Agreement which cannot be resolved through
negotiations between the parties shall be submitted to binding arbitration. If
the parties fail to reach a settlement of their dispute within fifteen (15) days
after the earliest date upon which one of the parties notified the other(s) of
its desire to attempt to resolve the dispute, then the dispute shall be promptly
submitted to arbitration by a single arbitrator through the Judicial Arbiter
Group, any successor of the Judicial Arbiter Group, or any similar arbitration
provider who can provide a former judge to conduct such arbitration if JAG is no
longer in existence ("JAG"). The arbiter shall be selected by JAG on the basis,
if possible, of his or her expertise in the subject matter(s) of the dispute.
The decision of the arbitrator shall be final, nonappealable and binding upon
the parties, and it may be entered in any court of competent jurisdiction. The
arbitration shall take place in Chicago, Illinois. The arbitrator shall be
bound by the laws of the State of Colorado applicable to the issues involved in
the arbitration and all Colorado rules relating to the admissibility of
evidence, including, without limitation, all relevant privileges and the
attorney work product doctrine. All discovery shall be completed in accordance
with the time limitations prescribed in the Colorado rules of civil procedure,
unless otherwise agreed by the parties or ordered by the arbitrator on the basis
of strict necessity adequately demonstrated by the party requesting an extension
of time. The arbitrator shall have the power to grant equitable relief where
applicable under Colorado law, and shall be entitled to make an award of
punitive damages when applicable under Colorado law. The arbitrator shall issue
a written opinion setting forth his or her decision and the reasons therefor
within thirty (30) days after the arbitration proceeding is concluded. The
obligation of the parties to submit any dispute arising under or related to this
Agreement to arbitration as provided in this Section shall survive the
expiration or earlier termination of this Agreement. Notwithstanding the
foregoing, either party may seek and obtain an injunction or other appropriate
relief from a court to preserve or protect trademarks, tradenames, copyrights,
patents, trade secrets or other intellectual property or proprietary information
or to preserve the status quo with respect to any matter pending conclusion of
the arbitration proceeding, but no such application to a court shall in any way
be permitted to stay or otherwise impede the progress of the arbitration
proceeding.
In the event of any arbitration or litigation being filed or instituted between
the parties concerning this Agreement, the prevailing party will be entitled to
receive from the other party or parties its attorneys' fees, witness fees, costs
and expenses, court costs and other reasonable expenses, whether or not such
controversy, claim or action is prosecuted to judgment or other form of relief.
7.07 Pronouns. Whenever the context may require any pronoun used
--------
herein shall include the corresponding masculine, feminine or neuter forms.
7.08 Section and Other Headings, The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
17
<PAGE>
7.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts or separate number of 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.
7.10 No Joint and Several Liability Among Purchasers. The
-----------------------------------------------
obligations, representations and warranties of the Purchasers hereunder are made
by each Purchaser as to himself, herself or itself only. There shall be no
joint and several liability among the Purchasers.
18
<PAGE>
IN WITNESS WHEREOF, the Company and each Purchaser has executed this
Agreement as of the day and year first above written.
ATTEST: IMAGEMATRIX CORPORATION.
_______________________________________ By:______________________________
Blair McNea, Vice President Gerald E. Henderson, President
Business Development, Secretary/Treasurer
Notices: 400 S. Colorado Boulevard,
Suite 500
Denver, CO 80303
Facsimile: (303) 399-1554
19
<PAGE>
PURCHASERS:
______________________________________________
By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
______________________________________________
By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
______________________________________________
By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
______________________________________________
20
<PAGE>
By:___________________________________________
___________________________________________
Notices:______________________________________
______________________________________
______________________________________
21
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Schedule 1 Purchasers
Exhibit A Certificate of Amendment
Exhibit B Form of Class A Warrant
Exhibit C Form of Class B Warrant
Exhibit D Form of Accredited Investor Statement
Exhibit E Shares, Options and Warrants
22
<PAGE>
IMAGEMATRIX CORPORATION
WEIGHTED AVERAGE SHARES OUTSTANDING
FOR THE PERIOD ENDED MARCH 31, 1997
EXHIBIT 11
DAYS
----
Total shares issued and outstanding from January
1, 1997 to March 31, 1997 4,665,897 15 69,988,455
Shares issued January 16, 1997 256,937 4,922,834 75 369,212,550
-------------
439,201,005
Days 90
-------------
WEIGHTED AVERAGE SHARES OUTSTANDING 4,880,011
=============
Common stock equivalents have been excluded from the calculation from January 1,
1997 to December 31, 1997 due to the fact that exercise price is greater than
stock price in all cases.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 162
<SECURITIES> 0
<RECEIVABLES> 584
<ALLOWANCES> 7
<INVENTORY> 57
<CURRENT-ASSETS> 1,639
<PP&E> 744
<DEPRECIATION> 226
<TOTAL-ASSETS> 2,454
<CURRENT-LIABILITIES> 1,145
<BONDS> 0
0
0
<COMMON> 5,604
<OTHER-SE> (4,295)
<TOTAL-LIABILITY-AND-EQUITY> 2,454
<SALES> 1,344
<TOTAL-REVENUES> 1,344
<CGS> 688
<TOTAL-COSTS> 688
<OTHER-EXPENSES> 1,208
<LOSS-PROVISION> (552)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (552)
<INCOME-TAX> 0
<INCOME-CONTINUING> (522)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (548)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
