<PAGE>
===============================================================================
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ImageMatrix Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
IMAGEMATRIX CORPORATION
400 South Colorado Boulevard, Suite 500
Denver, CO 80246
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 8, 1998
To Our Stockholders:
The Annual Meeting of Stockholders of ImageMatrix Corporation, a Colorado
corporation (the "Company"), will be held at 10:00 a.m., Mountain Time, on June
8, 1998, at The Cherry Creek Inn, 600 South Colorado Boulevard, Denver,
Colorado, for the following purposes, all of which are more completely set forth
in the accompanying Proxy Statement.
1. To elect two (2) Directors;
2. To approve of the amendment of the Company's 1996 Incentive Stock Option
Plan to increase the number of shares reserved to 1,212,500 from 737,500
shares of the Company's Common Stock for issuance thereunder.
3. To approve the selection of Hein + Associates, LLP, independent public
accountants, as auditors of the Company for the fiscal year ending
December 31, 1998.
4. To transact such other business as may properly come before the meeting,
or any adjournment thereof.
All Stockholders are cordially invited to attend the meeting, although only
Stockholders of record at the close of business on April 7, 1998, will be
entitled to notice of, and to vote at, the meeting or any and all adjournments
thereof.
In order for the other proposals listed above to be approved, each proposal
must be approved by the affirmative vote of holders of a majority of shares,
voting as a group.
Whether or not you expect to attend the Annual Meeting, holders of
ImageMatrix Corporation Common Stock should complete, date and sign the enclosed
form of proxy card and mail it promptly in the enclosed prepaid envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Dennis C. Hefter
President of the Corporation
May 11, 1998
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOUR
PROMPT RETURN OF THE PROXY WILL HELP TO ASSURE A QUORUM AT THE MEETING AND AVOID
ADDITIONAL COMPANY EXPENSE FOR FURTHER SOLICITATION. YOUR PROXY MAY BE REVOKED
AT ANY TIME BEFORE IT IS VOTED. THE GIVING OF A PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
IMAGEMATRIX CORPORATION
400 South Colorado Boulevard, Suite 500
Denver, CO 80246
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 8, 1998
To Our Stockholders:
The Annual Meeting of Stockholders of ImageMatrix Corporation, a Colorado
corporation (the "Company"), will be held at 10:00 a.m., Mountain Time, on June
8, 1998, at The Cherry Creek Inn, 600 South Colorado Boulevard, Denver,
Colorado, for the following purposes, all of which are more completely set forth
in the accompanying Proxy Statement.
1. To elect two (2) Directors;
2. To approve of the amendment of the Company's 1996 Incentive Stock Option
Plan to increase the number of shares reserved to _____________ from
737,500 shares of the Company's Common Stock for issuance thereunder.
3. To approve the selection of Hein + Associates, LLP, independent public
accountants, as auditors of the Company for the fiscal year ending
December 31, 1998.
4. To transact such other business as may properly come before the meeting,
or any adjournment thereof.
All Stockholders are cordially invited to attend the meeting, although only
Stockholders of record at the close of business on April 7, 1998, will be
entitled to notice of, and to vote at, the meeting or any and all adjournments
thereof.
In order for the other proposals listed above to be approved, each proposal
must be approved by the affirmative vote of holders of a majority of shares,
voting as a group.
Whether or not you expect to attend the Annual Meeting, holders of
ImageMatrix Corporation Common Stock should complete, date and sign the enclosed
form of proxy card and mail it promptly in the enclosed prepaid envelope.
BY ORDER OF THE BOARD OF DIRECTORS
Dennis C. Hefter
President of the Corporation
May 11, 1998
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED
POSTAGE PREPAID ENVELOPE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOUR
PROMPT RETURN OF THE PROXY WILL HELP TO ASSURE A QUORUM AT THE MEETING AND AVOID
ADDITIONAL COMPANY EXPENSE FOR FURTHER SOLICITATION. YOUR PROXY MAY BE REVOKED
AT ANY TIME BEFORE IT IS VOTED. THE GIVING OF A PROXY WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
<PAGE>
IMAGEMATRIX CORPORATION
400 South Colorado Boulevard, Suite 500
Denver, CO 80246
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
JUNE 8, 1998
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of ImageMatrix Corporation, a Colorado
corporation ("ImageMatrix" or the "Company"), for use at the Annual Meeting of
Shareholders of the Company to be held on June 8, 1998 at 10:00 a.m., Mountain
Time, at the Cherry Creek Inn, 600 South Colorado Boulevard, Denver, Colorado,
and at any and all adjournments of such meeting.
If the enclosed Proxy Card is properly executed and returned in time to be
voted at the meeting, the shares of Common Stock represented will be voted in
accordance with the instructions contained therein. Executed proxies that
contain no instructions will be voted FOR each of the proposals described
herein. Abstentions (proxies not returned) and broker non-votes will be treated
as shareholders absent from the Annual Meeting. The proxies will be tabulated
and votes counted by American Securities Transfer & Trust, Inc. It is
anticipated that this Proxy Statement and the accompanying Proxy Card will be
mailed to the Company's shareholders on or about May 11, 1998.
SHAREHOLDERS WHO EXECUTE PROXIES FOR THE ANNUAL MEETING MAY REVOKE THEIR
PROXIES AT ANY TIME PRIOR TO THEIR EXERCISE BY DELIVERING WRITTEN NOTICE OF
REVOCATION TO THE COMPANY, BY DELIVERING A DULY EXECUTED PROXY CARD BEARING A
LATER DATE, OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
The costs of the meeting, including the costs of preparing and mailing the
Proxy Statement and Proxy, will be borne by the Company. Additionally, the
Company may use the services of its Directors, officers and employees to solicit
proxies, personally or by telephone, but at no additional salary or
compensation. The Company will also request banks, brokers, and others who hold
shares of Common Stock of the Company in nominee names to distribute proxy
soliciting materials to beneficial owners, and will reimburse such banks and
brokers for reasonable out-of-pocket expenses which they may incur in so doing.
OUTSTANDING CAPITAL STOCK
The record date for shareholders entitled to vote at the Annual Meeting is
April 7, 1998. At the close of business on that day there were 9,567,678
shares of no par value Common Stock (the "Common Stock") of the Company
outstanding and entitled to vote at the meeting.
<PAGE>
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
outstanding Common Stock is necessary to constitute a quorum for each matter
voted upon at the Annual Meeting. In deciding all questions, a holder of Common
Stock is entitled to one vote, in person or by proxy, for each share held in his
or her name on the record date. Abstentions and broker non-votes, if any, will
not be included in vote totals and, as such, will have no effect on any
proposal. Preferred shareholders will not vote at the meeting since they do not
have voting rights.
ACTION TO BE TAKEN AT THE MEETING
The accompanying proxy, unless the shareholder otherwise specifies in the
proxy, will be voted (i) FOR the election of each of the two nominees named
herein for the office of director, (ii) FOR approval of an amendment to the
ImageMatrix Corporation 1996 Incentive Stock Option Plan to increase the number
of shares of common stock reserved for issuance thereunder to 1,212,500 from
737,500, (iii) FOR the selection of Hein + Associates, LLP, independent public
accountants, as the auditors of the Company for the fiscal year ending December
31, 1998; and (iv) at the discretion of the proxy holders, on any other matter
that may properly come before the meeting or any adjournment thereof.
Where shareholders have appropriately specified how their proxies are to be
voted, they will be voted accordingly. If any other matter of business is
brought before the meeting, the proxy holders may vote the proxies at their
discretion. The directors do not know of any such other matter or business.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of shares of Common Stock of the Company for each director of the
Company, for the Chief Executive Officer, for its executive officers who were
paid more than $100,000 in 1997, for all directors and executive officers of the
Company as a group, and for each shareholder who is known by the Company to own
more than 5% of the Company's Stock as of March 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF
COMMON SHARES PERCENT OF
BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
- ---------------- ------------------ ------------------
<S> <C> <C>
Gerald E. Henderson............................. 2,078,088 21.7%
400 S. Colorado Blvd. Ste. 500
Denver, CO 80246
David Seigle.................................... 273,067/(1)/ 2.9%
400 S. Colorado Blvd., Ste. 500
Denver, CO 80246
Blair W. McNea.................................. 388,071/(2)/ 4.0%
400 S. Colorado Blvd., Ste. 500
Denver, CO 80246
Dennis C. Hefter................................ 309,367/(3)/ 3.2%
400 S. Colorado Blvd., Ste. 500
Denver, CO 80246
- ------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Jaidev Sugavanam................................ 186,212/(4)/ 1.9%
400 S. Colorado Blvd., Ste. 500
Denver, CO 80246
Robert Beekmann................................. 10,075/(4)/ *
400 S. Colorado Blvd., Ste. 500
Denver, CO 80246
Bryan Finkel.................................... 2,325/(5)/ *
400 S. Colorado Blvd., Ste. 500
Denver, CO 80246
Beverly Sloan................................... 2,325/(5)/ *
400 S. Colorado Blvd., Ste. 500
Denver, CO 80246
All directors and executive officers as a
group...................................... 3,249,530/(6)/ 34.0%
(8 persons)
</TABLE>
______________________________________
*Less than one percent.
(1) Includes 87,746 shares owned by the Seigle Family Trust, of which Mr.
Seigle is the trustee and beneficiary. Includes options held by the Seigle
Family Trust to purchase 175,246 and options to David Seigle to purchase
10,075 shares, which are currently exercisable or become exercisable within
60 days.
(2) Includes options held by Treuhand, Inc. to purchase 388,071 which are
currently exercisable or become exercisable within 60 days. Mr. McNea is
the sole shareholder of Treuhand, Inc.
(3) Includes options to purchase 154,375 shares which are currently exercisable
or become exercisable within 60 days.
(4) Includes options to purchase 10,075 shares which are currently exercisable
or become exercisable within 60 days.
(5) Includes options to purchase 2,325 shares which are currently exercisable
or become exercisable within 60 days.
(6) Includes options to purchase 752,567 shares which are currently exercisable
or become exercisable within 60 days.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES
Pursuant to the Bylaws, the authorized number of directors of the Company
has been set at eight. The Company's Articles of Incorporation divide the Board
of Directors into three classes and provide that after an interim period or as
necessary to balance the number of directors by class, each class is to be
elected for a three-year term. The terms of office of directors Blair McNea and
Jaidev Sugavanam expire at the Annual Meeting to be held June 8, 1998. Messrs.
McNea and Sugavanam are standing for election for three-year terms, expiring at
the 2001 Annual Meeting of Shareholders. Unless otherwise specified, the proxy
solicited by the Board of Directors will be voted FOR the election of Blair
McNea and Jaidev Sugavanam.
The terms of office of the Company's other directors who are not standing
for election at the Annual Meeting are as follows: Bryan Finkel, Gerald
Henderson and David Seigle have terms which expire at the 1999 Annual Meeting of
Shareholders, and Robert Beekman, Dennis Hefter and Beverly Sloan have terms
which expire at the 2000 Annual Meeting of Shareholders.
3
<PAGE>
Proxy holders will not be able to vote the proxies held by them for more
than two persons. If a quorum is present, the two nominees having the highest
number of votes cast in favor of their election will be elected. Should any
nominee become unable or unwilling to accept nomination or election, the proxy
holders may vote the proxies for the election, in his or her stead, of any other
person the Board of Directors may recommend. Each nominee has expressed his or
her intention to serve the entire term for which election is sought.
THE BOARD OF DIRECTORS RECOMMEND THAT SHAREHOLDERS VOTE FOR EACH NOMINEE
---
FOR THE BOARD OF DIRECTORS.
The names, ages and period of service for each member of the Board of
Directors are as follows:
<TABLE>
<CAPTION>
Year First
Became a
Name Age Director
- -------------------------- --- ----------
<S> <C> <C>
Gerald E. Henderson/(A)/ 59 1992
Robert Beekmann/(A)(C)/ 57 1995
Bryan Finkel 35 1997
Dennis Hefter 35 1997
Blair W. McNea 35 1995
David Seigle/(A)/ 58 1995
Beverly Sloan 45 1997
Jaidev Sugavanam/(C)/ 42 1995
</TABLE>
___________________________
(A) Member of the Audit Committee
(C) Member of the Compensation Committee
Gerald E. Henderson has been Chairman of the Board and Chief Executive
Officer of the Company and its predecessor corporations since 1992. From 1992
to 1997, Mr. Henderson was President of the Company. Mr. Henderson has more
than 32 years of senior organizational management, operations management, sales
management, and software development experience, including industry specific
experience of 15 years in computer software, four years in systems integration,
and 13 years in the oil and gas industry. From 1990 to 1992, he served as
Chairman of the Board and Chief Executive Officer of Denver Resources, Inc., a
company involved in the acquisition of oil and gas properties. Mr. Henderson
sold Documatrix Corporation to the Company in July 1995.
Robert Beekmann has been a director of the Company since November 1995. He
is the founding and managing partner of Beekmann & Vanderberg & Co., LLC, a
Denver-based CPA and business consulting firm. From 1980 through 1994, he was a
partner with the Denver accounting firm of Scullion, Beekmann & Co. He is a
licensed Certified Public Accountant and Certified Financial Planner.
Bryan Finkel has been a director of the Company since April 1997. Mr.
Finkel has spent over eleven years in operating and advisory roles within the
information technology industry. His areas of experience include software,
online services and multimedia technologies. Since January 1994, Mr. Finkel has
been a
4
<PAGE>
director and management consultant with Technology Venture Management, Inc.,
providing operational and financing advisory services to public and private
technology companies. From September 1992 to January 1996, Mr. Finkel was an
investment banker with Broadview Associates where he was responsible for client
management and the execution of a variety of transactions in software and
hardware sectors.
Dennis Hefter has been a director of the Company since April 1997, has been
President and Chief Operating Officer of the Company since July 1997, and has
been an employee of the Company since December 1995. From September 1996 to
June 1997, Mr. Hefter was Executive Vice President of the Company. Mr. Hefter
has over 12 years of experience in management positions. From June 1995 through
December 1995, Mr. Hefter was a branch manager for Ameridata, Inc., a computer
systems and services integrator. From November 1988 to June 1995, Mr. Hefter
was President, Member of the Board of Directors and a major shareholder of Micro
Recovery Systems, Inc. ("MRS") a Wyomissing, Pennsylvania computer systems and
services integrator. Ameridata, Inc. purchased MRS in June 1995.
Blair W. McNea has been a director of the Company since December 1995.
From December 1995 to October 1997, Mr. McNea was Vice President--Business
Development of the Company and Secretary. From February 1997 to October 1997,
Mr. McNea was Chief Financial Officer and Treasurer of the Company. Mr. McNea
has over 13 years of experience in organizational management, financial
transactions, sales, corporate development and mergers and acquisitions. From
January 1995 through September 1995, Mr. McNea served as Vice President of
Business Development at ENTEX Information Systems of Colorado, Inc. ("ENTEX").
From March 1993 to December 1994, Mr. McNea was an independent consultant on
mergers and acquisitions and his clients at such time included ENTEX. From April
1991 to March 1993, Mr. McNea served as Commercial Manager--European Sales for
Destron/Fearing, Inc., an identification automation company. From January 1988
to April 1991, Mr. McNea was a Corporate Banker and Territory Manager for
Norwest Corporate Bank.
David Seigle has been a director of the Company since July 1995. Since 1991,
Mr. Seigle has been a consultant to technology and software industry businesses.
Mr. Seigle was a founding member of the management team of FileNet Corporation,
an imaging software and systems company, and from 1982 to 1991 held several
positions with that company including as Vice President of Marketing, and Senior
Vice President of International Sales and Customer Support.
Beverly Sloan has been a director of the Company since April 1997. Since May
1997, she has been Chief Operating Officer of Blue Cross Blue Shield of
Colorado. From January 1993 to April 1997, Ms. Sloan served as Executive
Director of Human Resources for US WEST, Inc. From June 1982 through December
1992 she was President of Mid-America Health Network, Inc., Kansas City,
Missouri, a regional health plan with over 325,000 members which she founded.
Jaidev Sugavanam has been a director of the Company since November 1995. He
currently is President and Chief Operating Officer of Asyst, Inc. which provides
consulting services to software and peripheral hardware companies in the
technology market. From 1995 to 1997, Mr. Sugavanam was Vice President of the
Education Access division of ENTEX. In 1987 Mr. Sugavanam founded Advanced
Systems and Peripherals, Inc., a St. Louis based computer systems integrator for
school systems and businesses, and served as President and Chief Executive
Officer until its sale to ENTEX in March 1995.
5
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee and a Compensation Advisory Committee. The
Audit Committee recommends the Company's independent auditors, reviews the
scope of their engagement, consults with the auditors, reviews the results of
their examinations, acts as liaison between the Board of Directors and the
auditors and reviews various Company policies, including those relating to
accounting and internal controls. The Audit Committee met once in 1997.
The Compensation Advisory Committee ("Compensation Committee") administers the
1996 Incentive Stock Option Plan and the Founders and Outside Consultants Stock
Option Plan, and determines the salaries, bonuses and other compensation of the
Company's President and CEO as well as other officers and executives as directed
by the Board of Directors of the Company. The Compensation Committee met once
in 1997.
Pursuant to an underwriting agreement entered into with the Company in
connection with its June 1996 initial public offering, Neidiger Tucker Bruner,
Inc., the principal underwriter, has designated Anthony Petrelli as an advisor
to the Board of Directors, and the Company has agreed to certain indemnification
obligations with respect to such advisor.
Directors are reimbursed for expenses incurred for attending any Board or
committee meeting. There is no family relationship between any current or
prospective director of the Company and any other current or prospective
executive of the Company.
During the fiscal year ended December 31, 1997, there were six meetings of the
Board of Directors. All directors attended at least 75% of the meetings of the
Board and committees of the Board on which they were members.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and holders of more than 10% of the
Company's Common Stock to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
of the Company. Except as stated below in this paragraph, based solely upon a
review of Forms 3 and 4 and amendments thereto furnished to the Company during
the fiscal year ended December 31, 1997 and Forms 5 and amendments thereto
furnished to the Company with respect to the fiscal year ended December 31,
1997, to the best of the Company's knowledge, the Company's directors, officers
and holders of more than 10% of its Common Stock complied with all Section 16(a)
filing requirements. Directors Bryan Finkel and Beverly Sloan each filed one
late Form 3 in connection with their election to the Board of Directors in May
1997. Director Jaidev Sugavanam filed one late Form 4 in connection with a
purchase of Company Common Stock in June 1997. Director Blair McNea timely
filed a Form 5 but the Form 5, subsequently amended, did not properly reflect an
option and a warrant grant. Director David Seigle timely filed a Form 5, but the
Form 5, subsequently amended, did not properly reflect an option grant.
6
<PAGE>
EXECUTIVE OFFICERS
The following persons are the executive officers of the Company:
Name Position
- ---- --------
Gerald E. Henderson Chairman of the Board and Chief Executive Officer
Dennis Hefter President and Chief Operating Officer
Information concerning Mr. Henderson and Mr. Hefter is provided under the
section entitled "Election of Directors."
All executive officers are appointed by the Board of Directors and serve at
the Board's discretion.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid to the Company's Chief
Executive Officer and its executive officers who were paid more than $100,000 in
salary and bonus during the year ended December 31, 1997 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
---------------------------------------------------------- ------
Securities
Other Annual Underlying
Name and Principal Position Year Salary ($) Bonus($) Compensation ($) Options/SARS (#)
- -------------------------------------- ---- ---------- ------------- ------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Gerald E. Henderson................... 1997 186,700 __ 10,100 __
Chief Executive Officer 1996 156,000 11,000 __ __
1995 101,305 100,000/(1)/ __ __
Dennis C. Hefter/ (2)/................ 1997 137,100 -- 96,300/(3)/ 200,000
President, Chief Operating Officer 1996 98,000 -- 95,000/(3)/ --
1995 250 -- -- 77,500
</TABLE>
______________
(1) A non-recurring bonus was paid to Mr. Henderson in 1995 in consideration for
his waiver to permit the Company to assume his employment agreement with
Documatrix Corporation at the time of the Company's acquisition of
Documatrix Corporation.
(2) Mr. Hefter joined the Company in December 1995.
(3) In December 1995 Mr. Hefter purchased 155,000 shares of Common Stock from
Gerald Henderson, the Chief Executive Office of the Company, at a price of
$1.94 per share at a time when the value of the common stock was $2.58 per
share. The Company recorded $100,000 deferred compensation expense in
connection with such sale, and Mr. Hefter is deemed to have received
$100,000 of deferred compensation. The deferred compensation is being
amortized over a two-year period beginning in January 1996 pursuant to the
vesting provisions of the restricted stock agreement between Messrs.
Henderson and Hefter and $50,000 of compensation expense was recognized in
each of 1997 and 1996. The additional annual compensation for 1996 is
attributable to moving expenses, and the additional annual compensation for
1997 is attributable to moving expenses and income tax reimbursement related
to the deferred compensation.
7
<PAGE>
The following table presents information concerning individual grants of
options to purchase Common Stock of the Company made during the fiscal year
ended December 31, 1997 to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Number of Securities Percent of Total Options/ Exercise or
Underlying Options/ SARs Granted to Base Price
Name SARs Granted (#) Employees in Fiscal Year ($/Sh.) Expiration Date
---- ------------------- ------------------------- ----------- ---------------
<S> <C> <C> <C> <C>
Gerald E. Henderson ----- -- --
Dennis C. Hefter 200,000/(1)/ 31% $2.58 5/2/02
</TABLE>
(1) Options vest as to 1/12th following each completed fiscal quarter beginning
with the quarter ended September 30, 1997, subject
to earlier vesting if certain performance objectives are achieved.
The following table sets forth the year-end value of unexercised options to
purchase Common Stock of the Company for the Named Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
Shares Number of Securities Value of Unexercised
Acquired Value Underlying Unexercised in-the-
on Exercise Realized Options/SARs at FY-End Money Options/SARs at FY-End
Name (#) ($) (#) ($)/(1)/
- --------------------- ----------- -------- ------------------------- ---------------------------
Exercisable/Unexercisable Exercisable/Unexercisable
------------------------- ----------------------------
<S> <C> <C> <C> <C>
Gerald E. Henderson.. 0 -- 0/0 $ 0/$0
Dennis C. Hefter..... 0 -- 108,125/169,375 $ 0/$0
</TABLE>
_____________________
(1) Based upon the difference between the exercise price and the fair market
value of the Common Stock for those options which at December 31, 1997 had
an exercise price less than the fair market value of the Common Stock on
such date. The fair market value of Company Common Stock at December 31,
1997, measured as the mean of the closing bid and asked prices of the
Common Stock on such date, was $2.09 per share.
DIRECTOR COMPENSATION
The Company pays its non-employee directors a fee of $1,000 for each regularly
scheduled meeting, plus reimbursement of travel costs and expenses incurred in
attending Board and Committee meetings. Pursuant to the terms of the ImageMatrix
Corporation Non-Employee Directors Stock Option Plan, in 1995 Mr. Beekmann, Mr.
Seigle, and Mr. Sugavanam each received options to purchase 7,750 shares of
Common Stock at an exercise price of $2.58 per share. In each year, non-
employee directors will receive options to acquire 5,812 shares of
8
<PAGE>
Common Stock on the first business day after the Annual Meeting of Shareholders,
at the closing price of the Company's Common Stock on the date prior to the
grant of the option. All options granted under the Non-Employee Directors Stock
Option Plan become exercisable on the following vesting schedule: 40% of a
particular grant amount vests on the next succeeding annual meeting, an
additional 30% of the grant amount vests on the second succeeding annual meeting
and the remaining 30% of the grant amount vests on the third succeeding annual
meeting. On May 17, 1997, the Company granted options pursuant to its Non-
Employee Director Stock Option Plan to purchase 5,812 shares of Common Stock at
an exercise price of $1.63 per share to each the following non-employee
directors: Jaidev Sugavanam, Robert Beekman, David Seigle, Beverly Sloan and
Bryan Finkel. Directors Blair McNea and David Seigle received options related to
certain consulting services they performed for the Company. See "Certain
Relationships and Related Transactions."
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company entered into an employment agreement with Gerald E. Henderson,
President and Chief Executive Officer of the Company, effective January 1, 1996,
which extended through December 31, 1997 and was, pursuant to certain automatic
renewal provisions, renewed through December 31, 1998. The employment agreement,
as amended and renewed, establishes Mr. Henderson's base salary at $180,000 in
1998. The agreement may be terminated by the Company with or without cause, by
Mr. Henderson for cause, or upon Mr. Henderson's death or his inability to
perform his normal duties on account of disability for a period of 90 or more
days. "Cause" is defined in the agreement. Mr. Henderson is entitled to receive
a bonus of $45,000 in 1998 if the Company's net income equals or exceeds
$3,800,000 in 1998. Mr. Henderson is entitled to additional bonuses equal to
2.32% of the Company's 1998 net income. Mr. Henderson is entitled to receive a
$700 monthly car allowance and participate in insurance and other benefit,
pension or health plans provided by the Company to its key executive employees.
Upon the Company's termination of Mr. Henderson's employment for any reason
other than death, disability, or by the Company for cause, as defined in the
employment agreement, Mr. Henderson is entitled to a one-time severance payment
equal to his annual salary at the time of severance, plus additional payments
for a period of 12 months from the date of termination of his employment at the
base salary rate in effect at the time of the termination of employment plus
continued health insurance coverage for 24 months from the date of termination.
Mr. Henderson is also entitled to a salary continuation benefit payable upon his
disability, which benefit shall equal 100% of his then current salary until a
determination of complete disability is made, and thereafter shall equal 80% of
his current salary for up to 36 months of such disability. Upon termination for
any reason other than death, the Company is required to transfer the Company's
insurance policy on Mr. Henderson's life to him without charge providing he
assumes the future premiums.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 1, 1996, Gerald Henderson sold 155,000 shares of the Company's
Common Stock owned by Mr. Henderson to Dennis Hefter, an officer of the Company,
at a price of $1.94 per share. Deferred compensation of $100,000 has been
recorded for the excess of the fair value of the shares sold above the price
paid by Mr. Hefter.
On May 24, 1996, the Company borrowed $100,000 from Gerald Henderson, Chief
Executive Officer of the Company, at an interest rate of 1% over the prime rate
(a 9.25% initial rate), due July 15, 1996. The proceeds of such loan were used
for short term working capital purposes, and the Company repaid such loan on May
30, 1996.
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On May 17, 1997, as an inducement to serve on the Company's Board of
Directors, the Company granted warrants to Director Bryan Finkel, to purchase
100,000 shares of Common Stock at $2.25 per share, which was the fair market
value of the Common Stock on such date. From May through October 1997, Director
Bryan Finkel provided consulting services to the Company and was paid $24,000
for those services.
On May 2, 1997, the Company granted options pursuant to its Founders Plan to
Treuhand, Inc. ("Treuhand"), a company owned by director Blair McNea, to
purchase 87,500 shares of the Company's Common Stock at an exercise price of
$2.58 per share. These options are exercisable from May 2, 1997 through August
30, 2001. On June 11, 1997, the Company granted options to Treuhand to purchase
100,000 shares of the Company's Common Stock at an exercise price of $2.58.
These options are exercisable June 11, 1997 to August 30, 2002. On May 2, 1997,
the Company granted options pursuant to the Founders Plan to director David
Seigle to purchase 87,500 shares of the Company's Common Stock at an exercise
price of $2.58 per share. These options are exercisable May 2, 1997 through
August 30, 2001.
On October 27, 1997, the Company entered into an agreement (the "Treuhand
Agreement") with Treuhand, Inc. Under the Treuhand Agreement, upon the Company's
request, Treuhand will find, negotiate and close transactions to raise capital,
and assist the Company's legal counsel with legal documentation, and SEC and
NASDAQ compliance related to the Company. The Treuhand Agreement commenced on
October 27, 1997, and terminates on January 31, 1999 or upon written notice of
termination by either party within 210 days after the date of the Treuhand
Agreement. The Treuhand Agreement provides for Treuhand to be paid 4% of any
cash proceeds raised by Treuhand on or before February 27, 1998, and 3% of any
cash proceeds raised by Treuhand after such date. Additionally, Treuhand will
receive warrants to purchase common stock equal to 2.5% of the total dollar
value of money raised by Treuhand at the share price at which money is raised.
Treuhand will be reimbursed for all out-of-pocket expenses directly associated
with the performance of its duties under the agreement. During 1997, pursuant to
the Treuhand Agreement, the Company paid $80,480 to Treuhand. Those payments
were compensation associated with the raising of $5,813,000 in capital for the
Company. In addition, on December 1, 1997, options to purchase 25,325 shares of
the Company's common stock at $2.00 were granted in conjunction with cash
proceeds raised during the fourth quarter of 1997. These options are exercisable
from December 1, 1997 through December 1, 2002.
PROPOSAL 2 - AMENDMENT OF 1996 STOCK OPTION PLAN
On July 15, 1997, the Board of Directors amended, subject to shareholder
approval, the ImageMatrix Corporation 1996 Incentive Stock Option Plan (the
"1996 Plan"). The number of common shares available for issuance under the 1996
Plan was increased to 1,212,500 from 737,500 shares of Common Stock. The 1996
Plan is set forth as Exhibit A to this Proxy Statement.
The Board of Directors believes that the 1996 Plan has been of material
benefit to the Company by assisting the Company in attracting, retaining and
motivating key employees of proven ability. The Board of Directors also believes
that the best interests of the Company and its shareholders require that the
Company continue to be in a position to offer options to present and prospective
key personnel and expand its ability to offer options to present and prospective
consultants and to present and prospective directors who are not employees of
the Company.
The purpose of the 1996 Plan is to promote the interests of the Company and
its shareholders by helping the Company attract, retain, and motivate key
employees and consultants, including officers and directors who are employees of
or consultants to the Company, and non-employee directors of the Company.
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The Board of Directors adopted the 1996 Plan in November 1995, and it was
approved by the shareholders in March 1996. The Board of Directors amended the
1996 plan in July 1996 to increase the number of common shares available for
issuance thereunder to 737,500 from 387,500, and it was approved by the
shareholders in May 1997.
As of March 31, 1998, options to purchase an aggregate of 1,056,500 shares of
Common Stock (net of options canceled) had been granted pursuant to the Plan and
27,125 options have been exercised. In addition to options outstanding under the
1996 Plan, there are 750,498 shares subject to outstanding options under the
Founders and Consultants Stock Option Plan and under the Non-Employee Directors
Stock Option Plan. As of April 8, 1998, the market value of all shares of Common
Stock subject to outstanding options issued under the 1996 Plan, the Founders
and Consultants Stock Option Plan and the Non-Employee Directors Stock Option
Plan was $3,650,136 (based upon the average bid and asked prices as reported on
the NASDAQ System on such date).
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT OF THE PLAN
---
INCREASING THE NUMBER OF COMMON SHARES AVAILABLE FOR ISSUANCE THEREUNDER TO
1,212,500 FROM 737,500.
The amendment to the 1996 Plan will be approved if the number of votes cast
favoring the action exceed the number of votes cast opposing the action. Unless
otherwise specified, proxies solicited by the Board of Directors will be voted
FOR the adoption of the amendment to increase the number of shares reserved for
issuance thereunder to 1,212,500 from 737,500 shares. The following description
of the 1996 Plan, as amended, is qualified in its entirety by reference to the
Plan included herewith as Exhibit A.
SUMMARY OF THE 1996 PLAN
Administration. The Board of Directors is responsible for administering the
Plan. The Board of Directors has full authority, subject to the terms of the
Plan, to make all determinations under the 1996 Plan. The Board of Directors may
delegate administration of the 1996 Plan to a committee composed of two or more
directors, each of whom is a "disinterested person" as defined in the 1996 Plan,
which is generally a person who is not eligible to receive options under such
Plan. The Company will indemnify each member of the Board of Directors for
actions taken under the 1996 Plan.
Incentive and Nonstatutory Stock Options. The Board of Directors may grant
incentive stock options under the 1996 Plan and options which do not qualify as
incentive stock options ("nonstatutory stock options").
Eligibility. Employees of the Company and its subsidiaries, including officers
and directors who are employees of the Company or any subsidiary of the Company,
are eligible to receive incentive stock options and nonstatutory stock options
under the 1996 Plan. As of March 31, 1998, the Company had approximately 49
total employees. Members of the Company's Board of Directors who are not
employees of the Company or any of its subsidiaries are eligible to receive
nonstatutory stock options under the Plan. As of March 31, 1998 there were 5
non-employee directors of the Company. The benefits or amounts that will be
received by or allocated to persons eligible to receive options under the Plan
are not determinable.
Exercise Price. The 1996 Plan provides that the exercise price under each
incentive stock option shall be no less than 100% of the fair market value (110%
of the fair market value for employees owning more than 10% of the Company's
Common Stock) of the Common Stock on the day the option is granted. The
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exercise price for each nonstatutory stock option granted under the 1996 Plan
will be the price established by the Board of Directors which normally is
expected to be no less than 100% of the fair market value on the date the option
is granted. The exercise price of an option is to be paid in cash or in such
other consideration as the Board deems acceptable, including the optionee's
promissory note. The Board may also permit a participant to surrender previously
owned shares to the Company, the fair market value of which would be applied to
the option exercise price.
Non-Transferability. All options granted under the 1996 Plan may be exercised
during the optionee's lifetime only by the optionee and are non-transferable
except by will or the laws of descent and distribution. Notwithstanding the
above, the Board may, at its discretion, permit the transfer of a nonstatutory
option.
Exercise. The duration of each option will be as specified by the Board but
will not exceed ten years from the date of grant. The Board, at its discretion,
may establish a vesting schedule for any option granted under the 1996 Plan.
Effect of Termination of Services. If an optionee's employment is terminated
for any reason other than the optionee's death or disability, the exercisable
options held by the optionee shall terminate immediately, however the Board of
Directors shall have the discretion to allow such options to remain exercisable
up to three months. If the optionee is an employee of the Company or a
subsidiary of the Company and the termination is due to the optionee's death or
permanent and total disability, exercisable options held by the optionee may be
exercised for a period of twelve months following the termination. In each case,
the options may be exercised only to the extent exercisable on the date of
termination of employment and in no event is an option exercisable after the
termination date specified in the option grant.
Stock Dividends and Stock Splits. In the event any changes are made to the
shares of Common Stock (whether by reason of merger, consolidation,
reorganization, recapitalization, stock dividend, stock split, combination of
shares, exchange of shares, change in corporate structure or otherwise),
appropriate adjustments shall be made in: (i) the number of shares of Common
Stock made subject to Stock Options, and in the option price of said shares;
and (ii) the aggregate number of shares which may be made subject to stock
options in the future. If any of the foregoing adjustments result in a
fractional share, the fraction shall be disregarded, and the Company shall have
no obligation to make any cash or other payment with respect to such a
fractional share.
Corporate Transactions. If within the duration of a stock option there shall
be a corporate merger, consolidation, acquisition of assets, or other
reorganization and if such transaction shall affect the Common Stock, the
participant shall thereafter be entitled to receive upon the exercise of his or
her Stock Option those shares or securities that he or she would have received
had the stock option been exercised prior to such transaction and had the
participant been a stockholder of the Company with respect to such shares. If
the Company or its stockholders enter into an agreement to dispose of all, or
substantially all, of the assets or outstanding capital stock of the Company by
means of a sale or liquidation, or a merger or reorganization in which the
Company is not the surviving corporation, the vesting schedule of some or all
stock options may, at the sole discretion of the Board of Directors, be
accelerated so that all or any portion of stock options outstanding under the
1996 Plan as of the day before the consummation of such sale, liquidation,
merger or reorganization, to the extent not exercised, shall for all purposes
under this 1996 Plan become exercisable as of such date.
Term of Plan; Amendment. The 1996 Plan will terminate on November 2, 2005, ten
years from the date the 1996 Plan was adopted by the Board of Directors, or, if
earlier, upon the purchase of all Common Stock subject to the 1996 Plan pursuant
to the exercise of options granted under the 1996 Plan. Any options outstanding
after
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<PAGE>
the termination of the 1996 Plan will remain in effect in accordance with their
terms. The Board of Directors may terminate or amend the 1996 Plan, except that
the Board may not, without shareholder approval, increase the number of shares
of Common Stock as to which options may be granted, materially increase the
benefits accruing to participants or materially modify the eligibility
requirements.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee will not realize taxable income upon the
grant of an incentive stock option under the 1996 Plan. In addition, an optionee
will not realize taxable income upon the exercise of an incentive stock option
if the optionee holds the shares acquired until at least one year after exercise
and, if later, until two years after the date of grant of option. The amount by
which the fair market value of the shares exceeds the option price at the time
of exercise generally is an item of tax preference for purposes of the
alternative minimum tax. If an optionee acquires stock through the exercise of
an incentive stock option under the 1996 Plan and subsequently sells the stock
after holding the stock for the period described above, the gain which is the
difference between the sale price of the stock and the option exercise price
will be taxed as capital gain. The gain will not be treated as ordinary income
except when the holding period requirements discussed above are not satisfied.
An incentive stock option does not entitle the Company to an income tax
deduction except to the extent that an optionee realizes ordinary income
therefrom.
Nonstatutory Options. An optionee generally will not realize taxable income
upon the grant of a nonstatutory stock option. When an optionee exercises a
nonstatutory stock option, the optionee will realize taxable ordinary income at
that time equal to the difference between the option price and the fair market
value of the stock on the date of exercise.
An optionee will generally have a basis in stock acquired through the exercise
of a nonstatutory stock option under the 1996 Plan equal to the fair market
value of the stock on the date of exercise. If the optionee subsequently sells
the stock, the gain which is the difference between the sale price and the basis
will be taxed as capital gain.
Any ordinary income realized by an optionee upon exercise of a nonstatutory
stock option will be allowable to the Company as a deduction at the time it is
realized by the optionee.
Participants in the 1996 Plan should consult their own tax advisors to
determine the specific tax consequences of the 1996 Plan for them.
PROPOSAL 3 - APPOINTMENT OF AUDITORS
On April 22, 1998, the Company engaged the accounting firm of Hein +
Associates LLP as its principal independent accountants to audit the Company's
financial statements for its fiscal year ending December 31, 1998 subject to the
approval of such appointment by the shareholders at the Annual Meeting. The
appointment of new independent accountants was approved by the Audit Committee
and Board of Directors of the Company. The Company dismissed its former
independent accountants, Ernst & Young LLP, effective with the appointment of
Hein + Associates, LLP.
Prior to the appointment of Hein + Associates, LLP, management of the Company
had not consulted with Hein + Associates, LLP regarding accounting issues.
During the two most recent fiscal years ended December 31, 1997 and 1996, and
the interim period subsequent to December 31, 1997, there were no disagreements
with the former accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, except
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<PAGE>
that in connection with the audit of the Company's year ended December 31, 1997,
Ernst & Young LLP informed the Company's Audit Committee in a meeting on April
8, 1998 that it believed the financial statements for the quarter ended
September 30, 1997, included in the Company's Form 10-QSB for the quarter ended
September 30, 1997, should be restated for the contract adjustment reported in
Note 8 of the Company's annual financial statements for the year ended December
31, 1997 included in the Company's Form 10-KSB filed April 15, 1998.
The Company believes the disclosures contained in its Form 10-KSB for the year
ended December 31, 1997 adequately describe the effect of the contract
adjustment on the September 30, 1997. In addition, the Company restated such
financial statements by filing a Form 10-QSB/A amending the Company's Form
10-QSB for the quarter ended September 30, 1997.
Ernst & Young LLP's reports on the financial statements for the past two years
have contained no adverse opinion or disclaimer of opinion and were not modified
as to uncertainty, audit scope or accounting principles except for an
explanatory paragraph in their report dated March 25, 1998 and February 18, 1997
(except as to Note 8, dated April 14, 1997) regarding doubt about the Company's
ability to continue as a going concern contained in the financial statements for
the years ended December 31, 1997 and 1996.
The ratification of the appointment of Hein + Associates, LLP will be
determined by the vote of the holders of a majority of the shares present in
person or represented by proxy at the Annual Meeting. If the foregoing
appointment of Hein + Associates, LLP is not ratified by shareholders, the Board
of Directors will appoint other independent accountants whose appointment for
any period subsequent to the 1998 Annual Meeting of Shareholders will be subject
to the approval of shareholders at that meeting. Representatives of Hein +
Associates, LLP are expected to be present at the Annual Meeting and will have
an opportunity to make a statement should they so desire and to respond to
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE TO RATIFY THE
APPOINTMENT OF THE FIRM OF HEIN + ASSOCIATES, LLP.
SHAREHOLDER PROPOSALS
Any proposals from shareholders to be presented for consideration for
inclusion in the proxy material in connection with the 1999 annual meeting of
shareholders of the Company must be submitted in accordance with the rules of
the Securities and Exchange Commission and received by the Secretary of the
Company at the Company's principal executive offices no later than the close of
business on January 12, 1999.
OTHER MATTERS
All information contained in this Proxy Statement relating to the occupations,
affiliations and securities holdings of directors and officers of the Company
and their relationship and transactions with the Company is based upon
information received from the individual directors and officers. All
information relating to any beneficial owner of more than 5% of the Company's
Stock is based upon information contained in reports filed by such owner with
the Securities and Exchange Commission.
The Annual Report to Shareholders of the Company for the fiscal year ended
December 31, 1997, which includes financial statements and accompanies this
Proxy Statement, does not form any part of the material for the solicitation of
proxies.
THE COMPANY WILL FURNISH WITHOUT CHARGE A COPY OF ITS ANNUAL REPORT ON FORM
10-K, INCLUDING THE FINANCIAL STATEMENTS, FOR THE FISCAL YEAR ENDED DECEMBER 31,
1997, FILED WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 TO ANY SHAREHOLDER
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(INCLUDING ANY BENEFICIAL OWNER) UPON WRITTEN REQUEST TO DENNIS C. HEFTER,
PRESIDENT, 400 SOUTH COLORADO BOULEVARD, STE. 500, DENVER, COLORADO 80222. A
COPY OF THE EXHIBITS TO SUCH REPORT WILL BE FURNISHED TO ANY SHAREHOLDER UPON
WRITTEN REQUEST THEREFOR AND PAYMENT OF A NOMINAL FEE.
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EXHIBIT A
IMAGEMATRIX CORPORATION
1996 STOCK OPTION PLAN
(as amended on July 15, 1997)
1. PURPOSE
The IMAGEMATRIX CORPORATION 1996 STOCK OPTION PLAN ("Plan") provides for
the grant of Stock Options to employees, directors and consultants of
ImageMatrix Corporation, (the "Company") and such of its subsidiaries (as
defined in Section 424(f) of the Internal Revenue Code of 1986) (the "Code") as
the Board of Directors of the Company shall from to time designate
("Participating Subsidiaries") in order to advance the interests of the Company
and its Participating Subsidiaries through the motivation, attraction and
retention of key personnel.
2. INCENTIVE STOCK OPTIONS AND NON-INCENTIVE STOCK OPTIONS
The Stock Options granted under the Plan may be either:
a) Incentive Stock Options ("ISOs") which are intended to be "Incentive
Stock Options" as that term is defined in Section 422 of the Code; or
b) Non-statutory Stock Options ("NSOs") which are intended to be options
that do not qualify as "Incentive Stock Options" under Section 422 of
the Code.
All Stock Options shall be ISOs unless the Option Agreement clearly
designates the Stock Options granted thereunder, or a specified portion thereof,
as NSOs. Subject to the other provisions of the Plan, a Participant may receive
ISOs and NSOs at the same time provided that the ISOs and NSOs are clearly
designated as such, and the exercise of one does not affect the exercise of the
other.
Except as otherwise expressly provided herein, all of the provisions and
requirements of the Plan relating to Stock Options shall apply to ISOs and NSOs.
3. ADMINISTRATION
The Plan shall be administered by the Board of Directors (the "Board") of
the Company if each member of the Board is a Disinterested Person. If each
member of the Board is not a Disinterested Person, the Plan shall be
administered by a committee of two or more directors ("Committee") each of whom
is a Disinterested Person. The Committee or the Board of Directors, as the case
may be, shall have full authority to administer the Plan, including authority to
interpret and construe any provision of the Plan and any Stock Options granted
thereunder, and to adopt such rules and regulations for administering the Plan
as it may deem necessary in order to comply with the requirements of the Code or
in order that Stock Options that are intended to be ISOs will be classified as
incentive stock options under the Code, or in order to conform to any regulation
or to any change in any law or regulation applicable thereto.
All actions taken and all interpretations and determinations made by the
Board or Committee in good faith (including determinations of Fair Market Value)
shall be final and binding upon all Participants, the Company and all other
interested persons. No member of the Board or Committee shall be personally
liable for any action, determination or interpretation made in good faith with
respect to the Plan, and all members of the Board and Committee shall, in
addition to their rights as directors, be fully protected by the Company
<PAGE>
with respect to any such action, determination or interpretation. Rule 16b-3
under the Securities Exchange Act of 1934 (the "Act") provides that the grant of
a stock option to a director or officer of a company will be exempt from the
provisions of Section 16(b) of the Act if the conditions set forth in said Rule
are satisfied. Unless otherwise specified by the Board or Committee, grants of
Stock Options hereunder to individuals who are officers or directors of the
Company shall be made in a manner that satisfies the conditions of said Rule.
4. DEFINITIONS
4.1 "Stock Option." A Stock Option is the right granted under the Plan
---------------
to an Employee, director, or consultant to purchase, at such time or
times and at such price or prices ("Option Price") as are determined
by the Committee, the number of shares of Common Stock determined by
the Committee.
4.2 "Common Stock." A share of Common Stock means a share of authorized
---------------
but unissued or reacquired common stock of the Company.
4.3 "Fair Market Value." If the Common Stock is traded publicly, the Fair
--------------------
Market Value of a share of Common Stock on any date shall be the
average of the representative closing bid and asked prices, as quoted
by the National Association of Securities Dealers through NASDAQ (its
automated system for reporting quotes), for the date in question, or,
if the Common Stock is listed on the NASDAQ National Market System or
is listed on a national stock exchange, the officially quoted closing
price on NASDAQ or such exchange, as the case may be, on the date in
question. If the Common Stock is not traded publicly, the Fair Market
Value of a share of Common Stock on any date shall be determined in
good faith by the Board of Directors or the Committee after such
consultations with outside legal, accounting and other experts as the
Board of Directors or the Committee may deem advisable, and the Board
of Directors or the Committee shall maintain a written record of its
method of determining such value.
4.4 "Employee." An Employee is an employee of the Company or any
-----------
Participating Subsidiary.
4.5 "Participant." A Participant is an Employee, director or consultant
--------------
to whom a Stock Option is granted.
4.6 "Disinterested Person." A Disinterested Person is a person who
-----------------------
satisfies the definition of a "disinterested person" set forth in Rule
16b-3 under the Act or any rule or regulation, as it may be amended
from time to time.
5. ELIGIBILITY AND PARTICIPATION
Grants of ISOs and NSOs may be made to Employees of the Company or any
Participating Subsidiary. Grants of NSOs may be made to directors of or
consultants to the Company or any Participating Subsidiary. Any director of the
Company or of a Participating Subsidiary who is also an Employee shall also be
eligible to receive ISOs. The Committee shall from time to time determine the
Participants to whom Stock Options shall be granted, the number of shares of
Common Stock subject to each Stock Option to be granted to each such
Participant, the Option Price of such Stock Options, all as provided in this
Plan. The Option Price of any ISO shall be not less than the Fair Market Value
of a share of Common Stock on the date on which the Stock Option is granted, but
the Option Price of an NSO may be less than the Fair Market Value on the date
the NSO is granted if the Committee so determines. If an ISO is granted to an
Employee who then owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or subsidiary
corporation of the Company, the Option Price of such ISO shall be at least 110%
of the Fair Market Value of the Common Stock subject to the ISO at the time such
ISOs are granted, and such ISO shall not be exercisable after five years after
the date on which it was granted. Each Stock Option shall be
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evidenced by a written agreement ("Option Agreement") containing such terms and
provisions as the Committee may determine, subject to the provisions of this
Plan.
6. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
6.1 Maximum Number. The maximum aggregate number of shares of Common Stock
---------------
that may be made subject to Stock Options shall be 1,212,500 authorized but
unissued shares. The aggregate Fair Market Value (determined as of the time the
ISO is granted) of the stock as to all ISOs granted to an individual which may
first become exercisable in a particular calendar year may not exceed $100,000.
If any shares of Common Stock subject to Stock Options are not purchased or
otherwise paid for before such Stock Options expire, such shares may again be
made subject to Stock Options.
6.2 Capital Changes. In the event any changes are made to the shares of
----------------
Common Stock (whether by reason of merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, combination of shares, exchange
of shares, change in corporate structure or otherwise), appropriate adjustments
shall be made in: (i) the number of shares of Common Stock theretofore made
subject to Stock Options, and in the Option Price of said shares; and (ii) the
aggregate number of shares which may be made subject to Stock Options in the
future. If any of the foregoing adjustments shall result in a fractional share,
the fraction shall be disregarded, and the Company shall have no obligation to
make any cash or other payment with respect to such a fractional share.
7. EXERCISE OF STOCK OPTIONS
7.1 Time of Exercise. Subject to the provisions of the Plan, the
-----------------
Committee, in its discretion, shall determine the time when a Stock Option, or a
portion of a Stock Option, shall become exercisable, and the time when a Stock
Option, or a portion of a Stock Option, shall expire. Such time or times shall
be set forth in the Option Agreement evidencing such Stock Options. A Stock
Option shall expire, to the extent not exercised, no later than the tenth
anniversary of the date on which it was granted, unless otherwise set forth in
such Option grant. The Committee may accelerate the vesting of any Participant's
Stock Option by giving written notice to the Participant. Upon receipt of such
notice, the Participant and the Company shall amend the Option grant to reflect
the new vesting schedule. The acceleration of the exercise period of a Stock
Option shall not affect the expiration date of that Stock Option.
7.2 Exchange of Outstanding Stock. The committee, in its sole discretion,
-------------------------------
may permit a Participant to surrender to the Company shares of the Common Stock
previously acquired by the Participant as part of full payment for the exercise
of a Stock Option. Such surrendered shares shall be valued at their Fair Market
Value on the date of exercise.
7.3 Use of Promissory Note; Exercise Loans. The Committee may, in its sole
---------------------------------------
discretion, impose terms and conditions, including conditions relating to the
manner and timing of payments, on the exercise of Stock Options. Such terms and
conditions may include, but are not limited to, permitting a Participant to
deliver to the Company his Promissory note as full or partial payment for the
exercise of a Stock Option. The Committee, in its sole discretion, may authorize
the Company to make a loan to a Participant in connection with the exercise of
Stock Options, or authorize the Company to arrange or guarantee loans to a
Participant by a third party.
7.4 Termination of Employment before Exercise. If the employment of a
------------------------------------------
Participant who was an employee of the Company or a Participating Subsidiary
when the Stock Option was granted shall terminate for any reason other than the
Participant's death or disability, any Stock Options then held by the
Participant, to the extent then exercisable under the applicable Option
Agreement(s), shall terminate immediately, however the Committee shall have the
discretion to allow such Option Agreement(s) to remain exercisable after the
termination of his employment for a period of up to three additional months (but
not later than the specified
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expiration date). If the Participant's employment is terminated because the
Participant is disabled within the meaning of Section 22(e)(3) of the Code, any
Stock Option then held by the Participant, to the extent then exercisable under
the applicable Option Agreement(s), shall remain exercisable after the
termination of his employment for a period of twelve months (but not later than
the specified expiration date). If the Participant dies while employed by the
Company or a Participating Subsidiary, or during the three-month or twelve-month
periods referred to above, his Stock Options may be exercised to the extent that
they were exercisable on the date of cessation of his employment by his estate,
or duly appointed representative, or beneficiary who acquires the Stock Options
by will or by the laws of descent and distribution, but no further installments
of his Stock Options will become exercisable and each of his Stock Options shall
terminate on the first anniversary of the date of his death (but not later than
the specified expiration dates). If a Stock Option is not exercised during the
applicable period, it shall be deemed to have been forfeited and of no further
force or effect.
7.5 Disposition of Forfeited Stock Options Any shares of Common Stock
--------------------------------------
subject to Stock Options forfeited by a Participant shall not thereafter be
eligible for purchase by the Participant, but may be made subject to Stock
Options granted to other Participants.
8. NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall confer upon the Participant the right to
continue in the employ of the Company. or any Participating Subsidiary, nor
shall it interfere in any way with the right of the Company, or any such
Participating Subsidiary, to discharge the Participant at any time for any
reason whatsoever, with or without cause. Nothing in this Article 8 shall affect
any rights or obligations of the Company or any Participant under any written
contract of employment.
9. NO RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder with respect to any
shares of Common Stock subject to a Stock Option. Except as provided in Section
6.2, no adjustment shall be made in the number of shares of Common Stock issued
to a Participant, or in any other rights of the participant upon exercise of a
Stock Option by reason of any dividend, distribution or other right granted to
stockholders for which the record date is prior to the date of exercise of the
Participant's Stock Option.
10. ASSIGNABILITY
No Stock Option granted under this Plan, nor any other rights acquired by
Participant under this Plan, be assignable or transferable by a Participant,
other than by will or the laws of descent and distribution, and Stock Options
issued to a Participant are exercisable during his lifetime only by him.
Notwithstanding the preceding sentence, the Committee may, in its sole
discretion, permit the assignment or offer of an NSO and the exercise thereof by
a person other than a Participant, on such terms and conditions as the Committee
in its sole discretion may determine. Any such terms shall be determined at the
time the NSO is granted, and shall be set forth in the Option Agreement. in the
event of his death, the Stock Option may be exercised by the personal
representative of the Participant's estate or by the successor or successors in
interest determined under the Participant's will or under the applicable laws of
descent and distribution.
11. MERGER OR LIQUIDATION OF THE COMPANY
11.1 If within the duration of a Stock Option there shall be a corporate
merger, consolidation, acquisition of assets, or other reorganization and if
such transaction shall affect the Common Stock, the Participant shall thereafter
be entitled to receive upon the exercise of his Stock Option those shares or
securities that he would have received had the Stock Option been exercised prior
to such transaction and had the Participant been a stockholder of the Company
with respect to such shares.
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11.2 If the Company or its stockholders enter into an agreement to dispose
of all, or substantially all, of the assets or outstanding capital stock of the
Company by means of a sale or liquidation, or a merger or reorganization in
which the Company is not the surviving corporation, the vesting schedule of some
or all Stock Options may, at the sole discretion of the Committee, be
accelerated so that all or any portion of Stock Options outstanding under the
Plan as of the day before the consummation of such sale, liquidation, merger or
reorganization, to the extent not exercised, shall for all purposes under this
Plan become exercisable as of such date.
12. AMENDMENT
The Board of Directors may from time to time alter, amend, suspend or
discontinue the Plan, including, whenever applicable, any modifications or
amendments as it shall deem advisable in order that ISOs will be classified as
incentive stock options under the Code, or in order to conform to any regulation
or to any change in any law or regulation applicable thereto; provided, however,
that no such action shall adversely affect the rights and obligations with
respect to Stock Options at any time outstanding under the Plan; and provided
however that no such action shall, without the approval of the stockholders of
the Company, (i) increase the maximum number of shares of Common Stock that may
be made subject to Stock Options (unless necessary to effect the adjustments
required by Section 6.2), (ii) materially increase the benefits accruing to
Participants under the Plan, or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
13. REGISTRATION OF OPTIONED SHARES
The Stock Options shall not be exercisable unless the purchase of such
optioned shares is pursuant to an applicable effective registration statement
under the Securities Act of 1933, as amended, or unless, in the opinion of
counsel to the Company, the proposed purchase of such optioned shares would be
exempt from the registration requirements of the Securities Act of 1933, as
amended, and from the registration or qualification requirements of applicable
state securities laws. The Company will not be required to issue registered
shares pursuant to the exercise of Stock Options granted under this Plan. Hence,
Stock Option holders may receive shares of restricted Common Stock upon their
exercise of their Stock Options. However, the Company may undertake, in its sole
discretion, to register the Common Stock issued upon the exercise of the Stock
Options pursuant to a registration statement on Form S-8, or equivalent form
that provides for the registration of stock issued pursuant to employee stock
option plans (it being noted that registration utilizing Form S-8 is not
available for the resale of securities by affiliates).
14. WITHHOLDING TAXES
The Company or Participating Subsidiary may take such steps as it may deem
necessary or appropriate for the withholding of any taxes which the Company or
the Participating Subsidiary is required by any law or regulation of any
governmental authority, whether federal, state or local, domestic or foreign to
withhold in connection with any Stock Options.
15. BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into arrangements with one or
more banks, brokers, or other financial institutions to facilitate the
acquisition of shares acquired upon exercise of Stock Options including, without
limitation, arrangements for the simultaneous exercise of Stock Options and the
sale of shares acquired upon exercise.
16. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to
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stockholders of the Company for approval shall be construed as creating any
limitations on the power or authority of the Board of Directors to adopt such
other or additional incentive or other compensation arrangements of whatever
nature as the Board of Directors may deem necessary or desirable or preclude or
limit the continuation of any other plan, practice or arrangement for the
payment of compensation or fringe benefits to employees generally, or to any
class or group of employees, which the Company or any Participating Subsidiary
now has lawfully put into effect, including, without limitation, any retirement,
pension, savings and stock purchase plan, insurance, death and disability
benefits and executive short-term incentive plans.
17. EFFECTIVE DATE
This Plan was adopted by the Board of Directors and became effective on
November 2, 1995 subject to the approval of the Company's stockholders within
twelve (12) months thereafter. No Stock Options shall be granted subsequent to
ten years after the effective date of the Plan. Stock Options outstanding
subsequent to ten years after the effective date of the Plan shall continue to
be governed by the provisions of the Plan.
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IMAGEMATRIX CORPORATION PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD JUNE 8, 1998
The undersigned hereby constitutes, appoints, and authorizes Gerald E.
Henderson and Dennis C. Hefter and each of them, as the true and lawful attorney
and Proxy of the undersigned, with full power of substitution and appointment,
for and in the name, place and stead of the undersigned to act for and vote as
designated below, all of the undersigned's shares of the no par value Common
Stock of ImageMatrix Corporation, a Colorado corporation, at the Annual Meeting
of the Shareholders to be held June 8, 1998, at The Cherry Creek Inn, 600 South
Colorado Boulevard, Denver, Colorado, at 10:00 a.m., and at any and all
adjournments thereof, with respect to the matters set forth below and described
in the Notice of Annual Meeting dated May 11, 1998, receipt of which is hereby
acknowledged.
1. Approval of the election of each of the two nominees named herein for the
office of director to serve a term until the 2001 Annual Meeting of
Shareholders or until their respective successors are elected and qualified.
For all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below)[_] to vote for all listed below [_]
(INSTRUCTION: To withhold authority to vote for any individual nominee
strike a line through the nominee's name in the list below.)
Blair McNea and Jaidev Sugavanam
2. Approval of the amendment of the Company's 1996 Incentive Stock Option Plan
to increase the number of shares reserved to 1,212,500 from 737,500 shares of
the Company's Common Stock for issuance thereunder.
[_] FOR [_] AGAINST [_] ABSTAIN
3. Approval of the selection of Hein + Associates, LLP, independent public
accountants, as auditors of the Company for the fiscal year ending December
31, 1998.
[_] FOR [_] AGAINST [_] ABSTAIN
4. The Proxy is authorized to vote upon any other business as may properly come
before the Annual Meeting or any adjournments thereof.
- --------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF IMAGEMATRIX
CORPORATION
PLEASE SIGN AND RETURN THIS PROXY USING THE ENCLOSED PRE-PAID ENVELOPE.
THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON
IF YOU ATTEND THE MEETING.
The undersigned hereby revokes any Proxies as to said shares heretofore given
by the undersigned, and ratifies and confirms all that said attorney and Proxy
may lawfully do by virtue hereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3. THIS PROXY CONFERS DISCRETIONARY AUTHORITY IN
RESPECT TO MATTERS NOT KNOWN OR DETERMINED AT THE TIME OF THE MAILING OF THE
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS TO THE UNDERSIGNED.
DATED:______________________, 1998 ________________________________
Signature(s) of Shareholder(s)
--------------------------------
Signature(s) of Shareholder(s)
Signature(s) should agree with the
name(s) shown hereon. Executors,
administrators, trustees, guardians
and attorneys should indicate their
capacity when signing. Attorneys
should submit powers of attorney.
When shares are held by joint
tenants, both should sign. If a
corporation, please sign in full
corporate name by President or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
