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 Rule 14a-12.
COLOR IMAGING, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
N/A
--------------------------------------------------------------------------------
(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)(1) 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:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
COLOR IMAGING, INC.
4350 PEACHTREE INDUSTRIAL BOULEVARD
SUITE 100
NORCROSS, GEORGIA 30071
MAY 12, 2003
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Color Imaging, Inc., which will be held at 10:00 a.m., local time, on June 16,
2003, at the Hilton Hotel, Atlanta NE, 5993 Peachtree Industrial Blvd, Norcross,
GA 30092. All holders of Color Imaging's outstanding common stock as of the
close of business on April 21, 2003 are entitled to vote at the annual meeting.
Enclosed is a copy of the Notice of Annual Meeting of Stockholders, proxy
statement and proxy card.
We hope you will be able to attend the annual meeting. Whether or not you
expect to attend, it is important that you complete, sign, date and return the
proxy card in the enclosed envelope in order to make certain that your shares
will be represented at the annual meeting.
Sincerely,
/s/ MORRIS E. VAN ASPEREN
Morris E. Van Asperen
Secretary
COLOR IMAGING, INC.
4350 PEACHTREE INDUSTRIAL BOULEVARD
SUITE 100
NORCROSS, GEORGIA 30071
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 2003
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Color
Imaging, Inc. will be held at 10:00 a.m., local time, on June 16, 2003, at the
Hilton Hotel, Atlanta NE, 5993 Peachtree Industrial Blvd, Norcross, GA 30092,
for the following purposes:
1. To elect seven directors to serve until the next Annual Meeting of
Stockholders or until their respective successors are elected and
qualified.
2. To consider a proposal to approve the Color Imaging 2003 Stock
Incentive Plan.
3. To consider a proposal to ratify the prior grant of options to
employees, officers and directors of Color Imaging.
4. To ratify the selection of Lazar Levine & Felix LLP as Color Imaging's
independent accountants for the year ending December 31, 2003.
5. To transact such other business as may properly come before the annual
meeting or any adjournment thereof.
The board of directors has fixed the close of business on April 21, 2003,
as the record date for the determination of stockholders entitled to notice of
and to vote at the annual meeting and all adjourned meetings thereof.
By Order of the Board of Directors
/s/ MORRIS E. VAN ASPEREN
Morris E. Van Asperen
Secretary
Dated: May 12, 2003
Please Complete, Date, Sign And Return The Enclosed Proxy Card In The Return
Envelope As Promptly As Possible, Whether Or Not You Plan To Attend The Annual
Meeting. If You Later Desire To Revoke Your Proxy For Any Reason, You May Do So
In The Manner Described In The Attached Proxy Statement.
COLOR IMAGING, INC.
4350 PEACHTREE INDUSTRIAL BOULEVARD
SUITE 100
NORCROSS, GEORGIA 30071
PROXY STATEMENT
GENERAL INFORMATION
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the board of directors of Color Imaging, Inc. for use at the
annual meeting of stockholders to be held at 10:00 a.m., local time, on June 16,
2003, at the Hilton Hotel, Atlanta NE, 5993 Peachtree Industrial Blvd, Norcross,
GA 30092, and at any adjournment thereof. When such proxy is properly executed
and returned, the shares it represents will be voted in accordance with any
directions noted thereon. Any stockholder giving a proxy has the power to revoke
it at any time before it is voted by written notice to the Secretary of Color
Imaging or by issuance of a subsequent proxy. In addition, a stockholder
attending the annual meeting may revoke his or her proxy and vote in person if
he or she desires to do so, but attendance at the annual meeting will not of
itself revoke the proxy.
At the close of business on April 21, 2003, the record date for determining
stockholders entitled to notice of and to vote at the annual meeting, Color
Imaging had issued and outstanding 12,925,005 shares of common stock, including
16,672 shares which have been repurchased by Color Imaging and not yet
cancelled. Each share of common stock entitles the holder of record thereof to
one vote, non-cumulative, on any matter coming before the annual meeting. Only
stockholders of record at the close of business on April 21, 2003 are entitled
to notice of and to vote at the annual meeting or any adjournment thereof.
The enclosed Proxy, when properly signed, also confers discretionary
authority with respect to amendments or variations to the matters identified in
the Notice of Annual Meeting and with respect to other matters which may be
properly brought before the annual meeting. At the time of printing this proxy
statement, management of Color Imaging is not aware of any other matters to be
presented for action at the annual meeting. If, however, other matters which are
not now known to the management should properly come before the annual meeting,
the proxies hereby solicited will be exercised on such matters in accordance
with the best judgment of the proxy holders.
Shares represented by executed and unrevoked proxies will be voted in
accordance with the instructions contained therein or, in the absence of such
instructions, in accordance with the recommendations of the board of directors.
Neither abstentions nor broker non-votes will be counted for the purposes of
determining whether any of the proposals have been approved by the stockholders
of Color Imaging, although they will be counted for purposes of determining the
presence of a quorum.
Color Imaging will pay the expenses of soliciting proxies for the annual
meeting, including the cost of preparing, assembling, and mailing the proxy
solicitation materials. Proxies may be solicited personally, by mail, by telex,
or by telephone, by directors, officers, and regular employees of Color Imaging
who will not be additionally compensated therefor. It is anticipated that this
proxy statement and accompanying proxy card will be mailed on or about May 12,
2003 to all stockholders entitled to vote at the annual meeting.
Nominees for election as directors will be elected by a majority of the
votes cast by the holders of shares entitled to vote in the election. It is
expected that shares beneficially owned by current executive officers, directors
and affiliates of Color Imaging, which in the aggregate represent approximately
39.7 percent of the outstanding shares of common stock, will be voted in favor
of management's nominees for director.
The affirmative vote of holders of a majority of the outstanding shares of
common stock of Color Imaging entitled to vote and present in person or by proxy
at the annual meeting is required for approval of the Stock Incentive Plan, for
the ratification of the options granted to employees, officers and directors and
for the ratification of Lazar Levine & Felix LLP as Color Imaging's independent
accountants. It is expected that shares beneficially owned by current executive
officers, directors and affiliates of Color Imaging, which in the aggregate
represent approximately 39.7 percent of the outstanding shares of common stock,
will be voted in favor of management's nominees for director, for approval of
the Stock Incentive Plan, for ratification of the options granted to employees,
1
officers and directors and for ratification of Lazar Levine & Felix LLP as Color
Imaging's independent accountants. With respect to the election of directors,
abstentions, votes "withheld" and broker non-votes will be disregarded and will
have no effect on the outcome of the vote. Abstentions and votes "withheld" will
have the effect of a vote against the proposal to approve the Stock Incentive
Plan, the proposal to ratify the grant of options to employees, officers and
directors and the proposal to ratify Lazar Levine & Felix LLP as Color Imaging's
independent accounts and broker non-votes will be disregarded and will have no
effect on the outcome of the votes. There are no rights of appraisal or similar
dissenters' rights with respect to any matter to be acted upon pursuant to this
proxy statement.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The board of directors of Color Imaging recommends a vote FOR the election
of each of the nominees named below for election as director, FOR the proposal
to approve the Stock Incentive Plan, FOR the proposal to ratify the prior grant
of options to employees, officers and directors and FOR the ratification of
Lazar Levine & Felix, LLP as Color Imaging's independent accountants.
ELECTION OF DIRECTORS
The proxy holders intend to vote "FOR" election of the nominees named
below, who are currently members of the board, as directors of Color Imaging,
unless otherwise specified in the proxy. Directors of Color Imaging elected at
the annual meeting to be held on June 16, 2003 will hold office until the next
annual meeting or until their successors are elected and qualified.
Each of the director nominees below has consented to serve on the board of
directors, if elected. Should any nominee for the office of director become
unable to accept nomination or election, which is not anticipated, it is the
intention of the persons named in the proxy, unless otherwise specifically
instructed in the proxy, to vote for the election of such other person as the
board may recommend.
The individuals listed below as nominees for the board of directors were
directors of Color Imaging during 2002, except Yi Jen Wang and Richard S.
Eiswirth. Ms. Wang and Mr. Eiswirth were each elected to the board in March
2003. Effective September 30, 2002, Michael W. Brennan, Edwin C. St. Amour,
Robert L. Langsam and Victor A. Hollander, each a director of Color Imaging
resigned from the board of directors in connection with the divestiture of
Logical Imaging Solutions. Charles R. Allison is scheduled to retire this year,
and as a result is not standing for re-election to the board of directors. The
name and age of each nominee, and the period during which such person has served
as a director, is set forth below:
SERVED AS
NAME AGE DIRECTOR SINCE POSITION
---------------------------------- ------- --------------------- -------------------------------------------------
Jui-Hung Wang 56 June 2001 Director and Chairman of the Board
Sueling Wang, PhD 50 June 2000 President and Vice Chairman of the Board
Morris E. Van Asperen 59 June 2000 Executive Vice President, Chief Financial
Officer, Secretary and Director
Yi Jen Wang 26 April 2003 Assistant Vice President and Director
Jui-Chi Wang 46 June 2000 Director
Jui-Kung Wang 59 September 2001 Director
Richard S. Eiswirth 34 April 2003 Director
JUI-HUNG (JACK) WANG, Chairman since June 2002, has served as a director of
Color Imaging since June 2001. He was a founder and director of Color Image,
Inc. until its merger with Color Imaging. He is a founder and serves as Chairman
of General Plastic Industrial Co., Ltd, a leading Taiwan based manufacturer of
after market injection molded cartridges and accessories for copiers and laser
printers. Since January 2001, Mr. Wang has served as a director of Taiwan Yu-Tzu
Company, a food company. In 1998, Mr. Wang was a founding member of Kings
2
Brothers LLC, which leases space to Color Imaging used for our headquarters and
manufacturing facilities in Norcross, Georgia. From 1986 to 1994, Mr. Wang was
mayor of Wu-Chi Town, Taiwan.
SUELING WANG, PHD., became President and Vice-Chairman of Color Imaging in June
2000. From 1989 to 2000, he served as President and director of Color Image,
Inc. which was merged with Color Imaging. Dr. Wang was also a founder of Color
Image Inc. In 1998, Dr. Wang was a founding member of Kings Brothers LLC, which
leases space to Color Imaging used for our headquarters and manufacturing
facilities in Norcross, Georgia. Dr. Wang received a M.S. degree from the
University of Windsor, in Ontario, Canada and a PhD degree from the University
of Detroit. Dr. Wang's expertise in resin synthesis brought him into the toner
industry and led to the formation of Color Image, Inc. in 1989.
MORRIS E. VAN ASPEREN has served as Executive Vice President, Chief Financial
Officer and director of Color Imaging since June 2000 and Secretary since June
2001. Since 1998, he has served as director of Logical Imaging Solutions. From
1986 to 2000, he was employed by National Bank of California in various
positions most recently as Executive Vice President and Credit Administrator.
Mr. Van Asperen also has extensive experience as a financial and management
consultant to businesses of up to $50 million in revenues and 1,000 employees in
construction, household goods, industrial glass, and electronics manufacturing
and software development. From 1977 to 1984, he served as Vice President & Chief
Financial Officer of ATE Associates, Inc., a supplier of test fixtures and
software for numerous military aircraft programs. Mr. Van Asperen received a
B.S. degree in Mathematics from the University of Oklahoma and an M.B.A. degree
from Pepperdine University.
YI JEN WANG has served as a director since April 2003 and as Assistant Vice
President and Purchasing Manager of Color Imaging since February 2003. Prior to
that Ms. Wang attended the University of San Francisco, where she is currently a
2004 graduate candidate for an MBA. From October 2000 to June 2001, Ms. Wang
served as a property manager for Kings Brothers LLC. From June 1998 to August
2000, Ms. Wang served as controller for GPI-USA, Inc. until it discontinued its
warehouse and marketing activities in the United States. From January 1997 to
May 1998, Ms. Wang was a sales representative assistant for our affiliate
General Plastic Industrial Co Ltd, Taiwan, R.O.C. Ms. Wang received a Bachelor
of Arts degree in June 1998 from Providence University, Taiwan, R.O.C.
JUI-CHI (JERRY) WANG has served as a director of Color Imaging since June 2000.
From 1994 until 2000, he served as a director of Color Image, Inc., which was
merged with Color Imaging. Since 1984, Mr. Wang has served as President of
General Plastic Industrial Co. Ltd (GPI), a Taiwan-based plastics manufacturer
specializing in injection moldings and more particularly toner cartridges and
accessories for copiers and laser printers. In 1998, Mr. Wang was a founding
member of Kings Brothers LLC, which leases space to Color Imaging used for our
headquarters and manufacturing facilities in Norcross, Georgia. Mr. Wang
received a Master's Degree in Computer Engineering from the University of
Southern California.
JUI-KUNG (ELMER) WANG has served as a director of Color Imaging since September
2001. He was a founder of Color Image, Inc. in 1989 and its Chairman until its
merger with Color Imaging. He is a co-founder and has served as a director of
General Plastic Industrial Co., Ltd, a leading Taiwan based manufacturer of
after market injection molded cartridges and accessories for copiers and laser
printers since 1978. In 1998 Mr. Wang was a founding member of Kings Brothers
LLC, which leases space to Color Imaging we use for our headquarters and
manufacturing facilities in Norcross, Georgia. Mr. Wang has been a professor of
management with Tung-Hai University, Taiwan for over 20 years. He has received a
bachelor's degree in economics, and MBA and PhD degrees in management.
RICHARD S. EISWIRTH has served as a director since April 2003. Mr. Eiswirth has
been a Director of Color Imaging since April 2003 and is Chairman of the Audit
Committee. Since April 2002 he has been involved in capital raising efforts for
several start up technology services. From August 1999 to April 2002, he was
Senior Executive Vice President and Chief Financial Officer of Netzee, Inc., a
publicly owned affiliate of The Intercept Group. Mr. Eiswirth was responsible
for the initial public offering and the identification, evaluation and
negotiation of ten acquisitions that fortified Netzee's product offerings.
Additionally, he facilitated the disposition of three operating units during the
company's restructuring. He has extensive experience in managing investment
bankers, brokers, attorneys, and accountants. For nine years prior to joining
Netzee, Mr. Eiswirth worked for Arthur Andersen LLP, where he was a senior
manager. In this capacity he provided audit, accounting, due diligence, merger
and acquisition, and consulting services to a variety of industries including
real estate, technology, banking, insurance and financial services. A certified
public accountant (CPA), Eiswirth graduated cum laude from Wake Forest
University in 1991 with a Bachelor of Arts degree in accounting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF
EACH OF THE ABOVE-NAMED DIRECTOR NOMINEES.
3
INFORMATION ABOUT THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
MEETINGS OF THE BOARD OF DIRECTORS
There were five (5) meetings of the board of directors during 2002. Each
incumbent director who was a director during 2002 attended 75 percent or more of
the aggregate of all meetings of the board of directors and any committees on
which that director served.
DIRECTOR COMPENSATION
Each of Color Imaging's non-employee directors receives fees of $1,000.00
per board meeting physically attended and $500.00 for other meetings of the
board of directors. During 2003, each director who is a member of the Audit
Committee will receive $500.00 for each meeting of the Audit Committee attended.
In addition, each director is reimbursed for certain out-of-pocket expenses
incurred in connection with attendance at board and committee meetings. Each of
Color Imaging's nonemployee directors, on the date they are first elected or
appointed to the board, receives a grant of non-qualified stock options to
purchase 25,000 shares of Color Imaging's common stock at the fair market value
of the common stock on the date of grant. The directors' options vest in equal
annual installments over a five year period.
AUDIT COMMITTEE
The Audit Committee makes recommendations for selection of Color Imaging's
independent public accountants, reviews with the independent public accountants
the plans and results of the audit engagement, approves professional services
provided by the independent public accountants, reviews the independence of the
independent public accountants, considers the range of audit and any non-audit
fees, and reviews the adequacy of Color Imaging's internal accounting controls
and financial management practices. During 2002, the Audit Committee consisted
of Messrs. Victor A. Hollander, CPA, Robert L. Langsam and Edwin C. St. Amour.
There were two (3) meetings of the Audit Committee, prior to its
responsibilities being returned to the board of directors on September 30, 2002,
the date the directors making up the Audit Committee resigned from the board in
connection with the divestiture of the Logical Imaging Solutions. Each incumbent
member who was a member during 2002 attended 75 percent or more of the aggregate
of all meetings of the Audit Committee.
The board of directors nominates and appoints the members of the Audit
Committee.
NOMINATING AND COMPENSATION COMMITTEES
The board of directors acts as the nominating and compensation committees
of Color Imaging.
Notwithstanding anything to the contrary that is or may be set forth in any
of Color Imaging's filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate Color Imaging filings, including
this proxy statement, in whole or in part, the following Reports and the
Performance Graph, shall not be incorporated by reference into any such filings.
4
REPORT OF AUDIT COMMITTEE
Color Imaging had an Audit Committee (the "Committee") composed entirely of
non-management directors, until the divestiture of Logical Imaging Solutions,
Inc. on September 30, 2002, and thereafter the oversight responsibility,
authority and specific duties of the Committee have been performed by the board
in accordance with the Audit Committee Charter of Color Imaging. The members of
the Committee, prior to September 30, 2002, met the independence and experience
requirements of the NASD. The Committee met with Lazar Levine & Felix LLP, the
independent auditors, and management prior to issuance of Color Imaging's annual
report on Form 10-K for the year ending December 31, 2002. In 2002, the
Committee adopted an amended charter, and the board of directors approved the
amended charter, outlining the practices it follows. A copy of the Committee
charter, as amended, is attached as Appendix A to this Proxy Statement.
The Committee recommended to the board of directors the engagement of Lazar
Levine & Felix LLP as Color Imaging's independent auditors and reviewed with
Color Imaging's financial managers and the independent auditors overall audit
scope and plans, the results of internal and external audit examinations,
evaluations by the auditors of Color Imaging's internal controls, and the
quality of Color Imaging's financial reporting.
The Committee has reviewed and discussed with management the audited
financial statements in the Annual Report, including a discussion of the
quality, not just the acceptability, of the accounting principles, the
reasonableness of significant judgments, and the clarity of disclosures in the
financial statements. In addressing the quality of management's accounting
judgments, members of the Audit Committee asked for management's representations
that the audited consolidated financial statements of Color Imaging have been
prepared in conformity with generally accepted accounting principles and have
expressed to both management and the independent auditors their general
preference for conservative policies when a range of accounting options is
available.
In its meetings with representatives of Lazar Levine & Felix LLP, the
independent auditors, the Committee asks them to address, and discuss their
responses to, several questions that the Committee believes are particularly
relevant to its oversight. These questions include:
- Are there any significant accounting judgments made by management in
preparing the financial statements that would have been made
differently had the independent auditors themselves prepared and been
responsible for the financial statements?
- Based on the independent auditors' experience and their knowledge of
Color Imaging, do Color Imaging's financial statements fairly present
to investors, with clarity and completeness, Color Imaging's financial
position and performance for the reporting period in accordance with
generally accepted accounting principles and SEC disclosure
requirements?
- Based on the independent auditors' experience and their knowledge of
Color Imaging, has Color Imaging implemented internal controls and
internal audit procedures that are appropriate for Color Imaging?
The Committee believes that by thus focusing its discussions with the
independent auditors, it can promote a meaningful dialogue that provides a basis
for its oversight judgments.
The Committee discussed with Lazar Levine & Felix LLP, the independent
auditors, the matters required to be discussed by Statement on Auditing
Standards No. 61, Communication with Audit Committees, as amended by the
Auditing Standards Board of the American Institute of Certified Public
Accountants. The Committee also received and reviewed the written disclosures
and the letter from the independent auditors required by Independence Standards
Board Standard No. 1, Independence Discussions with Audit committees, by the
Independence Standards Board, and have discussed the auditors' independence.
In performing all of these functions, the Audit Committee acts only in an
oversight capacity. The Committee, in its oversight role, necessarily relies on
the work and assurances of Color Imaging's management, which has the primary
responsibility for financial statements and reports, and of the independent
auditors, who, in their report, express an opinion on the conformity of Color
Imaging's annual financial statements to generally accepted accounting
principles.
5
In reliance on these reviews and discussions, and the report of Lazar
Levine & Felix LLP, the independent auditors, the Audit Committee recommended to
the board of directors, and the board approved, that the audited financial
statements be included in Color Imaging's Annual Report on Form 10-K for the
year ended December 31, 2002, for filing with the Securities and Exchange
Commission.
FEES PAID TO COLOR IMAGING'S INDEPENDENT AUDITORS
Color Imaging incurred the following fees for services performed by Lazar
Levine & Felix LLP:
Audit Fees
The aggregated fees for professional services rendered for each of the
fiscal years 2002 and 2001 for the audit of Color Imaging's annual financial
statements and limited reviews of financial statements included in Forms 10-Q
were approximately $85,900 and $78,300, respectively.
Audit-Related Fees
There were no fees for professional services rendered for each of the
fiscal years 2002 and 2001 for assurance and related services that have not been
reported as Audit Fees.
Tax Fees
The aggregate fees for all professional services related to tax services
and the filing of Federal and state income tax returns during fiscal years 2002
and 2001 was approximately $12,000 and $12,500 in connection with Color
Imaging's tax returns for fiscal years 2001 and 2000, respectively.
All Other Fees
Aggregate fees billed for all other professional services for the fiscal
years 2002 and 2001 were approximately $24,100 and $19,300, respectively, and
were for professional services in connection with Color Imaging's registration
statement filed with the SEC on Form SB-2 and due diligence in connection with a
prospective acquisition which was not completed.
The Audit Committee has determined that the payments made to its
independent accountants for non-audit services for 2002 and 2001 are compatible
with maintaining such auditors' independence.
AUDIT COMMITTEE'S PRE-APPROVAL POLICES AND PROCEDURES
The Committee has the sole authority to appoint or replace, compensate, and
oversee the work of any independent auditor, who must be, when required, a
registered firm as defined by law, whose purpose is the preparation or issuance
of an audit report or related work. The independent auditor's reports and other
communications are to be delivered directly to the Committee, and the Committee
is responsible for the resolution of disagreements between management and the
independent auditor regarding financial reporting.
The Committee pre-approves all audit and non-audit services and all
engagement fees and terms in connection therewith, except as otherwise permitted
by regulation or the exchange.
The fees for professional services other than Audit Fees, in aggregate, for
2002 and 2001 were approximately $67,900, of which the Committee approved 60%.
All of the hours expended on the principal accountant's engagement to audit the
financial statements of Color Imaging for the year 2002 were attributable to
work performed by full-time, permanent employees of the principal accountant.
Management is responsible for planning Color Imaging's financial reporting
process and compliance of the consolidated financial statements with generally
accepted accounting principles. Color Imaging's independent auditors are
responsible for auditing those financial statements. The Audit Committee
necessarily must rely, without independent verification, on (a) management's
representation that the financial statements have been prepared with integrity
and objectivity and in conformity with accounting principles generally accepted
in the United States of America, and (b) on the representations of the
independent auditors included in their report on Color Imaging's financial
statements.
6
AUDIT COMMITTEE:
Jui-Hung Wang, Chairman
Jui-Kung Wang
Sueling Wang
Jui-Chi Wang
Morris E. Van Asperen
Charles R. Allison
7
REPORT OF THE BOARD OF DIRECTORS ON
EXECUTIVE COMPENSATION
OVERVIEW
During the year ended 2002, the board of directors held primary
responsibility for determining the compensation for Sueling Wang, vice chairman
of the board and president, principal executive officer, and the stock based
incentives for all the Named Executives. The compensation committee is comprised
of Color Imaging's board of directors over whose name this report is also
presented.
Color Imaging is engaged in a highly competitive industry. The actions of
the executive officers have a profound impact on the short-term and long-term
profitability of Color Imaging; therefore, the design of the executive officer
compensation package is very important. In order to retain key employees, Color
Imaging has an executive compensation package that is driven by an increase in
shareholder value, the overall performance of Color Imaging, and the individual
performance of the executive. The measures of Color Imaging's performance
include revenue growth, pretax profit achievement, and pretax profit improvement
over the past year.
Pursuant to the above compensation philosophy, the three main components of
the executive compensation package are base salary, a cash incentive plan, and
stock-based incentive plans.
BASE SALARY
The factors subjectively used in determining base salary include the recent
profit performance of Color Imaging, the magnitude of responsibilities, the
scope of the position, individual and overall departmental performance
improvements, and the salary received by peers in similar positions in the same
geographic area. These factors are not used in any specific formula or
weighting. The salaries of the Named Executives are reviewed annually. Further,
in connection with the divestiture of Logical Imaging Solutions, Inc. in
September 2002, the responsibilities of the Vice Chairman and President, and
certain of the other Named Executives were reassessed and their compensation
packages were restructured. Increases in base salaries for the Named Executives
are set at a minimum of 5% per annum pursuant to their employment agreements.
However, for the year ended 2002, the Named Executives base salary increases
ranged from zero to up to two and one-half percent.
CASH BASED INCENTIVE PLANS
Color Imaging does not have an annual cash based incentive compensation
package for the Named Executives, and instead Color Imaging utilizes
discretionary annual bonuses based upon performance objectives for the ensuing
fiscal year. The Named Executives participate in a performance bonus plan
designed to encourage achievement of short-term objectives. The plan's payouts
are subjectively based on net income, budget objectives, and other individual
specific performance objectives. The specific performance objectives relate to
each executive improving the contribution of his functional area of
responsibility to further enhance the earnings of Color Imaging. These
performance objectives and incentive packages are then reviewed by the board of
directors and either accepted, amended, or modified. There were no discretionary
annual bonuses approved by Color Imaging or paid to any of the Named Executives
during 2002.
STOCK BASED INCENTIVE PLANS
During the fiscal year 2002, the Named Executives were not granted any
stock options or other stock incentives. The grant of awards is purely
discretionary, and are not based on any specific formula and may or may not be
granted in any given fiscal year. The board of directors gives consideration to
the overall performance of Color Imaging and the performance of individual
employees.
8
CHIEF EXECUTIVE OFFICER COMPENSATION
Color Imaging's principal executive officer's, compensation is determined
by the board of directors. For year ended 2002, the cash compensation of Sueling
Wang, Vice Chairman and President, was $158,439, none of which was cash based
incentive compensation. This represents the total compensation for Mr. Wang, no
portion of which was in stock based incentive plans. The President's
compensation is based upon the long-term growth in net income, stockholder value
improvements and the President's individual performance. The decision of the
board of directors is subjective and is not based upon any specific formula or
guidelines. The President does not consult with the board when his compensation
is determined and voluntarily accepts amendments to his employment agreement as
required.
COMPENSATION COMMITTEE
Jui-Hung Wang
Sueling Wang
Morris E. Van Asperen
Charles R. Allison
Jui-Hung Wang
Jui-Chi Wang
9
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the compensation earned
by our chief executive officers and the two other most highly compensated
executive officers who were serving as such as of December 31, 2002, 2001, and
2000 (collectively, the Named Executive Officers), whose aggregate compensation
for fiscal years 2002, 2001 and 2000 exceeded $100,000 for services rendered in
all capacities to Color Imaging and its subsidiaries for that fiscal year.
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ----------------
SECURITIES
UNDERLYING ALL OTHER
NAME YEAR SALARY OPTIONS(#) COMPENSATION (1)
---------------------------------------- --------------- -------------- ---------------- -------------------
Dr. Sueling Wang (10) 2002 $ 158,439 --- $ 38,736 (2)
President & Chief Operating Officer 2001 $ 158,423 100,000 (6) $ 22,313 (2)
2000 $ 149,159 200,000 (7) $ 18,887 (2)
Michael W. Brennan (11) 2002 $ 157,500 --- $ 6,889
2001 $ 151,442 150,000 (6) $ 6,403
2000 $ 146,485 --- $ 25,591 (3)
Morris E. Van Asperen 2002 $ 151,200 --- $ 14,353 (4)
Executive Vice President 2001 $ 146,714 100,000 (6) $ 5,461
Chief Financial Officer & Secretary 2000 $ 54,294 200,000 (8) $ ---
Charles R. Allison 2002 $ 103,028 --- $ 27,321 (5)
Vice President, Marketing & Sales 2001 $ 106,379 50,000 (6) $ 28,145 (5)
2000 $ 101,996 50,000 (9) $ 25,902 (5)
---------------
(1) For named executive officers the amount reported represents the cost of
group insurance benefits, Color Imaging's matching contribution to the
401(k) plan for the officer and other life insurance policies maintained
for him, as further described in the notes for each officer, respectively.
(2) The split dollar life insurance premiums were $22,773, $13,526 and $8,253
during 2002, 2001 and 2000, respectively. Pursuant to the policies Color
Imaging will, upon his death or earlier liquidation of each such policy, be
entitled to the refund of all premium payments made by Color Imaging on the
policies, and the balance of the proceeds will be paid to Mr. Wang's
designated beneficiaries.
(3) The split dollar life insurance policy is no longer in force. Premiums paid
during 2000 were $15,584.
(4) The life insurance premiums reimbursed by Color Imaging in 2002, 2001 and
2000 was $6,446, $0 and $0, respectively.
(5) The life insurance premiums paid by Color Imaging in 2002, 2001 and 2000
were $20,882, $21,977 and $22,476, respectively. Color Imaging owns and is
the beneficiary of this policy and maintains it to fund the deferred
compensation agreement with Mr. Allison. Upon Mr. Allison's retirement, he,
or his beneficiaries, are to receive 120 monthly payments of $2,500 per
month or, as provided, the net present value of any unpaid amounts.
(6) Options granted by action of the board of directors on March 21, 2001. 25%
vest upon grant and the balance vest 25% per year upon each anniversary of
the date of grant. The options expire five years after their respective
vesting date(s). As the result of Mr. Brennan's termination effective
September 30, 2002, with the divestiture of Logical Imaging Solutions by
Color Imaging, Mr. Brennan's options lapsed without exercise on December
31, 2002.
(7) The options were granted as part of the officer's employment agreement on
June 28, 2000. 100,000 vested immediately and the remainder vested ratably
over the next two years upon the anniversary date of the grant.
(8) The options were granted as part of the officer's employment agreement on
June 28, 2000. 100,000 vested immediately and the remainder vested ratably
over the next four years upon the anniversary date of the grant. Mr. Van
Asperen joined Color Imaging as Executive Vice President in August 2001.
(9) The options were granted as part of the officer's employment agreement on
June 28, 2000. 25,000 vested immediately and the remainder vested ratably
over the next two years upon the anniversary date of the grant.
(10) As a result of Mr. Brennan's resignation, Dr. Wang is the principal
executive officer of Color Imaging, and continues to serve as President and
Vice Chairman of the Color Imaging, Inc.
10
(11) On June 10, 2002, Mr. Brennan was replaced as Chairman and Chief Executive
Officer of Color Imaging, Inc. On September 10, 2002, Mr. Brennan resigned
from the board of directors, and as of September 30, 2002, he is no longer
an employee.
OPTION GRANTS TABLE
No options were granted to the Named Executive Officers during the year
ended December 31, 2002.
OPTION EXERCISES AND YEAR-END VALUE TABLE
None of the Named Executive Officers exercised stock options during 2002.
The following table sets forth certain information regarding unexercised options
held at year-end by each of the Named Executive Officers.
AGGREGATED OPTION EXERCISES IN 2002 AND OPTION VALUES AT DECEMBER 31, 2002
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED
OPTIONS
-----------------------------------
SHARES
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE
--------------------------- ------------- --------------- --------------- ----------------
Sueling Wang 0 0 250,000 50,000
Michael W. Brennan (1) 0 0 0 0
Morris E. Van Asperen 0 0 200,000 100,000
Charles R. Allison 0 0 75,000 25,000
----------------------
(1) Mr. Brennan's options lapsed without having been exercised, on December 31,
2002, as the result of the termination of his employment with Color Imaging
on September 30, 2002.
Based on the closing price of our common stock of $1.20 on December 31, 2002. No
unexercised options were in the money for the Named Executive Officers.
EMPLOYMENT AGREEMENTS
On June 28, 2000, Color Imaging entered into employment agreements with its
president, executive vice president and chief financial officer and vice
president of marketing and sales. All three of the employment agreements have a
5 year term. On December 27, 2002, the employment agreement with Color Imaging's
vice president of marketing and sales was cancelled. Color Imaging is obligated
to pay its president an annual salary of $150,000 with a guaranteed increase of
5% per annum over the term of the agreements. Color Imaging is obligated to pay
its chief financial officer an annual salary of $144,000 with a guaranteed
increase of 5% over the term of his agreement. Both the president and the chief
financial officer voluntarily waived the contractual 5% increase during the
fiscal year 2001. Both the president and the chief financial officer may
terminate the agreement upon 6 months notice to Color Imaging. Color Imaging may
terminate the president's or executive vice president and chief financial
officer's employment with Color Imaging upon 6 months notice; provided, however,
that Color Imaging is obligated to pay to the employee their respective annual
base salary, commissions or bonuses earned, and benefits for a period of 12
months after the date of such notice.
The employment agreements with the above named officers also commits Color
Imaging to purchasing for their benefit certain life insurance plans. Color
Imaging pays the premiums and is the collateral assignee of four split dollar
life insurance policies owned by the president. Pursuant to the policies Color
Imaging will, upon his death or earlier liquidation of each such policy, be
entitled to the refund of all premium payments made by Color Imaging on the
policies, and the balance of the proceeds will be paid to the president's
designated beneficiaries. The split dollar life insurance premiums were $22,773,
$13,526 and $8,253 during 2002, 2001 and 2000, respectively. The monies due from
its president in connection with these life insurance policies at the years
ended December 31, 2002, 2001 and 2000 was $134,877, $112,103 and $98,578,
11
respectively. Color Imaging did not have in place for its executive vice
president and chief financial officer until the year 2002 such supplemental life
insurance plan. During the year ended December 31, 2002, Color Imaging
reimbursed the executive vice president and chief financial officer $6,446 for
insurances premiums paid by the officer. Color Imaging owns and is the
beneficiary of a life insurance policy on its vice president marketing and sales
under a Salary Continuation and Deferred Compensation agreement ("SCDC
Agreement") entered into on May 1, 1998. The SCDC Agreement was modified on
December 27, 2002, changing the retirement date of the Vice President Marketing
and Sales from February 1, 2003 to December 31, 2003. Color Imaging maintains it
to fund the deferred compensation agreement with the officer. Upon the officer's
retirement, he, or his beneficiaries, are to receive 120 monthly payments of
$2,500 per month or, as provided, the net present value of any unpaid amounts.
The life insurance premiums paid by Color Imaging to fund the deferred
compensation agreement in 2002, 2001 and 2000 were $20,882, $21,977 and $11,238,
respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Directors Jui-Hung Wang, Jui-Kung Wang, Sueling Wang and Jui-Chi Wang, own Kings
Brothers, LLC, the landlord from which we lease our Norcross, Georgia plant. For
the three months ended March 31, 2003, and twelve months ended December 31,
2002, 2001 and 2000 we paid Kings Brothers LLC $132,861, $518,484, $505,836 and
$186,427, respectively, in lease payments. The lease was made on April 1, 1999,
and upon unanimous approval of the board of directors and the disinterested
members of the board of directors, it was amended February 5, 2003, to extend
its expiration from March 31, 2009 to March 31, 2013.
On November 19, 2001, we borrowed $200,000 on an unsecured basis from Kings
Brothers LLC. The revolving loan bears interest at the rate of 9% per annum,
matured on November 18, 2002 and is evidenced in writing. We paid the principal
and interest outstanding on December 10, 2001, paying $790.38 in total interest
to Kings Brothers. We borrowed this amount for general corporate purposes,
including working capital. On March 20, 2002 the revolving loan arrangement was
cancelled.
On June 1, 1999, the Development Authority of Gwinnett County, Georgia issued
$4,100,000 of industrial development revenue bonds on behalf of us and Kings
Brothers LLC. Pursuant to a certain joint debtor agreement we are jointly and
severally liable with Kings Brothers to pay the amounts borrowed under the bond.
The 3.5% revenue bonds are payable in varying annual principal and monthly
interest payments through July 2019. The bonds are collateralized by all of our
assets and the real property leased by us and owned by Kings Brothers. The
majority of the proceeds $3,125,872 from the bond issue were used by us to
relocate our manufacturing plant, make leasehold improvements at the new
facility and to purchase certain manufacturing equipment. The remaining proceeds
$974,128 were used by Kings Brothers to pay down the mortgage on its real
property, some of which is leased to us. The proceeds used by Kings Brothers
have been recorded as a receivable on our financial statements. We entered into
a Joint Debtor Agreement with Kings Brothers LLC concerning their rights, duties
and obligations in connection with the bonds. Kings Brothers and we,
collectively, are obligated to repay any outstanding debt under the bonds.
Amounts receivable from Kings Brothers are secured by a lien on all of Kings
Brothers' real estate, including the part we lease from them, and by personal
guarantees by the members of Kings Brothers. Principal due and paid by Kings
Brothers for the three months ended March 31, 2003, and for the twelve months
ended December 31, 2002, 2001 and 2000 was $0, $79,596, $76,032 and $0,
respectively. Interest due and paid by Kings Brothers for the three months ended
March 31, 2003, and for the twelve months ended December 31, 2002, 2001 and 2000
was $2,762, $14,612, $30,368 and $22,255, respectively. As of March 31, 2003 and
December 31, 2002, the principal outstanding was $3,445,000 and the portion due
to us from Kings Brothers was $818,500.
Directors Jui-Hung Wang, Jui-Kung Wang, Jui-Chi Wang, are owners in and
Chairman, Auditor and President, respectively, of General Plastic Industrial
Co., LTD (GPI), a Taiwanese manufacturer of injection molded cartridges and
accessories for copiers and laser printers. GPI also owned and operated GPI-USA,
Inc. (GPI-USA) a wholly-owned United States distributor of GPI's products. For
the three months ended March 31, 2003, and for the twelve months ended December
31, 2002 and 2001 we purchased $452,524, $2,148,279 and $2,061,683,
respectively, of injected molded products from GPI. In 2000, we purchased from
GPI and GPI-USA $268,966 and $166,526, respectively, of copier and laser printer
products.
On March 14, 2002, we borrowed $500,000 from director Sueling Wang on an
unsecured basis. The interest rate on the loan was 12% per annum, matured on
March 14, 2003 and is evidenced in writing. On September 2, 2002, we entered
into a modification agreement with Sueling Wang to change the terms of the note,
extending the term to March 1, 2005, providing for a $100,000 principal payment,
decreasing the interest rate to 6% per annum, providing for interest only
12
payments through February 28, 2003, and providing for 24 monthly payments of
principal and interest beginning on April 1, 2003, in the amount of $17,735.67.
We borrowed the $500,000 amount to meet a supplier commitment for product. For
the three months ended March 31, 2003, and the twelve months ended December 31,
2002, interest paid on the note was $7,962 and $36,296, respectively. As of
March 31, 2003, after prepaying principal on the note by $120,000 on February
20, 2003, $100,000 on February 27, 2003, and after making on March 26, 2003, the
principal payment of $7,500 due on April 1, 2003, the principal outstanding was
$172,500. As of December 31, 2002, the principal outstanding was $400,000.
On August 21, 2002, we borrowed $100,000 from director Jui-Chi Wang on an
unsecured basis. The loan bears interest at the rate of 6% per annum, matures on
March 1, 2005 and is evidenced in writing. We borrowed this amount in order to
repay $100,000 borrowed from director Sueling Wang on March 14, 2002. The note
is interest only through February 28, 2003, and then is fully amortizing over 24
months with principal and interest payments payable monthly beginning April 1,
2003 in the amount of $4,434. For the three months ended March 31, 2003, the
interest paid was $1,496. As of March 31, 2003, after having made on March 26,
2003, the principal payment of $3,908 due April 1, 2003, the principal
outstanding was $96,092. As of December 31, 2002, the interest accrued and paid
on the note was $2,170, and $100,000 was the outstanding principal balance.
On August 21 and September 2, 2002, we borrowed $200,000 and $300,000,
respectively, from director Jui-Hung Wang on an unsecured basis. The loan bears
interest at the rate of 6% per annum, matures on March 1, 2005 and is evidenced
in writing. We borrowed this amount in order to make a principal payment due on
our industrial development bond in the approximate amount of $255,000, for the
acquisition of capital equipment in the approximate of $125,000 and for general
corporate purposes. The note is interest only through February 28, 2003, and
then is fully amortizing over 24 months with principal and interest payments
payable monthly beginning April 1, 2003 in the amount of $22,169.60. For the
three months ended March 31, 2003, the interest paid was $7,479. As of March 31,
2003, after having made on March 26, 2003, the principal payment of $19,539 due
on April 1, 2003, the principal outstanding was $480,461. As of December 31,
2002, interest accrued and paid on the note was $10,259, and the principal
balance was $500,000.
Directors Jui-Chi Wang and Jui-Hung Wang purchased 350,000 and 50,000 Units
(each Unit consisted of one share of common stock and a warrant to purchase one
share of common stock at an exercise price of $2.00 per share) for $700,000 and
$100,000, including promissory notes, respectively. Jui-Chi Wang's $700,000
recourse promissory note without interest was made on December 1, 2001, due
December 31, 2001 and paid in full on December 18, 2001. Jui-Hung Wang's $99,500
recourse promissory note without interest was made on December 24, 2001, due
April 1, 2002 and paid in full on January 30, 2002. The terms of the notes were
consistent with the terms of notes of third parties who purchased Units in the
private placement from Color Imaging.
We believe that the terms of the loans and borrowings from affiliates were on
terms more favorable than were otherwise available from third parties.
On September 11, 2002, we entered into a share exchange agreement with four of
our directors, Messrs. Brennan, St. Amour, Langsam and Hollander, whereby a new
company, Digital Color Print, Inc., owned by them, acquired the capital stock of
our wholly owned subsidiary, Logical Imaging Solutions, in exchange for
approximately 1.6 million shares of the our common stock. On September 20, 2002,
we entered into an amendment to the share exchange agreement pursuant to which
the number of shares of the our common stock to be exchanged for the capital
stock of Logical Imaging Solutions was increased from 1.6 million to 1.7 million
and a requirement was added that Logical Imaging Solutions have at least
$100,000 on hand at closing. On September 30, 2002, the share exchange
transaction was closed, and the 1.7 million shares of our stock were received
and retired by our stock transfer agent.
On March 6, 2003, Color Imaging received from Chi Fu Investment Co Ltd
$6,075,000 of subscription proceeds for the public sale of 4,500,000 of our
common shares at a price of $1.35 per share in our offering on Form SB-2 filed
with the Securities and Exchange Commission. Chi Fu Investment Co Ltd is a
wholly owned subsidiary of our affiliate General Plastic Industrial Co., Ltd,
and our directors Jui-Hung Wang and Jui-Chi Wang each own 34.6% and 19.9%,
respectively, of General Plastic Industrial Co., Ltd.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to Color Imaging with
respect to the beneficial ownership of Color Imaging's common stock as of April
21, 2003 by:
o each stockholder known by Color Imaging to own beneficially more than
5% of Color Imaging's common stock;
o each Named Executive Officer;
o each of Color Imaging's directors; and
o all directors and executive officers as a group.
Except as otherwise indicated in the footnotes, Color Imaging believes that
the beneficial owners of the common stock listed below, have sole voting power
and investment power with respect to such shares of common stock indicated.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percent ownership of that person, shares
of common stock subject to options or warrants held by that person that are
currently exercisable or will become exercisable within 60 days of the date of
this proxy statement are deemed outstanding, while such shares are not deemed
outstanding for purposes of computing percent ownership of any other person.
PERCENTAGE OF
NAME OF BENEFICIAL OWNER NO. OF SHARES OWNERSHIP(1)
--------------------------------- ------------------ --------------------
Sueling Wang (2) 1,981,551 15.1%
Morris E. Van Asperen (3) 360,906 2.7%
Charles R. Allison (4) 87,500 *
Jui-Chi Wang (5) 694,450 5.4%
Jui-Hung Wang(6) 709,178 5.5%
Jui-Kung Wang(7) 321,209 2.5%
Michael W. Brennan(8) 100,000 *
Yi Jen Wang (9) 30,000 *
Richard S. Eiswirth (10) -- *
Chi Fu Investment Co Ltd (11) 4,500,000 34.1%
Executive officers and directors
as a group (9 persons) (12) 4,154,794 29.8%
----------------
* Less than 1%
(1) Percentage of ownership is calculated as required by Commission Rule
13d-3(d)(1). The table above includes the number of shares underlying
options and warrants which are exercisable within 60 days after the date of
this proxy statement.
(2) Includes: (a) 600,000 shares owned by Sueling Wang's four children, (b)
141,204 shares owned by Yik-Li Sih, Sueling Wang's wife, in which Dr. Wang
may be deemed to have pecuniary interest. Dr. Wang disclaims beneficial
ownership of such 741,204 shares. Also includes 275,000 shares subject to
options that are currently exercisable.
(3) Includes 250,000 shares subject to options that are currently exercisable.
(4) Includes 87,500 shares subject to options that are currently exercisable.
(5) Includes 15,000 shares subject to options that are currently exercisable.
(6) Includes 10,000 shares subject to options that are currently exercisable.
(7) Includes 5,000 shares subject to options that are currently exercisable.
(8) Mr. Brennan is no longer with Color Imaging as the result of the
discontinuation of the Logical Imaging Solutions' operations as of
September 30, 2002.
(9) Ms. Wang became a director of Color Imaging on April 18, 2003.
(10) Mr. Eiswirth became a director of Color Imaging on April 18, 2003.
14
(11) Information provided is based on a Schedule 13D filed March 6, 2003, by Chi
Fu Investment Co Ltd, Taiwan, R.O.C. Chi Fu Investment Co Ltd is a
wholly-owned subsidiary of our affiliate, General Plastic Industrial Co
Ltd.
(12) Includes 642,500 shares subject to options that are exercisable within 60
days after the date of this proxy statement. As of March 31, 2003, with the
inclusion of Jui-Hung Wang's, Jui-Chi Wang's and Jui-Kung Wang's
9.73%,10.19% and 1.78%, respectively, beneficial ownership of the common
stock owned by Chi Fu Investment Co Ltd, the ownership of the executive
officers and directors is 5,131,294 shares, or 39.7%, including the
aforementioned exercisable options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The members of the board of directors, certain executive officers of Color
Imaging and persons who hold more than 10% of Color Imaging's outstanding common
stock are subject to the reporting requirements of Section 16(a) of the Exchange
Act which require them to file reports with respect to their ownership of common
stock and their transactions in common stock. Based upon the copies of Section
16(a) reports that Color Imaging received from such persons for their 2002
fiscal year transactions, Color Imaging believes that all reporting requirements
under Section 16(a) for such fiscal year were met in a timely manner by its
executive officers, board members and greater than ten-percent stockholders.
PROPOSAL TO APPROVE THE COLOR IMAGING, INC.
2003 STOCK INCENTIVE PLAN
(ITEM NO. 2 ON THE PROXY CARD)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.
On March 10, 2003, the board of directors, subject to the approval of
shareholders, adopted the Color Imaging 2003 Stock Incentive Plan. The Stock
Incentive Plan shall be effective as of the date of such approval of
shareholders.
Options and other stock awards may be granted under the Stock Incentive
Plan to employees of Color Imaging and certain subsidiaries and affiliated
businesses, and directors, consultants and other persons providing key services
to Color Imaging. Color Imaging estimates that, as of the date of this proxy
statement, approximately twelve (12) employees (including officers) and the four
(4) non-employee directors are eligible to participate in the Stock Incentive
Plan. The following discussion summarizes the Stock Incentive Plan.
ELIGIBILITY FOR PARTICIPATION UNDER THE STOCK INCENTIVE PLAN
Options, stock appreciation rights ("SARs") and stock awards ("Stock
Awards") may be granted under the Stock Incentive Plan to key employees,
officers or directors of, and consultants and advisors to, Color Imaging and its
subsidiaries. Color Imaging estimates that, as of the date of this proxy
statement, approximately twelve (12) employees (including officers) and four (4)
non-employee directors of Color Imaging are eligible to participate in the Stock
Incentive Plan. Nothing contained in the Stock Incentive Plan or in any
agreement entered into pursuant thereto may confer upon any person any right to
continue as a director, officer or employee of Color Imaging or its subsidiaries
or as a consultant or advisor, or limit in any way any right of shareholders or
of the board, as applicable, to remove such person.
SHARES RESERVED UNDER THE STOCK INCENTIVE PLAN; INDIVIDUAL GRANT LIMITS
The Stock Incentive Plan currently provides for the grant of awards to
acquire a maximum of 1,500,000 shares of common stock (including options for
shares subject to previous grants), subject to adjustment in the event of stock
dividends, stock splits, combination of shares, recapitalizations, or other
changes in the outstanding common stock. Shares issued under the Stock Incentive
Plan may consist, in whole or in part, of authorized and unissued shares,
treasury shares or shares purchased on the open market. The maximum number of
SARs and shares subject to options that may be granted to any one individual
during any consecutive 12-month period under the Stock Incentive Plan is
15
200,000. The maximum number of shares that may be granted pursuant to Stock
Awards under the Stock Incentive Plan is 100,000 shares.
The Stock Incentive Plan permits the grant of incentive stock options
("ISOs"), non-qualified stock options ("NSOs"), SARs and Stock Awards at the
discretion of the Compensation Committee of the board of directors.
PURPOSE OF THE STOCK INCENTIVE PLAN
Color Imaging desires to attract and retain persons of skill and experience
and to encourage their highest levels of performance on behalf of Color Imaging
and its subsidiaries. The Stock Incentive Plan accordingly affords eligible
persons the opportunity to acquire stock rights in Color Imaging. A portion of
the options issued pursuant to the Stock Incentive Plan may constitute ISOs
within the meaning of Section 422 of the Code or any succeeding provisions. The
Stock Incentive Plan is not qualified under Section 401(a) of the Code and is
not subject to the provisions of the Employee Retirement Income Security Act of
1974.
DURATION OF THE STOCK INCENTIVE PLAN
Awards may be granted pursuant to the Stock Incentive Plan from time to
time prior to the earlier of (1) June 16, 2013; or (2) the date on which all
available shares for issuance under the Stock Incentive Plan have been issued.
ADMINISTRATION OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan is administered by the Board of Directors, unless
a Compensation Committee has been established to administer the Stock Incentive
Plan. Subject to the terms of the Stock Incentive Plan, in administering the
Stock Incentive Plan and the awards granted under the Stock Incentive Plan, the
Compensation Committee has authority to determine:
o the employees of Color Imaging and its subsidiaries to whom ISOs may be
granted;
o the directors, officers and employees of Color Imaging and its subsidiaries
and the consultants and advisors to whom NSOs, SARs and Stock Awards may be
granted;
o the time or times at which awards may be granted;
o the number of shares subject to each award and, for options and SARs, the
exercise price thereof;
o whether each option granted shall be an ISO or a NSO;
o the time or times when each option and SAR shall become exercisable and the
duration of the exercise period;
o whether restrictions are to be imposed on shares subject to options and the
nature of such restrictions;
o whether and under what circumstances cash payments shall be made upon the
termination of options or SARs, and whether and under what circumstances
stock acquired pursuant to the exercise of an option or SAR shall be
repurchased by Color Imaging; and
o the terms of any Stock Awards.
The Compensation Committee also interprets the Stock Incentive Plan and
prescribes and rescinds rules and regulations, relating to and consistent with
the Stock Incentive Plan.
Under the Stock Incentive Plan, acts by a majority of the Compensation
Committee, or acts reduced to or approved in writing by a majority of the
members of the Compensation Committee, shall be the valid acts of the
Compensation Committee.
16
No members of the board of directors or the Compensation Committee shall be
liable for any action or determination made in good faith with respect to the
Stock Incentive Plan or any stock options granted under it. No member of the
board or the Compensation Committee shall be liable for any act or omission of
any other member of the board or the Compensation Committee or for any act or
omission on his own part, including but not limited to the exercise of any power
or discretion given to him under the Stock Incentive Plan, except those
resulting from that member's own gross negligence or willful misconduct. In
addition to rights of indemnification as a member of the board or Compensation
Committee, each member of the board and the Compensation Committee shall be
entitled to indemnification by Color Imaging with respect to administration of
the Stock Incentive Plan and the granting of rights and benefits under it.
AMENDMENT OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan may be terminated or amended by the board of
directors at any time, except that the following actions may not be taken
without shareholder approval:
o materially altering the number of shares that may be issued under the
Stock Incentive Plan (except by certain adjustments under the Stock
Incentive Plan);
o materially modifying the persons or classes of persons eligible to
participate in the Stock Incentive Plan;
o materially increasing the benefits accruing to participants under the
Stock Incentive Plan;
o modifying the exercise price at which options and SARs may be offered
(except by adjustment pursuant to the Stock Incentive Plan); and
o extending the maximum option period under, or the term of, the Stock
Incentive Plan.
Awards may not be granted under the Stock Incentive Plan after the date of
termination of the Stock Incentive Plan, but options and SARs granted prior to
that date remain exercisable according to their terms.
NEW PLAN BENEFITS
No awards have been granted under the Stock Incentive Plan. No
determination has been made by the board or the Compensation Committee regarding
the number of option or awards to be granted to any executive officer, executive
officers as a group, non-executive directors or non-executive employees. At
April 21, 2003, the following options were outstanding:
Number of Dollar
Options Value ($)(1)
---------- ------------
Executive Officer Group 700,000 --
Non-Executive Director Group 125,000 --
All Employees excluding Executive Officer Group 145,000 --
-----------------
(1) None of the above options were in the money as of April 21, 2003.
17
GRANT OF STOCK OPTIONS AND SARS
The Compensation Committee may grant stock options and SARs to eligible
persons in such amounts and on such terms not inconsistent with the Stock
Incentive Plan as it may deem appropriate up to the number of shares remaining
subject to the Stock Incentive Plan. Color Imaging and each eligible person
shall execute an agreement providing for the grant of stock options or SARs in
accordance with the pertinent provisions of the Stock Incentive Plan.
OPTION AND SAR EXERCISE PRICE
The exercise price per share for the shares subject to ISOs, NSOs and SARs
shall be at whatever price is approved by the Compensation Committee; provided,
however, that, in general, the exercise price per share for the shares subject
to ISOs shall be not less than the fair market value per share of common stock
on the grant date, except that in the case of an ISO to be granted to an
employee owning more than 10% of the total combined voting power of all classes
of stock of Color Imaging, the exercise price per share shall be not less than
110% of the fair market value per share of common stock on the grant date. The
"fair market value" shall be the closing price of the common stock on the OTC
Bulletin Board on the day of grant or if no sale of the common stock has been
made on such date, on the next preceding day on which there was such a sale.
VESTING OF OPTIONS
Unless otherwise provided by the Compensation Committee, options granted
under the Stock Incentive Plan generally vest, beginning on the first
anniversary date of the date of grant, at the rate of 25% per annum, -so that
all options are vested after 4 years. The Compensation Committee has the
authority to accelerate or waive the vesting period for any option granted under
the Stock Incentive Plan upon the attainment of performance goals established by
the Compensation Committee for the grantee(s). In the event of a change of
control, the Compensation Committee may also accelerate the vesting of
outstanding options under the Stock Incentive Plan.
ADJUSTMENTS TO EXERCISE PRICE AND NUMBER OF SHARES
If the shares of common stock are subdivided or combined, or a stock
dividend is declared and paid, the number of shares of common stock subject to
the Stock Incentive Plan and to the individual limits thereunder deliverable
upon the exercise of Stock Options or SARs and subject to Stock Awards shall be
increased or decreased proportionately, and the purchase price per share of
options and SARs shall be adjusted to reflect such subdivision, combination or
stock dividend. If, while unexercised options or SARs remain outstanding under
the Stock Incentive Plan, Color Imaging proposes to merge or consolidate with
another corporation, whether or not Color Imaging is to be the surviving
corporation, or if Color Imaging proposes to liquidate or sell or otherwise
dispose of substantially all of its assets, or substantially all of the
outstanding shares of stock of Color Imaging are to be sold, then the
Compensation Committee may, in its sole discretion, either:
o make appropriate provision for the protection of any such outstanding
options and SARs by the substitution on an equitable basis of
appropriate stock of the surviving corporation or its parent in the
merger or consolidation or other reorganized corporation that will be
issuable in respect to the shares of common stock of Color Imaging
subject to such options and SARs, provided that, with respect to ISOs,
such provision shall satisfy the requirement that no additional
benefits shall be conferred upon optionees as a result of such
substitution within the meaning of Section 424(a) of the Code, and
that the excess of the aggregate fair market value of the shares
subject to the options immediately after such substitution over the
purchase price thereof is not more than the excess of the aggregate
fair market value of the shares subject to such options immediately
before such substitution over the purchase price thereof; or
o upon written notice to the grantees, provide that all unexercised
options and SARs must be exercised within a specified number of days
of the date of such notice or they will be terminated.
In any such case, the Compensation Committee may, in its discretion, accelerate
the date on which outstanding options and SARs become exercisable. In no event,
however, shall the Compensation Committee be obligated to take any action as a
18
result of any such transaction, it being acknowledged that it is in the
Compensation Committee's sole discretion to determine if, and to what extent,
any such action shall be taken.
DURATION AND TERMINATION OF OPTIONS AND SARS
Each option and SAR expires on the date specified by the Compensation
Committee, but not more than (i) 10 years from the respective grant date in the
case of NSOs, SARs and most ISOs, and (ii) five years from the grant date in the
case of ISOs granted to an employee owning more than 10% of the total combined
voting power of all classes of stock of Color Imaging; provided, however, that
if approved by the Compensation Committee, after request by the grantee, ISOs
may be converted into NSOs and the term of such option may be extended.
MEANS OF EXERCISE OF OPTIONS AND SARS
Options and SARs are exercised by giving written notice to Color Imaging at
its principal office address, accompanied, in the case of an option, by full
payment of the purchase price therefore and the applicable withholding tax,
either (a) in United States dollars in cash or by check, or (b) if permitted by
the Compensation Committee, the delivery of shares of common stock having a fair
market value equal as of the date of the exercise to the cash exercise price of
the option; provided, however, that such shares must have been held for at least
six months.
NON-TRANSFERABILITY OF OPTIONS, SARS AND STOCK AWARDS
No option, SAR or Stock Award is transferable except by will or by the laws
of descent and distribution, and all options and SARs are exercisable, during
the lifetime of the grantee, only by the grantee or the grantee's guardian or
legal representative. Shares subject to options, SARs or Stock Awards granted
under the Stock Incentive Plan that have lapsed or terminated may again be
subject to awards thereunder.
RESTRICTIONS ON STOCK AWARDS
Each Stock Award shall be subject to such conditions, restrictions and
contingencies as the Compensation Committee shall determine. These may include
continuous service and/or the achievement of specified performance measures. The
performance measures that may be used by the Compensation Committee for such
Stock Awards shall be measured by revenues, income, or such other criteria as
the Committee may specify. If vesting is conditioned solely upon continuous
service, the vesting schedule for Stock Awards shall cover a period of not less
than three years (subject to acceleration of vesting, to the extent permitted by
the Compensation Committee, in the event of the participant's death, disability,
or involuntary termination or in the event of a change in control of Color
Imaging).
TAX TREATMENT
The following discussion addresses certain anticipated U.S. federal income
tax consequences associated with awards made under the Stock Incentive Plan. It
is based on the Code and interpretations thereof as in effect on the date of
this Proxy Statement. This summary is not intended to be exhaustive and, among
other things, does not describe state, local or foreign tax consequences.
A company, such as Color Imaging, for which an individual is performing
services will generally be allowed to claim as a deduction for federal income
tax purposes amounts that are includable in the income of such individual as
compensation income in Color Imaging's taxable year in which the employee's
taxable year of inclusion ends, provided that such amounts qualify as reasonable
compensation for the services rendered. This general rule will apply to the
deductibility of a participant's compensation income resulting from
participation in the Stock Incentive Plan. The timing and amount of the federal
income tax deduction available to Color Imaging will, therefore, depend upon the
timing and amount of compensation income recognized by a participant as a result
of participation in the Stock Incentive Plan. The following discusses the timing
and amount of compensation income recognized by participants and the
accompanying federal income tax deduction that may be available to Color
Imaging.
19
Incentive Stock Options. A participant to whom an ISO which qualifies under
Section 422 of the Code is granted generally will not recognize compensation
income (and Color Imaging will not be entitled to a federal income tax
deduction) upon the grant or the exercise of the option. To obtain
nonrecognition treatment from the exercise of an ISO, however, the participant
must be an employee of Color Imaging or a subsidiary continuously from the date
of grant of the option until three months prior to the exercise of the option.
If termination of employment is due to disability of the participant, ISO
treatment will be available if the option is exercised within one year of
termination. If an option originally designated as an ISO is exercised after
these periods, the option will be treated as a NSO for income tax purposes and
compensation income will be recognized by the participant (and a federal income
tax deduction generally will be available to Color Imaging) in accordance with
the rules discussed below concerning NSOs.
The Code provides that ISO treatment will not be available to the extent
that the fair market value of shares subject to ISOs (determined as of the date
of grant of the ISOs) which become exercisable for the first time during any
calendar year exceeds $100,000. If the $100,000 limitation is exceeded, the
options in excess of the limitation are treated as NSOs when exercised.
While a participant may not recognize compensation income upon exercise of
an ISO, the excess of the fair market value of the shares of common stock
received over the exercise price for the option is an adjustment for alternative
minimum tax purposes and can affect the optionee's alternative minimum tax
liability under applicable provisions of the Code. The increase, if any, in an
optionee's alternative minimum tax liability resulting from exercise of an ISO
will not, however, create a deductible compensation expense for Color Imaging.
When a participant sells shares of common stock received upon exercise of
an ISO more than one year after the exercise of the option and more than two
years after the grant of the option, the participant will normally not recognize
any compensation income, but will instead recognize capital gain or loss from
the sale in an amount equal to the difference between the sales price for the
shares of common stock and the option exercise price. If, however, a participant
sells the shares of common stock within one year after exercising the ISO or
within two years after the grant of the ISO, the participant will recognize
compensation income (and Color Imaging generally will be entitled to a federal
income tax deduction) in an amount equal to the lesser of (i) the excess, if
any, of the fair market value of the shares of common stock on the date of
exercise of the option over the option exercise price, and (ii) the excess, if
any, of the sale price for the shares over the option exercise price. Any other
gain or loss on such sale (in addition to the compensation income mentioned
previously) will normally be capital gain or loss.
Nonqualified Stock Options. A participant to whom a NSO is granted will not
normally recognize income at the time of grant of the option. When a participant
exercises a NSO, the participant will generally recognize compensation income
(and Color Imaging generally will be entitled to a federal income tax deduction)
in an amount equal to the excess, if any, of the fair market value of the shares
of common stock when acquired over the option exercise price. The amount of gain
or loss recognized by a participant from a subsequent sale of shares of common
stock acquired from the exercise of a NSO will be equal to the difference
between the sales price for the shares of common stock and the sum of the
exercise price of the option plus the amount of compensation income recognized
by the participant upon exercise of the option.
SARs. The recipient of an SAR generally will not recognize any compensation
income upon grant of the SAR. At the time of exercise of an SAR, however, the
recipient should recognize compensation income (and Color Imaging generally will
be entitled to a federal income tax deduction) in an amount equal to the amount
of cash, or the fair market value of the shares, received.
Restricted Stock Awards. If stock received pursuant to a stock award made
through the Stock Incentive Plan is subject to a substantial restriction on
continued ownership which is dependent upon the recipient continuing to perform
services for Color Imaging or its affiliated companies (a "substantial risk of
forfeiture"), the participant should not recognize compensation income upon
receipt of the shares of common stock unless he/she makes a so-called "83(b)
election" as discussed below. Instead, the participant will recognize
compensation income (and Color Imaging generally will be entitled to a federal
income tax deduction) when the shares of common stock are no longer subject to a
substantial risk of forfeiture, in an amount equal to the fair market value of
the stock at that time. Absent a participant making an 83(b) election, dividends
paid with respect to shares of common stock which are subject to a substantial
risk of forfeiture will be treated as compensation income for the participant
20
(and a compensation deduction generally will be available to Color Imaging for
the dividend) until the shares of common stock are no longer subject to a
substantial risk of forfeiture.
Different tax rules will apply to a participant who receives shares of
common stock subject to a risk of forfeiture if the participant files an 83(b)
election. If, within 30 days of receipt of the shares of common stock, a
participant files an 83(b) election with the Internal Revenue Service and Color
Imaging, then, notwithstanding that the shares of common stock are subject to a
risk of forfeiture, the participant will recognize compensation income upon
receipt of the shares of common stock (and Color Imaging generally will be
entitled to a federal income tax deduction) in an amount equal to the fair
market value of the stock at the time of the award. If the 83(b) election is
made, any dividends paid with respect to the shares of common stock will not
result in compensation income for the participant (and will not entitle Color
Imaging to a federal income tax deduction). Rather, the dividends paid will be
treated as any other dividends paid with respect to common stock, as ordinary
income which is not compensation.
TAX WITHHOLDING
Whenever Color Imaging proposes, or is required, to distribute shares of
common stock under the Stock Incentive Plan, Color Imaging may require the
recipient to satisfy any Federal, state and local tax withholding requirements
prior to the delivery of any certificate for such shares or, in the discretion
of the Committee, Color Imaging may withhold from the shares to be delivered
shares sufficient to satisfy all or a portion of such tax withholding
requirements.
UNFUNDED STATUS OF THE STOCK INCENTIVE PLAN
The Stock Incentive Plan is intended to constitute an "unfunded" plan for
incentive and deferred compensation. With respect to any payments not yet made
to a participant by Color Imaging, nothing contained in the Stock Incentive Plan
shall give any such participant or optionee any rights that are greater than
those of a general creditor of Color Imaging.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE STOCK INCENTIVE PLAN
AND RECOMMENDS A VOTE FOR THE APPROVAL OF THE STOCK INCENTIVE PLAN.
PROPOSAL TO APPROVE GRANT OF OPTIONS TO EMPLOYEES, OFFICERS AND DIRECTORS
(ITEM NO. 3 ON THE PROXY CARD)
On June 28, 2000, we granted options to acquire 500,000 shares of our
common stock to senior members of our management at an exercise price of $2.00
per share following the merger with Advatex Associates, Inc. The options vest
over a two to four year period and expire 5 years from their respective date of
vesting.
During the year ended December 31, 2001, the board of directors granted
officers and employees options to acquire 535,000 shares of our common stock and
outside directors options to acquire 175,000 shares of our common stock at an
exercise price of $2.75 per share. Of the 535,000 options granted to officers
and employees, 25% vested immediately and the remainder will vest over 3 years.
The officer and employee options expire 5 years from their respective date of
vesting. Each outside director was granted options to acquire 25,000 shares of
our common stock, for a total of 175,000 options, effective upon his or her
election or appointment to the board of directors. The outside director options
vest over 5 years, beginning with the first anniversary date of his or her
appointment to the board, and expire 3 years from their respective date of
vesting. As a result of employment terminations or resignations, as of December
31, 2002, options to purchase 190,000 shares of common stock by management or
our employees have lapsed, and options to purchase 100,000 shares of our common
stock granted to outside directors have lapsed.
Since 2000, Color Imaging has authorized and issued approximately 1,360,000
stock options for employees, executives and directors of Color Imaging.
Currently, 970,000 options are outstanding. These options were issued without
shareholder approval as Color Imaging had no shareholder-approved stock
incentive plan in place. In order to comply with stock exchange listing
requirements Color Imaging may eventually wish to list on, Color Imaging is
submitting such prior stock option grants for shareholder ratification.
21
The following stock option grants were made during the period indicated
below:
GRANT OPTIONS OPTIONS OPTIONS
DATE GRANTED LAPSED OUTSTANDING
-------------------- ------------- ------------- -------------
June 2000 500,000 0 500,000
March 2001 685,000 290,000 395,000
September 2001 25,000 0 25,000
July 2002 100,000 100,000 0
April 2003 50,000 0 50,000
------------- ------------- -------------
Total 1,360,000 390,000 970,000
On March 10, 2003, subject to stockholder approval, the board of directors
approved the Color Imaging 2003 Stock Incentive Plan. Although the prior grant
of options were not granted pursuant to the Stock Incentive Plan, the terms of
the Stock Incentive Plan (except for the terms with respect to vesting and any
conflicting terms) shall be incorporated by reference to all prior option
grants, if the 2003 Stock Incentive Plan is approved by stockholders.
THE BOARD OF DIRECTORS HAS PREVIOUSLY APPROVED THE STOCK OPTION GRANTS TO
EMPLOYEES, OFFICERS AND DIRECTORS AND RECOMMENDS A VOTE FOR RATIFICATION OF
THESE PRIOR GRANTS.
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
(ITEM NO. 4 OF THE PROXY CARD)
The board of directors has selected Lazar Levine & Felix LLP as Color
Imaging's independent accountants for the year ending December 31, 2003, and has
further directed that management submit the selection of independent accountants
for ratification by the stockholders at the annual meeting. Lazar Levine & Felix
LLP has no financial interest in Color Imaging and neither it nor any member or
employee of the firm has had any connection with Color Imaging in the capacity
of promoter, underwriter, voting trustee, director, officer or employee. The
Delaware General Corporation Law does not require the ratification of the
selection of independent accountants by Color Imaging's stockholders, but in
view of the importance of the financial statements to the stockholders; the
board of directors deems it advisable that the stockholders pass upon such
selection. A representative of Lazar Levine & Felix LLP is not expected to be
present at the annual meeting.
In the event the stockholders fail to ratify the selection of Lazar Levine
& Felix LLP, the Audit Committee will reconsider whether or not to retain the
firm. Even if the selection is ratified, the Audit Committee and the board of
directors in their discretion may direct the appointment of a different
independent accounting firm at any time during the year if they determine that
such a change would be in the best interests of Color Imaging and its
stockholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THIS
PROPOSAL.
22
PERFORMANCE GRAPH
Set forth below is a line graph presentation comparing the cumulative
shareholder return on the Color Imaging's common stock (OTC: CIMG), on an
indexed basis, against cumulative total returns of the Nasdaq Stock Market (U.S.
Companies) Index and the MG Group Index. The graph assumes that the value of the
investment in the common stock in each index was $100 on December 31, 1997. The
Performance Graph shows total return on investment for the period beginning
December 31, 1997 through December 31, 2002.
[GRAPH OMITTED]
VALUE OF $100 INVESTED ON DEC. 31, 1997 AT:
1997 1998 1999 2000 2001 2002
--------- ---------- ---------- ---------- ----------- ----------
COLOR IMAGING, INC. $ 100.00 $ 57.18 $ 300.24 $ 632.47 $ 729.41 $ 282.35
MG GROUP INDEX $ 100.00 $ 88.35 $ 85.36 $ 84.09 $ 90.42 $ 75.10
NASDAQ MARKET INDEX $ 100.00 $ 141.04 $ 248.76 $ 156.35 $ 124.64 $ 86.94
Total return assumes reinvestment of any dividends.
23
OTHER BUSINESS
Color Imaging does not know of any other business to be presented to the
annual meeting and does not intend to bring any other matters before such
meeting. If any other matters properly do come before the annual meeting,
however, the persons named in the accompanying Proxy are empowered, in the
absence of contrary instructions, to vote according to their best judgment.
STOCKHOLDER PROPOSALS
Appropriate proposals of shareholders intended to be presented at Color
Imaging's 2004 Annual Meeting of Stockholders pursuant to Rule 14a-8 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), must
be received by Color Imaging by January 12, 2004 for inclusion in its proxy
statement and form of proxy relating to that meeting. In addition, all
shareholder proposals submitted outside of the shareholder proposal rules
promulgated pursuant to Rule 14a-8 under the Exchange Act must be received by
Color Imaging by March 28, 2004 in order to be considered timely. If such
shareholder proposals are not timely received, proxy holders will have
discretionary voting authority with regard to any such shareholder proposals
that may come before the 2004 Annual Meeting. With regard to such shareholder
proposals, if the date of the 2004 Annual Meeting is subsequently advanced or
delayed by more than 30 days from the date of the 2003 Annual Meeting, Color
Imaging shall, in a timely manner, inform shareholders of the change and the
date by which proposals must be received.
ANNUAL REPORT ON FORM 10-K
A copy of Color Imaging's Annual Report on Form 10-K for the calendar year
ended December 31, 2002 is being mailed to stockholders with this proxy
statement.
By Order of the Board of Directors
/s/ MORRIS E. VAN ASPEREN
Morris E. Van Asperen
Secretary
Norcross, Georgia
May 12, 2003
Please Complete, Date, And Sign The Enclosed Proxy Card And Return It Promptly
In The Enclosed Reply Envelope. No Postage Is Required If Mailed In The United
States.
24
APPENDIX A
AUDIT COMMITTEE CHARTER
November 1, 2000
Amended October 31, 2002
CORPORATE RESPONSIBLITY
The Board of Directors (the "Board") of Color Imaging, Inc., a Delaware
corporation (the "Company"), to the extent required by regulation or the
securities exchange upon which the Company's common stock is listed, is
responsible for the formation of an Audit Committee (the "Committee") that
includes individuals that are both independent of management and have the skills
necessary to fulfill their responsibilities.
PURPOSE
The Committee is appointed by the Board to assist the Board in meeting its
oversight responsibilities to appropriately monitor (1) the integrity of the
financial statements of the Company, (2) the independent auditor's
qualifications and independence, (3) the performance of the Company's internal
audit function, if any, and that of the independent auditors, (4) the adequacy
of the Company's internal controls and procedures, including disclosure of such
controls and procedures, and (5) the compliance by the Company with legal and
regulatory requirements.
The Committee is responsible for taking charge of corporate audits, including
appointing, compensating, and overseeing independent auditors, and receiving
reports directly from independent auditors. The Committee is also responsible
for the resolution of any disputes that arise on accounting matters between the
auditors and management.
To fulfill its duties and responsibilities, the Committee must also institute
procedures to ensure members are independent, and to hear and act on complaints
regarding Company accounting, internal control, and auditing issues. The Company
shall sufficiently fund and or allocate a budget for the Committee for the
payment of the fees and expenses of the Committee, any staff, and to pay the
auditors or other professionals.
The Committee shall prepare the report required by the rules of the Securities
and Exchange Commission (the "Commission") to be included in the Company's
annual proxy statement. The Committee's report must address whether the
Committee has (1) reviewed the financial statements with management, (2)
discussed with the auditors the matters covered by SAS No. 61 as amended by SAS
90, (3) discussed auditor independence with the auditors, (4) received from the
auditors written information and disclosures relating to auditor independence,
as required by Independent Standards Board Standard No. 1,and (5) recommended to
the Board of Directors, based on its review, that the audited statements should
be included in the Company's Form 10-K. The report must discuss questions
relating to the independence of audit committee members, under the standards set
by the Company's securities exchange, and certain other matter(s) having to do
with audit committee governance.
While the Committee has the responsibility and powers set forth in this Charter,
it is not the duty of the Committee to plan or conduct audits or to determine
that the Company's financial statements and disclosures are complete and
accurate and are in accordance with accounting principles generally accepted in
the United States of America and applicable rules and regulations. Nor is it the
responsibility of the Committee to provide assurances that the financial
information disclosed in a report, viewed in its entirety, meets a standard of
overall material accuracy and completeness that is broader than financial
reporting requirements under accounting principles generally accepted in the
United States of America. A "fair presentation" of financial condition, results
of operations and cash flows encompasses the selection of appropriate accounting
policies, proper application of appropriate accounting policies, disclosure of
financial information that is informative and reasonably reflects the underlying
transactions and events and the inclusion of any additional disclosure necessary
Audit Committee Charter Approved October 31, 2002
A-1
to provide investors with a materially accurate and complete picture of the
company's financial condition, results of operations and cash flows. These are
the responsibilities of management.
COMPOSITION
The composition of the Committee will, at a minimum, be comprised of member(s)
of the Board as required by regulation or the listing requirements of the
exchange upon which the Company's common stock is listed (the "Exchange"). In
the absence of a Committee, and where permitted by regulation or the Exchange,
the oversight responsibility, authority and specific duties of the Committee
shall be performed by the Board.
When required or feasible, the Committee will be comprised of three (3) or more
directors as determined by the Board who fulfill the independence and experience
requirements of the national securities exchanges. In that event, all of the
members will be directors: (i) who have no relationship to the Company that
would interfere with the exercise of their independence from management and the
Company, (ii) who are financially literate or who become financially literate
within a reasonable period of time after appointment to the Committee, and (iii)
with at least one member of the Committee having accounting or related financial
management experience and sophistication, a financial expert, preferably with
both a public accounting background and experience with the Commission or public
filings required to be made by public companies, to serve as chairman of the
Committee. In addition, each such member shall not accept consulting, advisory,
or other compensatory fees from, or be affiliated with, the Company, other than
as a Board or Committee member, and as such cannot be a member of management or
be employed by the Company.
The Members of the Committee will be appointed, and may be replaced, by the
Board, and if required, be nominated by a nominating committee, comprised solely
of independent directors. Committee members will be listed in the annual proxy
statement to the Company's stockholders. The Board will appoint one of the
members of the Committee as the Committee Chairman.
AUTHORITY AND RESPONSIBILITY
The Committee has the sole authority to appoint or replace, compensate, and
oversee the work of any independent auditor, who must be, when required, a
registered firm as defined by law, whose purpose is the preparation or issuance
of an audit report or related work (the "Auditor"). The Auditor's reports and
other communications are to be delivered directly to the Committee, and the
Committee is responsible for the resolution of disagreements between management
and the Auditor regarding financial reporting.
The Committee shall pre-approve all audit and non-audit services and all
engagement fees and terms in connection therewith, except as otherwise permitted
by regulation or the exchange.
The Committee has the authority, to the extent it deems necessary or
appropriate, to retain independent legal, accounting or other advisers
("Advisers") to render advice and counsel in such matters and to carry out its
duties and meet its responsibilities. The Committee is granted the authority to
investigate any matter or activity involving financial accounting and financial
reporting, as well as the internal controls of the Company. All employees will
be directed to cooperate with respect thereto as requested by members of the
Committee. The Company shall provide for appropriate funding (budget), as
determined by the Committee, for the payment of fees or costs of the Advisers,
including but not limited to the payment of the fees and costs of the Auditor
for the purpose of rendering or issuing an audit report and the fees and
expenses of the Committee members and any Committee staff.
In addition, the Committee provides an avenue for communication between internal
auditors, if any, the Auditor, financial management and the Board. The Committee
should have a clear understanding with the Auditor that they must maintain an
open and transparent relationship with the Committee, and that the ultimate
accountability of the Auditor is to the Board and the Committee. The Committee
will report to the Board concerning its activities.
Audit Committee Charter Approved October 31, 2002
A-2
The Committee also has the responsibility to establish procedures for the
receipt, retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or auditing matters; and the
confidential, anonymous submission by employees of the Company
("whistleblowers") of concerns regarding questionable accounting or auditing
matters.
The Committee may consult with and or receive the recommendation(s) of
management, but the Committee shall not delegate the above-mentioned
responsibilities. The Committee may form and delegate authority to subcommittees
consisting of one or more members, including the authority to grant
pre-approvals of audit and permitted non-audit services, provided that decisions
of such subcommittee granted pre-approval authority shall be presented to the
Committee at its next scheduled meeting.
MEETINGS
The Committee is to meet in separate executive session(s) with the Company's
chief financial officer, Auditor and internal auditors, if any, at least once
each year and at other times when considered appropriate.
Regular meetings of the Committee shall be held no less frequently than
quarterly to review and discuss the Company's quarterly financial statements and
related reports to be filed with the Commission.
ATTENDANCE
Committee members will strive to be present at all meetings. The Committee may
request any officer or employee of the Company, or the Company's outside counsel
or Auditor, to attend any meeting of the Committee or to meet with any members
of, or consultants to, or staff of, the Committee.
SPECIFIC DUTIES
The Committee shall make regular reports to the Board, and it shall review and
reassess the adequacy of this Charter annually and recommend any proposed
changes to the Board for approval. The review and reassessment of the Charter is
to be done in compliance with applicable regulations or exchange rules relating
to audit committee requirements.
In carrying out its oversight responsibilities, the Committee will, to the
extent it deems necessary or appropriate:
Financial Statement and Disclosure Matters
1. Controls. Review with the Company's management, internal auditors, if any,
and Auditor the Company's accounting, financial and disclosure reporting
controls, including any major issues as to the adequacy of the design and
operation of the Company's internal controls and any special remedial actions
taken in connection with any material control deficiencies which could adversely
affect the Company's ability to record, process, summarize and report financial
data and other information to be disclosed.
2. Principles and Practices. Review with the Company's management, internal
auditors, if any, and Auditor significant accounting and reporting principles,
judgments, practices and procedures applied by the Company in preparing its
financial statements, including any significant changes in the Company's
selection or application of accounting principles. Discuss with the Auditor
their judgments about the quality, not just the acceptability, of the Company's
accounting principles used in financial reporting.
3. Internal Audit. Review the scope of the Company's, or the internal auditor's,
work plan for the year, if any, and receive a summary report of major findings
by the Company or its internal auditors and how management is addressing the
conditions reported.
4. Quarterly Financial Statements & Reports. Review and discuss with management
and the Auditor the Company's quarterly financial statements, including
Audit Committee Charter Approved October 31, 2002
A-3
disclosures made in Form 10-Q, the certifications of the principal executive and
financial officer of the Company, the analysis and results of the Auditor's
review of the quarterly financial statements and other disclosures on Form 10-Q,
prior to the filing of the Form 10-Q with the Commission, and in their
discretion request written reports of review from the Auditor.
5. Annual Financial Statements & Reports. At the completion of the annual audit
and prior to the release to the public of the annual financial results, review
with management, internal auditors and the Auditor the following:
- The results of the audit of the financial statements and the annual
financial statements and related footnotes and disclosures, financial
information to be included in the Company's annual report to
stockholders and the certifications of the principal executive and
financial officer of the Company on Form 10-K.
- Other communications as required to be communicated by the Auditor by
Statement of Auditing Standards (SAS) 61, as amended by SAS 90,
relating to the conduct of the audit. Further, receive a communication
provided by the Auditor concerning their judgment about the quality of
the Company's accounting principles, as outlined in SAS 61 as amended
by SAS 90, and that they concur with management's representation
concerning audit adjustments. Further, discuss in particular, (a) the
adoption of, or changes to, the Company's significant auditing and
accounting principles and practices during the year as suggested by
the Auditor, any internal auditor or management, (b) the Management
Letter provided by the Auditor and the Company's response to that
letter and (c) significant changes to the audit plan, if any, the
cooperation received by the Auditor during their audit, including
access to all requested records, data and information and any
difficulties encountered in the course of the audit work, including
any restrictions on the scope of activities, and any significant
disagreements with management that, if not satisfactorily resolved,
would have caused them to issue a nonstandard report on the Company's
financial statements.
- Discuss with the Auditors the matters required to be discussed by
Section 10A(k) of the Securities Exchange Act of 1934, as amended, as
follows: (a) all critical accounting policies and practices to be
used, (b) all alternative treatments of financial information, if any,
within generally accepted accounting principles that have been
discussed with management, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred by
the Auditors, and (c) other material written communications between
the Auditor and management, such as any Management Letter or schedule
of unadjusted differences.
If deemed appropriate after such review and discussion, recommend to the
Board that the financial statements be included in the Company's annual report
on Form 10-K.
6. Annual Proxy Statement. After preparation by management and review by
internal auditors, if any, and Auditor, approve the report required under SEC
rules to be included in the Company's annual proxy statement. The Charter is to
be published as an appendix to the proxy statement every three (3) years.
7. Annual Counsel's Report. Generally as part of the review of the annual
financial statements, receive an oral report(s), at least annually, from the
Company's general counsel concerning legal and regulatory matters that may have
a material impact on the financial statements.
8. Personnel. Discuss with the Auditor the quality of the Company's financial
and accounting personnel.
9. Auditor Responsiveness. Elicit the comments of management regarding the
responsiveness of the Auditor to the Company's needs.
10. Auditor Recommendations. Meet with management, internal auditors, if any,
and the Auditor to discuss any relevant significant recommendations that the
Auditor may have, particularly those characterized as "material" or "serious."
Typically, such recommendations will be presented by the Auditor in the form of
a Letter of Comments and Recommendations to the Committee. The Committee should
review responses of management to the Letter of Comments and Recommendations
Audit Committee Charter Approved October 31, 2002
A-4
from the Auditor and receive follow-up reports on action taken concerning the
aforementioned recommendations.
11. Auditor Selection. Recommend to the Board the selection, retention or
termination of the Company's Auditor.
12. Internal Audit Staff. Review the appointment and replacement, if applicable,
of the senior internal audit executive.
13. Ethical Behavior. Review with management, internal auditors and the Auditor
the methods used to establish and monitor the Company's policies with respect to
unethical or illegal activities by Company employees that may have a material
impact on the financial statements, and any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Company's internal controls. Review and approve a Code of Ethics for senior
executives and monitor compliance therewith as required by applicable
regulations and the Exchange.
14. Expert Advice. As the Committee may deem appropriate, obtain, weigh and
consider expert advice as to audit committee related regulations or rules of the
Exchange or national exchange association, Statements on Auditing Standards and
other accounting, legal and regulatory provisions.
15. Discuss with management and the Auditor:
- the effect of regulatory and accounting initiatives;
- off-balance sheet structures, if any;
- related party transactions, if any;
- critical accounting policies and other major financial risk exposures
and the initiatives of management to assess, monitor and mitigate such
risks, and
- the principal executive and financial officers certifications in
connection with the reports to the Commission on Form 10-Q and Form
10-K.
Oversight of the Company's Relationship with the Auditor
16. Lead Partner. Review and evaluate the lead partner of the Auditor's team.
17. Audit Partner Rotation. Ensure the rotation of the lead (or coordinating)
audit partner having primary responsibility for the audit and the audit partner
responsible for review of the audit as required by regulation or by the rules of
the Exchange.
18. Auditor's Engagement, Controls. Determine the extent of the Auditor's
engagement to review the adequacy of the Company's accounting and financial
controls as required by applicable regulations and the Exchange. In their
discretion, or as so required, obtain written reports from the Auditor as to
their findings in such engagements.
18. Reporting Controls. Obtain annually in writing from the Auditor their letter
as to the adequacy of the Company's accounting and financial reporting controls.
19. Audit Procedures. The Auditor should confirm to the Committee that no
limitations have been placed on the scope or nature of their audit procedures.
Audit Committee Charter Approved October 31, 2002
A-5
20. Independence. Inquire as to the independence of the Auditor and obtain from
them, at least annually, a formal written statement delineating all
relationships between the Auditor and the Company as contemplated by
Independence Standards Board Standard No. 1, Independence Discussions with Audit
Committees.
21. Audit Scope. Review the scope and general extent of the Auditor's annual
audit. The Committee's review should include an explanation from the Auditor of
the factors considered by them in determining the audit scope, including the
major risk factors.
22. Required Reporting Issues. Have a predetermined arrangement with the Auditor
that they will advise the Committee, through its Chairman, and management of the
Company of any matters identified through procedures followed for interim
quarterly and annual financial statements, and that such notification is to be
made prior to the related press release or, if not practicable, prior to filing
the Company's Form 10-Q and Form 10-K. The Committee shall also receive a
confirmation provided by the Auditor at the end of each of the first three
quarters of the year that they have nothing to report to the Committee, if that
is the case, or the written enumeration of required reporting issues.
23. Hiring Auditor Personnel. Recommend to the Board policies for the Company's
hiring of employees or former employees of the Auditor who participated in any
capacity in the audit of the Company, so as not to preclude the Auditor from
performing its audit function.
Compliance with Oversight Responsibilities
24. Illegal Activities. Obtain from the Auditor assurance of whether or not they
have, per Section 10A(b) Required Response to Audit Discoveries of the Exchange
Act, discovered any illegal act; and, if so, that they have determined and
considered the possible effect of the illegal act on the financial statements of
the Company and did, as soon as practicable, inform the appropriate level of
management or the Committee with respect to the illegal act(s) that have been
detected or otherwise came to their attention.
25. Certifications. Review the certifications of the principal executive and
financial officers in connection with the filing of Forms 10-Q and Form 10-K
with the Commission.
26. Correspondence or Complaints. Discuss with management, the Auditor or
counsel any correspondence with the regulators or governmental agencies and any
employee complaints or published reports which raise material issues regarding
the Company's financial statements or accounting policies, practices, procedures
or controls.
27. Legal Matters. Discuss with counsel legal matters that may have a material
impact on the financial statements or the Company's compliance policies or
practices.
Complaints
28. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal accounting
controls or auditing matters, and (b) the confidential, anonymous submission by
employees of the Company of concerns regarding questionable accounting or
auditing matters.
Audit Committee Charter Approved October 31, 2002
A-6
ANNEX 1
COLOR IMAGING, INC.
2003 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of Color Imaging, Inc. 2003 Stock Incentive Plan (the "Plan")
is to enable Color Imaging, Inc. (the "Company") to attract, retain and reward
directors, officers and other employees of, and consultants and advisors to, the
Company, and any Subsidiaries, Parent or Affiliates thereof, and strengthen the
mutuality of interests between such persons and the Company's shareholders, by
offering such persons performance based stock incentives and/or other equity
interests or equity-based incentives in the Company.
SECTION 2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any corporation, partnership or other entity
controlled by, or under common control with, the Company. For these purposes,
control shall consist of the ownership, either directly or indirectly, of more
than 50% of the ownership interests of an entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(d) "Committee" means the Committee referred to in Section 3 of the Plan.
If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan may be exercised by the Board, as set forth in
Section 3 hereof.
(e) "Company" means Color Imaging, Inc., a corporation organized under the
laws of the State of Delaware, or any successor corporation.
(f) "Fair Market Value" means, for purposes of determining the exercise
price for a Stock Option or SAR granted hereunder, as of any given date:
(i) if the Stock is listed on an established stock exchange or
exchanges, or traded on the Nasdaq National Market System ("Nasdaq/NMS")
the closing price of the Stock as listed thereon on the applicable day, or
if no sale of Stock has been made on any exchange on that date, on the next
preceding day on which there was a sale of Stock;
(ii) if the Stock is not listed on an established stock exchange or
Nasdaq/NMS but is instead traded over-the-counter, the mean of the dealer
"bid" and "ask" prices of the Stock in the over-the-counter market on the
applicable day, as reported by the National Association of Securities
Dealers, Inc.;
(iii) if the Stock is not listed on any exchange or traded
over-the-counter, the value as determined in good faith by the Committee;
(g) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(h) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(i) "Optionee" means any person holding an Option in accordance with the
terms of this Plan.
(j) "Parent" means any corporation (other than the Company) and any
successor corporation in an unbroken chain of corporations ending with the
Company if each of the corporations other than the Company owns stock possessing
50% or more of the total combined voting power of all classes of stock in one of
the other corporations in the chain.
(k) "Plan" is defined in Section 1 hereof and includes the Plan as
hereinafter amended from time to time.
(l) "Plan Participant" means any person granted an Option SAR or Stock
Award pursuant to the Plan.
(m) "SAR" means a stock appreciation right which entitles a Plan
Participant to receive, in cash or Stock (as determined in accordance with
Section 6(g)) value equal to all or a portion of the excess of: (a) the Fair
Market Value of a specified number of shares of Stock at the time of exercise,
over (b) an exercise price established by the Committee.
(n) "Stock" means the common stock of the Company.
(o) "Stock Award" means a grant of shares of Stock or of a right to receive
shares of Stock (or their cash equivalent or a combination of both) in the
future.
(p) "Stock Option" or "Option" means any option to purchase shares of Stock
granted pursuant to the Plan.
(q) "Subsidiary" means any corporation (other than the Company) and any
successor corporation in an unbroken chain of corporations beginning with the
Company if each of the corporations (other than the last corporation in the
unbroken chain) owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
2
SECTION 3. ADMINISTRATION.
(a) By Committee. The Plan shall be administered by a Committee of not less
than two Directors who are not employees of the Company, who shall be members of
the Board and who shall serve at the pleasure of the Board. The functions of the
Committee specified in the Plan may be exercised by the Board, if and to the
extent that no Committee exists which has the authority to so administer the
Plan.
(b) Authority of Committee. The Committee shall have full authority to
grant, pursuant to the terms of the Plan, Stock Options, SARs and Stock Awards
to directors, officers and other key employees, consultants and advisors
eligible to be Plan Participants under Section 5 hereof. The Committee shall
have the authority to adopt, alter and repeal such rules, guidelines and
practices governing the Plan as it shall, from time to time, deem advisable; to
interpret the terms and provisions of the Plan and any award under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the Plan. Without limiting the generality of the foregoing, the Committee
shall have the authority:
(i) to select the directors, officers and other key employees of, and
consultants and advisors to, the Company and any Subsidiaries, Parent
and Affiliate to whom Stock Options, SARs and other Stock Awards may
from time to time be granted hereunder;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, SARS and other Stock Awards or any
combination thereof are to be granted hereunder to one or more
eligible persons;
(iii)to determine the number of shares subject to each such Option, SAR
and other Stock Award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any Option, SAR or other Stock Award granted hereunder
including, but not limited to, the exercise price, or any vesting,
acceleration, or forfeiture restrictions regarding any Option, SAR or
other Stock Award and/or the shares of Stock relating thereto, or any
other restrictions and to waive any such terms or conditions in each
case on such factors as the Committee shall determine, in its sole
discretion; and
(v) to determine whether and under what circumstances cash payments shall
be made upon the termination of a Stock Option, SAR or other Stock
Award, and whether and under what circumstances Stock acquired
pursuant to the exercise of a Stock Option or SAR or pursuant to the
grant of a Stock Award shall be repurchased by the Company.
3
(c) Committee Decisions Final and Binding. All decisions made by the
Committee pursuant to the provisions of the Plan shall be made in the
Committee's sole discretion and shall be final and binding on all persons,
including the Company and Plan Participants.
(d) Indemnification. In addition to such other rights of indemnification
that they may have as directors of the Company or as members of the Committee,
the members of the Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his or her duties.
SECTION 4. STOCK SUBJECT TO PLAN.
The total number of shares of Stock reserved and available for distribution
under the Plan shall be 1,500,000 shares , subject to adjustment as set forth
herein, increased from time to time by action of the Board of Directors and the
Stockholders of the Company. Such shares may consist, in whole or in part, of
authorized and unissued shares or treasury shares. If any outstanding Option,
SAR or other Stock Award under the Plan expires or is terminated, the shares
allocated to the unexercised portion of such Option, SAR or other Stock Award
shall again be available for future Stock Option grants.
Notwithstanding the foregoing,
(i) The maximum number of shares that may be covered by awards granted to
any one individual pursuant to Section 6 (relating to Options and
SARs) shall be 200,000 shares during any consecutive 12 month period.
(ii) The maximum number of shares that may be covered by Stock Awards
granted to any one individual pursuant to Section 7 shall be 100,000
shares during any consecutive 12 month period.
In the event of any transaction described in Section 8(d) hereof, such
substitution or adjustment shall be made in the aggregate number of shares
reserved for issuance under the Plan, in the individual maximums set forth
above, in the number and option price of shares subject to outstanding Options
and SARs and in the number of shares subject to outstanding Stock Awards such
that each Plan Participant will continue to hold the same economic equivalent he
had immediately prior to such transaction and such that all maximums will be
increased or decreased in accordance with such transaction, provided that the
number of shares subject to any such award shall always be a whole number.
4
SECTION 5. ELIGIBILITY.
Directors, officers and key employees of, and consultants and advisors to,
the Company and any Subsidiaries, Parent and Affiliate thereof who are
responsible for or contribute to the management, growth and/or profitability of
the business of the Company and/or any Subsidiaries, Parent and Affiliate
thereof are eligible to be Plan Participants and to receive awards under the
Plan.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS AND SARS.
Stock Options granted under the Plan may be of two types: (i) Incentive
Stock Options, and (ii) Non-Qualified Stock Options. The Committee shall have
the authority to grant to any eligible person Incentive Stock Options,
Non-Qualified Stock Options, or both types of Stock Options; provided, however,
that no person who is not an employee of the Company, its Parent or its
Subsidiaries shall be eligible to be granted Incentive Stock Options.
Options and SARs granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Option Designation. Each Option granted under the Plan shall be clearly
identified at the time of grant as an Incentive Stock Option or a Non-Qualified
Stock Option. An Incentive Stock Option may not be granted in tandem stock
option arrangements under the Plan (i.e., where an Incentive Stock Option is
issued together with a Non-Qualified Stock Option and the exercise of either
type of Option affects the right to exercise the other type of Option).
(b) Written Agreement. Each Option and SAR granted under the Plan shall be
evidenced by a written agreement in such form as the Committee shall from time
to time approve. All such agreements shall comply with and be subject to the
terms of the Plan.
(c) Exercise Price. The "Exercise Price" of each Option and SAR granted
under this Section 6 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted, except that the Exercise Price shall not be less than the
greater of 100% of the Fair Market Value or the par value of a share of Stock as
of the Pricing Date, as defined below. However, if the Plan participant owns
more than 10% of the total combined voting power of all classes of capital stock
of the Company or any Subsidiary or Parent, the Exercise Price of an Incentive
Stock Option granted to such Plan Participant shall not be less than 110% of the
Fair Market Value of a share of Stock as of the Pricing Date. For purposes of
the preceding sentence, the "Pricing Date" shall be the date on which the Option
or SAR is granted, except that the Committee may provide that: (x) the Pricing
5
Date is the date on which the recipient is hired or promoted (or similar event),
if the grant of the Option or SAR occurs not more than 90 days after the date of
such hiring, promotion or other event; and (y) if an Option or SAR is granted in
tandem with, or in substitution for, an outstanding award, the Pricing Date is
the date of grant of such outstanding award.
(d) Term. The term of each Stock Option and SAR shall be fixed by the
Committee, but no Stock Option shall be exercised more than ten years (or, in
the case of an Incentive Stock Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any Subsidiary or Parent, more than five years) after
the date the Option is granted.
(e) Exercisability. Stock Options and SARs shall be exercised at such time
or times and subject to such terms and conditions as shall be determined by the
Committee at or after grant. If the Committee provides, in its sole discretion,
that any Stock Option or SAR is exercisable only in installments, the Committee
may waive such installment exercise provisions at any time at or after grant in
whole or in part, based on such factors as the Committee shall determine, in its
sole discretion.
(f) Method of Exercise. Subject to whatever installment exercise provisions
apply pursuant to Section 6(e) hereof, Options and SARs may be exercised in
whole or in part at any time during the term thereof, by giving written notice
of exercise to the Company specifying the number of shares to be purchased or
the amount of the SAR to be exercised.
Such notice shall be accompanied by payment in full of the purchase price
in the case of an Option, either by cash, check, note or such other instrument
as the Committee may accept. As determined by the Committee, in its sole
discretion, at or after grant, payment in full or in part may also be made in
the form of Stock already owned by the Optionee based, in each case, on the fair
market value of the Stock on the date the Option is exercised, as determined for
this purpose by the Committee in its sole discretion; provided, however, that in
no event shall payment in full or in part for the exercise of an Option be made
with any Stock which, as of the date of exercise of the Option, has been owned
by the Optionee less than six (6) months. If the Committee permits such payment
in the form of Stock, the certificate or certificates representing the shares of
Stock to be delivered shall be duly executed in blank by the Optionee or shall
be accompanied by a stock power duly executed in blank suitable for purposes of
transferring such shares to the Company. Fractional shares of Stock will not be
accepted in payment of the purchase price of shares acquired upon exercise of
the Option.
No shares of Stock shall be issued until full payment therefor has been
made.
(g) Settlement of Award. Distribution following exercise of an Option or
SAR, and shares of Stock distributed pursuant to such exercise, shall be subject
to such conditions, restrictions and contingencies as the Committee may
establish. Settlement of SARs may be made in shares of Stock (valued at their
6
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in its
discretion, may impose such conditions, restrictions and contingencies and may
waive any such conditions, restrictions and contingencies, at or after grant, or
otherwise accelerate the vesting of any Option or SAR, at any time, in its
discretion with respect to shares of Stock acquired pursuant to the exercise of
an Option or an SAR as the Committee determines to be desirable.
SECTION 7. STOCK AWARDS.
Each Stock Award shall be subject to such conditions, restrictions and
contingencies as the Committee shall determine. These may include continuous
service and/or the achievement of performance measures. The performance measures
that may be used by the Committee for such Awards shall be measured by revenues,
income, or such other criteria as the Committee may specify. The Committee may
designate a single goal criterion or multiple goal criteria for performance
measurement purposes, with the measurement based on absolute Company or business
unit performance and/or on performance as compared with that of other
publicly-traded companies. If the right to become vested in a Stock Award
granted under this Section 7 is conditioned on the completion of a specified
period of service with the Company or any Subsidiary or Parent without
achievement of performance measures or other objectives being required as a
condition of vesting, then the required period of service for vesting shall be
not less than three years (subject to acceleration of vesting, to the extent
permitted by the Committee, in the event of the Participant's death, disability,
change in control or involuntary termination).
SECTION 8. MISCELLANEOUS.
(a) Non-Transferability of Options, SARs and Stock Awards. No Option, SAR
or Stock Award shall be transferable by a Plan Participant otherwise than by
will or by the laws of descent and distribution, and all Options and SARs shall
be exercisable, during the Plan Participant's lifetime, only by the Plan
Participant.
(b) Investment Representations. The Company may require any grantee, as a
condition of exercising an Option or SAR, to give written assurances in
substance and form satisfactory to the Company to the effect that such person is
acquiring the Stock subject to the Option or SAR for his own account for
investment and not with any present intention of selling or otherwise
distributing the same, and to such other effect as the Company deems necessary
or appropriate in order to comply with federal and applicable state securities
laws.
(c) Compliance with Securities Laws. Each Option and SAR shall be subject
to the requirement that, if at any time counsel to the Company shall determine
that the listing, registration, or qualification of the shares subject to such
Option and SAR upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, is necessary
as a condition of, or in connection with, the issuance or purchase of shares
thereunder, such Option or SAR may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
7
effected or obtained on conditions acceptable to the Committee. Nothing herein
shall be deemed to require the Company to apply for or to obtain such listing,
registration, or qualification.
(d) Recapitalization. If the outstanding shares of Stock are changed into
or exchanged for a different number or kind of shares or other securities of the
Company by reason of any recapitalization, reclassification, stock split, stock
dividend, combination, subdivision or similar transaction, then, subject to any
required action by the stockholders of the Company, the number and kind of
shares of Stock subject to outstanding Options, SARs or Stock Awards and
available under the Plan and price per share of Stock for any outstanding
Options and SARs shall be proportionately adjusted; provided, however, that no
fractional shares shall be issued or made subject to an Option, SAR or Stock
Award in making the foregoing adjustments. All adjustments made by the Committee
under this Section shall be final, conclusive and binding upon the holders of
Options, SARs and Stock Awards.
(e) Reorganization. If, while unexercised Options and/or SARs remain
outstanding under the Plan, the Company proposes to merge or consolidate with
another corporation, whether or not the Company is to be the surviving
corporation, or if the Company proposes to liquidate or sell or otherwise
dispose of substantially all of its assets or substantially all of the
outstanding shares of Stock of the Company are to be sold, then the Committee
may, in its sole discretion, either (i) make appropriate provision for the
protection of any such outstanding Options and SARs by the substitution on an
equitable basis of appropriate stock of the surviving corporation or its parent
in the merger or consolidation, or other reorganized corporation that will be
issuable in respect to the shares of Stock of the Company subject to such
Options and SARs, provided that, with respect to Incentive Stock Options, such
provision shall satisfy the requirement that no additional benefits shall be
conferred upon Optionees as a result of such substitution within the meaning of
Section 424(a) of the Code, and that the excess of the aggregate fair market
value of the shares subject to the Options immediately after such substitution
over the purchase price thereof is not more than the excess of the aggregate
fair market value of the shares subject to such Options immediately before such
substitution over the purchase price thereof, or (ii) upon written notice to the
Plan Participants, provide that all unexercised Options and SARs must be
exercised within a specified number of days of the date of such notice or they
will be terminated. In any such case, the Committee may, in its discretion,
accelerate the date on which outstanding Options and SARs become exercisable. In
no event, however, shall the Committee be obligated to take any action as a
result of any transaction described in this Section 8(e), it being acknowledged
that it is in the Committee's sole discretion to determine if, and to what
extent, the action authorized by this Section 8(e) shall be taken.
(f) Rights as a Shareholder. A Plan Participant shall have no rights as a
shareholder with respect to any shares subject to an Option or SAR until the
date of issue of a stock certificate to him or her for such shares and only
after such shares are fully paid. No adjustment shall be made for dividends or
other rights for which the record date is prior to the date such stock
certificate is issued.
8
(g) Annual Limitation For Incentive Stock Options. To the extent that the
Fair Market Value (determined as of the date of grant of an Option) of shares of
Stock with respect to which an Incentive Stock Option first becomes exercisable
by an Optionee during any calendar year exceeds $100,000, such excess portion of
the Stock Option shall thereafter be treated as a Non-Qualified Stock Option.
SECTION 9. NO SPECIAL EMPLOYMENT RIGHTS.
Nothing contained in the Plan or in any agreement pursuant to which an
Option, SAR or Stock Award is granted under the Plan shall confer upon any Plan
Participant any right with respect to the continuation of his employment or
other engagement by the Company or any Subsidiary, Parent or Affiliate or
interfere in any way with the ability of the Company or any Subsidiary, Parent
or Affiliate at any time to terminate such employment or other engagement or to
increase or decrease the compensation of the Plan Participant from the rate in
existence at the time of the grant of an award.
SECTION 10. OTHER EMPLOYEE BENEFITS.
The amount of any compensation deemed to be received by an Plan Participant
as a result of the exercise of an Option or the sale of shares received upon
such exercise will not constitute "earnings" with respect to which any other
benefits of such Plan Participant are determined, including, without limitation,
benefits under any pension, profit sharing, life insurance, or salary
continuation plan.
SECTION 11. WITHHOLDING.
The Company's obligation to deliver shares upon the exercise of any Option
or SAR granted under the Plan or to make any payments required by any option
agreement shall be subject to the grantee's satisfaction of any applicable
federal, state, and local income and employment tax and withholding requirements
in a manner and form satisfactory to the Company.
SECTION 12. GOVERNING LAW.
The Plan, all awards granted under the Plan and actions taken thereunder
shall be governed by and construed in accordance with the laws of the State of
Delaware.
SECTION 13. AMENDMENT OF THE PLAN.
The Board may at any time and from time to time amend, suspend, alter, or
discontinue the Plan in any respect, except that the Board may not, without the
approval of the Company's shareholders:
(a) except as expressly provided in Section 8(d) hereof, alter the
total number of shares reserved for issuance pursuant to the Plan;
9
(b) change the price at which Options and SARs may be granted pursuant
to Section 6(c) hereof;
(c) change the persons or class of persons eligible to participate in
the Plan;
(d) extend the maximum Option period under Section 6(d) hereof or the
term of the Plan described in Section 14(b) hereof;
(e) materially increase the benefits accruing to Plan Participants; or
(f) amend the terms of any award, prospectively or retroactively, if,
subject to Section 3 hereof, such amendment would impair the rights of any
holder without the holder's consent.
SECTION 14. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) Effective Date. The Plan shall become effective when approved by the
Company's shareholders.
(b) Termination. Unless the Plan is sooner terminated in accordance with
the terms herein, no further grants of awards may be made under the Plan after
the earlier of (i) the close of business on the day next preceding the tenth
anniversary of the date of its adoption by the shareholders and (ii) the date on
which all shares available for issuance under the Plan shall have been issued
pursuant to Stock Awards or the exercise of Options or SARs. Notwithstanding the
foregoing, Options granted prior to the date specified in (i) above may extend
beyond that date.
1578328v1
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COLOR IMAGING, INC.
The undersigned hereby appoints Sueling Wang, PhD and Morris E. Van
Asperen, attorneys and proxies, each with power to act without the other and
with power of substitution, and hereby authorizes them to represent and vote all
of the shares of stock of Color Imaging, Inc., standing in the name of the
undersigned with all powers which the undersigned would possess if present at
the Annual Meeting of Stockholders of Color Imaging to be held June 16, 2003 or
any adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE
TO SERVE AS A DIRECTOR, "FOR" PROPOSAL 2" TO APPROVE THE 2003 STOCK INCENTIVE
PLAN, "FOR" THE PROPOSAL 3 TO RATIFY THE GRANT OF OPTIONS AND "FOR" PROPOSAL 4
TO RATIFY THE SELECTION OF LAZAR LEVINE & FELIX LLP AS COLOR IMAGING'S
ACCOUNTANTS. IF NO DIRECTION IS GIVEN IN THE SPACE PROVIDED ON THE REVERSE SIDE,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS, AND "FOR" PROPOSALS 2,
3 AND 4. IF ANY OTHER BUSINESS SHOULD COME BEFORE THE MEETING, THIS PROXY WILL
BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PROXY HOLDER.
If you intend to attend the annual meeting, please be sure to check the "I
plan to attend the meeting" box on the reverse side of the Proxy.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF SHAREHOLDERS
COLOR IMAGING, INC.
June 16, 2003
- Please Detach and Mail in the Envelope Provided -
A [X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
FOR all nominees WITHHOLD NOMINEES: Sueling Wang, PhD
listed at right AUTHORITY (to Morris E. Van Asperen
(except as marked vote for all Yi Jen Wang
to the contrary) nominees Jui-Chi Wang
listed at Jui-Hung Wang
right) Jui-Kung Wang
Richard S. Eiswirth
1. Election of [ ] [ ]
Directors
(INSTRUCTION: To withhold authority to vote for any individual
nominee, write the nominee's name on the line provided below.)
FOR AGAINST ABSTAIN
---------------------------------------------------------------------
2. Approval of the 2003 Stock Incentive Plan. [ ] [ ] [ ]
3. Ratify the prior grant of options. [ ] [ ] [ ]
4. Ratify the selection of Lazar Levine & Felix LLP as Color [ ] [ ] [ ]
Imaging's Accountants for the year ending December 31, 2003.
5. In their discretion upon such other business as may properly come before the
meeting or any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE WITH RESPECT TO A
PROPOSAL, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE DIRECTORS AND FOR
PROPOSALS 2, 3 and 4 AND OTHERWISE IN ACCORDANCE WITH THE BEST JUDGMENT OF THE
PROXY HOLDER.
PLEASE SIGN, DATED, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
I plan to attend the meeting [ ]
Signature Signature Date:
------------------------- ------------------------- -----------------
NOTE: Please sign exactly as name appears hereon. When shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. 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.
1613735