SEC Company Response from COLOR IMAGING INC (CIK 0000820906) — Jun 24, 2005
COLOR IMAGING INC (CIK 0000820906)
Date: June 24, 2005 · CIK: 0000820906 · Accession: 0000914062-05-000437
AI Filing Summary & Sentiment
File numbers found in text: 000-16450
Referenced dates: June 2, 2005
Letter
VIA FEDERAL EXPRESS AND EDGAR Mr. Daniel F. Duchovny Assistant Director Division of Corporation Finance U.S. Securities and Exchange Commission Mail Stop 0303 100 "F" Street, N.E. Washington, D.C. 20549 SCHEDULE 13E-3 FILED MAY 5, 2005-06-02 FILE NO. 005-59249
RE: COLOR IMAGING, INC. PRELIMINARY SCHEDULE 14A FILED MAY 5, 2005 FILE NO. 000-16450
Dear Mr. Duchovny:
On behalf of Color Imaging, Inc. ("Color Imaging" or the "Company"), we transmit for filing Color Imaging's responses to the Staff's letter of comment dated June 2, 2005. For your convenience, the comments contained in that letter are reprinted below in italics. Unless otherwise indicated, all page references are to the marked copy of the Schedule 14A (file no. 0-16450). Concurrently, we have filed an amendment to the Schedule 14A.
On behalf of the Company, we respectfully request confidential treatment under the Freedom of Information Act (the "FOIA") (5 U.S.C. ss. 552), pursuant to the provisions of 17 C.F.R. ss. 200.83, of the Actuary Report identified as confidential, which are being provided supplementally to the staff (collectively, the "Confidential Materials"). Further discussion of this confidential treatment request appears at the end of this letter.
SCHEDULE 13E-3
INTRODUCTION
1. Please revise the references to an "annual" meeting in this section and to a "special" meeting in Item 16(a)(i) to make them consistent.
RESPONSE:
We have revised the documents to reflect that this is the annual meeting.
<PAGE> Mr. Daniel F. Duchovny June 24, 2005 Page 2
2. Please revise the last sentence in the second paragraph of this section to avoid stating that a proxy statement is incorporated by reference into itself.
RESPONSE:
We have deleted this sentence as it is redundant with the information in the third paragraph.
3. We note that Mr. Jui-Chi Wang, Mr. Jui-Hung Wang and Mr. Jui-Kung Wang serve on your board of directors and share voting and dispositive authority with respect to the shares of your common stock held by General Plastic Industrial through Chi Fu Investment. Please advise us why each of those persons has not also been identified as a filing person in the Schedule 13E-3.
RESPONSE:
We have examined Rule 13E-3 and believe that these three directors, as well as Sueling Wang (see comment 4 below), are required to be listed as filing persons. These four individuals collectively control most of the common stock of the Company and comprise a majority of the board. We have added them as filing persons.
4. We note that Sueling Wang is a director of the company who will continue in that capacity after the reverse stock split and his beneficial ownership of shares of your common stock will be approximately 17%. As for Mr. Sueling Wang and any other of your directors and executive officers, please provide an analysis as to whether each is engaged in this going private transaction. For help in making this determination, please review Section II.D.3 of our Current Issues Outline, publicly available at our website at www.sec.gov.
RESPONSE:
See comment 3 above. We believe the four Wangs represent the group controlling the Company and the outcome of the transaction. The other directors and officers play a much smaller role in the major business decisions of the Company, and we believe they are not filing persons.
5. Each filing person must individually comply with the filing, dissemination, disclosure and signature requirements of Schedule 13E-3. Therefore, you will need to include all of the information required by Schedule 13E-3 and its instructions for any filing persons added in response to the preceding comments. For example, include a statement as to whether each person believes the Rule 13e-3 transaction to be fair to unaffiliated security holders and an analysis of the material factors upon which he relied in reaching such a conclusion. See Item 8 of Schedule 13E-3, Item 1014 of Regulation M-A and Question and Answer No. 5 of Exchange Act Release No. 34-17719 (April 13,1981). In this regard, the reasons for the transaction and the alternatives considered by these affiliates may be different than those of the company, and this fact should be reflected in the disclosure. In addition, be sure that each new filer signs the Schedule 13E-3 in his or her individual capacity.
RESPONSE:
We have added information regarding the filing persons at the "Position of the Wangs as to the Fairness of the Transaction" at pages 4 and 25. Each of these filing persons has signed the 13E-3.
<PAGE> Mr. Daniel F. Duchovny June 24, 2005 Page 3
6. Please note also that you must include the information required by Items 3, 5, 6, 10 and 11 of Schedule 13E-3 with respect to each executive officer and director of your corporation. For example, you need to provide all of this information with respect to Mr. Wilson. See General Instruction C to Schedule 13E-3. In addition, provide the disclosure required by Item 1005(a) with respect to the filing persons and each of your executive officers and directors.
RESPONSE:
There is disclosure about Mr. Wilson's employment arrangements under Executive Compensation at page 72 ("Overview" and "Base Salary"), page 73 ("Stock Based Incentive Plans") and page 76 ("Employment Agreements"). Other information about Mr. Wilson is included under the following headings: Interests of Certain Persons in Matters to be Acted Upon; Security Ownership of Management; Section 16 Compliance.
PRELIMINARY SCHEDULE 14A
GENERAL
7. Rule 14a-4(b)(1) requires you to separately break out on the proxy card each matter to be voted on. Separate matters may be cross-conditioned upon one another, such that one will not pass unless the other does. See the September 2004 interim supplement to the Division of Corporation Finance's Manual of Publicly Available Telephone Interpretations (available on our Web site). We believe you must present as separate matters: (i) each potential ratio for the reverse stock split; and (ii) potentially also the forward stock split. Please revise to allow shareholders to separately vote on each potential ratio for the reverse stock split and the forward split, or explain why, based on our telephone interpretation and the reasoning articulated in this comment, separation is not required. With respect to a separate vote on the forward stock split, if you choose to present your analysis, it should note whether state law and/or Color Imaging's governing instruments require a shareholder vote.
RESPONSE:
We believe that the reverse stock split proposal is a single proposal and does not require "unbundling" into separate matters for each ratio. In no event will there be more than one action taken in regard to the reverse split; there will be only one reverse split. The board is asking for authority to choose one from several ratios at which to do the single reverse split. A vote on multiple splits would not be meaningful, for instance, if the shareholders approved 2 out of the 3 ratios. There is no scenario under which the Board would implement 2 reverse splits.
This is different from the situation described in the September 2004 interim supplement. There the staff discusses a merger which then might also lead to a second change in, for instance, the charter or bylaws. The staff gives as an example a staggered board which was not previously in place at the acquired company before the merger. So in that case there would be a 1. merger, followed by, 2. change to a staggered board. Here there is only going to be one reverse split.
The Board explicitly is asking for the authority to choose the ratio after the meeting, without additional input or choice from the shareholders. To suggest that the shareholders have such a choice would be misleading. The shareholders cannot choose between one ratio or another, there either will be a reverse split or not. Once that determination is made, the Board will choose the ratio. The reason for not giving them the choice is not due to obstinacy on the part of the Board - rather the Company cannot achieve the benefits of the going private transaction unless the ratio can be adjusted to make sure that the transaction stays within the budgetary guidelines deemed prudent by the Board and at the same time cashes out the optimal number of small holdings. As explained elsewhere in the proxy statement, this is due to the anticipated problem of stockholders changing their positions from now until after the record date for the meeting but before the record date for the split, coupled with the Company's limited budget for effectuating the reverse split. If we make each of the reverse split
<PAGE> Mr. Daniel F. Duchovny June 24, 2005 Page 4
ratios a separate proposal and the stockholders could approve one, all or a combination of the proposals, the Board would still reserve the right to select among the approved proposals the one that in its judgment required the least cash expenditure while also cashing out the optimum number of small holders. If required to make each reverse split ratio a separate proposal, the Board could not assure that the proposal receiving the largest number of votes would be acted upon, since any such ratio approved by the stockholders may be one that exceeds the level of expenditure the Board has established as prudent and or may not cash out sufficient numbers of small holders. This may lead to an otherwise unnecessary abandonment of the Transaction. If the stockholders approved one or two of the ratios but not the others the Board may not be able to complete the transaction and achieve the benefits for the company. Regardless of the ratio chosen, any stockholders who are cashed out will receive the same amount per pre-split share, i.e. $1.10, so the choice of ratio does not have a financial impact on the individual stockholder.
We would also point out that there have been numerous companies which have presented reverse splits with multiple ratios as a single proposal. See e.g., the definitive proxy statements for First Virtual Communications Corp. (4/30/03), Panamerican Bancorp (3/6/03, Penton Media (4/28/03), WJ Communications, Inc. (6/24/03), Railworks (3/29/01), Point West Capital Corp. (3/23/01), Lightspan, Inc. (7/29/03), Loral Space & Communications, Ltd. (4/18/03). See also Stratus Properties, Inc. (3/29/01), Bestway, Inc. (4/15/05) and The Alpine Group, Inc. (11/04/04), where a reverse split was combined with a follow on forward split into a single proposal. While we realize that the staff is not bound by past filings, we think it is significant that counsel for many companies who have addressed this issue have concluded that it is a single proposal.
With respect to the forward stock split, we believe the Board has the authority to approve a forward stock split without stockholder approval, if the forward split was reformatted as stock dividend. Therefore we do not believe this should need to be presented to the stockholders as a separate matter. We could simply reformat it and remove the reference to the forward split from the proposal, and may be willing to do so if the staff feels strongly about this. If we removed if from the proposal we could describe it elsewhere in the proxy statement. However, we believe it gives a more complete picture of the proposal to leave it in the proposal as a unified plan of action, with the reverse split followed by a forward split at the inverse of the ratio selected for the forward split. In any event, the Board does not intend to complete a forward split unless it is in connection with a reverse split. Therefore, it is not particularly meaningful to present it as a separate matter to be acted upon.
8. Please include the legend required by Rule 13e-3(e)(1)(iii).
RESPONSE:
We have added this legend to the front cover.
9. Please include the form of letter of transmittal as an appendix to your proxy statement.
RESPONSE:
We have added the form of letter of transmittal as Exhibit D to the proxy statement.
<PAGE> Mr. Daniel F. Duchovny June 24, 2005 Page 5
SUMMARY TERM SHEET - PAGE 3
10. It appears from the subsection entitled "Voting Information" that the approval of proposal 1 is assured. Please state affirmatively that approval is assured here and throughout the proxy statement.
RESPONSE:
We have added this statement on page 1 in the "Stock Splits Proposal, at page 4 "Voting Informatin,"in paragraph two of the Q&A "How will the Board Select the Reverse Stock Split Ratio" at page 12, at page 16 in Q&A "What are the Approval Requirements for the Stock Splits Proposal?" and at page 20 "Fairness of the Stock Splits."
11. We note your reference to the Private Securities Litigation Reform Act of 1995 in the "Cautionary Notice" subsection. The safe harbor for forward looking statements provided in the Reform Act does not apply to statements made in connection with a going private transaction. See Sec. 21E(b)(1)(E) of the Securities Exchange Act of 1934. Revise your proxy statement to delete the reference to the Reform Act, or revise to state explicitly that its
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<TEXT>
ARNALL GOLDEN GREGORY LLP
171 17TH STREET, NW
SUITE 2100
ATLANTA, GA 30363
Direct phone: 404.873.8706
Direct fax: 404.873.8707
E-mail: robert.dow@agg.com
www.agg.com
June 24, 2005
VIA FEDERAL EXPRESS AND EDGAR
Mr. Daniel F. Duchovny
Assistant Director
Division of Corporation Finance
U.S. Securities and Exchange Commission
Mail Stop 0303
100 "F" Street, N.E.
Washington, D.C. 20549
RE: COLOR IMAGING, INC.
PRELIMINARY SCHEDULE 14A
FILED MAY 5, 2005
FILE NO. 000-16450
SCHEDULE 13E-3
FILED MAY 5, 2005-06-02
FILE NO. 005-59249
Dear Mr. Duchovny:
On behalf of Color Imaging, Inc. ("Color Imaging" or the "Company"), we
transmit for filing Color Imaging's responses to the Staff's letter of comment
dated June 2, 2005. For your convenience, the comments contained in that letter
are reprinted below in italics. Unless otherwise indicated, all page references
are to the marked copy of the Schedule 14A (file no. 0-16450). Concurrently, we
have filed an amendment to the Schedule 14A.
On behalf of the Company, we respectfully request confidential treatment
under the Freedom of Information Act (the "FOIA") (5 U.S.C. ss. 552), pursuant
to the provisions of 17 C.F.R. ss. 200.83, of the Actuary Report identified as
confidential, which are being provided supplementally to the staff
(collectively, the "Confidential Materials"). Further discussion of this
confidential treatment request appears at the end of this letter.
SCHEDULE 13E-3
INTRODUCTION
1. Please revise the references to an "annual" meeting in this section and to
a "special" meeting in Item 16(a)(i) to make them consistent.
RESPONSE:
We have revised the documents to reflect that this is the annual meeting.
<PAGE>
Mr. Daniel F. Duchovny
June 24, 2005
Page 2
2. Please revise the last sentence in the second paragraph of this section to
avoid stating that a proxy statement is incorporated by reference into
itself.
RESPONSE:
We have deleted this sentence as it is redundant with the information in
the third paragraph.
3. We note that Mr. Jui-Chi Wang, Mr. Jui-Hung Wang and Mr. Jui-Kung Wang
serve on your board of directors and share voting and dispositive authority
with respect to the shares of your common stock held by General Plastic
Industrial through Chi Fu Investment. Please advise us why each of those
persons has not also been identified as a filing person in the Schedule
13E-3.
RESPONSE:
We have examined Rule 13E-3 and believe that these three directors, as well
as Sueling Wang (see comment 4 below), are required to be listed as filing
persons. These four individuals collectively control most of the common
stock of the Company and comprise a majority of the board. We have added
them as filing persons.
4. We note that Sueling Wang is a director of the company who will continue in
that capacity after the reverse stock split and his beneficial ownership of
shares of your common stock will be approximately 17%. As for Mr. Sueling
Wang and any other of your directors and executive officers, please provide
an analysis as to whether each is engaged in this going private
transaction. For help in making this determination, please review Section
II.D.3 of our Current Issues Outline, publicly available at our website at
www.sec.gov.
RESPONSE:
See comment 3 above. We believe the four Wangs represent the group
controlling the Company and the outcome of the transaction. The other
directors and officers play a much smaller role in the major business
decisions of the Company, and we believe they are not filing persons.
5. Each filing person must individually comply with the filing, dissemination,
disclosure and signature requirements of Schedule 13E-3. Therefore, you
will need to include all of the information required by Schedule 13E-3 and
its instructions for any filing persons added in response to the preceding
comments. For example, include a statement as to whether each person
believes the Rule 13e-3 transaction to be fair to unaffiliated security
holders and an analysis of the material factors upon which he relied in
reaching such a conclusion. See Item 8 of Schedule 13E-3, Item 1014 of
Regulation M-A and Question and Answer No. 5 of Exchange Act Release No.
34-17719 (April 13,1981). In this regard, the reasons for the transaction
and the alternatives considered by these affiliates may be different than
those of the company, and this fact should be reflected in the disclosure.
In addition, be sure that each new filer signs the Schedule 13E-3 in his or
her individual capacity.
RESPONSE:
We have added information regarding the filing persons at the "Position of
the Wangs as to the Fairness of the Transaction" at pages 4 and 25. Each of
these filing persons has signed the 13E-3.
<PAGE>
Mr. Daniel F. Duchovny
June 24, 2005
Page 3
6. Please note also that you must include the information required by Items 3,
5, 6, 10 and 11 of Schedule 13E-3 with respect to each executive officer
and director of your corporation. For example, you need to provide all of
this information with respect to Mr. Wilson. See General Instruction C to
Schedule 13E-3. In addition, provide the disclosure required by Item
1005(a) with respect to the filing persons and each of your executive
officers and directors.
RESPONSE:
There is disclosure about Mr. Wilson's employment arrangements under
Executive Compensation at page 72 ("Overview" and "Base Salary"), page 73
("Stock Based Incentive Plans") and page 76 ("Employment Agreements").
Other information about Mr. Wilson is included under the following
headings: Interests of Certain Persons in Matters to be Acted Upon;
Security Ownership of Management; Section 16 Compliance.
PRELIMINARY SCHEDULE 14A
GENERAL
7. Rule 14a-4(b)(1) requires you to separately break out on the proxy card
each matter to be voted on. Separate matters may be cross-conditioned upon
one another, such that one will not pass unless the other does. See the
September 2004 interim supplement to the Division of Corporation Finance's
Manual of Publicly Available Telephone Interpretations (available on our
Web site). We believe you must present as separate matters: (i) each
potential ratio for the reverse stock split; and (ii) potentially also the
forward stock split. Please revise to allow shareholders to separately vote
on each potential ratio for the reverse stock split and the forward split,
or explain why, based on our telephone interpretation and the reasoning
articulated in this comment, separation is not required. With respect to a
separate vote on the forward stock split, if you choose to present your
analysis, it should note whether state law and/or Color Imaging's governing
instruments require a shareholder vote.
RESPONSE:
We believe that the reverse stock split proposal is a single proposal and
does not require "unbundling" into separate matters for each ratio. In no
event will there be more than one action taken in regard to the reverse
split; there will be only one reverse split. The board is asking for
authority to choose one from several ratios at which to do the single
reverse split. A vote on multiple splits would not be meaningful, for
instance, if the shareholders approved 2 out of the 3 ratios. There is no
scenario under which the Board would implement 2 reverse splits.
This is different from the situation described in the September 2004
interim supplement. There the staff discusses a merger which then might
also lead to a second change in, for instance, the charter or bylaws. The
staff gives as an example a staggered board which was not previously in
place at the acquired company before the merger. So in that case there
would be a 1. merger, followed by, 2. change to a staggered board. Here
there is only going to be one reverse split.
The Board explicitly is asking for the authority to choose the ratio after
the meeting, without additional input or choice from the shareholders. To
suggest that the shareholders have such a choice would be misleading. The
shareholders cannot choose between one ratio or another, there either will
be a reverse split or not. Once that determination is made, the Board will
choose the ratio. The reason for not giving them the choice is not due to
obstinacy on the part of the Board - rather the Company cannot achieve the
benefits of the going private transaction unless the ratio can be adjusted
to make sure that the transaction stays within the budgetary guidelines
deemed prudent by the Board and at the same time cashes out the optimal
number of small holdings. As explained elsewhere in the proxy statement,
this is due to the anticipated problem of stockholders changing their
positions from now until after the record date for the meeting but before
the record date for the split, coupled with the Company's limited budget
for effectuating the reverse split. If we make each of the reverse split
<PAGE>
Mr. Daniel F. Duchovny
June 24, 2005
Page 4
ratios a separate proposal and the stockholders could approve one, all or a
combination of the proposals, the Board would still reserve the right to
select among the approved proposals the one that in its judgment required
the least cash expenditure while also cashing out the optimum number of
small holders. If required to make each reverse split ratio a separate
proposal, the Board could not assure that the proposal receiving the
largest number of votes would be acted upon, since any such ratio approved
by the stockholders may be one that exceeds the level of expenditure the
Board has established as prudent and or may not cash out sufficient numbers
of small holders. This may lead to an otherwise unnecessary abandonment of
the Transaction. If the stockholders approved one or two of the ratios but
not the others the Board may not be able to complete the transaction and
achieve the benefits for the company. Regardless of the ratio chosen, any
stockholders who are cashed out will receive the same amount per pre-split
share, i.e. $1.10, so the choice of ratio does not have a financial impact
on the individual stockholder.
We would also point out that there have been numerous companies which have
presented reverse splits with multiple ratios as a single proposal. See
e.g., the definitive proxy statements for First Virtual Communications
Corp. (4/30/03), Panamerican Bancorp (3/6/03, Penton Media (4/28/03), WJ
Communications, Inc. (6/24/03), Railworks (3/29/01), Point West Capital
Corp. (3/23/01), Lightspan, Inc. (7/29/03), Loral Space & Communications,
Ltd. (4/18/03). See also Stratus Properties, Inc. (3/29/01), Bestway, Inc.
(4/15/05) and The Alpine Group, Inc. (11/04/04), where a reverse split was
combined with a follow on forward split into a single proposal. While we
realize that the staff is not bound by past filings, we think it is
significant that counsel for many companies who have addressed this issue
have concluded that it is a single proposal.
With respect to the forward stock split, we believe the Board has the
authority to approve a forward stock split without stockholder approval, if
the forward split was reformatted as stock dividend. Therefore we do not
believe this should need to be presented to the stockholders as a separate
matter. We could simply reformat it and remove the reference to the forward
split from the proposal, and may be willing to do so if the staff feels
strongly about this. If we removed if from the proposal we could describe
it elsewhere in the proxy statement. However, we believe it gives a more
complete picture of the proposal to leave it in the proposal as a unified
plan of action, with the reverse split followed by a forward split at the
inverse of the ratio selected for the forward split. In any event, the
Board does not intend to complete a forward split unless it is in
connection with a reverse split. Therefore, it is not particularly
meaningful to present it as a separate matter to be acted upon.
8. Please include the legend required by Rule 13e-3(e)(1)(iii).
RESPONSE:
We have added this legend to the front cover.
9. Please include the form of letter of transmittal as an appendix to your
proxy statement.
RESPONSE:
We have added the form of letter of transmittal as Exhibit D to the proxy
statement.
<PAGE>
Mr. Daniel F. Duchovny
June 24, 2005
Page 5
SUMMARY TERM SHEET - PAGE 3
10. It appears from the subsection entitled "Voting Information" that the
approval of proposal 1 is assured. Please state affirmatively that approval
is assured here and throughout the proxy statement.
RESPONSE:
We have added this statement on page 1 in the "Stock Splits Proposal, at
page 4 "Voting Informatin,"in paragraph two of the Q&A "How will the Board
Select the Reverse Stock Split Ratio" at page 12, at page 16 in Q&A "What
are the Approval Requirements for the Stock Splits Proposal?" and at page
20 "Fairness of the Stock Splits."
11. We note your reference to the Private Securities Litigation Reform Act of
1995 in the "Cautionary Notice" subsection. The safe harbor for forward
looking statements provided in the Reform Act does not apply to statements
made in connection with a going private transaction. See Sec. 21E(b)(1)(E)
of the Securities Exchange Act of 1934. Revise your proxy statement to
delete the reference to the Reform Act, or revise to state explicitly that
its