SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
1MAGE SOFTWARE, INC.
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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: _________________________________________________________
1MAGE SOFTWARE, INC.
6025 S. QUEBEC STREET, SUITE #300
ENGLEWOOD, COLORADO 80111
(303) 694-9180
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 7, 2004
10:00 a.m.
To Our Shareholders:
We strongly encourage your attendance and participation at the Annual
Meeting of Shareholders of 1mage Software, Inc., which will be held at 10:00
a.m. on Monday, June 7, 2004, at the offices of the Company at 6025 S. Quebec
Street, Suite 300, Englewood, Colorado for the following purposes:
1. To elect five directors to the Board;
2. To approve and ratify the selection of BKD, LLP as the Company's
independent certified public accountants and auditors for the year
ending December 31, 2004;
3. To approve an amendment to the Company's 1996 Equity Incentive Plan to
increase the number of shares reserved under the Plan; and
4. To transact such other business as may properly come before the Annual
Meeting.
A Proxy Statement explaining the matters to be acted upon at the Annual
Meeting is enclosed.
The Board of Directors has designated April 1, 2004 as the record date for
determining shareholders entitled to notice of and to vote at the Annual
Meeting.
THE BOARD OF DIRECTORS WOULD LIKE TO EMPHASIZE THE IMPORTANCE OF
EXERCISING YOUR RIGHTS AS SHAREHOLDERS TO VOTE ON THE ISSUES DESCRIBED IN THE
ENCLOSED PROXY STATEMENT. THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE ELECTION OF DIRECTORS, APPROVE AND RATIFY THE SELECTION OF BKD,
LLP, AND APPROVE THE AMENDMENT TO THE EQUITY INCENTIVE PLAN.
YOU ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE
ENVELOPE PROVIDED AS PROMPTLY AS POSSIBLE.
April 16, 2004 David R. DeYoung
President, CEO
2
1MAGE SOFTWARE, INC.
6025 S. QUEBEC STREET, SUITE #300
ENGLEWOOD, COLORADO 80111
(303) 694-9180
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 7, 2004
10:00 A.M.
THE ENCLOSED PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF 1MAGE
SOFTWARE, INC., A COLORADO CORPORATION (THE "COMPANY"), FOR USE AT THE ANNUAL
MEETING OF SHAREHOLDERS TO BE HELD AT THE OFFICES OF THE COMPANY AT 6025 S.
QUEBEC STREET, SUITE 300, ENGLEWOOD, COLORADO ON MONDAY, JUNE 7, 2004 AT 10:00
A.M., MOUNTAIN DAYLIGHT TIME, AND AT ANY ADJOURNMENT THEREOF. It is anticipated
that this Proxy Statement and the accompanying Proxy will be mailed to the
Company's shareholders on or about April 16, 2004.
The expense of the Board of Directors' Proxy solicitation will be borne by
the Company. In addition to solicitation of Proxies by use of the mails, some of
the Company's officers and directors may solicit Proxies by telephone, telegraph
or personal interview without any additional compensation to them. The Company
will reimburse brokers, nominees, custodians and other fiduciaries for expenses
in forwarding Proxy materials to their principals.
Any shareholder giving a Proxy on the enclosed form may revoke it at any
time prior to the exercise thereof by advising the Secretary of the Company in
writing at the above address, by properly executing a later dated Proxy, or by
appearing in person and voting at the Annual Meeting.
VOTING OF SHARES
Only holders of the Company's outstanding shares of common stock, $.004
par value ("Common Stock"), of record at the close of business on April 1, 2004,
will be entitled to notice of, and to vote at, the Annual Meeting and at any
adjournment thereof. On that date, there were 3,287,597 shares of Common Stock
outstanding. A majority of the outstanding shares of Common Stock represented in
person or by proxy and entitled to vote at the Annual Meeting will constitute a
quorum at the Annual Meeting.
For the election of directors, of the shares of Common Stock represented
in person or by proxy and entitled to vote at the Annual Meeting, that number of
candidates equaling the number of directors to be elected having the highest
number of votes cast in favor of their election are elected to the Board of
Directors. Accordingly, the five (5) persons receiving the greatest number of
votes at the meeting, in person or by proxy, will be elected. The approval and
ratification of the selection of BKD, LLP and the amendment to the Equity
Incentive Plan require an affirmative vote of a majority of the shares
represented in person or by proxy and entitled to vote at the Annual Meeting.
Abstentions and broker non-votes will be counted for purposes of establishing a
quorum only. A majority of the shares represented in person or by proxy and
entitled to vote at the Annual Meeting will constitute a quorum. Only those
votes cast for the election of directors and the other proposals will be counted
as votes in favor or affirmative votes. THE BOARD OF DIRECTORS URGES EACH
SHAREHOLDER TO MARK, SIGN AND MAIL THE ENCLOSED PROXY CARD IN THE RETURN
ENVELOPE AS PROMPTLY AS POSSIBLE.
3
STOCK OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as far as is known to the Board of
Directors or the management of the Company, the only persons owning on April 1,
2004 more than five percent of the outstanding shares of the Company's Common
Stock. For purposes of this disclosure, the amount of the Company's Common Stock
beneficially owned by each person or entity is the aggregate number of shares of
the Common Stock outstanding on such date plus an amount equal to the aggregate
amount of Common Stock which could be issued upon the exercise of stock options
and warrants within 60 days of such date.
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Beneficial
Name and Address of Beneficial Owner Ownership(1) Percent of Class
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David R. DeYoung 933,216 (2),(3) 25.2%
6025 So. Quebec Street #300, Englewood, Colorado 80111
Mary Anne DeYoung 402,501 (4) 11.1%
6025 So. Quebec Street #300, Englewood, Colorado 80111
Robert Wiegand II 96,000 (5) 2.9%
5261 So. Quebec Street, Greenwood Village, Colorado 80111
John G. Mazza 365,937 (6) 11.0%
6613 Zumirez Drive, Malibu, California 90265
Spencer D. Lehman 360,638 (7) 10.9%
26671 Latigo Shores Drive, Malibu, California 90265
All Executive Officers and Directors as a Group - 5 2,158,293 (8) 52.8%
persons
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(1) Beneficial owners are believed to have sole voting and investment power
with respect to the shares shown unless otherwise indicated.
(2) Includes: 387,625 options 30,000 warrants to purchase Common Stock. See
EXECUTIVE COMPENSATION - Employment Contract.
(3) Excludes: any shares attributable to Mr. DeYoung's right under his
employment contract to maintain his proportional ownership of the Company
under certain circumstances. See EXECUTIVE COMPENSATION - Employment
Contract.
(4) Includes 332,000 options to purchase Common Stock
(5) Includes 76,000 options to purchase Common Stock
(6) Consists of 3,000 options and 30,000 warrants to purchase Common Stock
(7) Includes 30,000 warrants to purchase Common Stock
(8) Includes 798,625 options and 90,000 warrants to purchase Common Stock
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ELECTION OF DIRECTORS
The Board of Directors recommends the election as Directors of the five
(5) nominees listed below. The five nominees, if elected, will hold office until
the next annual meeting of shareholders and until their successors have been
elected and qualified. IT IS INTENDED THAT SHARES REPRESENTED BY PROXIES IN THE
ACCOMPANYING FORM WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES NAMED BELOW
UNLESS A CONTRARY DIRECTION IS INDICATED. If at the time of the Annual Meeting
any of the nominees named below should be unable to serve, which event is not
expected to occur, the discretionary authority provided in the Proxy will be
exercised to vote for such substitute nominee or nominees, if any, as shall be
designated by the Board of Directors.
The following table sets forth the name and age of each nominee for
Director, indicating all positions and offices with the Company currently held
by him, and the period during which he has served as a Director:
Period Served as
Director of the All Positions and Offices Held
Name Age Company With the Company
---- --- ------ ----------------
David R. DeYoung 59 Since 1981 President, Chief Executive Officer and Director
Mary Anne DeYoung 50 Since 1994 Treasurer, Chief Financial Officer, Asst. Secretary and Director
Robert Wiegand II 57 Since 1992 Secretary and Director
John G. Mazza 58 Since 2003 Director
Spencer D. Lehman 68 Since 2004 Director
None of the nominees hold directorships in any other company having a
class of securities registered under the Securities Exchange Act of 1934, as
amended, or in any company registered as an investment company under the
Investment Company Act of 1940, as amended.
There is no arrangement or understanding between any of the nominees and
any other person or persons pursuant to which he was or is to be selected as a
director or nominee.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors held one meeting and acted once by unanimous
written consent during the year ended December 31, 2003. The committees of the
Board include an Audit Committee and a Compensation Committee. The Board of
Directors does not have a standing nominating committee. The Board did not make
an affirmative decision regarding the independence of the members of the Board
for purposes of serving on such committee. The whole Board serves as the
nomination committee. Nominations for election to the Board of Directors may be
made by the Board of Directors or by any shareholder entitled to vote for the
election of directors in accordance with our bylaws, Colorado law and the rules
and regulations of the Securities and Exchange Commission.
5
The Audit Committee was comprised of Messrs. Wiegand and Knapp during
2003. It held two meetings and acted once by unanimous written consent during
the fiscal year. The Audit Committee first adopted its charter in fiscal 2001
and amended it March 4, 2004. Historically the Audit Committee's primary
function has been to assist the Board of Directors in fulfilling its independent
and objective oversight responsibilities of financial reporting and internal
financial and accounting controls of the Company. The Audit Committee amended
its charter to reflect the changes in the powers, duties and responsibilities of
audit committees generally after the Sarbanes-Oxley Act of 2002, including but
not limited to the power to hire independent legal and accounting experts to
advise the Committee at the Company's expense, the duty to approve any non-audit
services by the Company's auditors, and the responsibility for selection of the
Company's independent auditors. A copy of the amended charter of the Audit
Committee is attached hereto as Appendix A. The Company does not have a
"financial expert", as defined by the SEC's rules under Sarbanes-Oxley, serving
on the Committee because the Board of Directors believes that all of the members
of the Board, including but not limited to those serving on the Audit Committee,
have sufficient financial knowledge, experience and sophistication to comprehend
and critically analyze the Company's financial statements and the audit thereof.
Accordingly, the Board has determined that adding a "financial expert" to the
Board and the Audit Committee at this time is not a necessary or productive
expenditure of the Company's limited resources.
The Compensation Committee makes recommendations on executive compensation
and selects those persons eligible to receive grants of options under the
Company's Equity Incentive Plan. The members of the Compensation Committee in
January and February, 2003 were Messrs. Wiegand and Capeless. Mr. Capeless
resigned from the Board of Directors in February of 2003. Mr. Wiegand remained
as the sole member of the Committee through the end of the year. The Committee
acted one time by unanimous written consent during 2003.
DIRECTORS' REMUNERATION
The Company currently pays non-employee Directors $1,500 per quarter plus
specific hourly fees for special meetings or additional participation as a
director. Any director who serves on the Compensation Committee automatically
receives 4,000 options on the last trading day in June pursuant to the Company's
1996 Equity Incentive Option Plan. Accordingly, on June 30, 2003, Mr. Wiegand,
as a member of the Compensation Committee, received fully vested ten year
options to purchase 4,000 shares of Common Stock at an exercise price of $0.35
per share, the closing price on the date of grant.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names of all directors and executive officers of
the Company, their ages, all positions and offices held by each such person, the
period during which he has served as such, and the principal occupations and
employment of such persons during at least the last five years.
DAVID R. DEYOUNG - CHAIRMAN, PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
Mr. DeYoung has been President, Chief Executive Officer and a Director
of the Company since its formation in 1981. He served in similar capacities
with the Company's predecessor corporation from 1979 to 1981. He holds a
Bachelor of Science Degree in Business Administration and Computer Science
from California State Polytechnic University. Mr. DeYoung is the spouse of
Mary Anne DeYoung.
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MARY ANNE DEYOUNG - TREASURER, CHIEF FINANCIAL OFFICER, ASSISTANT SECRETARY AND
DIRECTOR
Ms. DeYoung was elected to the Board of Directors in April 1996. Ms.
DeYoung was appointed Treasurer, Chief Financial Officer and Assistant Secretary
of the Company on December 15, 1994. Ms. DeYoung has served as Vice President,
Finance and Administration since July 1986. Ms. DeYoung joined the Company as
Controller in April 1981. From 1975 to 1981, Ms. DeYoung was a systems analyst
with Arthur Andersen LLP, a financial analyst, and an independent financial
consultant. Ms. DeYoung holds a Bachelor of Science Degree in Accounting from
the University of Santa Clara. Ms. DeYoung is the spouse of David R. DeYoung.
ROBERT WIEGAND II - SECRETARY AND DIRECTOR
Mr. Wiegand was elected to the Board of Directors in July 1992. Mr.
Wiegand was appointed to the office of Secretary of the Company on March 1,
1994. Mr. Wiegand is presently a lawyer in private practice. From January 15,
1992 to December 26, 1992, he was Vice-President of Administration for Rose
Manufacturing Co., a privately held manufacturer of safety equipment based in
Englewood, Colorado. Mr. Wiegand has practiced law for 23 years, and prior to
joining Rose Manufacturing, was special counsel with Pendleton & Sabian, P.C., a
law firm in Denver. Mr. Wiegand graduated Phi Beta Kappa from the Tulane
University of Louisiana in 1970 and went on to receive a law degree and was
admitted to practice in Louisiana in 1972 and Colorado in 1977. Since 1976, Mr.
Wiegand's practice has been limited to securities offerings, estate planning,
business organizations and tax law. In addition to membership in six bar
Associations, Mr. Wiegand has been admitted to practice before the U.S. Supreme
Court, the U.S. District Court (Colorado and ED-Louisiana) and before the U.S.
Court of Appeals (5th Circuit).
JOHN G. MAZZA - DIRECTOR
Mr. Mazza was elected to the Board of Directors in March 2003. Mr. Mazza
is currently the President of Drake Holding Corp. and Drake Energy Corp., both
Nevada corporations and brokerage firms, located in Malibu, California, and has
served in that capacity since 1984 and 1990, respectively. From 1999 to 2001,
Mr. Mazza was a founder, Secretary and director of Aoptix Technologies Inc., a
manufacturer of free space optical laser data and telecommunication transmission
systems. From 1969 to 1984 Mr. Mazza held various senior management positions
with William O'Neil and Co. Incorporated, a New York Stock Exchange member firm
and O'Neil Data Systems, Inc., a brokerage company. In total, Mr. Mazza has been
associated with the securities industry for over 30 years. Mr. Mazza holds a
Bachelor of Science degree from Claremont McKenna College and a Masters of
Business Administration from the University of Southern California.
SPENCER D. LEHMAN - DIRECTOR
Mr. Lehman was elected to the Board of Directors in February 2004. Mr.
Lehman has been a securities broker with the Shemano Group in Los Angeles,
California since 2002. From 1987 until 2002, Mr. Lehman held various positions
with Drake Capital, another brokerage firm. From 1962 to 1987, Mr. Lehman held
positions at PaineWebber, Dean Witter and Shearson. From 1958 to 1960, Mr.
Lehman served as an officer in the United States Navy. Mr. Lehman holds a degree
in Geology from the University of California- Los Angeles (U.C.L.A.).
There is no arrangement or understanding between any of the executive
officers and any other persons pursuant to which he or she was or is to be
selected as an executive officer.
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CODES OF ETHICS
The Company has not yet adopted a code of ethics for its principal
executive officer and principal financial officer since they are the Company's
only two executive officers. The Board of Directors will continue to evaluate,
from time to time, whether a code of ethics should be developed and adopted. If
the Company does adopt a code of ethics in the future, in light of the Company's
modest size, it is likely to apply to all employees rather than only executive
officers.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 30, 2003, the Company closed on a Revolving Credit Loan Agreement
dated effective April 1, 2003 (the "Agreement") with DEMALE, LLC, a Colorado
limited liability company ("DEMALE"), under which DEMALE agreed to provide the
Company with a line of credit up to $300,000. DEMALE has three members, David R.
DeYoung, the Company's President and Chief Executive Officer, and John G. Mazza
and Spencer D. Lehman, both Directors and more than 10% shareholders. At
closing, each of Messrs. DeYoung, Mazza and Lehman received 30,000 shares of
Common Stock based on the closing bid price of $0.23 on April 1, 2003, and a
warrant to purchase up to an additional 30,000 shares of Common Stock at $0.18
per share, which price was set by reference to 80% of the closing bid price on
April 1, 2003. At December 31, 2003, the Company had been advanced $55,000 under
the line of credit. All ongoing and future transactions between the Company and
its affiliates will be no less favorable to the Company than from unaffiliated
third parties and will be approved by a majority of the Company's disinterested
directors.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following sets forth in summary form the compensation received during
each of the Company's last three completed fiscal years by the Chief Executive
Officer of the Company. There were no other Executive Officers serving at the
end of the last fiscal year whose compensation was greater than $100,000.
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Long Term
Annual Compensation * Compensation All Other
--------------------------------------- Compensation
Salary Bonus Awards **
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Securities
Underlying
Name and Principal Position Year ($) ($) Options (#) ($)
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David R. DeYoung 2003 132,408 5,250 80,000 1,767
President, CE O 2002 145,578 0 0 3,068
2001 144,260 18,529 25,000 3,156
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* Mr. DeYoung did not receive additional compensation other than noted above,
the aggregate amount of which was the lesser of either $50,000 or 10% of his
annual salary and bonus.
** Includes insurance premiums paid by the Company for term life and disability
insurance, as well as premiums paid for a key-man life insurance policy which
has the death benefit assigned to the Company and the cash value of the policy
intended to accrue for the benefit of Mr. DeYoung.
8
OPTION GRANTS FOR FISCAL YEAR ENDED DECEMBER 31, 2003
The following table sets forth the information concerning individual grants
of stock options during the last fiscal year to the named Executive Officers:
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Individual Grants
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Percent of
Number of Total
Securities Options Exercise
Underlying Granted to or
Options Employees Base
Granted in Fiscal Price Expiration Grant Date
Name (#)(1) Year ($/Share) Date Present Value(2)
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David R. DeYoung 22,500 10% $.35 01/03/2013 $7,597
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David R. De Young 27,500 12% $.385 01/03/2013 $9,268
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David R. DeYoung 10,000 4% $.385 06/06/2013 $3,331
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David R. DeYoung 20,000 9% $.34 12/31/2013 $6,008
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(1) All of the grants were nonqualified stock options.
(2) In accordance with SEC rules, we have used the Black-Scholes option
pricing model to estimate the grant date present value of the options set
forth in this table. Our use of this model should not be construed as an
endorsement of the accuracy at valuing options. All stock option valuation
models, including the Black-Scholes model, require a prediction about the
future movement of the stock price. The real value of the options in this
table depends upon the actual changes in the market price of the Company's
Common Stock during the applicable period.
AGGREGATED OPTION EXERCISES FOR FISCAL YEAR ENDED DECEMBER 31, 2003 AND
YEAR-END OPTION VALUES
The following table sets forth information concerning each exercise of
stock options during the last fiscal year by the named Executive Officer and the
fiscal year-end value of unexercised options:
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Number of securities Value of unexercised
Shares acquired Value underlying unexercised in-the-money options at
Name on exercise (#) Realized ($) options at fiscal year-end (#) fiscal year-end ($)*
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Exercisable/unexercisable Exercisable/unexercisable
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D.R. DeYoung 0 $ 0 393,000/0 $ 0/$ 0
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*For all the unexercised options held as of December 31, 2003, the aggregate
dollar value is the excess of the market value of the stock underlying those
options over the exercise price of those unexercised options. The price used to
calculate these figures is the closing price as of December 31, 2003 as reported
on the OTCBB, which was $.31 per share.
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EQUITY COMPENSATION PLAN INFORMATION AS OF YEAR END DECEMBER 31, 2003
Equity Compensation Plan Information
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(a) (b) (c)
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Plan Category Number of securities Weighted average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding future issuance under equity
outstanding options, options, warrants compensation plans
warrants and rights and rights (excluding securities
reflected in column (a) )
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Equity compensation
plans approved by 881,800 $ .54 0
security holders
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Equity compensation
plans not approved 309,849 $ .42 0
by security holders
(1)
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Total 1,191,649 $ .51 0
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(1) The 1994 Stock Option and Grant Plan, which was adopted by the Company but
not approved by the Company's securities holders, was intended to provide
incentives for selected persons to promote the financial success and progress of
the Company by granting such persons options to purchase shares of Common Stock
of the Company, or through the award of shares of the Company's Common Stock.
The maximum aggregate number of shares of Common Stock subject to the Plan is
700,000. The Plan is administered by the Board of Directors of the Company. The
Plan was amended in 2002 to permit grants to employees who were also members of
the Board. In addition, options for 20,000 shares were granted outside of the
1996 Equity Incentive Plan (which was approved by the shareholders) by the Board
of Directors on December 31, 2003. Those options are treated in all respects as
to terms and conditions as if they were granted under the 1996 Plan.
EMPLOYMENT CONTRACTS
Mr. DeYoung, the Company's President and Chief Executive Officer, is
employed pursuant to a three-year employment contract between the Company and
Mr. DeYoung, which has been extended and will expire on October 31, 2005. Since
November 1, 1999, the compensation of Mr. DeYoung has been established under the
terms of this employment contract. The contract calls for an annual base salary,
in an amount determined annually by the Board of Directors, payable
semi-monthly, plus expenses and normal fringe benefits. Mr. DeYoung earns a
bonus of 5% of the Company's pretax earnings, calculated on a quarterly basis.
An annual bonus may be paid to Mr. DeYoung based on the performance of the
Company and at the discretion of the Board of Directors. Mr. DeYoung's
employment contract provides that should his employment be terminated for any
reason other than for cause, he is entitled to a cash severance package equal to
one year's cash compensation. In addition, Mr. DeYoung is entitled to receive a
grant of a sufficient number of ten-year options as are necessary to permit him
to retain the same percentage of beneficial ownership interest in the Company as
he held on December 16, 1996. These grants would be made from the Company's
Equity Incentive Plan at the fair market value of the Common Stock on the date
of grant.
Ms. DeYoung, the Company's Vice President of Finance and Chief Financial
Officer, is employed pursuant to three-year employment contract between the
Company and Ms. DeYoung which has been extended and will expire on October 31,
2005. Her compensation is established under the terms of this employment
contract. The contract calls for an annual base salary, expenses, normal fringe
benefits, as well as a bonus equal to 4% of the
10
Company's pretax earnings, calculated on a quarterly basis. In addition, Ms.
DeYoung's employment contract provides that should her employment be terminated
for any reason other than for cause, she is entitled to a cash severance package
equal to one year's cash compensation.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following Audit Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or under the
Securities Exchange Act of 1934, except to the extent the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors (the "Audit Committee") is
composed of two directors and operates under a written charter which was first
adopted in March 2001 by the Board of Directors and amended in March 2004. The
charter is reviewed and updated as needed in accordance with applicable rules of
the Securities and Exchange Commission and The Sarbanes-Oxley Act of 2002 (the
"Sarbanes Act"). The Board of Directors has made the determination that only one
of the members of the Audit Committee, John Mazza, would be considered
independent under the Nasdaq definition of "independence" but he still falls
outside of the SEC's 10% ownership safe harbor for establishing the higher
independence of an audit committee member.
Management is responsible for the Company's internal controls and the
financial reporting process. The Company's independent auditors, BKD, LLP, are
responsible for performing an independent audit of the Company's financial
statements in accordance with generally accepted auditing standards accepted in
the United States and issuing a report thereon. The independent auditors have
full access to the Audit Committee and meet with them with or without management
being present, to discuss appropriate matters. The Audit Committee members are
not professional accountants or auditors, and their functions are not intended
to duplicate or to certify the activities of management and the independent
auditors, nor can the Audit Committee certify that the independent auditor is
"independent" under applicable rules. The Audit Committee's primary
responsibility is to monitor and oversee the processes performed by management
and the independent auditors. The Audit Committee is also responsible for the
appointment and compensation of the Company's independent auditors.
In this context, the Audit Committee has reviewed and discussed the
Company's financial statements with both management and the independent
auditors. The Audit Committee also discussed with the independent auditors those
matters which are required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees). The Company's independent auditors
also provided to the Audit Committee the written disclosure required by
Independence Standards Board Standard No.1. (Independence Discussions with Audit
Committees), and the Audit Committee discussed with the independent auditors
their independence.
Based on the foregoing, the Audit Committee recommended to the Board of
Directors that the audited financial statements be included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2003 for
filing with the Securities and Exchange Commission. While the Committee also
determined that BKD, LLP be retained as the Company's independent auditors for
the fiscal year ending December 31, 2004, it also reserved the right to consider
retaining a different independent auditor for that year if, after a review of
the services provided and fees charged by BKD, LLP the Committee determines that
a new independent auditor could provide a higher level of service at a
competitive price. It is the Committee's intent to conduct such a review of
11
BKD, LLP in the next few months, including an evaluation of the services
available from and fees charged by, other independent accounting firms.
March 29, 2004 Robert Wiegand II
John G. Mazza
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
APPROVAL AND RATIFICATION OF SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS AND AUDITORS
Although approval and ratification by shareholders of the selection of
BKD, LLP is not required by the Colorado Business Corporation Act, or by the
Company's Articles of Incorporation, as amended, or Bylaws, the Board of
Directors believes that a decision of this nature should be confirmed by the
Company's shareholders. Accordingly, shareholders are being asked to consider
approval and ratification of the selection of BKD, LLP for the year ending
December 31, 2004. If a significant number of shares are voted against the
approval and ratification of this selection, or if the Audit Committee
subsequently determines for any reason that BKD, LLP should not serve as the
Company's auditors, the Audit Committee will reconsider its selection of BKD,
LLP for the year ending December 31, 2004.
It is expected that BKD, LLP will have a representative at the Annual
Meeting who will be given the opportunity to make any statement deemed necessary
and will be available to answer appropriate questions.
FEES PAID TO BKD, LLP
For the calendar years ended December 31, 2003 and December 31, 2002, BKD,
LLP provided services in the following categories and amounts:
Calendar Year Calendar Year
Ended Ended
12/31/03 12/31/02
-------- --------
Audit Fees(1) $24,300 $24,700
All Other Fees $0 $0
(1) Represents the aggregate fees billed for professional services rendered
for the audit and/or reviews of the Company's financial statements and in
connection with the Company's statutory and regulatory filings or
engagements.
There were not any non-audit services rendered to the Company by BKD, LLP
in calendar 2003 and 2002. While the Audit Committee has not established formal
policies and procedures concerning pre-approval of audit or non-audit services,
the Company's officers have been informed that all audit and non-audit services
must be approved in advance by the Audit Committee. The establishment of any
such formal policies or procedures in the future is subject to the approval of
the Audit Committee.
12
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" THE APPROVAL AND RATIFICATION OF THE SELECTION OF
BKD, LLP AS THE INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS AND AUDITORS FOR THE
YEAR ENDING DECEMBER 31, 2004
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
PROPOSAL TO AMEND THE EQUITY INCENTIVE PLAN
The Equity Incentive Plan (the "Plan") was adopted by the Board of
Directors on December 16, 1996 and approved by the stockholders on May 17, 1997.
The purpose of the Plan is to advance the interests of the Company and its
stockholders by providing a means by which the Company shall be able to attract
and retain competent officers and directors by providing them with an
opportunity to participate in the increased value of the Company which their
effort, initiative, and skill have helped produce.
On March 4, 2004, the Compensation Committee (the "Committee") approved an
amendment to the Plan to increase the number of shares reserved under the Plan.
There are currently no shares available for grant under the Plan. The Company's
Board of Directors and its Compensation Committee (consisting of Robert Wiegand
II and Spencer D. Lehman) believe an increase in the number of options available
for grant is important to provide flexibility to the Committee in its
administration of the Plan, to encourage stock ownership by employees and
management and to permit the Company to attract and retain officers and
directors. Management believes that this amendment to the Plan is important to
provide incentives to present and future officers and directors because the
grant of stock options can represent meaningful compensation but is usually made
without the expenditure of the Company's limited cash or other liquid resources.
Accordingly, the shareholders are being asked to increase the number of shares
reserved under the Plan from 1,000,000 to 1,200,000.
DESCRIPTION OF THE EQUITY PLAN
ADMINISTRATION
The Plan is presently administered by the Compensation Committee of the
Company's Board of Directors (the "Committee"). The Plan provides that the Plan
could in the future be administered by the Board of Directors if and to the
extent such administration is consistent with applicable law. Subject to the
Plan, the Committee has the authority to determine to whom restricted stock,
stock options and stock appreciation rights may be granted, the time or times at
which stock, options and rights are granted, the number of shares covered by
each such grant, the duration of any options and rights, and any other terms and
conditions relating to restricted stock, options and rights. All decisions and
interpretations made by the Committee are binding and conclusive on all
participants in the Plan.
Notwithstanding the foregoing, the Board of Directors (with members of the
Committee abstaining) has the authority to make grants under the Plan to members
of the Committee and may create a formula by which grants will automatically be
made to Committee members. The Plan currently has an automatic grant provision
whereby members of the Committee are granted fully vested ten year options on
the last trading day of June each year exercisable at the closing price on the
date of grant. Unless the shareholders approve the amendment to the Plan to
increase the number of shares available, no shares will be granted on June 30,
2004.
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SECURITIES
The securities to be issued as restricted stock or upon the exercise of
stock options and stock appreciation rights under the Plan are shares of the
Company's $.004 par value Common Stock. Pursuant to the Plan, the maximum number
of shares of Common Stock that may be issued to participants will not exceed
1,000,000 shares (1,200,000 if this amendment is approved). If any options
granted under the Plan are surrendered, or for any other reason cease to be
exercisable in whole or in part, the shares as to which the option ceases to be
exercisable are available for options to be granted to the same or other
participants under the Plan, except to the extent that an option is deemed
surrendered by the exercise of a tandem stock appreciation right and that right
is paid by the Company in stock in which event the shares issued in satisfaction
of the right are not available for new options or stock appreciation rights
under the Plan.
The market value of the total shares authorized under the Plan as of April
1, 2004 was $850,000.
ELIGIBLE EMPLOYEES AND OTHERS
Officers and directors of the Company are eligible to receive restricted
stock, options and rights under the Plan, provided that incentive stock options
("ISOs") intended to qualify under Section 422 of the Internal Revenue Code (the
"Code") may only be granted to officers and directors who are employees of the
Company or its subsidiaries. No participant may be granted more than 500,000
options under the Plan.
As of April 1, 2004, the Company had five officers and directors eligible
to receive grants under the Plan.
PLAN BENEFITS
Set forth below in tabular form are the known benefits or amounts received
or to be received by or allocated to each of the named persons or groups under
the Equity Plan during fiscal 2004. The Committee or the Board of Directors
determines the number of shares of restricted stock, stock options and stock
appreciation rights which may be granted to officers and directors of the
Company (the "eligible persons") under the Equity Plan. The number of shares of
restricted stock, stock options and stock appreciation rights to be granted is
entirely in the discretion of the Committee or the Board of Directors, except
for the automatic grants of options to purchase 4,000 shares of Common Stock to
the members of the Compensation Committee on the last trading day of June of
each calendar year. The benefits or amounts to be received by or allocated to
all other eligible persons in fiscal 2004 and future years are not determinable.
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EQUITY PLAN
Name and Position Dollar Value ($)(1) Number of Shares
----------------- ------------------- ----------------
David R. DeYoung, President -0- 0
and Chief Executive Officer
Executive Officer Group -0- 0
(2 persons)
Nominee for Director Group -0- 8,000
(5 persons)(2)
------------------------
(1) All options have been granted at not less than the fair market value on
the date of grant. The dollar value to the grantee is solely dependent on
the increase in the stock price subsequent to the date of grant.
(2) Includes Mr. DeYoung and Ms. DeYoung.
STOCK OPTIONS
Options granted under the Plan may be either ISOs or nonqualified stock
options as determined by the Committee (or the Board of Directors with respect
to options granted to Committee members) in is sole discretion in accordance
with the Plan. See "Eligible Employees and Others."
OPTION PRICE AND DURATION
For ISOs, the option price is equal to 100% of the fair market value of
the stock on the date the option is granted; provided, however, in the case of
ISOs granted to employees holding more than 10% of the total combined voting
power of all classes of stock of the Company, the option price is 110% of the
fair market value of the Common Stock on the date of grant.
The option price for nonqualified stock options may be less than the fair
market value of the stock on the date of grant, but in no event will the option
price be less than 50% of the fair market value of the stock on the date of the
grant.
"Fair market value" means (a) if there is an established market for the
Company's Common Stock on a stock exchange, in an over-the-counter market or
otherwise, the closing price on the date of grant, or (b) as otherwise specified
by the Committee.
Unless otherwise prescribed by the Committee or the Plan, options expire
ten (10) years from the date of grant, or in the case of ISOs granted to
employees holding more than 10% of the total combined voting power of all
classes of stock of the Company, five (5) years from the date of grant.
EXERCISE OF OPTIONS AND PAYMENT FOR STOCK
Options are exercisable in accordance with the terms and conditions of the
grant to the participant. The exercise price of options may be paid in cash or
in shares of the Company's Common Stock (valued at the fair
15
market value of the shares on the date of exercise) or by a combination thereof.
The Committee may agree to a loan by the Company to one or more participants of
a portion of the exercise price (not to exceed the exercise price minus the par
value of the shares to be acquired, if any) for up to three (3) years with
interest payable at the prime rate quoted in the Wall Street Journal on the date
of exercise. Members of the Committee may receive such loans without further
approval. The Committee or the Board of Directors may elect to permit a
participant to effect a net exercise of an option without tendering shares of
the Company's stock as payment for the option. In such an event, the participant
would be deemed to have paid for the exercise of the option with shares of the
Company's stock and would receive from the Company a number of shares equal to
the difference between the shares that would have been tendered and the number
of options exercised.
STOCK APPRECIATION RIGHTS
Stock appreciation rights may be granted by the Committee on such terms
and conditions as it may prescribe, whether in connection with an option granted
under the Plan or by itself. Any right related to an option will be alternative
to the related option. A stock appreciation right entitles its holder to receive
the excess of the fair market value (at the date of exercise) of a share of
Common Stock over the price specified in the grant of the right which will be
the same as the exercise price of the related option, if any.
EXERCISE OF STOCK APPRECIATION RIGHTS
A stock appreciation right is exercisable at the time or times specified
in the grant which will be the same time or times that the related option is
exercisable, if any. Exercise of a stock appreciation right is effected by
written notice to the Company. The Company may pay the stock appreciation right
in cash or shares of Common Stock or any combination thereof in its sole
discretion. The exercise of a stock appreciation right automatically results in
the cancellation of the related option, if any, on a share-for-share basis. The
Committee may from time to time specify a limit on the maximum amount of cash or
stock which may be given upon exercise of any stock appreciation right in any
year.
NONTRANSFERABILITY OF OPTIONS AND RIGHTS
During a participant's lifetime, an option or right may be exercisable
only by the participant and options granted under the Plan may not be
transferred except by will or the applicable laws of descent and distribution,
provided that, to the extent permitted by applicable law, the Committee may
permit transferability of nonqualified stock options to the immediate family or
a family trust of the participant.
STOCK GRANTS
The Committee may grant shares of the Company's Common Stock subject to
such restrictions, if any, as may be determined by the Committee, including but
not limited to, that person's continuous employment by, or service to, the
Company for a specified period of time, or the attainment of specified
performance goals or objectives. The participant shall have the right to sell,
encumber or otherwise transfer stock so granted only to the extent that vest and
performance criteria, if any have been satisfied.
TAX WITHHOLDING
The Company may withhold, or require the payment by any participant of,
any state, federal or local taxes resulting from the grant of any restricted
stock or the exercise of any option or stock appreciation right, provided
16
that, to the extent permitted by law, the Committee may in its discretion,
permit some or all of such withholding obligation to be satisfied by the
delivery by the participant of, or the retention by the Company of, shares of
its Common Stock.
AMENDMENT, SUSPENSION AND TERMINATION
The Committee may at any time amend, suspend or terminate the Plan, except
that any such amendment cannot impair any rights or obligations under any
restricted stock, option or stock appreciation right previously granted under
the Plan. Shareholder approval is required for any amendment which (i) increases
the number of shares reserved to the Plan or (ii) is required to be approved by
shareholders under applicable law.
FEDERAL INCOME TAX CONSEQUENCES
a. INCENTIVE STOCK OPTIONS. The following general rules are applicable
for Federal income tax purposes under existing law to employees of the Company
who receive and exercise ISOs granted under the Equity Plan:
i. Generally, no taxable income results to the optionee upon the grant
of an ISO or upon the issuance of shares to him or her upon exercise
of the ISO.
ii. No tax deduction is allowed to the Company upon either grant or
exercise of an ISO under the Equity Plan.
iii. If shares acquired upon exercise of an ISO are not disposed of
prior to the later of two years following the date the option was
granted or one year following the date the shares are transferred to
the optionee pursuant to the exercise of the Option, the difference
between the amount realized on any subsequent disposition of the
shares and the exercise price will generally be treated as long-term
gain or loss to the optionee.
iv. If shares acquired upon exercise of an ISO are disposed of before
the expiration of one or both of the requisite holding periods (a
"disqualifying disposition"), then in most cases the lesser of any
excess of the fair market value of the shares at the time of exercise
of the option over the exercise price or the actual gain on
disposition, will be treated as compensation to the optionee and will
be taxed as ordinary income in the year of such disposition.
v. In any year that an optionee recognizes compensation income on a
disqualifying disposition of shares acquired by exercising an ISO, the
Company will generally be entitled to a corresponding deduction for
income tax purposes.
vi. Any excess of the amount realized by the optionee as the result of
a disqualifying disposition over the sum of the exercise price and the
amount of ordinary income recognized under the above rules will be
treated as either long-term or short-term capital gain, depending upon
the time elapsed between receipt and disposition of such shares.
vii. The bargain element at the time of exercise of an ISO, i.e., the
amount by which the fair market value of the Common Stock acquired
upon exercise of the ISO exceeds the exercise price, may be taxable to
the optionee under the "alternative minimum tax" provisions of the
Code.
17
b. NONQUALIFIED OPTIONS. Nonqualified Options are taxed in accordance
with Section 83 of the Code and the Regulations issued thereunder. The following
general rules are applicable to United States holders of such options and to the
Company for Federal income tax purposes under existing law:
i. The optionee does not realize any taxable income upon the grant of
a Nonqualified Option, and the Company is not allowed a business
expense deduction by reason of such grant.
ii. The optionee will recognize ordinary compensation income at the
time of exercise of a Nonqualified Option in an amount equal to the
excess, if any, of the fair market value of the shares on the date of
exercise over the exercise price. The Company will require employees
to make appropriate arrangements for the withholding of taxes on this
amount.
iii. When the optionee sells the shares, he or she will recognize a
capital gain or loss in an amount equal to the difference between the
amount realized upon the sale of the shares and his or her basis in
the shares (i.e., the exercise price plus the amount taxed to the
optionee as compensation income). If the optionee holds the shares for
longer than one year, this gain or loss will be a long-term capital
gain or loss.
iv. In general, the Company will be entitled to a tax deduction in the
year in which compensation income is recognized by the optionee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT TO THE EQUITY
INCENTIVE PLAN.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors, and persons who own more than ten percent of the Common
Stock of the Company, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission and the exchange on which the Common
Stock is listed for trading. Those persons are required by regulations
promulgated under the Exchange Act to furnish the Company with copies of all
reports filed pursuant to Section 16(a). The Company believes that all Section
16(a) Securities and Exchange Commission filing requirements applicable to the
Company's executive officers and directors for calendar 2003 were timely met.
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Company's Annual Report on Form 10-K for the year ended December 31,
2003 accompanies this Proxy Statement. The audited financial statements of the
Company are included in the Form 10-K. Copies of the exhibits to the Form 10-K
are available from the Company upon written request of a shareholder and payment
of the Company's out-of-pocket expenses addressed to Mary Anne DeYoung, 6025 S.
Quebec Street, Suite 300, Englewood, Colorado 80111. The Securities and Exchange
Commission also maintains a web site at http://www.sec.gov/edgarhp.htm that
contains the Form 10-K, the exhibits filed with the Form 10-K, and other
information concerning the Company which have been electronically filed by the
Company with the Commission.
18
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
FOR THE 2004 ANNUAL MEETING OF SHAREHOLDERS
Proposals of shareholders of the Company intended to be presented by such
shareholders at the next annual meeting of shareholders to be held after the
2003 Annual Meeting must be received at the offices of the Company, 6025 S.
Quebec Street, Suite 300, Englewood, Colorado 80111 no later than December 12,
2004, in order that they may be included in the proxy statement and proxy for
the 2004 Annual Meeting. In addition, any such proposals must satisfy the
conditions established by the Securities and Exchange Commission for shareholder
proposals to be included in the proxy statement and proxy for that meeting. If
the date of the 2004 Annual Meeting is advanced by more than 30 days or delayed
(other than as result of adjournment) by more than 30 days from the anniversary
of the 2003 Annual Meeting, any such proposals must be submitted no later than
the close of business on the later of the 60th day prior to the 2004 Annual
Meeting or the 10th day following the day on which public announcement of the
date of such meeting is first made.
SHAREHOLDER COMMUNICATIONS
The Company does not currently have a formal policy regarding shareholder
communications with the Board of Directors, however, any shareholder may submit
written communications to Robert Wiegand II, Corporate Secretary, 6025 S. Quebec
Street, Suite 300, Englewood, Colorado 80111, whereupon such communications will
be forwarded to the Board of Directors if addressed to the Board of Directors as
a group or to the individual director or directors addressed.
OTHER MATTERS
The Board of Directors knows of no other matter to be brought before the
2004 Annual Meeting. If other matters properly come before the Annual Meeting,
the persons named in the accompanying Proxy will vote in accordance with their
best judgment the Proxies solicited and received by the Company.
19
APPENDIX A
AMENDED AND RESTATED
CHARTER OF THE AUDIT COMMITTEE
OF
1MAGE SOFTWARE, INC.
This Charter outlines the purpose, composition and responsibilities of the
Audit Committee (the "Committee") of 1mage Software, Inc. (the "Company"), and
how these responsibilities are to be discharged. The Committee shall review and
update this Charter on the annual basis, as conditions dictate.
ARTICLE I
PURPOSE
PRIMARY PURPOSE. The primary function of the Committee is to assist the
Board of Directors in fulfilling its oversight responsibilities of financial
reporting and internal financial and accounting control of the Company by
reviewing:
- the financial reports and other financial information provided by
the Company to any governmental body or public;
- the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the
Board of Directors have established; and
- the Company's auditing, accounting and financial reporting
generally.
Consistent with this function, the Committee should encourage continuous
improvement of and should foster adherence to the Company's policies, procedures
and practices at all levels.
ARTICLE II
COMPOSITION OF THE COMMITTEE
2.01. NUMBER AND ELECTION. The Committee shall be comprised of two or more
Directors of the Company as determined by the Board of Directors. The Committee
members shall be elected by the Board of Directors at the meeting following the
annual shareholders' meeting of the Company or until their successors are duly
elected and qualified at a Board of Directors meeting.
2.02. INDEPENDENT DIRECTORS. The majority of the Committee shall be
independent directors
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who are free from any relationship with the Company that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgment as a
member of the Committee. For the purposes of this Charter, independence shall be
determined by reference to Nasdaq listing standards unless the Board of
Directors determines that considering all the facts and circumstances, a
director should be considered "independent" notwithstanding a failure to meet
the Nasdaq listing standards definition.
2.03. QUALIFICATIONS. Every member of the Committee shall be familiar with
basic finance and accounting practices and with the business of the Company and
its industry to the extent necessary to effectively perform his or her functions
as a member of the Committee. Committee members may enhance their familiarity
with finance and accounting by participating in educational programs conducted
by the Company or an outside consultant.
2.04. CHAIRMAN. Unless a Chairman of the Committee is elected by the Board
of Directors, the members of the Committee may designate a Chairman by majority
vote of all the Committee's members. The Chairman shall be an independent
director and shall possess adequate knowledge in accounting, finance, and the
business and affairs of the Company to qualify as a financial expert under SEC
and Nasdaq rules unless the Board of Directors determines that, considering all
the facts and circumstances, a director should be considered a "financial
expert" notwithstanding a failure to meet the SEC and Nasdaq rules.. The
Chairman shall preside over all the meetings of the Committee and shall
supervise and direct the activities of the Committee, including contacts with
legal counsel and the independent auditors.
ARTICLE III
COMPENSATION
The Board of Directors shall establish the compensation of the Committee
members for service on the Committee.
ARTICLE IV
MEETINGS
4.01. REGULAR MEETINGS. The Committee shall meet four times annually, or
more frequently as circumstances dictate. The Committee may provide by
resolution the date, time and place for the holding of regular meetings without
other notice. The Committee may ask members of Company management or others to
attend meetings and provide pertinent information as necessary. The Committee
may at any time choose to exclude members of the Company's management from all
or a portion of its meetings, including the exclusion of a member of the
Committee from the Committee's discussions with legal counsel or the independent
auditors.
4.02. SPECIAL MEETINGS. In addition to or as part of the regular Committee
meetings, the Committee members may meet periodically with the management of the
Company, the Company's internal accounting department and the Company's
independent auditors to discuss any financial,
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accounting and audit matters, including preparation and review of the annual and
quarterly financial statements. The Committee may meet with these groups in
separate sessions if the Committee or each of these groups believe that such
meetings should be conducted privately.
4.03. MINUTES. The Committee shall keep minutes of all of its meetings as
a Committee.
ARTICLE V
RESPONSIBILITIES AND DUTIES
5.01. PRIMARY RESPONSIBILITIES. The Committee shall serve as an
independent and objective party to monitor the Company's financial reporting
process and internal control system, review and appraise the efforts of the
Company's independent auditors and accounting department and provide an open
avenue of communication among the independent auditors, financial and senior
management, the accounting department, and the Board of Directors. To fulfill
its responsibilities, the Committee shall carry out activities enumerated below.
5.02. REVIEW OF DOCUMENTS AND REPORTS. The Committee shall review the
Company's annual and quarterly financial statements and any reports or other
financial information submitted to any governmental body, or the public,
including any certification, report, opinion, or review rendered by the
independent auditors. When practicable, prior to the filing of the Company's
10-Qs, and prior to the public release of quarterly or annual earnings, the
Committee, or its Chairman representing the Committee, shall review such reports
or releases with management and, if appropriate, the independent auditors. In
addition, the Committee shall review any internal reports to management prepared
by the accounting department and management's responses, if any, to such
reports.
5.03. INDEPENDENT ACCOUNTANTS. The Committee shall select the independent
auditors, consider their independence and effectiveness, pre-approve all
permissible non-audit services and all audit, review or attest engagements
required under the securities law, review the performance of the independent
auditors and approve any proposed discharge of the independent auditors when
circumstances warrant. On an annual basis, the Committee should review and
discuss with the independent auditors all significant relationships the auditors
have with the Company to ensure their continuing independence. The Committee
shall obtain a formal written statement from the independent auditors
delineating all relationships between the auditor and the Company, consistent
with Independence Standards Board Standard 1. The Committee shall consult with
the independent auditors out of the presence of management about internal
controls and the completeness and accuracy of the Company's financial
statements.
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5.04. FINANCIAL REPORTING PROCESSES. The Committee shall review the
integrity of the Company's financial reporting processes, both internal and
external, and consult with the independent auditors with respect to the quality
and appropriateness of the Company's accounting principles as applied to
financial reporting. If, upon its review and consultation with management and
the independent auditors, the Committee determines that major changes to the
Company's auditing and accounting principles and practices are required, the
Committee shall approve such changes or improvements, if appropriate. The
Committee shall monitor the implementation of such changes and improvements.
5.05. REPORTING TO THE COMMITTEE. The Committee shall establish separate
systems of reporting to the Committee by each of management and the independent
auditors regarding any significant judgments made in management's preparation of
the financial statements and the view of each of the above groups as to
appropriateness of such judgments.
5.06. PROCESSES IMPROVEMENT. Following completion of the annual audit, the
Committee shall review separately with each of management and the independent
auditors any significant difficulties and disagreements encountered during the
course of preparation of financial statements or audit, including any
restrictions on the scope of auditor's work or access to required information.
5.07. ETHICAL AND LEGAL COMPLIANCE. The Committee shall consider whether
management has the proper review system in place to ensure that the Company's
financial statements, reports and other financial information, as disseminated
to governmental organizations and the public, satisfy legal requirements. In
addition, the Committee shall communicate with the Company's legal counsel to
the extent necessary to consider any legal matters that could have significant
impact on the Company's financial statements, reports and other financial
information disseminated to the governmental organizations and the public.
5.08. OTHER ACTIVITIES. The Committee may perform any other activities
consistent with this Charter and the Company's Bylaws, as the Committee or the
Board of Directors deem necessary or appropriate.
5.09. MANAGEMENT'S ASSISTANCE. The Committee shall coordinate with the
Board of Directors and management to ensure that the Committee's members have
access to the information necessary to effectively monitor the Company's
financial reporting, internal financial and accounting controls and internal and
external auditing.
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ARTICLE VI
REPORTS
6.01. ANNUAL REPORT. The Committee may prepare and present to the Board of
Directors periodic reports summarizing its activities, conclusions and
recommendations and its future agendas. The Committee may elect to submit
written reports or make regular oral reports to the Board of Directors at
meetings of the Board as recorded in the minutes of such meetings.
6.02. OTHER REPORTS. The Committee shall prepare such other reports or
statements as it or the Board of Directors deems necessary or as may be required
by law. For example, the Committee may issue one or more statements or reports
which may be included in the annual report on Form 10-K, annual report to
shareholders, or proxy statement concerning the fact that the Committee has
adopted this Charter or that it has satisfied its responsibilities in compliance
with this Charter.
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PROXY
1MAGE SOFTWARE, INC.
6025 S. QUEBEC STREET, SUITE 300
ENGLEWOOD, COLORADO 80111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints David R. DeYoung and Mary Anne DeYoung as
Proxies, each with the power to appoint his or her substitute, and hereby
authorizes them to represent and to vote, as designated below, all shares of
common stock of 1mage Software, Inc. held of record by the undersigned on April
1, 2004 at the annual meeting of shareholders to be held on June 7, 2004 or any
adjournment thereof.
1. TO ELECT FIVE DIRECTORS
_____ FOR all nominees listed below
_____ WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
DAVID R. DEYOUNG
MARY ANNE DEYOUNG
ROBERT WIEGAND II
JOHN G. MAZZA
SPENCER D. LEHMAN
2. TO APPROVE AND RATIFY THE SELECTION OF BKD, LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS AND AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 2004
FOR AGAINST ABSTAIN
------- ---------- -----------
3. TO APPROVE AN AMENDMENT TO THE COMPANY'S 1996 EQUITY INCENTIVE PLAN TO
INCREASE THE NUMBER OF SHARES RESERVED UNDER THE PLAN
FOR AGAINST ABSTAIN
------- ---------- -----------
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR proposals 1, 2 and 3 above.
Please sign exactly as your name appears below. 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.
Dated _______________________, 2004
------------------------------------
Signature
------------------------------------
Signature if held jointly
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE
ENCLOSED ENVELOPE
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