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):
[ ] 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.
Amount
Previously Paid:
________________________________________
Form,
Schedule or Registration Statement No.:
________________________________________
Filing
Party:
_________________________________________
Date
Filed:
_________________________________________
January
__, 2010
Dear
Shareholders:
You are
cordially invited to attend the 2009 annual meeting of the shareholders of China
Direct Industries, Inc. on Monday, March 15, 2010, at 1:00 p.m., Eastern
Standard Time, at our corporate offices at 431 Fairway Drive, Suite 200,
Deerfield Beach, Florida, 33441-1856. Matters on which action will be taken at
the meeting are explained in detail in the attached Notice and Proxy
Statement.
We are
pleased to be furnishing our proxy materials through a “notice and access”
model. Instead of mailing printed copies to each shareholder, on or about
January __, 2010 we mailed a Notice of Internet Availability which contained
instructions on how to access your proxy materials through the Internet,
how each shareholder can receive a paper copy of the proxy materials, including
our Proxy Statement, our 2009 Transition Report for the nine months ended
September 30, 2009 on Form 10-K and a form of proxy card, and how to access your
proxy card to vote by mail, through the Internet or by fax. We believe this
process will expedite your receipt of proxy materials, lower the cost of
the annual meeting, and help to conserve natural resources.
We
sincerely hope that you will be able to attend the meeting in person, and we
look forward to seeing you. Whether or not you expect to be present, please
promptly vote as your vote is important. Instructions regarding the various
methods of voting are contained on the proxy card, including voting by mail,
through the Internet and by fax. If you attend the annual meeting, you may
revoke your proxy and vote your own shares.
To the
shareholders of China Direct Industries, Inc.
You are
cordially invited to attend the annual meeting of shareholders of China Direct
Industries, Inc. to be held at our corporate offices located at 431 Fairway
Drive, Suite 200, Deerfield Beach, Florida, 33441-1856 on Monday, March 15, 2010
at 1:00 PM Eastern Standard Time. At the annual meeting you will be asked to
vote on the following matters:
To
elect a board of directors consisting of six members;
To
ratify the appointment of Sherb & Co., LLP as our independent
registered public accounting firm;
To
approve an amendment to our Bylaws to decrease the quorum requirement for
meetings of our shareholders to one-third (1/3) of the voting power of our
issued and outstanding shares entitled to vote, whether represented in
person or by proxy at shareholder meetings; and
To
consider and act upon any other business as may properly come before the
annual meeting or any adjournments
thereof.
The board
of directors recommends that you vote FOR Proposals 1, 2 and 3. These items
of business are more fully described in the proxy statement that is attached to
this Notice. The board of directors has fixed the close of business on January21, 2010 as the Record Date for determining the shareholders that are entitled
to notice of and to vote at the annual meeting and any adjournments
thereof.
It is
important that your shares are represented and voted at the meeting. If you
received the proxy materials by mail, you can vote your shares by completing,
signing, dating, and returning your completed proxy card, by mail, over the
Internet or by fax. If you received the proxy materials over the Internet, a
proxy card was not sent to you, and you may vote your shares over the Internet.
To vote by fax or Internet, follow the instructions included in the proxy
statement. You can revoke a proxy at any time prior to its exercise at the
meeting by following the instructions in the proxy statement.
You may
attend the annual meeting and vote in person even if you have previously voted
by proxy in one of the three ways listed above. Your proxy is revocable in
accordance with the procedures set forth in the proxy statement.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2009 ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD ON MARCH 15, 2010.
The
Notice of Annual Meeting, Proxy Statement, the proxy card and 2009 Transition
Report for the nine month transition period ended September 30, 2009 are
available at http://www.iproxydirect.com/cdii.
By
Order of the Board of Directors
Lazarus
Rothstein,
Secretary
Deerfield
Beach, Florida
January
__, 2010
TABLE
OF CONTENTS
Page
General
1
Questions
and Answers
1
Who
Can Help Answer Your Questions?
4
Corporate
Governance
5
Board
Committees
6
Director
Compensation
8
Audit
Committee Report
9
Executive
Compensation
11
Principal
Shareholders
17
Certain
Relationships and Related Transactions
18
Certain
Defined Terms
21
Proposal
1 - Election of Directors
21
Proposal
2 - Ratification of the Appointment of Sherb & Co.,
LLP
23
Proposal
3 - Approval of the Amendment and Restatement of Bylaws
Shareholders
Should Read the Entire Proxy Statement Carefully Prior to Returning Their
Proxies
____________________
PROXY
STATEMENT
____________________
FOR
ANNUAL
MEETING OF SHAREHOLDERS
GENERAL
The
enclosed proxy is solicited on behalf of the board of directors of China Direct
Industries, Inc. for use at our annual meeting of shareholders to be held on
Monday, March 15, 2010 at 1:00 PM, Eastern Standard Time, and at any
adjournments thereof. The annual meeting will be held at our corporate
offices located at 431 Fairway Drive, Suite 200, Deerfield Beach, Florida,
33441. Voting materials, including this proxy statement, the proxy card
and our 2009 Transition Report on Form 10-K for the nine months ended September30, 2009, are being made available to all or our shareholders on or about
January 28, 2010.
QUESTIONS
AND ANSWERS
Following
are some commonly asked questions raised by our shareholders and answers to each
of those questions.
What
may I vote on at the annual meeting?
At the
annual meeting, shareholders will consider and vote upon the following
matters:
•
to
elect a board of directors consisting of six members;
•
to
ratify the appointment of Sherb & Co., LLP as our independent
registered public accounting firm;
•
to
approve an amendment to our Bylaws to decrease the quorum requirement for
meetings of our shareholders to one-third (1/3) of the voting power of our
issued and outstanding shares entitled to vote, whether represented in
person or by proxy at shareholder meetings; and
•
such
other matters as may properly come before the annual meeting or any
adjournments thereof
How
does the board of directors recommend that I vote on the proposals?
The board
of directors recommends a vote “FOR” each of the nominees to the board of
directors, “FOR” the proposal ratifying the appointment of Sherb & Co., LLP,
and “FOR” the proposal approving an amendment and restatement to our Bylaws to
decrease the quorum requirement for meetings of our shareholders to one-third
(1/3) of the voting power of our issued and outstanding shares entitled to vote,
whether represented in person or by proxy at shareholder meetings.
Why
did I receive a one-page notice in the mail regarding the Internet availability
of proxy materials instead of a full set of proxy materials?
In
accordance with rules adopted by the U.S. Securities and Exchange Commission
(SEC), rather than mailing a printed copy of our proxy materials to each
shareholder of record, we will send each of our shareholders a Notice of
Internet Availability of Proxy Materials "Notice", which indicates how our
shareholders may:
•
access
their proxy materials over the Internet;
•
make
a one-time request to receive a printed set of proxy materials by mail;
or
•
make
a permanent election to receive all of their proxy materials in printed
form by mail or electronically by
e-mail.
The Notice will also include your control number and instructions for voting
your proxy over the Internet. If you no longer have your Notice and
need to obtain your control number, you may contact us at
1-866-752-8683.
- 1
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How
can I get electronic access to the proxy materials?
The
Notice provides you with instructions regarding how to:
•
view
our proxy materials for the annual meeting over the Internet;
and
•
instruct
us to send our future proxy materials to you electronically by e-mail
instead of sending you printed copies by
mail.
Choosing
to receive your future proxy materials by email will save us the cost of
printing and mailing documents to you and will reduce the impact of our annual
meetings of shareholders on the environment. If you choose to receive
future proxy materials by email, you will receive an email next year with
instructions containing a link to those materials and a link to the proxy voting
site. Your election to receive proxy materials by email will remain
in effect until you terminate it. Our 2009 Transition Report for the nine month
transition period ended September 30, 2009 on Form 10-K accompanies these proxy
materials but is not considered part of the proxy soliciting
materials.
How
do I vote?
You can
vote either in person at the annual meeting or by proxy, by mail, by fax or over
the Internet whether or not you attend the annual meeting. To
obtain directions to attend the annual meeting, please call (954)
363-7333. If your shares are registered directly in your name with
our transfer agent, Computershare Trust Co., Inc., you are considered the
shareholder of record with respect to those shares and we are sending a Notice
directly to you. As the shareholder of record, you have the right to vote
in person at the annual meeting. If you choose to do so, you can bring the
proxy card that is part of this proxy statement or vote at the annual meeting
using the ballot provided at the meeting. Even if you plan to attend the
annual meeting in person, we recommend that you vote your shares in advance as
described below so that your vote will be counted if you later decide not to
attend the annual meeting in person.
Most of
our shareholders hold their shares in street name through a stockbroker, bank or
other nominee rather than directly in their own name. In that case, you
are considered the beneficial owner of shares held in street name, and the
Notice is being forwarded to you. As the beneficial owner, you are also
invited to attend the annual meeting. Because a beneficial owner is not the
shareholder of record, you may not vote these shares in person at the annual
meeting unless you obtain a “legal proxy” from the stockbroker, trustee or
nominee that holds your shares, giving you the right to vote the shares at the
meeting. You will need to contact your stockbroker, trustee or nominee to
obtain a legal proxy, and you will need to bring it to the annual meeting in
order to vote in person.
You can vote by proxy in threeways:
•
by
mail – If you received your proxy materials by mail, you can vote by mail
by using the enclosed proxy card;
•
by
Internet – You can vote by Internet by following the instructions on the
Notice to access the proxy materials or on your proxy card if you received
your materials by mail; and
If
you vote by proxy, your shares will be voted at the annual meeting in the manner
you indicate.
The Internet and fax voting system for shareholders of record will close at
11:59 p.m., Eastern Standard Time, on March 14, 2010. Please refer to
the proxy card for details on all methods of voting.
What
happens if additional matters are presented at the annual meeting?
Other
than the election of directors, the ratification of the appointment of our
auditor and the approval of an amendment and restatement of our Bylaws, we are
not aware of any other business to be acted upon at the annual meeting. If
you grant a proxy, the person named as proxy holder, Mr. Lazarus Rothstein,
our Executive Vice President, General Counsel and Corporate Secretary, will have
the discretion to vote your shares on any additional matters properly presented
for a vote at the annual meeting.
What
happens if I do not give specific voting instructions?
If you
hold shares in your name, and you sign and return a proxy card without giving
specific voting instructions, your shares will be voted as recommended by our
board of directors on all matters and as the proxy holder may determine in his
discretion with respect to any other matters properly presented for a vote
before the annual meeting. If you hold your shares through a stockbroker,
bank or other nominee and you do not provide instructions on how to vote, your
stockbroker or other nominee may exercise their
- 2
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discretionary
voting power with respect to the ratification of the appointment of Sherb &
Co., LLP as our independent registered public accounting firm which is
considered a routine matter. If the organization that holds your shares does not
receive instructions from you on how to vote your shares on a non-routine
matter, including the election of directors and the approval of the amendment to
our Bylaws, the organization that holds your shares will inform us that it does
not have the authority to vote on these matters with respect to your shares.
This is generally referred to as a “broker non-vote.” When the vote is tabulated
for any particular matter, broker non-votes will be counted for purposes of
determining whether a quorum is present, but will not otherwise be counted. We
encourage you to provide voting instructions to the organization that holds your
shares by carefully following the instructions provided in the
notice.
What
is the quorum requirement for the annual meeting?
On
January 21, 2010, the Record Date for determining which shareholders are
entitled to vote, there were ________________ shares of our common stock
outstanding which is our only class of voting securities. Each share of common
stock entitles the holder to one vote on matters submitted to a vote of our
shareholders. A majority of our outstanding common shares as of the Record Date
must be present at the annual meeting (in person or represented by proxy) in
order to hold the meeting and conduct business. This is called a quorum.
Your shares will be counted for purposes of determining if there is a
quorum, even if you wish to abstain from voting on some or all matters
introduced at the annual meeting, if you are present and vote in person at the
meeting or have properly submitted a proxy card or voted by fax or by using the
Internet.
How
can I change my vote after I return my proxy card?
You may
revoke your proxy and change your vote at any time before the final vote at the
annual meeting. You may do this by signing a new proxy card with a later date,
by voting on a later date by using the Internet (only your latest Internet proxy
submitted prior to the annual meeting will be counted), or by attending the
annual meeting and voting in person. However, your attendance at the
annual meeting will not automatically revoke your proxy unless you vote at the
annual meeting or specifically request in writing that your prior proxy be
revoked.
Is
my vote confidential?
Proxy
instructions, ballots and voting tabulations that identify individual
shareholders are handled in a manner that protects your voting privacy.
Your vote will not be disclosed either within our company or to third
parties, except:
•
as
necessary to meet applicable legal requirements;
•
to
allow for the tabulation of votes and certification of the vote;
and
•
to
facilitate a successful proxy
solicitation.
Any written comments that a shareholder might include on the proxy card will be
forwarded to our management.
Where
can I find the voting results of the annual meeting?
The
preliminary voting results will be announced at the annual meeting. The
final voting results will be tallied by our transfer agent and Inspector of
Elections and reported in a Current Report on Form 8-K which we will file with
the SEC within four business days from the date of the annual meeting. We
will also make the results available on our website, which is www.cdii.net. We
will identify a link to the results on the Investor Relations page of our
website.
How
can I obtain a separate set of voting materials?
To reduce
the expense of delivering duplicate voting materials to our shareholders who may
have more than one China Direct Industries stock account, we are delivering only
one Notice to certain shareholders who share an address, unless otherwise
requested. If you share an address with another shareholder and have
received only one Notice, you may write or call us to request to receive a
separate Notice. Similarly, if you share an address with another
shareholder and have received multiple copies of the Notice, you may write or
call us at the address and phone number below to request delivery of a single
copy of this Notice. For future annual meetings, you may request separate
Notices, or request that we send only one Notice to you if you are receiving
multiple copies, by writing or calling us at:
We will
pay the costs of the solicitation of proxies. We may also reimburse
brokerage firms and other persons representing beneficial owners of shares for
expenses incurred in forwarding the voting materials to their customers who are
beneficial owners and obtaining their voting instructions. In addition to
soliciting proxies by mail, our board members, officers, and employees may
solicit proxies on our behalf, without additional compensation, personally or by
telephone.
How
can I obtain a copy of China Direct Industries’ 2009 Transition Report on Form
10-K?
You may
obtain a copy of our Transition Report on Form 10-K for the nine month
transition period ended September 30, 2009 by sending a written request to the
address listed above under “How can I obtain a separate set of voting
materials”. We will furnish the Form 10-K without exhibits at no
charge. If you prefer a copy of the Form 10-K including exhibits, you will
be charged a fee (which will be limited to our reasonable expenses in furnishing
such exhibits). Our 2009 Transition Report on Form 10-K is available in
PDF format from the Investor Relations page of our website at
www.cdii.net and our Form 10-K with exhibits is available on the
website of the SEC at www.sec.gov.
What
is the voting requirement to approve the proposals?
In the
election of directors, the six persons receiving the highest number of (or
plurality) “FOR” votes at the annual meeting will be elected. There will be no
cumulative voting in the election of directors. The proposal to ratify the
appointment of Sherb & Co., LLP as our independent registered public
accounting firm and the proposal to approve the amendment and restatement of our
Bylaws to decrease the quorum requirement for meetings of our shareholders will
be approved if the votes cast “FOR” each of the proposals exceed those cast
against each of the respective proposals. Abstentions and broker non-votes
will be treated as shares that are present, or represented and entitled to vote
for purposes of determining the presence of a quorum at the annual meeting.
Broker non-votes will not be counted as a vote cast on any matter
presented at the annual meeting. Abstentions will not be counted in
determining the number of votes cast in connection with any matter presented at
the annual meeting.
How
can I communicate with the non-employee directors on China Direct Industries’
board of directors?
The board
of directors encourages shareholders who are interested in communicating
directly with the non-employee directors as a group to do so by writing to the
non-employee directors in care of our corporate secretary. Shareholders
can send communications by mail to:
Correspondence
received that is addressed to the non-employee directors will be reviewed by our
corporate secretary or his designee, who will regularly forward to the
non-employee directors a summary of all such correspondence and copies of all
correspondence that, in the opinion of our corporate secretary, deals with the
functions of the board of directors or committees thereof or that our corporate
secretary otherwise determines requires their attention. Directors may at
any time review a log of all correspondence received by us that is addressed to
the non-employee members of the board of directors and request copies of any
such correspondence.
WHO
CAN HELP ANSWER YOUR QUESTIONS?
You may
seek answers to your questions by writing, calling or emailing China Direct
Industries at:
The board
of directors oversees our business affairs and monitors the performance of
management. In accordance with our corporate governance principles, the
board of directors does not involve itself in day-to-day operations. The
directors keep themselves informed through discussions with the Chief Executive
Officer, other key executives and by reading the reports and other materials
that we send them and by participating in board of directors and committee
meetings. Our directors hold office until their successors have been
elected and duly qualified unless the director resigns or by reason of death or
other cause is unable to serve in the capacity of director. Biographical
information about our directors is provided in “Election of Directors – Proposal
No. 1” on page 21.
Director
Independence
We are
required to have a majority of independent directors within the meaning of
applicable NASDAQ Stock Market Rules. The board of directors has
determined four of the six directors and nominees who would serve after March15, 2010 are independent which excludes Dr. Yuejian (James) Wang, our Chief
Executive Officer, and Mr. Yuwei Huang, our Executive Vice President -
Magnesium. The board of directors’ determinations of independence was made
in accordance with applicable SEC and NASDAQ Stock Market Rules.
Board
of Directors Meetings and Attendance
During
the 2009 transition period, the board of directors held seven physical
meetings. No incumbent Director attended during their term, either in
person or via telephone, fewer than 75% of the total meetings of the board of
directors and at least 75% of the total meetings of the committees of the board
of directors on which such director served. The board of directors
also approved certain actions by unanimous written consent. It is our
policy that directors should make every effort to attend the annual meeting of
shareholders. Drs. Wang and Shen and Messrs. Barnes and Steiner were
present at our annual shareholders meeting held on May 29,2009.
Code
of Business Conduct and Ethics
We
adopted a Code of Business Conduct and Ethics that applies to all of our
directors, officers and employees, including our principal executive officer,
principal financial and accounting officer. A copy of the Code of Business
Conduct and Ethics is available on the Investor Relations page of our website at
www.cdii.net. We will post on our website any amendment to our Code of
Business Conduct and Ethics or waivers of our Code of Business Conduct and
Ethics for directors and executive officers.
Complaints
Regarding Accounting Matters
The audit committee has established procedures for:
•
the
receipt, retention and treatment of complaints regarding accounting,
internal accounting controls, or auditing matters; and
•
the
confidential, anonymous submission by our employees of concerns regarding
questionable accounting or auditing
matters.
Communications
with Directors
The board
of directors has approved procedures for shareholders to send communications to
individual directors or the non-employee directors as a group. Written
correspondence should be addressed to the director or directors in care of
Mr. Lazarus Rothstein, corporate secretary of China Direct Industries,
Inc., at our primary address. Correspondence received that is addressed to the
non-employee directors will be reviewed by our corporate secretary or his
designee, who will regularly forward to the non-employee directors a summary of
all such correspondence and copies of all correspondence that, in the opinion of
our corporate secretary, deals with the functions of the board of directors or
committees thereof or that the corporate secretary otherwise determines requires
their attention. Directors may at any time review a log of all
correspondence received by China Direct Industries that is addressed to the
non-employee members of the board of directors and request copies of any such
correspondence. You may also contact individual directors by calling our
principal executive offices at (954) 363-7333.
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Legal
Proceedings
There are
no legal proceedings to which any director, director nominee, officer or
affiliate of our company, any owner of record or beneficially of more than 5% of
common stock, or any associate of any such director, officer, affiliate of our
company or security holder that is a party adverse to our company or any of
our subsidiaries or has a material interest adverse to us.
Compliance
With Section 16(a) of the Exchange Act
Based
solely upon a review of Forms 3 and 4 and amendments thereto furnished to us
under Rule 16a-3(d) of the Securities Exchange Act of 1934 during the nine
month transition period ended September 30, 2009 and Forms 5 and amendments
thereto furnished to us with respect to the nine month transition period ended
September 30, 2009, as well as any written representation from a reporting
person that no Form 5 is required, we are not aware that any officer,
director or 10% or greater shareholder failed to file on a timely basis, as
disclosed in the aforementioned Forms, reports required by Section 16(a) of
the Securities Exchange Act of 1934 during the nine month transition period
ended September 30, 2009 with the exception of one Form 4 filing by
Philip Shen, Ph.D. in connection with a restricted stock award, three Form 4
filings by Andrew Weerarante in connection with three stock compensation awards
and two sales, two Form 4 filings by Marc Siegel in connection with two stock
compensation awards and one gift and one Form 3 filing by Huaqin (Kim) Chen in
connection with her appointment as our Controller. Each of these reports were
inadvertently filed late.
BOARD
COMMITTEES
The board
of directors has standing audit, compensation and nominating and governance
committees. Each of the audit committee, the compensation committee and
the nominating and governance committee has a written charter. The
charters are available on our website at www.cdii.net. Information
concerning the current membership and function of each committee is as
follows:
Board
of Directors Committee Membership
Director
Audit
Committee Member
Compensation
Committee Member
Nominating
and Governance Committee Member
Yuejian
(James) Wang, Ph.D.
David
Barnes
X
(1)
X
X
Sheldon
Steiner
X
X
(1)
X
(1)
George
Leibowitz (2)
X
X
Yuwei
Huang (3)
Philip
Y. Shen, Ph.D. (3)
X
X
X
Adam
Wasserman (4)
X
———————
(1
)
Denotes
Chairman.
(2
)
Mr.
Leibowitz did not standing for reelection to the board of directors at the
annual meeting of shareholders and his term expired on May 29,2009.
(3
)
Appointed
as a director effective January 26, 2009. Dr. Shen was appointed to the
Audit Committee, Compensation Committee and Nomination and Governance
Committee on May 29, 2009.
Audit
Committee. The
audit committee is responsible to the board of directors for the areas of audit
and compliance, and oversees our financial reporting process, including
monitoring the integrity of the financial statements and the independence and
performance of the registered public accounting firm and supervises our
compliance with legal and regulatory requirements. The current members of the
audit committee are Messrs. Barnes (Chairman), Steiner and Wasserman and
Dr. Shen. The board of directors has determined that each of
Messrs. Barnes, Steiner and Wasserman are “audit committee financial
experts” as defined under SEC rules. The board of directors has affirmatively
determined that none of the members of the audit committee have a material
relationship with us that would interfere with the exercise of independent
judgment and each of the members of the audit committee are “independent” as
defined in the applicable SEC and NASDAQ Stock Market Rules. The audit
committee held 4 meetings during the 2009 transition period.
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Compensation
Committee. The
compensation committee is responsible for establishing and reviewing our
compensation and employee benefit policies. The members of the
compensation committee are Messrs. Steiner (Chairman) and Barnes and Dr.
Shen, each of whom are “independent” directors within the meaning of the
applicable SEC and NASDAQ Stock Market Rules.
The
compensation committee reviews and recommends to the board of directors for
approval the compensation for our Chief Executive Officer and all of our other
executive officers, including salaries, bonuses and grants of awards under, and
administration of, our equity incentive plans. The compensation committee,
among other things, reviews and recommends to the board of directors employees
to whom awards will be made under our equity incentive plans, determines the
number of options to be awarded, and the time, manner of exercise and other
terms of the awards. During the 2009 transition period the compensation
committee met one time.
Nominating
and Governance Committee. The nominating and governance committee
was formed: (1) to assist the board of directors by identifying individuals
qualified to become board members, and to recommend for selection by the board
of directors the director nominees to stand for election for the next annual
meeting of our shareholders; (2) to recommend to the board of directors director
nominees for each committee of the board of directors; (3) to oversee
the evaluation of the board of directors and management, and (4) to develop
and recommend to the board of directors a set of corporate governance guidelines
and enhancements to the Code of Business Conduct and Ethics.
NASDAQ Stock
Market Rules require director nominees to be either selected, or
recommended for the board of directors’ selection, either by a majority of our
independent directors or our nominating and governance committee. The
nominating and governance committee is responsible for selecting those
individuals to recommend to the entire board of directors for election to the
board. The committee will consider candidates for directors proposed by
security holders. The nominating and governance committee has no formal
procedures for submitting candidates and, until otherwise determined, accepts
written submissions that include the name, address and telephone number of the
proposed nominee, along with a brief statement of the candidate’s qualifications
to serve as a director. If the proposed nominee is not the security holder
submitting the name of the candidate, a letter from the candidate agreeing to
the submission of his or her name for consideration should be provided at the
time of submission. If the committee believes it to be appropriate,
committee members may meet with the proposed nominee before making a final
determination whether to recommend the individual as a nominee to the entire
board of directors to stand for election to the board.
The
nominating and governance committee identifies director nominees through a
combination of referrals, including by management, existing board members and
security holders, and direct solicitations, where warranted. Once a
candidate has been identified the nominating and governance committee reviews
the individual’s experience and background, and may discuss the proposed nominee
with the source of the recommendation.
Among the
factors that the committee considers when evaluating proposed nominees are their
knowledge and experience in business matters, finance, capital markets and
mergers and acquisitions. The committee may request references and
additional information from the candidate prior to reaching a conclusion.
The committee is under no obligation to formally respond to
recommendations, although as a matter of practice, every effort is made to do
so.
The
nominating and governance committee received no security holder recommendations
for nomination to the board of directors in connection with the annual meeting
of shareholders. Drs. Yuejian (James) Wang and Philip Y. Shen
and Messrs. David Barnes, Sheldon Steiner and Yuwei Huang are
incumbent directors standing for reelection. Mr. Wasserman was
appointed in January 2010 and is standing for election.
During
the 2009 transition period the nominating and governance committee met one
time.
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DIRECTOR
COMPENSATION
The board
of directors' general policy on director compensation is that compensation for
non-employee directors should consist of both cash and equity based
compensation. The following table summarizes the compensation paid by us to our
directors during the 2009 transition period.
Director
Compensation Table for the 2009 Transition Period (1)
Name
Fees
Earned or Paid in Cash ($)
Stock
Awards ($) (2)
Total
($)
Yuejian
(James) Wang (3)
$
-
$
-
$
-
Yuwei
Huang (3)
$
-
$
-
$
-
David
Barnes
$
22,500
$
43,364
$
65,854
Sheldon
Steiner
$
19,500
$
43,364
$
62,864
Philip
Y. Shen (4)
$
12,800
$
46,074
$
58,874
George
Leibowitz (5)
$
13,750
$
15,013
$
28,763
Adam
Wasserman
(6)
$
-
$
-
$
-
(1
)
No
members of the board of directors received compensation in the form of
option awards, Non-Equity Incentive Plan Compensation, Nonqualified
Deferred Compensation Earnings, or any other forms of Compensation in
excess of the $10,000 in the aggregate in the 2009 transition
period.
(2
)
All
Stock Awards include the grant of restricted stock awards pursuant to our
2008 Non Executive Compensation Plan. The amounts reflected for
Stock Awards in the table above represent the dollar amount recognized for
financial statement reporting purposes with respect to the 2009 transition
period for the fair value of securities granted in that period in
accordance with Financial Accounting Standards Board Accounting Standards
Codification Topic 718 (formerly FAS 123R) (“ASC Topic 718”). Pursuant to
SEC rules, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. These amounts
reflect our accounting expense for these awards, and do not correspond to
the actual value that may be realized upon their sale.
(3
)
In
accordance with our board of directors' general policy directors who are
full time employees (currently Dr. Wang and Mr. Huang) are not paid for
board service in addition to their regular employee
compensation.
(4
)
Dr.
Shen was appointed to the board of directors on January 26,2009.
(5
)
Mr.
Leibowitz did not stand for reelection to the Board at the annual meeting
of shareholders on May 29, 2009. All amounts paid to Mr.
Leibowitz are for his services on the Board prior to May 29,2009.
(6
)
Mr.
Wasserman was appointed to the board of directors on January 13, 2010; as
such Mr. Wasserman did not receive any compensation in the 2009 transition
period.
On May30, 2008, the board of directors approved the following compensation for
non-employee directors (currently all directors other than Dr. Wang and Mr.
Huang). Each non-employee director is paid an annual retainer of
$20,000 and $750 for each day they attend in person a Board or committee
meeting. The Chairman of the Audit Committee also receives an annual
retainer of $4,000. The annual retainers are paid in quarterly
installments during the directors’ one year term in office. Additionally,
upon election to the board of directors on May 30, 2008, the board of
directors of directors granted each of Messrs. Barnes, Leibowitz and
Steiner 5,000 shares of our restricted common stock. The restricted common
stock vests in equal quarters during the directors’ term but only if the
director is still a director of our company at the time of
vesting.
The board of directors appointed Dr. Shen as a Director commencing on January26, 2009 terminating on May 31, 2009. The board of directors approved
the following compensation for Dr. Shen; $5,000 payable per quarter and $750 for
each board of directors meeting he attends in-person. Additionally,
the board of directors granted Dr. Shen a restricted stock award of 5,555 shares
of our common stock; 4,000 shares vested on April 26, 2009 and 1,555 vested on
July 26, 2009.
- 8
-
On April2, 2009, the board of directors approved the following annual compensation for
non-employee directors (currently all directors other than Dr. Wang and Mr.
Huang). Each non-employee director will continue to be paid an annual
retainer of $20,000 and $750 for each day they attend in person a board of
directors or committee meeting. The Chairman of the Audit Committee will
also receive an annual retainer of $4,000. The annual retainers will be
paid in quarterly installments during the directors’ one year term in office.
Additionally, the board of directors granted each of Messrs. Barnes,
Leibowitz, and Steiner and Dr. Shen 37,000 shares of our restricted common
stock. The restricted common stock will vest in equal quarters on May 30,2009, August 31, 2009, November 30, 2009 and February 28, 2010 but only if the
director is still a director of our company at the time of vesting. The
shares of restricted stock which have not vested hold voting rights and are
eligible for the payment of dividends, if the board of directors were to declare
dividends on our common stock. The grant of restricted stock is made in
addition to the directors’ annual cash retainers and meeting attendance
fees.
AUDIT
COMMITTEE REPORT
Report
of the Audit Committee of the board of directors
The audit
committee provides assistance to the board of directors in fulfilling its
oversight responsibilities relating to our corporate accounting and reporting
practices toward assurance of the quality and integrity of our consolidated
financial statements. The purpose of the audit committee is to serve as an
independent and objective party to monitor our financial reporting process and
internal control system; oversee, review and appraise the audit activities of
our independent registered public accounting firm and internal auditing
function, maintain complete, objective and open communication between the board
of directors, the independent accountants, financial management, and the
internal audit function.
Our
independent registered public accounting firm reports directly to the audit
committee and the audit committee is solely responsible to appoint or replace
our independent registered public accounting firm, and to assure its
independence and to provide oversight and supervision thereof. The audit
committee determines compensation of the independent registered public
accounting firm and has established a policy for approval of non-audit related
engagements awarded to the independent registered public accounting firm. Such
engagements must not impair the independence of the registered public accounting
firm with respect to our company as prescribed by the Sarbanes-Oxley Act of
2002; thus payment amounts are limited and non-audit related engagements must be
approved in advance by the audit committee. The audit committee determines
the extent of funding that we must provide to the audit committee to carry out
its duties, and has determined that such amounts were sufficient in the 2009
transition period.
With
respect to the nine month transition period ended September 30, 2009, in
addition to its other work, the audit committee:
•
Reviewed
and discussed with management our audited consolidated financial
statements as of September 30, 2009 and the year then
ended;
•
Discussed
with Sherb & Co., LLP the matters required to be discussed by
Statement on Auditing Standards No. 61, “Communication with Audit
Committees”, as amended, with respect to its review of the findings of the
independent registered public accounting firm during its examination of
our financial statements;
•
Received
from Sherb & Co., LLP written affirmation of its independence as
required by the Independence Standards Board Standard No. 1, “Independence
Discussions with Audit Committees”. In addition, the audit committee
discussed with Sherb & Co., LLP its independence and determined that
the provision of non-audit services was compatible with maintaining
auditor independence; and
•
Reviewed
and discussed with management our audited consolidated financial
statements as of September 30, 2009 and the year then
ended.
The audit
committee recommended, based on the review and discussion summarized above, that
the board of directors include the audited consolidated financial statements in
the 2009 Transition Report on Form 10-K for the nine months ended September 30,2009 for filing with the SEC.
Audit
Committee of the board of directors of China Direct Industries,
Inc.
David
Barnes, Chairman
Sheldon
Steiner
Philip
Y. Shen
- 9
-
Information
About Auditors
The audit
committee of the board of directors has appointed Sherb & Co., LLP as the
independent registered public accounting firm to conduct the audit of our
consolidated financial statements for the 2009 transition period and to report
on our consolidated balance sheets, statements of income and other related
statements. Sherb & Co., LLP has served as our independent registered
public accounting firm since 2006. The audit committee charter includes
the procedures for pre-approval of all fees charged by our independent
registered public accounting firm. Under the procedure, the audit
committee of the board of directors approves the engagement letter with respect
to audit, tax and review services. Other fees are subject to pre-approval
by the audit committee. The audit and audit-related fees paid to the
auditors with respect to the 2009 transition period were pre-approved by the
audit committee of the board of directors.
Fees
and Services
The
following table shows the fees that were billed for the audit and other services
provided by Sherb & Co., LLP for the 2009 transition period and
December 31, 2008.
2009
Transition Period
2008
Audit
Fees
$
205,000
$
328,000
Audit-Related
Fees
9,824
-
Tax
Fees
-
-
All
Other Fees
22,000
6,500
Total
$
236,824
$
334,500
Audit Fees – This
category includes the audit of our annual financial statements, review of
financial statements included in our quarterly reports and services that are
normally provided by the independent registered public accounting firm in
connection with engagements for those years and services that are normally
provided by our independent registered public accounting firm in connection with
statutory audits and SEC regulatory filings or engagements.
Audit-Related Fees –
This category consists of assurance and related services by the independent
registered public accounting firm that are reasonably related to the performance
of the audit or review of our financial statements and are not reported above
under “Audit Fees”.
Tax Fees – This category
consists of professional services rendered by our independent registered public
accounting firm for tax compliance and tax advice. The services for the
fees disclosed under this category include tax return preparation and technical
tax advice.
All Other Fees – This
category consists of fees for other miscellaneous items.
Pre-Approval
Policies and Procedure for Audit and Permitted Non-Audit Services
The audit
committee has developed policies and procedures regarding the approval of all
non-audit services that are to be rendered by our independent registered public
accounting firm, as permitted under applicable laws, and the corresponding fees
for such services. In situations where the full audit committee is unavailable
to pre-approve any permitted non-audit services to be rendered by our
independent registered public accounting firm: (i) our chief financial officer
and general counsel will evaluate the proposed engagement to confirm that the
engagement is not prohibited by any applicable rules of the SEC or Nasdaq, (ii)
following such confirmation by the chief financial officer and the general
counsel, the chairperson of the audit committee will determine whether we should
engage our independent registered public accounting firm for such permitted
non-audit services and, if so, negotiate the terms of the engagement with our
independent registered public accounting firm, and (iii) the chairperson of the
audit committee will report to the full audit committee at its next regularly
scheduled meeting about any engagements of our independent registered public
accounting firm for permitted non-audit services that have been approved by the
chairperson. Alternatively, after confirmation by the chief financial officer
and the general counsel, the full committee may pre-approve engagements of our
independent registered public accounting firm at audit committee
meetings.
Consistent
with these policies and procedures, all audit services and non-audit services
and all fees associated with such services performed by our independent
registered public accounting firm in the nine month transition period ended
September 30, 2009 and the fiscal year ended December 31, 2008 were
pre-approved by the chairperson of the audit committee and ratified by the audit
committee or approved by the full audit committee.
- 10
-
Compensation
Committee Interlocks and Insider Participation
During
the nine month transition period ended September 30, 2009, each of
Messrs. Steiner and Barnes and Dr. Shen were the members of the
compensation committee; Mr. Steiner served as the Chairman of the
committee.
was
not formerly an officer or employee of our company, or
•
did
not have any relationship requiring disclosure by us under Certain
Relationships and Related Transactions appearing later in this proxy
statement.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table summarizes all compensation recorded by us in the twelve month
period ended December 31, 2008 and the nine month transition period ended
September 30, 2009 for:
•
our
principal executive officer or other individual serving in a similar
capacity;
•
our
principal financial officer or other individual serving in a similar
capacity;
•
our
two most highly compensated executive officers other than our principal
executive officer and principal financial officer who were serving as
executive officers at September 30, 2009 as that term is defined under
Rule 3b-7 of the Securities Exchange Act of 1934, whose compensation
exceed $100,000; and
•
up
to two additional individuals for whom disclosure would have been required
but for the fact that the individual was not serving as an executive
officer at September 30, 2009.
For
definitional purposes these individuals are sometimes referred to as the “named
executive officers”. The value attributable to any stock or option awards
is computed in accordance with ASC Topic 718 (formerly FAS
123R). None of our named executive officers received compensation in
the form of Non-Equity Incentive Plan Compensation, Nonqualified Deferred
Compensation Earnings, or any other forms of Compensation in excess of the
$10,000 in the aggregate in the 2009 transition period and 2008. The
amounts reflected in columns (d) and (e) represent the dollar amount recognized
for financial statement reporting purposes with respect to the 2009 transition
period and 2008 for the fair value of securities granted in each respective year
in accordance with ASC Topic 718. Pursuant to SEC rules, the amounts shown
exclude the impact of estimated forfeitures related to service-based vesting
conditions. These amounts reflect our accounting expense for these awards,
and do not correspond to the actual value that may be realized upon
exercise.
Dr.
Wang has served as our Chief Executive Officer, President and Chairman
since January 2009. From August 2006 through December 2008 Dr. Wang served
as Chief Executive Officer. In January 2009 Dr. Wang waived the annual
base salary provided for under his employment agreement for the
period from October 1, 2008 through December 31, 2008 and the incentive
compensation including bonus, if any, due in 2008. The amounts reflected
in column (d) for 2008 represent cash payments made to Dr. Wang which were
approved by the board of directors.
(3
)
Ms.
Liu served as our Vice President of Finance and as our Principal
Financial and Accounting Officer from August 2007 to March 2009. The
amounts reflected in column (c) represent cash payments made to
Ms. Liu in 2008 and the 2009 transition period. For 2008 the amounts
reflected in column (e) represent the fair value of 80,000 shares of
common stock granted on October 9, 2008 pursuant to the 2008 Non Executive
Stock Incentive Plan which vested January 1, 2009 and 15,000 shares which
were granted on March 31, 2009.
(4
)
Mr.
Huang has served as Executive Vice President – Magnesium since February
2009 and as Chief Executive Officer of our subsidiary Chang Magnesium
since June 2006. Mr. Huang’s base salary from our subsidiary
Excel Rise is $240,000 per year which is accrued at the rate of $20,000
per month. In addition, Mr. Huang was awarded a bonus from Excel Rise in
the amount of $480,000. The amount of salary paid to Huang in the 2009
transition period was $55,838. The balance of Mr. Huang’s base
salary and bonus have been accrued. Mr. Huang was not a named executive
officer in fiscal 2008.
(5
)
Mr.
Rothstein has served as Executive Vice President, General Counsel and
Secretary since February 2009 and as Vice President, General Counsel and
Secretary since April 2008. For the 2009 transition period the amounts
reflected in column (e) represent the fair value of 13,903 shares of
restricted stock that are part of a grant of 5,700 on June 1, 2008 and
14,300 shares on January 12, 2009 pursuant to the 2008 Non Executive Stock
Incentive Plan which vest 5,000 shares on June 1, 2009, September 1, 2009,
January 1, 2010 and April 1, 2010.
(6
)
Ms.
Chen has served as our Controller, Internal Audit Manager and Principal
Financial and Accounting Officer from May 2009 to December 2009 and
currently serves as our Controller and Internal Audit Manager. For the
2009 transition period the amounts reflected in column (e) represent the
fair value of 4,750 shares of restricted stock that are part of a grant of
10,000 shares on April 3, 2009 pursuant to the 2008 Non Executive Stock
Incentive Plan which vest 2,500 shares on April 3, 2010, 2,500 shares on
July 3, 2010, 2,500 shares on October 3, 2010 and 2,500 shares on January3, 2011.
(7
)
Mr.
Weeraratne served as Chief Financial Officer from January 2009 to May
2009. The amounts in column (e) represent the fair value of
34,367 shares of stock granted on May 22, 2009 pursuant to the 2008 Non
Executive Stock Incentive Plan.
- 12
-
Outstanding
Equity Awards at Year End
The following table provides information concerning unexercised options, stock
that has not vested and equity incentive plan awards for each named executive
officer outstanding at September 30, 2009:
OPTION
AWARDS
STOCK
AWARDS
Name
(a)
Number
of Securities Underlying Unexercised options (#) (b)
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#) (c)
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options (#) (d)
Option
Exercise Price ($) (e)
Option
Expiration Date (f)
Number
of Shares or Units of Stock that have not Vested (#) (g)(1)
Market
Value of Shares or Units of Stock that have not Vested ($) (h)(2)
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights
that have not Vested (#) (i)
Equity
Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or
other Rights that have not Vested ($) (j)
Yuejian
(James) Wang
27,400
2.50
1/1/2011
400,000
5.00
1/1/2012
500,000
7.50
1/1/2013
500,000
10
1/1/2014
Yi
(Jenny) Liu
-
-
-
-
-
-
-
-
-
Yuwei
Huang
-
-
-
-
-
-
-
-
-
Lazarus
Rothstein (3)
-
-
-
-
-
10,000
$
15,700
-
-
Huaqin
(Kim) Chen (4)
-
-
-
-
-
10,000
$
15,700
-
-
Andrew
Weeraratne
-
-
-
-
-
-
-
-
-
(1
)
This
column reflects the number of shares of our restricted common stock
awarded to the respective named executive officer that had not yet vested
as of September 30, 2009.
(2
)
Determined
based on the closing market price of our common stock on September 30,2009, the last trading day in nine month transition period ended September30, 2009, of $1.57 per share.
(3
)
Number
of shares reflects 10,000 shares of restricted common stock which vest
5,000 shares on January 1, 2010 and 5,000 shares on April 1,2010.
Executive
Employment Agreements and Narrative Regarding Executive
Compensation
Yuejian
(James) Wang
In
August 2006 we entered into an employment agreement with Dr. Wang. The
agreement provides for a base salary and annual bonuses as determined by the
board of directors based upon their evaluation of a variety of factors including
our revenues, net income and other financial and operating factors the board of
directors deems appropriate. In addition, Dr. Wang is entitled to participate in
any of our employee benefit plans and he will be reimbursed for reasonable
business expenses incurred by him on our behalf. The employment agreement also
contains customary confidentiality and non-compete provisions.
- 13
-
Dr.
Wang’s August 2006 employment agreement which included a December 31, 2009
expiration date, provided for an annual base salary of $100,000 for 2007,
increasing to $150,000 for 2007, $200,000 for 2008 and $250,000 for 2009. This
employment agreement also included options to purchase 2,200,000 shares of our
common stock a portion of which vested over a three year period and are
exercisable for five years from vesting at prices ranging from $0.01 to $10.00
per share as additional compensation.
Dr.
Wang’s August 2006 employment agreement was approved by our board of directors
when there were no independent directors on the board. Accordingly, Dr. Wang and
other members of management who were also board members in August 2006, each had
significant influence over the terms and conditions of Dr. Wang’s employment
agreement and their own.
On August6, 2008 our board of directors approved, based on the recommendation of the
compensation committee, an employment agreement with Dr. Wang to replace
the August 2006 employment agreement effective as of August 1,2008. Dr. Wang’s August 1, 2008 employment agreement expires on
December 31, 2013 and provides for, among other things, payment of a base salary
which increases annually at fixed amounts, eligibility to receive an annual
incentive bonus in fiscal 2008 as described below, a discretionary bonus if
approved by our board of directors based on a recommendation of the compensation
committee, participation in certain health and welfare benefit plans, an
automobile allowance and an allowance for use of an email enabled mobile
phone. In January 2009, Dr. Wang waived his salary and any incentive
bonus due for fiscal 2008.
Dr.
Wang’s August 1, 2008 employment agreement provides that he will serve as our
chief executive officer and a member of our board of directors through December31, 2013 at a base salary of $166,667 from August 1, 2008 through December 31,2009 and an annual base salary of $450,000 in 2009, $500,000 in 2010, $550,000
in 2011, $600,000 in 2012 and $650,000 in 2013.
Under the
August 1, 2008 employment agreement, if Dr. Wang’s employment is terminated as a
result of his death, disability, by us without cause or he resigns within 90
days following a change of control or for “good reason”, Dr. Wang will be
entitled to receive (in addition to salary and certain other benefits earned
prior to termination) a single lump sum payment in an amount equal to two times
the sum of his then-current annual base salary and the highest annual
discretionary bonus and the highest incentive bonus that the employee was
entitled to receive within the three (3) years preceding the date of
termination. In addition, Dr. Wang will become fully vested in all outstanding
stock incentive awards, will be entitled to certain health and welfare benefits
for a period of two years following such termination and payment of additional
amounts in the event additional taxes are imposed on the under Section 280G
of the Internal Revenue Code.
Under the
August 1, 2008 employment agreement, “cause” means: (i) a final non-appealable
adjudication of Dr. Wang of a felony, which would have a material or adverse
effect on our business; or (ii) the determination of the board of directors
(other than the affected employee) that Dr. Wang has engaged in intentional
misconduct or the gross neglect of his duties, which has a continuing material
adverse effect on our business.
On
January 23, 2009, Dr. Wang entered into an amendment to his August 1, 2008
employment agreement waiving the annual base salary provided for in the
employment agreement from October 1, 2008 through December 31, 2008 and the
incentive compensation including bonus, if any, due in 2008. All other terms and
conditions of the employment agreement remain in full force and
effect.
Other
Executive Officers
The
compensation of our other executive officers and Chief Financial Officer is
determined by our Chief Executive Officer and board of directors who considered
a number of factors in determining their compensation including the scope of
their duties and responsibilities to our company and the time devoted to our
business. Our Chief Executive Officer or board of directors did not consult with
any experts or other third parties in fixing the amount of compensation for the
following individuals.
Jenny
Liu, who has served as our Vice President of Finance and as our Principal
Financial and Accounting Officer from August 2006 until February 2009 was paid a
base annual salary of $70,000 from January 1, 2008 until June 30, 2008. On July1, 2008, Ms. Liu’s annual base salary was increased to $105,000 plus payment of
a monthly allowance of $1,000 per month for automobile and cellular phone
expenses. In addition, on July 1, 2008, Ms. Liu was also awarded
15,000 shares of our restricted common stock pursuant to our 2008 Non-Executive
Stock Incentive Plan which shares were scheduled to vest 25% on June 1, 2009,
25% on September 1, 2009, 25% on December 1, 2009 and 25% on March 1,2010. In addition, we provided health care benefits to Ms. Liu in
2008. On December 3, 2008 we awarded Ms. Liu 80,000 shares of our restricted
common stock pursuant to our 2008 Non-Executive Stock Incentive Plan in lieu of
any prior stock option awards. The shares awarded to Ms. Liu on
December 3, 2008 vested in full on January 1, 2009. Effective on March 31,2009, Ms. Liu resigned from her position as Vice President of Finance and we
entered into a separation agreement with her that accelerated the vesting of
15,000 shares of our restricted common stock.
- 14
-
In
February 2009, we appointed I. Andrew Weeraratne as our Chief Financial
Officer. Mr. Weeraratne’s annual salary was $50,000 in cash plus
$12,500 per month in shares of our common stock, of which $5,000 per month was
payable in the form of registered shares of our common stock and $7,500 was
payable in the form of our restricted common stock (collectively referred to as
the “Stock Award”). The restricted common stock was scheduled to vest
100% 12 months after it was awarded and was subject to the terms and
conditions of our restricted stock award agreement as approved by our
compensation committee. The number of shares of our common stock to
be issued under the Stock Award was computed by dividing $12,500 by the closing
price of our common stock on the last business day of each full month during the
term of Mr. Weerantne's employment. In addition, Mr. Weeraratne
was entitled to participate in our health benefit plan. On May 22, 2009 Mr.
Weeraratne resigned from his position with us and we entered into a separation
agreement with him that accelerated the vesting of and awarded Mr. Weeraratne
34,367 shares of our common stock and provided for payment of his salary through
May 31, 2009.
Huaqin
(Kim) Chen served as our Controller, Internal Audit Manager and Principal
Financial and Accounting Officer from May 2009 to December 2009 and currently
serves as our Controller and Internal Audit Manager. Pursuant to the
April 3, 2009 employment agreement entered into between us and Ms. Chen, Ms.
Chen’s annual base salary is $80,000 in cash plus an award of 10,000 shares of
our restricted common stock. The restricted common stock will vest 25% on April3, 2010, then 25% each quarterly period thereafter until fully vested and is
subject to the terms and conditions of our restricted stock award agreement as
approved by our compensation committee. In addition, Ms. Chen is
eligible to receive a bonus of up to 20% of her salary subject to approval by
our compensation committee and is entitled to participate in our health, dental
and life insurance plan.
Effective
December 23, 2009, Andrew Wang, was appointed as our Executive Vice President
and Chief Financial Officer. We agreed to pay Mr. Wang an annual base
salary of $160,000 payable in cash plus an aggregate of $60,000 payable in
quarterly payments of $15,000 in cash or our common stock at our option, on
March 21, 2010, June 21, 2010, September 21, 2010 and December 21, 2010 during
the term of his employment. If we elect to make the quarterly payments in stock,
the number of shares to be issued on the date of each award will be computed by
dividing $15,000 by the closing price of our common stock on the date we grant
the stock. In addition, Mr. Wang is entitled to participate in our health,
dental and life insurance plan.
Pursuant
to the terms of a severance agreement between us and Mr. Wang, if he terminates
his employment with us for "good reason" or if he is terminated without "cause,"
he will be entitled to receive (in addition to salary and certain other benefits
earned prior to termination) a single lump sum payment in an amount equal to
four (4) months of his then-current annual base salary for the year in which
such termination occurs.
Lazarus
Rothstein has served as Executive Vice President, General Counsel and Secretary
since February 2009 and as Vice President, General Counsel and Secretary since
April 2008. Effective on June 1, 2008 when Mr. Rothstein became an employee of
ours, his annual base salary was $160,000 in cash plus an award of 5,700 shares
of our restricted common stock. On January 12, 2009, Mr. Rothstein was
awarded 14,300 shares of our restricted common stock. All shares
of the restricted stock will vest in equal quarters on June 1, 2009, September1, 2009, January 1, 2010 and April 1, 2010 but only if Mr. Rothstein is still an
employee of ours at the time of vesting. Effective January 1, 2009, Mr.
Rothstein’s annual base salary was increased to $180,000 per
year. Mr. Rothstein was entitled to certain discretionary bonuses in
2008 and the 2009 transition period. On April 2, 2009, Mr. Rothstein
was awarded 10,000 shares of our common stock as a discretionary bonus. In
addition, Mr. Rothstein is entitled to participate in our health, dental and
life insurance plan and receives a cellular telephone allowance.
Pursuant
to the terms of a severance agreement between us and Mr. Rothstein, if he
terminates his employment with us for "good reason" or if he is terminated
without "cause," he will be entitled to receive (in addition to salary and
certain other benefits earned prior to termination) a single lump sum payment in
an amount equal to six (6) months of his then-current annual base salary for the
year in which such termination occurs.
Under the
severance agreements entered into with Messrs. Wang and Rothstein, "cause"
means, subject to various exceptions:
•
any
violation by the executive of our Code of Business Conduct and Ethics or
any other material policy of ours applicable to the
executive;
•
the
commission of an intentional act of fraud, embezzlement, theft or
dishonesty against us by the executive;
•
the
conviction of the executive for (or the pleading by the executive of nolo contendere to) any
crime which constitutes a felony, or a misdemeanor involving moral
turpitude, or which, in our reasonable opinion, has caused material
embarrassment to us;
•
the
gross neglect or willful failure by the executive to perform his duties
and responsibilities in all material respects, if such breach of duty is
not cured within 10 days after receipt of written notice thereof to the
executive by us or our board of directors; or
•
the
executive’s failure to obey the reasonable and lawful orders or
instructions of our Chief Executive Officer, the executive’s supervisor or
our board of directors, unless such failure is cured within 10 days after
receipt of written notice thereof to the executive by us or our board of
directors.
- 15
-
Under the
severance agreements, "good reason" means, subject to certain
exceptions:
•
any
materially adverse change in the executive’s authority, duties, or
responsibilities or any assignment to the executive of duties and
responsibilities materially inconsistent with those normally associated
with the executive’s position; or
•
a
reduction in executive’s salary or benefits, to the extent a reduction in
benefits represent reductions not experienced in general by other senior
executives; or
•
executive
is required to be primarily based at any office more fifty (50) miles
outside the metropolitan area of the executive’s then current business
address, excluding travel reasonably required in the performance of
executive’s responsibilities (except as to Mr. Wang who acknowledged that
he will be required as part of his responsibilities to spend a significant
amount of time working at our offices located in the Peoples Republic of
China).
Securities
Authorized for Issuance under Equity Compensation Plans
The
following table sets forth securities authorized for issuance under any equity
compensation plans approved by our shareholders as well as any equity
compensation plans not approved by our shareholders as of September 30,2009.
Number of securities to be issued
upon exercise of outstanding options, warrants and rights
(a)
Weighted
average exercise price of outstanding options, warrants and rights
(b)
Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a)
(c)
Plan
category(1)
Plans
approved by our shareholders:
Evolve One, Inc. Stock Option Plan
480
$
11.25
79,520
2006 Equity Plan
312,000
$
2.69
9,688,000
2008 Executive Stock Incentive Plan
-
-
1,000,000
2008 Non-Executive Stock Incentive Plan
-
-
1,890,979
Plans
not approved by shareholders:
2005 Equity Compensation Plan (2)
260,000
$
30.00
-
2006 Stock Plan
301,540
$
3.46
611,100
(1
)
For
a description of each of the Plans listed in this table, see “Note 13 -
Stockholders' Equity – Stock Option Plans” to the consolidated financial
statements in our Transition Report on Form 10-K for the nine month
transition period ended September 30, 2009, as filed with the
SEC.
(2
)
Our
2005 Equity Compensation Plan was terminated in April 2006. No
additional awards will be made under this
plan.
- 16
-
PRINCIPAL
SHAREHOLDERS
At
January 13, 2010 we had 27,601,628 shares of common stock issued and
outstanding. The following table sets forth information known to us as of
January 13, 2010 relating to the beneficial ownership of shares of our common
stock by:
•
each
person who is known by us to be the beneficial owner of more than 5% of
our outstanding common stock;
•
each
director and nominee;
•
each
named executive officer; and
•
all
named executive officers and directors as a
group.
Name
and Address of Beneficial Owner(1)
Amount
and Nature of Beneficial Ownership(2)
Percentage
of Class(2)
Yuejian
(James) Wang (3)
5,427,400
18.7
%
Yuwei
Huang
500,000
1.8
%
Andrew
X. Wang (4)
1,694
Lazarus
Rothstein(5)
10,000
*
David
Barnes (6)
21,750
*
Sheldon
Steiner (7)
44,500
*
Philip
Shen (8)
42,000
*
Adam
Wasserman
-
-
All
directors and executive officers as a group (8
persons)
6,047,344
20.8
%
———————
*represents
less than 1%
(1
)
Except
as otherwise noted below, the address of each of the persons shown in the
above table is c/o China Direct Investments, Inc., 431 Fairway Drive,
Suite 200, Deerfield Beach, Florida33441.
(2
)
Includes,
where applicable, shares of common stock issuable upon the exercise of
options to acquire common stock held by such person that may be exercised
within 60 days after January 13, 2010. Also includes unvested shares of
restricted stock as to which such person has voting power but no
dispositive power. Unless otherwise indicated, we believe that all persons
named in the table above have sole voting power and/or investment power
with respect to all shares of common stock beneficially owned by
them.
(3
)
The
number of shares beneficially owned by Dr. Wang includes: 4,000,000 shares
of common stock held by Dragon Fund Management LLC ("Dragon Fund"), an
entity in which Dr. Wang owns 1% of the membership interests and holds 50%
of the voting control; options to purchase 27,400 shares of common stock
at an exercise price of $2.50 expiring on January 1, 2011; options to
purchase 400,000 shares of common stock at an exercise price of $5.00
expiring on January 1, 2012; options to purchase 500,000 shares of
common stock at an exercise price of $7.50 expiring on January 1, 2013;
and options to purchase 500,000 shares of common stock at an exercise
price of $10.00 expiring on January 1, 2014. Dr. Wang disclaims beneficial
ownership of our common stock owned by Dragon Fund except to the
extent of his pecuniary interest in Dragon Fund.
(4
)
The
number of shares beneficially owned by Mr. Wang includes 1,694
shares owned by Cumberland Capital Management Group, Inc. Mr. Wang is the
sole owner, officer and director of this company.
(5
)
The
number of shares beneficially owned by Mr. Rothstein includes 5,000
shares of our common stock presently outstanding, and 5,000 shares of our
restricted common stock which vests on April 1, 2010.
(6
)
The
number of shares beneficially owned by Mr. Barnes includes: options
to purchase 12,500 shares of common stock at an exercise price of $3.00
expiring on January 15, 2011 and 9,250 shares of our restricted
common stock which vest on February 28, 2010.
(7
)
The
number of shares beneficially owned by Mr. Steiner includes: 22,750
shares of our common stock; options to purchase 12,500 shares of common
stock at an exercise price of $3.00 expiring on January 15,2011 and 9,250 shares of our restricted common stock which vests on
February 28, 2010.
(8
)
The
number of shares beneficially owned by Dr. Shen includes: 32,750 shares of
our common stock and 9,250 shares of our restricted common stock which
vests on February 28, 2010.
- 17
-
CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS
From time
to time we engage in transactions with related parties. The following
is a summary of the related party transactions reflected on our consolidated
balance sheet at September 30, 2009 and Note 12 to our consolidated financial
statements for the nine month transition period ended September 30,2009.
Definitions
We have
specified the following persons and entities as related parties with ending
balances as of September 30, 2009 and December 31, 2008:
Yuwei
Huang, is executive vice president of our Magnesium segment, a member of
the board of directors, chief executive officer and chairman of Chang
Magnesium, chairman of Baotou Changxin Magnesium, chairman of YiWei
Magnesium, and chief executive officer and vice chairman of Golden
Magnesium;
Taiyuan
YiWei Magnesium Industry Co., Ltd., a company organized under the laws of
the PRC (“YiWei Magnesium”), is a minority interest owner in Chang
Magnesium;
Lifei
Huang, is the daughter of Yuwei Huang;
Huihuan
Huang is the sister of Yuwei Huang;
Lifei
Huang, is a registered representative of Pine Capital Enterprises Inc., a
company organized under the laws of the Cayman Islands (“Pine
Capital”);
Lifei
Huang, is a registered representative of Wheaton Group Corp., a company
organized under the laws of Brunei Darussalam
(“Wheaton”);
LingShi
County Yihong Magnesium Co., Ltd., a company organized under the laws of
the PRC (“Yihong Magnesium”), is legally represented by an officer of
Chang Magnesium;
LuCheng
Haixu Magnesium Co., Ltd., a company organized under the laws of the PRC
(“Haixu Magnesium”), is legally represented by an officer of Chang
Magnesium;
LuCheng
Xinghai Magnesium Co., Ltd., a company organized under the laws of the PRC
(“Xinghai Magnesium”), is legally represented by an officer of Chang
Magnesium;
Nippon
Magnetic Dressing Co., Ltd., a company organized under the laws of the
Japan (“Nippon Magnetic”), is a minority interest owner of YiWei
Magnesium;
Shanxi
Senrun Coal Chemistry Co., Ltd., a company organized under the laws of the
PRC (“Senrun Coal”), is a minority interest owner in Golden
Magnesium;
Youbing
Yang is a director on the Baotou Chang Magnesium’s Board of
Directors;
NanTong
Langyuan Chemical Co., Ltd., a company organized under the laws of the PRC
(“NanTong Chemical”), is owned by Jingdong Chen and Qian Zhu, the minority
interest owners of Lang Chemical;
Jingdong
Chen, is vice president of our Basic Materials segment and chief executive
officer of Lang Chemical;
Qian
Zhu, is chief financial officer of Lang Chemical. Jingdong Chen and Qian
Zhu are husband and wife;
Chen
Chi is vice president of our Basic Materials Segment and minority interest
owner of CDI Beijing;
Zhongmen
International Investments Co., Ltd., a company organized under the laws of
the PRC (“Zhongmen International”), is legally represented by an officer
of CDI Beijing;
Beijing
Jiaozhuang Hotel, a company organized and under the laws of the
PRC
(“Jiaozhuang
Hotel”), is legally represented by an officer of CDI
Beijing.
- 18
-
Accounts
Receivable – related parties
At
September 30, 2009 we reported accounts receivable – related parties of
$2,355,059 comprised of the following:
$756,795
due Chang Magnesium from YiWei Magnesium, for inventory
provided;
$869,105
due Chang Magnesium from Pine Capital for inventory provided;
and,
$729,159
due Golden Magnesium from YiWei Magnesium for inventory
provided.
At
December 31, 2008 we reported accounts receivable – related parties of
$1,676,191 comprised of the following:
$1,628,896
due BaoTou Changxin Magnesium from YiWei Magnesium, for inventory
provided; and,
$47,295
due Golden Magnesium from YiWei Magnesium for inventory
provided.
Prepaid
Expenses – related parties
At
September 30, 2009 we reported prepaid expenses – related parties of $5,823,039
comprised of the following:
$2,440,794 prepaid
by Chang Magnesium to YiWei Magnesium for future delivery of
inventory;
$73,133
prepaid by Chang Magnesium to Haixu Magnesium to for future delivery of
inventory;
$530,888
prepaid by Chang Magnesium to Xinghai Magnesium to for future delivery of
inventory;
$684,922
prepaid by Chang Magnesium to Yihong Magnesium to for future delivery of
inventory;
$1,376,395
prepaid by Baotou Changxi Magnesium to YiWei Magnesium to for future
delivery of inventory;
$51,470
prepaid by Golden Magnesium to Senrun Coal for future delivery of coke gas
for fuel; and,
$665,438
prepaid by Golden Magnesium to YiWei Magnesium for future delivery of
inventory.
At
December 31, 2008 we reported prepaid expenses – related parties of
$7,617,887 comprised of the following:
$5,830,718
prepaid by Chang Magnesium to YiWei Magnesium for future delivery of
inventory;
$940,699
prepaid by Golden Magnesium to SenRun Coal for future delivery of coke gas
for fuel;
$520,397
prepaid by Chang Magnesium to Nippon Magnetic to for future delivery of
inventory; and
$326,073
prepaid by Golden Magnesium to YiWei Magnesium for future delivery of
inventory.
Loan
Receivable – related parties
At
September 30, 2009 we reported loan receivables – related parties of $1,094,142
comprised of the following:
$1,094,142
due Lang Chemical from NanTong Chemical for funds advanced for working
capital purposes.
At
December 31, 2008 we reported loan receivables – related parties of
$1,652,728 comprised of the following:
$1,608,959
due Lang Chemical from NanTong Chemical for funds advanced for working
capital purposes; and,
$43,769
due CDI Shanghai Management from Dragon Capital for funds advanced for
working capital purposes.
At
December 31, 2008 we reported due from related parties of $35,710 comprised
of the following:
$21,125
due China Direct from a China Direct employee for the exercise price of
exercised options; and,
$14,585
due CDI Metal Recycling from Zhou Weiyi, for the contribution of
registered capital related to the formation of CDI Metal
Recycling.
Accounts
Payable – related parties
At
September 30, 2009 we reported accounts payable – related party of $51,716
comprised of the following:
$35,428
due from Chang Magnesium to Wheaton Group in repayment of an advance form
customer for the expected delivery of inventory;
$14,826
due from Baotou Changxi Magnesium to Haixu Magnesium in repayment of an
advance form customer for the expected delivery of inventory;
and
$1,463
due from Golden Magnesium to Haixu Magnesium in repayment of an advance
form customer for the expected delivery of
inventory.
At
December 31, 2008 we reported accounts payable – related party of
$7,516,728 comprised of the following:
$4,497,180
due from Chang Magnesium to Pine Capital in repayment of an advance from
customer for the expected delivery of inventory; and
$3,019,548
due from Chang Magnesium to Wheaton Group in repayment of an advance form
customer for the expected delivery of
inventory.
Due
to related parties
At
September 30, 2009 we reported due to related parties balance of $399,629
comprised of the following:
$355,753
due to Zhongmen International Investments for working capital of CDI
Beijing; and
$43,876
advanced by Jiaozhuang Hotel to CDI Beijing for working capital
purposes.
At
December 31, 2008 we reported due to related parties balance of $978,739
comprised of the following:
$832,843
due to Chen Chi, this amount is made of up $729,257 due from Capital One
Resource, and $103,586 from CDI Beijing for fund advances for working
capital purposes; and
$145,896
advanced by Huihuan Huang to Chang Magnesium for working capital
purposes.
Related
Person Transaction Policy
In
December 2009, our board of directors adopted a written Related Person
Transaction Policy that requires the board of directors or audit committee to
approve or ratify transactions between our company or one or more of our
subsidiaries and any related person involving an amount in excess of
$120,000. Under the Related Person Transaction Policy, the board of directors or
audit committee will review the relevant facts of the proposed transaction and
the interest of the related person in the transaction, and either approve or
reject the proposed transaction. If a related person transaction that has not
been previously approved or previously ratified is discovered, that transaction
will be presented to the board of directors or audit committee for
ratification. No director can participate in the deliberation or approval of any
related person transaction in which such director is the related
person.
For
purposes of the Related Person Transaction Policy, a "related person" means (i)
any director or executive officer of ours, (ii) any nominee for director, (iii)
any 5% beneficial owner of our common stock, (iv) any immediate family member of
a director, nominee for director, executive officer or 5% beneficial owner of
our common stock, and (v) any firm, corporation, or other entity in which any of
these persons is employed or is a partner or principal or in a similar position,
or in which such person has a 10% or greater beneficial ownership interest. The
Related Person Transaction Policy will provide that the following types of
transactions are deemed to be pre-approved under the policy: (1) transactions
that are available to related persons on the same terms as such
- 20
-
transactions
are available to all employees generally; (2) compensation or indemnification
arrangements of any executive officer, other than an individual who is an
immediate family member of a related person, if such arrangements have been
approved by the board of directors or the compensation committee; (3)
transactions in which the related person's interest derives solely from his or
her ownership of less than 10% of the equity interest in another person (other
than a general partnership interest) that is a party to the transaction; (4)
transactions in which the related person's interest derives solely from his or
her ownership of a class of our equity securities and all holders of that class
of equity securities received the same benefit on a pro rata basis, (5) director
compensation arrangements, if such arrangements have been approved by the board
of directors or the nominating and corporate governance committee; and (6) any
other transaction which is not required to be disclosed as a "related person
transaction" under applicable securities regulations. The Related Person
Transaction Policy defines the term "immediate family member" to mean any child,
stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law of a director,
nominee for director, executive officer, or 5% beneficial owner of our common
stock, and any person (other than a tenant or employee) sharing the household of
such director, nominee for director, executive officer, or 5% beneficial
owner.
This
policy, which was adopted in December 2009 by our board of directors, will
be applied to future related person transactions. During the 2009
transition period, the audit committee has reviewed the aforedescribed related
party transactions.
CERTAIN
DEFINED TERMS
From time
to time in this proxy statement we used certain defined terms to refer to our
subsidiaries and other entities, all of which have the same meaning as in our
2009 Transition Report on Form 10-K for the nine months ended September 30,2009 filed with the SEC.
MATTERS
TO BE CONSIDERED AT THE ANNUAL MEETING
PROPOSAL
1
ELECTION
OF DIRECTORS
Nominees
for the board of directors
The board
of directors proposes the election of the following six individuals to serve on
its board of directors for a term of one year. These nominees include current
board members Drs. Wang and Shen and Messrs. Barnes, Steiner and
Huang. Drs. Wang and Shen and Messrs. Huang, Barnes
and Steiner are standing for reelection. Mr. Wasserman was
appointed to the board in January 2009 and is standing for
election.
The
following is information about each nominee, including biographical data for at
least the last five years. Should one or more of these nominees become
unavailable to accept nomination or election as a director, the individual named
as proxy on the enclosed proxy card will vote the shares that he represents for
the election of such other persons as the board of directors may
recommend.
The board
of directors adheres to corporate governance principles designed to assure the
continued vitality of the board of directors and excellence in the execution of
its duties. The board of directors is responsible for supervision of the overall
affairs of the company. Following the annual meeting, the board of directors
will consist of six directors. All directors are U.S. citizens except for Mr.
Huang who is citizen of the Peoples Republic of China. The term of each director
continues until the next annual meeting or until their successors are elected.
The names of the nominees for our board of directors and information about
them are set forth below.
Yuejian (James) Wang, Ph.D.,
age 48, has served as our CEO and Chairman of the board of directors since
August 2006. Dr. Wang, a co-founder of China Direct Investments, has served
as its CEO and Chairman of its board of directors since its inception in
January 2005. Dr. Wang has also been a member of the board of
directors of CIIC Investment Banking Services (Shanghai) Company Limited from
since June 2004 to 2007. From 2001 to 2004, Dr. Wang was President and
Chairman of the board of directors of Jiangbo Genesis Pharmaceuticals
Enterprises, Inc. (formerly Genesis Pharmaceuticals Enterprises, Inc.) (OTCBB:
JGBO). From 2000 until 2001, Dr. Wang was President, Chief Operating Officer and
director of China Net & Technologies, Inc., a technology firm. From 2000
until 2001, Dr. Wang was Vice President, Chief Operating Officer and director of
Ten Sleep Corporation, a California-based integrated Internet company that
acquired and licensed technology, identified, acquired and developed
development-stage technology and service entities and focused on the internet
infrastructure market-PC, application-ready devices. From January 2000
until November 2000, Dr. Wang was President of Master Financial Group,
Inc., a St. Paul, Minnesota-based company which was a wholly-owned subsidiary of
Ten Sleep Corporation that provided consulting services for small private and
public entities in the area of corporate finance, investor relations and
business management. Between 1997 and 2000, Dr. Wang was a research scientist
and Assistant Professor, Lab Director at the University of Minnesota, School of
Medicine. Dr. Wang received a Bachelor of Science degree from the University of
Science and Technology of China in He Fei, China in 1985, a Master of Science
Degree from the Shanghai Second Medical University, Shanghai, China in 1988, and
his Ph.D. degree from the University of Arizona in 1994.
- 21
-
Yuwei Huang, age 56, has
served as our Executive Vice President – Magnesium since February 2009 and as
Chief Executive Officer of our subsidiary, Chang Magnesium, since June 2006. Mr.
Huang is responsible for the operations of Chang Magnesium. Mr. Huang also
serves as General Manager of Taiyuan YiWei Magnesium Industry Co., Ltd. (“YiWei
Magnesium”) since founding the company in 1999 and serves in various positions
with its affiliated entities including Vice Chairman of Shanxi Golden Trust
YiWei Magnesium Industry Co., Ltd. since 2002, Vice Chairman of Taiyuan
Qingcheng YiWei Magnesium Industry Co., Ltd. since 2001, Vice Chairman and
General Manager of Taiyuan Min Wei Magnesium Industry Co., Ltd. since 2000,
General Manager of Taiyuan YiWei Magnesium Factory since 1998 and Chairman of
Shang Xi NiChiMen YiWei Magnesium Co., Ltd. since 1994. YiWei Magnesium, a
minority owner of Chang Magnesium, owns interests in seven subsidiary magnesium
factories, a magnesium alloy factory and a magnesium powder desulphurization
reagent factory, all located in China.
David M. Barnes, age 67, is a
certified public accountant and has been a member of our board of directors
since April 2007. Mr. Barnes is the chairman of our audit committee and serves
on our compensation committee, nominating committee and governance committee.
Mr. Barnes brings over 40 years experience working with both public and private
companies. Since December 2008, Mr. Barnes has been the President and since
February 2009 has been the Chief Executive Officer and Chairman of the Board of
Directors of MDwerks, Inc. (MDWK:OTCBB). Mr. Barnes had served as the audit
committee chairman and a member of the compensation committee of the board of
MDwerks, Inc. from November 2005 until December 2008. MDwerks, Inc. is an
automated healthcare solutions provider and also markets digital pens and
associated software and customer service. From April 1996 through July 2006, Mr.
Barnes served as Executive Vice President, Chief Financial Officer and a
director of Solar Thin Films, Inc. (OTCBB:SLTZ) (formerly American United
Global, Inc., (OTCBB:AUGB). From 2002 to February 2009, Mr. Barnes was a
consultant to management of numerous companies. In this role, from
May 2006 to November 2007, Mr. Barnes was Chief Financial Officer and a director
of Cyber Defense Systems, Inc. (OTCBB:CYDF), a designer and builder of manned
and unmanned surveillance airships. From March 2006 to June 2008, Mr. Barnes was
the Chief Financial Officer of Neah Power Systems, Inc. (OTCBB:NPWS), a
developer of porous silicon based fuel cells. In addition, Mr. Barnes was a
director of Echometrics, Inc. (formerly Searchhelp, Inc.) from April 2005
to February 2009 (OTCBB:EHMI), Thinkpath, Inc. from May 2005 to February 2009
(OTCBB:THPHF) and Medical Solutions Management, Inc. from December 2007 to
December 2008 (OTCBB: MSMT). Thinkpath, Inc. filed for protection under Chapter
11 of the U.S. Bankruptcy code in March 2008. Mr. Barnes began his career as an
auditor for the accounting firm of Laventhol & Horwath and is a graduate of
C.W. Post College.
Sheldon Steiner, age
77, has been a member of our board of directors since April 2007.
Mr. Steiner is Chairman of the compensation committee and a member of the
audit committee and nominating and governance committee. Mr. Steiner
has over 52 years of both public and private accounting experience. Since
October 2008, Mr. Steiner has been a member of the board of directors of
MDwerks, Inc. From 2003 to 2005 Mr. Steiner served as a managing
director for American Express Tax and Business Services, Inc. From 2003 to 2007
Mr. Steiner was a principal of Millward & Co. CPAs. From 2006 to 2007
Mr. Steiner was a managing director of RSM McGladrey. Mr. Steiner
currently serves as a Senior Vice President at Valley Bank in south Florida and
is a member of the Fort Lauderdale Chamber of Commerce Trustees and the Broward
Economic Development Council. He is a graduate of the City College of New
York.
Philip Y. Shen, Ph.D., age 66,
possesses three decades of high level experience in international sales and
marketing, manufacturing, mergers/acquisitions, cross border investment,
combined with his cultural background and fluency in Chinese
dialects. For more than the past 20 years, Dr. Shen has held numerous
positions with Leggett and Platt, Inc., a Fortune 500 Company
that manufactures a broad variety of engineered components and products for
customers worldwide. Prior to his retirement at Leggett and Platt,
Inc., Dr. Shen held the position of president of its Asia Pacific operations
where he was responsible for business development, sales and marketing, sourcing
and manufacturing, mergers and acquisitions, licensing and cross-cultural
negotiations in the company’s Asia Pacific region. Since his
retirement in 2008, Dr. Shen has been engaged in international consulting
representing clients in the area of cross-border investment and
marketing. In addition, since 2004, Dr. Shen has published a monthly
publication, China Insights, which reports on a variety of topics important to
business development and bi-directional trade. Dr. Shen earned a
Ph.D. degree in biochemistry from Western Michigan University in
1971.
Adam Wasserman, age 46, is a
certified public accountant and has served as a member of our board of directors
since January 2009. Since November 1999, Mr. Wasserman has been the
chief executive officer of CFO Oncall, Inc., a Weston, Florida based provider of
accounting services specializing in SEC financial reporting, budgeting and
planning, mergers and acquisitions, audit preparation services, accounting,
automated systems, banking relations and internal controls. Through CFO Oncall,
Inc., Mr. Wasserman has served as the chief financial officer of China Wind
Systems, Inc. since 2007 and Transax International Limited since 2005. Mr.
Wasserman has also served as the chief financial officer of a number of private
and public companies at various times from 1999 through 2009 through CFO Oncall,
Inc. From June 1991 to November 1999 Mr. Wasserman was a Senior Audit Manager at
American Express Tax and Business Services, in Fort Lauderdale, Florida where
his responsibilities included supervising, training and evaluating senior
accounting staff members, work paper review, auditing, maintaining client
relations, preparation of tax returns and financial statements. From September
1986 to May 1991, Mr. Wasserman was employed by Deloitte & Touche, LLP where
his assignments included public and private company audits and SEC reporting,
tax preparation and planning, management consulting, systems design, staff
instruction and recruiting. Mr. Wasserman holds a Bachelor of Science from the
State University of New York at Albany.
There are
no family relationship between any of the executive officers and
directors.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
ELECTION OF THE DIRECTOR NOMINEES.
- 22
-
PROPOSAL
2
RATIFICATION
OF THE APPOINTMENT OF SHERB & CO., LLP
The audit
committee has appointed Sherb & Co, LLP as our independent registered public
accounting firm to audit the consolidated financial statements of China Direct
Industries, Inc. and its subsidiaries for the fiscal year ending September30, 2010. Representatives of Sherb & Co., LLP will be present at the annual
meeting and will have an opportunity to make a statement or to respond to
appropriate questions from shareholders. Although shareholder ratification
of the appointment of our independent auditor is not required by our Bylaws or
otherwise, we are submitting the selection of Sherb & Co., LLP to our
shareholders for ratification to permit shareholders to participate in this
important corporate decision. If not ratified, the audit committee will
reconsider the selection, although the audit committee will not be required to
select a different independent auditor for our company.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF SHERB & CO,
LLP AS THE INDEPENDENT REGISTERED ACCOUNTING FIRM OF CHINA DIRECT
INDUSTRIES
PROPOSAL
3
APPROVAL
OF AN AMENDMENT AND RESTATEMENT OF OUR BYLAWS
Our board
of directors has approved a resolution, subject to shareholder approval,
amending and restating our Bylaws in order to decrease the quorum requirement
for meetings of our shareholders to one-third (1/3) of the voting power of our
issued and outstanding shares entitled to vote, whether represented in person or
by proxy at shareholder meetings. The full text of the proposed
amended and restated Bylaws is set forth as Appendix A to this Proxy
Statement.
The
Florida Business Corporation Act (Florida law) permits us to specify the number
of shares that constitutes a quorum for the transaction of any business, so long
as a quorum does not consist of less than one-third of the shares entitled to
vote at a meeting. Consistent with Florida law, Section 3.04 of our Bylaws
currently provides that, at all meetings of shareholders, the presence of the
holders of not less than a majority of the outstanding shares of stock entitled
to vote shall constitute a quorum for the transaction of business. However,
given that our shares are very widely held, it has become increasingly difficult
to attract a sufficient number of shareholders to reach the required threshold
to establish a quorum. The board believes it to be in the best interests of our
company to amend Section 3.04 of our Bylaws so that the presence of the
holders of not less than one-third (1/3) of the outstanding shares of stock
entitled to vote shall constitute a quorum. This change will make
it easier and less costly and time consuming for us to obtain shareholder
approval and for a minority of shareholders to propose and pass
proposals.
Anti-Takeover
Effects of a Decrease in Shareholder Meeting Quorum Requirement
We do not
believe that the proposed amendment will have any anti-takeover effects, rather
we believe that it will enhance minority shareholder participation in matters
that require their approval enabling them to have greater influence to consider
a proposed transaction in a manner that best serves the overall interests of our
shareholders. Also, we have not proposed the decrease in shareholder meeting
quorum requirement as part of a plan by management to adopt a series of
anti-takeover amendments and we do not presently intend to propose any
anti-takeover measures in future proxy solicitations. Our board of directors
believes that the benefit of decreasing the quorum requirement to one-third of
the voting power outweighs any disadvantages.
Provisions
of our articles of incorporation and bylaws may be deemed to have anti-takeover
effects, which include when and by whom special meetings of our shareholders may
be called, and may delay, defer or prevent a takeover attempt. In addition,
certain provisions of Florida law also may be deemed to have certain
anti-takeover effects which include that control of shares acquired
in
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excess of
certain specified thresholds will not possess any voting rights unless these
voting rights are approved by a majority of a corporation’s disinterested
shareholders. In addition, our articles of incorporation authorize the issuance
of up to 10,000,000 shares of preferred stock with such rights and preferences
as may be determined by our board of directors, of which 12,950 shares have been
designated as our series A convertible preferred stock and the remaining
9,987,050 shares remain without designation. Our board of directors may, without
shareholder approval, issue preferred stock with dividends, liquidation,
conversion or voting rights that could adversely affect the voting power or
other rights of our common shareholders.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT AND
RESTATEMENT OF OUR BYLAWS
OTHER
MATTERS
As of the
date hereof, there are no other matters that we intend to present, or have
reason to believe others will present, at the annual meeting. If, however,
other matters properly come before the annual meeting, the accompanying proxy
authorizes the person named as proxy or his substitute to vote on such matters
as he determines appropriate.
DISSENTER’S
RIGHTS
Under
Florida law there are no dissenter’s rights available to our shareholders in
connection with either the election of our board of directors, the ratification
of the appointment of our registered public accounting firm or the approval of
the amendment and restatement of our Bylaws.
PROPOSALS
OF SHAREHOLDERS
Proposals
of shareholders to be included in our proxy statement for our annual meeting of
shareholders to be held in 2011 must be received by our corporate secretary on
or before October 1, 2010. The submission of a shareholder proposal does
not guarantee that it will be included in our proxy for our annual meeting
of shareholders we plan to have in 2011. All other shareholder proposals,
including nominations of directors, must be received by us not less than 60 days
nor more than 90 days prior to such meeting which is tentatively scheduled for
March 25, 2011.
2009
TRANSITION REPORT ON FORM 10-K
As
required, we have filed our Transition Report on Form 10-K for the nine
month period ended September 30, 2009 with the SEC. Shareholders may obtain,
free of charge, a copy of this 2009 Transition Report on Form 10-K by
writing to us at China Direct Industries, Inc. 431 Fairway Drive, DeerfieldBeach, Florida33441, Attention: Corporate Secretary, or from the Investor
Relations page of our website at www.cdii.net and
our 2009 Transition Report for the nine months ended September 30, 2009 on
Form 10-K with exhibits is available on the website of the SEC at
www.sec.gov.
WHERE
YOU CAN FIND MORE INFORMATION
This
proxy statement refers to certain documents that are not presented herein or
delivered herewith. Such documents are available to any person, including
any beneficial owner of our shares, to whom this proxy statement is delivered
upon oral or written request, without charge. Requests for such documents should
be directed to Corporate Secretary, China Direct Industries, Inc., 431 Fairway
Drive, Deerfield Beach, Florida (954) 363-7333. Please note that
additional information can be obtained from our website at www.cdii.net.
We file
annual and special reports and other information with the SEC. Certain of our
SEC filings are available over the Internet at the SEC’s web site at
http://www.sec.gov. You may also read and copy any document we file with
the SEC at its public reference facilities:
Public
Reference Room Office
100 F
Street, N.E.
Room
1580
Washington,
D.C. 20549
You may
also obtain copies of the documents at prescribed rates by writing to the Public
Reference Section of the SEC at 100 F Street, N.E., Room 1580, Washington,
D.C. 20549. Callers in the United States can also call 1-202-551-8090 for
further information on the operations of the public reference
facilities.
The principal office of the corporation
in the State of Florida shall be established at such places as the board of
directors from time to time determine.
Section
1.02. Registered
Office.
The registered office of the
corporation in the State of Florida shall be at the office of its registered
agent as stated in the articles of incorporation or as the board of directors
shall from time to time determine.
Section
1.03. Other
Offices.
The corporation may have additional
offices at such other places, either within or without the State of Florida, as
the board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE
II
Meetings of
Shareholders
Section
2.01. Annual
Meeting.
(1) The
corporation shall hold a meeting of shareholders annually, for the election of
directors and for the transaction of any proper business, at a time stated in or
fixed in accordance with a resolution of the board of directors.
(2) Annual
shareholders' meeting may be held in or out of the State of Florida at a place
stated in or fixed in accordance with a resolution by the board of directors or,
when not inconsistent with the board of directors' resolution stated in the
notice of the annual meeting. If no place is stated in or fixed in
accordance with these bylaws, or stated in the notice of the annual meeting,
annual meetings shall be held at the corporation's principal
office.
(3) The
failure to hold the annual meeting at the time stated in or fixed in accordance
with these bylaws or pursuant to the Act does not affect the validity of any
corporate action and shall not work a forfeiture of or dissolution of the
corporation.
Section
2.02. Special
Meeting.
(1) The
corporation shall hold a special meeting of shareholders:
(a) On
call of its board of directors or the person or persons authorized to do so by
the board of directors; or
(b) If
the holders of not less than 10% of all votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting sign, date and deliver
to the corporation's
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secretary
one or more written demands for the meeting describing the purpose or purposes
for which it is to be held.
(2) Special
shareholders' meetings may be held in or out of the State of Florida at a place
stated in or fixed in accordance with a resolution of the board of directors,
or, when not inconsistent with the board of directors' resolution, in the notice
of the special meeting. If no place is stated in or fixed in
accordance with these bylaws or in the notice of the special meeting, special
meetings shall be held at the corporation's principal office.
(3) Only
business within the purpose or purposes described in the special meeting notice
may be conducted at a special shareholders' meeting.
Section
2.03. Shareholders' List for
Meeting.
(1) After
fixing a record date for a meeting, a corporation shall prepare a list of the
names of all its shareholders who are entitled to notice of a shareholders'
meeting, in accordance with the Florida Business Corporation Act (the "Act"), or
arranged by voting group, with the address of, and the number and class and
series, if any, of shares held by, each.
(2) The
shareholders' list must be available for inspection by any shareholder for a
period of ten days prior to the meeting or such shorter time as exists between
the record date and the meeting and continuing through the meeting at the
corporation's principal office, at a place identified in the meeting notice in
the city where the meeting will be held, or at the office of the corporation's
transfer agent or registrar. A shareholder or his agent or attorney
is entitled on written demand to inspect the list (subject to the requirements
of Section 607.1602(3) of the Act), during regular business hours and at his
expense, during the period it is available for inspection.
(3) The
corporation shall make the shareholders' list available at the meeting, and any
shareholder or his agent or attorney is entitled to inspect the list at any time
during the meeting or any adjournment.
Section
2.04. Record
Date.
(1) The
board of directors may set a record date for purposes of determining the
shareholders entitled to notice of and to vote at a shareholders' meeting;
however, in no event may a record date fixed by the board of directors be a date
preceding the date upon which the resolution fixing the record date is
adopted.
(2) Unless
otherwise fixed by the board of directors, the record date for determining
shareholders entitled to demand a special meeting is the date the first
shareholder delivers his demand to the corporation. In the event that
the board of directors sets the record date for a special meeting of
shareholders, it shall not be a date preceding the date upon which the
corporation receives the first demand from a shareholder requesting a special
meeting.
(3) If
no prior action is required by the board of directors pursuant to the Act, and,
unless otherwise fixed by the board of directors, the record date for
determining shareholders entitled to take action without a meeting is the date
the first signed written consent is delivered to the corporation under Section
607.0704 of the Act. If prior action is required by the board of
directors pursuant to the Act, the record date for determining shareholders
entitled to take action without a meeting is at the close of business on the day
on which the board of directors adopts the resolution taking such prior
action.
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(4) Unless
otherwise fixed by the board of directors, the record date for determining
shareholders entitled to notice of and to vote at an annual or special
shareholders' meeting is the close of business on the day before the first
notice is delivered to shareholders.
(5) A
record date may not be more than 70 days before the meeting or action requiring
a determination of shareholders.
(6) A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
board of directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than one 120 days after the date fixed for the original
meeting.
Section
2.05. Notice of Meetings and
Adjournment.
(1) The
corporation shall notify shareholders of the date, time and place of each annual
and special shareholders' meeting no fewer than 10 or more than 60 days before
the meeting date. Unless the Act requires otherwise, the corporation
is required to give notice only to shareholders entitled to vote at the
meeting. Notice shall be given in the manner provided in Section
607.0141 of the Act, by or at the direction of the president, the secretary, of
the officer or persons calling the meeting. If the notice is mailed
at least 30 days before the date of the meeting, it may be done by a class of
United States mail other than first class. Notwithstanding Section
607.0141, if mailed, such notice shall be deemed to be delivered when deposited
in the United Statement mail addressed to the shareholder at his address as it
appears on the stock transfer books of the corporation, with postage thereon
prepaid.
(2) Unless
the Act or the articles of incorporation requires otherwise, notice of an annual
meeting need not include a description of the purpose or purposes for which the
meeting is called.
(3) Notice
of a special meeting must include a description of the purpose or purposes for
which the meeting is called.
(4) If
an annual or special shareholders meeting is adjourned to a different date,
time, or place, notice need not be given of the new date, time, or place if the
new date, time or place is announced at the meeting before adjournment is taken,
and any business may be transacted at the adjourned meeting that might have been
transacted on the original date of the meeting. If a new record date
is or must be fixed under Section 607.0707 of the Act, however, notice of the
adjourned meeting must be given under this section to persons who are
shareholders as of the new record date who are entitled to notice of the
meeting.
(5) Notwithstanding
the foregoing, no notice of a shareholders' meeting need be given
if: (a) an annual report and proxy statements for two consecutive
annual meetings of shareholders, or (b) all, and at least two checks in payment
of dividends or interest on securities during a 12-month period, have been sent
by first-class United States mail, addressed to the shareholder at his address
as it appears on the share transfer books of the corporation, and returned
undeliverable. The obligation of the corporation to give notice
of a shareholders' meeting to any such shareholder shall be reinstated once the
corporation has received a new address for such shareholder for entry on its
share transfer books.
Section
2.06. Waiver of
Notice.
(1) A
shareholder may waive any notice required by the Act, the articles of
incorporation, or bylaws before or after the date and time stated in the
notice. The waiver must be in writing, be signed by the shareholder
entitled to the notice, and be delivered to the corporation for inclusion in the
minutes or
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filing
with the corporate records. Neither the business to be transacted at
nor the purpose of any regular or special meeting of the shareholders need be
specified in any written waiver of notice.
(2) A
shareholder's attendance at a meeting: (a) Waives objection to lack
of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; or (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when it
is presented.
ARTICLE
III
Shareholder
Voting
Section
3.01. Voting Group
Defined.
A "voting group" means all shares of
one or more classes or series that under the articles of incorporation or the
Act are entitled to vote and be counted together collectively on a matter at a
meeting of shareholders. All shares entitled by the articles of
incorporation or the Act to vote generally on the matter are for that purpose a
single voting group.
Section
3.02. Quorum and Voting
Requirements for Voting Groups.
(1) Shares
entitled to vote as a separate voting group may take action on a matter at a
meeting only if a quorum of those shares exists with respect to that
matter. Unless the articles of incorporation or the Act provides
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
(2) Once
a share is represented for any purpose at a meeting, it is deemed present for
quorum purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for that adjourned
meeting.
(3) If
a quorum exists, action on a matter (other than the election of directors) by a
voting group is approved if the votes cast within the voting group favoring the
action exceed the votes cast opposing the action, unless the articles of
incorporation or the Act requires a greater number of affirmative
votes.
Section
3.03. Action by Single and
Multiple Voting Groups.
(1) If
the articles of incorporation or the Act provides for voting by a single voting
group on a matter, action on that matter is taken when voted upon by that voting
group as provided in Section 3.02 of these bylaws.
(2) If
the articles of incorporation or the Act provides for voting by two or more
voting groups on a matter, action on that matter is taken only when voted upon
by each of those voting groups counted separately as provided in Section 3.02 of
these bylaws. Action may be taken by one voting group on a matter
even though no action is taken by another voting group entitled to vote on the
matter.
Section
3.04. Shareholder Quorum and
Voting; Greater or Lesser Voting Requirements.
(1) One-third
of the issued and outstanding shares entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of
shareholders. When a specified item of business is
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required
to be voted on by a class or series of stock, one-third of the issued and
outstanding shares entitled to vote of such class or series shall constitute a
quorum for the transaction of such item of business by that class or
series.
(2) An
amendment to the articles of incorporation that adds, changes or deletes a
greater or lesser quorum or voting requirement must meet the same quorum
requirement and be adopted by the same vote and voting groups required to take
action under the quorum and voting requirements then in effect or proposed to be
adopted, whichever is greater.
(3) If
a quorum exists, action on a matter, other than the election of directors, is
approved if the votes cast by the holders of the shares represented at the
meeting and entitled to vote on the subject matter favoring the action exceed
the votes cast opposing the action, unless a greater number of affirmative votes
or voting by classes is required by the Act or the articles of
incorporation.
(4) After
a quorum has been established at a shareholders' meeting, the subsequent
withdrawal of shareholders, so as to reduce the number of shares entitled to
vote at the meeting below the number required for a quorum, shall not affect the
validity of any action taken at the meeting or any adjournment
thereof.
(5) The
articles of incorporation may provide for a greater voting requirement or a
greater or lesser quorum requirement for shareholders (or voting groups of
shareholders) than is provided by the Act, but in no event shall a quorum
consist of less than one-third of the shares entitled to vote.
Section
3.05. Voting for Directors;
Cumulative Voting.
(1) Directors
are elected by a plurality of the votes cast by the shares entitled to vote in
the election at a meeting at which a quorum is present.
(2) Each
shareholder who is entitled to vote at an election of directors has the right to
vote the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to
vote. Shareholders do not have a right to cumulate their votes for
directors unless the articles of incorporation so provide.
Section
3.06. Voting Entitlement of
Shares.
(1) Unless
the articles of incorporation or the Act provides otherwise, each outstanding
share, regardless of class, is entitled to one vote on each matter submitted to
a vote at a meeting of shareholders. Only shares are entitled to
vote.
(2) The
shares of the corporation are not entitled to vote if they are owned, directly
or indirectly, by a second corporation, domestic or foreign, and the first
corporation owns, directly or indirectly, a majority of shares entitled to vote
for directors of the second corporation.
(3) This
section does not limit the power of the corporation to vote any shares,
including its own shares, held by it in a fiduciary capacity.
(4) Redeemable
shares are not entitled to vote on any matter, and shall not be deemed to be
outstanding, after notice of redemption is mailed to the holders thereof and a
sum sufficient to redeem such shares has been deposited with a bank, trust
company, or other financial institution upon an irrevocable obligation to pay
the holders the redemption price upon surrender of the shares.
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(5) Shares
standing in the name of another corporation, domestic or foreign, may be voted
by such officer, agent, or proxy as the bylaws of the corporate shareholder may
prescribe or, in the absence of any applicable provision, by such person as the
board of directors of the corporate shareholder may designate. In the
absence of any such designation or in case of conflicting designation by the
corporate shareholder, the chairman of the board, the president, any vice
president, the secretary, and the treasurer of the corporate shareholder, in
that order, shall be presumed to be fully authorized to vote such
shares.
(6) Shares
held by an administrator, executor, guardian, personal representative, or
conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of
a trustee may be voted by him, either in person or by proxy, but no trustee
shall be entitled to vote shares held by him without a transfer of such shares
into his name or the name of his nominee.
(7) Shares
held by or under the control of a receiver, a trustee in bankruptcy proceedings,
or an assignee for the benefit of creditors may be voted by him without the
transfer thereof into his name.
(8) If
a share or shares stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the secretary of the corporation
is given notice to the contrary and is furnished with a copy of the instrument
or order appointing them or creating the relationship wherein it is so provided,
then acts with respect to voting have the following effect:
(a) If
only one votes, in person or in proxy, his act binds all;
(b) If
more than one vote, in person or by proxy, the act of the majority so voting
binds all;
(c) If
more than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally;
(d) If
the instrument or order so filed shows that any such tenancy is held in unequal
interest, a majority or a vote evenly split for purposes of this subsection
shall be a majority or a vote evenly split in interest;
(e) The
principles of this subsection shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum;
(f) Subject
to Section 3.08 of these bylaws, nothing herein contained shall prevent trustees
or other fiduciaries holding shares registered in the name of a nominee from
causing such shares to be voted by such nominee as the trustee or other
fiduciary may direct. Such nominee may vote shares as directed by a
trustee or their fiduciary without the necessity of transferring the shares to
the name of the trustee or other fiduciary.
Section
3.07. Proxies.
(1) A
shareholder, other person entitled to vote on behalf of a shareholder pursuant
to Section 3.06 of these bylaws, or attorney in fact may vote the shareholder's
shares in person or by proxy.
(2) A
shareholder may appoint a proxy to vote or otherwise act for him by signing an
appointment form, either personally or by his attorney in fact. An
executed telegram or cablegram
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appearing
to have been transmitted by such person, or a photographic, photostatic, or
equivalent reproduction of an appointment form, is a sufficient appointment
form.
(3) An
appointment of a proxy is effective when received by the secretary or other
officer or agent authorized to tabulate votes. An appointment is
valid for up to 11 months unless a longer period is expressly provided in the
appointment form.
(4) The
death or incapacity of the shareholder appointing a proxy does not affect the
right of the corporation to accept the proxy's authority unless notice of the
death or incapacity is received by the secretary or other officer or agent
authorized to tabulate votes before the proxy exercises his authority under the
appointment.
(5) An
appointment of a proxy is revocable by the shareholder unless the appointment
form conspicuously states that it is irrevocable and the appointment is coupled
with an interest. Appointments coupled with an interest include the
appointment of: (a) a pledgee; (b) a person who purchased or agreed
to purchase the shares; (c) a creditor of the corporation who extended credit to
the corporation under terms requiring the appointment; (d) an employee of the
corporation whose employment contract requires the appointment; or (e) a party
to a voting agreement created in accordance with the Act.
(6) An
appointment made irrevocable under this section becomes revocable when the
interest with which it is coupled is extinguished and, in a case provided for in
Subsection 5(c) or 5(d), the proxy becomes revocable three years after the date
of the proxy or at the end of the period, if any, specified herein, whichever is
less, unless the period of irrevocability is renewed from time to time by the
execution of a new irrevocable proxy as provided in this
section. This does not affect the duration of a proxy under
subsection (3).
(7) A
transferee for value of shares subject to an irrevocable appointment may revoke
the appointment if he did not know of its existence when he acquired the shares
and the existence of the irrevocable appointment was not noted conspicuously on
the certificate representing the shares or on the information statement for
shares without certificates.
(8) Subject
to Section 3.09 of these bylaws and to any express limitation on the proxy's
authority appearing on the face of the appointment form, a corporation is
entitled to accept the proxy's vote or other action as that of the shareholder
making the appointment.
(9) If
an appointment form expressly provides, any proxy holder may appoint, in
writing, a substitute to act in his place.
Section
3.08. Shares Held by
Nominees.
(1) The
corporation may establish a procedure by which the beneficial owner of shares
that are registered in the name of a nominee is recognized by the corporation as
the shareholder. The extent of this recognition may be determined in
the procedure.
(2) The
procedure may set forth (a) the types of nominees to which it applies; (b) the
rights or privileges that the corporation recognizes in a beneficial owner; (c)
the manner in which the procedure is selected by the nominee; (d) the
information that must be provided when the procedure is selected; (e) the period
for which selection of the procedure is effective; and (f) other aspects of the
rights and duties created.
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Section
3.09. Corporation's Acceptance of
Votes.
(1) If
the name signed on a vote, consent, waiver, or proxy appointment corresponds to
the name of a shareholder, the corporation if acting in good faith is entitled
to accept the vote, consent waiver, or proxy appointment and give it effect as
the act of the shareholder.
(2) If
the name signed on a vote, consent, waiver, or proxy appointment does not
correspond to the name of its shareholder, the corporation if acting in good
faith is nevertheless entitled to accept the vote, consent, waiver, or proxy
appointment and give it effect as the act of the shareholder if: (a) the
shareholder is an entity and the name signed purports to be that of an officer
or agent of the entity; (b) the name signed purports to be that of an
administrator, executor, guardian, personal representative, or conservator
representing the shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation has been presented with respect
to the vote, consent, waiver, or proxy appointment; (c) the name signed purports
to be that of a receiver, trustee in bankruptcy, or assignee for the benefit of
creditors of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver, or proxy appointment; (d) the name signed purports to be
that of a pledgee, beneficial owner, or attorney in fact of the shareholder and,
if the corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented with
respect to the vote, consent, waiver, or proxy appointment; or (e) two or more
persons are the shareholder as covenants or fiduciaries and the name signed
purports to be the name of at least one of the co-owners and the person signing
appears to be acting on behalf of all the co-owners.
(3) The
corporation is entitled to reject a vote, consent, waiver, or proxy appointment
if the secretary or other officer or agent authorized to tabulate votes, acting
in good faith, has reasonable basis for doubt about the validity of the
signature on it or about the signatory's authority to sign for the
shareholder.
(4) The
corporation and its officer or agent who accepts or rejects a vote, consent,
waiver, or proxy appointment in good faith and in accordance with the standards
of this section are not liable in damages to the shareholder for the
consequences of the acceptance or rejection.
(5) Corporate
action based on the acceptance or rejection of a vote, consent, waiver, or proxy
appointment under this section is valid unless a court of competent jurisdiction
determines otherwise.
Section
3.10. Action by Shareholders
Without Meeting.
(1) Any
action required or permitted by the Act to be taken at any annual or special
meeting of shareholders of the corporation may be taken without a meeting,
without prior notice and without a vote, if the action is taken by the holders
of outstanding stock of each voting group entitled to vote thereon having not
less than the minimum number of votes with respect to each voting group that
would be necessary to authorize or take such action at a meeting at which all
voting groups and shares entitled to vote thereon were present and
voted. In order to be effective, the action must be evidenced by one
or more written consents describing the action taken, dated and signed by
approving shareholders having the requisite number of votes of each voting group
entitled to vote thereon, and delivered to the corporation by delivery to its
principal office in this state, its principal place of business, the corporate
secretary, or another office or agent of the corporation having custody of the
book in which proceedings of meetings of shareholders are
recorded. No written consent shall be effective to take the corporate
action referred to therein unless, within 60 days of the date of the earliest
dated consent is delivered in the manner required
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by this
section, written consent signed by the number of holders required to take action
is delivered to the corporation by delivery as set forth in this
section.
(2) Within
10 days after obtaining such authorization by written consent, notice in
accordance with Section 607.0704(3) of the Act must be given to those
shareholders who have not consented in writing.
ARTICLE
IV
Board of Directors and
Officers
Section
4.01. Qualifications of
Directors.
Directors must be natural persons who
are 18 years of age or older but need not be residents of the State of Florida
or shareholders of the corporation.
Section
4.02. Number of
Directors.
(1) The
board of directors shall consist of not less than one nor more than nine
individuals.
(2) The
number of directors may be increased or decreased from time to time by amendment
to these bylaws.
(3) Directors
are elected at the first annual shareholders' meeting and at each annual meeting
thereafter unless their terms are staggered under Section 4.04 of these
bylaws.
Section
4.03. Terms of Directors
Generally.
(1) The
terms of the initial directors of the corporation expire at the first
shareholders' meeting at which directors are elected.
(2) The
terms of all other directors expire at the next annual shareholders' meeting
following their election unless their terms are staggered under Section 4.04 of
these bylaws.
(3) A
decrease in the number of directors does not shorten an incumbent director's
term.
(4) The
term of a director elected to fill a vacancy expires at the next shareholders'
meeting at which directors are elected.
(5) Despite
the expiration of a director's term, he continues to serve until his successor
is elected and qualifies or until there is a decrease in the number of
directors.
Section
4.04. Staggered Terms for
Directors.
The directors of any corporation
organized under the Act may, by the articles of incorporation, or by amendment
to these bylaws adopted by a vote of the shareholders, be divided into one, two
or three classes with the number of directors in each class being as nearly
equal as possible; the term of office of those of the first class to expire at
the annual meeting next ensuing; of the second class one year thereafter; at the
third class two years thereafter; and at each annual election held after such
classification and election, directors shall be chosen for a full term, as the
case may be, to succeed those whose terms expire. If the directors
have staggered terms, then any increase or decrease in the number of directors
shall be so apportioned among the classes as to make all classes as nearly equal
in number as possible.
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Section
4.05. Vacancy on
Board.
(1) Whenever
a vacancy occurs on a board of directors, including a vacancy resulting from an
increase in the number of directors, it may be filled by the affirmative vote of
a majority of the remaining directors.
(2) A
vacancy that will occur at a specific later date (by reason of a resignation
effective at a later date may be filled before the vacancy occurs but the new
director may not take office until the vacancy occurs.
Section
4.06. Compensation of
Directors.
The board of directors may fix the
compensation of directors.
Section
4.07. Meetings.
(1) The
board of directors may hold regular or special meetings in or out of the State
of Florida.
(2) A
majority of the directors present, whether or not a quorum exists, may adjourn
any meeting of the board of directors to another time and
place. Notice of any such adjourned meeting shall be given to the
directors who were not present at the time of the adjournment and, unless the
time and place of the adjourned meeting are announced at the time of the
adjournment, to the other directors.
(3) Meetings
of the board of directors may be called by the chairman of the board or by the
president.
(4) The
board of directors may permit any or all directors to participate in a regular
or special meeting by, or conduct the meeting through the use of, any means of
communication by which all directors participating may simultaneously hear each
other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
Section
4.08. Action by Directors Without
a Meeting.
(1) Action
required or permitted by the Act to be taken at a board of directors' meeting or
committee meeting may be taken without a meeting if the action is taken by all
members of the board or of the committee. The action must be
evidenced by one or more written consents describing the action taken and signed
by each director or committee member.
(2) Action
taken under this section is effective when the last director signs the consent,
unless the consent specifies a different effective date.
(3) A
consent signed under this section has the effect of a meeting vote and may be
described as such in any document.
Section
4.09. Notice of
Meetings.
Regular and special meetings of the
board of directors may be held without notice of the date, time, place, or
purpose of the meeting.
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Section
4.10. Waiver of
Notice.
Notice of a meeting of the board of
directors need not be given to any director who signs a waiver of notice either
before or after the meeting. Attendance of a director at a meeting
shall constitute a waiver of notice of such meeting and a waiver of any and all
objections to the place of the meeting, the time of the meeting, or the manner
in which it has been called or convened, except when a director states, at the
beginning of the meeting or promptly upon arrival at the meeting, any objection
to the transaction of business because the meeting is not lawfully called or
convened.
Section
4.11. Quorum and
Voting.
(1) A
quorum of a board of directors consists of a majority of the number of directors
prescribed by the articles of incorporation or these bylaws.
(2) If
a quorum is present when a vote is taken, the affirmative vote of a majority of
directors present is the act of the board of directors.
(3) A
director of a corporation who is present at a meeting of the board of directors
or a committee of the board of directors when corporate action is taken is
deemed to have assented to the action taken unless:
(a) He
objects at the beginning of the meeting (or promptly upon his arrival) to
holding it or transacting specified business at the meeting; or
(b) He
votes against or abstains from the action taken.
Section
4.12. Committees.
(1) The
board of directors, by resolution adopted by a majority of the full board of
directors, may designate from among its members an executive committee and one
or more other committees each of which, to the extent provided in such
resolution, shall have and may exercise all the authority of the board of
directors, except that no such committee shall have the authority
to:
(a) Approve
or recommend to shareholders actions or proposals required by the Act to be
approved by shareholders.
(b) Fill
vacancies on the board of directors or any committee thereof.
(d) Authorize
or approve the reacquisition of shares unless pursuant to a general formula or
method specified by the board of directors.
(e) Authorize
or approve the issuance or sale or contract for the sale of shares, or determine
the designation and relative rights, preferences, and limitations of a voting
group except that the board of directors may authorize a committee (or a senior
executive officer of the corporation) to do so within limits specifically
prescribed by the board of directors.
(2) The
sections of these bylaws which govern meetings, notice and waiver of notice, and
quorum and voting requirements of the board of directors apply to committees and
their members as well.
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(3) Each
committee must have two or more members who serve at the pleasure of the board
of directors. The board, by resolution adopted in accordance
herewith, may designate one or more directors as alternate members of any such
committee who may act in the place and stead of any absent member or members at
any meeting of such committee.
(4) Neither
the designation of any such committee, the delegation thereto of authority, nor
action by such committee pursuant to such authority shall alone constitute
compliance by any member of the board of directors not a member of the committee
in question with his responsibility to act in good faith, in a manner he
reasonably believes to be in the best interests of the corporation, and with
such care as an ordinarily prudent person in a like position would use under
similar circumstances.
Section
4.13. Loans to Officers,
Directors, and Employees; Guaranty of Obligations.
The corporation may lend money to,
guaranty any obligation of, or otherwise assist any officer, director, or
employee of the corporation or of a subsidiary, whenever, in the judgment of the
board of directors, such loan, guaranty, or assistance may reasonably be
expected to benefit the corporation. The loan, guaranty, or other
assistance may be with or without interest and may be unsecured or secured in
such manner as the board of directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation. Nothing
in this section shall be deemed to deny, limit, or restrict the powers of
guaranty or warranty of any corporation at common law or under any
statute. Loans, guaranties, or other types of assistance are subject
to section 4.19.
Section
4.14. Required
Officers.
(1) The
corporation shall have such officers as the board of directors may appoint from
time to time.
(2) A
duly appointed officer may appoint one or more assistant officers.
(3) The
board of directors shall delegate to one of the officers responsibility for
preparing minutes of the directors' and shareholders' meetings and for
authenticating records of the corporation.
(4) The
same individual may simultaneously hold more than one office in the
corporation.
Section
4.15. Duties of
Officers.
Each officer has the authority and
shall perform the duties set forth in a resolution or resolutions of the board
of directors or by direction of any officer authorized by the board of directors
to prescribe the duties of other officers.
Section
4.16. Resignation and Removal of
Officers.
(1) An
officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered
unless the notice specifies a later effective date. If a resignation
is made effective at a later date and the corporation accepts the future
effective date, the board of directors may fill the pending vacancy before the
effective date if the board of directors provides that the successor does not
take office until the effective date.
(2) The
board of directors may remove any officer at any time with or without
cause. Any assistant officer, if appointed by another officer, may
likewise be removed by the board of directors or by the officer which appointed
him in accordance with these bylaws.
The appointment of an officer does not
itself create contract rights.
Section
4.18. General Standards for
Directors.
(1) A director shall
discharge his duties as a director, including his duties as a member of a
committee:
(a) In
good faith;
(b) With
the care an ordinarily prudent person in a like position would exercise under
similar circumstances; and
(c) In
a manner he reasonably believes to be in the best interests of the
corporation.
(2) In
discharging his duties, a director is entitled to rely on information, opinions,
reports or statements, including financial statements and other financial data,
if prepared or presented by:
(a) One
or more officers or employees of the corporation whom the director reasonably
believes to be reliable and competent in the matters presented;
(b) Legal
counsel, public accountants, or other persons as to matters the director
reasonably believes are within the persons' professional or expert competence;
or
(c) A
committee of the board of directors of which he is not a member if the director
reasonably believes the committee merits confidence.
(3) In
discharging his duties, a director may consider such factors as the director
deems relevant, including the long-term prospects and interests of the
corporation and its shareholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the corporation
or its subsidiaries, the communities and society in which the corporation or its
subsidiaries operate, and the economy of the state and the nation.
(4) A
director is not acting in good faith if he has knowledge concerning the matter
in question that makes reliance otherwise permitted by subsection (2)
unwarranted.
(5) A
director is not liable for any action taken as a director, or any failure to
take any action, if he performed the duties of his office in compliance with
this section.
Section
4.19. Director Conflicts of
Interest.
No contract or other transaction
between a corporation and one or more interested directors shall be either void
or voidable because of such relationship or interest, because such director or
directors are present at the meeting of the board of directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction, or
because his or their votes are counted for such purpose, if:
(1) The
fact of such relationship or interest is disclosed or known to the board of
directors or committee which authorizes, approves or ratifies the contract or
transactions by a vote or consent sufficient for the purpose without counting the
votes or consents of such interested directors;
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(2) The
fact of such relationship or interest is disclosed or known to the shareholders
entitled to vote and they authorize, approve or ratify such contract or
transaction by vote or written consent; or
(3) The
contract or transaction is fair and reasonable as to the corporation at the time
it is authorized by the board, a committee or the shareholders.
Common or interested directors may be
counted in determining the presence of a quorum at the meeting of the board of
directors or a committee thereof which authorizes, approves or ratifies such
contract or transaction.
For the purpose of paragraph (2) above,
a conflict of interest transaction is authorized, approved or ratified if it
receives the vote of a majority of the shares entitled to be counted under this
subsection. Shares owned by or voted under the control of a director
who has a relationship or interest in the conflict of interest transaction may
not be counted in a vote of shareholders to determine whether to authorize,
approve or ratify a conflict of interest transaction under paragraph
(2). The vote of those shares, however, is counted in determining
whether the transaction is approved under other sections of the
Act. A majority of the shares, whether or not present, that are
entitled to be counted in a vote on the transaction under this subsection
constitutes a quorum for the purpose of taking action under this
section.
Section
4.20. Resignation of
Directors.
A director may resign at any time by
delivering written notice to the board of directors or its chairman or to the
corporation.
A resignation is effective when the
notice is delivered unless the notice specifies a later effective
date. If a resignation is made effective at a later date, the board
of directors may fill the pending vacancy before the effective date if the board
of directors provides that the successor does not take office until the
effective date.
ARTICLE
V
Indemnification
of Directors, Officers,
Employees and
Agents
Section
5.01. Directors, Officers,
Employees and Agents.
(1) The
corporation shall have power to indemnify any person who was or is a party to
any proceeding (other than an action by, or in the right of, the corporation),
by reason of the fact that he is or was a director, officer, employee, or agent
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against liability incurred in connection
with such proceeding, including any appeal thereof, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any proceeding by judgment, order,
settlement, or conviction or upon a plea of nolo contendere or its equivalent
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in, or not opposed to,
the best interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was
unlawful.
(2) The
corporation shall have power to indemnify any person, who was or is a party to
any proceeding by or in the right of the corporation to procure a judgment in
its favor by reason of the fact
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that he
is or was a director, officer, employee, or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee,
or agent of another corporation, partnership, joint venture, trust, or other
enterprise, against expenses and amounts paid in settlement not exceeding, in
the judgment of the board of directors, the estimated expense of litigating the
proceeding to conclusion, actually and reasonably incurred in connection with
the defense or settlement of such proceeding, including any appeal
thereof. Such indemnification shall be authorized if such person
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation, except that no
indemnification shall be made under this subsection in respect of any claim,
issue, or matter as to which such person shall have been adjudged to be liable
unless, and only to the extent that, the court in which such proceeding was
brought, or any other court of competent jurisdiction, shall determine upon
application that, despite the adjudication of liability but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
(3) To
the extent that a director, officer, employee, or agent of the corporation has
been successful on the merits or otherwise in defense of any proceeding referred
to in subsections (1) or (2), or in defense of any claim, issue, or matter
therein, he shall be indemnified against expenses actually and reasonably
incurred by him in connection therewith.
(4) Any
indemnification under subsections (1) or (2), unless pursuant to a determination
by a court, shall be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the director, officer,
employee, or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in subsections (1) or
(2). Such determination shall be made:
(a) By
the board of directors by a majority vote of a quorum consisting of directors
who were not parties to such proceeding;
(b) If
such a quorum is not obtainable or, even if obtainable, by majority vote of a
committee duly designated by the board of directors (in which directors who are
parties may participate) consisting solely of two or more directors not at the
time parties to the proceeding;
(c) By
independent legal counsel:
(i) Selected
by the board of directors prescribed in paragraph (a) or the committee
prescribed in paragraph (b); or
(ii) If
a quorum of the directors cannot be obtained for paragraph (a) and the committee
cannot be designed under paragraph (b), selected by majority vote of the full
board of directors (in which directors who are parties may participate);
or
(d) By
the shareholders by a majority vote of a quorum consisting of shareholders who
were not parties to such proceeding or, if no such quorum is obtainable, by a
majority vote of shareholders who were not parties to such
proceeding.
(5) Evaluation
of the reasonableness of expenses and authorization of indemnification shall be
made in the same manner as the determination that indemnification is
permissible. However, if the determination of permissibility is made
by independent legal counsel, persons specified by paragraph (4)(c) shall
evaluate the reasonableness of expenses and may authorize
indemnification.
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(6) Expenses
incurred by an officer or director in defending a civil or criminal proceeding
may be paid by the corporation in advance of the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if he is ultimately found not to be entitled to
indemnification by the corporation pursuant to this section. Expenses
incurred by other employees and agents may be paid in advance upon such terms or
conditions that the board of directors deems appropriate.
(7) The
indemnification and advancement of expenses provided pursuant to this section
are not exclusive, and the corporation may make any other or further
indemnification or advancement of expenses of any of its directors, officers,
employees, or agents, under any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding such
office. However, indemnification or advancement of expenses shall not
be made to or on behalf of any director, officer, employee, or agent if a
judgment or other final adjudication establishes that his actions, or omissions
to act, were material to the cause of action so adjudicated and
constitute:
(a) A
violation of the criminal law, unless the director, officer, employee, or agent
had reasonable cause to believe his conduct was lawful or had no reasonable
cause to believe his conduct was unlawful;
(b) A
transaction from which the director, officer, employee, or agent derived an
improper personal benefit;
(c) In
the case of a director, a circumstance under which the liability provisions of
Section 607.0834 under the Act are applicable; or
(d) Willful
misconduct or a conscious disregard for the best interests of the corporation in
a proceeding by or in the right of the corporation to procure a judgment in its
favor or in a proceeding by or in the right of a shareholder.
(8) Indemnification
and advancement of expenses as provided in this section shall continue as,
unless otherwise provided when authorized or ratified, to a person who has
ceased to be a director, officer, employee, or agent and shall inure to the
benefit of the heirs, executors, and administrators of such a person, unless
otherwise provided when authorized or ratified.
(9) Notwithstanding
the failure of the corporation to provide indemnification, and despite any
contrary determination of the board or of the shareholders in the specific case,
a director, officer, employee, or agent of the corporation who is or was a party
to a proceeding may apply for indemnification or advancement of expenses, or
both, to the court conducting the proceeding, to the circuit court, or to
another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice that it considers necessary, may
order indemnification and advancement of expenses, including expenses incurred
in seeking court-ordered indemnification or advancement of expenses, if it
determines that:
(a) The
director, officer, employee, or agent if entitled to mandatory indemnification
under subsection (3), in which case the court shall also order the corporation
to pay the director reasonable expenses incurred in obtaining court-ordered
indemnification or advancement of expenses;
(b) The
director, officer, employee, or agent is entitled to indemnification or
advancement of expenses, or both, by virtue of the exercise by the corporation
of its power pursuant to subsection (7); or
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(c) The
director, officer, employee, or agent is fairly and reasonably entitled to
indemnification or advancement of expenses, or both, in view of all the relevant
circumstances, regardless of whether such person met the standard of conduct set
forth in subsection (1), subsection (2) or subsection (7).
(10) For
purposes of this section, the term "corporation" includes, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger, so that any person who is
or was a director, officer, employee, or agent of a constituent corporation, or
is or was serving at the request of a constituent corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust or other enterprise, is in the same position under this section with
respect to the resulting or surviving corporation as he would have with respect
to such constituent corporation if its separate existence had
continued.
(11) For
purposes of this section:
(a) The
term "other enterprises" includes employee benefit plans;
(b) The
term "expenses" includes counsel fees, including those for appeal;
(c) The
term "liability" includes obligations to pay a judgment, settlement, penalty,
fine (including an excise tax assessed with respect to any employee benefit
plan), and expenses actually and reasonably incurred with respect to a
proceeding;
(d) The
term "proceeding" includes any threatened, pending, or completed action, suit or
other type of proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal;
(e) The
term "agent" includes a volunteer;
(f) The
term "serving at the request of the corporation" includes any service as a
director, officer, employee, or agent of the corporation that imposes duties on
such persons, including duties relating to an employee benefit plan and its
participants or beneficiaries; and
(g) The
term "not opposed to the best interest of the corporation" describes the actions
of a person who acts in good faith and in a manner he reasonably believes to be
in the best interests of the participants and beneficiaries of an employee
benefit plan.
(12) The
corporation shall have power to purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation
or is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise against any liability asserted against him and incurred by him
in any such capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this section.
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ARTICLE
VI
Office and
Agent
Section
6.01. Registered Office and
Registered Agent.
(1) The
corporation shall have and continuously maintain in the State of
Florida:
(a) A
registered office which may be the same as its place of business;
and
(b) A
registered agent, who, may be either:
(i) An
individual who resides in the State of Florida whose business office is
identical with such registered office; or
(ii) Another
corporation or not-for-profit corporation as defined in Chapter 617 of the Act,
authorized to transact business or conduct its affairs in the State of Florida,
having a business office identical with the registered office; or
(iii) A
foreign corporation or not-for-profit foreign corporation authorized pursuant to
chapter 607 or chapter 617 of the Act to transact business or conduct its
affairs in the State of Florida, having a business office identical with the
registered office.
Section
6.02. Change of Registered Office
or Registered Agent; Resignation of Registered Agent.
(1) The
corporation may change its registered office or its registered agent upon filing
with the Department of State of the State of Florida a statement of change
setting forth:
(a) The
name of the corporation;
(b) The
street address of its current registered office;
(c) If
the current registered office is to be changed, the street address of the new
registered office;
(d) The
name of its current registered agent;
(e) If
its current registered agent is to be changed, the name of the new registered
agent and the new agent's written consent (either on the statement or attached
to it) to the appointment;
(f) That
the street address of its registered office and the street address of the
business office of its registered agent, as changed, will be
identical;
(g) That
such change was authorized by resolution duly adopted by its board of directors
or by an officer of the corporation so authorized by the board of
directors.
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ARTICLE
VII
Shares, Options, Dividends
and Distributions
Section
7.01. Authorized
Shares.
(1) The
articles of incorporation prescribe the classes of shares and the number of
shares of each class that the corporation is authorized to issue, as well as a
distinguishing designation for each class, and prior to the issuance of shares
of a class the preferences, limitations, and relative rights of that class must
be described in the articles of incorporation.
(a) One
or more classes of shares that together have unlimited voting rights,
and
(b) One
or more classes of shares (which may be the same class or classes as those with
voting rights) that together are entitled to receive the net assets of the
corporation upon dissolution.
(3) The
articles of incorporation may authorize one or more classes of shares that have
special, conditional, or limited voting rights, or no rights, or no right to
vote, except to the extent prohibited by the Act;
(a) Are
redeemable or convertible as specified in the articles of
incorporation;
(b) Entitle
the holders to distributions calculated in any manner, including dividends that
may be cumulative, non-cumulative, or partially cumulative;
(c) Have
preference over any other class of shares with respect to distributions,
including dividends and distributions upon the dissolution of the
corporation.
(4) Shares
which are entitled to preference in the distribution of dividends or assets
shall not be designated as common shares. Shares which are not
entitled to preference in the distribution of dividends or assets shall be
common shares and shall not be designated as preferred shares.
Section
7.02. Terms of Class or Series
Determined by Board of Directors.
(1) If
the articles of incorporation so provide, the board of directors may determine,
in whole or part, the preferences, limitations, and relative rights (within the
limits set forth in Section 7.01) of:
(a) Any
class of shares before the issuance of any shares of that class, or
(b) One
or more series within a class before the issuance of any shares of that
series.
(2) Each
series of a class must be given a distinguishing designation.
(3) All
shares of a series must have preferences, limitations, and relative rights
identical with those of other shares of the same series and, except to the
extent otherwise provided in the description of the series, of those of other
series of the same class.
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(4) Before
issuing any shares of a class or series created under this section, the
corporation must deliver to the Department of State of the State of Florida for
filing articles of amendment, which are effective without shareholder action, in
accordance with Section 607.0602 of the Act.
Section
7.03. Issued and Outstanding
Shares.
(1) A
corporation may issue the number of shares of each class or series authorized by
the articles of incorporation. Shares that are issued are outstanding
shares until they are reacquired, redeemed, converted, or canceled.
(2) The
reacquisition, redemption, or conversion of outstanding shares is subject to the
limitations of subsection (3) and to Section 607.06401 of the Act.
(3) At
all times that shares of the corporation are outstanding, one or more shares
that together have unlimited voting rights and one or more shares that together
are entitled to receive the net assets of the corporation upon dissolution must
be outstanding.
Section
7.04. Issuance of
Shares.
(1) The
board of directors may authorize shares to be issued for consideration
consisting of any tangible or intangible property or benefit to the corporation,
including cash, promissory notes, services performed, promises to perform
services evidenced by a written contract, or other securities of the
corporation.
(2) Before
the corporation issues shares, the board of directors must determine that the
consideration received or to be received for shares to be issued is
adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and
non-assessable. When it cannot be determined that outstanding shares
are fully paid and non-assessable, there shall be a conclusive presumption that
such shares are fully paid and non-assessable if the board of directors makes a
good faith determination that there is no substantial evidence that the full
consideration for such shares has not been paid.
(3) When
the corporation receives the consideration for which the board of directors
authorized the issuance of shares, the shares issued therefor are fully paid and
non-assessable. Consideration in the form of a promise to pay money
or a promise to perform services is received by the corporation at the time of
the making of the promise, unless the agreement specifically provides
otherwise.
(4) The
corporation may place in escrow shares issued for a contract for future services
or benefits or a promissory note, or make other arrangements to restrict the
transfer of the shares, and may credit distributions in respect of the shares
against their purchase price, until the services are performed, the note is
paid, or the benefits received. If the services are not performed,
the shares escrowed or restricted and the distributions credited may be canceled
in whole or part.
Section
7.05. Form and Content of
Certificates.
(1) Shares
may but need not be represented by certificates. Unless the Act or
another statute expressly provides otherwise, the rights and obligations of
shareholders are identical whether or not their shares are represented by
certificates.
(2) At
a minimum, each share certificate must state on its face:
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(a) The
name of the issuing corporation and that the corporation is organized under the
laws of the State of Florida;
(b) The
name of the person to whom issued; and
(c) The
number and class of shares and the designation of the series, if any, the
certificate represents.
(3) If
the shares being issued are of different classes of shares or different series
within a class, the designations, relative rights, preferences, and limitations
applicable to each class and the variations in rights, preferences, and
limitations determined for each series (and the authority of the board of
directors to determine variations for future series) must be summarized on the
front or back of each certificate. Alternatively, each certificate
may state conspicuously on its front or back that the corporation will furnish
the shareholder a full statement of this information on request and without
charge.
(4) Each
share certificate:
(a) Must
be signed (either manually or in facsimile) by an officer or officers designated
by the board of directors, and
(b) May
bear the corporate seal or its facsimile.
(5) If
the person who signed (either manually or in facsimile) a share certificate no
longer holds office when the certificate is issued, the certificate is
nevertheless valid.
(6) Nothing
in this section may be construed to invalidate any share certificate validly
issued and outstanding under the Act on July 1, 1990.
Section
7.06. Shares Without
Certificates.
(1) The
board of directors of the corporation may authorize the issue of some or all of
the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already
represented by certificates until they are surrendered to the
corporation.
(2) Within
a reasonable time after the issue or transfer of shares without certificates,
the corporation shall send the shareholder a written statement of the
information required on certificates by the Act.
Section
7.07. Restriction on Transfer of
Shares and Other Securities.
(1) The
articles of incorporation, these bylaws, an agreement among shareholders, or an
agreement between shareholders and the corporation may impose restrictions on
the transfer or registration of transfer of shares of the
corporation. A restriction does not affect shares issued before the
restriction was adopted unless the holders of such shares are parties to the
restriction agreement or voted in favor of the restriction.
(2) A
restriction on the transfer or registration of transfer of shares is valid and
enforceable against the holder or a transferee of the holder if the restriction
is authorized by this section, and effected in compliance with the provisions of
the Act, including having a proper purpose as referred to in the
Act.
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Section
7.08. Shareholder's Pre-emptive
Rights.
The shareholders of the corporation do
not have a pre-emptive right to acquire the corporation's unissued
shares.
Section
7.09. Corporation's Acquisition of
its Own Shares.
(1)
The corporation may acquire its own shares, and, unless otherwise provided in
the articles of incorporation or except as provided in subsection (4), shares so
acquired constitute authorized but unissued shares of the same class but
undesignated as to series.
(2) If
the articles of incorporation prohibit the reissue of acquired shares, the
number of authorized shares is reduced by the number of shares acquired,
effective upon amendment of the articles of incorporation.
(3) Articles
of amendment may be adopted by the board of directors without shareholder
action, shall be delivered to the Department of State of the State of Florida
for filing, and shall set forth the information required by Section 607.0631 of
the Act.
(4) Shares
of the corporation in existence on June 30, 1990, which are treasury shares
under Section 607.004(18), Florida Statutes (1987), shall be issued, but not
outstanding, until canceled or disposed of by the corporation.
Section
7.10. Share
Options.
(1) Unless
the articles of incorporation provide otherwise, the corporation may issue
rights, options, or warrants for the purchase of shares of the
corporation. The board of directors shall determine the terms upon
which the rights, options, or warrants are issued, their form and content, and
the consideration for which the shares are to be issued.
(2) The
terms and conditions of stock rights and options which are created and issued by
the corporation, or its successor, and which entitle the holders thereof to
purchase from the corporation shares of any class or classes, whether authorized
by unissued shares, treasury shares, or shares to be purchased or acquired by
the corporation, may include, without limitation, restrictions, or conditions
that preclude or limit the exercise, transfer, receipt, or holding of such
rights or options by any person or persons, including any person or persons
owning or offering to acquire a specified number or percentage of the
outstanding common shares or other securities of the corporation, or any
transferee or transferees of any such person or persons, or that invalidate or
void such rights or options held by any such person or persons or any such
transferee or transferees.
Section
7.11. Terms and Conditions of
Stock Rights and Options.
The terms and conditions of the stock
rights and options which are created and issued by the corporation or its
successor, and which entitle the holders thereof to purchase from the
corporation shares of any class or classes, whether authorized but unissued
shares, treasury shares, or shares to be purchased or acquired by the
corporation, may include, without limitation, restrictions or conditions that
preclude or limit the exercise, transfer, receipt or holding of such rights or
options by any person or persons, including any person or persons owning or
offering to acquire a specified number or percentage of the outstanding common
shares or other securities of the corporation, or any transferee or transferees
of any
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such
person or persons, or that invalidate or void such rights or options held by any
such person or persons or any such transferee or transferees.
Section
7.12. Share
Dividends.
(1) Shares
may be issued pro rata and without consideration to the corporation's
shareholders or to the shareholders of one or more classes or
series. An issuance of shares under this subsection is a share
dividend.
(2) Shares
of one class or series may not be issued as a share dividend in respect of
shares of another class or series unless:
(b) A
majority of the votes entitled to be cast by the class or series to be issued
approves the issue, or
(c) There
are no outstanding shares of the class or series to be issued.
(3) If
the board of directors does not fix the record date for determining shareholders
entitled to a share dividend, it is the date of the board of directors
authorizes the share dividend.
Section
7.13. Distributions to
Shareholders.
(1) The
board of directors may authorize and the corporation may make distributions to
its shareholders subject to restriction by the articles of incorporation and the
limitations in subsection (3).
(2) If
the board of directors does not fix the record date for determining shareholders
entitled to a distribution (other than one involving a purchase, redemption, or
other acquisition of the corporation's shares), it is the date the board of
directors authorizes the distribution.
(3) No
distribution may be made if, after giving it effect:
(a) The
corporation would not be able to pay its debts as they become due in the usual
course of business; or
(b) The
corporation's total assets would be less than the sum of its total liabilities
plus (unless the articles of incorporation permit otherwise) the amount that
would be needed, if the corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
(4) The
board of directors may base a determination that a distribution is not
prohibited under subsection (3) either on financial statements prepared on the
basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. In the case of any distribution based upon such a
valuation, each such distribution shall be identified as a distribution based
upon a current valuation of assets, and the amount per share paid on the basis
of such valuation shall be disclosed to the shareholders concurrent with their
receipt of the distribution.
(5) Except
as provided in subsection (7), the effect of a distribution under subsection (3)
is measured;
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(a) In
the case of distribution by purchase, redemption, or other acquisition of the
corporation's shares, as of the earlier of:
(i) The
date money or other property is transferred or debt incurred by the corporation,
or
(ii) The
date the shareholder ceases to be a shareholder with respect to the acquired
shares;
(b) In
the case of any other distribution of indebtedness, as of the date the
indebtedness is distributed;
(c) In
all other cases, as of:
(i) The
date the distribution is authorized if the payment occurs within 120 days after
the date of authorization, or
(ii) The
date the payment is made if it occurs more than 120 days after the date of
authorization.
(6) A
corporation's indebtedness to a shareholder incurred by reason of a distribution
made in accordance with this section is at parity with the corporation's
indebtedness to its general, unsecured creditors except to the extent
subordinated by agreement.
(7) Indebtedness
of the corporation, including indebtedness issued as a distribution, is not
considered a liability for purposes of determinations under subsection (3) if
its terms provide that payment of principal and interest are made only if and to
the extent that payment of a distribution to shareholders could then be made
under this section. If the indebtedness is issued as a distribution,
each payment of principal or interest is treated as a distribution, the effect
of which is measured on the date the payment is actually made.
(1) The
corporation may amend its articles of incorporation at any time to add or change
a provision that is required or permitted in the articles of incorporation or to
delete a provision not required in the articles of
incorporation. Whether a provision is required or permitted in the
articles of incorporation is determined as of the effective date of the
amendment.
(2) A
shareholder of the corporation does not have a vested property right resulting
from any provision in the articles of incorporation, including provisions
relating to management, control, capital structure, dividend entitlement, or
purpose or duration of the corporation.
Section
8.02. Amendment by Board of
Directors.
The corporation's board of directors
may adopt one or more amendments to the corporation's articles of incorporation
without shareholder action:
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(1) To
extend the duration of the corporation if it was incorporated at a time when
limited duration was required by law;
(2) To
delete the names and addresses of the initial directors;
(3) To
delete the name and address of the initial registered agent or registered
office, if a statement of change is on file with the Department of State of the
State of Florida;
(4) To
delete any other information contained in the articles of incorporation that is
solely of historical interest;
(5) To
change each issued and unissued authorized share of an outstanding class into a
greater number of whole shares if the corporation has only shares of that class
outstanding;
(6) To
delete the authorization for a class or series of shares authorized pursuant to
Section 607.0602 of the Act, if no shares of such class or series have been
issued;
(7) To
change the corporate name by substituting the word "corporation,""incorporated," or "company," or the abbreviation "corp.," Inc.," or Co.," for a
similar word or abbreviation in the name, or by adding, deleting, or changing a
geographical attribution for the name; or
(8) To
make any other change expressly permitted by the Act to be made without
shareholder action.
Section
8.03. Amendment of Bylaws by Board
of Directors.
The corporation's board of directors
may amend or repeal the corporation's bylaws unless the Act reserves the power
to amend a particular bylaw provision exclusively to the
shareholders.
Section
8.04. Bylaw Increasing Quorum or
Voting Requirements for Directors.
(1) A
bylaw that fixes a greater quorum or voting requirement for the board of
directors may be amended or repealed:
(a) If
originally adopted by the shareholders, only by the shareholders;
(b) If
originally adopted by the board of directors, either by the shareholders or by
the board of directors.
(2) A
bylaw adopted or amended by the shareholders that fixes a greater quorum or
voting requirement for the board of directors may provide that it may be amended
or repealed only by a specified vote of either the shareholders or the board of
directors.
(3) Action
by the board of directors under paragraph (1)(b) to adopt or amend a bylaw that
changes the quorum or voting requirement for the board of directors must meet
the same quorum requirement and be adopted by the same vote required to take
action under the quorum and voting requirement then in effect or proposed to be
adopted, whichever is greater.
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ARTICLE
IX
Records and
Reports
Section
9.01. Corporate
Records.
(1) The
corporation shall keep as permanent records minutes of all meetings of its
shareholders and board of directors, a record of all actions taken by the
shareholders or board of directors without a meeting, and a record of all
actions taken by a committee of the board of directors in place of the board of
directors on behalf of the corporation.
(2) The
corporation shall maintain accurate accounting records.
(3) The
corporation or its agent shall maintain a record of its shareholders in a form
that permits preparation of a list of the names and addresses of all
shareholders in alphabetical order by class of shares showing the number and
series of shares held by each.
(4) The
corporation shall maintain its records in written form or in another form
capable of conversion into written form within a reasonable time.
(5) The
corporation shall keep a copy of the following records:
(a) Its
articles or restated articles of incorporation and all amendments to them
currently in effect;
(b) Its
bylaws or restated bylaws and all amendments to them currently in
effect;
(c) Resolutions
adopted by the board of directors creating one or more classes or series of
shares and finding their relative rights, preferences, and limitations, if
shares issued pursuant to those resolutions are outstanding;
(d) The
minutes of all shareholders' meetings and records of all action taken by
shareholders without a meeting for the past three years;
(e) Written
communications to all shareholders generally or all shareholders of a class or
series within the past three years, including the financial statements furnished
for the past three years;
(f) A
list of the names and business street addresses of its current directors and
officers; and
(g) Its
most recent annual report delivered to the Department of State of the State of
Florida.
Section
9.02. Financial Statements for
Shareholders.
(1) Unless
modified by resolution of the shareholders within 120 days of the close of each
fiscal year, the corporation shall furnish its shareholders annual financial
statements which may be consolidated or combined statements of the corporation
and one or more of its subsidiaries, as appropriate, that include a balance
sheet as of the end of the fiscal year, an income statement for that year, and a
statement of cash flows for that year. If financial statements are
prepared for the corporation on the
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basis of
generally-accepted accounting principles, the annual financial statements must
also be prepared on that basis.
(2) If
the annual financial statements are reported upon by a public accountant, his
report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(a) Stating
his reasonable belief whether the statements were prepared on the basis of
generally-accepted accounting principles and, if not, describing the basis of
preparation; and
(b) Describing
any respects in which the statements were not prepared on a basis of accounting
consistent with the statements prepared for the preceding year.
(3) The
corporation shall mail the annual financial statements to each shareholder
within 120 days after the close of each fiscal year or within such additional
time thereafter as is reasonably necessary to enable the corporation to prepare
its financial statements, if for reasons beyond the corporation's control, it is
unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not
mailed the statements, the corporation shall mail him the latest annual
financial statements.
Section
9.03. Other Reports to
Shareholders.
(1) If
the corporation indemnifies or advances expenses to any director, officer,
employee or agent otherwise than by court order or action by the shareholders or
by an insurance carrier pursuant to insurance maintained by the corporation, the
corporation shall report the indemnification or advance in writing to the
shareholders with or before the notice of the next shareholders' meeting, or
prior to such meeting if the indemnification or advance occurs after the giving
of such notice but prior to the time such meeting is held, which report shall
include a statement specifying the persons paid, the amounts paid, and the
nature and status at the time of such payment of the litigation or threatened
litigation.
(2) If
the corporation issues or authorizes the issuance of shares for promises to
render services in the future, the corporation shall report in writing to the
shareholders the number of shares authorized or issued, and the consideration
received by the corporation, with or before the notice of the next shareholders'
meeting.
Section
9.04. Annual Report for Department
of State.
(1) The
corporation shall deliver to the Department of State of the State of Florida for
filing a sworn annual report on such forms as the Department of State of the
State of Florida prescribes that sets forth the information prescribed by
Section 607.1622 of the Act.
(2) Proof
to the satisfaction of the Department of State of the State of Florida on or
before July 1 of each calendar year that such report was deposited in the United
States mail in a sealed envelope, properly addressed with postage prepaid, shall
be deemed in compliance with this requirement.
(3) Each
report shall be executed by the corporation by an officer or director or, if the
corporation is in the hands of a receiver or trustee, shall be executed on
behalf of the corporation by such receiver or trustee, and the signing thereof
shall have the same legal effect as if made under oath, without the necessity of
appending such oath thereto.
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(4) Information
in the annual report must be current as of the date the annual report is
executed on behalf of the corporation.
(5) Any
corporation failing to file an annual report which complies with the
requirements of this section shall not be permitted to maintain or defend any
action in any court of this state until such report is filed and all fees and
taxes due under the Act are paid and shall be subject to dissolution or
cancellation of its certificate of authority to do business as provided in the
Act.
ARTICLE
X
Miscellaneous
Section
10.01. Definition of the
"Act".
All references contained herein to the
"Act" or to sections of the "Act" shall be deemed to be in reference to the
Florida Business Corporation Act.
Section
10.02. Application of Florida
Law.
Whenever any provision of these bylaws
is inconsistent with any provision of the Florida Business Corporation Act,
Statutes 607, as they may be amended from time to time, then in such instance
Florida law shall prevail.
Section
10.03. Fiscal
Year.
The fiscal year of the corporation
shall be determined by resolution of the board of directors.
Section
10.04. Conflicts with Articles of
Incorporation.
In the event that any provision
contained in these bylaws conflicts with any provision of the corporation's
articles of incorporation, as amended from time to time, the provisions of the
articles of incorporation shall prevail and be given full force and effect, to
the full extent permissible under the Act.
In the event of an emergency, as
currently or hereafter defined or described under Section 607.02.07 of the
Florida Business Corporation Act, and if there are no officers or directors in
office or serving based on death, incapacity or resignation, the corporation,
acting through shareholders representing a majority in interest of shares and
who purport to be shareholders of the corporation, shall have a right to
designate one or more persons to serve as director or directors of the
corporation until formal procedures can be established in order to elect a
director or directors to serve on the board of directors of the
corporation. In the event the number of shareholders shall ultimately
be determined not to be a majority in interest of the shareholder interest of
the corporation, the actions taken by such shareholders, on the good faith
belief that they are acting as a majority in interest of the shareholders of the
corporation, shall be deemed valid and proper.
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THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL
MEETING OF STOCKHOLDERS – MARCH 15, 2010 AT 1:00
PM
CONTROL
ID:
PROXY
ID:
PASSWORD:
The
undersigned, a stockholder of China Direct Industries Inc. (the
“Company”), hereby revoking any proxy heretofore given, does hereby
appoint Lazarus Rothstein, proxy with power of substitution, for and in
the name of the undersigned to attend the Annual Meeting of Stockholders
of the Company to be held at its corporate offices located at 431 Fairway
Drive, Suite 200 Deerfield Beach, Florida, 33441-1856 on Monday March 15,2010 at 1:00 P.M., eastern standard time, or at any adjournment or
postponement thereof, and there to vote, as designated
below.
(CONTINUED
AND TO BE SIGNED ON REVERSE SIDE.)
VOTING
INSTRUCTIONS
If
you vote by fax, please DO NOT mail your proxy card.
ABC
HOLDER
400
MY STREET
CHICAGO
IL 60605
MAIL:
Please
mark, sign, date, and return this Proxy Card promptly using the enclosed
envelope.
FAX:
Complete
the reverse portion of this Proxy Card and Fax to 202-521-3464.
PLEASE
COMPLETE, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE:
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROPOSAL
1
FOR
ALL
AGAINST
ALL
FOR
ALL EXCEPT
To
elect a board of directors consisting of six members;
CONTROL
ID:
Dr.
Yuejian (James) Wang
PROXY
ID:
Mr.
David Barnes
PASSWORD:
Mr.
Sheldon Steiner
Mr.
Yuwei Huang
Dr.
Philip Y. Shen
Mr.
Adam Wasserman
PROPOSAL
2
FOR
AGAINST
ABSTAIN
To
ratify the appointment of Sherb & Co., LLP as our independent
registered public accountants;
PROPOSAL
3
FOR
AGAINST
ABSTAIN
To
approve an amendment to our Bylaws to decrease the quorum requirement for
meetings of our shareholders to one-third (1/3) of the voting power of our
issued and outstanding shares entitled to vote, whether represented in
person or by proxy at shareholder meetings.
MARK
“X” HERE IF YOU PLAN TO ATTEND THE MEETING:
MARK
HERE FOR ADDRESS CHANGE □
New
Address (if applicable):
THIS
PROXY WILL BE VOTED AS DIRECTED. IF NO CONTRARY INSTRUCTION IS INDICATED,
THE VOTE OF THE UNDERSIGNED WILL BE CAST “FOR” PROPOSALS 1 2 AND 3. IF ANY
OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT
TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT
THE SPECIAL MEETING.
IMPORTANT: Please sign
exactly as your name or names appear on this Proxy. When shares are held
jointly, each holder should sign. When signing as executor, administrator,
attorney, trustee or guardian, please give full title as such. If the
signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
Dated:
________________________, 2010
(Print
Name of Stockholder and/or Joint Tenant)
(Signature
of Stockholder)
(Second
Signature if held jointly)
Dates Referenced Herein and Documents Incorporated by Reference
