SCHEDULE
14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant To Section 14(a) of the
Securities
Exchange Act of 1934
Filed by
the Registrant
x
Filed by
a Party other than the Registrant
¨
Check the
appropriate box:
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Preliminary
Proxy Statement
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¨
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Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to § 240.14a-12
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CHINA INSONLINE
CORP.
(Name
of Registrant as Specified in its Charter)
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N/A
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
¨
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Fee
computed on the table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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¨
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Fee
paid previously with preliminary materials.
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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CHINA
INSONLINE CORP.
4F,
Henry House
10
Ice House Street
Central,
Hong Kong
Dear
Stockholder:
You are
cordially invited to attend the Annual Meeting of Stockholders of China
INSOnline Corp., a Delaware corporation. The meeting will be held on
June 29, 2010, at 10:00 a.m., local time, at Troutman Sanders LLP, The Chrysler
Building, 405 Lexington Avenue, 9th Floor, New York, NY 10174.
Your vote
is important. We encourage you to vote your proxy by mailing in your
enclosed proxy card so that your shares will be presented and voted at the
meeting even if you cannot attend. Accordingly, please return your
proxy as soon as possible.
We hope
to see you at the meeting.
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Sincerely,
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/s/ Junjun Xu
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Junjun
Xu
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President
and Chief Executive Officer
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Hong
Kong, People’s Republic of China
June 11,
2010
CHINA
INSONLINE CORP.
4F,
Henry House
10
Ice House Street
Central,
Hong Kong
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 29, 2010, AT 10:00 A.M.
NOTICE IS HEREBY GIVEN
that
the Annual Meeting (the “
Meeting
”) of
Stockholders of China INSOnline Corp, a Delaware corporation (the “
Company
”), will be
held on June 29, 2010, at 10:00 a.m., local time, at Troutman Sanders LLP, The
Chrysler Building, 405 Lexington Avenue, 9th Floor, New York, NY 10174 for the
following purposes, as more fully described in the attached Proxy
Statement:
1. To
elect seven (7) directors to serve on the Company’s Board of Directors until
their successors are duly elected and qualified;
2. To
approve and adopt the Company’s 2010 stock option plan, and
3. To
consider and act on any other matters that may properly come before the Meeting
or any postponement or adjournment thereof.
The
Company’s Board of Directors has fixed the close of business on May 11, 2010 as
the record date (the “R
ecord Date
”) for the
determination of the stockholders entitled to notice of, and to vote at, the
Meeting or any postponement or adjournment thereof. Only those
stockholders of record of the Company as of the close of business on the Record
Date will be entitled to vote at the Meeting or any postponement or adjournment
thereof. Included with this proxy statement is a copy of our Annual
Report on Form 10-K for the fiscal year ended June 30, 2009 and our Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2010.
A complete list of stockholders
entitled to vote at the Meeting will be open for examination by any stockholder
during ordinary business hours for a period of 10 days prior the Meeting at the
Company’s offices located at Room 42, 4F, New Henry House, 10 Ice House Street,
Central, Hong Kong.
IMPORTANT
All
stockholders entitled to vote are cordially invited to attend the Meeting in
person. Whether or not you plan to attend the Meeting, please sign
and return the enclosed proxy (the “
Proxy
”) as promptly
as possible in the envelope enclosed for your convenience. Should you
receive more than one Proxy because your shares are registered in different
names and addresses, each proxy should be signed and returned to ensure that all
your shares will be voted. You may revoke your Proxy at any time
prior to the Meeting. If you attend the Meeting and vote by ballot,
your Proxy will be revoked automatically and only your vote at the Meeting will
be counted.
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By
Order of the Board of Directors
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/s/ Junjun Xu
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Junjun
Xu
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June
11, 2010
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Chief
Executive Officer
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YOUR
VOTE IS VERY IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK YOU
OWN. PLEASE READ THE ATTACHED PROXY STATEMENT CAREFULLY, AND
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE AND
RETURN IT IN THE ENCLOSED ENVELOPE AS SOON AS POSSIBLE.
CHINA
INSONLINE CORP.
4F,
Henry House
10
Ice House Street
Central,
Hong Kong
PROXY
STATEMENT
This
Proxy Statement contains information related to the Annual Meeting (the “
Meeting
”) of
Stockholders of China INSOnline Corp., a Delaware corporation (the “
Company
”), to be held
on June 29, 2010, at 10:00 a.m., local time, at Troutman Sanders LLP, The
Chrysler Building, 405 Lexington Avenue, 9
th
Floor,
New York, NY 10174, and any postponements or adjournments
thereof. The Company is making this proxy solicitation.
ABOUT
THE MEETING
What
Is The Purpose Of The Meeting?
At the
Meeting, stockholders will act upon the matters outlined in the “Notice of
Annual Meeting”, which appears as the cover page of this Proxy Statement,
including the election of seven Directors to serve on the Company’s Board of
Directors (the “
Board
”). The
directors will be elected by the affirmative vote of a plurality of the votes
cast by the holders of outstanding shares of Common Stock of the
Company.
Who
Is Entitled To Vote?
Only
stockholders of record on the close of business on May 11, 2010 (the “
Record Date
”), are
entitled to receive notice of the Meeting and to vote the shares of Common Stock
that they held on the Record Date at the Meeting, or any postponements or
adjournments thereof. Each outstanding share of Common Stock will be
entitled to the number of votes set forth in the following table on each matter
to be voted upon at the Meeting by the holders of Common Stock (the “
Stockholders
”).
Who
Can Attend The Meeting?
All
Stockholders as of the Record Date, or their duly appointed proxies, may attend
the Meeting. Seating, however, is limited. Admission to
the meeting will be on a first-come, first-serve basis. Each
Stockholder may be asked to present valid picture identification, such as a
driver’s license or passport. Cameras, recording devices and other
electronic devices will not be permitted at the Meeting.
What
Constitutes A Quorum?
The
presence at the Meeting, in person or by proxy, of the holders of a majority of
the shares of Common Stock outstanding on the Record Date will constitute a
quorum, permitting the Meeting to conduct its business. As of the
Record Date, 40,000,000 shares of Common Stock were outstanding. As
such, holders of at least 20,000,001 shares of Common Stock (i.e., a majority)
must be present at the Meeting, in person or by proxy, to obtain a
quorum. Proxies received but marked as abstentions and broker
non-votes will be included in the calculation of the number of shares considered
to be present at the Meeting.
How
Do I Vote By Proxy?
Follow
the instructions on the enclosed Proxy Card to vote on each proposal to be
considered at the Meeting. Sign and date the Proxy Card and mail it
back to us in the enclosed envelope. The proxy holders named on the Proxy Card
will vote your shares as you instruct. If you sign and return the
Proxy Card but do not vote on a proposal, the proxy holders will vote for you on
that proposal.
What
if I do not specify how my shares are to be voted?
For
“Proposal No. 1 — Election of Directors”, if you submit a proxy but do not
indicate any voting instructions, your shares will be voted in accordance with
the recommendations of the Board.
For
“Proposal No. 2 – the approval of the Company’s 2010 Stock Option Plan”, if you
submit a proxy but do not indicate any voting instructions, your shares will be
voted in accordance with the recommendations of the Board.
Can
I change my vote after I return my proxy card?
Yes. Even
after you have submitted your Proxy Card, you may change your vote at any time
before the proxy is exercised by filing with the Secretary of the Company either
a notice of revocation or a duly executed proxy bearing a later
date. The powers of the proxy holders will be suspended if you attend
the Meeting in person and so request, although attendance at the Meeting will
not by itself revoke a previously granted proxy.
What
if other matters come up at the Meeting?
The
matters described in this Proxy Statement are the only matters we know will be
voted on at the Meeting. If other matters are properly presented at
the Meeting, the proxy holders will vote your shares as they see
fit.
Can
I vote in person at the Meeting rather than by completing the Proxy
Card?
Although
we encourage you to complete and return the Proxy Card to ensure that your vote
is counted, you can attend the Meeting and vote your shares in
person.
What
do I do if my shares are held in “street name”?
If you
hold your shares in “street name” through a broker or other nominee, and you do
not tell the nominee how to vote your shares, the nominee can vote them as it
sees fit only on matters that are determined to be routine, and not on any other
proposal. If you do not give your broker or nominee specific
instructions, your shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for
approval. Shares represented by such “broker non-votes,” however,
will be counted in determining whether there is a quorum. If you hold
your shares in street name, you will need to bring a copy of a brokerage
statement reflecting your stock ownership as of the Record Date and check in at
the registration desk at the Meeting. If you intend to vote your
street name shares in person at the meeting, you will need to obtain a “Legal
Proxy” from your brokerage firm.
How
are votes counted?
We will
hold the Meeting if holders of a majority of the shares of Common Stock entitled
to vote either sign and return their Proxy Cards or attend the
Meeting. If you sign and return your Proxy Card, your shares will be
counted to determine whether we have a quorum even if you abstain or fail to
vote on any of the proposals listed on the Proxy Card.
Who
pays for this proxy solicitation?
The
Company will pay all the costs of solicitation, including the preparation,
assembly, printing and mailing of this Proxy Statement, the Proxy Card, and any
additional solicitation materials furnished to Stockholders. Copies
of solicitation materials will be furnished to brokerage houses, fiduciaries,
and custodians holding shares in their names that are beneficially owned by
others so that they may forward this solicitation material to such beneficial
owners. In addition, the Company may reimburse such persons for their
costs in forwarding the solicitation materials to such beneficial
owners. In addition to sending you these materials, some of our
employees may contact you by telephone, by mail, or in person. None
of these employees will receive any extra compensation for doing
this.
What
vote is required to approve each item?
Election of
Directors.
At the meeting, seven director-nominees are
standing for election to the Board, which (the “Director-Nominees”) will be
elected by the affirmative vote of a plurality of the votes cast at the Meeting
by the Stockholders. This means that the Director-Nominees will be
elected if they receive more affirmative votes cast by Stockholders than any
other person. A properly executed proxy marked “Withheld” with
respect to the election of any Director-Nominee will not be voted with respect
to such Director-Nominee indicated, although it will be counted for purposes of
determining whether there is a quorum.
Approval of
Company’s 2010 Stock Option Plan and Other Matters.
For
approval of the Company’s 2010 Stock Option Plan and any other matter that
properly comes before the Meeting, the affirmative vote of a majority of shares
of Common Stock held by Stockholders, present in person or represented by proxy
and voted at the Meeting, will be required. A properly executed proxy
marked “Abstain” with respect to any such matter will not be voted, although it
will be counted for purposes of determining whether there is a
quorum. Accordingly, an abstention will have the effect of a negative
vote.
What
are the Board’s recommendations?
Our
Board of Directors has unanimously recommended a vote FOR each nominee named in
Proposal 1 and FOR Proposal 2.
Unless
you give other instructions on your Proxy Card, the persons named as proxy
holders on the Proxy Card will vote in accordance with the recommendation of the
Board. The Board’s recommendation is set forth together with the
description of each item in this Proxy Statement. In summary, the
Board recommends a vote:
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For
the election of the seven Director-Nominees that the Board has
recommended; and
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·
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For
the approval of the Company’s 2010 Stock Option
Plan.
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With
respect to any other matter that properly comes before the Meeting, the proxy
holders will vote as recommended by the Board or, if no recommendation is given,
in their own discretion.
It is
important that your shares are represented at the Meeting, and, therefore, all
shareholders are cordially invited to attend the Meeting. However,
whether or not you plan to attend the Meeting, you are urged to, as promptly as
possible, mark, sign, date and return the enclosed proxy card in the enclosed
pre-paid envelope, which requires no postage if mailed in the United
States. If you hold shares directly in your name and attend the
Meeting, you may vote your shares in person, even if you previously submitted a
proxy card.
Unless
otherwise specified, all proxies received will be voted
FOR
the election of all
nominees named herein to serve as directors and
FOR
the approval of the
Company’s 2010 Stock Option Plan. A proxy may be revoked at any time
before its exercise by delivering written notice of revocation to our Chief
Executive Officer, by executing a proxy bearing a later date, or by attendance
at the Meeting and electing to vote in person. Attendance at the
Meeting without voting in person will not constitute revocation of a
proxy.
STOCKHOLDER
PROPOSALS
PROPOSAL
NO. 1 - ELECTION OF DIRECTORS
General
Under the
Company’s Bylaws, members of the Board are elected at an annual or special
meeting of Stockholders. Directors are elected by the Stockholders of
the Company entitled to vote thereon. Members of the Board are
elected by a plurality of the votes cast by such
Stockholders. Elected Directors serve until the next annual or
special meeting of the stockholders where their successors have been duly
elected and qualified.
The Board
currently consists of Zhenyu Wang, Junjun Xu, Yuefeng Wang, Yinan Zhang,
Xiaoshuang Chen and Renbin Yu. All of these directors are currently
serving terms that will expire at the Meeting. The Board has
nominated the foregoing mentioned persons and Yong Bian as Director-Nominees,
and each has consented to serve if elected by the Stockholders at the
Meeting.
The Board
accepted the resignation of Mr. Chunsheng Zhou on June 9, 2010 as a director and
a member of the Company’s Audit Committee, Compensation Committee and the
Nominating Committee effective as of March 18, 2010.
Directors
Seeking Election
The table
below as well as in the subsection entitled “Biographies” sets forth the names
of our Director-Nominees, their ages, all positions and offices that they hold
with the Company, the period during which they have served as such, and their
business experience during at least the last five years.
Name
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Age
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Position(s)
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Zhenyu
Wang
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40
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Chairman
of the Board
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Junjun
Xu
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30
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Chief
Executive Officer and Director
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Yuefeng
Wang
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41
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Director
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Yinan
Zhang
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30
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Director
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Xiaoshuang
Chen
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47
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Director
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Renbin
Yu
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46
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Director
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Yong
Bian
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37
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Deputy
General Manager of New Fortune Associate (Beijing) Information Technology
Co., Ltd, a wholly owned subsidiary of the
Company
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Family
Relationships
There are no family relationships
between or among the members of the Board of Directors or other
executives. None of our directors and officers are directors or
executive officers of any company that files reports with the SEC.
Biographies
(Business Experience)
Zhenyu
Wang
.
Mr. Wang has
served as Chairman of the Board of the Company since January 4, 2008 and has
served as Executive Director and Chairman of Beijing ZYTX Technology Co., Ltd
(“ZYTX”) since July 2007. Prior to that, Mr. Wang served as Chairman
of Kaixin Jiye Investment Management Co., Ltd. from November 1994 through July
2001. Mr. Wang also currently serves as Chairman of Huayuan Runtong
(Beijing) Science and Technology Co., Ltd. (since March 2004), General Manager
of Huayuan Kaituo (Beijing) Science and Technology Co., Ltd. (since November
2004), Chairman of Beijing Putaika Guarding Technology Co., Ltd. (since April
2004) and Beijing Jinzheng Wantong Network Technology Development Co., Ltd.
(since July 2001). Mr. Wang earned a master’s degree (EMBA) from
Peking University. The Company believes that Mr. Wang has the
qualifications and skills to serve as a Director based upon his technological
and business expertise and his years of experience in executive and managerial
positions with the Company and previous positions.
Junjun
Xu
.
Ms. Xu has served
as Chief Executive Officer of the Company since January 4, 2008 and has served
as a Director of Dexterity Surgical, Inc. (now known as China INSOnline Corp.)
since December 18, 2007. Ms. Xu has also served as General Manager of
ZYTX since October 2006. Prior to that, Ms. Xu served as Manager of
Shiji Xinxun Science and Technology (Beijing) Co., Ltd. since December
2003. Prior to that, she was Senior Director of China Life Insurance
Inc. since November 2002 and a Partner with Yi Hu Technology (Beijing) Network
Co., Ltd. from August 2000 through November 2002. Prior to that, Ms.
Xu founded Beijing No. 9 Building Science and Technology Development Co., Ltd.
in April 2000. Ms. Xu received her Bachelors Degree in Economics and
Trade at Beijing Business College. The Company believes that Ms. Xu
has the qualifications and skills to serve as a Director based upon her business
expertise in the insurance industry and years of experience in executive and
managerial positions with the Company and previous positions.
Yuefeng
Wang
.
Mr. Wang has
served as a Director of the Company since January 4, 2008 and he has served as
Chairman of Hua Yuan Run Tong (Beijing) Technology Co., Ltd. since February
2007. From March 2005 through January 2007 Mr. Wang served as
Chairman, Assistant and HR Director of Hua Yuan Run Tong (Beijing) Technology
Co., Ltd. Prior to that, Mr. Wang served as the HR Supervisor of Beijing
Panasonic & Putian Communications Equipment Co., Ltd. from August 2004
through February 2005. Prior to that, Mr. Wang served as President,
Assistant and Manager of the HR Department at BaoDing Chang An Car Manufacturing
Co., Ltd. from July 1997 through August 2002. Mr. Wang earned his MBA
at Tsinghua University. The Company believes that Mr. Wang has the
qualifications and skills to serve as a Director based upon his accounting and
finance expertise; his more than 15 years experience in the industry; and his
experience in executive and managerial positions.
Yinan
Zhang
.
Ms. Zhang has
served as a Director of the Company since January 4, 2008 and currently serves
as president of Nautilus Creative Co., Ltd since June 2007. Prior to
that, Ms. Zhang served as Editor of Travel & Leisure Magazine, Chinese
Edition from October, 2006 through June, 2007, Prior to that, Ms. Zhang served
as Editor of Shanghai Weekly from October, 2002 through September,
2003. Ms. Zhang earned her master degree in Arts et Sciences de
l’enregistrement at Université de Marne-la-Vallée, France. The
Company believes that Ms. Zhang has the qualifications and skills to serve as a
Director based upon her significant business experience, including a diversified
background of managing and directing insurance related companies.
Xiaoshuang
Chen
.
Mr. Chen has
served as a director of the Company since July 16, 2009. Mr. Chen
recently served as Vice President of China Information Technology Development
Ltd., a Hong Kong listed company, since August 2008. Prior to that,
from September 2006 to July 2008, Mr. Chen served as Deputy General Manager of
the Henan Lantian Group in the Henan Province of China. From July
2001 to August 2006, Mr. Chen was employed by the XinAo Group to work for a
number of its subsidiaries. During this time, Mr. Chen served as
Director and Deputy General Manager of Hebei Veyong Bio-Chemical Co. Ltd., Chief
Human Resources Director of the XinAo Group, and Deputy General Manager of XinAo
Gas Holdings Limited. Mr. Chen earned a master’s degree (EMBA) from
Peking University. The Company believes that Mr. Chen has the
qualifications and skills to serve as a Director based upon his significant
business experience, including managing an insurance related technology
company.
Renbin
Yu
.
Mr. Yu has served
as a director of the Company since July 16, 2009. Mr. Yu recently
served as Chairman of the Dalian Wanshan Golf Club since October
2006. Prior to that, from July 2005 to October 2006, Mr. Yu has
served as General Manager of Dalian Water Sports Tourism Co. From
September 1983 to July 2005, Mr. Yu served as Deputy Director of the Urban
Construction Bureau of Dalian. Mr. Yu is Business Administration
graduate from Tsinghua University. The Company believes that Mr. Yu
has the qualifications to serve as a Director based upon his education, along
with his wide range of business expertise, including a diversified background of
managing and directing insurance technology related companies.
Yong
Bian
. Mr. Bian has served as the Deputy General Manager of New
Fortune Associate (Beijing) Information Technology Co., Ltd., a wholly owned
subsidiary of our Company since August 2009. Prior to that, Mr. Bian
was a Business Development Director at Beijing Holdings Information Development
Co., Ltd. From July 2007 to August 2009 and a Senior Consultant at
Beijing Ninesage Consulting Co., Ltd from July 2004 to July
2007. Mr. Bian earned a Bachelor of Science degree from Da Lian
University of Technology in 1993 and a MBA degree from TsingHua University in
2004. The Company believes that Mr. Bian has the qualifications and
skills to serve as a Director based upon his significant business experience,
including managing an insurance technology related company.
Shareholders
Communications
The Board
will give appropriate attention to written communications that are submitted by
shareholders and will respond if and as appropriate. Absent unusual
circumstances, the President and Chief Executive Officer is the primary person
responsible for monitoring communications from shareholders and for providing
copies or summaries of such communications to the other directors.
Communications
are forwarded to all directors if they relate to important substantive matters
and include suggestions or comments that are important for the directors to
know. Shareholders who wish to send communications on any topic to
the Board should address such communications to Junjun Xu, President and Chief
Executive Officer, 4F, Henry House, 10 Ice House Street, Central, Hong
Kong.
Involvement
in Certain Legal Proceedings
None of the members of the Board of
Directors or other executives has been involved in any bankruptcy proceedings,
criminal proceedings, any proceeding involving any possibility of enjoining or
suspending members of our Board of Directors or other executives from engaging
in any business, securities or banking activities, and have not been found to
have violated, nor been accused of having violated, any federal or state
securities or commodities laws.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act
requires our officers and directors, and persons who own more than ten percent
(10%) of a registered class of our equity securities, to file reports of
ownership and changes in ownership with the SEC. Officers, directors and greater
than ten percent (10%) stockholders are required by SEC regulation to furnish us
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies
of such forms furnished to us, we believe that during the fiscal year ended June
30, 2009 all officers, directors and ten percent (10%) beneficial owners who
were subject to the provisions of Section 16(a) complied with all of the filing
requirements during the year with the exception of (a) Edith Kam Ying Ho, a
former director who failed to file a Form 4 upon her resignation, (b) Xueyuan
Han, a former director who failed to file a Form 4 upon his resignation, (c)
Xiaoshuang Chen, a director who failed to file a Form 3 within ten (10) days of
his appointment as a director and (d) Renbin Yu, a director who failed to file a
Form 3 within ten (10) days of his appointment as a director.
Code
of Ethics
We have adopted a Code of Ethics, as
required by the rules of the SEC and NASDAQ. Our Code of Ethics
applies to all of our directors, officers and employees. The Code of
Ethics, and any amendments to, or waivers from, the Code of Ethics, is available
in print, at no charge, to any Stockholder who requests such
information.
Committees
of our Board of Directors
Our Board of Directors has an Audit
Committee, a Compensation Committee and a Nominating Committee established in
accordance with the Exchange Act and NASDAQ rules. The Audit
Committee met 3 times, the Compensation Committee met 2 times and the Nominating
Committee met 2 times during the fiscal year ended June 30, 2009. A
brief description of each committee is set forth below.
•
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Audit Committee
– Independent directors Yinan Zhang, Yuefeng Wang, Edith Kam Ying Ho and
Chunsheng Zhou were members of our Audit Committee during the fiscal year
ended June 30, 2009. Edith Kam Ying Ho resigned effective July
16, 2009 and Chunsheng Zhou, who at the time was already a Board member
and a member of the Compensation Committee and the Nominating Committee,
was appointed to fill Ms. Ho’s vacancy effective as of July 16,
2009. On June 9, 2010, the Board accepted the resignation from
Mr. Chunsheng Zhou as a director and a member of the Company’s Audit
Committee effective as of March 18, 2010. The purpose of the
Audit Committee is to provide assistance to our Board of Directors in
fulfilling their oversight responsibilities relating to our consolidated
financial statements and financial reporting process and internal controls
in consultation with our independent registered public accountants and
internal auditors. The Audit Committee is also responsible for
ensuring that the independent registered public accountants submit a
formal written statement to us regarding relationships and services which
may affect the auditors’ objectivity and
independence.
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•
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Compensation
Committee
–
Independent
directors Yinan Zhang, Yuefeng Wang and Chunsheng Zhou were members of our
Compensation Committee during the fiscal year ended June 30,
2009. On June 9, 2010, the Board accepted the resignation from
Mr. Chunsheng Zhou as a director and a member of the Company’s
Compensation Committee effective as of March 18, 2010. The
purpose of the Compensation Committee is to review and make
recommendations to our Board of Directors regarding all forms of
compensation to be provided to the executive officers and directors of our
company, including stock compensation and loans, and all bonus and stock
compensation to all employees.
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•
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Nominating
Committee
– Independent directors Yinan Zhang, Yuefeng Wang and
Chunsheng Zhou were members of our Nominating Committee during the fiscal
year ended June 30, 2009. On June 9, 2010, the Board accepted
the resignation from Mr. Chunsheng Zhou as a director and a member of the
Company’s Nominating Committee effective as of March 18,
2010. The purpose of the Nominating Committee is to review the
composition and evaluate the performance of the Board, recommend persons
for election to the Board and evaluate director
compensation. The Nominating Committee is also responsible for
reviewing the composition of committees of the Board and recommending
persons to be members of such committees, and maintaining compliance of
committee membership with applicable regulatory
requirements.
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The
Company is listed on NASDAQ. Pursuant to the definition of
independence as determined by the Marketplace Rules of The Nasdaq National
Market, all of the members of the Nomination Committee are considered
independent.
The
process followed by the Nomination Committee to identify and evaluate director
candidates includes requests to Board members and others for recommendations,
meeting from time-to-time to evaluate biographical information and background
material relating to potential candidates, and interviewing selected candidates
by committee members.
In
deciding whether to include a candidate in the Board’s list of recommended
director nominees, the Nomination Committee will look at criteria including the
candidate’s integrity, business acumen, knowledge of the Company’s business and
industry, experience, independence and the ability to act in the interests of
all shareholders. The Committee does not assign specific weight to
any particular criteria and no particular criterion is a prerequisite for each
prospective nominee. The Company believes that the backgrounds and
qualifications of its directors, considered as a group, should provide a
composite mix of experience, knowledge, and abilities that will allow the Board
to fulfill its responsibilities.
Shareholders
may recommend individuals to the Nomination Committee for consideration as
director candidates by submitting their names to the Nomination
Committee. Such communications should be addressed to, Yinan Zhang,
4F, Henry House, 10 Ice House Street, Central, Hong Kong, together with
appropriate biographical information and background materials and a statement as
to whether the shareholder or group of shareholders making the recommendation
has beneficially owned more than 5% of the Common Stock for at least a year as
of the date such recommendation is made. Upon receipt of appropriate
biographical and background material, the Committee will evaluate shareholder
recommended candidates by following substantially the same process and applying
substantially the same criteria that it follows for candidates submitted by
others.
Shareholders
may also directly nominate director candidates, without any action or
recommendation on the part of the Nomination Committee or the Board, to Junjun
Xu, President and Chief Executive Officer, 4F, Henry House, 10 Ice House Street,
Central Hong Kong, by following the procedures set forth under this “Shareholder
Proposals”.
Board
Leadership Structure and Role in Risk Oversight
Board Leadership
Structure
. Our Board of Directors has a general policy that
the positions of the Chairman and Chief Executive Officer should be held by
separate persons. However, this general policy serves as part of a
flexible framework within which the Board may conduct its business, and is not a
binding legal obligation. Our Board believes that it should have the
flexibility to make its determination as to whether these positions should be
held by separate persons or one person at any given point in time in the way
that it believes best to provide appropriate leadership for us at that
time.
The Board
of Directors has established a structure whereby our Chairman position is a
non-executive position held by Mr. Zhenyu Wang. The Board has
continued this separation, as it currently believes that having a Chairman
independent of management helps ensure critical advice, independent thinking and
independent oversight as we continue to implement our strategic plans, and
allows our Chief Executive Officer to more closely focus on our day-to-day
business. Our Chairman’s primary responsibilities are to preside at
meetings of the Board and of the non-management and independent Board members,
serve as the principal liaison between our Chief Executive Officer and
management, on the one hand, and the Board, on the other hand, and provide not
only our other directors, but also our stockholders with an independent
leadership contact. The Board of Directors recognizes that there
could be circumstances in the future that would lead it to combine the positions
of Chairman of the Board and Chief Executive Officer.
Board of Directors’ Role in Risk
Oversight
. Our Board of Director’s role in risk management is
primarily one of oversight with the day-to-day responsibility for risk
management implemented by our management team. At regularly scheduled
meetings, the Board receives management updates on our business operations,
financial results and strategy and discusses risks related to the
business. In carrying out its risk oversight function, our Board of
Directors has three standing committees: Audit, Compensation and Nominating,
each of which is responsible for risk oversight within that committee’s area of
responsibility.
As part
of its responsibilities, the Audit Committee oversees our financial policies,
including financial risk management. The Audit Committee assists our
Board in its oversight of risk management by discussing with management,
particularly the Chief Financial Officer, our guidelines and policies regarding
financial and enterprise risk management and risk appetite, including major risk
exposures and the steps management has taken to monitor and control risk
exposures. The Audit Committee also annually receives and considers a
report from external auditor, regarding the Company’s internal controls over
financial reporting, as well as a risk assessment and plan jointly prepared by
our management.
Each of
the other committees of our Board of Directors considers risks within its areas
of responsibility as follows. The Compensation Committee oversees
risk management as it relates to our compensation plans, policies and practices
in connection with structuring our executive compensation programs and reviewing
our incentive compensation programs for other employees and has reviewed with
management whether our compensation programs may create incentives for our
employees to take excessive or inappropriate risks which could have a material
adverse effect on the Company. The Compensation Committee has
concluded that our compensation policies and practices are not reasonably likely
to have a material adverse effect on the Company. The Nominating
Committing considers risks relating to board membership and corporate
governance.
Audit
Committee Report
Our Audit
Committee has reviewed and discussed with management of the Company and Weinberg
& Company, P.A. (“
Weinberg
”), the
Company’s independent auditor, the Company’s audited consolidated financial
statements for the fiscal year ended June 30, 2009 (the “Audited Financial
Statements”).
The Audit
Committee has discussed with the independent auditor matters required to be
discussed under Statement on Auditing Standards No. 61, has received and
reviewed the written disclosures and the letter from Weinberg required by the
applicable requirements of the Public Company Accounting Oversight Board
(“PCAOB”) regarding Weinberg’s communications with the Audit Committee
concerning independence and we have discussed with such firm its independence
from the Company. Weinberg has confirmed in its letter to us that, in its
professional judgment, it is independent of the Company within the meaning of
the United States securities laws. We also have discussed with management of the
Company and Weinberg such other matters and received such assurances from them
as we deemed appropriate.
Our
management is responsible for the Company’s internal controls and the financial
reporting process. Weinberg is responsible for performing an independent audit
of the Company’s financial statements in accordance with the standards of the
PCAOB and issuing a report thereon. The Audit Committee’s responsibility is to
monitor and oversee these processes.
Based on
the foregoing review and discussions and a review of the reports of Weinberg
with respect to the Audited Financial Statements, and relying thereon, we have
recommended to the Company’s Board the inclusion of the Audited Financial
Statements in the Company’s Annual Report on Form 10-K for the fiscal year ended
June 30, 2009.
|
Audit
Committee
|
|
|
|
Yinan
Zhang, Audit Committee Member
|
|
Yuefeng
Wang, Audit Committee
Member
|
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table sets forth
compensation information for services rendered by certain of our current and
former executive officers in all capacities during the last two (2) completed
fiscal years (ended June 30, 2009 and 2008). The following
information includes the U.S. dollar value of base salaries, bonus awards, the
number of stock options granted and certain other compensation, if any, whether
paid or deferred.
Summary Compensation
Table
Name And Principal
Function
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
|
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Junjun
Xu, Chief Executive Officer
|
|
2009
|
|
|
37,554
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
37,554
|
|
|
|
2008
|
|
|
19,476
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
19,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mingfei
Yang, Chief Financial Officer
|
|
2009
|
|
|
15,263
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
15,263
|
|
|
|
2008
|
|
|
8,288
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
8,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yun
Hon Man, Chief Operating Officer
|
|
2009
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
2008
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
|
|
-0-
|
|
Compensation
of Directors and Executive Officers
The following Company directors each
received $14,641 in compensation for their services as directors for the fiscal
year ended June 30, 2009: Zhenyu Wang, Chunseng Zhou, Yuefang Wang, Yinan Zhang,
Junjun Xu and Xueyuan Han. None of the Company’s directors received
compensation for their service on the board of directors for the fiscal year
ended June 30, 2008. All directors are reimbursed for out-of-pocket
expenses in connection with attendance at Board’s and/or committee
meetings.
Mr. Yun Hon Man resigned as the Chief
Operating Officer effective as of May 1, 2010.
Employment
Agreements
There are currently no employment
agreements between the Company and its employees.
ZYTX has two (2) agreements with each
employee, a Labor Contract and a Confidentiality Agreement. The Labor
Contract mainly includes working content, working time, payment and other
terms. The Confidentiality Agreement mainly includes confidentiality
content, responsibilities, validity and other terms.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER
MATTERS
The following table sets forth certain
information with respect to the beneficial ownership of the Common Stock as of
May 11, 2010 for: (i) each person who is known by the Company to beneficially
own more than 5 percent of the Common Stock, (ii) each of the Company’s
directors, (iii) each of the Company’s Named Executive Officers, and (iv) all
directors and executive officers as a group. As of May 11, 2010 the
Company had 40,000,000 shares of Common Stock outstanding. Unless
otherwise indicated, the Common Stock beneficially owned by a holder includes
shares owned by a spouse, minor children and relatives sharing the same home, as
well as entities owned or controlled by the named person.
Name and Address of
Beneficial Owner
(1)
|
|
Shares of Common
Stock Beneficially
Owned
|
|
|
Percentage of Class
Beneficially Owned
(2)
|
|
Zhenyu
Wang, Chairman of the Board
|
|
|
16,008,960
|
|
|
|
40.02
|
%
|
Junjun
Xu, Chief Executive Officer and Director
|
|
|
5,280,000
|
|
|
|
13.20
|
%
|
Mingfei
Yang, Chief Financial Officer
|
|
|
0
|
|
|
|
0
|
%
|
Yun
Hon Man, Chief Operating Officer
(3)
|
|
|
0
|
|
|
|
0
|
%
|
Yuefeng
Wang, Director
|
|
|
0
|
|
|
|
0
|
%
|
Yinan
Zhang, Director
|
|
|
0
|
|
|
|
0
|
%
|
Chunsheng
Zhou, Director
(4)
|
|
|
0
|
|
|
|
0
|
%
|
Xiaoshuang
Chen, Director
|
|
|
0
|
|
|
|
0
|
%
|
Renbin
Yu, Director
|
|
|
0
|
|
|
|
0
|
%
|
|
|
|
|
|
|
|
|
|
ALL
DIRECTORS AND OFFICERS AS A GROUP (9 PERSONS):
|
|
|
21,288,960
|
|
|
|
53.22
|
%
|
|
|
|
|
|
|
|
|
|
Yanling
Chen
(5)
Room
704, Zhenxing District Yijing Street, 33# No.2,
Dandong
City, Liaoning Province, China
|
|
|
2,999,040
|
|
|
|
7.50
|
%
|
(1) Unless
otherwise noted, each beneficial owner has the same address as the
Company.
(2) Applicable
percentage of ownership is based on 40,000,000 shares of the Common Stock
outstanding as of the date of this Proxy Statement, together with securities
exercisable or convertible into shares of Common Stock within sixty (60) days of
the date of this Proxy Statement for each Stockholder. Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to
securities. Shares of Common Stock are deemed to be beneficially
owned by the person holding such securities for the purpose of computing the
percentage of ownership of such person, but are not treated as outstanding for
the purpose of computing the percentage ownership of any other
person.
(3) Mr.
Yun Hon Man resigned as the Chief Operating Officer effective as of May 1,
2010.
(4) The
Board accepted the resignation of Mr. Chunsheng Zhou as a director and a member
of the Company’s Audit Committee, Compensation Committee and the Nominating
Committee effective as of March 18, 2010.
(5) Based
on the Company’s transfer agent’s record as of the Record Date.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS; DIRECTOR INDEPENDENCE
Transactions
With Related Persons
During the fiscal years ended June 30,
2009 and 2008, the Chairman of the Company, Mr. Wang Zhenyu, made advances to
the Company for operational needs. At June 30, 2009 and 2008, the
principal amount outstanding pursuant to these loans was $253,506 and $153,069,
respectively. The outstanding amounts are non-interest bearing,
unsecured and have no fixed repayment terms.
During the year ended June 30, 2009,
ZYTX entered into an agreement with Beijing Enterprises UniCard Co., Ltd.
(“
UniCard
”),
which Mr. Zhenyu Wang, the Chairman of the Company, is also the Chairman of
UniCard. For the year ended June 30, 2009, the Company rented office
space to UniCard for $131,758 and the Company also sold fixed assets to UniCard
for $130,563.
Director
Independence
The following directors are independent
pursuant to NASDAQ rules and the rules of the SEC: Yinan Zhang, Yuefeng Wang,
Renbin Yu and Xiaoshuang Chen. The following directors are not
independent: Zhenyu Wang and Junjun Xu. All of the members of our
Audit Committee, Compensation Committee and Nominating Committee are independent
pursuant to the Exchange Act and NASDAQ rules.
Principal
Accountant Fees and Services
Weinberg
has served and continues to serve as our principal accountant, effective from
January 31, 2008. The following is a summary of fees incurred for
services rendered.
Audit
Fees
During
the fiscal year ended June 30, 2009, the fees for our current principal
accountant, Weinberg, were $182,000, which was composed of $62,000 for quarterly
reviews, and $120,000 for the audit of our consolidated financial statements
included in the Annual Report on Form 10-K for fiscal year ended on June 30,
2009.
During
the fiscal year ended June 30, 2008, the fees for our current principal
accountant, Weinberg, were $185,243, which was composed of $47,900 for quarterly
reviews, and $137,343 for the audit of our consolidated financial statements
included in the Annual Report on Form 10-K for fiscal year ended on June 30,
2008.
During
the fiscal year ended June 30, 2008, the fees for our former principal
accountant, Akin, Doherty, Klein, P.C., were $300 for quarterly reviews for the
period ended September 30, 2007.
Audit-Related
Fees
During
the fiscal years ended June 30, 2009 and 2008, the fees for our current
principal accountant, Weinberg, were $121,571 and $0 for assurance and related
services reasonably related to the performance of the audit or review of our
financial statements.
Tax
Fees
During
the fiscal years ended June 30, 2009 and 2008, our current principal accountant,
Weinberg, did not render any tax services.
All
Other Fees
During
the fiscal year ended June 30, 2009, there were no fees billed for products and
services provided by the current principal accountant, Weinberg, other than
those set forth above.
Audit
Committee Pre-Approval
The
policy of the Audit Committee is to pre-approve all audit and non-audit services
provided by the independent accountants. These services may include
audit services, audit-related services, tax fees, and other
services. Pre-approval is generally provided for up to one year and
any pre-approval is detailed as to the particular service or category of
services. The Audit Committee has delegated pre-approval authority to
certain committee members when expedition of services is
necessary. The independent accountants and management are required to
periodically report to the full Audit Committee regarding the extent of services
provided by the independent accountants in accordance with this pre-approval
delegation, and the fees for the services performed to date. All of
the services described above in this Item were approved in advance by the Audit
Committee during the fiscal year ended June 30, 2009.
PROPOSAL
NO. 2 – APPROVAL OF COMPANY’S STOCK OPTION PLAN
The
Company's Board of Directors considers stock options as a useful means of
attracting and retaining employees, directors and consultants. It also provides
a long-term incentive for those individuals to foster the growth of the Company
by tying their interests to the interests of the Company's shareholders through
stock ownership and potential stock ownership.
Presently,
the Company does not have any equity compensation plans effective.
On May
11, 2010, the closing price for our common stock, as reported by the NASDAQ OTC
Bulletin Board, was $0.52 per share.
On May 3,
2010, the Board of Directors adopted, subject to shareholder approval at the
Meeting, the Company's 2010 Stock Option Plan (the “2010 Plan”).
The
following discussion of the 2010 Plan is qualified in its entirety by reference
to the copy of the 2010 Plan which is attached to this Proxy as
Exhibit
A
.
Required
Vote
The
affirmative vote of a majority of the shares of Common Stock present, in person
or by proxy, at the Meeting and entitled to vote on this proposal will be
required to adopt this proposal. The Board recommends that shareholders vote
FOR
this
proposal.
Purpose
of the Plan
The
purpose of the 2010 Plan is to enable the Company to provide an incentive to
employees (including directors and officers), non-employee directors and
consultants of the Company, any of its subsidiaries or Parent (as defined
therein), and to offer an additional inducement in obtaining the services of
such individuals.
Shares Subject to the
Plan
,
Eligibility
and Basis for
Grants
The 2010
Plan, if approved by the shareholders, will authorize the grant of options (the
“Options”) to purchase a maximum of 6,000,000 shares of the Company's Common
Stock, subject to adjustments described below, to employees and directors of,
and consultants to, the Company any of its subsidiaries. Upon
expiration, cancellation or termination of unexercised Options, the shares of
the Company's Common Stock subject to such Options will again be available for
the grant of Options under the 2010 Plan.
We
currently have approximately 4 employees (including directors and officers who
are employees), 5 non-employee directors and 9 consultants who will be eligible
to receive options under the 2010 Plan.
The
Company’s policy in granting Options under the 2010 Plan is to serve as a means
of incentivizing recipients for future services to be provided to the Company
and not as a means of compensation for past services rendered, except in
extraordinary circumstances where past performance warrants it.
Type
of Options
Options
granted under the 2010 Plan may either be incentive stock options (“ISOs”),
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”), or nonqualified stock options, which do not qualify as
ISOs (“NQSOs”). ISOs, however, may only be granted to
employees.
Administration
The 2010
Plan is to be administered by the Board or a committee of the Company's Board
consisting of two or more members of the Board. To the extent
required, each member of the committee is to be a “non-employee director,”
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and, to the extent required to
preserve a deduction under Section 162(m) of the Code, an “outside director”
within the meaning of Treas. Reg. § 1.162-27(e)(3). Those
administering the 2010 Plan are referred to as the
“Administrators.”
Among
other things, the Administrators are empowered to select, within the express
limits contained in the 2010 Plan, the employees, consultants and directors to
be granted Options, and to determine whether an Option granted to an employee is
to be an ISO or a NQSO, the number of shares of Common Stock to be subject to
each Option award, the exercise price of each Option, the term of any Option,
the date each Option shall become exercisable, as well as any terms and
conditions relating to the exercisability of each Option, whether to accelerate
the date of exercise of any Option and to select the form of payment of the
exercise price. The Administrators are also empowered to construe
each Option contract between the Company and a recipient and, with the consent
of the recipient, to cancel or modify an Option. The Administrators
are further authorized to prescribe, amend and rescind rules and regulations
relating to the 2010 Plan and make all other determinations necessary or
advisable for administering the 2010 Plan. The Administrators are
also authorized to ensure compliance of the 2010 Plan with applicable laws,
including the laws of the P.R.C. and any other jurisdiction in which Options are
granted and the State Administration of the Foreign Exchange of the P.R.C. (the
“SAFE”), and satisfy all other requirements for persons to be eligible to
receive Options.
Terms
and Conditions of Options
Options
granted under the 2010 Plan are subject, among other things, to the following
terms and conditions:
(a) The
exercise price of each Option is determined by the Administrators; provided,
however, that the exercise price of an ISO may not be less than the fair market
value of the Company's Common Stock on the date of grant (and 110% of such fair
market value if the optionee owns, or is deemed to own, more than 10% of the
voting power of the Company).
(b) Options
may be granted for terms established by the Administrators; provided, however,
that the term of an Option may not exceed ten years (and five years in the case
of an ISO granted to an optionee who owns, or is deemed to own, more than 10% of
the voting power of the Company).
(c) The
aggregate fair market value (determined at the time of grant of the Options) of
shares with respect to which ISOs may be granted to an employee which are
exercisable for the first time during any calendar year may not exceed $100,000
(based on the fair market value of the Company's Common Stock on the date of
grant).
(d) The
exercise price of each Option is payable in full upon the Option's
exercise. Payment of the exercise price of an option may be made (i)
in cash, or (ii) if the Administrators permit and such exercise would not
require the Company to incur a charge against its earnings for financial
accounting purposes, with previously acquired shares of Common Stock, or (iii)
any combination of the foregoing. The Administrators may also permit
payment of the exercise price of an Option through the optionee's irrevocable
instructions to a broker acceptable to the Administrators to deliver promptly to
the Company the amount of sale or loan proceeds sufficient to pay such exercise
price. In connection therewith, the Company may enter into agreements
for coordinated procedures with one or more brokerage firms.
(e) Options
may not be transferred other than by will or by the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by the
optionee.
(f) Except
as may otherwise be provided in an option contract related to the Option, if the
optionee's relationship with the Company as an employee, director or consultant
is terminated for any reason other than death or disability, the Option may be
exercised, to the extent exercisable on the date of termination of such
relationship, at any time within three months thereafter, but in no event after
the expiration of the term of the Option; provided, however, that if the
relationship is terminated either for cause (as defined in the option contract)
or without the consent of the Company, the Option will terminate
immediately.
(g) Except
as otherwise provided in the optionee's option contract, an optionee whose
relationship with the Company is terminated by reason of disability may exercise
the Option, to the extent exercisable at the effective date of such termination,
at any time within one year thereafter, but not after the expiration of the term
of the Option.
(h) Except
as otherwise provided in the optionee's option contract, in the case of the
death of an optionee while an employee, director or consultant, the optionee's
legal representative or beneficiary may exercise the Option, to the extent
exercisable on the date of death, at any time within one year after such death,
but in no event after the expiration of the term of the Option.
(i) The
Company may withhold cash and/or, with the consent of the Administrators, shares
of the Company's Common Stock having an aggregate fair market value equal to the
amount which the Administrators determine is necessary to satisfy the Company's
obligations to withhold any federal, state and/or local taxes, as required under
the laws of the P.R.C. or any other jurisdiction in which the options are
granted, or other amounts incurred by reason of the grant, vesting or exercise
of an Option or the disposition of shares acquired
thereunder. Alternatively, the Company may require the optionee to
pay the Company such amount in cash promptly upon demand.
(j) The
Company may apply with the SAFE for approval of the persons who will participate
in the 2010 Plan and satisfy all applicable registration and other requirements
for such persons to be eligible to receive Options under the 2010
Plan.
Adjustment
in Event of Capital Changes
Appropriate
adjustments are to be made in the number and kind of shares subject to the 2010
Plan and in the exercise prices of any outstanding Options, as well as the
limitation on the number of shares underlying Options that may be granted to any
recipient in any calendar year, in the event of any change in the Company's
Common Stock by reason of any stock dividend, split-up, reclassification,
spin-off, reverse split or other combination, exchange of shares or other
transaction that results in a change in the number or kind of shares of Common
Stock outstanding immediately prior to such event. In the event of
(a) the liquidation or dissolution of the Company, (b) sale of all or
substantially all of the assets of the Company, or (c) the merger or
consolidation of the Company with or into one or more other corporations or
entities in which the Company is not the surviving corporation or in which the
holders of securities of the Company immediately prior to such merger or
consolidation cease to own securities of the surviving corporation or other
entity representing at least 50% of the combined voting power entitled to vote
in the election of directors of the surviving corporation or entity, the Board
of the Company shall, as to outstanding Options, either (a) make appropriate
provision for any such outstanding Options by the substitution, on an equitable
basis, of appropriate stock of the Company or of the merged, consolidated or
otherwise reorganized corporation, or (b) upon written notice to an optionee
with respect to any Option, provide that all unexercised Options must be
exercised within a specified number of days of the date of such notice or they
will be terminated.
Duration
and Amendment of the 2010 Plan
No Option
may be granted under the 2010 Plan after June 28, 2020. The Board may
at any time terminate, suspend or amend the 2010 Plan; provided, however, that,
without the approval of the Company's shareholders, no amendment may be made
which would (a) except as a result of the anti-dilution adjustments described
above, increase the maximum number of shares for which Options may be granted
under the 2010 Plan, (b) change the eligibility requirements for persons who may
receive Options under the 2010 Plan or (c) make any change for which applicable
law requires shareholder approval. No termination, suspension or
amendment may adversely affect the rights of an optionee with respect to an
outstanding Option without the optionee's consent.
Certain
Federal Income Tax Consequences
The
following is a general summary of certain material federal income tax
consequences of the grant and exercise of options under the 2010 Plan and the
sale of any underlying security. This description is based on the
Code, Treasury regulations promulgated thereunder, judicial decisions and
administrative pronouncements of the Internal Revenue Service, all of which are
subject to change, possibly with retroactive effects. This discussion
does not purport to address all tax considerations relating to the issuance and
exercise of any Options, or resulting from the application of special rules to a
particular Option recipient (including a recipient subject to the reporting and
short-swing profit provisions under Section 16 of the Exchange Act, a recipient
exercising an option with previously owned shares, or a recipient who is not an
individual U.S. citizen or permanent resident), as well as applicable state,
local, foreign and other tax consequences inherent in the ownership of Options
and exercise thereof and the ownership and disposition of any underlying
security.
An Option
recipient should consult with his own tax advisors with respect to the tax
consequences inherent in the ownership and exercise of Options and the ownership
and disposition of any underlying security.
Incentive
Stock Options Exercised With Cash
No
taxable income will be recognized by an optionee upon the grant or exercise of
an ISO. The optionee's tax basis in the shares acquired upon the
exercise of an ISO with cash will be equal to the exercise price paid by the
optionee for such shares.
If the
shares received upon exercise of an ISO are disposed of more than one year after
the date of transfer of such shares to the optionee and more than two years from
the date of grant of the option, the optionee will recognize long-term capital
gain or loss on such disposition equal to the difference between the selling
price and the optionee's basis in the shares, and the Company will not be
entitled to a deduction. Long-term capital gain is generally subject
to more favorable tax treatment than short-term capital gain or ordinary
income.
If the
shares received upon the exercise of an ISO are disposed of prior to the end of
the two-years-from-grant/one-year-after-transfer holding period (a
“disqualifying disposition”), the excess (if any) of the fair market value of
the shares on the date of transfer of such shares to the optionee over the
exercise price (but not in excess of the gain realized on the sale of the
shares) will be taxed to the optionee as ordinary income in the year of such
disposition, and the Company generally will be entitled to a deduction in the
year of disposition equal to such amount. Any additional gain or any
loss recognized by the optionee on such disposition will be short-term or
long-term capital gain or loss, as the case may be, depending upon the period
for which the shares were held.
Non-Qualified
Stock Options Exercised With Cash
No
taxable income will be recognized by an optionee upon the grant of an
NQSO. Upon the exercise of an NQSO, the excess of the fair market
value of the shares received at the time of exercise over the exercise price
therefore will be taxed as ordinary income, and the Company will generally be
entitled to a corresponding deduction. The optionee's tax basis in
the shares acquired upon the exercise of such NQSO will be equal to the exercise
price paid by the optionee for such shares plus the amount of ordinary income so
recognized.
Any gain
or loss recognized by the optionee on a subsequent disposition of shares
purchased pursuant to an NQSO will be short-term or long-term capital gain or
loss, depending upon the period during which such shares were
held. The amount of such gain will be equal to the difference between
the selling price and the optionee's tax basis in the shares.
Alternative
Minimum Tax
In
addition to the federal income tax consequences described above, an optionee who
exercises an ISO may be subject to the alternative minimum tax, which is payable
only to the extent it exceeds the optionee's regular tax
liability. For this purpose, upon the exercise of an ISO, the excess
of the fair market value of the shares over the exercise price is an adjustment
which increases the optionee's alternative minimum taxable income. In
addition, the optionee's basis in such shares is increased by such amount for
purposes of computing the gain or loss on disposition of the shares for
alternative minimum tax purposes. If the optionee is required to pay
an alternative minimum tax, the amount of such tax which is attributable to
deferral preferences (including the ISO adjustment) is allowable as a tax credit
against the optionee's regular tax liability (net of other non-refundable
credits) in subsequent years. To the extent the credit is not used,
it is carried forward. An optionee holding an ISO should consult with
his tax advisors concerning the applicability and effect on the optionee of the
alternative minimum tax.
Employment
Tax Withholding on Compensation Income
The
compensation income recognized by the recipient of an Option (as described
above) will be subject to federal and applicable state income and employment
(social security) taxes. The Company will be responsible for
withholding the applicable taxes and remitting such taxes to the respective
government authorities. As the payer of such compensation, the
Company will also have certain reporting obligations in connection with its duty
to withhold such taxes. As provided in a separate agreement that each
recipient of an Option will be required to execute, the Company reserves the
right to withhold the applicable taxes from the amounts of any cash payments or
the issuance of its Common Stock to each recipient. As an
alternative, the Company may require Option recipients to pay to the Company in
cash the amount equal to the taxes required to be withheld.
New
Plan Benefits
The Board
of Directors or a committee of the Board, as summarized below under
“Administration,” in its sole discretion will determine the number and types of
Option awards that will be granted under the Plan. Thus, it is not possible at
this time to determine the benefits that will be received by eligible
participants if the Plan were to be approved by our shareholders.
MANNER
IN WHICH THE PROXIES WILL BE SOLICITED AND VOTED
The cost
of soliciting proxies will be borne by the Company. Officers and
regular associates of the Company may, but without compensation other than their
regular compensation, solicit proxies by additional mailings, personal
conversations, telephone, facsimile, or electronically. The Company
will, upon request, reimburse brokerage firms and others for their reasonable
expenses in forwarding solicitation material to the beneficial owners of the
Common Stock. Other proxy solicitation expenses that we will pay
include those for preparation, mailing and tabulating the proxies.
Our
management knows of no other matter that may come up for action at the
Meeting. However, if any other matter properly comes before the
Meeting, the proxies named on the enclosed proxy will vote in accordance with
their judgment upon such matter. Whether or not you expect to be
present at the meeting, you are urged to vote your proxy by signing, dating and
promptly mailing in your proxy card.
STOCKHOLDER
PROPOSALS TO BE PRESENTED AT NEXT ANNUAL MEETING
In order
for Stockholder business to be included in the Company’s Proxy Statement for the
next annual meeting or properly brought before that meeting by a Stockholder,
the Stockholder must have given timely notice in writing to the Secretary of the
Company. A stockholder proposal for the next annual meeting must be
received at the Company’s principal executive offices at 4F, Henry House, 10 Ice
House Street, Central, Hong Kong by no later than 120 calendar days before the
date on which the Company’s proxy materials are released to stockholders in
connection with such annual meeting, which the Company expects will occur on
June 29, 2011, to be considered timely. Inclusion of stockholder
proposals in the Company’s Proxy Statement for a meeting also requires
satisfaction of certain conditions established by the SEC.
OTHER
MATTERS
The Board
knows of no other business which will be presented at the Meeting. If
any other business is properly brought before the Meeting, proxies in the
enclosed form will be voted in respect thereof in accordance with the judgments
of the persons voting said proxies. It is important that the proxies
be returned promptly and that your shares are represented. You are
urged to sign, date and promptly return the enclosed Proxy Card in the enclosed
envelope. As of the date of this Proxy Statement, we know of no
business that will be presented for consideration at the Meeting other than the
items referred to above. If any other matter is properly brought
before the Meeting for action by Stockholders, proxies in the enclosed form
returned to our Company will be voted in accordance with the recommendations of
our Board or, in the absence of such a recommendation, in accordance with the
judgment of the proxy holder.
WHERE
YOU CAN FIND MORE INFORMATION
The
Company is subject to the informational requirements of the 1934 Act and files
reports and other information with the SEC. Such reports and other
information filed by the company may be inspected and copied at the SEC’s public
reference room at One Station Place, 100 F Street NE, Washington, DC 20549, as
well as in the SEC’s public reference rooms in New York, New York and Chicago
Illinois. You can request copies of these documents, upon payment of
a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including this Proxy Statement, are also
available to you on the SEC’s website at
www.sec.gov
.
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By
Order of the Board of Directors,
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/s/ Zhenyu Wang
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Zhenyu
Wang,
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Chairman
of the Board
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Date: June
11, 2010
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EXHIBIT
A
CHINA
INSONLINE CORP.
2010
STOCK OPTION PLAN
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1.
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Purposes of the
Plan
.
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(a) This
stock option plan (the “Plan”) is intended to provide an incentive to employees
(including directors and officers who are employees) and non-employee directors
of, and consultants and advisors to, CHINA INSONLINE CORP., a Delaware
corporation (the “Company”) or any of its Subsidiaries, and to offer an
additional inducement in obtaining the services of such
individuals.
(b) The
Plan provides for the grant of “incentive stock options” (“ISOs”) within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
“Code”) and stock options which do not qualify as ISOs
(“NQSOs”). ISOs and NQSOs are collectively referred to herein as
“Options.” The Company makes no representation or warranty, express or implied,
as to the qualification of any Option as an “incentive stock option” or any
other treatment under the Code.
(c) Capitalized
terms used but not defined elsewhere herein have the meanings assigned to them
in Section 18 below.
2.
Stock Subject to the
Plan
. Subject to the provisions of Section 11, the aggregate
number of shares of the Company’s Common Stock, par value $0.001 per share
(“Common Stock”), for which Options may be granted under the Plan shall not
exceed six million (6,000,000) shares. Such shares of Common Stock
may, in the discretion of the Board of Directors of the Company (the “Board of
Directors”), consist either in whole or in part of authorized but unissued
shares of Common Stock or shares of Common Stock held in the treasury of the
Company. Subject to the provisions of Section 12, any shares of
Common Stock subject to an Option which for any reason expires or is forfeited,
canceled, or terminated unexercised or which ceases for any reason to be
exercisable, shall again become available for the granting of Options under the
Plan. The Company shall at all times during the term of the Plan
reserve and keep available such number of shares of Common Stock as will be
sufficient to satisfy the requirements of the Plan. Additionally, the
Company, during the term of this Plan, shall use its best efforts to seek to
obtain from appropriate regulatory agencies any requisite authorizations needed
in order to issue and to sell such number of shares of Common Stock as shall be
sufficient to satisfy the requirements of the Plan. However, the
inability of the Company to obtain from any such regulatory agency the requisite
authorizations the Company’s counsel deems to be necessary for the lawful
issuance and sale of any shares of Common Stock hereunder, or the inability of
the Company to confirm to its satisfaction that any issuance and sale of any
shares of Common Stock hereunder will meet applicable legal requirements, shall
relieve the Company of any liability in respect to the failure to issue or to
sell such shares of Common Stock as to which such requisite authority shall not
have been obtained.
3.
Administration of the
Plan
.
(a) The
Plan will be administered by the Board of Directors, or by a committee (the
“Committee”) consisting of two or more directors appointed by the Board of
Directors. Those administering the Plan shall be referred to herein
as the “Administrators.” Notwithstanding the foregoing, if the
Company is or becomes a corporation issuing any class of common equity
securities required to be registered under Section 12 of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), to the extent necessary to
preserve any deduction under Section 162(m) of the Code or to comply with Rule
16b-3 promulgated under the Exchange Act, or any successor rule (“Rule 16b-3”),
any Committee appointed by the Board of Directors to administer the Plan shall
be comprised of two or more directors each of whom shall be a “non-employee
director,” within the meaning of Rule 16b-3, and an “outside director,” within
the meaning of Treasury Regulation Section 1.162-27(e)(3), and the delegation of
powers to the Committee shall be consistent with applicable laws and regulations
(including, without limitation, applicable state law and Rule 16b-3, and the
laws of the P.R.C. and the rules regulations of State Administration of the
Foreign Exchange of the P.R.C. (the “SAFE”), as applicable). Unless
otherwise provided in the By-Laws of the Company, by resolution of the Board of
Directors or applicable law, a majority of the members of the Committee shall
constitute a quorum, and the acts of a majority of the members present at any
meeting at which a quorum is present, and any acts approved in writing by all
members without a meeting, shall be the acts of the Committee.
(b) Subject
to the express provisions of the Plan, the Administrators shall have the
authority, in their sole discretion, to determine each person who shall be
granted an Option; the type of Option to be granted, the times when an Option
shall be granted; whether an Option granted to a Designee (as defined in Section
4 below) shall be an ISO or a NQSO; the number of shares of Common Stock to be
subject to each Option, and the terms on which each Option shall be exercised;
the date each Option shall become exercisable; whether an Option shall be
exercisable in whole or in installments, and, if in installments, the number of
shares of Common Stock to be subject to each installment; whether the
installments shall be cumulative; the date each installment shall become
exercisable and the term of each installment; whether to accelerate the date of
exercise of any Option hereunder (or any installment of any such Option);
whether shares of Common Stock may be issued upon the exercise of an Option
granted under the Plan as partly paid, and, if so, the dates when future
installments of the exercise price shall become due and the amounts of such
installments; the exercise price or other amount to be paid in connection with
the exercise of an Option granted under the Plan; the form of payment of the
exercise price; the fair market value of a share of Common Stock; the
restrictions and/or contingencies, if any, imposed with respect to an Option and
whether and under what conditions to waive any such restrictions and/or
contingencies; whether and under what conditions to restrict the sale or other
disposition of the shares of Common Stock acquired upon the exercise of an
Option granted under the Plan and, if so, whether and under what conditions to
waive any such restriction and/or contingencies; whether and under what
conditions to subject the exercise of all or any portion of an Option granted
under the Plan, the vesting of the shares acquired pursuant to the exercise of
an Option granted under the Plan to the fulfillment of certain restrictions
and/or contingencies as specified in the contract or other document evidencing
the Option (the “Agreement”), including, without limitation, restrictions and/or
contingencies relating to (i) entering into a covenant not to compete with the
Company, its Parent (if any) and any of its Subsidiaries, (ii) financial
objectives for the Company, any of its Subsidiaries, a division, a product line
or other category and/or (iii) the period of continued employment with the
Company or any of its Subsidiaries, and to determine whether such restrictions
or contingencies have been met; whether to accelerate the date on which an
Option may be exercised or to waive any restriction or limitation with respect
to an Option; the amount, if any, necessary to satisfy the obligation of the
Company, any of its Subsidiaries or Parent to withhold taxes or other amounts
and, to the extent applicable, withholding requirements under the laws of the
P.R.C.; whether a Designee has a Disability; with the consent of the Designee,
to cancel or modify an Option; provided, however, that the modified provision is
permitted to be included in an Option granted under the Plan on the date of the
modification; provided, further, however, that in the case of a modification
(within the meaning of Section 424(h) of the Code) of an ISO, such Option as
modified would be permitted to be granted on the date of such modification under
the terms of the Plan; to construe the respective Agreements and the Plan; to
prescribe, amend and rescind rules and regulations relating to the Plan; to
approve any provision of the Plan or any Option granted under the Plan or any
amendment to either which, under Rule 16b-3 or Section 162(m) of the Code,
requires the approval of the Board of Directors, a committee of non-employee
directors or the shareholders, in order to be exempt under Section 16(b) of the
Exchange Act (unless otherwise specifically provided herein) or to preserve any
deduction under Section 162(m) of the Code; to ensure compliance of the Plan
with applicable law, including to the extent applicable, applying to the SAFE
for approval of the persons who will participate in the Plan and satisfy all
applicable registration and other requirements for such persons to be eligible
to receive Options under the Plan; and to make all other determinations
necessary or advisable for administering the Plan. Any controversy or
claim arising out of or relating to the Plan, any Option granted under the Plan
or any Agreement shall be determined unilaterally by the Administrators in their
sole discretion. The determinations of the Administrators on matters
referred to in this Section 3 shall be conclusive and binding on all
parties. No Administrator or former Administrator shall be liable for
any action or determination made in good faith with respect to the Plan or any
Option granted hereunder.
4.
Eligibility
. The
Administrators may from time to time, consistent with the purposes of the Plan,
grant Options to (a) employees (including officers and directors who are
employees) of the Company, any of its Subsidiaries or Parent, (b) consultants to
the Company, any of its Subsidiaries or Parent, (c) advisors to the Company, any
of its Subsidiaries or Parent, and (b) such directors of the Company who, at the
time of grant, are not common law employees of the Company, as the
Administrators may determine in their sole discretion (each, a
“Designee”). Such Options granted shall cover the number of shares of
Common Stock that the Administrators may determine in their sole discretion;
provided, however, that if on the date of grant of an Option any class of common
stock of the Company (including without the limitation the Common Stock) is
required to be registered under Section 12 of the Exchange Act, the maximum
number of shares subject to Options that may be granted to any recipient under
the Plan during any calendar year shall be 1,000,000 shares; provided further,
however, that the aggregate fair market value (determined at the time any Option
is granted) of the shares of Common Stock for which any eligible employee may be
granted ISOs under the Plan or any other plan of the Company, or of a Parent or
a Subsidiary of the Company, which are exercisable for the first time by such
Designee during any calendar year shall not exceed One Hundred Thousand Dollars
($100,000). The One Hundred Thousand Dollar ($100,000) ISO limitation
amount shall be applied by taking ISOs into account in the order in which they
were granted. Any Option (or portion thereof) granted in excess of
such ISO limitation amount shall be treated as a NQSO to the extent of such
excess. To the extent required by P.R.C. law, the Board or the
Committee shall apply to the SAFE for approval of the persons who will
participate in the Plan and satisfy all applicable registration and other
requirements for such persons to be eligible to receive Options under the
Plan.
5.
Grant of
Options
.
(a) The
Administrators may from time to time, in their sole discretion, consistent with
the purposes of the Plan, grant Options to one or more Designees.
(b) The
exercise price of the shares of Common Stock under each Option shall be
determined by the Administrators in their sole discretion; provided, however,
that the exercise price of an ISO or any Option intended to satisfy the
performance-based compensation exemption to the deduction limitation under
Section 162(m) of the Code shall not be less than the fair market value of the
Common Stock subject to such option on the date of grant; and provided, further,
however, that if, at the time an ISO is granted, the Designee owns (or is deemed
to own under Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company,
any of its Subsidiaries or Parent, the exercise price of such ISO shall not be
less than one hundred and ten percent (110%) of the fair market value of the
Common Stock subject to such ISO on the date of grant.
(c) Each
Option granted pursuant to the Plan shall be for such term as is established by
the Administrators, in their sole discretion, at or before the time such Option
is granted; provided, however, that the term of each Option granted pursuant to
the Plan shall be for a period not exceeding ten (10) years from the date of
grant thereof, and provided further, that if, at the time an ISO is granted, the
Designee owns (or is deemed to own under Section 424(d) of the Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, any of its Subsidiaries or Parent, the term of
the ISO shall be for a period not exceeding five (5) years from the date of
grant. Options shall be subject to earlier termination as hereinafter
provided.
6. [Reserved.]
7.
Rules of
Operation
.
(a) The
fair market value of a share of Common Stock on any day shall be (i) if the
principal market for the Common Stock is a national securities exchange, the
average of the highest and lowest sales prices per share of the Common Stock on
such day as reported by such exchange or on a consolidated tape reflecting
transactions on such exchange, or (ii) if the principal market for the Common
Stock is not a national securities exchange and the Common Stock is not quoted
on Nasdaq, the average of the highest bid and lowest asked prices per share for
the Common Stock on such day as reported on the OTC Bulletin Board Service or by
National Quotation Bureau, Incorporated or a comparable service; provided,
however, that if clauses (i) and (ii) of this Section 7(a) are all inapplicable
because the Company’s Common Stock is not publicly traded, or if no trades have
been made or no quotes are available for such day, the fair market value of a
share of Common Stock shall be determined by the Administrators by any method
consistent with any applicable regulations adopted by the Treasury Department
relating to stock options and the laws of the P.R.C. and rules and regulations
of the SAFE, as applicable, and any other jurisdiction in which Options are
granted.
(b) An
Option granted under the Plan (or any installment thereof), to the extent then
exercisable, shall be exercised by giving written notice to the Company at its
principal office stating which Option is being exercised, specifying the number
of shares of Common Stock as to which such Option is being exercised and
accompanied by payment in full of the aggregate exercise price therefore (or the
amount due on exercise if the applicable Agreement permits installment payments)
(i) in cash and/or by certified check, (ii) with the authorization of the
Administrators, with previously acquired shares of Common Stock having an
aggregate fair market value, on the date of exercise, equal to the aggregate
exercise price of all Options being exercised, or (iii) some combination
thereof; provided, however, that in no case may shares be tendered if such
tender would require the Company to incur a charge against its earnings for
financial accounting purposes. The Company shall not be required to
issue any shares of Common Stock pursuant to the exercise of any Option until
all required payments with respect thereto, including payments for any required
withholding amounts, have been made.
(c) The
Administrators may, in their sole discretion, permit payment of the exercise
price of an Option granted under the Plan by delivery by the Designee of a
properly executed notice, together with a copy of the Designee’s irrevocable
instructions to a broker acceptable to the Administrators to deliver promptly to
the Company the amount of sale or loan proceeds sufficient to pay such exercise
price. In connection therewith, the Company may enter into agreements
for coordinated procedures with one or more brokerage firms.
(d) In
no case may a fraction of a share of Common Stock be purchased or issued under
the Plan.
(e) A
Designee shall not have the rights of a shareholder with respect to such shares
of Common Stock to be received upon the exercise of an Option until the date of
issuance of a stock certificate to the Designee for such shares or, in the case
of uncertificated shares, until the date an entry is made on the books of the
Company’s transfer agent representing such shares; provided, however, that until
such stock certificate is issued or until such book entry is made, any Designee
using previously acquired shares of Common Stock in payment of an Option
exercise price shall continue to have the rights of a shareholder with respect
to such previously acquired shares.
8.
Termination of
Relationship
.
(a) Except
as may otherwise be expressly provided in the applicable Agreement, any Designee
whose employment, consulting or advisory relationship with the Company, its
Parent and any of its Subsidiaries has terminated for any reason other than the
death or Disability of the Designee may exercise any Option granted to the
Designee as an employee, consultant or advisor, to the extent exercisable on the
date of such termination, at any time within three (3) months after the date of
termination, but not thereafter and in no event after the date the Option would
otherwise have expired; provided, however, that if the Designee’s employment is
terminated for Cause, such Option shall terminate immediately.
(b) For
the purposes of the Plan, an employment relationship shall be deemed to exist
between an individual and a corporation if, at the time of the determination,
the individual was an employee of such corporation for purposes of Section
422(a) of the Code. As a result, an individual on military leave,
sick leave or other bona fide leave of absence shall continue to be considered
an employee for purposes of the Plan during such leave if the period of the
leave does not exceed ninety (90) days, or, if longer, so long as the
individual’s right to re-employment with the Company, any of its Subsidiaries or
Parent is guaranteed either by statute or by contract. If the period
of leave exceeds ninety (90) days and the individual’s right to re-employment is
not guaranteed by statute or by contract, the employment relationship shall be
deemed to have terminated on the ninety-first (91st) day of such
leave.
(c) Except
as may otherwise be expressly provided in the applicable Agreement, a Designee
whose directorship with the Company has terminated for any reason other than the
Designee’s death or Disability may exercise the Options granted to the Designee
as a director who was not an employee of or consultant to the Company or any of
its Subsidiaries to the extent exercisable on the date of such termination, at
any time within three (3) months after the date of termination, but not
thereafter and in no event after the date the Option would otherwise have
expired; provided, however, that if the Designee’s directorship is terminated
for Cause, such Option shall terminate immediately.
(d) Except
as may otherwise be expressly provided in the applicable Agreement, Options
granted under this Plan to a director, officer, employee, consultant or advisor
shall not be affected by any change in the status of the Designee so long as
such Designee continues to be a director of the Company, or an officer or
employee of, or a consultant or advisor to, the Company, any of its Subsidiaries
or Parent (regardless of having changed from one to the other or having been
transferred from one entity to another).
(e) nothing
in the Plan or in any Option granted under the Plan shall confer on any person
any right to continue in the employ of or as a consultant to the Company, its
Parent or any of its Subsidiaries, or as a director of the Company, or interfere
in any way with any right of the Company, its Parent or any of its Subsidiaries
to terminate such relationship at any time for any reason whatsoever without
liability to the Company, its Parent or any of its Subsidiaries.
(f) Except
as may otherwise be expressly provided in the applicable Agreement, if a
Designee dies (i) while the Designee is employed by, or a consultant or advisor
to, the Company, its Parent or any of its Subsidiaries (ii) within three (3)
months after the termination of the Designee’s employment, consulting or
advisory relationship with the Company, its Parent or any of its Subsidiaries
(unless such termination was for Cause or without the consent of the Company) or
(iii) within one (1) year following the termination of such employment,
consulting or advisory relationship by reason of the Designee’s Disability, any
Options granted to the Designee as an employee of, or consultant to, the Company
or any of its Subsidiaries, may be exercised, to the extent exercisable on the
date of the Designee’s death, by the Designee’s Legal Representative, at any
time within one (1) year after death, but not thereafter and in no event after
the date the Option would otherwise have expired. Except as may
otherwise be expressly provided in the applicable Agreement, any Designee whose
employment, consulting or advisory relationship with the Company, its Parent or
any of its Subsidiaries has terminated by reason of the Designee’s Disability
may exercise such Options, to the extent exercisable upon the effective date of
such termination, at any time within one year after such date, but not
thereafter and in no event after the date the Option would otherwise have
expired.
(g) Except
as may otherwise be expressly provided in the applicable Agreement, if a
Designee dies (i) while the Designee is a director of the Company, (ii) within
three (3) months after the termination of the Designee’s directorship with the
Company (unless such termination was for Cause) or (iii) within one (1) year
after the termination of the Designee’s directorship by reason of the Designee’s
Disability, the Options granted to the Designee as a director who was not an
employee of, or consultant or advisor to, the Company or any of its
Subsidiaries, may be exercised, to the extent exercisable on the date of the
Designee’s death, by the Designee’s Legal Representative at any time within one
(1) year after death, but not thereafter and in no event after the date the
Option would otherwise have expired. Except as may otherwise be
expressly provided in the applicable Agreement, a Designee whose directorship
with the Company has terminated by reason of Disability may exercise such
Options, to the extent exercisable on the effective date of such termination, at
any time within one year after such date, but not thereafter and in no event
after the date the Option would otherwise have expired.
9.
Compliance with
the
Law
s
.
(a)
General
. No
Option shall be exercisable, no shares of Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal, state
and foreign laws and regulations (including, without limitation, withholding tax
requirements and, to the extent applicable, registration, notice and withholding
requirements under the laws of the P.R.C.), any listing agreement to which the
Company is a party, and the rules of all stock exchanges on which the Company’s
shares may be listed. The Company shall have the right to rely on an
opinion of its counsel as to such compliance.
(b)
Legends
. Any
stock certificate evidencing shares of Common Stock issued pursuant to an Option
may bear such legends and statements as the Committee may deem advisable to
assure compliance with all applicable laws and regulations and to reflect any
other restrictions applicable to such shares as the Committee otherwise deems
appropriate. No Option shall be exercisable, no shares of Common
Stock shall be issued, no certificate for shares of Common Stock shall be
delivered, and no payment shall be made under this Plan until the Company has
obtained such consent or approval as the Committee may deem advisable from
regulatory bodies having jurisdiction over such matters.
(c)
P.R.C.
Law
. By way of example and not limitation, the Company shall
(i) comply with applicable notice and registration requirements of the SAFE,
(ii) implement appropriate currency exchange procedures with respect to Options
under the Plan and payments, remittances and deposits in connection therewith,
(iii) file such reports with the SAFE as may be necessary under law, (iv)
prepare and distribute any required disclosures (whether to Participants or
otherwise) regarding the Plan and any Options hereunder and (v) take any and all
other actions to comply with the legal requirements of the P.R.C. and the SAFE
with respect to the Plan and any Options granted hereunder.
(d)
Securities
Laws
.
(i) It
is a condition to exercise of any Option that either (x) a Registration
Statement under the Securities Act of 1933, as amended (the “Securities Act”),
with respect to the shares of Common Stock to be issued upon exercise shall be
effective and current at the time of such exercise, or (y) there is an exemption
from registration under the Securities Act for the issuance of the shares of
Common Stock upon such exercise. Nothing herein shall be construed as
requiring the Company to register shares subject to any Option under the
Securities Act or to keep any Registration Statement effective or
current.
(ii) The
Administrators may require, in their sole discretion, as a condition to the
exercise of an Option granted under the Plan, that the Designee execute and
deliver to the Company the Designee’s representations and warranties, in form,
substance and scope satisfactory to the Administrators, which the Administrators
determine is necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, including without limitation,
that (x) the shares of Common Stock to be issued upon the exercise of an Option
granted under the Plan are being acquired by the Designee for the Designee’s own
account, for investment only and not with a view to the resale or distribution
thereof, and (y) any subsequent resale or distribution of shares of Common Stock
by such Designee will be made only pursuant to (A) a Registration Statement
under the Securities Act which is effective and current with respect to the
shares of Common Stock being sold, or (B) a specific exemption from the
registration requirements of the Securities Act, but in claiming such exemption,
the Designee, prior to any offer of sale or sale of such shares of Common Stock,
shall provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such exemption to the proposed sale or
distribution.
(e)
Postponement of
Exercise
. In addition, if at any time the Administrators shall
determine that the listing or qualification of the shares of Common Stock
subject to any Option on any securities exchange or under any applicable law
(including the laws of the P.R.C.), or that the consent or approval of any
governmental agency or regulatory body (including those of the P.R.C. and the
SAFE), is necessary or desirable as a condition to, or in connection with, the
issuance of shares of Common Stock upon exercise of an Option, such Option may
not be exercised in whole or in part, as the case may be, unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Administrators.
10.
Option
Agreements
. Each Option shall be evidenced by an appropriate
Agreement, which shall be duly executed by the Company and the
Designee. Such Agreement shall contain such terms, provisions and
conditions not inconsistent herewith as may be determined by the Administrators
in their sole discretion. The terms of each Option and Agreement need
not be identical.
11.
Adjustments upon Changes in
Common Stock
.
(a) Notwithstanding
any other provision of the Plan, in the event of any change in the outstanding
Common Stock by reason of a stock dividend, recapitalization, merger in which
the Company is the surviving corporation, spin-off, split-up, combination or
exchange of shares or the like which results in a change in the number or kind
of shares of Common Stock which are outstanding immediately prior to such event,
the aggregate number and kind of shares subject to the Plan, the aggregate
number and kind of shares subject to each outstanding Option, and the exercise
price of each Option, and the maximum number of shares subject to each Option
that may be granted to any employee in any calendar year, shall be appropriately
adjusted by the Board of Directors, whose determination shall be conclusive and
binding on all parties. Such adjustment may provide for the
elimination of fractional shares that might otherwise be subject to Options
without payment therefore. Notwithstanding the foregoing, no
adjustment shall be made pursuant to this Section 11 if such adjustment (i)
would cause the Plan to fail to comply with Section 422 of the Code or with Rule
16b-3 of the Exchange Act (if applicable to such Option), or (ii) would be
considered as the adoption of a new plan requiring shareholder
approval.
(b) Except
as may otherwise be expressly provided in an applicable Agreement, in the event
of (i) a liquidation or dissolution of the Company, or (ii) any transaction (or
series of related transactions) that is approved by a majority of the members of
the Company’s Board of Directors who were elected by shareholders prior to the
first such transaction (including, without limitation, a merger, consolidation,
sale of stock by the Company or its shareholders, tender offer or sale of all or
substantially all assets) and in which either (A) the voting power (in the
election of directors generally) of the Company’s voting securities outstanding
immediately prior to such transaction(s) ceases to represent more than fifty
percent (50%) of the combined voting power (in the election of directors
generally) of the Company or such surviving entity outstanding immediately after
such transaction(s), or (B) all or substantially all of the Company’s assets are
sold to an unaffiliated third party, the Board of Directors of the Company, or
the board of directors of any corporation or other legal entity assuming the
obligations of the Company, shall, as to outstanding Options, either (x) make
appropriate provision for the protection of any such outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company or of the
merged, consolidated or otherwise reorganized entity which will be issuable in
respect of the shares of Common Stock of the Company, provided that no
additional benefits shall be conferred upon optionees as a result of such
substitution, and the excess of the aggregate fair market value of the shares
subject to the Options immediately after such substitution over the purchase
price thereof is not more than the excess of the aggregate fair market value of
the shares subject to the Options immediately before such substitution over the
purchase price thereof, or (y) upon written notice to the optionees, provide
that all unexercised Options must be exercised within a specified number of days
of the date of such notice or they will be terminated. In any such
case, the Board of Directors may, in its discretion, accelerate the exercise
dates of outstanding Options.
12.
Amendments and Termination
of the Plan
. The Plan was adopted by the Board of Directors on
May 3, 2010 to be effective June 29, 2010. No Option may be granted
under the Plan after June 28, 2020. The Board of Directors, without
further approval of the Company's shareholders, may at any time suspend or
terminate the Plan, in whole or in part, or amend it from time to time in such
respects as it may deem advisable, including without limitation, in order that
ISOs granted hereunder meet the requirements for "incentive stock options" under
the Code, or to comply with the provisions of Rule 16b-3 or Section 162(m) of
the Code or any change in applicable laws or regulations, ruling or
interpretation of any governmental agency or regulatory body, including the laws
of the P.R.C. and rules and regulations of SAFE; provided, however, that no
amendment shall be effective, without the requisite prior or subsequent
shareholder approval, which would (a) except as contemplated in Section 11,
increase the maximum number of shares of Common Stock for which any Options may
be granted under the Plan, (b) change the eligibility requirements for
individuals entitled to receive Options hereunder, or (c) make any change for
which applicable law or any governmental agency or regulatory body requires
shareholder approval. No termination, suspension or amendment of the
Plan shall adversely affect the rights of a Designee under any Option granted
under the Plan without such Designee's consent. The power of the
Administrators to construe and administer any Option granted under the Plan
prior to the termination or suspension of the Plan shall continue after such
termination or during such suspension. Additionally, to the extent
required by the laws of the P.R.C., the Company shall notify the relevant
authority of any amendment to the Plan.
13.
Non-Transferability
. Except
as may otherwise be expressly provided in the applicable Agreement, no Option
granted under the Plan shall be transferable other than by will or the laws of
descent and distribution, and Options may be exercised, during the lifetime of
the Designee, only by the Designee or the Designee’s Legal
Representatives. Except as may otherwise be expressly provided in the
applicable Agreement, an Option, to the extent not exercisable, shall not be
transferable otherwise than by will or the laws or descent and
distribution. Except to the extent provided above, Options may not be
assigned, transferred, pledged, hypothecated or disposed of in any way (whether
by operation of law or otherwise) and shall not be subject to execution,
attachment or similar process, and any such attempted assignment, transfer,
pledge, hypothecation or disposition shall be null and void ab initio and of no
force or effect.
14.
Withholding
Taxes
. The Company, its Subsidiary or Parent, as applicable,
may withhold (a) cash or (b) with the consent of the Administrators (in the
Agreement or otherwise), shares of Common Stock to be issued under an Option or
a combination of cash and shares, having an aggregate fair market value equal to
the amount which the Administrators determine is necessary to satisfy the
obligation of the Company, a Subsidiary or Parent to withhold federal, state and
local income taxes, as required under the laws of the P.R.C. or any foreign
jurisdiction in which Options are granted, or other amounts incurred by reason
of the grant, vesting, exercise or disposition of an Option, or the disposition
of the underlying shares of Common Stock. Alternatively, the Company
may require the Designee to pay to the Company such amount, in cash, promptly
upon demand.
15.
Legends; Payment of
Expenses
.
(a) The
Company may endorse such legend or legends upon the certificates for shares of
Common Stock issued upon the grant or exercise of an Option and may issue such
“stop transfer” instructions to its transfer agent in respect of such shares as
it determines, in its sole discretion, to be necessary or appropriate to (i)
prevent a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act, applicable state securities laws or other
legal requirements, (ii) implement the provisions of the Plan or any agreement
between the Company and the Designee with respect to such shares of Common
Stock, or (iii) permit the Company to determine the occurrence of a
“disqualifying disposition,” as described in Section 421(b) of the Code, of the
shares of Common Stock transferred upon the exercise of an ISO granted under the
Plan.
(b) The
Company shall pay all issuance taxes with respect to the issuance of shares of
Common Stock upon exercise of an Option granted under the Plan, as well as all
fees and expenses incurred by the Company in connection with such
issuance.
16.
Use of Proceeds; Unfunded
Plan
. The cash proceeds to be received upon the exercise of an
Option granted under the Plan shall be added to the general funds of the Company
and used for such corporate purposes as the Board of Directors may determine, in
its sole discretion. The Company shall not be required to segregate
any assets, nor shall the Plan be construed as providing for such segregation,
nor shall the Board of Directors or the Committee, if designated, be deemed to
be a trustee of any cash or assets in connection with the Plan. Any
liability of the Company to any Designee or any beneficiary thereof shall be
based solely upon any contractual obligations that may be created by the Plan
and an Agreement, and no such obligation shall be secured by any pledge or other
encumbrance on the property of the Company, any Subsidiary or
Parent.
17.
Substitutions and
Assumptions of Options of Certain Constituent
Corporations
. Anything in this Plan to the contrary
notwithstanding, the Board of Directors may, without further approval by the
shareholders, substitute new Options hereunder for prior options of a
Constituent Corporation or assume the prior options or restricted stock of such
Constituent Corporation.
18.
Definitions
.
(a)
“Cause,” in connection with the termination of a Designee, shall mean (i)
”cause,” as such term (or any similar term, such as “with cause”) is defined in
any employment, consulting or other applicable agreement for services between
the Company and such Designee, or (ii) in the absence of such an agreement,
“cause” as such term is defined in the Agreement executed by the Company and
such Designee, or (iii) in the absence of both of the foregoing, (A) indictment
of such Designee for any illegal conduct, (B) failure of such Designee to
adequately perform any of the Designee’s duties and responsibilities in any
capacity held with the Company, any of its Subsidiaries or Parent (other than
any such failure resulting solely from such Designee’s physical or mental
incapacity), (C) the commission of any act or failure to act by such Designee
that involves moral turpitude, dishonesty, theft, destruction of property,
fraud, embezzlement or unethical business conduct, or that is otherwise
injurious to the Company, any of its Subsidiaries or Parent or any other
affiliate of the Company (or its or their respective employees), whether
financially or otherwise, (D) any violation by such Designee of any Company rule
or policy, or (E) any violation by such Designee of the requirements of such
Agreement, any other contract or agreement between the Company and such Designee
or this Plan (as in effect from time to time); in each case, with respect to
subsections (A) through (E), as determined by the Board of
Directors.
(b) “Constituent
Corporation” shall mean any corporation which engages with the Company, its
Parent or any Subsidiary in a transaction to which Section 424(a) of the Code
applies (or would apply if the Option assumed or substituted were an ISO), or
Parent or any Subsidiary of such corporation.
(c) “Disability”
shall mean permanent and total disability within the meaning of Section 22(e)(3)
of the Code.
(d) “Legal
Representative” shall mean the executor, administrator or other person who at
the time is entitled by law to exercise the rights of a deceased or
incapacitated Designee with respect to an Option granted under the
Plan.
(e) “Parent”
shall mean any “parent corporation” within the meaning of Section 424(e) of the
Code.
(f)
“Subsidiary” shall mean a “subsidiary corporation” within the meaning of Section
424(f) of the Code
19.
Governing
Law
.
(a) The
Plan, any Options granted hereunder, the Agreements and all related matters
shall be governed by, and construed in accordance with, the laws of the State of
Delaware, without regard to conflict or choice of law provisions that would
defer to the substantive laws of another jurisdiction, except to the extent that
federal law or the laws of the P.R.C. apply.
(b) Neither
the Plan nor any Agreement shall be construed or interpreted with any
presumption against the Company by reason of the Company causing the Plan or
Agreement to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
20.
Partial
Invalidity
. The invalidity, illegality or unenforceability of
any provision in the Plan, any Option or Agreement shall not affect the
validity, legality or enforceability of any other provision, all of which shall
be valid, legal and enforceable to the fullest extent permitted by applicable
law.
21.
Shareholder
Approval
. The Plan shall be subject to approval of the
Company’s shareholders. No Options granted hereunder may be exercised
prior to such approval, provided, however, that the date of grant of any Option
shall be determined as if the Plan had not been subject to such
approval.
REQUEST
TO EXERCISE FORM
The
undersigned hereby irrevocably elects to exercise all or part, as specified
below, of the Vested Portion of the option (“Option”) granted to him pursuant to
a certain stock option agreement (“Agreement”) effective _____________________,
between the undersigned and CHINA INSONLINE CORP. (the “Company”) to purchase an
aggregate of _____________________ (__________) shares (the “Shares”) of the
Company’s Common Stock, par value $0.001 per share.
The
undersigned hereby tenders cash in the amount of $__________ per share
multiplied by _____________________ (_________), the number of Shares he is
purchasing at this time, for a total of $_______________, which constitutes full
payment of the total Exercise Price thereof.
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INSTRUCTIONS
FOR REGISTRATION OF SHARES
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IN
COMPANY’S TRANSFER BOOKS
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Name:
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(Please
typewrite or print in block letters)
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Address:
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Signature:
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Accepted
by CHINA INSONLINE CORP.:
PROXY
CHINA
INSONLINE CORP.
Room 42,
4F, New Henry House, 10 Ice House Street, Central, Hong Kong
Telephone: (011)
00852-25232986
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS
OF CHINA INSONLINE CORP.
The
undersigned hereby appoints Mr. Zhenyu Wang and Ms. Junjun Xu as Proxies, each
with the power to appoint his/her substitute, and authorizes them to represent
and vote, as designated below, all the shares of common stock of China INSOnline
Corp. held of record by the undersigned on May 11, 2010 at the Annual Meeting of
Shareholders to be held on June 29, 2010.
1.
ELECTION OF
DIRECTORS
:
For
all Nominees Listed Below ____________
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Withhold
Authority____________
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(except
as indicated below)
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Zhenyu
Wang, Junjun Xu, Yuefeng Wang, Yinan Zhang, Xiaoshuang Chen, Renbin Yu, and Yong
Bian.
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INSTRUCTION
:
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To
withhold authority to vote for any individual nominee(s), write that
nominee's name(s) in the space immediately
below.
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2. APPROVAL
OF COMPANY’S 2010 STOCK OPTION PLAN
FOR_____
AGAINST_____ ABSTAIN_____
3.
OTHER BUSINESS
:
Take
action on other business, which may properly come before the
meeting.
THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION OR DIRECTION IS MADE, THEY WILL BE VOTED “FOR” THE ELECTION OF THE
DIRECTORS, “FOR” THE APPROVAL OF THE COMPANY’S 2010 STOCK OPTION PLAN AND “FOR”
ANY OTHER BUSINESS IN ACCORDANCE WITH THE RECOMMENDATIONS OF
MANAGEMENT. THIS PROXY MAY BE REVOKED PRIOR TO ITS
EXERCISE.
Dated
this_______day of June, 2010.
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(SEAL)
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Signature
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(SEAL)
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Signature
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When
shares are held by joint tenants, both should sign. If signing
as attorney, executor, administrator, trustee, guardian, custodian,
corporate official or in any other fiduciary or representative capacity,
please give your full title as
such.
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Please sign your name exactly as it
appears on this proxy, and mark, date and return this proxy as soon as possible
in the enclosed envelope.
No postage is necessary if mailed in
the United States in the enclosed self-addressed envelope.
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