1
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:
[X] Preliminary Proxy Statement [ ] Confidential, For Use
of the Commission Only (as
permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Zindart Limited
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------
2
(5) Total fee paid:
----------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
----------------------------------------------------------------
(2) Form, schedule or registration statement no.:
----------------------------------------------------------------
(3) Filing party:
----------------------------------------------------------------
(4) Date filed:
----------------------------------------------------------------
3
ZINDART LIMITED
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 6, 2001
To the Shareholders of Zindart Limited:
You are cordially invited to the Annual General Meeting of Shareholders of
Zindart Limited, a Hong Kong corporation (the "Company"), to be held on
September 6, 2001 at 2:00 p.m. local time at the Mandarin Oriental Hotel, 222
Sansome Street, San Francisco, California, United States of America for the
following purposes:
1. To adopt the audited financial statements and the reports of the
directors and auditors of the Company for the fiscal year ended March
31, 2001.
2. To re-elect ten directors to serve for the ensuing year and until
their successors are elected.
3. To approve an amendment to the Company's 1997 Equity Incentive Plan,
as amended, (1) to increase the aggregate number of Ordinary Shares
and/or American Depositary Shares ("ADSs") authorized for issuance
under such plan from 1,320,000 to 2,200,000, an increase of 880,000
Ordinary Shares and/or ADSs and (2) to increase the maximum share
awards that may be granted to an individual in any calendar year from
75,000 Ordinary Shares and/or ADSs to 100% of the Ordinary Shares
and/or ADSs available for issuance under such plan.
4. To authorize the Board of Directors to issue all or part of the
authorized but unissued shares of the Company, in such manner and to
such persons as they shall in their absolute discretion deem fit,
such authorization to lapse at the Company's next annual general
meeting.
5. To re-appoint Arthur Andersen & Co as independent auditors of the
Company for the fiscal year ending March 31, 2002.
6. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on July 31, 2001 as
the record date for the determination of shareholders entitled to notice of this
Annual General Meeting.
By Order of the Board of Directors,
Alexander M.K. Ngan
President and Chief Executive Officer
Tai Po, New Territories, Hong Kong
August [3], 2001
All shareholders are cordially invited to attend the meeting in person. Any
shareholder entitled to attend and vote at the meeting is entitled to appoint a
proxy to attend and vote on his or her behalf; a proxy holder need not be a
shareholder of the Company. Whether or not you expect to attend the meeting,
please complete, date, sign and return the enclosed proxy as promptly as
possible in order to ensure your representation at the meeting. A
postage-prepaid return envelope is enclosed for that purpose. Even if you have
given your proxy, you may still vote in person if you attend the meeting. Please
note, however, that if your shares are held of record by a broker, bank or other
nominee and you wish to vote at the meeting, you must obtain from the record
holder a proxy issued in your name.
4
ZINDART LIMITED
FLAT C & D, 25/F BLOCK 1, TAI PING INDUSTRIAL CENTRE
57 TING KOK ROAD
TAI PO, NEW TERRITORIES
HONG KONG S.A.R., CHINA
------------------------
PROXY STATEMENT FOR ANNUAL GENERAL MEETING OF SHAREHOLDERS
SEPTEMBER 6, 2001
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors (the
"Board") of Zindart Limited, a company incorporated with limited liability under
the laws of Hong Kong (the "Company"), for use at the Annual General Meeting of
Shareholders to be held on September 6, 2001, at 2:00 p.m. local time (the
"Annual General Meeting"), or at any adjournment or postponement thereof, for
the purposes set forth herein and in the accompanying Notice of Annual General
Meeting. The Annual General Meeting will be held at the Mandarin Oriental Hotel,
222 Sansome Street, San Francisco, California, United States of America. The
Company intends to mail this proxy statement and accompanying proxy card on or
about August [3], 2001 to all holders of Ordinary Shares ("Shares") of the
Company ("Shareholders") entitled to vote at the Annual General Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to Shareholders. Copies of solicitation
materials will be furnished to banks, brokerage houses, fiduciaries and
custodians holding in their names Shares or American Depositary Shares ("ADSs")
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Shares and ADSs for
their costs of forwarding solicitation materials to such beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone,
electronic mail, facsimile transmission or personal solicitation by directors,
officers or other regular employees of the Company. No additional compensation
will be paid to directors, officers or other regular employees for such
services.
NOTICE, VOTING RIGHTS AND OUTSTANDING SHARES AND ADSS
Only holders of record of Shares (including those represented by ADSs) at
the close of business on July 31, 2001 will be entitled to notice of the Annual
General Meeting. At the close of business on July 31, 2001, the Company had
outstanding and entitled to vote 8,834,125 Shares, of which [ ] were
represented by ADSs.
Each holder of record of Shares on such date will be entitled to one vote
for each Share held on all matters to be voted upon at the Annual General
Meeting. The Bank of New York, as depositary of the ADSs (the "Depositary"), has
advised the Company that it intends to mail to all owners of the ADSs this Proxy
Statement and the accompanying Notice of Annual General Meeting. Upon the
written request of an owner of record of ADSs, the Depositary will endeavor,
insofar as practicable, to vote or cause to be voted the amount of Shares
represented by the ADSs evidenced by the American Depositary Receipts (the
"ADRs") related thereto in accordance with the instructions set forth in such
request. The Depositary has advised the Company that it will not vote or attempt
to exercise the right to vote that attaches to the Shares other than in
accordance with such instructions. As the holder of record for all of the Shares
represented by the ADSs, only the Depositary may vote such Shares at the Annual
General Meeting.
When proxies are properly dated, executed and returned, the Shares they
represent will be voted at the Annual General Meeting in accordance with the
instructions of the stockholder. If no specific instructions are
5
given, the Shares will be voted FOR proposals 1, 2, 3, 4 and 5 and in the proxy
holder's discretion as to other matters that may properly come before the Annual
General Meeting.
All votes will be tabulated by the inspector of election appointed for the
meeting, who will separately tabulate affirmative and negative votes,
abstentions, broker non-votes and depositary non-votes. Abstentions will be
counted towards a quorum but will not be counted for any purpose in determining
whether a matter is approved. Broker non-votes and depositary non-votes will not
be counted towards a quorum or for any purpose in determining whether a matter
is approved.
REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, Zindart
Limited, Flat C & D, 25/F Block 1, Tai Ping Industrial Centre, 57 Ting Kok Road,
Tai Po, New Territories, Hong Kong S.A.R., China., a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
SHAREHOLDER PROPOSALS
Proposals which Shareholders of the Company wish to be considered for
inclusion in the Company's proxy statement and proxy card for the 2002 Annual
General Meeting must be received by the Secretary of the Company by April 5,
2002 and must comply with the requirements of Rule 14a-8 under the Securities
Exchange Act of 1934, as amended. The submission of a proposal does not assure
that it will be included in the proxy statement or proxy card.
The Hong Kong Companies Ordinance provides that Shareholders who hold at
least 5% of the total number of outstanding Shares, or a group of at least 100
Shareholders who hold Shares on which there has been paid an average of at least
HK$2,000 per Shareholder, may submit a proposal to be presented at the Company's
2002 Annual General Meeting of Shareholders. Such proposals must be deposited at
the Company's registered office at least six weeks prior to the Company's 2002
Annual General Meeting of Shareholders, which the Company anticipates will take
place in September 2002. If a proposal has been submitted and the Company's 2002
Annual General Meeting of Shareholders is thereafter called for a date six weeks
or less after the date of submission, then such proposal will be deemed to have
been timely submitted.
PROPOSAL 1
ADOPTION OF AUDITED FINANCIAL STATEMENTS
The Board recommends that the audited financial statements for the fiscal
year ended March 31, 2001, which are included in the Annual Report sent to the
Shareholders of the Company concurrently with this proxy statement, be adopted.
The financial statements for the fiscal year ended March 31, 2001 were audited
by Arthur Andersen & Co and were reviewed and approved by the Board prior to the
Annual General Meeting.
The affirmative vote of the holders of a majority of the Shares present in
person or represented by proxy and entitled to vote at the meeting will be
required to approve this Proposal 1.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 1.
2
6
PROPOSAL 2
ELECTION OF DIRECTORS
There are ten nominees for the eleven Board positions presently authorized
in the Company's Articles of Association. Each director to be elected will hold
office until the next Annual General Meeting of Shareholders and until such
director's successor is elected and has qualified, or until such director's
earlier death, resignation or removal. Each nominee listed below is currently a
director of the Company and each director was elected by the Shareholders at the
2000 Annual General Meeting.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the ten nominees named below. In the event
that any nominee should be unavailable for election as a result of an unexpected
occurrence, such Shares will be voted for the election of such substitute
nominee as management may propose. Each person nominated for election has agreed
to serve if elected, and management has no reason to believe that any nominee
will be unable to serve.
Directors will be elected by a majority of the Shares present in person or
represented by proxy and entitled to vote at the meeting.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF ALL OF THE LISTED NOMINEES.
NOMINEES
The names of the nominees, their ages as of March 31, 2001, and the
principal positions with the Company held by them, are as follows:
NAME AGE PRINCIPAL POSITION HELD WITH THE COMPANY
- ---- --- ----------------------------------------
Peter A.J. Gardiner............... 65 Chairman of the Board
Robert A. Theleen(1).............. 55 Vice-Chairman of the Board
Alexander M. K. Ngan.............. 50 Director, President, and Chief Executive
Officer
Christopher Guest................. 54 Director and Chief Executive Officer of
Corgi Classics Limited
George Chen....................... 50 Director
Feather S. Y. Fok(3).............. 39 Director
James E. Gilleran(2).............. 67 Director
Leo Paul Koulos(1)(2)............. 67 Director
Gordon L. M. Seow................. 68 Director
Victor Yang(1)(2)................. 55 Director
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
(3) Ms. Fok served as Chief Financial Officer ("CFO") of the Company for the
fiscal year ended March 31, 2001. Ms. Fok resigned from her position as CFO
as of March 31, 2001.
Peter A.J. Gardiner serves as the Chairman of the Board of Directors. Mr.
Gardiner joined the Board in January 2000. Previously, Mr. Gardiner had been
Chairman, Chief Executive Officer and a major shareholder of Veriflo
Corporation, a leading manufacturer of semiconductor components. Mr. Gardiner
received a bachelor's degree in brewing and industrial fermentation from
Heriot-Watt University in Edinburgh, United Kingdom.
Robert A. Theleen serves as Vice-Chairman of the Board of the Company and
served as Chairman of the Board of Directors from January 1997 until September
2000. Mr. Theleen is also the founder and Chairman of ChinaVest, a group of
venture capital investment funds. Mr. Theleen joined the Board of Directors in
January 1997. Mr. Theleen is a director of several ChinaVest portfolio
companies. Mr. Theleen is a founding member of the executive committee of the
Hong Kong-Taipei Business Cooperation Committee of the Hong
3
7
Kong General Chamber of Commerce. Mr. Theleen received a B.A. degree from
Duquesne University and an M.B.A. from the American School of International
Management.
Alexander M.K. Ngan has served as President and Chief Executive Officer
since May 8, 1998 and as a director since October 1995. Mr. Ngan is a partner of
ChinaVest, which he joined in 1993. Mr. Ngan is a director of several privately
held ChinaVest portfolio companies. Prior thereto, Mr. Ngan worked for over 20
years in banking and financial consulting in Canada and Hong Kong. Mr. Ngan
received a Bachelor of Mathematics degree from the University of Waterloo,
Ontario.
Christopher Guest joined the Board as a director in June 1999. Mr. Guest is
the Chief Executive Officer of Corgi Classics Limited ("Corgi"), a subsidiary of
the Company. Mr. Guest joined Corgi in 1984 as Sales and Marketing Director. He
was appointed Managing Director of Corgi in 1988, and was responsible for the
integration of Corgi with Mattel in connection with Mattel's acquisition of
Corgi. He left Corgi in January 1995 after completion of the integration. Later
the same year, he led Corgi's management in a leveraged buyout of the company
from Mattel. His previous marketing experience includes seven years with
Unilever PLC and eight years with Mars Inc. Mr. Guest received a Bachelor of
Arts degree in English and Economics from the University of York.
George Chen has served as a director since January 2000. Mr. Chen is the
Chief Executive Officer of Tait Asia Limited, a food and beverage distribution
company in China. He is also a director of, Tait Asia Ltd., South Pacific Sea
Land Air Ltd., Sea Star Fishing Co. Ltd., Pacific Genesis Ltd., China Food and
Beverage.com, Ltd., Tonga Petroleum & Gas Ltd. and China National Advertising
Co. Mr. Chen is a graduate of Boston University and has a bachelor's degree in
business administration.
Feather S.Y. Fok has served as a director since August 1993. Ms. Fok served
as Chief Financial Officer from August 1993 to March 2001. Ms. Fok joined the
Company in January 1989. Before joining the Company, Ms. Fok worked in the Audit
and Business Advisory division of Arthur Andersen & Co in Hong Kong. Ms. Fok is
a Certified Public Accountant in Hong Kong and an associate member of the Hong
Kong Society of Accountants. Ms. Fok is also a member of the Chartered
Association of Certified Accountants, United Kingdom. Ms. Fok received a
bachelor's degree in Business Administration from the Chinese University of Hong
Kong.
James E. Gilleran joined the Board in March 1997. Mr. Gilleran served as
Chairman of the Board and Chief Executive Officer of Bank of San Francisco and
its holding company from January 1994 through December 2000 when the bank was
sold. Prior thereto, Mr. Gilleran served as Superintendent of Banks of the
California State Banking Department. Mr. Gilleran received a B.B.A. degree from
Pace University, and a J.D. from Northwestern California University.
Leo Paul Koulos joined the Board in March 1997. Prior to the sale of his
company, Mr. Koulos was President and Chief Executive Officer of National Coupon
Redemption Service, Inc., a national clearinghouse for manufacturers' cents-off
coupons and served as Chairman and Chief Executive Officer of Coupon Processing
Associates, Inc., of Texas, and its Mexican affiliate, Enlace Vital, S.A. de.
C.V. He is now the Chairman of the Board of International Data, LLC, its
successor company. Mr. Koulos received a B.A. degree from the University of San
Francisco.
Gordon L.M. Seow joined the Board in March 1998. He is a barrister-at-law
from Lincoln's Inn, United Kingdom. Mr. Seow was a director of Shell Eastern
Petroleum (Pte) Ltd., Singapore and retired from the company in 1987 after 30
years of service. He then joined the Ministry of Foreign Affairs in 1988 and
served as Singapore's Commissioner to Hong Kong from 1988 to 1994 and
subsequently retired. Mr. Seow is currently a director of several companies in
Singapore, including Hotel Properties Ltd, Kim Eng Holdings Ltd and Pacific
Century Regional Developments Ltd. He is a member of the advisory board of
ChinaVest IV-B.
Victor Yang joined the Board in March 1998. He is a founding partner of and
has practiced for over 20 years with the Canadian law firm Boughton Peterson
Yang Anderson, Solicitors and resides currently in the firm's Hong Kong office.
Mr. Yang has served on the Board of Directors of various publicly listed
companies in Canada, Singapore and Hong Kong. He is also a member of the law
societies of British Columbia, Canada, Hong Kong and United Kingdom.
4
8
BOARD COMMITTEES AND MEETINGS
The business and affairs of the Company are managed under the direction of
the Company's Board. The Board monitors the overall performance of the Company
and oversees strategic planning. The Board also monitors the Company's financial
controls and reviews and ratifies the selection and compensation of senior
executives.
During fiscal year ended March 31, 2001, the Board held three meetings and
acted by written consent one time. The Board has two standing committees: the
Audit Committee and the Compensation Committee.
The Audit Committee reviews the Company's internal accounting procedures
and considers and reports to the Board with respect to other auditing and
accounting matters, including the selection of the Company's independent
auditors, the scope of annual audits, fees to be paid to our independent
auditors and the performance of the Company's independent auditors. The Audit
Committee is currently composed of three members: Mr. Gilleran, Mr. Koulos and
Mr. Yang. Both Mr. Gardiner and Mr. Theleen served on the Audit Committee during
a portion of fiscal year ended March 31, 2001; however, on January 11, 2001
(Hong Kong time), Mr. Theleen and Mr. Gardiner resigned from the Audit
Committee. On January 11, 2001 (Hong Kong time), Mr. Koulos was appointed to the
Audit Committee.
The Audit Committee met twice during fiscal year ended March 31, 2001 and
all directors who were members of the committee at the time of such meetings
were present.
The Company's Compensation Committee makes recommendations concerning
salaries and incentive compensation, administers and awards stock options to
employees and consultants under the Company's stock option plans, otherwise
determines compensation levels and performs such other functions regarding
compensation as the Board may delegate. The Compensation Committee is composed
of Mr. Theleen, Mr. Koulos and Mr. Yang. The Compensation Committee met once
during fiscal year ended March 31, 2001 and all members were present.
During the fiscal year ended March 31, 2001 each Board member attended 75%
or more of the aggregate of the meetings of the Board and of the committees on
which he or she served that were held during the period for which he or she was
a director or committee member, respectively, except Ms. Fok.
PROPOSAL 3
APPROVAL OF THE AMENDMENT TO THE 1997 EQUITY INCENTIVE PLAN
In May 1997, the Board adopted, and the Shareholders subsequently approved,
the Company's 1997 Equity Incentive Plan (the "Incentive Plan"), authorizing:
(1) the issuance of 672,500 Shares and (2) the repurchase, by the Company, of
such Shares in accordance with the terms of the Incentive Plan, subject to
compliance with Hong Kong law. The Incentive Plan provides that the Company may,
at its option, issue ADSs in lieu of Shares or convert Shares into ADSs in order
to comply with applicable U.S. securities laws or otherwise.
In May 1998, the Board approved an amendment to the Incentive Plan and the
Shareholders subsequently approved an increase in the number of Shares
authorized for issuance under the Incentive Plan from a total of 672,500 Shares
to a total of 1,320,000 Shares, an increase of 647,500 Shares. In addition, the
Board and the Shareholders authorized the Company to repurchase unvested Shares
thereunder, subject to compliance with Hong Kong law.
In April 2001, the Board approved an amendment to the Incentive Plan,
subject to Shareholder approval, increasing the number of Shares authorized for
issuance under the Incentive Plan from a total of 1,320,000 to a total of
2,200,000 Shares, an increase of 880,000 Shares. As a result of prior grants of
options and subsequent cancellation of certain options under the Incentive Plan
to directors, officers and other employees of the Company, the number of
remaining Shares available for future grants is 449,625 Shares as of March 31,
2001. The Board has determined that this number is insufficient to maintain the
Incentive Plan as an incentive device.
5
9
In July 2001, the Board approved an amendment to the Incentive Plan,
subject to Shareholder approval, authorizing the Company to grant share awards
to a person in any calendar year in an amount up to 100% of the Shares available
for issuance under the Incentive Plan. Currently, the Incentive Plan provides
that the Company may not grant a person share awards covering more than 75,000
Shares in any calendar year, except that an employee may be granted options to
purchase an additional 25,000 Shares in connection with the commencement of
employment.
The Board believes that the availability of award grants under the
Incentive Plan enhances the Company's ability to attract, motivate and retain
the caliber of directors, officers and other employees necessary for the
Company's future growth and success. The Board also believes that increasing the
number of Shares available under the Incentive Plan, as well as increasing the
number of Shares the Company may annually grant to an individual, will help the
Company achieve its goals by keeping its incentive compensation program
competitive with those of comparable companies.
At the Annual General Meeting you are being requested to approve an
amendment to the Incentive Plan (1) to increase the number of Shares reserved
for issuance under the Incentive Plan from 1,320,000 to 2,200,000 and (2) to
authorize the Company to grant share awards to a person in any calendar year in
an amount up to 100% of the Shares available for issuance under the Incentive
Plan.
The affirmative vote of the holders of a majority of the Shares present in
person or represented by proxy and entitled to vote at the meeting will be
required to approve this Proposal 3.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 3.
The following is a summary of the provisions of the Incentive Plan as
amended and restated. References in the summary to the Incentive Plan are to
such plan as amended. Such summary is qualified in its entirety by reference to
the text of the Incentive Plan. If the amendment is not approved by the
Shareholders, the Incentive Plan will continue in effect under the present
terms.
GENERAL
The Incentive Plan provides for, in the case of U.S. persons, incentive
stock options, nonstatutory stock options and Share bonuses. For non-U.S.
persons, awards granted under the Incentive Plan will be only nonstatutory stock
options and Share bonuses. Incentive stock options granted under the Incentive
Plan are intended to qualify as "incentive stock options" within the meaning of
Section 422 of the Code and the regulations promulgated thereunder. Nonstatutory
stock options granted under the Incentive Plan are intended not to qualify as
incentive stock options under the Code. See "Federal Income Tax Information" for
a discussion of the tax treatment of incentive and nonstatutory stock options.
PURPOSE
The Incentive Plan was adopted to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employees, directors and consultants of the Company and its
subsidiaries and to promote the success of the Company's business.
FORMS OF BENEFIT
The Incentive Plan provides for incentive stock options, nonstatutory stock
options and Share bonuses (collectively, "Share Awards").
ADMINISTRATION
The Incentive Plan is administered by the Board unless and until the Board
delegates administration to a committee composed of two or more Board members,
all of the members of which committee may be non-employee directors (as defined
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) and
may also be, in the discretion of the Board, outside directors (as defined under
the Code). If administration is delegated to a committee, such committee will
have, in connection with the administration of
6
10
the Incentive Plan, the powers possessed by the Board, subject, however, to such
resolutions, not inconsistent with the provisions of the Incentive Plan, as may
be adopted from time to time by the Board. The Board or the committee may
delegate to a subcommittee the authority to grant Share Awards to eligible
persons. The Board may abolish a committee or subcommittee at any time and
revest in the Board the administration of the Incentive Plan. The Board has
delegated the administration of the Incentive Plan to the Compensation
Committee. References to the Board include the Compensation Committee.
The Board has the power to determine from time to time which of the persons
eligible under the Incentive Plan shall be granted awards, the type of awards to
be granted, when and how each award shall be granted, to construe and interpret
the Incentive Plan and awards granted under it, and to establish, amend and
revoke rules and regulations for its administration. The Board may correct any
defect in the Incentive Plan or in any award agreement to make the Incentive
Plan fully effective.
SHARES SUBJECT TO THE INCENTIVE PLAN
The maximum aggregate number of Shares that may be awarded under the
Incentive Plan is 2,200,000 Shares, subject to certain adjustments upon changes
in capitalization. The Shares may be authorized but unissued. If options granted
under the Incentive Plan expire or become unexercisable without having been
exercised in full, or are surrendered pursuant to an option exchange program,
the unpurchased Shares that were subject thereto shall become available for
future award or sale under the Incentive Plan (unless the Incentive Plan has
terminated). Shares that have been issued under the Incentive Plan shall not be
returned to, or become available for future distribution under, the Incentive
Plan except for unvested Shares repurchased by the Company at their original
purchase price and subject to compliance with Hong Kong law.
ELIGIBILITY
Incentive stock options may be granted under the Incentive Plan only to
U.S. employees of the Company or any parent or subsidiary of the Company.
Nonstatutory stock options and Share bonuses may be granted only to employees,
directors or consultants.
No person is eligible for the grant of an incentive stock option if, at the
time of grant, such person owns (or is deemed to own pursuant to Section 424(d)
of the Code) Shares possessing more than 10% of the total combined voting power
of all classes of Shares of the Company unless the exercise price of such option
is at least 110% of the fair market value per Share subject to the option at the
date of grant and the option is not exercisable after the expiration of five
years from the date of grant. The maximum Share Awards that a person may be
granted in any calendar year is equal to 100% of the Shares and or/ADSs
available for issuance under the Incentive Plan.
TERM AND TERMINATION
No option is exercisable after the expiration of ten years from the date it
was granted.
In the event an optionee's continuous status as an employee, director or
consultant is terminated, the optionee may exercise his or her option (to the
extent that the optionee was entitled to exercise it at the time of termination)
but only within the earlier of (i) the date three months (or such other date as
set forth in the option agreement) after the termination of the optionee's
continuous status as an employee, director or consultant, or (ii) the expiration
of the term of the option as set forth in the option agreement.
An optionee's option agreement may also provide that if the exercise of the
option following the termination of the optionee's continuous status as an
employee, director, or consultant would result in liability under Section 16(b)
of the Exchange Act, then the option shall terminate on the earlier of (i) the
expiration of the term of the option set forth in the option agreement, or (ii)
the tenth day after the last date on which such exercise would result in such
liability under Section 16(b) of the Exchange Act. Finally, an optionee's option
agreement may also provide that if the exercise of the option following the
termination of the optionee's continuous status as an employee, director or
consultant (other than upon the optionee's death or disability) would be
prohibited at any time solely because the issuance of Shares would violate the
registration
7
11
requirements under the Securities Act of 1933, as amended (the "Securities Act")
then the option shall terminate on the earlier of (i) the expiration of the term
of the option as set forth in the immediately preceding paragraph, or (ii) the
expiration of a period of three months after the termination of the optionee's
continuous status as an employee, director or consultant during which the
exercise of the option would not be in violation of such registration
requirements.
In the event an optionee's continuous status as an employee, director or
consultant terminates as a result of the optionee's death or disability, the
optionee (or such optionee's estate, heirs or beneficiaries) may exercise his or
her option, but only within the period ending on the earlier of (i) 12 months
following such termination or (ii) the expiration of the term of the option as
set forth in the option agreement.
EXERCISE/PURCHASE PRICE
The exercise price of incentive stock options under the Incentive Plan
shall be no less than 100% of the fair market value per Share on the date of
grant; provided, however, the exercise price of incentive stock options granted
to an employee of the Company, who at the time of the grant of such incentive
stock options, owns Shares representing more than 10% of the voting power of all
classes of Shares of the Company or any Parent or Subsidiary, shall be no less
than 110% of the fair market value per Share on the date of grant, and the term
of the option will not exceed five years from the date of grant. The exercise
price of nonstatutory stock options under the Incentive Plan shall be no less
than 100% of the fair market value per Share on the date of grant.
CONSIDERATION
The exercise price of options granted under the Incentive Plan may be paid
to the extent permitted by applicable statutes and regulations either (a) in
cash (or check) at the time the option is exercised or (b) at the discretion of
the Board, at the time of the grant of the option, (i) by delivery to the
Company of other Shares of the Company, (ii) according to a deferred payment or
other arrangement subject to the terms of the Incentive Plan, or (iii) in any
other form of legal consideration that may be acceptable to the Board.
TRANSFERABILITY
An incentive stock option shall not be transferable except by will or by
the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the incentive stock option is granted only by
such person. A Share bonus shall not be transferable except by will or by the
laws of descent and distribution or pursuant to a domestic relations order. A
nonstatutory stock option shall be transferable only to the extent specifically
provided for in the option agreement evidencing the nonstatutory stock option,
provided that if the nonstatutory stock option agreement does not provide for
transferability, then the option is not transferable except by will or by the
laws of descent and distribution or pursuant to a domestic relations order. An
award holder may designate a beneficiary who may exercise his or her award after
death.
VESTING
The total number of Shares subject to an option may, but need not, be
allotted in periodic installments. The option agreement may provide that from
time to time during each of such installment periods, the option may become
exercisable ("vest") with respect to some or all of the Shares allotted to that
period, and may be exercised with respect to some or all of the Shares allotted
to such period and/or any prior period as to which the option became vested but
was not fully exercised. The option may be subject to such other terms and
conditions on the time or times when it may be exercised (which may be based on
performance or other criteria) as the Board may deem appropriate.
Share bonuses granted under the Incentive Plan may, but need not, be
subject to a repurchase option in favor of the Company, subject to compliance
with Hong Kong law, in accordance with a vesting schedule determined by the
Board.
8
12
CANCELLATION AND REGRANT
In the event of a decline in the fair market value of the Shares, the Board
may, at any time, replace one or more outstanding options with new options with
a lower exercise price. To the extent required by Section 162(m), a repriced
option is deemed canceled and a new option granted. Both the canceled and new
options are counted toward the per-person Share limitation.
ADJUSTMENTS UPON CHANGES IN SHARES
If any change is made in the Shares subject to the Incentive Plan, or
subject to any Share Award, without receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, Share dividend, dividend in property other than cash, Share
split, liquidating dividend, combination of Shares, exchange of Shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the class(es) and maximum number of Shares
subject to the Incentive Plan, the maximum annual award applicable under the
Incentive Plan and the class(es) and number of Shares and price per Share
subject to outstanding Share Awards will be appropriately adjusted. Such
adjustments shall be made by the Board or committee(s) delegated by the Board to
administer the Incentive Plan and shall be final, binding and conclusive.
In the event of a merger, consolidation, liquidation, dissolution or the
sale of substantially all of the Company's assets or a reverse merger in which
the Company is the surviving corporation (but the Shares of the Company
outstanding immediately preceding the merger are converted by virtue of the
merger into other property), any surviving or acquiring corporation shall assume
any Share Awards outstanding under the Incentive Plan or shall substitute
similar awards for those outstanding under the Incentive Plan. In the event a
surviving or acquiring corporation refuses to assume such Share Awards or
substitute similar awards, then, with respect to Share Awards held by persons
then performing services as employees, directors or consultants, the time during
which such Share Awards may vest and be exercised shall be accelerated prior to
completion of such transaction and such Share Awards shall be terminated if not
exercised prior to such transaction.
AMENDMENT TO THE INCENTIVE PLAN
The Board at any time, and from time to time, may amend the Incentive Plan.
However, no amendment shall be effective unless approved by the Shareholders of
the Company, to the extent Shareholder approval is necessary for the Incentive
Plan to satisfy the requirements of Section 422 of the Code, to comply with the
requirements of Rule 16b-3 of the Exchange Act or any NASDAQ or other securities
exchange listing requirements or the laws of Hong Kong. The Board may in its
sole discretion submit any other amendment to the Incentive Plan for Shareholder
approval.
Rights and obligations under any Share Award granted prior to an amendment
to the Incentive Plan may not be impaired by any amendment without the prior
written consent of the affected participant.
TERMINATION OR SUSPENSION OF THE INCENTIVE PLAN
The Board may suspend or terminate the Incentive Plan at any time. Unless
sooner terminated, the Incentive Plan shall terminate ten years from the date
the Plan is adopted by the Board or approved by the Shareholders of the Company,
whichever is earlier. No Share Awards may be granted under the Incentive Plan
while the Incentive Plan is suspended or after it is terminated.
Rights and obligations under any Share Award may not be impaired by
suspension or termination of the Incentive Plan without the prior written
consent of the affected participant.
HONG KONG INCOME TAX INFORMATION
Any gain realized by the exercise of a stock option or the receipt of a
Share bonus will be subject to salaries tax in Hong Kong. Salaries tax is a tax
upon emoluments and benefits received by a person as a consequence of employment
with, or holding an office with, a company. The current effective maximum rate
of such taxation is 15%. The gain in respect of the exercise of an option is
defined as the difference between
9
13
the amount that a person might reasonably expect to obtain for itself in the
open market at the time of the acquisition of the stock in question, and the
value of the consideration given in respect of the exercise. Salaries tax is
only chargeable where the source of such gain derives from Hong Kong. The source
of gain is determined by reference to the source of the employee's salary.
Therefore, where an option is exercised or a Share bonus is granted to an
officer or an employee who is not engaged under a Hong Kong contract of
employment or Hong Kong contract of service, any gains derived therefrom should
not be subject to salaries tax.
There is currently no tax charge in Hong Kong in respect of the grant of a
stock option. In addition, there is currently no tax charge in Hong Kong in
respect of any capital gain realized upon the subsequent sale of stock
originally acquired pursuant to an option, except as mentioned above.
UNITED STATES FEDERAL INCOME TAX INFORMATION
INCENTIVE STOCK OPTIONS. Incentive stock options under the Incentive Plan
are intended to be eligible for the favorable U.S. federal income tax treatment
accorded "incentive stock options" under the Code.
There generally are no U.S. federal income tax consequences to the optionee
or the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
U.S. alternative minimum tax liability, if any.
If an optionee holds Shares acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the Shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of such
Shares will be capital gain or loss. Generally, if the optionee disposes of the
Shares before the expiration of either of these holding periods (a
"disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
Share's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The optionee's
additional gain, or any loss, upon the disqualifying disposition will be a
capital gain or loss, which will be long-term or short-term depending on how
long the Shares were held. Capital gains currently are generally subject to
lower tax rates than ordinary income. Slightly different rules may apply to
optionees who acquire Shares subject to certain repurchase options or who are
subject to Section 16(b) of the Exchange Act.
To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness and the satisfaction of a tax reporting
obligation) to a corresponding business expense deduction in the tax year in
which the disqualifying disposition occurs.
NONSTATUTORY STOCK OPTIONS. Nonstatutory stock options granted under the
Incentive Plan generally have the following U.S. federal income tax
consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory stock
option, the optionee normally will recognize taxable ordinary income equal to
the excess of the Share's fair market value on the date of exercise over the
option exercise price. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Generally, the Company will be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the optionee. Upon disposition of the Shares, the optionee will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such Shares plus any amount recognized as ordinary
income upon exercise of the option. Such gain or loss will be long-term or
short-term depending on how long the Shares were held. Slightly different rules
may apply to optionees who acquire Shares subject to certain repurchase options
or who are subject to Section 16(b) of the Exchange Act.
10
14
SHARE BONUSES. Share bonuses granted under the Incentive Plan generally
have the following U.S. federal income tax consequences:
Upon acquisition of the Shares, the recipient normally will recognize
taxable ordinary income equal to the excess of the Share's fair market value
over the purchase price, if any. However, to the extent the Shares are subject
to certain types of vesting restrictions, the taxable event will be delayed
until the vesting restrictions lapse unless the recipient elects to be taxed on
receipt of the Shares. With respect to employees, the Company is generally
required to withhold from regular wages or supplemental wage payments an amount
based on the ordinary income recognized. Generally, the Company will be entitled
to a business expense deduction equal to the taxable ordinary income realized by
the recipient. Upon disposition of the Shares, the recipient will recognize a
capital gain or loss equal to the difference between the selling price and the
sum of the amount paid for such Shares plus any amount recognized as ordinary
income upon acquisition (or vesting) of the Shares. Such gain or loss will be
long-term or short-term depending on how long the shares were held. Slightly
different rules may apply to recipients who acquire Shares subject to certain
repurchase options or who are subject to Section 16(b) of the Exchange Act.
POTENTIAL LIMITATIONS ON COMPANY DEDUCTIONS. Code Section 162(m) denies a
deduction to any publicly held corporation for compensation paid to certain
employees in a taxable year to the extent that compensation exceeds $1 million
for a covered employee. It is possible that compensation attributable to Share
Awards granted in the future under the Incentive Plan, when combined with all
other types of compensation received by a covered employee from the Company, may
cause this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m), compensation
attributable to stock options will qualify as performance-based compensation,
provided that the option is granted by a compensation committee comprised solely
of "outside directors" and either: (i) the plan contains a per-employee
limitation on the number of Shares for which options may be granted during a
specified period, the per-employee limitation is approved by the Shareholders,
and the exercise price of the option is no less than the fair market value of
the Shares on the date of grant; or (ii) the option is granted (or exercisable)
only upon the achievement (as certified in writing by the compensation
committee) of an objective performance goal established in writing by the
compensation committee while the outcome is substantially uncertain, and the
option is approved by Shareholders. Share bonuses qualify as performance-based
compensation under these Treasury regulations only if: (i) the award is granted
by a compensation committee comprised solely of "outside directors"; (ii) the
award is granted (or exercisable) only upon the achievement of an objective
performance goal established in writing by the compensation committee while the
outcome is substantially uncertain; (iii) the compensation committee certifies
in writing prior to the granting (or exercisability) of the award that the
performance goal has been satisfied; and (iv) prior to the granting (or
exercisability) of the award, Shareholders have approved the material terms of
the award (including the class of employees eligible for such award, the
business criteria on which the performance goal is based, and the maximum amount
(or formula used to calculate the amount) payable upon attainment of the
performance goal).
11
15
PROPOSAL 4
AUTHORIZATION OF BOARD TO ISSUE ALL OR PART OF THE AUTHORIZED BUT UNISSUED
SHARES OF THE COMPANY IN SUCH MANNER AND TO SUCH PERSONS AS THEY SHALL IN THEIR
ABSOLUTE DISCRETION DEEM FIT, SUCH AUTHORIZATION TO LAPSE AT THE COMPANY'S NEXT
ANNUAL MEETING.
Unlike the laws of most states of the United States, the Companies
Ordinance of Hong Kong (the "Companies Ordinance") generally prohibits a
corporation from issuing additional shares of its capital stock without the
approval of its shareholders (unless the issue is pro rata to its existing
shareholders). However, the Companies Ordinance also provides that a
corporation's board of directors may issue authorized but unissued shares of
that corporation at such time and in such a manner as the board of directors of
the corporation may, in its discretion, deem fit, if the shareholders give
general authorization to the board of directors to do so. If such authorization
is provided, the corporation can avoid calling an extraordinary general meeting
each time it wishes to issue shares. Such general authorization automatically
lapses at the corporation's next annual general meeting.
Accordingly, you are requested in this Proposal 4 to authorize the Board to
issue all or part of the authorized and unissued Shares, subject to Section 57B
of the Companies Ordinance, in such manner and to such persons as the Board may
in its absolute discretion deem fit.
The Board recommends that the unissued Shares of the Company be available
to the Board for issuance in their discretion in order to provide additional
flexibility to use its capital stock for business, investment and financial
purposes in the future. If this Proposal 4 is approved, the additional Shares
may be issued, without further Shareholder approval, for any purpose recommended
by the Board including, without limitation, raising capital, providing equity
incentives to employees, officers or directors, establishing strategic
relationships with other companies and expanding the Company's business or
product lines through the acquisition of other businesses or products.
The affirmative vote of the holders of a majority of the Shares present in
person or represented by proxy and entitled to vote at the meeting will be
required to approve this Proposal 4.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 4.
PROPOSAL 5
RE-APPOINTMENT OF THE SELECTION OF INDEPENDENT AUDITORS
The Board recommends that Arthur Andersen & Co be re-appointed as the
Company's independent auditors for the fiscal year ending March 31, 2002,
subject to Shareholder ratification. Arthur Andersen & Co has audited the
Company's financial statements since 1983. Representatives of Arthur Andersen &
Co are expected to be present at the Annual General Meeting, will have an
opportunity to make a statement if they so desire, and will be available to
respond to appropriate questions.
The affirmative vote of the holders of a majority of the Shares present in
person or represented by proxy and entitled to vote at the meeting will be
required to approve this Proposal 5.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF PROPOSAL 5.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth beneficial ownership of the Company's
outstanding Shares as of May 2, 2001 by: (1) each person known by the Company to
own beneficially more than 5% of the outstanding Shares, (2) each member of the
Board of Directors, (3) the Company's Chief Executive Officer and its other four
most highly compensated executive officers and (4) the executive officers,
directors and nominees for director of the Company as a group.
12
16
Information with respect to beneficial ownership is based upon information
furnished by each director, officer or holder or contained in filings made with
the Securities and Exchange Commission ("SEC"). Unless otherwise indicated in
the footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the Shareholders named in this
table has sole voting and investment power with respect to the Shares indicated.
Except as set forth below, the business address of each named individual is that
of the Company.
SHARES PERCENTAGE OF
BENEFICIALLY SHARES
NAME OF BENEFICIAL OWNER OWNED OUTSTANDING(1)
------------------------ ------------ --------------
ZIC Holdings Limited(2)........................... 2,611,111 29.6
HYP Holdings Limited(3)............................ 492,713 5.6
Heartland Advisors, Inc.(4)....................... 1,620,500 18.3
Gruber & McBaine Capital Management LLC(5)........ 758,900 8.6
Advent International Corporation(6)............... 709,095 8.0
Alexander M.K. Ngan(7)(8)......................... 418,000 4.7
Feather S.Y. Fok.................................. -- --
John H. Dunkel.................................... -- --
Trevor Dyer....................................... -- --
George Chen....................................... -- --
Peter A.J. Gardiner(8)............................ 120,000 1.4
James E. Gilleran(8).............................. 30,000 *
Christopher Guest................................. -- --
Leo Paul Koulos(8)................................ 32,000 *
Gordon L.M. Seow(8)............................... 27,500 *
Robert A. Theleen(7).............................. 4,000 *
Victor Yang(8).................................... 20,000 *
All executive officers, directors and nominees for
director as a group (17 persons)(8)............. 660,875 7.5
- ---------------
* Less than 1%
(1) Based on 8,834,125 Shares outstanding on May 2, 2001.
(2) The address of ZIC Holdings Limited ("ZIC") is c/o Maples & Calder, P.O. Box
309, Ugland House, South Church Street, Grand Cayman, Cayman Island. The
ChinaVest Funds (described below in Note 7) own a majority of the voting
securities of ZIC and therefore may be deemed to be the beneficial owner of
the Shares directly owned by ZIC.
(3) The address of HYP Holdings Limited ("HYP") is c/o Mapes & Calder, P.O. Box
309, Ugland House, South Church Street, Grand Cayman, Cayman Island. The
ChinaVest Funds (described below in Note 7) own a majority of the voting
securities of HYP and therefore may be deemed to be the beneficial owner of
the Shares directly owned by HYP.
(4) Based on the Form 13F filed May 11, 2001 by Heartland Advisors, Inc. The
address of Heartland Advisors, Inc. is 789 North Water Street, Milwaukee,
Wisconsin 53202.
(5) Based on a Schedule 13G jointly filed on June 29, 2001, Gruber & McBaine
Capital Management LLC ("GMCM"), Jon D. Gruber ("Gruber"), J. Patterson
McBaine ("McBaine"), Thomas O. Lloyd-Butler ("Lloyd-Butler") and Eric B.
Swergold ("Swergold") beneficially own and have shared voting power with
respect to 758,900 Shares. Pursuant to the Schedule 13G, Gruber also has
sole voting authority for an additional 122,2000 Shares, and McBaine also
has sole voting authority for an additional 94,100 Shares. GMCM is a
registered investment advisor. Gruber and McBaine are managers, members and
portfolio managers of GMCM. Lloyd-Buter and Swergold are members and
portfolio managers of GMCM. The address for GMCM, Gruber, McBaine,
Lloyd-Butler and Swergold is 50 Osgood Place, San Francisco, California
94133.
13
17
(6) Includes 511,228 Shares held indirectly as a shareholder of ZIC, and such
Shares may be deemed to be beneficially owned by ZIC. Also include 197,867
Shares held indirectly as a shareholder of HYP, and such Shares may be
deemed to be beneficially owned by HYP. Based on a Schedule 13D/A filed on
April 8, 1998, the following table sets forth the aggregate number of Shares
beneficially owned by the following Advent funds:
ENTITY NUMBER OF SHARES
------ ----------------
Advent Global GECC Limited Partnership...................... 64,683
-------
Advent Global Management Limited Partnership................ 64,683
Advent Asia/Pacific Fund Limited Partnership................ 82,759
Asia/Pacific Special Situations Fund Limited Partnership.... 461,615
Global Private Equity II Limited Partnership................ 86,191
Global Private Equity II PGGM Limited Partnership........... 10,823
-------
Advent International Limited Partnership.................... 706,071
Advent International Investors II Limited Partnership....... 3,024
-------
Advent International Corporation............................ 709,095
Advent Advisory Corporation ("AIC") is an investment advisory firm. AIC is
the general partner of Advent International Limited Partnership ("AILP")
and Advent International Investors II Limited Partnership. AILP is the
general partner of Advent Asia/Pacific Fund Limited Partnership,
Asia/Pacific Special Situations Fund Limited Partnership, Global Private
Equity II Limited Partnership, and Global Private Equity II -- PGGM Limited
Partnership, which are venture capital investment funds. AILP is also the
general partner of Advent Global Management Limited Partnership ("AGMLP")
which, in turn is the general partner of Advent Global GECC Limited
Partnership, a venture capital investment fund. As such, AIC has the sole
power to vote and dispose of the securities owned by the all of the above
listed funds. The principal business address for the above mentioned
funds is c/o Advent International Corporation, 101 Federal Street, Boston,
Massachusetts 02110.
(7) Excludes 2,611,111 Shares owned by ZIC and 492,713 Shares owned by HYP which
may be deemed to be beneficially owned by the ChinaVest Funds ("ChinaVest").
Based on a Schedule 13D filed on October 2, 1998, ChinaVest consist of
ChinaVest Partners IV, a Delaware limited partnership ("Partners"),
ChinaVest Management Ltd., a Bermuda corporation ("Management"), ChinaVest
IV, L.P., a Delaware limited partnership ("IV"), ChinaVest IV-A, L.P., a
Delaware limited partnership ("IV-A"), and ChinaVest IV-B, a Bermuda limited
partnership ("IV-B"). Partners is the general partner of IV and IV-A, and
Management is the general partner of IV-B. Messrs. Theleen and Ngan are
general partners of Partners. Mr. Ngan and Mr. Theleen disclaim beneficial
ownership of the Shares that may be deemed to be beneficially owned by
ChinaVest, except to the extent they have a pecuniary interest in such
Shares.
(8) Includes: 400,000, 120,000, 30,000, 30,000, 27,500, 20,000, 2,500, 3,125 and
3,750 ADSs issuable upon exercise of options within 60 days after the date
of this table with respect to Mr. Ngan, Mr. Gardiner, Mr. Gilleran, Mr.
Koulos, Mr. Seow, Mr. Yang, Mr. Lai, Mr. Murphy and Mr. Li, respectively.
14
18
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
The Company's employee directors did not receive compensation for their
services for the fiscal year ended March 31, 2001.
The Company does not have a fixed compensation policy for its non-employee
directors. Rather, the Board determines the compensation for the Company's
non-employee directors annually. As compensation for their services for the
fiscal year ended March 31, 2001, Mr. Gilleran, Mr. Koulos, Mr. Seow and Mr.
Yang received a non-qualified stock option to purchase 10,000 Shares. Such
options were fully vested upon grant.
Directors did not receive any other compensation for serving on the Board
or any committee thereof, but were reimbursed for their expenses for each Board
or committee meeting they attended.
COMPENSATION OF EXECUTIVES
The following table sets forth information concerning compensation of the
Company's Chief Executive Officer and the Company's four most highly compensated
executive officers other than the Chief Executive Officer whose salary and bonus
exceeded $100,000 for the years ended March 31, 1999, 2000 and 2001
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
FISCAL --------------------------------------
YEAR OTHER ANNUAL
NAME AND PRINCIPAL POSITION ENDED SALARY($) BONUS($) COMPENSATION($)
--------------------------- ------ --------- -------- ---------------
Alexander M.K. Ngan........... 2001 452,083 64,103 --
President and Chief 2000 455,000 146,532 --
Executive Officer 1999 408,493 82,016 --
Feather S.Y. Fok.............. 2001 210,800 -- --
Chief Financial 2000 205,316 65,626 --
Officer(1) 1999 205,316 48,206 --
Christopher Guest............. 2001 191,616(3) 68,837(3) 1,806(5)
Chief Executive Officer, 2000 124,722(4) 34,345(4) 21,812(4)(5)
Corgi Classics Ltd. 1999 --(6) --(6) --
Trevor Dyer................... 2001 133,852(3) 42,549(3) 87,546(3)(5)
Operations Director, 2000 93,211(4) 21,718(4) 59,231(4)(5)
Corgi Classics Ltd. 1999 --(6) --(6) --
John H. Dunkel................ 2001 152,500 16,856 18,000
Vice President and 2000 59,583 -- --
General Manager, 1999 --(6) --(6) --
Corgi Classics, Inc.
LONG-TERM COMPENSATION
-----------------------------------------------------
AWARDS
---------------------------- PAYOUTS
FISCAL RESTRICTED SECURITIES ----------------------
YEAR STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION ENDED AWARDS($) OPTIONS/SARS(#) PAYOUTS COMPENSATION
--------------------------- ----- --------- --------------- ------- ------------
Alexander M.K. Ngan........... 2001 -- 65,000 -- --
President and Chief 2000 -- -- -- --
Executive Officer 1999 -- 400,000 -- --
Feather S.Y. Fok.............. 2001 -- -- -- --
Chief Financial 2000 -- 10,000(2) -- --
Officer(1) 1999 -- 10,000(2) -- --
Christopher Guest............. 2001 -- 80,000 -- --
Chief Executive Officer, 2000 -- -- -- --
Corgi Classics Ltd. 1999 -- -- -- --
Trevor Dyer................... 2001 -- -- -- --
Operations Director, 2000 -- -- -- --
Corgi Classics Ltd. 1999 -- -- -- --
John H. Dunkel................ 2001 -- 20,000 -- --
Vice President and 2000 -- -- -- --
General Manager, 2001 -- -- -- --
Corgi Classics, Inc.
- ---------------
(1) Ms. Fok served as CFO of the Company for the fiscal year ended March 31,
2001. Ms. Fok resigned from her position as CFO as of March 31, 2001.
(2) Ms. Fok voluntarily cancelled these options on February 9, 2001.
(3) Based on an exchange rate of $1.4183 = 1 British pound sterling as of March
31, 2001.
(4) Based on an exchange rate of $1.5922 = 1 British pound sterling as of March
31, 2000. Includes only compensation for the eight months commencing August
1999, the month that Corgi Classics Limited was acquired.
(5) Comprised of automobile allowance, pension contribution, health insurance
premiums and, in respect of Mr. Dyer, residential rent allowance.
(6) The Named Executive Officer was not employed by the Company during the
applicable period.
15
19
COMPENSATION PURSUANT TO PLANS
The following tables show for the fiscal year ended March 31, 2001, certain
information regarding options granted to, exercised by, and held at year end by
the Named Executive Officers.
OPTION GRANTS IN FISCAL YEAR ENDED MARCH 31, 2001
INDIVIDUAL GRANTS
--------------------------- POTENTIAL
NUMBER OF REALIZABLE VALUE AT
SHARES OF PERCENT OF ASSUMED ANNUAL RATES
COMMON TOTAL OF STOCK PRICE
STOCK OPTIONS/SARS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE PER OPTION TERM ($)(4)
OPTIONS EMPLOYEES IN SHARE EXPIRATION --------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH)(3) DATE 5% 10%
---- ---------- -------------- --------- ------------- -------- ---------
Alexander M.K. Ngan..... 65,000 7.2% $1.5625 Jan. 10, 2011 $63,872 $161,864
Feather S.Y. Fok........ -- -- -- -- -- --
Christopher Guest....... 80,000 8.9% $1.5625 Jan. 10, 2011 $78,612 $199,218
Trevor Dyer............. -- -- -- -- -- --
John H. Dunkel.......... 20,000 2.2% $1.5625 Jan. 10, 2011 $19,653 $ 49,804
- ---------------
(1) Such options vest in installments of 25% per year and such vesting period
commences on the date of the grant.
(2) Based on options to purchase 900,000 ADSs granted to employees in fiscal
year ended March 31, 2001.
(3) Represents the fair market value of the ADSs on January 11, 2001 (Hong Kong
time), the date of such grant.
(4) In accordance with Securities and Exchange Commission rules, these columns
show gains that might exist for the respective options, assuming that the
market price of ADSs appreciates from the date of grant over a period of 10
years at the annualized rates of 5% and 10%, respectively. If the stock
price does not increase above the exercise price at the time of exercise,
realized value to the named executives from these options will be zero.
These values do not take into account amounts required to be paid as income
taxes under the Internal Revenue Code, any applicable state laws and any
applicable tax laws promulgated by a foreign jurisdiction.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES FOR FISCAL YEAR ENDED
MARCH 31, 2001
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END(#) FISCAL YEAR-END($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Alexander M.K. Ngan........ -- -- 383,334 81,666 -- $16,250
Feather S.Y. Fok........... -- -- --(1) --(1) -- --
Christopher Guest.......... -- -- -- 80,000 -- $20,000
Trevor Dyer................ -- -- -- -- -- --
John H. Dunkel............. -- -- -- 20,000 -- $ 5,000
- ---------------
(1) This table excludes the 20,000 options granted to Ms. Fok in 1999 and 2000
and cancelled by Ms. Fok in February 2001.
The "Value of Unexercised In-the-Money Options at Fiscal Year End" is based
on a value of $1.8125 per share, the last reported sales price of the ADSs
reported on the Nasdaq National Market on March 30, 2001, less the per share
exercise price, multiplied by the number of Shares and/or ADSs issued upon
exercise of the option.
16
20
SERVICE AGREEMENTS
The Company entered into a service agreement dated May 8, 2001 with Mr.
Ngan. The service agreement shall terminate upon the earliest of (1) the Company
or Mr. Ngan giving to the other no less than three months' written notice or (2)
one year from the date thereof. The service agreement provides for an annual
bonus to be determined by the Board.
The Company entered into a service agreement dated October 1, 1998 with Ms.
Fok. Ms. Fok's service agreement terminated on December 31, 2000. Ms. Fok
resigned from her position as Chief Financial Officer of the Company on March
31, 2001.
Corgi entered into service agreements with Christopher Guest and Trevor
Dyer on July 28, 1999. These service agreements have no fixed term. Mr. Guest's
service agreement is terminable by three months notice from Mr. Guest and one
year from Corgi. Mr. Dyer's service agreement is terminable by one month's
notice from Mr. Dyer and six months from Corgi.
Corgi entered into a service agreement with John H. Dunkel on November 15,
1999. The service agreement has no fixed term.
On October 1, 2000, Zindart Limited, a corporation organized under the laws
of Bermuda and an indirect wholly-owned subsidiary of the Company ("Zindart
Bermuda") entered into an employment agreement with Peter Gardiner (Chairman of
the Board of Directors of the Company). The agreement provides that Mr. Gardiner
will serve as the Chief Executive Officer of Zindart Bermuda and perform such
duties as determined by the Board of Directors of the Company for a base salary
of $300,000 per year plus a performance-based annual bonus. Pursuant to the
agreement, the Board of Directors of Zindart Bermuda retains the discretion to
increase Mr. Gardiner's base salary at any time and in any amount as it so
decides in its sole discretion. In addition, effective October 31, 2000, Mr.
Gardiner was granted options to purchase 500,000 ADSs representing 500,000
Shares of the Company, with 120,000 of the ADSs vesting immediately upon the
grant. Of the remaining 380,000 ADSs, one third vests on October 31, 2001 and
the remaining two-thirds vest monthly over the following two year period.
Zindart Bermuda may terminate Mr. Gardiner's employment with or without "cause"
as defined in the agreement. However, if Zindart Bermuda terminates Mr. Gardiner
without "cause," Zindart Bermuda must pay him severance equal to one full year
of his base salary.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to its Articles of Association, the Company may indemnify any
director, officer or auditor of the Company out of assets of the Company against
any liability incurred by him in the performance of his duties or in defending
any proceedings, whether civil or criminal, in which judgment is given in his
favor or which he is acquitted. Provided, however, that no such indemnity shall
apply in respect of liability for negligence, default, breach of duty or breach
of trust in relation to the affairs of the Company.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION(1)
The Company applies a consistent philosophy to compensation for all
employees, including senior management. It is based on the premise that
achievements of the Company result from the coordinated efforts of all
individuals working toward common objectives focused on meeting customer and
shareholder expectations.
The goals of the Company's compensation program are to align compensation
with business objectives and performance while enabling the Company to attract,
retain and reward employees who contribute to the long-term success of the
Company. In all cases, attention is given to fairness in the administration of
- ---------------
(1) This section is not "soliciting material," is not deemed "filed" with the
SEC, and is not incorporated by reference into any of our filings under the
1933 Act or the 1934 Act, whether made before or after the date hereof and
irrespective of any general incorporation language contained in such filing.
17
21
compensation and to assuring that all employees understand the related
performance evaluation and administrative process.
The Company's compensation program for executive officers is based on the
principles described above and it is administered by the Compensation Committee.
The Company's executive compensation is intended to be consistent with
leading companies in the Company's industry while being contingent upon the
Company's achievement of near- and long-term objectives and goals. For the
fiscal year ended March 31, 2001, the principal measures the Compensation
Committee looked to in evaluating the Company's progress towards these
objectives and goals were growth in revenues, net profits and customer
satisfaction. The Company's executive compensation is based on four components,
each of which is intended to serve the overall compensation philosophy.
BASE SALARY
Base salary is targeted toward the middle to the top of the range
established by comparable manufacturing companies in the People's Republic of
China and Hong Kong. Base salaries are reviewed annually to ensure that the
Company's salaries are competitive within the target range.
MERIT INCREASE
Merit increases are designed to encourage management to perform at
consistently high levels. Salaries for executives are reviewed by the
Compensation Committee on an annual basis and may be increased at that time
based on the Compensation Committee's agreement that the individual's overall
contribution to the Company merits recognition. The salary adjustments reflected
in the Summary Compensation Table were also affected, in the case of executive
officers other than the Chief Executive Officer, by the evaluation of individual
contributions to the Company as provided to the Compensation Committee by the
Chief Executive Officer.
BONUSES
Bonuses for executives are intended to be used as an incentive to encourage
management to perform at a high level or to recognize a particular contribution
by an employee or exceptional Company performance. Generally, the higher the
employee's level of job responsibility, the larger the portion of the
individual's compensation package that may be represented by a bonus. As is
customary in Hong Kong and the People's Republic of China, the range of possible
bonus amounts are determined upon commencement of employment. The actual bonus
amount must be approved by the Chief Executive Officer and the Compensation
Committee in the case of executives other than the Chief Executive Officer and
by the Compensation Committee alone in the case of the Chief Executive Officer.
In determining the bonus element of compensation, the Compensation Committee
places particular emphasis on the Company's performance against the management
objectives and goals described above.
STOCK OPTIONS
The Compensation Committee believes that stock ownership by management is
beneficial in aligning management and shareholder interests with respect to
enhancing shareholder value. Stock options are also used to retain executives
and motivate them to improve long-term stock market performance. Stock options
are granted at the prevailing market value and will only have value if the
Company's stock price increases. Generally, stock option grants vest 25% per
year over four years.
The Compensation Committee determines the number of options to be granted
based upon the competitive marketplace, with a particular focus on determining
what level of equity incentive is necessary to retain a particular individual.
Outstanding historical performance by an individual is additionally recognized
through larger than normal option grants.
18
22
CHIEF EXECUTIVE OFFICER
The Compensation Committee uses the same philosophy described above with
respect to other executive officers in setting the compensation for the Chief
Executive Officer.
COMPENSATION COMMITTEE
Leo Paul Koulos, Chairman
Robert A. Theleen
Victor Yang
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Theleen, Mr. Koulos and Mr. Yang served on the Compensation Committee
in fiscal year ended March 31, 2001. No director or executive officer of the
Company serves on the compensation committee of the board of directors of any
company for which Mr. Theleen, Mr. Koulos or Mr. Yang serve as executive
officers or directors.
AUDIT COMMITTEE REPORT(2)
The Audit Committee is comprised of three outside directors, all of whom
are independent under Rule 4200(a)(15) of the National Association of Securities
Dealers' ("NASD") listing standards. In fiscal year ended March 31, 2001, the
Board approved and adopted a written charter, which sets forth the Audit
Committee's duties and responsibilities and reflects new SEC regulations and
NASD rules. A copy of the charter is attached as Attachment A to this Proxy
Statement.
The Audit Committee has reviewed and discussed the Company's audited
financial statements for the fiscal year ended March 31, 2001 with management
and with the Company's independent auditors, Arthur Andersen & Co. The Audit
Committee has discussed with Arthur Andersen & Co the matters required to be
discussed by Statement on Auditing Standards No. 61 relating to the conduct of
the audit. The Audit Committee has received the written disclosures and the
letter from Arthur Andersen & Co required by Independence Standards Board
Standard No. 1, Independence Discussions with Audit Committees, and has
discussed with Arthur Andersen & Co their independence. The Audit Committee has
considered the compatibility of the provision of non-audit services with
maintaining the auditor's independence.
Based on the Audit Committee's review of the audited financial statements
and the review and discussions described in the foregoing paragraph, the Audit
Committee recommended to the Board that the audited financial statements for the
fiscal year ended March 31, 2001 be included in the Company's Annual Report on
Form 10-K for the fiscal year ended March 31, 2001 for filing with the SEC.
AUDIT COMMITTEE
James Gilleran, Chairman
Leo Paul Koulos
Victor Yang
- ---------------
(2) This section is not "soliciting material," is not deemed "filed" with the
SEC, and is not incorporated by reference into any of our filings under the
1933 Act or the 1934 Act, whether made before or after the date hereof and
irrespective of any general incorporation language contained in such filing.
19
23
PERFORMANCE MEASUREMENT COMPARISON(3)
Set forth below is a line graph comparing (a) the cumulative total
shareholder return of an investment of $100 in cash on March 4, 1997, the date
of the Company's initial public offering of ADSs, in the Company's ADSs, based
on its initial public offering price, with (b) the Standard & Poor's Small Cap
600 Index and (c) the Russell 2000 Index. All values assume reinvestment of the
full amount of all dividends and are calculated as of March 31 of each year.
This graph assumes that the value of the investment in the Company's Shares was
$100 on March 4, 1997 and was $100 on February 28, 1997 for each of the
comparison groups. The performance on the following graph is not necessarily
indicative of future stock price performance.
[PERFORMANCE GRAPH]
ZINDART LIMITED S & P SMALL CAP 600 RUSSELL 2000
--------------- ------------------- ------------
3/4/97 100.00 100.00 100.00
3/97 92.50 94.80 95.10
3/98 143.00 139.00 134.00
3/99 56.30 111.00 110.00
3/00 43.80 144.00 145.00
3/01 18.13 142.00 125.00
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Since April 1, 2001, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are to be
a party in which the amount involved exceeds $60,000 and in which any director,
executive officer or holder of more than 5% of our common stock, or an immediate
family member of any of the foregoing, had or will have a direct or indirect
interest other than compensation arrangements, which are described above and the
transactions described below.
OTHER TRANSACTIONS
During fiscal year ended March 31, 2001, the Company paid ChinaVest a fee
of $250,000 for management services.
The Company intends that all future transactions with affiliates will be
approved by a committee of disinterested directors.
- ---------------
(3) This section is not "soliciting material," is not deemed "filed" with the
SEC, and is not incorporated by reference into any of our filings under the
1933 Act or the 1934 Act, whether made before or after the date hereof and
irrespective of any general incorporation language contained in such filing.
20
24
OTHER MATTERS
The Board knows of no other matters that will be presented for
consideration at the Annual General Meeting. If any other matters are properly
brought before the meetings, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors,
Alexander M.K. Ngan
President and Chief Executive Officer
August [3], 2001
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 2001 IS AVAILABLE
WITHOUT CHARGE UPON WRITTEN REQUEST TO: SECRETARY, ZINDART LIMITED, FLAT C & D,
25/F BLOCK 1, TAI PING INDUSTRIAL CENTRE, 57 TING KOK ROAD, TAI PO, NEW
TERRITORIES, HONG KONG S.A.R., CHINA.
21
25
ATTACHMENT A
ZINDART LIMITED
AUDIT COMMITTEE CHARTER
I. ORGANIZATION
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of Zindart Limited (the "Corporation") shall be comprised of three or
more directors as determined from time to time by resolution of the Board.
Consistent with the appointment of other Board committees, the members of the
Committee shall be elected by the Board at the annual organizational meeting of
the Board or at such other time as may be determined by the Board. The Chairman
of the Committee shall be designated by the Board, provided that if the Board
does not so designate a Chairman, the members of the Committee, by majority
vote, may designate a Chairman. The presence in person or by telephone of a
majority of the Committee's members shall constitute a quorum for any meeting of
the Committee. All actions of the Committee will require the vote of a majority
of its members present at a meeting of the Committee at which a quorum is
present.
II. STATEMENT OF POLICY
The Committee shall provide assistance to the Board in fulfilling its legal
and fiduciary obligations relating to accounting, auditing, financial reporting
and internal control practices of the Corporation. The Committee shall oversee
the audit efforts of the Corporation's independent accountants and internal
auditors and, in that regard, shall take such actions as it may deem necessary
to satisfy itself that the Corporation's auditors are independent of management.
It is the objective of the Committee to maintain free and open means of
communication among the directors, the independent auditors, the internal
auditors, and the financial and senior management of the corporation.
III. COMPOSITION OF THE COMMITTEE
(1) Each member of the Committee shall be an "independent" director within
the meaning of the Nasdaq Marketplace rules and, as such, shall be free from any
relationship that may interfere with the exercise of his or her independent
judgment as a member of the Committee. Notwithstanding the foregoing, as
permitted by the Nasdaq Marketplace rules, under exceptional and limited
circumstances, one director who does not meet certain of the criteria for
"independence" may be appointed to the Committee if the Board determines in its
business judgment that membership on the Committee by such person is required by
the best interests of the Corporation and its stockholders and the Corporation
discloses in the annual proxy statement the nature of such person's relationship
and the reasons for the Board's determination. All members of the Committee
shall be financially literate at the time of their election to the Committee or
shall become financially literate within a reasonable period of time after their
appointment to the Committee. "Financial literacy" shall be determined by the
Board in the exercise of its business judgment, and shall include a working
familiarity with basic finance and accounting practices and an ability to read
and understand fundamental financial statements. At least one member of the
Committee shall have past employment experience in finance or accounting,
requisite professional certification in accounting or any other comparable
experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or senior officer with financial oversight responsibilities.
Committee members, if they or the Board deem it appropriate, may enhance their
understanding of finance and accounting by participating in educational programs
conducted by the Corporation or an outside consultant or firm.
A-1
26
(2) Upon any changes in the composition of the Committee and otherwise
approximately once each year, the Committee shall ensure that the Corporation
provides the Nasdaq Stock Market, Inc., to the extent required by the Nasdaq
Marketplace rules, with written confirmation regarding:
(A) Any determination that the Board has made regarding the
independence of the Committee members;
(B) The financial literacy of the Committee members;
(C) The determination that at least one of the Committee members has
accounting or related financial management expertise; and
(D) The annual review and reassessment of the adequacy of the
Committee's charter.
IV. MEETINGS OF THE COMMITTEE
The Committee shall meet twice per year and at any other times as it shall
determine is necessary to carry out its duties and responsibilities. In
addition, the Committee should meet at least once a year with the Corporation's
qualified accountant, senior management and independent auditors.
V. RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its policies
and procedures should remain flexible, in order to best react to changing
circumstances or conditions and to ensure to the Board that the accounting and
financial reporting practices of the Corporation are in accordance with all
requirements and are of the highest quality. In carrying out these
responsibilities, the Committee will:
(A) Review and reassess the Committee's charter annually.
(B) Review and recommend to the Board the firm of independent auditors
to be selected to audit the books and accounts of the Corporation and its
divisions and subsidiaries for each fiscal year.
(C) Meet with the independent auditors and financial management of the
Corporation to review the annual audit plan of the independent auditors
including the scope of the proposed audit and the audit procedures to be
utilized and at the conclusion thereof review the results of such audit,
including any comments or recommendations of the independent auditors.
(D) Review with the independent auditors and the Corporation's
financial and accounting personnel the adequacy and effectiveness of the
accounting and internal financial controls of the Corporation, and elicit
any recommendations for the improvement of such internal control procedures
or particular areas where new or revised controls or procedures are
desirable.
(E) Review, in draft form, the Corporation's Form 10-K, annual report
and accounts before submission to the Board and provide advice and comments
focusing on:
(i) any changes in accounting policies and practices;
(ii) major judgmental areas;
(iii) significant adjustments resulting from audits;
(iv) unusual transactions;
(v) accounting policies relating to significant financial
statement items;
(vi) compliance with accounting standards; and
(vii) compliance with stock exchange and legal requirements.
(F) In relation to the above, the Committee should consider any
significant or unusual items that are, or may need to be, reflected in such
reports and accounts and must give due consideration to any matters that
have been raised by the Corporation's qualified accountant, compliance
officer or auditors.
A-2
27
(G) Review the Corporation's Form 10-Qs and earnings press releases
prior to their filing or prior to the release of earnings. The Chairman of
the Committee may represent the entire committee for purposes of this
review and he will contact other committee members at his discretion.
(H) Review the Corporation's internal audit plan and procedures, and
the independence, adequacy and effectiveness of such audit plan and
procedures.
(I) Consider and review with management and the internal auditors the
significant findings and any difficulties encountered in the course of
their audits during the year and management's responses thereto.
(J) Provide sufficient opportunity for the internal and independent
auditors to meet with the members of the Committee without members of
management present. Among the items to be discussed in these meetings are
the independent auditors' evaluation of the Corporation's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of the audit.
(K) Oversee the independence of the Corporation's independent auditors
by, among other things:
(i) requiring the independent auditors to deliver to the Committee
on a periodic basis a formal written statement delineating all
relationships between the independent auditors and the Corporation;
(ii) actively engaging in a dialogue with the independent auditors
with respect to any disclosed relationships or services that may impact
the objectivity and independence of the independent auditors and
recommending that the Board take appropriate action to satisfy itself of
the auditors' independence; and
(iii) ensuring the Committee's receipt from the Corporation's
independent auditors of the written disclosures and the letter required
by Independence Standards Board Standard No. 1, as may be modified or
supplemented.
(L) Submit the minutes of all meetings of the Committee to, or discuss
the matters discussed at each Committee meeting with, the Board.
(M) Investigate any matter brought to its attention within the scope
of the Committee's duties, with the power to retain outside counsel for
this purpose if, in its judgment, that is appropriate.
VI. AUTHORITY
(1) The Committee is authorized by the Board to investigate any activity
within the scope of responsibilities set forth in the Committee's charter. The
Committee is authorized to seek any information it requires from any employee of
the Corporation and all employees are directed to co-operate with any request
made by the Committee. The Committee shall have full and unlimited access to all
books and accounts of the Corporation and any employees, consultants and
advisers it may, from time to time, which to consult.
(2) The Committee is authorized by the Board to obtain outside accounting,
legal or other independent professional advice and to secure the attendance of
outsiders with relevant experience and expertise if it considers this necessary.
(3) The Committee is authorized by the Board to select, evaluate and, where
appropriate, replace (subject to any required shareholders' approval) the
Corporation's independent auditors.
*****************
While the Committee has the duties and responsibilities set forth in this
charter, the Committee is not responsible for planning or conducting the audit
or for determining whether the Corporation's financial statements are complete
and accurate and are in accordance with generally accepted accounting
principles. Similarly, it is not the responsibility of the Committee to resolve
disagreements, if any, between management and the independent auditors or to
ensure that the Corporation complies with all laws and regulations.
A-3
28
ZINDART LIMITED
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL GENERAL MEETING OF
SHAREHOLDERS TO BE HELD ON SEPTEMBER 6, 2001
The undersigned, being a shareholder of Zindart Limited (the "Company"), hereby
appoints Robert A. Theleen or ________________________________(*), as attorney
and proxy of the undersigned, with full power of substitution, to vote all of
the shares of the Company that the undersigned may be entitled to vote at the
Annual General Meeting of Shareholders of the Company to be held at the Mandarin
Oriental Hotel located at 222 Sansome Street, San Francisco, California, United
States of America on Wednesday, September 6, 2001 at 2:00 p.m. local time, and
at any and all postponements, continuations and adjournments thereof, with all
powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
(*) If a proxy other than Robert A. Theleen is preferred, strike out this
name and insert the name of the desired proxy in the space provided.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 2 AND FOR PROPOSALS 1, 3, 4 AND 5, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSAL 1.
Proposal 1: To adopt the audited financial statements and the
reports of the directors and auditors of the Company
for the fiscal year ended March 31, 2001.
______ FOR ______ AGAINST ______ ABSTAIN
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
Proposal 2: To elect the following nominees for director until
the next Annual General Meeting of Shareholders and
until their successors are elected.
Mr. Peter A.J. Gardiner FOR _____ AGAINST _____ ABSTAIN _____
Mr. Robert A. Theleen FOR _____ AGAINST _____ ABSTAIN _____
Mr. Alexander M.K. Ngan FOR _____ AGAINST _____ ABSTAIN _____
Ms. Feather S.Y. Fok FOR _____ AGAINST _____ ABSTAIN _____
Mr. George Chen FOR _____ AGAINST _____ ABSTAIN _____
Mr. James E. Gilleran FOR _____ AGAINST _____ ABSTAIN _____
Mr. Christopher Guest FOR _____ AGAINST _____ ABSTAIN _____
Mr. Leo Paul Koulos FOR _____ AGAINST _____ ABSTAIN _____
Mr. Gordon L. M. Seow FOR _____ AGAINST _____ ABSTAIN _____
Mr. Victor Yang FOR _____ AGAINST _____ ABSTAIN _____
29
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 3, 4 AND 5.
Proposal 3: To approve an amendment to the Company's 1997
Equity Incentive Plan, as amended (1) to increase the
aggregate number of Ordinary Shares and/or American
Depositary Shares ("ADSs") authorized for issuance
under such plan from 1,320,000 to 2,200,000, an
increase of 880,000 Ordinary Shares and/or ADSs and
(2) to increase the maximum share awards that may be
granted to an individual in any calendar year from
75,000 Ordinary Shares and/or ADSs to 100% of the
Ordinary Shares and/or ADSs available for issuance
under such plan.
______FOR ______AGAINST ______ABSTAIN
Proposal 4: To authorize the Board to issue all or part of the
authorized but unissued Ordinary Shares of the
Company, in such manner and to such persons as the
Board shall deem fit in its absolute discretion, such
authorization to lapse at the Company's next annual
general meeting.
______FOR ______AGAINST ______ABSTAIN
Proposal 5: To re-appoint Arthur Andersen & Co as independent
auditors of the Company for the fiscal year ending
March 31, 2002.
______FOR ______AGAINST ______ABSTAIN
Dated: __________, 2001 ______________________________________________
SIGNATURE(S)
Please sign exactly as your name appears
hereon. If the stock is registered in the
names of two or more persons, each should
sign. Executors, administrators, trustees,
guardians and attorneys-in-fact should add
their titles. If signer is a corporation,
please give full corporate name and have a
duly authorized officer sign, stating title.
If signer is a partnership, please sign in
partnership name by authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED POSTAGE-PREPAID
RETURN ENVELOPE.