SCHEDULE 14A
(Rule 14a-101)
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 to appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the commission Only
(as Permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHINAB2BSOURCING.COM, INC.
(FORMERLY INTERNATIONAL SMART SOURCING, INC.)
(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)(4) and
O-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 O-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:
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 O-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:
CHINAB2BSOURCING.COM, INC.
(FORMERLY INTERNATIONAL SMART SOURCING, INC.)
320 Broad Hollow Road
Farmingdale, NY 11735
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON August 15, 2001
NOTICE IS HEREBY GIVEN that the 2001 Annual Meeting of Stockholders (the "Annual
Meeting") of ChinaB2Bsourcing.com, Inc. (Formerly International Smart Sourcing,
Inc.) (the "Company") will be held on Wednesday, August 15 at 9:00 a.m. New York
time at Koerner Silberberg & Weiner LLP 112 Madison Avenue, 3rd Floor, New York,
New York, for the following purposes :
1. To elect six directors of the Company to serve until the 2002 Annual
Meeting of Stockholders and until their respective successors are duly
elected and qualified.
2. To consider and act upon a proposal to amend the Certificate of
Incorporation of the Company to change the name of the Company from
ChinaB2Bsourcing.com.Inc. to International Smart Sourcing, Inc.
3. To consider and act upon any other matters that may properly be
brought before the Annual Meeting and at any adjournments or
postponements thereof.
Any action may be taken on the foregoing matters at the Annual Meeting on the
date specified above, or on any date or dates to which, by original or later
adjournment, the Annual Meeting may be adjourned, or to which the Annual Meeting
may be postponed.
The Board of Directors has fixed the close of business on July 6, 2001 as the
record date for determining the stockholders entitled to notice of and to vote
at the Annual Meeting and at any adjournments or postponements thereof. Only
stockholders of record of the Common Stock at the close of business on that date
will be entitled to notice of and to vote at the Annual Meeting and at any
adjournments or postponements thereof.
You are requested to fill in and sign the enclosed form of proxy, which is being
solicited by the Board of Directors of the Company, and to mail it promptly in
the enclosed postage-prepaid envelope. Any proxy may be revoked by delivery of a
later dated proxy. Stockholders of record who attend the Annual Meeting may vote
in person, even if they have previously delivered a signed proxy.
By Order of the Board of Directors
Harry Goodman
Secretary
Farmingdale, New York
July 5, 2001
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN,
DATE, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE-PREPAID
ENVELOPE PROVIDED. IF YOU ARE A STOCKHOLDER OF RECORD AND YOU ATTEND THE ANNUAL
MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF YOU HAVE PREVIOUSLY
RETURNED YOUR PROXY CARD.
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CHINAB2BSOURCING.COM, INC.
(FORMERLY INTERNATIONAL SMART SOURCING, INC.)
320 Broad Hollow Road
Farmingdale, NY 11735
PROXY STATEMENT
FOR 2001 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON August 15, 2001
July 5, 2001
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of ChinaB2Bsourcing.com, Inc. (Formerly International
Smart Sourcing, Inc. (the "Company")for use at the 2001 Annual Meeting of
Stockholders of the Company to be held on Wednesday, August 15, 2001, and at any
adjournments or postponements thereof (the "Annual Meeting"). At the Annual
Meeting, stockholders will be asked to vote upon the election of six directors
of the Company, to consider and act upon a proposal to amend the Certificate of
Incorporation of the Company (the "Certificate of Incorporation") to change the
name of the Company, and to act upon any other matters properly brought before
them.
This Proxy Statement and the accompanying Notice of Annual Meeting and Proxy
Card are first being sent to stockholders on or about July 27, 2001. The Board
of Directors has fixed the close of business on July 6, 2001 as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting (the "Record Date"). Only stockholders of record of the Company's
common stock, par value $.001 per share (the "Common Stock"), at the close of
business on the Record Date will be entitled to notice of and to vote at the
Annual Meeting. Holders of Common Stock outstanding as of the close of business
on the Record Date will be entitled to one vote for each share held by them.
The presence, in person or by proxy, of holders of at least a majority of the
total number of shares of Common Stock outstanding and entitled to vote is
necessary to constitute a quorum for the transaction of business at the Annual
Meeting. Both abstentions and broker non-votes (as defined below) will be
counted as present in determining the presence of a quorum. A plurality of votes
cast shall be sufficient for the election of directors. Abstentions and broker
non-votes will be disregarded in determining the "votes cast" for purposes of
electing directors and will not affect the election of the candidates receiving
a plurality of votes. The affirmative vote of the holders of a majority of the
shares of Common Stock present or represented and entitled to vote is required
to approve the amendment to the Certificate of Incorporation. Abstentions will
be included in determining the number of shares of Common Stock present or
represented and entitled to vote for purposes of approval of the proposal to
amend the Certificate of Incorporation, and will therefore have the effect of
votes "against" such proposals. Broker non-votes will not be counted in
determining the number of shares of Common Stock present or represented and
entitled to vote to approve the amendment to the Certificate of Incorporation
and will therefore not have the effect of votes either "for" or "against" such
proposals. A "broker non-vote" is a proxy from a broker or other nominee
indicating that such person has not received instructions from the beneficial
owner or other person entitled to vote the shares which are the subject of the
proxy on a particular matter with respect to which the broker or other nominee
does not have discretionary voting power.
Stockholders of the Company are requested to complete, sign, date, and promptly
return the accompanying Proxy Card in the enclosed, postage-prepaid envelope.
Shares represented by a properly executed proxy received prior to the vote at
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the Annual Meeting and not revoked will be voted at the Annual Meeting as
directed on the proxy. If a properly executed proxy is submitted and no
instructions are given, the proxy will be voted FOR the election of the nominees
for director of the Company named in this Proxy Statement and FOR the proposals
to approve the amendment to the Certificate of Incorporation. It is not
anticipated that any matters other than the election of directors and the
amendment to the Certificate of Incorporation will be presented at the Annual
Meeting. If other matters are presented, proxies will be voted in accordance
with the discretion of the proxy holders.
A stockholder of record may revoke a proxy at any time before it has been
exercised by filing a written revocation with the Secretary of the Company at
the address of the Company set forth above; by filing a duly executed proxy
bearing a later date; or by appearing in person and voting by ballot at the
Annual Meeting. Any stockholder of record as of the Record Date attending the
Annual Meeting may vote in person whether or not such stockholder has previously
given a proxy, but the presence (without further action) of a stockholder at the
Annual Meeting will not constitute revocation of a previously given proxy.
The Company's 2000 Annual Report, including audited financial statements for the
fiscal year ended December 29, 2000 ("Fiscal 2000"), is being mailed to
stockholders concurrently with this Proxy Statement. The Annual Report, however,
is not part of the proxy solicitation materials.
PROPOSAL 1: ELECTION OF DIRECTORS
The Board of Directors of the Company currently consists of six members. At the
Annual Meeting, six directors will be elected to serve until the 2002 Annual
Meeting of Stockholders and until their respective successors are duly elected
and qualified. The Board of Directors has nominated Andrew Franzone, David
Kassel, Harry Goodman, Bao-Wen Chen, Carl Seldin Koerner and Mitchell Solomon
(each a "Nominee") to serve as directors. Each of the Nominees is currently
serving as a director of the Company. The Board of Directors anticipates that
each of the Nominees will serve, if elected, as a director. However, if any
Nominee is unable to accept election, the proxies will be voted for the election
of such other person or persons as the Board of Directors may recommend. The
Board of Directors will consider a Nominee for election to the Board of
Directors recommended by a stockholder of record if the stockholder submits the
nomination in compliance with the requirements of the Company's By-laws (the
"By-laws"). See "Other Matters-Stockholder Proposals" for a summary of these
requirements.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NOMINEES.
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Information Regarding the Directors/Nominees
The names, ages, and a description of the business experience, principal
occupation and past employment during the last five years of each of the
Nominees are set forth below.
Name Age Position
Andrew Franzone 63 Chief Executive Officer and President,
Director
David L. Kassel (2) 65 Chairman of the Board of Directors
Harry Goodman 75 Vice President and Secretary, Director
Bao-Wen Chen 33 Director
Carl Seldin Koerner (1)(2) 51 Director
Mitchell Solomon (1)(2) 41 Director
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
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Andrew Franzone served as President of Electronic Hardware Corp., a wholly owned
subsidiary of the Company ("EHC") from 1987 through May 2001. Mr. Franzone has
also served as President of Allen Field Company, Inc.("AFC") since 1984. Mr.
Franzone served as Chairman of the Board of Directors and President of Ackerman
Bodnar Corp., a manufacturer of interior aircraft lighting, from 1974 through
1983.
David L. Kassel founded EHC in 1970. Mr. Kassel has served as Chairman of EHC
since 1975 and President of Compact Disc Packaging Corp., a wholly owned
subsidiary of the Company ("CDP") since 1995. From 1983 until 1995, he was
Chairman of the Board of Directors of American Safety Closure Corp., a company
engaged in the manufacturing of bottle caps. Mr. Kassel has been the Chairman
and principal stockholder of AFC since 1984. Mr. Kassel has been the Chairman of
Memory Protection Devices, Inc., a company engaged in the manufacturing of
devices for the protection of computer memory, since 1987. Mr. Kassel has been a
partner in K&G Realty Associates, a privately held real estate company, since
1978.
Harry Goodman served as Vice President of EHC since 1986. Mr. Goodman served as
President of EHC from 1976 to 1986 and began working as an officer of EHC in
1970. Mr. Goodman has been a partner at K&G Realty Associates since 1978. Mr.
Goodman has served as an officer of AFC since 1984. Mr. Goodman has served as an
officer of Memory Protection Devices, Inc. since 1987.
Bao-Wen Chen joined the Company in 1998 as a director. Ms. Chen currently serves
as the president of B.C. China Business Consulting, Inc., a partner of China
Trade Limited. In 1995, Ms. Chen formed B.C. China Business Consulting,
Inc., a provider of advisory and consulting services to clients engaging in
transactions between U.S. and Chinese companies, and currently serves as its
president. In January 1998, Ms. Chen became a partner of China Trade Limited, a
company comprised of U.S. businessmen, international attorneys and U.S. resident
Chinese nationals formed to assist clients in representation and trade, sales
and distribution and strategic service in transactions between U.S. and Chinese
companies. Since 1992, Ms. Chen has served as Secretary General of the U.S.China
Economics and Trade Promotion Council, a non-profit government trade
organization providing a forum to promote economic exchange and trade between
Chinese and U.S. companies.
Carl Seldin Koerner joined the Company in 1998 as a director. Mr. Koerner has
been a practicing attorney since 1976 and is a managing partner in the law firm
of Koerner Silberberg & Weiner, LLP. Mr. Koerner established Koerner Silberberg
& Weiner, LLP, in 1986 and has served as counsel to the Company since 1976. Mr.
Koerner has served as a principal of Koerner Kronenfeld Partners, LLC, a
production company, since 1996 and has served on the board of directors of ASI
Solutions Incorporated (NASDAQ: ASIS), a human resources outsourcing firm, since
1997.
Mitchell Solomon joined the Company in 1998 as a director. Mr. Solomon has
served as President and director of Eby Electro Inc., a privately held
corporation, since 1993 and serves as President and director of Aspro Technology
Inc. and ECAM Technology Inc., both privately held corporations.
Board Committees
The Board of Directors of the Company has established a compensation committee
(the "Compensation Committee") and an audit committee (the "Audit Committee").
The Compensation Committee, which consists of David L. Kassel and two
non-employee directors, Carl Seldin Koerner and Mitchell Solomon, determines the
salaries and bonuses of the Company's executive officers. The Compensation
Committee also administers the Company's 1998 Stock Option and Grant Plan. Mr.
Kassel, Mr. Koerner, and Mr. Solomon also serve as members of the Audit
Committee. The Audit Committee recommends the appointment of auditors and
oversees the accounting and audit functions of the Company.
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Meetings of the Board
During Fiscal 2000, the Board of Directors met three times. During Fiscal 2000,
each director attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors (held during the period for which such
director served on the Board of Directors) and (ii) the total number of meetings
of all committees of the Board of Directors on which such director served
(during the periods for which such director served on such committee or
committees).
Compensation of Directors
Directors of the Company who are also employees receive no additional
compensation for their service as directors. Non employee Directors of the
Company receive a fee of $ 300 a month for serving on the Board of Directors and
reimbursement of reasonable expenses incurred in attending meetings.
Information Regarding Executive Officers
The names, ages and positions of each of the executive officers of the Company,
as well as a description of their business experience and past employment, are
as set forth below:
Name Age Position
Andrew Franzone 63 Chief Executive Officer and President,
Director
David L. Kassel 65 Chairman of the Board of Directors
Harry Goodman 75 Vice President and Secretary, Director
David Hale 55 Chief Operating Officer
Arthur Myers 47 Chief Financial Officer
Frank Pellegrino 54 Vice President of Engineering
For biographical information regarding Messrs. Franzone, Kassel, and Goodman,
see "-Information Regarding the Directors/Nominees."
David Hale commenced his position as Chief Operating Officer in May 2001 and
commenced employment at the Company in October 1999 as Director of Operations.
Prior to his Employment at the Company, Hale was a two star major general in the
United States Army serving as the senior U.S. officer in NATO's Allied Land
Forces, Southeastern Europe command. Hale also served as deputy inspector
general at the Pentagon until his retirement in 1998. Hale was the recipient of
a Purple Heart and a Silver Star in Vietnam. Subsequent to his retirement, in
1999 General Hale entered a plea of guilty to seven counts of "conduct
unbecoming an officer and a gentleman" and one count of making a false official
statement for which he received a reprimand and a $22,000 fine.
Arthur Myers commenced his position as Chief Financial Officer of the Company in
May 2001 and commenced employment at the Company in January 2001 as Vice
President of Finance. Prior to his employment at the Company, Myers served as
Vice Presient of Finance for Orion Telecommuncations Corp from 1999 to 2001.
Myers also served as Vice President of Finance and Administration and Treasurer
for Quintel Communications, Inc. & Subsidiaries from 1997 to 1999 and served as
Comptroller for Sam Ash Music Corp. from 1995 to 1997.
Frank Pellegrino has served as the Vice President of Engineering of EHC since
1974.
Report of the Audit Committee of the Board of Directors
The Audit Committee of the Board of Directors of the Company serves as the
representative of the Board for general oversight of the Company's financial
accounting and reporting process, system of internal control, audit process, and
process for monitoring compliance with laws and regulations and the Company's
Standards of Business Conduct. The Company's management has primary
responsibility for preparing the Company's financial statements. The Audit
Committee met a total of three times during the fiscal year ended December 29,
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2000. The audit committee is governed by a written charter which is appended
hereto as Appendix I.
In this regard, the Audit Committee hereby reports as follows:
1. The Audit Committee has reviewed and discussed the audited
financial statements with the Company's management.
2. The Audit Committee has discussed with the independent
accountants the matters required to be discussed by SAS 61
(Codification of Statements on Auditing Standard, AU 380).
3. The Audit Committee has received the written disclosures and
the letter from the independent accountants required by
Independence Standards Board Standard No. 1 (Independence
Standards Board Standards No. 1, Independence Discussions
with Audit Committees) and has discussed with the
independent accountants the independent accountants'
independence.
4. Based on the review and discussion referred to in paragraphs
(1) through (3) above, the Audit Committee recommended to
the Board of Directors of the Company, and the Board has
approved, That the audited financial statements be included
in the Company's Annual Report on Form 10-K for the fiscal
year ended December 29, 2000, for filing with the Securities
and Exchange Commission.
Each of the members of the Audit Committee is independent as defined under
the listing standards of the National Association of Securities Dealers.
Audit Committee
Carl Koerner
Mitchell Solomon
Audit Firm Fee Summary
During Fiscal 2000, the Company retained Feldman, Sherb & Co., P.C. to provide
services in the following categories and amounts:
Audit Fees
Feldman, Sherb & Co., P.C. billed the Company an aggregate of $55,525 in fees
for professional services rendered in connection with the audit of the Company's
financial statements for the most recent fiscal year and financial statements
included in each of the Company's Quarterly Reports on Form 10-QSB during the
fiscal year ended December 29, 2000.
Financial Information Systems Design and Implementation Fees
The Company did not engage Feldman, Sherb & Co., P.C. for professional services
relating to financial information systems design and implementation for the
fiscal year ended December 29, 2000.
All Other Fees
The Company did not engage Feldman, Sherb & Co., P.C. for professional services
related to tax compliance and consulting services for the fiscal year ended
December 29, 2000.
Executive Compensation
Summary Compensation Table. The following table sets forth cash compensation
paid or accrued during the indicated periods by the Company's Chief Executive
Officer and the Company's other executive officers whose total salary and bonus
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exceeded $100,000 during Fiscal 2000 (collectively, the "Named Executive
Officers"). No other officers received compensation in excess of $ 100,000 in
1999.
Summary Compensation Table
Long Term
Annual Compensation Compensation
Awards
-------------------------------------- ----------
Fiscal Salary Bonus Options All Other
Year $ $ # Compensation
-------------------------------------------------------------------------
David Kassel 2000 50,322[1] -- -- 7,800
Chairman of the Board 1999 101,152 -- -- 7,800
1998 209,399(2) -- -- 10,400
Andrew Franzone 2000 138,909 -- -- 7,800
Chief Executive Officer and 1999 155,507 -- -- 7,800
President 1998 99,176 -- -- 7,800
Harry Goodman 2000 50,190[1] -- -- 7,800
Executive Vice President 1999 100,000 -- -- 7,800
and Secretary 1998 44,985 -- -- 6,700
(1) These Officers agreed to accept the amounts indicated as payment in full
for the fiscal year 2000 and agreed to waive any contrary provisions in
their respective employment agreements.
(2) Includes $ 150,000 in consideration for consulting services provided by Mr.
Kassel to the Company.
Option Grants. The following table sets forth the option grants made during
Fiscal 2000 to the Named Executive Officers.
Option Grants in Fiscal 2000
Individual Grants
-------------------------------------------------------------
Number of Percent of
Securities Total Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Granted (1) Fiscal Year ($/Share) Date
--------------- ---------------- ---------------- -----------
David Kassel -- -- -- --
Andrew Franzone -- -- -- --
Harry Goodman -- -- -- --
David Hale 2,000 *(2) 5.125 04/17/2005
Frank Pellegrino 7,500 2.4 5.125 04/17/2005
Carl S. Koerner -- -- -- --
Bao-Wen Chen 250,000 80.5 5.125 04/17/2005
Mitch Solomon -- -- -- --
(1) These options are fully exercisable after two years from the date of the
grant.
(2) Indicates that value is less than one (1%) percent.
Year-End Option Holdings. The following table sets forth the value of options
held at the end of Fiscal 2000 by the Named Executive Officers. None of the
Named Executive Officers exercised any options during Fiscal 2000.
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Fiscal 2000 Year-End Option Values
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal In-the-Money Options
Year-End (#) At Fiscal Year-End ($)
Exercisable/Unexercisable Exercisable/Unexercisable (1)
David Kassel -- --
Andrew Franzone -- --
Harry Goodman -- --
Mitch Solomon -- --
Bao-Wen Chen 0/266,667 $0/$666,668
Carl S. Koerner 0/10,000 $0/$ 25,000
Frank Pellegrino 0/20,834 $0/$ 52,085
David Hale 0/2,000 $0/$ 5,000
(1) Based on $2.50 per share, the price of the last reported trade of the Common
Stock on the Nasdaq SmallCap Market on December 29, 2000.
Employment Agreements
The Company entered into executive employment agreements as of March 15, 1998
with Andrew Franzone, David Kassel and Harry Goodman each an "Executive". The
term of each of the employment agreements ends March 2, 2008 (the "Term"). The
annual base salaries of Messrs. Franzone, Kassel and Goodman under their
employment agreements are $ 125,000, $ 100,000 and $ 100,000, respectively, with
annual salary adjustments equal to the greater of 5 % or the increase in the
Consumer Price Index. Each Executive is entitled to fringe benefits and an
annual bonus to be determined by the Compensation Committee of the Board of
Directors. Each Executive can be terminated for cause (as defined in the
employment agreements) with all future compensation ceasing. If the Executive
dies during the Term or is unable to competently and continuously perform the
duties assigned to him because of ill health or other disability (as defined in
the employment agreements), the Executive or the Executive's estate or
beneficiaries shall be entitled to full compensation for three years following
the date thereof. If the executive is terminated without cause, the executive
shall be entitled to full compensation for the remainder of the Term. If the
Executive resigns, his compensation ceases as of the date of his resignation.
During the period of employment and for two years thereafter the Executives are
prohibited from competing with the Company; provided, however, that the
Executives may provide services to other noncompeting business. In order for a
restrictive covenant to be enforceable under applicable state law, the covenant
must be limited in terms of scope and duration. While the Company believes that
the covenants in the employment contracts are enforceable, there can be no
assurance that a court will declare them enforceable under particular
circumstances.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Interest of Counsel
Koerner Silberberg & Weiner, LLP has been general counsel to the Company since
1986. The Company believes that the fees paid to Koerner Silberberg & Weiner,
LLP are comparable to those fees that would have been paid to an unrelated third
party law firm.
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Leases
EHC lease its facility in Farmingdale, New York from K & G Realty Associates ("K
& G"), a partnership owned by David L. Kassel and Harry Goodman, both officers
and directors of the Company. The lease agreement has been extended until
December 31, 2005. The annual rent is currently $ 153,000, with increases equal
to the greater of the increase in the Consumer Price Index or 5 %. Pursuant to a
rider of the lease agreement dated as of March 1, 1998, EHC shall pay as an
additional rent, any and all real property taxes for the demised premises in
excess of $ 26,000 per annum. In 2000, the taxes were approximately $34,000. The
mortgage agreement between Long Island Commercial Bank and K & G dated November
28, 1995, is a 15 year self liquidating adjustable mortgage currently bearing
9.5 % interest in the original principal amount of $ 610,000. The mortgage is
guaranteed by EHC. By agreement dated November 28, 1995, K & G has assigned all
rents due from EHC to the Long Island Commercial Bank. The Company believes that
the terms and consideration of this lease are no less favorable to the Company
than a lease from a third party.
Officer Loans
Messrs. Kassel and Goodman have advanced or arranged for the advance of funds to
the Company for working capital. The loans advanced of arranged for by Mr.
Kassel are represented by the following two notes (i) a demand negotiable
promissory note, dated August 1, 1996, from EHC in favor of Kassel MGT Defined
Benefit Plan for the principal amount of $219,483, bearing interest at a rate of
10 % per annum, payable in 60 monthly installments of approximately $4,663 per
month, and (ii) a demand negotiable promissory note, dated October 16, 2000,
from ChinaB2Bsourcing.com, Inc., in favor of Kassel MGT Defined Benefit Plan for
the principal amount of $100,000, bearing interest at 10% per annum, payable in
60 monthly installments of approximately $2,125. Both notes are being paid in
accordance with their terms.
The loans advanced by Mr. Goodman are represented by the following two notes (i)
a demand negotiable promissory note, dated August 1, 1996 from EHC in favor of
Mr. Goodman, for the principal amount of $175,000 bearing interest at a rate of
10% per annum and payable in 60 monthly installments of approximately $3,719 and
(ii) a demand negotiable promissory note, dated October 16, 2000, from
ChinaB2Bsourcing.com, Inc., in favor of Mr. Goodman for the principal amount of
$100,000, bearing interest at 10% per annum, payable in 60 monthly installments
of approximately $2,125. Both notes are being paid in accordance with their
terms.
Affiliated Transactions
EHC and AFC have entered into an engineering consulting and services agreement
on a fee for service basis. Under such agreement, (a) EHC will have the
exclusive right to manufacture or contract for the manufacturing of certain AFC
products on a time and materials basis and (b) EHC will not develop products in
the following lines other than for AFC: (i) point of sale display items; and
(ii) cabinet and furniture plastic hardware. The Company believes the terms and
consideration of this agreement are no less favorable to the Company than
agreements with similar unrelated third party companies. The President of AFC,
Andrew Franzone Jr., is the son of the President and Chief Executive Officer of
the Company. AFC is owned by three officer/stockholders of the Company.
The Company recorded sales during the years ended December 29, 2000 and December
31, 1999 of $809,000 and $631,000, respectively to Allen Field Company, Inc.
("AFC"). Gross Profit on such sales was approximately $235,000 and $125,000 for
the years ended December 29, 2000 and December 31, 1999, respectively. Accounts
receivable from AFC were $64,409 at December 29, 2000. On or about September 1,
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1999 the Company converted the outstanding accounts receivable ($253,150) from
AFC into a term loan with payments of $5,132.97 per month including principal
and interest for 5 years starting January 1, 2000. The balance of the note
receivable on December 29, 2000 was $210,256.
Ms. Bao-Wen Chen, a director of the Company, also provides consulting services
to the Company on behalf of her company, B.C. China Business Consulting, Inc.
("BCI"), in connection with the Company's manufacturing in China. The agreement
between the Company and BCI provides that BCI will provide such consulting
services until March 1, 2008 at an hourly rate as mutually determined and agreed
upon by the Company and the Consultant from time to time and an amount
equivalent to 1.5% of the net cost of products manufactured in China up to
$5,000,000 per year and 1% of net costs exceeding $5,000,000. In consideration
for her services to the Company, Ms. Chen received on April 23, 1999 ("the
Effective Date") an aggregate amount of (i) 25,000 shares of unregistered Common
Stock granted pursuant to the Grant Plan which Ms Chen subsequently returned to
the Company and (ii) 25,000 options granted pursuant to the Grant Plan,
exercisable at $4.50 per share, and fully vesting on the second anniversary of
the Effective Date and terminating on the tenth anniversary of the Effective
Date. During the fiscal year ended December 29, 2000, Ms. Chen received 250,000
options granted pursuant to the Grant Plan, exercisable at $5.125 per share, and
vesting at increments of 20% annually beginning on the first anniversary date
following the grant, and terminating on the tenth anniversary of the effective
date. The Company believes that consulting fees paid to Ms. Chen and grants of
Common Stock and options are no less favorable to the Company than consideration
it would pay to other third party consultants, as the Consultant's consideration
was determined through arms' length transaction between the Consultant and the
Company at a time when the Consultant was not affiliated in any way with the
Company.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth as of June 30, 2001 (except as otherwise
indicated) certain information regarding the beneficial ownership of Common
Stock by (i) each person or "group" (as that term is defined in Section 13(d)(3)
of the Exchange Act) known by the Company to be the beneficial owner of more
than 5% of the Common Stock, (ii) each executive officer of the Company, (iii)
each director and Nominee and (iv) all directors and executive officers as a
group (10 persons). Except as otherwise indicated, the Company believes, based
on information furnished by such persons, that each person listed below has sole
voting and investment power over the shares of Common Stock shown as
beneficially owned, subject, to community property laws, where applicable.
Number of Shares Percentage of
Name of Beneficial Owner Beneficially Owned (1) Common Stock Owned
---------------------- ------------------
David Kassel 840,000 22.5
Andrew Franzone 450,000 (1) 12.1
Harry Goodman 420,000 (1) 11.3
Steven Sgammato 10,000 (2) .5
Bao-Wen Chen 75,000 2.1
All directors and
executives as a group 1,746,665 48.3
(1) Includes 100,000 shares owned by wife, of which beneficial ownership is
disclaimed.
(2) Includes 10,000 shares owned by wife, of which beneficial ownership is
disclaimed.
10
PROPOSAL 2: APPROVAL OF AN AMENDMENT
TO THE CERTIFICATE OF INCORPORATION, OF THE COMPANY TO CHANGE
THE NAME OF THE COMPANY
The Board of Directors of the Company has unanimously approved and directed that
there be submitted to stockholders for their approval a proposal to amend the
Certificate of Incorporation of the Company to change the Company's name from
ChinaB2Bsourcing.com Inc. to International Smart Sourcing, Inc. (the "Name
Change Amendment"). To effect such a change, the Company's Certificate of
Incorporation will be amended to read in its entirety as follows:
"FIRST: The name of the corporation is International Smart Sourcing, Inc."
The Amendment, if approved by stockholders, will become effective on the date
the Name Change Amendment is filed with the Office of the Secretary of State of
the State of Delaware. The Company anticipates that the filing to effect the
Name Change Amendment will be made as soon after the Annual Meeting as
practicable.
Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
NAME CHANGE AMENDMENT.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's executive officers and
directors, and persons who own more than 10% of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and Nasdaq. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file. To the Company's knowledge, based solely
on a review of the copies of such reports provided to the Company and written
representations that no other reports were required during, or with respect to,
Fiscal 1999, all Section 16(a) filing requirements applicable to its executive
officers, directors and greater than 10% beneficial owners have been satisfied.
Independent Public Accountants
The accounting firm of Feldman, Sherb & Co. P.C. served as the Company's
independent public accountants during Fiscal years 1999 and 2000, is expected to
continue to do so for fiscal year 2001. A representative of Feldman, Sherb & Co.
P.C. is expected to be present at the Annual Meeting, will be given an
opportunity to make a statement if he desires and will be available to respond
to appropriate questions.
Expenses of Solicitation
The cost of solicitation of proxies will be borne by the Company. In an effort
to have as large a representation at the Annual Meeting as possible, special
solicitation of proxies may, in certain instances, be made personally or by
telephone, telegraph or mail by one or more employees of the Company. The
Company also may reimburse brokers, banks, nominees, and other fiduciaries for
postage and reasonable clerical expenses of forwarding the proxy materials to
their principals who are beneficial owners of Common Stock.
11
Stockholder Proposals
Any stockholder proposals submitted pursuant to Exchange Act Rule 14a-8 and
intended to be presented at the Company's 2002 Annual Meeting of Stockholders
must be received by the Company at its principal executive office on or before
January 12, 2002 to be eligible for inclusion in the proxy statement and form of
proxy to be distributed by the Board of Directors in connection with such
meeting.
Any stockholder proposals (including recommendations of nominees for election to
the Board of Directors) intended to be presented at the Company's 2002 Annual
Meeting of Stockholders, other than a stockholder proposal submitted pursuant to
Exchange Act Rule 14a-8, must be received in writing at the principal executive
office of the Company no later than sixty (60) days prior to the date of such
meeting, nor prior to ninety (90) days prior to the date of such meeting,
together with all supporting documentation required by the By-laws; provided,
however, that in the event that less than seventy (70) days' notice or prior
public disclosure of the date of such meeting is given or made to stockholders,
stockholder proposals must be received, together with all required supporting
documentation, not later than the close of business on the tenth day following
the date on which such notice or public disclosure of the date of the annual
meeting is first made.
Other Matters
The Board of Directors does not know of any matters other than those described
in this Proxy Statement, which will be presented for action at the Annual
Meeting. If other matters are presented, proxies will be voted in accordance
with the best judgment of the proxy holders.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED DECEMBER
29, 2000 (INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO), WHICH WAS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 12, 2001, WILL BE PROVIDED
WITHOUT CHARGE TO ANY PERSON TO WHOM THIS PROXY STATEMENT IS MAILED UPON THE
WRITTEN REQUEST OF ANY SUCH PERSON TO ARTHUR MYERS, CHIEF FINANCIAL OFFICER,
CHINAB2BSOURCING.COM, INC., 320 BROAD HOLLOW ROAD, FARMINGDALE, NEW YORK 11735.
12
ChinaB2Bsourcing.com Inc.
320 Broad Hollow Road
Farmingdale, New York 11735
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Andrew Franzone and Arthur Myers, and each
of them, proxies with full power of substitution to vote for and on behalf of
the undersigned at the Annual Meeting of Stockholders of ChinaB2Bsourcing.com
(the "Company"), to be held at Koerner Silberberg & Weiner LLP, 112 Madison
Avenue, 3rd Floor, New York, New York on Wednesday, August 15, 2001 at 9:00
a.m., New York time, and at any adjournments or postponements thereof, hereby
granting full power and authority to act on behalf of the undersigned at said
meeting and any adjournments or postponements thereof. The undersigned hereby
revokes any proxy previously given in connection with such meeting and
acknowledge receipt of the Notice of Annual Meeting of Stockholders and Proxy
Statement and the 2000 Annual Report to Stockholders.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTION IS INDICATED WITH
RESPECT TO THE PROPOSALS BELOW, THE UNDERSIGNED'S VOTES WILL BE CAST "FOR" EACH
OF SUCH MATTERS. THE UNDERSIGNED'S VOTES WILL BE CAST IN ACCORDANCE WITH THE
PROXIES' DISCRETION ON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. PLEASE SIGN AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE.
1. Proposal to elect David Kassel, Andrew Franzone, Harry Goodman,
Mitchell Solomon, Bao-Wen Chen and Carl Seldin Koerner as Directors of
the Company, each for a one year term to continue until the 2002
Annual Meeting of Stockholders and until the successor of each is duly
elected and qualified.
[ ] FOR ALL [ ] WITHHELD FROM ALL
-----------------------------------------------
[ ] WITHHELD AS TO THE NOMINEE NOTED ABOVE
2. Proposal to amend the Company's Certificate of Incorporation to change
the Company's name from ChinaB2Bsourcing.com, Inc. to International
Smart Sourcing, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. To consider and act upon such other business as may properly come
before the meeting or any adjournments or postponements thereof.
Dated: _________________ Signature: __________________________________
Name: __________________________________
Signature (if held jointly): __________________________________
Name (if held jointly): __________________________________
NOTE: Please sign exactly as your name appears hereon. Joint owners
should each sign. When signing as an attorney, executor,
administrator, trustee, or guardian, please give full title of
such.
APPENDIX I
CHINAB2BSOURCING.COM, INC.
AUDIT COMMITTEE CHARTER
The purpose of the Audit Committee of ChinaB2Bsourcing.com, Inc. (the "Company")
is to provide oversight of the financial reporting process, the system of
internal controls and the audit process. In addition, the Audit Committee will
provide regular reports to the full Board of Directors on an as-needed basis.
The Audit Committee is presently comprised of two directors of the Company: Carl
Seldin Koerner and Mitchell Solomon. A Chairman of the Audit Committee has not
yet been appointed. The Audit Committee is scheduled to meet no less frequently
than three times per fiscal year. Notice of meetings of the Audit Committee will
be provided to each of its members not less than five days prior to a scheduled
meeting, unless the Chairman of the Audit Committee determines that less notice
is necessary.
Roles and Responsibilities of the Audit Committee
Review the adequacy of the Company's internal control structure;
Review the activities, organizational structure and qualifications of the
internal audit function;
Review the proposed audit scope and approach of the Company's independent
accountants;
Conduct a review of the financial statements and audit findings, including
any suggestions for improvements provided to management by the Company's
independent accountants;
Review the performance of the Company's independent accountants, the
independent accountants' accountability to the Board of Directors and the
Audit Committee, and the independence of the independent accountants;
Review fee arrangements between the Company and its independent
accountants;
Review significant accounting and reporting issues, including recent
professional and regulatory pronouncements, and consider their impact on
the financial statements;
Review interim financial reports;
Review any legal matters that could have a significant impact on the
Company's financial statements;
Review the findings of any examinations by regulatory agencies;
If necessary, institute special investigations and, if appropriate, hire
special counsel or experts to assist in the Audit Committee's fulfillment
of its duty; and
Perform any other oversight functions as requested by the Board of
Directors.