SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
[X] Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
ETERNAL TECHNOLOGIES GROUP, INC.
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(Name of Registrant As Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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[ ] 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:
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2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
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4. Date Filed:
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ETERNAL TECHNOLOGIES GROUP, INC.
Sect. D, 5/F, Block A. Innotech Tower,
235 Nanjing Rd. Heping District, Tianjin 300052
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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DATE August 26, 2005
TIME 10:00 a.m. Eastern Daylight Time
PLACE Hyatt Regency Crystal City
2799 Jefferson Davis Highway
Arlington, VA 22202
ITEMS OF BUSINESS (1) To elect seven (7) directors of the Company to hold
office until the next annual meeting of shareholders or
until their successors are duly elected and qualified.
(2) To consider a proposal to ratify the
appointment of Ham Langston & Brezina LLP as
the Company's independent certifying
accountants.
(3) To transact such other business as may properly
come before the meeting or any adjournment
thereof.
RECORD DATE Holders of Eternal Technologies Group, Inc. common stock
of record at the close of business on July 15, 2005 are
entitled to vote at the meeting.
ANNUAL REPORT The Company's 2004 annual report, which is not
part of the proxy soliciting materials, is included
with this document.
PROXY VOTING It is important that your shares be
represented and voted at the meeting. You can vote
your shares by completing and returning the proxy
card sent to you. Shareholders may be able to vote
their shares over the Internet or by telephone. If
Internet or telephone voting is available to you,
voting instructions are printed on the proxy card
sent to you. You can revoke a proxy at any time prior
to its exercise at the meeting by following the
instructions in the accompanying proxy statement.
You are cordially invited to attend the meeting. Whether or not you are planning
to attend the meeting, you are urged to complete, date and sign the enclosed
proxy card and return it promptly.
By Order of the Board of Directors
/s/ Jijun Wu
Jijun Wu
Chairman
Tianjin, China
July 13, 2005
TABLE OF CONTENTS
INTRODUCTION................................................................................. 1
General............................................................................. 1
Matters to be Voted on by Shareholders.............................................. 1
Proxies............................................................................. 1
Revocation of Proxies............................................................... 1
Record Date......................................................................... 1
Voting Securities................................................................... 1
Quorum.............................................................................. 2
Voting Procedures................................................................... 2
PROPOSALS.................................................................................... 2
PROPOSAL 1 - ELECTION OF DIRECTORS........................................................... 2
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS............................. 4
EXECUTIVE COMPENSATION AND OTHER INFORMATION................................................. 5
Summary Compensation Table.......................................................... 5
Equity Compensation Plan Information................................................ 5
Employment Contracts................................................................ 5
Compensation of Directors........................................................... 5
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................. 6
CORPORATE GOVERNANCE AND RELATED MATTERS..................................................... 6
Overview............................................................................ 6
Committees of the Board............................................................. 6
Board Meetings...................................................................... 7
Codes of Ethics..................................................................... 7
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS............................................. 7
Fees Paid to Independent Public Accountants......................................... 7
Policy on Pre-Approval of Audit and Non-Audit Services of Independent Auditors...... 8
OTHER MATTERS................................................................................ 8
Compliance with Section 16(a) of the Securities Exchange Act........................ 8
Certain Relationships and Transactions.............................................. 8
Submission of Shareholder Proposals................................................. 8
Expenses of Solicitation............................................................ 8
ETERNAL TECHNOLOGIES GROUP, INC.
Sect. D, 5/F, Block A. Innotech Tower,
235 Nanjing Rd. Heping District, Tianjin 300052
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PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 26, 2005
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INTRODUCTION
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General
This Proxy Statement is being furnished in connection with the solicitation of
proxies on behalf of the Board of Directors of Eternal Technologies Group, Inc.
(the "Company") for use at the 2004 Annual Meeting of Shareholders of the
Company and at any adjournment thereof (the "Annual Meeting"). The Annual
Meeting is scheduled to be held at the Hyatt Regency Crystal City, 2799
Jefferson Davis Highway, Arlington, VA 22202, on August 26, 2005 at 10 a.m.
local time. This Proxy Statement and the enclosed form of proxy will first be
sent to shareholders on or about August 1, 2005.
Matters to be Voted on by Shareholders
At the Annual Meeting, the shareholders will vote upon three proposals, the
election of directors, and the ratification of the appointment of Ham Langston
Brezenia LLP. as independent certifying accountants, as described further in
this Proxy Statement. The Board of Directors is not aware of any matters that
are expected to come before the Annual Meeting other than those referred to in
this Proxy Statement.
Proxies
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting prior to the closing of the polls, will be voted in accordance with the
specifications made thereon. Proxies on which no specification has been made by
the shareholder will be voted FOR the election to the Board of Directors of the
nominees of the Board of Directors named herein, and FOR the ratification of the
appointment of the designated independent accountants. If any other matter
should come before the Annual Meeting, the persons named in the accompanying
proxy intend to vote such proxies in accordance with their best judgment.
Revocation of Proxies
Proxies are revocable by written notice received by the Secretary of the Company
at any time prior to their exercise or by executing a later dated proxy. Proxies
will be deemed revoked by voting in person at the Annual Meeting.
Record Date
Shareholders of record at the close of business on July 15, 2005 (the "Record
Date") are entitled to notice of and to vote at the Annual Meeting.
Voting Securities
On the Record Date, the total number of shares of common stock of the Company,
$0.001 par value per share (the "Common Stock"), outstanding and entitled to
vote was 30,679,630.
Quorum
The presence at the Annual Meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum.
1
Voting Procedures
Casting Votes. "Record" shareholders of Common Stock (that is, persons holding
Common Stock in their own name in Eternal Technologies' stock records maintained
by our transfer agent, OTC Stock Transfer, Inc, may attend the Annual Meeting
and vote in person or complete and sign the accompanying proxy card and return
it to Eternal Technologies.
"Street name" shareholders of Common Stock (that is, shareholders who hold
Common Stock through a broker or other nominee) who wish to vote at the Annual
Meeting will need to obtain a proxy form from the institution that holds their
shares and to follow the voting instructions on that form.
Counting of Votes. The holders of all outstanding shares of Common Stock are
entitled to one vote for each share of Common Stock registered in their names on
the books of the Company at the close of business on the Record Date.
Broker Non-Votes. A broker non-vote occurs when a broker submits a proxy card
with respect to shares of common stock held in a fiduciary capacity (typically
referred to as being held in "street name"), but declines to vote on a
particular matter because the broker has not received voting instructions from
the beneficial owner. Under the rules that govern brokers who are voting with
respect to shares held in street name, brokers have the discretion to vote such
shares on routine matters, but not on non-routine matters. Routine matters
include the election of directors, increases in authorized common stock for
general corporate purposes and ratification of auditors. Non-routine matters
include adoption of stock plans.
Required Vote to Constitute a Quorum and Approve Proposals. Shares of Common
Stock represented by a properly dated, signed and returned proxy will be counted
as present at the Annual Meeting for purposes of determining a quorum, without
regard to whether the proxy is marked as casting a vote or abstaining. Directors
will be elected by a plurality of the votes cast at the Annual Meeting. Each of
the other matters scheduled to come before the Annual Meeting requires the
approval of a majority of the votes cast at the Annual Meeting. Therefore,
abstentions and broker non-votes will have no effect on the election of
directors or any other matter.
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PROPOSALS
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The stockholders are being asked to consider and vote upon two proposals at the
meeting. The following is a summary of the proposals and the voting
recommendations of the Board of Directors:
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Proposal Board Recommendation
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1 - Election of Directors FOR
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2 - Ratification of Appointment of Auditors FOR
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Following is a detailed description of the proposals to be considered by the
stockholders.
PROPOSAL 1 - ELECTION OF DIRECTORS
The first proposal to be vote on is the election of seven (7) directors. The
Board's nominees are Jijun Wu, Jiansheng Wei, XingJian Ma, Shien Zhu, James Q.
Wang, Genchang Li, and Shicheng Fu. Each of the nominees is presently serving as
a Eternal Technologies Group, Inc. director. Biographical information about each
of the nominees is included in "Director Information" below. If elected, each of
the nominees will serve a one-year term and will be subject to reelection next
year along with the other directors.
The Board of Directors has no reason to believe that any nominee will be unable
to serve or decline to serve as a director if elected. If a nominee becomes
unable or unwilling to accept nomination or election, the Board will either
select a substitute nominee or will reduce the size of the Board. If you have
submitted a proxy and a substitute nominee is selected, your shares will be
voted for the election of the substitute nominee.
2
In accordance with Eternal Technologies Group, Inc.'s bylaws, directors are
elected only by a majority vote of shares represented issued and outstanding.
That means the seven (7) nominees will be elected only if they receive a vote of
more than fifty-percent (50%) of the shares outstanding as of the record date.
The Board of Directors recommends a vote "For" all nominees.
Director Information
Set out below is certain information concerning our nominees for election as
directors of the Company:
Jijun Wu Mr. Wu has served as President and Chairman of the Board of
Age: 68 the Company since 2002. Mr. Wu was a co-founder of the
Director since 2002 Company's predecessor, Eternal Technologies Group Ltd. (a
British Virgin Islands corporation)("ETG") and served as
President and Chairman of the Board of ETG from the
company's inception in 2000 until 2002. Prior to forming
ETG, Mr. Wu served as President of Sky Dragon Foundation, a
Malaysian financial institution, from 1997 to 2000. Mr. Wu
previously served as Accountant - General of Tianjin
Electronic Bureau, a PRC state-owned electronics company
with revenues in excess of $1.5 billion and as a consultant
to various multinational corporations entering the PRC
market. Mr. Wu is a graduate of China Central Finance &
Economics University and holds the designation of CPA in
China.
Jiansheng Wei Mr. Wei has served as Chief Operation Officer and a Director
Age: 52 of the Company since 2002. From March 2000 to 2002, Mr. Wei
Director since 2002 served as Chief Operation Officer and a Director of ETG.
From 1998 to 2000, Mr. Wei was the vice-general manager of
Towering Industrial Group Ltd, a trading company. Mr. Wei
has been engaged in animal husbandry practices and
management for over 30 years and has been responsible for
operations of several large farms in Inner Mongolia and
Hebei Province. Mr. Wei holds an MBA from Tianjin Finance &
Economics College.
XingJian Ma Xiangjian Ma has served as our Chief Financial Officer since
Age: 58 the Reorganization. From 2000 to the Reorganization, Mr. Ma
Director since 2004 served as Chief Financial Officer of Eternal Technologies
Group, Ltd. From 1990 to 2000 Mr. Ma served as Chief of the
Financial Department of Tianjin Electronic Instrument
Corporation.
Shien Zhu Mr. Zhu has served as a Director since 2002. Mr. Zhu served
Age: 48 as a Director of ETG from 2000 to 2002. Since 2001, Mr. Zhu
Director has been a professor at China Agricultural University. From
since 2002 1996 to 2001, Mr. Zhu was an associate professor at China
Agricultural University. Mr. Zhu is also Associate Professor
and Master Director, involved in post doctorate studies, at
Kochi University and Ehime University in Japan. Mr. Zhu
majored in the area of early embryo vitrification freezing
and transfer and mammal adoscuolation in embryo
biotechnology. He invented a system of freezing and
preservation, not aided by a cooling frigorimeter, which is
characterized by low cost, simple operation and a high
embryo survival rate. In recent years, he has written more
than 40 articles that were published in international and
domestic periodicals. Currently, he is undertaking vital
"863" projects for China and scientific research projects
under the "Ninth Five-Year Plan" period.
3
James Q. Wang Mr. Wang has served as a Director since 2002. Mr. Wang
Age: 35 founded, and serves as President of, DNS Technologies Group
Director since 2002 Inc. (Canada), a position he has held since 1999, an
Internet technologies company involved in outsourcing
between North America and Asia. Mr. Wang began his
professional career as an engineer with NEC where he
published a technical innovation proposal and was honored
Awards of Excellence at NEC's headquarters in Tokyo. Mr.
Wang was transferred to the marketing department of NEC
where he was in charge of marketing and sales in eastern
region of Mainland China. Mr. Wang is a Canadian citizen and
received his Master of Applied Science from the University
of Ottawa.
Mr. Genchang Li Mr. Genchang Li is an experienced researcher with Tianjin
Age 65 Social Science Academy. Mr. Li is a pioneer in the
Director since 2004 development and operation of China's stock market. When he D
was working for the municipal government , he was in charge
of the review and administration of reorganizations of
assets and going public of state owned enterprises. He is
engaged in the research of the policies for China's stock
market. He was involved in the publication of various
instructive essays and books. He was Section Chief in
Econmic System Reform Commission of Tianjin Municipal
Government from 1985 to 1993 and Vice General Manager of
Investment Banking Department of Junan Securities Company
fropm 1994 to 1999. He is a researcher with Tianjin Social
Science Academy since 2000.
Shicheng Fu Prof. Fu is a lawyer, Dean of Law Dept., Nankai University,
Age 41 and Supervisor for graduate students. His other professional
Director since 2004 activities include Director Director of China Law Institiute
Administrative Law Research Society, Guest Researcher of
Peking University Public Law Research Center, Adjunct
Researcher of State Administrative College Institute
Administrative Law Research Center, Consultant to he
Standing Committee of Tianjin Municipal People's Congress
for legal affairs, Legal Consultant to Tianjin Municipal
Government, and Arbitrator of Tianjin Arbitrator Committee,
etc.
Prof. Fu attended Nankai University, Law Department from
September 1981 to July 1985. Durint the last year of Law
Department, the University decided to retain him as a
teacher and sent him to China Politics and Law Univeristy,
Graduate School for course study in administrative laws. His
advisor was Prof. Ying Songnian, a distinguished legal
sholar. He has been teaching at Nankai University since
1985. He has been to Japan and Republic of Korea for
international academic exchanges since 1998.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Ham Langston & Brezenia LLP. as independent
auditors for the fiscal year ending December 31, 2005, and recommends that the
shareholders vote for ratification of such appointment. In the event of a
negative vote on such ratification, the Board of Directors will reconsider its
selection.
Representatives of Ham Langston & Brezenia LLP. are expected to be present at
the Annual Meeting, will be afforded an opportunity to make a statement if they
desire to do so, and are expected to be available to respond to appropriate
inquiries from shareholders.
The Board of Directors unanimously recommends a vote "For" the ratification of
the appointment of Ham Langston & Brezenia LLP as independent accountants for
Eternal Technologies.
4
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EXECUTIVE COMPENSATION AND OTHER INFORMATION
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Summary Compensation Table
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities to the Company
during the year ended December 31, 2004 of each person who served as the
Company's Chief Executive Officer during fiscal 2004 and the four other most
highly paid executive officers whose total annual salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 2004 (the "Named Officers").
Restricted Long Term
Name and Annual Compensation Stock Compensation
------ ------------ ---------- ------------
Principal Position Year Salary($) Bonus($) Awards $ Stock Options(#)
- --------- -------- ---- --------- -------- --------------
JiJun Wu 2004 20,000 -0- 80,000 -0-
President and 2003 27,299 -0- 80,000 -0-
Chief Executive Officer 2002 7,299 -0- -0- -0-
Equity Compensation Plan Information
Except for the 2004 Stock Option Plan the Company presently maintains no equity
compensation option plans.
The following table gives information about equity awards under the Company's
existing plan as of December 31, 2003:
Number of securities
remaining available for
Weighted-average future issuance under
Number of securities to be exercise price of equity compensation plans
issued upon exercise of outstanding options, (excluding securities
outstanding options, warrants and rights reflected in column (a))
Plan Category warrants and rights (a) (b)
- ------------------------------------- ---------------------------- ----------------------- ---------------------------
Equity compensation plans approved
by security holders 0 -- 0
Equity compensation plans not
approved by security holders 0 -- 0
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Total 0 -- 0
============================ ======================= ===========================
Employment Contracts
The Company has an employment contract with Zhai Rui. This contract runs from
February 20, 2005 to February 19, 2006 and pays annual compensation of $60,000.
Compensation of Directors
We reimburse all direct costs of attendance of Board meetings by our directors.
No additional compensation of any nature is paid to employee directors.
5
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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The following table is furnished as of June 30, 2005 to indicate beneficial
ownership of shares of the Company's Common Stock by (1) each shareholder of the
Company who is known by the Company to be a beneficial owner of more than 5% of
the Company's Common Stock, (2) each director, nominee for director and Named
Officer of the Company, individually, and (3) all officers and directors of the
Company as a group. The information in the following table was provided by such
persons.
Name and Address of Beneficial Owner (1) Shares (2) Percent of Class (2)
------------------------------------------------ ---------------------- ---------------------
Shang Jiaji (3) 3,385,000 11.03%
Jijun Wu 1,684,500 5.49%
Xingjian Ma 100 *
James Q. Wang 1,102,500 3.59%
Jiansheng Wei 602,500 1.96%
Shien Zhu 50,000 .16%
Genchang Li 0 *
Shicheng Fu 0 *
Garfield Hu 100 *
------ ----
All executive officers and directors as a group
(9 persons) 5,672,206 21.57%
========= ======
*........Less than 1%.
(1) The persons named in the table have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned
by them, subject to community property laws, where applicable, and the
information contained in the footnotes to the table.
(2) Includes shares of Common Stock not outstanding, but which are subject
to options, warrants and other convertible securities exercisable or
convertible within 60 days of the date of the information set forth in
this table, which are deemed to be outstanding for the purpose of
computing the shares held and percentage of outstanding Common Stock
with respect to the holder of such options. Such shares are not,
however, deemed to be outstanding for the purpose of computing the
percentage of any other person.
(3) Address Sect. D, 5/F, Block A. Innotech Tower, 235 Nanjing Rd. Heping
District, Tianjin 300052
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CORPORATE GOVERNANCE AND RELATED MATTERS
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Overview
Our Board of Directors believes that corporate governance practices should be
designed to create an environment that encourages and supports optimum
shareholder value, compliance with all legal requirements and maintenance of the
highest standards of integrity. The Board, in conjunction with senior
management, has adopted and adheres to corporate governance practices that they
believe promote those goals. Because of our limited financial resources, the
limited scope and size of our operations and the difficulty of attracting and
retaining independent directors for a small company, our governance procedures,
to date, are limited. If we grow, as we expect, we intend to continually review
governance practices, applicable state law, the rules and regulations of the SEC
and listing standards of exchanges, as well as best practices suggested by
recognized governance authorities, with a view to establishing and maintaining
appropriate systems, practices and procedures which will further our stated
goals.
Committees of the Board
The Company does not presently maintain an audit committee, a compensation
committee, a nomination committee or any other committees of its board of
directors. Similarly, we do not have an "audit committee financial expert".
6
At such time as our Board determines that the size and scope of our operations
and our available financial resources warrant such, we expect to seek to add
independent directors and to form committees to perform the functions of an
audit committee, compensation committee and nominating committee.
Board Meetings
During the year ended December 31, 2004, the Board of Directors held ten (10)
formal meetings. Each director attended at least 75% of the aggregate of the
total number of meetings of the Board of Directors.
At an appropriate time in the future, the Board intends to evaluate the
appointment of a "Lead Independent Director" and the establishment of procedures
for conducting regular executive sessions of non-management members of the Board
without management present.
Codes of Ethics
The Board of Directors has adopted a Code of Business Ethics covering all
officers, directors and employees of Eternal Technologies. We require all
employees to adhere to the Code of Business Ethics in addressing legal and
ethical issues encountered in conducting their work. The Code of Business Ethics
requires that our employees avoid conflicts of interest, comply with all laws
and other legal requirements, conduct business in an honest and ethical manner
and otherwise act with integrity and in the company's best interest.
The Board of Directors has also adopted a separate Code of Business Ethics for
the CEO and Senior Financial Officers. This Code of Ethics supplements our
general Code of Business Ethics and is intended to promote honest and ethical
conduct, full and accurate reporting, and compliance with laws as well as other
matters.
Both the Code of Business Ethics and the Code of Business Ethics for the CEO and
Senior Financial Officers are filed as exhibits to Eternal Technologies' Annual
Report on Form 10-KSB for the year ended December 31, 2004 and are available for
review at the SEC's web site at www.sec.gov.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
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Fees Paid to Independent Public Accountants
The following table presents fees for professional audit services rendered by
Thomas Leger & Co., L.L.P. for the audit of the Company's annual financial
statements for the years ended December 31, 2004 and December 31, 2003 and fees
billed for other services rendered by Thomas Leger & Co., L.L.P. during those
periods.
Fiscal 2004 Fiscal 2003
---------------- ----------------
---------------- ----------------
Audit fees (1) $111,271 $95,581
Audit related fees (2) 39,162 25,156
Tax fees 5,000 -
All other fees - -
---------------- ----------------
---------------- ----------------
Total $155,433 $120,737
================ ================
(1) Audit Fees consist of fees billed for professional services rendered
for the audit of the Company's consolidated annual financial statements
and review of the interim consolidated financial statements included in
quarterly reports and services that are normally provided by Thomas
Leger & Co., L.L.P. in connection with statutory and regulatory filings
or engagements.
(2) Audit-Related Fees consist of fees billed for assurance and other
services not explicitly related to the performance of the audit or
review of the Company's consolidated financial statements and are not
reported under "Audit Fees." This category includes fees related to the
registration statement, review of proxy statements and accounting
research.
7
Policy on Pre-Approval of Audit and Non-Audit Services of Independent Auditor
At such time, if ever, as we form an audit committee, we intend that the audit
committee will establish a specific policy relating to pre-approval of all audit
and non-audit services provided by our independent auditors. As we do not
presently maintain an audit committee, no such policy has been adopted to date.
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OTHER MATTERS
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Compliance With Section 16(a) of the Exchange Act
Under the securities laws of the United States, the Company's directors, its
executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in this Proxy Statement
any failure to file by these dates during 2004. Based solely on a review of such
reports and written statements of its directors, executive officers and
shareholders, the Company believes that all of the filing requirements were
satisfied on a timely basis in 2004, except (1) the Form 10-KSB for the
year-ended December 31, 2004
Certain Relationships and Transactions
We, as well as our predecessor have periodically entered into transactions with
various persons and/or entities that may be deemed to be affiliates. In
particular, our predecessor entered into a number of transactions with Shang
Jiaji, or entities controlled by Shang Jiaji, including China Continental, Inc.
Shang Jiaji is one of our principal shareholders (see "Security Ownership of
Certain Beneficial Owners and Management").
All amounts that are due to or from officers, directors or affiliated parties
are unsecured, interest-free and are payable on demand.
In January 2003, we entered into a consulting agreement with Market Management,
LLC pursuant to which consulting services were to be provided to us over a 24
month period. Payments for those services total $10,000 per month. Market
Management, LLC is controlled by Thomas L. Tedrow, one of our then principal
shareholders and a former officer. Total payments to Market Management, LLC
during 2003 were $120,000 and during 2004 totaled $50,000.
Since the reverse merger on December 12, 2002, the Company has adopted a policy
that all related party transactions must be reviewed by and unanimously approved
by the outside directors.
Other than elections to office, no director, nominee for director, executive
officer or associate of any of the foregoing persons has any substantial
interest, direct or indirect, by security holdings or otherwise, in any matter
to be acted upon at the Annual Meeting.
Submission of Shareholder Proposals
In order for shareholder proposals to be included in the Company's Proxy
Statement and proxy relating to the Company's 2006 Annual Meeting of
Shareholders, such proposals must be received by the Company at its principal
executive offices not later than December 31, 2005. If the Company receives
notice of a shareholder proposal after June 10, 2005, persons named as proxies
for the 2005 Annual Meeting of Shareholders will have discretionary authority to
vote on such proposal at such meeting.
Expenses of Solicitation
All of the expenses of soliciting proxies from shareholders, including the
reimbursement of brokerage firms and others for their expenses in forwarding
proxies and proxy statements to the beneficial owners of the Company's Common
Stock, will be borne by the Company.
8
/s/ Jijun Wu
Chairman
Tianjin, China
July 13, 2005