UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exchange Act of 1934
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by the Registrant [X]
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by a Party other than the Registrant [ ]
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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[X]
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Definitive
Proxy Statement
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to § 240.14a-12
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Professional
Diversity Network, 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)
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4)
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Proposed
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(1)
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Amount
previously paid:
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Form,
Schedule or Registration Statement No.:
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Filing
Party:
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(4)
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Date
Filed:
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October
15, 2018
Dear
Stockholder:
On
behalf of the Board of Directors, I am pleased to invite you to attend the 2018 Annual Meeting of Stockholders of Professional
Diversity Network, Inc. (the “
Company
”). The meeting will be held at the Company’s offices at 801 W.
Adams Street, Sixth Floor, Chicago, Illinois 60607, on November 8, 2018, at 9:00 a.m., Central Time.
At
the meeting, you and the other stockholders will be asked to vote on the proposals described in detail in the notice of meeting
on the following page and the accompanying proxy statement. The proxy materials are being mailed on or about October 15, 2018
to our stockholders of record and beneficial owners as of the close of business on September 14, 2018.
It
is important that your shares be represented and voted at the Annual Meeting regardless of the size of your holdings. Whether
or not you plan to attend the meeting, please vote electronically via the Internet, by telephone or by completing, signing, dating
and returning the proxy card included with a paper copy of the proxy statement as promptly as possible. See “
Voting
”
in the proxy statement for more details. Voting electronically, by telephone or returning your proxy does NOT deprive you of your
right to attend the meeting and to vote your shares in person for the matters acted upon at the meeting.
Thank
you for your continued interest in the Company. We look forward to seeing you at the meeting.
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Sincerely,
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/s/
Maoji (Michael) Wang
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Maoji
(Michael) Wang
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Chief
Executive Officer
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PROFESSIONAL
DIVERSITY NETWORK, INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on November 8, 2018
TO
OUR STOCKHOLDERS:
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Stockholders (the “
Annual Meeting
”) of Professional Diversity Network,
Inc., a Delaware corporation (the “
Company
”), will be held at the Company’s offices, at 801 W. Adams
Street, Sixth Floor, Chicago, Illinois 60607, on November 8, 2018, at 9:00 a.m., Central Time, for the following purposes:
1.
To elect nine directors to serve until the next Annual Meeting of Stockholders (and until their successors are duly elected and
qualified);
2.
To approve an amendment to the Professional Diversity Network, Inc. 2013 Equity Compensation Plan to increase the number of shares
reserved for issuance from 615,000 to 915,000;
3.
To ratify the appointment by the Company’s Audit Committee of Marcum LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2018;
4.
To conduct an advisory vote on the compensation of our named executive officers;
5.
To conduct an advisory vote on the frequency of future advisory votes on the compensation of our named executive officers; and
6.
To transact such other business as may properly come before the Annual Meeting and any adjournment or postponement thereof.
The
Board of Directors has fixed the close of business on September 14, 2018 as the record date for the determination of the holders
of our common stock entitled to notice of and to vote on all matters presented at the Annual Meeting and at any adjournments or
postponements.
A
list of stockholders entitled to vote at the Annual Meeting will be open for examination by any stockholder for any purpose germane
to the meeting during ordinary business hours for a period of ten days prior to the Annual Meeting at the Company’s offices,
at 801 W. Adams Street, Sixth Floor, Chicago, Illinois 60607, and will also be available for examination by any stockholder at
the Annual Meeting until its adjournment.
Your
vote is very important. Please submit your proxy as soon as possible by using the Internet, telephone or mail. Submitting your
proxy by one of these methods will ensure your representation at the Annual Meeting regardless of whether you attend the meeting.
Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy as described in proxy statement so that
your vote will be counted if you are unable to attend the Annual Meeting.
Copies
of the proxy statement and of our annual report for the fiscal year ended December 31, 2017 are available by visiting the following
website:
www.proxyvote.com
and using the control number appeared on the proxy card.
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By
Order of the Board of Directors
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/s/
Jingbo Song
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Jingbo
Song
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Executive
Chairman of the Board
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Chicago,
Illinois
October
15, 2018
PROFESSIONAL
DIVERSITY NETWORK, INC.
PROXY
STATEMENT
TABLE
OF CONTENTS
PROXY
STATEMENT
Professional
Diversity Network, Inc.
801
W. Adams Street, Sixth Floor
Chicago,
Illinois 60607
ANNUAL
MEETING
To
Be Held on November 8, 2018
THE
ANNUAL MEETING
The
enclosed proxy is solicited by and on behalf of the board of directors (the “
Board
”) of Professional Diversity
Network, Inc., a Delaware corporation (“
Professional Diversity Network
,” the “
Company
” or
“
PDN
”), for use at Professional Diversity Network’s 2018 Annual Meeting of Stockholders (the “
Annual
Meeting
”) to be held on November 8, 2018 at 9:00 a.m., Central Time, at the Company’s offices, at 801 W. Adams
Street, Sixth Floor, Chicago, Illinois 60607, and at any and all adjournments or postponements thereof, for the purposes set forth
in the accompanying Notice of Annual Meeting of Stockholders.
We
anticipate that mailing of this proxy statement and form of proxy to our stockholders will commence on or about October 15, 2018.
This proxy statement and the form of proxy relating to the Annual Meeting will also be made available on the Internet to stockholders
on the date that the proxy materials are first sent.
Record
Date and Outstanding Shares
The
Board has fixed the close of business on September 14, 2018 as the record date for the Annual Meeting (the “
Record Date
”).
Only holders of record of the Company’s common stock, $0.01 par value per share (“
Common Stock
”), at
the close of business on the Record Date are entitled to notice of and to vote at the Annual Meeting. Each holder of Common Stock
on the Record Date is entitled to one vote for each share on all matters to be voted upon at the Annual Meeting. As of the close
of business on the Record Date, there were approximately 4,841,404 shares of Common Stock outstanding and entitled to vote.
Quorum
and Vote Required
Quorum
.
The holders of record of a majority of the aggregate voting power of the Common Stock issued and outstanding and entitled to be
voted, present in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting or any adjournment
or postponement thereof. In the event there are not sufficient shares present to establish a quorum or to approve proposals at
the time of the Annual Meeting, the Annual Meeting may be adjourned in order to permit further solicitation of proxies by the
Company.
Vote
Required
. Holders of Common Stock are entitled to one vote for each share held as of the Record Date on all matters to be
voted on. In the election of directors (Proposal 1), the Board will be elected by a plurality of the voting power of the Common
Stock represented in person or by proxy and entitled to vote at the Annual Meeting. Each stockholder is entitled to vote in favor
or withhold his, her or its vote with respect to each individual nominee or all nominees. Votes that are withheld will have no
effect on the outcome of the election of directors. The Company’s Bylaws provide that, except as otherwise provided by applicable
law, the rules of the Nasdaq Stock Market, the Company’s Certificate of Incorporation or the Bylaws, all matters other than
the election of directors will be decided by the vote of a majority in voting power of the shares present in person or by proxy
and entitled to vote at the Annual Meeting and on the matter. The affirmative vote of a majority in voting power of the shares
present in person or by proxy and entitled to vote at the Annual Meeting and on such proposal is required to approve Proposal
2 (Amendment of the Professional Diversity Network, Inc. 2013 Equity Compensation Plan) and Proposal 3 (Auditing Firm Ratification
Proposal). None of the proposals are contingent upon the approval of any other proposal.
Abstentions
.
Abstentions will be counted for purposes of determining a quorum at the Annual Meeting. Abstentions are not considered votes cast
and therefore will have no effect on the outcome of Proposal 1 (Election of Directors). Abstentions with respect to Proposal 2
(Amendment of the Professional Diversity Network, Inc. 2013 Equity Compensation Plan) and Proposal 3 (Ratifying the Selection
of Marcum LLP) will have the same effect as a vote against such proposals.
Broker
Discretionary Voting
. If your shares are held in a brokerage account, by a bank or other nominee, you are considered the beneficial
owner of shares held in “street name,” and the proxy materials are being sent to you by your broker, bank or other
nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right
to direct your broker, bank or other nominee how to vote. If you do not give instructions to your brokerage firm or bank, it will
still be able to vote your shares with respect to “discretionary” proposals, but will not be allowed to vote your
shares with respect to “non-discretionary” proposals. The Company expects that Proposal 3 (Ratifying the Selection
of Marcum LLP) will be considered to be a discretionary proposal on which banks and brokerage firms may vote. The Company expects
that all other proposals being presented to stockholders at the Annual Meeting will be considered to be non-discretionary items
on which banks and brokerage firms may not vote. Therefore, if you do not instruct your broker or bank regarding how you would
like your shares to be voted, your bank or brokerage firm will not be able to vote on your behalf with respect to these proposals.
In the case of these non-discretionary items, the shares will be treated as “broker non-votes.” Broker non-votes are
shares that are held in “street name” by a bank or brokerage firm that indicates on its proxy that it does not have
discretionary authority to vote on a particular matter. Your failure to give instructions to your bank or broker will not affect
the outcome of Proposal 1, because broker non-votes are not considered votes cast, nor the outcome of Proposal 2 or Proposal 3
because Proposal 2 and Proposal 3 require the affirmative vote of a majority in voting power of the shares present in person or
by proxy and entitled to vote at the Annual Meeting and on these proposals and broker non-votes will not be deemed “entitled
to vote on the proposal” and therefore broker non-votes are not counted in the vote for these proposals.
Shares
Not Present in Person or by Proxy at the Annual Meeting
. Shares not present in person or by proxy at the Annual Meeting will
not be counted for purposes of determining a quorum at the Annual Meeting and will have no impact on the outcome of Proposal 1,
Proposal 2 or Proposal 3.
Expenses
of Proxy Solicitation
Officers,
directors and other employees of the Company may solicit proxies in person or by regular mail, electronic mail, facsimile transmission
or personal calls. These persons will receive no additional compensation for solicitation of proxies, but may be reimbursed for
reasonable out-of-pocket expenses.
The
Company will pay all of the expenses of soliciting proxies to be voted at the Annual Meeting. Banks, brokerage firms and other
custodians, nominees or fiduciaries will be requested to forward soliciting material to their principals and to obtain authorization
for the execution of proxies. They will be reimbursed for their reasonable out-of-pocket expenses incurred in that regard.
Voting
Methods
Your
vote is important. You may vote on the Internet, by telephone, by mail or by attending the Annual Meeting and voting by ballot,
all as described below. If you vote by telephone or on the Internet, you do not need to return your proxy card or voting instruction
card. Telephone and Internet voting facilities are available now and will be available 24 hours a day until 11:59 p.m., Eastern
Time, on November 7, 2018.
Vote
on the Internet
If
you have Internet access, you may submit your proxy by going to
www.proxyvote.com
and following the instructions provided
on the secure website. If you vote on the Internet, you do not have to mail in a proxy card.
Vote
by Telephone
You
can also vote by telephone by calling 1-800-690-6903. Easy-to-follow voice prompts allow you to vote your shares and confirm that
your instructions have been properly recorded. If you vote on by telephone, you do not have to mail in a proxy card.
Vote
by Mail
If
you choose to vote by mail, complete, sign and date the proxy card included with a paper copy of this proxy statement, and return
it to the attention of the Company’s Secretary at the Company’s offices, at 801 W. Adams Street, Sixth Floor, Chicago,
IL 60607. Please allow sufficient time before the date of the Annual Meeting for mailing if you decide to vote by mail.
Vote
at the Annual Meeting
The
method or timing of your vote will not limit your right to vote at the Annual Meeting if you attend the Annual Meeting and vote
in person. However, if your shares are held in the name of a bank, broker or other nominee, you must obtain a legal proxy, executed
in your favor, from the holder of record to be able to vote at the Annual Meeting. You should allow yourself enough time prior
to the Annual Meeting to obtain this proxy from the holder of record.
Street
name holders may submit a proxy by telephone or the Internet if their bank or broker makes these methods available, in which case
the bank or broker will enclose related instructions with this proxy statement. If you submit a proxy by telephone or via the
Internet you should not return the proxy card included with a paper copy of this proxy statement. If you hold your shares through
a bank, broker or other nominee you should follow the voting instructions you receive from your bank, broker or other nominee.
R
evocability
of Proxy
If
you are the holder of record for your shares, you may revoke your proxy at any time before it is exercised at the Annual Meeting
by taking either of the following actions: (i) delivering to the Company’s Secretary a revocation of the proxy or a new
proxy relating to the same shares and bearing a later date prior to the vote at the Annual Meeting; or (ii) attending the Annual
Meeting and voting in person, although attendance at the Annual Meeting will not, by itself, revoke a proxy. Stockholders may
also revoke a prior proxy submitted by telephone or on the internet by providing later voting instructions for voting of a later
proxy prior to 11:59 P.M. Eastern Time the night of the last business day, November 7, 2018, before the date of the Annual Meeting.
Appraisal
Rights
Stockholders
have no appraisal rights with respect to any of the matters to be voted upon at the Annual Meeting.
Recommendation
of the Board of Directors
The
Board of Professional Diversity Network recommends that Professional Diversity Network stockholders vote
FOR
the election
of each nominee for director (Proposal 1),
FOR
the amendment to the Professional Diversity Network, Inc. 2013 Equity Compensation
Plan (Proposal 2),
FOR
the ratification of the Company’s selection of Marcum LLP as the Company’s independent
registered public accounting firm (Proposal 3),
FOR
the approval of the compensation paid to our named executive officers
as disclosed in this Proxy Statement (Proposal 4) and
FOR
the approval of the frequency of future advisory votes to approve
the compensation of our named executive officers (Proposal 5).
PROPOSAL
1: NOMINATION AND ELECTION OF DIRECTORS
Nominees
for Director
The
Board has nominated the nine persons listed below to be elected as directors at the Annual Meeting. Directors are to be elected
by a plurality vote of the voting power of the Common Stock present in person or by proxy at the Annual Meeting to serve until
the next Annual Meeting and until their successors have been duly elected and qualified. All of the nominees are currently members
of the Board.
The
following table provides the name, age and position of each of our nominees of the Board as of the date of this proxy statement.
There are no family relationships between our executive officers and directors.
Name
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Age
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Position
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James
Kirsch
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56
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Non-executive
Chairman of the Board
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Maoji
(Michael) Wang
|
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46
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Chief
Executive Officer and Director
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Jingbo
(James) Song
|
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64
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Executive
Co-Chairman of the Board
|
Star
Jones
|
|
56
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President
and Director
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Xin
(Adam) He
|
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45
|
|
Director
(1), (3)
|
Michael
D. Belsky
|
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57
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Director
(1), (2), (3)
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Haibing
Gong
|
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45
|
|
Director
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Lida
Fang
|
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60
|
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Director
(1)
|
Hao
(Howard) Zhang
|
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50
|
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Director
(2), (3)
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(1)
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Member
of our audit committee.
|
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(2)
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Member
of compensation committee.
|
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(3)
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Member
of our nominating and corporate governance committee.
|
Set
forth below is the name of each nominee for election to the Board, as well as each such person’s age, his or her current
principal occupation (which has continued for at least the past five years unless otherwise indicated) together with the name
and principal business of the company that employs such person, if any, the period during which such person has served as a director
of the Company, all positions and offices that such person holds with the Company and such person’s directorships over the
past five years in other companies with a class of securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended (the “
Exchange Act
”) or subject to the requirements of Section 15(d) of the Exchange Act
or companies registered as an investment company under the Investment Company Act of 1940 and the specific experience, qualifications,
attributes or skills that led to the conclusion that such person should serve as a director of the Company.
James
Kirsch
(age 56) served as our Executive Co-Chairman of the Board since November 2016. Mr. Kirsch resigned as Co-Executive
Chairman of the Board effective June 4, 2018 and continued to serve as a director and non-executive Chairman of the Company. He
previously served as our Chief Executive Officer and Chairman of the Board from the consummation of our initial public offering
in March 2013 until March 2016 and, prior to our initial public offering, served as our Chief Executive Officer and a member of
our management board since 2008. Mr. Kirsch served as Chief Strategic Officer at AMightyRiver.com, a division of the Company from
2004 to 2008 and from 1996 to 2001 as Chief Executive Officer of eSpecialty Brands, an online retail company. Previously, Mr.
Kirsch served as Chief Executive Officer at iMaternity.com, the ecommerce partner of iVillage.com from 1983 to 1996 and Manager,
Vice President and Chief Operating Officer at Dan Howard Industries, a vertically integrated retailer of apparel. He holds a B.S.
in Economics and Political Science from University of Arizona. We believe Mr. Kirsch is a valuable asset to the Board because
of his experience and vision in leading the Company since 2008.
Maoji
(Michael) Wang
(age 46) has been our Chief Executive Officer and a member of the Board since November 2016. He is also an
investor in Cosmic Forward Limited (“
CFL
”), the Company’s majority stockholder and is currently the managing
partner of Beijing Daqian Law Firm, and has held that position since November 2005. Mr. Wang has also served as a vice president
at GNet Group Plc, an e-commerce company based in China, since April 2014, and as Chief Executive Officer of Tibet Weibai Investment
Fund Management Co., Ltd. since March 2016, Guangzhou Gaixin Network Technology Development Co., Ltd. since May 2016 and Guangzhou
Yougaojiu Marketing Management Co., Ltd. since June 2016. He has also worked as a supervisor at Guangzhou Wu Wei E-commerce Services
Co., Ltd. since January 2015 and Yunnan Linkenuodi Education Information Consulting Co., Ltd. since November 2012. Mr. Wang was
originally appointed to our Board and has been nominated to stand for reelection as a director on our Board under the terms of
a stockholders’ agreement entered into between the Company and CFL, our majority stockholder, which agreement grants to
CFL the right to designate one director nominee for every 9.9% of the total voting power of our common stock that CFL beneficially
owns, up to a maximum of six directors.
Jingbo
(James) Song
(age 64) has been a member of the Board and its Executive Co-Chairman since November 2016. He has served as Chairman
of GNet Group Plc., an e-commerce company based in China, since March 2016. Before joining GNet Group Plc., Mr. Song was retired.
Mr. Song was originally appointed to our Board and has been nominated to stand for reelection as a director on our Board under
the terms of a stockholders’ agreement entered into between the Company and CFL, our majority stockholder, which agreement
grants to CFL the right to designate one director nominee for every 9.9% of the total voting power of our common stock that CFL
beneficially owns, up to a maximum of six directors.
Star
Jones
(age 56) has been our President and a member of the Board since September 2014. She joined NAPW’s predecessor
company in September 2011 as its National Spokesperson and became its Chief Development Officer in May 2013 and President in June
2014. Ms. Jones became the “face” of NAPW, tasked with conveying the message, brand and image of NAPW worldwide. As
President, she has responsibility for the overall development, expansion and implementation of NAPW’s development and programming
strategy. For the last 25 years, Ms. Jones has been a licensed attorney in the State of New York and was formerly a New York homicide
prosecutor. Ms. Jones has worked in television for more than 20 years as a journalist, talk show host, commentator, NBC News Legal
Correspondent and Veteran Legal Analyst and co-host of ABC’s
The View
for nine years. She is also regularly seen
on NBC’s
Today Show
and CNN’s
Piers Morgan Live
as a veteran law and news analyst. Ms. Jones is also
an accomplished author who has written two best-selling non-fiction books,
You Have to Stand for Something, or You’ll
Fall for Anything
and
Shine...a Physical, Emotional & Spiritual Journey to Finding Love
. Her third book,
Satan’s
Sisters
, a fictional account of the behind-the-scenes workings of a daytime talk show, was published in the spring of 2011.
In the corporate world, Ms. Jones has been a featured personality for numerous consumer brands including Payless, Saks Fifth Avenue
and Kohls, and has appeared on the cover of and/or been featured in a number of major newspapers and magazines in the country
on topics ranging from news to lifestyle. Her newest venture, Status, by Star Jones, a collection of women’s apparel for
the professional woman, was launched by QVC in the fall of 2013. Since 2011, she has actively participated in the American Heart
Association’s National Go Red efforts, has lobbied Congress on behalf of that association and was asked by the Presidential
Inaugural Committee to speak at the National Day of Service on heart health during President Obama’s 2013 Inauguration.
As the National Volunteer for the American Heart Association, Ms. Jones led NAPW in its efforts to help raise awareness of heart
disease during “Heart Month,” helping to raise millions of dollars for much needed research and community outreach.
Ms. Jones was selected to serve as a director based on her substantial leadership and networking abilities, as well as her in-depth
knowledge of the business of NAPW.
Xin
(Adam) He
(age 45) has been a member of the Board since January 2018. Mr. He has served as Chief Financial Officer of Wanda
America Investment Holding Co. since May 2012, and majorly managed two projects – a 99-story landmark building development
in downtown Chicago since February 2015, and NYSE traded AMC Entertainment Holdings, Inc. from August 2012 to February 2015, principally
involved in the theatrical exhibition business by owning and operating 660 theatres primarily located in the United States. He
also served as an independent board director at iFresh Inc. and Energy Focus Inc., both listed on NASDAQ. From December 2010 to
May 2012, he served as Financial Controller of NYSE listed Xinyuan Real Estate Co., a top developer of large scale, high quality
residential real estate projects. Previously, Mr. He served as an auditor at Ernst & Young, LLP in New York, and held various
roles at Chinatex Corporation and an architecture company. He is a member of the Financial Executives International and vice chair
of the China General Chamber of Commerce Chicago. Mr. He obtained a Master of Science in Taxation from Central University of Finance
and Economics in Beijing, and a Master of Science in Accounting from Seton Hall University in New Jersey. He is a Certified Public
Accountant, both in China and in US.
Michael
D. Belsky
(age 57) has been a member of the Board since January 2018. Mr. Belsky is the Executive Director of the Center for
Municipal Finance at Harris and teaches a course on the fundamentals of municipal bonds as part of the Municipal Finance Certificate
Program. Mr. Belsky was previously the Managing Director for Fixed Income at Greenwich Investment Management a firm specializing
in High Yield Municipal Bonds. Prior to joining the firm he worked in the municipal finance industry for over 30 years. From 2009
to 2011 he developed a credit review process for Chicago-based C.W. Henderson and Associates, a $3 billion municipal bond investment
advisory firm. Mr. Belsky spent most of his career as Group Managing Director of the Public Finance Group at Fitch Ratings. He
worked at the rating agency from 1993 to 2008 and was named top rating agency executive in public finance by institutional investors
three years in a row (Smith’s Research and Ratings Review Municipal All Star Team, 2005–07). Mr. Belsky also served
two terms as a member of the City Council in Highland Park, Illinois (1995–2003), and two terms as mayor (2003–11).
Under his leadership the city received national recognition in the areas of environmental sustainability, budgeting, financial
reporting, affordable housing and local health initiatives. The city maintained a triple-A rating by Moody’s Investors Service
throughout his tenure. From 2008 to 2011 Mr. Belsky was a member of the Governmental Accounting Standards Board, a national body
that sets accounting and financial reporting standards for state and local governments. Mr. Belsky received a BA in urban studies
from Lake Forest College and an MA in public policy from the University of Chicago.
Haibin
Gong
(age 62) has extensive experience in the fashion industry in China and was one of the earliest Chinese international
male models. Since April 2017, Mr. Gong has been serving as the Legal Representative of Jiangshan Culture and Tourism Development
Co., Ltd. Since 2010, Mr. Gong has been serving as the Secretary General and Chief Negotiator of Asian Professional Modeling Committee.
In addition, since 2010, Mr. Gong has been serving as President and Secretary General at “MRS GLOBE”, a beauty contest
sponsored by the US charity WIN Fund for married women globally. MRS GLOBE has been held in various countries around the world
since 1996, having global influence and receiving support from many celebrity politicians. Mr. Gong is very influential in the
fashion and women circles in China. He also actively promotes interactions among various women’s associations and seminars,
which greatly promotes the development of women’s career.
Lida
Fang
(age 60) has extensive experience and resources in the media industry and has been actively promoting the career development
of Chinese women. From March 2001, Ms. Fang has been serving as the editor in chief of magazine
Illustrated Newspaper of Macao,
Hong Kong and Taiwan
. From 2001 to 2017, Ms. Fang served as a member of the committee of Beijing Liaison Committee of China
Democratic National Construction Association. Since 2008, Ms. Fang has been working as the vice academic dean of Beijing Charity
Academy. Ms. Fang received her MBA from Beihang University in 2004 and her bachelor degree in Computer Science from HeFei University
of Technology in 1985.
Hao
(Howard) Zhang
(age 50) has been a member of the Board since November 2016. Mr. Zhang is a private investor based in China.
Mr. Zhang has served as a director of Wealth Power Global Trading Limited since June 2015. Mr. Zhang was originally appointed
to our Board and has been nominated to stand for reelection as a director on our Board under the terms of a stockholders’
agreement entered into between the Company and CFL, our majority stockholder, which agreement grants to CFL the right to designate
one director nominee for every 9.9% of the total voting power of our common stock that CFL beneficially owns, up to a maximum
of six directors.
Required
Vote
In
order to be elected to the Board, each nominee must receive a plurality of the voting power of the Common Stock present in person
or represented by proxy at the Annual Meeting. Stockholders may only vote for or withhold their votes for the election of the
nominees to the Board. Votes that are withheld and broker non-votes, if any, will be counted for purposes of determining the presence
or absence of a quorum. Votes that are withheld, abstentions and broker non-votes will have no effect on the election of directors.
Unless instructions to the contrary are specified, as permitted by applicable law and the rules of the Nasdaq Stock Market, the
proxy holders will vote the proxies received by them “FOR” each of the director nominees.
Recommendation
of the Board of Directors
The
Board recommends that the stockholders vote “FOR” the election of all of the nominees as directors.
CORPORATE
GOVERNANCE
Meetings
and Committees of the Board of Directors
The
Board has constituted an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee.
Audit
Committee
. The Audit Committee was established for the purpose of overseeing the Company’s accounting and financial
reporting processes and audits of the Company’s financial statements. The Audit Committee met on 4 occasions in 2017 and
operates under a charter approved by the Board. The Audit Committee’s primary functions are:
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to
assist the Board with the oversight of the Company’s financial reporting process, accounting functions and internal
controls; and
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the
appointment, compensation, retention and oversight of the work of any registered public auditing firm employed by the Company
for the purpose of preparing or issuing an audit report or related work.
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The
Audit Committee currently consists of Xin (Adam) He (Audit Committee Chair), Michael D. Belsky and Lida Fang, each of whom are
independent under the rules of the NASDAQ Stock Exchange. The Audit Committee meets periodically with the Company’s independent
registered public accounting firm, both with and without management present. The Board has determined that Mr. He is an “audit
committee financial expert” within the meaning of Item 407 of Regulation S-K under the Exchange Act. A copy of the Audit
Committee charter is posted and available on the Corporate Governance link of the Investor Relations section of the Company’s
website,
www.ipdnusa.com
. Information on the Company’s website is not incorporated by reference in this proxy statement.
Compensation
Committee
. The Compensation Committee met on one occasion in 2017 and operates under a charter approved by the Board. The
Compensation Committee’s primary functions are:
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annually
reviewing and approving corporate goals and objectives relevant to Chief Executive Officer compensation, evaluating the Chief
Executive Officer’s performance in light of those goals and objectives, and recommending to the Board the Chief Executive
Officer’s overall compensation levels based on this evaluation;
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annually
reviewing and approving the annual base salaries and annual incentive opportunities of the Chief Executive Officer and the
other executive officers;
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reviewing
and approving the following as they affect the Chief Executive Officer and the other executive officers: (a) all other incentive
awards and opportunities, including both cash-based and equity-based awards and opportunities; (b) any employment agreements
and severance arrangements; and (c) any change-in-control agreements and change-in-control provisions affecting any elements
of compensation and benefits; and
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monitoring
and evaluating matters relating to the compensation and benefits structure of the Company as the Compensation Committee deems
appropriate, including: (a) providing guidance to senior management on significant issues affecting compensation philosophy
or policy and (b) evaluating whether the risks arising from the Company’s compensation policies and practices for its
employees would be reasonably likely to have a material adverse effect on the Company.
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The
Compensation Committee currently consists of Michael D. Belsky and Hao (Howard) Zhang. The Compensation Committee also has authority
to delegate its responsibilities to a subcommittee. The Company and the Compensation Committee may, from time to time, directly
retain the services of consultants or other experts to assist the Company or the Compensation Committee, as the case may be, in
connection with executive compensation matters. The Compensation Committee does not believe the risks from the Company’s
compensation policies and practices for its employees would be reasonably likely to have a material adverse effect on the Company.
A
copy of the Compensation Committee charter is posted and available on the Corporate Governance link of the Investor Relations
section of the Company’s website,
www.prodivnet.com
.
Information on the Company’s website is not incorporated
by reference in this proxy statement.
Nominating
and Corporate Governance Committee
. The Nominating and Corporate Governance Committee met on 1 occasion in 2017 and operates
under a charter approved by the Board. The Nominating and Corporate Governance Committee’s primary functions are:
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leading
the search for individuals qualified to serve as members of the Board and conducting the appropriate inquiries with respect
to such persons;
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evaluating
the size and composition of the Board and its committees and recommending any changes to the Board;
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reviewing
the qualifications of, and making recommendations regarding, director nominations submitted to the Company by shareholders;
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reviewing
the Board’s committee structure and recommending to the Board for its approval directors to serve as members of each
committee; and
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reviewing
and recommending committee slates annually and recommending additional committee members to fill vacancies as needed.
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The
Nominating and Corporate Governance Committee currently consists of Michael D. Belsky (Nominating and Corporate Governance Committee
Chair), Xin (Adam) He and Hao (Howard) Zhang. A copy of the charter of the Nominating and Corporate Governance Committee is posted
and available on the Corporate Governance link of the Investor Relations section of the Company’s website,
www.prodivnet.com
.
Information on the Company’s website is not incorporated by reference in this proxy statement.
Attendance
at Board and Committee Meetings
During
the fiscal year ended December 31, 2017, the Board held a total of 10 meetings. Each member of the Board, other than Hao (Howard)
Zhang, attended 80% or more of the meetings of the Board and of the committees of which the director was a member during the fiscal
year ended December 31, 2017. The Company does not have a policy regarding director attendance at Annual Meetings of stockholders,
however, all directors are strongly encouraged to attend.
Director
Independence
Our
Board has reviewed the materiality of any relationship that each of our directors has with us, either directly or indirectly.
Based on this review, our board has determined that Messrs. Belsky, He, Gong and Zhang and Ms. Fang are “independent directors”
as defined by Rule 5605(a)(2) of the Marketplace Rules of the Nasdaq Stock Market. Under the terms of a stockholders’ agreement
entered into between the Company and CFL, our majority stockholder, CFL has right to designate one director nominee for every
9.9% of the total voting power of our common stock that CFL beneficially owns, up to a maximum of six directors.
Board
Leadership Structure
The
Board does not have a policy requiring that the roles of Chief Executive Officer and Chairman of the Board (or Co-Chairmen of
the Board) be separate. The Board believes that the Company and its stockholders benefit when the Board is free to determine the
most appropriate leadership structure in light of the experience, skills and availability of directors and the Chief Executive
Officer as well as other circumstances. From November 7, 2016 through June 4, 2018 Mr. Kirsch and Mr. Song served as Executive
Co-Chairmen of the Board. Following Mr. Kirsch’s resignation as the Co-Executive Chairman on June 4, 2018, he continued
to serve as a director and non-executive Chairman of the Company and Mr. James Song became the sole Executive Chairman of the
Board. Additionally, because five of the Company’s nine Board members have been determined by the Board to be “independent,”
the Board believes that its current structure provides sufficient independent oversight of management given the Company’s
current size, and therefore, the Board has not designated a lead independent director.
Board’s
Role in Management of Risk
The
Company faces numerous risks more fully described in the Company’s annual and quarterly reports filed with the SEC. The
Company’s management bears responsibility for the day-to-day management of risks the Company faces and for communicating
the most material risks to the Board and its committees. The Board, as a whole and through its committees, is responsible for
company-wide oversight of risk management. The Board and its committees perform their risk management function principally through
the receipt of regular reports from management and discussions with management regarding risk assessment and risk management.
In its risk oversight role, the Board is responsible for satisfying itself that the risk management processes described and implemented
by management are adequate and functioning as designed.
Board
Nominee Process
The
Board has adopted a Nominating and Corporate Governance Committee Charter, which includes the Company’s general director
nomination policies.
The
Nominating and Corporate Governance Committee (the “
Nominating Committee
”) believes that it is in the best
interest of the Company and its stockholders to obtain highly-qualified candidates to serve as members of the Board. In addition
to any past or future policies adopted by the Board, with respect to director nominations, the Nominating Committee will consider
any additional factors as it deems appropriate to assist in developing a Board and committees that are diverse in nature and comprised
of experienced and seasoned advisors. These factors may include decision-making ability, judgment, personal integrity and reputation,
experience with businesses and other organizations of comparable size, experience as an executive with a publicly traded company
and the extent to which the candidate would be a desirable addition to the Board and any committees of the Board.
The
Nominating Committee Charter specifically requires the Nominating Committee to develop a Board that reflects diversity among its
members. The Nominating Committee is able to assess the effectiveness of the Company’s policy regarding diversity through
its regular, required monitoring of the composition of the Board and its committees. Further, in connection with such regular
monitoring, the Nominating Committee Charter specifically requires the Nominating Committee to determine whether it may be appropriate
to add individuals with different backgrounds or skills to the Board.
The
Nominating Committee may use multiple sources for identifying director candidates, including its own contacts and referrals from
other directors, members of management, the Company’s advisors and executive search firms. The Nominating and Corporate
Governance Committee will also consider director candidates recommended by stockholders in accordance with the procedures governing
such recommendations in the Company’s bylaws and will evaluate such director candidates in the same manner in which it evaluates
candidates recommended by other sources.
Stockholder
Communication with the Board of Directors
Stockholders
may communicate with one or more directors or the Board as a whole by sending written communications addressed to such person
or persons to the Secretary, Professional Diversity Network, Inc., 801 W. Adams Street, Sixth Floor, Chicago, Illinois 60607,
or by sending electronic mail to
investor@prodivnet.com
. All communications will be compiled by the Secretary and relayed
to the applicable director or directors.
Code
of Business Conduct and Ethics
We
have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors, including those
officers responsible for financial reporting. The code of business conduct and ethics is available under the “Investor Relations”
tab on our corporate website at
www.prodivnet.com
. Any amendment to, or waiver from, a provision of such code of ethics
will be posted on our website. Information on the Company’s website is not incorporated by reference in this proxy statement.
Certain
Relationships and Related Party Transactions
The
following is a summary of transactions, since January 1, 2017, to which we have been a party in which the amount involved exceeded
the lesser of $120,000 or 1% of the average of our total assets at December 31, 2016 and December 31, 2017, and in which any of
our directors, executive officers, beneficial holders of more than 5% of our capital stock or certain other related persons had
or will have a direct or indirect material interest, other than compensation arrangements that are described under the section
of this proxy statement entitled “
Executive Compensation
.”
Stockholders’
Agreement
. As previously disclosed, in November 2016, we concluded a transaction with CFL pursuant to a stock purchase
agreement, the result of which was that CFL became our majority stockholder. At time of the closing of such transaction with CFL,
we also entered into a stockholders’ agreement (as amended, the “
Stockholders’ Agreement
”) with
CFL and each of its shareholders: Maoji (Michael) Wang, Jingbo Song, Yong Xiong Zheng and Nan Nan Kou (collectively, the “
CFL
Shareholders
”). The Stockholders’ Agreement sets forth the agreement of the Company, CFL and the CFL Shareholders
relating to board representation rights, transfer restrictions, standstill provisions, voting, registration rights and other matters
following the closing of the November transaction between CFL and the Company.
Under
the Stockholders’ Agreement, the CFL Shareholders and their respective controlled affiliates (collectively, the “
CFL
Group
”) are prohibited from directly or indirectly acquiring, agreeing to acquire or publicly proposing or offering
to acquire any shares of Common Stock directly from PDN or commencing any tender offer or exchange offer for any shares of common
stock, in each case which would cause the aggregate beneficial ownership of members of the CFL Group to exceed 54.64% of the then
outstanding shares of Common Stock, on a fully-diluted basis. In addition, members of the CFL Group are prohibited from directly
or indirectly acquiring, agreeing to acquire or publicly proposing or offering to acquire directly or indirectly, or commencing
any tender offer or exchange offer for, any other capital stock or debt securities of the Company. Any common stock or rights
to acquire common stock granted to an affiliate of CFL or a CFL Shareholder in his or her capacity as an employee, director or
officer of the Company pursuant to a board-approved compensation or equity plan are excluded from this beneficial ownership cap
and are to be excluded from the calculation of the beneficial ownership of members of the CFL Group.
Notwithstanding
the foregoing, members of the CFL Group have the right to make open market purchases or privately-negotiated purchases from the
Company’s stockholders of additional shares of common stock up to any amount, provided that, as a result of such purchases,
the Company does not have fewer than 350 stockholders, thus preventing the CFL Group from causing the Company to fall below the
number of stockholders required to maintain a listing on the NASDAQ Capital Market.
For
so long as members of the CFL Group beneficially own at least 25% of our outstanding shares of common stock, CFL and the CFL Shareholders
have a participation right with respect to any future issuances of our common stock, such that CFL and the CFL Shareholders may
purchase an amount of shares necessary to maintain its then-current beneficial ownership interest, up to a maximum of 54.64% of
our then-outstanding Common Stock, on a fully-diluted basis, subject to certain exceptions. This participation right does not
apply to any issuance by the Company:
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as
consideration in any merger, acquisition or similar strategic transaction approved by the Board;
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to
directors, officers or employees, advisors or consultants pursuant to a compensation, incentive or similar plan approved by
the Board;
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as
a result of the conversion of convertible securities or the exercise of any warrants, options or other rights to acquire PDN’s
capital stock; or
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in
an “at the market offering” or other continuous offering of equity securities by PDN.
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This
participation right also does not apply to the extent that, as a result of the exercise thereof, CFL and the CFL Shareholders
would beneficially own greater than 54.64% of PDN’s then outstanding Common Stock, on a fully-diluted basis.
The
Stockholders’ Agreement contains standstill provisions that, among other things and subject to certain exceptions, prohibit
members of the CFL Group from, directly or indirectly:
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facilitating,
knowingly encouraging, inducing, supporting or becoming a “participant” in, or a member of certain “groups”
(as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”)) formed
for the purposes of acting with respect to, any solicitation of proxies or consents with respect to any proposal submitted
to the holders of our voting securities for their consideration, vote or consent, other than any such proposal included in
the Company’s definitive proxy statement including the affirmative recommendation of the Board or any committee thereof;
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submitting,
inducing, facilitating or knowingly encouraging the making or submission by any person or entity to the Board, management
or any of our security holders, any proposal or offer providing for or contemplating any merger, acquisition, sale, lease,
mortgage, encumbrance or pledge or other transfer of all or a material portion of the assets of, business combination, amalgamation,
share exchange, tender or exchange offer, recapitalization, reorganization, spin-off, issuance or sale or purchase or shares
of any class of capital stock, dissolution, liquidation or winding up, or any similar transaction, in each case, involving
the Company’s or any of its subsidiaries’ securities, assets or businesses, except for an acquisition proposal
for all of the outstanding common stock satisfying the conditions described below; or
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taking
any action, directly or indirectly, to change the composition of the Board or its committees such that they no longer satisfy
NASDAQ Listing Rule 5605 regarding board and committee independence.
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These
restrictions generally do not prohibit members of the CFL Group from:
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making
a bona fide acquisition proposal or offer to the Company to acquire all outstanding shares of Common Stock not then beneficially
owned by members of the CFL Group, provided such proposal contemplates the acquisition of all shares of Common Stock for 100%
cash consideration and is expressly and irrevocably conditioned at the time the proposal is made on the approval of both a
committee (a “
Special Committee
”) of the Board comprised solely of independent directors, a majority of
which are not CFL Board Designees (as defined below; currently Mr. Hillman and Mr. Schramm) and the affirmative vote of a
majority of the outstanding shares of Common Stock not then beneficially owned by the CFL Group; or
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transferring
their shares of Common Stock in connection with a third-party tender offer or a third-party business combination proposal,
provided that:
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such
third-party tender offer or proposal was not commenced or conducted as a result of a
breach of the standstill provisions of the Stockholders’ Agreement; and
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no
such transfer shall be permitted during the one-year period following the closing of
the Share Issuance (the “
Lock-Up Period
”) unless the third-party tender
offer or proposal has been approved and recommended by a Special Committee or by the
Board (including the affirmative vote of a majority of the independent directors, which
majority includes at least one independent director that is not a CFL Board Designee).
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The
Stockholders’ Agreement provides for certain restrictions on the ability of members of the CFL Group to transfer their shares
of Common Stock during the Lock-Up Period. However, members of the CFL Group are permitted to transfer shares of Common Stock
to:
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CFL,
one or more CFL Shareholders, any of their respective controlled affiliates, or, in the case of the CFL Shareholders, certain
of its family members;
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certain
third-parties as discussed above;
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to
PDN or any of its subsidiaries; or
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in
any transaction approved in advance by the Special Committee or the Board (including the affirmative vote of a majority of
the independent directors, which majority includes at least one independent director that is not a CFL Board Designee).
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Notwithstanding
these restrictions, during the Lock-Up Period, members of the CFL Group may transfer shares of Common Stock at any time, in a
single transaction or in multiple transactions, provided the aggregate number of shares transferred may not exceed 10% of the
outstanding shares of Common Stock. In addition, as noted above, members of the CFL Group may transfer their shares of Common
Stock during the Lock-Up Period in connection with a third-party tender offer or third-party business combination proposal.
Following
the expiration of the Lock-Up Period, members of the CFL Group may transfer their shares of Common Stock without restriction under
the Stockholders’ Agreement, provided that, as a result of such transfers, no single transferee acquires beneficial ownership
of more than 14.9% of the then-outstanding outstanding shares of Common Stock.
CFL
and the CFL Shareholders may transfer or issue capital stock of CFL to any party, as long as the CFL Shareholders continue to
own a majority of the outstanding capital stock and voting power of CFL.
Under
the Stockholders’ Agreement, CFL and the CFL Shareholders have the right to nominate individuals reasonably acceptable to
the Nominating and Governance Committee of the Board for election as directors of PDN (the
“CFL Board Designees
”),
for so long as the CFL Group beneficially owns at least 9.9% of PDN’s total voting power. For purposes of the Stockholders’
Agreement, “total voting power” means the total number of votes represented by and entitled to be cast by holders
of PDN’s outstanding voting securities.
CFL
has the right to nominate one director nominee for every 9.9% of total voting power that the CFL Group beneficially owns, provided
that, under the Stockholders’ Agreement, CFL will not have the right to nominate more than six directors regardless of how
many shares of Common Stock it beneficially owns. CFL and the CFL Shareholders may assign the right to designate a director to
any third party to whom CFL or a CFL Shareholder sells 9.9% of the total voting power.
For
so long as the Stockholders’ Agreement is in effect, the size of the Board will be fixed at nine directors.
In
addition, unless otherwise approved by the Board (including the affirmative vote of a majority of the independent directors then
on the Board, which majority includes at least one independent director that is not a CFL Board Designee), PDN will not utilize
any controlled company exceptions to the corporate governance requirements under NASDAQ rules. As CFL’s board designation
rights decrease, so do the number of CFL Board Designees that must be independent. Specifically, if CFL has the right to designate:
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Five
or six CFL Board Designees, then three must be independent;
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four
CFL Board Designees, then two must be independent;
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three
CFL Board Designees, then one must be independent; and
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fewer
than three CFL Board Designees, then CFL will not be required to designate any independent directors.
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At
least one CFL Board Designee will serve on each committee of the Board. Consistent with the Stockholders’ Agreement, at
the closing of the Share Issuance, the Board appointed Jim Kirsch and Jingbo Song as co-Chairmen of the Board. If Mr. Kirsch is
no longer serving on the Board, then there will be no co-Chairmanship, and Mr. Song or another CFL Board Designee will be the
sole Chairman of the Board. Board Chairmanship will be designated by CFL for so long as CFL has board designation rights under
the Stockholders’ Agreement.
PDN
will maintain directors’ and officers’ liability insurance for the benefit of each CFL Board Designee on substantially
similar terms, conditions and amounts as its current insurance policy, and shall provide the CFL Board Designees with all benefits
as currently provided to other directors performing similar roles.
CFL
and the CFL Shareholders must cause all of the shares of Common Stock held by the CFL Group to be present for quorum purposes
at every meeting of PDN’s stockholders. In addition, CFL and the CFL Shareholders will cause all of the shares of Common
Stock held by the CFL Group to be voted (i) “for” the election of all director nominees approved and recommended by
the Board, for so long as PDN is in material compliance with the Stockholders’ Agreement and (ii) “against”
any proposal that would have the effect of circumventing the Stockholders’ Agreement.
Pursuant
to the Stockholders’ Agreement, following the expiration of the Lock-Up Period, CFL and the CFL Shareholders have unlimited
demand, shelf and piggyback registration rights to require PDN to effect a registration under the Securities Act of a resale of
the shares of Common Stock acquired by CFL at the closing of the Share Issuance and any other shares of Common Stock acquired
by CFL or the CFL Shareholders following the closing.
CFL
and the CFL Shareholders have the right to require PDN to file a registration statement every 120 days, and PDN has the right,
once per twelve-month period, to delay such filing up to 120 days. PDN is required to use commercially reasonable efforts to cause
the registration statement to become effective. PDN is precluded from granting any registration rights to any party in the future
that would adversely impact CFL’s registration rights.
PDN,
on the one hand, and CFL and the CFL Shareholders, on the other hand, agreed to indemnify each other for any material misstatements
or omissions in any registration statement filed pursuant to the registration rights provisions of the Stockholders’ Agreement,
provided that the indemnity obligations of CFL and the CFL Shareholders will cover only information provided by them expressly
for inclusion in the registration statement and is limited to the amount of net proceeds received by CFL and the CFL Shareholders
in the offering to which the registration statement relates.
The
registration rights of CFL and the CFL Shareholders under the Stockholders’ Agreement terminate when CFL or the CFL Shareholder,
as applicable, no longer holds “registrable securities.” For purposes of the Stockholders’ Agreement, “registrable
securities” means:
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any
shares of Common Stock issued to, purchased or acquired by CFL or a CFL Shareholder (other than in violation of the Stockholders’
Agreement); and
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any
of PDN’s securities issued or issuable to CFL or a CFL Shareholder with respect to any shares of Common Stock (including,
by way of stock dividend, stock split, distribution, exchange, combination, merger, recapitalization, reorganization or otherwise).
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Any
particular registrable securities once issued shall cease to be “registrable securities” upon the earliest to occur
of:
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the
date on which such securities are disposed of pursuant to an effective registration statement under the Securities Act;
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the
date on which such securities are disposed of pursuant to Rule 144 (or any successor provision) promulgated under Securities
Act;
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the
date on which such securities may be sold without volume limitations or manner of sale restrictions pursuant to Rule 144 (or
any successor provision) promulgated under the Securities Act (without the requirement that we be in compliance with the current
public information requirement of such rule);
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the
date on which CFL (or a CFL Shareholder, if applicable) ceases to hold, together with its affiliates, at least 10% of the
then outstanding Common Stock; and
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the
date on which such securities cease to be outstanding.
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The
Stockholders’ Agreement will automatically terminate on the 181st day following the date on which the CFL Group beneficially
owns less than 9.9% of the total voting power of the Common Stock, provided that the registration rights provided under the Stockholders’
Agreement will not terminate until CFL and the CFL Shareholders no longer hold any registrable securities as described above.
In addition, the Stockholders’ Agreement will terminate with respect to a CFL Shareholder if it no longer holds any registrable
securities and ceases to control CFL, either jointly or solely. The Stockholders’ Agreement may also be terminated by the
mutual written consent of the parties or if PDN dissolves.
Additional
Equity Purchase by CFL
. On January 13, 2017, the Company entered into a stock purchase agreement dated as of January
13, 2017 (the “
Additional Purchase Agreement
”), with CFL. Pursuant to the Additional Purchase Agreement, the
Company agreed to issue and sell to CFL (the “
Additional Share Issuance
”), and CFL agreed to purchase, at a
price of $9.60 per share (the “
Per Share Price
”), upon the terms and subject to the conditions set forth in
the Additional Purchase Agreement, 312,500 shares of the Company’s common stock. The Per Share Price represented an approximately
3.1% premium to the $9.31 closing consolidated bid price of our common stock on January 12, 2017.
On
January 18, 2017, the Company consummated the Additional Share Issuance. As a result of the completion of the Additional Share
Issuance, as of January 18, 2017, CFL beneficially owned 54.64% of our outstanding shares of Common Stock, on a fully diluted
basis. We received total gross proceeds of $3.0 million from the Additional Share Issuance and approximately $2.8 million in net
proceeds from the Additional Share Issuance, after payment of transaction-related expenses.
Policy
Regarding Review, Approval or Ratification of Related Party Transactions
The
charter of the Company’s Audit Committee sets forth the Company’s policies and procedures for the review, approval
or ratification of transactions in which the Company is a participant and the amount exceeds $120,000, and in which any related
person had or will have a direct or indirect material interest. The Audit Committee charter expressly states that the review and
approval of such transactions is among the responsibilities of the Audit Committee, unless otherwise delegated to another committee
of the Board consisting solely of independent directors. The Audit Committee is authorized to engage independent counsel and other
advisers as it determines is necessary to carry out its duties, including with respect to its review of related party transactions.
There are no additional policies stating the standards required to be met for such transactions to be approved; accordingly, the
Audit Committee will act within its discretion, subject to its fiduciary and other duties, in deciding whether to approve any
related party transaction.
Executive
Compensation
In
this section, we describe our compensation programs and policies and the material elements of compensation for the year ended
December 31, 2017 for our Chief Executive Officer, and our two most highly compensated executive officers, other than our Chief
Executive Officer, whose total compensation was in excess of $100,000. Other than as disclosed below, we did not have any other
employee whose compensation was such that executive compensation disclosure would be required but for the fact that they were
not executive officers as of the end of the last fiscal year. We refer to all individuals whose executive compensation is disclosed
in this proxy statement as our “
named executive officers
.”
Our
Compensation Committee is responsible for reviewing and evaluating the components of our compensation programs, including employee
base salaries and benefit plans. The Compensation Committee will provide advice and recommendations to the Board on such matters.
See “
Corporate Governance-Meetings and Committees of the Board of Directors
” for further details on the role
of the compensation committee.
Compensation
Consultants
The
Company and the Compensation Committee may, from time to time, directly retain the services of consultants and other experts to
assist the Company or the Compensation Committee in connection with executive compensation matters.
Summary
Compensation Table
The
following table provides information regarding the compensation earned during the years ended December 31, 2017 and December 31,
2016 by the persons who served as our Chief Executive Officer and our two most highly compensated executive officers, other than
our Chief Executive Officer, whose total compensation was in excess of $100,000.
Name
and Principal
Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Awards
($)
|
|
|
All
Other Compensation
($)
|
|
|
Total
($)
|
|
Maoji (Michael) Wang,
|
|
|
2017
|
|
|
$
|
320,000
|
|
|
$
|
—
|
|
|
$
|
928,200
|
(2)
|
|
$
|
—
|
|
|
$
|
1,248,200
|
|
Chief Executive Officer(1)
|
|
|
2016
|
|
|
$
|
7,890
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
7,890
|
|
James Kirsch,
|
|
|
2017
|
|
|
$
|
337,261
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
337,261
|
|
Co-executive Chairman and Former Chief
Executive Officer(3)
|
|
|
2016
|
|
|
$
|
344,792
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
344,792
|
|
Jingbo Song,
|
|
|
2017
|
|
|
$
|
315,205
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
315,205
|
|
Co-executive Chairman (4)
|
|
|
2016
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(1)
|
Mr.
Wang was appointed as our Chief Executive Officer on December 22, 2016.
|
|
|
(2)
|
Represents
the grant date fair value of the stock options awarded to Mr. Wang on March 9, 2017 computed in accordance with FASB ASC Topic
718. On such date, Mr. Wang was granted an option to purchase 210,000 shares of the Company’s common stock at an exercise
price of $10.72, of which one-third of such options were immediately exercisable on the date of the grant, one-third vested
and became exercisable on December 22, 2018 and the remaining one-third vest and become exercisable on December 22, 2019.
Please refer to Note 10 of our Quarterly Report on Form 10-Q for the three months ended March 31, 2017 for the assumptions
utilized in calculating the fair value.
|
|
|
(3)
|
Mr.
Kirsch served as our Co-Executive Chairman since March 30, 2016. On March 6, 2018, Mr. Kirsch notified the Company of his
intent to resign as Co-Executive Chairman of the Board, which notification triggered a ninety-day notice period at the expiration
of which Mr. Kirsch shall no longer serve as Co-Executive Chairman. Following Mr. Kirsch’s resignation as Co-Executive
Chairman he shall continue to serve as a director and non-executive Chairman of the Company and Mr. James Song shall be the
sole Executive Chairman of the Board.
|
|
|
(4)
|
Mr.
Song was appointed as our Co-Executive Chairman effective January 12, 2017.
|
Employment
Agreements with Named Executive Officers
In
2016, we entered into an employment agreement with Maoji (Michael) Wang, who became our Chief Executive Officer effective December
22, 2016 (the “
Wang Employment Agreement
”). We have also previously entered into employment agreements with
(i) James Kirsch, our Co-Chairman of the Board, who served as our Chairman and Chief Executive Officer through March 30, 2016
and (ii) Star Jones, our President (each such agreement, a “
2014 Employment Agreement
,” collectively, the “
2014
Employment Agreements
.”
2014
Employment Agreements
The
employment agreement with Mr. Kirsch provides that he will serve as the Company’s Chief Executive Officer and may be designated
to serve as Executive Chairman of the Board and receive an annual base salary of $275,000. Ms. Jones’s Employment Agreement
provides that she will serve as the Company’s President and receive an annual base salary of $300,000. Effective January
1, 2015, upon the approval of the Board, Mr. Kirsch’s annual base salary was increased from $275,000 to $325,000. Mr. Kirsch’s
Employment Agreement provides that his base salary will be automatically increased annually by the greater of 3% of his then current
base salary or the annual percentage increase in the Consumer Price Index.
Each
of the 2014 Employment Agreements provides for an initial term of three years that automatically renews for successive one-year
terms unless either party provides advance written notice of its intention to terminate the employment agreement. In March 2016,
Mr. Kirsch became our Executive Chairman. As a result, the term of Mr. Kirsch’s Employment Agreement was automatically renewed
for another three years, and his base salary in effect immediately prior to his change in role cannot be reduced.
The
2014 Employment Agreements provide that each of Mr. Kirsch and Ms. Star Jones will be eligible to receive an annual bonus and
have his or her salary reviewed each year by the Board. In addition, Mr. Kirsch and Ms. Jones will be reimbursed for all reasonable
business expenses incurred in the ordinary course of business and taking into consideration each such executive officer’s
unique responsibilities within the Company. The 2014 Employment Agreements also generally allow each of the executives to participate
in all benefit plans and programs offered by the Company.
Under
the terms of the 2014 Employment Agreements, each of Mr. Kirsch and Ms. Jones is subject to non-competition, non-interference
and non-raiding restrictive covenants during their employment and 18 months following the named executive officer’s last
day of employment with the Company. In the event that employment is terminated without “cause” or Mr. Kirsch and Ms.
Jones resign for “good reason” (as those terms are defined by the 2014 Employment Agreements), the post-employment
restrictive covenant period may not extend past the severance period (as described below). The 2014 Employment Agreements also
contain customary confidentiality, work product and return of Company property covenants.
The
2014 Employment Agreements provide each of Mr. Kirsch and Ms. Jones with severance pay in the event they are terminated without
“cause” or resign for “good reason.” Upon such a termination of employment, they are entitled to continue
to receive their monthly salary at the then current rate for the greater of six months or the number of remaining whole months
in their term (whether the initial term or an extension), as well as a pro rata bonus based on the Company’s actual performance
for the year in which such termination occurs. Finally, Ms. Jones’ Employment Agreement also provides that she will become
immediately fully vested in any unvested shares of restricted stock granted to her in connection with the merger with NAPW, Inc.
upon her termination without “cause” or her resignation for “good reason.”
Wang
Employment Agreement
The
Wang Employment Agreement with Mr. Wang was executed on March 9, 2017 (the
“Wang Effective Date”
) with a retroactive
effective date for purposes of base compensation of December 22, 2016. The Wang Employment Agreement continues until terminated
in writing by either party or earlier terminated pursuant to the provisions of the Wang Employment Agreement. Under the Wang Employment
Agreement, Mr. Wang will receive an annual base salary of $320,000, subject to adjustment in the sole discretion of the Board
or the Compensation Committee of the Board; provided however, that such annual base salary may not be decreased until the first
anniversary of the Wang Effective Date. Mr. Wang will be eligible to receive an annual incentive bonus, at a target amount of
not less than his base salary, based upon the achievement of one or more performance goals, targets, measurements and other factors,
established for such year by the Board or the Compensation Committee. Mr. Wang will also participate in all benefit plans and
programs, subject to certain conditions and exceptions, as are generally provided by the Company to its other senior executive
employees.
Under
the terms of the Wang Employment Agreement, Mr. Wang is subject to non-solicitation, non-competition and non-interference restrictive
covenants during his employment and for the 12-month period following his last day of employment with the Company. The Wang Employment
Agreement also contains customary confidentiality, work product and return of Company property covenants.
In
addition, Mr. Wang is entitled to severance pay if he is terminated without “cause” or resigns for “good reason,”
each as defined in the Wang Employment Agreement. Upon such termination, provided that he executes a release and waiver agreement,
Mr. Wang will be entitled to receive an amount equal to the sum of his base salary, any earned but unpaid bonus for the year prior
to the year of termination, and the pro rata portion of any bonus earned for the year in which termination occurs, as well as
continuation of applicable benefits for a period of 12 months following his termination.
In
connection with the approval of the Wang Employment Agreement, the Board also granted to Mr. Wang a non-qualified stock option
to purchase 210,000 shares of the Company’s common stock. The option will vest in accordance with the following schedule:
(i) 1/3 of the shares underlying the option vested immediately upon award, (ii) 1/3 of the shares underlying the option will vested
on the first anniversary of the Wang Effective Date, and (iii) 1/3 of the shares underlying the option will vest on the second
anniversary of the Wang Effective Date.
Additionally,
on March 9, 2017 (the “
Xiao Effective Date
”), the Company entered into an employment agreement (the “
Xiao
Employment Agreement
”) with Jiangping Xiao, the Company’s Chief Financial Officer. The Xiao Employment Agreement
continues until terminated in writing by either party or earlier terminated pursuant to the provisions of the Xiao Employment
Agreement. Under the Xiao Employment Agreement, Mr. Xiao will receive an annual base salary of $200,000, subject to adjustment
in the sole discretion of the Board or the Compensation Committee of the Board;
provided
,
however
, that such annual
base salary may not be decreased. Mr. Xiao will be eligible to receive an annual incentive bonus in an amount equal to up to fifty
percent (50%) of his base salary, based upon the achievement of one or more performance goals, targets, measurements and other
factors, established for such year by the Compensation Committee. Mr. Xiao will also participate in all benefit plans and programs,
subject to certain conditions and exceptions, as are generally provided by the Company to its other senior executive employees.
Under the terms of Xiao Employment Agreement, Mr. Xiao is subject to non-solicitation, non-competition and non-interference restrictive
covenants during his employment and for the 18-month period following his last day of employment with the Company. The Xiao Employment
Agreement also contains customary confidentiality, work product and return of Company property covenants. In addition, Mr. Xiao
is entitled to severance pay if he is terminated without “cause” or resigns for “good reason,” each as
defined in the Xiao Employment Agreement. Upon such termination, provided that he executes a release and waiver agreement, Mr.
Xiao will be entitled to receive an amount equal to six months of his base salary, any earned but unpaid bonus for the year prior
to the year of termination, and the pro rata portion of any bonus earned for the year in which termination occurs, as well as
continuation of applicable benefits for a period of six months following his termination. In connection with the approval of the
Xiao Employment Agreement, Mr. Xiao also received a non-qualified stock option to purchase 30,000 shares of the Company’s
common stock. The option will vest in accordance with the following schedule: (i) 1/3 of the shares underlying the option vested
immediately upon award, (ii) 1/3 of the shares underlying the option vested on the first anniversary of the Xiao Effective Date,
and (iii) 1/3 of the shares underlying the option will vest on the second anniversary of the Xiao Effective Date.
Outstanding
Equity Awards at December 31, 2017
The
following table sets forth the equity awards we have made to our named executive officers that were outstanding as of December
31, 2017.
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
exercisable
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
unexercisable
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of
shares
of
stock
that
have
not
vested
(#)
|
|
|
Market
Value
of
shares
or
units
that
have
not
vested
($)
|
|
Maoji (Michael) Wang
|
|
|
140,000
|
|
|
|
70,000
|
(1)
|
|
$
|
10.72
|
|
|
|
03/08/2027
|
|
|
|
—
|
|
|
|
—
|
|
James Kirsch
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Jingbo Song
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
(1)
|
Represents
unvested portion of an award of options to purchase 210,000 shares of the Company’s common stock. The stock options
awarded pursuant to this stock option grant vest and become exercisable in accordance with the following schedule: (i) 1/3
of the shares underlying the option vested immediately on the date of grant (March 9, 2017), (ii) 1/3 of the shares underlying
the option vested on December 22, 2017, and (iii) 1/3 of the shares underlying the option will vest on December 22, 2018.
|
Director
Compensation
During
2017, we paid our non-employee directors the following fees in cash: (1) $30,000 annual retainer fee, (2) $60,000 cash in lieu
of Restricted Stock Units
1
, (3) a $5,000 retainer for those directors serving on the Audit Committee and a $10,000
retainer for the Audit Committee Chair, (4) a $4,000 retainer for those directors for serving on the Compensation Committee and
a $7,500 retainer for the Compensation Committee Chair, (4) a $2,500 retainer for those directors serving on the Nominating and
Corporate Governance Committee and a $5,000 retainer for the Nominating and Corporate Governance Committee Chair.
Messrs.
Wang, Song and Kirsch and Ms. Jones served as our executive officers during 2017. As executive officers, these individuals are
not compensated for their service as directors.
The
following table details the total compensation earned by the Company’s non-employee directors in 2017:
Name
|
|
Fees
Earned or Paid in Cash ($)
|
|
|
All
Other Compensation ($)
|
|
|
Total
($)
|
|
Lee Hillman (8)
|
|
$
|
55,750
|
(1)
|
|
$
|
90,000
|
(2)
|
|
$
|
145,750
|
|
Xiaojing Huang (8)
|
|
$
|
42,842
|
(3)
|
|
$
|
60,000
|
(4)
|
|
$
|
102,842
|
|
Xianfang (Scott) Liu
|
|
$
|
40,874
|
(5)
|
|
$
|
—
|
|
|
$
|
40,874
|
|
David Schramm (8)
|
|
$
|
65,660
|
(6)
|
|
$
|
90,000
|
(2)
|
|
$
|
155,660
|
|
Hao Zhang
|
|
$
|
41,455
|
(7)
|
|
$
|
—
|
|
|
$
|
41,455
|
|
(1)
|
Represents
Board annual retainer fees earned during 2016 and 2017 as well as fees earned for Mr. Hillman’s service as Chair of
the Audit Committee. Mr. Hillman joined our Board in July 2016.
|
|
|
(2)
|
Represents
$30,000 cash compensation in lieu of Restricted Stock Units for 2016 and $60,000 cash compensation in lieu of Restricted Stock
Units for 2017.
|
|
|
(3)
|
Represents
Board annual retainer fees earned during 2016 and 2017 as well as fees earned for Ms. Huang’s service as a member of
Audit Committee and Compensation Committee. Ms. Huang joined our Board in November 2016.
|
|
|
(4)
|
Represents
$60,000 cash compensation in lieu of Restricted Stock Units for 2017.
|
|
|
(5)
|
Represents
Board annual retainer fees earned during 2016 and 2017 as well as fees earned for Mr. Liu’s service as a member of Audit
Committee and Nominating and Corporate Governance Committee. Mr. Liu joined our Board in November 2016. Mr. Liu resigned as
a member of the Board on October 8, 2018.
|
|
|
(6)
|
Represents
Board annual retainer fees earned during 2016 and 2017 as well as fees earned for Mr. Schramm’s service as Chair of
the Compensation Committee and Nominating and Corporate Governance Committee and as a member of the Audit Committee. Mr. Schramm
joined our Board in July 2016.
|
|
|
(7)
|
Represents
Board annual retainer fees earned during 2016 and 2017 as well as fees earned for Mr. Zhang’s service as a member of
Compensation Committee and Nominating and Corporate Governance Committee. Mr. Zhang joined our Board in November 2016.
|
|
|
(8)
|
Messrs.
Hillman and Schramm and Ms. Huang resigned from the Board on December 31, 2017.
|
1
Because the Company didn’t have sufficient shares available for issuance under its 2013 Equity Plan before June 26,
2017, certain Board members, including Messrs. Hillman and Schramm and Ms. Huang, chose to be compensated with cash in lieu of
Restricted Stock Units.
The
table below sets forth the unexercised options held by each of our non-employee directors outstanding as of December 31, 2017.
Name
|
|
Aggregate
Number of
Unexercised
Stock
Options
Outstanding at
December
31, 2017
|
|
Lee Hillman
|
|
|
—
|
|
Xiaojing Huang
|
|
|
—
|
|
Xianfang (Scott) Liu
|
|
|
—
|
|
David Schramm
|
|
|
—
|
|
Hao (Howard) Zhang
|
|
|
—
|
|
The
table below sets forth the number of Restricted Stock Units held by each of our non-employee directors outstanding as of December
31, 2017.
Name
|
|
Aggregate
Number of
Restricted
Stock Units at
December
31, 2017
|
|
Lee Hillman
|
|
|
—
|
|
Xiaojing Huang
|
|
|
—
|
|
Xianfang (Scott) Liu
|
|
|
7,772
|
(1)
|
David Schramm
|
|
|
—
|
|
Hao (Howard) Zhang
|
|
|
7,772
|
(1)
|
|
(1)
|
On
June 26, 2017, the Company granted 7,772 restricted stock units (“RSUs”) to Mr. Liu and Mr. Zhang. The RSUs vest
on June 28, 2018, subject to continued service on the vesting date. The RSUs have no voting or dividend rights. The fair value
of the common stock on the date of grant was $7.72 per share.
|
PROPOSAL
2: APPROVAL OF AMENDMENT TO 2013 EQUITY COMPENSATION PLAN
The
Professional Diversity Network, Inc. 2013 Equity Compensation Plan (the “
Plan
”) originally authorized for issuance
500,000 shares of Common Stock of the Company, of which 101,143 shares remained available for future grants as of April 24, 2015.
On June 3, 2015, the Company’s stockholders voted to approve Amendment No. 1 to the Plan (the “
2015 Amendment
”),
which amended the Plan to increase the total number of shares reserved for grants of awards under the Plan by 1.3 million shares
to a total of 1.8 million shares.
At
the Company’s annual meeting held on September 26, 2016, the Company’s stockholders voted to amend the Company’s
certificate of incorporation to effect a reverse stock split of the Company’s issued and outstanding common stock, par value
$0.01 per share (the
“Common Stock”
), such that the shares of the Common Stock would be combined and reclassified
into one share of Common Stock at a ration within the range between 1-for-2 and 1-for-15, such ratio to be determined by the Board
in its discretion. On September 27, 2016, the Company effected a 1-for-8 split of its common stock, that ratio having been determined
by the Board (the
“Reverse Stock Split”
). As a result of the Reverse Stock Split, the total shares reserved
for grants of awards under the Plan were reduced from 1.8 million shares to 225,000 shares.
On
June 26, 2017, the Company’s stockholders voted to Approve Amendment No. 2 to the Plan (the
“2017 Amendment”
),
which amended the Plan to increase the total number of shares reserved for grants of awards under the Plan by 390,000 shares to
a total of 615,000 shares.
As
of the record date, approximately 104 employees (including officers), 9 directors, and 10 consultants were eligible to receive
awards under the Plan.
You
are being asked to approve Amendment No. 3 to the Plan (the “
2018 Amendment
”), which amends the Plan to increase
the total number of shares reserved for grants of awards under the Plan by 300,000 shares to a total of 915,000 shares. A copy
of the Plan and the 2018 Amendment are attached as Appendix A and Appendix B hereto, respectively. Our Board believes that the
approval of the 2018 Amendment is in the best interests of the Company and its stockholders because it will provide the Company
an adequate number of shares reserved for issuance under the Plan to grant as awards designed to attract, motivate and retain
qualified individuals who are essential to our success.
Key
Component of Compensation
The
Plan is a key component of our incentive compensation program. The Plan is designed to further our long term stability and financial
success by attracting, retaining and motivating our directors, officers, employees and consultants through the use of incentives
and to further align the interests of such persons with those of the stockholders of the Company by providing for or increasing
the proprietary interest of such persons in the Company. The Plan includes a mechanism to provide incentive awards to participants
through the use of stock options (both incentive stock options and nonqualified stock options), stock appreciation rights, restricted
stock, restricted stock units, other stock-based awards and annual incentive awards. Those persons who receive incentive awards
under the Plan are referred to as “
Participants
.”
Requested
Shares Authorization
|
●
|
The
2018 Amendment authorizes 300,000 shares, plus the shares that remain unissued under the Plan when the 2018 Amendment takes
effect.
|
|
|
|
|
●
|
As
a relatively newly publicly-traded company, the Company does not have a long history of grant practices on which to rely.
Based on awards granted during our prior fiscal year and our anticipated incentive compensation program, the Company estimates
that this request should be sufficient to grant equity as a portion of compensation for the next three years.
|
|
|
|
|
●
|
When
determining the number of additional shares to request, the Company also considered its significant recent growth and corresponding
increase in key individuals and directors that will likely participate in the Plan. The Company also considered the fact that
the Compensation Committee recently approved a compensation plan for the board that will require additional equity to be available
for issuance under the Plan.
|
This
following summary is subject to the more complete description of the terms and conditions of the Plan contained the full text
of the Plan and the 2018 Amendment, which are attached hereto as Appendix A and Appendix B, respectively.
Effective
Dates of the Plan and the 2015, 2017 and 2018 Amendments
The
Plan was originally effective March 8, 2013. The 2015 Amendment was effective upon approval by the Company’s stockholders
on June 3, 2016. The 2017 Amendment was effective upon approval by the Company’s stockholders on June 26, 2017. The 2018
Amendment was adopted in October 2018, subject to and effective upon the approval of our stockholders. If not sooner terminated,
the Plan will terminate on March 8, 2023. Any awards made prior to the date the Plan is terminated will continue in effect pursuant
to the terms of the award and the Plan.
Eligibility
Any
person who is an employee of the Company or any affiliate, a member of the Board of Directors of the Company, or a consultant,
advisor or independent contractor who provides services to the Company or any affiliate, a total of approximately 120 or fewer
people, can be considered by the Committee for grants of awards under the Plan. The Committee has sole and complete discretion
to determine the Participants who receive awards pursuant to the Plan and to determine the type and terms and conditions of any
award.
Administration
The
Plan is administered and interpreted by the Compensation Committee of the Board of Directors (the “
Committee
”).
The Committee has the authority to take any and all actions necessary or desirable in its sole discretion, in connection with
the administration of the Plan. In connection with the administration, the Committee may:
|
●
|
prescribe,
amend and rescind rules and regulations relating to the Plan;
|
|
●
|
determine
who is eligible to participate in the Plan and, if eligible, to which eligible persons awards may be granted and the timing,
price, vesting and other terms and conditions of the awards;
|
|
|
|
|
●
|
to
establish, verify, adjust, reduce and/or waive any performance goals relating to any award;
|
|
|
|
|
●
|
prescribe
and amend the terms and conditions of any document relating to any award; and
|
|
|
|
|
●
|
interpret
and construe the Plan, any rules and regulations under the Plan and the terms and conditions of any award granted under the
Plan
|
All
decisions, determinations and interpretations made by the Committee are final and binding on all eligible persons and Participants
in the Plan.
Common
Shares Available for Incentive Awards
If
this Proposal 2 is approved, the number of common shares of the Company available for issuance under the Plan, will be 300,000
shares plus the total number of shares remaining available for issuance under the Plan as of the effective date of the 2018 Amendment
(the “
Previously Reserved Shares
”). The Previously Reserved Shares were authorized by the Company’s stockholders
for reservation under the Plan.
As
of October 3, 2018:
|
●
|
Approximately
11,000 shares remained available for issuance under the Plan;
|
|
|
|
|
●
|
There
were 79,000 restricted shares of the Company, granted under the Plan that are issued and outstanding, but which have not yet
vested and are subject to forfeiture;
|
|
|
|
|
●
|
There
were 499,000 options of the Company granted under the Plan that are outstanding with all current executive officers as a group
holding 490,000 options, all current non-employee directors as a group holding no options, and all employees (including all
current officers who are not executive officers) as a group holding 9,000 options;
|
|
|
|
|
●
|
There
were no stock appreciation rights or other stock incentive awards outstanding under the Plan.
|
Shares
of Common Stock covered by an incentive award shall only be counted as used to the extent shares are actually delivered. If the
outstanding shares of Common Stock shall be changed or exchanged by declaration of a stock dividend, stock split, combination
of shares, recapitalization, reorganization, or other corporate event, the Committee may, appropriately and equitably adjust the
number and kind of shares which are subject to the Plan or any awards so as to maintain the proportionate number of shares without
changing the aggregate exercise or settlement price.
The
Company’s Common Stock is traded on the NASDAQ Global Market. The last reported sales price of the Company’s Common
Stock on October 12, 2018 was $2.90 per share.
Types
of Incentive Awards That May Be Granted Under the Plan
Any
award will be governed by the terms of the Plan and an award agreement or other documents, if any, between the Company and the
Participant receiving the award.
Incentive
Stock Options.
The
Committee may grant an incentive stock option at its discretion at any time or from time to time or automatically upon the occurrence
of an event. Any incentive stock option shall be granted pursuant to one or more award documents which will contain provisions
determined by the Committee including the number of shares, the purchase price (not less than fair market value on the grant date,
though greater for certain shareholders (see below)), the term of the option, any vesting and restrictions on transfer, among
other restrictions. An incentive stock option granted to a Participant under this Plan is a right to purchase shares of the Company’s
Common Stock. Incentive stock options may be granted only to employees. If certain terms and conditions are met by the Company
and the Participant, an incentive stock option is given favorable tax treatment to the Participant under the Internal Revenue
Code of 1986, as amended (the “
Code
”). See the “Federal Income Tax Consequences” section below
for a discussion of the difference in tax treatment.
In
order to receive the favorable tax treatment, the exercise provisions for an incentive stock option must be no more favorable
than the following terms and conditions:
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●
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The
incentive stock option cannot be exercised later than the first to occur of 10 years after the grant date, three months after
the Participant’s retirement or termination of employment with the Company and its affiliates and one year after the
Participant’s termination of employment with the Company and its affiliates due to death or disability.
|
|
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|
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●
|
Only
the first $100,000 in fair market value (determined at the time of grant of the incentive stock option) of incentive stock
options that first become exercisable in any calendar year will be treated as incentive stock options and the excess will
be treated as nonqualified stock options.
|
|
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●
|
If
an incentive stock option is granted to a person who owns more than 10% of the total combined voting power of all classes
of capital stock of the Company (or any subsidiary), then the exercise price will not be less than 110% of the fair market
value on the grant date and the incentive stock option will not be exercisable more than 5 years after the grant date.
|
Nonqualified
Stock Options.
The
Committee may grant a nonqualified stock option at its discretion at any time or from time to time or automatically upon the occurrence
of an event. Any nonqualified stock option shall be granted pursuant to one or more award documents which will contain provisions
determined by the Committee including without limitation, the number of shares, the purchase price (not less than fair market
value on the grant date), the term of the option, any vesting and restrictions on transfer. A nonqualified stock option granted
to a Participant under this Plan is a right to purchase shares of the Company’s Common Stock. Nonqualified stock options
may be granted to employees, members of the Board of Directors, consultants and other service providers to the Company or any
affiliates. Unlike an incentive stock option, a nonqualified stock option is not given favorable tax treatment under the Code.
See the “Federal Income Tax Consequences” section below for a discussion of the difference in tax treatment.
Stock
Appreciation Rights.
The
Committee may grant an award of stock appreciation rights (“
SARs
”) at its discretion at any time or from time
to time. SARs under the Plan may be freestanding or tandem SARs, or any combination of the two. Each SAR award shall be evidenced
by an award agreement and shall specify the grant price, the term of the SAR, and other provisions, including restrictions, determined
by the Committee. The Committee shall have discretion in determining the number of SARs to be granted to each Participant, and
determining the terms and conditions of the SARs. The grant price for a freestanding SAR shall be determined by the Committee,
but shall not be less than the fair market value of a share of the Company’s Common Stock on the grant date. The grant price
of a tandem SAR shall be equal to the option price of the option to which it relates. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee imposes, while tandem SARs may only be exercised with respect to shares for which
their related options are then exercisable. At the discretion of the Committee, payment upon SAR exercise may be in cash, shares
or any combination of the two, or in another manner approved by the Committee.
Restricted
Stock and Restricted Stock Units.
The
Committee may grant restricted stock or Restricted Stock Units to Participants in such amounts as it determines from time to time.
RSUs are similar to restricted stock, except no shares are actually awarded to the Participant on the grant date. Each restricted
stock or RSU grant shall be evidenced by an award agreement that specifies the restriction periods, the number of shares or restricted
stock or the number of RSUs granted, and other provisions and restrictions determined by the Committee, including, a requirement
that Participants pay a purchase price for each share of restricted stock or RSU, restrictions based upon the achievement of specific
performance goals, time-based restrictions on vesting after the attainment of performance goals and time based restrictions alone,
among other restrictions.
The
Company may retain certificates representing shares of restricted stock until all restrictions applicable to the shares lapse.
RSUs shall be paid in shares, unless otherwise provided in an award agreement. Unless otherwise determined by the Committee, to
the extent permitted or required by law, Participants holding restricted stock may be granted voting rights even though the shares
are subject to restrictions. Participants shall have no voting rights with respect to RSUs.
Other
Stock-Based Awards.
The
Committee may grant other equity-based awards in such amounts and subject to such terms and conditions determined by the Committee.
Such awards might be paid in cash, based on share value, or they may involve the transfer of shares to Participants. The Committee
may establish performance goals for such awards.
Annual
Incentive Award
The
Committee may designate employees who are eligible to receive a monetary payment in any Plan year based on a percentage of an
incentive pool determined by reference to one or more performance measures. The Committee shall allocate an incentive pool percentage
to each designated employee for each Plan year, and the sum of the incentive pool percentages for all employees cannot exceed
100% of the total pool. An employee’s allocated portion of the incentive pool is subject to adjustment downward in the sole
discretion of the Committee, though the allocated portion may not be increased, including as a result of any reduction in another
employee’s allocated portion.
In
the event the Committee desires for the incentive award to satisfy the requirements of Section 162(m) of the Code in order to
guarantee that the Company may deduct such payments, then the performance criteria shall be measured based on one or more of the
performance goals described in the Plan. Examples of performance goals described in the plan include earnings per share, return
on equity and total shareholder return, among others.
Applicable
Withholding Taxes
The
Company shall have the power and right to deduct or withhold, or require a Participant to remit to the Company, the minimum statutory
amount to satisfy federal, state and local taxes, domestic or foreign, required by law or regulation to be withheld with respect
to any taxable event arising as a result of the Plan.
With
respect to withholding required as the result of a taxable event arising as a result of an incentive award granted under the Plan,
Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement in whole or in part,
by having the Company withhold shares of Common Stock having a fair market value on the date of withholding equal to the minimum
statutory total tax that could be imposed on the transaction.
Change
in Control
Upon
a dissolution of the Company, a merger or consolidation involving the Company, a sale of substantially all of the assets of the
Company, a change in majority ownership of the Company or another transaction or event resulting in a change in control of the
Company, the Committee may take such actions with respect to the Plan and awards granted under the Plan as it deems appropriate
and the documentation regarding such a transaction may mandate the treatment of such awards.
If
provided in an award agreement or otherwise determined by the Committee, upon a Change in Control, all then-outstanding options
and stock appreciation rights shall become fully vested and exercisable, and all other then-outstanding awards shall vest in full
and be free of restrictions. The Committee will not be required to treat all awards similarly in a Change in Control.
Termination
of the Plan
The
Committee may terminate the Plan and any incentive award in whole or in part at any time subject to certain restrictions. If not
sooner terminated, the Plan will terminate on March 8, 2023. Any awards made prior to the date the Plan is terminated will continue
in effect pursuant to the terms of the award and the Plan.
Amendment
of the Plan or Incentive Awards
The
Board of Directors may amend the Plan and any document governing any award at any time. The Company’s stockholders must
approve any amendment by the Board which increases the maximum number of shares of Common Stock for which awards may be granted
under the Plan or other material changes that require stockholder approval under the law, regulations or applicable stock exchange
rules. Any amendment of the Plan or any document governing any award by the Board shall not impair the rights of any award holder
without such award holder’s consent, unless the amendment is in connection with compliance with Section 409A of the Code,
or otherwise required to satisfy any law or regulation or to meet the requirements of applicable stock exchange rules.
Transferability
of Incentive Awards
Rights
under the Plan are not transferable, except by will or the laws of descent and distribution, and during the Participant’s
life are exercisable only by the Participant.
New
Plan Benefits
It
is not possible at this time to determine the benefits that will be received by executive officers or other employees, directors
or consultants of the Company under the Plan if it is approved by our stockholders. The Summary Compensation Table and Director
Compensation Table above disclose the Company’s grant practices for the last fiscal year. Future benefits will depend on
future actions of the Committee and on the fair market value of the shares of Common Stock of the Company at various future dates
and the extent to which performance goals set by the Compensation Committee are met.
On
March 13, 2018, the Compensation Committee adopted a compensation program for the directors, which include the following compensation
items:
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Board
compensation: to pay each independent director of the Company $5,000 annual retainer, and $500 per full Board meeting, including
meetings via conference calls but excluding Committee meetings;
|
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●
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Audit
Committee Chair: to pay additional $4,000 per year in addition to compensation as a member of the Board;
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●
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Audit
Committee member: to pay additional $1,000 per year in addition to compensation as a member of the Board;
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●
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Nomination
Committee Chair: to pay additional $1,000 per year in addition to compensation as a member of the Board;
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●
|
Nomination
Committee member: to pay additional $500 per year in addition to compensation as a member of the Board;
|
|
●
|
Compensation
Committee Chair: to pay additional $1,000 per year in addition to compensation as a member of the Board;
|
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●
|
Compensation
Committee member: to pay additional $500 per year in addition to compensation as a member of the Board;
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●
|
In
addition to cash compensation, the Company will issue to each independent director $25,000 worth of RSUs. The RSUs issued
to the independent directors will vest one year after the date of issuance.
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Federal
Income Tax Consequences
The
following is a brief description of the federal income tax treatment that will generally apply to awards granted under the Plan,
based on federal income tax laws in effect on the date hereof. The exact federal income tax treatment of awards will depend on
the specific nature of the award. Such an award may, depending on the conditions applicable to the award, be taxable as an option,
as restricted or unrestricted stock, as a cash payment or otherwise. Recipients of options or other awards should not rely on
this discussion for individual tax advice, as each recipient’s situation and the tax consequences of any particular award
will vary depending on the specific facts and circumstances involved. Each recipient is advised to consult his or her own tax
advisor for particular federal, as well as state and local, income and any other tax advice.
Grant
of Option
As
the holder of an option, a Participant will not recognize any taxable income at the time an option is granted to him or her and
the Company will not be entitled to a federal income tax deduction at that time unless an option is granted at an exercise price
below fair market value. If an option is granted below fair market value, the grant may be treated as a deferral of income pursuant
to Section 409A of the Code and the difference between fair market value and the option exercise price would be treated as deferred
income which would be taxed as current income for income tax purposes as well as be subject to a 20% excise tax. Currently the
Plan does not permit the grant of an option at below fair market value of the underlying share on the grant date.
Exercise
of Incentive Stock Options
No
ordinary income will be recognized by the holder of an incentive stock option at the time of exercise. The excess of the fair
market value of the shares of Common Stock at the time of exercise over the aggregate option exercise price will be an adjustment
to alternative minimum taxable income for purposes of the federal “alternative minimum tax” at the date of exercise.
If the option holder holds the shares of Common Stock purchased for not less than two years after the date the incentive stock
option was granted and not less than one year after the acquisition of such shares of Common Stock, the difference between the
aggregate option price and the amount realized upon disposition of the shares of Common Stock will constitute a long term capital
gain or loss, as the case may be, and the Company will not be entitled to a federal income tax deduction.
If
the shares of Common Stock acquired upon exercise of an incentive stock option are disposed of in a sale, exchange or other “disqualifying
disposition” within two years after the date of grant or within one year after the date of exercise, the option holder will
realize taxable ordinary income in an amount equal to the lesser of (i) the excess of the fair market value of the shares of Common
Stock purchased at the time of exercise over the aggregate option exercise price or (ii) the excess of the amount realized upon
disposition of such shares of Common Stock over the option exercise price the Company will be entitled to a federal income tax
deduction equal to the amount of ordinary income recognized by the option holder. The excess, if any, of the amount realized upon
disposition of the shares of Common Stock in a disqualifying disposition over the fair market value of the shares of Common Stock
at the time of exercise will constitute capital gain.
Exercise
of Nonqualified Stock Options
Taxable
ordinary income will be recognized by the holder of an option that does not qualify as an incentive stock option and is therefore
a nonqualified stock option at the time of exercise, in an amount equal to the excess of the fair market value of the shares of
Common Stock purchased at the time of such exercise over the aggregate option exercise price the Company will be entitled to a
federal income tax deduction equal to that amount. The option holder will generally recognize a taxable capital gain or loss based
upon the difference between the per share fair market value at the time of exercise and the per share selling price at the time
of a subsequent sale of the shares. The capital gain or loss will be short term or long term depending on the period of time the
shares are held by the option holder following exercise.
Stock
Appreciation Rights
SARs
will not be subject to taxation upon the date of grant or vesting. Upon exercise of the SARs, the full value of the difference
between fair market value of the shares of Common Stock on the date of exercise and the fair market value of the shares of Common
Stock on the grant date, or the “spread,” will be taxed at ordinary income tax rates the Company will be entitled
to a federal income tax deduction equal to the amount of ordinary income recognized by the holder of SARs. To avoid potential
excise taxes under Section 409A of the Code, the SARs must be limited to the increase in the fair market value of a share of Common
Stock between the date of grant and the date of exercise, and should not contain any feature for the deferral of compensation.
Restricted
Stock
Restricted
stock grants under the Plan will generally result in ordinary income to the recipient at the time of payment except in the case
of grants subject to a vesting requirement. The amount of ordinary income the recipient will be required to recognize from restricted
stock grants other than those subject to a vesting requirement is equal to the amount by which the fair market value of any shares
received by the recipient exceeds the purchase price, if any, paid by the recipient for such shares.
A
recipient of shares pursuant to a restricted stock grant which is not substantially vested, may elect in accordance with Section
83(b) of the Code, within 30 days of the date the shares are transferred, to recognize ordinary income at the time of transfer
of the shares equal to the amount by which the fair market value on the date of transfer of the shares exceeds the purchase price,
if any, paid by the recipient for such shares.
A
recipient of shares pursuant to a restricted stock grant which is not substantially vested who does not make an election under
Section 83(b) of the Code will recognize ordinary income at the time the shares become substantially vested in an amount equal
to the difference between the fair market value on the date of substantial vesting of the shares and the purchase price, if any,
paid by the recipient for such shares.
The
recipient’s tax basis for purposes of determining the amount of gain or loss realized in a taxable disposition of restricted
stock grant shares will be equal to the amount, if any, paid for the shares plus the amount of ordinary income recognized by the
recipient upon transfer or vesting, as the case may be. Any gain or loss realized by the recipient from a taxable disposition
of the shares of common stock in excess of such basis generally will be taxed as short-term capital gain or loss if the disposition
occurs within 12 months of the event giving rise to ordinary income (i.e., transfer or vesting) and long-term capital gain or
loss if1he disposition occurs 12 months or more after such event.
Subject
to the application of Section 162(m) of the Code, the Company will receive a tax deduction in the amount of the ordinary income
recognized by a recipient.
Restricted
Stock Units
A
recipient of restricted stock units will not have taxable income at the time of grant. Instead, the recipient will recognize ordinary
income when he or she receives payment for such units in cash or Common Stock. The Company generally will be entitled to a deduction
equal in amount to the ordinary income realized by the recipient in the year paid.
Any
gain or loss the recipient recognizes upon the same or exchange of shares acquired through a grant of restricted stock units generally
will be treated as capital gain or loss and will be long-term or short-term depending upon whether the recipient held the shares
for more than one year.
Subject
to the application of Section 162(m) of the Code, the Company will receive a tax deduction in the amount of the ordinary income
recognized by a recipient
Annual
Incentive Award
An
eligible person receiving an incentive award will not recognize income, and the Company will not be allowed a deduction at the
time the award is granted. When the recipient receives payment in cash, the amount of cash received will be ordinary income to
the recipient. Subject to the application of Section 162(m) of the Code, the Company will receive a tax deduction in the amount
of the ordinary income recognized by a recipient.
Miscellaneous
Rules
Special
rules will apply in cases where a recipient of an award pays the exercise or purchase price of the award or any applicable withholding
tax obligations under the Plan by delivering previously owned shares of Common Stock or by reducing the number of shares of Common
Stock otherwise issuable pursuant to the award. The surrender or withholding of such shares of Common Stock will in certain circumstances
result in the recognition of income with respect to such shares of Common Stock or a carry-over basis in the shares of Common
Stock acquired, and may constitute a disqualifying disposition with respect to incentive stock option shares.
In
the event of a change in control and depending on the individual circumstances of the recipient, certain amounts with respect
to such awards may constitute “excess parachute payments” under the “golden parachute” provisions of the
Code. Pursuant to these provisions, a recipient will be subject to a 20% excise tax on any excess parachute payments and the Company
will be denied any deduction with respect to such payments. Participants in the Plan should consult their tax advisors as to whether
accelerated vesting of an award in connection with a change in control would give rise to an excess parachute payment.
Section
409A of the Code sets forth the rules for deferral of compensation and describes situations where compensation is deemed deferred.
It is possible that certain awards made under the Plan, in particular when the award is not subject to a substantial risk of forfeiture,
will be deemed deferred compensation under Code Section 409A. If that is the result, then the recipient of the award may be subject
to income tax and a 20% excise tax upon the grant of the award.
Withholding
Taxes
No
withholding taxes are payable in connection with the grant of any stock option or the exercise of an incentive stock option. However,
withholding taxes must be paid at the time of exercise of any nonqualified stock option. In respect of all other awards, withholding
taxes must be paid whenever the participant recognizes income for tax purposes.
Vote
Required
The
affirmative vote of a majority of the voting power of Common Stock present in person or by proxy and entitled to vote at the Annual
Meeting and on the proposal is required to approve the amendment to the Plan.
Board
of Directors Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 2.
PROPOSAL
3: RATIFICATION OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board has appointed Marcum LLP as the Company’s independent registered public accounting firm for
the fiscal year ending December 31, 2018.
Although
the Company’s governing documents do not require the submission of this matter to stockholders, the Board of Directors considers
it desirable that the appointment of Marcum LLP be ratified by the stockholders. In addition, even if the stockholders ratify
the selection of Marcum LLP, the Audit Committee may in its discretion appoint a different independent registered public accounting
firm at any time during the year if the Audit Committee determines that a change is in the best interests of the Company.
Representatives
of Marcum LLP are expected to attend the Annual Meeting to make such statements as they may desire and respond to appropriate
questions that may be asked by stockholders.
The
Audit Committee and the Board recommend that you ratify this appointment.
Vote
Required
The
affirmative vote of a majority of the voting power of Common Stock present in person or by proxy and entitled to vote at the Annual
Meeting and on the proposal is required to ratify the selection of Marcum LLP as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2018.
Board
of Directors Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 3.
PROPOSAL
4: ADVISORY VOTE ON EXECUTIVE COMPENSATION
(Say-On-Pay)
The
Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) requires that we provide our stockholders
a non-binding, advisory vote to approve the compensation of our named executive officers. This vote is sometimes referred to as
a “say-on-pay vote.” Although this advisory vote is nonbinding, the Compensation Committee of our Board will review
and consider the voting results when making future decisions regarding our named executive officer compensation and related executive
compensation programs.
As
described in more detail above, our executive compensation program is comprised principally of salary, equity and performance-based
cash compensation, designed to: (i) attract, motivate and retain key executives who are critical to our success, (ii) align the
interests of our executives with stockholder value and our financial performance and (iii) achieve a balanced package that would
attract and retain highly qualified senior officers and appropriately reflect each such officer’s individual performance
and contributions. In addition, the Company regularly reviews its compensation program and the overall compensation package paid
to each of its senior executives to assess risk and to confirm that the structure is still aligned with the Company’s long-term
strategic goals.
Before
you vote on the resolution below, please read the entire “Executive Compensation” section, including the tables, together
with the related narrative disclosure and footnotes, beginning on page 14 of this Proxy Statement. Note, as a “smaller
reporting company,” we are obligated to provide compensation disclosures pursuant to Item 402 (m) through (q) of Regulation
S-K promulgated under the Security Exchange Act of 1934 (“Regulation S-K”). Even though, as a smaller reporting company,
we are exempt from compensation discussion and analysis by the executive compensation requirements of Item 402(b) of Regulation
S-K, we continue to elect to provide information regarding our objectives and practices regarding executive compensation in order
to give our stockholders transparency into our compensation philosophy and practices.
For
the reasons provided, the Board is asking stockholders to cast a non-binding, advisory vote FOR the following resolution:
“RESOLVED,
that stockholders approve the compensation paid to our named executive officers as disclosed in this Proxy Statement pursuant
to Item 402 (m) through (q) of Regulation S-K (which includes the compensation tables and related narrative discussion).”
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 4.
PROPOSAL
5:
ADVISORY
VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
(Say-When-On-Pay)
We
are providing our stockholders with the opportunity to vote, on a non-binding, advisory basis, for their preference on the frequency
of future advisory votes to approve the compensation of our named executive officers as reflected in Proposal No. 4 above. Stockholders
may indicate whether they prefer that we conduct future advisory votes to approve the compensation of our named executive officers
every one, two or three years. Stockholders also may abstain from casting a vote on this proposal.
The
Board has determined that holding an advisory vote on the compensation of our named executive officers every year is the most
appropriate policy at this time, and recommends that future advisory votes to approve the compensation of our named executive
officers occur once every year. We believe that holding this advisory vote annually will provide us with timely and appropriate
feedback on compensation decisions for our named executive officers.
Stockholders
will be able to specify one of four choices for this proposal on the proxy card: one year, two years, three years, or abstain.
Although this advisory vote on the frequency of future advisory votes on the compensation of our named executive officers is non-binding,
the Board and the Compensation Committee will carefully review the voting results when determining the frequency of future advisory
votes on the compensation of our named executive officers.
The
Board is asking stockholders to cast a non-binding, advisory vote for the ONE-YEAR option on the following resolution:
“RESOLVED,
that the stockholders of the Company recommend, in a non-binding vote, whether an advisory vote to approve the compensation of
our named executive officers should occur every one, two or three years.”
The
Board believes that say-on-pay votes should be conducted every year so that stockholders may annually express their views on our
executive compensation program. This vote, like the say-on-pay vote itself, is non-binding.
THE
BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE “ONE-YEAR” OPTION AS TO THE FREQUENCY OF THE ADVISORY VOTE ON
THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
EXECUTIVE
OFFICERS
The
following table provides the name, age and position of each of our executive officers as of October 12, 2018. There are no family
relationships between or among our executive officers and directors.
Name
|
|
Age
|
|
Position
|
James
Kirsch
|
|
56
|
|
Non-executive
Chairman of the Board
|
Jingbo
(James) Song
|
|
64
|
|
Executive
Chairman of the Board
|
Maoji
(Michael) Wang
|
|
46
|
|
Chief
Executive Officer
|
Star
Jones
|
|
56
|
|
President
and Director
|
Jiangping
(Gary) Xiao
|
|
39
|
|
Chief
Financial Officer
|
John
Michael Hall
|
|
67
|
|
Executive
Vice President
|
Joseph
Bzdyl
|
|
36
|
|
Executive
Vice President of Operations
|
James
Kirsch
’s biographical information is included on page 4 of this proxy statement, under the heading “Proposal
1 – Nomination and Election of Directors – Nominees for Director.”
Jingbo
(James) Song
’s biographical information is included on page 5 of this proxy statement, under the heading “Proposal
1 – Nomination and Election of Directors – Nominees for Director.”
Maoji
(Michael) Wang
’s biographical information is included on page 5 of this proxy statement, under the heading “Proposal
1 – Nomination and Election of Directors – Nominees for Director.”
Star
Jones
’ biographical information is included on page 5 of this proxy statement, under the heading “Proposal
1 – Nomination and Election of Directors – Nominees for Director.”
Jiangping
(Gary) Xiao
has served as Chief Financial Officer since March of 2017. Prior to that, he served as Corporate Controller of
United Tactical Systems, a private-equity owned non-lethal weapon and projectile manufacturer, from April 2016 until March 7,
2017. Prior to that, from June 2013 to April 2016, Mr. Xiao served as Controller of Petstages, a pet toy company. Earlier in his
career, Mr. Xiao served as the Controller of the Operations Management Group of The Jordan Company, a private equity firm, from
August of 2008 to May of 2013, and as a Senior Finance Associate, Financial Planning and Analysis of United Airlines from June
2006 to August of 2008. Mr. Xiao obtained a Master of Business Administration from the Ross School of Business Management at the
University of Michigan in 2006 and a B.A. in Accounting from Tsinghua University in Beijing, China in 2000.
John
Michael Hall
currently serves as the Company’s Executive Vice President, managing partnerships and overseeing the Company’s
Professional & Technology Diversity Career events. Mr. Hall has held this position for over four years. He was previously
the President and owner of Personnel Strategies Inc. (“
PSI
”), a company he founded and led until its acquisition
by PDN in 2013. At the time of its acquisition, PSI had been identified by INC Magazines as one of the fastest growing privately-held
companies in the United States. Mr. Hall’s experience as a diversity practitioner led to his forming a unique Community
Partner Network that included the NAACP, National Urban League, Congressional Black Caucus Foundation, National Council of La
Raza, The Historically Black Fraternities and Sororities, Black Data Processing Association, Congressional Hispanic Caucus Institute
and Women in Technology.
Joseph
Bzdyl
, Senior Vice Present, has been with the Company since 2014 and, since January 2017, has led the PDN Recruitment and
Noble Voice business divisions as Senior Vice President. From December 2015 to January 2017, he was Vice President of Strategic
Partnerships and Business Intelligence for the Company, and prior that, was Director of Business Intelligence from October 2014
until November 2015. He was originally hired by Noble Voice as a business analyst. Mr. Bzdyl’s professional career began
in sales, moved into post-secondary admissions management, transitioned to business analysis, and is now centered in operations,
finance planning and analysis and project management. Mr. Bzdyl holds a bachelor’s degree from Illinois Wesleyan University
and an MBA.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security
Ownership of Management and Certain Beneficial Owners
The
following table sets forth information regarding the beneficial ownership of our Common Stock as of October 12, 2018 by:
|
●
|
each
person, or group of affiliated persons, known by us to beneficially own more than 5% of our Common Stock;
|
|
|
|
|
●
|
each
of our named executive officers;
|
|
|
|
|
●
|
each
of our directors; and
|
|
|
|
|
●
|
all
of our directors and named executive officers as a group.
|
The
percentage ownership information shown in the table is based upon a total of 4,856,948 shares of Common Stock outstanding as of
October 12, 2018.
Information
with respect to beneficial ownership has been furnished by each director, officer or beneficial owner of more than 5% of our Common
Stock. We have determined beneficial ownership in accordance with the rules of the SEC. These rules generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities.
In addition, the rules include shares of Common Stock issuable pursuant to the exercise of stock options or warrants that are
either immediately exercisable or exercisable on or before the date that is 60 days after the date of this proxy statement. These
shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the
percentage ownership of that person. Unless otherwise indicated, the persons or entities identified in this table have sole voting
and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property
laws.
Unless
otherwise noted below, the address for each person or entity listed in the table is c/o Professional Diversity Network, 801 W.
Adams Street, Sixth Floor, Chicago, Illinois 60667.
Name
and Address of Beneficial Owner
|
|
Amount
and Nature of Beneficial Ownership
|
|
|
Percent
of Class
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
Cosmic Forward Limited
|
|
|
2,295,842
|
(1)
|
|
|
47.27
|
%
|
White Winston Select Asset Funds, LLC
|
|
|
305,616
|
(2)
|
|
|
6.29
|
%
|
Ahmed Alomari
|
|
|
286,326
|
(3)
|
|
|
5.90
|
%
|
Shengqi Cai
|
|
|
391,505
|
(4)
|
|
|
8.06
|
%
|
China EWI International Finance Group
Co., Limited
|
|
|
496,510
|
(5)
|
|
|
10.22
|
%
|
Executive
Officers and Directors
|
|
|
|
|
|
|
|
|
James Kirsch
|
|
|
218,127
|
(6)
|
|
|
4.47
|
%
|
Jingbo (James) Song
|
|
|
31,490
|
(7)
|
|
|
*
|
|
Maoji (Michael) Wang
|
|
|
252,193
|
(8)
|
|
|
5.02
|
%
|
Star Jones
|
|
|
119,887
|
|
|
|
2.47
|
%
|
Jiangping (Gary) Xiao
|
|
|
30,800
|
(9)
|
|
|
*
|
|
Xin (Adam) He
|
|
|
-
|
|
|
|
-
|
|
Michael Belsky
|
|
|
-
|
|
|
|
-
|
|
Haibin Gong
|
|
|
-
|
|
|
|
-
|
|
Lida Fang
|
|
|
-
|
|
|
|
-
|
|
Hao (Howard) Zhang
|
|
|
7,772
|
|
|
|
*
|
|
Directors
and officers as a group (10 persons)
|
|
|
660,269
|
|
|
|
12.95
|
%
|
*
|
Less
than 1%
|
(1)
|
Based
on the most current Form 4 filed by Cosmic Forward Limited on January 18, 2017.
|
(2)
|
Based
on an amended Schedule 13D filed with the SEC on June 27, 2017 by White Winston Select Asset Funds, LLC. Todd M. Enright,
Mark Blundell and Donald Feagan, the managers (the “Managers”) of White Winston, have shared voting power and
dispositive power over the 305,616 shares beneficially owned by White Winston Select Asset Funds, LLC. Includes 125,000 shares
that may be acquired upon the exercise of warrants that are currently exercisable for a purchase price of $20.00 per share.
The Managers’ address is 265 Franklin St., Suite 1702, Boston, MA 02110.
|
(3)
|
Based
on an amended Schedule 13G filed by Mr. Alomari with the SEC on May 16, 2017. Mr. Alomari’s address is 3901 W Charleston
Blvd #200, Las Vegas, NV 89102.
|
(4)
|
Based
on a Schedule 13G filed with the SEC on February 20, 2018 by Mr. Shengqi Cai. Mr. Cai’s address is New Zealand Mian
Ling 11 Lane on the 9th, Dongcheng District, Dongguan City, Guangdong Province, China.
|
(5)
|
Mr.
Ji XU is the Chairman and President of China EWI International Finance Group Co., Limited and therefore has the voting power
and dispositive power over the 496,510 shares. Mr. Xu’s address is Building C, Hengao Center, 26 Jinshifang Street,
Xicheng District, Beijing, China.
|
(6)
|
1,000
of these shares are held by Mr. Kirsch’s daughter who shares the same household as Mr. Kirsch in an account over which
Mr. Kirsch serves as custodian. 1,000 of these shares are subject to Mr. Kirsch’s investment power and held in an account
for Mr. Kirsch’s adult son and 1,000 of these shares are subject to Mr. Kirsch’s investment power and held in
an account for Mr. Kirsch’s adult daughter. 46,165 of these shares are currently owned by the Ladurini Family Trust
and subject to an option agreement between the Ladurini Family Trust and Mr. Kirsch pursuant to which Mr. Kirsch may purchase,
during a ten year exercise period that began in March 2013, from the Ladurini Family Trust a number of shares of the Company’s
Common Stock at $64.00 per share, the initial public offering price of such stock, as to which Mr. Kirsch would have sole
voting and sole dispositive power upon acquisition. As of the date of this proxy statement, Mr. Ladurini is also the beneficial
owner of these 46,165 shares. 25,000 of these shares may be acquired upon the exercise of options that are currently exercisable,
or will become exercisable within 60 days of October 12, 2018.
|
(7)
|
Includes
25,000 shares that may be acquired upon the exercise of options that are currently exercisable, or will become exercisable
within 60 days of October 12, 2018.
|
(8)
|
Includes
163,333 shares that may be acquired upon the exercise of options that are currently exercisable, or will become exercisable
within 60 days of October 12, 2018.
|
(9)
|
Includes
30,000 shares that may be acquired upon the exercise of options that are currently exercisable, or will become exercisable
within 60 days of October 12, 2018.
|
Change
in Control of the Company
On
November 7, 2016, the Company consummated the issuance and sale of 1,777,417 shares of PDN’s common stock to CFL at a price
of $9.60 per share (giving effect to PDN’s 1-for-8 reverse stock split effective on September 27, 2016), pursuant to the
terms of a stock purchase agreement, dated August 12, 2016 (the “
CFL Purchase Agreement
”), with CFL (the “
Share
Issuance
”). In addition, on November 7, 2016, PDN completed the purchase of 312,500 shares of its common stock, at a
price of $9.60 per share, net to the seller in cash, less any applicable withholding taxes and without interest, pursuant to its
previously announced partial issuer tender offer as disclosed in its Offer to Purchase, dated September 28, 2016, as amended.
CFL
paid $17.1 million as the purchase price for the 1,777,417 shares of common stock issued to it in the Share Issuance, which shares,
together with the 205,925 shares purchased by CFL at the closing of the Share Issuance from a PDN shareholder pursuant to an existing
co-sale right, represented 51% of PDN’s outstanding shares of common stock, on a fully-diluted basis. Accordingly, as a
result of CFL becoming the holder 51% of PDN’s outstanding shares of common stock, a change of control of the Company occurred.
CFL paid such purchase price using proceeds from equity contributions to CFL made by each of CFL’s shareholders.
Additionally,
on January 18, 2017, PDN consummated the Additional Share Issuance to CFL. As a result of the completion of the Additional Share
Issuance, as of January 18, 2017, CFL beneficially owned 54.64% of our outstanding shares of common stock, on a fully diluted
basis. As discussed under the heading “Certain Relationships and Related Party Transactions,” CFL also has the right
to select as nominees a majority of the directors on our Board.
Securities
Authorized for Issuance under Equity Compensation Plans
Equity
Compensation Plan Information
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
Plan
category
|
|
Number
of
securities to
be issued upon exercise of
outstanding options,
warrants and
rights (1)
|
|
|
Weighted
-average
exercise
price of
outstanding
options
|
|
|
Number
of securities remaining
available for future issuance under
equity compensation plans
(excluding securities
reflected in
column (a))
|
|
Equity compensation plans
approved by our shareholders
|
|
|
499,439
|
|
|
|
6.94
|
|
|
|
11,016
|
|
Equity compensation
plans not approved by our shareholders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
499,439
|
|
|
|
6.94
|
|
|
|
11,016
|
|
AUDIT
COMMITTEE REPORT
The
Audit Committee of the Board is composed of three directors, each of whom is an independent director as defined by applicable
law and Rule 5605(a)(2) of the Marketplace Rules of the Nasdaq Stock Market. The Audit Committee operates under a written charter
adopted by the Board.
Management
is responsible for the Company’s internal controls and the financial reporting process. Marcum LLP, the Company’s
independent registered public accounting firm, is responsible for performing an independent audit of the Company’s consolidated
financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and issuing
a report on those financial statements. The Audit Committee, among other things, is responsible for monitoring and overseeing
these processes and is directly responsible for the appointment, compensation, retention and oversight of the Company’s
independent auditors.
The
Audit Committee has met and held discussions with management and Marcum LLP regarding the Company’s audited financial statements,
the adequacy of the Company’s internal controls, the results of the audit, the overall quality of the Company’s financial
reporting and any other matters required to be discussed by the Statement on Auditing Standards No. 61, as amended, as adopted
by the Public Company Accounting Oversight Board. The Company’s independent auditors also provided to the Audit Committee
the written disclosures and the letter required by the Public Company Accounting Oversight Board regarding the independent accountant’s
communications with the Audit Committee concerning independence, and the Audit Committee discussed with the independent auditors
that firm’s independence.
Based
upon the Audit Committee’s discussions with management and the independent auditors and the Audit Committee’s review
of the representations of management and the report of the independent auditors to the Audit Committee, the Audit Committee recommended
that the Board include the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2017.
The
Audit Committee of the Board furnished the foregoing report on its activities during the fiscal year ended December 31, 2017.
The report is not deemed to be “soliciting material” or “filed” with the Securities and Exchange Commission
(“
SEC
”) or subject to the SEC’s proxy rules or to the liabilities of Section 18 of the Exchange Act,
and the report shall not be deemed incorporated by reference into any prior or subsequent filing under the Securities Act of 1933,
as amended, or the Exchange Act, except to the extent that the Company specifically incorporates the report by reference.
|
SUBMITTED
BY THE AUDIT COMMITTEE
|
|
|
|
Xin
(Adam) He (Audit Committee Chair)
|
|
Michael
D. Belsky
|
|
Lida
Fang
|
Independent
Registered Public Accounting Firm
The
Audit Committee retained Marcum LLP as independent registered public accountants to audit the Company’s consolidated financial
statements for the fiscal years ended December 31, 2016 and 2015.
The
following table summarizes fees for professional services rendered to the Company by Marcum LLP for the fiscal years ended December
31, 2017 and 2016, respectively.
Fees:
|
|
2017
|
|
|
2016
|
|
Audit Fees
|
|
$
|
287,325
|
|
|
$
|
293,977
|
|
Audit-Related Fees
|
|
$
|
0
|
|
|
|
27,784
|
|
Tax Fees
|
|
|
0
|
|
|
|
—
|
|
All Other Fees
|
|
|
0
|
|
|
|
—
|
|
Total
|
|
$
|
287,325
|
|
|
$
|
321,761
|
|
Audit
Fees.
For the fiscal years ended December 31, 2017 and 2016, the “Audit Fees” reported above were billed by Marcum
LLP for professional services rendered for the audit of the Company’s annual financial statements, reviews of the Company’s
quarterly financial statements, services normally provided by the independent auditors in connection with statutory and regulatory
filings and engagements, and comfort letters and consents.
Audit-Related
Fees.
Audit-related fees for the fiscal year ended December 31, 2017 and 2016 were billed by Marcum LLP for professional services
rendered to assist the Company with certain complex accounting matters, as well as our 2016 and 2017 share issuances to Cosmic
Forward Ltd.
Tax
Fees.
The Company did not pay any tax-related fees to Marcum LLP in 2017 or 2016
All
Other Fees.
The Company did not pay any other fees to Marcum LLP in 2017 or 2016
Pre-Approval
Policy and Independence
The
Audit Committee has a policy requiring the pre-approval of all audit and permissible non-audit services provided by the Company’s
independent auditors. Under the policy, the Audit Committee is to specifically pre-approve any recurring audit and audit-related
services to be provided during the following fiscal year. The Audit Committee also may generally pre-approve, up to a specified
maximum amount, any nonrecurring audit and audit-related services for the following fiscal year. All pre-approved matters must
be detailed as to the particular service or category of services to be provided, whether recurring or non-recurring, and reported
to the audit committee at its next scheduled meeting. Permissible non-audit services are to be pre-approved on a case-by-case
basis. The Audit Committee may delegate its pre-approval authority to any of its members, provided that such member reports all
pre-approval decisions to the Audit Committee at its next scheduled meeting. The Company’s independent auditors and members
of management are required to report periodically to the Audit Committee the extent of all services provided in accordance with
the pre-approval policy, including the amount of fees attributable to such services.
In
accordance with Section 10A of the Exchange Act, the Company is required to disclose the approval by the Audit Committee of non-audit
services performed by the Company’s independent auditors. Non-audit services are services other than those provided in connection
with an audit review of the financial statements. During the period covered by this filing, all audit-related fees, tax fees and
all other fees, and the services rendered in connection with those fees, as reported in the table shown above, were approved by
the Company’s Audit Committee.
The
Audit Committee considered the fact that Marcum LLP has not provided non-audit services to us, which the committee determined
was compatible with maintaining auditor independence.
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires that our executive officers and directors, and persons who own more than ten percent of a registered
class of our equity securities, file reports of ownership and changes in ownership with the SEC. Executive officers, directors
and greater-than-ten percent stockholders are required by SEC regulations to furnish us with all Section 16(a) forms they file.
Based solely on our review of the copies of the forms received by us and written representations from certain reporting persons
that they have complied with the relevant filing requirements, we believe that, during the year ended December 31, 2017:
|
●
|
Mr.
Jiangping (Gary) Xiao, our Chief Financial Officer, failed to timely file a Form 3 to
report his appointment as the Company’s Chief Financial Officer within 10 days
after this appointment and a Form 4 to report his acquisition of employee stock options
to purchase 30,000 shares of the Company’s common stock; and
|
|
●
|
Mr.
Maoji Wang, our Chief Executive Officer, failed to timely file a Form 4 to report his
acquisition of employee stock options to purchase 210,000 shares of the Company’s
common stock.
|
TRANSACTION
OF OTHER BUSINESS AT ANNUAL MEETING
As
of the date of this proxy statement, the Board is not aware of any matters other than those set forth herein and in the Notice
of Annual Meeting of Stockholders that will come before the Annual Meeting. Should any other matters arise requiring the vote
of stockholders, it is intended that proxies will be voted in respect thereto in accordance with the best judgment of the person
or persons voting the proxies.
FUTURE
STOCKHOLDER NOMINATIONS AND PROPOSALS
In
order to be included in Professional Diversity Network’s proxy materials for the 2019 annual meeting of stockholders, any
proposal must be received by Monday, December 31, 2018 and otherwise comply with the requirements of Rule 14a-8 of the Exchange
Act.
In
addition, Professional Diversity Network’s bylaws establish advance notice procedures with regard to stockholder nominations
for the election of directors or other business to be properly brought before an annual meeting. For nominations or other business
to be properly brought before the meeting by a stockholder, a stockholder must provide written notice delivered to the Secretary
of Professional Diversity Network not less than ninety (90) days nor more than one hundred twenty (120) days prior to the anniversary
date of the immediately preceding annual meeting.
However,
in the event that the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after the one
year anniversary date of the prior year’s meeting, a stockholder must provide written notice of any stockholder nominations
for the election of directors or other business to the Secretary of Professional Diversity Network not earlier than the close
of business on July 11, 2018, the 120
th
day before the date of the annual meeting and not later than the close of business
on the later of (i) August 10, 2018, the 90th day prior to the annual meeting or (ii) October
25
,
2018, the tenth day following the day on which a Public Announcement (as defined in Professional Diversity Network’s bylaws)
of the annual meeting was first made.
The
notice must contain specified information and representations concerning the stockholder (and the beneficial owner, if any, on
whose behalf the nomination or proposal is made), the nominee(s) or other business.
All
notices of nominations or proposals by stockholders, whether or not to be included in the Company’s proxy materials, should
be sent to Professional Diversity Network, Inc., 801 W. Adams Street, Sixth Floor, Chicago, Illinois 60607, Attention: Secretary.
A copy of the full text of the bylaw provision discussed above may be obtained by writing to the Secretary of Professional Diversity
Network.
The
Company reserves the right to reject, rule out of order or take other appropriate action with respect to any nominations or proposals
that do not comply with these and other applicable requirements.
Because
the Company did not have timely notice of any other matters to be brought before the Annual Meeting, the enclosed proxy card confers
discretionary authority to vote on any other matters that may be presented at the meeting.
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
SEC
rules permit registrants to send a single set of proxy materials to any household at which two or more shareholders reside if
the registrant believes they are members of the same family. This procedure, referred to as householding, reduces the volume of
duplicate information shareholders receive and reduces the expense to the registrant. The Company has not implemented these householding
rules with respect to its record holders; however, a number of brokerage firms have instituted householding which may impact certain
beneficial owners of common stock. If your family has multiple accounts by which you hold common stock, you may have previously
received a householding notification from your broker. Please contact your broker directly if you have any questions, require
additional copies of the proxy materials, or wish to revoke your decision to household, and thereby receive multiple copies of
the proxy materials. Those options are available to you at any time.
GENERAL
INFORMATION
Voting
Procedures
All
matters specified in this proxy statement that are to be voted on at the Annual Meeting will be by written ballot. One or more
inspectors of election will be appointed, among other things, to determine the number of shares outstanding and the voting power
of each, the shares represented at the Annual Meeting, the existence of a quorum and the authenticity, validity and effect of
proxies, to receive votes or ballots, to hear and determine all challenges and questions in any way arising in connection with
the right to vote, to count and tabulate all votes and to determine the result.
Admission
to Annual Meeting
Attendance
at the Annual Meeting is limited to stockholders. Admission to the meeting will be on a first-come, first-served basis. Registration
will begin at 8:30 a. m. and each stockholder may be asked to present valid picture identification such as a driver’s license
or passport. Recording video and taking photographs will not be permitted during the meeting.
|
By
Order of the Board of Directors
|
|
|
|
/s/
Jinbo Song
|
|
Jinbo
Song
|
|
Executive
Chairman of the Board
|
Chicago,
Illinois
October
15
, 2018
Appendix
A
Professional
Diversity Network, Inc.
2013
Equity Compensation Plan
Effective
March 8, 2013
Contents
Professional
Diversity Network, Inc.
2013
Equity Compensation Plan
Article
1. Purpose
The
purpose of the Plan is to promote the growth and profitability of the Company by providing certain employees, directors, and consultants
of the Company with an incentive to achieve corporate objectives and by attracting and retaining such individuals through an interest
in the equity of the Company.
Article
2. Definitions
Whenever
used in the Plan, the following terms shall have the meanings set forth below, and when the meaning is intended, the initial letter
of the word shall be capitalized.
2.1
“
Affiliate
” means any corporation or other entity, whether domestic or foreign, in which the Company has
or obtains, directly or indirectly, a proprietary interest of more than fifty percent (50%) by reason of stock ownership or otherwise.
2.2
“Annual Incentive Award”
means an award under Article 10.
2.3
“
Award
” means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive
Stock Options, SARs, Restricted Stock, Restricted Stock Units, Annual Incentive Awards or Other Stock-Based Awards, in each case
subject to the terms of this Plan.
2.4
“
Award Agreement
” means a written agreement entered into by the Company and a Participant setting forth
the terms and provisions applicable to an Award granted under this Plan including any amendment or modification.
2.5
“
Beneficial Owner
” or “
Beneficial Ownership
” shall have the meaning ascribed to such
term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.
2.6
“
Board
” or “
Board of Directors
” means the Board of Directors of the Company.
2.7
“
Cause
” means the Participant’s (a) continued failure to substantially perform his duties with the
Company or to follow rules of the Company; (b) conviction of a felony; (c) engagement in illegal conduct, an act of dishonesty,
or other conduct, that the Committee, in its sole discretion, determines to be injurious to the Company; or (d) material breach
of fiduciary duties to the Company. Notwithstanding the foregoing, if the Participant and the Company have entered into an employment
or service agreement which defines “Cause” (or words of similar import), such definition and any procedures relating
to the determination thereof set forth in such agreement shall govern the determination of whether “Cause” has occurred
for purposes of the Plan.
2.8
“
Change in Control
” means the occurrence of any of the following events after the Effective Date:
|
(a)
|
The
acquisition or holding by any Person of Beneficial Ownership of combined voting power
of the then outstanding voting securities of the Company entitled to vote generally in
the election of a majority of the Board of Directors (the “Outstanding Company
Voting Securities”); provided, that for purposes of this Section 2.8, any such
acquisition or holding by any of the following entities shall not by itself constitute
a Change in Control: (i) a Person who on the Effective Date is the Beneficial Owner of
thirty percent (30%) or more of the Outstanding Company Voting Securities, (ii) the Company
or any Affiliate, or (iii) any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its Affiliates;
|
|
(b)
|
Individuals
who constitute the Board as of the Effective Date hereof (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board, provided that any
individual becoming a director subsequent to the Effective Date whose election, or nomination
for election by the Company’s stockholders, was approved by the Nominating Committee
of the Board and/or the subcommittees of such Nominating Committee in accordance with
the Company’s Amended and Restated Certificate of Incorporation and By-laws shall
be considered as though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election or removal of
the directors of the Company or other actual or threatened solicitation of proxies of
consents by or on behalf of a Person other than the Board;
|
|
|
|
|
(c)
|
Consummation
of a reorganization, merger, or consolidation to which the Company is a party or a sale
or other disposition of all or substantially all of the assets of the Company (a “Business
Combination”), in each case unless, following such Business Combination: the shareholders
of the Company immediately before such event continue to hold, directly or indirectly,
(i) more than fifty percent (50%) of the Outstanding Company Voting Securities of the
Company or a corporation which as a result of such transaction owns the Company or all
or substantially all of the Company’s assets either directly or through one or
more direct or indirect subsidiaries (the Company or such other entity resulting from
Business Combination, the “Successor Entity”) and (ii) more than 50% of the
equity ownership interests of the Successor Entity; or
|
|
|
|
|
(d)
|
Approval
by the stockholders of the Company of a complete liquidation or dissolution of the Company.
|
2.9
“
Code
” means the U.S. Internal Revenue Code of 1986, as amended from time to time. For purposes of this
Plan, references to sections of the Code shall be deemed to include references to any applicable regulations thereunder and any
successor or similar provisions.
2.10
“
Committee
” means the Compensation Committee of the Board or a subcommittee thereof, or any other committee
designated by the Board to administer this Plan. There shall be at least two (2) members of the Committee, who shall be appointed
from time to time by and shall serve at the discretion of the Board, and who shall be (a) “independent” within the
requirements of applicable listing standards, (b) “outside directors” within the meaning of Section 162(m) of the
Code, and (c) “non-employee directors” within the meaning of Rule 16b-3.
2.11
“
Company
” means Professional Diversity Network, Inc. and any successor thereto as provided in Article 19.
References herein to Company shall also include Affiliates as the context requires.
2.12
“
Consultant
” means any consultant, advisor, or independent contractor who renders services to the Company
and/or its Affiliates.
2.13
“
Director
” means any individual other than an employee who is a member of the Board of Directors of the
Company.
2.14
“
Effective Date
” means March 8, 2013, or if later, the effective date of the Company’s initial public
offering in 2013.
2.15
“
Employee
” means any employee of the Company, and/or its Affiliates.
2.16
“
Exchange Act
” means the Securities Exchange Act of 1934, as amended from time to time, or any successor
act thereto.
2.17
“
Fair Market Value
” or “
FMV
” means, with respect to a Share on a specified date:
(a)
the final reported sales price on the date in question (or if there is no reported sale on such date, on the last preceding date
on which any reported sale occurred) as reported in the principal consolidated reporting system with respect to securities listed
or admitted to trading on the principal United States securities exchange on which the Shares are listed or admitted to trading,
as of the close of the market in New York City and without regard to after-hours trading activity; or
(b)
if the Shares are not listed or admitted to trading on any such exchange, the closing bid quotation with respect to a Share on
such date, as of the close of the market in New York City and without regard to after-hours trading activity, on the National
Association of Securities Dealers Automated Quotations System, or, if no such quotation is provided, on another similar system,
selected by the Committee, then in use; or
(c)
if section 2.17(a) and (b) are not applicable, the fair market value of a Share as the Committee may determine.
2.18
“
Freestanding SAR
” means an SAR that is granted independently of any Options, as described in Article 7.
2.19
“
Grant Price
” means the price established at the time of grant of an SAR pursuant to Article 7, used to
determine whether there is any payment due upon exercise of the SAR.
2.20
“
Incentive Stock Option
” or “
ISO
” means an Option to purchase Shares granted under Article
6 to an Employee and that is designated as an Incentive Stock Option and that is intended to meet the requirements of Section
422 of the Code, or any successor provision.
2.21
“
Nonqualified Stock Option
” or “
NQSO
” means an Option to Purchase Shares that is not
intended to meet the requirements of Section 422 of the Code, or that otherwise does not meet such requirements.
2.22
“
Option
” means an Incentive Stock Option or a Nonqualified Stock Option, as described in Article 6.
2.23
“
Option Price
” means the price at which a Share may be purchased by a Participant pursuant to an Option.
2.24
“
Other Stock-Based Award
” means an equity-based or equity-related Award not otherwise described by the
terms of this Plan, granted pursuant to Article 10.
2.25
“
Participant
” means any Employee, Director or Consultant as set forth in Article 5 to whom an Award is
granted.
2.26
“
Performance Measures
” means the measures set forth in Section 10.3.
2.27
“
Performance Period
” means the period of time during which the performance goals must be met in order to
determine the degree of payout and/or vesting with respect to an Award.
2.28
“
Person
” shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in
Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) thereof.
2.29
“
Plan
” means this Professional Diversity Network, Inc. 2013 Equity Compensation Plan.
2.30
“
Plan Year
” means the Company’s fiscal year or such other period as is provided by the Committee
with respect to an Award.
2.31
“
Restricted Stock
” means a Restricted Stock Award granted to a Participant pursuant to Article 8.
2.32
“
Restricted Stock Unit
” means a Restricted Stock Award granted to a Participant pursuant to Article 8.
2.33
“
Share
” means a share of common stock of the Company, $ 0.01 par value per share.
2.34
“
Stock Appreciation Right
” or “
SAR
” means an Award, designated as an SAR, granted pursuant
to the terms of Article 7 herein.
2.35
“
Tandem SAR
” means an SAR that is granted in connection with a related Option pursuant to Article 7 herein,
the exercise of which shall require forfeiture of the right to purchase a Share under the related Option (and when a Share is
purchased under the Option, the Tandem SAR shall similarly be canceled).
Article
3. Administration
3.1
General
. The Committee shall be responsible for administering the Plan, subject to this Article 3 and the other provisions
of the Plan. The Committee may employ attorneys, consultants, accountants, agents, and other Persons, any of whom may be an Employee,
and the Committee, the Company, and its officers and Directors shall be entitled to rely upon the advice, opinions, or valuations
of any such Persons. All actions taken and all interpretations and determinations made by the Committee shall be final and binding
upon the Participants, the Company, and all other interested Persons.
3.2
Authority of the Committee
. The Committee shall have full and exclusive discretionary power to interpret the terms and the
intent of the Plan and any Award Agreement or other agreement or document ancillary to or in connection with the Plan, to determine
eligibility for Awards and to adopt such rules, regulations, forms, instruments, and guidelines for administering the Plan as
the Committee may deem necessary or proper. Such authority shall include, but not be limited to, selecting Award recipients, establishing
all Award terms and conditions, including the terms and conditions set forth in Award Agreements, granting Awards as an alternative
to or as the form of payment for grants or rights earned or due under compensation plans or arrangements of the Company, and,
subject to Article 16, adopting modifications and amendments to the Plan or any Award Agreement, including without limitation,
any that are necessary to comply with the laws of the countries and other jurisdictions in which the Company and/or its Affiliates
operate.
3.3
Delegation
. A Participant who wishes to appeal any determination of the Committee concerning an Award granted pursuant to
the Plan shall notify the Committee in a writing, which shall state the basis for the appeal. The appeal shall be filed with the
Committee within 30 days after the date the Participant received the notice from the Committee. The written appeal may be filed
by the Participant’s authorized representative. The Committee shall review the appeal and issue its decision within 90 days
after it receives the Participant’s appeal. If the Committee needs additional time to review the appeal, it shall notify
the Participant in writing and specify when it expects to render its decision. After completion of its review, the Committee shall
notify the Participant of its decision in writing, which shall state the reasons for the Committee’s decision.
Article
4. Shares Subject to the Plan and Maximum Awards
4.1
Number of Shares Available for Awards
. Subject to adjustment as provided in Section 4.4 herein, the maximum number of Shares
available for issuance to Participants under the Plan shall be 500,000 Shares.
4.2
Share Usage
. Shares covered by an Award shall only be counted as used to the extent Shares are actually delivered. Any Shares
related to Awards which terminate by expiration, forfeiture, cancellation, or otherwise without the issuance of such Shares shall
be available again for grant under the Plan. The Shares available for delivery under the Plan may be authorized and unissued Shares
or treasury Shares.
4.3
Shares Available
. Subject to Section 4.4, the aggregate number of Shares subject to awards granted during any calendar year
that may be the subject of Options, Stock Appreciation Rights and Awards (including the Shares issued for meeting or exceeding
Performance Measures, as defined in Article 10 hereof, (the “Peformance Units”)) to any one Employee shall not exceed
500,000 Shares.
Subject
to Section 4.4, the maximum number of Shares that may be the subject of any type of Award other than Options and Stock Appreciation
Rights (including the Share-equivalent number of Performance Shares) granted to an Eligible Individual in any calendar year shall
be 500,000. For purposes of this Article 4, the Share-equivalent number of Performance Shares shall be equal to the quotient of
(i) the aggregate dollar amount in which the Performance Shares are denominated, divided by (ii) the Fair Market Value of a Share
on the date of grant. In the case of any Award under the Plan that is neither denominated in Shares nor valued on the basis of
the value or change in value of a Share, the maximum Award to any individual for any year shall be $10,000,000.
4.4
Adjustments in Authorized Shares
. In the event of any corporate event or transaction (including, but not limited to, a change
in the Shares of the Company or the capitalization of the Company) after the Effective Date, such as a merger, consolidation,
reorganization, recapitalization, separation, stock dividend, stock split, reverse stock split, split up, spin-off, or other distribution
of stock or property of the Company, combination of Shares, exchange of Shares, dividend in kind, or other like change-in-capital
structure or distribution (other than normal cash dividends) to stockholders of the Company, or any similar corporate event or
transaction, the Committee, in its sole discretion, in order to prevent dilution or enlargement of Participants’ rights
under the Plan, shall substitute or adjust, as applicable, the number and kind of Shares that may be issued under the Plan or
under particular forms of Awards, the number and kind of Shares subject to outstanding Awards, the Option Price or Grant Price
applicable to outstanding Awards, and other value determinations applicable to outstanding Awards. The Committee, in its sole
discretion, may also make appropriate adjustments in the terms of any Awards under the Plan to reflect or related to such changes
or distributions and to modify any other terms of outstanding Awards, including modifications of performance goals and changes
in the length of Performance Periods. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive
and binding on Participants.
Article
5. Eligibility and Participation; Grant of Award
5.1
Eligibility
. Subject to the provisions of the Plan, the Committee may, from time to time, select the Employees, Directors,
and Consultants, whom Awards shall be granted and shall determine, in its sole discretion, the nature of, any and all terms permissible
by law, and the amount of, each Award.
5.2
Award Agreement
. Each Award shall be evidenced by an Award Agreement. Each Award Agreement shall set forth the extent to which
the Participant shall have the right to exercise the Option following termination of the Participant’s employment or provision
of services to the Company and/or its Affiliates. Such provisions shall be determined in the sole discretion of the Committee,
shall be included in the Award Agreement entered into with each Participant, need not be uniform among all Awards issued pursuant
to the Plan, and may reflect distinctions based on the reasons for termination.
Article
6. Stock Options
6.1
Grant of Options
. Subject to the terms and provisions of the Plan, Options may be granted to Participants in such number,
and upon such terms, and at any time and from time to time as shall be determined by the Committee, in its sole discretion.
6.2
Award Agreement
. Each Award Agreement granting an Option shall specify the Option Price, the maximum duration of the Option,
the number of Shares to which the Option pertains, the conditions upon which an Option shall become vested and exercisable, and
such other provisions as the Committee shall determine which are not inconsistent with the terms of the Plan. The Award Agreement
also shall specify whether the Option is intended to be an ISO or a NQSO, and in the absence of any such specification, the Option
shall be an NQSO.
6.3
Option Price
. The Option Price for each grant of an Option under this Plan shall be as determined by the Committee and shall
be specified in the Award Agreement, and shall be no less than the Fair Market Value on the date of grant.
6.4
Duration of Options
. Each Option granted to a Participant shall expire at such time as the Committee shall determine at the
time of grant; provided, however, no Option shall be exercisable later than the tenth (10th) anniversary of its grant date other
than an Option granted to a Participant outside the United States.
6.5
Exercise of Options
. Options granted under this Article 6 shall be exercisable at such times and be subject to such restrictions
and conditions as the Committee shall in each instance approve, which terms and restrictions need not be the same for each grant
or for each Participant.
6.6
Payment
. Options shall be exercised by the delivery of a notice of exercise to the Company or an agent designated by the Company
in a form specified or accepted by the Committee, or by complying with any alternative procedures which may be authorized by the
Committee, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment
for the Shares.
A
condition of the issuance of the Shares as to which an Option shall be exercised shall be the payment of the Option Price. The
Option Price of any Option shall be payable to the Company in full either: (a) in cash or its equivalent; (b) by tendering previously
acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the aggregate Option Price (provided that
the Committee may require that the Shares that are tendered must have been held by the Participant for specified period prior
to their tender to satisfy the aggreagte Option Price if acquired under this Plan or any other compensation plan mentioned by
the Company, or have been purchased on the open market); (c) by a combination of (a) and (b); or (d) any other method approved
or accepted by the Committee in its sole discretion, including, without limitation, if the Committee so determines, a cashless
(broker-assisted) exercise.
Subject
to any governing rules or regulations, as soon as practicable after receipt of written notification of exercise and full payment
(including satisfaction of any applicable tax withholding), the Company shall deliver to the Participant evidence of book entry
Shares, or upon the Participant’s request, Share certificates in an appropriate amount based upon the number of Shares purchased
under the Option(s).
6.7
ISO
. To the extent that an Option is an Incentive Stock Option, the following provisions shall apply:
Subject
to the limit set forth in Section 4.1 on the number of Shares that may be issued in the aggregate under the Plan, the maximum
number of Shares that may be issued pursuant to ISOs shall be 500,000. ISOs may be granted only to eligible Employees of the Company
or of any parent or subsidiary corporation (as permitted by Section 422 of the Code and the treasury regulations thereunder).
If any Participant shall make any disposition of Shares issued pursuant to the exercise of an ISO under the circumstances described
in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such
disposition within ten (10) days thereof and such Option shall be considered to be an NQSO.
Notwithstanding
any other provision of this Plan to the contrary, with respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem
SAR will expire no later than the expiration of the underlying ISO; (b) the value of the payout with respect to the Tandem SAR
may be for no more than one hundred percent (100%) of the excess of the Fair Market Value of the Shares subject to the underlying
ISO at the time the Tandem SAR is exercised over the Option Price of the underlying ISO; and (c) the Tandem SAR may be exercised
only when the Fair Market Value of the Shares subject to the ISO exceeds the Option Price of the ISO. Notwithstanding the foregoing,
no Incentive Stock Options may be granted more than ten (10) years after the earlier of (a) adoption of the Plan by the Board,
or (b) the Effective Date.
To
the extent that the aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which options designated
as ISOs are exercisable for the first time by a Participant during any calendar year (under this Plan or any other plan of the
Company, or any subsidiary as defined in Section 424 of the Code) exceeds $100,000, such options shall constitute NQSOs. If an
ISO is granted to any person who, at the time such option is granted, owns capital stock possessing more than ten percent (10%)
of the total combined voting power of all classes of capital stock of the Company (or of any subsidiary), the purchase price per
Share shall be 110% of Fair Market Value and the ISO may not be exercised more than 5 years from the date of grant, otherwise
the grant shall be considered to be an NQSO.
Article
7. Stock Appreciation Rights
7.1
Grant of SARs
. Subject to the terms and conditions of the Plan, SARs may be granted to Participants at any time and from time
to time as shall be determined by the Committee. The Committee may grant Freestanding SARs, Tandem SARs, or any combination of
these forms of SARs.
Subject
to the terms and conditions of the Plan, the Committee shall have complete discretion in determining the number of SARs granted
to each Participant and, consistent with the provisions of the Plan, in determining the terms and conditions pertaining to such
SARs.
The
Grant Price for each grant of a Freestanding SAR shall be determined by the Committee and shall be specified in the Award, but
shall be no less than the Fair Market Value of a Share on the date of grant
.
The Grant Price of Tandem SARs shall be equal
to the Option Price of the related Option.
7.2
SAR Agreement
. Each SAR Award shall be evidenced by an Award Agreement that shall specify the Grant Price, the term of the
SAR, and such other provisions as the Committee shall determine.
7.3
Term of SAR
. The term of an SAR granted under the Plan shall be determined by the Committee, in its sole discretion, and except
as determined otherwise by the Committee and specified in the SAR Award Agreement, no SAR shall be exercisable later than the
tenth (10th) anniversary of its grant date.
7.4
Exercise of Freestanding SARs
. Freestanding SARs may be exercised upon whatever terms and conditions the Committee, in its
sole discretion, imposes.
7.5
Exercise of Tandem SARs
. Tandem SARs may be exercised for all or part of the Shares subject to the related Option upon the
surrender of the right to exercise the equivalent portion of the related Option. A Tandem SAR may be exercised only with respect
to the Shares for which its related Option is then exercisable.
7.6
Payment of SAR Amount
. Upon the exercise of an SAR, a Participant shall be entitled to receive payment from the Company in
an amount determined by multiplying:
|
(a)
|
The
excess of the Fair Market Value of a Share on the date of exercise over the Grant Price;
by
|
|
|
|
|
(b)
|
The
number of Shares with respect to which the SAR is exercised.
|
At
the discretion of the Committee, the payment upon SAR exercise may be in cash, Shares, or any combination thereof, or in any other
manner approved by the Committee in its sole discretion. The Committee’s determination regarding the form of SAR payout
shall be set forth in the Award Agreement pertaining to the grant of the SAR.
7.7
Other Restrictions
. The Committee shall impose such other conditions and/or restrictions on any Shares received upon exercise
of an SAR granted pursuant to the Plan as it may deem advisable or desirable. These restrictions may include, but shall not be
limited to, a requirement that the Participant hold the Shares received upon exercise of an SAR for a specified period of time.
Article
8. Restricted Stock and Restricted Stock Units
8.1
Grant of Restricted Stock or Restricted Stock Units
. Subject to the terms and provisions of the Plan, the Committee, at any
time and from time to time, may grant Shares of Restricted Stock and/or Restricted Stock Units to Participants in such amounts
as the Committee shall determine. Restricted Stock Units shall be similar to Restricted Stock except that no Shares are actually
awarded to the Participant on the date of grant.
8.2
Restricted Stock or Restricted Stock Unit Agreement
. Each Restricted Stock and/or Restricted Stock Unit grant shall be evidenced
by an Award Agreement that shall specify the period(s) of restriction, the number of Shares of Restricted Stock or the number
of Restricted Stock Units granted, and such other provisions as the Committee shall determine.
8.3
Other Restrictions
. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock
or Restricted Stock Units granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted Stock or each Restricted Stock Unit, restrictions based
upon the achievement of specific performance goals, time-based restrictions on vesting following the attainment of the performance
goals, time-based restrictions, and/or restrictions under applicable laws or under the requirements of any stock exchange or market
upon which such Shares are listed or traded, or holding requirements or sale restrictions placed on the Shares by the Company
upon vesting of such Restricted Stock or Restricted Stock Units.
To
the extent deemed appropriate by the Committee, the Company may retain the certificates representing Shares of Restricted Stock
in the Company’s possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied
or lapse.
Except
as otherwise provided in this Article 8, Shares of Restricted Stock covered by each Restricted Stock Award shall become freely
transferable by the Participant after all conditions and restrictions applicable to such Shares have been satisfied or lapse (including
satisfaction of any applicable tax withholding obligations), and except as expressly provided by the Committee in the Award Agreement,
Restricted Stock Units shall be paid in Shares.
8.4
Certificate Legend
. In addition to any legends placed on certificates pursuant to Section 20.3, each certificate representing
Shares of Restricted Stock granted pursuant to the Plan may bear a legend such as the following or as otherwise determined by
the Committee in its sole discretion:
The
sale or transfer of Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the Professional Diversity Network, Inc. 2013 Equity Compensation
Plan, and in the associated Award Agreement. A copy of the Plan and such Award Agreement may be obtained from Professional Diversity
Network, Inc.
8.5
Voting Rights
. Unless otherwise determined by the Committee and set forth in a Participant’s Award Agreement, to the
extent permitted or required by law, as determined by the Committee, Participants holding Shares of Restricted Stock granted hereunder
may be granted the right to exercise full voting rights with respect to those Shares during the time such shares are subject to
restrictions under Section 8.2 or 8.3. A Participant shall have no voting rights with respect to any Restricted Stock Units granted
hereunder.
8.6
Section 83(b) Election
. If a Participant makes an election pursuant to Section 83(b) of the Code concerning a Restricted Stock
Award, the Participant shall be required to promptly file copy of such election with the Company.
Article
9. Other Stock-Based Awards
9.1
Other Stock-Based Awards
. The Committee may grant other types of equity-based or equity-related Awards not otherwise described
by the terms of this Plan (including the grant or offer for sale of unrestricted Shares) in such amounts and subject to such terms
and conditions, as the Committee shall determine. Such Awards may involve the transfer of actual Shares to Participants, or payment
in cash or otherwise of amounts based on the value of Shares.
9.2
Value of Other Stock-Based Awards
. Each Other Stock-Based Award shall be expressed in terms of Shares or units based on Shares,
as determined by the Committee. The Committee may establish performance goals in its discretion. If the Committee exercises its
discretion to establish performance goals, the number and/or value of Other Stock-Based Awards that will be paid out to the Participant
will depend on the extent to which the performance goals are met.
9.3
Payment of Other Stock-Based Awards
. Payment, if any, with respect to an Other Stock-Based Award shall be made in accordance
with the terms of the Award, in cash or Shares as the Committee determines.
Article
10. Annual Incentive Award
10.1
Establishment of Annual Incentive Pool
. The Committee may designate Employees who are eligible to receive a monetary payment
in any Plan Year based on a percentage of an incentive pool determined by reference to one or more Performance Measures set forth
in Section 10.3. The Committee shall allocate an incentive pool percentage to each designated Employee for each Plan Year, provided
the sum of the incentive pool percentages for all Employees cannot exceed one hundred percent (100%) of the total pool.
10.2
Determination of Employees’ Portions
. As soon as possible after the determination of the incentive pool for a Plan Year,
the Committee shall calculate each Employee’s allocated portion of the incentive pool based upon the percentage established
at the beginning of the Plan Year. Each Employee’s incentive award then shall be determined by the Committee based on the
Employee’s allocated portion of the incentive pool subject to adjustment in the sole discretion of the Committee. In no
event may the portion of the incentive pool allocated to a Employee be increased in any way, including as a result of the reduction
of any other Employee’s allocated portion. The Committee shall retain the discretion to adjust such Awards downward.
10.3
Performance Measures
. The performance measures applicable to the payment or vesting of an Award intended to qualify as performance-based
compensation under section 162(m) of the Code to a person determined by the Committee to be reasonably likely to be a covered
employee under section 162(m) of the Code shall be chosen from among the following performance measures (“
Performance
Measures
”): net earnings or net income (before or after taxes); earnings per Share; net sales or revenue growth; net
operating profit; return measures (including, but not limited to, return on assets, capital, invested capital, equity, revenue,
or sales); cash flow (including, but not limited to, operating cash flow, free cash flow, and cash flow return on equity); earnings
before or after taxes, interest, depreciation, and/or amortization; gross or operating margins; productivity ratios; Share price
(including, but not limited to, growth measures and total shareholder return); expense targets; margins; operating efficiency;
market share; customer satisfaction; and balance sheet and statement of cash flow measures (including but not limited to, working
capital amounts and levels of short and long-term debt). In addition, the Committee may make grants without satisfying the requirements
of Code Section 162(m) and provide for vesting to be determined based on Performance Measures other than those set forth herein.
For
Awards intended to qualify as performance-based compensation under section 162(m) of the Code, the Committee shall establish the
applicable Performance Measure(s) within the time prescribed under section 162(m) of the Code. All determinations by the Committee
as to the achievement of the applicable Performance Measure(s) shall be in writing prior to the payment of the Award.
Article
11. Dividend Equivalents
Any
Participant selected by the Committee may be granted dividend equivalents based on the dividends declared on Shares that are subject
to any Award, to be credited as of dividend payment dates, during the period between the date the Award is earned or vested and
the date the Award is exercised or expires, as determined by the Committee. Such dividend equivalents shall be converted to cash
or additional Shares by such formula and at such time and subject to such limitations as may be determined by the Committee. Notwithstanding
the foregoing, the receipt of dividend equivalents on Options or SARs shall not be made contingent on the exercise of any Award.
Article
12. Beneficiary Designation
Each
Participant under the Plan may, from time to time, name any beneficiary or beneficiaries to whom any benefit under the Plan is
to be paid in case of his death before he receives any or all of such benefit. Each such designation shall revoke all prior designations
by the same Participant, shall be in a form prescribed by the Committee, and will be effective only when filed by the Participant
in writing with the Company during the Participant’s lifetime. In the absence of any such designation, benefits remaining
unpaid at the Participant’s death shall be paid to the Participant’s estate.
Article
13. Transferability
Unless
otherwise determined by the Committee, Awards by their terms shall not be transferable by the Participant other than by will or
by the laws of descent and distribution, and the Shares granted pursuant to Awards shall be distributable, during the lifetime
of the Participant, only to the Participant.
Article
14. Rights of Participants
14.1
Employment
. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company and/or
its Affiliates to terminate any Participant’s employment or service on the Board or to the Company at any time or for any
reason not prohibited by law, nor confer upon any Participant any right to continue his employment or service as a Director or
Consultant for any specified period of time.
Neither
an Award nor any benefits arising under this Plan shall constitute an employment contract with the Company and/or its Affiliates
and, accordingly, subject to Article 16 of this Plan, the benefits hereunder may be terminated at any time in the sole and exclusive
discretion of the Committee without giving rise to any liability on the part of the Company and/or its Affiliates.
14.2
Participation
. No individual shall have the right to be selected to receive an Award under this Plan, or, having been so selected,
to be selected to receive a future Award.
14.3
Rights as a Stockholder
. Except as otherwise provided herein, a Participant shall have none of the rights of a shareholder
with respect to Shares covered by any Award until the Participant becomes the record holder of such Shares.
Article
15. Change in Control
If
provided in an Award Agreement or otherwise determined by the Committee, upon a Change in Control, all then-outstanding Options
and Stock Appreciation Rights shall become fully vested and exercisable, and all other then-outstanding Awards shall vest in full
and be free of restrictions. The Committee will not be required to treat all Awards similarly in a Change in Control.
Article
16. Shareholder Approval; Amendment, Modification, Suspension, and Termination
16.1
Shareholder Approval; Amendment, Modification, Suspension, and Termination
. The Plan shall be subject to approval of shareholders
of the Company. Subject to Section 16.4, the Committee may, at any time and from time to time, alter, amend, modify, suspend,
or terminate the Plan and any Award Agreement in whole or in part; provided, however, that, without the prior approval of the
Company’s stockholders and except as provided in Sections 4.4 and 16, Options or SARs issued under the Plan will not be
repriced, replaced, or regranted through cancellation, or cash out, or by lowering the Option Price of a previously granted Option
or the Grant Price of a previously granted SAR, and no amendment of the Plan or grant of Award under the Plan shall be made without
stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule; including, but not limited
to, the Exchange Act, the Code, and, if applicable, the New York Stock Exchange Listed Company Manual/the Nasdaq Stock Market
Rules.
16.2
Termination of the Plan
. Unless sooner terminated as provided herein, the Plan shall terminate ten (10) years from the Effective
Date. After the Plan is terminated, no Awards may be granted but Awards previously granted shall remain outstanding in accordance
with their applicable terms and conditions and the Plan’s terms and conditions.
16.3
Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events
. The Committee may make adjustments in
the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including,
without limitation, the events described in Section 4.4 hereof) affecting the Company or the financial statements of the Company
or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments
are appropriate in order to prevent unintended dilution or enlargement of the benefits or potential benefits intended to be made
available under the Plan. The determination of the Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.
16.4
Awards Previously Granted
. Notwithstanding any other provision of the Plan to the contrary, except as set forth in Section
17.1, no termination, amendment, suspension, or modification of the Plan or an Award Agreement shall adversely affect in any material
way any Award previously granted under the Plan, without the written consent of the Participant holding such Award.
Article
17. Section 409A.
17.1
To the extent that the Plan and/or any Awards granted or awarded under the Plan are construed to be non-qualified deferred
compensation plans described in section 409A of the Code, the Plan and any Award Agreements shall be operated, administered and
construed so as to comply with the requirements of section 409A of the Code. The Plan and any Award Agreements shall be subject
to amendment, with or without advance notice to Employees, Directors and other interested parties, and on a prospective or retroactive
basis, including, but not limited to, amendment in a manner that adversely affects the rights of Employees, Directors and other
interested parties, to the extent necessary to effect compliance with section 409A of the Code. This Plan does not permit the
acceleration of the time or schedule of any distribution of an Award subject to section 409A of the Code, except as provided by
Section 409A of the Code.
Article
18. Withholding
18.1
Tax Withholding
. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to
the Company, the minimum statutory amount to satisfy federal, state, and local taxes, domestic or foreign, required by law or
regulation to be withheld with respect to any taxable event arising as a result of this Plan.
18.2
Share Withholding
. With respect to withholding required upon the exercise of Options or SARs, upon the lapse of restrictions
on Restricted Stock and Restricted Stock Units, or upon the achievement of performance goals related to Performance Shares, or
any other taxable event arising as a result of an Award granted hereunder, Participants may elect, subject to the approval of
the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair
Market Value on the date the tax is to be determined equal to the minimum statutory total tax that could be imposed on the transaction.
All such elections shall be irrevocable, made in writing, and signed by the Participant, and shall be subject to any restrictions
or limitations that the Committee, in its sole discretion, deems appropriate.
Article
19. Successors
All
obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of
all or substantially all of the business and/or assets of the Company.
Article
20. General Provisions
20.1
Forfeiture Events
. The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits
with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain
specified events, in addition to any otherwise applicable vesting or performance conditions of an Award. Such events may include,
but shall not be limited to, termination of employment for Cause, termination of the Participant’s provision of services
to the Company and/or its Affiliates, violation of material Company and/or Affiliate policies, breach of noncompetition, confidentiality,
or other restrictive covenants that may apply to the Participant, or other conduct by the Participant that is detrimental to the
business or reputation of the Company and/or its Affiliates.
20.2
Recapture
. If the grant of an Award or a payment under this Plan is subject to recapture under any securities law or rule
or other applicable provision or in accordance with any recapture or clawback policy of the Company, the Participant shall reimburse
the Company the amount of any payment in settlement of an Award earned or accrued subject to such recapture or clawback provision.
20.3
Legend
. The certificates for Shares may include any legend which the Committee deems appropriate to reflect any restrictions
on transfer of such Shares.
20.4
Gender and Number
. Except where otherwise indicated by the context, any masculine term used herein also shall include the
feminine, the plural shall include the singular, and the singular shall include the plural.
20.5
Severability
. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision
had not been included.
20.6
Requirements of Law
. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
20.7
Delivery of Title
. The Company shall have no obligation to issue or deliver evidence of title for Shares issued under the
Plan prior to the earlier of (a) obtaining any approvals from governmental or regulatory body or agencies that the Company determines
are necessary or advisable; and (b) completion of any registration or other qualification of the Shares under any applicable national,
local or foreign law or ruling of any governmental or regulatory body or agency that the Company determines to be necessary or
advisable. The inability of the Company to obtain authority from any governmental or regulatory body having jurisdiction, which
authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
20.8
Investment Representations
. The Committee may require any individual receiving Shares pursuant to an Award under this Plan
to represent and warrant in writing that the individual is acquiring the Shares for investment and without any present intention
to sell or distribute such Shares.
20.9
Uncertificated Shares
. To the extent that the Plan provides for issuance of certificates to reflect the transfer of Shares,
the transfer of such Shares may be affected on a noncertificated basis, to the extent not prohibited by applicable law or the
rules of any stock exchange.
20.10
Unfunded Plan
. Participants shall have no right, title, or interest whatsoever in or to any investments that the Company and/or
its Affiliates may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the
Company and any Participant, beneficiary, legal representative, or any other Person. To the extent that any individual acquires
a right to receive payments from the Company and/or its Affiliates under the Plan, such right shall be no greater than the right
of an unsecured general creditor of the Company and/or its Affiliates.
20.11
No Fractional Shares
. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, Awards, or other property shall be issued or paid in lieu of fractional Shares or whether such fractional
Shares or any rights thereto shall be forfeited or otherwise eliminated.
20.12
Retirement and Welfare Plans
. Neither Awards made under the Plan nor Shares or cash paid pursuant to such Awards, except pursuant
to Annual Incentive Awards, may be included as “compensation” for purposes of computing the benefits payable to any
Participant under the Company’s, and/or its Affiliates’ retirement plans (both qualified and nonqualified) or welfare
benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s
benefit.
20.13
No Constraint on Corporate Action
. Nothing in this Plan shall be construed to: (i) limit, impair, or otherwise affect the
Company’s or its Affiliates’ right or power to make adjustments, reclassifications, reorganizations, or changes of
its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its
business or assets; or (ii) limit the right or power of the Company and/or its Affiliates to take any action which such entity
deems to be necessary or appropriate.
20.14
Governing Law
. The Plan and each Award Agreement shall be governed by the laws of the State of Delaware, excluding any conflicts
or choice of law rule or principle that might otherwise refer construction or interpretation of the Plan to the substantive law
of another jurisdiction.
Appendix
B
AMENDMENT
NO. 3 TO
PROFESSIONAL
DIVERSITY NETWORK, INC.
2013
EQUITY COMPENSATION PLAN
The
Professional Diversity Network, Inc. 2013 Equity Compensation Plan (the “
Plan
”) is hereby amended as follows,
effective upon the date approved by Professional Diversity Network, Inc.’s shareholders:
1.
Section 4.1 of the Plan is amended to read as follows:
“
4.1
Number of Shares Available for Awards
. Subject to adjustment as provided in Section 4.4 herein, the maximum number of Shares
available for issuance to Participants under the Plan shall be 915,000 shares.”
2.
Continuing Effect of Plan
. Except as expressly modified herein, the provisions of the Plan are and shall remain in full
force and effect.
IN
WITNESS HEREOF, the undersigned have acknowledged and executed this amendment to the Plan as of the date set forth below.
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By:
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Name:
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Title:
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Date:
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PROFESSIONAL
DIVERSITY NETWORK, INC.
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