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
Filed
by the Registrant [X]
Filed
by a Party other than the Registrant [ ]
Check
the appropriate box:
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Preliminary
Proxy Statement
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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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Payment
of Filing Fee (Check the appropriate box):
[X]
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No
fee required.
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[ ]
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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
of each class of securities to which transaction applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials.
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[ ]
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Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
previously paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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May
12, 2020
Dear
Stockholder:
On
behalf of the Board of Directors, I am pleased to invite you to attend the 2020 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 June 25, 2020, 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 May 12, 2020 to our
stockholders of record and beneficial owners as of the close of business on the record date, May 11, 2020.
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 in person, please vote electronically via the Internet, by telephone or by completing, signing,
dating and returning the proxy card included with a paper copy of this 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/
Xin (Adam) He
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Xin
(Adam) He
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Interim
Chief Executive Officer and Chief Financial Officer
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PROFESSIONAL
DIVERSITY NETWORK, INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
To
Be Held on June 25, 2020
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 June 25, 2020, at 9:00 a.m., Central Time, for the following purposes:
1.
To elect five (5) directors to serve until the next Annual Meeting of Stockholders (and until their successors are duly elected
and qualified);
2.
To ratify the appointment by the Company’s Audit Committee of Ciro E. Adams, CPA, LLC as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2020;
3.
To conduct an advisory vote on the compensation of our named executive officers; and
4.
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 May 11, 2020 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, 2019 are available by visiting the following
website: www.proxyvote.com.
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By
Order of the Board of Directors
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/s/
Hao (Howard) Zhang
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Hao
(Howard) Zhang
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Chairman
of the Board
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Chicago,
Illinois
May
12, 2020
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 June 25, 2020
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 2020 Annual Meeting of Stockholders (the “Annual
Meeting”) to be held on June 25, 2020 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 May 12, 2020.
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 May 11, 2020 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 10,925,859 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, provided that a quorum is present. 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 (Auditing Firm Ratification Proposal) and Proposal 3 (Advisory Vote on Executive Compensation).
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
(Ratifying the Selection of Auditing Firm) or Proposal 3 (Advisory Vote on Executive Compensation) will have the same effect
as a vote against such proposal.
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 2 (Ratifying the Selection
of Auditing Firm) 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 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 June 24, 2020.
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.
Revocability
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, June 24, 2020, 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 ratification of the Company’s selection of Ciro E. Adams, CPA,
LLC as the Company’s independent registered public accounting firm (Proposal 2), and FOR the advisory vote on
executive compensation (Proposal 3).
PROPOSAL
1: NOMINATION AND ELECTION OF DIRECTORS
Nominees
for Director
The
Board has determined to reduce the size of the Board from seven (7) to five (5) and nominated the five 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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Courtney
Shea
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59
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Director
(1), (2)
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Michael
D. Belsky
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61
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Director
(1), (2), (3)
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Xin
(Adam) He
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47
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Director,
Interim CEO, CFO
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Lida
Fang
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62
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Director
(1), (3)
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Hao
(Howard) Zhang
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52
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Director
(2), (3), Chairman of the Board
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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 our compensation committee.
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(3)
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Member
of our nominating and corporate governance committee.
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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.
Michael
D. Belsky (age 61) 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.
Lida
Fang (age 62) joined our Board in October 2018. She 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. Ms. Fang was originally nominated to our Board under the terms
of a stockholders’ agreement (the “Stockholders’ Agreement”) entered into between the Company and Cosmic
Forward Limited (“CFL”), our largest 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.
Hao
(Howard) Zhang (age 52) has been a member of the Board since November 2016, further elected as the Chairman of the Board in
March 2020. 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 nominated to our Board under the terms of a stockholders’ agreement entered
into between the Company and CFL.
Courtney
C. Shea (age 59) joined our Board on March 22, 2019. She has over 30 years of professional experience in municipal advisory
and investment banking. Ms. Shea is a managing member of Columbia Capital Management, LLC, which she joined in 2013. She
served as the head of Chicago office and senior vice president at Acacia Financial Group, Inc. from 2009 to 2013. She was
also the head of Chicago office and managing director of Siebert Branford Shank & Co, LLC from 2006 to 2008. She served
as the national department manager at LaSalle Financial Services from 2001 to 2006. Ms. Shea has been a member of the Board
of Center for Municipal Finance at Harris School of Public Policy, University of Chicago since 2016 and a member of the National
Association of Bond Lawyers since 2010. She chaired the Illinois State Securities Advisory Committee from 1995 to 1998 and
was a member there from 1991 to 1995. She was also a member of the State of Illinois Banking Board from 2001 to 2002.
In addition, Ms. Shea established the National Women in Public Finance as a co-founder in 1996. Ms. Shea received her MBA
degree from the University of Chicago in 1985, her Juris Doctor degree from Loyola University Law School in 1983 and her
bachelor degree in Economics from University of Notre Dame in 1980.
Xin
(Adam) He (age 47) joined the Board in January 2018, initially serving as audit committee chair of the Board. He was appointed
as the Company’s Chief Financial Officer in March 2019 and stepped down from the Board in connection with such appointment.
He was nominated to the Board by CFL in November 2019 and was appointed as the Company’s Interim Chief Executive Officer
around the same time. Previously, Mr. He was Chief Financial Officer of Wanda USA Group, a Fortune Global 500 company, since May
2012, where he managed two projects: a 101-story landmark “Vista Tower” development in downtown Chicago, and NYSE
traded AMC Entertainment Holdings, Inc., the largest movie exhibitor owning and operating 660 theatres primarily located in the
United States. He also served as an independent board director at several Nasdaq listed companies. From 2010 to 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.
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
Committees
of the Board
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’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 Michael Belsky (Audit Committee Chair), Lida Fang and Courtney C. Shea, each of whom is
deemed 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 Ms. Shea
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
herein.
Compensation
Committee. The Compensation Committee 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 (Compensation Committee Chair), Hao (Howard) Zhang and Courtney
Shea. 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.ipdnusa.com. Information on the Company’s website is not incorporated
by reference herein.
Nominating
and Corporate Governance Committee. The Nominating and Corporate Governance Committee 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 Hao (Howard) Zhang (Nominating and Corporate Governance Committee
Chair), Michael D. Belsky and Lida Fang. 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.ipdnusa.com.
Information on the Company’s website is not incorporated by reference herein.
Attendance
at Board and Committee Meetings
During
the fiscal year ended December 31, 2019, the Board held a total of 15 meetings. Each member of the Board, other than Hao (Howard)
Zhang and Haibin Gong, 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, 2019. 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 Mr. Belsky,,Mr. Zhang,,,Ms. Fang and Ms. Shea are “independent directors”
as defined by Rule 5605(a)(2) of the Nasdaq Stock Market. Under the terms of the Stockholders’ Agreement, 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. CFL currently owns approximately 31.5% of the total outstanding commons stock of the Company and
has appointed Mr. Zhang, Ms. Fang and Mr. He as directors pursuant to its right under the stockholders’ agreement.
Board
Leadership Structure
The
Board does not have a policy requiring that the roles of Chief Executive Officer and Chairman 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.
Mr. Hao (Howard) Zhang was nominated as the Chairman of the Board by CFL pursuant to its right under the Stockholders’ Agreement.
Additionally, because four of the Company’s five 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 investors@ipdnusa.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 on our corporate website at
www.ipdnusa.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 herein.
Certain
Relationships and Related Party Transactions
The
following is a summary of transactions, since January 1, 2018, 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, 2018 and December 31, 2019, 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
entitled “Executive Compensation.”
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, 2019 for our Chief Executive Officer, and our 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 herein 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. Currently, the Company has
not engaged any such compensation consultant.
Summary
Compensation Table
The
following table provides information regarding the compensation earned during the years ended December 31, 2019 and December 31,
2018 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
($)
|
|
|
Total
($)
|
|
Xin (Adam) He, Interim Chief Executive Officer and Chief Financial Officer (1)
|
|
|
2019
|
|
|
$
|
161,180
|
|
|
$
|
—
|
|
|
$
|
53,400
|
(2)
|
|
$
|
—
|
|
|
$
|
214,580
|
|
Maoji (Michael) Wang,
|
|
|
2019
|
|
|
$
|
266,667
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
266,667
|
|
Chief Executive Officer(3)
|
|
|
2018
|
|
|
$
|
320,000
|
|
|
$
|
—
|
|
|
$
|
151,200
|
(4)
|
|
$
|
—
|
|
|
$
|
471,200
|
|
Star Jones,
|
|
|
2019
|
|
|
$
|
300,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
300,000
|
|
President (5)
|
|
|
2018
|
|
|
$
|
300,000
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
300,000
|
|
Jingbo Song,
|
|
|
2019
|
|
|
$
|
46,042
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
46,042
|
|
Co-executive Chairman (6)
|
|
|
2018
|
|
|
$
|
325,000
|
|
|
$
|
—
|
|
|
$
|
162,000
|
(7)
|
|
$
|
—
|
|
|
$
|
487,000
|
|
(1)
|
Mr.
He was appointed as our interim Chief Executive Officer on November 15, 2019 and Chief Financial Officer effective March 11,
2019.
|
|
|
(2)
|
Represents
the grant date fair value of the stock options awarded to Mr. He on March 11, 2019 computed in accordance with FASB ASC Topic
718. On such date, Mr. Wang was granted an option to purchase 30,000 shares of the Company’s common stock at an exercise
price of $2.23, of which one-third of such options were immediately exercisable on the date of the grant, one-third vested
and became exercisable on March 11, 2020 and the remaining one-third will vest and become exercisable on March 11, 2021.
|
|
|
(3)
|
Mr.
Wang was appointed as our Chief Executive Officer on December 22, 2016, and resigned on November 12, 2019.
|
|
|
(4)
|
Represents
the grant date fair value of the stock options awarded to Mr. Wang on April 19, 2018 computed in accordance with FASB ASC
Topic 718. On such date, Mr. Wang was granted an option to purchase 70,000 shares of the Company’s common stock at an
exercise price of $2.82. Due to Mr. Wang resignation on Nov 12, 2019, all options expired and were cancelled as of March 31,
2020.
|
|
|
(5)
|
Ms.
Jones served as our President since September 2014 and resigned from the Company effective December 31, 2019.
|
|
|
(6)
|
Represents
the grant date fair value of the stock options awarded to Mr. Song on April 19, 2018 computed in accordance with FASB ASC
Topic 718. On such date, Mr. Song was granted an option to purchase 75,000 shares of the Company’s common stock at an
exercise price of $2.82. Due to Mr. Song resignation, all options expired and were cancelled as of March 31, 2020.
|
(7)
|
Mr.
Song was appointed as our Co-Executive Chairman effective January 12, 2017 and he resigned from the Board on February 20,
2019.
|
Employment
Agreements with Named Executive Officers
He’s
Employment Agreement
On
March 11, 2019 (the “He Effective Date”), the Company entered into an employment agreement (the “He
Employment Agreement”) with Mr. He, which term continues until terminated in writing by either party or earlier terminated
pursuant to the provisions of the He Employment Agreement. Under the He Employment Agreement, Mr. He 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 during Mr. He’s employment period. Mr. He will be eligible to
receive an annual incentive bonus 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. He 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 He Employment Agreement, Mr. He is subject to non-solicitation, non-competition and non-interference restrictive
covenants during his employment and for the 12-month period following his termination. The He Employment Agreement also contains
customary confidentiality, work product and return of Company property covenants.
In
addition, Mr. He is entitled to severance pay if he is terminated without “cause” or resigns for “good reason,”
each as defined in the He Employment Agreement. Upon such termination, Mr. He will be entitled to receive an amount equal to 30
days 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 He Employment Agreement, Mr. He 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 will vest immediately upon award, (ii) 1/3 of the shares underlying the option will vest on the first anniversary
of the He Effective Date, and (iii) 1/3 of the shares underlying the option will vest on the second anniversary of the He Effective
Date.
Outstanding
Equity Awards at December 31, 2019
The
following table sets forth the equity awards we have made to our named executive officers that were outstanding as of December
31, 2019.
|
|
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
|
|
|
210,000
|
|
|
|
—
|
|
|
$
|
10.72
|
|
|
02/10/2020
|
|
|
—
|
|
|
|
—
|
|
Maoji
(Michael) Wang
|
|
|
46,667
|
|
|
|
—
|
|
|
$
|
2.82
|
|
|
02/10/2020
|
|
|
—
|
|
|
|
—
|
|
Xin
(Adam) He
|
|
|
20,000
|
|
|
|
10,000
|
(1)
|
|
$
|
2.23
|
|
|
03/11/2029
|
|
|
—
|
|
|
|
—
|
|
(1)
|
Represents
the grant date fair value of the stock options awarded to Mr. He on March 11, 2019 computed in accordance with FASB ASC Topic
718. On such date, Mr. Wang was granted an option to purchase 30,000 shares of the Company’s common stock at an exercise
price of $2.23, of which one-third of such options were immediately exercisable on the date of the grant, one-third vest and
became exercisable on March 11, 2020 and the remaining one-third vest and become exercisable on March 11, 2021.
|
Director
Compensation
During
2019, we paid our non-employee directors the following fees in cash: (1) $5,000 annual retainer fee, (2) $25,000 of Restricted
Stock Units, (3) a $1,000 retainer for those directors serving on the Audit Committee and a $4,000 retainer for the Audit Committee
Chair, (4) a $500 retainer for those directors serving on the Compensation Committee and a $1,000 retainer for the Compensation
Committee Chair, (4) a $500 retainer for those directors serving on the Nominating and Corporate Governance Committee and a $1,000
retainer for the Nominating and Corporate Governance Committee Chair.
Three
directors, Mr. Wang, Mr. He, and Ms. Jones, served as our executive officers during 2019. As executive officers, these individuals
are not compensated for their service as directors.
The
following table details the total compensation earned by the Company’s non-employee directors in 2019:
Name
|
|
Fees
Earned or
Paid
in Cash
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Michael
Belsky
|
|
$
|
15,500
|
|
|
$
|
0
|
|
|
$
|
15,500
|
|
Lida
Fang
|
|
$
|
13,917
|
|
|
$
|
0
|
|
|
$
|
13,917
|
|
Hao
(Howard) Zhang
|
|
$
|
10,917
|
|
|
$
|
0
|
|
|
$
|
10,917
|
|
Courtney
C. Shea (1)
|
|
$
|
10,119
|
|
|
$
|
0
|
|
|
$
|
10,119
|
|
Haibin
Gong
|
|
$
|
8,916
|
|
|
$
|
0
|
|
|
$
|
8,916
|
|
|
(1)
|
Ms.
Shea joined the Board on March 22, 2019.
|
The
following table details the total compensation earned by the Company’s non-employee directors in 2018:
Name
|
|
Fees
Earned or
Paid
in Cash
($)
|
|
|
All
Other
Compensation
($)
|
|
|
Total
($)
|
|
Xin
(Adam) He (2)
|
|
$
|
14,000
|
|
|
$
|
0
|
|
|
$
|
14,000
|
|
Michael
Belsky
|
|
$
|
11,500
|
|
|
$
|
0
|
|
|
$
|
11,500
|
|
Lida
Fang
|
|
$
|
3,458
|
|
|
$
|
0
|
|
|
$
|
3,458
|
|
Haibin
Gong
|
|
$
|
3,083
|
|
|
$
|
0
|
|
|
$
|
3,083
|
|
Hao
(Howard) Zhang
|
|
$
|
7,000
|
|
|
$
|
0
|
|
|
$
|
7,000
|
|
Courtney
C. Shea
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
(2)
|
Mr.
He resigned from the Board and became our CFO on March 11, 2019.
|
The
table below sets forth the unexercised options held by each of our non-employee directors outstanding as of December 31, 2018
and 2019.
Name
|
|
|
Aggregate
Number of
Unexercised
Stock
Options
Outstanding at
December
31, 2018 and 2019
|
|
Xin
(Adam) He (1)
|
|
|
-
|
|
Michael
Belsky
|
|
|
-
|
|
Lida
Fang
|
|
|
-
|
|
Haibin
Gong
|
|
|
-
|
|
Hao
(Howard) Zhang
|
|
|
-
|
|
Courtney
C. Shea
|
|
|
-
|
|
|
(1)
|
Mr.
He resigned from the Board and became our CFO on March 11, 2019.
|
|
(2)
|
Ms.
Shea joined the Board on March 22, 2019.
|
The
table below sets forth the number of Restricted Stock Units held by each of our non-employee directors outstanding as of December
31, 2018 and 2019.
Name
|
|
Aggregate Number of Restricted Stock Units at December 31, 2019
|
|
|
Aggregate Number of Restricted Stock Units at December 31, 2018
|
|
Xin (Adam) He (1)
|
|
|
|
|
|
|
8,865
|
|
Michael Belsky
|
|
|
9,832
|
|
|
|
8,865
|
|
Lida Fang
|
|
|
9,876
|
|
|
|
8,038
|
|
Haibin Gong
|
|
|
8,776
|
|
|
|
7,267
|
|
Hao (Howard) Zhang
|
|
|
32,386
|
|
|
|
8,865
|
|
Courtney C. Shea
|
|
|
|
|
|
|
-
|
|
|
(1)
|
Mr.
He resigned from the Board and became our CFO on March 11, 2019.
|
|
(2)
|
Ms.
Shea joined the Board on March 22, 2019.
|
PROPOSAL
2: RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit Committee of the Board has appointed Ciro E. Adams, CPA, LLC as the Company’s independent registered public accounting
firm for the fiscal year ending December 31, 2020.
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 Ciro E. Adams, CPA, LLC be ratified by the stockholders. In addition, even if the stockholders
ratify the selection of Ciro E. Adams, CPA, LLC, 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 Ciro E. Adams, CPA, LLC 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 Ciro E. Adams, CPA, LLC as the Company’s independent
registered public accounting firm for the fiscal year ending December 31, 2020.
Board
of Directors Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE “FOR” PROPOSAL 2.
PROPOSAL
3: 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 8 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 3.
EXECUTIVE
OFFICERS
The
following table provides the name, age and position of each of our executive officers. There are no family relationships between
or among our executive officers and directors.
Name
|
|
Age
|
|
Position
|
Xin
(Adam) He
|
|
|
47
|
|
Interim
Chief Executive Officer and Chief Financial Officer
|
Adam
He joined the Board in January 2018, initially serving as audit committee chair of the Board. He was appointed as the Company’s
Chief Financial Officer in March 2019 and stepped down from the Board in connection with such appointment. He was nominated to
the Board by CFL in November 2019 and was appointed as the Company’s Interim Chief Executive Officer around the same time.
Previously, Mr. He was Chief Financial Officer of Wanda USA Group, a Fortune Global 500 company, since May 2012, where he managed
two projects: a 101-story landmark “Vista Tower” development in downtown Chicago, and NYSE traded AMC Entertainment
Holdings, Inc., the largest movie exhibitor owning and operating 660 theatres primarily located in the United States. He also
served as an independent board director at several Nasdaq listed companies. From 2010 to 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.
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 May 11, 2020 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 10,925,859 shares of Common Stock outstanding as
of May 11, 2020.
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 60607.
Name
and Address of Beneficial Owner
|
|
Amount
and Nature of Beneficial Ownership
|
|
|
Percent
of Class
|
|
5%
Stockholders
|
|
|
|
|
|
|
|
|
Cosmic
Forward Limited
|
|
|
3,438,699
|
|
|
|
31.5
|
%
|
Malven
Group Limited
|
|
|
1,939,237
|
|
|
|
17.8
|
%
|
EGBT
Foundation LTD
|
|
|
1,265,823
|
|
|
|
11.6
|
%
|
Executive
Officers and Directors
|
|
|
|
|
|
|
|
|
Courtney
C. Shea
|
|
|
8,090
|
|
|
|
*
|
|
Xin
(Adam) He (1)
|
|
|
36,299
|
|
|
|
*
|
|
Michael
Belsky
|
|
|
29,061
|
|
|
|
*
|
|
Haibin
Gong
|
|
|
8,776
|
|
|
|
*
|
|
Lida
Fang
|
|
|
9,896
|
|
|
|
*
|
|
Hao
(Howard) Zhang
|
|
|
51,469
|
|
|
|
*
|
|
Directors
and officers as a group (6 persons)
|
|
|
143,591
|
|
|
|
1.3
|
%
|
(1)
|
Including
16,299 shares directly owned by Mr. He and vested options to acquire 20,000 shares at an exercise price of $2.23 per share.
|
*
|
Less
than 1%
|
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.
On
November 15, 2019, CFL purchased additional 1,142,857 shares through a private stock transfer from an existing shareholder.
As
discussed under the heading “Certain Relationships and Related Party Transactions,” CFL also has the right to nominate
certain number of directors on our Board. As of the date of this Proxy Statement, CFL beneficially owns approximately 31.5% of
the Company’s total outstanding common stock and has ceased to be a controlling shareholder of the Company, although it
remains the largest shareholder of the Company.
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
|
|
|
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
|
|
|
295,793
|
|
|
$
|
8.88
|
|
|
|
591,888
|
|
Equity
compensation plans not approved by our shareholders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
295,793
|
|
|
$
|
8.88
|
|
|
|
591,888
|
|
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. Ciro E. Adams, CPA, LLC, 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 Ciro E. Adams, CPA, LLC 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.
Management
determined that as of December 31, 2019, the Company internal control over financial reporting had a material weakness related
to deficiencies in controls over the application of complex accounting principles, timely and complete financial statement reviews
and procedures to ensure all required disclosures are made in our financial statements. Specifically, (i) relevant operating information
was not adequately used to develop accounting and financial information and served as a basis for reliable financial reporting,
(ii) employees lacked full technical competence and training necessary for the nature and complexity of the entity’s activities,
(iii) supporting analysis was not prepared for each nonroutine event or transaction that requires management’s judgement
and/or estimate, and (iv) accounting procedures relevant to foreign subsidiaries were not sufficiently formal that management
could determine whether the control objective is met, documentation supporting the procedures were in place, and personnel routinely
knew the procedures that needed to be performed . During 2019, the Company completed certain measures to remediate material weaknesses
related to internal control over financial reporting that had been identified as of December 31, 2018. Specifically, the Company
(i) improved segregation of duties within the Company’s accounting and financial reporting functions, (ii) improved GAAP
training of internal staff, and (iii) engaged an outside consultant to assist the Company on complex GAAP matters. And the Company
further discontinued all China operations in the 1st quarter of 2020. The Company anticipates that the actions described
above and resulting improvements in controls will strengthen the Company’s internal control over financial reporting and
will, over time, address the related material weakness. However, because many of the controls in the Company’s system of
internal controls rely extensively on manual review and approval, the successful operation of these controls may be required for
several quarters prior to management being able to conclude that the material weakness has been remediated.
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, 2019.
The
Audit Committee of the Board furnished the foregoing report on its activities during the fiscal year ended December 31, 2019.
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
|
|
|
|
Michael
D. Belsky (Audit Committee Chair)
|
|
Lida Fang
|
|
Courtney Shea
|
Independent
Registered Public Accounting Firm
The
Audit Committee retained Ciro E. Adams, CPA, LLC as independent registered public accountants to audit the Company’s consolidated
financial statements for the fiscal years ended December 31, 2019 and 2018. The following table summarizes fees received by Ciro
E. Adams, CPA, LLC for professional services rendered to the Company.
Fees:
|
|
2019
|
|
|
2018
|
|
Audit
Fees
|
|
$
|
135,000
|
|
|
$
|
97,500
|
|
Audit-Related
Fees
|
|
|
-
|
|
|
|
-
|
|
Tax
Fees
|
|
|
-
|
|
|
|
-
|
|
All
Other Fees
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
135,000
|
|
|
$
|
97,500
|
|
Audit
Fees. For the fiscal years ended December 31, 2019 and 2018, the “Audit Fees” reported above were billed by Ciro
E. Adams CPA LLC 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. The Company did not pay any audit-related fees to Ciro E. Adams CPA LLC in 2019 or 2018.
Tax
Fees. The Company did not pay any tax-related fees to Ciro E. Adams CPA LLC in 2019 or 2018.
All
Other Fees. The Company did not pay any other fees to Ciro E. Adams CPA LLC in 2019 or 2018.
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 Ciro E. Adams CPA LLC 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, 2018 and December
31, 2019, all of our executive officers, directors and greater-than-ten percent stockholders complied with all Section 16(a) filing
requirements, except the following:
|
●
|
Cosmic
Forward Limited filed a Form 4 on May 6, 2020 to report transactions that occurred on November 15, 2019
|
|
●
|
Malven
Group Limited filed a Form 3 on April 27, 2020 to report transactions that occurred on March 31, 2020
|
|
●
|
Fang
Lida filed a Form 4 on May 15, 2019 to report transactions that occurred on May 12, 2019;
|
|
●
|
Gong
Haibin filed a Form 4 on May 15, 2019 to report transactions that occurred on May 12, 2019;
|
|
●
|
Zhang
Hao filed a Form 4 on May 15, 2019 to report transactions that occurred on May 12, 2019.
|
|
●
|
Michael
Belsky filed a Form 4 on May 15, 2019 to report transactions that occurred on May 12, 2019.
|
|
●
|
He
Xin filed a Form 4 on May 15, 2019 to report transactions that occurred on May 12, 2019.
|
|
●
|
Shea
Courtney C. filed a Form 3 on March 29, 2019 after becoming subject to Section 16(a) reporting requirements on March 22, 2019.
|
|
●
|
Michael
Belsky filed a Form 3 on April 24, 2018 after becoming subject to Section 16(a) reporting requirements on January 22, 2018;
|
|
●
|
Xin
(Adam) He filed a Form 3 on April 27, 2018 after becoming subject to Section 16(a) reporting requirements on January 22, 2018;
|
|
●
|
Xin
(Adam) He filed a Form 4 on April 27, 2018 to report transactions that occurred on April 19, 2018.
|
|
●
|
Jingbo
Song filed a Form 4 on April 24, 2018 to report transactions that occurred on April 19, 2018.
|
|
●
|
Maoji
Wang filed a Form 4 on April 24, 2018 to report transactions that occurred on April 19, 2018.
|
|
●
|
Maoji
Wang filed a Form 4 on May 30, 2018 to report transactions that occurred on May 25, 2018.
|
|
●
|
James
Kirsch, our former Co-Executive Chairman, filed a Form 4 on April 24, 2018 to report transactions that occurred on April 19,
2018.
|
|
●
|
Hao
Zhang filed a Form 4 on April 24, 2018 to report transactions that occurred on June 26, 2017.
|
|
●
|
Michael
Belsky filed a Form 4 on April 27, 2018 to report transactions that occurred on April 19, 2018.
|
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 2020 annual meeting of stockholders, any
proposal must be received by Monday, December 31, 2019 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 March 27, 2020, the 120th day before the date of the annual meeting and not later than the close of
business on the later of (i) April 26, 2020, the 90th day prior to the annual meeting or (ii) May 21, 2020, 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/
Hao (Howard) Zhang
|
|
Hao
(Howard) Zhang
|
|
Chairman
of the Board
|
Chicago,
Illinois
May
12, 2020
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