Delaware
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65-1129912
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(State
or other jurisdiction of
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(I.R.S.
Employer Identification No.)
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incorporation)
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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Florida
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Delaware
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Standard
of Conduct for Directors
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Under
the FBCA, directors have a fiduciary relationship to their corporation and
its shareholders and, as such, are required to discharge their duties as a
director in good faith with the care an ordinarily prudent person in a
like position would exercise under similar circumstances and in a manner
they reasonably believe to be in the best interests of the
corporation. In discharging his or her duties, a director may
consider such factors as the director deems relevant, including the
long-term prospects and interests of the corporation and its shareholders,
and the social, economic, legal, or other effects of any action on the
employees, suppliers, customers of the corporation or its subsidiaries,
the communities and society in which the corporation or its subsidiaries
operate, and the economy of the state and the nation.
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Under
the DGCL, the standards of conduct for directors have developed through
written opinions of the Delaware courts. Generally, directors
of Delaware corporations are subject to fiduciary duties of care, loyalty
and good faith. The duty of loyalty has been said to require
directors to refrain from self-dealing and the duty of care requires
directors managing the corporate affairs to use that amount of care which
ordinarily careful and prudent persons would use in similar circumstances
and act on an informed basis after due consideration of the relevant
information that is reasonably available. In general, gross
negligence has been established as the test for breach of the standard for
the duty of care in the process of decision-making by directors of
Delaware corporations. Breaching the duty of good faith
requires more, for example, intentional dereliction of duty or a conscious
disregard of one’s responsibilities. When directors act
consistently with their duties of care, loyalty and good faith, their
decisions generally are presumed to be valid under the business judgment
rule.
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Dividends
and Other Distributions
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Under
the FBCA, a company may make a distribution, unless after giving effect to
the distribution:
·
the company would
not be able to pay its debts as they come due in the usual course of
business; or
·
the company’s assets
would be less than the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of
the distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
Under
the FBCA, a corporation’s redemption of its own common stock is deemed a
distribution.
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The
DGCL permits a corporation to declare and pay dividends out of surplus or,
if there is no surplus, out of net profits for the fiscal year in which
the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the
capital represented by the issued and outstanding stock of all classes
having a preference upon the distribution of assets. In
addition, the DGCL generally provides that a corporation may redeem or
repurchase its shares only if the capital of the corporation is not
impaired and such redemption or repurchase would not impair the capital of
the corporation.
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Florida
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Delaware
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Limitation
of Liability
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The
FBCA generally provides that a director of a corporation is not personally
liable for monetary damages to the corporation or other person unless the
director breached or failed to perform his duties as a director, and such
breach or failure:
· constitutes
a violation of criminal law, unless the director had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his
conduct was unlawful;
· constitutes
a transaction from which the director derived an improper personal
benefit;
· results
in an unlawful distribution;
· in
the case of a derivative action or an action by a shareholder, constitutes
conscious disregard for the best interests of the corporation or willful
misconduct; or
· in
the case of a proceeding other than a derivative action or an action by a
shareholder, constitutes recklessness or an act or omission which was
committed in bad faith or with malicious purpose or in a manner exhibiting
wanton and willful disregard of human rights, safety or
property.
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The
DGCL permits a corporation to include in its certificate of incorporation
a provision eliminating or limiting the personal liability of a director
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except that such provision may not limit the
liability of a director for:
· any
breach of the director’s duty of loyalty to the corporation or its
stockholders;
· acts
or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law;
· liability
under the DGCL for unlawful payment of dividends or stock purchases or
redemptions; or
· any
transaction from which the director derived an improper personal
benefit.
The
Charter contains a provision limiting the liability of its directors in
this manner. The Charter limits the liability of the Company’s
directors to the fullest extent permitted by the DGCL. A
director of the Company shall not be personally liable to the Company or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director’s duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived any improper personal
benefit.
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Indemnification
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The
FBCA requires a corporation to indemnify any director, officer, employee
or agent of the corporation if such person has been successful on the
merits or otherwise in defense of any proceeding, or any claim, issue or
matter therein, for expenses actually and reasonably incurred by such
person in connection with the proceeding or the person’s defense of the
claim, issue or matter.
Expenses
incurred by an officer or director in defending a civil or criminal
proceeding may be paid by the corporation in advance of the final
disposition of the proceeding upon receipt of an undertaking by or on
behalf of such director or officer to repay such amount if he or she is
ultimately found not to be entitled to
indemnification. Expenses incurred by other employees and
agents may be paid in advance upon such terms or conditions that the Board
of Directors deems appropriate.
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The
By-laws, as discussed below, reflect the broad scope of indemnification
under the DGCL.
The
By-laws provide for indemnification to the fullest extent permitted under
the DGCL to any person made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding, whether
criminal, civil, administrative, or investigative, by reason of the fact
that such person (a) is or was a director or officer of the Company or any
predecessor of the Company or (b) served any other corporation,
partnership, joint venture, trust, employee benefit plan or other
enterprise as a director, officer, partner, trustee, employee or agent at
the request of the Company or any predecessor of the Company; provided,
however, that such indemnification must be authorized in advance by the
Board of
Directors.
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Florida
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Delaware
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The
indemnification and advancement of expenses provided under the FBCA are
not exclusive, and a corporation may enter into an agreement to provide
for indemnification; however, no indemnification or advancement of
expenses may be made to any person if a judgment or other final
adjudication establishes that the person’s actions, or omissions to act,
were material to the cause of adjudicated action and
constitute:
· a violation of criminal law,
unless the person had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was
unlawful;
· a transaction from which the
person derived an improper personal benefit;
· in the case of a director, an
unlawful distribution to shareholders; or
· willful misconduct or a conscious
disregard for the best interests of the corporation in a proceeding by or
in the right of the corporation or a shareholder.
Under
Florida law, unless the corporation’s articles of incorporation provide
otherwise, notwithstanding the failure of a corporation to provide
indemnification, and despite any contrary determination of the board or of
the shareholders in the specific case, a director, officer, employee, or
agent of the corporation who is or was a party to a proceeding may apply
for indemnification or advancement of expenses, or both, to the court
conducting the proceeding, to the circuit court, or to another court of
competent jurisdiction. On receipt of an application, the
court, after giving any notice that it considers necessary, may order
indemnification and advancement of expenses, including expenses incurred
in seeking court-ordered indemnification or advancement of expenses, if it
determines that:
· the indemnitee is entitled to
mandatory indemnification, in which case the court shall also order the
corporation to pay the director reasonable expenses incurred in obtaining
court-ordered indemnification or advancement of
expenses;
· the indemnitee is entitled to
further indemnification or advancement of expenses, or both, by virtue of
the corporation’s exercise of its power to make further indemnification;
or
· the indemnitee is fairly and
reasonably entitled to indemnification or advancement of expenses, or
both, in view of all the relevant circumstances, regardless of whether
such person met the required standard of conduct.
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The
By-laws provide that the Company may grant rights to indemnification, and
rights to be paid by the Company the expenses incurred in defending any
proceeding in advance of its final disposition, to any present or former
employee or agent of the Company or any predecessor of the Company to the
fullest extent with respect to the indemnification and advancement of
expenses of directors and officers of the Company.
The
right to indemnification includes the right to receive payment of expenses
to directors or officers in advance of the final disposition of such
proceeding, consistent with applicable law from time to time in effect;
provided, however, that if the DGCL requires payment of such expenses in
advance of the final disposition of a proceeding, payment shall be made
only if such person undertakes to repay the Company if it is ultimately
determined that he or she was not entitled to
indemnification.
The
broad scope of indemnification available under Delaware law will permit
the Company to offer its directors and officers greater protection against
the costs and risks attendant to litigation of claims against officers and
directors. The Board of Directors believes that such protection
is reasonable and desirable in order to enhance the Company’s ability to
attract and retain qualified directors as well as to encourage directors
to continue to make good faith decisions on behalf of the Company with
regard to the best interests of the Company and its
stockholders.
Insofar
as the By-laws provide indemnification to directors or officers for
liabilities arising under the Securities Act of 1933, it is the position
of the Securities and Exchange Commission that such indemnification would
be against public policy as expressed in such statute and, therefore,
unenforceable.
The
members of the Board of Directors may be deemed to have a personal
interest in the effectuation of the reincorporation, because, as directors
of the Company, they may personally benefit from the indemnification
provisions of the
By-laws.
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Florida
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Delaware
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We have entered into
Indemnification Agreements with certain executive officers and directors
providing indemnification rights and mandating advancement
of expenses to the maximum extent permitted by
Florida law.
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Amendment
to Charter
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The
FBCA generally requires approval by a majority of directors and by holders
of a majority of the shares entitled to vote on any amendment to a Florida
corporation’s articles of incorporation. In addition, the
amendment must be approved by a majority of the votes entitled to be cast
on the amendment by any class or series of shares with respect to which
the amendment would create dissenters’ rights. The Board of
Directors must recommend the amendment to the shareholders, unless the
Board of Directors determines that because of conflict of interest or
other special circumstances it should make no recommendation and
communicates the basis for its determination to the shareholders with the
amendment.
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The
DGCL provides that the certificate of incorporation of a Delaware
corporation may be amended upon adoption by the Board of Directors of a
resolution setting forth the proposed amendment and declaring its
advisability, followed by the affirmative vote of a majority of the
outstanding shares entitled to vote. It also provides that a
certificate of incorporation may provide for a greater vote than would
otherwise be required by the DGCL.
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Interested
Director Transactions
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The
FBCA provides that a contract or other transaction between a Florida
corporation and any of its directors or any entity in which one of its
directors or officers is a director or officer or holds a financial
interest will not be void because of such relationship or interest or
because that director was present at the meeting of directors which
authorized that transaction if:
· the fact of the relationship or
interest is disclosed or known to the board and the transaction is
authorized by a sufficient number of votes when the vote of the interested
director is excluded;
· the fact of the relationship or
interest is disclosed or known to the shareholders entitled to vote and
they authorize the contract or transaction; or
· the contract or transaction is
fair and reasonable to the corporation.
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Under
the DGCL, specified contracts or transactions in which one or more of a
corporation’s directors has an interest are not void or voidable solely
because of such interest if such contract or transaction:
· is authorized in good faith by
the corporation’s stockholders or a majority of disinterested members of
the board (even though less than a quorum) and the material facts of the
contract or transaction are disclosed or known; or
· was fair to the corporation at
the time it was approved.
Accordingly,
it is possible that certain transactions that the Board of Directors
currently might not be able to approve itself, because of the number of
interested directors, could be approved by a majority of the disinterested
directors of the Company, although less than a majority of a
quorum. The Board of Directors is not aware of any plans to
propose any transaction that could not be approved by it under Florida law
but could be approved under Delaware
law.
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Florida
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Delaware
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Business
Combination Statutes
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Florida
does not have a business combination statute like Delaware, but instead
has an affiliated transactions statute, described below.
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Section 203
of the DGCL limits specified business combinations of Delaware
corporations with interested stockholders. Under the DGCL, an
“interested stockholder,” defined as a stockholder whose beneficial
ownership in the corporation is at least 15% of the outstanding voting
securities or an affiliate who owned at least 15% of outstanding voting
shares in the last three years, cannot enter specified business
combinations with the corporation for a period of three years following
the time that such person became an interested stockholder
unless:
· before
such time, the corporation’s Board of Directors approved either the
business combination or the transaction in which the stockholder became an
interested stockholder;
· upon
consummation of the transaction in which any person becomes an interested
stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by specified employee stock ownership
plans and persons who are both directors and officers of the corporation;
or
· at
or subsequent to such time, the business combination is both approved by
the Board of Directors and authorized at an annual or special meeting of
stockholders, not by written consent, by the affirmative vote of at least
66-2/3% of the outstanding voting stock not owned by the interested
stockholder.
A
corporation may elect in its certificate of incorporation not to be
governed by Section 203 of the DGCL. The Charter does not
contain this
election.
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Florida
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Delaware
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Florida
Affiliated Transactions Statute
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This
Florida statute is very complex, but generally defines an “affiliated
transaction” as a merger by a Florida corporation with an “interested
shareholder,” a sale, lease or other disposition to the interested
shareholder of assets of the corporation above a certain threshold
including 5% or more of the fair market value of all of the assets of the
corporation, or the issuance or transfer by the corporation of shares of
its capital stock having a fair market value equal to 5% of the fair
market value of all of the outstanding shares of the corporation to the
interested shareholder, adoption of any plan for liquidation or
dissolution involving the interested shareholder, any reclassification of
securities, or any receipt by the interested shareholder of any loans,
guarantees or other financial assistance. An interested
shareholder is any person who is a beneficial owner of more than 10% of
the outstanding voting shares of the corporation. Beneficial
ownership is defined similarly to that defined by the
SEC. Generally, the Florida statute requires approval of an
affiliated transaction by two-thirds of the voting shares of the
corporation other than the shares beneficially owned by the interested
shareholder. The statute further provides that a majority of
the disinterested directors may approve an affiliated
transaction. Additionally, the statute regulates the amount of
cash and other assets to be received by the corporation’s holders of
voting securities. Finally, among other limitations, for a
specified three-year period during which the interested shareholder has
been an interested shareholder, he shall not have received any loans,
guarantees or other financial assistance from the
corporation.
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Delaware
does not have an affiliated transactions statute but has a business
combination statute, described above.
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Dissenter’s
Rights
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Under
the FBCA, shareholders may dissent from, and demand cash payment of, the
fair value of their shares in the event of a number of corporate actions
including but not limited to:
· a merger or consolidation of the
corporation, or
· a sale or exchange of all or
substantially all of a corporation’s assets, including a sale in
dissolution.
Appraisal
rights shall not be available for the holders of shares of any class or
series of shares which is:
· listed on the New York Stock
Exchange or the American Stock Exchange or designated as a national market
system security on an interdealer quotation system by the National
Association of Securities Dealers, Inc.; or
· not so listed or designated, but
has at least 2,000 shareholders (including beneficial owners who hold
their shares in “street name” through brokers) and the outstanding shares
of such class or series have a market value of at least $10 million,
exclusive of the value of such shares held by its subsidiaries, senior
executives, directors, and beneficial shareholders owning more than
10 percent of such shares.
The
Company’s shareholders will not have dissenters’ rights for the
reincorporation because (i) the Company has more than 2,000
shareholders; and (ii) its outstanding shares of such class or series has
a market value of at least $10 million, exclusive of the value of
such shares held by its subsidiaries, senior executives, directors, and
beneficial shareholders owning more than 10 percent of such
shares.
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Under
the DGCL, appraisal rights may be available in connection with a statutory
merger or consolidation in specified situations.
Appraisal
rights are not available under the DGCL for the holders of shares of any
class or series of stock which is listed:
· on a national securities exchange
or
· held of record by more than 2,000
holders.
As
a Delaware corporation, appraisal rights will be unavailable to our
stockholders since the holders of shares of any class or series of stock
are held of record by more than 2,000 holders.
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Florida
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Delaware
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Sequestration
of Shares
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The
FBCA has no comparable provision.
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The
DGCL provides that the shares of any person in a Delaware corporation may
be attached or “sequestered” for debts or other
demands.
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Financial
Statements and Reports to Shareholders
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In
addition to keeping complete books and records, under the FBCA, and unless
modified by resolution of the shareholders within 120 days of the close of
each fiscal year, a corporation shall furnish its shareholders annual
financial statements which may be consolidated or combined statements of
the corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal year, an income
statement for that year, and a statement of cash flows for that
year. If financial statements are prepared for the corporation
on the basis of generally accepted accounting principles, the annual
financial statements must also be prepared on that basis. If
the annual financial statements are reported upon by a public accountant,
his or her report must accompany them. If not, the statements
must be accompanied by a statement of the president or the person
responsible for the corporation’s accounting records. A
corporation shall mail the annual financial statements to each shareholder
within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the
corporation to prepare its financial statements if, for reasons beyond the
corporation’s control, it is unable to prepare its financial statements
within the prescribed period. Thereafter, on written request
from a shareholder who was not mailed the statements, the corporation
shall mail him or her the latest annual financial statements.
If
a corporation indemnifies or advances expenses to any director, officer,
employee, or agent otherwise than by court order or action by the
shareholders or by an insurance carrier pursuant to insurance maintained
by the corporation, the corporation shall report the indemnification or
advance in writing to the shareholders with or before the notice of the
next shareholders’ meeting, or prior to such meeting if the
indemnification or advance occurs after the giving of such notice but
prior to the time such meeting is held, which report shall include a
statement specifying the persons paid, the amounts paid, and the nature
and status at the time of such payment of the litigation or threatened
litigation. If a corporation issues or authorizes the issuance
of shares for promises to render services in the future, the corporation
shall report in writing to the shareholders the number of shares
authorized or issued, and the consideration received by the corporation,
with or before the notice of the next shareholders'
meeting.
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The
DGCL only requires that a corporation allow any stockholder to have the
right during the usual hours for business to inspect for any proper
purpose, and to make copies and extracts from (i) the corporation’s stock
ledger, a list of its stockholders and its other books and records; and
(ii) a subsidiary’s books and records, to the extent that the corporation
has actual possession and control of such records of such subsidiary or
the corporation could obtain such records through the exercise of control
over such subsidiary.
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Florida
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Delaware
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Certification
of Shares
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Under
the FBCA, shares may but need not be represented by
certificates. Unless the articles of incorporation or by-laws
provide otherwise, the board of directors of a corporation may authorize
the issue of some or all of the shares of any or all of its classes or
series without certificates. The authorization does not affect
shares already represented by certificates until they are surrendered to
the corporation.
The
Company’s by-laws as a Florida corporation require that its shares be
certificated.
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Under
the DGCL the shares of a corporation shall be represented by certificates,
provided that the board of directors of a corporation may provide by
resolution or resolutions that some or all of any or all classes or series
of its stock shall be uncertificated shares (except that the foregoing
shall not apply to shares represented by a certificate until such
certificate is surrendered to the corporation).
The
By-laws of the Company as a Delaware corporation allow the Board of
Directors to provide by resolution that some or all of any or all classes
or series of its stock shall be uncertificated
shares.
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Exhibit
No.
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Description
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3.1
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Plan
of Conversion, dated July 1, 2009
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3.2
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Delaware
Certificate of Conversion
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3.3
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Florida
Certificate of Conversion
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3.4
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Certificate
of Incorporation of Puda Coal, Inc., a Delaware
corporation
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3.5
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By-laws
of Puda Coal, Inc., a Delaware
corporation
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PUDA
COAL, INC.
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Date: July
7, 2009
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By:
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/s/ Qiong Wu
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Qiong
Wu
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Chief
Financial Officer
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