SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Filed by
the Registrant
x
Filed by
a Party other than the Registrant
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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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Definitive
Additional Materials
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Soliciting
Material Pursuant to 240.14a-11(c) or
240.14a-12
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SORL AUTO
PARTS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) 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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¨
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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
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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NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD ON MAY 27, 2010
To our
Stockholders:
The 2010
annual meeting of stockholders of SORL Auto Parts, Inc. will be held on May 27,
2010, beginning at 8:00 p.m. local time (China Standard Time) at Ruihong Room,
Ruili Business Hotel, No.188, Wansongdong Road, Ruian City, Zhejiang
Province, Zip 325200, China. Only holders of record of shares of our common
stock at the close of business on April 1, 2010 (the “Record Date”) are entitled
to vote at the meeting and any postponements or adjournments of the meeting.
Below are proposals to be voted on at the annual meeting:
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(1)
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To
elect seven directors to hold office until the 2011 annual meeting of
stockholders and until their successors are elected and
qualified;
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(2)
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To
approve an amendment to our Certificate of Incorporation to delete an
anti-takeover provision;
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(3)
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To
ratify the appointment of our independent registered public accounting
firm for fiscal year 2010; and
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(4)
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To
transact any other matters that properly come before the meeting or any
adjournments or postponements
thereof.
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This year, we are making proxy
materials available on the Internet.
The proxy materials
include Notice of Annual Meeting of Stockholders, 2010 proxy statement, annual
report to stockholders for the fiscal year ended December 31, 2009, and proxy
card.
It is
important that your shares be represented and voted at the annual
meeting. You may vote on the Internet or by telephone, in addition to
voting in person or by mail. A Notice of Internet Availability of
Proxy Materials is also being sent to you. Please refer to that
notice for detailed instructions on how to access the proxy materials, how to
cast your vote, and how to receive proxy materials in paper
form.
By
order of the Board of Directors,
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Xiao
Ping Zhang
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Chairman
of the Board of Directors,
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Chief
Executive Officer
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April 9,
2010
Ruian
City, China
TABLE OF
CONTENTS
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL
MEETING
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1
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ITEM
1 - ELECTION OF DIRECTORS
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8
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ITEM
2 – APPROVAL OF DELETION OF ANTI-TAKEOVER PROVSION FROM CERTIFICATE OF
INCORPORATION
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14
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ITEM
3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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15
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OTHER
MATTERS
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16
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BENEFICIAL
OWNERSHIP OF COMMON STOCK
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16
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SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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17
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RELATED
PERSON TRANSACTIONS
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18
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EXECUTIVE
OFFICERS AND CERTAIN KEY EMPLOYEES
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19
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COMPENSATION
TO EXECUTIVE OFFICERS
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20
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COMPENSATION
TO DIRECTORS
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24
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REPORT
OF THE AUDIT COMMITTEE
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26
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PRINCIPAL
ACCOUNTING FIRM FEES
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26
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ADDITIONAL
INFORMATION
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27
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SORL Auto
Parts, Inc.
No. 1169
Yumeng Road
Ruian
Economic Development District
Ruian
City, Zhejiang Province, Zip: 325200
People’s
Republic of China
PROXY
STATEMENT
This
proxy statement contains information related to the annual meeting of
stockholders of SORL Auto Parts, Inc., to be held on May 27, 2010, beginning at
8:00 p.m. local time (China Standard Time) at Ruihong Room, Ruili Business
Hotel, No.188, Wansongdong Road, Ruian City, Zhejiang Province, Zip 325200,
China, and any postponements or adjournments thereof. This proxy
statement and the accompanying proxy are being mailed to stockholders on or
about April 15, 2010 in connection with the solicitation by the Board of
Directors of proxies for use at the annual meeting.
QUESTIONS
AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Proxy
Materials
Why
am I receiving these materials?
The Board
of Directors (the “Board of Directors” or “Board”) of SORL Auto Parts, Inc.
(“SORL,” “our,” “us,” “the Company,” or “we”), a Delaware corporation, is
providing these proxy materials for you in connection with our annual meeting of
stockholders, which will take place on May 27, 2010. As a stockholder
on the Record Date (close of business on April 1, 2010), you are invited to
attend the annual meeting. Further, you are entitled to, and requested to, vote
on the items of business described in this proxy statement.
What
information is contained in this proxy statement?
The
information included in this proxy statement relates to the proposals to be
voted on at the annual meeting, the voting process, the compensation of our
directors and most highly paid executive officers, and certain other required
information.
How
may I obtain SORL’s Annual Report, Form 10-K and/or other financial
information?
A copy of
our annual report to stockholders is enclosed. Stockholders may
request another free copy of that annual report and/or a free copy of our annual
report on Form 10-K for the year ended December 31, 2009, as filed with the
United States Securities and Exchange Commission (SEC), from:
Corporate
Controller
SORL Auto
Parts, Inc.
No. 1169
Yumeng Road
Ruian
Economic Development District
Ruian
City, Zhejiang Province, Zip: 325200
People’s
Republic of China
Tel. (86)
577-65817720
Alternatively,
you may access our 2009 Form 10-K on our website at http://www.SORL.cn, under
“Investor Relations.”
SORL also
will furnish any exhibit to our 2009 Form 10-K, if specifically
requested.
Additionally,
SORL is making proxy materials, including our 2010 proxy statement and annual
report to stockholders for fiscal year 2009, available on the
Internet. Please see the Notice of Internet Availability of Proxy
Materials we have sent to you for detailed instructions on how to access the
proxy materials on the Internet and how to request a paper or e-mail form of the
proxy materials free of charge.
For those
stockholders who share the same address, one copy of the annual report to
stockholders or other documents to stockholders may be delivered unless you
request separate sets of documents by writing to our address provided
above. Upon receiving such written request, the Company will promptly
deliver a copy of the requested documents. A stockholder may also
send a written notification to the address above requesting to receive a
separate copy of the documents instead of sharing with others having the same
address.
How
may I request a single set of proxy materials for my household?
If you
share an address with another stockholder and have received multiple copies of
our proxy materials, you may write us at the address above to request delivery
of a single copy of these materials.
What
should I do if I receive more than one set of voting materials?
You may
receive more than one set of voting materials, including multiple copies of this
proxy statement and multiple proxy cards or voting instruction
cards. For example, if you hold your shares in more than one
brokerage account, you may receive a separate voting instruction card for each
brokerage account in which you hold shares. If you are a stockholder
of record and your shares are registered in more than one name, you will receive
more than one proxy card. Please submit each SORL proxy card and
voting instruction card that you receive by following the instructions attached
to the proxy or voting instruction cards.
Voting
Information
What
items of business will be voted on at the annual meeting?
The items
of business scheduled to be voted on at the annual meeting are:
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The
election of directors
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The
approval of an amendment to our Certificate of Incorporation to delete an
anti-takeover provision
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The
ratification of our independent registered public accounting firm for
fiscal year 2010
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We
will also consider any other business that properly comes before the
annual meeting
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What
happens if additional matters are presented at the annual meeting?
Other
than the three items of business described in this proxy statement, we are not
aware of any other business to be acted upon at the annual
meeting. If you grant a proxy, the persons named as proxy holders,
Xiao Ping Zhang and Xiao Feng Zhang, will have the discretion to vote your
shares on any additional matters properly presented for a vote at the meeting.
If for any reason any of our nominees are not available as a candidate for
director, the persons named as proxy holders will vote your proxy for such other
candidate or candidates as may be nominated by the Board.
What
are the Board's recommendations?
Unless
you give other instructions on your proxy card, the persons named as proxy
holders on the proxy card will vote in accordance with the recommendations of
the Board of Directors. The Board's recommendations are set forth
together with the description of each item in this proxy
statement. In summary, the Board recommends a vote:
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For
the election of the
nominated slate of directors (see Item 1);
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For
the deletion of an
anti-takeover provision from our Certificate of Incorporation (see Item
2);
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For
the ratification of
the appointment of EFP Rotenberg, LLP as our independent registered public
accounting firm for fiscal year 2010 (see Item 3);
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With
respect to any other matter that properly comes before the meeting, the
proxy holders will vote as recommended by the Board of Directors, or, if
no recommendation is given, in the proxy holders’ own
discretion.
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What
shares can I vote?
Each
share of SORL common stock issued and outstanding as of the close of business on
April 1, 2010, the
Record
Date
, is entitled to be voted on all items being voted upon at the annual
meeting. You may vote all shares owned by you as of the
Record Date
, including (i)
shares held directly in your name as the
stockholder of record
, and
(ii) shares held for you as the
beneficial owner
through a
broker, trustee or other nominee such as a bank. On the
Record Date
, SORL had
approximately 19,304,921 shares of common stock issued and
outstanding.
How
can I vote my shares?
If you
hold shares in your name as the stockholder of record, you may
vote:
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In
person at the annual meeting. In order to be admitted to the
annual meeting, you must present proof of ownership of our stock on the
record date and a photo identification such as a driver’s license. The
time and location of the annual meeting are: Thursday, May 27,
2010, beginning at 8:00 pm local time(China Standard Time) at Ruihong
Room, Ruili Business Hotel, No 188, Wansongdong Road, Ruian City, Zhejiang
Province, Zip 325200, China. Please arrive early to ensure that
you are seated by the commencement of the meeting at 8:00
pm. You may also refer to your Notice of Internet Availability
of Proxy Materials for the meeting
location.
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By
telephone. Please see the instructions attached to your proxy card for
detailed instructions.
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On
the Internet. Please see the instructions attached to your proxy card for
detailed instructions.
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By
mail. Please mark, sign, and date your proxy card, detach it from the
instructions, and return it in the postage prepaid envelope provided with
the proxy card.
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Returning
your proxy or voting electronically 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. Even if you plan to attend the annual meeting, we recommend
that you also submit your proxy by telephone, on the Internet, or by mail, as
described above, so that your vote will be counted if you later decide not to
attend the meeting.
If you
hold shares beneficially in street name, you may vote by submitting voting
instructions to your broker, trustee or nominee. Specifically:
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·
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You may vote in person at the
annual meeting only if you obtain a legal proxy from the broker, trustee
or nominee that holds your shares giving you the right to vote the
shares. To request a legal proxy, please follow the
instructions attached to your voting instructions card provided by your
broker, trustee or nominee. In order to be admitted to the
annual meeting, you must present the legal proxy and a photo
identification such as a driver’s license. The time and
location of the annual meeting are: Thursday, May 27, 2010, beginning at
8:00 pm local time (China Standard Time) at Ruihong Room, Ruili Business
Hotel, No 188, Wansongdong Road, Ruian City, Zhejiang Province, Zip
325200, China. Please arrive early to ensure that you are
seated by the commencement of the meeting at 8:00
pm.
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You may vote by submitting voting
instructions by telephone, on the Internet, or by mail. Please
follow the instructions attached to your voting instruction card provided
by your broker, trustee or nominee on how to submit voting
instruction.
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Even if
you plan to attend the annual meeting, we recommend that you also submit your
voting instructions as described below so that your vote will be counted if you
later decide not to attend the meeting.
Can
I change my vote?
Yes. Even
after you have submitted your proxy, you may change your vote at any time before
the proxy is exercised by filing with our Corporate Secretary either a notice of
revocation or a duly executed proxy bearing a later date. The powers
of the proxy holders will be suspended if you attend the meeting in person and
so request, although attendance at the meeting will not by itself revoke a
previously granted proxy.
Is
my vote confidential?
Proxy
instructions, ballots and voting tabulations that identify individual
stockholders are handled in a manner that protects your voting
privacy. Your vote will not be disclosed either within SORL or to
third parties, except: (1) as necessary to meet applicable legal
requirements, (2) to allow for the tabulation of votes and certification of the
vote, and (3) to facilitate a successful proxy
solicitation. Occasionally, stockholders provide on their proxy card
written comments, which are then forwarded to SORL management.
What
are the voting rights of the holders of our common stock?
For all
matters, each outstanding share of our common stock will be entitled to one vote
on each matter. Under the law of the state of Delaware, directors
shall be elected by a plurality of the votes of the shares (i) presented in
person or by proxy at the meeting and (ii) entitled to vote at the meeting. With
respect to Item 2, the proposed amendment to our Certificate of Incorporation
deleting an existing anti-takeover provision may only be approved and adopted if
the holders of at least 80% of our outstanding common stock vote in favor of the
proposal, as discussed further below. For all other matter relevant to this
meeting, the vote required for approval is the affirmative vote of the majority
of the shares (i) present in person or by proxy at the meeting and (ii) entitled
to vote at the meeting. Stockholders do not have cumulative voting
rights.
Who
will bear the cost of soliciting votes for the annual meeting?
We are
making this solicitation and will pay substantially all of the costs of
preparing, assembling, printing, mailing and distributing these proxy materials
and soliciting votes. We will reimburse banks, brokers or other
nominees for their costs of sending our proxy materials to beneficial owners.
Directors, officers or other employees of ours may also solicit proxies from
stockholders in person, by telephone, facsimile transmission or other electronic
means of communication without additional compensation. We have
engaged Morrow & Co., 470 West Ave., Stamford, Connecticut 06902, to assist
with the solicitation of proxies for an estimated fee of $6,500 plus
expenses.
Where
can I find the voting results of the annual meeting?
We intend
to announce preliminary voting results at the annual meeting and publish final
results on Form 8-K within four business days after the meeting.
Stock
Ownership Information
What
is the difference between holding shares as a stockholder of record and as a
beneficial owner?
Many SORL
stockholders hold their shares through a broker, or other nominee, rather than
directly in their own names. As summarized below, there are some
distinctions between shares held of record and those owned
beneficially.
Stockholder
of Record
If your
shares are registered directly in your name with our transfer agent, Continental
Stock Transfer & Trust Company, you are considered, with respect to those
shares, the stockholder of record, and we are sending these proxy materials
directly to you. As the stockholder of record, you have the right to
grant your voting proxy directly to us or to vote in person at the
meeting. We have provided a proxy card for you to use.
Beneficial
Owner
If your
shares are held by a trust, in a brokerage account, or by another nominee, you
are considered the beneficial owner of those shares, and these proxy materials
are being forwarded to you together with a voting instruction
card. As the beneficial owner, you have the right to direct your
broker, trustee or nominee on how to vote and are also invited to attend the
annual meeting.
Since a
beneficial owner is not the stockholder of record, you may not vote these shares
in person at the meeting, unless you obtain a "legal proxy" from the broker,
trustee or nominee that holds your shares, giving you the right to vote the
shares at the meeting. Your broker, trustee or nominee should provide
voting instructions for you to use in directing the broker, trustee or nominee
on how to vote your shares.
What
if I have questions for SORL’s transfer agent?
Please
contact SORL's transfer agent, at the phone number or address listed below, with
questions concerning stock certificates, dividend checks, transfer of ownership
or other matters pertaining to your stock account.
Continental
Stock Transfer & Trust Company
17
Battery Place, Eighth Floor
New York,
New York 10004
Tel.
(212) 509-4000
Fax.
(212) 509-5150
Annual
Meeting Information
What
is the purpose of the annual meeting?
At our
annual meeting, stockholders will act upon the matters outlined in the notice of
meeting on the cover page of this proxy statement, including the election of
directors, approval of an amendment to our Certificate of Incorporation to
remove an anti-takeover provision, and ratification of our independent
registered public accounting firm. In addition, management will
report on our performance during fiscal year 2009 and respond to questions from
stockholders.
Who
can attend the meeting?
All
stockholders as of the
Record
Date
, or their duly appointed proxies, may attend the meeting, and each
may be accompanied by one guest. Seating, however, is limited. Please
note that space limitations make it necessary to limit attendance to
stockholders and their guests. Admission to the meeting will be on a
first-come, first-served basis.
What
constitutes a quorum?
The
presence at the meeting, in person or by proxy, of the holders of a majority of
the shares of the common stock that are outstanding on the
Record Date
will constitute a
quorum, permitting the meeting to conduct its business. As of the
Record Date
, 19,304,921
shares of common stock, representing the same number of votes, were
outstanding. Thus, the presence, in person or by proxy, of the
holders of common stock representing at least 9,652,461 votes will be required
to establish a quorum.
Proxies
received, but marked as abstentions, will be included in the calculation of the
number of votes considered to be present at the meeting, but they will be
treated as unvoted with respect to the matter or matters on which the
abstentions are indicated. As a result, abstentions will have the same effect as
a vote against the proposal set forth in Item 2.
If you
hold your shares in “street name” through a broker or other nominee, your broker
or nominee may not be permitted by applicable rules to exercise voting
discretion with respect to some of the matters to be acted upon. If
you do not give your broker or nominee specific voting instructions, your shares
may not be voted on those matters and will not be counted in determining the
number of votes necessary for approval. However, shares represented
by such “broker non-votes” will be counted in determining whether there is a
quorum.
Stockholder
Proposals, Director Nominations and Related Matters
How
can a stockholder propose actions for consideration at an annual meeting of
stockholders or to nominate individuals to serve as directors?
You may
submit proposals or nominees for the board for consideration at an annual
stockholders’ meeting.
For a
stockholder proposal that is subject to SEC Rule 14a-8, and is to be considered
for inclusion in our proxy statement for the annual meeting next year, the
written proposal must be received by our Corporate Secretary, at our principal
executive offices, on or before January 27, 2011. If the date of next
year's annual meeting is advanced more than 30 days prior to or delayed by more
than 30 days after the anniversary date of this year's annual meeting, the
deadline for inclusion of proposals in our proxy statement must be so delivered
not later than the close of business on the later of (i) the 120th day prior to
such annual meeting or (ii) the 10th day following the day on which public
announcement of the date of such meeting is first made. Such
proposals also will need to comply with SEC regulations under Rule 14a-8
regarding the inclusion of stockholder proposals in company-sponsored proxy
materials. Proposals should be addressed to our corporate address as
follows:
Corporate
Secretary
c/o
Corporate Controller
SORL Auto
Parts, Inc.
No. 1169
Yumeng Road
Ruian
Economic Development District
Ruian
City, Zhejiang Province, Zip: 325200
People’s
Republic of China
If notice
of a stockholder proposal is submitted outside the process of Rule 14a-8 or is
subject to Rule 14a-8 but is not received by January 27, 2011 by our Corporate
Secretary, such proposal will not be considered to be a matter that properly
comes before the meeting.
You may
propose director candidates for consideration by the Board of Directors. Such
recommendations should be directed to our Corporate Controller at the address of
our principal executive offices set forth above, and must be submitted on or
before January 27, 2011 in the manner specified in our bylaws.
How
may I communicate with SORL's Board of Directors?
You may
contact our Board via e-mail at boardmembers@sorl.com.cn.
ITEM
1 - ELECTION OF DIRECTORS
We are
committed to having sound corporate governance principles. Having
such principles is essential to running our business efficiently and to
maintaining our integrity in the marketplace. We have adopted a code
of ethics that applies to all of our directors, officers and
employees. A copy of our code of ethics is posted on our Internet
site at http://www.SORL.cn/IRhome.asp.
Directors’
Independence
Our
Corporate Governance Guidelines and the Rules of the Nasdaq Stock Market provide
that a majority of our seven-member Board must consist of independent
directors. The Board has determined that each of the following four
non-employee director nominees standing for election, which include Li Min
Zhang, Zhi Zhong Wang, Yi Guang Huo, and Jiang Hua Feng, is independent within
the meaning of Nasdaq Stock Market Marketplace Rule 4200(a)(15). We
do not have a lead independent director.
In
determining independence, the Board reviews whether directors have any material
relationship with the Company. The Board considers all relevant facts
and circumstances. In assessing the materiality of a director's relationship
with us, the Board is guided by the standards set forth below and considers the
issues from the director's standpoint and from the perspective of the persons or
organizations with which the director has an affiliation. The Board
reviews commercial, industrial, banking, consulting, legal, accounting,
charitable and familial relationships, if applicable. An independent director
must not have any material relationship with us, either directly or indirectly
as a partner, stockholder or officer of an organization that has a relationship
with us, or any other relationship that would interfere with the exercise of
independent judgment in carrying out the responsibilities of a
director.
Irrespective
of other potentially disqualifying relationships, no director will be considered
independent in the following circumstances:
(1) The
director is, or has been in the past three years, an employee of SORL, or a
family member of the director is, or has been in the past three years, an
executive officer of SORL.
(2) The
director has received, or has a family member who has received, compensation
from us in excess of $120,000 in any 12 month period in the past three years,
other than compensation for board service, compensation received by the
director's family member for service as a non-executive employee, and benefits
under a tax-qualified plan or other non-discretionary compensation.
(3) The
director is, or has a family member who is, a current partner of our outside
auditor, or was a partner or employee of our outside auditor, who worked on our
audit at any time during any of the past three years.
(4) The
director is a family member of an individual who is, or at any time during the
past three years was, employed by the Company as an executive
officer.
(5) The
director is, or has a family member who is, employed as an executive officer of
another entity where, at any time during the past three years, any of our
executive officers served on the compensation committee of that other
entity.
(6) The
director is, or a family member is, a partner in, or a controlling stockholder
or an executive officer of, any organization to which we made, or from which we
received, payments for property or services in the current or any of the past
three fiscal years that exceed the greater of 5% of the recipient's consolidated
gross revenues for that year, or $200,000.
For these
purposes, a "family member” includes a director's spouse, parents, children and
siblings, whether by blood, marriage, or adoption, and anyone residing in the
director's home.
Committees
of the Board
As of the
date of this proxy statement, our Board has seven directors. The Board has
recommended the re-election of the seven director nominees who are identified in
this proxy statement.
The Board
has the following three committees: Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee. The membership during
the last fiscal year through the date of this proxy statement, and the function
of each of the Committees, are described below. During fiscal year 2009, the
Board held 4 meetings. Each director attended at least 75% of all
Board and applicable Committee meetings. The Board has determined
that each current member of the Audit Committee, Compensation Committee, and
Nominating and Corporate Governance Committee is independent within the meaning
of Nasdaq Rule 4200(a)(15) and 4350(d), and that each current member of the
Audit Committee is independent within the meaning of applicable regulations of
the Securities and Exchange Commission regarding the independence of audit
committee members.
Director
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Audit
Committee
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Compensation
Committee
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Nominating and
Corporate Governance
Committee
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Li
Min Zhang
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X
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X
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Zhi
Zhong Wang
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X
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X
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X
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Yi
Guang Huo
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X
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X
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Jiang
Hua Feng
|
|
|
|
X
|
|
X
|
Audit Committee
. The members
of our Audit Committee are Professor Zhang and Messrs. Wang and Huo. Professor
Zhang is the Chairman of the Audit Committee and serves as the Audit Committee’s
“financial expert.” His qualifications are described in greater
detail below. During fiscal year 2009, the Audit Committee held 4
meetings. Our Audit Committee assists our Board of Directors in the
Board’s oversight of:
·
|
the
integrity of our financial
statements;
|
·
|
our
independent auditors’ qualifications and independence;
and
|
·
|
the
performance of our independent
auditors.
|
The Audit
Committee has the sole and direct responsibility for appointing, evaluating and
retaining our independent auditors, and for overseeing their
work. All audit services and all non-audit services, other than de
minimis non-audit services, to be provided to us by our independent auditors
must be approved in advance by our Audit Committee. We believe that
the composition of our Audit Committee meets the requirements for independence
under the current Nasdaq Capital Market and SEC rules and regulations. We
believe that the functioning of our Audit Committee complies with the applicable
requirements of the Nasdaq Global Market and SEC rules and
regulations. We intend to comply with future requirements as
applicable.
The
charter of the Audit Committee is posted on our website
http://www.sorl.cn/Committee-Audit.asp
.
Compensation Committee
. The
members of the Compensation Committee are Messrs. Wang, Huo, and Feng. During
fiscal year 2009, the Compensation Committee held 1 meeting. The
purpose of our Compensation Committee is to discharge the responsibilities of
our Board of Directors relating to compensation of our executive officers. With
respect to the processes and procedures for the consideration and determination
of executive and director compensation, the scope of authority of our
Compensation Committee includes:
·
|
reviewing
and recommending approval of compensation of our executive
officers;
|
·
|
administering
our stock incentive and employee stock purchase plans;
and
|
·
|
reviewing
and making recommendations to our Board with respect to incentive
compensation and equity plans.
|
The
charter of the Compensation Committee is posted on our website
http://www.sorl.cn/Committee-Comp.asp
Nominating and Corporate Governance
Committee.
The Board of Directors of SORL Auto Parts, Inc., has
established a Nominating and Corporate Governance Committee consisting of three
directors, all of whom meet the requirements for “independent
directors”. The members of our Nominating and Corporate Governance
Committee are Messrs, Feng and Wang and Professor Zhang. Mr. Feng chairs the
Nominating and Corporate Governance Committee. The purpose of the
Nominating and Corporate Governance Committee is to:
·
|
Identify
qualified individuals to become Board
members;
|
·
|
Determine
the composition of the Board and its
committees;
|
·
|
Monitor
a process to assess the effectiveness of the Board and Board committees;
and
|
·
|
Ensure
good corporate governance.
|
The
charter of the Nominating and Corporate Governance Committee is posted on our
website
http://www.sorl.cn/Committee-NOMINATING.asp
Stockholder
nominees
The
Nominating and Corporate Governance Committee will consider stockholder
nominations for candidates for membership on the Board and will evaluate such
nominees in its sole discretion, giving due consideration to achieving a balance
of knowledge, experience and capability of the Board.
The names
of any individuals proposed for consideration by the Committee as potential
Board members must be submitted at the time and in the manner specified in our
bylaws and should be addressed to:
Corporate
Controller
SORL Auto
Parts, Inc.
No. 1169
Yumeng Road
Ruian
Economic Development District
Ruian
City, Zhejiang Province, Zip: 325200, People’s Republic of China
Director
Qualifications
The
Nominating and Corporate Governance Committee believes that members of the Board
should have the highest professional and personal ethics and values, consistent
with longstanding SORL values and standards. They should have broad
experience at the policy-making level in business, government, education,
technology or public interest. They should be committed to enhancing
stockholder value and should have sufficient time to carry out their duties and
to provide insight and practical wisdom based on experience. Their
service on other boards of public companies should be limited to a number that
permits them, given their individual circumstances, to perform responsibly all
director duties. Each director must represent the interests of all
stockholders.
Identifying
and Evaluating Nominees for Director
The
Nominating and Corporate Governance Committee utilizes a variety of methods for
identifying and evaluating nominees for director. The Committee will
periodically assess the appropriate size of the Board and whether any vacancies
on the Board are expected due to retirement or otherwise. In the event that
vacancies are anticipated, or otherwise arise, the Committee will consider
potential candidates for director. Candidates may come to the
attention of the Committee through current Board members, professional search
firms, stockholders or other persons. These candidates will be
evaluated at regular or special meetings of the Committee, and may be considered
at any point during the year. As described above, the Committee will
evaluate any stockholder nominations for candidates for the Board submitted in
accordance with our bylaws. If any materials are provided by a
stockholder in connection with the nomination of a director candidate, such
materials will be forwarded to the Committee. The Committee will also
review materials provided by professional search firms or other parties in
connection with a nominee who is not proposed by a stockholder.
The
current term of office of all of our directors expires at the 2010 annual
meeting of stockholders. As recommended by the Nominating and Corporate
Governance Committee, the Board of Directors proposes that the following seven
nominees, all of whom are currently serving as directors, be elected for a new
term of one year and until their successors are duly elected and
qualified.
The Board
recommends that stockholders vote
FOR
the candidates described
below.
Each of the nominees has consented to serve if
elected. If any of them becomes unavailable to serve as a director,
the Board may designate a substitute nominee. In that case, the persons named as
proxies will vote for the substitute nominee designated by the
Board.
Messrs.
Xiao Feng Zhang and Xiao Ping Zhang are brothers. There is no other
family relationship between any director, executive officer, or person nominated
or chosen by the Company to become a director or executive officer.
The
director nominees standing for election are:
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Xiao
Ping Zhang
|
|
47
|
|
Chief
Executive Officer and Chairman
|
|
|
|
|
|
Xiao
Feng Zhang
|
|
42
|
|
Director
|
|
|
|
|
|
Jung
Kang Chang
|
|
44
|
|
Vice
President of International Sales and Director
|
|
|
|
|
|
Li
Min Zhang
|
|
54
|
|
Director
|
|
|
|
|
|
Zhi
Zhong Wang
|
|
65
|
|
Director
|
|
|
|
|
|
Yi
Guang Huo
|
|
67
|
|
Director
|
|
|
|
|
|
Jiang
Hua Feng
|
|
44
|
|
Director
|
XIAO
PING ZHANG - CHAIRMAN OF THE BOARD OF DIRECTORS AND CHIEF EXECUTIVE OFFICER
(CEO)
Xiao Ping
Zhang has been the CEO and chairman of the Board since the 2004 reverse merger
with Fairford Holdings Limited, a Hong Kong limited liability
company. He founded the Ruili Group, a company specializing in a
variety of automotive parts and components, in 1987, and has been serving as
chairman of Ruili Group since then. In 2003, he was elected the President of
Wenzhou Auto Parts Association, and Vice-President of China Federation of
Industry and Commerce Auto & Motorbike Parts Chamber of
Commerce. Mr. Zhang is also a member of the Standing Committee of the
People’s Congress in Zhejiang Province of China. He is also currently
engaged as a mentor in entrepreneurship for graduate students of Zhejiang
University. Mr. Zhang graduated from Zhejiang Radio and TV University
in 1986 with a major in Industrial Management.
XIAO
FENG ZHANG - DIRECTOR
Xiao Feng
Zhang has been a member of the Board of Directors since the reverse merger. He
served as COO from 2004 to January 14, 2010. Mr. Zhang co-founded the Ruili
Group with his brother, Mr. Xiao Ping Zhang, in 1987, and served as the General
Manager of Ruili Group until March 2004. Mr. Zhang received his
diploma in economics from Shanghai Fudan University in 1994.
JUNG
KANG CHANG - DIRECTOR AND VICE PRESIDENT, INTERNATIONAL SALES
Jung Kang
Chang has been a member of our Board of Directors since the reverse
merger. He is also in charge of our international sales. From January
1998 to May 2004, Mr. Chang served as the General Manager of JieXiangHao
Enterprise Company Limited based in Taipei, Taiwan; before taking office as the
general manager, he was the sales engineer and sales manager with JieXiangHao in
Taipei. Mr. Chang graduated from Taiwan Taoyuan Longhua Industry
College in 1986.
LI
MIN ZHANG - DIRECTOR
Dr. Li
Min Zhang has been a member of our Board of Directors since August
2004. He chairs the Audit Committee of our Board and is a member of
the Nominating and Corporate Governance Committee. Dr. Zhang
currently is a professor at Beijing Jiaotong University School of Management and
Economics in Beijing, China, coaching Ph.D. candidates with an accounting
major. From 1999 to 2008, Dr. Zhang was a professor at Sun Yat-Sen University
Management School in Guangdong, China, coaching Ph.D. candidates with an
accounting major. During 1994 and 1995, Dr. Zhang conducted academic
research at the University of Illinois at Urbana-Champaign, and practiced at Mok
& Chang CPAs in USA. In 1986, he conducted academic research at
the Office of Auditor General of Canada. Dr. Zhang currently also serves as vice
chairman of China Audit Society, and secretary of China Association of Chief
Financial Officers. He is a member of American Accounting
Association. Also, Dr. Zhang is involved with the China CPA Society
Auditing Principles Task Force and China Audit Society Training Committee. Dr.
Zhang earned his Ph.D. in Economics in January 1991.
ZHI
ZHONG WANG - DIRECTOR
Zhi Zhong
Wang has been a member of our Board of Directors, as well as a member of the
Audit and the Compensation Committees since August 2004. Mr. Wang is
also a member of the Nominating and Corporate Governance Committee. Since 1980,
Mr. Wang has been an instructor and professor at Beijing Jiaotong University
(formerly Northern Jiaotong University), Department of Electrical Engineering.
Before 1980, he was an electrical engineer with Science and Technology Institute
of the Qiqihaer Railway Administration, Heilongjiang, China. Mr. Wang
has led over twenty research projects such as novel pneumatic generator and
streamer discharging, and corona power supply for
desulphurization. His numerous publications include Research on the
Novel AC Voltage Stabilized Power Supply in Power Electronics. Mr.
Wang received his bachelor degree in electrical engineering from Northern
Jiaotong University in 1968.
YI
GUANG HUO - DIRECTOR
Yi Guang
Huo has been a member of our Board of Directors, as well as a member of the
Audit Committee and chairman of the Compensation Committee under the Board since
August 2004. Mr. Huo has been engaged in scientific and technological work and
has been responsible for various national key research projects, such as
designing and conducting experiments for automotive products, drafting ministry
standards and econo-technological policies. He has been awarded
ministry-level First Prize for Technology Innovation. Mr. Huo is
Honorary President of China Federation of Industry and Commerce Auto &
Motorbike Parts Chamber of Commerce, a Board member and visiting professor of
Wuhan University of Technology, and secretary of Society of Auto Engineering -
China. Between 1995 and 1996, Mr. Huo conducted academic research as a visiting
researcher at Tokyo University Economics Department. During 1987 and 1988, he
studied Scientific Research and Management with Japan Automobile Research
Institute as well as Japanese automobile companies including Nissan, Hino, Isuzu
and Mitsubishi. Mr. Huo earned his B.S. degree from Jilin University
Automobile Department in 1965.
JIANG
HUA FENG - DIRECTOR
Jiang Hua
Feng has been a member of our Board of Directors as well as a member of the
Compensation Committee under the Board since August 2004. Mr. Feng Chairs the
Nominating and Corporate Governance Committee. Since 1988, Mr. Feng has also
been the chief lawyer at Yuhai Law Firm in Ruian, Zhejiang
Province. Mr. Feng is a member of China Lawyers Association. He is
also a member of the Standing Committee of the People’s Congress in Zhejiang
Province of China. Mr. Feng received his bachelor’s degree in law from East
China University of Politics and Law.
ITEM
2- APPROVAL OF DELETION OF ANTI-TAKEOVER PROVISION FROM CERTIFICATE OF
INCORPORATION
Our
Certificate of Incorporation, as filed with the Delaware Secretary of State,
includes the following provision as Article Eleventh:
“ELEVENTH: The
affirmative vote of the holders of not less than eighty percent (80%) of the
total voting power of all outstanding shares of voting stock of this corporation
shall be required for the approval of any proposal that (1) this corporation
merge or consolidate with any other corporation or any affiliate of such other
corporation if such other corporation and its affiliates singly or in the
aggregate are directly or indirectly the beneficial owners of more than five
percent (5%) of the outstanding shares of the Common Stock of this corporation
(such other corporation and any affiliate thereof being herein referred to as a
“related corporation”), or that (2) this corporation sell or exchange
all or substantially all of its assets or business to or with such related
corporation, or in a merger of any affiliate of this corporation with or into
such related corporation or any of its affiliates or that (3) this corporation
issue to such related corporation securities having more than 5% of the total
voting power of all shares of voting stock of this corporation outstanding prior
to such issuance; provided, however, that the foregoing shall not apply to any
such merger, consolidation, sale or exchange, or issuance or delivery of stock
or other securities which was approved by resolution of the Board of Directors
of this corporation prior to the acquisition of the beneficial ownership of more
than five percent (5%) of the outstanding Common Stock of this corporation by
such related corporation and its affiliates, nor shall it apply to any such
transaction solely between this corporation and another corporation, fifty
percent (50%) or more of the voting stock of which is owned by this corporation,
nor shall it apply to any such transaction if the related corporation has, or is
an affiliate of any person who has, prior to July 1, 1986, filed with the
Securities and Exchange Commission a report stating that such person was the
beneficial owner of 5% or more of the outstanding shares of Common
Stock. For the purpose hereof, an “affiliate” is any person
(including a corporation, partnership, trust, estate or individual) who
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the person specified; “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a person, whether through the
ownership of voting securities, by contract, or otherwise; and in computing the
percentage of the outstanding Common Stock beneficially owned by any person, the
shares outstanding and the shares owned shall be determined as of the record
date fixed to determine the stockholders entitled to vote or express consent
with respect to such proposal. The stockholder vote, if any, required
for mergers, consolidations, sales or exchanges of assets of the issuance of
stock or other securities not expressly provided for in this Article shall be
such as may be required by applicable law.
The
provisions set forth in this Article may not be repealed or amended in any
respect unless such repeal or amendment is approved by the affirmative vote of
the holders of not less than eighty percent (80%) of the total voting power of
all outstanding shares of voting stock of this corporation.”
This is
an anti-takeover provision that requires an 80% stockholder vote to approve a
merger, consolidation, or sale or exchange of all or substantially all of our
assets or business to or with a holder of 5% or more of our shares of voting
stock, or with an affiliate of such a holder. The provision
specifically does not apply to transactions with certain stockholders, including
a transaction that is approved by our board of directors prior to the
stockholder’s acquisition of 5% of or more of our voting stock, a transaction
with any stockholder that owns 50% or more of our voting stock, or a transaction
with a stockholder who was the beneficial owner of 5% or more of out outstanding
common stock prior to July 1, 1986 as reported to the Securities and Exchange
Commission.
We
believe this provision is not in the best interests of our stockholders because
it makes certain mergers, consolidations, or sales or exchanges of all or
substantially all of our assets or business more difficult to
complete. This could prevent transactions that otherwise are in the
best interests of our company and our stockholders and reduce the value of our
shares.
Deletion
of this provision, and as a result approval of this Item 2, requires approval by
the holders of 80% of our outstanding common stock. It is therefore
very important that you vote on this proposal.
The Board of Directors recommends
that you vote
FOR
the deletion of the
anti-takeover provision from the Certificate of
Incorporation.
ITEM
3- RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We have
appointed EFP Rotenberg, LLP as our independent registered public accounting
firm for fiscal year 2010. EFP Rotenberg, LLP has been our
independent registered public accounting firm since the 2005 fiscal year.
Services provided to us by EFP Rotenberg, LLP in fiscal year 2009, and/or
expected to be provided in fiscal year 2010, include the auditing of our
consolidated financial statements, limited reviews of interim financial
statements included in our quarterly reports, services related to filings with
the Securities and Exchange Commission and consultations on various tax and
accounting matters. See “Principal Auditor Fees and Services” for detailed
information.
We expect
that a representative of EFP Rotenberg, LLP will be present at the annual
meeting via teleconference to respond to appropriate questions and to make such
statements as they may desire.
The
Board of Directors recommends that stockholders vote "
FOR
" ratification of
the appointment of EFP Rotenberg, LLP as the Company's independent registered
public accounting firm for fiscal 2010.
In the
event stockholders do not ratify the appointment, the appointment will be
reconsidered by the Audit Committee.
OTHER
MATTERS
As of the
date of this proxy statement, we know of no business that will be presented for
consideration at the annual meeting other than the items referred to
above. If any other matter is properly brought before the meeting for
action by stockholders, proxies in the enclosed form returned to us will be
voted in accordance with the recommendation of the Board of Directors or, in the
absence of such a recommendation, in accordance with the judgment of the proxy
holders.
BENEFICIAL
OWNERSHIP OF COMMON STOCK
The
following table sets forth certain information known to us regarding beneficial
ownership of our common stock as of March 31, 2010 by:
|
·
|
each
person known to us to be the beneficial owner of more than 5% of any class
of our voting securities;
|
|
·
|
our
chief executive officer, who is our “named executive
officer;”
|
|
·
|
each
of our directors; and
|
|
·
|
all
executive officers and directors as a
group.
|
Beneficial
ownership is determined according to the rules of the SEC and generally means
that a person has beneficial ownership of a security if he or she possesses sole
or shared voting or investment power of that security, and includes options and
warrants that are currently exercisable or that become exercisable within 60
days of March 31, 2010. Information with respect to beneficial
ownership has been furnished to us by each director, executive officer or 5% or
more stockholder, as the case may be. Unless otherwise indicated, to
our knowledge, each stockholder possesses sole voting and investment power over
the shares listed, except for shares owned jointly with that person’s
spouse.
This
table lists applicable percentage ownership based on 19,304,921 shares of common
stock outstanding as of March 31, 2010.
The
address for each of the stockholders in the table is c/o of the
Company.
NAME OF BENEFICIAL OWNER
|
|
AMOUNT
AND NATURE
BENEFICIAL
OWNER
|
|
POSITION
|
|
PERCENT
OF CLASS
|
|
|
|
|
|
|
|
|
|
Xiao
Ping Zhang
|
|
|
9,087,527
|
|
Chief
Executive Officer and Chairman
|
|
|
47.1
|
%
|
|
|
|
|
|
|
|
|
|
|
Xiao
Feng Zhang
|
|
|
1,135,938
|
|
Director
|
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Jung
Kang Chang
|
|
|
—
|
|
VP
of International Sales and Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Li
Min Zhang
|
|
|
—
|
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Zhizhong
Wang
|
|
|
—
|
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Yiguang
Huo
|
|
|
—
|
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Jianghua
Feng
|
|
|
—
|
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Officers
and Directors as a Group (7 persons)
|
|
|
10,223,465
|
|
|
|
|
53.
|
%
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL
STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shu
Ping Chi
|
|
|
1,135,938
|
|
|
|
|
5.9
|
%
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our
directors, executive officers and holders of more than 10% of our common stock
to file with the Securities and Exchange Commission reports regarding their
ownership and changes in ownership of our securities. We believe that, during
fiscal year 2009, our directors, executive officers and 10% stockholders
complied with all Section 16(a) filing requirements. In making this
statement, we have relied upon our examination of the copies of Forms 3, 4 and
5, and amendments thereto, provided to us and the written representations of our
directors, executive officers and 10% stockholders.
RELATED
PERSON TRANSACTIONS
Capital
Stock Issuances in the Reverse Acquisition
Pursuant
to the reverse acquisition in July 2004 between Fairford Holdings Limited and
the Company, Mr. Xiao Ping Zhang, our Chief Executive Officer, and Mr. Xiao Feng
Zhang, our former Chief Operating Officer, received 9,087,527 shares and
1,135,938 shares, respectively, of our common stock representing 68.4% and 8.55%
respectively, of our then outstanding shares.
Ruili
Group
Mr. Xiao
Ping Zhang and Mr. Xiao Feng Zhang are the principal stockholders of the Ruili
Group which was the owner of the assets contributed to Ruili Group Ruian Auto
Parts Co., Ltd., a sino-foreign joint venture, in the reverse
acquisition. The Company continued to purchase non-valve automotive
products, components for valve parts and packaging materials from the Ruili
Group Co., Ltd. The Ruili Group Co., Ltd., is the minority shareholder of the
Joint Venture and is controlled by the Zhang family, who is also the controlling
party of the Company.
The
following related party transactions occurred during the fiscal years ended
December 31, 2009 and 2008:
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
PURCHASES
NON-VALVE PRODUCT , COMPONENTS FOR VALVE AUTO PARTS AND PACKAGING MATERIAL
FROM:
|
|
|
|
|
|
|
Ruili
Group Co., Ltd.
|
|
$
|
18,179,641
|
|
|
$
|
35,344,273
|
|
Total
Purchases
|
|
$
|
18,179,641
|
|
|
|
35,344,273
|
|
|
|
|
|
|
|
|
|
|
SALES
TO:
|
|
|
|
|
|
|
|
|
Ruili
Group Co., Ltd.
|
|
|
569,621
|
|
|
|
2,816,816
|
|
Total
Sales
|
|
$
|
569,621
|
|
|
$
|
2,816,816
|
|
|
|
December 31,
|
|
|
|
2009
|
|
|
2008
|
|
ACCOUNTS
PAYABLE
|
|
|
|
|
|
|
Ruili
Group Co., Ltd.
|
|
$
|
1,985,291
|
|
|
$
|
—
|
|
Total
|
|
$
|
1,985,291
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
OTHER
PAYABLES
|
|
|
|
|
|
|
|
|
Ruili
Group Co., Ltd.
|
|
$
|
200,762
|
|
|
$
|
—
|
|
Total
|
|
$
|
200,762
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
PREPAYMENTS
|
|
|
|
|
|
|
|
|
Ruili
Group Co., Ltd.
|
|
$
|
—
|
|
|
$
|
187,813
|
|
Total
|
|
$
|
—
|
|
|
$
|
187,813
|
|
|
|
|
|
|
|
|
|
|
OTHER ACCOUNTS
RECEIVABLE
|
|
|
|
|
|
|
|
|
Ruili
Group Co., Ltd.
|
|
$
|
—
|
|
|
$
|
1,906,070
|
|
Total
|
|
$
|
—
|
|
|
$
|
1,906,070
|
|
1.
|
The total purchases from Ruili
Group during the fiscal year ended December 31, 2009 consisted of
$16.1 million of finished products for non-valve auto
parts, and $2.0 million of packaging
materials.
|
The
Company believes that the prices charged and payments made between the parties
in connection with the foregoing transactions are at least as favorable to the
company as would be obtained from a third party.
EXECUTIVE
OFFICERS AND CERTAIN KEY EMPLOYEES
The
following table sets forth our executive officers, directors and key employees,
their ages and the positions they held as of December 31, 2009.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Xiao
Ping Zhang (1)
|
|
47
|
|
Chief
Executive Officer and Chairman
|
|
|
|
|
|
Xiao
Feng Zhang (1)(2)
|
|
42
|
|
Chief
Operating Officer and Director
|
|
|
|
|
|
Jung
Kang Chang (1)
|
|
44
|
|
Vice
President of International Sales and Director
|
|
|
|
|
|
Zong
Yun Zhou
|
|
55
|
|
Chief
Financial Officer
|
(1) The
business experience of Messrs. Xiao Ping Zhang, Xiao Feng Zhang, and Jung Kang
Chang is described above under “Item 1 - Election of Directors.”
(2) On
January 14, 2010, Mr. Zhang’s term as Chief Operating Officer ended, and he was
succeeded in that position by Mr. Baojian Tao. Mr. Zhang continues to
serve as a Director.
ZONG
YUN ZHOU - CHIEF FINANCIAL OFFICER
Zong Yun
Zhou has been our CFO since our inception. Between April 2002 and May
2004, Ms. Zhou served as the Financial Controller of Shanghai Huhao Auto Parts
Manufacturing Company Limited, a joint venture between Ruili Group and Shanghai
Automotive Industry Corporation. From January 1996 until April 2002, Ms. Zhou
worked for the Auditing Department of Anhui Province, China, in charge of
auditing state-owned companies in Anhui Province. Ms. Zhou is a
Chinese Certified Public Accountant, and a member of the Institute of Internal
Auditors (IIA). Ms. Zhou completed her undergraduate studies at Anhui
University.
COMPENSATION
OF EXECUTIVE OFFICERS
Overview
of Executive Compensation Program
The
Compensation Committee of our Board of Directors is responsible for
establishing, implementing and monitoring our executive compensation program
philosophy and practices. The Compensation Committee seeks to ensure
that the total compensation paid to our named executive officer is fair,
reasonable and competitive. Generally, the types of compensation and
benefits provided to the named executive officer are similar to those provided
to our other officers.
Throughout
this document, the individual who served as our Chief Executive Officer and who
is included in the Summary Compensation Table is referred to as the “named
executive officer.”
Compensation
Philosophy and Objectives
The
Compensation Committee believes that an effective executive compensation program
should provide base annual compensation that is reasonable in relation to
individual executive’s job responsibilities and reward the achievement of both
annual and long-term strategic goals of our company.
Because
of the size of our Company, the small number of executive officers in our
Company, and our Company’s financial priorities, our Compensation Committee has
decided not to implement or offer any retirement plans, pension benefits,
deferred compensation plans, or other similar plans for our executive
officers. Accordingly, the components of the executive compensation
currently consist solely of cash salary. The Compensation Committee
will consider using stock option grants to provide executives with long-term
incentives.
As a
manufacturing company operating in Zhejiang Province, China, the Compensation
Committee also takes the local average executives’ salary level into account in
its compensation decisions. The Compensation Committee may reassess
the proper level of equity and cash compensation in light of the Company’s
improved profitability and working capital situation.
Role
of Executive Officers in Compensation Decisions
The
Compensation Committee makes all compensation decisions for the named executive
officer and approves recommendations regarding equity awards to all of our
officers. Decisions regarding the non-equity compensation of officers
other than the named executive officer are made by the Chief Executive
Officer.
The
Compensation Committee and the Chief Executive Officer annually review the
performance of each executive officer (other than the Chief Executive Officer,
whose performance is reviewed only by the Committee). The conclusions
reached and recommendations based on these reviews, including with respect to
salary adjustments and annual award amounts, are determined by the
Committee. The Committee can exercise its discretion in modifying any
recommended adjustments or awards to executives, including recommendations made
by the Chief Executive Officer.
Setting
Executive Compensation
Based on
the foregoing objectives, the Committee has structured the Company’s annual cash
and incentive-based cash and non-cash executive compensation to motivate
executives to achieve the business goals set by the Company, to reward the
executives for achieving such goals, and to retain the executives. In
doing so, the Committee does not employ outside compensation
consultants. The Compensation Committee sets compensation for our
executive officers at levels targeted at or around the average of the
compensation amounts provided to executives at comparable local companies
considering, for each individual, their individual experience level related to
their position with us. There is no pre-established policy or target for the
allocation between either cash or non-cash incentive compensation.
2009
Executive Compensation Components
For 2009,
the principal component of compensation for the named executive officer was base
salary.
The
Company provides the named executive officer and other employees with a base
salary to compensate them for services rendered during the fiscal
year. Base salary range for each executive officer is based on his or
her position and responsibility.
During
its review of base salaries for executives, the Committee primarily
considers:
|
·
|
the
negotiated terms of each executive employment
agreement;
|
|
·
|
internal
review of the executive’s compensation, both individually and relative to
other executive officers; and
|
|
·
|
individual
performance of the executive.
|
Salary
levels are typically considered annually as part of the Company’s performance
review process, as well as upon a change in job
responsibility. Merit-based increases to salaries are based on the
Compensation Committee’s assessment of the individual’s performance. Base
salaries for the named executive officers in 2009 have not been changed from the
base salaries in effect during the prior year.
Summary
Compensation Table
The
following table presents summary information concerning all compensation paid or
accrued by us for services rendered in all capacities during 2009 and 2008 by
Mr. Xiao Ping Zhang, who served as our principal executive officer during the
fiscal years ended December 31, 2009 and 2008. No executive officer
received compensation in excess of $100,000 for either of the fiscal years ended
December 31, 2009 and 2008.
Name
and Position
|
|
Year
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Awards
($)
|
|
|
Total
($)
|
|
|
|
2009
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
Mr.
Xiao Ping Zhang, CEO (1)
|
|
2008
|
|
|
50,000
|
|
|
—
|
|
|
—
|
|
|
|
50,000
|
|
(1)
|
Mr. Zhang is also employed by the
Ruili Group which makes separate payments to him for his services to that
company. Mr. Zhang did not receive any compensation, other than
the cash salary of $50,000 listed herein, from the Company in each of 2009
and 2008.
|
Employment
Agreements
Effective
May 1, 2006, the Company entered into employment agreements with Mr. Xiao Ping
Zhang, our Chief Executive Officer, Mr. Xiao Feng Zhang, our former Chief
Operating Officer, and Ms. Zong Yun Zhou, our Chief Financial
Officer. The term of their employment with the Company is for a
period of five years with an additional one year period unless the Company
decides not to renew. Their compensation is subject to an annual review by the
Compensation Committee of the Board of Directors. The agreements also set forth
their respective duties and confidentiality responsibilities.
Severance
and Change of Control Arrangements
There are
no severance or change of control arrangements.
Equity
Compensation Plans
Our 2005
Stock Compensation Plan, or the Plan, was adopted by our Board of Directors in
July 2005.
Share Reserve.
We have
reserved 1,700,000 shares for issuance under the 2005 Stock Compensation Plan.
To date, the Company has granted 53,628 shares and options to purchase an
additional 64,128 shares under the Plan. 60,000 options expired on March 1,2009
and 4,128 options were excised on November 12, 2009. No stock options
are presently outstanding under the Plan.
Administration.
The
Compensation Committee of our Board of Directors administers the 2005
Compensation Plan and has complete discretion to make all decisions relating to
our 2005 Compensation Plan as are permitted therein.
Eligibility.
Employees, non-employee members of our Board of Directors, advisors and
consultants are eligible to participate in our 2005 Stock Compensation Plan.
Types of
Awards. Our 2005 Stock Compensation Plan provides for awards of stock options,
restricted shares, stock appreciation rights and performance
shares.
Change in
Control. If we are merged or consolidated with another company, and
such merger or consolidation results in a change in control, any award under the
2005 Stock Compensation Plan will be subject to the terms of the merger
agreement. Such terms may provide that the option continues, is
assumed or substituted, fully vests or is settled for the full value of such
option in cash, followed by the cancellation of such option.
Amendments
or Termination. Our Board of Directors may amend, suspend or
terminate the 2005 Stock Compensation Plan at any time. If our Board
amends the Plan, it does not need to seek stockholder approval of the amendment
unless such consent is required in order to comply with any NASDAQ or applicable
tax or regulatory requirement. No award may be made under the 2005
Stock Compensation Plan after the tenth anniversary of the effective date of the
Plan.
Options.
The Board may
determine the number of shares covered by each option, the exercise price
therefor, the conditions and limitations on the exercise and any restrictions on
the shares issuable. Optionees may pay the exercise price by using cash, shares
of common stock that the optionee already owns or, at the election of the Board,
a promissory note, an immediate sale of the option shares through a broker
designated by us, or other property.
Performance Shares.
The Board
may make performance share awards entitling recipients to acquire shares of
Common Stock upon the attainment of specified performance goals.
Stock Appreciation Rights.
A
participant who exercises a stock appreciation right receives the increase in
fair market value of our common stock over the fair market value on the date of
grant.
Restricted Shares.
Restricted
shares may be awarded under the 2005 Stock Compensation Plan. Restricted shares
vest at the times and payment terms therefor shall be determined by our
Compensation Committee.
Adjustments.
If there is a
subdivision of our outstanding shares of common stock, a dividend declared in
stock or a combination or consolidation of our outstanding shares of common
stock into a lesser number of shares, corresponding adjustments will be
automatically made in each of the following: (a) the number of shares of common
stock available for future awards under the 2005 Stock Compensation Plan; (b)
any limitation on the maximum number of shares of common stock that may be
subject to awards in a fiscal year; (c) the number of shares of common stock
covered by each outstanding option or stock appreciation right, as well as the
exercise price under each such award; (d) the number of shares of common stock
covered by the options to be granted under the automatic option grant program;
or (e) the number of stock units included in any prior award that has not yet
been settled.
Stock
Option Grants
None of
the Company’s executive officers have received any grant of stock options or
stock awards.
Equity
Compensation Plan Information
Our 2005
Stock Compensation Plan was adopted by our Board of Directors in July 2005. We
have reserved 1,700,000 shares for issuance under the 2005 Stock Compensation
Plan. To date, 53,628 shares and options to purchase 64,128 shares
have been awarded under the Plan. Therefore, at the present time, the
number of securities available for future issuance under the plan is
1,582,244.
COMPENSATION
TO DIRECTORS
The
following table sets forth the compensation paid to our directors other than our
Chief Executive Officer for 2009:
Director
Compensation Table
Name (1)
|
|
Fees Earned
or
Paid in Cash
($) (2)
|
|
|
Option
Awards
($) (3)
|
|
|
All other
compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xiao
Feng Zhang (4)
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
30,000
|
|
COO
& Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jung
Kang Chang (5)
|
|
|
—
|
|
|
|
—
|
|
|
|
15,000
|
|
|
|
15,000
|
|
VP
of International Sales & Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Li
Min Zhang, Director
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhi
Zhong Wang, Director
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yi
Guang Huo, Director
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang
Hua Feng, Director
|
|
|
10,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
(1)
|
Mr. Xiao Ping Zhang does not
receive additional compensation for his role as a Director. For
information relating to Mr. Xiao Ping Zhang’s compensation as Chairman and
Chief Executive Officer, see the Summary Compensation Table elsewhere in
this proxy statement.
|
(2)
|
The amounts in this column
represent cash payments made to Non-Employee Directors for attendance at
meetings during the year.
|
(3)
|
The
amounts in this column represent the compensation cost of stock options
awarded by the Compensation Committee in 2006. These amounts do
not include any estimate for forfeitures. On March 1, 2006, the
Board of Directors approved a grant of a total of 60,000 options (See Note
18 of the Notes to Consolidated Financial Statements in Part II Item 8 of
our 2009 Form 10-K). Each non-employee director received
options to purchase 15,000 shares of common stock with an exercise price
of $4.79 per share. The options expired unexercised on March 1,
2009. The grant date fair market value of option awards granted
were determined in accordance with Statement of Financial Accounting
Standards No. 123R (SFAS123(R)) and are recognized as compensation cost
over the requisite service period. The amount recognized for
these awards was calculated using the Black Scholes option-pricing
model.
|
(4)
|
Mr. Xiao Feng Zhang is an
employee of the Company and did not receive cash compensation or other
stock options for attending Board meetings in 2009. However, he
received cash compensation of $30,000 as salary for his managerial role
with the Company. Mr. Zhang is also employed by the Ruili Group
which makes separate payments to him for his services to that
company.
|
(5)
|
Mr. Jung Kang Chang is an
employee of the Company and did not receive cash compensation or other
stock options for attending Board meetings in 2009. However, he
received cash compensation of $15,000 as salary for his managerial role
with the Company.
|
We use a
combination of cash and stock-based compensation to attract and retain qualified
candidates to serve on our Board of Directors. Directors who are also
employees of our company currently receive no compensation for their service as
directors. In setting director compensation, we consider the significant amount
of time that directors dedicate to the fulfillment of their director
responsibilities, as well as the competency and skills required of members of
our Board. The directors’ current compensation schedule has been in
place since March 2009. The directors’ annual compensation year
begins with the annual election of directors at the annual meeting of
stockholders. The annual retainer year period has been in place for directors
since 2009. Periodically, our Board of Directors reviews our director
compensation policies and, from time to time, makes changes to such policies
based on various criteria the Board deems relevant.
Non-employee
directors are reimbursed for travel, lodging and other reasonable out-of-pocket
expenses incurred in attending meetings of our Board of Directors and for
meetings of any Committees of our Board of Directors on which they
serve. During 2009, our non-employee directors had each received or
earned cash compensation of $10,000 for attending Board or Committee
meetings.
The
following Report of the Audit Committee does not constitute soliciting material
and should not be deemed filed or incorporated by reference into any of our
other filings under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent we specifically incorporate this Report of the Audit
Committee by reference therein.
REPORT
OF THE AUDIT COMMITTEE
The Audit
Committee has reviewed and discussed with management the audited financial
statements for the Company’s 2009 fiscal year included in the Company’s Annual
Report on Form 10-K as filed with the SEC and has discussed with EFP Rotenberg.
LLP, our registered independent public accountants, the matters required to be
discussed by statement of Accounting Standards No. 61, as amended The
Audit Committee has also received from and discussed with EFP Rotenberg. LLP,
our registered independent public accountants, the written disclosures required
by Independence Standards Board Standard No. 1 regarding their
independence. Based on the Audit Committee’s review and discussions,
the Audit Committee recommended to the Board of Directors that the audited
financial statements be included in the Company's annual report on Form 10-K for
filing with the SEC
The Audit
Committee
Yi Guang
Huo
Zhi Zhong
Wang
Li Min
Zhang
PRINCIPAL
ACCOUNTING FIRM FEES
EFP
Rotenberg. LLP, Certified Public Accountants, was the Registrant’s independent
registered public accounting firm engaged to examine the financial statements of
the Registrant for the fiscal years ended December 31, 2009, 2008, 2007, 2006
and 2005. EFP Rotenberg. LLP performed the following services and has been paid
the following fees.
FISCAL
YEARS ENDED DECEMBER 31, 2009 and 2008
AUDIT
FEES
EFP
Rotenberg. LLP was paid aggregate fees of approximately $183,500 and $175,500 in
each fiscal year ended December 31, 2009 and 2008, respectively, for
professional services rendered for the audit of the Registrant’s annual
financial statements and for the reviews of the financial statements included in
the Registrant’s quarterly reports on Form 10-Q for the periods ended March 31,
June 30, September 30 of 2009 and 2008.
AUDIT-RELATED
FEES
EFP
Rotenberg. LLP was not paid additional fees for the fiscal years ended December
31, 2009 or 2008 for assurance or related services reasonably related to the
performance of the audit or review of the Registrant’s financial
statements.
TAX
FEES
EFP
Rotenberg. LLP was not paid any fees for the fiscal years ended December 31,
2009 or 2008 for professional services rendered for tax compliance, tax advice
and tax planning. This service was not provided.
ALL
OTHER FEES
EFP
Rotenberg. LLP was paid no other fees for professional services during the
fiscal years ended December 31, 2009 and December 31, 2008.
AUDIT
COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
Our Audit
Committee’s policy is to pre-approve all audit and permissible non-audit
services provided by our independent auditors. These services may
include audit services, audit-related services, tax services and other
services. Pre-approval is generally provided for up to one year and
any pre-approval is detailed as to the particular service or category of
services. The independent auditor and management are required to
periodically report to the Audit Committee regarding the extent of services
provided by the independent auditor in accordance with this
pre-approval.
ADDITIONAL
INFORMATION
STOCKHOLDERS
ENTITLED TO VOTE AT THE ANNUAL MEETING MAY OBTAIN, WITHOUT CHARGE, A COPY OF OUR
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2009, OTHER
THAN EXHIBITS TO SUCH REPORT, UPON WRITTEN OR ORAL REQUEST TO SORL AUTO PARTS,
INC, NO. 1169 YUMENG ROAD, RUIAN ECONOMIC DEVELOPMENT DISTRICT, RUIAN CITY,
ZHEJIANG PROVINCE, ZIP 325200, PEOPLE’S REPUBLIC OF CHINA, ATTENTION BEN
CHEN. WE WILL ALSO FURNISH TO SUCH PERSONS A COPY OF ANY EXHIBITS TO
OUR ANNUAL REPORT ON FORM 10-K FOR A FEE OF $.20 PER PAGE, PAYABLE IN
ADVANCE. THIS FEE COVERS ONLY OUR REASONABLE EXPENSES IN FURNISHING
THE EXHIBITS.
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