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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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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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 JUNE 10, 2009
To our
Stockholders:
The 2009
annual meeting of stockholders of SORL Auto Parts, Inc. will be held on June 10,
2009, beginning at 9:00 am. 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 17, 2009 (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 2010 annual meeting of
stockholders and until their successors are elected and
qualified;
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(2)
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To
approve an Amended and Restated Certificate of
Incorporation;
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(3)
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To
ratify the appointment of our independent registered public accounting
firm for fiscal year 2009; 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, 2009 proxy statement, annual
report to stockholders for the fiscal year ended December 31, 2008, 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.
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By
order of the Board of Directors,
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Xiao
Ping Zhang
Chairman
of the Board of Directors,
Chief
Executive Officer
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April
8, 2008
Ruian
City, China
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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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7
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ITEM
2 - APPROVAL OF AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
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12
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ITEM
3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
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13
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OTHER
MATTERS
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14
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BENEFICIAL
OWNERSHIP OF COMMON STOCK
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14
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SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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15
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RELATED
PERSON TRANSACTIONS
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15
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EXECUTIVE
OFFICERS AND CERTAIN KEY EMPLOYEES
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16
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COMPENSATION
TO EXECUTIVE OFFICERS
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16
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COMPENSATION
TO DIRECTORS
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20
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REPORT
OF THE AUDIT COMMITTEE
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PRINCIPAL
ACCOUNTING FIRM FEES
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22
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ADDITIONAL
INFORMATION
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APPENDIX
A: AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
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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 June 10, 2009, beginning at
9:00 a.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 24, 2009 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 June 10, 2009. As a
stockholder on the Record Date (close of business on April 17, 2009), 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, 2008, 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 2008 Form 10-K on our website at http://www.SORL.cn, under
“Investor Relations.”
SORL also
will furnish any exhibit to our 2008 Form 10-K, if specifically
requested.
Additionally,
SORL is making proxy materials, including our 2009 proxy statement and annual
report to stockholders for fiscal year 2008, 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 card.
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 Amended and
Restated Certificate of
Incorporation
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The ratification of our
independent registered public accounting firm for fiscal year
2009
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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 approval of an amended and
restated certificate of corporation (see Item 2);
and
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For
the ratification of the
appointment of Rotenberg & Co. LLP as our independent registered
public accounting firm for fiscal year 2009 (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 Board of Directors’ 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 17, 2009, 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 this time,
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 18,279,254 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:
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: Wednesday, June 10, 2009, beginning at 9:00 am 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 9:00 am. 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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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: Wednesday, June 10, 2009, beginning at
9:00 am 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 9:00
am.
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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. For all other matters relevant to this meeting except one,
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. The one exception to the majority vote requirement,
applicable to this meeting, is that one aspect of the Amended and Restated
Certificate of Incorporation, the deletion of an existing antitakeover provision
that requires an 80% vote for certain transactions, may only be deleted if the
proposal to delete it receives 80% approval at the meeting, as discussed further
below.
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. If we choose
to engage a proxy solicitation firm, we will pay any associated
costs.
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 in our quarterly report on Form 10-Q for the second quarter of fiscal
2009.
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 amended and restated certificate of corporation, and
ratification of our independent registered public accounting firm. In
addition, management will report on our performance during fiscal year 2008 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
, 18,279,254
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 9,139,628 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.
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 annual meeting of
stockholders or to nominate individuals to serve as directors?
You may
submit proposals or nominees for the board for consideration at our 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 December 28, 2009. 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 Securities and Exchange Commission
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 December 28, 2009 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 December 28, 2009 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).
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 2008, 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
|
|
Audit
Committee
|
|
|
Compensation
Committee
|
|
|
Nominating and
Corporate Governance
Committee
|
|
Li
Min Zhang
|
|
|
X
|
|
|
|
|
|
|
X
|
|
Zhi
Zhong Wang
|
|
|
X
|
|
|
|
X
|
|
|
|
X
|
|
Yi
Guang Huo
|
|
|
X
|
|
|
|
X
|
|
|
|
|
|
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 2008, 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 2008, 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, Jiang and Wang and Professor Zhang. Mr. Jiang 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 2009 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
|
|
46
|
|
Chief
Executive Officer and Chairman
|
|
|
|
|
|
Xiao
Feng Zhang
|
|
41
|
|
Chief
Operating Officer and Director
|
|
|
|
|
|
Jung
Kang Chang
|
|
43
|
|
Vice
President of International Sales and Director
|
|
|
|
|
|
Li
Min Zhang
|
|
53
|
|
Director
|
|
|
|
|
|
Zhi
Zhong Wang
|
|
64
|
|
Director
|
|
|
|
|
|
Yi
Guang Huo
|
|
66
|
|
Director
|
|
|
|
|
|
Jiang
Hua Feng
|
|
43
|
|
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 AND CHIEF OPERATING OFFICER (COO)
Xiao Feng
Zhang has been the COO and a member of the Board of Directors since the reverse
merger. He is responsible for sales and marketing. 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 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
As previously disclosed, the company is
a successor by reverse merger with a pre-existing corporation. As a
result, our Certificate of Incorporation, as filed with the Delaware Secretary
of State, consists of numerous documents filed over a period of years, many of
which are no longer relevant. The reasons for amending and restating
our Certificate of Incorporation are primarily for improved clarity and improved
corporate governance. The most material changes are summarized below,
but you should review the full text of our proposed Amended and Restated
Certificate of Incorporation which is attached as Appendix A to this proxy
statement.
|
·
|
Capital
Structure. Our existing Certificate of Incorporation allows us
to issue up to ten million shares of preferred stock and it specifies the
series, terms and specifications of that stock, including several
amendments to those terms. No shares of preferred stock are
outstanding.
|
The
Amended and Restated Certificate of Incorporation deletes the existing
provisions concerning preferred stock and provides instead for issuance of up to
one million shares of preferred stock on such terms and conditions as the Board
of Directors may determine. We have no plans at this time to issue
any preferred stock, but the new provision gives the company the flexibility to
use preferred stock to raise capital; to make acquisitions; and for other lawful
purposes. There could also be anti-takeover uses for the preferred
stock, although none is presently intended
|
·
|
Anti-Takeover
Provisions. Our present Certificate of Incorporation contains
an anti-takeover provision that would require an 80% shareholder vote to
approve a merger with a holder of 5% or more of our shares, or with an
affiliate of such a holder. Further, that provision requires an
80% vote to delete it.
|
The
Amended and Restated Certificate would delete this provision, which we believe
is not in the best interests of shareholders. Note, however, that if
the Amended and Restated Certificate of Incorporation receives at least 50%
stockholder approval but does not receive at least 80% approval, that
antitakeover provision will remain in our Certificate of
Incorporation. It is therefore very important that you vote on this
proposal, and the Board of Directors recommends that you vote
FOR
Proposal No.
2.
|
·
|
There
are no other material changes in the proposed Amended and Restated
Certificate of Incorporation, other than simplification, shortening and
clarification of
language.
|
ITEM
3- RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We have
appointed Rotenberg & Co. LLP as our independent registered public
accounting firm for fiscal year 2009. Rotenberg & Co. LLP
has been our independent registered public accounting firm since the 2005 fiscal
year. Services provided to us by Rotenberg & Co. LLP in fiscal year
2008, and/or expected to be provided in fiscal year 2009, 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 Rotenberg & Co. 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 Rotenberg & Co., LLP as the Company's independent
registered public accounting firm for fiscal 2009.
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, 2009 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, 2009. 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 18,279,254 shares of common
stock outstanding as of March 31, 2009.
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
|
|
|
49.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Xiao
Feng Zhang
|
|
|
1,135,938
|
|
Chief
Operating Officer
and
Director
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Jung
Kang Chang
|
|
|
—
|
|
VP
of International
Sales
and Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Li
Min Zhang
|
|
|
15,000
|
(1)
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Zhizhong
Wang
|
|
|
15,000
|
(1)
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Yiguang
Huo
|
|
|
15,000
|
(1)
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Jianghua
Feng
|
|
|
15,000
|
(1)
|
Director
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
Officers
and Directors as a Group (8 persons)
|
|
|
10,283,465
|
|
|
|
|
55.9
|
%
|
|
|
|
|
|
|
|
|
|
|
PRINCIPAL
STOCKHOLDERS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shu
Ping Chi
|
|
|
1,135,938
|
|
|
|
|
6.2
|
%
|
____________________
(1) Represents
shares issuable within 60 days upon exercise of stock options, which are, under
the rules of the Securities and Exchange Commission, required to be reported
as
‘beneficially
owned.’
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 2008, 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 between Fairford Holdings Limited and the Company,
Mr. Xiao Ping Zhang, our Chief Executive Officer, and Mr. Xiao Feng Zhang, our
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. We purchase non-valve automotive products, components
for valve parts and packaging material from the Ruili Group. In 2008, we
purchased products from the Ruili Group representing approximately $35.3 million
of our sales. We generate only a small profit on these sales, but our
sales of these products represent an important marketing benefit as they enable
us to fill out our product line and reduce our customers’ transaction
costs. The Ruili Group also guaranteed certain bank loans to the
joint venture without fee and licensed two patents and the trademark “SORL” to
the joint venture on a royalty free basis. The two patents licensed
were assigned to the joint venture in 2007 for $50,000.
The joint
venture has leased two apartment buildings from Ruili Group Co., Ltd. for its
management personnel and ordinary staff, respectively. The lease term
is from January 2007 to December 2011 for one apartment building, and is from
January 2007 to December 2012 for the other. The annual rental of the two
apartment buildings is approximately $271,821.
On
September 28, 2007, the joint venture purchased land rights, a manufacturing
plant, and an office building from Ruili Group Co. Ltd., with purchase price of
approximately RMB152 million (approximately US$20.2 million at the time). DTZ
Debenham Tie Leung Ltd., an internationally recognized appraiser, appraised the
total asset value at RMB154 million (approximately US$20.5 million at the
time). The purchase price was paid by the Company by transferring to
Ruili Group the Company’s $9 million investment in an existing project that
includes a new-facility-in-progress and prepayment of land use
rights. The balance was paid from cash generated from operations and
borrowings under a bank credit line.
The
Company believes that the above-mentioned transactions were made at arm’s
length, and all prices charged and payments made between the parties are at
least as favorable to the joint venture 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, 2008.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Xiao
Ping Zhang (1)
|
|
46
|
|
Chief
Executive Officer and Chairman
|
|
|
|
|
|
Xiao
Feng Zhang (1)
|
|
41
|
|
Chief
Operating Officers and Director
|
|
|
|
|
|
Jung
Kang Chang (1)
|
|
43
|
|
Vice
President of International Sales and Director
|
|
|
|
|
|
Zong
Yun Zhou
|
|
54
|
|
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.”
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
TO 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 officers is fair,
reasonable and competitive. Generally, the types of compensation and
benefits provided to named executive officers 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
officers and approves recommendations regarding equity awards to all of our
officers. Decisions regarding the non-equity compensation of officers
other than the named executive officers 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.
2008
Executive Compensation Components
For 2008,
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 2008 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 2007 and 2008 by
Mr. Xiao Ping Zhang, who served as our principal executive officer during the
fiscal years ended December 31, 2008 and 2007. No executive officer
received compensation in excess of $100,000 for either of the fiscal years ended
December 31, 2008 and 2007.
Name and Position
|
|
Year
|
|
|
Salary ($)
|
|
Bonus
($)
|
|
Option
Awards
($)
|
|
Total
($)
|
|
Mr.
Xiao Ping Zhang, CEO (1)
|
|
|
2008
2007
|
|
|
|
50,000
50,000
|
|
—
__
|
|
—
__
|
|
|
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 2007
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 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.
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 2008:
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
|
|
|
|
14,909
|
|
|
|
—
|
|
|
|
24,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhi
Zhong Wang, Director
|
|
|
10,000
|
|
|
|
14,909
|
|
|
|
—
|
|
|
|
24,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yi
Guang Huo, Director
|
|
|
10,000
|
|
|
|
14,909
|
|
|
|
—
|
|
|
|
24,909
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jiang
Hua Feng, Director
|
|
|
10,000
|
|
|
|
14,909
|
|
|
|
—
|
|
|
|
24,909
|
|
____________
(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 2008 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 became exercisable in full 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 2008. 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 2008. 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 2008. 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 2008. 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 2008, 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 2008 fiscal year included in the Company’s Annual
Report on Form 10-K as filed with the SEC and has discussed with Rotenberg &
Co. 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
Rotenberg & Co. 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
Rotenberg
& Co. 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, 2008, 2007, 2006and 2005.
Rotenberg & Co. LLP performed the following services and has been paid the
following fees.
FISCAL
YEARS ENDED DECEMBER 31, 2008 and 2007
AUDIT
FEES
Rotenberg
& Co. LLP was paid aggregate fees of approximately $175,500 and $170,500 in
each fiscal year ended December 31, 2008 and 2007, 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 2008 and 2007.
AUDIT-RELATED
FEES
Rotenberg
& Co. LLP was not paid additional fees for the fiscal years ended December
31, 2008 or 2007 for assurance or related services reasonably related to the
performance of the audit or review of the Registrant’s financial
statements.
TAX
FEES
Rotenberg
& Co. LLP was not paid any fees for the fiscal years ended December 31, 2008
or 2007 for professional services rendered for tax compliance, tax advice and
tax planning. This service was not provided.
ALL
OTHER FEES
Rotenberg
& Co. LLP was paid no other fees for professional services during the fiscal
years ended December 31, 2008 and December 31, 2007.
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, 2008, 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.
APPENDIX
A
AMENDED
AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
SORL
AUTO PARTS, INC.
Pursuant
to the General Corporation Law of the State of Delaware (the “
DGCL
”), SORL AUTO
PARTS, INC., a Delaware corporation (the “
Corporation
”), hereby
certifies that:
FIRST
: The name of
the corporation is SORL Auto Parts, Inc. The name under which the
Corporation was originally incorporated is The Enchanted Village,
Inc. The corporation was incorporated by filing of its original
Certificate of Incorporation with the Secretary of State of the State of
Delaware on March 24, 1982.
SECOND
: This
Amended and Restated Certificate of Incorporation of the corporation, which
restates, integrates and further amends the provisions of the Certificate of
Incorporation of this corporation as previously amended or supplemented, has
been duly adopted by the corporation’s Board of Directors and a majority of the
stockholders in accordance with Sections
242 and 245 of the
DGCL.
THIRD
: The
Certificate of Incorporation of the Corporation is hereby amended, integrated
and restated to read in its entirety as follows:
ARTICLE
I.
The name of the corporation is SORL
Auto Parts, Inc. (the “
Corporation
”).
ARTICLE
II.
The purpose for which the Corporation
is organized is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of
Delaware.
ARTICLE
III.
The address of its registered office in
the State of Delaware is 2711 Centerville Road, Suite 400, in the City of
Wilmington, County of New Castle 19808. The name of its registered
agent at such address is Corporation Service Company.
ARTICLE
IV.
The Corporation shall have the
authority to issue up to 50,000,000 shares of common stock, $0.002 par value per
share, of which all shares shall be designated “Common Stock”, and up to
1,000,000 shares of Preferred Stock, all of which shall be referred to herein as
“Preferred Stock”. Shares of Preferred Stock may be issued from time
to time in one or more series as the Board of Directors, by resolution or
resolutions, may from time to time determine, each of such series to be
distinctively designated. The voting powers, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, if any, of such series of
Preferred Stock may differ from those of any and all other series of Preferred
Stock at any time outstanding, and the Board of Directors is expressly granted
authority to fix or alter, by resolution or resolutions, the designation,
number, voting powers, preferences and relative, participating, optional and
other special rights, and the qualifications, limitations and restrictions
thereof of each such series of Preferred Stock.
ARTICLE
V.
Meetings of stockholders may be held
within or without the State of Delaware, as the Bylaws of the Corporation may
provide. The books of the Corporation may be kept (subject to any
provision contained in the General Corporation Law of the State of Delaware)
outside the State of Delaware at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws of the
Corporation.
ARTICLE
VI.
The
Bylaws of the Corporation may be adopted, amended or repealed by the Board of
Directors of the Corporation; provided, however, that nothing contained in this
Article VI shall be deemed to divest the stockholders of the Corporation of the
power, nor limit their power, to adopt, amend or repeal the Bylaws of the
Corporation; or to specify, when adopting or amending the Bylaws of the
Corporation, that one or more provisions thereof shall not be amended without
the consent of the stockholders.
ARTICLE
VII.
No
director of the Corporation shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of his fiduciary duty as a
director; provided, that this provision shall eliminate or limit the liability
of a director only to the extent permitted from time to time by the General
Corporation Law of the State of Delaware or any successor law or
laws.
ARTICLE
VIII.
A. The
Corporation shall indemnify its directors and officers to the fullest extent
authorized or permitted by Delaware law, as now or hereafter in effect, and such
right to indemnification shall continue as to a person who has ceased to be a
director or officer of the Corporation and shall inure to the benefit of his or
her heirs, executors and personal and legal representatives; provided, however,
that, except for proceedings to enforce rights to indemnification, the
Corporation shall not be obligated to indemnify any director or officer (or his
or her heirs, executors or personal or legal representatives) in connection with
a proceeding (or part thereof) initiated by such person unless such proceeding
(or part thereof) was authorized or consented to by the Board of
Directors. The right to indemnification conferred by this Article
VIII shall include the right to be paid by the Corporation the expenses incurred
in defending or otherwise participating in any proceeding in advance of its
final disposition.
B. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, provide rights to indemnification and to the advancement of expenses
to employees and agents of the Corporation similar to those conferred in this
Article VIII to directors and officers of the Corporation.
C. The
rights to indemnification and to the advance of expenses conferred in this
Article VIII shall not be exclusive of any other right which any person may have
or hereafter acquire under this Certificate of Incorporation, the Bylaws of the
Corporation, any statute, agreement, vote of stockholders or disinterested
directors or otherwise.
D. Any
repeal or modification of this Article VIII by the stockholders of the
Corporation shall not adversely affect any rights to indemnification and to the
advancement of expenses of a director or officer of the Corporation existing at
the time of such repeal or modification with respect to any acts or omissions
occurring prior to such repeal or modification.
IN WITNESS WHEREOF
, the
undersigned has executed this Amended and Restated Certificate of Incorporation
on this ________ day of _______________________, 2009.