SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant
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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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Aggregate number of securities to which transaction applies:
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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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Proposed maximum aggregate value of transaction:
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Fee paid previously with preliminary materials.
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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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Form, Schedule or Registration Statement No.:
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 7, 2012
To our Stockholders:
The 2012 annual meeting
of stockholders of SORL Auto Parts, Inc. (SORL) will be held on June 7, 2012, beginning at 8:00 p.m. local time (China Standard
Time) in Meeting Room 205, No. 1169 Yumeng Road, Ruian Economic Development District, Ruian City, Zhejiang Province, Zip 325200,
China. Only holders of record of shares of our common stock at the close of business on April 11, 2012 (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 2013 annual meeting of stockholders and until their
successors are elected and qualified; the following seven persons are candidates: Mr. Xiao Ping Zhang, Mr. Xiao Feng Zhang, Mr.
Jung Kang Chang, Mr. Yi Guang Huo, Mr. Li Min Zhang, Mr. Zhi Zhong Wang and Mr. Jiang Hua Feng.
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(2)
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To continue the appointment of EFP Rotenberg, LLP as our independent registered public accounting
firm for fiscal year 2012; and
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To transact any other matters that properly comes before the meeting or any adjournments or postponements
thereof.
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This year, we are pleased
to continue taking the advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to
stockholders over the Internet. Consequently, most stockholders will not receive paper copies of our proxy materials. We believe
that this e-proxy process expedites stockholders’ receipt of proxy materials, while also lowering the costs and reducing
the environmental impact of our annual meeting.
On April 23, 2012,
we will begin mailing to our stockholders of record a Notice of Internet Availability of Proxy Materials (the “Notice”)
containing instructions on how to access our 2012 proxy statement and annual report to stockholders for the fiscal year ended December
31, 2011, and how to vote online. Please refer to the Notice for detailed instructions on how to access the proxy materials, how
to cast your vote, and how to request and receive proxy materials in paper form.
It is important
that your shares be represented and voted at the annual meeting. As an alternative to voting in person at the annual meeting, you
may vote on the Internet, by telephone, or , if you receive a paper proxy card in the mail, by mailing the completed proxy card.
The proxy statement and annual report are available online at http://www.cstproxy.com/sorl/2012.
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By order of the Board of Directors,
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Xiao Ping Zhang
Chairman of the Board of Directors and Chief Executive Officer
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April 20, 2012
Ruian City, China
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TABLE OF CONTENTS
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Page
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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 – CONTINUED APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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14
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OTHER MATTERS
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BENEFICIAL OWNERSHIP OF COMMON STOCK
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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RELATED PERSON TRANSACTIONS
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EXECUTIVE OFFICERS AND CERTAIN KEY EMPLOYEES
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COMPENSATION TO DIRECTORS
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COMPENSATION COMMITTEE REPORT
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REPORT OF THE AUDIT COMMITTEE
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PRINCIPAL ACCOUNTING FIRM FEES
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ADDITIONAL INFORMATION
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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 7, 2012, beginning
at 8:00 p.m. local time (China Standard Time) in Meeting Room 205, No.1169 Yumeng Road, Ruian Economic Development District, Ruian
City, Zhejiang Province, Zip 325200, China, and any postponements or adjournments thereof. On April 23, 2011, we will begin mailing
to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on
how to access our 2012 proxy statement and annual report to stockholders for the fiscal year ended December 31, 2011, and how to
vote online. This solicitation is made on behalf of the Board of Directors (the “Board of Directors” or the “Board”)
of SORL Auto Parts, Inc. (“SORL,” “our,” “us,” “the Company,” or “we”),
a Delaware corporation.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE
ANNUAL MEETING
Proxy Materials
Why am I receiving these materials?
The Board of Directors
is providing these proxy materials to you in connection with our annual meeting of stockholders, which will take place on June
7, 2012. As a stockholder at the close of business on April 11, 2012 (the “Record Date”), you are invited to attend
the annual meeting of stockholders. 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 of stockholders, the voting process, and
the compensation of our directors and most highly paid executive officers, and certain other required information.
Why did I receive a Notice
of Internet Availability of Proxy Materials in the mail instead of a printed set of proxy materials?
Pursuant
to rules adopted by the Securities and Exchange Commission, we are permitted to furnish our proxy materials over the Internet to
our stockholders by delivering a Notice in the mail. We are sending the Notice to our stockholders of record as of the Record Date.
If you received a Notice by mail, you will
not
receive a printed copy of the proxy materials in the mail. Instead, the Notice
instructs you on how to access and review the proxy statement and annual report over the Internet at [http://www.cstproxy.com/sorl/2012].
The Notice also instructs you on how you may submit your proxy over the Internet. If you received a Notice by mail and would like
to receive a printed copy of our proxy materials, you should follow the instructions for requesting these materials contained in
the Notice.
Further, stockholders may request a free
copy of our annual report on Form 10-K for the year ended December 31, 2011, as filed with the United States Securities and Exchange
Commission (the “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 2011 Form 10-K on our website at http://www.SORL.cn, under “Investor Relations.”
SORL also will furnish
any exhibit to our 2011 Form 10-K, if specifically requested.
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 of stockholders?
The items of business
scheduled to be voted on at the annual meeting of stockholders are:
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The election of directors;
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The continued appointment of our independent registered public accounting firm for fiscal year 2012;
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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 two
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 continued appointment of EFP Rotenberg, LLP as our independent registered public accounting firm for fiscal
year 2012 (see Item 2);
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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 11, 2012, 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. As of 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 photo identification such as a driver’s license. The time and location
of the annual meeting are: Wednesday, June 7, 2012, beginning at 8:00 pm local time (China Standard Time) in Meeting Room 205,
No.1169 Yumeng Road, Ruian Economic Development District, 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 on your proxy card for detailed instructions.
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On the Internet. Please see the instructions on your proxy card for detailed instructions.
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By mail. If you receive a proxy card 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 photo identification such as a driver’s license. The time and location
of the annual meeting are: Wednesday, June 7, 2012, beginning at 8:00 pm local time (China Standard Time) in Meeting Room 205,
No.1169 Yumeng Road, Ruian Economic Development District, 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 to your broker, trustee or nominee 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 above 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, 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 of stockholders?
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 anticipate the costs of such
services to the Company to be approximately $6,500.
Where can I find the voting
results of the annual meeting of stockholders?
We intend to publish
any preliminary voting results on Form 8-K within four business days after the meeting, and publish final results on Form 8-K within
four business days after they are known.
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.
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 of stockholders?
At our annual meeting,
stockholders will act upon the matters outlined in Notice, including the election of directors and continued appointment of our
independent registered public accounting firm. In addition, management will report on our performance during fiscal year 2011 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 February 1,
2013. 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 February 1, 2013 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 February 1, 2013 in the manner
specified in our bylaws.
How may I communicate with
SORL's Board of Directors?
You may contact members
of 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 Global 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 Marketplace
Rule 5605(a)(2). 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.
Board of Directors Leadership Structure
and Role in Risk Oversight
Our Board of Directors
includes a majority of independent directors, and our Chief Executive Officer, Xiao Ping Zhang, serves as Chairman of the Board.
Mr. Zhang has served as the Chairman of the Board since May 7, 2004. Having our Chief Executive Officer serve as Chairman of the
Board is consistent with the historical practice of our Company.
In addition to a majority
of our directors being independent, all of the directors on each of the Audit Committee, the Compensation Committee and the Nominating
and Corporate Governance Committee of the Company are independent directors, and each of these committees is led by a committee
chair. The committee chairs set the agendas for their respective committees and report to the full Board on their work. We do not
have a lead director, but our non-management directors meet in executive sessions without management present as frequently as they
deem appropriate. The chairs of the independent board committees rotate as presiding director, and the presiding director acts
as a liaison between the non-management directors and the Chairman of the Board and the Chief Executive Officer.
Our Company has employed
this leadership structure of having a combined Chairman of the Board and Chief Executive Officer for many years, and we believe
that this leadership structure has been effective for the Company. We believe that having a combined Chairman of the Board and
Chief Executive Officer, a Board with a majority of independent directors who meet regularly in executive sessions, and independent
chairs for the Board’s Audit, Compensation, and Nominating and Corporate Governance committees provides the best form of
leadership for the Company and the Board. We have a single leader for our Company and he is seen by our employees, customers, business
partners, shareowners and other stakeholders as providing strong leadership for the Company, in our industry, and in the communities
in which we operate.
Our Board is responsible
for overseeing our risk management. The Board delegates many of these functions to the Audit Committee. As discussed below, under
its charter, the Audit Committee is responsible for discussing management policies with respect to financial risk assessment and
enterprise risk management, including guidelines to govern the process by which major financial and accounting risk assessment
and management is undertaken by the Company. The Audit Committee also oversees our corporate compliance programs, as well as the
internal audit function. In addition to the Audit Committee’s work in overseeing risk management, our full Board regularly
engages in discussions of the most significant risks that the Company is facing and how these risks are being managed, and the
Board receives reports on risk management from senior officers of the Company and from the chair of the Audit Committee. The Board
receives periodic assessments from the Company’s ongoing enterprise risk management process that are designed to identify
potential events that may affect the achievement of the Company’s objectives.
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 2011, the Board held 4 meetings. Each director attended at least 75% of all Board and applicable committee meetings.
Although we do not have a formal policy regarding attendance by members of our Board
at our annual meeting of stockholders,
we encourage all of our directors to attend. Three members of our Board of Directors attended last year’s annual meeting
of stockholders.
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 5605(a)(2), and that each current member of the Audit Committee is independent within the meaning
of applicable regulations of the SEC 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
|
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 Li Min Zhang and Messrs. Zhi Zhong Wang and Yi Guang Huo. Professor Li Min 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 2011, the Audit Committee held four 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 Global 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 at
http://www.sorl.cn/Committee-Audit.asp
.
Compensation Committee
The members of the Compensation Committee are Messrs. Zhi Zhong Wang, Yi Guang Huo, and Jiang Hua Feng. During the fiscal year
ended 2011, the Compensation Committee held one 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 plan; and
|
|
·
|
reviewing and making recommendations to our Board with respect to our incentive compensation and
employee stock purchase plan.
|
The charter of the Compensation Committee is posted on our website at
http://www.sorl.cn/Committee-Comp.asp.
Compensation Committee
Interlocks and Insider Participation
No member of the Compensation
Committee served as an officer or employee of the Company during the year ended December 31, 2011, or formerly served as an
officer of the Company. In addition, during the year ended December 31, 2011, none of our executive officers served as a member
of a compensation committee (or other board committee performing equivalent functions or, in the absence of any such committee,
the entire board of directors) or as a director of any entity that has one or more executive officers serving as a member of our
Board of Directors.
Nominating and Corporate
Governance Committee
The Board of Directors has established a Nominating and Corporate Governance Committee consisting of three
directors, all of whom meet the requirements for “independent directors,” and has delegated to the Nominating and Corporate
Governance Committee the responsibility for reviewing and recommending to the Board nominees for directors. The members of our
Nominating and Corporate Governance Committee are Messrs,
Jiang Hua
Feng and Zhi Zhong Wang,
and Professor Li Min Zhang. Mr. Jiang Hua Feng chairs the Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee held 4 meetings in 2011.
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 Nominating and
Corporate Governance Committee, in evaluating Board candidates, considers factors such as personal character, values and disciplines,
ethical standards, diversity, other outside commitments, professional background and skills, all in the context of an assessment
of the needs of the Board at the time. In addition, each director is expected to ensure that other existing and planned future
commitments do not materially interfere with his or her responsibilities as a director.
The charter of the
Nominating and Corporate Governance Committee is posted on our website at
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. For additional information on the procedures to be followed by stockholders in submitting such recommendations, see
the discussion under “Stockholder Proposals, Director Nominations and Related Matters” on page 5 of the Questions and
Answers section of this proxy statement.
The names of any individuals
proposed for consideration by the Nominating and Corporate Governance 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 Nominating
and Corporate Governance 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 Nominating
and Corporate Governance Committee will consider potential candidates for director. Candidates may come to the attention of the
Nominating and Corporate Governance Committee through current Board members, professional search firms, stockholders or other persons.
These candidates will be evaluated at regular or special meetings of the Nominating and Corporate Governance Committee, and may
be considered at any point during the year. As described above, the Nominating and Corporate Governance 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 Nominating
and Corporate Governance Committee. The Nominating and Corporate Governance 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.
For each of the nominees
to the Board of Directors, the biographies shown below highlight the experiences and qualifications that were among the most important
to the Nominating and Corporate Governance Committee in concluding that the nominee should serve as a director of the Company.
The Nominating and Corporate Governance Committee considers diversity in identifying nominees for director, including personal
characteristics, such as race and gender, as well as diversity in the experience and skills that contribute to the Board’s
performance of its responsibilities and oversight of our business.
The current term of
office of all of our directors expires at the 2012 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 re-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
|
|
50
|
|
Chief Executive Officer and Chairman
|
|
|
|
|
|
Xiao Feng Zhang
|
|
45
|
|
Director
|
|
|
|
|
|
Jung Kang Chang
|
|
47
|
|
Director and Vice President of International Sales
|
|
|
|
|
|
Li Min Zhang
|
|
57
|
|
Director
|
|
|
|
|
|
Zhi Zhong Wang
|
|
68
|
|
Director
|
|
|
|
|
|
Yi Guang Huo
|
|
70
|
|
Director
|
|
|
|
|
|
Jiang Hua Feng
|
|
47
|
|
Director
|
XIAO PING ZHANG - CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER (CEO)
Xiao Ping Zhang has
been the Chief Executive Officer and Chairman of the Board since the Company’s 2004 reverse merger with Fairford Holdings
Limited, a Hong Kong limited liability company (“Fairford Holdings Limited”). 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 2010, he was elected as the President of Zhejiang Province Auto Parts Association. In 2012, he was re-elected the President
of Wenzhou Auto Parts Association. He is now still serving as 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. Mr. Zhang was selected
to serve as a director because he is the Chief Executive Officer of the Company, and his experience and knowledge regarding our
Company and our industry are believed to provide significant value to the Board of Directors.
XIAO FENG ZHANG - DIRECTOR
Xiao Feng Zhang has
been a member of the Board of Directors since the Company’s reverse merger with Fairford Holdings Limited. He served as Chief
Operating Officer 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. We believe Mr. Zhang’s qualifications to serve on our Board of Directors include his expertise
in business and corporate strategy and his knowledge regarding our Company and our industry.
JUNG KANG CHANG - DIRECTOR AND VICE PRESIDENT,
INTERNATIONAL SALES
Jung Kang Chang has
been a member of our Board of Directors since the Company’s reverse merger with Fairford Holdings Limited. 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. We believe Mr. Chang’s
qualifications to serve on our Board of Directors include his expertise in business and corporate strategy, and his knowledge regarding
our Company and our industry.
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 recognized by the
Board as its Audit Committee financial expert. Dr. Zhang is also a member of the Nominating and Corporate Governance Committee.
Dr. Zhang is currently 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. We believe Dr. Zhang’s qualifications to serve on our Board of Directors include
his extensive experience practicing and teaching accounting at the highest level, and his knowledge of our Company and our industry.
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. We believe that Mr. Wang’s extensive
experience practicing and teaching in the
Department of Electrical Engineering at the highest level, and his knowledge of
our Company and our industry will bring valuable resources to the Board of Directors.
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 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 an Honorary President of the 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. We believe that Mr. Huo’s
extensive experience practicing and teaching in the Wuhan University of Technology at the highest level and his knowledge of our
Company and our industry will bring valuable resources to the Board of Directors
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 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 the 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. We believe that Mr. Feng’s extensive legal experience as well as knowledge of our Company and our industry
will bring valuable resources to the Board of Directors.
ITEM 2 – CONTINUED APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have appointed EFP
Rotenberg, LLP as our independent registered public accounting firm for 2011 and will continue such appointment in the fiscal year
2012. 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 the fiscal year ended 2011, and/or expected to be provided in the fiscal year 2012, 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 SEC 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
" the continued appointment of EFP Rotenberg, LLP as the Company's independent registered
public accounting firm for the fiscal year 2012.
In the event stockholders
do not approve the continued 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 2012 annual meeting of stockholders 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 April 11, 2012 by:
|
·
|
each person known to us to be the beneficial owner of more than 5% of any class of our voting securities;
|
|
·
|
our named executive officer;
|
|
·
|
each of our directors; and
|
|
·
|
all directors and named executive officer 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 April 11, 2012. Information with respect to beneficial ownership
has been furnished to us by each director, named 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 April 11, 2012.
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
|
|
|
|
|
|
|
|
|
|
|
NAMED EXECUTIVE OFFICER AND DIRECTORS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 (the “Exchange Act”), requires our directors, executive officers and holders
of more than 10% of our common stock to file with the SEC reports regarding their ownership and changes in ownership of our securities.
We believe that, during the fiscal year 2011, 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
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 packaging
materials from the Ruili Group Co. The Ruili Group 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 Company sold certain automotive products to Guangzhou Kormee Vehicle
Brake Technology Development Co., Ltd., which is controlled by the Ruili Group Co., Ltd.
The following related
party transactions occurred during the fiscal years ended December 31, 2011 and 2010:
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
PURCHASES FROM:
|
|
|
|
|
|
|
|
|
Ruili Group Co., Ltd.
|
|
$
|
6,392,197
|
|
|
$
|
4,170,084
|
|
Total Purchases
|
|
$
|
6,392,197
|
|
|
$
|
4,170,084
|
|
|
|
|
|
|
|
|
|
|
SALES TO:
|
|
|
|
|
|
|
|
|
Ruili Group Co., Ltd.
|
|
|
2,392,090
|
|
|
|
1,304,624
|
|
Total Sales
|
|
$
|
2,392,090
|
|
|
$
|
1,304,624
|
|
|
|
December 31,
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
OTHER ACCOUNTS RECEIVABLE TO RELATED PARTIES
|
|
|
|
|
|
|
|
|
MGR Hong Kong Limited
|
|
$
|
—
|
|
|
$
|
52,743
|
|
Total
|
|
$
|
—
|
|
|
$
|
52,743
|
|
|
|
|
|
|
|
|
|
|
ACCOUNTS PAYABLE TO RELATED PARTIES
|
|
|
|
|
|
|
|
|
Ruili Group Co., Ltd.
|
|
$
|
524,148
|
|
|
$
|
3,151,493
|
|
Total
|
|
$
|
524,148
|
|
|
$
|
3,151,493
|
|
|
|
|
|
|
|
|
|
|
OTHER PAYABLES TO RELATED PARTIES
|
|
|
|
|
|
|
|
|
MGR Hong Kong Limited
|
|
|
25,559
|
|
|
|
60,376
|
|
Ruili Group Co., Ltd.
|
|
$
|
118,391
|
|
|
$
|
4,224
|
|
Total
|
|
$
|
143,950
|
|
|
$
|
64,600
|
|
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.
Review and Approval of Related-Person Transactions
The Company's policy
with regard to any transactions between the Company and a related person is that such transactions must be on terms at least as
favorable to the Company as arms'-length transactions of similar types with unaffiliated third parties. Additionally, all related
party transactions must be disclosed to, and considered and approved by, our Audit Committee prior to entering into any such transaction.
This policy has been
followed with regard to all related-party transactions disclosed herein.
EXECUTIVE OFFICERS AND CERTAIN KEY EMPLOYEES
The following table
sets forth our executive officers and key employees, their ages and the positions they hold. For information on Xiao Ping Zhang,
our Chief Executive Officer and Chairman of the Board, and Jung Kang Chang, our Vice President of International Sales and a director,
please refer to biographical information on our director nominees above.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Zong Yun Zhou
|
|
58
|
|
Chief Financial Officer
|
|
|
|
|
|
Bao Jian Tao (1)
|
|
65
|
|
Chief Operating Officer
|
|
|
|
|
|
Jin Rui Yu (2)
|
|
37
|
|
Chief Operating Officer
|
|
(1)
|
On January 14, 2010, Mr. Tao succeeded Mr. Xia Feng
Zhang as our Chief Operating Officer.
|
|
(2)
|
On March 3, 2012, Ms. Yu succeeded Mr. Bao Jian Tao as
our Chief Operating Officer.
|
ZONG YUN ZHOU - CHIEF FINANCIAL OFFICER
Zong Yun Zhou has been
our Chief Financial Officer 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.
BAO JIAN TAO- CHIEF OPERATING OFFICER
Bao
Jian Tao was our Chief Operating Officer and Deputy GM from January 2010 to March 2012. Between 2004 and 2010, Mr. Tao served as
our Senior Vice President. Mr. Tao has over 20 years of experience in the auto and parts industry. Mr. Tao is now the Vice-Chairman
of International Trade Coordinating Committee of CAAM and the Deputy Director of SAE-Zhejiang province.
JIN RUI
YU
-
CHIEF OPERATING OFFICER
Ms. Yu has been our
Chief Operating Officer since March 2012. Ms. Yu has more than 15 years of experience in the auto parts industry. Ms. Yu has served
as the Company’s Production and Export Vice President since August 2009. From 2004 to 2009, Ms. Yu served as the Company’s
Export Department Manager. From 1999 to 2004, Ms. Yu served as the international sales manager of Ruili Group Co., Ltd., which
specializes in manufacturing auto parts, and from 1997 to 1999, she worked in the market sales department of Ruili Group Co., Ltd.
Ms Yu received her Bachelor of English from Zhejiang University of Technology in 2006.
COMPENSATION DISCUSSION AND ANALYSIS
Overview of Executive Compensation
Program
The Compensation Committee
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 the 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 a 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 Compensation Committee). There is no pre-established policy or target for the allocation
between either cash or non-cash incentive compensation. The conclusions reached and recommendations based on these reviews, including
with respect to salary adjustments and annual award amounts, are determined by the Compensation Committee. The Compensation 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 Compensation 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 Compensation Committee does not employ outside compensation consultants and
sets the compensation of our Chief Executive Officer at the levels provided in his employment agreement with the Company.
2011 Executive Compensation
Components
For the year ended
2011, 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
of 2011. 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 Compensation 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.
Summary Compensation Table
The following table
presents summary information concerning all compensation paid or accrued by us for services rendered in all capacities during 2011
and 2010 by Mr. Xiao Ping Zhang, who served as our Chief Executive Officer and Mr. Zong Yun Zhou during the fiscal years ended
December 31, 2011 and 2010. No executive officer received compensation in excess of $100,000 for either of the fiscal years ended
December 31, 2011 and 2010.
Name and Position
|
|
Year
|
|
|
Salary ($)
|
|
|
Bonus
($)
|
|
|
Option
Awards
($)
|
|
|
Total
($)
|
|
Mr. Xiao Ping Zhang, CEO(1)
|
|
|
2011
|
|
|
|
60,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
60,000
|
|
|
|
|
2010
|
|
|
|
50,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
Mr. Zong Yun Zhou, CFO (2)
|
|
|
2011
|
|
|
|
30,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
30,000
|
|
|
|
|
2010
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
(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 2011 and 2010.
|
|
(2)
|
Mr. Zhou did not receive compensation other than what
listed above.
|
Employment Agreements
The Company is party
to an employment agreement with each of Mr. Xiao Ping Zhang, our Chief Executive Officer, and Ms. Zong Yun Zhou, our Chief Financial
Officer. The term of Messrs. Zhan and Zhou’s 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. 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 Plan. We have awarded 53,628 shares of common stock under the Plan, all
of which are currently outstanding. We have also granted options to purchase aggregate of 64,128 shares under the Plan. 60,000
of such options expired without being exercised on March 1, 2009 and are not subject to being re-issued under the Plan; and 4,128
options were excised on November 12, 2009. No stock options are presently outstanding under the Plan.
Administration
The Compensation Committee administers the Plan and has complete discretion to make all decisions relating to the Plan as are permitted
therein.
Eligibility
Employees,
non-employee members of our Board of Directors, advisors and consultants are eligible to participate in the Plan.
Types of Awards
Our 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 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 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 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 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 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 under the Plan.
Equity Compensation Plan Information
Our Plan was adopted
by our Board of Directors in July 2005. We have reserved 1,700,000 shares for issuance under the Plan.
The table below presents
the number of shares of our common stock remaining available for issuance under the Plan as of December 31, 2011:
Plan Category
|
|
Number of Securities to
Be Issued upon
Exercise of
Outstanding Options,
Warrants and Rights
|
|
|
Weighted Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
|
Number of
Securities
Remaining
Available for
Future Issuance
|
|
Equity compensation plans approved by security holders (1)
|
|
|
0
|
|
|
|
N/A
|
|
|
|
1,582,244
|
|
Equity compensation plans not approved by security holders
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
0
|
|
|
|
N/A
|
|
|
|
1,582,244
|
|
COMPENSATION TO DIRECTORS
The following table
sets forth the compensation paid to our directors, other than our Chief Executive Officer, for 2011:
Director Compensation Table
Name (1)
|
|
Fees Earned
or
Paid in Cash
($) (2)
|
|
|
All other compensation
($)
|
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xiao Feng Zhang (3)
Director
|
|
|
—
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jung Kang Chang (4)
VP of International Sales and Director
|
|
|
—
|
|
|
|
15,000
|
|
|
|
15,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 Board meetings during the year.
|
|
(3)
|
Mr. Xiao Feng Zhang provided consulting services to the
Company, for which he received cash compensation of $20,000. In addition, Mr. Zhang received $10,000 for attending Board meetings
in 2011. Mr. Zhang is also employed by the Ruili Group which makes separate payments to him for his services to that company.
|
|
(4)
|
Mr. Jung Kang Chang is an employee of the Company and
did not receive cash compensation or stock options for attending Board meetings in 2011. 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 2011. 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 2011. 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.
COMPENSATION COMMITTEE REPORT
The Compensation Committee
has reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management. Based on
such review and discussion, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion
and Analysis be included in this proxy statement.
Compensation Committee:
Zhi Zhong Wang
Yi Guang Huo
Jiang Hua Feng
REPORT OF THE AUDIT COMMITTEE
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 Exchange Act, except to the extent we specifically incorporate
this Report of the Audit Committee by reference therein.
The Audit Committee
has reviewed and discussed with management the audited financial statements as of and for the Company’s 2011 fiscal year
included in the Company’s Annual Report on Form 10-K as filed with the SEC on March 30, 2012, 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 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.
Audit Committee:
Yi Guang Huo
Zhi Zhong Wang
Li Min Zhang
PRINCIPAL ACCOUNTING FIRM FEES
EFP Rotenberg, LLP,
Certified Public Accountants, was the Company’s independent registered public accounting firm engaged to examine the financial
statements of the Company for the fiscal years ended December 31, 2011 and 2010. EFP Rotenberg, LLP performed the following
services and has been paid the following fees:
Fiscal Years Ended December 31,
2011 and 2010
Audit Fees
EFP Rotenberg, LLP
was paid aggregate fees of approximately $239,150 and $238,500 in the fiscal years ended December 31, 2011 and 2010, respectively,
for professional services rendered for the audit of the Company’s annual financial statements and for the reviews of the
financial statements included in the Company’s quarterly reports on Form 10-Q for the periods ended March 31, June 30, September
30 of 2011 and 2010:
Audit-Related
Fees
EFP Rotenberg, LLP
was not paid additional fees for the fiscal years ended December 31, 2011 or 2010 for assurance or related services reasonably
related to the performance of the audit or review of the Company’s financial statements.
Tax Fees
EFP Rotenberg, LLP
was not paid any fees for the fiscal years ended December 31, 2011 or 2010 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, 2011 and December 31, 2010.
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, subject to the
de
minimis
exceptions for non-audit services described in Section 10A(i)(1)(b) of the Exchange Act and the rules and regulations
of the SEC. 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.
All services rendered
by EFP Rotenberg, LLP for the year ended December 31, 2011 were pre-approved in accordance with the policies and procedures
described above.
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, 2011,
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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