CHINA
RECYCLING ENERGY CORPORATION
12/F,
Tower A
Chang
An International Building
No.
88 Nan Guan Zheng Jie
Xi’an
City, Shaanxi Province
China
710068
PROXY
STATEMENT
FOR
THE ANNUAL MEETING OF STOCKHOLDERS
To
Be Held June 4, 2010
We are
furnishing this proxy statement to the stockholders of China Recycling Energy
Corporation in connection with the solicitation of proxies by the Board of
Directors to be voted at our 2010 Annual Meeting of Stockholders to be held at
our principal executive officers, located at 12/F, Tower A, Chang An
International Building, No. 88 Nan Guang Zheng Jie, Xi’an City, Shaanxi
Province, 710068 China, on June 4, 2010, at 9:00 a.m. local time, and at any
adjournments or postponements of the meeting.
When used
in this proxy statement, the terms “we,” “us,” “our” and “CREG” refer to China
Recycling Energy Corporation.
The date
on which we are first sending this proxy statement and form of proxy card to
stockholders is on or about April 30, 2010.
This
Proxy Statement, including the Proxy Card and the Notice of Annual Meeting are
available at www.shareholdervote.info/. Directions to our 2010 Annual
Meeting of Stockholders are available by calling +86-29-8769-1097.
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS AND VOTING
Why
am I receiving these materials?
The proxy
materials are being furnished to you because the Board of Directors of China
Recycling Energy Corporation (sometimes referred to as the “Company”, “CREG”,
“us” or “our”) is soliciting your proxy to vote at the 2010 Annual Meeting of
Stockholders. You are invited to attend the annual meeting to vote on the
proposals described in this proxy statement. However, you do not need to attend
the annual meeting to vote your shares. Instead, you may simply complete, sign
and return the proxy card, which is available at
www.shareholdervote.info/. The date on which the proxy statement and
accompanying materials are intended to be sent or given to the stockholders is
on or about April 30, 2010.
Who
can vote at the annual meeting?
Only
stockholders of record at the close of business on April 29, 2010, will be
entitled to vote at the annual meeting. On this record date, there were
38,778,035 shares of common stock outstanding and entitled to
vote. Such shares were held by 2,871 holders of record.
Stockholders of Record: Shares
Registered in Your Name
If on
April 29, 2010, your shares were registered directly in your name with our
transfer agent, Securities Transfer Corporation, then you are a stockholder of
record. As a stockholder of record, you may vote in person at the annual meeting
or vote by proxy. Whether or not you plan to attend the annual meeting, we ask
you to fill out and return the proxy card if you wish to have your vote
recorded.
Beneficial Owner: Shares Registered
in the Name of a Broker or Bank
If on
April 29, 2010, your shares were held in an account at a brokerage firm, bank,
dealer or other similar organization, then you are the beneficial owner of
shares held in “street name” and these proxy materials are being forwarded to
you by that organization. The organization holding your account is considered
the stockholder of record for purposes of voting at the annual meeting. As a
beneficial owner, you have the right to direct your broker or other agent on how
to vote the shares in your account. You are also invited to attend the annual
meeting. However, since you are not the stockholder of record, you may not vote
your shares in person at the annual meeting unless you request and obtain a
valid proxy from your broker or other agent.
What
am I voting on?
The only
matters scheduled for a vote are (i) the election of directors to hold office
until our 2011 Annual Meeting of Stockholders; (ii) the appointment of Goldman
Park Kurland Mohidin, LLP to act as our independent registered public accounting
firm for the fiscal year ending December 31, 2010; and (iii) the approval
of the Amended and Restated 2007 Nonstatutory Stock Option Plan, which
increases the aggregate number of shares of common stock authorized for issuance
by 2,200,000 from 3,000,000 shares to 5,200,000 shares.
How
do I vote?
In voting
with regard to the election of directors, you may vote in favor of all nominees,
withhold your vote as to all nominees or withhold your vote as to specific
nominees. In voting with regard to the approval of the Amended and
Restated 2007 Nonstatutory Stock Option Plan and the appointment of the
independent registered public accounting firm, you may vote in favor of the
proposal or against the proposal or may abstain from voting.
Stockholder of Record: Shares
Registered in Your Name
If you
are a stockholder of record, you may vote in person at the annual meeting, or
vote by proxy using the enclosed proxy card which also is available at
www.shareholdervote.info/. Whether or not you plan to attend the annual meeting,
we urge you to vote by proxy to ensure your vote is counted. You may still
attend the annual meeting and vote in person if you have already voted by
proxy. Please note that the notice letter you received directing you
to the website at which the proxy materials are available is not the proxy card
and should not be used to submit your vote.
1. To
vote in person, come to the annual meeting and we will give you a ballot when
you arrive.
2. To
vote using the proxy card, simply print the proxy card, complete, sign and date
it and return it promptly to Mr. Zhigang Wu, our Vice President of Finance, at
12/F, Tower A, Chang An International Building, No. 88 Nan Guang Zheng Jie,
Xi’an City, Shaanxi Province, 710068 China. If you return your signed proxy card
to us before the annual meeting, we will vote your shares as you
direct. Please note that the notice letter you received directing you
to the website at which proxy materials are available is not the proxy card and
should not be used to submit your vote.
Beneficial Owner: Shares Registered
in the Name of Broker or Bank
If you
are a beneficial owner of shares registered in the name of your broker, bank, or
other agent, you should have received a proxy card and voting instructions with
these proxy materials from that organization rather than from us. Simply
complete and mail the proxy card or follow the instructions included with the
proxy materials to vote by telephone or Internet to ensure that your vote is
counted. To vote in person at the annual meeting, you must obtain a valid proxy
from your broker, bank, or other agent. Follow the instructions from your broker
or bank included with these proxy materials, or contact your broker or bank to
request a proxy form.
How many votes do I have
?
On each
matter to be voted upon, you have one vote for each share of common stock you
own as of April 29, 2010.
What
if I return a proxy card but do not make specific choices?
If you
return a signed and dated proxy card without marking any voting selections, your
shares will be voted “For” (i) the election of all of the Company’s nominees for
director, (ii) the ratification of the appointment of Goldman Park Kurland
Mohidin, LLP to act as our independent registered public accounting firm for the
fiscal year ended December 31, 2010, and (iii) the approval of the Amended and
Restated 2007 Nonstatutory Stock Option Plan. If any other matter is properly
presented at the annual meeting, your proxy (one of the individuals named on
your proxy card) will vote your shares using his or her best
judgment.
Who
is paying for this proxy solicitation?
We will
pay for the entire cost of soliciting proxies. In addition to these proxy
materials, our directors and employees may also solicit proxies in person, by
telephone or by other means of communication. Directors and employees will not
be paid any additional compensation for soliciting proxies. We may also
reimburse brokerage firms, banks and other agents for the cost of forwarding
proxy materials to beneficial owners.
What does it mean if I receive more
than one set of proxy materials or notice letter?
If you
receive more than one set of proxy materials or notice letter for the Annual
Meeting of Stockholders, your shares are registered in more than one name or are
registered in different accounts. Please submit your vote by proxy for all of
your shares to ensure that all of your shares are voted.
Can
I change my vote after submitting my proxy?
Yes. You
can revoke your proxy at any time before the final vote at the annual meeting.
You may revoke your proxy in any one of three ways:
1. You
may submit another properly completed proxy bearing a later date.
2. You
may send a written notice that you are revoking your proxy to Mr. Zhigang Wu,
our Vice President of Finance, at 12/F, Tower A, Chang An International
Building, No. 88 Nan Guang Zheng Jie, Xi’an City, Shaanxi Province, 710068
China.
3. You
may attend the annual meeting and vote in person. Simply attending the annual
meeting will not, by itself, revoke your proxy.
When
are stockholder proposals due for next year’s annual meeting?
To be
considered for inclusion in next year’s proxy materials, your proposal must be
delivered in writing after February 22, 2011 but before March 24, 2011, to Mr.
Zhigang Wu, our Vice President of Finance, at 12/F, Tower A, Chang An
International Building, No. 88 Nan Guang Zheng Jie, Xi’an City, Shaanxi
Province, 710068 China. If the 2011 annual meeting is to be held before May 25,
2011 or after April 25, 2011, the proposal must be received by us either 90 days
prior to the actual meeting date or 10 days after we first
publicly announce the meeting date, whichever is later.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the annual meeting,
who will separately count “For” and (with respect to proposals other than the
election of directors) “Against” votes, abstentions and broker non-votes.
Abstentions will be counted towards the vote total for each proposal and will
have the same effect as “Against” votes. Broker non-votes have no effect and
will not be counted towards the vote total for any proposal.
If your
shares are held by your broker as your nominee (that is, in “street name”), you
will need to obtain a proxy form from the institution that holds your shares and
follow the instructions included on that form regarding how to instruct your
broker to vote your shares. If the broker or nominee is not given specific
instructions, shares held in the name of such broker or nominee may not be voted
on those matters and will not be considered as present and entitled to vote with
respect to those matters. Shares represented by such “broker non-votes” will,
however, be counted in determining whether there is a quorum.
How
many votes are needed to approve the proposal?
For the
election of Directors, the nominees receiving the most “For” votes (among votes
properly cast in person or by proxy) will be elected. Broker non-votes will have
no effect.
What
is the quorum requirement?
A quorum
of stockholders is necessary to hold a valid meeting. A quorum will
be present if at least one-third of the shares entitled to vote are represented
by stockholders present at the meeting or by proxy. On the record
date, there were 38,778,035 shares outstanding and entitled to
vote. Thus, 12,926,012 shares must be represented by stockholders
present at the annual meeting or by proxy to have a quorum. Your
shares will be counted towards the quorum only if you submit a valid proxy vote
or vote at the annual meeting. Abstentions and broker non-votes will
be counted towards the quorum requirement. If there is no quorum, the
stockholders entitled to vote at the meeting, present in person or by proxy will
have the power to adjourn the meeting without notice other than announcement at
the meeting.
How
can I find out the results of the voting at the annual meeting?
Voting
results will be published in a Current Report on Form 8-K issued by the Company
within four (4) business days following the annual meeting.
PROPOSAL
1— ELECTION OF DIRECTORS
Nominees
The Board
of Directors currently consists of seven members. The Board has nominated all
current directors for re-election as directors at the 2010 Annual
Meeting.
If
re-elected as a director at the Annual Meeting, each of the nominees would serve
a one-year term expiring at the 2011 Annual Meeting of Stockholders and until
his successor has been duly elected and qualified. Biographical
information regarding each of the nominees is set forth below. No
family relationships exist among any of our directors or executive
officers.
Each of
the nominees has consented to serve another term as a director if
re-elected. If any nominee should be unavailable to serve for any
reason (which is not anticipated), the Board of Directors may designate a
substitute nominee or nominees (in which event the persons named on the enclosed
proxy card will vote the shares represented by all valid proxy cards for the
election of such substitute nominee or nominees), allow the vacancies to remain
open until a suitable candidate or candidates are located, or by resolution
provide for a lesser number of directors.
Executive
Officers and Directors
The
following table sets forth certain information regarding our executive officers
and directors as of April 29, 2010:
Name
|
|
Age
|
|
Position
|
Guohua
Ku
|
|
48
|
|
Chief
Executive Officer and Chairman of the Board
|
Lanwei
Li
|
|
28
|
|
Chief
Operating Officer, Vice President and Director of Business and
Director
|
Xinyu
Peng
|
|
41
|
|
Chief
Financial Officer and Secretary
|
Zhigang
Wu
|
|
38
|
|
Vice
President, Finance
|
Xiaogang
Zhu |
|
56
|
|
Vice
President, Accounting
|
Nicholas
Shao
|
|
38
|
|
Director
|
Dr.
Robert Chanson
|
|
60
|
|
Director
|
Timothy
Driscoll
|
|
66
|
|
Director
|
Julian
Ha
|
|
41
|
|
Director
|
Sean
Shao
|
|
52
|
|
Director
|
Guohua Ku
was appointed as a director and Chief Executive Officer as of December 10,
2008. He was elected Chairman of the Board as of April 1,
2009. Prior to joining the Company, Mr. Ku served as a Senior
Engineer for Yingfeng Technology from 2003 to 2007. From 1979 to
2003, Mr. Ku served in multiple capacities for Shaanxi Blast Air Blower (Group)
Co., Ltd., with his last position serving as a Senior Engineer.
Lanwei Li
was appointed as a director on April 1, 2009. He has worked for the
Company and its predecessors since March 2005 and currently works as Chief
Operating Officer and the Vice President and Director of Business, supervising
the departments of Business Development, Investment Management and Strategy
Development. He has a higher education background in investment
economy management.
Xinyu
Peng was appointed as Chief Financial Officer of the Company on August 4,
2008. On December 10, 2008, the Board of Directors also appointed Mr.
Peng as Secretary of the Company. Prior to joining the Company, Mr.
Peng served as Vice President of Tavistock Group Asia from January 2008 to July
2008. From November 2006 to July 2008, Mr. Peng served as Chief Financial
Officer and Director of MOD3 Cabinets & Home LLC. From July 2003
to July 2008, he served as Chief Financial Officer of Creative Hospitality
Concepts LLC. From 1990 to 2001, he worked for the Bank of
China. He earned his MBA from University of Miami and his B.A. in
International Finance from Shanghai Fudan University.
Zhigang
Wu was appointed as Vice President, Finance starting in October 2007 and is
responsible for the securities and financing activities of the
Company. Before joining the Company, Mr. Wu worked for over a decade
in the securities and investment industries with Guotai-Junan Securities and
Zhongzheng Investment. Mr. Wu received a bachelor degree from
Inner-Mongolia Finance & Economy University in 1998, with a major in
international finance.
Xiaogang
Zhu joined China Recycling Energy Corporation as Accounting Manager in December
2007. In April 2010, Mr. Zhu was appointed Vice President,
Accounting. From 2005 to joining us in 2007, Mr. Zhu was the Chief
Financial Officer of China Natural Gas, Inc. From 2000 through 2005, Mr. Zhu was
the Vice President of Xian Dapeng Biotechnology Company. While with Xian Dapeng
Biotechnology Company, Mr. Zhu served in various management roles, including
time as head of accounting in which he established the accounting management and
internal control systems. Mr. Zhu received his bachelor degree in
Accounting from Shaanxi Finance and Accounting Institute (now Xian Jiaotong
University Management School).
Nicholas
Shao was appointed as a director of the Company on June 3, 2008, in accordance
with the terms of the Stockholders Agreement between the Company and, among
other parties, certain Carlyle Asia Growth investors. Mr. Shao is
currently a Vice President of Carlyle Asia Growth and has worked in several
international investment banks, including Credit Suisse First Boston and
Morgan Stanley as a senior manager and analyst.
Dr.
Robert Chanson was appointed a director of the Company on January 20, 2010, by
the Board of Directors. Mr. Chanson has served as the Chairman of
Calventis SA, Switzerland since 2009 and the Chairman of Samba Minerals Ltd,
Australia since 2008. Mr. Chanson previously served as the Chairman
and chief executive officer of AmbioCare Holding from 2001 to 2007, a director
of Plant Health Care plc in the U.K. from 2004 through 2008, a director of Plant
Health Care, Inc. in the U.S. from 1995 through 2004, and a director of EHC
Viridian Ltd. in the U.K. from 1999 to 2001. Mr. Chanson received
both his Doctorate and Master in Law degrees from the University of Zurich and
his Bachelor Degree in Natural Sciences (Physics & Chemistry) with Latin
from Kantons- schule Zurich’ in Zurich, Switzerland.
Timothy
Driscoll was appointed a director of the Company on October 30, 2009, by the
Board of Directors. Mr. Driscoll currently serves as president of MTD
Ventures, and president and chief of executive officer of Driscoll Management
Services. Mr. Driscoll also serves as a director of American Oil and Supply
International and Proteus Industries. From 1994 through 1999, Mr.
Driscoll was the president and chief executive officer of Agrevo Environmental
Health and was the president and chief executive officer of Rouossel UCLAF
Environmental Health from 1991 to 1994. Mr. Driscoll received his MBA
in Finance from Xavier University and B.S. in Economics from Villanova
University.
Julian Ha
was appointed a director of the Company on October 30, 2009, by the Board of
Directors. Since 2006, Mr. Ha has been a member of the Private
Equity, Financial Officers and Legal practice groups of Heidrick & Struggles
International, Inc. From 2005 through 2006, Mr. Ha was a Director in
the Corporate Finance group of Evolution Securities China
Limited. From 2001 to 2005, Mr. Ha was a Director of European
Business Development for CapitalKey Advisors and Capital IQ. Mr. Ha
was an Executive Vice President with DDL from 2000 to 2001, where he was
responsible for portfolio management. Mr. Ha trained as a corporate
lawyer and has practiced in New York, Washington, D.C., London, Singapore and
Shanghai. Mr. Ha received his BA from Cornell University , his
Masters degrees from the London School of Economics and Harvard University and
his JD from the NYU School of Law.
Sean Shao
was appointed a director of the Company on October 30, 2009, by the Board of
Directors. Mr. Shao currently serves as a director of Agria
Corporation and as the Chairman of its Compensation Committee since November
2008, as a director and Chairman of the Audit Committee of Yongye International,
Inc. since April 2009, and a director and Chairman of the Audit Committee of
China Biologic Products, Inc. since July 2008. From 2006 to 2008, Mr.
Shao served as the CFO of Trina Solar Limited, an NYSE-listed integrated
manufacturer of solar photovoltaic products. During his tenure, Mr. Shao
assisted Trina Solar Limited in its initial public offering on the NYSE. Mr.
Shao also served as the CFO of ChinaEdu Corporation, an educational service
provider and Watchdata Technologies Ltd., a China-based security software
company from 2004 to 2006. Prior to that, Mr. Shao took several managerial
positions at Deloitte Touche Tohmatsu for over a decade. Mr. Shao holds a
master’s degree in health care administration from the University of California,
Los Angeles and a bachelor’s degree in art from East China Normal University.
Mr. Shao is a member of the American Institute of Certified Public
Accountants.
All
directors hold office until the next annual meeting of stockholders and until
their successors have been duly elected and qualified. There are no membership
qualifications for directors. Pursuant to the Stockholders
Agreement, dated as of November 16, 2007, between the Company and, amongst other
parties, Carlyle Asia Growth Partners III, L.P. and CAGP III Co-Investment,
L.P. CAGP III Co-Investment, L.P. has the right to appoint up to two
members of the Board of Directors for so long as they remain investors in the
Company. There are no other arrangements or understandings pursuant
to which our directors are selected or nominated.
The
Board of Directors unanimously recommends that the stockholders vote “FOR” the
proposal to re-elect the current directors as directors for a one-year term
expiring at the 2011 Annual Meeting of Stockholders and until their successors
have been duly elected and qualified.
CORPORATE
GOVERNANCE
Director
Independence
Dr.
Robert Chanson and Messrs., Timothy Driscoll, Julian Ha, Nicholas Shao, and
Sean Shao are our non-employee directors, and our Board of Directors has
determined that each of them is independent pursuant to the listing rules of
NASDAQ. All of the members of each of the Audit Committee,
Compensation Committee and Corporate Governance and Nominating Committee are
independent pursuant to the listing rules of NASDAQ.
Board
Meetings and Committee; Annual Meeting Attendance
During
the year ended December 31, 2009, the Board of Directors did not hold any
meetings but acted through consent actions on nine different occasions, and we
did not hold an Annual Meeting. All members of the Board of Directors
are encouraged, but not required, to attend the Annual Meeting.
Corporate
Governance and Nominating Committee
The
corporate governance and nominating committee members currently consist of Dr.
Chanson and Messrs. Driscoll and Sean Shao. The corporate governance and
nominating committee oversees all aspects of the Company’s corporate governance
functions on behalf of the Board of Directors, including identifying individuals
qualified to become board members, recommending to the full board the selection
of Director nominees for each meeting of the stockholders at which directors are
elected and overseeing the monitoring and evaluation of the Company’s corporate
governance practices. The corporate governance and nominating
committee operates under a written charter, which is available on our website at
www.creg-cn.com under the links “Investor Relations –
Corporate Governance.” Mr. Driscoll is
the chairman of our corporate governance and nominating committee.
Audit
Committee
The Audit
Committee is responsible for assisting the Board of Directors in fulfilling its
oversight responsibilities with respect to: (i) the financial reports and other
financial information provided by us to the public or any governmental body;
(ii) our compliance with legal and regulatory requirements; (iii) our systems of
internal controls regarding finance, accounting and legal compliance that have
been established by management and the Board; (iv) the qualifications and
independence of our independent registered public accounting firm; (v) the
performance of our internal audit function and the independent registered public
accounting firm; and (vi) our auditing, accounting and financial reporting
processes generally. The Audit Committee has been established in accordance with
Section 3(a)(58)(A) of the Exchange Act. In connection with its
responsibilities, the Board has delegated to the Audit Committee the authority
to select and hire our independent registered public accounting firm and
determine their fees and retention terms. The Audit Committee Charter is
included as Appendix
A and is
also available on our website at www.creg-cn.com under the
links “Investor Relations – Corporate Governance.” The Audit Committee is
composed of Timothy Driscoll, Julian Ha and Sean Shao, each of whom is
independent under NASDAQ listing standards. Sean Shao is the Chair of the Audit
Committee. The Board has determined that Sean Shao is an audit committee
financial expert.
Compensation
Committee
The
compensation committee members currently consist of Dr. Chanson and Mr. Ha. The
compensation committee purpose is (i) to oversee the Company’s efforts to
attract, retain and motivate members of the Company’s senior management team,
(ii) to carry out the board’s overall responsibility relating to the
determination of compensation for all executive officers, (iii) to oversee all
other aspects of the Company’s compensation policies, and (iv) to oversee the
Company’s management resources, succession planning and management development
activities. The compensation committee operates under a written charter, which
is available on our website at www.creg-cn.com
under the links “Investor Relations – Corporate Governance.” Mr.
Ha is the chairman of our compensation committee.
Stockholder
Communication with the Board of Directors
Stockholders
may communicate with the Board by writing to the attention of Mr. Zhigang Wu,
our Vice President of Finance, at 12/F, Tower A, Chang An International
Building, No. 88 Nan Guang Zheng Jie, Xi’an City, Shaanxi Province, 710068
China.
Code
of Ethics
We have
adopted a “code of ethics” as defined by regulations promulgated under the
Securities Act of 1933, as amended, and the Exchange Act that applies to all of
our directors and employees worldwide, including our principal executive
officer, principal financial officer and principal accounting
officer. A current copy of our Code of Business Conduct and Ethics is
available on our website at www.creg-cn.com under the links “Investor
Relations—Corporate Governance.” We intend to disclose any amendments
to the Code of Business Conduct and Ethics, as well as any waivers for executive
officers or directors, on our website.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth certain information provided to us by each of the
following as of April 29, 2010 (unless otherwise indicated) regarding their
beneficial ownership of our common stock:
|
·
|
each
person who is known by us to beneficially own more than 5% of our common
stock;
|
|
·
|
our
Chief Executive Officer and each of the other individuals named in the
Summary Compensation Table in this proxy
statement;
|
|
·
|
each
of our directors that served in such capacity during 2008, but no longer
served in that capacity at the end of the fiscal year;
and
|
|
·
|
all
of our directors and executive officers as of March 31, 2009 as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the SEC and includes
voting and investment power with respect to the securities. Except as
indicated by footnote, and subject to applicable community property laws, the
persons and entities named in the table below have sole voting and sole
investment power with respect to the shares set forth opposite each person’s or
entity’s name.
|
|
Common Stock
Beneficially Owned
|
Beneficial Owner
|
|
Number of
Shares
|
|
|
Percent of
Class
|
|
Carlyle
Asia Growth Partners III, L.P.
c/o
The Carlyle Group
1001
Pennsylvania Avenue, NW, Suite 220
Washington,
DC 20004
|
|
|
8,131,746
|
(1)
|
|
|
20.97
|
%
|
Guohua
Ku
|
|
|
18,706,943
|
|
|
|
48.24
|
%
|
Lanwei
Li
|
|
|
90,000
|
|
|
|
*
|
|
Zhigang
Wu
|
|
|
36,000
|
|
|
|
*
|
|
Xiaogang
Zhu |
|
|
36,000 |
(5)
|
|
|
* |
|
Xinyu
Peng
|
|
|
—
|
|
|
|
*
|
|
Nicholas
Shao
|
|
|
—
|
|
|
|
*
|
|
Dr.
Robert Chanson
|
|
|
—
|
|
|
|
*
|
|
Timothy
Driscoll
|
|
|
—
|
|
|
|
*
|
|
Julian
Ha
|
|
|
—
|
|
|
|
*
|
|
Sean
Shao
|
|
|
—
|
|
|
|
*
|
|
All
executive officers and directors as a group
(10 persons)
|
|
|
18,904,943
|
(6)
|
|
|
48.75
|
%
|
* Less than one percent (1%) of
outstanding shares.
(1)
|
The amount shown and the
following information is derived from Amendment No. 1 to the Schedule 13D
filed jointly by (i) Carlyle Asia Growth Partners III, L.P., a Cayman
Islands exempt limited partnership (“Asia Growth”), (ii) CAGP III
Co-Investment, L.P., a Cayman Islands exempt limited partnership
(“Co-Investment”), (iii) CAGP General Partner, L.P., a Cayman Islands
exempt limited partnership, (iv) CAGP Ltd., a Cayman Islands exempt
company, (v) TC Group Cayman, L.P., a Cayman Islands exempt limited
partnership (vi) TCG Holdings Cayman, L.P., a Cayman Islands exempt
limited partnership, and (vii) Carlyle Offshore Partners II, Ltd. A Cayman
Islands exempt company, reporting beneficial ownership as of April 29,
2008. According to the amended Schedule 13D, Asia Growth and Co-Investment
are the record owners of 7,785,415 and 346,331 shares of Common Stock,
respectively. CAGP General Partner, L.P. is the general partner of both
Asia Growth and Co-Investment. CAGP General Partner, L.P. may, by virtue
of it being the general partner of Asia Growth and Co-Investment, be
deemed to have voting control and investment discretion over the
securities held by Asia Growth and Co-Investment. The sole general partner
of CAGP General Partner, L.P. is CAGP Ltd., a limited company that is
wholly owned by TC Group Cayman, L.P. The sole general partner of TC Group
Cayman, L.P. is TCG Holdings Cayman, L.P. Carlyle Offshore Partners II,
Ltd. Is the sole general partner of TCG Holdings Cayman, L.P. Each of CAGP
Ltd., TC Group Cayman, L.P., TCG Holdings Cayman, L.P., and Carlyle
Offshore Partners II, Ltd. may, by virtue of being the owner or general
partner, as the case may be, of CAGP General Partner, L.P., CAGP Ltd., TC
Group Cayman, L.P., and TCG Holdings Cayman, respectively, be deemed to
have voting control and investment discretion over the securities held by
Asia Growth and
Co-Investment.
|
(2)
|
Includes
9,353,472 shares pledged to secure the Company’s obligations under that
certain 5% Secured Convertible Promissory Note with Asia Growth
and Co-Investment and that certain 8% Secured Convertible Promissory Note
with Asia Growth.
|
(3)
|
Includes 90,000 shares issuable
upon the exercise of
options.
|
(4)
|
Includes 36,000 shares issuable
upon the exercise of
options.
|
(5)
|
Includes 36,000 shares issuable
upon the exercise of options.
|
(6)
|
Includes 18,706,843 shares held
directly and 162,000 shares issuable upon the exercise of
options.
|
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table summarizes the compensation earned during the years ended
December 31, 2009 and 2008, by those individuals who served as our Chief
Executive Officer, or Chief Financial Officer during 2009 or any other executive
officer with total compensation in excess of $100,000 during
2009. The individuals listed in the table below are referred to as
the “named executive officers.”
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($) (3)
|
|
Non-Equity
Incentive
Plan
Compensation
($)
|
|
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
Guohua
Ku (1)
|
|
2009
|
|
|
17,876
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
17,876
|
|
Chief
Executive Officer
and
Chairman of the Board
|
|
2008
|
|
|
1,498
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
1,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyu Peng(2)
|
|
2009
|
|
|
115,200
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
115,200
|
|
Chief
Financial
Officer
and Secretary
|
|
2008
|
|
|
40,773
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
|
40,773
|
|
|
(1)
|
Guohua
Ku was appointed as Chief Executive Officer of the Company on December 10,
2008.
|
|
(2)
|
Xinyu
Peng was appointed as Chief Financial Officer and Secretary of the Company
on August 4, 2008, and December 10, 2008,
respectively.
|
Employment
Contracts
Mr.
Guohua Ku entered into an employment agreement with the Company to serve as its
CEO on December 10, 2008. The agreement has a two-year term starting
December 10, 2008 that includes a one-month probationary period. Mr.
Ku receives a salary of $17,876 annually for his service as CEO. The
Company may terminate the employment agreement at any time without any prior
notice to the employee if Mr. Ku engages in certain conduct, including, but not
limited to (i) the violation of the rules and procedures of the Company or
breaches the terms of the employment agreement; (ii) neglecting his duties or
engages in malpractice for personal gain that damages the Company; (iii)
entering into an employment relationship with any other employer during his
employment with the Company; or (iv) the commission of a crime. The Company also
may terminate the employment agreement upon 30 days written notice to Mr. Ku
under certain other conditions, including but not limited to (i) inability to
continue position due to non-work-related sickness or injury; (ii) incompetence;
and (iii) the need for mass layoffs or other restructuring. Mr.
Ku has the right to resign at any time upon a 30 days written notice to the
Company.
Mr. Xinyu
Peng entered into an employment agreement with the Company to serve as its CFO
on July 17, 2008. The agreement has a two-year term starting July 17,
2008, that included a one-month probationary period. Mr. Peng’s
employment agreement calls for him to be paid a salary of $140,000 annually for
his service as CFO. In 2009, due to the worldwide economic slowdown,
several executive officers of the Company voluntarily agreed to take half of
their salary in certain months. Mr. Peng agreed to take such a
reduced salary for a few months and, therefore, received a total salary of
approximately $115,000 during 2009. The Company and Mr. Peng expect
that he will receive his full salary in 2010. The Company may
terminate Mr. Peng's employment agreement at any time without any
prior notice to the employee if Mr. Peng engages in certain conduct, including,
but not limited to (i) the violation of the rules and procedures of the Company
or breaches the terms of the employment agreement; (ii) neglecting his duties or
engages in malpractice for personal gain that damages the Company; (iii)
entering into an employment relationship with any other employer during his
employment with the Company; or (iv) the commission of a crime. The Company also
may terminate the employment agreement upon 30 days written notice to Mr. Peng
under certain other conditions, including but not limited to (i) inability to
continue position due to non-work-related sickness or injury; (ii) incompetence;
and (iii) the need for mass layoffs or other restructuring. Mr.
Peng has the right to resign at any time upon a 30 days written notice to the
Company.
Nonstatutory
Stock Option Plan
The Board
of Directors of the Company approved the China Recycling Energy Corporation 2007
Nonstatutory Stock Option Plan (the “2007 Plan”) on November 13, 2007, which
permits grants of nonstatutory stock options to all employees, officers,
directors and consultants of the Company or its affiliates. The 2007
Plan authorizes the issuance of up to 3,000,000 shares of common stock of the
Company and by its terms will expire on November 12, 2012. On
November 13, 2007, the Board authorized the issuance of options on all 3,000,000
shares to eligible recipients under the 2007 Plan. These stock
options had a five year term and an exercise price of $1.23 per
share. Proposal No. 2 in the accompanying Proxy Statement is seeking
the stockholder’s approval of the Amended and Restated 2007 Plan, which, among
other things, increases the number of shares of common stock available for
issuance from 3,000,000 to 5,200,000. The Amended and Restated 2007
Plan is discussed in more detail in “Proposal No. 2—Approval of
Amended and Restated 2007 Nonstatutory Stock Option Plan.”
The
recipients of the outstanding stock options forfeited all of the outstanding
options as of June 25, 2008 and new grants of stock options equaling
3,000,000 shares were made on August 4, 2008. These new stock options
were granted with an exercise price of $0.80 per share, the fair market value of
the Company’s common stock on the date of grant. On November 9 and
11, 2009, the Company and three option holders agreed to cancel 87,000 vested
but unexercised shares and to forfeit 203,0000 unvested shares. On
November 12, 2009, we granted two other employees options to purchase 290,000
shares of our common stock at $2.35 per share. The vesting terms
of options granted under the 2007 Plan are subject to the Non-Statutory Stock
Option Agreements for managerial and non-managerial employees. For managerial
employees, no more than 15% of the total stock options shall vest and become
exercisable on the six month anniversary of the grant date. An additional 15%
and 50% of the total stock options shall vest and become exercisable on the
first and second year anniversary of the grant date, respectively. The remaining
20% of the total stock options shall vest and become exercisable on the third
year anniversary of the grant date. For non-managerial employees, no more than
30% of the total stock options shall vest and become exercisable on the first
year anniversary of the grant date. An additional 50% of the total stock options
shall vest and become exercisable on the second year anniversary of the grant
date. The remaining 20% of the total stock options shall vest and become
exercisable on the third year anniversary of the grant date. The
stock options also become fully vested upon termination without cause,
termination for good reason, termination due to death or disability or in the
event of a change in control of the Company. The stock options expire
on the fifth anniversary of the date of grant.
Outstanding
Equity Awards at 2009 Fiscal Year-End
The
following table sets forth information regarding all outstanding equity awards
held by the named executive officers at December 31, 2009.
|
|
Option Awards
|
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Number
of Shares or
Units of
Stock That
Have Not
Vested (#)
|
|
|
Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested
($ )
|
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested (#)
|
|
|
Equity Incentive
Plan Awards:
Market or Payout
Value of
Unearned
Shares, Units or
Other Rights That
Have Not Vested
($)
|
|
Guohua
Ku
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Xinyu
Peng
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Potential
Payments Upon Termination or Change of Control
Employment
Agreements
Certain
of our executive officers, including our CEO, have an employment agreement with
the Company. Under Chinese law, we may only terminate employment
agreements without cause and without penalty by providing notice of non-renewal
one month prior to the date on which the employment agreement is scheduled to
expire. If we fail to provide this notice or if we wish to terminate an
employment agreement in the absence of cause, as defined in the agreement, then
we are obligated to pay the employee one month’s salary for each year we have
employed the employee. We are, however, permitted to terminate an employee for
cause without penalty pursuant to the employment
agreement.
2007
Plan
To date,
the only awards outstanding under the 2007 Plan are stock
options. Under the terms of the 2007 Plan, recipients have the right
to exercise any vested options, in whole or in part, at any time after
termination during the remaining term of the option; provided, however, that the
Board may specify a shorter period for exercise following termination as it
deems reasonable and appropriate. In the event of the
recipient’s termination of employment by the Company without “cause” (as may be
defined in an employment agreement), by the recipient for “good reason” (as may
be defined in an employment agreement), or by reason of the recipient’s death or
“disability” (as may be defined in an employment agreement), any portion of the
option that has not become vested and exercisable as of the date of the
termination of employment shall immediately vest and become
exercisable. The 2007 Plan is more fully described above in the
narrative following the Summary Compensation Table.
NON-EMPLOYEE
DIRECTOR COMPENSATION
The
following table sets forth certain information regarding the compensation earned
by or awarded during the 2009 fiscal year to each director that is not a named
executive officer and who served on our Board of Directors in the 2009 fiscal
year.
Name
|
|
Fees Earned
or Paid in
Cash ($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($) (1)(2)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
|
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Nicholas
Shao
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hanqiao
Zheng
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy
Driscoll
|
|
|
4,000
|
|
|
|
0
|
|
|
|
56,166
|
|
|
|
|
|
|
|
0
|
|
|
|
0
|
|
|
|
60,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Julian
Ha
|
|
|
4,000
|
|
|
|
0
|
|
|
|
56,166
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
60,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sean
Shao
|
|
|
4,000
|
|
|
|
0
|
|
|
|
70,207
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
74,207
|
|
(1)
|
The
amounts in these columns reflect the full grant date fair value of option
awards for the year ended December 31, 2009, in accordance with ASC Topic
718. Assumptions used in the calculation of these amounts are described in
Note 19 to our audited financial statements for the fiscal year ended
December 31, 2009 included in our Annual Report on Form 10-K filed with
the SEC on March 16, 2010.
|
|
|
(2)
|
The
aggregate number of option awards outstanding at December 31, 2009
for each of the directors was as
follows:
|
Name
|
|
Options
|
|
Nicholas
Shao
|
|
|
0
|
|
Hanqiao
Zheng
|
|
|
0
|
|
Sean
Shao
|
|
|
50,000
|
|
Julian
Ha
|
|
|
40,000
|
|
Timothy
Driscoll
|
|
|
40,000
|
|
Three
grants of stock options were made to non-employee directors in 2009 pursuant to
the Board’s authority to grant such awards. The recipients were Sean
Shao, who received an option to purchase 50,000 shares, Julian Ha, who received
an option to purchase 40,000 shares, and Timothy Driscoll, who received an
option to purchase 40,000 shares.
EQUITY
COMPENSATION PLAN INFORMATION
Information
about our equity compensation plans at December 31, 2009 that were either
approved or not approved by our stockholders was as follows:
Plan Category
|
|
Number of
securities
to be issued
upon
exercise of
outstanding
options
|
|
|
Weighted-average
exercise price of
outstanding options
|
|
|
Number of
securities
remaining
available
for future
issuance
under equity
compensation
plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
3,000,000
|
|
|
$
|
0.95
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,000,000
|
|
|
$
|
0.95
|
|
|
|
0
|
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The Board of Directors must approve all
related party transactions. All material related party transactions will be made
or entered into on terms that are no less favorable to us than can be obtained
from unaffiliated third parties.
REPORT
OF THE AUDIT COMMITTEE
The
primary function of the Audit Committee is to assist the Board of Directors in
its oversight and monitoring of our financial reporting and auditing
process. The Audit Committee charter sets forth the responsibilities
of the Audit Committee. A copy of the Audit Committee charter is
available on our website at www.creg-cn.com under the links “Investor
Relations—Corporate Governance.”
Management
has primary responsibility for our financial statements and the overall
reporting process, including maintaining effective internal control over
financial reporting and assessing the effectiveness of our system of internal
controls. The independent registered public accounting firm audits
the annual financial statements prepared by management, expresses an opinion as
to whether those financial statements fairly present our financial position,
results of operations and cash flows in conformity with U.S. generally accepted
accounting principles, and discusses with the Audit Committee any issues they
believe should be raised with the Audit Committee. These discussions
include a discussion of the quality, not just the acceptability, of the
accounting principles, the reasonableness of significant judgments, and the
clarity of disclosures in the financial statements. The Audit
Committee monitors our processes, relying, without independent verification, on
the information provided to it and on the representations made by management and
the independent registered public accounting firm.
The Audit
Committee held one meeting in 2009. Representatives of Goldman Park
Kurland Mohidin, LLP, our independent registered public accounting firm,
attended each meeting of the Audit Committee that involved the discussion of
financial statements. The Audit Committee reviewed and discussed with
management and Goldman Park Kurland Mohidin, LLP our audited financial
statements for the year ended December 31, 2009 and discussed Goldman Park
Kurland Mohidin, LLP’s judgments as to the quality, not just the acceptability,
of our accounting principles and such other matters as are required to be
discussed with the Audit Committee by Statement on Auditing Standards
No. 114 (which superseded Statement on Auditing Standards No. 61),
other standards of the Public Company Accounting Oversight Board (United
States), rules of the SEC, and other applicable regulations.
The Audit
Committee also received the written disclosures and the letter from Goldman Park
Kurland Mohidin, LLP required by applicable requirements of the Public Company
Accounting Oversight Board regarding the firm’s independence from our management
and has discussed Goldman Park Kurland Mohidin, LLP its
independence. The Audit Committee considered whether the services
provided by Goldman Park Kurland Mohidin, LLP for the year ended
December 31, 2009 are compatible with maintaining their
independence. The Board of Directors has delegated to the Audit
Committee the authority to approve the engagement of our independent registered
public accounting firm.
Based
upon its review of the audited financial statements and the discussions noted
above, the Audit Committee recommended that the Board of Directors include the
audited financial statements in our Annual Report on Form 10-K for the year
ended December 31, 2009 for filing with the SEC.
|
Audit
Committee:
|
|
Sean
Shao (Chairman)
|
|
Timothy
Driscoll
|
|
Julian
Ha
|
PROPOSAL
NO. 2—APPROVAL OF AMENDED AND RESTATED 2007 NONSTATUTORY STOCK OPTION
PLAN
Our
stockholders are being asked to consider and vote on this proposal to approve
the Amended and Restated 2007 Nonstatutory Stock Option Plan, which we refer to
as the “2007 Plan.” The Board of Directors has approved, subject to
stockholder approval, the 2007 Plan.
The 2007
Plan is intended to further our growth and financial success by providing
incentives, in the form of options to acquire common stock to selected
employees, officers, directors, and consultants of the Corporation and its
parent or subsidiaries, that are aligned with the best interests of our
stockholders. To date, we have achieved our business objective, which
we attribute in part to the 2007 Plan. Our equity incentive program
has been a significant contributing factor in our performance to date, and we
believe that preserving the ability to grant equity awards is in the best
interests of our Company and our stockholders.
Key
Features of the 2007 Plan
|
·
|
Provides
for the issuance of nonqualified stock
options;
|
|
·
|
Administered
by our Board of Directors or its
designee;
|
|
·
|
No
reload or “evergreen” share replenishment
features;
|
|
·
|
Five-year
maximum term for stock option grants;
and
|
|
·
|
Stock
options may not be granted below fair market value on the date of
grant.
|
Participation
|
·
|
Participation
in the 2007 Plan is broad-based, and includes directors, officers,
employees and consultants.
|
Description
of the 2007 Plan
The
following paragraphs summarize material terms of the 2007 Plan. This
summary is qualified in its entirety by the specific terms of the 2007
Plan. A copy of the 2007 Plan is included as Appendix
B to this proxy statement.
Plan
Administration. The Board has delegated the administration
of the 2007
Plan to the Compensation Committee of the Board. Among
other powers and duties, the Compensation Committee determines the persons who
will be eligible to receive awards and establishes the terms and conditions of
all awards.
Unless
prohibited by applicable law or the applicable rules of a stock exchange, the
Compensation Committee may delegate ministerial, non-discretionary functions to
individuals who are officers or employees of the Company or any of its
affiliates or to third parties.
Types of
Awards. The 2007 Plan provides
for the issuance of nonqualified stock options. Each option award is
subject to an option agreement approved by the Board or the designated
committee thereof reflecting the terms and conditions of the
award.
Option Grant: Each
option award must be evidenced by an option agreement specifying the option
exercise price, the term of the option, the number of shares of our common stock
subject to the option, and such other provisions as the Board or the designated
committee thereof determines, and which are not inconsistent with the terms and
provisions of the 2007 Plan (which need not be the same for each award or for
each recipient).
Exercise of Options: Options
granted under the 2007 Plan will be exercisable at such times set forth in the
applicable option agreement. The exercise price of each option
granted under the 2007 Plan will be at least 100% of the fair market value of a
share of our common stock on the date of grant. For purposes of
option awards, fair market value of a share of our common stock means the
closing sale price of a share of our common stock on the relevant date on the
principal exchange on which the common stock is then listed or admitted to
trading. If no reported sale of common stock takes place on the
relevant date on the principal exchange, then the reported closing asked price
of a share of our common stock on such date on the principal exchange shall be
the fair market value. If our common stock is not at the time listed
or admitted to trading on a stock exchange, the fair market value of a share of
our common stock means between the lowest reported bid price and highest
reported asked price of a share of our common stock on the relevant date in the
over-the-counter market, as such prices are reported in a publication of general
circulation selected by the Board or the designated committee thereof and
regularly reporting the market price of a share of our common
stock. If our common stock is not listed or admitted to trading on
any stock exchange or traded in the over-the-counter market, the Board shall
determine the fair market value in good faith.
Payment of Exercise Price:
The exercise price is payable in cash, by tendering shares of our common stock
(which were not acquired directly or indirectly from the Company), or, if
permitted by the Board, by other form of legal consideration permitted by
applicable state and federal law. Options are exercisable at such
times and subject to the conditions, restrictions and contingencies specified by
the applicable option agreement.
Option Term: The maximum term
of any option is 5 years from the date of grant.
Eligible
Persons. Any
directors, officers, employees or consultants (including any prospective
director, officer, employee or consultant) of the Corporation or its parent or
subsidiaries, as
selected by our Board or the designated committee thereof, may receive awards
under the 2007 Plan. As of April 29, 2010, the record date for
our annual general meeting, approximately fifteen (15) participants have been
granted options under the 2007 Plan.
The
following table indicates the number of stock options granted under the 2007
Plan as of December 31, 2009 to the individuals below, including our named
executive officers.
|
|
|
|
Guohua
Ku
|
|
|
0 |
|
Chief Executive
Officer and Director
|
|
|
|
|
|
|
|
|
|
Xinyu Peng
|
|
|
0 |
|
Chief Financial
Officer
|
|
|
|
|
|
|
|
|
|
Executive
Officers as a Group
|
|
|
590,000
|
|
|
|
|
|
|
Non-Executive
Directors as a Group
|
|
|
0
|
|
|
|
|
|
|
Non-Executive
Officer Employees as a Group
|
|
|
2,410,000 |
|
Shares Available
For Awards. The total number of our
common shares that may be delivered pursuant to awards granted under the 2007
Plan is 5,200,000. If an award granted under the 2007 Plan expires or
terminates, then the shares covered by that award that remain unpurchased will
again be available for new awards under the 2007 Plan.
Limits on
Transfers of Awards. All awards are
transferable only by will or by the laws of descent and
distribution.
Adjustments. Upon the occurrence of
any reclassification, recapitalization, stock split, merger, combination,
consolidation or other reorganization, any spin-off, split-up or similar
extraordinary dividend distribution or other extraordinary corporate
transaction, subject to applicable law or regulation, the Board shall provide
for an equitable and proportionate adjustment of the number and type of shares
for which options may be granted, the number, amount and type of shares subject
to outstanding options, the price of outstanding options, and the deliverable
upon exercise of any outstanding options, in each case to the extent necessary
to preserve (but not increase) the level of incentives intended by the 2007 Plan
and the then-outstanding options.
Upon the
occurrence of a merger, combination, consolidation or other reorganization,
stock exchange, or sale or dissolution of the Company, subject to applicable law
or regulation, the Board may provide for a cash payment in settlement of, or for
the assumption, substitution or exchange of any outstanding options, based upon
the consideration payable to stockholders upon the occurrence of such
event. If no such provision is made by the Board, and if the
applicable option agreement does not otherwise provide, upon the occurrence of
such an event, each then-outstanding option shall become fully vested and shall
terminate, provided that reasonable notice shall have been given to the option
holder providing for a reasonable time period to exercise all outstanding vested
and exercisable options.
Amendment and
Termination of the 2007 Plan. Subject to any
applicable law or regulation, with respect to any shares at the time not subject
to option awards, the 2007 Plan may be amended, modified, suspended or
terminated by our Board without the approval of our stockholders, except that
stockholder approval will be procured, if required by applicable law or listing
agency rule, for any amendment that would (i) increase the number of shares
subject to the 2007 Plan, (ii) decrease the price at which options may be
granted, (iii) materially increase the benefits to optionees, or (iv) change the
class of persons eligible to receive options under the 2007 Plan. No
option may be granted while the 2007 Plan is suspended or after it is
terminated, but the rights and obligations under any option granted while the
2007 Plan is in effect shall not be impaired by suspension or
termination.
Expiration of the
2007 Plan. The 2007 Plan shall
expire on November 12, 2012. All options outstanding on such
date shall be unaffected by the expiration of the 2007 Plan.
U.S.
Federal Income Tax Consequences
The
following summary of the U.S. federal income tax consequences relating to the
2007 Plan is based on present federal tax laws and regulations. The
laws and regulations may change in the future and affect the tax consequences of
the matters discussed in this section. This summary is only a general
discussion of the federal income tax consequences of the 2007 Plan and does not
purport to be a complete description of all federal, foreign, state or local
income tax aspects of the 2007 Plan. This summary is not intended to be
exhaustive and does not discuss the tax consequences of a participant’s death or
the provisions of any income tax laws of any municipality, state or foreign
country in which a participant may reside. This summary is only
applicable with respect to 2007 Plan participants that are subject to U.S.
federal income tax.
A
participant generally has no income tax consequences from the grant of stock
options. Generally, in the tax year when the participant exercises
the stock option, he or she recognizes ordinary income in the amount by which
the fair market value of the shares at the time of exercise exceeds the exercise
price for the shares, and that amount will be subject to employment
taxes.
If a
participant exercises a stock option by paying the exercise price with
previously acquired common stock, he or she will have federal income tax
consequences (relative to the new shares received) in two steps. In
the first step, a number of new shares equivalent to the number of older shares
tendered (in payment of the stock option exercised) is considered to have been
exchanged in accordance with Code Section 1036 and related rulings, and no gain
or loss is recognized. In the second step, with respect to the number
of new shares acquired in excess of the number of old shares tendered, the
participant recognizes income on those new shares equal to their fair market
value less any non-stock consideration tendered. The new shares equal
to the number of the old shares tendered will have the same basis the
participant had in the old shares and the holding period with respect to the
tendered older shares will apply to the new shares. The excess new
shares received will have a basis equal to the amount of income recognized on
exercise, increased by any non-stock consideration tendered. The
holding period begins on the exercise of the option.