UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_][ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (As Permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
CHINA BAK BATTERY, 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):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) | Title of each class of securities to which transaction applies: | |
(2) | Aggregate number of securities to which transaction applies: | |
(3) | 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): | |
(4) | Proposed maximum aggregate value of transaction: | |
(5) | Total fee paid: | |
| |
[ ] Fee paid previously with preliminary materials. [ ] 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 paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing. |
(1) | Amount Previously Paid: | |
(2) | Form, Schedule or Registration Statement No.: | |
(3) | Filing Party: | |
(4) | Date Filed: | |
NOTICE OF 2014 ANNUAL MEETING OF STOCKHOLDERS
To Be Held On September 26, 2014June 12, 2015
To the Stockholders of CHINA BAK BATTERY, INC.:
You are cordially invited to attend the 20142015 Annual Meeting of Stockholders (the “Annual Meeting”) of China BAK Battery, Inc., a Nevada corporation (the “Company”) on Friday, September 26, 2014,June 12, 2015, at 9:00 a.m., local time, at BAK Industrial Park, Meigui Street, Huayuankou Economic Zone, Dalian City, 116422, China.
We are now filing this proxy statement on Schedule 14A with the SECSecurities and Exchange Commission (“SEC”) in order to provide the disclosures required by the rules and regulations of the SEC in connection with the Annual Meeting, which will be held for the following purposes:
1. | To elect five (5) persons to the Board of Directors of the Company, each to serve until the next annual meeting of stockholders of the Company or until such person shall resign, be removed or otherwise leave office; | |
2. | To ratify the appointment of Crowe Horwath (HK) CPA Limited as the Company’s independent registered public accounting firm for the fiscal year ending September 30, | |
3. | To | |
4. | To approve an amendment to the Company’s Articles of Incorporation to authorize 10,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”) of the Company, which may be issued in one or more series, with such rights, preferences, privileges and restrictions as shall be fixed by the Company’s Board of Directors from time to time; | |
5. | To act upon a proposal to amend Section 1.7 of the Company’s Stock Option Plan; | |
6. | To approve the China BAK Battery, Inc. 2015 Equity Incentive Plan, subject to the approval of Proposal 3; and | |
To transact such other business as may properly come before the Annual Meeting or at any postponement or adjournment |
The foregoing items of business are more fully described in the proxy statement accompanying this Notice or made available over the Internet. We are not aware of any other business to come before the Annual Meeting.
Only stockholders of record at the close of business on August 4, 2014April 20, 2015 (the “Record Date”) are entitled to notice and to vote at the Annual Meeting and any adjournment or postponement thereof.
A Proxy Statement describing the matters to be considered at the Annual Meeting is attached to this Notice. Our 2013 Annual Report is part of the full set of our proxy materials, but it is not deemed to be part of the Proxy Statement.
It is important that your shares are represented at the Annual Meeting. We urge you to review the attached Proxy Statement and, whether or not you plan to attend the Annual Meeting in person, please vote your shares promptly by casting your vote via the Internet or, if you receive a full set of proxy materials by mail or request one be mailed to you, and prefer to fax or mail your proxy or voter instructions, please complete, sign, date, and return your proxy or vote instruction form by fax or in the pre-addressed envelope provided, whichrequires no additional postage if mailed in the United States. You may revoke your vote by submitting a subsequent vote over the Internet or by fax or mail before the Annual Meeting, or by voting in person at the Annual Meeting.
If you plan to attend the meeting,Annual Meeting, please notify us of your intentions. This will assist us with meeting preparations. If your shares are not registered in your own name and you would like to attend the Annual Meeting, please follow the instructions contained in the Notice of Internet Availability of Proxy Materials that is being mailed to you and any other information forwarded to you by your broker, trust, bank, or other holder of record to obtain a valid proxy from it. This will enable you to gain admission to the Annual Meeting and vote in person.
By Order of the Board of Directors, | |
/s/ Xiangqian Li | |
Secretary | |
April ____, 2015 |
August 8, 2014
TABLE OF CONTENTS
CHINA BAK BATTERY, INC.
_______________________
PROXY STATEMENT
_______________________
This Proxy Statement and the accompanying proxy are being furnished with respect to the solicitation of proxies by the Board of Directors of China BAK Battery, Inc., a Nevada corporation (the “Company” or “we”), for the Company’s 2014 Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting is to be held at 9:00 a.m., local time, on Friday, September 26, 2014,June 12, 2015, and at any adjournment(s) or postponement(s) thereof, at the principal executive offices of the Company, located at BAK Industrial Park, Meigui Street, Huayuankou Economic Zone, Dalian City, 116422, China.
The approximate date on which the Proxy Statement and the accompanying notice and form of proxy card are intended to be sent or made available to stockholders is on or about August 8, 2014.______________.
We are asking you to elect the five nominees identified in this proxy statement as directors of the Company until the next annual meeting of stockholders, to ratify our selection of Crowe Horwath (HK) CPA Limited as our registered public accounting firm for our fiscal year ending September 30, 2014, and to consider an advisory vote to approve executive compensation.
We will also transact such other business as may properly come before the Annual Meeting or any adjournment thereof.
QUESTIONS AND ANSWERS ABOUT VOTINGTHE PROXY MATERIALS AND THE ANNUAL MEETING
Why am I receiving these materials?
Our records indicate that you owned your shares of Company common stockCommon Stock at the close of business on August 4, 2014April 20, 2015 (the “Record Date”). You have been sent this Proxy Statement and the enclosed proxy card because the Company is soliciting your proxy to vote your shares of common stockCommon Stock at the Annual Meeting on the proposals described in this Proxy Statement.
What proposals am I voting on?on at the Annual Meeting?
There are three matters scheduled for a vote:
Six proposals will be voted on at the election of the five nominees identified in this Proxy Statement as directors, each to serve until the next annual meeting of stockholders of the Company or until such person shall resign, be removed or otherwise leave office (“Proposal 1”);
(1) | to elect five (5) persons to the Board of Directors of the Company, each to serve until the next annual meeting of stockholders of the Company or until such person shall resign, be removed or otherwise leave office (Proposal 1); | |
(2) | to ratify the appointment of Crowe Horwath (HK) CPA Limited as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2015 (Proposal 2); | |
(3) | to approve an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares available for issuance from 20,000,000 to 500,000,000 shares of common stock, par value $0.001 per share (“Common Stock”) (Proposal 3), | |
(4) | to approve an amendment to the Company’s Articles of Incorporation to authorize 10,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”) of the Company, which may be issued in one or more series, with such rights, preferences, privileges and restrictions as shall be fixed by the Company’s Board of Directors from time to time (Proposal 4); | |
(5) | to act upon a proposal to amend Section 1.7 of the Company’s Stock Option Plan (Proposal 5); and |
the ratification of the appointment of Crowe Horwath (HK) CPA Limited as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2014 (“Proposal 2”); and
an advisory vote to approve executive compensation (“Proposal 3”).1
(6) | to approve the China BAK Battery, Inc. 2015 Equity Incentive Plan, subject to the approval of Proposal 3 (Proposal 6). |
Who is entitled to vote at the Annual Meeting?
All owners of our common stockCommon Stock as of the close of business on the Record Date are entitled to vote their shares of common stockCommon Stock at the Annual Meeting and any adjournment or postponement thereof. As of the Record Date, a total of 12,619,597 shares of common stockCommon Stock are outstanding and eligible to vote at the Annual Meeting. Each share of common stockCommon Stock is entitled to one vote on each matter properly brought before the Annual Meeting. The enclosed proxy card or voting instruction card shows the number of shares you are entitled to vote at the Annual Meeting.
Stockholder of Record: Shares Registered in Your Name
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If on the Record Date your shares were registered directly in your name with the Company, 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, to ensure your vote is counted, we encourage you to vote either by Internet or by filling out and returning the enclosed proxy card.
Beneficial Owner: Shares Registered in the Name of a Broker or Bank
If on the Record Date 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 the beneficial owner, you have the right to direct your broker or other agent on how to vote the shares in your account.
How do I vote?
Your shares may only be voted at the Annual Meeting if you are present in person or are represented by proxy. Whether or not you plan to attend the Annual Meeting, we encourage you to vote by proxy to ensure that your shares will be represented. To vote by proxy, complete the enclosed proxy card and mail it in the postage-paid envelope provided, or you
You may vote by using any of the Internet in accordance with the instructions provided on the enclosed proxy card.following methods:
• | By Internet. You may vote by using the Internet in accordance with the instructions provided on the Notice of Internet Availability of Proxy Materials. The Internet voting procedures are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded. | |
• | By Mail. Stockholders of record of Common Stock as of the Record Date may submit proxies by completing, signing and dating their proxy cards and mailing them in the accompanying pre-addressed envelopes. If you return your signed proxy but do not indicate your voting preferences, your shares will be voted on your behalf “FOR” the five nominees to the Board of Directors (Proposal 1), “FOR” the ratification of Crowe Horwath (HK) CPA Limited as our independent registered public accounting firm for our fiscal year ending September 30, 2015 (Proposal 2), “FOR” the amendment to the Company’s Articles of Incorporation to increase the authorized number of shares available for issuance from 20,000,000 to 500,000,000 shares of Common Stock (Proposal 3), “FOR” the amendment to the Company’s Articles of Incorporation to authorize 10,000,000 shares of Preferred Stock of the Company (Proposal 4), “FOR” the proposal to amend Section 1.7 of the Company’s Stock Option Plan (Proposal 5) and “FOR” the approval of the China BAK Battery, Inc. 2015 Equity Incentive Plan (Proposal 6). Stockholders who hold shares beneficially in street name and have requested to receive printed proxy materials may provide voting instructions by mail by completing, signing and dating the voting instruction forms provided by their brokers, banks or other nominees and mailing them in the accompanying pre-addressed envelopes. | |
• | By Fax. Stockholders of record of Common Stock as of the Record Date may submit proxies by completing, signing and dating their proxy cards and faxing them to our proxy solicitor, Advantage Proxy, at 206-870-8492. |
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• | In person at the Annual Meeting.Shares held in your name as the stockholder of record may be voted in person at the Annual Meeting or at any postponement or adjournment of the Annual Meeting. Shares held beneficially in street name may be voted in person only if you obtain a legal proxy from the broker, bank or nominee that holds your shares giving you the right to vote the shares.Even if youplan to attend the Annual Meeting, we recommend that you also submit your proxy or votinginstructions by mail or Internet so that your vote will be counted if you later decide not to attend theAnnual Meeting. |
Can I change my vote or revoke my proxy?
If you are designed to authenticate stockholders’ identities, to allow stockholders to vote their shares and to confirm that their instructions have been properly recorded.
Youa stockholder of record, you may revoke your proxy at any time before it is exercised by timely submission of a written revocationprior to our Secretary, submission of a properly executed later-dated proxy or by timely voting by ballotthe vote at the Annual Meeting. VotingIf you submitted your proxy by mail or fax, you must file with our Secretary or proxy will in no way limit your rightsolicitor a written notice of revocation or deliver, prior to the vote at the Annual Meeting, ifa valid, later-dated proxy. If you submitted your proxy by the Internet, you may revoke your proxy with a later decide to attend in person.Internet proxy. Attendance at the Annual Meeting will not have the effect of revoking a proxy unless you give written notice of revocation to the Secretary before the proxy is exercised or you vote by itself constitute a revocation of your proxy – you must votewritten ballot at the Annual Meeting.
If you are a beneficial owner, you may vote by submitting new voting instructions to your broker, bank or nominee, or, if you have obtained a legal proxy from your broker, bank or nominee giving you the right to vote your shares, are heldby attending the meeting and voting in the name of a brokerage firm, bank, dealer or other similar organization that holds your shares in “street name,” you will receive instructions from that organization that you must follow in order for your shares to be voted.
All shares that you are entitled to vote and that are represented by a properly-completed proxy received prior to the Annual Meeting and not revoked will be voted at the Annual Meeting in accordance with the instructions on the proxy. If you properly deliver your proxy but fail to indicate how your shares should be voted, the shares represented by your proxy will be voted FOR Proposal 1, FOR Proposal 2, FOR Proposal 3 and in the discretion of the persons named in the proxy as proxy appointees as to any other matter that may properly come before the Annual Meeting.person.
Who may attend the Annual Meeting?
All stockholders that were stockholders of the Company as of the Record Date, or their authorized representatives, may attend the Annual Meeting. Admission to the Annual Meeting will be on a first-come, first-served basis. If your shares are held in the name of a brokerage firm, bank, dealer or other similar organization that holds your shares in “street name” and you plan to attend the Annual Meeting, you should bring proof of ownership to the Annual Meeting, such as a current bank or brokerage account statement, to ensure your admission.
HowWhat constitutes a quorum and how will votes be counted?
The Annual Meeting will be held if a quorum, consisting of thirty-three and one-third percent (33-1/3%) of the outstanding shares of common stockCommon Stock entitled to vote as of the Record Date, is represented in person or by proxy. Abstentions and broker “non-votes” will be counted as present and entitled to vote for purposes of determining a quorum.
A broker “non-vote” occurs when a nominee, such as a bank or broker, holding shares for a beneficial owner, does not vote on a particular proposal because the nominee does not have discretionary voting power with respect to that item and has not received instructions from the beneficial owner. Under the rules of the New York Stock Exchange, (the “NYSE”), absent instructions from the beneficial owners, banks and brokers who hold shares in street name for beneficial owners have the authority to vote only on routine corporate matters. The approval of the change of our company’s name andmatters, such as the ratification of the appointment ofCrowe Horwath (HK) CPA Limited as our independent registered public accounting firm are consideredfor our fiscal year ending September 30, 2015 (Proposal 2) and the approval of amendment to be routinethe Company’s Articles of Incorporation to increase the authorized number of shares available for issuance from 20,000,000 to 500,000,000 shares of Common Stock (Proposal 3), without instructions from the beneficial owner of those shares. On the other hand, absent instructions from the beneficial owner of such shares, a broker is not entitled to vote shares held for a beneficial owner on certain “non-routine” matters, whilesuch as the uncontested election of our directors (Proposal 1), the amendment to our Articles of Incorporation to authorize 10,000,000 shares of Preferred Stock of the Company (Proposal 4), the amendment to Section 1.7 of the Company’s Stock Option Plan (Proposal 5) and the advisory vote to approve executive compensation are not.
Proposal 1. With respect to the nominees for director listed under “Proposal 1 – Election of Directors,” to be elected, each nominee must receive at least a pluralityapproval of the votes castChina BAK Battery, Inc. 2015 Equity Incentive Plan (Proposal 6).
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Broker non-votes are counted for purposes of determining whether or not a quorum exists for the transaction of business at the Annual Meeting (assuming a quorum is present) with respect to that nominee’s election. A “plurality” means thator any postponement or adjournment of the individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to be chosen at the election. In the election of directors, you may vote “FOR,” “AGAINST” or “ABSTAIN” with respect to each nominee. If you elect to abstain in the election of directors, the abstention will not impact the election of directors. In tabulating the voting results for the election of directors, only “FOR” and “AGAINST” votes are counted. Broker “non-votes”Annual Meeting, but will not be counted as a vote castfor purposes of determining the number of shares represented and voted with respect to a nomineean individual proposal, and therefore will therefore not affecthave no effect on the outcome of the vote on Proposal 1.
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Proposal 2. With respect to Proposal 2 – “Ratification of Selection of Independent Registered Public Accountant,”an individual proposal. Thus, if you do not give your broker specific voting instructions, your shares may not be voted on these “non-routine” matters and will not be counted in determining the affirmative vote of a majoritynumber of shares present in person or represented by proxy and entitled to vote is requirednecessary for approval of this item. You may vote “FOR,” “AGAINST” or “ABSTAIN”. If you abstain from voting, it will have the same effect as a vote against this item. Your broker (or another organization that holds your shares for you) may exercise its discretionary authority to vote your shares in favor of Proposal 2.
Proposal 3. With respect to Proposal 3 – “Advisory Vote to Approve Executive Compensation,” the affirmative vote of a majority of shares present in person or represented by proxy and entitled to vote is required for approval of this item. You may vote “FOR,” “AGAINST” or “ABSTAIN”. If you abstain from voting, it will have the same effect as a vote against this item. Your broker (or another organization that holds your shares for you) does not have discretionary authority to vote your shares with regard to Proposal 3. Therefore, if your shares are held in the name of a brokerage firm, bank, dealer or similar organization that provides a proxy to us, and the organization has not received your instructions as to how to vote your shares on this proposal, your shares will be counted as if you had voted against Proposal 3.
Although the advisory vote on Proposal 3 is non-binding, as provided by law, our Board will review the results of the vote and will take it into account in making future decisions regarding executive compensation.
Why did I receive in the mail a Notice of Internet Availability of Proxy Materials rather than a full set of proxy materials?
Securities and Exchange Commission (“SEC”) rules allow companies to provide stockholders with access to proxy materials over the Internet rather than mailing the materials to stockholders. To conserve natural resources and reduce costs, we are sending to many of our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”). The Notice provides instructions for accessing the proxy materials on the website referred to in the Notice or for requesting printed copies of the proxy materials. The Notice also provides instructions for requesting the delivery of the proxy materials for future annual meetings in printed form by mail or electronically by email.approval.
How are proxies being solicited and who will pay for the solicitation of proxies?
We will bearThis proxy solicitation is being made by the expenseCompany on behalf of the solicitationBoard of proxies.Directors of the Company and will be paid for by the Company. In addition, we have retained Advantage Proxy, Inc. to assist with the solicitation for an estimated fee of proxies by mail,$5,500 plus reasonable out-of- pocket expenses. In addition, we will reimburse brokerage firms, banks and other persons representing beneficial owners of shares for their expenses in forwarding solicitation materials to such beneficial owners. Proxies may be madesolicited by certain of our directors, officers and regular employees personally or by other means, including telephone, over the Internetfacsimile or in person.electronic mail. No specialadditional compensation will be paid to our directors, officers or employeesthese persons for the solicitation of proxies. To solicit proxies, we will also request the assistance of banks, brokerage housessuch services.
I am a stockholder, and other custodians, nominees or fiduciaries, and, upon request, will reimburse these organizations or individuals for their reasonable expenses in forwarding soliciting materials to beneficial owners and in obtaining authorization for the execution of proxies.
How are proxy materials delivered to households?
Only oneI only received a copy of the Company’s 2013 Annual Report, this Proxy Statement, and/or Notice of Internet Availability of Proxy Materials, as applicable, will be delivered to an address where two or more stockholders reside with the same last name or whom otherwise reasonably appear to be members of the same family based on the stockholders’ prior express or implied consent.
We will deliver promptly upon written or oral request a separate copy of the 2013 Annual Report, this Proxy Statement, and/or Notice of Internet Availability of Proxy Materials, as applicable, upon such request. If you share an address with at least one other stockholder, currently receive one copy of our Annual Report, Proxy Statement, and/or Notice of Internet Availability of Proxy Materials at your residence, and would like to receive a separate copy of our Annual Report, Proxy Statement, and Notice of Internet Availability of Proxy Materials for future stockholder meetings of the Company, please follow the instructions for requesting materials indicated on the Notice of Internet Availability of Proxy Materials sent(“Notice”) in the mail. How may I obtain a full set of the proxy materials?
In accordance with the “notice and access” rules of the SEC, we may furnish proxy materials, including this Proxy Statement, to your residenceour stockholders of record and specify this preference in your request.
If you share an address with at least one other stockholder and currentlybeneficial owners of shares by providing access to such documents on the Internet instead of mailing printed copies. Stockholders will not receive multipleprinted copies of the proxy materials unless they request them. Instead, the Notice, which was mailed to our Annual Report, Proxy Statement, or Noticestockholders, will instruct you as to how you may access and review all of Internet Availability of Proxy Materials, andthe proxy materials on the Internet. If you would like to receive a singlepaper or electronic copy of our Annual Report, Proxy Statement, or Notice of Internet Availability of Proxy Materials, pleaseproxy materials, you should follow the instructions for requesting such materials indicated onin the Notice.
I share an address with another stockholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?
We have adopted a procedure called “householding,” which the SEC has approved. Under this procedure, we deliver a single copy of the Notice and, if applicable, the proxy materials to multiple stockholders who share the same address unless we received contrary instructions from one or more of Internet Availabilitythe stockholders. This procedure reduces our printing costs, mailing costs and fees. Stockholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, we will deliver promptly a separate copy of Proxy Materials that is addressedthe Notice and, if applicable, the proxy materials to you and specify this preference in your request.
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Who can help answer my other questions andany stockholder at a shared address to whom should I sendwhich we delivered a request for copiessingle copy of certain material?
If you have more questions about voting, wish to obtain another proxy card or wish toany of these documents. To receive a separate copy of our Annual Report on Form 10-K for the fiscal year ended September 30, 2013 without charge, you shouldNotice and, if applicable, these proxy materials, stockholders may contact:
Corporate Secretary
China BAK Battery, Inc.
BAK Industrial Park,
Meigui Street, Huayuankou Economic Zone,
Dalian City, 116422, China
Telephone: 86-411-62510619;86-411-39185985; Fax: 86-411-6251062886-411-39185980
E-mail: ir@cbak.com.cn
Stockholders who hold shares in street name (as described above) may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.
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Whom should I contact with other questions?
We have retained Advantage Proxy, Inc. as proxy solicitor in connection with the Annual Meeting. You may contact our proxy soliciting agent by telephone at 877-870-8565, by email to ksmith@advantageproxy.com or in writing at PO Box 13581, Des Moines, WA 98198.
Alternatively, you may obtain information from us by making a request by telephone or in writing at the address of our Corporate Secretary set forth above.
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Important Notice Regarding the Availability of Proxy Materials for |
the Annual Meeting to Be Held on June 12, 2015: |
The Notice of Annual Meeting of Stockholders, Proxy Statement and |
available at www.shareholdervote.info |
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth information known to us with respect to the beneficial ownership of our Common Stock as of the close of business on August 4, 2014April 10, 2015 (the “Reference Date”) for: (i) each person known by us to beneficially own more than 5% of our voting securities, (ii) each named executive officer, (iii) each of our directors and nominees, and (iv) all of our executive officers and directors as a group:
Names of Management and Names | Amount and Nature of | Amount and Nature of | ||||||||||
of Certain Beneficial Owners(1) | Beneficial Ownership(1) | Beneficial Ownership(1) | ||||||||||
Number(2) | Percent(3) | |||||||||||
Number(2) | Percent(3) | |||||||||||
Xiangqian Li(4) | 3,910,778 | 30.8% | 3,910,778 | 31.0% | ||||||||
Chunzhi Zhang(5) | 3,500 | * | 3,500 | * | ||||||||
Martha C. Agee | 0 | * | 0 | * | ||||||||
Jianjun He | 0 | * | 0 | * | ||||||||
Guosheng Wang | 0 | * | 0 | * | ||||||||
All executive officers and directors as a group (5 persons) | 3,914,278 | 30.9% | 3,914,278 | 31.0% |
* | Denotes less than 1% of the outstanding shares of Common Stock. |
** | All information in and below this table gives retroactive effect to our one-for-five reverse stock split effected on October 26, 2012. |
(1) | The number of shares beneficially owned is determined under Securities and Exchange Commission (“SEC”) rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power, and also any shares which the individual has the right to acquire within 60 days of the Reference Date, through the exercise or conversion of any stock option, convertible security, warrant or other right (a “Presently Exercisable” security). Including those shares in the table does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of those shares. |
(2) | Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power (or shares that power with that person’s spouse) with respect to all shares of Common Stock listed as owned by that person or entity. |
(3) | A total of 12,619,597 shares of Common Stock are considered to be outstanding on the Reference Date. For each beneficial owner above, any Presently Exercisable securities of such beneficial owner have been included in the denominator, pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. |
(4) | Including 100,000 restricted shares of the Common Stock granted under the Stock Option Plan on June 22, 2009, which restricted stock is subject to a five-year vesting schedule. It vests in twenty equal quarterly installments on the first day of each fiscal quarter beginning on October 1, 2009. |
(5) | On June 25, 2007, Mr. Zhang was granted 1,000 shares of restricted Common Stock. On August 6, 2008, Mr. Zhang was granted an additional 1,000 shares of restricted Common Stock on the same terms as those governing the June 25, 2007 grant. On June 26, 2009, Mr. Zhang was granted an additional 1,000 shares of restricted Common Stock, on the same terms as those governing the June 25, 2007 and August 6, 2008 grants. On July 1, 2010, Mr. Zhang was granted an additional 1,000 shares of restricted Common Stock on the same terms as those governing the June 25, 2007, August 6, 2008, and June 26, 2009 grants. On January 19, 2011, Mr. Zhang waived the receipt of 500 shares of the July 1, 2010 grant in consideration of an additional quarterly payment by the Company of $6,250 on or about January 6, 2011 pursuant to the increase, effective January 1, 2011, of each of the directors’ annual retainer fee under the Company’s Stock Option Plan by $25,000 in lieu of each director’s receipt of restricted shares under the Stock Option Plan. |
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Changes in Control
There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of the Company.
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PROPOSAL NO. 11. - ELECTION OF DIRECTORS
TheOur Board of Directors is responsible for establishing broad corporate policies and monitoring the overall performance of the Company. It selects the Company’s executive officers, delegates authority for the conduct of the Company’s day-to-day operations to those officers, and monitors their performance. Members of the Board of Directors are kept informed of the Company’s business by participating in Board of Directors and Committee meetings, by reviewing analyses and reports, and through discussions with the Chairman and other officers.
Effective December 8, 2006, Article V of our articles of incorporation was amended so that the number of our directors shall be determined in accordance with our Bylaws instead of in accordance with provisions contained in our articles of incorporation. At the Annual Meeting, five (5) directors will be elected, each to hold office until the next annual meeting of stockholders or his or her earlier death or resignation or until his or her successor, if any, is elected or appointed. The individuals who have been nominated for election to the Board of Directors at the Annual Meeting are listed in the table below. Each of the nominees is a current director of the Company.
If, as a result of circumstances not now known or foreseen, any of the nominees is unavailable to serve as a nominee for the office of Director at the time of the Annual Meeting, the holders of the proxies solicited by this Proxy Statement may vote those proxies either (i) for the election of a substitute nominee who will be duly designated by the proxy holders or by the present Board of Directors or (ii) for the balance of the nominees, leaving a vacancy. Alternatively, the size of the Board may be reduced accordingly. The Board of Directors has no reason to believe that any of the nominees will be unwilling or unable to serve, if elected as a Director. To be elected, each of the five nominees proposed for election as directors at the Annual Meeting must receive at least a plurality of the votes cast at the Annual Meeting.
Director Selection
There have been no material changes to the procedures by which stockholders may recommend nominees to our boardBoard of directorsDirectors since such procedures were last disclosed. As provided in its Charter, the Nominating and Corporate Governance Committee of the Company’s Board of Directors is responsible for identifying individuals qualified to become Board members and recommending to the Board nominees for election as directors. The Nominating and Corporate Governance Committee considers recommendations for director nominees, including those submitted by the Company’s stockholders, on the bases described below. Stockholders may recommend nominees by writing to the Nominating and Corporate Governance Committee c/o the Secretary at BAK Industrial Park, Meigui Street, Huayuankou Economic Zone, Dalian City, 116422, China; via email at IR@cbak.com.cn; or via fax at (86)411-62510628.411-39185980. Stockholder recommendations will be promptly provided to the chairman of the Nominating and Corporate Governance Committee. To be considered by the Nominating and Corporate Governance Committee for inclusion in the proxy for the 20152016 annual meeting, recommendations must be received by the Secretary of the Company not later than the close of business on December 31, 2014.2015.
In identifying and evaluating nominees, the Nominating and Corporate Governance Committee may consult with the other Board members, management, consultants, and other individuals likely to possess an understanding of the Company’s business and knowledge of suitable candidates. In making its recommendations, the Nominating and Corporate Governance Committee assesses the requisite skills and qualifications of nominees and the composition of the Board as a whole in the context of the Board's criteria and needs. In evaluating the suitability of individual Board members, the Nominating and Corporate Governance Committee may take into account many factors, including general understanding of marketing, finance and other disciplines relevant to the success of a publicly traded company in today’s business environment; understanding of the Company’s business and technology; the international nature of the Company’s operations; educational and professional background; and personal accomplishment. The Nominating and Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of the Company’s business and represent stockholder interests through the exercise of sound judgment, using its diversity of experience. The Nominating and Corporate Governance Committee also ensures that a majority of nominees would be “independent directors” as defined under the applicable rules of the SEC and The NASDAQ Stock Market LLC (“NASDAQ”). For a description of the qualifications that the Nominating and Corporate Governance Committee seeks in potential nominees, please see “Nominees – Qualifications for All Directors” below.
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The names, the positions with the Company and the ages as of the Record Date of the individuals who are our nominees for election as directors are:
Name | Age | Position/s | Director Since | |||
Xiangqian Li | 45 | Chairman, President and Chief Executive Officer | January 2005 | |||
Jianjun He | 41 | Director | November 2013 | |||
Chunzhi Zhang | 51 | Director | June 2007 | |||
Martha C. Agee | 59 | Director | November 2012 | |||
Guosheng Wang | 42 | Director | August 2014 |
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Director Qualifications
Qualifications, Attributes, Skills and Experience to be Represented on the Board of Directors as a Whole
In its assessment of each potential candidate, including those recommended by stockholders, the Nominating and Corporate Governance Committee considers the nominee’s judgment, integrity, experience, independence, understanding of the Company’s business or other related industries and such other factors the Nominating and Corporate Governance Committee determines are pertinent in light of the current needs of the Board.Board of Directors. The Nominating and Corporate Governance Committee also takes into account the ability of a Director to devote the time and effort necessary to fulfill his or her responsibilities to the Company.
The Board of Directors and the Nominating and Corporate Governance Committee require that each Director be a recognized person of high integrity with a proven record of success in his or her field. Each Director must demonstrate innovative thinking, familiarity with and respect for corporate governance requirements and practices, an appreciation of multiple cultures and a commitment to sustainability and to dealing responsibly with social issues. In addition to the qualifications required of all Directors, the Board assesses intangible qualities including the individual’s ability to ask difficult questions and, simultaneously, to work collegially.
The Board has identified particular qualifications, attributes, skills and experience that are important to be represented on the Board as a whole, in light of the Company’s current needs and business priorities. The Company’s services are performed in various countries and in significant areas of future growth located outside of the United States. Accordingly, the Board believes that international experience or specific knowledge of key geographic growth areas and diversity of professional experiences should be represented on the Board. In addition, the Company’s business is multifaceted and involves complex financial transactions. Therefore, the Board believes that the Board should include some Directors with a high level of financial literacy and some Directors who possess relevant business experience as a Chief Executive Officer or President. Our business involves complex technologies in a highly specialized industry. Therefore, the Board believes that extensive knowledge of the Company’s business and industry should be represented on the Board.
The Board of Directors and the Nominating and Corporate Governance Committee do not have a specific diversity policy, but consider diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process.
Biographical Information and Summary of Qualifications of 2013 Nominees for Director
Xiangqian Li has served as the chairman of our board, our president and chief executive officer since January 20, 2005. He has been a director of BAK International Limited, or BAK International, our Hong Kong incorporated subsidiary, since November 2004. Mr. Li is the founder and has served as the chairman of the board of Shenzhen BAK Battery Co., Ltd., or Shenzhen BAK, or Shenzhen BAK, our indirect wholly owned subsidiary, since its inception in August 2001, and served as Shenzhen BAK’s general manager since December 2003. From June 2001 to June 2003, Mr. Li was the chairman of Huaran Technology Co., Ltd., a PRC-incorporated company engaged in the car audio business. Mr. Li received a bachelor’s degree in thermal energy and power engineering from the Lanzhou Railway Institute, China and a doctorate degree in quantitative economics from Jilin University in China.
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Director Qualifications: Mr. Li has extensive senior management experience in the industry in which we operate, having served as our Chief Executive Officer and Chairman since January 2005 and as the Chief Executive Officer or Chairman of various other companies since 2001.
Jianjun Hehas served as our director since November 4, 2013. Mr. He has more than 15 years experience in accounting and finance and is an associate member of the Chinese Institute of Certificate Public Accounts. Mr. He has been the Managing Director of Jilin Cybernaut Lvke Investment and Management Co., Ltd., an investment consulting firm in China, since January 1, 2013. From June 30, 2009 to December 31, 2012, Mr. He served as the Chief Financial Officer of THT Heat Transfer Technology, Inc. (Nasdaq: THTI) (“THT Heat”), a provider of heat exchangers and heat exchange solutions in China. Mr. He was the Chief Financial Officer of Siping City Juyuan Hanyang Plate Heat Exchanger Co. Ltd, a wholly owned subsidiary of THT Heat from 2007 to December 2012. From 1999 to 2007, Mr. He worked as senior financial officer in Jilin Grain Group, a state-owned enterprise engaged in the grain processing and trading business. Mr. He graduated from Changchun Taxation College in 1995 with a Bachelor’s degree in Auditing and obtained a Master’s degree from Jilin University in 2005.
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Director Qualifications: Mr. He has a rich knowledge in accounting and corporate finance. He also has more than three years’ experience acting as CFO of a Nasdaq listed company.
Chunzhi Zhang has served as our director since June 25, 2007. Since mid-2005, Mr. Zhang has served as General Manager of AASTOCKS.com, Ltd., Shenzhen Branch, a software integration and one-stop system solutions provider for financial markets in China. From 2003 through mid-2005, Mr. Zhang served as General Manager of Shenzhen Sharemax Management Co., Ltd, where he was involved in both private equity business and asset management. From 1998 through 2003, Mr. Zhang served as General Manager of Haixing Security Brokerage Co., Ltd, Shenzhen Branch, involved in securities trading and asset management. Prior to joining Haixing Security Brokerage, from 1985 to 1996, Mr. Zhang served as senior Management in Hong Kong for China Resources Holding Co., Ltd., a China central government-owned enterprise. Mr. Zhang received his bachelor degree in Economy from Jilin University in 1985 and MBA degree from University of Wales in the United Kingdom. Mr. Zhang is also a distinguished finance lecturer at the Graduate School in Shenzhen of Tsinghua University.
Director Qualifications: Mr. Zhang, Chair of the Compensation Committee, is experienced in securities analysis and investment. Mr. Zhang has accumulated this experience in managerial positions in firms in the securities industry since 1998.
Martha C. Ageehas served as our director since November 15, 2012. Since 1997, Ms. Agee has been a senior lecturer of business law at Hankamer School of Business of Baylor University where she teaches courses in the Legal Environment of Business, International Business Law, and Healthcare Law & Ethics for graduate and undergraduate students. Prior to that, Ms. Agee practiced law from 1988 to 1996. Ms. Agee obtained her bachelor’s degree in Accounting in 1976 and Juris Doctorate degree in 1988 from Baylor University.
Director Qualifications: Ms. Agee, Chair of the Audit Committee, was previously Certified Public Accountant, worked as Chief Accountant for a political sub-division for five and a half years and worked as Supervisor of Accounting for a large retail chain with the responsibilities included hiring, training, and supervision of accounting staff; preparation and analysis of 17 monthly financial statements and quarterly consolidated financial statements; budgeting, and internal auditing.
Guosheng Wanghas served as our director since August 1, 2014. Since June 2014, Mr. Wang has been in charge of the construction of facilities of the Company’s subsidiary, Dalian BAK Power Battery Co., Ltd (“Dalian BAK”) and the relocation of assets and equipment of BAK International (Tianjin) Limited (“BAK Tianjin”) to Dalian BAK. Prior to that, Mr. Wang served as vice president of operations of BAK Tianjin since May 2013, where he was managing the Quality Department, Purchase Department, Equipment Department and HR Department. From May 2010 to May 2013, Mr. Wang served as manager of Equipment Department of BAK Tianjin. From March 2008 to May 2010, he served as Director of No. 1 Manufacture Department of BAK Tianjin. Mr. Wang began his career working as an engineer at Harbin Railway Transportation Equipment Co., Ltd in 1994. Mr. Wang obtained his bachelor’s degree in mechanical manufacturing engineering and equipment from Lanzhou Jiaotong University in July 1994.
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Director Qualifications: Having served with the Company since 2003, Mr. Wang brings to the Board of Directors extensive experience in all aspects of our business and industry and strong management and technical skills.
Each director holds office until the earlier of his or her death, resignation, removal from office by the stockholders, or his or her respective successor is duly elected and qualified. There are no arrangements or understandings between any of our nominees or directors and any other person pursuant to which any of our nominees or directors have been selected for their respective positions. No nominee or director is related to any executive officer or any other nominee or director.
No director of the Company is a party adverse to the Company or any of its subsidiaries or has a material interest adverse to the Company or any of its subsidiaries. There are no family relationships among our directors or officers.
Other than as described above, no director has held any directorship during the past five years with any other public company.
For information as to the shares of the Common Stock held by each nominee, see “Securities Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters – Securities Ownership of Certain Beneficial Owners and Management.”
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Involvement in Certain Legal Proceedings
None of our directors or executive officers has, during the past ten years:
• | been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences); | |
• | had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time; | |
• | been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity; | |
• | been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; | |
• | been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
• | been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self- regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);
had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;
been found by a court of competent jurisdiction in a civil action or by the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;
been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self- regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.12
Director Independence
Our Board of Directors has determined that each of our non-employee directors, Mr. Zhang, Ms. Agee and Mr. He, is an “independent director” as defined by the applicable rules of the SEC and NASDAQ. Each of our non-employee directors serves on the Board’s committees, and therefore all of the members of our board committees are independent as defined under the NASDAQ listing standards and by the SEC. There were and are no transactions, relationships or arrangements not otherwise disclosed in this Proxy Statement that were considered by the Board of Directors under the applicable independence definitions in determining that each of these directors is independent.
Governance Structure
Currently, our Chief Executive Officer is also our Chairman. The Board of Directors believes that, at this time, having a combined Chief Executive Officer and Chairman is the appropriate leadership structure for the Company. In making this determination, the Board of Directors considered, among other matters, Mr. Li’s experience and tenure of having been Chairman and Chief Executive Officer since 2005, and felt that his experience, knowledge, and personality allowed him to serve ably as both Chairman and Chief Executive Officer. Among the benefits of a combined Chief Executive Officer/Chairman considered by the Board of Directors is that such structure promotes clearer leadership and direction for our Company and allows for a single, focused chain of command to execute our strategic initiatives and business plans.
The Board’sBoard of Directors’ Role in Risk Oversight
The Board of Directors oversees that the assets of the Company are properly safeguarded, that the appropriate financial and other controls are maintained, and that the Company’s business is conducted wisely and in compliance with applicable laws and regulations and proper governance. Included in these responsibilities is the Board of Directors’ oversight of the various risks facing the Company. In this regard, the Board of Directors seeks to understand and oversee critical business risks. The Board of Directors does not view risk in isolation. Risks are considered in virtually every business decision and as part of the Company’s business strategy. The Board recognizes that it is neither possible nor prudent to eliminate all risk. Indeed, purposeful and appropriate risk-taking is essential for the Company to be competitive on a global basis and to achieve its objectives.
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While the Board oversees risk management, Company management is charged with managing risk. The Company has robust internal processes and a strong internal control environment to identify and manage risks and to communicate with the Board.Board of Directors. The Board of Directors and the Audit Committee monitor and evaluate the effectiveness of the internal controls and the risk management program at least annually. Management communicates routinely with the Board of Directors, Board Committees and individual Directors on the significant risks identified and how they are being managed. Directors are free to, and indeed often do, communicate directly with senior management.
The Board implements its risk oversight function both as a whole and through Committees. Much of the work is delegated to various Committees, which meet regularly and report back to the full Board. All Committees play significant roles in carrying out the risk oversight function. In particular:
• | The Audit Committee oversees risks related to the Company’s financial statements, the financial reporting process, accounting and legal matters. The Audit Committee oversees the internal audit function. The Audit Committee members meet separately with representatives of the Company’s independent auditing firm; and | |
• | The Compensation Committee evaluates the risks and rewards associated with the Company’s compensation philosophy and programs. The Compensation Committee reviews and approves compensation programs with features that mitigate risk without diminishing the incentive nature of the compensation. Management discusses with the Compensation Committee the procedures that have been put in place to identify and mitigate potential risks in compensation. |
The Audit Committee oversees risks related to the Company’s financial statements, the financial reporting process, accounting and legal matters. The Audit Committee oversees the internal audit function. The Audit Committee members meet separately with representatives of the Company’s independent auditing firm; and
The Compensation Committee evaluates the risks and rewards associated with the Company’s compensation philosophy and programs. The Compensation Committee reviews and approves compensation programs with features that mitigate risk without diminishing the incentive nature of the compensation. Management discusses with the Compensation Committee the procedures that have been put in place to identify and mitigate potential risks in compensation.
The Nominating and Corporate Governance Committee evaluates risk associated with management decisions and strategic direction and reports concerns to the full Board. In addition, this committee evaluates the performance of independent directors and makes suggestions to the full Board concerning director qualifications and number of independent directors. The committee also oversees the Company’s ethics programs, including the Code of Business Ethics and Conduct.
Required Vote
To be elected, each nominee for director must receive at least a plurality of the votes cast at the Annual Meeting (assuming a quorum is present) with respect to that nominee’s election. Abstentions and broker “non-votes” will not be counted as a vote cast with respect to a nominee.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the election of the nominees set forth in Proposal 1.
COMMITTEES OF THE BOARD OF DIRECTORS
Committees and Meetings
Our Board of Directors currently has three standing Committees which, pursuant to delegated authority, perform various duties on behalf of and report to the Board: (i) Audit Committee, (ii) Compensation Committee and (iii) Nominating and Corporate Governance Committee. Each of the three standing Committees is comprised entirely of independent directors as that term is defined under the NASDAQ listing standards applicable to each of these committees. From time to time, the Board may establish other committees.
During the fiscal year ended September 30, 2013,2014, the Board held a total of eight meetings. Each director attended 100% of the total number of meetings of the Board and 100% of the meetings of all Committees on which he or she served. We do not have a policy requiring Board members to attend the annual meeting of our stockholders. Two members of the Board attended our 20132014 annual meeting of stockholders.
Each of the Charters of our Audit, Compensation and Nominating and Corporate Governance Committees contains a definition for determining whether members of the respective Committee are independent for purposes of that committee. Current copies of these Charters are posted on our Internet website at www.bak.com.cn.www.cbak.com.cn.
Audit Committee
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During the fiscal year ended September 30, 2013, ourOur Audit Committee consistedconsists of Charlene Spoede Budd (resigned on February 27, 2013), Jonathan Christopher Paugh (resigned on October 3, 2013),three members: Martha C. Agee, Chunzhi Zhang and Martha Agee.Jianjun He. Pursuant to the determination of our Board of Directors, Dr. Budd servedMs. Agee serves as the chair of the Audit Committee and as our Audit Committee financial expert as that term is defined by the applicable SEC rules before her resignation.rules. Each director who has served or is serving on our Audit Committee was or is “independent” as that term is defined under the NASDAQ listing standardsrules for Audit Committee members at all times during their service on such Committee.
The Audit Committee, which was established in accordance with Section 3(a)(58)(A) of the Exchange Act, oversees our accounting and financial reporting processes and the audits of the financial statements of our company. During the fiscal year ended September 30, 2013,2014, the Audit Committee held sixfour meetings, in compliance with its Charter. The Audit Committee is responsible for, among other things:
• | the appointment, compensation, retention and oversight of the work of the independent auditor; |
• | reviewing and pre-approving all auditing services and permissible non-audit services (including the fees and terms thereof) to be performed by the independent auditor; |
• | reviewing and approving all proposed related-party transactions; |
selecting our independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by our independent auditors;
reviewing with our independent auditors any audit problems or difficulties and management’s response;
reviewing and approving certain proposed related-party transactions, as defined in Item 404 of SEC Regulation S- K;
discussing the annual audited financial statements with management and our independent auditors;
reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of significant internal control deficiencies;
annually reviewing and reassessing the adequacy of our Audit Committee Charter;
such other matters that are specifically delegated to our Audit Committee by our Board from time to time;
meeting separately and periodically with management and our internal and independent auditors; and
reporting regularly to the full Board.14
• | discussing the interim and annual financial statements with management and our independent auditors; |
• | reviewing and discussing with management and the independent auditor (a) the adequacy and effectiveness of the Company’s internal controls, (b) the Company’s internal audit procedures, and (c) the adequacy and effectiveness of the Company’s disclosure controls and procedures, and management reports thereon; |
• | reviewing reported violations of the Company’s code of conduct and business ethics; and |
• | reviewing and discussing with management and the independent auditor various topics and events that may have significant financial impact on the Company or that are the subject of discussions between management and the independent auditors. |
Compensation Committee
During the fiscal year ended September 30, 2013, ourOur Compensation Committee consistedconsists of Charlene Spoede Budd (resigned on February 27, 2013), Jonathan Christopher Paugh (resigned on October 3, 2013),three members: Martha C. Agee, Chunzhi Zhang and Martha Agee,Jianjun He, with Mr. Zhang serving as chair of the Compensation Committee.chair. Each director who has served or is serving on our Compensation Committee was or is “independent” as that term is defined under the NASDAQ listing standardsrules at all times during their service on such Committee. The Compensation Committee has a charter, which is available on our website at www.cbak.com.cn.
Our Compensation Committee assists the Board in reviewing and approving the compensation structure of our directors and executive officers, including all forms of compensation to be provided to our directors and executive officers. Our Chief Executive Officer may not be present at any Committee meeting during which his compensation is deliberated. The Compensation Committee is permitted to delegate its authority in accordance with Nevada law unless prohibited by the Company’s Bylaws or the Compensation Committee Charter. The Compensation Committee held one meeting during the fiscal year ended September 30, 2013.2014.
The purpose of our Compensation Committee is to discharge the responsibilities of the Company’s Board of Directors relating to compensation of the Company’s executives, to produce an annual report on executive compensation for inclusion in the Company’s proxy statement, if required, and to oversee and advise the Board on the adoption of policies that govern the Company’s compensation programs, including stock and benefit plans. Our chief executive officer may not be present at any Compensation Committee meeting during which his compensation is deliberated. The Compensation Committee is responsible for, among other things:
determining the compensation package for our executive officers (other than our Chief Executive Officer);
reviewing and making recommendations to the Board with respect to the compensation of our directors and Chief Executive Officer;
reviewing and approving corporate goals and objectives relevant to the compensation of our Chief Executive Officer;
evaluating the performance of our Chief Executive Officer in light of those goals and objectives, and recommending the compensation level of our chief executive officer based on this evaluation;
reviewing periodically and making recommendations to the Board regarding any long-term incentive compensation or equity plans, programs or similar arrangements; and
reviewing and approving any employment agreements, retirement agreements, severance arrangements, change-in- control arrangements or special or supplemental employee benefits and any material amendments to the foregoing, applicable to executive officers, including the Chief Executive Officer.
The Compensation Committee may delegate all or a portion of its duties and responsibilities to a subcommittee of the Committee. The Compensation Committee also has the authority and sole discretion to retain compensation consultants as it deems necessary.
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The Chief Executive Officer makes recommendations concerning the performance and compensation of the Company’s other executive officers. The Committee oversees these recommendations and makes final determinations as to the other executive officers’ compensation.
• | reviewing and approving the compensation structure for corporate officers at the level of corporate vice president and above; |
• | overseeing an evaluation of the performance of the Company’s executive officers and approve the annual compensation, including salary, bonus, incentive and equity compensation, for the executive officers; |
• | reviewing and approving chief executive officer goals and objectives, evaluate chief executive officer performance in light of these corporate objectives, and set chief executive officer compensation consistent with Company philosophy; |
• | making recommendations to the Board regarding the compensation of board members; |
• | reviewing and making recommendations concerning long-term incentive compensation plans, including the use of equity-based plans. Except as otherwise delegated by the Board of Directors, the Compensation Committee will act on behalf of the Board of Directors as the “Committee” established to administer equity-based and employee benefit plans, and as such will discharge any responsibilities imposed on the Compensation Committee under those plans, including making and authorizing grants, in accordance with the terms of those plans. |
Nominating and Corporate Governance Committee
During the fiscal year ended September 30, 2013, ourOur Nominating and Corporate Governance Committee consistedconsists of Charlene Spoede Budd (resigned on February 27, 2013), Jonathan Christopher Paugh (resigned on October 3, 2013),three members: Martha C. Agee, Chunzhi Zhang and Martha Agee. Ms. Agee servedJianjun He, with Mr. He serving as chair of this Committee until August 6, 2013.chair. Each director who has served or is serving on our Nominating and Corporate Governance Committee was or is “independent” as that term is defined under the NASDAQ listing standards at all times during their service on such Committee.
The Nominating and Corporate Governance Committee assists the Board in identifying individuals qualified to become our directors and in determining the composition of the Board and its committees. The Nominating and Corporate Governance Committee held threetwo meetings during the fiscal year ended September 30, 2013,2014, in compliance with its Charter.
The purpose of the Nominating and Corporate Governance Committee is to determine the slate of director nominees for election to the Company’s Board of Directors, to identify and recommend candidates to fill vacancies occurring between annual shareholder meetings, and to review the Company’s policies and programs that relate to matters of corporate responsibility, including public issues of significance to the Company and its members. The Nominating and Corporate Governance Committee is responsible for, among other things:
identifying and recommending
reviewing annually with the Board the current compositioncommittees of the Board in light of the characteristics of independence, business experience, and specific areas of expertise;
identifying and recommending to the Board the directors to serve as members of the Board’s committees;
evaluating risk associated with management decisions and strategic direction and reporting concerns to the full Board;
evaluating the performance of independent directors and making suggestions to the full Board concerning director qualifications and number of independent directors; and
monitoring compliance with our Code of Business Ethics and Conduct.15
• | annually reviewing the composition of each committee and present recommendations for committee memberships to the Board as needed; and |
• | annually evaluating and reporting to the Board of Directors on the performance and effectiveness of the Board of Directors to facilitate the directors fulfillment of their responsibilities in a manner that serves the interests of the Company’s shareholders. |
Code of Business Ethics and Conduct
We have adopted a Code of Business Ethics and Conduct relating to the conduct of our business by our employees, officers and directors. We intend to maintain the highest standards of ethical business practices and compliance with all laws and regulations applicable to our business, including those relating to doing business outside the United States. During the fiscal year ended September 30, 2013,2014, there were no amendments to or waivers of our Code of Business Ethics and Conduct. If we effect an amendment to, or waiver from, a provision of our Code of Business Ethics and Conduct, we intend to satisfy our disclosure requirements by posting a description of such amendment or waiver on our Internet website at www.bak.com.cn or via a current report on Form 8-K. A current copy of our Code of Business Ethics and Conduct is posted on our Internet website at www.cbak.com.cn.
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REPORT OF THE AUDIT COMMITTEE
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 20132014
The Audit Committee of the Board is comprised of three non-employee Directors, each of whom has been determined by the Board to be “independent” undermeeting the meaning of Rule 10A-3(b)(1) under the Exchange Act. Dr. Budd, the chairindependence requirements of the AuditListing Rules of NASDAQ and the SEC. The Board has determined, based upon an interview of Martha Agee and a review of Ms. Agee’s responses to a questionnaire designed to elicit information regarding her experience in accounting and financial matters, that Ms. Agee shall be designated as an “Audit Committee is an “audit committee financial expert” within the meaning of Item 407(d)(5)(ii)401(e) of SEC Regulation S-K.S-K, as Ms. Agee has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in her financial sophistication. The Audit Committee assists the Board’s oversight of the integrity of the Company’s financial reports, compliance with legal and regulatory requirements, the qualifications and independence of the Company’s independent registered public accounting firm, the audit process, and internal controls. The Audit Committee operates pursuant to a written Chartercharter adopted by the Board. The Audit Committee is responsible for overseeing the corporate accounting and financialfinancing reporting practices, recommending the selection of the Company’s registered public accounting firm, reviewing the extent of non-audit services to be performed by the auditors, and reviewing the disclosures made in the Company’s periodic financial reports. The Audit Committee also reviews and recommends to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K.
DuringFollowing the end of the fiscal year 2013,ended September 30, 2014, the Audit Committee (1) reviewed and discussed the audited financial statements for the fiscal year ended September 30, 2013,2014 with Company management; (2) discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA,Professional Standards , Vol. 1. AU section 380), as adopted by the PCAOB in Rule 3200T; and (3) received the written disclosures and the letters from the independent accountants required by applicable requirements of the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, and has discussed with the independent accountants their independence.
Based on the review and discussions referred to above, the Audit Committee had recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 20132014 for filing with the SEC.
/s/ The Audit Committee /s/ The Audit Committee Martha C. Agee, Chair Chunzhi Zhang Jianjun He Martha C. Agee, ChairChunzhi ZhangJianjun He
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all compensation awarded to, earned by or paid to the following personsXiangqian Li, our Chief Executive Officer for services rendered in all capacities during fiscal years 20132014 and 2012: Xiangqian Li, our Chief Executive Officer, President and Chairman, and Kenneth G. Broom, our former Chief Operating Officer who resigned on January 31, 2013. No other executive officers received total compensation in excess of $100,000 in either fiscal year.
Stock | Option | Stock | ||||||||||||||||||
Salary | Awards | Awards | Awards | Option | ||||||||||||||||
Name and Principal Position | Year | ($)(1) | ($)(2) | ($)(2) | Total ($) | Year | Salary ($)(1) | ($)(2) | Awards ($)(2) | Total ($) | ||||||||||
Xiangqian Li, President, Chief Executive Officer | 2013 | 38,776 | - | - | 38,776 | 2014 | 39,044 | - | - | 39,044 | ||||||||||
2012 | 37,957 | - | - | 37,957 | 2013 | 38,776 | - | - | 38,776 | |||||||||||
Kenneth G. Broom, former Chief Operating Officer | 2013 | 83,333 | - | - | 83,333 | |||||||||||||||
2012 | 249,990 | - | - | 249,990 |
(1) The amounts reported in this table have been converted from RMB to U.S. dollars based on the average conversion rate between the U.S. dollar and RMB for the applicable fiscal year, or $1.00 to RMB 6.1469 (fiscal year 2014 exchange rate), $1.00 to RMB 6.1894 (fiscal year 2013 exchange rate), $1.00 to RMB 6.3374 (fiscal year 2012 exchange rate), except with respect to the salary payments to Mr. Broom, which payments were in U.S. dollars..
(2) The amounts represented in the stock and option awards columns reflect the compensation expense recognized by the Company determined pursuant to SFAS No. 168 “The FASB Accounting Standards CodificationTMand the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“SFAS No. 168”), as superseded by The FASB Accounting Standards CodificationTM(“ASC”), now included in ASC Topic 718 (“ASC 718”), and no forfeitures are assumed. The assumptions used to calculate the value of option and restricted stock awards are set forth under Note 1716 of the Notes to Consolidated Financial Statements of this annual report.
Summary of Employment Agreements
The base salary shown in the Summary Compensation Table is described in each named executive officer’s respective employment agreement. The material terms of those employment agreements are summarized below.
With the exception of Mr. Broom, the named executive officers entered into the Company’s standard employment agreement. On December 20, 2006, Shenzhen BAK entered into a non-standard employment agreement with Mr. Broom in connection with his employment in Canada as Executive Vice President for BAK Canada Ltd. Mr. Broom’s employment agreement entitles him to a grant of 100,000 stock options, an allowance for monthly car expenses, and the cost of legal representation and indemnification for damages in the event Mr. Broom’s prior employer files any claims or demands against him relating to his employment with the Company. In the event the Company terminates Mr. Broom’s employment without cause prior to the expiration of the minimum two-year term of the agreement, he is entitled to a lump sum payment or salary continuation equal to the amount he would have received had no termination occurred. Neither the Company nor Mr. Broom has incurred any legal costs or damages relating to Mr. Broom’s former employment. The compensation terms of Mr. Broom’s agreement have not changed since his appointment as Chief Operating Officer of the Company.
Material Terms of Standard Employment Agreement.
We entered into employment agreements with three-year initial terms with our named executive officers with standard employment agreements. We entered into the employment agreementagreements with Mr. Li and Mr. Wenwu Wang on June 30, 2012.2012 and August 28, 2014, respectively. Each of our standard employment agreements is automatically extended by a year at the expiration of the initial term and at the expiration of every one-year extension, until terminated in accordance with the termination provisions of the agreements, which are described below.
Our standard employment agreement permits us to terminate the executive’s employment for cause, at any time, without notice or remuneration, for certain acts of the executive, including but not limited to a conviction or plea of guilty to a felony, negligence or dishonesty to our detriment and failure to perform agreed duties after a reasonable opportunity to cure the failure. An executive may terminate his employment upon one month’s written notice if there is a material reduction in his authority, duties and responsibilities or if there is a material reduction in his annual salary before the next annual salary review. Furthermore, we may terminate the executive’s employment at any time without cause by giving one month’s advance written notice to the executive officer. If we terminate the executive’s employment without cause, the executive will be entitled to a termination payment of up to three months of his or her then base salary, approximately $2,530 to $9,489, depending on the length of such executive’s employment with us. Specifically, the executive will receive salary continuation for: (i) one month following a termination effective prior to the first anniversary of the effective date of the employment agreement; (ii) two months following a termination effective prior to the second anniversary of the effective date; and (iii) three months following a termination effective prior to or any time after the third anniversary of the effective date. The employment agreements provide that the executive will not participate in any severance plan, policy, or program of the Company.
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Our standard employment agreement contains customary non-competition, confidentiality, and non-disclosure covenants. Each executive officer has agreed to hold, both during and after the employment agreement expires or is earlier terminated, in strict confidence and not to use, except as required in the performance of his duties in connection with the employment, any confidential information, technical data, trade secrets and know-how of our company or the confidential information of any third party, including our affiliated entities and our subsidiaries, received by us. The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice and to assign all right, title and interest in them to us. In addition, each executive officer has agreed to be bound by non-competition restrictions set forth in his or her employment agreement. Specifically, each executive officer has agreed not to, while employed by us and for a period of one year following the termination or expiration of the employment agreement,
approach our clients, customers or contacts or other persons or entities, and not to interfere with the business relationship between us and such persons and/or entities;
assume employment with or provide services as a director for any of our competitors, or engage in any business which is in direct or indirect competition with our business; or
solicit the services of any of our employees.18
• | approach our clients, customers or contacts or other persons or entities, and not to interfere with the business relationship between us and such persons and/or entities; |
• | assume employment with or provide services as a director for any of our competitors, or engage in any business which is in direct or indirect competition with our business; or |
• | solicit the services of any of our employees. |
Outstanding Equity Awards at Fiscal Year-End 20132014
The following table sets forth theThere were no equity awards outstanding atas of September 30, 2013 for each of the2014 that were granted to our named executive officers.
Option Awards | Stock Awards | |||||||||||||||||
Market | ||||||||||||||||||
Number of | Number of | Number of | Value of | |||||||||||||||
Securities | Securities | Shares or | Shares or | |||||||||||||||
Underlying | Underlying | Option | Units of | Units of | ||||||||||||||
Unexercised | Unexercised | Exercise | Option | Stock That | Stock That | |||||||||||||
Options (#) | Options (#) | Price | Expiration | Have Not | Have Not | |||||||||||||
Name | Exercisable | Unexercisable | ($) | Date | Vested (#) | Vested ($) | ||||||||||||
Xiangqian Li(1) | - | - | - | 20,000 | 46,400 | |||||||||||||
Kenneth G. Broom(2) | - | - | - | - | - |
*All information in and below this table gives retroactive effect to our one-for-five reverse stock split effected on October 26, 2012.
(1) Our Chief Executive Officer, Mr. Li was granted an option to purchase 216,000 shares of our common stock on May 29, 2008 under the Stock Option Plan. The option is subject to a three-year vesting schedule, with the first 1/12 vesting on the last day of the full fiscal quarter following the date of grant (September 30, 2008), and the remaining 11/12 vesting in eleven equal installments on the last day of each following fiscal quarter. The exercise price is $20.9. The option expiresexpired on May 28, 2013. Mr. Li was also granted 100,000 restricted shares of the Company’s common stock, par value $0.001, under the Stock Option Plan. The restricted stock is subject to a five-year vesting schedule. It vestsAll of the restricted stock has been vested in twenty equal quarterly installments on the first day of each fiscal quarter beginning on October 1, 2009.
(2) On June 25, 2007, Mr. Broom was granted an option to purchase 20,000 shares of Common Stock at a price of $16.34 per share. The option vests over four years. On January 28, 2008, Mr. Broom was granted an option to purchase 8,000 shares of Common Stock at a price of $21.5 per share. All of Mr. Broom’s options were terminated and cancelled upon Mr. Broom’s resignation from the Company on January 31, 2013.
Compensation of Directors
Under our Compensation Plan for Non-Employee Directors, or the Directors Plan, each eligible non-employee director of the Company may receive an annual retainer fee. Pursuant to the Directors Plan, the annual retainer fee under the Directors Plan is subject to adjustments determined by our Board from time to time. Each independent director is also eligible to be granted 5,000 restricted shares of our common stock for serving as a director.
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In December 2010, our Board of Directors unanimously approved a change in the annual retainer fee for independent directors in accordance with the Directors Plan. Effective January 1, 2011, our independent directors will be paid an annual retainer fee of $45,000. As was previously our policy, the chair of the Audit Committee will continue to receive an additional $5,000 in recognition of the added responsibility of this position. In connection with this change, the Board unanimously determined that the independent directors will no longer receive an annual issuance of restricted shares under the Directors Plan. Each of the independent directors has waived all rights to such annual issuances, including with respect to 2,500 of the shares that were to be issued to each of the independent directors during calendar year 2011 in connection with their grants on July 1, 2010.
Effective October 1, 2012, each of our independent directors will be paid an annual retainer fee of $61,000. The chair of the Audit Committee will receive an additional $9,000 in recognition of the added responsibility of this position.
In June 2013, due to the current financial situation of the Company, each of the independent directors agreed to reduce their annual retainer fee to $20,000, effective from the quarter ended June 30, 2013.
The following table sets forth the total compensation earned by our non-employee directors during our fiscal year ended September 30, 2013:2014:
Fees Earned or | |||||||||
Name | Paid in Cash | Stock Awards | Total ($) | ||||||
($) | ($) | ||||||||
Charlene Spoede Budd (resigned on February 27, 2013) | 35,000 | - | 35,000 | ||||||
Chunzhi Zhang | 40,500 | - | 40,500 | ||||||
Martha C. Agee | 40,500 | - | 40,500 | ||||||
Jonathan Christopher Paugh (appointed on August 6, 2013 and resigned on October 3, 2013) | - | - | - |
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Fees | |||||||||
Earned or | |||||||||
Name | Paid in | Stock | Total ($) | ||||||
Cash ($) | Awards ($) | ||||||||
Chunzhi Zhang | 20,000 | - | 20,000 | ||||||
Martha C. Agee | 20,000 | - | 20,000 | ||||||
Jianjun He | 20,000 | - | 20,000 |
We do not maintain a medical, dental or retirement benefits plan for the directors.
During fiscal year ended September 30, 2013, we didWe have not compensate,compensated, and will not compensate, our non-independent directors, Mr. Xiangqian Li and Mr. Guosheng Wang, for serving as our directors, although they are entitled to reimbursements for reasonable expenses incurred in connection with attending our board meetings.
The directors may determine remuneration to be paid to the directors with interested members of the Board refraining from voting. The Compensation Committee will assist the directors in reviewing and approving the compensation structure for the directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under U.S. securities laws, directors, certain executive officers and persons beneficially owning more than 10% of our Common Stock must report their initial ownership of the Common Stock, and any changes in that ownership, to the SEC. The SEC has designated specific due dates for these reports. Based solely on our review of copies of such reports filed with the SEC and written representations of our directors and executive offers, we believe that all persons subject to reporting filed the required reports on time in fiscal year 2013.2014.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Transactions with Related Persons
We have severala one-year term outstanding credit facilities and linesshort-term bank loan of credit primarily$4.9 million from (i) Agricultural Bank of China, (ii) Bank of China, (iii) Bank of Dalian, (iv) Ping An Bank and (v) China CITIC Bank, the proceeds of which were used primarily to fund the operations of our manufacturing facilities locatedDandong bearing a fixed interest rate at the BAK Industrial Park in Shenzhen and Tianjin and for general working capital requirements. As of September 30, 2013, we had short-term bank loans of $151.4 million, and bills payable of $41.4 million.7.8% per annum. The short-term loans bore interest rates ranging from 4.4% to 15.0% per annum, and had maturity dates ranging from two to six months. The loans areloan is guaranteed by BAK International, BAK Tianjin, Shenzhen BAK Tianjin BAK New Energy Research InstituteBattery Co., Ltd (“Tianjin New Energy”Shenzhen BAK”), common shareholderour former subsidiary and director of the Company, Mr. Xiangqian Li, our CEO, and Ms. Xiaoqiu Yu, the wife of our CEO, whoCEO. Mr. Li did not receive and areis not entitled to receive any consideration for acting as a guarantor.the above-referenced guarantees. We are not independently obligated to indemnify any of those guarantors for any amounts paid by them pursuant to any guarantee.
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On December 28, 2011, ShenzhenAfter the foreclosure of BAK entered intoInternational Limited and its subsidiaries effective on June 30, 2014, our former subsidiaries owed us a loan agreement with Shenzhen BAK Haoze Investment Co., Ltd. (“Shenzhen Haoze”), under which Shenzhen Haoze extended a loan in an amount RMB1,750,000 ($278,410) to Shenzhen BAK as working capital, which loan is non-interest bearing and unsecured. The loan matures on December 27, 2013. Shenzhen Haoze is a company established in China and mainly engages in the businesssum of industry investment and investment consultation. Approximately 96 percent of equity interest in Shenzhen Haoze is currently owned by Mr. Xiangqian Li.$17,844,674. As of September 30, 2013,2014, our former subsidiaries had:
(i) | repaid $876,240 in cash to us; | |
(ii) | passed us title to property, plant and equipment with a total carrying amount of $4,268,397; | |
(iii) | provided us inventories with a total carrying amount of $3,299,456; and | |
(iv) | paid $558,577 to our subcontractors on our behalf. |
As of September 30, 2014, our former subsidiaries, Shenzhen BAK had paid off the above loan.and BAK International (Tianjin) Ltd. (“BAK Tianjin”) owed us aggregate amount of $9,117,445 which were interest-free, unsecured and repayable on demand.
On July 2, 2012, Shenzhen BAK entered into a loan agreement withAs of September 30, 2014, we obtained an advance from Tianjin BAK New Energy Research Institute Co., Ltd. (“Tianjin New Energy”),Ltd, a related party under which Tianjin New Energy extended a loan in an amountthe common control of RMB10,000,000 ($1,590,913) to Shenzhen BAK as working capital, which loan is non-interest bearing and unsecured. The loan matures on July 11, 2014. AsMr. Xiangqian Li, our CEO, of September 30, 2013, Shenzhen BAK had paid off the rest of the above loans. Approximately 59 percent of equity interest in Tianjin New Energy is currently owned by Mr. Li. Tianjin New Energy is a company established in China and mainly engages in the business of researching, developing and selling new energy related materials. It is not engaged in the business that competes with the Company and did not have any transactions with the Company except for the guarantee relationship between them and short-term advances explained herewith.
On March 24, 2011, Shenzhen BAK entered into a guarantee agreement with Jilin Province Trust & Investment Co., Ltd. (“Jilin Trust & Investment”), under which Shenzhen BAK agreed to guarantee a loan of Tianjin New Energy, in a total amount of RMB 50,700,000 (approximately $8.1 million) that it borrowed from Jilin Trust & Investment. In addition, Mr. Li and his wife entered into a guarantee agreement with Jilin Trust & Investment under which they pledged all of their personal assets to Jilin Trust & Investment to provide unlimited liability guarantees for the loan. As of September 30, 2013, Tianjin New Energy has paid off the above loans and the guarantee upon the loan had been terminated accordingly.
On July 2, 2012, Shenzhen BAK also entered into a guarantee agreement with Bank of Dalian, under which Shenzhen BAK agreed to guarantee a loan of Tianjin New Energy in a total amount of RMB20,000,000 (approximately $3.2 million) that it borrowed from Bank of Dalian. In addition, Mr. Li entered into a guarantee agreement with Bank of Dalian and assumed joint and several liabilities to guarantee the loan.
On October 15, 2012, Shenzhen BAK also entered into guarantee agreements with Bank of Dalian, under which Shenzhen BAK agreed to guarantee the banking facilities of Tianjin New Energy in a total amount of RMB10,000,000 (approximately $1.6 million) that it borrowed from Bank of Dalian. In addition, Mr. Li, and Ms. Yu entered into a guarantee agreement with Bank of Dalian and assumes joint and several liabilities to guarantee the loan.
On July 11, 2013, Shenzhen BAK executed a new guarantee agreement with Bank of Dalian with the same terms and conditions to guarantee the above loans of RMB30 million (approximately $4.9 million) for a period from July 11, 2013 to July 10, 2016. This new guarantee agreement supersedes the above two guarantee agreements.
On October 15, 2012, Shenzhen BAK entered into a loan agreement with Tianjin New Energy, under which Tianjin New Energy extended a loan in an amount of RMB8,600,000 ($1,368,185) to Shenzhen BAK as working capital, which loan is non-interest bearing, unsecured and repayable on demand. As of October 15, 2012, the total amount of non-interest loans between Shenzhen BAK and Tianjin New Energy was RMB11,838,794 ($1,899,891). As of September 30, 2013, Shenzhen BAK had paid off this loan.
As of September 30, 2013, Shenzhen BAK and Tianjin BAK advanced to Tianjin New Energy an aggregate amount of $885,052,$651,657 which was interest-free, unsecured and repayable on demand.
Shenzhen BAK believes that Tianjin New Energy owns sufficient assets, including buildings measuring 24,000 square meters and land use rights over a parcel of land of 233,450 square meters, to repay the above RMB 30,000,000 loans to Bank of Dalian without incurring Shenzhen BAK’s guarantor liability.20
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five fiscal years.
1821
PROPOSAL NO. 22. – RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The consolidated balance sheets of the Company as of September 30, 2012, and the related consolidated statements of operations and comprehensive loss, shareholders’ equity, and cash flows for the year ended September 30, 2012, were audited by PKF, Certified Public Accountants, Hong Kong, China, a member firm of PKF International Limited network of legally independent firms (“PKF”). As the Company disclosed in the Current Report on Form 8-K, filed with the SEC on January 8, 2013, PKF resigned as the Company’s the independent registered public accounting firm on January 2, 2013. On January 16, 2013, the Audit Committee appointed Crowe Horwath (HK) CPA Limited (“Crowe Horwath”) as the Company’s independent registered public accounting firm for the fiscal year endingended September 30, 2013. Crowe Horwath served as our company’s independent registered public accountants for fiscal yearyears 2014 and 2013 and reported on our company’s consolidated financial statements for that year.such years.
The Audit Committee has selected Crowe Horwath to serve as the Company’s independent auditors for the fiscal year ending September 30, 2014.2015. We are asking our stockholders to ratify our company’s selection of Crowe Horwath as our independent registered public accountants at the Annual Meeting. Although ratification is not required by our amended and restated bylaws or otherwise, the Board of Directors is submitting the selection of Crowe Horwath to our stockholders for ratification as a matter of good corporate governance practice. If the selection is not ratified, the Audit Committee will consider whether it is appropriate to select another registered public accounting firm. Even if the selection is ratified, the Audit Committee in its discretion may select a different registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of our company and our stockholders.
One or more representatives of Crowe Horwath are expected to be present at the Annual Meeting. They will have an opportunity to make a statement and will be available to respond to appropriate questions.
Independent Registered Public Accounting Firm’s Fees and Services
Audit Fees
PKFCrowe Horwath has billed us $234,500$102,000 and $143,000,$392,000 in the aggregate for the fiscal years ended September 30, 20122013 and 2014, respectively for professional services rendered for the audit of our fiscal years 2013 respectivelyand 2014 annual financial statements, including reviews of the interim financial statements included in our quarterly reports on Form 10-Q and assistance with the Securities Act filings.
PKF billed us $143,000 in the aggregate for the fiscal year ended September 30, 2013 for professional services rendered to audit our annual financial statements, and to review the interim financial statements included in our quarterly reports on Form 10-Q filed during fiscal year 2012.
Crowe Horwath has billed us nil and $102,000 in the aggregate for the fiscal years ended September 30, 2012 and 2013, respectively for professional services rendered for the audit of our fiscal year 2013 annual financial statements, including reviews of the interim financial statements included in our quarterly reports on Form 10-Q and assistance with the Securities Act of 1933 filings.
Audit-Related Fees
PKF billed us $11,128 and nil, in the aggregate, for providing consent related to our annual report on Form 10-K filed during the fiscal years ended September 30, 2012 and 2013, respectively. We did not engage Crowe Horwath to provide assurance or related services during the last two fiscal years.
Tax Fees
We did not engage our principal accountants to provide tax compliance, tax advice or tax planning services during the last two fiscal years.
All Other Fees
We did not engage our principal accountants to render services to us during the last two fiscal years, other than as reported above.
22
Pre-Approval Policies and Procedures
All auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for the Company by our independent auditor must be approved by the Audit Committee in advance, except non-audit services (other than review and attestation services) if such services fall within exceptions established by the SEC. The Audit Committee will pre-approve any permissible non-audit services to be provided by the Company’s independent auditors on behalf of the Company that do not fall within any exception to the pre-approval requirements established by the SEC. The Audit Committee may delegate to one or more members the authority to pre-approve permissible non-audit services, but any such delegate or delegates must present their pre-approval decisions to the Audit Committee at its next meeting. All of our accountants’ services described above were pre-approved by the Audit Committee or by one or more members under the delegate authority described above.
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Required Vote
Ratification of Crowe Horwath as our company’s independent registered public accountant for the fiscal year ending September 30, 20142015 requires the affirmative vote of a majority of the shares of the common stock present in person or represented by proxy and entitled to vote on the matter (assuming a quorum is present). Abstentions will have the same effect as a vote against the proposal, and broker “non-votes” may be voted at the discretion of the broker holding the shares.
Recommendation of the Board
The Board of Directors recommends a vote FOR ratification of the selection of Crowe Horwath as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2014.2015.
2023
PROPOSAL NO. 33. – ADVISORY VOTEAPPROVAL OF AMENDMENT TO APPROVE EXECUTIVE COMPENSATIONTHE ARTICLES OF INCORPORATION TO
INCREASE THE AUTHORIZED COMMON STOCK TO 500,000,000 SHARES
On April 10, 2015, the Company’s Board of Directors approved, subject to receiving shareholder approval, an amendment to the Company’s Articles of Incorporation to increase the authorized number of shares of Common Stock from 20,000,000 to 500,000,000 shares of Common Stock. A copy of the Certificate of Amendment to Articles of Incorporation is attached herein asAppendix A to this proxy statement (the “Certificate of Amendment”). If this proposal is approved by our stockholders, we intend to promptly file the Certificate of Amendment with the State of Nevada, which will become effective upon the filing.
Reasons for the Increase in Authorized Common Stock of the Company
The Dodd-Frank Wall Street ReformBoard of Directors believes that it is in the best interests of the Company and Consumer Protection Actstockholders to increase the number of 2010 enablesauthorized shares of Common Stock in order to have additional authorized but unissued shares available for issuance to meet business needs as they arise. We currently have only 7,380,403 shares of authorized but unissued shares of Common Stock. The Board of Directors believes that the proposed increase in the number of authorized shares of Common Stock is essential to facilitate our ability to develop our technology, raise capital to fund our operations and compensate our employees. The shares proposed for authorization could be used, among other things, to increase funding through potential equity transactions with institutional or other investors, to help secure commercial agreements with potential partners who might seek to acquire an equity interest as part of their overall business arrangement with us, or to possibly acquire other businesses, as well as for other bona fide corporate purposes. If our stockholders do not approve this proposal to voteincrease the number of authorized shares of Common Stock, we believe that we will be substantially limited in our ability to approve, on an advisory (non-binding) basis, the compensation ofadvance our named executive officers as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K.
Our executive compensation programs are designed to attract, motivate, and retain our named executive officers, who are critical to our success. Under these programs, our named executive officers are rewarded for the achievement of specific annual, long-termoperational and strategic goals, business unit goals, corporate goals,plans.
The increased number of authorized shares of Common Stock will be available for issuance from time to time for such purposes and consideration as the realizationBoard of increased stockholder value.
Our Compensation Committee continually reviews the compensation programs for our named executive officers to ensure they achieve the desired goals of aligning our executive compensation structure with our stockholders’ interestsDirectors may approve and current market practices. We are askingno further approval by our stockholders to indicate their supportwill be required, except as may be required by applicable law or the rules of any national securities exchange or market on which our Common Stock will be listed. The availability of additional shares for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholdersissuance, without the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific itemdelay and expense of compensation, but ratherobtaining the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement. At our 2011 annual meeting of stockholders, we solicited an advisory voteapproval of our stockholders to approveat a subsequent meeting, will afford us greater flexibility in acting upon proposed transactions.
Effects of the compensationIncrease in Authorized Common Stock of the Company
The increase in authorized Common Stock will not have any immediate effect on the rights of our named executive officers and to determine how frequentlyexisting stockholders. To the extent that additional authorized shares are issued in the future, they would decrease our existing stockholders’ percentage equity ownership in the Company should conductand, depending on the price at which they are issued, may be dilutive to existing stockholders. The additional shares of Common Stock for which authorization is sought would have identical rights, preferences and privileges to the shares of our Common Stock authorized prior to approval of this proposal. Holders of our Common Stock do not have preemptive rights to subscribe to additional securities that may be issued by us, which means that current stockholders do not have a prior right to purchase any new issue of our capital stock in order to maintain their proportionate ownership thereof.
The increase in the number of authorized shares of our Common Stock may facilitate certain other anti-takeover devices that may be advantageous for our management to attempt to prevent or delay a change of control. For example, our Board of Directors could cause additional shares to be issued to a holder or holders who might side with the Board of Directors in opposing a takeover bid. Additionally, the existence of such advisory votes. A majorityshares might have the effect of discouraging any attempt by a person or entity, through an acquisition of a substantial number of shares of our Common Stock, to acquire control of the votes cast atCompany, since the 2011 annual meetingissuance of such shares could dilute the Common Stock ownership of such person or entity. Employing such devices may adversely impact stockholders votedwho desire a change in favormanagement, or who desire to participate in a tender offer or other sale transaction involving the Company.
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No Dissenters’ Rights
Under the Nevada Revised Statutes, holders of approvalshares of the compensationCommon Stock are not entitled to dissenters’ rights with respect to any aspect of our named executive officersthis proposal, and having an advisory vote on executive compensation every three years. Consistentwe will not independently provide holders with the majority of stockholder votes cast, we are conducting our advisory vote on executive compensation at this Meeting.any such right.
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board. Our Board and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the approval the named executive officer compensation as disclosed in this Proxy Statement, they will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
Required Vote Required
Approval of the above resolutionproposal requires the affirmative vote of a majority of the outstanding voting power of our Common Stock as of the Record Date.
Recommendation of the Board
The Board of Directors recommends a vote FOR adoption of this proposal.
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PROPOSAL 4. – APPROVAL OF AMENDMENT TO THE ARTICLES OF INCORPORATION TO
AUTHORIZE THE ISSUANCE OF UP TO 10,000,000 SHARES OF PREFERRED STOCK
On April 10, 2015, the Company’s Board of Directors approved, subject to receiving shareholder approval, an amendment to the Company’s Articles of Incorporation to authorize 10,000,000 shares of Preferred Stock, which may be issued in one or more series, with such rights, preferences, privileges and restrictions as shall be fixed by the commonBoard from time to time. A copy of the Certificate of Amendment is attached herein asAppendix A to this proxy statement. If this proposal is approved by our stockholders, we intend to promptly file the Certificate of Amendment with the State of Nevada, which will become effective upon the filing.
Reasons for the Authorization of Blank Check Preferred Stock
The term blank check” preferred stock presentrefers to stock for which the designations, preferences, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions thereof are determined by the board of directors of a company. The Board of Directors has the flexibility to create one or more series of preferred stock, from time to time, and to determine the relative rights, preferences, powers and limitations of each series, including, without limitation: (i) the number of shares in personeach series, (ii) whether a series will bear dividends and whether dividends will be cumulative, (iii) the dividend rate and the dates of dividend payments, (iv) liquidation preferences and prices, (v) terms of redemption, including timing, rates and prices, (vi) conversion rights, (vii) any voting rights and (viii) any other relative, participating, optional or representedother special rights, preferences, powers, qualifications, limitations or restrictions.
Upon filing of the Certificate of Amendment with the Nevada Secretary of State, contingent upon receiving the approval of our stockholders, the Board of Directors will be able to authorize the designation and issuance of up to 10,000,000 shares of Preferred Stock in one or more series with such limitations and restrictions as may be determined in the sole discretion of the Board, with no further authorization by proxyshareholders required for the creation and issuance thereof. When required by law and in accordance with the Nevada Revised Statutes of the State of Nevada (“Nevada Revised Statutes”), the Board of Directors will have the express authority to execute, acknowledge and file a certificate of designations setting forth, any and all powers, designations, preferences, rights, qualifications, limitations or restrictions on the Preferred Stock.
The Board believes that the authorization of shares of Preferred Stock is desirable because it will provide the Company with increased flexibility of action to meet future business requirements through equity financings or acquisition of other companies without the delay and expense on obtaining further shareholder approvals. The authorization of blank check preferred stock will also improve the Company’s ability to attract needed investment capital, as various series of the Preferred Stock may be customized to meet the needs of any particular transaction or market conditions.
Effects of the Authorization of Blank Check Preferred Stock
The issuance of shares of Preferred Stock may adversely affect the rights of the holders of Common Stock. If the Company issues Preferred Stock, such Preferred Stock will include certain designations, preferences, conversion rights, cumulative, relative, participating, optional or other rights, including voting rights, qualifications, limitations or restrictions, any of which may dilute the voting power and economic interest of the holders of the Common Stock. For example, in the absence of a proportionate increase in the Company’s earnings and book value, an increase in the aggregate number of outstanding shares caused by the issuance of Preferred Stock would dilute the earnings per share and book value per share of all outstanding shares of Common Stock. In addition, in a liquidation, the holders of the Preferred Stock may be entitled to votereceive a certain amount per share of Preferred Stock before the holders of the Common Stock receive any distribution. The holders of Preferred Stock may also be entitled to a certain number of votes per share of Preferred Stock and such votes may dilute the voting rights of the holders of Common Stock when the Company seeks to take corporate action. A series of Preferred Stock also may be convertible into shares of Common Stock. Furthermore, Preferred Stock could be issued with certain preferences over the holders of Common Stock with respect to dividends or the power to approve the declaration of a dividend.
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The issuance of shares of Preferred Stock may also have the effect of discouraging or thwarting persons seeking to take control of the Company through a tender offer, proxy fight or otherwise or seeking to bring about removal of incumbent management or a corporate transaction such as a merger. The issuance of shares of Preferred Stock in a public or private sale, merger or in a similar transaction may, depending on the matter (assumingterms of the series of Preferred Stock dilute the interest of a quorum is present).party seeking to take over the Company. Further, the authorized Preferred Stock could be used by the Board for adoption of a shareholder rights plan or “poison pill.”
There are currently no plans, arrangements, commitments or understandings for the issuance of the additional shares of Common Stock or Preferred Stock which are to be authorized. The Board did not propose this amendment to the Articles of Incorporation of the Company for the purpose of discouraging mergers, tender offers, proxy contests, solicitation in opposition to management or other changes in control. We are not aware of any specific effort to accumulate our Common Stock or obtain control of us by means of a merger, tender offer, solicitation or otherwise. We have no present intention to use the increased number of authorized shares of Common Stock or creation of the blank check Preferred Stock in response to, or for the purpose of deterring, any effort to obtain control of the Company or as an anti-takeover measure.
No Dissenters’ Rights
Under the Nevada Revised Statutes, holders of shares of Common Stock are not entitled to dissenters’ rights with respect to any aspect of this proposal, and we will not independently provide holders with any such right.
Required Vote
Approval of the above proposal requires the affirmative vote of a majority of the outstanding voting power of our Common Stock as of the Record Date. Abstentions will have the same effect as a vote against the proposal, and broker “non-votes” may not be voted at the discretion of the broker holding the shares.
Recommendation of the Board
The Board of Directors recommends a vote FOR adoption of this proposal.
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PROPOSAL 5. - APPROVAL OF THE SECOND AMENDMENT TO THE COMPANY’S STOCK OPTION PLAN
Background
In May 2005, the Board adopted the China BAK Battery, Inc. Stock Option Plan (the “Plan”). The Plan provides for equity-based awards to employees, non-employee directors, and certain non-employee advisors of the Company. The Company may grant stock options and restricted Common Stock to eligible participants under the Plan. On July 25, 2008, the Company’s stockholders approved certain amendment to the Plan, including increasing the total number of shares available for issuance under the Plan to 8,000,000. As a result of the one-for-five reverse stock split effective on October 26, 2012, the total number of shares available for issuance under the Plan was reduced to 1,600,000.
As of April 20, 2015, approximately 1.1 million shares remained available for issuance pursuant to future awards.
The Proposal
The Board of Directors has adopted a resolution to amend Section 1.7 of the Plan to provide that if an option terminates without being wholly exercised, new options or restricted stock may be granted hereunder covering the number of shares to which such option termination relates (the “Amendment No. 2”). Section 1.7 of the Plan currently provides that only new options may be granted in this case.
Reasons for the Amendment
The amendment would provide more flexibility to the Company to continue to grant equity awards to its employees, directors and agents under the Plan, as amended (the “Amended Plan”). The Company may decide the type of equity award based on various factors, such as the market condition, the Company’s overall performance and potential tax consequences. The continued success of the Company depends on its ability to attract and retain directors and employees who are highly qualified and motivated. The Board of Directors believes that the Amended Plan promotes this objective by giving participants an opportunity to share in the success of the Company through equity ownership. The Amended Plan also is designed to create an identity of interests between the Company’s directors and employees and its stockholders by providing participants with appropriate incentives to build stockholder value.
Summary of the Amended Plan
Below is a summary of the principal provisions of the Amended Plan, which summary is qualified in its entirety by reference to the full text of the Amendment No. 2, which is attached asAppendix B to this Proxy Statement, and the Plan (as amended to date), which is attached asAppendix C to this Proxy Statement. The Amended Plan is identical to the Plan, except for the amendment to Section 1.7.All terms used in the Summary but not defined herein have the meanings assigned to such terms in the Amended Plan.
Purpose.The purpose of the Amended Plan is to promote the growth and general prosperity of the Company by permitting the Company to grant options to purchase Common Stock and restricted Common Stock of the Company to key employees, nonemployee directors, and advisors. The Amended Plan is designed to help the Company and its subsidiaries and affiliates attract and retain superior personnel for positions of substantial responsibility and to provide key employees, nonemployee directors, and advisors with an additional incentive to contribute to the success of the Company.
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Options and Stock Granted Under the Amended Plan. If an option terminates without being wholly exercised, new options or restricted stock may be granted hereunder covering the number of Amended Plan Shares to which such option termination relates.
Eligibility. Employees, nonemployee directors and advisors (individuals who are neither employees nor directors who perform substantial bona fide services to the Company) are eligible to participate in the Plan.
Administration. Administration of the Amended Plan is charged to a committee or committees appointed by the Board (the “Committee”). The Compensation Committee of the Board currently serves as the Committee of the Plan. The Committee has sole discretion and authority to determine which participants shall be granted options or restricted shares and the terms of such grants, to interpret the Amended Plan and any option or restricted stock agreement, to prescribe, amend and rescind any rules and regulations necessary or appropriate for the administration of the Plan, to modify or amend any option or restricted stock agreement or waive any conditions or restrictions applicable to any options (or the exercise thereof) or restricted stock, and to make all other determinations necessary or advisable for the administration of the Plan.
Limitation on Issuances of Amended Plan Shares. The maximum aggregate number of shares of Common Stock which may be issued under the Amended Plan shall during any given calendar year not exceed 5% of the total outstanding shares of the Company’s Common Stock during such calendar year.
Restricted Stock. The Committee shall have sole and complete authority to determine to whom shares of restricted stock shall be granted, the number of shares of restricted stock to be granted to each participant, the duration of the period during which, and the conditions under which, the restricted stock may be forfeited to the Company, and the other terms and conditions of such restricted stock. Dividends and other distributions paid on or in respect of any shares of restricted stock may be paid directly to the participant, or may be reinvested in additional shares of restricted stock as determined by the Committee in its sole discretion.
Adjustments Upon Changes in Capitalization.If the outstanding Common Stock is increased, decreased, changed into, or exchanged for a different number or kind of shares or securities through merger, consolidation, combination, exchange of shares, other reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or any other increase, or decrease in the number of issued shares of Common Stock effected without receipt of consideration by the Company (but not including conversion of convertible securities issued by the Company), an appropriate and proportionate adjustment shall be made in the maximum number and kind of shares as to which options may be granted under the Plan. A corresponding adjustment changing the number or kind of shares allocated to unexercised options or portions thereof that shall have been granted prior to any such change shall likewise be made. Any such adjustment in outstanding options shall be made without change in the aggregate purchase price applicable to the unexercised portion of the options, but with a corresponding adjustment in the price for each share covered by the options.
Amendment and Termination.The Amended Plan shall terminate on May 17, 2055, unless provided otherwise in an agreement between the Company and an optionee with respect to one or more options. No option shall be granted under the Amended Plan after the date of termination. The Committee may at any time amend or revise the terms of the Plan, including the form and substance of option agreements to be used in connection herewith; provided that no amendment or revision may be made without the approval of the compensationstockholders of our named executive officers, as disclosed in this Proxy Statementthe Company if such approval is required under applicable law or rule. No amendment, suspension or termination of the Amended Plan shall, without the consent of the individual who has received an option, alter or impair any of that individual’s rights or obligations under any option granted under the Amended Plan prior to that amendment, suspension or termination.
Purchase Price. The purchase price for shares acquired pursuant to the compensation disclosure rulesexercise, in whole or in part, of any option shall not be less than fair market value at the time of the SEC.grant of the option, where “fair market value” means such value as determined by the Committee on the basis of such factors as it deems appropriate on the basis of the reported sales prices for the Common Stock over a ten business day period ending on the date for which such determination is relevant, as reported on the Nasdaq National Market System; provided that, with respect to U.S. taxpayers, “fair market value” shall mean the closing price of the Common Stock as reported on the Nasdaq National Market System on the date of grant or, if the Common Stock is not listed, the average of the bid and asked priced of the Common Stock on the date of grant.
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OTHER INFORMATIONEffect of Optionees’ Rights Upon Termination of Employment or Service with the Company.In the event an optionee ceases to be an employee, nonemployee director or advisor for any reason other than death, permanent disability or misconduct, unless provided in an option agreement or in connection with a corporate transaction (described below), then, the unvested portion of such optionee’s option shall terminate immediately and cease to remain outstanding and the vested portion shall immediately terminate at the beginning of the 31st day following termination of optionee’s service.
Effect of Optionees’ Rights Upon Death, Permanent Disability or Misconduct. In the event an optionee ceases to serve as an employee, nonemployee director or advisor due to death, permanent disability or misconduct, the optionee’s options may be exercised as follows:
Death.Except as otherwise limited by the Committee at the time of the grant of an option, if an optionee dies while serving as, or within three months after ceasing to be, an employee, nonemployee director or advisor, his or her option shall become fully exercisable on the date of his or her death and shall expire 12 months thereafter, unless by its terms it expires sooner or unless the Committee agrees, in its sole discretion, to further extend the term of such option.
Disability.If an optionee ceases to serve as an employee, nonemployee director or advisor as a result of permanent disability, his or her option shall become fully exercisable and shall expire 12 months thereafter, unless by its terms it expires sooner or, unless the Committee agrees, in its sole discretion, to extend the term of such option.
Misconduct. Should the optionee cease to be an employee, nonemployee director or advisor because of misconduct, his or her option, whether vested or unvested, shall terminate immediately.
Corporate Transactions.In the event of any Corporate Transaction (defined below), each outstanding option shall automatically accelerate so that each such option shall, immediately prior to the effective date of Corporate Transaction, become fully exercisable. However, an outstanding option shall not so accelerate if: (i) such option is either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such option is to be replaced with a cash incentive program of the successor corporation or (iii) the acceleration of such option is subject to other limitations imposed by the Committee at the time of the option grant.
A “Corporation Transaction” is defined under theAmended Planas either of the following stockholder-approved transactions to which the Company is a party: (i) a merger or consolidation in which securities possessing more than 50% of the total combined voting power of the Company’s outstanding securities are transferred to a person or person different from the persons holding those securities immediately prior to such transaction or (ii.) the sale, transfer or other disposition of all or substantially all of the Company’s assets in complete liquidation or dissolution of the Company.
Immediately following the consummation of the Corporate Transaction, all outstanding Options shall terminate and cease to be outstanding, except to the extent assumed by the successor corporation (or parent thereof) as provided in Section VII of the Plan. The Committee shall have the discretion (i) to provide that any options which are assumed or replaced in the Corporate Transaction and do not otherwise accelerate at that time shall automatically accelerate in the event the optionee’s service should subsequently terminate by reason of an involuntary termination within 18 months following the effective date of such Corporate Transaction and (ii) to provide for the automatic acceleration of one or more outstanding options upon the occurrence of a Corporate Transaction, whether or not those options are to be assumed or replaced in the Corporation Transaction.
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Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Committee shall notify each Optionee as soon as practicable prior to the effective date of such proposed transaction. The Committee in its discretion may provide for an Optionee to have the right to exercise his or her Option until ten (10) days prior to such transaction as to all of the Optioned Stock covered thereby, including Shares as to which the Option would not otherwise be exercisable. In addition, the Committee may provide that any Company repurchase option applicable to any Shares purchased upon exercise of an Option shall lapse as to all such Shares, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the extent it has not been previously exercised, an Option will terminate immediately prior to the consummation of such proposed action.
Certain U.S. Federal Income Tax Consequences
Following is a brief summary of the United States federal income tax consequences for optionees who are granted nonqualified stock options (“NSO”) under the Stock Option Plan and who are subject to tax in the United States. This summary does not purport to address all tax considerations that are relevant. State, local, foreign and other taxes may differ. Each optionee is urged to consult his or her own tax advisor as to the specific tax consequences to such participant of the grant of an option, the vesting or exercise of an option, and the disposition of shares that may be issued pursuant to an option.
Generally, an optionee will not recognize income, and the Company is not entitled to a deduction, upon a grant of a NSO. On exercise, an optionnee will recognize as ordinary income the difference between the exercise price and the fair market value of the shares on the exercise date, unless the shares are subject to any restrictions on the optionnee's ownership or disposition thereof. At the time the optionee recognizes income, the Company is entitled to a deduction equal to the amount of income recognized by the optionee, assuming the deduction is allowed by section 162(m) of the Internal Revenue Code of 1986, as amended. Upon sale of the shares, the optionee will recognize long-term or short-term capital gain or loss depending on the sale price and holding period of the shares.
New Plan Benefits
The Reportawards, if any, that will be made to eligible participants under the Amended Plan are subject to the discretion of its administrator, and thus the Company cannot currently determine the benefits or number of shares subject to awards that may be granted in the future to its executive officers, employees and directors under the Amended Plan. Therefore, the New Benefits Table is not provided.
Vote Required
The approval of the Auditamendment to the Company’s Stock Option Plan requires the affirmative vote of a majority of the shares of the common stock present in person or represented by proxy and entitled to vote on the matter (assuming a quorum is present).
Recommendation of the Board of Directors
The Board recommends that the stockholders vote “FOR” the approval of this proposal.
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PROPOSAL 6 - APPROVAL OF THE CHINA BAK BATTERY, INC. 2015 EQUITY INCENTIVE PLAN
In light of the limited amount of shares available for future issuance under our Stock Option Plan, our stockholders are being asked to approve the 2015 Equity Incentive Plan (the "Equity Incentive Plan") which will be used to provide stock-based compensation to our employees, directors and consultants. Both our Compensation Committee set forthand Board of Directors have approved the Equity Incentive Plan, subject to stockholder approval at the Annual Meeting. The Equity Incentive Plan is subject to the approval of Proposal No. 3 regarding the increase of our authorized number of shares available for issuance from 20,000,000 to 500,000,000 shares of Common Stock. If our stockholders do not approve the Equity Incentive Plan, or if Proposal 3 is not approved, we will not implement the Equity Incentive Plan.
The Equity Incentive Plan is intended to allow the Company to obtain and retain the services of the types of employees, consultants and directors who will contribute to the Company’s long range success and to provide incentives that are linked directly to increases in share value which will inure to the benefit of all of our stockholders.
The Equity Incentive Plan became effective upon approval by the Board of Directors, but no award under the Equity Incentive Plan may be exercised or settled (or, in the case of stock awards, granted) until the Equity Incentive Plan is approved by the stockholders of the Company.
The following summary of the material features of the Equity Incentive Plan is qualified in its entirety by reference to the Equity Incentive Plan, a copy of which is attached asAppendix D. Unless otherwise defined, capitalized terms in this Proxy Statementsummary have the same meanings as provided in the Equity Incentive Plan.
Summary of the Equity Incentive Plan
Purpose. The purposes of the Equity Incentive Plan are to promote the long-term growth and profitability of the Company and its Affiliates by stimulating the efforts of Employees, Directors and Consultants of the Company and its Affiliates who are selected to be participants, aligning the long-term interests of participants with those of shareholders, heightening the desire of participants to continue in working toward and contributing to our success, attracting and retaining the best available personnel for positions of substantial responsibility, and generally providing additional incentive for them to promote the success of our business through the grant of Awards of or pertaining to our Common Stock. The Equity Incentive Plan permits the grant of ISOs, NSOs, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units and Performance Shares as the Administrator may determine.
Administration. The Equity Incentive Plan may be administered by our Board or a committee. The Equity Incentive Plan is currently being administered by our Compensation Committee. The Administrator has the authority to determine the specific terms and conditions of all Awards granted under the Equity Incentive Plan, including, without limitation, the number of Common Stock subject to each Award, the price to be paid for the Common Stock and the applicable vesting criteria. The Administrator has discretion to make all other determinations necessary or advisable for the administration of the Equity Incentive Plan.
Eligibility. NSOs, Restricted Shares, Restricted Share Units, Share Appreciation Rights, Performance Units and Performance Shares may be granted to Employees, Directors or Consultants either alone or in combination with any other Awards. ISOs may be granted only to employees of the Company, and of any Parent or Subsidiary.
Effect of Termination of Employment, Etc. Except for in connection with a Change of Control, unless the Administrator in its sole discretion shall at any time determine otherwise with respect to any Award, if the Participant’s employment or other association with the Company and its Affiliates ends for any reason, including because of the Participant’s employer ceasing to be an Affiliate, (a) any outstanding Options or SARs of the Participant shall cease to be exercisable in any respect not later than three (3) months following that event and, for the period it remains exercisable following that event, shall be exercisable only to the extent exercisable at the date of that event, and (b) any other outstanding Award of the Participant shall be forfeited or otherwise subject to return to or repurchase by the Company on the terms specified in the award agreement. Military or sick leave or other bona fide leave shall not be deemed a termination of employment or other association,provided thatit does not exceed the longer of three (3) months or the period during which the absent Participant’s reemployment rights, if any, are guaranteed by statute or by contract.
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Shares Available for Issuance Under the Equity Incentive Plan. Subject to adjustment as described below, (a) the maximum aggregate number of Shares that may be issued under the Equity Incentive Plan is 10,000,000 shares of Common Stock, (b) to the extent consistent with Section 422 of the Code, not more than an aggregate of 10,000,000 shares of Common Stock may be issued under ISOs, and (c) not more than 1,000,000 shares of Common Stock (or for Awards denominated in cash, the Fair Market Value of 1,000,000 shares of Common Stock on the Grant Date), may be awarded to any individual Participant in the aggregate in any one fiscal year of the Company, such limitation to be “soliciting material”applied in a manner consistent with the requirements of, and only to the extent required for compliance with, the exclusion from the limitation on deductibility of compensation under Code Section 162(m). The number and class of shares available under the Equity Incentive Plan are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, share splits, share dividends, or other similar events which change the number or kind of shares outstanding.
Vesting and Option Periods. The Administrator, in its sole discretion, may impose vesting schedules, limitations on transferability and forfeiture conditions on any Award granted under the Equity Incentive Plan as it may deem advisable or appropriate, on the basis of such conditions, including but not limited to, achievement of Company-wide, business unit, or individual goals (including, but not limited to, continued status as a Service Provider), or any other basis the Administrator may determine in its discretion. The Administrator, in its discretion, may accelerate the time at which any such restrictions will lapse or be removed. The Administrator may, in its discretion, also provide for such complete or partial exceptions to an employment or service restriction as it deems equitable. Unless terminated sooner in accordance with the Equity Incentive Plan, each Option shall expire either ten (10) years after the Grant Date, or after a shorter term as may be fixed in the award agreement.
Option Grants. An Option is the right to purchase our Common Stock at a future date at a specified price. Options granted under the Equity Incentive Plan may be either ISOs, within the meaning of Code section 422, or NSOs (i.e., options not intended to qualify as ISOs). The Administrator determines the terms of each Option at the time of grant, including the number of Common Stock covered by, the exercise price of, and the conditions and limitations applicable to the exercise of each Option (including vesting criteria); provided that (i) the exercise price of an Option may not be less than the Fair Market Value of a share of Common Stock or the par value of a share of Common Stock on the grant date and the term may not exceed ten years, (ii) ISOs may only be granted to Employees; (iii) if the optionee owns more than 10% of the total combined voting power of all classes of our shares, the exercise price of an ISO may not be less than 110% of the Fair Market Value of a share of Common Stock on the grant date and the option term may not exceed five years. To the extent that the aggregate Fair Market Value of the shares underlying ISOs that first become exercisable in any calendar year exceeds $100,000, such options will be treated as NSOs.
The Equity Incentive Plan permits the following forms of payment of the exercise price of Options:
• | cash or check; | |
• | to the extent not prohibited by Section 402 of the Sarbanes-Oxley Act of 2002, a promissory note; | |
• | other Common Stock, provided the Common Stock has a Fair Market Value on the date of exercise of the Option equal to the aggregate exercise price for the Common Stock as to which said Option will be exercised (such Common Stock will be repurchased by the Company at a repurchase price equal to their Fair Market Value); | |
• | to the extent not prohibited by Section 402 of the Sarbanes-Oxley Act of 2002, in accordance with any broker- assisted cashless exercise procedures approved by the Company and as in effect from time to time; | |
• | by requesting the Company to withhold such number of Common Stock then issuable upon exercise of the Option that have an aggregate Fair Market Value equal to the exercise price for the Option being exercised; |
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• | any combination of the foregoing; or | |
• | such other consideration and method of payment for the issuance of Common Stock to the extent permitted by Applicable Laws. |
Restricted Share Awards. The Administrator may, in its discretion, award Restricted Shares to Service Providers and may determine the number of Common Stock awarded and the terms and conditions (including vesting criteria) of, and the amount of payment (which may not be less than par value per share of Common Stock) to be “filed” withmade by the SEC orrecipient for such Restricted Shares. During the Period of Restriction, Restricted Shares shall be subject to Regulation 14Avesting or 14Cforfeiture (including a right of the Company to repurchase Restricted Shares at less than the then Fair Market Value per Share) arising on the basis of such conditions as the Administrator may determine in its sole discretion. Any such risk of forfeiture may be waived or terminated, or the Period of Restriction shortened, at any time by the Administrator on such basis as it deems appropriate. During the Period of Restriction, Service Providers holding Restricted Shares may exercise full voting rights with respect to those Common Stock and will be entitled to receive all dividends and other distributions paid with respect to such Common Stock. If any such dividends or distributions are paid in Common Stock, the Common Stock will be subject to the same restrictions on transferability and forfeitability as the Restricted Shares with respect to which they were paid. Except as provided in the Equity Incentive Plan, Restricted Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction.
Restricted Share Units. A Restricted Share Unit is the right to receive one share of Common Stock at the end of a specified period of time. The Administrator may, in its discretion, award Restricted Share Units to Service Providers in such number and upon such terms and conditions (including vesting criteria) as determined by the Administrator. During the Period of Restriction, Restricted Share shall be subject to vesting or forfeiture arising on the basis of such conditions as the Administrator may determine in its sole discretion. Any such risk of forfeiture may be waived or terminated, or the Period of Restriction shortened, at any time by the Administrator on such basis as it deems appropriate. The Administrator may, at its discretion, pay Restricted Share Units in cash, shares or a combination thereof. Restricted Share Units that are paid in cash will not reduce the number of shares available for issuance under the Exchange Act orEquity Incentive Plan. On the date set forth in the award agreement, all unearned Restricted Share Units are forfeited to the liabilitiesCompany.
Share Appreciation Rights. The Administrator may, in its discretion, award SARs to Service Providers in such number and upon such terms and conditions (including vesting criteria) as determined by the Administrator. The per share exercise price for the exercise of Section 18a SAR will be no less that the Fair Market Value or par value per share on the grant date. A SAR will expire upon the date determined by the Administrator, at its discretion, and set forth in the award agreement,provided thatno SAR is exercisable on or after the fifth anniversary of the Exchange Act.grant date. Upon exercise of a SAR, the recipient of the SAR is entitled to receive payment in an amount no greater than (i) the difference between the Fair Market Value of a share on the exercise date over the exercise price; times (ii) the number of shares with respect to which the SAR is exercised. At the discretion of the Administrator, the payment upon exercise of a SAR may be in cash, shares of equivalent value or some combination thereof.
Performance Units and Performance Shares. The Administrator may, in its discretion, award Performance Units or Performance Shares to Service Providers in such number and upon such terms and conditions as determined by the Administrator. Each Performance Unit will have an initial value established by the Administrator, at its discretion, on or before the grant date. Each Performance Share will have an initial value equal to the Fair Market Value of a share on the grant date. The Administrator shall, at its discretion, determine the performance objectives or other vesting provisions which will determine the number or value of the Performance Units or Performance Shares granted. After the applicable Performance Period has ended, the holder of Performance Units or Performance Shares will be entitled to receive a payout of the number of Performance Units or Performance Shares earned by the holder over the Performance Period as determined by the extent to which performance objectives were achieved. At the discretion of the Administrator, the payment upon earned Performance Units or Performance Shares may be in cash, shares of equivalent value or some combination thereof. On the date set forth in the award agreement, all unearned or unvested Performance Units or Performance Shares will be forfeited to the Company and again be available for grant under the Equity Incentive Plan.
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Adjustments, Dissolution, Liquidation, Merger or Change in Control. In the event that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, share split, reverse share split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Common Stock or other securities of the Company, or other change in the corporate structure of the Company, affecting the Common Stock occurs, the Administrator, in order to prevent diminution or enlargement of the benefits or potential benefits intended under the Equity Incentive Plan, shall adjust the number and kind of Common Stock that may be delivered under the Equity Incentive Plan and/or the number, class, and price of Common Stock covered by each outstanding Award.
In the event of the proposed dissolution or liquidation of the Company, the Administrator will notify each Participant as soon as practicable prior to the effective date of such proposed transaction. To the extent it has not been previously exercised, an Award will terminate immediately prior to the consummation of such proposed action.
In the event of a Change in Control, any or all outstanding Awards may be assumed or replaced by the successor corporation, which assumption or replacement shall be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to shareholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Common Stock of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event that the successor corporation does not assume or substitute for the Award, unless the Administrator provides otherwise, the Participant will fully vest in and have the right to exercise all of his or her outstanding Options and SARs, including Common Stock as to which such Awards would not otherwise be vested or exercisable, all restrictions on Restricted Shares and Restricted Share Units will lapse, and, with respect to Performance Shares and Performance Units, all Performance Goals or other vesting criteria will be deemed achieved at target levels and all other terms and conditions met. In addition, it shallif an Option or SAR is not assumed or substituted in the event of a Change in Control, the Administrator will notify the Participant in writing or electronically that the Option or SAR will be exercisable for a period of time determined by the Administrator in its sole discretion, and the Option or SAR will terminate upon the expiration of such period.
An Award that vests, is earned or paid-out upon the satisfaction of one or more performance goals will not be considered assumed if the Company or its successor modifies any of such performance goals without the Participant’s consent;provided, however, a modification to such performance goals only to reflect the successor corporation’s post-Change in Control corporate structure will not be deemed incorporatedto invalidate an otherwise valid Award assumption.
In the event of an involuntary termination of services of a Service Provider for any reason other than death, disability or cause within six (6) months following the consummation of a Change in Control, any of his or her Awards assumed or substituted in the Change in Control which are subject to vesting conditions and/or a right of repurchase in favor of the Company or a successor entity, shall accelerate in full. All such Accelerated Awards shall be exercisable for a period of one (1) year following termination, but in no event after expiration date of such Award.
Transferability. Unless otherwise provided in the Equity Incentive Plan or otherwise determined by referencethe Administrator, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Participant, only by the Participant. However, the Administrator may, at or after the grant of an Award other than an ISO, provide that such Award may be transferred by the recipient to a “family member” (as defined in the Equity Incentive Plan);provided, however, that any statementsuch transfer is without payment of any consideration whatsoever and that incorporates this Proxy Statementno transfer shall be valid unless first approved by reference into any filingthe Administrator, acting in its sole discretion, and as required by our Amended and Restated Articles of Association. If the Administrator makes an Award transferable, such Award will contain such additional terms and conditions as the Administrator deems appropriate.
Substitution and Assumption of Awards. The Administrator may make Awards under the Securities ActEquity Incentive Plan by assumption, substitution or replacement of performance shares, phantom shares, share awards, share options, share appreciation rights or similar awards granted by another entity (including an Affiliate), if such assumption, substitution or replacement is in connection with an asset acquisition, share acquisition, merger, consolidation or similar transaction involving the Company (and/or its Affiliate) and such other entity. The Administrator may also make Awards under the Equity Incentive Plan by assumption, substitution or replacement of a similar type of award granted by the Company prior to the adoption and approval of the Equity Incentive Plan.
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Repricing; Exchange Act, exceptand Buyout of Awards. The repricing or termination and subsequent repricing of Options or SARs at a lower purchase price per share of Common Stock than the original grant is permitted without prior shareholder approval. The Administrator may authorize the Company to issue new Option or SAR Awards in exchange for the surrender and cancellation of any or all outstanding Awards, subject to the consent of the Participant whose rights would be impaired. The Administrator may at any time repurchase Options with payment in cash, Common Stock or other consideration, based on such terms and conditions as the Administrator and the Participant shall agree.
Termination of, or Amendments to, the Equity Incentive Plan. The Board may at any time amend, alter, suspend or terminate the Equity Incentive Plan, provided that the Company will obtain shareholder approval of any Equity Incentive Plan amendment to the extent that we specifically incorporate this informationnecessary and desirable to comply with Applicable Laws. No amendment, alteration, suspension or termination of the Equity Incentive Plan will impair the rights of any Participant, unless mutually agreed otherwise between the Participant and the Administrator, which agreement must be in writing and signed by reference.the Participant and the Company. Termination of the Equity Incentive Plan will not affect the Administrator’s ability to exercise the powers granted to it hereunder with respect to Awards granted prior to the date of such termination.
GENERALU.S. Federal Income Tax Consequences
AtThe following is a brief summary of the United States federal income tax consequences relating to Awards granted under the Equity Incentive Plan for participants. This summary is based on the federal tax laws in effect as of the date of this Proxy Statement, managementStatement. The summary is limited to the federal income tax consequences for individuals who are U.S. citizens or residents for U.S. federal income tax purposes and the summary does not purport to address all tax considerations that are relevant. State, local, foreign and other taxes may differ. In addition, this summary assumes that all Awards are exempt from, or comply with, Internal Revenue Code section 409A. Each participant is urged to consult his or her own tax advisor as to the specific tax consequences to such participant of the grant of an Award, the vesting or exercise of an Award, and the disposition of shares that may be issued pursuant to an Award.
Incentive Share Options. Generally, a participant will not recognize income upon a grant or exercise of an ISO. At exercise, however, the excess of the Fair Market Value of the shares acquired upon such exercise over the option price is an item of adjustment in computing the participant’s alternative minimum taxable income. If the participant holds the shares received upon exercise of an ISO for more than two years from the grant date and one year from the date of exercise, any gain realized on a disposition of the shares is treated as long-term capital gain. If the participant sells the shares received upon exercise prior to the expiration of such periods (a “disqualifying disposition”), the participant will recognize ordinary income in the year of the disqualifying disposition equal to the excess of the Fair Market Value of such shares on the exercise date over the option price (or, if less, the excess of the amount realized upon disposition over the option price). The excess, if any, of the sale price over the Fair Market Value on the exercise date will be capital gain.
Our Company is not entitled to a tax deduction as the result of the grant or exercise of an ISO. If the participant has ordinary income as compensation as a result of a disqualifying disposition, our Company is entitled to a deduction at the same time equal to the amount of ordinary income realized by the participant, assuming the deduction is allowed by Section 162(m) of the Internal Revenue Code.
Nonstatutory Share Options. Generally, a participant will not recognize income, and our Company is not entitled to a deduction, upon a grant of a NSO. On exercise, a participant will recognize as ordinary income the difference between the exercise price and the Fair Market Value of the shares on the exercise date, unless the shares are subject to certain restrictions on the participant’s ownership or disposition thereof. At the time the participant recognizes income, our Company is entitled to a deduction at the same time equal to the amount of ordinary income realized by the participant, assuming the deduction is allowed by Section 162(m) of the Internal Revenue Code. Upon disposition of the shares acquired by exercise of the Option, the participant will recognize long-term or short-term capital gain or loss depending upon the sale price and holding period of the shares.
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Share Appreciation Rights. Generally, a participant will not recognize income, and our Company is not entitled to a deduction, upon a grant of a SAR. When a participant exercises a SAR, the amount of cash and the Fair Market Value of the shares received will be ordinary income to the participant and will be deductible by our Company to the extent allowed by Section 162(m) of the Internal Revenue Code. Upon disposition of any shares acquired by exercise of a SAR, the participant will recognize long-term or short-term capital gain or loss depending upon the sale price and holding period of the shares.
Restricted Shares. Generally, a participant will not recognize income, and our Company is not entitled to a deduction, upon a grant of Restricted Shares. A participant may make an election under Section 83(b) of the Internal Revenue the Code to be taxed on the difference between the purchase price of the award and the fair market value of the award on the grant date.
Otherwise, upon the lapse of restrictions on Restricted Shares, the participant generally recognizes ordinary compensation income equal to the fair market value of the shares as of the date on which the restrictions lapse less the purchase price (if any) paid by the participant. When the participant recognizes ordinary income, the amount recognized by the participant will be deductible by our Company to the extent allowed by Section 162(m) of the Internal Revenue Code. Upon disposition of any shares acquired through Restricted Share awards, the participant will recognize long-term or short-term capital gain or loss depending upon the sale price and holding period of the shares.
Restricted Share Units. Generally, a participant will not recognize income, and our Company is not entitled to a deduction, upon a grant of Restricted Share Units. Upon the delivery to the participant of Common Stock or cash in respect of Restricted Share Units, the participant generally recognizes ordinary compensation income equal to the Fair Market Value of the shares as of the date of delivery or the cash amount less the purchase price (if any) paid by the participant. When the participant recognizes ordinary income, the amount recognized by the participant will be deductible by our Company to the extent allowed by Section 162(m) of the Internal Revenue Code. Upon disposition of any shares acquired through a Restricted Share Unit award, the participant will recognize long-term or short-term capital gain or loss depending upon the sale price and holding period of the shares.
Performance Units and Performance Share Awards. Generally, a participant will not recognize income, and our Company is not entitled to a deduction, upon a grant of a Performance Unit or a Performance Share award. Generally, at the time a Performance Unit or Performance Share award is settled, following the determination that the performance targets have been achieved, the Fair Market Value of the shares delivered on that date, plus any cash that is received, constitutes ordinary income to the participant, and, provided the requirements of Section 162(m) of the Internal Revenue Code are met, our Company is entitled to a deduction for that amount. Upon disposition of any shares acquired through a Performance Unit or Performance Share Award, the participant will recognize long-term or short-term capital gain or loss depending upon the sale price and holding period of the shares.
Withholding. Our Company generally must collect and pay withholding taxes upon the exercise of a NSO or SAR, upon the earlier of the filing of a Section 83(b) election or upon the release of restrictions on Restricted Shares, and at the time that Restricted Share Units, Performance Shares or Performance Units are settled by delivering shares or cash to a participant.
New Plan Benefits
To date, we have not granted any awards under the Equity Incentive Plan and we cannot now determine the number or type of awards to be granted in the future. Future grants of awards under the Plan are subject to the discretion of our Compensation Committee.
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Vote Required
The approval of Equity Incentive Plan requires the affirmative vote of a majority of the shares of the common stock present in person or represented by proxy and entitled to vote on the matter (assuming a quorum is present).
Recommendation of the Board
The Board believes that it is in the Company’s best interests and in the best interests of the shareholders to adopt the Equity Incentive Plan to help attract, motivate and retain outstanding employees, directors, and consultants and to align further their interests with those of shareholders.
The Board recommends a voteFORthe approval of the Equity Incentive Plan, subject to the approval of Proposal 3.
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OTHER MATTERS
Our Board of Directors is not aware of any mattersbusiness to be presented for action atcome before the Annual Meeting other than those matters described above.above in this Proxy Statement. However, if any other matters should properly come before the Annual Meeting, it is the intention of the persons namedintended that proxies in the accompanying proxy to vote such proxyform will be voted in accordance with their bestthe judgment on such matters.of the person or persons voting the proxies.
STOCKHOLDER COMMUNICATIONS
The Company has a process for stockholders who wish to communicate with the Board.Board of Directors. Stockholders who wish to communicate with the Board of Directors may write to it at the Company’s address given above. These communications will be reviewed by one or more employees of the Company designated by the Board of Directors, who will determine whether they should be presented to the Board.Board of Directors. The purpose of this screening is to allow the Board of Directors to avoid having to consider irrelevant or inappropriate communications.
STOCKHOLDER PROPOSALS FOR THE 20152016 ANNUAL MEETING
If you wish to have a proposal included in our proxy statement for next year’s annual meeting in accordance with Rule 14a-8 under the Exchange Act, your proposal must be received by the Secretary of the Company at BAK Industrial Park, Meigui Street, Huayuankou Economic Zone, Dalian City, 116422, China, no later than December 31, 2014.2015. A proposal which is received after the applicable date or which otherwise fails to meet the requirements for stockholder proposals established by the SEC will not be included. The submission of a stockholder proposal does not guarantee that it will be included in the proxy statement.
ANNUAL REPORT ON FORM 10-K
We will provide without charge to each person solicited by this Proxy Statement, on the written request of such person, a copy of our Annual Report on Form 10-K with any amendments, including the financial statements and financial statement schedules, as filed with the SEC for our most recent fiscal year. Such written requests should be directed to the Secretary of the Company, at our address listed on the top of page one of this Proxy Statement. A copy of our Annual Report on Form 10-K, with any amendments, is also made available on our website atwww.cbak.com.cn after it is filed with the SEC.