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
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CHINA BAK BATTERY,CBAK ENERGY TECHNOLOGY, INC.
(Name of Registrant as Specified In Its Charter)
_____________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On June 12, 2015September 22, 2017
To the Stockholders of CHINA BAK BATTERY,CBAK ENERGY TECHNOLOGY, INC.:
You are cordially invited to attend the 20152017 Annual Meeting of Stockholders (the “Annual Meeting”) of China BAK Battery,CBAK Energy Technology, Inc., a Nevada corporation (the “Company”) on Friday, June 12, 2015,September 22, 2017, at 9:00 a.m., local time, at BAK Industrial Park, Meigui Street, Huayuankou Economic Zone, Dalian City, 116422,116450, China.
We are now filing this proxy statement on Schedule 14A (the “Proxy Statement”) with the Securities 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 | |
3. | To | |
4. | To vote to approve, on an | |
5. |
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To transact such other business as may properly come before the Annual Meeting or at any postponement or adjournment of the Annual Meeting. |
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 April 20, 2015July 27, 2017 (the “Record Date”) are entitled to notice and to vote at the Annual Meeting and any adjournment or postponement thereof.
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 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/ | |
Secretary | |
TABLE OF CONTENTS
CHINA BAK BATTERY,CBAK ENERGY TECHNOLOGY, INC.
BAK Industrial Park,
Meigui Street, Huayuankou Economic Zone,
Dalian City, 116422,116450, China
_______________________
PROXY STATEMENT_______________________
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,CBAK Energy Technology, Inc., a Nevada corporation (the “Company” or “we”), for the Company’s Annual Meeting of Stockholders (the “Annual Meeting”). The Annual Meeting is to be held at 9:00 a.m., local time, on Friday, June 12, 2015,September 22, 2017, 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, 116422,116450, China.
The approximate date on which the Proxy Statement and the accompanying notice and form of proxy are intended to be sent or made available to stockholders is on or about April 24, 2015.July 31, 2017.
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
Why am I receiving these materials?
Our records indicate that you owned your shares of Company Common Stock at the close of business on April 20, 2015July 27, 2017 (the “Record Date”). You have been sent this Proxy Statement and the enclosed proxy because the Company is soliciting your proxy to vote your shares of Common Stock at the Annual Meeting on the proposals described in this Proxy Statement.
What proposals am I voting onwill be voted at the Annual Meeting?
SixFour proposals will be voted on at the Annual Meeting:
(1) |
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(2) |
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(3) | A vote to approve, on an | |
(4) | A vote to approve, on an |
We will also consider any other business that properly comes before the Annual Meeting. If any other matters are properly brought before the Annual Meeting, the persons named in the enclosed proxy card or voter instruction card will vote the shares they represent using their judgment.
What are the recommendations of the Board of Directors?
Our Board of Directors unanimously recommends that you vote:
(1) | “For” the election of the |
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(2) | “For” the ratification of the appointment of Centurion ZD CPA Limited as | |
“For” the proposal regarding a vote to | ||
(4) | “EVERY THREE YEARS” for the proposal regarding a |
1Will there be any other items of business on the agenda?
The Board of Directors knows of no other matters that will be presented for consideration at the Annual Meeting. Nonetheless, in case there is an unforeseen need, the accompanying proxy gives discretionary authority to the persons named on the proxy with respect to any other matters that might be brought before the Annual Meeting or at any postponement or adjournment of the Annual Meeting. Those persons intend to vote that proxy in accordance with their judgment. If for any reason any of the nominees are not available as candidates for director, and our Board of Directors has not reduced the authorized number of directors on our Board of Directors, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors. |
Who is entitled to vote at the Annual Meeting?
All owners of our Common Stock as of the close of business on the Record Date are entitled to vote their shares of Common Stock at the Annual Meeting and any adjournment or postponement thereof. As of the Record Date, a total of 12,619,59726,223,317 shares of Common Stock are outstanding and eligible to vote at the Annual Meeting. Each share of Common 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
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. Other than routine matters, such as a proposal to ratify an independent registered public accounting firm, your broker will not be able to vote your shares unless your broker receives specific voting instructions from you. You must give your broker voting instructions in order for your vote to be counted on the proposal to elect directors (Proposal 1), the proposal regarding a vote to approve, on an advisory basis, the compensation of our Named Executive Officers (Proposal 3) and the proposal regarding a vote to approve, on an advisory basis, the frequency of the voting with respect to the compensation of our Named Executive Officers (Proposal 4). We strongly encourage you to vote.
How do I vote?
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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.
You may vote using any of the 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 | |
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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 a stockholder of record, you may revoke your proxy at any time prior to the vote at the Annual Meeting. If you submitted your proxy by mail, or fax, you must file with our Secretary or proxy solicitor a written notice of revocation or deliver, prior to the vote at the Annual Meeting, a valid, later-dated proxy. If you submitted your proxy by the Internet, you may revoke your proxy with a later 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 written 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, by attending the meeting and voting in 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.
What constitutes a quorum and how will votes be counted?
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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 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, 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, such as the ratification of Crowe Horwath (HK)the appointment of Centurion ZD CPA Limited as our independent registered public accounting firm for our fiscal year ending September 30, 20152017 (Proposal 2) and the approval of 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), 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, such as the uncontested election of our directors (Proposal 1), the amendmentvote to approve, on an advisory basis, the compensation of our Articles of IncorporationNamed Executive Officers (Proposal 3) and the vote to authorize 10,000,000 shares of Preferred Stockapprove, on an advisory basis, the frequency of the Companyvoting with respect to the compensation of our Named Executive Officers (Proposal 4), the amendment to Section 1.7 of the Company’s Stock Option Plan (Proposal 5) and the approval of the China 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 or any postponement or adjournment of the Annual Meeting, but will not be counted for purposes of determining the number of shares represented and voted with respect to an individual proposal, and therefore will have no effect on the outcome of the vote on 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 number of shares necessary for approval.
How are proxies being solicited and who will pay for the solicitation of proxies?
This proxy solicitation is being made by the Company on behalf of the Board of 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 $5,500 plus reasonable out-of- pocket expenses. In addition, weWe 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 solicited by certain of our directors, officers and regular employees personally or by telephone, facsimile or electronic mail. No additional compensation will be paid to these persons for such services.
I am a stockholder, and I only received a copy of the Notice of Internet Availability of Proxy Materials (“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 our stockholders of record and beneficial owners of shares by providing access to such documents on the Internet instead of mailing printed copies. Stockholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice, which was mailed to our stockholders, will instruct you as to how you may access and review all of the proxy materials on the Internet. If you would like to receive a paper or electronic copy of our proxy materials, you should follow the instructions for requesting such materials in 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 the 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 the Notice and, if applicable, the proxy materials to any stockholder at a shared address to which we delivered a single copy of any of these documents. To receive a separate copy of the Notice and, if applicable, these proxy materials, stockholders may contact:
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Corporate SecretaryChina BAK Battery,CBAK Energy Technology, Inc.
BAK Industrial Park,
Meigui Street, Huayuankou Economic Zone,
Dalian City, 116422,116450, China
Telephone: 86-411-39185985; Fax: 86-411-39185980
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 |
The Notice of Annual Meeting of Stockholders, Proxy Statement and |
available at |
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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 April 10, 2015July 27, 2017 (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 named executive officers and directors as a group:
Names of Management and Names | Amount and Nature of | |||||
of Certain Beneficial Owners(1) | Beneficial Ownership(1) | |||||
Number(2) | Percent(3) | |||||
Xiangqian Li(4) | 3,910,778 | 31.0% | ||||
Chunzhi Zhang(5) | 3,500 | * | ||||
Martha C. Agee | 0 | * | ||||
Jianjun He | 0 | * | ||||
Guosheng Wang | 0 | * | ||||
All executive officers and directors as a group (5 persons) | 3,914,278 | 31.0% |
Names of Management and Names | Amount and Nature of | |||||
of Certain Beneficial Owners(1) | Beneficial Ownership(1) | |||||
Number(2) | Percent(3) | |||||
Yunfei Li(4) | 3,806,018 | 14.4% | ||||
J. Simon Xue(5) | 10,000 | * | ||||
Martha C. Agee(6) | 17,500 | * | ||||
Jianjun He(6) | 17,500 | * | ||||
Guosheng Wang(7) | 31,667 | * | ||||
Wenwu Wang(8) | 35,834 | * | ||||
All executive officers and directors as a group (6 persons) | 3,918,519 | 14.9% |
* | Denotes less than 1% of the outstanding shares of Common Stock. |
(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 |
(4) |
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(5) | On April 19, 2016, pursuant to the 2015 Plan, the Company granted Dr. Xue an aggregate of |
On June | |
(7) | On |
(8) | On June 30, 2015, Mr. Wenwu Wang was granted 50,000 restricted shares of the Company’s common stock under the 2015 Plan. The restricted |
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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 1. - ELECTION OF DIRECTORS
Our 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 Board of Directors 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, 116422,116450, China; via email at IR@cbak.com.cn; or via fax at (86)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 20162018 annual meeting, recommendations must be received by the Secretary of the Company not later than the close of business on December 31, 2015.2017.
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 | |||
51 | Chairman, President and Chief Executive Officer | March 2016 | ||||
Jianjun He | 45 | Director | November 2013 | |||
63 | Director | February 2016 | ||||
Martha C. Agee | 62 | Director | November 2012 | |||
Guosheng Wang | 45 | Director | August 2014 |
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 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 Nominees for Director
XiangqianYunfei Li has served as the chairman of our board, our president and chief executive officer since JanuaryMarch 1, 2016. Mr. Li has more than 20 2005. Heyears management experience in industries of real estate development, battery and new energy. Since May 2014, he has been a directorVice President of the Company’s subsidiary, Dalian BAK International Limited, or BAK International, our Hong Kong incorporated subsidiary, since November 2004.Power Battery Co., Ltd in charge of the company’s construction of manufacturing facilities, government relationship and development of new customers. From May 2010 to May 2014, Mr. Li is the founderheld management positions of various new energy development and has served as the chairmanreal estate development companies in China. Prior to that, he was Director of the boardConstruction Department, Director of Comprehensive Management Department and Assistant to President of Shenzhen BAK Battery Co., Ltd., or Shenzhen BAK, or Shenzhen BAK, our indirect wholly owneda former subsidiary since its inception in August 2001, and served as Shenzhen BAK’s general manager since December 2003. From June 2001of the Company, from March 2003 to June 2003,May 2010. Mr. Li was the chairman of Huaran Technology Co., Ltd.,holds a PRC-incorporated company engaged in the car audio business. Mr. Li received a bachelor’sBachelor’s degree in thermal energy and power engineeringCivil Engineering from the Lanzhou Railway Institute, China and a doctorate degree in quantitative economics from Jilin University in China.Liao Yuan Vocational Technical College.
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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 Chairmanhas held management positions of various othernew energy development and real estate development companies since 2001.in China.
Jianjun Hehas served as our director since November 4, 2013. Mr. He has more than 15 years16-year 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.
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 ZhangJ. Simon Xuehas served as our director since June 25, 2007. Since mid-2005, Mr. ZhangFebruary 1, 2016. Dr. Xue has approximately 40 years experience in nuclear chemistry, solid state chemistry, superconductivity and materials for Lithium ion batteries. Within his research career, he has spent 21 years in the research and development of Lithium ion battery. Dr. Xue is currently the Senior Director of National Institute for Low-&-Clean Energy in China and a member of National “Thousand Talent” Plan and a member of Expert Committee for “Chinese Industrial Association of Power Sources.” Prior to that, Dr. Xue was a director of Altair Nanotechnologies Inc., a Delaware company, between August 2011 and April 2012. From 2010 to 2011, he served as General Managerthe chief executive officer 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 HoldingYintong Energy Co., Ltd., a subsidiary of Canon Investment Holdings Ltd. Dr. Xue has also held positions at Ultralife, Duracell, B&K Electronics Co., Ltd., Valence Energy-Tech (Suzhou) Co., A123 Systems Inc. and International Battery Inc. He enjoys an extensive reputation in the whole product chain of lithium ion battery in China, central government-owned enterprise. Mr. Zhang receivedincluding materials, equipment, cell manufacturing and testing. He has authored or co-authored over 50 scientific articles, 12 patents relevant to battery chemistry and materials and participated, presented and hosted more than 30 battery or material related international conferences. Dr. Xue completed his bachelor degreePh.D. program in Economy from JilinSolid State Chemistry in McMaster 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.1992.
Director Qualifications: Mr. Zhang,Dr. Xue, Chair of the Compensation Committee, is experienced in securities analysis and investment. Mr. Zhang has accumulated thisapproximately 40 years experience in managerial positions in firmsnuclear chemistry, solid state chemistry, superconductivity and materials for Lithium ion batteries. Within his research career, he has spent 21 years in the securities industry since 1998.research and development of Lithium ion battery.
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.
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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.”
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 | |
|
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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.
Director Independence
Our Board of Directors has determined that each of our non-employee directors, Mr. Zhang,Xue, 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. Yunfei Li’s experience and tenure of having been Chairmanofficers of the Company since 2003, and Chief Executive Officer since 2005, and feltbelieved that his experience, knowledge, and personality allowed himMr. Li is highly qualified to serve ablyact as both Chairman and Chief Executive Officer.Officer due to his experience, knowledge, and personality. 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 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.
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 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
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| ||
• | 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. |
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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“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, 2014,2016, the Board held a total of eightfour 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 20142016 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.cbak.com.cn.
Audit Committee
Our Audit Committee consists of three members: Martha C. Agee, Chunzhi ZhangJ. Simon Xue and Jianjun He. Pursuant to the determination of our Board of Directors, Ms. 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. 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 rules 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, 2014,2016, the Audit Committee held four meetings, in compliance with its Charter. The Audit Committee is responsible for, among other things:
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• | 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; |
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• | 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
Our Compensation Committee consists of three members: Martha C. Agee, Chunzhi ZhangJ. Simon Xue and Jianjun He, with Mr. ZhangXue serving as 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 rules at all times during their service on such Committee. The Compensation Committee held one meeting meetings during the fiscal year ended September 30, 2014.2016.
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:
• | 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
Our Nominating and Corporate Governance Committee consists of three members: Martha C. Agee, Chunzhi ZhangJ. Simon Xue and Jianjun He, with Mr. He serving as 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 held two meetings during the fiscal year ended September 30, 2014,2016, 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:
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• | annually presenting to the Board a list of individuals recommended for nomination for election to the Board at the annual meeting of stockholders, and for appointment to the committees of the Board; | |
• | 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, 2014,2016, 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, 20142016
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” meeting the independence requirements of the Listing 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 financial expert” within the meaning of Item 401(e) of SEC Regulation 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 charter adopted by the Board. The Audit Committee is responsible for overseeing the corporate accounting and financing 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.
Following the end of the fiscal year ended September 30, 2014,2016, the Audit Committee (1) reviewed and discussed the audited financial statements for the fiscal year ended September 30, 20142016 with Company management; (2)management. The Audit Committee has also discussed with the independent auditors the matters required to be discussed by Statement onPCAOB Auditing StandardsStandard No. 61,1301, “Communications with Audit Committees” as amended (AICPA, Professional Standards , Vol. 1. AU section 380), asand adopted by PCAOB. PCAOB Auditing Standard No. 1301 requires an auditor to discuss with the PCAOBAudit Committee, among other things, the auditor’s judgments about the quality, not just the acceptability, of the accounting principles applied in Rule 3200T; and (3)the Company’s financial reporting. In addition, the Audit Committee has received the written disclosures and the lettersletter from the independent accountantsregistered public accounting firm required by applicable requirements of the PCAOB regarding the independent accountants’ communicationsRule 3526, “Communication with the Audit Committee concerning independence,Committees Concerning Independence,” and has discussed with the independent accountants their independence.registered public accounting firm its independence from the Company.
Based on the review and discussions referred to above, the Audit Committee had recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 20142016 for filing with the SEC.
/s/ The Audit Committee | |
Martha C. Agee, Chair | |
Jianjun He |
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to Xiangqian Li, our Chiefthe named persons (“Name Executive OfficerOfficers”) for services rendered in all capacities during fiscal years 2014 and 2013.the noted periods. No other executive officersofficer received total annual salary and bonus compensation in excess of $100,000 in either fiscal year.$100,000.
Stock | Stock | |||||||||||||||||||
Awards | Option | Awards | Option | |||||||||||||||||
Name and Principal Position | Year | Salary ($)(1) | ($)(2) | Awards ($)(2) | Total ($) | Year | Salary | ($)(3) | Awards | Total ($) | ||||||||||
Xiangqian Li, President, Chief Executive Officer | 2014 | 39,044 | - | - | 39,044 | |||||||||||||||
2013 | 38,776 | - | - | 38,776 | ($)(1) | ($) | ||||||||||||||
Yunfei Li, President, Chief Executive Officer(2) | 2016 | 92,044 | 24,300 | 116,344 | ||||||||||||||||
2015 | - | - | - | - | ||||||||||||||||
Wenwu Wang, Interim Chief Financial Officer | 2016 | 48,531 | 54,000 | 102,531 | ||||||||||||||||
2015 | 49,300 | 27,000 | - | 76,300 | ||||||||||||||||
Xiangqian Li, former President and Chief Executive Officer(2) | 2016 | 9,185 | 9,185 | |||||||||||||||||
2015 | 21,214 | - | - | 21,214 |
(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 6.14696.5325 (fiscal year 20142016 exchange rate), $1.00 to RMB 6.1894RMB6.2224 (fiscal year 20132015 exchange rate).
(2) Mr. Yunfei Li became our President and Chief Executive Officer on March 1, 2016 upon the resignation of Mr. Xiangqian Li.
(3) The amounts representedstock awards consisted of restrict shares granted on June 30, 2015, which are vested and exercisable in twelve equal quarterly installment with the stockfirst vesting date of June 30, 2015 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,with 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 thefair value of option and restricted stock awards are set forth under Note 16 of the Notes to Consolidated Financial Statements of this annual report.$3.24.
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.
We entered into employment agreements with three-year initial terms with our named executive officers with standard employment agreements. We entered into the employment agreements with Mr. Yunfei Li and Mr. Wenwu Wang on JuneMarch 1, 2016 and September 30, 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, 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,
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• | 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 20142016
There were noThe following table sets forth the equity awards outstanding as ofat September 30, 2014 that were granted to2016 for each of our named executive officers. Our Chief Executive
OUTSTANDING | |||||||||
EQUITY | |||||||||
AWARDS AT | |||||||||
FISCAL | |||||||||
YEAR-END | |||||||||
Option | Stock | ||||||||
Awards | Awards | ||||||||
Name | Number of | Number of | Equity | Option | Option | Number | Market | Equity | Equity |
securities | securities | incentive | exercise | expiration | of | value | incentive | incentive | |
underlying | underlying | plan awards: | price | date | shares | of | plan | plan | |
unexercised | unexercised | Number of | ($) | or units | shares | awards: | awards: | ||
options (#) | options (#) | securities | of stock | or units | Number | Market or | |||
exercisable | unexercisable | underlying | that | of | of | payout | |||
unexercised | have | stock | unearned | value of | |||||
unearned | not | that | shares, | unearned | |||||
options (#) | vested | have | units or | shares, | |||||
(#) | not | other | units or | ||||||
vested | rights | other | |||||||
(#) | that have | rights that | |||||||
not | have not | ||||||||
vested | vested ($) | ||||||||
(#) | |||||||||
Yunfei Li | - | - | 165,000* | 371,250 | |||||
Wenwu Wang, | - | - | 45,000# | 101,250 | |||||
Interim Chief | |||||||||
Financial Officer |
* On June 30, 2015, 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 expired on May 28, 2013. Mr. Li was also granted 100,00030,000 restricted shares of the Company’s common stock, par value $0.001, under the Stock Option2015 Equity Incentive Plan of the Company (the “2015 Plan”). The restricted shares vest over a three year period in 12 equal quarterly installments with the first vesting date on June 30, 2015. On April 19, 2016, pursuant to the 2015 Plan, the Company granted Mr. Li an aggregate of 150,000 restricted shares of the Company’s common stock. The restricted shares vest semi-annually in 6 equal installments over a three year period with the first vesting on December 31, 2016.
#On June 30, 2015, Mr. Wang was granted 50,000 restricted shares of the Company’s common stock, par value $0.001, under the 2015 Plan. The restricted stock is subject toshares vest over a five-year vesting schedule. All of the restricted stock has been vestedthree year period in twenty12 equal quarterly installments onwith the first dayvesting date on June 30, 2015. On April 19, 2016, pursuant to the 2015 Plan, the Company granted Mr. Wang an aggregate of each fiscal quarter beginning20,000 restricted shares of the Company’s common stock. The restricted shares vest semi-annually in 6 equal installments over a three year period with the first vesting on October 1, 2009.December 31, 2016.
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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.
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 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.
On June 30, 2015, each of our independent directors was granted 30,000 restricted shares of the Company’s common stock, par value $0.001, under the 2015 Plan. The restricted shares vest over a three year period in 12 equal quarterly installments with the first vesting date on June 30, 2015.
On April 19, 2016, pursuant to the 2015 Plan, the Company granted Dr. Xue an aggregate of 30,000 restricted shares of the Company’s common stock. The restricted shares vest semi-annually in 6 equal installments over a three year period with the first vesting on December 31, 2016.
The following table sets forth the total compensation earned by our non-employee directors during our fiscal year ended September 30, 2014:2016:
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Fees | Fees Earned | |||||||||||||||||
Earned or | or | |||||||||||||||||
Name | Paid in | Stock | Total ($) | Paid in | Stock | Total ($) | ||||||||||||
Cash ($) | Awards ($) | Cash ($) | Awards ($) | |||||||||||||||
Chunzhi Zhang | 20,000 | - | 20,000 | |||||||||||||||
J. Simon Xue | 13,333 | - | 13,333 | |||||||||||||||
Martha C. Agee | 20,000 | - | 20,000 | 20,000 | 32,400 | 52,400 | ||||||||||||
Jianjun He | 20,000 | - | 20,000 | 20,000 | 32,400 | 52,400 |
We do not maintain a medical, dental or retirement benefits plan for the directors.
WeExcept as disclosed in this annual report, we have not compensated, and will not compensate, our non-independent directors, Mr. XiangqianYunfei 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.
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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 2014.ended September 30, 2016.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Transactions with Related Persons
We haveobtained a one-year term outstanding short-term bank loanthree-year banking facilities of $4.9$19.5 million from Bank of Dandong bearing a fixed interest rate at 7.8% per annum.Dandong. The loan isbanking facilities were guaranteed by Shenzhen BAK Battery Co., LtdMr. Yunfei Li (“Shenzhen BAK”Mr. Li”), our former subsidiaryCEO, and Ms. Qinghui Yuan, Mr. XiangqianLi’s wife, Mr. Xianqian Li, our CEO.former CEO, Ms. Xiaoqiu Yu, the wife of our former CEO, and Shenzhen BAK, our former subsidiary. We also obtained a one-year banking facilities of $7.5 million from Bank of Dalian. The banking facilities were guaranteed by Mr. Li, Ms. Qinghui Yuan, and Shenzhen BAK. Mr. Yunfei Li did not receive and is not entitled to receive any consideration for 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.
After the foreclosuredisposal of BAK International Limited and its subsidiaries effective on June 30, 2014,prior to the completion of construction of the new manufacturing site in Dalian, we generated our revenues from sale of batteries via subcontracting the production to BAK Tianjin, a former subsidiary. Also, from time to time, in order to meet the needs of our customers, we purchased products from these former subsidiaries owed us a sum of $17,844,674. As ofthat we did not produce.
For the years ended September 30, 2014, our former subsidiaries had:2015 and 2016, we purchased inventories of (i) $10.5 million and $2.7 million from BAK Tianjin, respectively; and (ii) nil and $5.6 million from Shenzhen BAK, respectively.
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As ofFor the years ended September 30, 2014, our former subsidiaries, Shenzhen BAK2015 and BAK International (Tianjin) Ltd. (“BAK Tianjin”) owed us aggregate amount2016, we purchased inventories of $9,117,445 which were interest-free, unsecured$395,593 and repayable on demand.
As of September 30, 2014, we obtained an advancenil, respectively, from Tianjin BAK New Energy Research Institute Co.CO., Ltd, a related party under the common control ofLtd. (“Tianjin New Energy”). Mr. Xiangqian Li, our former CEO, is director of $651,657 which was interest-free, unsecuredTianjin New Energy.
During the years ended September 30, 2015 and repayable on demand.2016, the Company purchased machinery and equipment from BAK Tianjin totaled $6.8 million and nil, respectively.
20For the years ended September 30, 2015 and 2016, we generated revenue of
• | $1,377,004 and $836,425 from sale of raw materials to Shenzhen BAK, respectively; | |
• | $1,470,579 and $636,331 from BAK Tianjin, respectively; | |
• | nil and $102,322 from Shenzhen BAK, respectively; | |
• | $17,063 and $576, respectively from Zhengzhou BAK Battery Co., Ltd. Mr. Xiangqian Li, our former CEO, is director of this company; and | |
• | $298,983 and nil, respectively from Tianjin New Energy. |
Promoters and Certain Control Persons
We did not have any promoters at any time during the past five fiscal years.
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PROPOSAL 2. – RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The consolidated balance sheets of the Company as ofEffective on 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 appointed29, 2016, Crowe Horwath (HK) CPA Limited (“Crowe Horwath”) resigned as the Company’s independent registered public accounting firm. On September 29, 2016, the Company’s Audit Committee appointed Centurion ZD CPA Limited (formerly known as DCAW (CPA) Limited) (“Centurion”) as the Company’s independent registered public accounting firm, for the fiscal year ended September 30, 2013. Crowe Horwath served as our company’s independent registered public accountants for fiscal years 2014 and 2013 and reported on our company’s consolidated financial statements for such years.effective immediately.
The Audit Committee has selected Crowe HorwathCenturion to serve as the Company’s independent auditors for the fiscal year ending September 30, 2015.December 31, 2017. We are asking our stockholders to ratify our company’s selection of Crowe HorwathCenturion 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 HorwathCenturion 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 HorwathCenturion 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
Crowe Horwath has billed us $102,000$228,000 and $392,000$218,314 in the aggregate for the fiscal years ended September 30, 20132015 and 2014,2016, respectively, for professional services rendered for the audit of our fiscal years 2013 and 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.
PKFCenturion has billed us $143,000 in the aggregate$50,000 for the fiscal year ended September 30, 20132016 for professional services rendered tofor the audit of our annual financial statements, and to review the interim financial statements included in our quarterly reports on Form 10-Q with the Securities Act filings.statements.
Audit-Related Fees
We did not engage Crowe Horwathour principal accountants 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.
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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 HorwathCenturion as our company’sCompany’s independent registered public accountant for the fiscal year ending September 30, 2015December 31, 2017 requires the affirmative vote of a majority of the shares of the common stockCommon Stock present in person or represented by proxy andthat are entitled to vote on the matterthat actually voted (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“FOR” ratification of the selection of Crowe HorwathCenturion as the Company’s independent registered public accounting firm for the fiscal year ending September 30, 2015.December 31, 2017.
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PROPOSAL 3.3 – APPROVAL OF AMENDMENTADVISORY VOTE TO THE ARTICLES OF INCORPORATION TOINCREASE THE AUTHORIZED COMMON STOCK TO 500,000,000 SHARESAPPROVE EXECUTIVE COMPENSATION
On April 10, 2015,The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 enables our stockholders to vote to approve, on an advisory (non-binding) basis, the Company’scompensation of 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-term and strategic goals, business unit goals, corporate goals, and the realization 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’ interests and current market practices. We are asking our stockholders to indicate their support for our named executive officer compensation as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our named executive officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this Proxy Statement.
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 Directors approved, subject to receiving shareholder approval, an amendmentour stockholders and 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 Incorporationextent there 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 Board of Directors believes that it is in the best interests of the Company and stockholders to increase the number of authorized 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 increase the number of authorized shares of Common Stock, we believe that we will be substantially limited in our ability to advance our operational and strategic 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 Board of Directors may approve and no further approval by our stockholders will 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 issuance, without the delay and expense of obtainingsignificant vote against the approval of the named executive officer compensation as disclosed in this Proxy Statement, they will consider our stockholders at a subsequent meeting,stockholders’ concerns and the Compensation Committee will afford us greater flexibility in acting upon proposed transactions.evaluate whether any actions are necessary to address those concerns.
Effects of the Increase in Authorized Common Stock of the Company
The increase in authorized Common Stock will not have any immediate effect on the rights of our existing 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 and, 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 shares 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 Company, since the issuance of such shares could dilute the Common Stock ownership of such person or entity. Employing such devices may adversely impact stockholders who desire a change in management, 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 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.
Vote Required Vote
Approval of the above proposalProposal 3 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 TOAUTHORIZE 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 Board 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 refers 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 each 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 other 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 shareholders 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 receive 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 bepresent in person or represented by proxy and 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, dependingvote on the terms of the series of Preferred Stock dilute the interest ofmatter (assuming a 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.quorum is present). 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“FOR” the approval of the compensation of our Named Executive Officers as disclosed in this proposal.Proxy Statement in accordance with Securities and Exchange Commission rules.
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PROPOSAL 5.4 - APPROVALADVISORY VOTE REGARDING THE FREQUENCY OF THE SECOND AMENDMENTVOTING WITH
RESPECT TO THE COMPANY’S STOCK OPTION PLAN
BackgroundCOMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
In May 2005,addition to Proposal 3 above, our stockholders are being provided the Board adoptedopportunity to cast vote to approve, on an advisory basis, 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 advisorsfrequency 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 amendmentvoting with respect to the Plan, including increasingcompensation of our Named Executive Officers. The advisory vote on executive compensation described in Proposal 3 above is referred to as a “say-on-pay vote.”
This Proposal 4 affords stockholders the total number of shares availableopportunity to cast an advisory vote on how often we should include a say-on- pay vote in our proxy materials for issuance underfuture annual stockholder meetings (or special stockholder meeting for which we must include executive compensation information in the Planproxy statement). Under this Proposal 4, stockholders may vote to 8,000,000. As a result ofhave 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.say-on-pay vote every year, every two years or every three years.
As of April 20, 2015, approximately 1.1 million shares remained available for issuance pursuant to future awards.
The Proposal
TheOur Board of Directors has adopted a resolution to amend Section 1.7 ofdetermined that an advisory vote on executive compensation that occurs once every three years is 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.
Reasonsmost appropriate alternative 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. Thetherefore our Board of Directors believesrecommends 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 isyou vote for 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, exceptthree-year interval 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 stockholders of the 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 exercise, in whole or in part, of any option shall not be less than fair market value at the time of the 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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Effect 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 awards, 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 amendment 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 toadvisory 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
executive compensation. 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 and 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 bydetermining its recommendation, the Board of Directors but no award underconsidered how an advisory vote once every three years will provide our stockholders with sufficient time to evaluate the Equity Incentive Plan may be exercised or settled (or,effectiveness of our overall compensation philosophy, policies and practices in the casecontext of stock awards, granted) untilour long-term business results for the Equity Incentive Plan is approved bycorresponding period, while avoiding over-emphasis on short-term variations in compensation and business results. An advisory vote occurring once every three years will also permit our stockholders to observe and evaluate the stockholdersimpact of any changes to our executive compensation policies and practices which have occurred since the last advisory vote on executive compensation, including changes made in response to the outcome of a prior advisory vote on executive compensation.
Required Vote
The choice of frequency that receives the highest number of “FOR” votes will be considered a non-binding advisory vote 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 attachedstockholders. Abstentions and broker non-votes will not count asAppendix D. Unless otherwise defined, capitalized terms in this summary votes cast “for” or “against” any frequency choice, and will 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 Companyno direct effect on the terms specified in the award agreement. Military or sick leave or other bona fide leave shalloutcome of this proposal. While this vote is advisory and 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 Stockbinding 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 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:
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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 made by the recipient for such Restricted Shares. During the Period of Restriction, Restricted Shares shall be subject to vesting or forfeiture (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 Equity Incentive Plan. On the date set forth in the award agreement, all unearned Restricted Share Units are forfeited to the Company.
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 a 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 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 priorBoard of Directors expects 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 takingtake into account the existing provisionsoutcome 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 orvote, along with 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 inrelevant factors, 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 restrictionswhen considering future advisory votes 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, if 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 to 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 the 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 such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless first approved by the 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 Equity 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 and 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 necessary 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 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.
U.S. Federal Income Tax Consequences
The 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. 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).executive compensation.
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 BoardDirectors recommends a voteFOR forEVERY THREE YEARSas the approvalfrequency with which stockholders are provided future advisory votes on the compensation of the Equity Incentive Plan, subject to the approval of Proposal 3.our Named Executive Officers.
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OTHER MATTERS
Our Board of Directors is not aware of any business to come before the Annual Meeting other than those matters described above in this Proxy Statement. However, if any other matters should properly come before the Annual Meeting, it is intended that proxies in the accompanying form will be voted in accordance with the judgment of the person or persons voting the proxies.
STOCKHOLDER COMMUNICATIONS
The Company has a process for stockholders who wish to communicate with the 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 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 20162018 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, 116422,116450, China, no later than December 31, 2015.2017. 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.