UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the
Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[
] Confidential, For Use of the Commission Only (As Permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ]
Definitive Additional Materials
[ ] Soliciting Material under
Rule 14a-12
CHINA BAK BATTERY, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[X]
No fee required
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1) |
Title of each class of securities to which transaction
applies: |
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(2) |
Aggregate number of securities to which transaction
applies: |
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(3) |
Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined): |
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(4) |
Proposed maximum aggregate value of
transaction: |
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(5) |
Total fee paid: |
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[ ] Fee paid previously with preliminary
materials.
[ ] Check box if any part of the fee is offset
as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the form or schedule and the date of its
filing.
(1) |
Amount Previously Paid: |
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(2) |
Form, Schedule or Registration Statement No.: |
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(3) |
Filing Party: |
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(4) |
Date Filed: |
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be
Held On June 12, 2015
To the Stockholders of CHINA BAK BATTERY, INC.:
You are cordially invited to attend the 2015 Annual Meeting of
Stockholders (the Annual Meeting) of China BAK Battery, Inc., a Nevada
corporation (the Company) on Friday, June 12, 2015, at 9:00 a.m., local time,
at BAK Industrial Park, Meigui Street, Huayuankou Economic Zone, Dalian City,
116422, China.
We are now filing this proxy statement on Schedule 14A with the
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:
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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; |
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2. |
To ratify the appointment of Crowe Horwath (HK) CPA
Limited as the Companys independent registered public accounting firm for
the fiscal year ending September 30, 2015; |
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3. |
To approve an amendment to the Companys Articles of
Incorporation to increase the authorized number of shares available for
issuance from 20,000,000 to 500,000,000 shares of common stock, par value
$0.001 per share (Common Stock); |
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4. |
To approve an amendment to the Companys Articles of
Incorporation to authorize 10,000,000 shares of preferred stock, par value
$0.001 per share (Preferred Stock) of the Company, which may be issued
in one or more series, with such rights, preferences, privileges and
restrictions as shall be fixed by the Companys Board of Directors from
time to time; |
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5. |
To act upon a proposal to amend Section 1.7 of the
Companys Stock Option Plan; |
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6. |
To approve the China BAK Battery, Inc. 2015 Equity
Incentive Plan, subject to the approval of Proposal 3; and |
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7. |
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, 2015 (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, which requires 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.
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By Order of the Board of Directors, |
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/s/
Xiangqian Li |
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Secretary |
April ____, 2015 |
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TABLE OF CONTENTS
CHINA BAK BATTERY, INC.
BAK Industrial Park,
Meigui Street, Huayuankou Economic Zone,
Dalian City, 116422, China
_______________________
PROXY STATEMENT
_______________________
This Proxy Statement and the accompanying proxy are being
furnished with respect to the solicitation of proxies by the Board of Directors
of China BAK Battery, Inc., a Nevada corporation (the Company or we), for
the Companys 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, and at
any adjournment(s) or postponement(s) thereof, at the principal executive
offices of the Company, located at BAK Industrial Park, Meigui Street,
Huayuankou Economic Zone, Dalian City, 116422, China.
The approximate date on which the Proxy Statement and the
accompanying notice and form of proxy are intended to be sent or made available
to stockholders is on or about ______________.
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,
2015 (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 on at the Annual Meeting?
Six proposals will be voted on at the
Annual Meeting:
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(1) |
to elect five (5) persons to the Board of Directors of
the Company, each to serve until the next annual meeting of stockholders
of the Company or until such person shall resign, be removed or otherwise
leave office (Proposal 1); |
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(2) |
to ratify the appointment of Crowe Horwath (HK) CPA
Limited as the Companys independent registered public accounting firm for
the fiscal year ending September 30, 2015 (Proposal 2); |
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(3) |
to approve an amendment to the Companys Articles of
Incorporation to increase the authorized number of shares available for
issuance from 20,000,000 to 500,000,000 shares of common stock, par value
$0.001 per share (Common Stock) (Proposal 3), |
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(4) |
to approve an amendment to the Companys Articles of
Incorporation to authorize 10,000,000 shares of preferred stock, par value
$0.001 per share (Preferred Stock) of the Company, which may be issued
in one or more series, with such rights, preferences, privileges and
restrictions as shall be fixed by the Companys Board of Directors from
time to time (Proposal 4); |
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(5) |
to act upon a proposal to amend Section 1.7 of the
Companys Stock Option Plan (Proposal 5); and |
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(6) |
to approve the China BAK Battery, Inc. 2015 Equity
Incentive Plan, subject to the approval of Proposal 3 (Proposal
6). |
Who is entitled to vote at the Annual Meeting?
All owners of our Common 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 12,619,597 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.
How do I vote?
Your shares may only be voted at the Annual Meeting if you are
present in person or are represented by proxy. Whether or not you plan to attend
the Annual Meeting, we encourage you to vote by proxy to ensure that your shares
will be represented.
You may vote using any of the following methods:
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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. |
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By Mail. Stockholders of record of
Common Stock as of the Record Date may submit proxies by completing,
signing and dating their proxy cards and mailing them in the accompanying
pre-addressed envelopes. If you return your signed proxy but do not
indicate your voting preferences, your shares will be voted on your behalf
FOR the five nominees to the Board of Directors (Proposal 1), FOR the
ratification of Crowe Horwath (HK) CPA Limited as our independent
registered public accounting firm for our fiscal year ending September 30,
2015 (Proposal 2), FOR the amendment to the Companys Articles of
Incorporation to increase the authorized number of shares available for
issuance from 20,000,000 to 500,000,000 shares of Common Stock (Proposal
3), FOR the amendment to the Companys Articles of Incorporation to
authorize 10,000,000 shares of Preferred Stock of the Company (Proposal
4), FOR the proposal to amend Section 1.7 of the Companys Stock Option
Plan (Proposal 5) and FOR the approval of the China BAK Battery,
Inc. 2015 Equity Incentive Plan (Proposal 6). Stockholders who hold shares
beneficially in street name and have requested to receive printed proxy
materials may provide voting instructions by mail by completing, signing and
dating the voting instruction forms provided by their brokers, banks or other
nominees and mailing them in the accompanying pre-addressed envelopes. |
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By Fax. Stockholders of record of Common Stock as of
the Record Date may submit proxies by completing, signing and dating their
proxy cards and faxing them to our proxy solicitor, Advantage Proxy, at
206-870-8492. |
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In person at the Annual Meeting. Shares
held in your name as the stockholder of record may be voted in person at
the Annual Meeting or at any postponement or adjournment of the Annual
Meeting. Shares held beneficially in street name may be voted in person
only if you obtain a legal proxy from the broker, bank or nominee that
holds your shares giving you the right to vote the shares. Even if
you plan to attend the Annual Meeting, we recommend that you
also submit your proxy or voting instructions by mail or
Internet so that your vote will be counted if you later decide not to
attend the Annual 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?
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) CPA Limited as our independent
registered public accounting firm for our fiscal year ending September 30, 2015
(Proposal 2) and the approval of amendment to the Companys 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
amendment to our Articles of Incorporation to authorize
10,000,000 shares of Preferred Stock of the Company (Proposal 4), the amendment
to Section 1.7 of the Companys 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, we will reimburse brokerage firms, banks and other persons
representing beneficial owners of shares for their expenses in forwarding
solicitation materials to such beneficial owners. Proxies may be 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:
Corporate Secretary
China BAK Battery, Inc.
BAK
Industrial Park,
Meigui Street, Huayuankou Economic Zone,
Dalian City,
116422, 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 June 12, 2015: |
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The Notice of Annual Meeting of Stockholders, Proxy
Statement and 2014 Annual Report are |
available at www.shareholdervote.info |
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SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
Securities Ownership of Certain Beneficial Owners and
Management
The following table sets forth information known to us with
respect to the beneficial ownership of our Common Stock as of the close of
business on April 10, 2015 (the Reference Date) for: (i) each person known by
us to beneficially own more than 5% of our voting securities, (ii) each named
executive officer, (iii) each of our directors and nominees, and (iv) all of our
executive officers and directors as a group:
Names of Management and Names |
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Amount and Nature of
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of
Certain Beneficial Owners (1) |
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Beneficial Ownership (1) |
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Number (2) |
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Percent (3) |
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Xiangqian Li (4) |
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3,910,778 |
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31.0% |
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Chunzhi Zhang (5) |
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3,500 |
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* |
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Martha C. Agee |
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0 |
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* |
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Jianjun He |
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0 |
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* |
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Guosheng Wang |
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0 |
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* |
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All executive officers and directors as a group (5 persons)
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3,914,278 |
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31.0% |
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* |
Denotes less than 1% of the outstanding shares of Common
Stock. |
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* * |
All information in and below this table gives retroactive effect to
our one-for-five reverse stock split effected on October 26, 2012. |
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(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. |
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(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 persons spouse) with respect to all shares of Common
Stock listed as owned by that person or entity. |
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(3) |
A total of 12,619,597 shares of Common Stock are
considered to be outstanding on the Reference Date. For each beneficial
owner above, any Presently Exercisable securities of such beneficial owner
have been included in the denominator, pursuant to Rule 13d-3(d)(1) under
the Securities Exchange Act of 1934, as amended, or the Exchange
Act. |
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(4) |
Including 100,000 restricted shares of the Common Stock
granted under the Stock Option Plan on June 22, 2009, which restricted
stock is subject to a five-year vesting schedule. It vests in twenty equal
quarterly installments on the first day of each fiscal quarter beginning
on October 1, 2009. |
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(5) |
On June 25, 2007, Mr. Zhang was granted 1,000 shares of
restricted Common Stock. On August 6, 2008, Mr. Zhang was granted an
additional 1,000 shares of restricted Common Stock on the same terms as
those governing the June 25, 2007 grant. On June 26, 2009, Mr. Zhang
was granted an additional 1,000 shares of restricted Common Stock, on the same
terms as those governing the June 25, 2007 and August 6, 2008 grants. On July 1,
2010, Mr. Zhang was granted an additional 1,000 shares of restricted Common
Stock on the same terms as those governing the June 25, 2007, August 6, 2008,
and June 26, 2009 grants. On January 19, 2011, Mr. Zhang waived the receipt of
500 shares of the July 1, 2010 grant in consideration of an additional quarterly
payment by the Company of $6,250 on or about January 6, 2011 pursuant to the
increase, effective January 1, 2011, of each of the directors annual retainer
fee under the Companys Stock Option Plan by $25,000 in lieu of each directors
receipt of restricted shares under the Stock Option Plan. |
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Changes in Control
There are no arrangements known to us, including any pledge by
any person of our securities, the operation of which may at a subsequent date
result in a change in control of the Company.
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PROPOSAL 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 Companys executive officers, delegates authority for the conduct of
the Companys day-to-day operations to those officers, and monitors their
performance. Members of the Board of Directors are kept informed of the
Companys 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 Companys 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 Companys stockholders, on the bases described
below. Stockholders may recommend nominees by writing to the Nominating and
Corporate Governance Committee c/o the Secretary at BAK Industrial Park, Meigui
Street, Huayuankou Economic Zone, Dalian City, 116422, China; via email at
IR@cbak.com.cn; or via fax at (86)411-39185980. 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 2016 annual meeting, recommendations must be
received by the Secretary of the Company not later than the close of business on
December 31, 2015.
In identifying and evaluating nominees, the Nominating and
Corporate Governance Committee may consult with the other Board members,
management, consultants, and other individuals likely to possess an
understanding of the Companys 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 todays business environment;
understanding of the Companys business and technology; the international nature
of the Companys 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
Companys 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
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Position/s |
Director Since |
Xiangqian Li |
45 |
Chairman, President and Chief
Executive Officer |
January 2005 |
Jianjun He |
41 |
Director |
November 2013 |
Chunzhi Zhang |
51 |
Director |
June 2007 |
Martha C. Agee |
59 |
Director |
November 2012 |
Guosheng Wang |
42 |
Director |
August 2014
|
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 nominees judgment, integrity, experience, independence,
understanding of the Companys 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 individuals 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 Companys current needs and business priorities. The
Companys 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 Companys 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
Companys 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
Xiangqian Li has served as the chairman of our
board, our president and chief executive officer since January 20, 2005. He has
been a director of BAK International Limited, or BAK International, our Hong
Kong incorporated subsidiary, since November 2004. Mr. Li is the founder and has
served as the chairman of the board of Shenzhen BAK Battery Co., Ltd., or
Shenzhen BAK, or Shenzhen BAK, our indirect wholly owned subsidiary, since its
inception in August 2001, and served as Shenzhen BAKs general manager since
December 2003. From June 2001 to June 2003, Mr. Li was the chairman of Huaran
Technology Co., Ltd., a PRC-incorporated company engaged in the car audio
business. Mr. Li received a bachelors degree in thermal energy and power
engineering from the Lanzhou Railway Institute, China and a doctorate degree in
quantitative economics from Jilin University in China.
10
Director Qualifications: Mr. Li has extensive senior
management experience in the industry in which we operate, having served as our
Chief Executive Officer and Chairman since January 2005 and as the Chief
Executive Officer or Chairman of various other companies since 2001.
Jianjun He has served as our director since
November 4, 2013. Mr. He has more than 15 years experience in accounting and
finance and is an associate member of the Chinese Institute of Certificate
Public Accounts. Mr. He has been the Managing Director of Jilin Cybernaut Lvke
Investment and Management Co., Ltd., an investment consulting firm in China,
since January 1, 2013. From June 30, 2009 to December 31, 2012, Mr. He served as
the Chief Financial Officer of THT Heat Transfer Technology, Inc. (Nasdaq: THTI)
(THT Heat), a provider of heat exchangers and heat exchange solutions in
China. Mr. He was the Chief Financial Officer of Siping City Juyuan Hanyang
Plate Heat Exchanger Co. Ltd, a wholly owned subsidiary of THT Heat from 2007 to
December 2012. From 1999 to 2007, Mr. He worked as senior financial officer in
Jilin Grain Group, a state-owned enterprise engaged in the grain processing and
trading business. Mr. He graduated from Changchun Taxation College in 1995 with
a Bachelors degree in Auditing and obtained a Masters 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 Zhang has served as our director since
June 25, 2007. Since mid-2005, Mr. Zhang has served as General Manager of
AASTOCKS.com, Ltd., Shenzhen Branch, a software integration and one-stop system
solutions provider for financial markets in China. From 2003 through mid-2005,
Mr. Zhang served as General Manager of Shenzhen Sharemax Management Co., Ltd,
where he was involved in both private equity business and asset management. From
1998 through 2003, Mr. Zhang served as General Manager of Haixing Security
Brokerage Co., Ltd, Shenzhen Branch, involved in securities trading and asset
management. Prior to joining Haixing Security Brokerage, from 1985 to 1996, Mr.
Zhang served as senior Management in Hong Kong for China Resources Holding Co.,
Ltd., a China central government-owned enterprise. Mr. Zhang received his
bachelor degree in Economy from Jilin University in 1985 and MBA degree from
University of Wales in the United Kingdom. Mr. Zhang is also a distinguished
finance lecturer at the Graduate School in Shenzhen of Tsinghua University.
Director Qualifications: Mr. Zhang, Chair of the
Compensation Committee, is experienced in securities analysis and investment.
Mr. Zhang has accumulated this experience in managerial positions in firms in
the securities industry since 1998.
Martha C. Agee has 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 bachelors
degree in Accounting in 1976 and Juris Doctorate degree in 1988 from Baylor
University.
Director Qualifications: Ms. Agee, Chair of the Audit
Committee, was previously Certified Public Accountant, worked as Chief
Accountant for a political sub-division for five and a half years and worked as
Supervisor of Accounting for a large retail chain with the responsibilities
included hiring, training, and supervision of accounting staff; preparation and
analysis of 17 monthly financial statements and quarterly consolidated financial
statements; budgeting, and internal auditing.
Guosheng Wang has served as our director since
August 1, 2014. Since June 2014, Mr. Wang has been in charge of the construction
of facilities of the Companys 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 bachelors degree in mechanical manufacturing engineering and
equipment from Lanzhou Jiaotong University in July 1994.
11
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:
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been convicted in a criminal proceeding or been subject
to a pending criminal proceeding (excluding traffic violations and other
minor offences); |
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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; |
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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; |
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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; |
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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. |
12
Director Independence
Our Board of Directors has determined that each of our
non-employee directors, Mr. Zhang, Ms. Agee and Mr. He, is an independent
director as defined by the applicable rules of the SEC and NASDAQ. Each of our
non-employee directors serves on the Boards 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. Lis experience and tenure of having been Chairman and Chief
Executive Officer since 2005, and felt that his experience, knowledge, and
personality allowed him to serve ably as both Chairman and Chief Executive
Officer. Among the benefits of a combined Chief Executive Officer/Chairman
considered by the Board of Directors is that such structure promotes clearer
leadership and direction for our Company and allows for a single, focused chain
of command to execute our strategic initiatives and business plans.
The Board 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 Companys 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 Companys 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:
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The Audit Committee oversees risks related to the
Companys 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 Companys independent auditing firm; and |
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The Compensation Committee evaluates the risks and
rewards associated with the Companys 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. |
13
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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 Companys
ethics programs, including the Code of Business Ethics and Conduct.
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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 nominees election. Abstentions and broker
non-votes will not be counted as a vote cast with respect to a nominee.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the election of
the nominees set forth in Proposal 1.
COMMITTEES OF THE BOARD OF DIRECTORS
Committees and Meetings
Our Board of Directors currently has three standing Committees
which, pursuant to delegated authority, perform various duties on behalf of and
report to the Board: (i) Audit Committee, (ii) Compensation Committee and (iii)
Nominating and Corporate Governance Committee. Each of the three standing
Committees is comprised entirely of independent directors as that term is
defined under the NASDAQ listing standards applicable to each of these
committees. From time to time, the Board may establish other committees.
During the fiscal year ended September 30, 2014, the Board held
a total of eight meetings. Each director attended 100% of the total number of
meetings of the Board and 100% of the meetings of all Committees on which he or
she served. We do not have a policy requiring Board members to attend the annual
meeting of our stockholders. Two members of the Board attended our 2014 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 Zhang 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, 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; |
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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; |
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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; |
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reviewing and discussing with management and the
independent auditor (a) the adequacy and effectiveness of the Companys
internal controls, (b) the Companys internal audit procedures, and (c)
the adequacy and effectiveness of the Companys disclosure controls and
procedures, and management reports thereon; |
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reviewing reported violations of the Companys code of
conduct and business ethics; and |
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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 Zhang and Jianjun He, with Mr. Zhang 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 during the fiscal year ended September 30, 2014.
The purpose of our Compensation Committee is to discharge the
responsibilities of the Companys Board of Directors relating to compensation of
the Companys executives, to produce an annual report on executive compensation
for inclusion in the Companys proxy statement, if required, and to oversee and
advise the Board on the adoption of policies that govern the Companys
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:
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reviewing and approving the compensation structure for
corporate officers at the level of corporate vice president and above;
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overseeing an evaluation of the performance of the
Companys executive officers and approve the annual compensation,
including salary, bonus, incentive and equity compensation, for the
executive officers; |
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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; |
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making recommendations to the Board regarding the
compensation of board members; |
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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 Zhang 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, 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
Companys Board of Directors, to identify and recommend candidates to fill
vacancies occurring between annual shareholder meetings, and to review the
Companys 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; |
15
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annually reviewing the composition of each committee and
present recommendations for committee memberships to the Board as needed;
and |
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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 Companys shareholders.
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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, 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.
16
REPORT OF THE AUDIT COMMITTEE
FOR THE FISCAL YEAR ENDED
SEPTEMBER 30, 2014
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. Agees 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 Boards oversight
of the integrity of the Companys financial reports, compliance with legal and
regulatory requirements, the qualifications and independence of the Companys
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
Companys registered public accounting firm, reviewing the extent of non-audit
services to be performed by the auditors, and reviewing the disclosures made in
the Companys periodic financial reports. The Audit Committee also reviews and
recommends to the Board that the audited financial statements be included in the
Companys Annual Report on Form 10-K.
Following the end of the fiscal year ended September 30, 2014,
the Audit Committee (1) reviewed and discussed the audited financial statements
for the fiscal year ended September 30, 2014 with Company management; (2)
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61, as amended (AICPA, Professional
Standards , Vol. 1. AU section 380), as adopted by the PCAOB in Rule 3200T; and
(3) received the written disclosures and the letters from the independent
accountants required by applicable requirements of the PCAOB regarding the
independent accountants communications with the Audit Committee concerning
independence, and has discussed with the independent accountants their
independence.
Based on the review and discussions referred to above, the
Audit Committee had recommended to the Board that the audited financial
statements be included in the Companys Annual Report on Form 10-K for the
fiscal year ended September 30, 2014 for filing with the SEC.
/s/ The Audit
Committee |
Martha C. Agee, Chair |
Chunzhi Zhang |
Jianjun He |
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning all
compensation awarded to, earned by or paid to Xiangqian Li, our Chief Executive
Officer for services rendered in all capacities during fiscal years 2014 and
2013. No other executive officers received total compensation in excess of
$100,000 in either fiscal year.
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Stock |
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Awards |
Option |
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Name and
Principal Position |
Year |
Salary ($)(1) |
($)(2) |
Awards ($)(2) |
Total ($) |
Xiangqian Li, President, Chief Executive
Officer |
2014 |
39,044 |
- |
- |
39,044 |
|
2013 |
38,776 |
- |
- |
38,776 |
(1) The amounts reported in this table have been converted from
RMB to U.S. dollars based on the average conversion rate between the U.S. dollar
and RMB for the applicable fiscal year, or $1.00 to RMB 6.1469 (fiscal year 2014
exchange rate), $1.00 to RMB 6.1894 (fiscal year 2013 exchange rate).
(2) The amounts represented in the stock and option awards
columns reflect the compensation expense recognized by the Company determined
pursuant to SFAS No. 168 The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162 (SFAS No. 168), as superseded by The
FASB Accounting Standards CodificationTM (ASC), now included in ASC
Topic 718 (ASC 718), and no forfeitures are assumed. The assumptions used to
calculate the value of option and restricted stock awards are set forth under
Note 16 of the Notes to Consolidated Financial Statements of this annual report.
Summary of Employment Agreements
The base salary shown in the Summary Compensation Table is
described in each named executive officers 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. Li and Mr. Wenwu Wang on June
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
executives 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 months 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 executives
employment at any time without cause by giving one months advance written
notice to the executive officer. If we terminate the executives 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
executives 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.
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; |
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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 |
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solicit the services of any of our employees.
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Outstanding Equity Awards at Fiscal Year-End 2014
There were no equity awards outstanding as of September 30,
2014 that were granted to our named executive officers. Our Chief Executive
Officer, Mr. Li was granted an option to purchase 216,000 shares of our common
stock on May 29, 2008 under the Stock Option Plan. The option is subject to a
three-year vesting schedule, with the first 1/12 vesting on the last day of the
full fiscal quarter following the date of grant (September 30, 2008), and the
remaining 11/12 vesting in eleven equal installments on the last day of each
following fiscal quarter. The exercise price is $20.9. The option expired on May
28, 2013. Mr. Li was also granted 100,000 restricted shares of the Companys
common stock, par value $0.001, under the Stock Option Plan. The restricted
stock is subject to a five-year vesting schedule. All of the restricted stock
has been vested in twenty equal quarterly installments on the first day of each
fiscal quarter beginning on October 1, 2009.
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
$20,000, effective from the quarter ended June 30, 2013.
The following table sets forth the total compensation earned by
our non-employee directors during our fiscal year ended September 30, 2014:
19
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Fees |
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Earned or |
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Name |
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Paid in |
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Stock |
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Total ($) |
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Cash ($) |
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Awards ($) |
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Chunzhi Zhang |
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20,000 |
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- |
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20,000 |
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Martha C. Agee |
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20,000 |
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- |
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20,000 |
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Jianjun He |
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20,000 |
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- |
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20,000 |
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We do not maintain a medical, dental or retirement benefits
plan for the directors.
We have not compensated, and will not compensate, our
non-independent directors, Mr. Xiangqian Li and Mr. Guosheng Wang, for serving
as our directors, although they are entitled to reimbursements for reasonable
expenses incurred in connection with attending our board meetings.
The directors may determine remuneration to be paid to the
directors with interested members of the Board refraining from voting. The
Compensation Committee will assist the directors in reviewing and approving the
compensation structure for the directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under U.S. securities laws, directors, certain executive
officers and persons beneficially owning more than 10% of our Common Stock must
report their initial ownership of the Common Stock, and any changes in that
ownership, to the SEC. The SEC has designated specific due dates for these
reports. Based solely on our review of copies of such reports filed with the SEC
and written representations of our directors and executive offers, we believe
that all persons subject to reporting filed the required reports on time in
fiscal year 2014.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Transactions with Related Persons
We have a one-year term outstanding short-term bank loan of
$4.9 million from Bank of Dandong bearing a fixed interest rate at 7.8% per
annum. The loan is guaranteed by Shenzhen BAK Battery Co., Ltd (Shenzhen BAK),
our former subsidiary and Mr. Xiangqian Li, our CEO. Mr. 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 foreclosure of BAK International Limited and its
subsidiaries effective on June 30, 2014, our former subsidiaries owed us a sum
of $17,844,674. As of September 30, 2014, our former subsidiaries had:
|
(i) |
repaid $876,240 in cash to us; |
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(ii) |
passed us title to property, plant and equipment with a
total carrying amount of $4,268,397; |
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(iii) |
provided us inventories with a total carrying amount of
$3,299,456; and |
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(iv) |
paid $558,577 to our subcontractors on our
behalf. |
As of September 30, 2014, our former subsidiaries, Shenzhen BAK
and BAK International (Tianjin) Ltd. (BAK Tianjin) owed us aggregate amount of
$9,117,445 which were interest-free, unsecured and repayable on demand.
As of September 30, 2014, we obtained an advance from Tianjin
BAK New Energy Research Institute Co., Ltd, a related party under the common
control of Mr. Xiangqian Li, our CEO, of $651,657 which was interest-free,
unsecured and repayable on demand.
20
Promoters and Certain Control Persons
We did not have any promoters at any
time during the past five fiscal years.
21
PROPOSAL 2. RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS
The consolidated balance sheets of the Company as of September
30, 2012, and the related consolidated statements of operations and
comprehensive loss, shareholders equity, and cash flows for the year ended
September 30, 2012, were audited by PKF, Certified Public Accountants, Hong
Kong, China, a member firm of PKF International Limited network of legally
independent firms (PKF). As the Company disclosed in the Current Report on
Form 8-K, filed with the SEC on January 8, 2013, PKF resigned as the Companys
the independent registered public accounting firm on January 2, 2013. On January
16, 2013, the Audit Committee appointed Crowe Horwath (HK) CPA Limited (Crowe
Horwath) as the Companys independent registered public accounting firm for the
fiscal year ended September 30, 2013. Crowe Horwath served as our companys
independent registered public accountants for fiscal years 2014 and 2013 and
reported on our companys consolidated financial statements for such years.
The Audit Committee has selected Crowe Horwath to serve as the
Companys independent auditors for the fiscal year ending September 30, 2015. We
are asking our stockholders to ratify our companys selection of Crowe Horwath
as our independent registered public accountants at the Annual Meeting. Although
ratification is not required by our amended and restated bylaws or otherwise,
the Board of Directors is submitting the selection of Crowe Horwath to our
stockholders for ratification as a matter of good corporate governance practice.
If the selection is not ratified, the Audit Committee will consider whether it
is appropriate to select another registered public accounting firm. Even if the
selection is ratified, the Audit Committee in its discretion may select a
different registered public accounting firm at any time during the year if it
determines that such a change would be in the best interests of our company and
our stockholders.
One or more representatives of Crowe Horwath are expected to be
present at the Annual Meeting. They will have an opportunity to make a statement
and will be available to respond to appropriate questions.
Independent Registered Public Accounting Firms Fees and
Services
Audit Fees
Crowe Horwath has billed us $102,000 and $392,000 in the
aggregate for the fiscal years ended September 30, 2013 and 2014, 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.
PKF billed us $143,000 in the aggregate for the fiscal year
ended September 30, 2013 for professional services rendered to audit our annual
financial statements, and to review the interim financial statements included in
our quarterly reports on Form 10-Q with the Securities Act filings.
Audit-Related Fees
We did not engage Crowe Horwath to provide assurance or related
services during the last two fiscal years.
Tax Fees
We did not engage our principal accountants to provide tax
compliance, tax advice or tax planning services during the last two fiscal
years.
All Other Fees
We did not engage our principal accountants to render services
to us during the last two fiscal years, other than as reported above.
22
Pre-Approval Policies and
Procedures
All auditing services and permitted non-audit services
(including the fees and terms thereof) to be performed for the Company by our
independent auditor must be approved by the Audit Committee in advance, except
non-audit services (other than review and attestation services) if such services
fall within exceptions established by the SEC. The Audit Committee will
pre-approve any permissible non-audit services to be provided by the Companys
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.
Required Vote
Ratification of Crowe Horwath as our companys independent
registered public accountant for the fiscal year ending September 30, 2015
requires the affirmative vote of a majority of the shares of the common stock
present in person or represented by proxy and entitled to vote on the matter
(assuming a quorum is present). Abstentions will have the same effect as a vote
against the proposal, and broker non-votes may be voted at the discretion of
the broker holding the shares.
Recommendation of the Board
The Board of Directors recommends a vote FOR ratification of
the selection of Crowe Horwath as the Companys independent registered public
accounting firm for the fiscal year ending September 30, 2015.
23
PROPOSAL 3. APPROVAL OF AMENDMENT TO THE ARTICLES OF
INCORPORATION TO
INCREASE THE AUTHORIZED COMMON STOCK TO 500,000,000 SHARES
On April 10, 2015, the Companys Board of Directors approved,
subject to receiving shareholder approval, an amendment to the Companys
Articles of Incorporation to increase the authorized number of shares of Common
Stock from 20,000,000 to 500,000,000 shares of Common Stock. A copy of the
Certificate of Amendment to Articles of Incorporation is attached herein as
Appendix 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 obtaining the approval of our stockholders at a
subsequent meeting, will afford us greater flexibility in acting upon proposed
transactions.
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.
24
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.
Recommendation of the Board
The Board of Directors recommends a vote FOR adoption of this
proposal.
25
PROPOSAL 4. APPROVAL OF AMENDMENT TO THE ARTICLES OF
INCORPORATION TO
AUTHORIZE THE ISSUANCE OF UP TO 10,000,000 SHARES OF
PREFERRED STOCK
On April 10, 2015, the Companys Board of Directors approved,
subject to receiving shareholder approval, an amendment to the Companys
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 as Appendix 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 Companys 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
Companys 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 be entitled to a certain number of votes per share of Preferred
Stock and such votes may dilute the voting rights of the holders of Common Stock
when the Company seeks to take corporate action. A series of Preferred Stock
also may be convertible into shares of Common Stock. Furthermore, Preferred
Stock could be issued with certain preferences over the holders of Common Stock
with respect to dividends or the power to approve the declaration of a dividend.
26
The issuance of shares of Preferred Stock may also have the
effect of discouraging or thwarting persons seeking to take control of the
Company through a tender offer, proxy fight or otherwise or seeking to bring
about removal of incumbent management or a corporate transaction such as a
merger. The issuance of shares of Preferred Stock in a public or private sale,
merger or in a similar transaction may, depending on the terms of the series of
Preferred Stock dilute the interest of 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. Abstentions will have the same effect as a vote against the proposal, and
broker non-votes may not be voted at the discretion of the broker holding the
shares.
Recommendation of the Board
The Board of Directors recommends a vote FOR adoption of this
proposal.
27
PROPOSAL 5. - APPROVAL OF THE SECOND AMENDMENT TO THE
COMPANYS STOCK OPTION PLAN
Background
In May 2005, the Board adopted the China BAK Battery, Inc.
Stock Option Plan (the Plan). The Plan provides for equity-based awards to
employees, non-employee directors, and certain non-employee advisors of the
Company. The Company may grant stock options and restricted Common Stock to
eligible participants under the Plan. On July 25, 2008, the Companys
stockholders approved certain amendment to the Plan, including increasing the
total number of shares available for issuance under the Plan to 8,000,000. As a
result of the one-for-five reverse stock split effective on October 26, 2012,
the total number of shares available for issuance under the Plan was reduced to
1,600,000.
As of April 20, 2015, approximately 1.1 million shares remained
available for issuance pursuant to future awards.
The Proposal
The Board of Directors has adopted a resolution to amend
Section 1.7 of the Plan to provide that if an option terminates without being
wholly exercised, new options or restricted stock may be granted hereunder
covering the number of shares to which such option termination relates (the
Amendment No. 2). Section 1.7 of the Plan currently provides that only new
options may be granted in this case.
Reasons for the Amendment
The amendment would provide more flexibility to the Company to
continue to grant equity awards to its employees, directors and agents under the
Plan, as amended (the Amended Plan). The Company may decide the type of equity
award based on various factors, such as the market condition, the Companys
overall performance and potential tax consequences. The continued success of the
Company depends on its ability to attract and retain directors and employees who
are highly qualified and motivated. The Board of Directors believes that the
Amended Plan promotes this objective by giving participants an opportunity to
share in the success of the Company through equity ownership. The Amended Plan
also is designed to create an identity of interests between the Companys
directors and employees and its stockholders by providing participants with
appropriate incentives to build stockholder value.
Summary of the Amended Plan
Below is a summary of the principal provisions of the Amended
Plan, which summary is qualified in its entirety by reference to the full text
of the Amendment No. 2, which is attached as Appendix B to this Proxy
Statement, and the Plan (as amended to date), which is attached as Appendix
C to this Proxy Statement. The Amended Plan is identical to the Plan, except
for the amendment to Section 1.7. All terms used in the Summary but not
defined herein have the meanings assigned to such terms in the Amended Plan.
Purpose. The purpose of the Amended Plan is to promote
the growth and general prosperity of the Company by permitting the Company to
grant options to purchase Common Stock and restricted Common Stock of the
Company to key employees, nonemployee directors, and advisors. The Amended Plan
is designed to help the Company and its subsidiaries and affiliates attract and
retain superior personnel for positions of substantial responsibility and to
provide key employees, nonemployee directors, and advisors with an additional
incentive to contribute to the success of the Company.
28
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 Companys 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 individuals 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.
29
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 optionees 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 optionees 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 optionees 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 the Amended
Plan as 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 Companys
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
Companys 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 optionees 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 Companys Stock Option
Plan requires the affirmative vote of a majority of the shares of the common
stock present in person or represented by proxy and entitled to vote on the
matter (assuming a quorum is present).
Recommendation of the Board of Directors
The Board recommends that the stockholders vote FOR the
approval of this proposal.
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PROPOSAL 6 - APPROVAL OF THE CHINA BAK BATTERY, INC. 2015
EQUITY INCENTIVE PLAN
In light of the limited amount of shares available for future
issuance under our Stock Option Plan, our stockholders are being asked to
approve the 2015 Equity Incentive Plan (the "Equity Incentive Plan") which will
be used to provide stock-based compensation to our employees, directors and
consultants. Both our Compensation Committee 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 Companys long range success and to provide
incentives that are linked directly to increases in share value which will inure
to the benefit of all of our stockholders.
The Equity Incentive Plan became effective upon approval by the
Board of Directors, but no award under the Equity Incentive Plan may be
exercised or settled (or, in the case of stock awards, granted) until the Equity
Incentive Plan is approved by the stockholders of the Company.
The following summary of the material features of the Equity
Incentive Plan is qualified in its entirety by reference to the Equity Incentive
Plan, a copy of which is attached as Appendix D. Unless otherwise
defined, capitalized terms in this summary 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 Participants employment or other association with the Company and its
Affiliates ends for any reason, including because of the Participants employer
ceasing to be an Affiliate, (a) any outstanding Options or SARs of the
Participant shall cease to be exercisable in any respect not later than three
(3) months following that event and, for the period it remains exercisable
following that event, shall be exercisable only to the extent exercisable at the
date of that event, and (b) any other outstanding Award of the Participant shall
be forfeited or otherwise subject to return to or repurchase by the Company on
the terms specified in the award agreement. Military or sick leave or other bona
fide leave shall not be deemed a termination of employment or other association,
provided that it does not exceed the longer of three (3) months or the period during which the
absent Participants reemployment rights, if any, are guaranteed by statute or
by contract.
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Shares Available for Issuance Under the Equity Incentive
Plan. Subject to adjustment as described below, (a) the maximum
aggregate number of Shares that may be issued under the Equity Incentive Plan is
10,000,000 shares of Common Stock, (b) to the extent consistent with Section 422
of the Code, not more than an aggregate of 10,000,000 shares of Common Stock may
be issued under ISOs, and (c) not more than 1,000,000 shares of Common Stock (or
for Awards denominated in cash, the Fair Market Value of 1,000,000 shares of
Common Stock on the Grant Date), may be awarded to any individual Participant in
the aggregate in any one fiscal year of the Company, such limitation to be
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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to the extent not prohibited by Section 402 of the
Sarbanes-Oxley Act of 2002, a promissory note; |
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other Common Stock, provided the Common Stock has a Fair
Market Value on the date of exercise of the Option equal to the aggregate
exercise price for the Common Stock as to which said Option will be
exercised (such Common Stock will be repurchased by the Company at a
repurchase price equal to their Fair Market Value); |
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to the extent not prohibited by Section 402 of the
Sarbanes-Oxley Act of 2002, in accordance with any broker- assisted
cashless exercise procedures approved by the Company and as in effect from
time to time; |
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by requesting the Company to withhold such number of
Common Stock then issuable upon exercise of the Option that have an
aggregate Fair Market Value equal to the exercise price for the Option
being exercised; |
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any combination of the foregoing; or |
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such other consideration and method of payment
for the issuance of Common Stock to the extent permitted by Applicable
Laws. |
Restricted Share Awards. The Administrator may,
in its discretion, award Restricted Shares to Service Providers and may
determine the number of Common Stock awarded and the terms and conditions
(including vesting criteria) of, and the amount of payment (which may not be
less than par value per share of Common Stock) to be 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 that no 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
prior to the effective date of such proposed transaction. To the extent it has
not been previously exercised, an Award will terminate immediately prior to the
consummation of such proposed action.
In the event of a Change in Control, any or all outstanding
Awards may be assumed or replaced by the successor corporation, which assumption
or replacement shall be binding on all Participants. In the alternative, the
successor corporation may substitute equivalent Awards or provide substantially
similar consideration to Participants as was provided to shareholders (after
taking into account the existing provisions of the Awards). The successor
corporation may also issue, in place of outstanding Common Stock of the Company
held by the Participant, substantially similar shares or other property subject
to repurchase restrictions no less favorable to the Participant. In the event
that the successor corporation does not assume or substitute for the Award,
unless the Administrator provides otherwise, the Participant will fully vest in
and have the right to exercise all of his or her outstanding Options and SARs,
including Common Stock as to which such Awards would not otherwise be vested or
exercisable, all restrictions on Restricted Shares and Restricted Share Units
will lapse, and, with respect to Performance Shares and Performance Units, all
Performance Goals or other vesting criteria will be deemed achieved at target
levels and all other terms and conditions met. In addition, 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
Participants consent; provided, however, a modification to such
performance goals only to reflect the successor corporations 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.
35
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
Administrators 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 participants
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 participants 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.
36
Share Appreciation Rights. Generally, a participant will
not recognize income, and our Company is not entitled to a deduction, upon a
grant of a SAR. When a participant exercises a SAR, the amount of cash and the
Fair Market Value of the shares received will be ordinary income to the
participant and will be deductible by our Company to the extent allowed by
Section 162(m) of the Internal Revenue Code. Upon disposition of any shares
acquired by exercise of a SAR, the participant will recognize long-term or
short-term capital gain or loss depending upon the sale price and holding period
of the shares.
Restricted Shares. Generally, a participant will not
recognize income, and our Company is not entitled to a deduction, upon a grant
of Restricted Shares. A participant may make an election under Section 83(b) of
the Internal Revenue the Code to be taxed on the difference between the purchase
price of the award and the fair market value of the award on the grant date.
Otherwise, upon the lapse of restrictions on Restricted Shares,
the participant generally recognizes ordinary compensation income equal to the
fair market value of the shares as of the date on which the restrictions lapse
less the purchase price (if any) paid by the participant. When the participant
recognizes ordinary income, the amount recognized by the participant will be
deductible by our Company to the extent allowed by Section 162(m) of the
Internal Revenue Code. Upon disposition of any shares acquired through
Restricted Share awards, the participant will recognize long-term or short-term
capital gain or loss depending upon the sale price and holding period of the
shares.
Restricted Share Units. Generally, a participant will
not recognize income, and our Company is not entitled to a deduction, upon a
grant of Restricted Share Units. Upon the delivery to the participant of Common
Stock or cash in respect of Restricted Share Units, the participant generally
recognizes ordinary compensation income equal to the Fair Market Value of the
shares as of the date of delivery or the cash amount less the purchase price (if
any) paid by the participant. When the participant recognizes ordinary income,
the amount recognized by the participant will be deductible by our Company to
the extent allowed by Section 162(m) of the Internal Revenue Code. Upon
disposition of any shares acquired through a Restricted Share Unit award, the
participant will recognize long-term or short-term capital gain or loss
depending upon the sale price and holding period of the shares.
Performance Units and Performance Share Awards.
Generally, a participant will not recognize income, and our Company is not
entitled to a deduction, upon a grant of a Performance Unit or a Performance
Share award. Generally, at the time a Performance Unit or Performance Share
award is settled, following the determination that the performance targets have
been achieved, the Fair Market Value of the shares delivered on that date, plus
any cash that is received, constitutes ordinary income to the participant, and,
provided the requirements of Section 162(m) of the Internal Revenue Code are
met, our Company is entitled to a deduction for that amount. Upon disposition of
any shares acquired through a Performance Unit or Performance Share Award, the
participant will recognize long-term or short-term capital gain or loss
depending upon the sale price and holding period of the shares.
Withholding. Our Company generally must collect and pay
withholding taxes upon the exercise of a NSO or SAR, upon the earlier of the
filing of a Section 83(b) election or upon the release of restrictions on
Restricted Shares, and at the time that Restricted Share Units, Performance
Shares or Performance Units are settled by delivering shares or cash to a
participant.
New Plan Benefits
To date, we have not granted any awards under the Equity
Incentive Plan and we cannot now determine the number or type of awards to be
granted in the future. Future grants of awards under the Plan are subject to the
discretion of our Compensation Committee.
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Vote Required
The approval of Equity Incentive Plan requires the affirmative
vote of a majority of the shares of the common stock present in person or
represented by proxy and entitled to vote on the matter (assuming a quorum is
present).
Recommendation of the Board
The Board believes that it is in the Companys best interests
and in the best interests of the shareholders to adopt the Equity Incentive Plan
to help attract, motivate and retain outstanding employees, directors, and
consultants and to align further their interests with those of shareholders.
The Board recommends a vote FOR the approval of the
Equity Incentive Plan, subject to the approval of Proposal 3.
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OTHER MATTERS
Our Board of Directors is not aware of any 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 Companys 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 2016 ANNUAL MEETING
If you wish to have a proposal included in our proxy statement
for next years annual meeting in accordance with Rule 14a-8 under the Exchange
Act, your proposal must be received by the Secretary of the Company at BAK
Industrial Park, Meigui Street, Huayuankou Economic Zone, Dalian City, 116422,
China, no later than December 31, 2015. A proposal which is received after the
applicable date or which otherwise fails to meet the requirements for
stockholder proposals established by the SEC will not be included. The
submission of a stockholder proposal does not guarantee that it will be included
in the proxy statement.
ANNUAL REPORT ON FORM 10-K
We will provide without charge to each person solicited by
this Proxy Statement, on the written request of such person, a copy of our
Annual Report on Form 10-K with any amendments, including the financial
statements and financial statement schedules, as filed with the SEC for our most
recent fiscal year. Such written requests should be directed to the Secretary of
the Company, at our address listed on the top of page one of this Proxy
Statement. A copy of our Annual Report on Form 10-K, with any amendments, is
also made available on our website at www.cbak.com.cn after it is filed
with the SEC.
By Order of the Board of Directors
____________________, 2015
/s/ Xiangqian Li
|
Secretary |
39
Appendix A
BARBARA K. CEGAVSKE
Secretary of State
202 North Carson Street
Carson City, Nevada 89701-4201
(775) 684-5708
Website: www.nvsos.gov
Certificate of Amendment
(PURSUANT TO NRS 78.385 AND 78.390) |
|
Certificate of Amendment to Articles of
Incorporation
For Nevada Profit Corporations
(Pursuant to NRS 78.385 and 78.390 - After Issuance of Stock)
1. |
Name of corporation: China BAK Battery, Inc. |
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2. |
The articles have been amended as follows: (provide
article numbers, if available) |
Article IV is hereby deleted in its
entirety and the following is substituted in lieu thereof:
CAPITAL STOCK
A. The total number of shares of all
classes of stock which the corporation shall have authority to issue is FIVE
HUNDRED AND TEN MILLION (510,000,000), consisting of FIVE HUNDRED MILLION
(500,000,000) shares of common stock, par value $0.001 per share (the Common
Stock) and TEN MILLION (10,000,000) shares of preferred stock, par value $0.001
per share (the Preferred Stock).
B. The Board of Directors of the
corporation (the Board of Directors) is authorized, at any time and from time
to time, to provide for the issuance of shares of Preferred Stock in one or more
series with such designations, preferences, voting powers and relative,
participating, optional or other special rights and qualifications, limitations
or restrictions thereof as are stated and expressed in the resolution or
resolutions providing for the issuance of such Preferred Stock adopted by the
Board of Directors, and as are not stated and expressed in these articles of
incorporation or any amendment thereto.
C. The holders of the Common Stock
shall have one (1) vote per share on each matter submitted to a vote of
stockholders. The stockholders of Common Stock shall not possess cumulative
voting rights at all shareholders meeting called for the purpose of electing a
Board of Directors. Each share of Common Stock shall be entitled to the same
dividend and liquidation rights.
3. The
vote by which the stockholders holding shares in the corporation entitling them
to exercise at least a majority of the voting power, or such greater proportion
of the voting power as may be required in the case of a vote by classes or
series, or as may be required by the provisions of the articles of incorporation
have voted in favor of the amendment is: _________________________
4.
Effective date of filing: (optional)
___________________________________________
(must not be later than 90 days after the
certificate is filed)
5.
Signature:
(required) ________________________
Signature of Officer
*If any proposed amendment would alter or change any preference
or any relative or other right given to any class or series of outstanding
shares, then the amendment must be approved by the vote, in addition to the
affirmative vote otherwise required, of the holders of shares representing a
majority of the voting power of each class or series affected by the amendment
regardless to limitations or restrictions on the voting power thereof.
IMPORTANT: Failure to include any of the above
information and submit with the proper fees may cause this filing to be
rejected.
Nevada Secretary of State Amend Profit-After
Revised: 1-5-15
A-1
Appendix B
AMENDMENT NO. 2 TO THE
CHINA BAK BATTERY INC.
STOCK OPTION PLAN
WHEREAS, China BAK Battery, Inc. (the Company) maintains the
China BAK Battery, Inc. Stock Option Plan; and
WHEREAS, the Compensation Committee of the Board of Directors
of the Company has been appointed as the Committee under the Plan; and
WHEREAS, Article 5.1 of the Plan provides that the Committee
may amend the Plan, subject to shareholder approval of such amendment if such
approval is required under applicable law;
WHEREAS, On July 25, 2008, the Companys stockholders approved
certain amendments to the Plan, including an amendment to Section 1.7 of the
Plan;
WHEREAS, the Committee now desires to further amend Section 1.7
of the Plan; and NOW, THEREFORE, the Plan is hereby amended as follows:
FIRST: Section 1.7 of the Plan is amended to read in its
entirety:
1.7
Options and Stock Granted Under Plan. If an Option terminates without
being wholly exercised, new Option or Restricted Stock may be granted hereunder
covering the number of Plan Shares to which such Option termination relates.
TWO: Except as provided above, the Plan shall continue
in full force and effect.
THIRD: Any capitalized term used herein, but not defined
herein, shall have the meaning ascribed to such term in the Plan.
FOURTH: This Amendment No. 2 to the Plan is subject to
the approval of the stockholders of the Company and shall become effective upon
such approval.
B-1
Appendix C
CHINA BAK BATTERY, INC.
STOCK OPTION PLAN
ARTICLE I.
THE PLAN
1.1
Name. This Plan shall be known as the China BAK Battery, Inc. Stock
Option Plan. Capitalized terms used herein are defined in Article VII hereof.
1.2
Purpose. The purpose of the 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 Stock of the Company to key Employees,
Nonemployee Directors, and Advisors. The 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.
This Plan is intended to comply with Section 409A of the
Internal Revenue Code of 1986, as amended (the Code), and any regulatory or
other guidance issued under such section. At the Effective Date of the Plan,
additional guidance had yet to be promulgated by the Department of Treasury. Any
terms of the Plan that conflict with such guidance shall be null and void as of
the Effective Date. After such additional guidance is issued, the intent is to
amend the Plan to delete any conflicting provisions and to add such other
provisions as are required to fully comply with Section 409A and any other
legislative or regulatory requirements applicable to the Plan. The Plan is also
intended to comply with Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended from time to time, or any successor provision thereto (Rule
16b-3), and shall be construed to so comply. With respect to any restriction in
the Plan that is based on the requirements of Rule 16b-3 or the rules of any
exchange upon which the Companys securities are listed or automated quotation
system upon which the Companys securities are quoted, or any other applicable
law, rule or restriction, to the extent that any such restriction is no longer
required, the Committee shall have the sole discretion and authority to remove
such restrictions from the Plan and/or to waive them.
1.3
Effective Date. The Plan shall become effective upon the Effective Date.
1.4
Eligibility to Participate. Any key Employee, Nonemployee Director, or
Advisor shall be eligible to participate in the Plan. Subject to the provisions
of this Plan, the Committee may grant Options in accordance with such
determinations as the Committee shall make from time to time in its sole
discretion.
1.5
Shares Subject to the Plan. The shares of Common Stock to be issued pursuant
to the Plan shall be either authorized and unissued shares of Common Stock or
shares of Common Stock issued and thereafter acquired by the Company.
1.6
Maximum Number of Plan Shares. Subject to adjustment pursuant to the
provisions of Section 5.2, and subject to any additional restrictions elsewhere
in the Plan, the maximum aggregate number of shares of Common Stock that may be
issued and sold hereunder shall be 8,000,000. Notwithstanding the foregoing, the
maximum aggregate number of shares of Company Common Stock which may be issued
under the Plan shall during any given calendar year not exceed 5% of the total
outstanding shares of Company Common Stock during such calendar year.
1.7
Options and Stock Granted Under Plan. If an Option terminates without
being wholly exercised, new Options may be granted hereunder covering the number
of Plan Shares to which such Option termination relates.
1.8
Conditions Precedent. The Company shall not issue any certificate for
Plan Shares pursuant to the Plan prior to fulfillment of all of the following
conditions:
C-1
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(a) |
The admission of the Plan Shares to listing on all stock
exchanges on which the Common Stock is then listed, unless the Committee
determines in its sole discretion that such listing is neither necessary
nor advisable; |
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(b) |
The completion of any registration or other qualification
of the offer or sale of the Plan Shares under any federal or state law or
under the rulings or regulations of the Securities and Exchange Commission
or any other governmental regulatory body that the Committee shall in its
sole discretion deem necessary or advisable; and |
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(c) |
The obtaining of any approval or other clearance from
stockholders of the Company and any federal or state governmental agency
that the Committee shall in its sole discretion determine to be necessary
or advisable. |
1.9
Reservation of Shares of Common Stock. During the term of the Plan, the
Company shall at all times reserve and keep available such number of shares of
Common Stock as shall be necessary to satisfy the requirements of the Plan as to
the number of Plan Shares. In addition, the Company shall from time to time, as
is necessary to accomplish the purposes of the Plan, seek or obtain from any
regulatory agency having jurisdiction any requisite authority that is necessary
to issue Plan Shares hereunder. The inability of the Company to obtain from any
regulatory agency having jurisdiction the authority deemed by the Companys
counsel to be necessary to the lawful issuance of any Plan Shares shall relieve
the Company of any liability in respect of the nonissuance of Plan Shares as to
which the requisite authority shall not have been obtained.
1.10 Tax
Withholding.
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(a) |
Condition Precedent. The issuance of Plan Shares
is subject to the condition that if at any time the Committee shall
determine, in its discretion, that the satisfaction of withholding tax or
other withholding liabilities under any federal, state or local law is
necessary or desirable as a condition of, or in connection with, such
issuances, then the issuances shall not be effective unless the
withholding shall have been effected or obtained in a manner acceptable to
the Committee. |
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(b) |
Manner of Satisfying Withholding Obligation. When
a participant is required by the Committee to pay to the Company an amount
required to be withheld under applicable income tax laws in connection
with the exercise of an Option, such payment may be made (i) in cash, (ii)
by check, (iii) if permitted by the Committee, by delivery to the Company
of shares of Common Stock already owned by the participant having a Fair
Market Value on the Tax Date equal to the amount required to be withheld,
(iv) if permitted by the Committee, through the withholding by the Company
of a portion of the Plan Shares acquired upon the exercise of the Options
(if applicable) having a Fair Market Value on the Tax Date equal to the
amount required to be withheld, or (v) in any other form of valid
consideration, as permitted by the Committee in its
discretion. |
1.11
Exercise of Options.
|
(a) |
Method of Exercise. Each Option shall be
exercisable in accordance with the terms of the Option Agreement pursuant
to which the Option was granted. No Option may be exercised for a fraction
of a Plan Share. |
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(b) |
Payment of Purchase Price. The purchase price of
any Plan Shares purchased shall be paid at the time of exercise of the
Option either (i) in cash, (ii) by certified or cashiers check, (iii) if
permitted by the Committee, by shares of Common Stock so long as the
participant has not acquired the Common Stock from the Company within six
(6) months prior to the date of exercise, (iv) if permitted by the
Committee, by cash or certified or cashiers check for the par value of
the Plan Shares plus a promissory note for the balance of the purchase
price, which note shall provide for full personal liability of the maker
and shall contain such terms and provisions as the Committee may
determine, including without limitation the right to repay the note
partially or wholly with Common Stock, (v) if approved by the Committee,
in accordance with a cashless exercise program under which either (A) if
so instructed by the participant, Plan Shares may be issued directly to
the participants broker or dealer upon receipt of the purchase price in
cash from the broker or dealer, or (B) Plan Shares may be issued by the
Company to a participants broker or dealer in consideration of such brokers or dealers
irrevocable commitment to pay to the Company that portion of the proceeds from
the sale of such Plan Shares that is equal to the exercise price of the
Option(s) relating to such Plan Shares, or (vi) in any other form of valid
consideration, as permitted by the Committee in its discretion. If any portion
of the purchase price or a note given at the time of exercise is paid in shares
of Common Stock, those shares shall be valued at the then Fair Market Value. |
C-2
1.12
Written Notice Required. Any Option shall be deemed to be exercised for
purposes of the Plan when written notice of exercise has been received by the
Company at its principal office from the person entitled to exercise the Option
and payment for the Plan Shares with respect to which the Option is exercised
has been received by the Company in accordance with Section 1.11.
1.13
Compliance with Securities Laws. Plan Shares shall not be issued with
respect to any Option unless the issuance and delivery of the Plan Shares and
the exercise of an Option shall comply with all relevant provisions of state and
federal law (including without limitation (i) the Securities Act and the rules
and regulations promulgated thereunder, and (ii) the requirements of any stock
exchange upon which the Plan Shares may then be listed) and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. The Committee may also require a participant to furnish evidence
satisfactory to the Company, including without limitation a written and signed
representation letter and consent to be bound by any transfer restrictions
imposed by law, legend, condition, or otherwise, that the Plan Shares are being
acquired only for investment and without any present intention to sell or
distribute the shares in violation of any state or federal law, rule, or
regulation. Further, each participant shall consent to the imposition of a
legend on the certificate representing the Plan Shares issued pursuant to the
exercise of an Option restricting their transfer as required by law or this
section.
1.14
Employment or Service of Optionee. Nothing in the Plan or in any Option
or Restricted Stock granted hereunder shall confer upon any Employee any right
to continued employment by the Company or any of its subsidiaries or affiliates
or limit in any way the right of the Company or any of its subsidiaries or
affiliates at any time to terminate or alter the terms of that employment.
Nothing in the Plan or in any Option granted hereunder shall confer upon any
Nonemployee Director or Advisor any right to continued service as a Nonemployee
Director or Advisor of the Company or any of its subsidiaries or affiliates or
limit in any way the right of the Company or any of its subsidiaries or
affiliates at any time to terminate or alter the terms of that service.
1.15
Rights of Optionees Upon Termination of Employment or Service. 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 Article VI hereof, then, the unvested portion of
the Optionees Option shall terminate immediately and cease to remain
outstanding and the vested portion shall immediately terminate at the beginning
of the thirty-first (31st) day following termination of Optionees
service. In the event an Optionee ceases to serve as an Employee, Nonemployee
Director, or Advisor due to death, Permanent Disability or Misconduct, the
Optionees Options may be exercised as follows:
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(a) |
Death. Except as otherwise limited by the
Committee at the time of the grant of an Option, if an Optionee dies while
serving as an Employee, Nonemployee Director, or Advisor or within three
months after ceasing to be an Employee, Nonemployee Director, 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, with respect to a Nonqualified Stock Option, the
Committee agrees, in its sole discretion, to further extend the term of
such Nonqualified Stock Option. During such period, the Option may be
fully exercised, to the extent that it remains unexercised on the date of
death, by the Optionees personal representative or by the distributees to
whom the Optionees rights under the Option shall pass by will or by the
laws of descent and distribution. |
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(c) |
Disability. If an Optionee ceases to serve as an
Employee, Nonemployee Director, or Advisor as a result of Permanent
Disability, the Optionees Option shall become fully exercisable and shall
expire 12 months thereafter, unless by its terms it expires sooner or,
unless, with respect to a Nonqualified Stock Option, the Committee agrees,
in its sole discretion, to extend the term of such Nonqualified Stock
Option. |
C-3
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(d) |
Misconduct. Should the Optionee cease to be an
Employee, Nonemployee Director or Advisor because of Misconduct, the
Optionees Option shall terminate whether vested or unvested
immediately. |
1.16
Transferability of Options. Except as the Committee may otherwise
provide, Options shall not be transferable other than by will or the laws of
descent and distribution or, with respect to Nonqualified Stock Options,
pursuant to the terms of a qualified domestic relations order as defined by the
Code or Title I of ERISA, or the rules thereunder. The designation by an
Optionee of a beneficiary shall not constitute a transfer of the Option. The
Committee may, in its discretion, provide in an Option Agreement that
Nonqualified Stock Options granted hereunder may be transferred by the Optionee
to members of his or her immediate family, trusts for the benefit of such
immediate family members and partnerships in which such immediate family members
are the only partners.
1.17 Information
to Participants. The Company shall furnish to each participant a copy of the
annual report, proxy statements and all other reports (if any) sent to the
Companys stockholders. Upon written request, the Company shall furnish to each
participant a copy of its most recent Form 10-K Annual Report (if any) and each
quarterly report to stockholders issued (if any) since the end of the Companys
most recent fiscal year.
ARTICLE II.
ADMINISTRATION
2.1
Committee. The Plan shall be administered by a Committee, which shall be
appointed by the Board. If the Board so elects, the Plan may be administered by
different Committees with respect to different groups of participants. The
Committee shall be constituted to satisfy applicable laws. Subject to the
provisions of the Plan, the Committee shall have the sole discretion and
authority to determine from time to time the Employees, Non-Employee Directors,
and Advisors to whom Options shall be granted and the number of Plan Shares
subject to each Option, to interpret the Plan, to prescribe, amend and rescind
any rules and regulations necessary or appropriate for the administration of the
Plan, to determine and interpret the details and provisions of each Option
Agreement, to modify or amend any Option 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. The Board may remove any member of the Committee,
with or without cause.
2.2 Majority
Rule; Unanimous Written Consent. A majority of the members of the Committee
shall constitute a quorum, and any action taken by a majority present at a
meeting at which a quorum is present or any action taken without a meeting
evidenced by a writing executed by all members of the Committee shall constitute
the action of the Committee. Meetings of the Committee may take place by
telephone conference call.
2.3
Company Assistance. The Company shall supply full and timely
information to the Committee on all matters relating to Employees, Nonemployee
Directors, and Advisors, their employment, death, Permanent Disability, or other
termination of employment or other relationship with the Company, and such other
pertinent facts as the Committee may require. The Company shall furnish the
Committee with such clerical and other assistance as is necessary in the
performance of its duties.
2.4
Exculpation of Committee. No member of the Committee shall be personally
liable for, and the Company shall indemnify all members of the Committee and
hold them harmless against, any claims resulting directly or indirectly from any
action or inaction by the Committee pursuant to the Plan.
ARTICLE III.
NONQUALIFIED STOCK OPTIONS
3.1
Option Terms and Conditions. The terms and conditions of Options granted
under this Article may differ from one another as the Committee shall, in its
discretion, determine as long as all Options granted under this Article satisfy
the requirements of this Article.
3.2
Duration of Options. Each Option granted pursuant to this Article and all
rights thereunder shall expire on the date determined by the Committee. In
addition, each Option shall be subject to early termination as provided
elsewhere in the Plan.
C-4
3.3
Purchase Price. The purchase price for the Plan Shares acquired pursuant
to the exercise, in whole or in part, of any Option granted under this Article
shall not be less than the Fair Market Value of the Plan Shares at the time of
the grant of the Option.
3.4
Individual Option Agreements. Each Optionee receiving Options pursuant to
this Article shall be required to enter into a written Option Agreement with the
Company. In such Option Agreement, the Optionee shall agree to be bound by the
terms and conditions of the Plan, the Options made pursuant hereto, and such
other matters as the Committee deems appropriate.
ARTICLE IV.
RESTRICTED STOCK
4.1
Grant. Notwithstanding any provisions of the Plan to the contrary, 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.
4.2
Dividends and Distributions. 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.
ARTICLE V.
TERMINATION, AMENDMENT, AND ADJUSTMENT
5.1
Termination and Amendment. The Plan shall terminate with
respect to Nonqualified Stock Options on the date that is fifty years after the
Effective Date unless provided otherwise in the option agreement. No Option
shall be granted under the Plan after the respective date of termination.
Subject to the limitations contained in this section, the Committee may at any
time amend or revise the terms of the Plan, including the form and substance of
the 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 the Code, Rule 16b-3, or any
other applicable law or rule. No amendment, suspension, or termination of the
Plan shall, without the consent of the individual who has received an Option,
alter or impair any of that individuals rights or obligations under any Option
granted under the Plan prior to that amendment, suspension, or termination.
5.2
Adjustments. 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 Plan 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. The foregoing adjustments
and the manner of application of the foregoing provisions shall be determined
solely by the Committee, and any such adjustment may provide for the elimination
of fractional share interests.
ARTICLE VI.
CORPORATE TRANSACTIONS;
CHANGES IN CAPITALIZATION; DISSOLUTION
6.1
Corporate Transactions. In the event of any Corporate Transaction, each
outstanding option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding C-5 Option shall not so accelerate if and to the extent: (i) such
Option is, in connection with the Corporate Transaction, 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 which preserves the spread
existing on the unvested Option shares at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) the acceleration of such Option is subject to
other limitations imposed by the Committee at the time of the option grant. The
determination of option comparability under clause (i) above shall be made by
the Committee, and its determination shall be final, binding and conclusive.
6.2
Termination. 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 this Section VII.
6.3
Assumption. Each Option which is assumed in connection with the
Corporate Transaction shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to the Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate Transaction shall
also be made to (i) the number and class of securities available for issuance
under the Plan following consummation of such Corporate Transaction and (ii) the
exercise price payable per share under each outstanding Option, provided the
aggregate exercise price payable for such securities shall remain the same.
6.4
Subsequent Termination. The Committee shall have the discretion,
exercisable at the time the Option is granted or at any time while the Option
remains outstanding, 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 Optionees Service should subsequently
terminate by reason of an involuntary termination within eighteen (18) months
following the effective date of such Corporate Transaction. Any Options so
accelerated shall remain exercisable for fully-vested shares until the earlier
of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the involuntary termination.
6.5
Automatic Acceleration. The Committee shall have the discretion,
exercisable either at the time the Option is granted or at any time while the
option remains outstanding 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 (or those repurchase rights
are to be assigned) in the Corporation Transaction.
6.6
No Limitation on Actions. The grant of Options under the Plan shall in no
way affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
6.7
Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon
as practicable prior to the effective date of such proposed transaction. The
Administrator 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 Administrator 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.
ARTICLE VII.
MISCELLANEOUS
7.1
Other Compensation Plans. The adoption of the Plan shall not affect any
other stock option or incentive or other compensation plans in effect for the
Company or any subsidiary or affiliate of the Company, nor shall the Plan
preclude the Company or any subsidiary or affiliate thereof from establishing
any other forms of incentive or other compensation plans.
C-6
7.2
Plan Binding on Successors. The Plan shall be binding upon the successors
and assigns of the Company and any subsidiary or affiliate of the Company that
adopts the Plan.
7.3
Number and Gender. Whenever used herein, nouns in the singular shall
include the plural where appropriate, and the masculine pronoun shall include
the feminine gender.
7.4
Headings. Headings of articles and sections hereof are inserted for
convenience of reference and constitute no part of the Plan.
7.5
Stockholder Rights. The holder of an option shall have no stockholder rights
with respect to the shares subject to the option until such person shall have
exercised the option, paid the exercise price and become a holder of record of
the purchased shares.
7.6
Market Stand-Off. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the Securities Act of 1933, the Optionee may not sell,
make any short sale of, loan, hypothecate, pledge, grant any option for the
purchase of, or otherwise dispose or transfer for value or otherwise agree to
engage in any of the foregoing transactions with respect to, any shares of
Common Stock acquired upon exercise of an option granted under the Plan without
the prior written consent of the Corporation or its underwriters. Such
restriction (the Market Stand-Off) shall be in effect for such period of time
from and after the effective date of the final prospectus for the offering as
may be required to execute such agreements as the Corporation or the
underwriters request in connection with the Market Stand-Off.
ARTICLE VIII.
DEFINITIONS
As used herein with initial capital letters, the following
terms have the meanings hereinafter set forth unless the context clearly
indicates to the contrary:
8.1 Advisor means any individual performing
substantial bona fide services for the Company or any subsidiary or affiliate of
the Company that has adopted the Plan who is not an Employee or a Director.
8.2
Applicable Laws means the requirements relating to the administration of stock
option plans under U.S. state corporate laws, U.S. federal and state securities
laws, the Code, any stock exchange or quotation system on which the Common Stock
is listed or quoted and the applicable laws of any foreign country or
jurisdiction where Options are, or will be, granted under the Plan.
8.3
Board means the Board of Directors of the Company.
8.4
Code means the Internal Revenue Code of 1986, as amended.
8.5
Committee means the Committee appointed in accordance with Section 2.1.
8.6
Common Stock means the Common Stock, par value $.001 per share, of the Company
or, in the event that the outstanding shares of such Common Stock are hereafter
changed into or exchanged for shares of a different stock or security of the
Company or some other corporation, such other stock or security.
8.7
Company means China BAK Battery, Inc., a Nevada corporation.
8.8 Corporate Transaction means 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 fifty percent (50%) of the total combined voting power of the
Companys outstanding securities are transferred to a person or person different
from the persons holding those securities immediately prior to such transaction,
or
C-7
ii. the sale, transfer or other disposition of all or
substantially all of the Companys assets in complete liquidation or dissolution
of the Company.
8.9
Director means a member of the Board.
8.10
Effective Date means May 16, 2005.
8.11 Employee
means an employee (as defined in Section 3401(c) of the Code and the regulations
thereunder) of the Company or of any subsidiary or affiliate of the Company that
adopts the Plan, including Officers.
8.12 ERISA
means the Employee Retirement Income Security Act of 1974, as amended.
8.13 Exchange Act means the Securities Exchange Act of 1934, as
amended.
8.14 Fair
Market Value means such value as determined by the Committee on the basis of
such factors as it deems appropriate; provided that if the Common Stock
is traded on a national securities exchange or transactions in the Common Stock
are quoted on the Nasdaq National Market System, such value as shall be
determined by the Committee 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 national securities exchange or
the Nasdaq National Market System, as the case may be. If the Common Stock is
not listed and traded upon a recognized securities exchange or on the Nasdaq
National Market System, the Committee shall make a determination of Fair Market
Value on a reasonable basis, which may include the mean between the closing bid
and asked quotations for such stock on the date for which such determination is
relevant (as reported by a recognized stock quotation service) or, in the event
that there shall be no bid or asked quotations on the date for which such
determination is relevant, then on the basis of the mean between the closing bid
and asked quotations on the date nearest preceding the date for which such
determination is relevant for which such bid and asked quotations were
available.
8.15
Misconduct means the commission of any act of fraud, embezzlement or
dishonesty by the Optionee, any unauthorized use or disclosure by such person of
confidential information or trade secrets of the Company, or any other
intentional misconduct or negligence by such person adversely affecting the
business or affairs of the Company in a material manner. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Company may consider as grounds for the dismissal or discharge of any
Optionee or other person in the service of the Company.
8.16
Nonemployee Director means a member of the Board who is not an Officer or
Employee; provided that, as used in Section 2.1, the term Non-Employee
Director shall have the meaning provided in that section.
8.17
Nonqualified Stock Option means an Option granted pursuant to Article III.
8.18 Officer
means an officer of the Company or of any subsidiary or affiliate of the
Company.
8.19 Option means a Nonqualified Stock Option.
8.20
Optionee means an Employee, Nonemployee Director, or Advisor to whom an Option
has been granted hereunder.
8.21 Option
Agreement means an agreement between the Company and an Optionee with respect
to one or more Options.
8.22
Permanent Disability has the same meaning as that provided in Section 22(e)(3)
of the Code.
8.23 Plan means the China BAK Battery, Inc. Stock Option
Plan, as amended from time to time.
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8.24 Plan Shares
means shares of Common Stock issuable pursuant to the Plan.
8.25
Restricted Stock means any shares granted under Article IV of the Plan.
8.26 Rule 16b-3
means Rule 16b-3 promulgated under the Exchange Act or any successor rule.
8.27 Securities Act means the Securities Act of 1933, as amended.
8.28 Tax Date
means the date on which the amount of tax to be withheld is determined.
Appendix D
CHINA BAK BATTERY, INC.
2015 EQUITY INCENTIVE PLAN
1. |
Purposes of the Plan. China BAK Battery, Inc., a
Nevada corporation (the Company) hereby establishes the CHINA BAK
BATTERY, INC. 2015 EQUITY INCENTIVE PLAN (the Plan). The purposes
of this 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 the success
of the Company, attracting and retaining the best available personnel for
positions of substantial responsibility, and generally providing
additional incentive for them to promote the success of the Companys
business through the grant of Awards of or pertaining to shares of the
Companys Common Stock. The Plan permits the grant of Incentive Share
Options, Nonstatutory Share Options, Restricted Shares, Restricted Share
Units, Share Appreciation Rights, Performance Units and Performance Shares
as the Administrator may determine. |
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2. |
Definitions. The following definitions will apply
to the terms in the Plan: |
Administrator means the Board
or any of its Committees as will be administering the Plan, in accordance with
Section 4.
Affiliate means any
corporation, partnership, limited liability company, limited liability
partnership, business trust, or other entity or person controlling, controlled
by or under common control of the Company, as determined by the Administrator in
its sole discretion. For purposes of this defined term, control means having
the power to direct or appoint the management of a company and controlled or
controlling shall have correlative meanings. The term Affiliate shall
include any business venture in which the Company has a direct or indirect
significant interest, as determined by the Administrator in its sole discretion.
Applicable Laws means the
requirements relating to the administration of equity-based awards under U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where Awards are,
or will be, granted under the Plan.
Award means, individually or
collectively, a grant under the Plan of Options, SARs, Restricted Shares,
Restricted Share Units, Performance Units or Performance Shares.
Award Agreement means the
written or electronic agreement setting forth the terms and provisions
applicable to each Award granted under the Plan. The Award Agreement is subject
to the terms and conditions of the Plan.
Board means the Board of
Directors of the Company.
Change in Control means the
occurrence of any of the following events:
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(i) |
Any person (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) becomes the beneficial owner (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the total voting
power represented by the Company's then outstanding voting securities;
provided however, that for purposes of this subsection, the following
shall not constitute a Change in Control: (1) any acquisition of
securities directly from the Company other than an acquisition by virtue
of the exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company; (2)
any acquisition by the Company; or (3) any acquisition by an employee benefit
plan (or related trust) sponsored or maintained by the Company or any entity
controlled by the Company or |
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(ii) |
A change in the composition of the Board occurring within
a two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. Incumbent Directors means
directors who either (A) are Directors as of the effective date of the
Plan, or (B) are elected, or nominated for election, to the Board with the
affirmative votes of at least a majority of the Directors at the time of
such election or nomination (except where such election or nomination is
in connection with an actual or threatened proxy contest relating to the
election of directors to the Company); |
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(iii) |
The consummation of the sale, transfer or other
disposition by the Company of all or substantially all of the Company's
assets, except with respect to a sale, transfer or other disposition of
assets to a Parent, Subsidiary, or Affiliate; |
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(iv) |
The consummation of a merger or consolidation of the
Company with or into any other person, unless securities possessing more
than 50% of the total combined voting power of the survivors or
acquirors outstanding securities (or the securities of any parent
thereof) are held by a person or persons who directly or indirectly held
securities possessing more than 50% of the total combined voting power of
the Companys outstanding securities immediately prior to that
transaction. |
For avoidance of doubt, a transaction
will not constitute a Change in Control if: (i) its sole purpose is to change
the state of the Companys incorporation, or (ii) its sole purpose is to create
a holding company that will be owned in substantially the same proportions by
the persons who held the Companys securities immediately before such
transaction.
Code means the Internal
Revenue Code of 1986, as amended. Any reference in the Plan to a section of the
Code will be a reference to any successor or amended section of the Code.
Committee means a
committee or subcommittee of Directors or of other individuals satisfying
Applicable Laws appointed by the Board in accordance with Section 4 hereof.
Common Stock means the common
stock of the Company.
Company means CHINA BAK
BATTERY, INC., a Nevada corporation, or any successor thereto. For purposes of
the Plan, the term Company shall include any present or future Parent and
Subsidiary.
Consultant means any person,
including an advisor, engaged by the Company or any Affiliate of the Company to
render services to such entity if: (i) such person renders bona fide services to
the Company or any Affiliate; (ii) the services rendered by such person are not
in connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market for
the Companys securities; and (iii) such person is a natural person who has
contracted directly with the Company or any Affiliate to render such services.
Covered Employee means an
employee who is a covered employee within the meaning of Section 162(m) of the
Code.
Designated Beneficiary means
the beneficiary designated by a Participant, in a manner determined by the
Administrator, to receive amounts due or exercise rights of the Participant in
the event of the Participants death or, in the absence of an effective
designation by a Participant, the Participants estate.
D-2
Director means a member of the
Board or any board of directors (or similar governing authority) of any
Affiliate, including a non-employee Director.
Disability generally means
total and permanent disability as determined by the Administrator in its
discretion in accordance with uniform and non-discriminatory standards adopted
by the Administrator from time to time, but Disability, for purposes of an
ISO, means total and permanent disability as defined in Section 22(e)(3) of the
Code.
Employee means any person,
including Officers and Directors, employed by the Company or any Affiliate of
the Company. Neither service as a Director nor payment of a director's fee by
the Company will be sufficient to constitute employment by the Company.
Exchange Act means the
Securities Exchange Act of 1934, as amended.
Fair Market Value means, as of
any date, the value of Common Stock determined as follows:
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(i) |
If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation, any
division or subdivision of the Nasdaq Stock Market, its Fair Market Value
will be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system on the day of
determination or, if no closing price is reported on that date, the
closing price on the next preceding date for which a closing price is
reported, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable; or |
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(ii) |
If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, including without
limitation quotation through the over the counter bulletin board
(OTCBB) quotation service administered by the Financial Industry
Regulatory Authority (FINRA), the Fair Market Value of a Share
will be the mean between the high bid and low asked prices for the Common
Stock on the day of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
or |
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(iii) |
In the absence of an established market for the Common
Stock of the type described in (i) and (ii), above, the Fair Market Value
will be determined in good faith by the Administrator, and to the extent
Section 15 applies (a) with respect to ISOs, the Fair Market Value shall
be determined in a manner consistent with Code Section 422 or (b) with
respect to NSOs or SARs, the Fair Market Value shall be determined in a
manner consistent with Code Section 409A. |
Grant Date means, for all
purposes, the date on which the Administrator determines to grant an Award, or
such other later date as is determined by the Administrator, provided that the
Administrator cannot grant an Award prior to the date the material terms of the
Award are established. Notice of the Administrators determination to grant an
Award will be provided to each Participant within a reasonable time after the
Grant Date.
Incentive Share Option or
ISO means an Option that by its terms qualifies and is otherwise intended
to qualify as an Incentive Share Option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
Nonstatutory Share Option or
NSO means an Option that by its terms does not qualify or is not intended
to qualify as an ISO.
Officer means a person who is
an officer of the Company within the meaning of Section 16 of the Exchange Act
and the rules and regulations promulgated thereunder.
Option means a share option
granted pursuant to the Plan.
D-3
Optionee means the holder of
an outstanding Option.
Parent means a parent
corporation, whether now or hereafter existing, as defined in Section 424(e) of
the Code.
Participant means the holder
of an outstanding Award.
Performance Period means, in
respect of a Performance Share or Performance Unit or Qualified
Performance-Based Awards, the time period during which the performance
objectives or other vesting provisions must be met.
Performance Share means an
Award denominated in Shares which may vest in whole or in part upon attainment
of performance goals or other vesting criteria as the Administrator may
determine pursuant to Section 10.
Performance Unit means an
Award which may vest in whole or in part upon attainment of performance goals or
other vesting criteria as the Administrator may determine and which may be
settled for cash, Shares or other securities or a combination of the foregoing
pursuant to Section 10.
Period of Restriction means
the period during which Restricted Shares or Restricted Share Units are subject
to forfeiture (such forfeiture may be effected by way of redemption by the
Company in respect of the Restricted Shares).
Plan means this China BAK
Battery, Inc. 2015 Equity Incentive Plan.
Qualified Performance-Based
Award means an Award intended to qualify as performance-based
compensation under Section 162(m) of the Code.
Restricted Shares means Shares
awarded to a Participant subject to forfeiture (such forfeiture may be effected
by way of redemption by the Company) in accordance with Section 7.
Restricted Share Unit means
the right to receive one Share at or after the end of the Period of Restriction,
which right is subject to forfeiture in accordance with Section 8 of the
Plan.
Securities Act means the
Securities Act of 1933, as amended.
Service Provider means an
Employee, Director or Consultant.
Share means a share of Common
Stock, as adjusted in accordance with Section 13.
Share Appreciation Right or
SAR means the right to receive payment from the Company in an amount no
greater than the excess of the Fair Market Value of a Share at the date the SAR
is exercised over a specified price fixed by the Administrator in the Award
Agreement, which shall not be less than the Fair Market Value of a Share on the
Grant Date. In the case of a SAR which is granted in connection with an Option,
the specified price shall be the Option exercise price.
Subsidiary means a subsidiary
corporation, whether now or hereafter existing, as defined in Section 424(f) of
the Code.
Ten Percent Owner means any
Service Provider who is, on the grant date of an ISO, the owner of Shares
(determined with application of ownership attribution rules of Section 424(d))
of the Code possessing more than 10% of the total combined voting power of all
classes of shares of the Company, or any Parent or Subsidiaries.
3. |
Shares Subject to the
Plan. |
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a. |
Shares Subject to the Plan. Subject to the
provisions of Section 13, the maximum aggregate number of Shares
that may be issued under the Plan is ten million (10,000,000)
Shares. |
D-4
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b. |
Lapsed Awards. If for any reason an Award is
cancelled, terminates, expires, is forfeited or otherwise becomes
unexercisable without having been exercised in full or, with respect to
Restricted Shares, Restricted Share Units, Performance Shares or
Performance Units, is forfeited in whole or in part to the Company, the
unpurchased, forfeited, redeemed or unissued Shares (as the case may be)
which were subject to the Award will be added back to the Plan share
reserve and again be available for future grant or sale under the Plan
(unless the Plan has terminated). With respect to SARs, only Shares
actually issued pursuant to an SAR will cease to be available under the
Plan; all remaining Shares subject to the SARs will remain available for
future grant or sale under the Plan (unless the Plan has terminated).
Shares that are exchanged by a Participant or withheld by the Company to
pay the full or partial exercise price of an Award or to satisfy tax
withholding obligations with respect to an Award will become available for
future grant or sale under the Plan. Notwithstanding the foregoing, Shares
that have actually been issued under the Plan under any Award will not be
returned to the Plan and will not become available for future distribution
under the Plan; provided, however, that if Shares issued pursuant to
Awards of Restricted Shares, Restricted Share Units, Performance Shares or
Performance Units are forfeited to the Company, such Shares will become
available for future grant under the Plan. To the extent an Award under
the Plan is paid out in cash rather than Shares, such cash payment will
not result in reducing the number of Shares available for issuance under
the Plan. To the extent required by Section 162(m) of the Code in order
for Awards to be exempt from the tax deduction limits thereof, Shares
subject to Awards that are cancelled shall not be available for future
grant or sale under the Plan. |
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c. |
Share Reserve. The Company, during the term of
this Plan, will at all times reserve and keep available such number of
Shares as will be sufficient to satisfy the requirements of the
Plan. |
4. |
Administration of the
Plan. |
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a. |
Procedure. The Plan shall be administered by the
Board or a Committee (or Committees) appointed by the Board, which
Committee shall be constituted to comply with Applicable Laws. If and so
long as the Common Stock is registered under Section 12(b) or 12(g) of the
Exchange Act, the Board shall consider in selecting the Administrator and
the membership of any committee acting as Administrator the requirements
regarding: (i) nonemployee directors within the meaning of Rule 16b-3
under the Exchange Act; (ii) independent directors as described in the
listing requirements for any share exchange on which Shares are listed;
and (iii) Section 15(b)(i) of the Plan, if the Company grants any
Qualified Performance-Based Award. The Board may delegate the
responsibility for administering the Plan with respect to designated
classes of eligible Participants to different committees consisting of two
or more members of the Board, subject to such limitations as the Board or
the Administrator deems appropriate. Committee members shall serve for
such term as the Board may determine, subject to removal by the Board at
any time. |
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b. |
Powers of the Administrator. Subject to the
provisions of the Plan and the approval of any relevant authorities, and
in the case of a Committee, subject to the specific duties delegated by
the Board to such Committee, the Administrator will have the authority, in
its discretion: |
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i. |
to determine the Fair Market Value; |
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ii. |
to select the Service Providers to whom Awards may be
granted hereunder; |
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iii. |
to determine the type of Award and number of Shares to be
covered by each Award granted hereunder; |
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iv. |
to approve forms of agreement for use under the
Plan; |
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v. |
to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time
or times when Awards may be exercised (which may be based on continued
employment, continued service or performance criteria), any
vesting acceleration (whether by reason of a Change of Control or
otherwise) or waiver of forfeiture, and any restriction or limitation regarding
any Award or the Shares relating thereto, based in each case on such factors as
the Administrator, in its sole discretion, will determine; |
D-5
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vi. |
to construe and interpret the terms of the Plan and
Awards granted pursuant to the Plan, including the right to construe
disputed or doubtful Plan and Award provisions; |
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vii. |
to prescribe, amend and rescind rules and regulations
relating to the Plan; |
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viii. |
to modify or amend each Award to the extent any
modification or amendment is consistent with the terms of the Plan, and
does not materially 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; |
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ix. |
to allow Participants to satisfy withholding tax
obligations in such manner as prescribed in Section 14; |
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x. |
to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Award previously
granted by the Administrator; |
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xi. |
to delay issuance of Shares or suspend Participants
right to exercise an Award as deemed necessary to comply with Applicable
Laws; |
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xii |
to the extent permitted by Applicable Laws, to delegate,
as it may deem appropriate, to one or more executive officers of the
Company the authority to grant Awards to Service Providers who are not
Officers and Directors, and exercise such other powers under the Plan as
the Administrator may determine, in accordance with such guidelines as the
Administrator shall set forth at any time or from time to time;
and |
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xiii. |
to make all other determinations deemed necessary or
advisable for administering the Plan. |
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c. |
Effect of Administrator's Decision. The
Administrators decisions, determinations and interpretations will be
final and binding on all Participants and any other holders of Awards. Any
decision or action taken or to be taken by the Administrator, arising out
of or in connection with the construction, administration, interpretation
and effect of the Plan and of its rules and regulations, shall, to the
maximum extent permitted by Applicable Laws, be within its absolute
discretion (except as otherwise specifically provided in the Plan) and
shall be final, binding and conclusive upon the Company, all Participants
and any person claiming under or through any
Participant. |
5. |
Authorization of
Grants |
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a. |
Eligibility. NSOs, Restricted Shares, Restricted
Share Units, SARs, Performance Units and Performance Shares may be granted
to Service Providers either alone or in combination with any other Awards.
ISOs may be granted as specified in Section 15(a) to employees of the
Company, and of any Parent or Subsidiary. |
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b. |
General Terms of Awards. Each grant of an Award
shall be subject to all applicable terms and conditions of the Plan
(including but not limited to any specific terms and conditions applicable
to that type of Award set out in the following Sections), and such other
terms and conditions, not inconsistent with the terms of the Plan, as the
Administrator may prescribe. Any additional terms of an Award shall be set
forth in an agreement evidencing the Award by and between the Company and
the Participant. |
D-6
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c. |
Vesting Conditions. The Administrator may impose
vesting schedules, limitations on transferability and forfeiture
conditions on any Award granted under this Plan as the Administrator in
its sole discretion 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 and provide for in the
applicable Award Agreement. 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. |
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d. |
Effect of Termination of Employment, Etc. Except
as otherwise provided in Section 13, unless the Administrator in its sole
discretion shall at any time determine otherwise with respect to any
Award, if the Participants employment or other association with the
Company and its Affiliates ends for any reason, including because of the
Participants employer ceasing to be an Affiliate, (a) any outstanding
Option or SAR of the Participant shall cease to be exercisable in any
respect not later than three (3) months following that event and, for the
period it remains exercisable following that event, shall be exercisable
only to the extent exercisable at the date of that event, and (b) any
other outstanding Award of the Participant shall be forfeited or otherwise
subject to return to or repurchase by the Company on the terms specified
in the applicable Award Agreement. Military or sick leave or other bona
fide leave shall not be deemed a termination of employment or other
association, provided that it does not exceed the longer of three
(3) months or the period during which the absent Participants
reemployment rights, if any, are guaranteed by statute or by
contract. |
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a. |
Grant of Options. Subject to the terms and
conditions of the Plan, the Administrator, at any time and from time to
time, may grant Options to Service Providers in such amounts as the
Administrator will determine in its sole discretion. The Administrator may
grant NSOs, ISOs, or any combination of the two. ISOs shall be granted in
accordance with Section 15(a) of the Plan. |
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b. |
Option Award Agreement. Each Option shall be
evidenced by an Award Agreement that shall specify the type of Option
granted, the Options exercise price, the exercise date, the term of the
Option, the number of Shares to which the Option pertains, vesting
criteria and such other terms and conditions (which need not be identical
among Participants) as the Administrator shall determine in its sole
discretion. If the Award Agreement does not specify that the Option is to
be treated as an ISO, the Option shall be deemed a NSO. |
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c. |
Exercise Price. The per Share exercise price for
the Shares to be issued pursuant to exercise of an Option will be no less
than the Fair Market Value per Share on the Grant Date. Notwithstanding
the above or any other term in this Plan or any Award Agreement, Shares
shall be issued pursuant to exercise of an Option at a price at least
equal to their par value. |
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d. |
Term of Options. The term of each Option will be
stated in the Award Agreement. Unless terminated sooner in accordance with
the Plan or Award Agreement, no Option shall be exercisable on or after
the tenth anniversary of the Grant Date. |
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e. |
Time and Form of
Payment. |
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i. |
Exercise Date. Each Award Agreement shall specify
how and when Shares covered by an Option may be purchased. The Award
Agreement may specify waiting periods, the dates on which Options become
exercisable or vested and, subject to the termination provisions of the
Option, exercise periods. The Administrator may accelerate the
exercisability of any Option or portion thereof. |
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ii. |
Exercise of Option. Any Option granted hereunder
will be exercisable according to the terms of the Plan and at such times
and under such conditions as determined by the Administrator and set forth
in the Award Agreement. An Option may not be
exercised for a fraction of a Share. An Option will be deemed exercised
when the Company receives: (1) notice of exercise (in such form as the
Administrator shall specify from time to time) from the person entitled to
exercise the Option, and (2) full payment for the Shares with respect to which
the Option is exercised (together with all applicable withholding taxes). Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Award Agreement and the Plan (together with
all applicable withholding taxes). Shares issued upon exercise of an Option will
be issued in the name of the Optionee or, if requested by the Optionee, in the
name of the Optionee and his or her spouse or a Designated Beneficiary. Until
the Shares are issued (as evidenced by the appropriate entry in the register of
members of the Company), no right to vote or receive dividends or any other
rights as a shareholder will exist with respect to the Shares subject to the
Option, notwithstanding the exercise of the Option. The Company will issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section
13. |
D-7
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iii. |
Payment. The Administrator will determine the
acceptable form of consideration for exercising an Option, including the
method of payment. Such consideration may consist entirely
of: |
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(1) |
cash; |
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(2) |
check; |
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(3) |
to the extent not prohibited by Section 402 of the
Sarbanes-Oxley Act of 2002, a promissory note; |
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(4) |
other Shares, provided Shares have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares
as to which said Option will be exercised (such Shares will be repurchased
by the Company at a repurchase price equal to their Fair Market
Value); |
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(5) |
to the extent not prohibited by Section 402 of the
Sarbanes-Oxley Act of 2002, in accordance with any broker-assisted
cashless exercise procedures approved by the Company and as in effect from
time to time; |
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(6) |
by asking the Company to withhold Shares from the total
Shares to be delivered upon exercise equal to the number of Shares having
a value equal to the aggregate exercise price of the Shares being
acquired; |
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(7) |
any combination of the foregoing methods of payment;
or |
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(8) |
such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable
Laws. |
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f. |
Forfeiture of Options. All unexercised Options
shall be forfeited to the Company in accordance with the terms and
conditions set forth in the Award Agreement and again will become
available for grant under the Plan. |
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a. |
Grant of Restricted Shares. Subject to the terms
and conditions of the Plan, the Administrator, at any time and from time
to time, may grant Restricted Shares to Service Providers in such amounts
as the Administrator will determine in its sole discretion. |
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b. |
Restricted Shares Award Agreement. Each Award of
Restricted Shares will be evidenced by an Award Agreement that will
specify the Period of Restriction, the number of Shares granted, the
purchase price of the Shares, if any, and the means of payment for the
Shares, vesting criteria, transferability restrictions, and such other terms and
conditions (which need not be identical among Participants) as the Administrator
will determine in its sole discretion. Unless the Administrator determines
otherwise, the Companys designee as escrow agent will hold Restricted Shares
until the restrictions on such Shares have lapsed. Any share certificates issued
in respect of an Award of Restricted Shares shall be registered in the name of
the Participant and, unless otherwise determined by the Administrator, deposited
by the Participant, together with a signed share transfer instrument endorsed in
blank, with the Company (or its designee). |
D-8
|
i. |
Vesting Conditions. During the Period of
Restriction, Restricted Shares shall be subject to forfeiture (including
but not limited to a right in 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 or removed, at any time by the Administrator on such
basis as it deems appropriate. |
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ii. |
Sale Price. Subject to the requirements of the
Applicable Laws, the Administrator shall determine the price, if any, at
which Restricted Shares shall be sold or awarded to a Participant, which
may vary from time to time and among Participants and which may be below
the market value of such Shares at the date of grant or
issuance. |
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iii. |
Voting Rights. During the Period of Restriction,
Service Providers holding Restricted Shares granted hereunder may exercise
full voting rights with respect to those Shares. |
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iv. |
Dividends and Other Distributions. During the
Period of Restriction, Service Providers holding Restricted Shares will be
entitled to receive all dividends and other distributions paid with
respect to such Shares. If any such dividends or distributions are paid in
Shares, the Shares will be subject to the same restrictions on
transferability and forfeitability as the Restricted Shares with respect
to which they were paid. |
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v. |
Transferability. Except as provided in the Plan,
Restricted Shares may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period
of Restriction. |
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d. |
Removal of Restrictions. All restrictions imposed
on Restricted Shares shall lapse and the Period of Restriction shall end
upon the satisfaction of the vesting conditions imposed by the
Administrator. Restricted Shares not previously forfeited will be released
from escrow as soon as practicable after the last day of the Period of
Restriction or at such other time as the Administrator may determine, but
in no event later than the 15th day of the third month
following the end of the year in which vesting
occurred. |
8. |
Restricted Share
Units. |
|
a. |
Grant of Restricted Share Units. Subject to the
terms and conditions of the Plan, the Administrator, at any time and from
time to time, may grant Restricted Share Units to Service Providers in
such amounts as the Administrator will determine in its sole
discretion. |
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b. |
Restricted Share Units Award Agreement. Each Award
of Restricted Share Units will be evidenced by an Award Agreement that
will specify the number of Restricted Share Units granted, vesting
criteria, form of payout, vesting criteria and such other terms and
conditions (which need not be identical among Participants) as the
Administrator will determine in its sole discretion. |
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c. |
Vesting Conditions. During the Period of
Restriction, Restricted Shares Units shall be subject to 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. |
D-9
|
d. |
Time and Form of Payment. Upon satisfaction of the
applicable vesting conditions, payment of vested Restricted Share Units
shall occur in the manner and at the time provided in the Award Agreement,
but in no event later than the 15th day of the third month
following the end of the year in which vesting occurred. Except as
otherwise provided in the Award Agreement, Restricted Share Units may be
paid in cash (equal to the aggregate Fair Market Value of the Shares
underlying the vested Restricted Share Units), Shares, or a combination
thereof at the sole discretion of the Administrator. Restricted Share
Units that are fully paid in cash will not reduce the number of Shares
available for issuance under the Plan. |
9. |
Share Appreciation
Rights. |
|
a. |
Grant of SARs. Subject to the terms and conditions
of the Plan, the Administrator, at any time and from time to time, may
grant SARs to Service Providers in such amounts as the Administrator will
determine in its sole discretion. |
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b. |
Award Agreement. Each SAR grant will be evidenced
by an Award Agreement that will specify the exercise price, the number of
Shares underlying the SAR grant, the term of the SAR, the conditions of
exercise, vesting criteria and such other terms and conditions (which need
not be identical among Participants) as the Administrator will determine
in its sole discretion. |
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c. |
Exercise Price and Other Terms. The per Share
exercise price for the exercise of an SAR will be no less than the Fair
Market Value per Share on the Grant Date. No SAR shall be exercisable on
or after the tenth anniversary of the Grant Date. Notwithstanding the
above or any other term in this Plan or any Award Agreement, Shares shall
be issued pursuant to exercise of an SAR at a price at least equal to
their par value. |
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d. |
Time and Form of Payment of SAR Amount. Upon
exercise of a SAR, a Participant will be entitled to receive payment from
the Company in an amount no greater than: (i) the difference between the
Fair Market Value of a Share on the date of exercise over the exercise
price; times (ii) the number of Shares with respect to which the SAR is
exercised. An Award Agreement may provide for a SAR to be paid in cash,
Shares of equivalent value, or a combination
thereof. |
10. |
Performance Units and Performance
Shares. |
|
a. |
Grant of Performance Units and Performance Shares.
Performance Units or Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. The Administrator will have
complete discretion in determining the number of Performance Units and
Performance Shares granted to each Participant. |
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b. |
Award Agreement. Each Award of Performance Units
and Performance Shares will be evidenced by an Award Agreement that will
specify the initial value, the Performance Period, the number of
Performance Units or Performance Shares granted, and such other terms and
conditions (which need not be identical among Participants) as the
Administrator will determine in its sole discretion. |
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c. |
Value of Performance Units and Performance Shares.
Each Performance Unit will have an initial value that is established by
the Administrator 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. |
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d. |
Vesting Conditions and Performance Period. The
Administrator will set performance objectives or other vesting provisions
(including, without limitation, continued status as a Service Provider) in
its discretion which, depending on the extent to which they are met, will
determine the number or value of Performance Units or Performance Shares
that will be paid out to the Participant. The time period during which the
performance objectives or other vesting provisions must be met will be
called the Performance Period. After the applicable Performance
Period has ended, the holder of Performance Units shall be entitled to
receive payout on the number and value of Performance Units or Performance
Shares earned by the Participant over the Performance
Period, to be determined as a function of the extent to which the
corresponding performance objectives have been achieved. |
D-10
|
e. |
Time and Form of Payment. 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
vested Performance Units or Performance Shares by the Participant over the
Performance Period, to be determined as a function of the extent to which
the corresponding performance objectives or other vesting provisions have
been achieved. Vested Performance Units or Performance Shares will be paid
as soon as practicable after the expiration of the applicable Performance
Period, but in no event later than the 15th day of the third
month following the end of the year the applicable Performance Period
expired. An Award Agreement may provide for the satisfaction of
Performance Unit or Performance Share Awards in cash or Shares (which have
an aggregate Fair Market Value equal to the value of the vested
Performance Units or Performance Shares at the close of the applicable
Performance Period) or in a combination thereof. |
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f. |
Forfeiture of Performance Units and Performance
Shares. All unvested Performance Units or Performance Shares will be
forfeited to the Company on the date set forth in the Award Agreement, and
again will become available for grant under the
Plan. |
11. |
Leaves of Absence/Transfer Between Locations.
Unless the Administrator provides otherwise or as required by Applicable
Laws, vesting of Awards will be suspended during any unpaid leave of
absence. An Employee will not cease to be an Employee in the case of (i)
any approved leave of absence or (ii) transfers between locations of the
Company or between the Company and any Affiliate. |
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|
12. |
Transferability of Awards. Unless otherwise
provided in this 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; 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 the
articles of association of the Company. For this purpose, family
member means any child, stepchild, grandchild, parent, stepparent,
spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
employees household (other than a tenant or employee), a trust in which
the foregoing persons have more than fifty (50) percent of the beneficial
interests, a foundation in which the foregoing persons (or the
Participant) control the management of assets, and any other entity in
which these persons (or the Participant) own more than fifty (50) percent
of the voting interests. If the Administrator makes an Award transferable,
such Award will contain such additional terms and conditions as the
Administrator deems appropriate. |
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|
13. |
Adjustments; Dissolution or Liquidation; Merger or
Change in Control. |
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a. |
Adjustments. In the event that any dividend or
other distribution (whether in the form of cash, Shares, other securities,
or other property), recapitalization, share split, reverse share split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or
other change in the corporate structure of the Company affecting the
Shares occurs, the Administrator, in order to prevent diminution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan, shall appropriately adjust the number and kind
of Shares that may be delivered under the Plan, the Share-based
limitations under Section 15(b), and/or the number, kind, and price
of Shares covered by each outstanding Award. |
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b. |
Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, the Administrator will
notify each Participant as soon as practicable prior to the effective date
of such proposed transaction. To the extent it has not been previously
exercised, an Award will terminate immediately prior to the consummation
of such proposed action. |
D-11
|
c.
|
Change in Control. In the event of a Change in
Control, any or all outstanding Awards may be assumed by the successor
corporation on an equitable basis, which assumption shall be binding on
all Participants. In the alternative, the successor corporation may
substitute equivalent Awards (after taking into account the existing
provisions of the Awards) on an equitable basis. The successor corporation
may also issue, in place of outstanding Shares of the Company held by the
Participant, substantially similar shares or other property subject to
vesting requirements and repurchase restrictions no less favorable to the
Participant than those in effect prior to the Change in
Control. |
In the event that the successor
corporation does not assume or substitute for the Award, unless the
Administrator provides otherwise, the Participant will fully vest in and have
the right to exercise all of his or her outstanding Options and SARs, including
Shares as to which such Awards would not otherwise be vested or exercisable, all
restrictions on Restricted Shares and Restricted Share Units will lapse, and,
with respect to Performance Shares and Performance Units, all Performance Goals
or other vesting criteria will be deemed achieved at target levels and all other
terms and conditions met. In addition, 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.
For the purposes of this Section
13(c), an Award will be considered assumed if, following the Change in
Control, the Award confers the right to purchase or receive, for each Share
subject to the Award immediately prior to the Change in Control, the
consideration (whether shares, cash, or other securities or property) or, in the
case of a SAR upon the exercise of which the Administrator determines to pay
cash or a Performance Share or Performance Unit which the Administrator can
determine to pay in cash, the fair market value of the consideration, received
in the Change in Control by holders of Common Stock for each Share held on the
effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the Change in Control is not solely common stock of the successor corporation
or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
an Option or SAR or upon the payout of a Restricted Share Unit, Performance
Share or Performance Unit, for each Share subject to such Award (or in the case
of Restricted Share Units and Performance Units, the number of implied shares
determined by dividing the value of the Restricted Share Units and Performance
Units, as applicable, by the per share consideration received by holders of
Common Stock in the Change in Control), to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the Change in Control.
Notwithstanding anything in this
Section 13(c) to the contrary, (A) an Award that vests, is earned or
paid-out upon the satisfaction of one or more performance goals will not be
considered assumed upon a Change in Control 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 and (B) 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.
|
a. |
Withholding Requirements. Prior to the issue or
delivery of any Shares or cash pursuant to an Award (or exercise thereof),
the Company will have the power and the right to deduct or withhold or
cause to be deducted or withheld, or require a Participant to remit to the
Company or its Affiliates, an amount sufficient to satisfy national, federal,
state, provincial, local, foreign or other taxes required by Applicable Laws to
be withheld with respect to such Award (or exercise thereof). |
D-12
|
b. |
Withholding Arrangements. The Administrator, in
its sole discretion and pursuant to such procedures as it may specify from
time to time, may permit a Participant to satisfy such tax withholding
obligation, in whole or in part by (without limitation) (i) paying cash,
(ii) electing to have the Company withhold otherwise deliverable Shares
having a Fair Market Value equal to the amount required to be withheld, or
(iii) delivering to the Company already-owned Shares for repurchase having
a Fair Market Value equal to the amount required to be withheld. The
amount of the withholding requirement will be deemed to include any amount
which the Administrator agrees may be withheld at the time the election is
made. The Fair Market Value of the Shares to be withheld or delivered will
be determined as of the date that the taxes are required to be
withheld. |
15. |
Provisions Applicable In the Event the Company or the
Service Provider is Subject to U.S.
Taxation. |
|
a. |
Grant of Incentive Share Options. If the
Administrator grants Options to Employees subject to U.S. taxation, the
Administrator may grant such Employee an ISO and the following terms shall
also apply: |
|
i. |
Maximum Amount. Subject to the provisions of
Section 13, to the extent consistent with Section 422 of the Code,
not more than an aggregate of ten million (10,000,000) Shares may be
issued as ISOs under the Plan. |
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ii. |
General Rule. Only employees of the Company or any
Parent or Subsidiary shall be eligible for the grant of ISOs. The ability
of the Company to grant ISOs is subject to the shareholder approval
requirement under the Code. |
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iii. |
Continuous Employment. Unless otherwise provided
under the Code, the ISO will cease to be treated as an ISO unless the
Optionee remains in the continuous employ of the Company or its Parent or
Subsidiaries from the date the ISO is granted until not more than three
months before the date on which it is exercised (or such longer periods as
may be permitted by provisions in each Service Providers contract with
the Company, such as the employment agreement, that predates this Plan, or
in the event termination is due to death or Disability). A leave of
absence approved by the Company may exceed three (3) months if
reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved
by the Company is not so guaranteed, then on the first day following the
first three (3) months of such leave, the Optionees employment will be
deemed terminated for this purpose and any ISO held by the Optionee will
cease to be treated as an ISO if not exercised within three (3) months
after the deemed termination date. |
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iv. |
Award Agreement. |
|
(1) |
The Administrator shall designate Options granted as ISOs
in the Award Agreement. Notwithstanding such designation, to the extent
that the aggregate Fair Market Value of the Shares with respect to which
ISOs are exercisable for the first time by the Optionee during any
calendar year (under all plans of the Company and any Parent or
Subsidiary) exceeds one hundred thousand dollars (U.S.$100,000), Options
will not qualify as an ISO. For purposes of this section, ISOs will be
taken into account in the order in which they were granted. The Fair
Market Value of the Shares will be determined as of the time the Option
with respect to such Shares are granted. |
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(2) |
The Award Agreement shall specify the term of the ISO.
The term shall not exceed ten (10) years from the Grant Date or five (5)
years from the Grant Date for Ten Percent Owners. |
D-13
|
(3) |
The Award Agreement shall specify an exercise price of
not less than the Fair Market Value per Share on the Grant Date or one
hundred ten percent (110%) of the Fair Market Value per Share on the Grant
Date for Ten Percent Owners. |
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(4) |
The Award Agreement shall specify that an ISO is not
transferable except by will, beneficiary designation or the laws of
descent and distribution. |
|
v. |
Form of Payment. The consideration to be paid for
the Shares to be issued upon exercise of an ISO, including the method of
payment, shall be determined by the Administrator in accordance with
Section 6(e)(iii). |
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vi. |
Notice. In the event of any disposition of the
Shares acquired pursuant to the exercise of an ISO within two years from
the Grant Date or one year from the exercise date, the Optionee will
notify the Company thereof in writing within thirty (30) days after such
disposition. In addition, the Optionee shall provide the Company with such
information as the Company shall reasonably request in connection with
determining the amount and character of Optionees income, the Companys
deduction, and the Companys obligation to withhold taxes or other amounts
incurred by reason of a disqualifying disposition, including the amount
thereof. |
|
b. |
Performance-based Compensation. If the Company
grants an Award as performance-based compensation for which it claims
deductions that are subject to the Code Section 162(m) limitation on its
U.S. tax returns, then the following terms shall control over any contrary
provision contained in the Plan and 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
Section 162(m) of the Code: |
|
i. |
Outside Directors. All grants of Awards intended
to qualify as Qualified Performance-Based Awards and determination of
terms applicable thereto shall be made by the Administrator or, if not all
of the members thereof qualify as outside directors within the meaning
of applicable regulations under Section 162 of the Code, a subcommittee of
the Administrator consisting of such of the members of the Administrator
as do so qualify. Any action by such a subcommittee shall be considered
the action of the Administrator for purposes of the Plan. |
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ii. |
Applicability. This Section 15(b) will
apply only to those Covered Employees, or to those persons who the
Administrator determines are reasonably likely to become Covered Employees
in the period covered by an Award, selected by the Administrator to
receive Qualified Performance-Based Awards. The Administrator may, in its
discretion, grant Awards not intended to qualify as Qualified
Performance-Based Awards to Covered Employees that do not satisfy the
requirements of this Section 15(b). |
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iii. |
Maximum Amount. Subject to the provisions of
Section 13, the maximum number of Shares that can be subject to
Awards granted to any individual Participant in the aggregate in any one
fiscal year of the Company is one million (1,000,000) Shares. For purposes
of this limitation: |
|
(1) |
For Awards denominated in Shares and satisfied in cash,
the maximum Award to any individual Participant in the aggregate in any
one fiscal year of the Company is the Fair Market Value of one million
(1,000,000) Shares on the Grant Date; and |
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(2) |
The maximum amount payable pursuant to any cash Awards to
any individual Participant in the aggregate in any one fiscal year of the
Company is the Fair Market Value of one million (1,000,000) Shares on the
Grant Date. |
D-14
|
iv. |
Performance Criteria. All performance criteria
must be objective and be established in writing prior to the beginning of
the Performance Period or at later time as permitted by Section 162(m) of
the Code and shall otherwise meet the requirements of Section 162(m) of
the Code, including the requirement that the outcome of the performance
goals be substantially uncertain (as defined in the regulations under
Section 162(m) of the Code) at the time established. Performance criteria
may include alternative and multiple performance goals and may be based on
one or more business and/or financial criteria. In establishing the
performance goals, the Committee in its discretion may include one or any
combination of the following criteria in either absolute or relative
terms, for the Company or any Subsidiary: |
(1) Increased revenue;
(2) Net income measures (including but
not limited to income after capital costs and income before or after taxes);
(3) Share price measures (including
but not limited to growth measures and total shareholder return);
(4) Market share;
(5) Earnings per Share (actual or
targeted growth);
(6) Earnings before interest, taxes,
depreciation, and amortization (EBITDA);
(7) Cash flow measures (including but
not limited to net cash flow and net cash flow before financing activities);
(8) Return measures (including but not
limited to return on equity, return on average assets, return on capital,
risk-adjusted return on capital, return on investors capital and return on
average equity);
(9) Operating measures (including
operating income, funds from operations, cash from operations, after-tax
operating income, sales volumes, production volumes, and production efficiency);
(10) Expense measures (including but
not limited to overhead cost and general and administrative expense);
(11) Margins;
(12) Shareholder value;
(13) Total shareholder return;
(14) Proceeds from dispositions;
(15) Total market value; and
(16) Corporate values measures
(including but not limited to ethics compliance, environmental, and safety).
|
c. |
Share Options and SARs Exempt from Section 409A of the
Code. If the Administrator grants Options or SARs to Service Providers
subject to U.S. taxation, the Company must qualify as an eligible issuer
of service recipient shares within the meaning of Section 409A of the Code
with respect to such Service Provider (unless the Option or SAR otherwise
complies with Section 409A of the Code), and the Administrator may not
modify or amend the Options or SARs to the extent that the modification or
amendment adds a feature allowing for additional deferral within the
meaning of Section 409A of the Code. |
16. |
Grants to Foreign Nationals. Awards may be granted
to Service Providers who are foreign nationals or employed outside the
United States, or both, on such terms and conditions different from those
applicable to grants to Services Providers in the United States as in the
judgment of the Administrator may be necessary or desirable in order to
recognize differences in local law or tax policy, and such Awards shall be
considered granted pursuant to a non-U.S. sub-plan. The Administrator also
may impose conditions on the exercise or vesting of Awards in order to minimize the
companys obligation with respect to tax equalization for employees on
assignments outside their home country. |
D-15
17. |
No Effect on Employment or Service. Neither the
Plan nor any Award will confer upon any Participant any right with respect
to continuing the Participant's relationship as a Service Provider with
the Company or any Affiliate of the Company, nor will they interfere in
any way with the Participant's right or the Company's or its Affiliates
right to terminate such relationship at any time, with or without cause,
to the extent permitted by Applicable Laws. |
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|
18. |
Effective Date. The Plans effective date is the
date on which it is adopted by the Board (the Effective Date), so
long as it is approved by the Companys shareholders at any time within 12
months of such adoption. |
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|
19. |
Term of Plan. The Plan will terminate on the day
before the tenth anniversary of the Effective Date, unless sooner
terminated by the Board pursuant to Section 20. |
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20. |
Amendment and Termination of the
Plan. |
|
a. |
Amendment and Termination. The Board may at any
time amend, alter, suspend or terminate the Plan. |
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b. |
Shareholder Approval. The Company will obtain
shareholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws. |
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c. |
Effect of Amendment or Termination. No amendment,
alteration, suspension or termination of the 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 Plan will
not affect the Administrator's ability to exercise the powers granted to
it hereunder with respect to Awards granted under the Plan prior to the
date of such termination. |
21. |
Conditions Upon Issuance of
Shares. |
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a. |
Legal Compliance. The Administrator may delay or
suspend the issuance and delivery of Shares, suspend the exercise of
Options or SARs, or suspend the Plan as necessary to comply with
Applicable Laws. Shares will not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of
such Shares will comply with Applicable Laws and will be further subject
to the approval of counsel for the Company with respect to such
compliance. |
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b. |
Corporate Restrictions on Rights in Shares. Any
Shares to be issued pursuant to Awards granted under the Plan shall be
subject to all restrictions upon the transfer thereof which may be now or
hereafter imposed by the memorandum and articles of association of the
Company. In addition, either at the time an Award is granted or by
subsequent action, the Administrator may, but need not, impose such
restrictions, conditions or limitations as it determines appropriate as to
the timing and manner of any resales or other subsequent transfers by a
Participant, or a holder of Shares acquired pursuant to the Plan, of any
Share issued under an Award, including without limitation (a) restrictions
under an insider trading policy, (b) restrictions designed to delay and/or
coordinate the timing and manner of sales by the Participant(s), and (c)
restrictions as to the use of a specified brokerage firm for such resales
or other transfers. |
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c. |
Registration. If the Company shall deem it
necessary or desirable to register under the Securities Act or other
Applicable Law any Shares issued or to be issued pursuant to Awards
granted under the Plan, or to qualify any such Shares for exemption from
the Securities Act or other Applicable Law, then the Company may, but
shall not be required to, take such action at its own expense. The Company
may require from each Participant, or each holder of Shares acquired
pursuant to the Plan, such information in writing for use in any
registration statement, prospectus, preliminary prospectus or offering
circular as is reasonably necessary for that purpose and may
require reasonable indemnity to the Company and its officers and
directors from that holder against all losses, claims, damage and liabilities
arising from use of the information so furnished and caused by any untrue
statement of any material fact therein or caused by the omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made. In addition, the Company may require any such person to agree to lock-up
terms as the Company may deem advisable or appropriate. |
D-16
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d. |
Investment Representations. As a condition to the
exercise of an Award, the Shares to be issued pursuant to such Award shall
have been effectively registered under the Securities Act, or the
Participant exercising such Award shall have made such written
representations and warranties to the Company (upon which the Company
believes it may reasonably rely) as the Administrator may deem necessary
or appropriate for the purposes of confirming that the issuance of the
Shares pursuant to such Award will be exempt from the registration
requirements of the Securities Act and any applicable state securities
laws and otherwise in compliance with all Applicable Laws, including but
not limited to that the Participant is acquiring the Shares only for
investment and without any present intention to sell or distribute such
Shares. |
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e. |
Placement of Legends; Stop Orders; etc. Each Share
to be issued pursuant to Awards granted under the Plan may bear a
reference to the investment representations made in accordance with
Section 21(d) in addition to any other applicable restriction under
the Plan, the terms of the Award and to the fact that no registration
statement has been filed with the Securities and Exchange Commission in
respect to such Shares. All certificates for Shares or other securities
delivered under the Plan shall be subject to such share transfer orders
and other restrictions as the Administrator may deem advisable under the
rules, regulations, and other requirements of any share exchange upon
which the Shares are then listed, and any Applicable Law, and the
Administrator may cause a legend or legends to be put on any such
certificates to make appropriate reference to such
restrictions. |
22. |
Inability to Obtain Authority. The inability of
the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Companys counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, will
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority will not have been
obtained. |
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23. |
Repricing; Exchange And Buyout of Awards. The
repricing or termination and subsequent repricing of Options or SARs at a
lower purchase price per Share 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 any Participant whose rights would be impaired. The Administrator may
at any time repurchase Options with payment in cash, Shares or other
consideration, based on such terms and conditions as the Administrator and
the Participant shall agree. |
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24. |
Substitution and Assumption of Awards. The
Administrator may make Awards under the 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 (and/or its affiliate). The
Administrator may also make Awards under the Plan by assumption,
substitution or replacement of a similar type of award granted by the
Company prior to the adoption and approval of the Plan. Notwithstanding
any provision of the Plan (other than the maximum number of shares of
Common Stock that may be issued under the Plan), the terms of such
assumed, substituted or replaced Awards shall be as the Administrator, in
its discretion, determines is appropriate. |
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25. |
Governing Law. The Plan and all Agreements shall
be construed in accordance with and governed by the laws of the State of
Nevada, without regard to the principles of conflicts of law
thereof. |
Adopted by the Board of Directors on April 10, 2015
D-17
CHINA BAK BATTERY, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE
12, 2015
__________________________________
Annual Meeting Proxy Card
__________________________________
This Proxy is Solicited on Behalf of the Board of
Directors
The undersigned stockholder of CHINA BAK BATTERY, INC., a
Nevada corporation (the Company), acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, dated _____________, and hereby
constitutes and appoints Mr. Xiangqian Li, the Companys Chairman, President,
Chief Executive Officer and Secretary, and Mr. Wenwu Wang, the Companys Interim
Chief Financial Officer, or either of them acting singly in the absence of the
other, with full power of substitution in either of them, the proxies of the
undersigned to vote with the same force and effect as the undersigned all shares
of the Companys Common Stock which the undersigned is entitled to vote at the
Annual Meeting of Stockholders to be held on June 12, 2015, and at any
adjournment or adjournments thereof, hereby revoking any proxy or proxies
heretofore given and ratifying and confirming all that said proxies may do or
cause to be done by virtue thereof with respect to the following matters:
The undersigned hereby instructs said proxies or their
substitutes:
The Board of Directors recommends that you vote FOR the
following:
1. |
Elect as Directors the nominees listed
below: |
01 Xiangqian Li |
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
02 Chunzhi Zhang |
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
03 Martha C. Agee |
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
04 Jianjun He |
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
05 Guosheng Wang |
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
The Board of Directors recommends that you vote FOR the
following:
2. |
Ratify the selection of Crowe Horwath as the Companys
independent registered public accounting firm for fiscal year ending
September 30, 2015. |
|
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
The Board of Directors recommends that you vote FOR the
following:
3. |
To approve an amendment to the Companys 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. |
|
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
The Board of Directors recommends that you vote FOR the
following:
4. |
To approve an amendment to the Companys
Articles of Incorporation to authorize 10,000,000 shares of Preferred
Stock of the Company, which may be issued in one or more series, with such
rights, preferences, privileges and restrictions as shall be fixed by the
Companys Board of Directors from time to time. |
|
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
The Board of Directors recommends that you vote FOR the
following:
5. |
To approve the amendment to Section 1.7 of the Companys
Stock Option Plan; |
|
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
The Board of Directors recommends that you vote FOR the
following:
6. |
To approve the China BAK Battery, Inc. 2015 Equity
Incentive Plan, subject to the approval of Proposal
3. |
|
FOR [_] |
AGAINST [_] |
ABSTAIN [_] |
NOTE: In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the Annual Meeting,
and any adjournment or adjournments thereof.
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF COMMON
STOCK COVERED HEREBY WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFICATION IS
MADE, SUCH SHARES WILL BE VOTED FOR ALL NOMINEES, AND FOR PROPOSALS 2, 3, 4, 5
and 6. IN THEIR DISCRETION, THE PROXIES ARE ALSO AUTHORIZED TO VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
I (we) acknowledge receipt of the Notice of Annual Meeting of
Stockholders and the Proxy Statement dated _______________, and ratify all that
the proxies, or either of them, or their substitutes may lawfully do or cause to
be done by virtue hereof and revoke all former proxies.
If you are voting by mail, please sign, date and mail this
proxy immediately in the enclosed envelope. You are also permitted and
encouraged to vote online by following the instructions on the Notice of
Internet Availability of Proxy Materials that was separately mailed to you.
Name |
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Name (if joint) |
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Date _____________, 2015 |
|
Please sign your name exactly as it appears hereon. When
signing as attorney, executor, administrator, trustee or guardian, please
give your full title as it appears hereon. When signing as joint tenants,
all parties in the joint tenancy must sign. When a proxy is given by a
corporation, it should be signed by an authorized officer and the
corporate seal affixed. No postage is required if returned in the enclosed
envelope, if mailed in the United States.
|
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