SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
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 o
Check
the
appropriate box:
o Preliminary
Proxy Statement
o Confidential,
For Use of the
Commission Only (As Permitted by Rule 14a-6(e)(2))
x Definitive
Proxy
Statement
o Definitive
Additional
Materials
o 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
o Fee
computed on table below per
Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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o Fee
paid previously with
preliminary materials.
o 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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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July
30,
2007
Dear
Stockholder:
On
behalf
of the Board of Directors of China BAK Battery, Inc. (the “Company”), I invite
you to attend our 2007 Annual Meeting of Stockholders. We hope you can join
us.
The annual meeting will be held:
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At:
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BAK
Industrial Park, No. 1 BAK Street
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Kuichong
Town, Longgang District
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Shenzhen,
518119
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People’s
Republic of China
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On:
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September
21, 2007
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Time:
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9:00
a.m., local time
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The
Notice of Annual Meeting of Stockholders, the Proxy Statement and our 2006
Annual Report accompany this letter.
At
the
Annual Meeting, we will report on important activities and accomplishments
of
the Company and review the Company’s financial performance and business
operations. You will have an opportunity to ask questions and gain an up-to-date
perspective on the Company and its activities, and to meet certain directors
and
key executives of the Company.
As
discussed in the enclosed Proxy Statement, the Annual Meeting will also be
devoted to the election of directors, the ratification of the appointment of
the
Company’s accountants and consideration of any other business matters properly
brought before the Annual Meeting.
We
know
that many of our stockholders will be unable to attend the Annual Meeting.
We
are soliciting proxies so that each stockholder has an opportunity to vote
on
all matters that are scheduled to come before the stockholders at the Annual
Meeting. Whether or not you plan to attend, please take the time now to read
the
proxy statement and vote and submit your proxy by signing, dating and returning
your proxy card promptly in the enclosed postage-paid envelope. You may revoke
your proxy at any time before it is exercised. Regardless of the number of
Company shares you own, your presence in person or by proxy is important for
quorum purposes and your vote is important for proper corporate
action.
Thank
you
for your continuing interest in China BAK Battery, Inc. We look forward to
seeing you at our Annual Meeting.
If
you
have any questions about the Proxy Statement, please contact Tracy Li, Investor
Relations Manager, China BAK Battery, Inc., BAK Industrial Park, No. 1 BAK
Street, Kuichong Town, Longgang District, Shenzhen, 518119, People’s Republic Of
China; Telephone: 011 (86-755) 8977-0093.
| Sincerely, | |||
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/s/
Xiangqian
Li
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Xiangqian Li |
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| Chief Executive Officer |
CHINA
BAK BATTERY, INC.
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER
21, 2007
To
the
Stockholders of CHINA BAK BATTERY, INC.:
Notice
is
hereby given that the Annual Meeting of Stockholders (the “Meeting”) of China
BAK Battery, Inc., a Nevada corporation (the “Company”), will be held on Friday,
September 21, 2007, at 9:00 a.m., local time, at BAK Industrial Park, No. 1
BAK Street, Kuichong Town, Longgang District, Shenzhen, 518119, People’s
Republic of China for the following purposes:
| 1. |
To
elect five persons to the Board of Directors of the Company, each
to serve
until the next annual meeting of shareholders of the Company or until
such
person shall resign, be removed or otherwise leave office;
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| 2. |
To
ratify the selection by the Audit Committee of PKF as the Company’s
independent registered public accounting firm for the fiscal year
ending
September 30, 2007; and
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| 3. |
To
transact such other business as may properly come before the Meeting
or
any adjournment thereof.
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Only
stockholders of record at the close of business on July 25, 2007 are entitled
to
notice and to vote at the Meeting and any adjournment.
You
are
cordially invited to attend the Meeting.
A
Proxy
Statement describing the matters to be considered at the Meeting is attached
to
this Notice. Our 2006 Annual Report accompanies this Notice, but it is not
deemed to be part of the Proxy Statement.
It
is important that your shares are represented at the Meeting. We urge you to
review the attached Proxy Statement and, whether or not you plan to attend
the
meeting in person, please vote your shares promptly by either completing,
signing and returning the accompanying proxy card or casting your vote via
the
internet as directed either in instructions of our transfer agent, Securities
Transfer Corporation (the “Transfer Agent”) or on the proxy card included with
this Proxy Statement. You do not need to affix postage to the enclosed reply
envelope if you mail it within the United States. If you attend the meeting,
you
may withdraw your proxy and vote your shares personally.
If
you
plan to attend the meeting, please mark the accompanying proxy card in the
space
provided and return it to us, or notify us of your intentions via the internet
as directed on the proxy card. This will assist us with meeting preparations.
If
your shares are not registered in your own name and you would like to attend
the
Meeting, please ask the broker, trust, bank, or other nominee that holds your
shares to provide you with evidence of your share ownership. This will enable
you to gain admission to the Meeting.
| By Order of the Board of Directors, | |||
| /s/ Yongbin Han | |||
|
Secretary |
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July
30,
2007
CHINA
BAK BATTERY, INC.
BAK
Industrial Park, No. 1 BAK Street
Kuichong
Town, Longgang District
Shenzhen,
518119
People’s
Republic of 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,” “China BAK” or “we”), for the 2007
Annual Meeting of Shareholders (the “Meeting”). The Meeting is to be held at
9:00 a.m., local time, on Friday, September 21, 2007, and at any adjournment
or
adjournments thereof, at BAK Industrial Park, No. 1 BAK Street, Kuichong Town,
Longgang District, Shenzhen, 518119, People’s Republic of China.
The
approximate date on which the Proxy Statement and form of proxy are intended
to
be sent or given to stockholders is July 30, 2007.
The
purposes of the Meeting are to seek stockholder approval of two proposals:
(i) electing five (5) directors to the Board of Directors of the Company
(the “Board”) and (ii) ratifying the appointment of the Company’s accountants
for fiscal year 2007.
Who
May Vote
Only
stockholders of record of our common stock, $.001 par value (the “Common
Stock”), as of the close of business on July 25, 2007 (the “Record Date”) are
entitled to notice and to vote at the Meeting and any adjournment or
adjournments thereof.
A
list of
stockholders entitled to vote at the Meeting will be available at the Meeting
and for ten days prior to the Meeting, during office hours, at the executive
offices of the Company at BAK Industrial Park, No. 1 BAK Street, Kuichong Town,
Longgang District, Shenzhen 518119, People’s Republic of China, by contacting
the Secretary of the Company.
The
presence at the Meeting of a majority of the outstanding shares of Common Stock
as of the Record Date, in person or by proxy, is required for a quorum. Should
you submit a proxy, even though you abstain as to one or more proposals, or
you
are present in person at the Meeting, your shares shall be counted for the
purpose of determining if a quorum is present.
Broker
“non-votes” are included for the purposes of determining whether a quorum of
shares is present at the Meeting. A broker “non-vote” occurs when a nominee
holder, such as a brokerage firm, bank or trust company, holding shares of
record for a beneficial owner does not vote on a particular proposal because
the
nominee holder does not have discretionary voting power with respect to that
item and has not received voting instructions from the beneficial
owner.
As
of the
Record Date, we had issued and outstanding 49,247,103 shares of Common Stock.
Each holder of Common Stock on the Record Date is entitled to one vote for
each
share then held on all matters to be voted at the Meeting. No other class of
voting securities was then outstanding.
Voting
Your Proxy
You
may
vote by one of the following methods:
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Completing
and signing the proxy card and mailing it in the enclosed postage-paid
envelope; or
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Voting
on the internet. Please follow the instructions that are either included
with the proxy materials provided by the Transfer Agent (you may
obtain
copies of such information by contacting the Transfer Agent at
Securities
Transfer Corporation, 2591 Dallas Parkway, Suite 102, Frisco, Texas
75034;
Telephone No. (469) 633-0101; www.stctransfer.com)
or
on the proxy card.
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If
your
shares are held through a broker, trust, bank or other nominee, you should
refer
to information forwarded to you by such holder of record for your voting
options.
The
shares represented by any proxy duly given will be voted at the Meeting in
accordance with the instructions of the stockholder. If no specific instructions
are given, the shares will be voted FOR the
election of the nominees for director set forth herein, and FOR ratification
of PKF as the Company’s independent registered public accounting firm. In
addition, if other matters come before the Meeting, the persons named in the
accompanying form of proxy will vote in accordance with their best judgment
with
respect to such matters.
Each
share of Common Stock outstanding on the record date will be entitled to one
vote on all matters. Under Proposal 1 (Election of Directors), the five
candidates for election as directors at the Meeting are uncontested. In
uncontested elections, directors are elected by majority of the votes cast
at
the Meeting. Proposal 2 (Ratification of Independent Auditors) requires the
vote
of a majority of the shares present in person or by proxy at the Meeting for
approval.
Shares
which abstain from voting as to a particular matter, and shares held in “street
name” by brokers or nominees who indicate on their proxies that they do not have
discretionary authority to vote such shares as to a particular matter, will
not
be counted as votes in favor of such matter, and will also not be counted as
shares voting on such matter. Accordingly, abstentions and “broker non-votes”
will have no effect on the voting on matters (such as the election of directors,
and the ratification of the selection of the independent registered public
accounting firm) that require the affirmative vote of a plurality or a majority
of the votes cast or the shares voting on the matter.
Revoking
Your Proxy
Even
if
you execute a proxy, you retain the right to revoke it and to change your vote
by notifying us at any time before your proxy is voted. Mere attendance at
the
meeting will not revoke a proxy. Such revocation may be effected in writing
by
execution of a subsequently dated proxy or by a written notice of revocation,
in
each case sent to the attention of the Secretary at the address of our principal
office set forth above in the Notice to this Proxy Statement, or by your
attendance and voting in person at the Meeting. In addition, you may revoke
your
proxy via the Transfer Agent’s website at www.stctransfer.com
(please
contact the Transfer Agent at Securities Transfer Corporation, 2591 Dallas
Parkway, Suite 102, Frisco, Texas 75034; Telephone No. (469) 633-0101;
www.stctransfer.com
for
instructions). Unless so revoked, the shares represented by proxies, if received
in time, will be voted in accordance with the directions given
therein.
If
the
Meeting is postponed or adjourned for any reason, at any subsequent reconvening
of the Meeting, all proxies will be voted in the same manner as the proxies
would have been voted at the original convening of the Meeting (except for
any
proxies that have at that time effectively been revoked or withdrawn), even
if
the proxies had been effectively voted on the same or any other matter at a
previous Meeting.
2
You
are
requested, regardless of the number of shares you own or your intention to
attend the Meeting, to sign the proxy and return it promptly in the enclosed
envelope.
Solicitation
of Proxies
The
expenses of solicitation of proxies will be paid by the Company. We may solicit
proxies by mail, and the officers and employees of the Company, who will receive
no extra compensation therefore, may solicit proxies personally or by telephone.
The Company will reimburse brokerage houses and other nominees for their
expenses incurred in sending proxies and proxy materials to the beneficial
owners of shares held by them.
Delivery
of Proxy Materials to Households
Only
one
copy of the Company’s 2006 Annual Report and Proxy Statement for the 2007 Annual
Meeting of Stockholders will be delivered to an address where two or more
stockholders reside unless we have received contrary instructions from a
stockholder at the address. A separate proxy card will be delivered to each
stockholder at the shared address.
If
you
are a stockholder who lives at a shared address and you would like additional
copies of the 2006 Annual Report, this Proxy Statement, or any future annual
reports or proxy statements, contact the
Manager, Investor Relations at China BAK Battery, Inc., BAK Industrial Park,
No.
1 BAK Street Kuichong Town, Longgang District, Shenzhen 518119, People’s
Republic of China; Telephone number 011 (86-755) 8977-0093, and we will promptly
mail you copies.
Interest
of Officers and Directors in Matters to Be Acted Upon
None
of
the Company’s officers or directors have any interest in any of the matters to
be acted upon, except to the extent that a director is named as a nominee for
election to the Board of Directors.
3
SECURITY
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 July
1,
2007 for: (i) each person known by us to beneficially own more than 5% of our
voting securities, (ii) each executive officer, (iii) each of our directors
and
nominees, and (iv) all of our executive officers and directors as a group:
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Name
and Address
of
Beneficial Owner(1)
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Amount
and Nature of Beneficial Ownership(1)
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Number(2)
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Percent(3)
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||||||
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Xiangqian
Li(4)
c/o
China BAK Battery, Inc.
BAK
Industrial Park
No.
1 BAK Street
Kuichong
Town, Longgang District
Shenzhen
518119
People’s
Republic of China
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20,143,662
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41.2
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%
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Yongbin
Han
c/o
China BAK Battery, Inc.
BAK
Industrial Park
No.
1 BAK Street
Kuichong
Town, Longgang District
Shenzhen
518119
People’s
Republic of China
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448,822
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*
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Huanyu
Mao(5)
c/o
China BAK Battery, Inc.
BAK
Industrial Park
No.
1 BAK Street
Kuichong
Town, Longgang District
Shenzhen
518119
People’s
Republic of China
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329,805
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*
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Richard
B. Goodner(6)
6608
Emerald Drive
Colleyville,
Texas 76034
United
States
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5,000
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*
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Charlene
Spoede Budd(6)
199
Air Strip Road
Jackson
Georgia 30233
United
States
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5,000
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*
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Chunzhi
Zhang(6)
Room
1505, Block B Tairan 9th Road
Chengongmiao,
Futian District
Shenzhen
F4 518000
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5,000
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*
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|||||
4
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Name
and Address
of
Beneficial Owner(1)
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Amount
and Nature of Beneficial Ownership(1)
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||||||
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Number(2)
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Percent(3)
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||||||
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Yanlong
Zou
c/o
China BAK Battery, Inc.
BAK
Industrial Park
No.
1 BAK Street
Kuichong
Town, Longgang District
Shenzhen
518119
People’s
Republic of China
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159,045
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*
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|||||
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Shuquan
Zhang
c/o
China BAK Battery, Inc.
BAK
Industrial Park
No.
1 BAK Street
Kuichong
Town, Longgang District
Shenzhen
518119
People’s
Republic of China
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166,851
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*
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|||||
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Houde
Liu
c/o
China BAK Battery, Inc.
BAK
Industrial Park
No.
1 BAK Street
Kuichong
Town, Longgang District
Shenzhen
518119
People’s
Republic of China
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34,142
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*
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|||||
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Zhongyi
Deng(7)
c/o
China BAK Battery, Inc.
BAK
Industrial Park
No.
1 BAK Street
Kuichong
Town, Longgang District
Shenzhen
518119
People’s
Republic of China
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—
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—
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| All officers and directors as a group | 21,297,327 | 43.4 | % | ||||
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*
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Denotes
less than 1% of the outstanding shares of Common Stock.
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(1)
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The
number of shares beneficially owned is determined under 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 Record 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)
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Unless
otherwise indicated, each person or entity named in the table has
sole
voting power and investment power (or shares that power with that
person’s
spouse) with respect to all shares of common stock listed as owned
by that
person or entity.
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5
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(3)
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A
total of 48,893,396
shares
of the Company’s common stock are considered to be outstanding on July 1,
2007, pursuant to Rule 13d-3(d)(1) under the Securities Exchange
Act of
1934. For each beneficial owner above, any options exercisable within
60
days have been included in the denominator.
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(4)
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Mr.
Li is a party to an escrow agreement under which he agreed to place
2,179,550 shares of his common stock into escrow for the benefit
of
certain stockholders in the event we fail to satisfy certain “performance
thresholds,” as defined in the escrow agreement for the fiscal years
ending September 30, 2005 and 2006. Mr. Li’s shares include the 1,089,775
shares relating to the performance threshold for the fiscal year
ended
September 30, 2005. This is because our previously reported net income
for
the fiscal year ended September 30, 2005 exceeded the performance
threshold for such period; accordingly, 1,089,775 of the shares placed
in
escrow by Mr. Li were released to Mr. Li. Because the recognition
of the
related compensation charge would cause our net income for fiscal
2005 to
fall below $12.0 million and therefore entitle the investors to the
shares
released, Mr. Li has undertaken to transfer to those investors the
shares
that were released to him. The shares listed under Mr. Li in this
table do
not include the other 1,089,775 shares that have been released from
escrow
to the investors because we failed to satisfy the performance threshold
for our fiscal year 2006, as required under the escrow agreement.
Mr. Li
is also a party to a lock-up agreement under which he has agreed,
except
for distributions of his shares of common stock required under the
escrow
agreement, not to transfer his common stock for a period commencing
January 20, 2005 and ending 12 months after the date our common stock
is
listed on either the NASDAQ Stock Market, Inc. or another national
stock
exchange or quotation medium. Mr. Li is also a party to a guarantee
agreement under which he has pledged certain of his shares of our
common
stock to China Development Bank as collateral for a long-term loan
agreement entered into by Shenzhen BAK. Such shares had previously
been
subject to a pledge in favor of Shenzhen Development Bank which was
released by Shenzhen Development Bank on August 25,
2006.
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(5)
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Mr.
Mao was granted an option to purchase 200,000 shares of Common Stock
on
May 16, 2006, at a price of $6.25, the closing price of the Common
Stock
on the date of grant, 40% of which vested on July 1, 2007. Any unvested
portion of the option is subject to forfeiture if Mr. Mao is no longer
employed by the Company.
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(6)
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On
June 25, 2007, each of Ms. Budd and Mr. Zhang were granted 5,000
shares of
restricted Common Stock and on July 17, 2007, Mr. Goodner was granted
5,000 shares of restricted Common Stock. The restricted Common Stock
granted to each director is subject to a one-year vesting schedule,
with
unvested shares being subject to limitations on transfer and forfeiture
provisions. The first 25% of the restricted shares vested on the
applicable grant date, and the remaining 75% vest in three equal
installments on the last day of each following full fiscal quarter
of the
Company.
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(7)
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On
June 25, 2007, Mr. Deng was granted an option to purchase 200,000
shares
of Common Stock at an exercise price of $3.35, the closing price
of the
Common Stock on the date of grant. Any unvested portion of the option
is
subject to forfeiture if Mr. Deng is no longer employed by the Company.
The option vests and becomes exercisable beginning July 1, 2008,
as
follows: On July 1, 2008, 25% of such option shall vest and shall
no
longer be subject to forfeiture; on July 1, 2009, the second 25%
of such
option shall vest and shall no longer be subject to forfeiture; on July 1,
2010, the third 25% of such option shall vest and shall no longer
be
subject to forfeiture; on July 1, 2011, the final 25% of such option
shall
vest and shall no longer be subject to forfeiture, in each case so
long as
Mr. Deng remains employed by the Company. The expiration date of
the
option is June 25, 2017.
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6
PROPOSAL
1
ELECTION
OF DIRECTORS
The
Board
is responsible for establishing broad corporate policies and monitoring the
overall performance of the Company. It selects the Company’s executive officers,
delegates authority for the conduct of the Company’s day-to-day operations to
those officers, and monitors their performance. Members of the Board are kept
informed of the Company’s business by participating in Board 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. There
are
currently five (5) directors serving on the Board. At the 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 at the 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
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 designated by the proxy holders or by the present Board or (ii) for the
balance of the nominees, leaving a vacancy. Alternatively, the size of the
Board
may be reduced accordingly. The Board has no reason to believe that any of
the
nominees will be unwilling or unable to serve, if elected as a Director. The
five nominees for election as directors are uncontested. In uncontested
elections, directors are elected by majority of the votes cast at the meeting.
Proxies
submitted on the accompanying proxy card will be voted for the election of
the
nominees listed below, unless the proxy card is marked otherwise.
Director
Selection
As
provided in its charter, the Nominating and Corporate Governance Committee
of
the Company’s Board is responsible for identifying individuals qualified to
become Board members and recommending to the Board nominees for election as
directors. The Nominating and Corporate Governance Committee considers
recommendations for director nominees, including those submitted by the
Company’s stockholders, on the bases described below. Stockholders may recommend
nominees by writing to the Nominating and Corporate Governance Committee c/o
the
Secretary at BAK Industrial Park, No. 1 BAK Street Kuichong Town, Longgang
District, Shenzhen, 518119. 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 2008 annual meeting, recommendations must be
received by the Secretary of the Company not later than the close of business
on
April 1,
2008.
In
identifying and evaluating nominees, the Nominating and Corporate Governance
Committee may consult with the other Board members, management, consultants,
and
other individuals likely to possess an understanding of the Company’s business
and knowledge of suitable candidates. In making its recommendations, the
Nominating and Corporate Governance Committee assesses the requisite skills
and
qualifications of nominees and the composition of the Board as a whole in the
context of the Board's criteria and needs. In evaluating the suitability of
individual Board members, the Nominating and Corporate Governance Committee
may
take into account many factors, including general understanding of marketing,
finance and other disciplines relevant to the success of a publicly traded
company in today’s business environment; understanding of the Company’s business
and technology; the international nature of the Company’s operations;
educational and professional background; and personal accomplishment. The
Nominating and Corporate Governance Committee evaluates each individual in
the
context of the Board as a whole, with the objective of recommending a group
that
can best perpetuate the success of the Company’s business and represent
shareholder interests through the exercise of sound judgment, using its
diversity of experience. The Nominating and Corporate Governance Committee
also
ensures that each member satisfies the NASDAQ Stock Market, Inc. (“Nasdaq”)
independence requirements.
7
The
Board of Directors recommends a vote FOR the election of the nominees listed
below.
The
names, the positions with the Company and the ages as of the Record Date of
the
individuals who are our nominees for election as directors are:
|
Name
|
Age
|
Position/s
|
Director
Since
|
|
Xiangqian
Li
|
38
|
Chairman,
President and Chief Executive Officer
|
January
2005
|
|
Huanyu
Mao
|
55
|
Director,
Chief Operating Officer and Chief Technology Officer
|
May
2006
|
|
Richard
B. Goodner
|
60
|
Director
|
May
2006
|
|
Charlene
Spoede Budd
|
68
|
Director
|
June
2007
|
|
Chunzhi
Zhang
|
45
|
Director
|
June
2007
|
For
information as to the shares of the Common Stock held by each nominee, see
“Securities Ownership of Certain Beneficial Owners and Management,” which starts
on page 4
of this
Proxy Statement.
The
following are biographical summaries for our nominees for election as
directors:
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,
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.,
our wholly owned subsidiary (“Shenzhen BAK”), since its inception in August
2001, and served as Shenzhen BAK’s general manager since December 2003. From
June 2001 to June 2003, Mr. Li was the chairman of Huaran Technology Co., Ltd.,
a company incorporated in the People’s Republic of China (“PRC”) that is engaged
in the car audio business. Mr. Li received a bachelor’s degree in thermal energy
and power engineering from the Lanzhou Railway Institute, China and a doctorate
degree in quantitative economics from Jilin University in China.
Huanyu
Mao has
served as a director of our company since May 12, 2006. He has also served
as
our chief technology officer since January 20, 2005 and as our chief operating
officer since June 30, 2005. Dr. Mao has been the chief scientist of Shenzhen
BAK since September 2004. Prior to joining us, between 1997 and September 2004,
Dr. Mao was the chief technology officer of Tianjin Lishen, a leading battery
manufacturer in China. Mr. Mao pioneered core technologies on lithium-ion
battery before its commercialization in 1992 and was the inventor under seven
U.S. patents relating to lithium-ion technology. Dr. Mao received a doctorate
degree in electrochemistry from Memorial University of Newfoundland, Canada
where he focused on conductive polymers.
Richard
B. Goodner has
served as our director since May 12, 2006. Since June 2003, Mr. Goodner has
served as the vice president for legal affairs and general counsel for U.S.
Home
Systems, Inc., a public company listed on the Nasdaq National Market. Since
May
2006, Mr. Goodner also has been a director of Winner Medical Group Inc., a
leading Chinese exporter of medical disposal products, which shares are traded
on the Over-the-Counter Bulletin Board in the United States. From 1997 to 2003,
Mr. Goodner was a partner in the law firm of Jackson Walker L.L.P. Mr. Goodner
holds a bachelor of arts degree in economics from Eastern New Mexico University
and a law degree from Southern Methodist University, the United States.
8
Charlene
Spoede Budd, PhD, CPA, CMA, CFM, PMP,
has
served as our director since June 25, 2007. Ms. Budd is Professor Emeritus
of
Accounting at Baylor University, where she was a professor and Emerson O. Henke
Chair of Accounting from 1993 through 2005, and where she has taught graduate
management accounting, graduate project management, and other classes since
1973. She received her PhD in business administration from The University of
Texas-Austin and her MBA and undergraduate degrees from Baylor University.
She
holds certifications as a CPA, CMA, CFM, PMP, and in all six professional
categories of the theory of constraints. Currently, Ms. Budd also serves as
Chair, Business Environment & Content Subcommittee, of the American
Institute of Certified Public Accountants (AICPA) and the Chair, Finance &
Metrics (F&M) Committee of the Theory of Constraints International
Certification Organization (TOC-ICO).
All
directors will hold office for the terms indicated, or until their earlier
death, resignation, removal or disqualification, and until their respective
successors are duly elected and qualified. There are no arrangements or
understandings between any of the nominees, directors or executive officers
and
any other person pursuant to which any of our nominees, directors or executive
officers have been selected for their respective positions. No nominee, member
of the Board of Directors or executive officer is related to any other nominee,
member of the Board of Directors or executive officer.
9
COMMITTEES
OF THE BOARD OF DIRECTORS
Committees
and Meetings
Our
Board
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. From time to time, the Board may establish other
committees.
During
the fiscal year ended September 30, 2006, the Board held a total of six
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 served.
Audit
Committee
During
the fiscal year ended September 30, 2006, our Audit Committee consisted of
our
directors Richard B. Goodner, Joseph R. Mannes and Jay J. Shi. Mr. Mannes served
as the chair of the Audit Committee and as our Audit Committee financial expert
as that term is defined by the applicable SEC rules. On June 25, 2007, Messrs.
Mannes and Shi resigned from the Board, and Charlene Spoede Budd and Chunzhi
Zhang were elected to the Board. Each of Ms. Budd and Mr. Zhang were appointed
to the Audit Committee, with Ms. Budd replacing Mr. Mannes as chair of the
Audit
Committee and as our Audit Committee financial expert. 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 standards at all times during their service
on such Committee.
The
Audit
Committee oversees our accounting and financial reporting processes and the
audits of the financial statements of our company. During the fiscal year ended
September 30, 2006, the Audit Committee held two meetings. The Audit Committee
is responsible for, among other things:
| · |
selecting
our independent auditors and pre-approving all auditing and non-auditing
services permitted to be performed by our independent
auditors;
|
| · |
reviewing
with our independent auditors any audit problems or difficulties
and
management’s response;
|
| · |
reviewing
and approving all proposed related-party transactions, as defined
in Item
404 of Regulation S-K under the Securities Act of 1933, as amended;
|
| · |
discussing
the annual audited financial statements with management and our
independent auditors;
|
| · |
reviewing
major issues as to the adequacy of our internal controls and any
special
audit steps adopted in light of significant internal control
deficiencies;
|
| · |
annually
reviewing and reassessing the adequacy of our Audit Committee
charter;
|
| · |
such
other matters that are specifically delegated to our Audit Committee
by
our Board from time to time;
|
| · |
meeting
separately and periodically with management and our internal and
independent auditors; and
|
| · |
reporting
regularly to the full Board.
|
Audit
Committee Charter
A
copy of
our Audit Committee charter is attached hereto as Appendix
A.
10
Compensation
Committee
During
the fiscal year ended September 30, 2006, our Compensation Committee consisted
of our directors Richard B. Goodner, Joseph R. Mannes and Jay J. Shi. On June
25, 2007, Ms. Budd and Mr. Zhang replaced Messrs Mannes and Shi on the
Compensation Committee, with Mr. Zhang replacing Mr. Shi as chair of the
Compensation Committee. 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 standards at all times during their service on such
Committee.
Our
Compensation Committee assists the Board in reviewing and approving the
compensation structure of our directors and executive officers, including all
forms of compensation to be provided to our directors and executive officers.
Our chief executive officer may not be present at any Committee meeting during
which his compensation is deliberated. The Compensation Committee is permitted
to delegate its authority in accordance with Nevada law unless prohibited by
the
Company’s by-laws or the Compensation Committee charter. The Compensation
Committee did not meet separately during the fiscal year ended September 30,
2006.
The
Compensation Committee is responsible for, among other things:
| · |
approving
and overseeing the compensation package for our executive
officers;
|
| · |
reviewing
and making recommendations to the Board with respect to the compensation
of our directors;
|
| · |
reviewing
and approving corporate goals and objectives relevant to the compensation
of our chief executive officer,
|
| · |
evaluating
the performance of our chief executive officer in light of those
goals and
objectives, and setting the compensation level of our chief executive
officer based on this evaluation;
and
|
| · |
reviewing
periodically and making recommendations to the Board regarding any
long-term incentive compensation or equity plans, programs or similar
arrangements, annual bonuses, employee pension and welfare benefit
plans.
|
Compensation
Committee Charter
A
copy of
the Compensation Committee charter is attached hereto as Appendix
B.
Compensation
Committee Interlocks and Insider Participation
All
current members of the Compensation Committee are independent directors, and
all
past members were independent directors at all times during their service on
such Committee. None of the past or present members of our Compensation
Committee are present or past employees or officers of ours or any of our
subsidiaries. No member of the Compensation Committee has had any relationship
with us requiring disclosure under Item 404 of Regulation S-K under the
Securities Exchange Act of 1934, as amended. None of our executive officers
has
served on the Board or Compensation Committee (or other committee serving an
equivalent function) of any other entity, one of whose executive officers served
on our Board or Compensation Committee.
Nominating
and Corporate Governance Committee
During
the fiscal year ended September 30, 2006, our Nominating and Corporate
Governance Committee consisted of our directors Richard B. Goodner, Joseph
R.
Mannes and Jay J. Shi. On June 25, 2007, Ms. Budd and Mr. Zhang replaced Messrs.
Mannes and Shi on the Nominating and Corporate Governance Committee. Mr. Goodner
continues to serve as chair of this Committee. 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.
11
The
Nominating and Corporate Governance Committee assists the Board in identifying
individuals qualified to become our directors and in determining the composition
of the Board and its committees. The Nominating and Corporate Governance
Committee did not meet separately during the fiscal year ended September 30,
2006. The Nominating and Corporate Governance Committee is responsible for,
among other things:
| · |
identifying
and recommending to the Board nominees for election or re-election
to the
Board, or for appointment to fill any
vacancy;
|
| · |
reviewing
annually with the Board the current composition of the Board in light
of
the characteristics of independence, age, skills, experience and
availability of service to us;
|
| · |
identifying
and recommending to the Board the directors to serve as members of
the
Board’s committees; and
|
| · |
monitoring
compliance with our code of business conduct and
ethics.
|
We
recognize that transactions between us and any of our directors or executive
officers can present potential or actual conflicts of interest and create the
appearance that our decisions are based on considerations other than the best
interests of our shareholders. Pursuant to its charter, the Nominating and
Corporate Governance Committee considers and makes recommendations to the Board
with regard to possible conflicts of interest of Board members or management.
The Board then makes a determination as to whether to approve the transaction.
Nominating
and Corporate Governance Committee Charter
A
copy of
our Nominating and Corporate Governance Committee charter is attached hereto
as
Appendix
C.
Code
of Business Conduct and Ethics
We
have
adopted a code of business conduct and ethics 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,
2006, there were no amendments to or waivers of our Code of
Conduct.
12
REPORT
OF THE AUDIT COMMITTEE
FOR
THE FISCAL YEAR ENDED SEPTEMBER 30, 2006
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” under the meaning of
Rule 10A-3(b)(1) under the Exchange Act. Mr. Mannes, the chair of the Audit
Committee, is an “audit committee financial expert” within the meaning of Item
401(h) of SEC Regulation S-K. The Audit Committee assists the Board’s oversight
of the integrity of the Company’s financial reports, compliance with legal and
regulatory requirements, the qualifications and independence of the Company’s
independent registered public accounting firm, the audit process, and internal
controls. The Audit Committee operates pursuant to a written charter adopted
by
the Board. The Audit Committee is responsible for overseeing the corporate
accounting and financing reporting practices, recommending the selection of
the
Company’s registered public accounting firm, reviewing the extent of non-audit
services to be performed by the auditors, and reviewing the disclosures made
in
the Company’s periodic financial reports. The Audit Committee also reviews and
recommends to the Board that the audited financial statements be included in
the
Company’s Annual Report on Form 10-K.
During
2006, the Audit Committee (1) reviewed and discussed the audited financial
statements for the fiscal year ended September 30, 2006 with Company management;
(2) discussed with the independent auditors the matters required to be discussed
by SAS 61 (Codification of Statements on Auditing Standards), as may be modified
or supplemented; and (3) received the written disclosures and the letter from
the independent accountants required by Independence Standards Board Standard
No. 1 (Independence Standards Board Standard No. 1, Independence Discussions
with Audit Committees), as may be modified or supplemented, and has discussed
with the independent accountant its independence.
Based
on
the review and discussions referred to above, the Audit Committee had
recommended to the Board of Directors that the audited financial statements
be
included in the Company’s Annual Report on Form 10-K for the fiscal year ended
September 30, 2006 for filing with the SEC.
| /s/ The Audit Committee | |||
|
Richard B. Goodner, Joseph R. Mannes and Jay J. Shi |
|||
13
REPORT
OF THE COMPENSATION COMMITTEE
FOR
THE FISCAL YEAR ENDED SEPTEMBER 30, 2006
The
compensation of the Company’s executive officers is determined by the
Compensation Committee of the Board. The Committee has three members, each
of
whom is independent of management. None of the members of the Committee has
any
insider or interlocking relationship with the Company, and each of them is
a
non-employee director, as these terms are defined in applicable rules and
regulations of the SEC.
Compensation
Philosophy
The
Company’s executive compensation philosophy is to align the interests of
executive management with shareholder interests and with the Company’s business
strategy and success, through an integrated executive compensation program
that
considers short-term performance, the achievement of long-range strategic goals
and growth in total shareholder value. The key elements of executive
compensation are competitive base salary, annual incentives and equity
participation. The aggregate compensation package is designed to attract and
retain individuals critical to the long-term success of the Company, to motivate
these persons to perform at their highest levels, and to reward exceptional
performance.
Base
Salary
Base
salary levels for executive officers are determined not only on the basis of
the
Committee’s assessment of individual performance, but also on the total
compensation, including salaries, paid by companies engaged in similar
businesses, to persons holding equivalent positions. The Compensation Committee
believes that any increases in base salary should be based upon a favorable
evaluation of individual performance relative to individual goals, the
functioning of the executive’s team within the corporate structure, success in
furthering the corporate strategy and goals, and individual management skills,
responsibilities and anticipated workload.
Apart
from contractual commitments, the Compensation Committee also considers
demonstrated loyalty and commitment and the competitive salaries offered by
similar companies to attract and retain executives. Merit increases for
executives are to be subject to the same budgetary guidelines as apply to any
other employees. In those cases where an executive has entered into an
employment agreement, the base salary is determined pursuant to the terms of
the
agreement, and renewals of contracts will be considered on the basis of the
performance of the individual, the performance of the Company and the
compensation philosophy of the Company.
Bonuses
The
Company may pay bonuses to provide an incentive to executives and to reward
executives based on the overall performance of the Company, as well as on the
performance of each executive officer’s area of responsibility or operating
group. Measures of performance are both financial and strategic. Financial
elements are based on achieving quarterly and annual EBITDA targets and
strategic elements include, but are limited to technological or quality
improvements, improvements in operations and contributions to business success.
The goals are also structured to provide the kinds of objectivity and checks
and
balances required to ensure compliance with SEC regulations and the
Sarbanes-Oxley Act.
Equity
Awards
In
May
2005 the Board approved a stock option plan to expand the number of employees
eligible for equity awards so as to award equity more broadly and deeply
throughout the organization and thus provide additional incentive to employees
to maximize shareholder value. The stock option plan authorizes the issuance
of
up to 4,000,000 shares of the Company’s common stock.
In September 2006,
the Compensation Committee approved the cancellation of options for 1,400,000
shares of common stock previously granted to employees who are residents of
the
PRC. In December 2006, a total of 914,994 shares of restricted stock were
granted as replacement awards for the cancelled options to the employees
whose options had been terminated and who continued to be employed by the
Company at that time.
14
Executives
are eligible for equity awards in the form of stock options and restricted
stock
units under the Company’s equity plan. Awards are made at the discretion of the
Compensation Committee. The number of shares awarded to any individual depends
on individual performance, salary level and competitive data, and the impact
that such employee’s productivity may make to shareholder value over time. In
addition, in determining the number of stock options or restricted stock units
granted to each executive, the Compensation Committee reviews the unvested
options and units of each executive to determine the future benefits potentially
available to the executive. The number of options or units granted will depend
in part on the total number of unvested options and units deemed necessary
to
provide an incentive to that individual to make a long term commitment to remain
with the Company. By giving to executives an equity interest in our company,
the
value of which depends upon stock performance, the policy seeks to further
align
management and shareholder interests. The Committee believes that using
restricted stock units as part of the overall equity awards program better
aligns the interest of management and shareholders as restricted stock units
closely replicate the economic characteristics of capital stock.
| /s/ The Compensation Committee | |||
|
Richard B. Goodner, Joseph R. Mannes and Jay J. Shi |
|||
15
SECTION
16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) of the Exchange Act requires our executive officers and directors and
persons who own more than ten percent of the outstanding Common Stock to file
with the SEC an initial report of ownership on Form 3 and changes in ownership
on Forms 4 and 5. The reporting persons are also required to furnish us with
copies of all forms they file.
Based
solely on our review of copies of Forms 3, 4 and 5 furnished to the Company
with
respect to the fiscal year ended September 30, 2006, we have determined that
our
directors, officers and greater than 10% beneficial owners complied with all
applicable Section 16 filing requirements except as follows: (i)
late
Form 4 reports filed by each of Houde Liu and Shuquan Zhang on October 23,
2006
and by Yanlong Zou on October 20, 2006, in each case to report the cancellation
of a stock option grant on September 28, 2006 of 50,000 shares of common stock
pursuant to termination and release agreements entered into between us and
each
of Messrs. Liu, Zhang and Zou; (ii) late Form 3 reports filed by each of Joseph
R. Mannes, Richard B. Goodner and Jay J. Shi on October 25, 2006, in each case
to report his appointment as our director on May 12, 2006; (iii) late Form
4
reports filed by each of Messrs. Mannes, Goodner and Shi on October 25, 2006,
in
each case to report the grant of 5,000 restricted shares of our common stock
pursuant to our Compensation Plan for Nonemployee Directors; (iv) late Form
4
report filed by Xiangqian Li on April 2, 2007, to report the release of
1,089,775
shares of common stock from escrow to investors pursuant to an escrow agreement
between Mr.
Li
and such investors; (v) late Form 4 reports filed by each of Houde Liu, Yanlong
Zou, Shuquan Zhang and Yongbin Han on April 2, 2007 to report the grant of
34,142,
34,142, 34,142 and 136,566 shares of restricted stock, respectively, on December
26, 2006; and (vi) late Form 3 report filed by Zhongyi Deng on April 3, 2007
to
report his appointment as our Vice-President of Business Development.
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Our
PRC
subsidiary, Shenzhen
BAK Battery, Co., Ltd. (“Shenzhen BAK”) has several outstanding short term bank
loans, long term bank loans and bills payable to (i) Agricultural Bank of China
(Longgang/Shenzhen Eastern Branches), (ii) Shenzhen Commercial Bank (Shuibei
Branch), (iii) Shenzhen Development Bank (Longgang Branch), (iv) China CITIC
Bank, (v) Bank of China (Shenzhen Branch) and (vi) China Development Bank,
respectively, the proceeds of which were used primarily to fund the operations
of our manufacturing facility located at the BAK Industrial Park and for general
working capital requirements. At March 31, 2007, we had aggregate amounts due
and payable under these debt arrangements of $109.2 million, including
short-term bank loans of $71.8 million, long-term bank loans of $18.1 million
and bills payable of $19.3 million. The debt arrangements bear interest at
rates
ranging from 4.725% to 6.48% per annum and have maturity dates ranging from
six
to forty-eight months. Each loan is guaranteed by Mr. Li, our director, Chairman
of the Board, President and Chief Executive Officer. Mr. Li has also pledged
certain of his shares of our common stock to secure certain of our indebtedness.
Mr. Li did not receive or is entitled to receive any consideration for the
above
referenced guarantees, and we are not independently obligated to indemnify
any
of those guarantors for any amounts paid by them pursuant to any guarantee.
16
PROPOSAL
2
RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
The
Audit
Committee has selected PKF to serve as the independent registered public
accounting firm of the Company for the fiscal year ending September 30, 2007.
KPMG was the Company’s independent registered public accounting firm for the
fiscal year ending September 30, 2006 and George Stewart, C.P.A. and Schwartz
Levitsky Feldman LLP (“SLF”) performed services for us for the fiscal year
ending September 30, 2005.
We
are
asking our stockholders to ratify the selection of PKF as our independent
registered public accounting firm. Although ratification is not required by
our
bylaws or otherwise, the Board is submitting the selection of PKF to our
stockholders for ratification as a matter of good corporate practice. In the
event our stockholders fail to ratify the appointment, the Audit Committee
may
reconsider this appointment.
The
Company has been advised by PKF that neither the firm nor any of its associates
had any relationship with the Company. Representatives of PKF will be available
via teleconference during the Meeting, at which time they may make any statement
they consider appropriate and will respond to appropriate questions raised
at
the Meeting.
Former
Auditors
On
January 20, 2005, we dismissed George Stewart, C.P.A. as our independent
registered public accounting firm and appointed Schwartz Levitsky Feldman LLP
(“SLF”), as our independent registered public accounting firm. The dismissal of
George Stewart, C.P.A. was approved by the Board of Directors of the Company
at
such time. On
May
15, 2006, the Company changed its independent registered public accounting
firm
from SLF to KPMG. On July 7, 2006, the Board, acting upon the recommendation
of
the Audit Committee, ratified and authorized the appointment KPMG as the
Company’s independent registered public accounting firm for the fiscal year
ending September 30, 2006. Subsequently, effective April 1, 2007, the Board
dismissed KPMG and authorized the appointment of PKF as the Company’s
independent registered public accounting firm for the fiscal year ending
September 30, 2007. On April 2, 2007 the Company and PKF signed a formal
engagement letter appointing PKF as the Company’s independent registered public
accounting firm for the fiscal year ending September 30, 2007.
For
the
fiscal years ended September 30, 2005 and 2006, the Company’s principal
accountants’ report on the Company’s financial statements did not contain any
adverse opinion or disclaimer of opinion, nor was it qualified or modified
as to
uncertainty, audit scope or accounting principles, except as follows: KPMG’s
audit report, dated December 8, 2006, on the consolidated financial statements
of the Company as of and for the years ended September 30, 2006 and 2005,
contained a separate paragraph stating that “As discussed in note 2(q) to the
consolidated financial statements, on October 1, 2005, the Group adopted
Statement of Financial Accounting Standards (‘SFAS’) No.123 (Revised 2004),
‘Share-Based Payment,’ using the modified prospective method, representing a
change in the Group’s method of accounting for stock-based compensation.”
The
audit
report, dated August 22, 2006, of KPMG on the consolidated financial statements
of the Company and its subsidiaries as of and for the fiscal years ended
September 30, 2005 and 2004, which was included in Amendment No. 3 to our Form
10-KSB/A for the fiscal year ended September 30, 2005, did not contain an
adverse opinion or disclaimer of opinion, and were not qualified or modified
as
to uncertainty, audit scope or accounting principles, except as follows: KPMG’s
report contained a separate paragraph stating that “As described in Note 3 to
the accompanying consolidated financial statements, the Company has restated
the
consolidated balance sheets as of September 30, 2004 and 2005 and the related
consolidated statements of income and comprehensive income, and cash flows
for
each of the years in the three-year period ended September 30, 2005, which
were
previously audited by other independent accountants, to correct certain
accounting errors that were detected after the original issuance of those
consolidated financial statements.” The
audit
reports of KPMG on management’s assessment of the effectiveness of internal
control over financial reporting and the effectiveness of internal control
over
financial reporting as of September 30, 2006 and 2005, which is included in
our
Annual Report on Form 10-K for the fiscal year ended September 30, 2006 (the
“2006 Form 10-K”), did not contain any adverse opinion or disclaimer of opinion,
nor were they qualified or modified as to uncertainty, audit scope, or
accounting principles, except that KPMG’s report indicates that the Company did
not maintain effective internal control over financial reporting as of September
30, 2006, because of the effect of material weaknesses, including those set
forth below, described in such report and elsewhere in the 2006 Form
10-K.
17
During
the fiscal years ended September 30, 2005 and 2006, there were no disagreements
with the Company’s former accountants on any matters of accounting principles or
practices, financial statement disclosure or auditing scope or procedure which,
if not resolved to such former accountant’s satisfaction, would have caused such
former accountant to make reference thereto in its reports on the Company’s
financial statements for such fiscal years. During the fiscal years ended
September 30, 2005 and 2006, there were no “reportable events,” as such term is
defined in Item 304(a)(1)(v) of Regulation S-K, except that KPMG advised
the Company of certain material weakness in its internal controls over financial
reporting, which were reported by the Company under Item 9A. “Controls and
Procedures” of the 2006 Form 10-K, to the effect that the Company had an
insufficient complement of personnel, including in senior management, with
a
level of accounting knowledge, experience and training in the application of
U.S. GAAP and did not implement adequate supervisory review to ensure that
the
consolidated financial statements were prepared in conformity with U.S. GAAP.
The lack of sufficient personnel with such accounting knowledge, experience
and
training contributed to material weaknesses (i) in the Company’s accounting for
capitalization of interest costs, and the related recognition of property,
plant
and equipment and depreciation expense; (ii) accounting for deferred taxes
under
U.S. GAAP, in particular the identification and measurement of differences
between the respective tax and financial reporting bases of certain assets
and
liabilities and the determination of the applicable income tax rate to ensure
that deferred taxes were accurately presented in the Company’s consolidated
financial statements; (iii) accounting for the share-based compensation, in
particular the accounting for cancellation and replacement of certain option
grants and the classification of the associated share-based compensation expense
in the consolidated statement of income and comprehensive income; (iv) the
calculation of earnings per share in accordance with Statement of Financial
Accounting Standards No. 128 “Earnings per Share,” in particular the
identification of dilutive instruments in the calculation of diluted earnings
per share; (v)
accounting for the complete and accurate recognition of construction in progress
assets; and (vi) accounting for construction in progress assets and the
determination of depreciation expense when the assets are ready for their
intended use.
Each
of
KPMG, SLF and George Stewart, C.P.A. were provided copies of the disclosures
contained above.
Independent
Registered Public Accounting Firm’s Fees
The
following is a summary of the fees billed to the Company by KPMG for
professional services rendered for the fiscal year ended September 30, 2006,
and
by SLF and George Stewart, C.P.A. for professional services rendered for the
fiscal year ended September 30, 2005:
|
2006
|
2005
|
||||||
|
Audit
fees(1)
|
$
|
161,000
|
$
|
935,826
|
|||
|
Audit-related
fees(2)
|
97,000
|
9,342
|
|||||
|
Tax
fees
|
—
|
—
|
|||||
|
All
other fees
|
—
|
—
|
|||||
|
Total
|
258,000
|
945,168
|
|||||
__________
|
(1)
|
Consists
of fees billed for the audit of our annual financial statements,
review of
financial statements included in our Quarterly Reports on Form 10-Q
and
services that are normally provided by the accountant in connection
with
statutory and regulatory filings or
engagements.
|
|
(2)
|
Consists
of assurance and related services that are reasonably related to
the
performance of the audit and reviews of our financial statements
and are
not included in “audit fees” in this table. The services provided by our
accountants within this category consisted of advice relating to
SEC
matters and employee benefit
matters.
|
18
Pre-Approval
Policies and Procedures
Under
the
Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our
auditors must be approved in advance by our Audit Committee to assure that
such
services do not impair the auditors’ independence from us. In accordance with
its policies and procedures, our Audit Committee pre-approved the audit service
performed by KPMG for our consolidated financial statements as of and for the
year ended September 30, 2006, and our internal control over financial reporting
as of September 30, 2006. As our Audit Committee was formed only in May 2006,
there was no such pre-approval by our audit committee before George Stewart,
C.P.A. and SLF performed their audit in fiscal 2005 and before KPMG performed
the re-audit of our consolidated financial statements for fiscal 2003, 2004
and
2005.
The
Board of Directors recommends a vote FOR ratification of the selection of PKF
as
the Company’s independent registered public accounting firm for the fiscal year
ending September 30, 2007.
GENERAL
At
the
date of this Proxy Statement, management is not aware of any matters to be
presented for action at the meeting other than those described above. However,
if any other matters should come before the Annual Meeting, it is the intention
of the persons named in the accompanying proxy to vote such proxy in accordance
with their judgment on such matters.
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 may write to
it
at the Company’s address given above. These communications will be reviewed by
one or more employees of the Company designated by the Board, who will determine
whether they should be presented to the Board. The purpose of this screening
is
to allow the Board to avoid having to consider irrelevant or inappropriate
communications.
19
STOCKHOLDER
PROPOSALS FOR THE 2008 ANNUAL MEETING
If
you
wish to have a proposal included in our proxy statement for next year’s annual
meeting in accordance with Rule 14a-8 under the Exchange Act, your proposal
must
be received by the Secretary of the Company at BAK Industrial Park, No. 1 BAK
Street Kuichong Town, Longgang District, Shenzhen 518119, People’s Republic of
China, no later than the close of business on April
1,
2008.
A
proposal which is received after that 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,
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
is
also made available on our website at www.bak.com.cn
after it
is filed with the SEC.
OTHER
MATTERS
As
of the
date of this Proxy Statement, the Board of Directors has no knowledge of any
business which will be presented for consideration at the Meeting other than
the
election of directors and the ratification of the appointment of the accountants
of the Company. Should any other matters be properly presented, it is intended
that the enclosed proxy will be voted in accordance with the best judgment
of
the persons voting the proxies.
| July 30, 2007 | By Order of the Board of Directors | ||
| /s/ Yongbin Han | |||
|
Secretary |
|||
20
Appendix
A
CHINA
BAK BATTERY, INC.
Audit
Committee Charter
Article
I. Purposes
The
Audit
Committee (the “Committee”)
of the
Board of Directors (the “Board”)
of
China BAK Battery, Inc. (the “Company”)
has
been appointed by the Board for the purpose of overseeing:
|
1.
|
the
Company’s accounting and financial reporting processes;
|
|
|
2.
|
the
Company’s internal control over financial reporting;
|
|
|
3.
|
the
audits of the Company’s financial statements;
|
|
|
4.
|
the
Company’s compliance with legal and regulatory requirements relating to
financial reporting;
|
|
|
5.
|
the
selection, engagement, qualifications and independence of the Company’s
independent auditors; and
|
|
|
6.
|
the
performance of the Company’s internal audit function and its independent
auditors.
|
The
Committee is also charged with making regular reports to the Board and preparing
any reports that may from time to time be required by the rules of the Nasdaq
Stock Market, Inc. (“NASDAQ”)
or the
Securities and Exchange Commission (the “SEC”)
to be
included in the Company’s annual proxy statement or annual report on Form 10-K.
Article
II. Membership
The
Committee shall consist of no fewer than three members of the Board. Prior
to
their election and annually thereafter, the members of the Committee shall
each
have been affirmatively determined by the Board (i) not to be an officer or
employee of the Company, (ii) to have no relationship that would interfere
with
their exercise of independent judgment in carrying out the responsibilities
of a
director and (iii) to be “independent” under (x) the rules of NASDAQ and (y) the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated by the SEC thereunder (collectively, the “Exchange
Act”),
except as permitted by such independence rules of NASDAQ and under the Exchange
Act.
In
addition:
|
1.
|
No
member shall have participated in the preparation of the financial
statements of the Company or any then-current subsidiary of the
Company at
any time during the three years preceding the date of the annual
determination of independence;
|
A-1
|
2.
|
Each
member of the Committee shall be “financially literate” as determined by
the judgment of the Board, which shall include being able to read
and
understand financial statements, including the Company’s balance sheet,
income statement and cash flow statement; and
|
|
|
3.
|
At
least one member of the Committee shall, in the judgment of the
Board,
(a) have past employment experience in finance or accounting,
requisite professional certification in accounting, or some comparable
experience or background that results in the member’s financial
sophistication, in accordance with the NASDAQ rules and (b) be
an “audit
committee financial expert” within the meaning of Regulation S-K under the
Securities Act of 1933, as amended (the “Securities
Act”)
and the Exchange Act.
|
Each
member of the Committee shall first be nominated by the Nominating and Corporate
Governance Committee of the Board and then be elected by the full Board, and
shall serve until such member’s successor is duly elected and qualified or until
such member’s earlier resignation, retirement or removal from the Committee or
the Board. The members of the Committee may be removed from the Committee at
any
time, with or without cause, by majority vote of the Board.
The
Board
shall elect a Chairperson of the Committee. The Chairperson of the Committee
shall chair all regular and special sessions of the Committee, be responsible
for scheduling regular and special meetings of the Committee and set the agendas
for Committee meetings. This Chairperson shall serve until the expiration of
his
or her term or until his or her earlier resignation, retirement or removal
from
the Committee or the Board. If the Chairperson is absent from a particular
meeting, another member of the Committee shall serve as chairperson for purposes
of that meeting.
The
Committee may delegate all or a portion of its duties and responsibilities
to a
subcommittee of the Committee.
Article
III. Meetings
The
Committee shall meet at least four times per year. Additional meetings may
occur
as the Committee or its Chairperson deem advisable. As part of the Committee’s
oversight function, the Committee shall meet with the Company’s independent
auditors and management at least quarterly to review the Company’s financial
statements. The Committee (1) may meet separately in executive session with
(a) the Company’s Director of Internal Audit, (b) the Company’s independent
auditors, (c) members of management, (d) non-management members of the Board
who
are not members of the Committee or (e) any other persons the Committee
deems appropriate to discuss any matters that any member of the Committee or
any
other such individual or group believes should be discussed privately and (2)
shall meet separately in executive session at least annually with each of (x)
the Company’s Director of Internal Audit, (y) the Company’s Chief Financial
Officer and (z) the Company’s independent auditors. In addition, the Committee
may exclude from its meetings any persons it deems appropriate in order to
carry
out its responsibilities.
A
majority of Committee members shall constitute a quorum for the conduct of
business at a meeting of the Committee. A majority of the members present at
any
meeting at which a quorum is present may act on behalf of the Committee. The
Committee may meet by telephone or videoconference and may take action by
unanimous written consent to the fullest extent permitted by the Nevada General
Corporation Law.
A-2
The
Committee will cause to be kept adequate minutes of all its proceedings and
will
report its actions to the next meeting of the Board. Committee members will
be
furnished with copies of the minutes of each meeting and any action taken by
unanimous consent.
Article
IV. Authority
The
Committee shall have the resources and authority necessary to discharge its
duties and responsibilities as it deems appropriate. In connection therewith,
the Committee shall have:
|
1.
|
Such
unrestricted access to Company personnel, records and documents
as is
necessary to carry out its responsibilities;
|
|
|
2.
|
The
sole authority to retain, compensate, evaluate and terminate the
Company’s
independent auditors and to retain independent legal counsel or
other
outside advisors, including other auditors or accountants, as the
Committee determines necessary to carry out its duties; and
|
|
|
3.
|
The
Company shall provide the appropriate funding, as determined by
the
Committee, (i) for payment of compensation (A) to the independent
auditors
for purposes of preparing or issuing an audit report and performing
their
audit review and attest services for the Company, and (B) to any
advisors
employed by the Committee, and (ii) for the ordinary administrative
expenses of the Committee that are necessary or appropriate in
carrying
out its duties
|
Any
communications between the Committee and legal counsel in the course of
obtaining legal advice will be considered privileged communications of the
Company, and the Committee will take all necessary steps to preserve the
privileged nature of those communications.
Article
V. Responsibilities
and Duties
The
Committee shall have the following responsibilities and duties:
|
A.
|
Independent Auditors | |
|
1.
|
The
Committee shall have sole authority to appoint and terminate the
Company’s
independent auditors. The Committee shall also be responsible for
setting
the compensation and retention terms for, and overseeing and evaluating
the performance of, the Company’s independent auditors with respect to
audit, review or attestation services. The Company’s independent auditors
shall report directly to the Committee.
|
|
|
2.
|
The
Committee shall have sole authority and responsibility to approve
in
advance (a) the retention of independent auditors for the performance
of
all audit and lawfully permitted non-audit services and (b) the
fees to be
paid for such services. Pre-approval of non-audit services (other
than
review and attestation services) will not be required if such services
fall within exceptions established by the SEC.
|
|
|
3.
|
The
Committee shall ensure that it receives from the independent auditors
all
written disclosures, statements and letters required by Independence
Standards Board Standard 1 delineating all relationships between
the
independent auditors and the Company. The Committee shall discuss
with the
Company’s independent auditors their independence, including any disclosed
relationships or services that may impact the auditors’ objectivity and
independence. If deemed appropriate by the Committee, the Committee
shall
either take, or recommend that the Board take, appropriate action
to
oversee the independence of the Company’s outside auditor and in response
to the independent auditors’ report, to satisfy itself of the auditors’
independence. The Committee shall also confirm with the Company’s
independent auditors that the independent auditors rotate (a) the
lead (or
coordinating) audit partner of the audit team as well as the concurring
or
reviewing partner at least once every five years and (b) any other
audit
team members within any applicable period required under Regulation
S-X
under the Securities Act and the Exchange Act. Additionally, in
order to
ensure continuing auditor independence, the Committee shall periodically
consider whether to rotate the independent audit firm
itself.
|
|
A-3
|
4.
|
On
at least an annual basis, the Committee shall evaluate the qualifications,
independence and performance of the Company’s independent auditors. This
evaluation and review shall include a review of the lead audit
partner.
|
|
|
5.
|
The
Committee shall recommend to the Board a policy regarding the hiring
of
employees or former employees of the Company’s independent
auditors.
|
|
|
6.
|
On
at least an annual basis, the Committee shall obtain assurance
from the
Company’s independent auditors that no acts required to be reported under
Section 10A(b) of the Exchange Act have arisen.
|
|
|
B.
|
Audit
and Accounting Process
|
|
|
1.
|
The
Committee shall review and discuss with the Company’s independent auditors
reports that the independent auditors are required to provide to
the
Committee relating to significant financial reporting issues and
judgments
made in connection with the preparation of the Company’s financial
statements, including, among other things, (a) all critical accounting
policies and practices used, (b) all alternative treatments of
financial
information within U.S. generally accepted accounting principles
(“GAAP”)
that have been discussed with management, the ramifications of
such
treatments and the treatment preferred by the Company’s independent
auditors and (c) any material written communications between the
Company’s
independent auditors and management.
|
|
|
2.
|
The
Committee shall inquire as to whether there was any significant
difference
of opinion or disagreement between management and the Company’s
independent auditor in connection with the preparation of the Company’s
audited financial statements and review with the independent auditors
any
audit problems or difficulties (including any restrictions on the
scope of
activities or access to required information) and management’s responses
to such problems or difficulties.
|
|
|
3.
|
To
the extent required by applicable law or the NASDAQ rules, the
Committee
shall discuss with the Company’s independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, “Communication
with Audit Committees”
(“SAS
61”).
SAS 61 requires that independent auditors provide audit committees
with
such additional information regarding the scope and results of
outside
audits as may be necessary to assist such committees in overseeing
the
financial reporting and disclosure process for which management
is
responsible. To ensure that all matters required to be discussed
by SAS 61
have already been discussed pursuant to the other provisions of
this
Charter, the Committee may ask the Company’s independent auditors to
advise them as to whether the requirements of SAS 61 have been
satisfied.
|
|
A-4
|
C.
|
Financial
Reporting Process
|
|
|
1.
|
The
Committee shall review with members of management and discuss with
the
Company’s independent auditors the annual audited financial statements
to
be included in the Company’s annual reports on Form 10-K (including the
Company’s disclosures under “Management’s Discussion and Analysis of
Financial Condition and Results of Operations”) prior to the filing of
each Form 10-K.
|
|
|
2.
|
The
Committee shall review with members of management and discuss with
the
Company’s independent auditors the quarterly financial statements to be
included in the Company’s quarterly reports on Form 10-Q prior to the
filing of each Form 10-Q.
|
|
|
3.
|
The
Committee shall review with members of management and discuss with
the
Company’s independent auditors any registration statement of the Company
that contains new or pro forma financial information prior to the
initial
filing of such registration statement with the SEC. The Chairperson
of the
Committee or a quorum of the Committee may represent the entire
Committee
for the purpose of these reviews.
|
|
|
4.
|
The
Committee shall discuss with management financial information and
earnings
guidance provided to analysts and rating agencies. Such discussions
may be
general (i.e., the types of information to be disclosed and the
type of
presentation to be made) and do not necessarily need to be held
in advance
of each release or presentation.
|
|
|
5.
|
The
Committee shall discuss with management (i) any significant financial
reporting issues and judgments made in the preparation of the Company’s
financial statements and (ii) any changes in the Company’s accounting
policies and procedures.
|
|
|
D.
|
Approval
of Disclosure and Non-Audit Services
|
|
|
1.
|
The
Committee shall pre-approve any permissible non-audit services
to be
provided by the Company’s independent auditors on behalf of the Company
that do not fall within any exception to the pre-approval requirements
established by the SEC. The 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
Committee at its next meeting. In the event that any permissible
non-audit
services are approved by the Committee or a delegate or delegates
thereof,
the Committee shall take steps to ensure that such approval is
appropriately disclosed in the Company’s periodic reports filed with the
SEC to the extent such disclosure is required.
|
|
|
2.
|
The
Committee shall ensure that Company’s independent auditors are not engaged
to perform for the Company any of the non-audit services set forth
on
Exhibit
A
hereto or any other services that applicable law prohibits independent
registered public accounting firms from performing for their audit
clients.
|
|
|
E.
|
Whistleblower
Procedures
|
|
|
1.
|
The
Committee shall establish and maintain procedures for the receipt,
retention, and treatment of complaints received by the Company
regarding
(a) accounting, (b) internal accounting controls and (c) auditing
matters.
|
|
A-5
|
2.
|
The
Committee shall establish procedures for the confidential, anonymous
submission by Company employees of concerns regarding questionable
accounting or auditing matters.
|
|
|
F.
|
Disclosure
Controls and Procedures
|
|
|
1.
|
The
Committee shall discuss periodically with members of management
and the
Company’s independent auditors the adequacy of the Company’s disclosure
controls and procedures, including applicable internal controls
and
procedures for financial reporting and changes in internal controls
designed to address any significant deficiencies in the design
or
operation of internal controls or material weaknesses therein and
any
fraud involving management or other employees that are reported
to the
Committee.
|
|
|
2.
|
The
Committee shall review with management, and discuss with the Company’s
independent auditors: (a) the annual report of management affirming
management’s responsibility for establishing and maintaining internal
control over financial reporting and assessing the effectiveness
of the
Company’s internal control over financial reporting and (b) the
independent auditors’ report on, and attestation of, management’s report
when those reports are required by SEC or NASDAQ rules.
|
|
|
G.
|
Compliance
Matters
|
|
|
1.
|
The
Committee shall have oversight and responsibility for the Company’s
compliance with applicable laws and regulations relating to the
Company’s
financial reporting. The Committee may obtain advice and assistance,
as
needed, from internal or external legal counsel, accounting firms
or other
advisors, with the sole authority to retain, terminate and negotiate
the
terms and conditions of the engagement.
|
|
|
H.
|
Evaluation
of Performance
|
|
|
1.
|
The
Committee shall annually evaluate its own performance and deliver
a report
to the Board setting forth the results of the
evaluation.
|
|
|
2.
|
The
Committee shall annually review re-assess the adequacy of this
Charter and
submit any recommended changes to the Board for its
approval.
|
|
|
3.
|
The
Committee shall, through its Chairperson, regularly report to the
Board on
the Committee’s activities and actions.
|
|
A-6
|
I.
|
Other
Compliance
|
|
|
1.
|
The
Committee shall meet periodically with management to review the
Company’s
major financial risk exposures and the steps management has taken
to
monitor and control such exposures.
|
|
|
2.
|
The
Committee shall establish procedures for the approval of and approve
the
entry of the Company into any and all “related party transactions” between
the Company and any executive officer or director that would potentially
require disclosure pursuant to Item 404 of Regulation S-K under
the
Securities Act.
|
|
|
3.
|
The
Committee shall publish this Charter in accordance with applicable
SEC and
NASDAQ rules.
|
|
|
4.
|
The
Committee shall perform any other activities consistent with this
Charter,
the Company’s bylaws and applicable law as the Committee or the Board
deems necessary or
appropriate.
|
|
Article
VI. Explanatory
Note
While
the
Committee has the responsibilities and powers set forth in this Charter, it
is
not the duty of the Committee to ensure that the Company complies with laws
and
regulations and its policies and procedures. The Company’s financial statements
are the responsibility of management. The Company’s independent auditors are
responsible for planning and conducting audits to determine whether the
Company’s financial statements fairly present, in all material respects, the
financial position of the Company.
Approved
on May 15, 2006
A-7
Exhibit
A
Under
the
Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”),
the
Company’s independent auditors cannot contemporaneously provide any of the
following non-audit services to the Company:
| (A) |
bookkeeping
or other services related to accounting records or financial
management;
|
| (B) |
financial
systems design and implementation;
|
| (C) |
appraisal
or valuation services or fairness
opinions;
|
| (D) |
actuarial
services;
|
| (E) |
internal
audit outsourcing services;
|
| (F) |
management
functions or human resources;
|
| (G) |
broker
or dealer, investment advisor or investment banking
services;
|
| (H) |
legal
services and expert services unrelated to the audit;
or
|
| (I) |
any
other service determined to be impermissible by the Public Company
Accounting Oversight Board established pursuant to
Sarbanes-Oxley.
|
A-8
Appendix
B
CHINA
BAK BATTERY, INC.
Compensation
Committee Charter
Article
I. Purpose
The
Compensation Committee (the “Committee”)
of the
Board of Directors (the “Board”)
of
China BAK Battery, Inc. (the “Company”)
has
been appointed by the Board to assist the Board by assuming primary
responsibility for evaluating issues relating to executive compensation. The
Committee is also charged with making regular reports to the Board and
delivering any reports that may from time to time be required by the rules
of
the Nasdaq Stock Market, Inc. (“NASDAQ”)
or the
Securities and Exchange Commission (the “SEC”)
to be
included in the Company’s annual proxy statement or annual report on Form
10-K.
Article
II. Membership
The
Committee shall consist of two or more members of the Board. Prior to their
election and annually thereafter, the members of the Committee shall each have
been affirmatively determined by the Board to satisfy the same standards of
“independence” as apply to the members of the Company’s Audit Committee. In
addition, each member of the Committee shall qualify both (i) as a “non-employee
director” in the meaning of Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended, and (ii) as an “outside director” in the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended.
Each
member of the Committee shall first be nominated by the Nominating and Corporate
Governance Committee of the Board and then be elected by the full Board, with
interested members of the Board recusing themselves as appropriate, and shall
serve until the expiration of such member’s term or until such member’s earlier
resignation, retirement or removal. The members of the Committee may be removed
at any time, with or without cause, by majority vote of the Board.
The
Board
shall elect a Chairperson of the Committee. The Chairperson of the Committee
shall chair all regular and special sessions of the Committee, be responsible
for scheduling regular and special meetings of the Committee and set the agendas
for Committee meetings. This Chairperson shall serve until the expiration of
his
or her term or until his or her earlier resignation, retirement or removal
from
the Committee or the Board. If the Chairperson is absent from a particular
meeting, another member of the Committee shall serve as chairperson for purposes
of that meeting.
The
Committee may delegate all or a portion of its duties and responsibilities
to a
subcommittee of the Committee.
B-1
Article
III. Meetings
The
Committee shall meet at least twice a year. Additional meetings may occur as
the
Committee or its Chairperson deem advisable.
A
majority of Committee members shall constitute a quorum for the conduct of
business of the Committee. A majority of the members present at any meeting
at
which a quorum is present may act on behalf of the Committee, unless the act
of
a greater number is required by law, the Company’s Certificate of Incorporation
or the Company’s Bylaws. The Committee may meet by telephone or videoconference
and may take action by unanimous written consent to the fullest extent permitted
by the Delaware General Corporation Law.
The
Committee will cause to be kept adequate minutes of all its proceedings and
will
report its actions to the next meeting of the Board. Committee members will
be
furnished with copies of the minutes of each meeting and any action taken by
unanimous written consent.
Article
IV. Authority
The
Company shall provide the Committee with the necessary financial resources
and
the Committee shall have the authority necessary to discharge its duties and
responsibilities, including the authority to retain outside counsel or other
experts or consultants, as it deems appropriate in its sole discretion. Any
communications between the Committee and legal counsel in the course of
obtaining legal advice will be considered privileged communications of the
Company. The Committee will take all necessary steps to preserve the privileged
nature of those communications.
Article
V. Responsibilities
and Duties
The
Committee shall have the following responsibilities and duties:
| 1. |
To
evaluate and/or develop the compensation policies applicable to the
executive officers of the Company, which shall include guidance regarding
the specific relationship of corporate performance to executive
compensation;
|
| 2. |
To
assist the Board in developing and evaluating potential candidates
for
executive positions, including the Chief Executive Officer, and to
oversee
the development of executive succession
plans;
|
| 3. |
To
review and recommend on an annual basis the corporate goals and objectives
with respect to compensation for the Chief Executive
Officer;
|
| 4. |
To
assess the ongoing competitiveness of the total executive compensation
package;
|
| 5. |
To
evaluate at least once a year the Chief Executive Officer’s performance in
light of the corporate goals and objectives with respect to compensation
for the Chief Executive Officer;
|
| 6. |
To
recommend the Chief Executive Officer’s annual compensation, including
salary, bonus, incentive and equity compensation, which such
recommendation shall be subject to approval by the full Board, with
interested members of the Board recusing themselves as
appropriate;
|
B-2
| 7. |
To
recommend the annual compensation of other officers of the Company
who are
Board members, including salary, bonus, incentive and equity compensation,
which such recommendation shall be subject to approval by the full
Board,
with interested members of the Board recusing themselves as
appropriate;
|
| 8. |
To
provide oversight of the Chief Executive Officer’s recommendations
concerning the performance and compensation of the Company’s other
executive officers and to make final determinations with respect
to the
compensation of the Company’s other executive
officers;
|
| 9. |
To
periodically review the compensation paid to non-employee directors
(including Board and committee chairpersons) in the form of annual
retainers and meeting fees, if any, and to make recommendations to
the
Board regarding any adjustments;
|
| 10. |
To
review the Company’s incentive compensation plans, including cash and/or
stock-based plans, and recommend changes in such plans to the Board
as
needed;
|
| 11. |
To
assist the full Board with respect to the administration of the Company’s
incentive compensation plans;
|
| 12. |
To
review and approve any employment agreements, retirement agreements,
severance arrangements, change-in-control arrangements or special
or
supplemental employee benefits and any material amendments to the
foregoing, applicable to executive officers, including the Chief
Executive
Officer;
|
| 13. |
To
maintain regular contact with management of the Company;
|
| 14. |
To
prepare and publish any required Compensation Committee report on
executive compensation to be included in the Company’s annual proxy
statement if required by the rules and regulations of the
SEC;
|
| 15. |
To
evaluate its own performance, and review the adequacy of this charter,
at
least annually, delivering a report setting forth the results of
such
evaluation and review, and any recommended changes, to the Board
for its
approval; and
|
| 16. |
To
perform such other responsibilities and duties as compensation committees
of companies similarly situated with the Company would
perform.
|
Approved
on May 15, 2006
B-3
Appendix
C
CHINA
BAK BATTERY, INC.
Nominating
and Corporate Governance Committee Charter
Article
I. Purpose
The
Nominating and Corporate Governance Committee (the “Committee”)
of the
Board of Directors (the “Board”)
of
China BAK Battery, Inc. (the “Company”)
has
been appointed by the Board for the purpose of:
| 1. |
Identifying,
recruiting, evaluating and recommending individuals for nomination
for
election to the Board and the committees thereof as well as to fill
any
vacancies;
|
| 2. |
Developing
a policy with regard to the consideration of any director candidates
recommended by stockholders of the Company and the procedures to
be
followed by such stockholders in making such recommendations;
|
| 3. |
Assisting
the Board and the committees of the Board in the conduct of their
annual
evaluations; and
|
| 4. |
Taking
a leadership role in shaping corporate governance policies and practices,
including recommending to the Board corporate governance guidelines
applicable to the Company and monitoring Company compliance with
said
policies and guidelines.
|
The
Committee is also charged with making regular reports to the Board and
delivering any reports that may from time to time be required by the rules
of
the Nasdaq Stock Market, Inc. (“NASDAQ”)
or the
Securities and Exchange Commission (the “SEC”)
to be
included in the Company’s annual proxy statement or annual report on Form 10-K.
Article
II. Membership
The
Committee shall consist of two or more members of the Board. Prior to their
election and annually thereafter, the members of the Committee shall each have
been affirmatively determined by the Board to satisfy the same standards of
“independence” as apply to the members of the Company’s Audit
Committee.
Each
member of the Committee shall be elected by the Board and shall serve until
the
expiration of such member’s term or until such member’s earlier resignation,
retirement or removal from the Committee or the Board. The members of the
Committee may be removed at any time, with or without cause, by majority vote
of
the Board.
The
Board
shall elect a Chairperson of the Committee. The Chairperson of the Committee
shall chair all regular and special sessions of the Committee, be responsible
for scheduling regular and special meetings of the Committee and set the agendas
for Committee meetings. This Chairperson shall serve until the expiration of
his
or her term or until his or her earlier resignation, retirement or removal
from
the Committee or the Board. If the Chairperson is absent from a particular
meeting, another member of the Committee shall serve as chairperson for purposes
of that meeting.
C-1
The
Committee may delegate all or a portion of its duties and responsibilities
to a
subcommittee of the Committee.
Article
III. Meetings
The
Committee shall meet at least twice a year. Additional meetings may occur as
the
Committee or its Chairperson deem advisable.
A
majority of Committee members shall constitute a quorum. A majority of the
members present at any meeting at which a quorum is present may act on behalf
of
the Committee. The Committee may meet by telephone or videoconference and may
take action by unanimous written consent to the fullest extent permitted by
the
Delaware General Corporation Law.
The
Committee will cause to be kept adequate minutes of all its proceedings and
will
report its actions to the next meeting of the Board. Committee members will
be
furnished with copies of the minutes of each meeting and any action taken by
unanimous written consent.
Article
IV. Authority
The
Company shall provide the Committee with the necessary resources and the
Committee shall have the authority necessary to discharge its duties and
responsibilities, including the authority to retain any search firm, outside
counsel or other experts or consultants, as it deems appropriate in its sole
discretion. Any communications between the Committee and legal counsel in the
course of obtaining legal advice will be considered privileged communications
of
the Company. The Committee will take all necessary steps to preserve the
privileged nature of those communications.
Article
V. Responsibilities
and Duties
The
Committee shall have the following responsibilities and duties:
| 1. |
To
develop a process to be used by the Committee in identifying and
evaluating candidates for membership on the Board and the committees
thereof;
|
| 2. |
To
assist the Board in identifying, recruiting and evaluating candidates
for
membership on the Board and the committees thereof;
|
| 3. |
To
annually present to the Board a list of nominees recommended for
election
to the Board at the annual meeting of stockholders;
|
| 4. |
To
develop appropriate criteria and make recommendations to the Board
regarding the independence of directors and
nominees;
|
| 5. |
To
present to the Board, as necessary, individuals recommended to fill
any
vacancies that may occur on the
Board;
|
| 6. |
To
adopt a process for stockholders of the Company to send communications
to
the Board;
|
| 7. |
To
adopt a policy regarding the consideration of any director candidates
recommended by stockholders of the Company and the procedures to
be
followed by such stockholders in making such
recommendations;
|
C-2
| 8. |
To
review the size and overall composition of the Board, taking into
consideration such factors as business experience and specific areas
of
expertise of each Board member, and make recommendations to the Board
as
necessary;
|
| 9. |
To
recommend to the Board the number, identity and responsibilities
of Board
committees and the Chair and members of each committee. This shall
include
advising the Board on committee appointments and removal from committees
or from the Board, rotation of committee members and Chairs and committee
structure and operations;
|
| 10. |
To
periodically assess the effectiveness of the Board in meeting its
responsibilities, representing the long-term interests of
stockholders;
|
| 11. |
To
report annually to the Board with an assessment of the Board’s
performance;
|
| 12. |
To
consult with the Company’s Chief Executive Officer, as appropriate, and
other Board members to ensure that its decisions are consistent with
the
sound relationship between and among the Board, Board committees,
individual directors, and Company management;
|
| 13. |
To
recommend general matters for consideration by the Board, which may
include: (i) the structure of Board meetings, including recommendations
for the improvement of such meetings, and the timeliness and adequacy
of
the information provided to the Board prior to such meetings; (ii)
director retirement policies; (iii) director and officer insurance
policy
requirements; (iv) policies regarding the number of boards on which
a
director may serve; (v) director orientation and training; and (vi)
the
roles of the Company’s executive officers and the outside directorships of
such executives;
|
| 14. |
To
review adherence by directors to corporate guidelines regarding
transactions with the Company;
|
| 15. |
To
assist the Board and the other committees of the Board in the conduct
of
their annual evaluations;
|
| 16. |
To
monitor the orientation and continuing education programs for
directors;
|
| 17. |
To
review and assess the adequacy of the Company’s policies and practices on
corporate governance and recommend any proposed changes to the Board
for
approval;
|
| 18. |
To
review and assess the adequacy of the Company’s Code of Conduct and other
internal policies and guidelines and monitor that the principles
described
therein are being incorporated into the Company’s culture and business
practices;
|
| 19. |
To
review requests for any waiver of the Company’s Code of Conduct and
recommend to the Board whether a particular waiver should be
granted;
|
| 20. |
To
obtain advice and assistance, as needed, from internal or external
legal
counsel, accounting firms, search firms or other advisors, with the
sole
authority to retain, terminate and negotiate the terms and conditions
of
the assignment;
|
| 21. |
To
review the adequacy of the charters adopted by each committee of
the
Board, and recommend changes as
necessary;
|
| 22. |
To
regularly report to the Board on the Committee’s
activities;
|
| 23. |
To
conduct an annual review of the Committee’s performance and report the
results to the Board, periodically assess the adequacy of its charter
and
recommend changes to the Board as
needed;
|
| 24. |
To
delegate responsibility to subcommittees of the Committee as necessary
or
appropriate; and
|
C-3
| 25. |
To
perform any other activities consistent with this Charter, the Company’s
Certificate of Incorporation (as the same may be amended and/or restated
and in effect from time to time), the Company’s bylaws (as the same may be
amended and/or restated and in effect from time to time), and governing
law, as the Committee or the Board deems necessary or
appropriate.
|
Approved
on May 15, 2006
C-4
CHINA
BAK BATTERY, INC.
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON SEPTEMBER 21, 2007
This
Proxy is Solicited on Behalf of the Board of Directors
The
undersigned shareholder of CHINA BAK BATTERY, INC., a Nevada corporation (the
“Company”), acknowledges receipt of the Notice of Annual Meeting of Stockholders
and Proxy Statement, dated July 30,
2007,
and hereby constitutes and appoints Mr. Xiangqian Li, the Company’s Chairman,
President and Chief Executive Officer, and Mr. Yongbin Han, the Company’s Chief
Financial Officer, Secretary and Treasurer, 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 Company’s Common Stock which the undersigned is
entitled to vote at the 2007 Annual Meeting of Stockholders to be held on
September 21, 2007, 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:
1. Elect
as
Directors the nominees listed below: o
Xiangqian
Li
Huanyu
Mao
Richard
B. Goodner
Charlene
Spoede Budd
Chunzhi
Zhang
Withhold
authority for the following:
□
Xiangqian Li
□
Huanyu
Mao
□
Richard
B. Goodner
□
Charlene
Spoede Budd
□
Chunzhi
Zhang
2. Approve
the ratification of PKF as the Company’s accountant for fiscal year 2007.
|
FOR o
|
AGAINST o
|
ABSTAIN
o
|
3. In
their
discretion, the proxies are authorized to vote upon such other business as
may
properly come before the Meeting, and any adjournment or adjournments thereof.
THIS
PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED; IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES AND FOR
THE RATIFICATION OF THE SELECTION OF PKF AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTANTS. IN THEIR DIRECTION, THE PROXIES ARE ALSO AUTHORIZED TO
VOTE
UPON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING, INCLUDING
THE
ELECTION OF ANY PERSON TO THE BOARD OF DIRECTORS WHERE A NOMINEE NAMED IN THE
PROXY STATEMENT DATED JULY 30,
2007 IS UNABLE TO SERVE OR, FOR GOOD CAUSE, WILL NOT SERVE.
I
(we) acknowledge receipt of the Notice of Annual Meeting of Stockholders
and the Proxy Statement dated July 30,
2007,
and the 2006 Annual Report to Stockholders 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.
Please
sign, date and mail this proxy immediately in the enclosed
envelope.
|
Name
|
||
|
Name
(if
joint)
|
||
|
Date
_____________, 2007
|
||
|
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.
|
||