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 ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
( X ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
TURBODYNE TECHNOLOGIES, INC.
-----------------------------------------------
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) No fee required
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
TURBODYNE TECHNOLOGIES INC.
6155 Carpinteria Avenue
Carpinteria, CA 93013
June 24, 2002
Dear Shareholder:
You are cordially invited to attend the annual meeting of shareholders of
Turbodyne Technologies Inc., which will be held on July 16, 2002 at 1:00 p.m.,
Pacific Time at Four Seasons Hotel, 1260 Channel Drive, Santa Barbara,
California 93108.
Details of the business to be conducted at the annual meeting are given in the
attached Notice of Annual Meeting of Shareholders and Proxy Statement.
Whether or not you attend the annual meeting it is important that your shares be
represented and voted at the meeting. Therefore, I urge you to sign, date, and
promptly return the enclosed proxy in the enclosed postage-paid envelope. If you
decide to attend the annual meeting and vote in person, you will of course have
that opportunity.
On behalf of the Board of Directors, I would like to express our appreciation
for your continued interest in the affairs of the Company.
Sincerely,
/s/ Daniel Black
Daniel Black
President
TURBODYNE TECHNOLOGIES INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
JULY 16, 2002
To our Shareholders:
Notice is hereby given that the annual meeting of the shareholders of Turbodyne
Technologies Inc., a Delaware corporation (the "Company") will be held at the
Four Seasons Hotel, 1260 Channel Drive, Santa Barbara, California 93108 on July
16, 2002, commencing at 1:00 p.m. Pacific Time, (the "Annual Meeting") for the
following purposes:
1. To elect three directors to act as the board of directors of the
Company;
2. To increase the number of authorized shares of the common stock of the
Company to 150,000,000 shares;
3. To approve the Company's 2002 Stock Option Plan;
4. To approve the merger of the Company into Turbodyne Nevada, Inc., a
newly formed Nevada subsidiary of the Company, which would be the
surviving entity in such merger, in order to change the Company's
state of incorporation from Delaware to Nevada and the subsequent name
change of Turbodyne Nevada, Inc. to Turbodyne Technologies Inc.;
5. To ratify the selection of BDO Dunwoody LLP as independent public
accountants for the Company for the year ending December 31, 2002; and
6. To consider and act upon such other business as may properly come
before the Annual Meeting or any adjournment thereof.
With respect to the proposed merger with Turbodyne Nevada, stockholders are
entitled to assert dissenters' rights in accordance with Section 262 of the
Delaware General Corporation Law and the Company's Certificate of Incorporation.
A discussion of these rights is included in the proxy statement accompanying
this Notice and is incorporated into this Notice by this reference. Also
incorporated into this Notice by reference is a copy of Section 262 of the
Delaware General Corporation Law which is attached as Appendix E to the proxy
statement.
Only shareholders of record at the close of business on June 14, 2002 are
entitled to notice of, and to vote at, the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
OF TURBODYNE TECHNOLOGIES INC.
/s/ Daniel Black
Daniel Black, President
Carpinteria, California
June 24, 2002
IMPORTANT
Whether or not you expect to attend in person, we urge you to sign, date, and
return the enclosed Proxy at your earliest convenience. This will help to ensure
the presence of a quorum at the meeting. PROMPTLY SIGNING, DATING, AND RETURNING
THE PROXY WILL SAVE TURBODYNE TECHNOLOGIES, INC. THE EXPENSE AND EXTRA WORK OF
ADDITIONAL SOLICITATION. Sending in your Proxy will not prevent you from voting
your stock at the meeting if you desire to do so, as your Proxy is revocable at
your option.
TURBODYNE TECHNOLOGIES INC.
6155 Carpinteria Avenue
Carpinteria, CA 93013
PROXY STATEMENT
FOR THE ANNUAL MEETING OF THE SHAREHOLDERS
TO BE HELD ON JULY 16, 2002
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT IN CONNECTION
WITH THE SOLICITATION OF PROXIES MADE HEREBY, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, ITS ASSOCIATES OR ANY OTHER PERSON.
THE ANNUAL MEETING
GENERAL
This Proxy Statement is furnished in connection with the solicitation of Proxies
by the board of directors of Turbodyne Technologies Inc. (the "Company" or
"Turbodyne") for use at the Annual Meeting of the Shareholders to be held on
July 16, 2002 at 1:00 p.m. Pacific Time at the Four Seasons Hotel, 1260 Channel
Drive, Santa Barbara, California 93108, and at any adjournment thereof (the
"Annual Meeting"), for the purposes set forth in the accompanying Notice of
Annual Meeting.
The following documents are attached to this proxy statement as appendices:
Appendix A - 2002 Stock Option Plan
Appendix B - Agreement and Plan of Merger between Turbodyne
Technologies Inc. and Turbodyne Nevada, Inc.
Appendix C - Articles of Incorporation of Turbodyne Nevada, Inc.
Appendix D - Bylaws of Turbodyne Nevada, Inc.
Appendix E - Delaware Appraisal Rights
This Proxy Statement, the Notice of Meeting, the enclosed form of Proxy and the
Company's Annual Report on Form 10-K for the year ended December 31, 2001 are
expected to be mailed to shareholders on or about June 24, 2002.
VOTING OF PROXIES
You can vote by either attending the annual meeting in person or by filling out
and sending in your Proxy. All Proxies will be voted in accordance with the
instructions of the shareholder. If no choice is specified, the Proxies will be
voted FOR the election of all the nominees to serve as Turbodyne's directors and
FOR the approval of all of the other proposals set forth in the accompanying
Notice of Meeting and on the proxy card. In the discretion of the Proxy
holders, the Proxies will also be voted for or against such other matters as may
properly come before the Annual Meeting. Management is not aware of any other
matters to be presented for action at the Annual Meeting.
Execution of a Proxy by a shareholder will not affect such shareholder's right
to attend the Annual Meeting and to vote in person. Any shareholder who
executes a Proxy has a right to revoke it at any time before it is voted by: (a)
advising the Company in writing of such revocation; (b) executing a later-dated
Proxy which is presented to Turbodyne at or prior to the Annual Meeting; or (c)
appearing at the Annual Meeting and voting in person. Attendance at the Annual
Meeting will not itself be deemed to revoke a Proxy unless the shareholder gives
affirmative notice at the Annual Meeting that the shareholder intends to revoke
the proxy and vote in person.
2
RECORD DATE AND SHARES ENTITLED TO VOTE
The board of directors of Turbodyne Technologies Inc. has fixed the close of
business on June 14, 2002 as the record date for the determination of
shareholders entitled to notice of and to vote at the annual meeting. At the
record date, there were approximately 89,793,914 shares of common stock issued,
outstanding, and entitled to vote at the annual meeting. Holders of common stock
are entitled to one vote at the annual meeting for each share of common stock
held of record at the record date. There are no separate voting groups or
separate series of stock. There is no cumulative voting in the election of
directors.
QUORUM
A quorum is necessary to hold a valid meeting of shareholders. The required
quorum for the transaction of business at the Annual Meeting is thirty three and
one-third percent (33 1/3%) of the shares of Common Stock issued and outstanding
on the Record Date, which shares must be present in person or represented by
Proxy at the Annual Meeting. Shares of Common stock present in person or
represented by proxy (including shares which abstain or do not vote with respect
to one or more of the matters presented for shareholder approval) will be
counted for purposes of determining whether a quorum exists at the Annual
Meeting.
Abstentions and broker "non-votes" are counted as present and entitled to vote
for determination of a quorum. An abstention is a properly executed proxy
marked ABSTAIN for any matter. A broker "non-vote" occurs when shares held by a
broker for a beneficial owner are not voted with respect to a particular
proposal because (1) the broker has not received voting instructions from the
beneficial owner, and (2) the broker lacks discretionary voting power to vote
such shares.
VOTES REQUIRED
The affirmative vote of the holders of a plurality of the shares of Common Stock
voting is required for the election of directors. This means that the nominees
who receive the greatest number of votes for each open seat will be elected.
Votes may be cast in favor of the election of directors or withheld. A vote is
withheld when a properly executed proxy is marked WITHHOLD for the election of
one or more directors. Votes that are withheld will be counted for the purposes
of determining the presence or absence of a quorum but will have no other effect
on the election of directors. Broker "non-votes" will have no effect on the
election of directors.
The affirmative vote of the holders of a majority of the Common Stock
represented at the Annual Meeting in person or by proxy is required for: (a) the
approval of the Company's 2002 stock option plan; and (b) the ratification of
the appointment of the Company's independent public accountants. Shareholders
may vote in favor or against any of these proposals, or they may abstain.
Abstentions and broker "non-votes" will be counted for purposes of determining
the presence or absence of a quorum and will have no effect on the vote with
respect to the proposals listed in this paragraph.
The affirmative vote of the holders of a majority of the shares of Common Stock
outstanding on the Record Date is required for the approval of the amendment to
the Company's Certificate of Incorporation to increase the authorized number of
shares of the Company's common stock and to approve the merger of the Company
into Turbodyne Nevada, Inc., in order to change the Company's state of
incorporation from Delaware to Nevada, Shareholders may vote in favor of or
against any of these proposals, or they may abstain. Abstentions and broker
"non-votes" will be counted for purposes of determining the presence or absence
of a quorum and will have the same effect as a vote against the proposals listed
in this paragraph.
SHAREHOLDER PROPOSALS
No proposals have been received from any shareholder to be considered at the
Annual Meeting.
OTHER MATTERS
It is not expected that any matters other than those referred to in this proxy
statement will be brought before the annual meeting. If other matters are
properly presented, however, the persons named as proxy appointees will vote in
accordance with their best judgment on such matters. The grant of a proxy also
will confer discretionary
3
authority on the persons named as proxy appointees to vote in accordance with
their best judgment on matters incident to the conduct of the annual meeting.
SOLICITATION OF PROXIES
Turbodyne Technologies will bear the costs of the annual meeting and the costs
of soliciting proxies for the annual meeting, including the cost of printing and
mailing this proxy statement and related materials. In addition to the
solicitation of proxies by the board of directors through use of the mails,
proxies may also be solicited by Turbodyne Technologies and its directors,
officers and employees (who will receive no additional compensation therefore)
by telephone, telegram, facsimile transmission or other electronic
communication, and/or by personal interview. Turbodyne Technologies will
reimburse banks, brokerage houses, custodians and other fiduciaries who hold
shares of common stock in their name or custody, or in the name of nominees for
others, for their out-of-pocket expenses incurred in forwarding copies of the
proxy materials to those persons for whom they hold such shares. Turbodyne
Technologies has spent approximately $5,000 in legal and other expenses in the
preparation of this proxy statement and other expenses connected with the
solicitation of security holders. It is anticipated that Turbodyne Technologies
will spend an additional $5,000 in solicitation of security holders before the
Annual Meeting is held.
Any questions or requests for assistance regarding Turbodyne Technologies
proxies and related materials may be directed in writing to Mr. Charles Caverno,
at 6155 Carpinteria Avenue, Carpinteria, California 93013.
4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the number of
shares of Turbodyne's common stock owned beneficially as of May 31, 2002 by: (i)
each person (including any group) known to Turbodyne to own more than five
percent (5%) of any class of Turbodyne's voting securities, (ii) each of
Turbodyne's directors and each of Turbodyne's named executive officers, and
(iii) officers and directors as a group. Unless otherwise indicated, the
shareholders listed possess sole voting and investment power with respect to the
shares shown.
- --------------------------------------------------------------------------------
Name and address Number of Shares of Percentage of
Title of class of beneficial owner Common Stock Common Stock(1)
- --------------------------------------------------------------------------------
Common Stock Daniel Black 149,000 Shares (2) 0.2%
President and Chief
Executive Officer
- --------------------------------------------------------------------------------
Common Stock Charles Caverno 116,700 Shares (3) 0.1%
Secretary and Chief
Financial Officer
- --------------------------------------------------------------------------------
Common Stock Manfred Hanno Janssen 216,240 shares (4) 0.2%
Chairman of the Board
of Directors
- --------------------------------------------------------------------------------
Common Stock Eugene O'Hagan 175,000 (5) 0.2%
Director
- --------------------------------------------------------------------------------
Common Stock Andrew Martyn-Smith 175,000 (6) 0.2%
Director
- --------------------------------------------------------------------------------
Common Stock Lars Neujeffski 7,242,358 shares (7) 8.1%
Director
- --------------------------------------------------------------------------------
Common Stock Dieter Neujeffski 7,242,358 shares (7) 8.1%
Director
- --------------------------------------------------------------------------------
Common Stock All Officers and 8,074,298 9.0%
Directors as a Group
(7 persons)
- --------------------------------------------------------------------------------
(1) Under Rule 13d-3, a beneficial owner of a security includes any person
who, directly or indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares: (i) voting power, which includes the
power to vote, or to direct the voting of shares; and (ii) investment power,
which includes the power to dispose or direct the disposition of shares.
Certain shares may be deemed to be beneficially owned by more than one person
(if, for example, persons share the power to vote or the power to dispose of the
shares). In addition, shares are deemed to be beneficially owned by a person if
the person has the right to acquire the shares (for example, upon exercise of an
option) within 60 days of the date as of which the information is provided. In
computing the percentage ownership of any person, the amount of shares
outstanding is deemed to include the amount of shares beneficially owned by such
person (and only such person) by reason of these acquisition rights. As a
result, the percentage of outstanding shares of any person as shown in this
table does not necessarily reflect the person's actual ownership or voting power
with respect to the number of shares of common stock
5
actually outstanding on May 31, 2002. As of May 31, 2002, there were 89,401,299
shares of Turbodyne's common stock issued and outstanding.
(2) Consists of 1,000 shares held by Mr. Black and 148,000 shares that are
immediately acquirable upon the exercise of stock options held by Mr. Black
within 60 days of May 31, 2002.
(3) Consists of 116,700 shares that are immediately acquirable upon the
exercise of stock options held by Mr. Caverno within 60 days of May 31, 2002.
(4) Consists of 20,620 shares held by Mr. Janssen, 175,000 shares that are
immediately acquirable upon the exercise of stock options held by Mr. Janssen
within 60 days of May 31, 2002 and 20,620 shares that are immediately acquirable
upon the exercise of share purchase warrants held by Mr. Janssen within 60 days
of May 31, 2002.
(5) Consists of 175,000 shares that are immediately acquirable upon the
exercise of stock options held by Mr. O'Hagan within 60 days of May 31, 2002.
(6) Consists of 175,000 shares that are immediately acquirable upon the
exercise of stock options held by Mr. Martyn-Smith within 60 days of May 31,
2002.
(7) Consists of 3,500,000 shares in the name of Neujeffski GMBH and
3,142,048 shares in the name of Dieter Neujeffski.
================================================================================
Except as otherwise noted, it is believed by the Company that all persons have
full voting and investment power with respect to the shares indicated. Under the
rules of the Securities and Exchange Commission, a person (or group of persons)
is deemed to be a "beneficial owner" of a security if he or she, directly or
indirectly, has or shares the power to vote or to direct the voting of such
security, or the power to dispose of or to direct the disposition of such
security. Accordingly, more than one person may be deemed to be a beneficial
owner of the same security. A person is also deemed to be a beneficial owner of
any security, which that person has the right to acquire within 60 days, such as
options or warrants to purchase the Common Stock of the Company.
CHANGE IN CONTROL
Turbodyne is not aware of any arrangement that might result in a change in
control in the future.
6
PROPOSAL NUMBER ONE
ELECTION OF DIRECTORS TO THE BOARD OF DIRECTORS OF THE COMPANY
YOUR BOARD RECOMMENDS A VOTE "FOR" THESE NOMINEES. DIRECTORS
ARE ELECTED BY A PLURALITY OF THE VOTES CAST.
Three directors are to be elected at the Annual Meeting to comprise Turbodyne's
board of directors. Directors elected at the Annual Meeting of shareholders will
hold office until the expiry of the term of their appointment and until their
successors are elected and qualified. The following persons are currently
serving as directors of the Company and are being nominated for election to the
Board of Directors for the Annual Meeting:
MANFRED HANNO JANSSEN
EUGENE O'HAGAN
ANDREW MARTYN-SMITH
It is the intention of the persons named in the accompanying form of proxy to
vote proxies for the election of the three nominees. Each nominee has consented
to being named in this Proxy Statement and to serve, if elected. In the event
that any of the nominees should for some reason, presently unknown, become
unavailable for election, the persons named in the form of proxy intend to vote
for substitute nominees.
ELECTION OF DIRECTORS AND OFFICERS
Turbodyne's board of directors is divided into three classes that are elected
for staggered three-year terms. The term of each class expires as follows:
- - Class I directors-terms expire at the annual meeting of stockholders in
2004;
- - Class II directors-terms expire at the annual meeting of stockholders in
2005; and
- - Class III directors-terms expire at the annual meeting of stockholders in
2003.
Each director serves until the end of his term and until his successor has been
elected and qualified.
Turbodyne's officers serve at the discretion of Turbodyne's board of directors.
NOMINEES FOR ELECTION AS DIRECTORS
The nominees for election to the Board of Directors, their classifications and
the expiry of their terms are:
Name of Nominee Class Expiry of Term
----------------- ----- ----------------
MANFRED HANNO JANSSEN Class II 2005 AGM
EUGENE O'HAGAN Class I 2004 AGM
ANDREW MARTYN-SMITH Class III 2003 AGM
Turbodyne's directors and their respective ages as of May 31, 2002 are as
follows:
Name of Director Age
- ------------------ ---
Manfred Hanno Janssen 63
Eugene O'Hagan 63
Andrew Martyn-Smith 53
Lars Neujeffski 25
7
Dieter Neujeffski 58
Set forth below is a brief description of the background and business experience
of Turbodyne's directors:
Mr. Manfred Hanno Janssen was appointed as one of Turbodyne's directors on
November 9, 2001. On February 6, 2002 Mr. Janssen was appointed as Chairman of
the Board of Directors. Mr. Janssen is currently the head of asset management
with Deutsche Bank AG. Mr. Janssen has been employed by Deutsche Bank AG since
1957.
Mr. Eugene O'Hagan was appointed as one of Turbodyne's directors on August 19,
2001. Mr. O'Hagan's principal employment has been in the business of real
estate brokerage and investments since 1997.
Mr. Andrew Martyn-Smith was appointed as one of Turbodyne's directors on August
19, 2001. Mr. Martyn-Smith's principal employment has been in the business of
real estate brokerage and investments since 1996.
Mr. Lars Neujeffski and Mr. Dieter Neujeffski were appointed as directors on
July 3, 2001. Mr. Lars Neujeffski is the son of Mr. Dieter Neujeffski. Mr.
Lars Neujeffski and Mr. Dieter Neujeffski own and operate a beverage bottling
business in Duelmen, Germany. Mr. Lars Neujeffski and Mr. Dieter Neujeffski are
also involved in the business of real estate investment and development.
BOARD MEETINGS AND COMMITTEES
There were thirteen meetings of Turbodyne's board of directors during
Turbodyne's fiscal year ended December 31, 2001.
Turbodyne's board of directors had previously established an audit committee, a
compensation committee, a stock option committee, an executive committee and a
special committee. Each of these committees was disbanded when Turbodyne's
previous board of directors resigned on July 3, 2001.
Turbodyne constituted an executive committee made up of Mr. Janssen, Mr. O'Hagan
and Mr. Martyn-Smith on April 12, 2002.
Turbodyne anticipates that the other committees previously established by
Turbodyne's board of directors may be re-established subsequent to the Annual
Meeting.
COMPENSATION OF DIRECTORS
Turbodyne's directors are reimbursed for reasonable out-of-pocket expenses in
connection with attendance at board of director and committee meetings, and are
periodically granted options to purchase shares of Turbodyne's common stock at
the discretion of Turbodyne's board of directors or Turbodyne's stock option
committee, when constituted. Directors are not otherwise provided any
remuneration for their services as Turbodyne's directors.
8
EXECUTIVE COMPENSATION
COMPENSATION
The following table sets forth certain compensation information as to the
following individuals (Turbodyne's "named executive officers"):
(i) Mr. Daniel Black, Turbodyne's chief executive officer;
(ii) Mr. Charles Caverno, Turbodyne's most highly compensated executive
officer, other than Turbodyne's chief executive officer;
(iii) two of Turbodyne's former executive officers who were not serving as
Turbodyne's executive officers as of Turbodyne's most recently
completed fiscal year end.
Turbodyne has also included compensation information for Mr. Gerhard Delf and
Mr. Joseph Castano. Mr. Delf served as Turbodyne's chief executive officer
during Turbodyne's most recently completed fiscal year but resigned prior to
Turbodyne's most recently completed fiscal year end. Mr. Castano served as
Turbodyne's chief financial officer during Turbodyne's most recently completed
fiscal year but resigned prior to Turbodyne's most recently completed fiscal
year end.
No other compensation was paid to Turbodyne's named executive officers other
than the compensation set forth below.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------- -------------------------------
AWARDS PAYOUTS
--------------- --------------
All
Other Other
Annual Com-
Com- Restricted pen-
pen- Stock Options LTIP sa-
Name Title Year Salary Bonus sation Awarded SARs(#) payouts($)tion
- ---- ----- ---- ------ ------ ------- ------- ------- --------- ----
Daniel President 2001 $82,000 0 0 0 110,000 0 0
Black and Chief 2000 $82,000 0 0 0 0 0 0
(1) Executive 1999 $68,000 0 0 0 0 0 0
Officer
- --------------------------------------------------------------------------------
Charles Secretary 2001 $109,000 0 0 0 110,000 0 0
Caverno and Chief 2000 $95,000 0 0 0 0 0 0
(2) Financial 1999 $95,000 0 0 0 0 0 0
Officer
- --------------------------------------------------------------------------------
Gerhard Former 2001 $94,375 0 0 0 0 0 0
Delf (3) President 2000 $188,750 $26,000 0 0 350,000 0 $42,440
and Chief 1999 $180,000 $15,000 0 0 0 0 0
Executive
Officer
- --------------------------------------------------------------------------------
Joseph Former 2001 $75,000 0 0 0 1,500,000 0 0
Castano Chief 2000 $150,000 0 0 0 0 0 0
(4) Financial 1999 $150,000 0 0 0 0 0 0
Officer
- --------------------------------------------------------------------------------
Notes to Summary Compensation Table:
(1) Mr. Black was appointed as Turbodyne's president and chief executive
officer on August 15, 2001.
(2) Mr. Caverno was appointed as Turbodyne's secretary and chief financial
officer on August 15, 2001.
(3) Mr. Delf resigned as Turbodyne's president and chief executive officer on
July 3, 2001.
(4) Mr. Castano resigned as Turbodyne's chief financial officer on July 3,
2001.
9
STOCK OPTION GRANTS
The following table sets forth information with respect to stock options granted
to each of the Company's named executive officers during the Company's most
recent fiscal year ended December 31, 2001:
- --------------------------------------------------------------------------------
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
- --------------------------------------------------------------------------------
Number of Potential Realizable Value
Securities % of Total At Assumed Annual Rates
Under- Options Exercise of Stock Price
lying Granted Price Appreciation for Option
Options to (per Expiration Term
Name Granted Employees Share) Date 0%($) 5%($) 10%($)
- --------------------------------------------------------------------------------
Daniel 50,000 0.9% $0.30 Aug. 2, 2003 $3,500 $5,396 $7,385
Black 60,000 1.1% $0.35 Nov. 30, 2004 N/A NIL NIL
President
and Chief
Executive
Officer
- --------------------------------------------------------------------------------
Charles 50,000 0.9% $0.30 Aug. 2, 2003 $3,500 $5,396 $7,385
Caverno 60,000 1.1% $0.35 Nov. 30, 2004 N/A NIL NIL
Secretary
and Chief
Financial
Officer
- --------------------------------------------------------------------------------
Gerhard NIL N/A N/A N/A N/A N/A N/A
Delf (1)
Former
President
and Chief
Executive
Officer
- --------------------------------------------------------------------------------
Joseph 1,500,000 27.8% $0.09 July 16, $360,000 $496,759 $662,202
Castano 2005
Former
Chief
Financial
Officer
- --------------------------------------------------------------------------------
Notes:
(1) The options granted to Mr. Delf were terminated in 2001 as a consequence of
Mr. Delf ceasing to act as one of Turbodyne's executive officers.
10
EXERCISES OF STOCK OPTIONS AND YEAR-END OPTION VALUES
The following is a summary of the share purchase options exercised by
Turbodyne's chief executive officer and Turbodyne's named executive officers
during the financial year ended December 31, 2001:
- --------------------------------------------------------------------------------
AGGREGATED OPTION/SAR EXERCISES DURING THE LAST
FINANCIAL YEAR END AND FINANCIAL YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------
Value of
Unexercised
Unexercised In-The-Money
Options at Options/SARs
Common Financial at Financial
Shares Year-End(#) Year-End ($)
Acquired on Value exercisable/ exercisable/
Name (#) Exercise($) Realized($) unexercisable unexercisable
- --------------------------------------------------------------------------------
Daniel Black NIL NIL 110,000/NIL NIL/N/A
President and
Chief Executive
Officer
- --------------------------------------------------------------------------------
Charles Caverno NIL NIL 110,000/NIL NIL/N/A
Secretary and
Chief Financial
Officer
- --------------------------------------------------------------------------------
Gerhard Delf NIL NIL NIL/NIL N/A/N/A
Former President
and Chief
Executive Officer
- --------------------------------------------------------------------------------
Joseph Castano 1,500,000 $135,000 NIL/NIL N/A/N/A
Former Chief
Financial Officer
- --------------------------------------------------------------------------------
COMPENSATION ARRANGEMENTS
Management Agreements
Turbodyne pays Mr. Daniel Black, Turbodyne's president and chief executive
officer, a salary of $82,000 per annum. Turbodyne is not party to any written
compensation agreement with Mr. Black.
Turbodyne pays Mr. Charles Caverno, Turbodyne's secretary and chief financial
officer, a salary of $95,000 per annum. Turbodyne is not party to any written
compensation agreement with Mr. Caverno.
Compensation Plans
On October 1, 1999, the 2000 Stock Option Plan was adopted by the board of
directors and was subsequently approved by the stockholders. The purpose of the
plan is to advance Turbodyne's interests and that of Turbodyne's stockholders by
strengthening Turbodyne's ability to obtain and retain the services of
employees, consultants, officers and directors that will contribute to
Turbodyne's long-term success. The plan is current administered by Turbodyne's
board of directors. The maximum number of shares of common stock authorized for
issuance under the plan is 4,800,000. As of December 31, 2001 and 2000, the
number of un-optioned shares available for granting of options under the plan
was 3,142,604 and 2,953,500, respectively.
11
On June 3, 2002, Turbodyne's 2002 Stock Option Plan was adopted by the board of
directors. The purpose of the plan is to advance Turbodyne's interests and that
of Turbodyne's stockholders by strengthening Turbodyne's ability to obtain and
retain the services of employees, consultants, officers and directors that will
contribute to Turbodyne's long-term success. The plan is current administered by
Turbodyne's board of directors. The maximum number of shares of common stock
authorized for issuance under the plan is 6,000,000, subject to an increase
approved by Turbodyne's board of directors to a number equal to 7.5% of
Turbodyne's issued and outstanding shares of common stock at the beginning of
each fiscal quarter. As of June 7, 2002, no options have been granted under the
2002 Stock Option Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as described below, none of the following persons has any direct or
indirect material interest in any transaction to which Turbodyne was or is a
party during the past two years, or in any proposed transaction to which
Turbodyne proposes to be a party:
(A) any director or officer;
(B) any proposed nominee for election as a director;
(C) any person who beneficially owns, directly or indirectly, shares
carrying more than 5% of the voting rights attached to Turbodyne's common stock;
or
(D) any relative or spouse of any of the foregoing persons, or any relative
of such spouse, who has the same house as such person or who is a director or
officer of any parent or subsidiary.
In February 1999, Turbodyne signed three promissory notes totaling $1,300,000
with a relative of Mr. Edward Halimi, one of Turbodyne's former directors and
executive officers (and a company in which Mr. Halimi had signatory power).
This loan was personally guaranteed by Mr. Halimi. All notes boar interest at
12% per annum, compounded monthly. Only $1,250,000 of the $1,300,000 notes were
drawn down in 1999. The notes had maturity dates occurring in 1999 and
therefore the notes were considered due on demand. No interest was paid on
these loans in 1999. Interest expense of $132,094 was accrued in 1999. In 2000
the note was converted to 1,570,000 shares of stock which included satisfying
the $1,250,000 principal on the note, $211,465 of accrued interest, and an
additional interest amount of $108,535.
Turbodyne subleased Turbodyne's Carpinteria facility on a month-to-month basis
from a private company controlled by Mr. Halimi, one of Turbodyne's former
directors and a former chairman of the board, president and chief executive
officer until June 30, 2001. This arrangement with Mr. Halimi's private company
was terminated when Turbodyne Systems entered into a new sub-lease for these
premises on July 1, 2001. The monthly rental paid prior to July 1, 2001 was
$28,840 plus operating costs, including taxes, insurance and utilities.
Turbodyne agreed to the payment of a total of $118,761 on execution of the
sub-lease to the landlord on account of late rent from March 31, 2001 to June
30, 2001, late rent fees, a late tax payment fee, attorneys fees and an annual
insurance payment. Mr. Halimi remains a guarantor of Turbodyne's new lease for
these premises.
Turbodyne issued 3,500,000 shares of Turbodyne's common stock to Neujeffski
GMBH, a company controlled by Mr. Lars Neujeffski and Mr. Dieter Neujeffski,
each of whom is one of Turbodyne's directors, for which proper consideration was
not received. Turbodyne has demanded that these shares be returned for
cancellation. To date, Mr. Lars Neujeffski and Mr. Dieter Neujeffski have not
agreed to the return of these shares for cancellation. Turbodyne intend to
vigorously pursue the return of these shares. An amount of $1,470,000 has been
recorded as a selling, general and administration expense on Turbodyne's
financial statements for the year ended December 31, 2001 in respect of this
share issuance.
Turbodyne issued 3,142,048 shares to Mr. Dieter Neujeffski, one of Turbodyne's
directors, at various prices ranging from $0.14 per share to $0.284 per share on
a private placement basis for total proceeds of $509,739. The prices of the
stock issued were based on the market price of Turbodyne's common stock at the
date of issuance, with a discount to market to reflect the fact that the
securities were issued as restricted shares. All
12
shares were issued during the period from October 16, 2000 to June 28, 2001. Mr.
Neujeffski was appointed as one of Turbodyne's directors on July 3, 2001.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Exchange Act requires Turbodyne's executive officers and
directors, and persons who beneficially own more than ten percent of Turbodyne's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. Officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish Turbodyne with
copies of all Section 16(a) forms they file. Based on Turbodyne's review of the
copies of such forms received by us, Turbodyne believes that during the fiscal
year ended December 31, 2001 all such filing requirements applicable to
Turbodyne's officers and directors were complied with exception that reports
were filed late by the following persons:
- --------------------------------------------------------------------------------
Number Transactions Known Failures
Of Late Not Timely To File a Required
Name and Principal Position Reports Reported Form
- --------------------------------------------------------------------------------
Daniel Black 0 1 2
President and
Chief Executive Officer
Charles Caverno 0 1 2
Secretary and Chief
Financial Officer
Manfred Hanno Janssen, Director 0 0 1
Eugene O'Hagan, Director 0 0 1
Andrew Martyn-Smith, Director 0 0 1
Lars Neujeffski, Director 0 1 2
Dieter Neujeffski, Director 0 0 1
- --------------------------------------------------------------------------------
LEGAL PROCEEDINGS
- ------------------
There are currently no legal proceedings to which any of the Company's directors
and officers are a party adverse to the Company or in which any of the Company's
directors and officers have a material interest adverse to the Company.
13
PROPOSAL NUMBER TWO
AMENDMENT OF
THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK
On June 3, 2002, the Board of Directors approved an amendment to the Certificate
of Incorporation of the Company to increase in the authorized common stock of
the Company to 150,000,000 shares of common stock. The increase to the number
of shares will require an amendment to the Company's Certificate of
Incorporation. The Board of Directors has directed that the increase to the
shares of authorized common stock and the corresponding amendment to the
Company's Certificate of Incorporation be submitted for approval by the
stockholders of the Company.
The Board of Directors has determined that it would be in the best interests of
the Company to amend its Certificate of Incorporation to increase the number of
authorized shares of Common Stock from 99,000,000 shares to 150,000,000 shares.
Each additional share of Common Stock will have the same rights and privileges
as each share of currently authorized Common Stock. The Board of Directors
believes it is in the best interests of the Company to increase the number of
authorized shares in order to give the Company greater flexibility in
considering and planning for future business needs. The shares will be available
for issuance by the Board of Directors for proper corporate purposes, including
but not limited to, stock dividends, stock splits, acquisitions, financings and
compensation plans. The issuance of additional shares of common stock could
have the effect of diluting earnings per share, voting power and shareholdings
of stockholders. It could also have the effect of making it more difficult for a
third party to acquire control of the Company. Other than in connection with the
Company's existing employee stock option plans, the Company has no present
intent to issue any shares of Common Stock. The Company anticipates issuing
additional shares of Common Stock in connection with a future financing with the
Company. The Company presently does not have any agreement or other arrangement
for any financing involving the issuance of shares of Common Stock. Current
stockholders do not have preemptive rights to subscribe for, purchase or reserve
any shares of the authorized capital stock of the Company.
If the increase to the Company's authorized shares of common stock is approved
by the Company's stockholders and the reincorporation of the Company as a Nevada
corporation is not approved by the Company's stockholders, the Company will file
an amendment to the Company's Certificate of Incorporation with the Secretary of
the State of Delaware as practicable after shareholder approval is obtained. If
the increase to the Company's authorized shares of common stock is approved by
the Company's stockholders and the reincorporation of the Company as a Nevada
corporation is also approved by the Company's stockholders, the increase to the
authorized number of shares will be effected upon the merger of the Company with
Turbodyne Nevada, Inc.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE INCREASE TO THE
AUTHORIZED NUMBER OF SHARES OF COMMON STOCK AND A CORRESPONDING AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION.
14
PROPOSAL NUMBER THREE
APPROVAL OF THE 2002 STOCK OPTION PLAN
GENERAL. On June 3, 2002, the Board of Directors adopted the Company's 2002
Stock Option Plan (the "Plan"), which authorizes the Board, or a Committee of
the Board that administers the Plan (the "Committee"), to grant non-qualified
stock options and incentive stock options (the "Options") to directors,
officers, employees and consultants of the Company. The United States Internal
Revenue Code of 1986, as amended (the "Code"), among other things, provides
certain tax advantages to persons granted stock options under a qualifying
"incentive stock option plan." In order to take advantage of the favorable tax
attributes associated with such options, it is proposed that the stockholders
approve the Plan.
There are 6,000,000 shares of Common Stock of the Company available for grant to
participants designated by the Committee under the Plan. A copy of the Plan is
attached to this Proxy Statement as Exhibit A and the following description is
qualified in its entirety by reference to the complete text of the Plan.
OUTSTANDING OPTIONS. As of June 17, 2002, no options to shares of the Company's
common had been granted under the Plan. Accordingly, options to purchase
6,000,000 shares of common stock remain available for future grant under the
Plan.
EQUITY COMPENSATION PLAN INFORMATION. The Company has three equity compensation
plans under which shares of the common stock have been authorized for issuance
to its officers, directors, employees and consultants. These equity
compensation plans include the Company's 1997 Stock Option Plan, 1998 Stock
Option Plan and 2000 Stock Option Plan. Each of these stock options plans has
been approved by the Company's stockholders. The Company does not have any
equity compensation plans that have not been approved by the Company's
stockholders.
The following summary information is presented for the Company's 1997 Stock
Option Plan, 1998 Stock Option Plan and 2000 Stock Option Plan on an aggregate
basis as of December 31, 2001.
- --------------------------------------------------------------------------------
Number of Securities
Remaining Available
for Future
Issuance Under
Number of Securities Equity Compensation
to be Issued Weighted-Average Plans (Excluding
Upon Exercise of Exercise Price of Securities
Outstanding Options, Outstanding Options, Reflected in
Warrants and Rights Warrants and Rights column (a))
- --------------------------------------------------------------------------------
Plan Category (a) (b) (c)
- --------------------------------------------------------------------------------
Equity 1,913,415 Shares 0.33 per Share 3,142,604 Shares
Compensation of Common Stock
Plans Approved
By Security
Holders
- --------------------------------------------------------------------------------
Equity Not Applicable Not Applicable
Compensation
Plans Not
Approved By
Security Holders
- --------------------------------------------------------------------------------
DESCRIPTION OF THE PLAN. The Board of Directors has determined that in order to
attract and retain employees and consultants and to provide additional incentive
for directors, officers, employees and consultants, upon whose efforts and
judgment the success of the Company is largely dependent, the Plan should be
adopted to permit the plan administrator (the "Committee") the right to grant
either non-qualified stock
15
options ("NQSO Options") or incentive stock options ("ISO Options") under the
features provided for by the Code. The Board believes that the best interest of
the Company will be served by the availability of both NQSO Options and ISO
Options.
THE COMMITTEE. The Plan provides for the granting by the Committee of Options to
directors, officers, employees and consultants of the Company. The shares
subject to the Plan will be registered at the Company's expense pursuant to the
Securities Act of 1933, as amended (the "Act"), and applicable state securities
acts, or will be issued by the Company pursuant to exemptions from the
registration requirements of the Act and applicable state securities acts. The
Committee administers and interprets the Plan and has authority to grant Options
to all eligible persons. The Committee also determines, at the time the Option
is granted, the number of shares granted, the type of option (NQSO Options or
ISO Options), the purchase or exercise price, the vesting and expiration period
of the option and other applicable terms of the option grant. To date the entire
Board has acted as the Committee.
STOCK OPTIONS. The Plan provides for the issuance of either NQSO Options or ISO
Options to employees, directors and consultants of the Company and its
subsidiaries, including any officer or director who is an employee of the
Company for the purchase of shares of the Company's Common Stock from the
6,000,000 shares, which have been set aside for such purpose. Under the
provisions of the Plan, it is intended that the ISO Options granted thereunder
will qualify as options granted pursuant to Section 422 of the Code, which will
provide certain favorable tax consequences to participants who are granted and
elect to exercise such Options. The Committee may grant either NQSO Options or
ISO Options for such number of shares to eligible participants as the Committee
from time to time shall determine and designate. Shares involved in the
unexercised portion of any terminated or expired Option may again be subjected
to Options. The Committee is vested with discretion in determining the terms,
restrictions and conditions of each Option. The option price of the Common Stock
to be issued under the Plan will be determined by the Committee, provided that
such price may not be less than 85% of the fair market value of the shares on
the day prior to the date of grant for NQSO Options and 100% for the fair market
value for ISO Options. Furthermore, if the participant owns greater than 10% of
the total combined voting power of all classes of capital stock of the Company,
the exercise price of ISO Options may not be less than 110% of the fair market
value of the Common Stock on the day prior to the date of the grant and the ISO
Options cannot be exercised more than five years after the grant. The fair
market value of a share of the Company's Common Stock will initially be
determined by averaging the closing high bid and low asked quotations for such
share on the date of grant in the over-the-counter market (NASD Electronic
Bulletin Board).
Options granted under the Plan are exercisable in such amounts, at such
intervals and upon such terms as the Committee shall provide in such Option.
With respect to ISO Options, the aggregate fair market value (determined as of
the date the ISO Option is granted) of the stock with respect to which any ISO
Option is exercisable for the first time by a participant during any calendar
year under the Plan (and under all incentive stock option plans of the Company
and its subsidiaries qualified under the Code) shall not exceed $100,000. Upon
the exercise of a NQSO Option or an ISO Option, the option price and any
applicable withholding taxes must be paid in full by:
- - cash or check for an amount equal to the aggregate stock option exercise
price for the number of shares being purchased;
- - in the discretion of the Committee, upon such terms as the Committee may
approve, a copy of instructions to a broker directing such broker to sell
the common stock for which such Option is exercised, and to remit to the
Company the aggregate exercise price of such Option;
- - in the discretion of the Committee, upon such terms as the Committee may
approve, shares of Company common stock owned by the optionee, duly
endorsed for transfer to the Company, with a fair market value on the date
of delivery equal to the aggregate purchase price of the shares with
respect to which such stock option or portion is thereby exercised; or
- - other consideration having equivalent value at the time of purchase as the
Committee may determine.
16
An employee or consultant option will terminate at the earliest of the following
dates:
- - the termination date specified in the applicable option agreement;
- - three (3) months after employment or consultant agreement with the Company
or its subsidiaries terminates; or
- - one (1) year after employment or the consultant agreement with the Company
or its subsidiaries terminates due to death or permanent and total
disability.
Options otherwise expire a maximum of ten (10) years after the date on which the
Option is granted, the actual term to be determined by the Committee. An Option
is not transferable or assignable except by will or the laws of descent and
distribution.
Options will become exercisable by the participants in such amounts and at such
times as shall be determined by the Committee in each individual grant. Options
are not transferable except by will or by the laws of descent and distribution.
STOCK SUBJECT TO THE PLAN. As adopted, the Committee was authorized to grant
Options exercisable to acquire up to 6,000,000 shares of the Company's common
stock. Under the terms of the Plan, the maximum number of shares that may be
subject to Options granted under the Plan will be increased, effective the first
day of each of the Company's fiscal quarters beginning with the fiscal quarter
commencing July 1, 2002, by an amount equal to the lesser of (a) the number of
shares which is equal to 7.5% of the issued shares outstanding on the first day
of the applicable quarter, less the number of shares of common stock which are
subject to options under the Plan prior to the first date of the applicable
fiscal quarter; and (b) a lesser number of shares of common stock determined by
the Board.
PARTICIPANTS. As of the date of this Proxy Statement, no Options have been
granted. It is impossible at this time to determine who in the future among the
eligible participants may be selected to receive additional NQSO Options and ISO
Options under the Plan or the number of shares of the Company's Common Stock
which may be optioned to any eligible participant. It is expected, however, that
these determinations will be made on the basis of the eligible person's
responsibilities and present and potential contributions to the success of the
Company as indicated by the Committee's evaluation of the position such eligible
person occupies.
ADJUSTMENTS. If there is any material change in the Company's shares through or
by means of a declaration of a stock dividend, reverse stock split, stock split
or recapitalization of stock, reorganization, merger, consolidation, separation
or otherwise, the number of shares available under the plan, the shares subject
to any option, and the purchase price thereof will be adjusted appropriately by
the Committee and the adjustment will be effective and binding for all purposes
of the plan. If the Company participates in a merger, amalgamation,
reorganization, consolidation or a sale of all or substantially all of the
Company's assets, pursuant to an agreement with another company where the
Company is not the surviving company, any unexercised options granted under the
plan will be deemed cancelled unless the surviving company elects to assume the
options under the plan or to issue substitute options in place of the options
previously granted. If such options would be cancelled, the optionee will have
the right to exercise the previously granted options, in whole or in part,
without regard to any installment exercise provisions in the optionee's option
agreement, during the ten (10) day period ending the fifth (5) day prior to such
transaction.
TERMINATION AND AMENDMENT. The Plan terminates as of midnight on June 3, 2012,
but prior thereto may be altered, changed, modified, amended or terminated by
written amendment approved by the Board of Directors. Provided, that the Board
of Directors must first obtain the approval of stockholders for any plan
amendment that results in an increase in the total number of shares covered by
the plan, changes the class of persons eligible to receive options granted under
the plan, reduces the exercise price of options granted under the plan, extends
the latest date upon which options may be exercised or for any other action
where shareholder approval is required pursuant to any applicable law, rule or
regulation. No amendment, modification or termination of the Plan shall in any
manner adversely affect any Option previously granted under the Plan without the
consent of the optionee except as described under "Adjustments" above.
17
EFFECTIVE DATE. The Plan became effective June 3, 2002. The Company expects that
the ISO Options and NQSO Options granted under the Plan will be afforded the
U.S. federal income tax treatment as described under "Federal Income Tax
Consequences," below.
US FEDERAL INCOME TAX CONSEQUENCES. A participant receiving a NQSO Option under
the Plan will not be in receipt of income under the Code and the applicable
Treasury Regulations thereunder, upon the grant of the NQSO Option. However, he
will realize income at the time the NQSO Option is exercised in an amount equal
to the excess of the fair market value of the Common Stock acquired on the date
of exercise or six months thereafter with respect to a participant subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, unless such
participant elects to include such excess in income on the exercise date under
Section 83 of the Code, over the purchase price. The amount of income realized
by a participant will be treated as ordinary income, and the Company will be
entitled to deduct that same amount as a compensation expense. The tax basis of
any Common Stock received by a participant will be its fair market value on the
exercise date.
The granting of ISO Options will not produce income under the Code and the
applicable Treasury Regulations to the participant and will not result in a tax
deduction to the Company. Upon exercise of such rights, any cash a participant
receives and the fair market value on the exercise date of any Common Stock
received will be taxable to the participant as ordinary income. The amount of
income recognized by a participant will be deductible by the Company. The tax
basis of any Common Stock received by a participant will be its fair market
value on the exercise date.
Upon the granting of ISO Options, no taxable event will occur to a participant
upon such grant or upon the exercise of ISO Options and the Company will not be
entitled to federal income tax deductions as the result. When a participant
disposes of the shares acquired under an ISO Option, the difference between the
option price and the selling price will be treated as long-term capital gain (or
loss) if the shares are held for the requisite period of time. Under these
constraints, shares may not be disposed of within two years from the date of the
grant, or within one year after the shares are received in exercise of the
Option. The holding periods are not applicable in the event of death of the
shareholder. If shares acquired pursuant to an ISO Option under the Plan are
disposed of prior to the end of these periods, generally the amount received
which exceeds the price paid for the stock will be ordinary income to the
optionee, and there will be a corresponding deduction to the Company for federal
income tax purposes.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE PROPOSAL TO APPROVE THE
2002 STOCK OPTION PLAN.
18
PROPOSAL NUMBER FOUR
REINCORPORATION IN NEVADA
To accomplish the proposed change in the Company's state of incorporation from
Delaware to Nevada, the board of directors has unanimously adopted an Agreement
and Plan of Merger between the Company and its wholly-owned subsidiary,
Turbodyne Nevada, Inc. ("Turbodyne Nevada"). Under the merger agreement,
Turbodyne Technologies Inc. will be merged with and into Turbodyne Nevada and
each share of Turbodyne Technologies Inc. common stock (other than shares with
respect to which the holder has asserted statutory dissenter's rights) will
automatically be converted into one share of common stock, par value $0.001 per
share of Turbodyne Nevada (the "Merger"). Upon completion of the Merger, the
name of Turbodyne Nevada will be changed to "Turbodyne Technologies Inc.".
A copy of the merger agreement is attached as Appendix B to this Proxy
Statement. Turbodyne Nevada was recently formed by the Company under Chapter 78
of the Nevada Revised Statutes (the "NRS") for the purpose of effecting the
reincorporation. If the reincorporation is approved by the stockholders and the
merger is completed, the NRS and the Articles of Incorporation and By-laws of
Turbodyne Nevada (the "Nevada Charter Documents") will govern the rights of
stockholders in the surviving entity. A copy of the Articles of Incorporation of
Turbodyne Nevada is attached as Appendix C to this Proxy Statement. A copy of
the Bylaws of Turbodyne Nevada is attached as Appendix D to this Proxy
Statement. See "Comparative Rights of Stockholders of the Company and Turbodyne
Nevada."
PRINCIPAL FEATURES OF THE MERGER
Upon the approval of the Merger by the Company's stockholders, the Company's
Board of Directors will, as promptly as practicable, cause the Merger to be
consummated. Upon the consummation of the Merger, the separate existence of the
Company will cease, and Turbodyne Nevada, to the extent permitted by law, will
succeed to all business, properties, assets and liabilities of the Company.
Each share of Common Stock of the Company issued and outstanding immediately
prior to the consummation of the merger will, by virtue of the Merger, be
converted into one Common Share of Turbodyne Nevada. Upon the consummation of
the Merger, stock certificates which immediately prior to the Merger represented
common stock of the Company will be deemed for all purposes to represent the
same number of shares of Turbodyne Nevada common stock. Stockholders will not be
required to exchange their existing stock certificates for stock certificates of
Turbodyne Nevada. However, following the Merger, if any stock certificates of
the Company are submitted to Turbodyne Nevada or to its transfer agent for
transfer, or if any stockholder so requests, a new stock certificate
representing the subject Turbodyne Nevada shares will be delivered to the
transferee or holder of such shares. This exchange of securities will be exempt
from the registration requirements of the federal securities laws.
Approval of the Merger Agreement will not result in any change in the business,
management, assets or liabilities of the Company. The directors of Turbodyne
Nevada following the Merger will be Manfred Hanno Jannsen, Eugene O'Hagan and
Andrew Martyn-Smith, unless different directors are elected to the board of
Turbodyne Delaware at the Annual Meeting in which case the elected directors of
the Company will be the directors of Turbodyne Nevada. On the Effective Date,
the Turbodyne Nevada common stock will be eligible for trading on the NASD Over
the Counter Bulletin Board, where the Common Stock of the Company is currently
traded.
Pursuant to the terms of the Merger Agreement, each option and warrant to
purchase shares of Common Stock of the Company outstanding immediately prior to
the consummation of the Merger will become an option or warrant to purchase
Turbodyne Nevada common stock, subject to the same terms and conditions as set
forth in the agreement pursuant to which such option or warrant was granted. All
employee benefit plans and other agreements and arrangements of the Company,
including the Company's 2002 Stock Option Plan, will be continued by Turbodyne
Nevada upon the same terms and subject to the same conditions as in effect prior
to the Merger.
It is a condition to the merger that stockholders owning not more than 1% of the
outstanding shares of Common Stock of the Company exercise dissenter's appraisal
rights. This condition may be waived in the sole discretion of the respective
boards of directors of the Company and Turbodyne Nevada.
19
If approved by the Company's stockholders, it is anticipated that the
reincorporation by means of the merger will be completed as soon as practicable
after such consent. However, the merger may be abandoned, and the merger
agreement may be amended, either before or after stockholder approval if
circumstances arise which, in the opinion of the board of directors, make such
action advisable, although subsequent to stockholder approval none of the
principal terms may be amended without further stockholder approval.
The Merger does not require the approval of any federal or state regulatory
agency.
PURPOSE OF THE REINCORPORATION
The board of directors determined to reincorporate the Company in Nevada
primarily because of its desire to reduce corporate expenses. As a Delaware
corporation, the Company is required to pay franchise fees to the State of
Delaware. Delaware bases its franchise fees on the number of authorized shares
of a company's stock, subject to a maximum fee of $150,000. Nevada, however,
charges a flat filing fee of $85 per year, regardless of the number of
authorized shares. In 1991, Nevada revised the Nevada general corporation law
making Nevada a more desirable jurisdiction for corporation's to conduct
business. In many instances, Nevada adopted provisions identical or similar to
the advantageous provisions provided by the Delaware General Corporation Law.
The Company is also required to incur the additional legal expense of retaining
Delaware legal counsel to assist on matters of Delaware law resulting from the
fact that the Company is a Delaware corporation.
COMPARATIVE RIGHTS OF STOCKHOLDERS OF THE COMPANY AND TURBODYNE NEVADA, INC.
Upon consummation of the reincorporation, the outstanding shares of the
Company's common stock (other than shares with respect to which the holder has
asserted statutory dissenter's rights) will be converted into shares of
Turbodyne Nevada common stock. Consequently, the Company's stockholders, whose
rights as stockholders are currently governed by the General Corporation Law of
the State of Delaware (the "DGCL") and the Company's Certificate of
Incorporation and By-laws (the "Delaware Charter Documents"), will become
stockholders of Turbodyne Nevada whose rights will be governed by Nevada general
corporate law (the "NRS") and Turbodyne Nevada's Articles of Incorporation and
By-laws. Copies of the Articles of Incorporation and By-laws of Turbodyne Nevada
which are proposed to be in effect upon the consummation of the reincorporation
appear later in this Proxy Statement as Appendices D and E, respectively.
The approval of the reincorporation in Nevada will result in the increase in the
authorized number of shares of common stock of the Company from 99,000,000
shares to 150,000,000 shares of common stock and 100,000,000 shares of preferred
stock. The increase to the authorized number of shares of common stock of the
Company is the subject of a separate vote for shareholder approval. See
"Proposal No. 2. "AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED COMMON STOCK". In the event that
the proposal to increase the number of authorized shares of common stock is not
approved by stockholders at the Annual Meeting but the reincorporation in Nevada
is approved, the Articles of Incorporation of Turbodyne Nevada will be amended
to provide that the number of shares of authorized common stock of Turbodyne
Nevada is 99,000,000 shares, as it is under the current Delaware Charter
Documents.
In most respects the rights of holders of the Company's common stock are similar
to those of Turbodyne Nevada common stock. Certain aspects of the rights of
holders of the Company's common stock and Turbodyne Nevada common stock are
discussed below. The following summary does not purport to be a complete
statement of the rights of the Company's stockholders under applicable Nevada
law and the Nevada Charter Documents as compared with the rights of the Delaware
stockholders under applicable Delaware law and the Delaware Charter Documents
and is qualified in its entirety by the DGCL and the NRS to which stockholders
are referred.
Authorized Capital Stock. The Company's authorized capital stock currently
consists of 99,000,000 shares of common stock, par value $0.001 per share and
1,000,000 shares of preferred stock, par value $0.001 per share. Turbodyne
Nevada's authorized capital stock consists of 150,000,000 shares of the
Company's common stock, par value $0.001 per share, and 1,000,000 shares of
preferred stock, par value $0.001 per share. If the proposal to increase the
authorized capital is not approved, Turbodyne Nevada's authorized capital stock
at the Effective Time of the reincorporation will consist of 99,000,000 shares
of common stock.
20
Amendment to Charter. Delaware and Nevada law require the approval of the
holders of a majority of all outstanding shares entitled to vote (with, in each
case, each stockholder being entitled to one vote for each share so held) to
approve proposed amendments to a corporation's charter. The Delaware Charter
Documents require that two-thirds (66-2/3%) of all outstanding shares entitled
to vote approve any amendments to the Company's Certificate of Incorporation
that would amend the following provisions of the Company's Certificate of
Incorporation:
(i) the second sentence of Article VI that provides that special meetings
of the stockholders of the Company for any purpose or purposes may be
called only by the board of directors, the chairman of the board, the
chief executive officer or the president of the Company;
(ii) Article VII that provides for a classified board of directors;
iii) the second paragraph of Article VIII that prohibits the taking of
stockholder action by written consent of the stockholders;
(iv) Article XI that authorizes the Directors of the Company to adopt,
repeal, alter, amend or rescind the bylaws of the Company;
(v) Article XII that that imposes the two-thirds majority requirement for
the above amendments to the Certificate of Incorporation.
The Nevada Charter Documents do not impose any requirements for shareholder
approval of amendments to the Articles of Incorporation of Turbodyne Nevada in
excess of the approval of a majority of all outstanding shares entitled to vote.
Neither state requires stockholder approval for the board of directors of a
corporation to fix the voting powers, designation, preferences, limitations,
restrictions and rights of a class of stock provided that the corporation's
charter documents grant such power to its board of directors. The holders of the
outstanding shares of a particular class are entitled to vote as a class on a
proposed amendment if the amendment would alter or change the power, preferences
or special rights of one or more series of any class so to affect them
adversely.
Amendment to Bylaws. Under the Delaware Charter documents, the board of
directors has the authority to adopt, repeal, alter, amend or rescind the bylaws
of the Company, subject to the power of stockholders to adopt, repeal, amend or
rescind the bylaws. Nevada law permits the board of directors to make the
bylaws of the corporation, subject to the bylaws, if any, adopted by the
stockholders.
Stockholder Approval of Certain Business Combinations. Both Nevada law and
Delaware law provide certain protections to stockholders in connection with
certain business combinations. These protections can be found in Sections 78.411
- - - 78.444 of the NRS and Section 203 of the DGCL. The Articles of
Incorporation of Turbodyne Nevada will elect not to be governed by Sections
78.411 to 78.444 of the NRS.
Under Section 203 of the DGCL, certain "business combinations" with "interested
stockholders" of the Company are subject to a three-year moratorium unless
specified conditions are met. For purposes of Section 203, the term "business
combination" is defined broadly to include (i) mergers with or caused by the
interested stockholder; (ii) sales or other dispositions to the interested
stockholder (except proportionately with the corporation's other stockholders)
of assets of the corporation or a subsidiary equal to ten percent or more of the
aggregate market value of the corporation's consolidated assets or its
outstanding stock; (iii) the issuance or transfer by the corporation or a
subsidiary of stock of the corporation or such subsidiary to the interested
stockholder (except for transfers in a conversion or exchange or a pro rata
distribution or certain other transactions, none of which increase the
interested stockholder's proportionate ownership of any class or series of the
corporation's or such subsidiary's stock); or (iv) receipt by the interested
stockholder (except proportionately as a stockholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits provided
by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203 of the
DGCL does not apply if: (i) prior to the time on which such stockholder becomes
an interested stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
interested stockholder; (ii) the interested stockholder owns 85 percent of the
corporation's voting stock upon consummation of the transaction which made him
or her an interested stockholder (excluding from the 85 percent calculation
shares owned by directors who are also officers of the target corporation and
shares held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or
21
exchange offer); or (iii) at or after rested stockholder, the board approves the
business combination and it is also approved at a stockholder meeting by
two-thirds (66-2/3%), of the voting stock not owned by the interested
stockholder.
Nevada law regulates combinations more stringently. First, an interested
stockholder is defined as a beneficial owner of 10% or more of the voting power.
Second, the three-year moratorium can be lifted only by advance approval by a
corporation's board of directors, as opposed to Delaware's provision that allows
interested stockholder combinations at the time of the transaction with
stockholder approval. Finally, after the three-year period, combinations remain
prohibited unless (i) they are approved by the board of directors, the
disinterested stockholders or a majority of the outstanding voting power not
beneficially owned by the interested party or (ii) the interested stockholders
satisfy certain fair value requirements.
Companies are entitled to opt-out of the business combination provisions of the
DGCL and NRS. The Company has not opted out of the business combination
provisions of Section 203 of the DGCL. The Articles of Incorporation of
Turbodyne Nevada will elect not to be governed by Sections 78.411 to 78.444 of
the NRS based by a determination by the board of directors that the regulation
of business combinations is not in the best interests of shareholders to
maximize the value of the shareholders' common stock.
Classified Board of Directors. Delaware law permits any Delaware corporation to
classify its board of directors into as many as three classes with staggered
terms of office. The stockholders elect only one class each year and each class
has a term of office of three years. The Delaware Charter Documents provide for
a classified board of directors, with three classes of directors and three year
terms of appointment for each director.
Nevada law also permits corporations to classify boards of directors provided
that at least one-fourth of the directors is elected annually. The Nevada
Charter Documents of Turbodyne Nevada also provide for a classified board of
directors, with three classes of directors and three year terms of appointment
for each director.
Cumulative Voting. Cumulative voting for directors entitles each stockholder to
cast a number of votes that is equal to the number of voting shares held by such
stockholder multiplied by the number of directors to be elected and to cast all
such votes for one nominee or distribute such votes among up to as many
candidates as there are positions to be filled. Cumulative voting may enable a
minority stockholder or group of stockholders to elect at least one
representative to the board of directors where such stockholders would not be
able to elect any directors without cumulative voting.
Nevada law permits cumulative voting in the election of directors as long as
certain procedures are followed. Although the DGCL does not generally grant
stockholders cumulative voting rights, a Delaware corporation may provide for
cumulative voting in the corporation's certificate of incorporation.
The Company's current Delaware Charter Documents do not provide for cumulative
voting in the election of directors. Similarly, the Articles of Incorporation
for Turbodyne Nevada will not provide for cumulative voting.
Vacancies. Subject to the rights, if any, of any series of preferred stock to
elect directors and to fill vacancies on the board of directors, vacancies
during the year shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even if less than a quorum. Any director
appointed shall hold office for the remainder of the term of the class of
directors in which the vacancy occurred. There are not currently any shares of
any series of preferred stock outstanding.
Removal of Directors. Under Delaware law, the holders of a majority of voting
shares of each class entitled to vote at an election of directors may vote to
remove any director or the entire board without cause unless (i) the board is a
classified board in which case directors may be removed only for cause, or (ii)
the corporation has cumulative voting in which case if less than the entire
board is to be removed no director may be removed without cause if the vote cast
against his removal would be enough to elect him.
Nevada law requires at least two-thirds of the majority of voting shares or
class entitled to vote at an election of directors to remove a director.
Furthermore, Nevada law does not make a distinction between removals for cause
and removals without cause.
22
Under Delaware law, a director of a corporation that does not have a classified
board or permit cumulative voting may be removed, without cause, by the
affirmative vote of a majority of the outstanding shares entitled to vote at an
election of directors.
Actions by Written Consent of Stockholders. Nevada law and Delaware law each
provide that any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting if the holders of outstanding stock
having at least the minimum number of votes that would be necessary to authorize
or take such action at a meeting consents to the action in writing. In addition,
Delaware law requires the corporation to give prompt notice of the taking of
corporate action without a meeting by less than unanimous written consent to
those stockholders who did not consent in writing. The Delaware Charter
Documents prohibit the taking of action by written consent of the stockholders.
The Nevada Charter Documents will permit the taking of action by written consent
of the stockholders.
Stockholder Vote for Mergers and Other Corporate Reorganizations. Unless the
charter specifies a higher percentage, both jurisdictions require authorization
by an absolute majority of outstanding shares entitled to vote, as well as
approval by the board of directors with respect to the terms of a merger or a
sale of substantially all of the assets of the corporation. Neither Nevada law
nor Delaware law requires approval by the stockholders of a surviving
corporation in a merger or consolidation as long as the surviving corporation
issues no more than 20% of its voting stock in the transaction.
The Company's Delaware Certificate of Incorporation does not require a higher
percentage to vote to approve certain corporate transactions. Turbodyne Nevada's
Articles of Corporation will not specify a higher percentage.
Stockholders' Dissenter's Rights. In both jurisdictions, dissenting stockholders
of a corporation engaged in certain major corporate transactions are entitled to
appraisal rights. Appraisal rights permit a stockholder to receive cash equal to
the fair value of the stockholder's shares (as determined by agreement by the
parties or by court) in lieu of the consideration such stockholder would
otherwise receive in any such transaction.
Under Delaware law, appraisal rights are generally available for the shares of
any class or series of stock of a corporation in a merger or consolidation,
provided that no appraisal rights are available for the shares of any class or
series of stock which, at the record date for the meeting held to approve such
transaction, were either (i) listed on a national security exchange or
designated as a national market system security on an inter-dealer quotation
system by the National Association of Securities Dealers, Inc. (NASD) or (ii)
held of record by more than 2,000 stockholders. Even if the shares of any class
or series of stock meet the requirements of clause (i) or (ii) above, appraisal
rights are available for such class or series if the holders thereof receive in
the merger or consolidation anything except: (i) shares of stock of the
corporation surviving or resulting from such merger or consolidation; (ii)
shares of stock of any other corporation which at the effective date of the
merger or consolidation is either listed on a national securities exchange, or
designated as a national market system security on an interdealer quotation
system by the NASD or held of record by more than 2,000 stockholders; (iii) cash
in lieu of fractional shares; or (iv) any combination of the foregoing. No
appraisal rights are available to stockholders of the surviving corporation if
the merger did not require their approval.
In addition to the appraisal rights provided under Delaware law, stockholders of
the Company are provided with additional appraisal rights by the Company's
Certificate of Incorporation. Stockholders of the Company are entitled to
appraisal rights in the event that the board of directors resolves to:
(i) to amend the Certificate of Incorporation to add, change or remove any
provisions restricting or constraining the issue, transfer, or
ownership of shares of that class or series of capital stock;
(ii) to amend the Certificate of Incorporation in any manner which would
require a vote of stockholders of the outstanding shares of such class
or series under Section 242 of the Delaware Law;
(iii) to amend the Certificate of Incorporation to add, change or remove
any restriction upon the business or businesses in which the
Corporation may engage;
(iv) to sell, lease or exchange all or substantially all of the Company's
assets;
(v) to amend the provisions of the Certificate of Incorporation providing
for dissent rights in addition to those provided by Delaware law; or
23
(vi) to effect any merger or consolidation in which the Company is a
constituent corporation, whether or not any appraisal rights are
otherwise available under Section 262 of the Delaware Law.
Under Nevada law, a stockholder is entitled to dissent from, and obtain payment
for the fair value of his shares in the event of consummation of, a plan of
merger or plan of exchange in which the corporation is a party and any corporate
action taken pursuant to a vote of the stockholders to the extent that the
articles of incorporation, bylaws or a resolution of the board of directors
provides that voting or nonvoting stockholders are entitled to dissent and
obtain payment for their shares. As with Delaware law, Nevada law provides an
exception to dissenter's rights. Holders (i) of securities listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the NASD or (ii) of securities held by 2,000
stockholders of record are generally not entitled to dissenter's rights. The
Nevada Charter Documents do not provide for any dissent rights in addition to
those provided by the NRS.
Stockholder Inspection Rights. Delaware law grants any stockholder the right to
inspect and to copy for any proper purpose the corporation's stock ledger, a
list of its stockholders, and its other records. A proper purpose is one
reasonably related to such person's interest as a stockholder. Directors also
have the right to examine the corporation's stock ledger, a list of its
stockholders and its other records for a purpose reasonably related to their
positions as directors.
Nevada law provides that any person who has been a stockholder of record of a
corporation for at least six months immediately preceding his demand, or any
person who owns or has been authorized by the holders of at least 5% of all of
its outstanding shares, is entitled to inspect and copy the stock ledger.
Furthermore, any person who has been a stockholder of record of any corporation
and owns or has been authorized by the holders of at least 15% of all of its
outstanding shares, is entitled to inspect and copy the books of account and
financial records of a corporation and conduct an audit of such records.
Dividends and Distributions. Nevada law prohibits distributions to stockholders
when the distributions would (i) render the corporation unable to pay its debts
as they become due in the usual course of business; and (ii) render the
corporation's total assets less than the sum of its total liabilities plus the
amount that would be needed to satisfy the preferential rights upon dissolution
of stockholders whose preferential rights are superior to those receiving the
distribution.
Delaware law permits a corporation to pay dividends out of either (i) surplus or
(ii) in case there is no surplus, out of its net profits for the fiscal year in
which the dividend is declared and/or the preceding fiscal year, except when the
capital is diminished to an amount less than the aggregate amount of the capital
represented by issued and outstanding stock having a preference on the
distribution of assets. Delaware law defines surplus as the excess, at any time,
of the net assets of a corporation over its stated capital.
To date, neither the Company nor Turbodyne Nevada has paid dividends on its
common stock. The payment of dividends, if any, is within the discretion of the
board of directors of Turbodyne Nevada and will depend upon Turbodyne Nevada's
earnings, its capital requirements and financial condition, and other relevant
factors. The board of Turbodyne Nevada does not intend to declare any dividends
in the foreseeable future, but instead intends to retain all earnings, if any,
for use in Turbodyne Nevada's business operations.
Limitation of Liability and Indemnification Matters. Nevada law and Delaware law
each permit corporations to adopt provisions in their charter documents that
eliminate or limit the personal liability of directors to the corporation or
their stockholders for monetary damages for breach of a director's fiduciary
duty, subject to the differences discussed below.
In suits that are not brought by or in the right of the corporation, both
jurisdictions permit a corporation to indemnify directors, officers, employees
and agents for attorney's fees and other expenses, judgments and amounts paid in
settlement. The person seeking indemnity may recover as long as he acted in good
faith and believed his actions were either in the best interests of or not
opposed to the best interests of the corporation. Similarly, the person seeking
indemnification must not have had any reason to believe his conduct was
unlawful.
In derivative suits, a corporation in either jurisdiction may indemnify its
agents for expenses that the person actually and reasonably incurred. A
corporation may not indemnify a person if the person was adjudged to be
24
liable to the corporation unless a court otherwise orders. Delaware law does not
permit corporations to indemnify parties for amounts paid in derivative actions
if they were adjudged liable to the corporation without court approval.
No corporation may indemnify a party unless it makes a determination that
indemnification is proper. In Delaware, the corporation through its
stockholders, directors or independent legal counsel will determine that the
conduct of the person seeking indemnity conformed with the statutory provisions
governing indemnity. In Nevada, the corporation through its stockholders,
directors or independent counsel must only determine that the indemnification is
proper.
Delaware law provides that a corporation may advance attorney's fees to a
director, officer or employee upon receipt of an undertaking to repay the
corporation if the person seeking the advance is ultimately found not to be
entitled to indemnification. Nevada law does not require employees to give the
undertaking. Both jurisdictions preclude liability limitation for acts or
omissions not in good faith or involving intentional misconduct and for paying
dividends or repurchasing stock out of other than lawfully available funds.
Nevada law does not expressly preclude a corporation from limiting liability for
a director's breach of the duty of loyalty or preclude a corporation from
limiting liability for any transaction from which a director derives an improper
personal benefit.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The following is a summary discussion of certain federal income tax consequences
of the reincorporation to stockholders who receive Turbodyne Nevada common stock
in exchange for their common stock. The discussion does not address all the
federal income tax consequences of the reincorporation and, in particular, does
not address the federal income tax consequences that may be relevant to
particular stockholders, such as dealers in securities, holders of stock options
or those stockholders who acquired their shares upon the "exercise" of stock
options.
The Company has not requested a ruling from the Internal Revenue Service (the
"IRS") with respect to the federal income tax consequences of the
reincorporation under the Internal Revenue Code of 1986, as amended. The Company
is of the opinion, however, that: (a) the reincorporation will constitute a
tax-free reorganization under section 368(a) of the Internal Revenue Code of
1986; (b) no gain or loss will be recognized by holders of the Company's common
stock upon receipt of Turbodyne Nevada common stock pursuant to the
reincorporation; (c) the aggregate tax basis of Turbodyne Nevada common stock
received by each stockholder will be the same as the aggregate tax basis of
common stock held by such stockholder immediately prior to the reincorporation;
and (d) the holding period of Turbodyne Nevada common stock received by each
stockholder will include the period during which such stockholder held the
Company common stock surrendered in exchange therefor, provided that such the
Company common stock was held by such stockholder as a capital asset at the time
of the reincorporation.
Although the Company is of the opinion that the federal income tax consequences
to the reincorporation will be as described above, such opinion is not binding
upon the IRS nor does it preclude the IRS from taking a contrary position. There
can be no assurance that the federal income tax consequences described above
will not be challenged by the IRS or, if challenged, will be decided favorably
to the parties to the reincorporation.
A successful IRS challenge to the tax-free status of the reincorporation would
result in a stockholder recognizing gain or loss with respect to each share of
the Company common stock surrendered equal to the difference between that
stockholder's basis in such share and the fair market value, as of the time of
the reincorporation, of Turbodyne Nevada common stock received in exchange
therefor. In such event, a stockholder's aggregate basis in the shares of
Turbodyne Nevada common stock received in the exchange would equal such fair
market value, and such stockholder's holding period for such shares would not
include the period during which such stockholder held the Company common stock.
No information is provided herein with respect to the tax consequences, if any,
under applicable state, local or foreign tax laws. In addition, the federal
income tax discussion set forth above is for general information only. Because
the stockholders' tax circumstances may differ, stockholders are urged to
consult their own tax advisors with respect to these and other tax consequences
of the reincorporation.
25
APPRAISAL RIGHTS
Holders of shares of Common Stock are entitled to appraisal rights under Section
262 of the DGCL and in accordance with the Company's Certificate of
Incorporation. A holder having a beneficial interest in shares of Common Stock
held of record in the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect whatever appraisal rights the
beneficial owner may have.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW PERTAINING TO
APPRAISAL RIGHTS UNDER THE DELAWARE GENERAL CORPORATION LAW AND IS QUALIFIED IN
ITS ENTIRETY BY THE FULL TEXT OF SECTION 262, WHICH IS REPRINTED IN ITS ENTIRETY
AS APPENDIX E TO THIS DOCUMENT.
All references in Section 262 and in this summary to a "stockholder" are to the
record holder of shares of Common Stock as to which appraisal rights are
asserted. As used in this document, "surviving corporation" means Turbodyne
Nevada, the corporation surviving the merger.
Holders of shares of Common Stock who do not wish to accept, pursuant to the
merger, the merger consideration provided for in the merger agreement and who
follow the procedures set forth in Section 262 of the DGCL will be entitled to
have their shares of Common Stock appraised by the Delaware Court of Chancery
and to receive payment in cash of the "fair value" of such shares of common
stock, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, if any, as
determined by such court.
Under the Delaware Charter Documents and Section 262 of the DGCL, where a merger
is to be submitted for approval and adoption at a meeting of stockholders the
corporation submitting the proposed merger to a vote of its stockholders must
notify each of its stockholders entitled to appraisal rights that such appraisal
rights are available. Such notice must be given by the corporation to its
stockholders entitled to appraisal rights no less than 20 days prior to the
meeting at which the merger proposal will be submitted to the stockholders for a
vote and such notice must include a copy of Section 262 of the DGCL. THIS
DOCUMENT CONSTITUTES SUCH NOTICE TO THE HOLDERS OF SHARES OF COMMON STOCK, AND
THE APPLICABLE STATUTORY PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW ARE
ATTACHED TO THIS DOCUMENT AS APPENDIX E. Any holder who wishes to exercise such
appraisal rights, or who wishes to preserve his or her right to do so, should
review the following discussion and Appendix E to this document carefully
because failure to timely and properly comply with the procedures specified will
result in the loss of appraisal rights under the DGCL.
A HOLDER OF SHARES OF COMMON STOCK WISHING TO EXERCISE HIS OR HER APPRAISAL
RIGHTS MUST DELIVER TO THE SECRETARY OF THE COMPANY, BEFORE THE VOTE ON THE
MERGER AND THE MERGER AGREEMENT AT THE ANNUAL MEETING, A WRITTEN DEMAND FOR
APPRAISAL OF HIS OR HER SHARES OF COMMON STOCK AND MUST NOT VOTE HIS OR HER
SHARES OF COMMON STOCK IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AND THE
MERGER AGREEMENT. Because a proxy which does not contain voting instructions
will, unless revoked, be voted for approval and adoption of the merger and the
merger agreement, a holder of shares of Common Stock who votes by proxy and who
wishes to exercise his appraisal rights must:
- - vote against approval and adoption of the merger and the merger agreement;
or
- - abstain from voting on approval and adoption of the merger and the merger
agreement.
Neither voting (in person or by proxy) against, abstaining from voting on or
failing to vote on the proposal to approve and adopt the merger and the merger
agreement will constitute a written demand for appraisal within the meaning of
Section 262 of the DGCL. The written demand for appraisal must be in addition to
and separate from any such proxy or vote. In addition, a holder wishing to
exercise his or its appraisal rights must continue to hold all of such holder's
other shares of Common Stock from the date of the demand for appraisal until the
completion of the merger.
26
Only the person who is the holder of record on the date the written demand for
appraisal is made is entitled to assert appraisal rights for the Common Stock
registered in that holder's name. A demand for appraisal should be executed by
or on behalf of the holder of record, fully and correctly, as his or her name
appears on the stock certificate(s). If the shares of Common Stock are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares of
common stock are owned of record by more than one person, as in a joint tenancy
and tenancy-in-common, the demand should be executed by or on behalf of all
joint owners. An authorized agent, including one or more joint owners, may
execute a demand for appraisal on behalf of a holder of record; however, the
agent must identify the record owner or owners and expressly disclose the fact
that, in executing the demand, the agent is agent for such owner or owners.
A record holder such as a broker who holds shares of Common Stock as nominee for
several beneficial owners may exercise appraisal rights with respect to the
shares of Common Stock held for one or more beneficial owners while not
exercising such rights with respect to the shares of Common Stock held for other
beneficial owners. In such a case, the written demand should set forth the
number of shares of Common Stock as to which appraisal is sought and when no
number of shares of Common Stock is expressly mentioned the demand will be
presumed to cover all shares of Common Stock held in the name of the record
owner. Holders who hold their shares of Common Stock in brokerage accounts or
other nominee forms and who wish to exercise appraisal rights are urged to
consult with their brokers to determine the appropriate procedures for the
making of a demand for appraisal by such a nominee.
All written demands for appraisal must be delivered to the Secretary of the
Company, either in person or by mail (certified mail, return receipt requested,
being the recommended form of transmittal) addressed to the Company, Attention:
Charles Caverno, Corporate Secretary at 6155 Carpinteria Avenue, Carpinteria,
California 93013. All written demands for appraisal must be received by the
Company before the taking of the vote on the merger agreement and the merger.
Within 10 days after the effective time of the merger, the surviving corporation
must send a notice as to the effectiveness of the merger to each former
stockholder of the Company who has made such a written demand for appraisal and
who has not voted in favor of approval and adoption of the merger and the merger
agreement. Within 120 days after the effective time, but not thereafter, the
surviving corporation, or any holder who is entitled to appraisal rights under
Section 262 of the DGCL and has complied with the requirements of that section,
may file a petition in the Delaware Court of Chancery demanding a determination
of the fair value of the shares of Common Stock. The surviving corporation is
under no obligation to and does not presently intend to file a petition in
respect of the appraisal of the fair value of the shares of Common Stock.
Accordingly, it is the obligation of the holders to initiate all necessary
action to perfect their appraisal rights within the time prescribed in Section
262 of the DGCL.
Within 120 days after the effective time, any holder who has complied with the
requirements under Section 262 of the DGCL for exercise of appraisal rights will
be entitled, upon written request, to receive from the surviving corporation a
statement setting forth the aggregate number of shares of Common Stock with
respect to which demands for appraisal have been received and which have not
voted in favor of approval and adoption of the merger and the merger agreement,
and the aggregate number of holders of such shares of Common Stock. Such
statements must be mailed within 10 days after a written request therefor has
been received by the surviving corporation.
If a petition for appraisal is duly filed by a holder of shares of Common Stock
and a copy thereof is delivered to the surviving corporation, the surviving
corporation will then be obligated within 20 days to provide the Delaware Court
of Chancery with a duly verified list containing the names and addresses of all
holders of shares of Common Stock who have demanded appraisal of their shares.
After notice to such holders, the Delaware Court of Chancery is empowered to
conduct a hearing upon the petition to determine those holders who have complied
with Section 262 of the DGCL and who have become entitled to appraisal rights
under that section. The Delaware Court of Chancery may require the holders who
have demanded payment for their shares of Common Stock to submit their stock
certificates to the Register in Chancery for a notation thereon of the pendency
of the appraisal proceedings, and if any holder fails to comply with such
direction, the Delaware Court of Chancery may dismiss the proceedings as to such
holder.
27
After determining the holders entitled to an appraisal, the Delaware Court of
Chancery will appraise the "fair value" of their shares of Common Stock,
exclusive of any element of value arising from the accomplishment or expectation
of the merger, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. Holders considering seeking
appraisal should be aware that the fair value of their shares of Common Stock as
determined under Section 262 of the DGCL could be more than, the same as or less
than the consideration they would receive pursuant to the merger agreement if
they did not seek appraisal of their shares of Common Stock and that investment
banking opinions as to fairness from a financial point of view are not
necessarily opinions as to fair value under Section 262 of the DGCL. The
Delaware Supreme Court has stated that "proof of value by any techniques or
methods which are generally considered acceptable in the financial community and
otherwise admissible in court" should be considered in the appraisal
proceedings. More specifically, the Delaware Supreme Court has stated that:
"Fair value, in an appraisal context, measures 'that which has been taken from
the stockholder, viz., his proportionate interest in a going concern.' In the
appraisal process the corporation is valued 'as an entity,' not merely as a
collection of assets or by the sum of the market price of each share of its
stock. Moreover, the corporation must be viewed as an on-going enterprise,
occupying a particular market position in the light of future prospects." In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy. The Court also will determine the amount of interest, if any, to be paid
upon the amounts to be received by persons whose shares of Common Stock have
been appraised. The costs of the action may be determined by the Court and taxed
upon the parties as the Court deems equitable. The Court also may order that all
or a portion of the expenses incurred by any stockholder in connection with an
appraisal, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts utilized in the appraisal proceeding, be charged
pro rata against the value of all of the shares of Common Stock that have
effectively pursued appraisal.
From and after the effective time, a holder who has duly demanded an appraisal
in compliance with Section 262 of the DGCL will not be entitled to vote the
shares of Common Stock subject to the appraisal demand for any purpose or be
entitled to the payment of dividends or other distributions, if any, on those
shares (except dividends or other distributions, other than the merger
consideration, payable to holders of record of shares of Common Stock as of a
date prior to the effective time).
If any holder who demands appraisal of his shares of Common Stock under Section
262 of the DGCL fails to perfect, or effectively withdraws or loses, his right
to appraisal as provided in the DGCL, the shares of Common Stock of such
stockholder will be converted into the right to receive the merger consideration
in accordance with the merger agreement. A holder will fail to perfect, or
effectively lose or withdraw, his or her right to appraisal if he or she:
- - fails to provide a written demand for appraisal of his or her shares of
Common Stock before the taking of the vote on the merger;
- - votes for approval and adoption of the merger and the merger agreement (or
submits an executed proxy without voting instructions);
- - does not file a petition for appraisal in the Court of Chancery within 120
days after the effective time of the merger; or
- - delivers to the Company (or, after the effective time, to the surviving
corporation) a written withdrawal of his or her demand for appraisal and an
acceptance of the merger, except that any such attempt to withdraw made
more than 60 days after the effective time will require the written
approval of the surviving corporation.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF SUCH
RIGHTS.
EXCHANGE OF CERTIFICATES
Upon the merger becoming effective, each outstanding share of the Company common
stock will be converted into one fully paid and non-assessable share of
Turbodyne Nevada common stock. Stockholders are requested, but are not required,
to exchange their current share certificates for shares of Turbodyne Nevada.
Stockholders
28
who desire to exchange their shares may do so following consummation of the
merger by surrendering them to the Company's transfer agent, Computershare Trust
Company of Canada, who will issue new certificates for shares of Turbodyne
Nevada common stock upon receipt of old share certificates. Delivery of stock
certificates issued by the Company prior to the effectiveness of the
reincorporation will constitute "good delivery" of shares in transaction
subsequent to reincorporation. Certificates of Turbodyne Nevada will be issued
with respect to transfers consummated after the merger.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE REINCORPORATION.
29
PROPOSAL NUMBER FIVE
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The board of directors has appointed BDO Dunwoody LLP effective March 6, 2002 as
the independent public accountants of the Company for the fiscal year ending
December 31, 2002. BDO Dunwoody LLP audited the Company's financial statements
for the fiscal year ending December 31, 2001.
The Company anticipates that no representatives of BDO Dunwoody LLP will be
present at the annual meeting.
In the event ratification by the stockholders of the appointment of BDO Dunwoody
LLP as the Company's independent public accountants is not obtained, the board
of directors will reconsider such appointment.
CHANGE OF AUDITORS
McGowan Guntermann, the independent accounting firm which was previously engaged
as the principal accountant to audit Turbodyne's financial statements, resigned
and confirmed the cessation of the client-auditor relationship by letter dated
July 16, 2001 to Turbodyne's board of directors. Unfortunately, the firm's
letter of July 16, 2001 was initially routed to former members of management who
had resigned on July 3, 2001, and was not delivered to Turbodyne's current
management until August 12, 2001.
The principal accountant's reports on Turbodyne's financial statements for the
past two years did not contain an adverse opinion or disclaimer of opinion, nor
were such reports qualified or modified as to uncertainty, audit scope or
accounting principles.
The decision to terminate the client-auditor relationship was made by the
auditor and was not recommended or approved by Turbodyne's board of directors or
any committee of Turbodyne's board of directors.
There were not, during Turbodyne's two most recent fiscal years and any
subsequent interim period preceding such resignation, any disagreements with the
former accountant on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreement, if not
resolved to the satisfaction of the former accountant, would have caused it to
make a reference to the subject matter of the disagreement in connection with
its report.
No "reportable events," as defined in paragraphs (a)(2)(v)(A) through (D) of
Item 304 of Regulation S-K, occurred during Turbodyne's two most recent fiscal
years or any subsequent interim period preceding the former accountant's
resignation.
Turbodyne filed the consent of McGowan Guntermann dated August 16, 2001 with the
Securities and Exchange Commission on August 17, 2001 confirming their agreement
to the above statements.
Effective on March 6, 2002, Turbodyne engaged a new independent accountant, BDO
Dunwoody, LLP, chartered accountants to audit Turbodyne's financial statements.
Neither Turbodyne nor anyone on Turbodyne's behalf has, during the two most
recent fiscal years or any subsequent interim period prior to engaging BDO
Dunwoody, consulted with BDO Dunwoody regarding any of the subject matters
identified in paragraph (a)(2) of Item 304 of Regulation S-K.
AUDIT FEES
The Company has been billed $95,000 for professional services rendered for the
audit of its annual financial statements for the most recent fiscal year ended
December 31, 2001. In addition, the Company paid $5,000 for the reviews of its
quarterly financial statements for the most recent fiscal year ended December
31, 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
There were no fees billed by the Company's auditors for: (a) directly or
indirectly operating, or supervising the operation of, the Company's information
system or managing the Company's local area network; or (b) designing or
implementing a hardware or software system that aggregates source data
underlying the financial
30
statements or generates information that is significant to the Company's
financial statements taken as a whole. As there were no fees billed or expended
for the above services, The Company's board of directors did not consider
whether such expenditures were compatible with maintaining the auditor's
independence from the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THE APPROVAL OF THE
RATIFICATION OF THE APPOINTMENT OF BDO DUNWOODY LLP AS THE INDEPENDENT PUBLIC
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 2002.
31
FORWARD-LOOKING STATEMENTS
This proxy statement includes statements that are not historical facts. These
statements are "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 and are based, among other things, on the
Company's current plans and expectations relating to expectations of anticipated
growth in the future and future success under various circumstances. As such,
these forward-looking statements involve uncertainty and risk.
Other factors and assumptions not identified above could also cause the actual
results to differ materially from those set forth in any forward-looking
statement. The Company does not undertake any obligation to update the
forward-looking statements contained in this proxy statement to reflect actual
results, changes in assumptions, or changes in other factors affecting these
forward-looking statements.
FUTURE STOCKHOLDER PROPOSALS
It is anticipated that the release date for the Company's proxy statement and
form of proxy for this current annual meeting of shareholders will be June 24,
2002. The deadline for submittals of shareholder proposals to be included in
the proxy statement and form of proxy for the Company's next annual general
meeting of shareholders will be February 18, 2003. Shareholder proposals must
satisfy the conditions established by the Securities and Exchange Commission for
stockholder proposals in order to be included in the Company's proxy statement
for that meeting.
WHERE YOU CAN FIND MORE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. The Company files reports, proxy statements
and other information with the SEC. You may read and copy these reports, proxy
statements and other information at the SEC's Public Reference Section at 450
Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
The SEC also maintains an Internet website, located at www.sec.gov, that
contains reports, proxy statements and other information regarding companies and
individuals that file electronically with the SEC.
By Order of the Board of Directors of Turbodyne Technologies Inc.
/s/ Daniel Black
Daniel Black
Chief Executive Officer, President and Director
Carpinteria, California
June 24, 2002
32
APPENDIX A
TO THE PROXY STATEMENT OF
TURBODYNE TECHNOLOGIES, INC.
FOR ITS 2002 AGM
2002 STOCK OPTION PLAN
2002 STOCK OPTION PLAN OF
TURBODYNE TECHNOLOGIES INC.
June 3, 2002
A Delaware Corporation
STOCK OPTION PLAN OF
TURBODYNE TECHNOLOGIES INC.
TABLE OF CONTENTS
Page No.
--------
PURPOSE OF THE PLAN 1
TYPES OF STOCK OPTIONS 1
DEFINITIONS 1
ADMINISTRATION OF THE PLAN 2
GRANT OF OPTIONS 3
STOCK SUBJECT TO PLAN 4
TERMS AND CONDITIONS OF OPTIONS 4
TERMINATION OR AMENDMENT OF THE PLAN 9
INDEMNIFICATION 9
EFFECTIVE DATE AND TERM OF THE PLAN 10
STOCK OPTION PLAN OF
TURBODYNE TECHNOLOGIES INC.
A Delaware Corporation
1. PURPOSE OF THE PLAN
The purpose of this Plan is to strengthen Turbodyne Technologies Inc.
(hereinafter the "Company") by providing incentive stock options as a means to
attract, retain and motivate key corporate personnel, through ownership of stock
of the Company, and to attract individuals of outstanding ability to render
services to and enter the employment of the Company or its subsidiaries.
2. TYPES OF STOCK OPTIONS
There shall be two types of Stock Options (referred to herein as "Options"
without distinction between such different types) that may be granted under this
Plan: (1) Options intended to qualify as Incentive Stock Options under Section
422 of the Internal Revenue Code ("Qualified Stock Options"), and (2) Options
not specifically authorized or qualified for favorable income tax treatment
under the Internal Revenue Code ("Non-Qualified Stock Options").
3. DEFINITIONS
The following definitions are applicable to the Plan:
(1) Board. The Board of Directors of the Company.
(2) Code. The Internal Revenue Code of 1986, as amended from time to time.
(3) Common Stock. The shares of Common Stock of the Company.
(4) Company. Turbodyne Technologies Inc., a Delaware corporation.
(5) Consultant. An individual or entity that renders professional services to
the Company as an independent contractor and is not an employee or under
the direct supervision and control of the Company.
(6) Disabled or Disability. For the purposes of Section 7, a disability of the
type defined in Section 22(e)(3) of the Code. The determination of whether
an individual is Disabled or has a Disability is determined under
procedures established by the Plan Administrator for purposes of the Plan.
(7) Fair Market Value. For purposes of the Plan, the "fair market value" per
share of Common Stock of the Company at any date shall be: (a) if the
2
Common Stock is listed on an established stock exchange or exchanges or the
NASDAQ National Market, the closing price per share on the last trading day
immediately preceding such date on the principal exchange on which it is
traded or as reported by NASDAQ; or (b) if the Common Stock is not then
listed on an exchange or the NASDAQ National Market, but is quoted on the
NASDAQ Small Cap Market, the NASDAQ electronic bulletin board or the
National Quotation Bureau pink sheets, the average of the closing bid and
asked prices per share for the Common Stock as quoted by NASDAQ or the
National Quotation Bureau, as the case may be, on the last trading day
immediately preceding such date; or (c) if the Common Stock is not then
listed on an exchange or the NASDAQ National Market, or quoted by NASDAQ or
the National Quotation Bureau, an amount determined in good faith by the
Plan Administrator.
(8) Incentive Stock Option. Any Stock Option intended to be and designated as
an "incentive stock option" within the meaning of Section 422 of the Code.
(9) Non-Qualified Stock Option. Any Stock Option that is not an Incentive Stock
Option.
(10) Optionee. The recipient of a Stock Option.
(11) Plan Administrator. The board or the Committee designated by the Board
pursuant to Section 4 to administer and interpret the terms of the Plan.
(12) Stock Option. Any option to purchase shares of Common Stock granted
pursuant to Section 7.
4. ADMINISTRATION OF THE PLAN
This Plan shall be administered by the Board of Directors, the Executive
Committee of the Board of Directors, or by a Compensation Committee (hereinafter
the "Committee") composed of members selected by, and serving at the pleasure
of, the Board of Directors (the "Plan Administrator"). Subject to the provisions
of the Plan, the Plan Administrator shall have authority to construe and
interpret the Plan, to promulgate, amend, and rescind rules and regulations
relating to its administration, to select, from time to time, among the eligible
employees and non-employee consultants (as determined pursuant to Section 5) of
the Company and its subsidiaries those employees and consultants to whom Stock
Options will be granted, to determine the duration and manner of the grant of
the Options, to determine the exercise price, the number of shares and other
terms covered by the Stock Options, to determine the duration and purpose of
leaves of absence which may be granted to Stock Option holders without
constituting termination of their employment for purposes of the Plan, and to
make all of the determinations necessary or advisable for administration of the
Plan. The interpretation and construction by the Plan Administrator of any
provision of the Plan, or of any agreement issued and executed under the Plan,
shall
3
be final and binding upon all parties. No member of the Committee or Board shall
be liable for any action or determination undertaken or made in good faith with
respect to the Plan or any agreement executed pursuant to the Plan.
If a Committee is established, all of the members of the Committee shall be
persons who, in the opinion of counsel to the Company, are outside directors and
"non-employee directors" within the meaning of Rule 16b-3(b)(3)(i) promulgated
by the Securities and Exchange Commission. -From time to time, the Board may
increase or decrease the size of the Committee, and add additional members to,
or remove members from, the Committee. The Committee shall act pursuant to a
majority vote, or the written consent of a majority of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the provisions of the Plan and the directions of the Board,
the Committee may establish and follow such rules and regulations for the
conduct of its business as it may deem advisable.
At the option of the Board, the entire Board of Directors of the Company may act
as the Plan Administrator during such periods of time as all members of the
Board are "outside directors" as defined in Prop. Treas. Regs. '1.162-27(e)(3).
5. GRANT OF OPTIONS
The Company is hereby authorized to grant Incentive Stock Options as defined in
section 422 of the Code to any employee or director (including any officer or
director who is an employee) of the Company, or of any of its subsidiaries;
provided, however, that no person who owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company, or any of
its parent or subsidiary corporations, shall be eligible to receive an Incentive
Stock Option under the Plan unless at the time such Incentive Stock Option is
granted the Option price is at least 110% of the fair market value of the shares
subject to the Option, and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
An employee may receive more than one Option under the Plan. Non-Employee
Directors shall be eligible to receive Non--Qualified Stock Options in the
discretion of the Plan Administrator. In addition, Non--Qualified Stock Options
may be granted to employees, officers, directors and consultants who are
selected by the Plan Administrator.
4
6. STOCK SUBJECT TO PLAN
The stock available for grant of Options under the Plan shall be shares of the
Company's authorized but unissued, or reacquired, Common Stock. Subject to
adjustment as provided herein, the maximum aggregate number of shares of the
Company's common stock that may be optioned and sold under the Plan is 6,000,000
shares. The maximum aggregate number of shares of the Company's common stock
that may be optioned and sold under the Plan may be increased effective the
first day of each of the Company's fiscal quarters, beginning with the fiscal
quarter commencing July 1, 2002, upon approval by the Company's board of
directors, by an amount equal to the lesser of:
(1) The number of shares which is equal to 7.5% of the outstanding shares of
the Common Stock on the first day of the applicable fiscal quarter, less
the number of shares of Common Stock which may be optioned and sold under
the Plan prior to the first day of the applicable fiscal quarter; and
(2) a lesser number of shares of Common Stock determined by the board of
directors of the Company.
The maximum number of shares for which an Option may be granted to any Optionee
during any calendar year shall not exceed three percent (3%) of the issued and
outstanding common shares of the Company. In the event that any outstanding
Option under the Plan for any reason expires or is terminated, the shares of
Common Stock allocable to the unexercised portion of the Option shall again be
available for Options under the Plan as if no Option had been granted with
regard to such shares.
7. TERMS AND CONDITIONS OF OPTIONS
Options granted under the Plan shall be evidenced by agreements (which need not
be identical) in such form and containing such provisions that are consistent
with the Plan as the Plan Administrator shall from time to time approve. Such
agreements may incorporate all or any of the terms hereof by reference and shall
comply with and be subject to the following terms and conditions:
(1) Number of Shares. Each Option agreement shall specify the number of shares
subject to the Option.
(2) Option Price. The purchase price for the shares subject to any Option shall
be determined by the Plan Administrator at the time of the grant, but shall
not be less than 85% of Fair Market Value per share. Anything to the
contrary notwithstanding, the purchase price for the shares subject to any
Incentive Stock Option shall not be less than 100% of the Fair Market Value
of the shares of Common Stock of the Company on the date the Stock Option
is granted. In the case of any Incentive Stock Option granted to an
employee who owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, or any of its parent
or
5
subsidiary corporations, the Option price shall not be less than 110% of
the Fair Market Value per share of the Common Stock of the Company on the
date the Option is granted. For purposes of determining the stock ownership
of an employee, the attribution rules of Section 424(d) of the Code shall
apply.
(3) Notice and Payment. Any exercisable portion of a Stock Option may be
exercised only by: (a) delivery of a written notice to the Company prior to
the time when such Stock Option becomes unexercisable herein, stating the
number of shares bring purchased and complying with all applicable rules
established by the Plan Administrator; (b) payment in full of the exercise
price of such Option by, as applicable, delivery of: (i) cash or check for
an amount equal to the aggregate Stock Option exercise price for the number
of shares being purchased, (ii) in the discretion of the Plan
Administrator, upon such terms as the Plan Administrator shall approve, a
copy of instructions to a broker directing such broker to sell the Common
Stock for which such Option is exercised, and to remit to the Company the
aggregate exercise price of such Stock Option (a "cashless exercise"), or
(iii) in the discretion of the Plan Administrator, upon such terms as the
Plan Administrator shall approve, shares of the Company's Common Stock
owned by the Optionee, duly endorsed for transfer to the Company, with a
Fair Market Value on the date of delivery equal to the aggregate purchase
price of the shares with respect to which such Stock Option or portion is
thereby exercised (a "stock-for-stock exercise"); (c) payment of the amount
of tax required to be withheld (if any) by the Company, or any parent or
subsidiary corporation as a result of the exercise of a Stock Option. At
the discretion of the Plan Administrator, upon such terms as the Plan
Administrator shall approve, the Optionee may pay all or a portion of the
tax withholding by: (i) cash or check payable to the Company, (ii) a
cashless exercise, (iii) a stock-for-stock exercise, or (iv) a combination
of one or more of the foregoing payment methods; and (d) delivery of a
written notice to the Company requesting that the Company direct the
transfer agent to issue to the Optionee (or his designee) a certificate for
the number of shares of Common Stock for which the Option was exercised or,
in the case of a cashless exercise, for any shares that were not sold in
the cashless exercise. Notwithstanding the foregoing, the Company, in its
sole discretion, may extend and maintain, or arrange for the extension and
maintenance of credit to any Optionee to finance the Optionee's purchase of
shares pursuant to the exercise of any Stock Option, on such terms as may
be approved by the Plan Administrator, subject to applicable regulations of
the Federal Reserve Board and any other laws or regulations in effect at
the time such credit is extended.
(4) Terms of Option. No Option shall be exercisable after the expiration of the
earliest of: (a) ten years after the date the Option is granted, (b) three
months after the date the Optionee's employment with the Company and its
subsidiaries terminates, or a Non-Employee Director or Consultant ceases to
6
provide services to the Company, if such termination or cessation is for
any reason other than Disability or death, (c) one year after the date the
Optionee's employment with the Company, and its subsidiaries, terminates,
or a Non--Employee Director or Consultant ceases to provide services to the
Company, if such termination or cessation is a result of death or
Disability; provided, however, that the Option agreement for any Option may
provide for shorter periods in each of the foregoing instances. In the case
of an Incentive Stock Option granted to an employee who owns stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company, or any of its parent or subsidiary corporations,
the term set forth in (a) above shall not be more than five years after the
date the Option is granted.
(5) Exercise of an Option. No Option shall be exercisable during the lifetime
of an Optionee by any person other than the Optionee. Subject to the
foregoing, the Plan Administrator shall have the power to set the time or
times within which each Option shall vest or be exercisable and to
accelerate the time or times of vesting and exercise; provided, however
each Option shall provide the right to exercise at the rate of at least 20%
per year over five years from the date the Option is granted. Unless
otherwise provided by the Plan Administrator, each Option will not be
subject to any vesting requirements. To the extent that an Optionee has the
right to exercise an Option and purchase shares pursuant hereto, the Option
may be exercised from time to time by written notice to the Company,
stating the number of shares being purchased and accompanied by payment in
full of the exercise price for such shares.
(6) No Transfer of Option. No Option shall be transferable by an Optionee
otherwise than by will or the laws of descent and distribution.
(7) Limit on Incentive Stock Option. The aggregate Fair Market Value
(determined at the time the Option is granted) of the stock with respect to
which an Incentive Stock Option is granted and exercisable for the first
time by an Optionee during any calendar year (under all Incentive Stock
Option plans of the Company and its subsidiaries) shall not exceed
$100,000. To the extent the aggregate Fair Market Value (determined at the
time the Stock Option is granted) of the Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by an Optionee
during any calendar year (under all Incentive Stock Option plans of the
Company and any parent or subsidiary corporations) exceeds $100,000, such
Stock Options shall be treated as Non--Qualified Stock Options. The
determination of which Stock Options shall be treated as Non--Qualified
Stock Options shall be made by taking Stock Options into account in the
Order in which they were granted.
7
(8) Restriction on Issuance of Shares. The issuance of Options and shares shall
be subject to compliance with all of the applicable requirements of law
with respect to the issuance and sale of securities, including, without
limitation, any required qualification under state securities laws. If an
Optionee acquires shares of Common Stock pursuant to the exercise of an
Option, the Plan Administrator, in its sole discretion, may require as a
condition of issuance of shares covered by the Option that the shares of
Common Stock be subject to restrictions on transfer. The Company may place
a legend on the share certificates reflecting the fact that they are
subject to restrictions on transfer pursuant to the terms of this Section.
In addition, the Optionee may be required to execute a buy-sell agreement
in favor of the Company or its designee with respect to all or any of the
shares so acquired. In such event, the terms of any such agreement shall
apply to the optioned shares.
(9) Investment Representation. Any Optionee may be required, as a condition of
issuance of shares covered by his or her Option, to represent that the
shares to be acquired pursuant to exercise will be acquired for investment
and without a view toward distribution thereof, and in such case, the
Company may place a legend on the share certificate(s) evidencing the fact
that they were acquired for investment and cannot be sold or transferred
unless registered under the Securities Act of 1933, as amended, or unless
counsel for the Company is satisfied that the circumstances of the proposed
transfer do not require such registration.
(10) Rights as a Shareholder or Employee. An Optionee or transferee of an Option
shall have no right as a stockholder of the Company with respect to any
shares covered by any Option until the date of the issuance of a share
certificate for such shares. No adjustment shall be made for dividends
(Ordinary or extraordinary, whether cash, securities, or other property),
or distributions or other rights for which the record date is prior to the
date such share certificate is issued, except as provided in paragraph (13)
below. Nothing in the Plan or in any Option agreement shall confer upon any
employee any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with any right of the Company or any
subsidiary to terminate the Optionee's employment at any time.
(11) No Fractional Shares. In no event shall the Company be required to issue
fractional shares upon the exercise of an Option.
(12) Exercise in the Event of Death. In the event of the death of the Optionee,
any Option or unexercised portion thereof granted to the Optionee, to the
extent exercisable by him or her on the date of death, may be exercised by
the Optionee's personal representatives, heirs, or legatees subject to the
provisions of paragraph (4) above.
8
(13) Recapitalization or Reorganization of the Company. Except as otherwise
provided herein, appropriate and proportionate adjustments shall be made
(1) in the number and class of shares subject to the Plan, (2) to the
Option rights granted under the Plan, and (3) in the exercise price of such
Option rights, in the event that the number of shares of Common Stock of
the Company are increased or decreased as a result of a stock dividend (but
only on Common Stock), stock split, reverse stock split, recapitalization,
reorganization, merger, consolidation, separation, or like change in the
corporate or capital structure of the Company. In the event there shall be
any other change in the number or kind of the outstanding shares of Common
Stock of the Company, or any stock or other securities into which such
common stock shall have been changed, or for which it shall have been
exchanged, whether by reason of a complete liquidation of the Company or a
merger, reorganization, or consolidation with any other corporation in
which the Company is not the surviving corporation, or the Company becomes
a wholly-owned subsidiary of another corporation, then if the Plan
Administrator shall, in its sole discretion, determine that such change
equitably requires an adjustment to shares of Common Stock currently
subject to Options under the Plan, or to prices or terms of outstanding
Options, such adjustment shall be made in accordance with such
determination.
To the extent that the foregoing adjustments relate to stock or securities
of the Company, such adjustment shall be made by the Plan Administrator,
the determination of which in that respect shall be final, binding, and
conclusive. No right to purchase fractional shares shall result from any
adjustment of Options pursuant to this Section. In case of any such
adjustment, the shares subject to the Option shall he rounded down to the
nearest whole share. Notice of any adjustment shall be given by the Company
to each Optionee whose Options shall have been so adjusted and such
adjustment (whether or not notice is given) shall be effective and binding
for all purposes of the Plan.
In the event of a complete liquidation of the Company or a merger,
reorganization, or consolidation of the Company with any other corporation
in which the Company is not the surviving corporation, or the Company
becomes a wholly-owned subsidiary of another corporation, any unexercised
Options granted under the Plan shall be deemed cancelled unless the
surviving corporation in any such merger, reorganization, or consolidation
elects to assume the Options under the Plan or to issue substitute Options
in place thereof; provided, however, that notwithstanding the foregoing, if
such Options would be cancelled in accordance with the foregoing, the
Optionee shall have the right exercisable during a ten-day period ending on
the fifth day prior to such liquidation, merger, or consolidation to
exercise such Option in whole or in part without regard to any installment
exercise provisions in the Option agreement.
9
(14) Modification, Extension and Renewal of Options. Subject to the terms and
conditions and within the limitations of the Plan, the Plan Administrator
may modify, extend or renew outstanding options granted under the Plan,
including an amendment to the exercise price of outstanding options, and
accept the surrender of outstanding Options (to the extent not theretofore
exercised). The Plan Administrator shall not, however, without the approval
of the Board, modify any outstanding Incentive Stock Option in any manner
that would cause the Option not to qualify as an Incentive Stock Option
within the meaning of Section 422 of the Code. Notwithstanding the
foregoing, no modification of an Option shall, without the consent of the
Optionee, alter or impair any rights of the Optionee under the Option.
(15) Other Provisions. Each Option may contain such other terms, provisions, and
conditions not inconsistent with the Plan as may be determined by the Plan
Administrator.
8. TERMINATION OR AMENDMENT OF THE PLAN
The Board may at any time terminate or amend the Plan; provided that, without
approval of the holders of a majority of the shares of Common Stock of the
Company represented and voting at a duly held meeting at which a quorum is
present or the written consent of a majority of the outstanding shares of Common
Stock, there shall be (except by operation of the provisions of paragraph (13)
above) no increase in the total number of shares covered by the Plan, no change
in the class of persons eligible to receive options granted under the Plan, no
reduction in the limits for determination of the minimum exercise price of
Options granted under the Plan, and no extension of the limits for determination
of the latest date upon which Options may be exercised; and provided further
that, without the consent of the Optionee, no amendment may adversely affect any
then outstanding Option or any unexercised portion thereof.
9. INDEMNIFICATION
In addition to such other rights of indemnification as they may have as members
of the Board Committee that administers the Plan, the members of the Plan
Administrator shall be indemnified by the Company against reasonable expense,
including attorney's fees, actually and necessarily incurred in connection with
the defense of any action, suit or proceeding, or in connection with any appeal
therein to which they, or any of them, may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Option
granted thereunder, and against any and all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company). In addition, such members shall be indemnified by the
Company for any amount paid by them in satisfaction of a judgment in any action,
suit, or proceeding, except in relation to matters as to which it shall have
been adjudged that such member is liable for negligence or misconduct in the
performance of his or her duties, provided however that within sixty (60) days
after institution of any such action, suit, or
10
proceeding, the member shall in writing offer the Company the opportunity, at
its own expense, to handle and defend the same.
10. EFFECTIVE DATE AND TERM OF THE PLAN
This Plan shall become effective (the "Effective Date") on the date of adoption
by the board of directors. Unless sooner terminated by the Board in its sole
discretion, this Plan will expire on June 3, 2012.
IN WITNESS WHEREOF, the Company by its duly authorized officer, has caused this
Plan to be executed as of the 3rd day of June, 2002.
TURBODYNE TECHNOLOGIES INC.
/s/ Daniel Black
__________________________
By: Daniel Black
Its: Chief Executive Officer
33
APPENDIX B
TO THE PROXY STATEMENT OF
TURBODYNE TECHNOLOGIES, INC.
FOR ITS 2002 AGM
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is entered into
on the 7th of June, 2002 by Turbodyne Technologies, Inc., a Delaware corporation
("Turbodyne Delaware") and Turbodyne Nevada, Inc., a Nevada corporation
("Turbodyne Nevada").
PRELIMINARY STATEMENTS
Turbodyne Nevada is a wholly owned subsidiary of Turbodyne Delaware.
The Boards of Directors of Turbodyne Nevada and Turbodyne Delaware deem it
desirable and in the best interests of their respective shareholders that
Turbodyne Delaware be merged with and into Turbodyne Nevada (the "Merger") on
the terms and conditions of this Agreement.
The Boards of Directors of Turbodyne Nevada and Turbodyne Delaware, by
resolutions duly adopted, have approved and adopted this Agreement.
It is intended that the Merger be completed pursuant to Section 252 of the
Delaware General Corporation Law and Article 92A.190 of the Nevada Revised
Statutes.
It is intended that the Merger will qualify as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder
NOW THEREFORE the parties do hereby adopt the plan of reorganization
encompassed by this Merger Agreement and do hereby agree that Turbodyne Delaware
shall merge with and into Turbodyne Nevada on the following terms, conditions
and other provisions:
STATEMENT OF TERMS
SECTION 1
THE MERGER
1.1 The Merger. Subject to Section 1.8, upon and subject to the
-----------
approval of the shareholders of Turbodyne Delaware, Turbodyne Delaware will be
merged with and into Turbodyne Nevada in accordance with this Agreement, the
Certificate of Merger substantially in the form of Exhibit A attached to this
---------
Agreement (the "Certificate of Merger"), and the applicable provisions of the
Delaware General Corporation Law (the "Delaware Law") and the Nevada Revised
Statutes (the "Nevada Law"). Following the Merger, Turbodyne Nevada will
continue as the surviving corporation ("Surviving Corporation") and the separate
existence of Turbodyne Delaware will cease, except insofar as it may be
continued by the Delaware Law and the Nevada Law.
1.2 Effective Time of the Merger. The Merger will be effective at the
-----------------------------
time (the "Effective Time") of the later of (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware and (ii) the filing
of the Certificate of Merger with the Secretary of State of the State of Nevada,
which certificate is to be filed in both places as soon as practicable on or
after approval of the Merger by the shareholders of Turbodyne Delaware.
1.3 Effect of the Merger. The Merger will have the effects set forth
----------------------
in of the Delaware Law, including section 259 of the Delaware Law and Section
92A.250 of the Nevada Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of Turbodyne Nevada and Turbodyne Delaware will vest in
Surviving Corporation without further act or deed, and all debts, liabilities
and duties of Turbodyne Nevada and Turbodyne Delaware will become the debts,
liabilities and duties of Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
---------------------------------------
(a) The certificate of incorporation of Turbodyne Nevada as in effect
immediately prior to the Effective Time will continue unchanged, except to the
extent amended by the Certificate of Merger, and will be the certificate of
incorporation of Surviving Corporation until thereafter amended in accordance
with the terms thereof and in accordance with applicable law. The Certificate
of Merger will effect a name change of the Surviving Corporation to Turbodyne
Technologies, Inc.
(b) At the Effective Time, the by-laws of Turbodyne Nevada, as in
effect immediately prior to the Effective Time, will be the by-laws of Surviving
Corporation until thereafter amended in accordance with the terms thereof and in
accordance with applicable law.
1.5 Directors. The directors of Turbodyne Delaware immediately prior to
---------
the Effective Time will be the directors and officers, respectively, of the
Surviving Corporation after the Effective Time, unless different directors are
elected to the board of Turbodyne Delaware at the 2002 annual general meeting of
Turbodyne Delaware in which case the elected directors of Turbodyne Delaware
will be the directors of the Surviving Corporation. The directors will hold
office in the classes and for the terms in effect immediately prior to the
Effective Date. The directors will hold office until their successors are duly
elected, appointed or qualified or until their earlier death, resignation or
removal in accordance with certificate of incorporation and bylaws of Surviving
Corporation.
1.6 Officers. The officers of Turbodyne Delaware immediately prior
--------
to the Effective Time will be the directors of the Surviving Corporation after
the Effective Time, unless different officers. The officers will hold office
until their successors are duly elected, appointed or qualified or until their
earlier death, resignation or removal in accordance with certificate of
incorporation and bylaws of Surviving Corporation.
1.7 Taking of Necessary Action. If after the Effective Time any
-----------------------------
further action is necessary to carry out the purposes of this Agreement or to
vest the Surviving Corporation with full title to all assets, rights, approvals,
immunities and franchises of either Turbodyne Nevada or Turbodyne Delaware, and
the officers and directors, or the former officers and directors, as the case
may be, of Turbodyne Nevada and Turbodyne Delaware and the Surviving Corporation
will take all such necessary action.
1.8 Dissenting Shareholders. It is a condition of the Merger
------------------------
that stockholders of Turbodyne Delaware holding not more than 1% of Turbodyne
Delaware's issued and outstanding shares of common stock will have exercised
dissent rights in respect of the Merger, provided that this condition may be
waived by each party by joint notice in writing.
SECTION 2
MERGER CONSIDERATION
2.1 Merger Consideration.
---------------------
(a) Conversion of Turbodyne Delaware Common Stock. Each share of
----------------------------------------------
Turbodyne Delaware common stock, par value $0.001 per share ("Turbodyne Delaware
Common Stock") issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares, as defined in Section 2.4) will, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into one share of common stock of Turbodyne Nevada (each a share of "Turbodyne
Nevada Common Stock").
(b) Conversion of Turbodyne Nevada Stock. Each share of Turbodyne
----------------------------------------
Nevada Common Stock issued and outstanding immediately prior to the Effective
Time will, by virtue of the Merger and without any action on the part of the
holder thereof, be cancelled and returned to the status of authorized but
unissued shares.
(c) Conversion of Turbodyne Delaware Stock Options. Each option to
----------------------------------------------
purchase or otherwise acquire shares of Turbodyne Delaware Common Stock, whether
for cash or other consideration (each, a "Turbodyne Delaware Stock Option")
issued and outstanding immediately prior to the Effective Time will, by virtue
of the Merger and without any action on the part of the holder thereof, be
converted into an option to purchase or otherwise acquire an equal number of
shares of Turbodyne Nevada Common Stock on the same terms and conditions and
will be recognized as such by Turbodyne Nevada.
(d) Conversion of Turbodyne Delaware Warrants. Each warrant to
---------------------------------------------
purchase or otherwise acquire shares of Turbodyne Delaware Common Stock, whether
for cash or other consideration (each, a "Turbodyne Delaware Warrant") issued
and outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into a warrant to purchase or otherwise acquire an equal number of shares of
Turbodyne Nevada Common Stock on the same terms and conditions and will be
recognized as such by Turbodyne Nevada.
2.2 Conversion Procedure.
---------------------
(a) Stock Certificate Conversion Procedure. After the Effective Time,
---------------------------------------
each holder of Turbodyne Delaware Common Stock will be entitled to exchange his,
her, or its certificate representing the Turbodyne Delaware Common Stock
("Turbodyne Delaware Stock Certificate") for a certificate representing the
number of shares of Turbodyne Nevada Common Stock into which the number of
shares of Turbodyne Delaware Stock previously represented by such certificate
surrendered have been converted pursuant to Section 2.1(a) of this Agreement.
Each holder of Turbodyne Delaware Common Stock may exchange his, her or its
Turbodyne Delaware Stock Certificate by delivering it to the Surviving
Corporation duly endorsed in blank (or accompanied by duly executed stock powers
duly endorsed in blank), in each case in proper form for transfer, with
signatures guaranteed, and, if applicable, with all stock transfer and any other
required documentary stamps affixed thereto and with appropriate instructions to
allow the transfer agent to issue certificates for the Turbodyne Nevada Common
Stock to the holder thereof. Until surrendered as contemplated by this Section
2.2, each Turbodyne Delaware Stock Certificate will be deemed at any time after
the Effective Time to represent only the right to receive Turbodyne Nevada
Common Stock certificates representing the number of whole shares of Turbodyne
Nevada Common Stock into which the shares of Turbodyne Delaware Common Stock
formerly represented by such certificate have been converted. Upon receipt of
such duly endorsed Turbodyne Delaware Stock Certificates, the Surviving
Corporation will cause the issuance of the number of shares of Turbodyne Nevada
Common Stock as converted pursuant to Section 2.1(a) of this Agreement.
(b) Turbodyne Delaware Stock Option Conversion Procedure. After the
---------------------------------------------------------
Effective Time, to the extent determined necessary by the Surviving Corporation,
the Surviving Corporation will replace the certificate, agreement or other
documentation evidencing any Turbodyne Delaware Stock Option ("Turbodyne
Delaware Stock Option Agreement") with a new certificate, agreement,
confirmation or other documentation for the purchase or acquisition of the same
number of shares of Turbodyne Nevada Common Stock as were subject to the
Turbodyne Delaware Stock Option on terms as nearly equivalent to those of the
Turbodyne Delaware Stock Option Agreement as may be accomplished under
applicable law (the "Replacement Stock Option"). Any holder of a Turbodyne
Delaware Stock Option may request a Replacement Stock Option by notifying the
Surviving Corporation of such request in writing and including a copy of his,
her or its Turbodyne Delaware Stock Option Agreement. No replacement of a
Turbodyne Delaware Stock Option will be issued until the original Turbodyne
Delaware Stock Option
Agreement and any other documentation deemed reasonably necessary by the
Surviving Corporation is signed and surrendered to the Surviving Corporation by
the holder of the Turbodyne Delaware Stock Option Agreement. Until surrendered
as contemplated by this Section 2.2, each Turbodyne Delaware Stock Option will
be deemed at any time after the Effective Time to represent only the right to
receive a Replacement Stock Option for the same number of shares of Turbodyne
Delaware Common Stock subject to the Turbodyne Delaware Stock Option.
(c) Turbodyne Delaware Warrant Conversion Procedure. After the
---------------------------------------------------
Effective Time, to the extent determined necessary by the Surviving Corporation,
the Surviving Corporation will replace the certificate, agreement or other
documentation evidencing any Turbodyne Delaware Warrant ("Turbodyne Delaware
Warrant Agreement") with a new certificate, agreement, confirmation or other
documentation for the purchase or acquisition of the same number of shares of
Turbodyne Nevada Common Stock as were subject to the Turbodyne Delaware Warrant
on terms as nearly equivalent to those of the Turbodyne Delaware Warrant
Agreement as may be accomplished under applicable law (the "Replacement
Warrant"). Any holder of a Turbodyne Delaware Warrant may request a Replacement
Warrant by notifying the Surviving Corporation of such request in writing and
including a copy of his, her or its Turbodyne Delaware Warrant Agreement. No
replacement of a Turbodyne Delaware Warrant will be issued until the original
Turbodyne Delaware Warrant Agreement and any other documentation deemed
reasonably necessary by the Surviving Corporation is signed and surrendered to
the Surviving Corporation by the holder of the Turbodyne Delaware Warrant
Agreement. Until surrendered as contemplated by this Section 2.2, each
Turbodyne Delaware Warrant will be deemed at any time after the Effective Time
to represent only the right to receive a Replacement Warrant for the same number
of shares of Turbodyne Delaware Common Stock subject to the Turbodyne Delaware
Warrant.
2.3 No Fractional Shares. No fractional shares of Turbodyne Nevada
----------------------
Common Stock will be issued as a result of the Merger. In lieu of any such
fractional shares, each holder of Turbodyne Delaware Common Stock who would
otherwise have been entitled to receive a fraction of a share of Turbodyne
Nevada Common Stock in the Merger will be rounded up to the next nearest whole
number of shares of Turbodyne Nevada Common Stock.
2.4 Appraisal Rights. Notwithstanding any provision of this Agreement
-----------------
to the contrary, shares of Turbodyne Delaware Common Stock ("Dissenting Shares")
that are issued and outstanding immediately prior to the Effective Time and held
by stockholders who did not vote in favor of the Merger and who comply with all
of the relevant provisions of Section 262 of the Delaware Law (the "Dissenting
Stockholders") will not be converted into or be exchangeable for the right to
receive Turbodyne Nevada Common Stock, unless and until such holders will have
failed to perfect or will have effectively withdrawn or lost their rights to
appraisal under the Nevada Law. Turbodyne Delaware will give the Surviving
Corporation (i) immediate oral notice followed by prompt written notice of any
written demands for appraisal of any shares of Turbodyne Delaware Common Stock,
attempted withdrawals of any such demands and any other instruments served
pursuant to the Delaware Law and received by Turbodyne Delaware relating to
stockholders' rights of appraisal, and (ii) will keep the Surviving Corporation
informed of the status of all negotiations and proceedings with respect to
demands for appraisal under the Delaware Law. If any Dissenting Stockholder
fails to perfect or will have effectively withdrawn or lost the right to
appraisal, the shares of Turbodyne Delaware Common Stock held by such Dissenting
Stockholder will thereupon be treated as though such shares had been converted
into the right to receive Turbodyne Nevada Common Stock pursuant to Section 2.1
of this Agreement.
2.5 No Further Ownership Rights in Turbodyne Delaware Stock. The
-------------------------------------------------------------
promise to exchange the Turbodyne Delaware Common Stock for shares of Turbodyne
Nevada Common Stock in accordance with the terms of this Section 2 will be
deemed to have been given in full satisfaction of all rights pertaining to the
Turbodyne Delaware Common Stock, and there will be no further registration of
transfers on the stock transfer books of Turbodyne Delaware of the
shares of Turbodyne Delaware Common Stock that were outstanding immediately
prior to the Effective Time. From and after the Effective Time, the holders of
Turbodyne Delaware Common Stock outstanding immediately prior to the Effective
Time will cease to have any rights with respect to such Turbodyne Delaware
Common Stock, except as otherwise provided in this Agreement or by law.
2.6 Distributions with Respect to Unsurrendered Turbodyne Delaware
-------------------------------------------------------------------
Stock. No dividends or other distributions with a record date after the
- -----
Effective Time will be paid to the holder of any unsurrendered Turbodyne
Delaware Stock Certificate until the surrender of such Turbodyne Delaware Stock
Certificate in accordance with Section 2.2 of this Agreement. Following
surrender of any such Turbodyne Delaware Stock Certificate, the Surviving
Corporation will pay to the holder of the Turbodyne Nevada Common Stock
certificate issued in exchange the Turbodyne Delaware Stock Certificate, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time previously paid with
respect to such Turbodyne Nevada Common Stock which such holder is entitled
pursuant to Section 2.1 of this Agreement, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to such surrender and with a payment date
subsequent to such surrender payable with respect to such Turbodyne Nevada
Common Stock.
2.7 Lost, Stolen or Destroyed Certificates. If any certificate
------------------------------------------
representing Turbodyne Delaware Common Stock, any Turbodyne Delaware Stock
Option Agreement or any Turbodyne Delaware Warrant Agreement has been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such certificate or agreement to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such certificate,
the Surviving Corporation will cause to be issued in exchange for such lost,
stolen or destroyed certificate, the applicable Turbodyne Nevada Common Stock,
Replacement Stock Option or Replacement Warrant deliverable in respect thereof,
pursuant to Section 2.1 of this Agreement.
SECTION 3
MISCELLANEOUS PROVISIONS
3.1 Further Assurances. Each of the parties hereto will cooperate with
------------------
the others and execute and deliver to the other parties hereto such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by any other party hereto as necessary to carry out,
evidence, and confirm the intended purposes of this Agreement.
3.2 Amendment. This Agreement may not be amended except by an
---------
instrument in writing signed by each of the parties.
3.3 Abandonment. At any time before the Effective Date, this Merger
-----------
Agreement may be terminated and the Merger abandoned by either the board of
directors of Turbodyne Delaware or Turbodyne Nevada, or both, notwithstanding
approval of the Merger by the shareholders of Turbodyne Delaware.
3.4 Governing Law. This Agreement will be governed by and construed in
-------------
accordance with the laws of the State of Nevada.
3.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
3.6 Fax Execution. This Agreement may be executed by delivery of
--------------
executed signature pages by fax and such fax execution will be effective for all
purposes.
3.7 Schedules and Exhibits. The schedules and exhibits are attached to
----------------------
this Agreement and incorporated herein.
IN WITNESS WHEREOF, this Merger Agreement, having first been duly approved
by the board of directors of Turbodyne Delaware and Turbodyne Nevada is hereby
executed on behalf of each corporation.
TURBODYNE TECHNOLOGIES, INC.
a Delaware Corporation
/s/ Daniel Black
_________________________
Daniel Black, Chief Executive Officer
TURBODYNE NEVADA, INC.
a Nevada Corporation
/s/ Charles Caverno
_________________________
Charles Caverno, Chief Financial Officer
34
APPENDIX C
TO THE PROXY STATEMENT OF
TURBODYNE TECHNOLOGIES, INC.
FOR ITS 2002 AGM
ARTICLES OF INCORPORATION OF TURBODYNE NEVADA, INC.
Filing Fee: ___________
Receipt #:___________
ARTICLES OF INCORPORATION
(PURSUANT TO NRS 78)
Filed # C14850-02
STATE OF NEVADA June 11, 2002
In the Office of
Secretary of State "Dean Heller"
Dean Heller, Secretary
of State
Article 1. Name
The name of the Corporation is: TURBODYNE NEVADA, INC.
Article 2. Registered Agent
The name of the Resident Agent of the Corporation is Cane & Company, LLC. The
address of the Resident Agent of the Corporation is 2300 West Sahara Avenue,
Suite 500, Box 18, Las Vegas, Nevada 89102.
Article 3. Capital Stock
The aggregate number of shares that the Corporation will have authority to issue
is One Hundred and Fifty-One Million (151,000,000), of which One Hundred and
Fifty Million (150,000,000) shares will be common stock, with a par value of
$0.001 per share, and One Million (1,000,000) shares will be preferred stock,
with a par value of $0.001 per share.
The Preferred Stock may be divided into and issued in series. The Board of
Directors of the Corporation is authorized to divide the authorized shares of
Preferred Stock into one or more series, each of which shall be so designated as
to distinguish the shares thereof from the shares of all other series and
classes. The Board of Directors of the Corporation is authorized, within any
limitations prescribed by law and this Article, to fix and determine the
designations, rights, qualifications, preferences, limitations and terms of the
shares of any series of Preferred Stock including but not limited to the
following.
(a) The rate of dividend, the time of payment of dividends, whether
dividends are cumulative, and the date from which any dividends shall
accrue;
(b) Whether shares may be redeemed, and, if so, the redemption price and
the terms and conditions of redemption;
(c) The amount payable upon shares in the event of voluntary or
involuntary liquidation;
(d) Sinking fund or other provisions, if any, for the redemption or
purchase of shares;
(e) The terms and conditions on which shares may be converted, if the
shares of any series are issued with the privilege of conversion;
(f) Voting powers, if any, provided that if any of the Preferred Stock or
series thereof shall have voting rights, such Preferred Stock or
series shall vote only on a share for share basis with the Common
Stock on any matter, including but not limited to the election of
directors, for which such Preferred Stock or series has such rights;
and
(g) Subject to the foregoing, such other terms, qualifications,
privileges, limitations, options, restrictions, and special or
relative rights and preferences, if any, of shares or such series as
the Board of Directors of the Corporation may, at the time so acting,
lawfully fix and determine under the laws of the State of Nevada.
The Corporation shall not declare, pay or set apart for payment any dividend or
other distribution (unless payable solely in shares of Common Stock or other
class of stock junior to the Preferred Stock as to dividends or upon
liquidation) in respect of Common Stock, or other class of stock junior to the
Preferred Stock, nor shall it redeem, purchase or otherwise acquire for
consideration shares of any of the foregoing, unless dividends, if any, payable
to holders of Preferred Stock for the current period (and in the case of
cumulative dividends, if any, payable to holders of Preferred Stock for the
current period and in the case of cumulative dividends, if any, for all past
periods) have been paid, are being paid or have been set aside for payment, in
accordance with the terms of the Preferred Stock, as fixed by the Board of
Directors.
In the even of the liquidation of the Corporation, holders of Preferred Stock
shall be entitled to receive, before any payment or distribution on the Common
Stock or any other class of stock junior to the Preferred Stock upon
liquidation, a distribution per share in the amount of the liquidation
preference, if any, fixed or determined in accordance with the terms of such
Preferred Stock plus, if so provided in such terms, an amount per share equal to
accumulated and unpaid dividends in respect of such Preferred Stock (whether or
not earned or declared) to the date of such distribution. Neither the sale,
lease or exchange of all or substantially all of the property and assets of the
Corporation, nor any consolidation or merger of the Corporation, shall be deemed
to be a liquidation for the purposes of this Article.
- 2 -
Article 4. Board of Directors
(a) Number of Directors. The number of the directors constituting the
entire Board will be not less than one (1) nor more than fifteen (15) as fixed
from time to time by vote of the majority of the entire Board, provided,
however, that the number of directors will not be reduced so as to shorten the
term of any director at the time in office.
(b) Vacancies. Any vacancies in the Board of Directors for any reason,
and any directorships resulting from any increase in the number of directors,
may be filled by the Board of Directors, acting by a majority of the directors
then in office, although less than a quorum, and any directors so chosen will
hold office during the remainder of the term of office of the resigning
director.
(c) Classified Board of Directors. The directors of the Corporation
shall be divided into three classes, designated Class I, Class II and Class III.
The term of the initial Class I directors shall terminate on the date of the
2004 annual meeting of stockholders; the term of the Class II directors shall
terminate on the date of the 2005 annual meeting of stockholders and the term of
the Class III directors shall terminate on the date of the 2003 annual meeting
of stockholders. At each annual meeting of stockholders beginning in 2003,
successors to the class of directors whose term expires at that annual meeting
shall be elected for a three-year term. If the number of directors is changed,
any increase or decease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as reasonably possible,
and any additional directors of any class elected to fill a vacancy resulting
form an increase in such class shall hold for a term that shall coincide with
the remaining term of that class, but in no case will a decrease in the number
of directors shorten the term of any incumbent directors. A director shall hold
office until the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to prior
death, resignation, retirement, disqualification or removal from office. Any
vacancy on the Board of Directors, however resulting, shall be filled only by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director and not by the stockholders. Any director elected to
fill a vacancy shall hold office for a term that shall coincide with the terms
of the class to which such director shall have been elected.
(d) First Board of Directors. The first Board of Directors will consist
of three (3) member(s) and their names and addresses and their classification
are as follows:
Class I Director
------------------
Name of Director: EUGENE O'HAGAN
Address of Director: P.O. Box 5368
Santa Barbara, CA 93150
- 3 -
Class II Director
-------------------
Name of Director: MANFRED HANNO JANSSEN
Address of Director: Buerenbrucher Weg 34
58239 Schwerte, Germany
Class III Director
--------------------
Name of Director: ANDREW MARTYN-SMITH
Address of Director: 1106 Coast Village Road
Santa Barbara, CA 93108
Article 5. Purpose
The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under NRS 78.
Article 6. Acquisition of Controlling Interest
The Corporation elects not to be governed by NRS 78.378 to 78.3793, inclusive.
Article 7. Combinations with Interest Stockholders
The Corporation elects not to be governed by NRS 78.411 to 78.444, inclusive.
Article 8. Liability
To the fullest extent permitted by NRS 78, a director or officer of the
Corporation will not be personally liable to the Corporation or its stockholders
for damages for breach of fiduciary duty as a director or officer, provided that
this article will not eliminate or limit the liability of a director or officer
for:
(a) acts or omissions which involve intentional misconduct, fraud or a
knowing violation of law; or
(b) the payment of distributions in violation of NRS 78.300, as amended.
- 4 -
Any amendment or repeal of this Article 7 will not adversely affect any right or
protection of a director of the Corporation existing immediately prior to such
amendment or repeal.
Article 9. Indemnification
(a) Right to Indemnification. The Corporation will indemnify to the
fullest extent permitted by law any person (the "Indemnitee") made or threatened
to be made a party to any threatened, pending or completed action or proceeding,
whether civil, criminal, administrative or investigative (whether or not by or
in the right of the Corpora-tion) by reason of the fact that he or she is or was
a director of the Corporation or is or was serving as a director, officer,
employee or agent of another entity at the request of the Corporation or any
predecessor of the Corporation against judgments, fines, penalties, excise
taxes, amounts paid in settlement and costs, charges and expenses (including
attorneys' fees and disbursements) that he or she incurs in connection with such
action or proceeding.
(b) Inurement. The right to indemnifi-cation will inure whether or not
the claim asserted is based on matters that predate the adoption of this Article
8, will continue as to an Indemnitee who has ceased to hold the position by
virtue of which he or she was entitled to indemnification, and will inure to the
benefit of his or her heirs and personal representatives.
(c) Non-exclusivity of Rights. The right to indemnification and to the
advancement of expenses conferred by this Article 9 are not exclusive of any
other rights that an Indemnitee may have or acquire under any statute, bylaw,
agreement, vote of stockholders or disinterested directors, this Certificate of
Incorporation or otherwise.
(d) Other Sources. The Corporation's obligation, if any, to indemnify
or to advance expenses to any Indemnitee who was or is serving at its request as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, enterprise or other entity will be reduced by any amount
such Indemnitee may collect as indemnification or advancement of expenses from
such other entity.
(e) Advancement of Expenses. The Corporation will, from time to time,
reimburse or advance to any Indemnitee the funds necessary for payment of
expenses, including attorneys' fees and disbursements, incurred in connection
with defending any proceeding for which he or she is indemnified by the
Corporation, in advance of the final disposition of such proceeding; provided
that the Corporation has received the undertaking of such director or officer to
repay any such amount so advanced if it is ultimately determined by a final and
unappealable judicial decision that the director or officer is not entitled to
be indemnified for such expenses.
- 5 -
SIGNATURES OF INCORPORATORS
The names and address of each of the incorporator(s) signing the Articles of
Incorporation:
/s/ Michael A. Cane
Signature of Incorporator: _____________________________
Name of Incorporator: MICHAEL A. CANE
Address of Incorporator: 2300 West Sahara Avenue, Suite 500, Box 18
Las Vegas, NV 89102
This instrument was acknowledged before me on the 7th day of June, 2002 by
____
MICHAEL A. CANE as incorporator of TURBODYNE NEVADA, INC.
Signature of Notary Public: /s/ Cynthia J. Reed
Name of Notary Public: Cynthia J. Reed
_____________________________
CERTIFICATE OF ACCEPTANCE BY APPOINTMENT OF RESIDENT AGENT
CANE & COMPANY, LLC, hereby accepts appointment as Resident Agent for the above
name corporation.
Signature of Authorized
Signatory for Resident Agent: /s/ Michael Cane
_____________________________
Name of Authorized Signatory: Michael A. Cane
_____________________________
Date: June 7, 2002
_____________________________
- 6 -
<Page>
State of Nevada
Secretary of State
I hereby certify that this true and
complete copy of the document as filed
in this office.
June 12, 2002
"Official Seal of State of Nevada"
"Dean Heller"
By /s/ Signature
-------------------------------
35
APPENDIX D
TO THE PROXY STATEMENT OF
TURBODYNE TECHNOLOGIES, INC.
FOR ITS 2002 AGM
BYLAWS OF TURBODYNE NEVADA, INC.
BYLAWS
OF
TURBODYNE NEVADA, INC.
(A NEVADA CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of TURBODYNE NEVADA,
INC. (the "Corporation") in the State of Nevada shall be in the City of Las
Vegas, State of Nevada.
Section 2. Other Offices. The Corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Nevada as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the Corporation and the inscription, "Corporate
Seal-Nevada." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
Section 4. Place of Meetings. Meetings of the stockholders of the
Corporation shall be held at such place, either within or without the State of
Nevada, as may be designated from time to time by the Board of Directors, or, if
not so designated, then at the office of the Corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meeting.
(a) The annual meeting of the stockholders of the Corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from
1
the date contemplated at the time of the previous year's proxy statement, notice
by the stockholder to be timely must be so received not earlier than the close
of business on the ninetieth (90th) day prior to such annual meeting and not
later than the close of business on the later of the sixtieth (60th) day prior
to such annual meeting or, in the event public announcement of the date of such
annual meeting is first made by the Corporation fewer than seventy (70) days
prior to the date of such annual meeting, the close of business on the tenth
(10th) day following the day on which public announcement of the date of such
meeting is first made by the Corporation. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his capacity as a proponent to a stockholder proposal.
Notwithstanding the foregoing, in order to include information with respect to a
stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, stockholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he should
so determine, he shall so declare at the meeting that any such business not
properly brought before the meeting shall not be transacted.
(c) Only persons who are confirmed in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the Corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stock-holder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business address and
residence address of such person, (B) the principal occupation or employment of
such person, (c) the class and number of shares of the Corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder, and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to Regulation 14A
under the 1934 Act (including without limitation such person's written consent
to being named in the proxy statement, if any, as a nominee and to serving as a
director if elected); and (ii) as to such stockholder giving notice, the
information required to be provided pursuant to paragraph (b) of this Section 5.
At the request of the Board of Directors, any person nominated by a stockholder
for election as a director shall furnish to the Secretary of the Corporation
that information required to be set forth in the stockholder's notice of
nomination which pertains to the nominee. No person shall be eligible for
election as a director of the Corporation unless nominated in accordance with
the procedures set forth in this paragraph (c). The chairman of the meeting
shall, if the facts warrant, determine and declare at the meeting that a
nomination was not made in accordance with the procedures prescribed by these
Bylaws, and if he should so determine, he shall so declare at the meeting, and
the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
2
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the Corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption), and shall be held at such place, on such date, and at
such time as the Board of Directors, shall determine.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by tele-graphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the Corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within
sixty (60) days after the receipt of the request, the person or persons
requesting the meeting may set the time and place of the meeting and give the
notice. Nothing contained in this paragraph (b) shall be construed as limiting,
fixing, or affecting the time when a meeting of stockholders called by action of
the Board of Directors may be held.
Section 7. Notice of Meetings. Except as otherwise provided by law or the
Articles of Incorporation, written notice of each meeting of stockholders shall
be given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each stockholder entitled to vote at such meeting, such notice to
specify the place, date and hour and purpose or purposes of the meeting. Notice
of the time, place and purpose of any meeting of stockholders may be waived in
writing, signed by the person entitled to notice thereof, either before or after
such meeting, and will be waived by any stockholder by his attendance thereat in
person or by proxy, except when the stockholder attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Articles of Incorporation, or by these
Bylaws, the presence, in person or by proxy duly authorized, of the holder or
holders of not less than one-third (33 1/3%) of the outstanding shares of stock
entitled to vote shall constitute a quorum for the transaction of business. In
the absence of a quorum, any meeting of stockholders may be adjourned, from time
to time, either by the chairman of the meeting or by vote of the holders of a
majority of the shares represented thereat, but no other business shall be
transacted at such meeting. The stockholders present at a duly called or
convened meeting, at which a quorum is present, may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. Except as otherwise provided by law,
the Articles of Incorporation or these Bylaws, all action taken by the holders
of a majority of the votes cast, excluding abstentions, at any meeting at which
a quorum is present shall be valid and binding upon the Corporation; provided,
however, that directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Articles of Incorporation or these Bylaws, a majority of the outstanding shares
of such class or classes or series, present in person or represented by proxy,
shall constitute a quorum entitled to take action with respect to that vote on
that matter and, except where otherwise provided by the statute or by the
Articles of Incorporation or these Bylaws, the affirmative vote of the majority
(plurality, in the case of the election of directors) of the votes cast,
including abstentions, by the holders of shares of such class or classes or
series shall be the act of such class or classes or series.
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the
3
vote of a majority of the shares casting votes, excluding abstentions. When a
meeting is adjourned to another time or place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the Corporation may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days or if after the adjournment
a new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the Corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Nevada law. An
agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
Section 11. Joint Owners of Stock. If shares or other securities
having voting power stand of record in the names of two (2) or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety, or otherwise, or if two (2) or more persons have the
same fiduciary relationship respecting the same shares, unless the Secretary is
given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(a) if only one (1) votes, his act binds all; (b) if more than one (1) votes,
the act of the majority so voting binds all; (c) if more than one (1) votes, but
the vote is evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Nevada Court of
Chancery for relief as provided in the General Corporation Law of Nevada,
Section 217(b). If the instrument filed with the Secretary shows that any such
tenancy is held in unequal interests, a majority or even-split for the purpose
of subsection (c) shall be a majority or even-split in interest.
Section 12. List of Stockholders. The Secretary shall prepare and
make, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at said meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, or by the written consent of the shareholders in
accordance with Chapter 78 of the Nevada Revised Statutes.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the Corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for
4
maintaining order at the meeting and the safety of those present, limitations on
participation in such meeting to stockholders of record of the Corporation and
their duly authorized and constituted proxies and such other persons as the
chairman shall permit, restrictions on entry to the meeting after the time fixed
for the commencement thereof, limitations on the time allotted to questions or
comments by participants and regulation of the opening and closing of the polls
for balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number and Qualification. The authorized number of
directors of the Corporation shall be not less than one (1) nor more than twelve
(12) as fixed from time to time by resolution of the Board of Directors;
provided that no decrease in the number of directors shall shorten the term of
any incumbent directors. Directors need not be stockholders unless so required
by the Articles of Incorporation. If for any cause, the directors shall not
have been elected at an annual meeting, they may be elected as soon thereafter
as convenient at a special meeting of the stockholders called for that purpose
in the manner provided in these Bylaws.
Section 16. Powers. The powers of the Corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Articles of
Incorporation.
Section 17. Election and Term of Office of Directors. Members of the
Board of Directors shall hold office for the terms specified in the Articles of
Incorporation, as it may be amended from time to time, and until their
successors have been elected as provided in the Articles of Incorporation.
Section 18. Vacancies. Unless otherwise provided in the Articles of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholder vote, be filled
only by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A
vacancy in the Board of Directors shall be deemed to exist under this Bylaw in
the case of the death, removal or resignation of any director.
Section 19. Resignation. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When
one or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each director so chosen shall hold office for the unexpired
portion of the term of the director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
Section 20. Removal. Subject to the Articles of Incorporation, any
director may be removed by:
(a) the affirmative vote of the holders of a majority of the
outstanding shares of the Corporation then entitled to vote, with or without
cause; or
5
(b) the affirmative and unanimous vote of a majority of the directors
of the Corporation, with the exception of the vote of the directors to be
removed, with or without cause.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately after the annual meeting of stockholders and at the
place where such meeting is held. No notice of an annual meeting of the Board
of Directors shall be necessary and such meeting shall be held for the purpose
of electing officers and transacting such other business as may lawfully come
before it.
(b) Regular Meetings. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
Corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Articles of Incorporation, regular meetings of the
Board of Directors may also be held at any place within or without the state of
Nevada which has been designated by resolution of the Board of Directors or the
written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Articles of
Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Nevada whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
facsimile, telegraph or telex, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) Waiver of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 22. Quorum and Voting.
(a) Unless the Articles of Incorporation requires a greater number and
except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Articles of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Articles of Incorporation provided, however, at any meeting whether a
quorum be present or otherwise, a majority of the directors present may adjourn
from time to time until the time fixed for the next regular meeting of the Board
of Directors, without notice other than by announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Articles of Incorporation or these Bylaws.
6
Section 23. Action Without Meeting. Unless otherwise restricted by
the Articles of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees and Compensation. Directors shall be entitled to
such compensation for their services as may be approved by the Board of
Directors, including, if so approved, by resolution of the Board of Directors, a
fixed sum and expenses of attendance, if any, for attendance at each regular or
special meeting of the Board of Directors and at any meeting of a committee of
the Board of Directors. Nothing herein contained shall be construed to preclude
any director from serving the Corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors appoint an Executive
Committee to consist of one (1) or more members of the Board of Directors. The
Executive Committee, to the extent permitted by law and provided in the
resolution of the Board of Directors shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and
affairs of the Corporation, including without limitation the power or authority
to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Articles of Incorporation (except that a committee may, to the extent authorized
in the resolution or resolutions providing for the issuance of shares of stock
adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the Corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
Corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), adopting an agreement of
merger or consolidation, recommending to the stockholders the sale, lease or
exchange of all or substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the bylaws of the Corporation.
(b) Other Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, from time to time appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times
7
and places as are determined by the Board of Directors, or by any such
committee, and when notice thereof has been given to each member of such
committee, no further notice of such regular meetings need be given thereafter.
Special meetings of any such committee may be held at any place which has been
determined from time to time by such committee, and may be called by any
director who is a member of such committee, upon written notice to the members
of such committee of the time and place of such special meeting given in the
manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends such special meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
Section 26. Organization. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the Corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer, the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Direction. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the Corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the Corporation shall be fixed by or in the manner designated by the Board of
Directors.
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the Corporation,
the President shall be the chief executive officer of the Corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the Corporation. The
8
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the Corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the Corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the Corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order
of the Board of Directors, shall have the custody of all funds and securities of
the Corporation. The Chief Financial Officer shall perform other duties
commonly incident to his office and shall also perform such other duties and
have such other powers as the Board of Directors or the President shall
designate from time to time. The President may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume and
perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
Section 29. Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the Corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
Section 32. Execution of Corporate Instrument. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute
9
on behalf of the Corporation any corporate instrument or document, or to sign on
behalf of the Corporation the corporate name without limitation, or to enter
into contracts on behalf of the Corporation, except where otherwise provided by
law or these Bylaws, and such execution or signature shall be binding upon the
Corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the Corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock
owned by the Corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiting the corporate signature, but not
requiring the corporate seal, may be executed as aforesaid or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the Corporation or in special accounts of the Corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the Corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting of Securities Owned by the Corporation. All
stock and other securities of other corporations owned or held by the
Corporation for itself, or for other parties in any capacity, shall be voted,
and all proxies with respect thereto shall be executed, by the person authorized
so to do by resolution of the Board of Directors, or, in the absence of such
authorization, by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 34. Form and Execution of Certificates. Certificates for the
shares of stock of the Corporation shall be in such form as is consistent with
the Articles of Incorporation and applicable law. Every holder of stock in the
Corporation shall be entitled to have a certificate signed by or in the name of
the Corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
Corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the Corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the Corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
Corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
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Section 35. Lost Certificates. A new certificate or certificates
shall be issued in place of any certificate or certificates theretofore issued
by the Corporation alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate of
stock to be lost, stolen, or destroyed. The Corporation may require, as a
condition precedent to the issuance of a new certificate or certificates, the
owner of such lost, stolen, or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
or to give the Corporation a surety bond in such form and amount as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen, or destroyed.
Section 36. Transfers.
(a) Transfers of record of shares of stock of the Corporation shall be
made only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The Corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the Corporation to restrict the transfer of shares of stock of the Corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Nevada.
Section 37. Fixing Record Dates.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is filed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution of Other Securities. All bonds, debentures and
other corporate securities of the Corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the
11
Board of Directors, and the corporate seal impressed thereon or a facsimile of
such seal imprinted thereon and attested by the signature of the Secretary or an
Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant
Treasurer; provided, however, that where any such bond, debenture or other
corporate security shall be authenticated by the manual signature, or where
permissible facsimile signature, of a trustee under an indenture pursuant to
which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the Corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the Corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the Corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration of Dividends. Dividends upon the capital stock
of the Corporation, subject to the provisions of the Articles of Incorporation,
if any, may be declared by the Board of Directors pursuant to law at any regular
or special meeting. Dividends may be paid in cash, in property, or in shares of
the capital stock, subject to the provisions of the Articles of Incorporation.
Section 41. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the Corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the Corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a) Directors Officers. The Corporation shall indemnify its directors
and officers to the fullest extent not prohibited by the Nevada General
Corporation Law; provided, however, that the Corporation may modify the extent
of such indemnification by individual contracts with its directors and officers;
and, provided, further, that the Corporation shall not be required to indemnify
any director or officer in connection with any proceeding (or part thereof)
initiated by such person unless (i) such indemnification is expressly required
to be made by law, (ii) the proceeding was authorized by the Board of Directors
of the Corporation, (iii) such
12
indemnification is provided by the Corporation, in its sole discretion, pursuant
to the powers vested in the Corporation under the Nevada General Corporation Law
or (iv) such indemnification is required to be made under subsection (d).
(b) Employees and Other Agents. The Corporation shall have power to
indemnify its employees and other agents as set forth in the Nevada General
Corporation Law.
(c) Expense. The Corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or officer, of
the Corporation, or is or was serving at the request of the Corporation as a
director or executive officer of another corporation, partnership, joint
venture, trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request therefor, all expenses incurred by any
director or officer in connection with such proceeding upon receipt of an
undertaking by or on behalf of such person to repay said mounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the Corporation to an
officer of the Corporation (except by reason of the fact that such officer is or
was a director of the Corporation in which event this paragraph shall not apply)
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
Corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this Bylaw shall be deemed to be contractual rights and be effective to
the same extent and as if provided for in a contract between the Corporation and
the director or officer. Any right to indemnification or advances granted by
this Bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if (i) the
claim for indemnification or advances is denied, in whole or in part, or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid also the expense of prosecuting his claim. In
connection with any claim for indemnification, the Corporation shall be entitled
to raise as a defense to any such action that the claimant has not met the
standard of conduct that make it permissible under the Nevada General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed. In connection with any claim by an officer of the Corporation (except
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such officer is or was a director of
the Corporation) for advances, the Corporation shall be entitled to raise a
defense as to any such action clear and convincing evidence that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed in the best interests of the Corporation, or with respect to any
criminal action or proceeding that such person acted without reasonable cause to
believe that his conduct was lawful. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the Nevada
General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct. In any suit brought by a director or
officer to enforce a right to indemnification or to an advancement of expenses
hereunder, the burden of proving that the director or officer is not entitled to
be indemnified, or to such advancement of expenses, under this Article XI or
otherwise shall be on the Corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of
13
the Articles of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The Corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Nevada General Corporation
Law.
(f) Survival of Rights. The rights conferred on any person by this Bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Nevada General
Corporation Law, the Corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only be
prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the Corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each director and officer to the full
extent not prohibited by any applicable portion of this Bylaw that shall not
have been invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(i) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony
in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative.
(ii) The term "expenses" shall be broadly construed and shall include,
without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of
any nature or kind incurred in connection with any proceeding.
(iii) The term the "Corporation" shall include, in addition to the
resulting Corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority
to indemnify its directors, officers, and employees or agents, so that any
person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent or
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Bylaw with
respect to the resulting or surviving corporation as he would have with
respect to such constituent corporation if its separate existence had
continued.
(iv) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the Corporation shall include, without
limitation, situations where such person is serving at the request of the
Corporation as, respectively, a director, executive officer, officer,
employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
(v) References to "other enterprises" shall include employee benefit
plans; references to "fines" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving
at the request of the Corporation" shall include any service as a director,
officer, employee or agent of the Corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries;
and a person who acted in good faith and in a manner he reasonably believed
to be in
14
the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the Corporation" as referred to in this Bylaw.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the Corporation or its transfer agent.
(b) Notice to directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the Corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure to Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent him in the
manner above provided, shall not be affected or extended in any manner by the
failure of such stockholder or such director to receive such notice.
(g) Notice to Person with Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Articles of
Incorporation or Bylaws of the Corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
require and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action
or meeting which shall be taken or held without notice to any such person with
whom communication is unlawful shall have the same force and effect as if such
notice had been duly given. In the event that the action taken by the
Corporation is such as to require the filing of a certificate under any
provision of the Nevada General Corporation Law, the certificate shall state, if
such is the fact and if notice is required, that notice was given to all persons
entitled to receive notice except such persons with whom communication is
unlawful.
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Articles of
Incorporation or Bylaws of the Corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities
15
during a twelve-month period, have been mailed addressed to such person at his
address as shown on the records of the Corporation and have been returned
undeliverable, the giving of such notice to such person shall not be required.
Any action or meeting which shall be taken or held without notice to such person
shall have the same force and effect as if such notice had been duly given. If
any such person shall deliver to the Corporation a written notice setting forth
his then current address, the requirement that notice be given to such person
shall be reinstated. In the event that the action taken by the Corporation is
such as to require the filing of a certificate under any provision of the Nevada
General Corporation Law, the certificate need not state that notice was not
given to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
AMENDMENTS
Section 45. Amendments.
The Board of Directors shall have the power to adopt, amend, or repeal
Bylaws as set forth in the Articles of Incorporation.
ARTICLE XIV
LOANS TO OFFICERS
Section 46. Loans to Officers. The Corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the Corporation or of its subsidiaries, including any officer or employee who
is a Director of the Corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the Corporation. The loan, guarantee or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including, without limitation, a pledge
of shares of stock of the Corporation. Nothing in these Bylaws shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the Corporation
at common law or under any statute.
Declared as the By-Laws of TURBODYNE NEVADA, INC. as of the 11th day of
June, 2002.
Signature of Officer: /s/ Daniel Black
________________________
Name of Officer: DANIEL BLACK
Position of Officer: PRESIDENT
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36
APPENDIX E
TO THE PROXY STATEMENT OF
TURBODYNE TECHNOLOGIES, INC.
FOR ITS 2002 AGM
ARTICLE 262 OF THE DELAWARE GENERAL CORPORATION LAW
DELAWARE APPRAISAL RIGHTS
APPENDIX E
DELAWARE GENERAL CORPORATION LAW SECTION 262
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to the provisions of
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with the provisions of subsection (d) of this section and
who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a
non-stock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest of a
member of a non-stock corporation; and the words "depository receipt" mean a
receipt or other instrument issued by a depository representing an interest in
one or more shares, or fractions thereof, solely of stock of a corporation,
which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sections 251 (other than a merger effected pursuant to
section 251(g) of this title), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in respect
thereof) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
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d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) and (c) hereof that appraisal rights are available for any or
all of the shares of the constituent corporations, and shall include in such
notice a copy of this section. Each stockholder electing to demand the appraisal
of such stockholder's shares shall deliver to the corporation, before the taking
of the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not constitute
such a demand. A stockholder electing to take such action must do so by a
separate written demand as herein provided. Within 10 days after the effective
date of such merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who has complied
with the provisions of this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to section
228 or section 253 of this title, then, either a constituent corporation before
the effective date of the merger or consolidation, or the surviving or resulting
corporation within ten days thereafter, shall notify each of the holders of any
class or series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the effective date
of the merger or consolidation, shall, also notify such stockholders of the
effective date of the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation the appraisal of
such holder's shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such notice
did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent corporation
that are entitled to appraisal rights of the effective date of the
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merger or consolidation or (ii) the surviving or resulting corporation shall
send such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more than
20 days following the sending of the first notice, such second notice need only
be sent to each stockholder who is entitled to appraisal rights and who has
demanded appraisal of such holder's shares in accordance with this subsection.
An affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with the provisions of subsections (a) and (d) hereof and who is
otherwise entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days after
the effective date of the merger or consolidation, any stockholder shall have
the right to withdraw such stockholder's demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within 120 days after the
effective date of the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) hereof, upon written request,
shall be entitled to receive from the corporation surviving the merger or
resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with the provisions of this section and who have
become entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock represented by
certificates to submit their certificates of stock to the Register in Chancery
for notation
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thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
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TURBODYNE TECHNOLOGIES INC.
PROXY
FOR THE 2002 ANNUAL MEETING OF THE STOCKHOLDERS OF TURBODYNE TECHNOLOGIES INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints MANFRED HANNO JANSSEN and DANIEL BLACK with full
power of substitution as proxy to vote the shares which the undersigned is
entitled to vote at the 2002 annual meeting of Turbodyne Technologies, Inc., a
Delaware corporation (the "Company") to be held at the Four Seasons Hotel, 1260
Channel Drive, Santa Barbara, California 93108 on July 16, 2002 at 1:00 p.m.
Pacific Time, and at any adjournments thereof.
Please mark your votes as indicated: [X]
This proxy when properly signed will be voted in the manner directed herein by
the undersigned stockholder.
IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF THE ELECTION OF
THE NAMED NOMINEES TO THE BOARD OF DIRECTORS, THE INCREASE IN AUTHORIZED COMMON
STOCK, THE STOCK OPTION PLAN, THE MERGER WITH TURBODYNE NEVADA, INC. IN ORDER TO
CHANGE THE COMPANY'S JURISDICTION FROM DELAWARE TO NEVADA AND THE RATIFICATION
OF BDO DUNWOODY LLP AS INDEPENDENT PUBLIC ACCOUNTANTS.
1. Election Of Directors: Nominees - MANFRED HANNO JANSSEN, EUGENE O'HAGAN
and ANDREW MARTYN-SMITH
FOR Election WITHOLD Election For All Nominees Except those
of nominees of nominees Written on the Lines Below
[__] [__] [__] __________________
__________________
2. Increase the Number of Shares of Authorized Common Stock to 150,000,000
Shares
FOR Increase NOT FOR Increase ABSTAIN
[__] [__] [__]
3. 2002 Stock Option Plan
FOR Stock Option Plan NOT FOR Stock Option Plan ABSTAIN
[__] [__] [__]
4. Merger by and between the Company and Turbodyne Nevada, Inc. in order to
change the Company's state of incorporation from Delaware to Nevada and the
subsequent name change of Turbodyne Nevada, Inc. to Turbodyne Technologies Inc.
FOR Merger NOT FOR Merger ABSTAIN
[__] [__] [__]
5. Ratify the selection of BDO Dunwoody, as independent public accountants
FOR Ratification NOT FOR Ratification ABSTAIN
[__] [__] [__]
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting.
IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
Total Number of Shares Held: _________________________ Shares
Please Print Name: _______________________________
Date: __________________________, 2002
_______________________________
Signature of Stockholder
_______________________________
Signature of Stockholder, if held jointly