FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of March, 1998
TURBODYNE TECHNOLOGIES INC.
---------------------------
(Translation of registrant's name into English)
SUITE 510, 1090 WEST PENDER STREET, VANCOUVER, BC, CANADA, V6E 2N7
------------------------------------------------------------------
(Address of principal executive offices)
[Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
-------- ---------
[Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes No X
--------- --------
[If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b):82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TURBODYNE TECHNOLOGIES INC.
---------------------------
Registrant
MARCH 1998 /S/ANDREW LEE
- -------------------- ---------------------------
Date Signature
ANDREW LEE
---------------------------
Name
CORPORATE SECRETARY
---------------------------
Title
*Print the name and title of the signing officer under his signature
<PAGE>
TURBODYNE TECHNOLOGIES INC.
NOTICE OF MEETING
AND
PROXY CIRCULAR
FOR THE
EXTRAORDINARY GENERAL MEEING
TO BE HELD ON
FEBRUARY 27, 1998
<PAGE>
TURBODYNE TECHNOLOGIES INC.
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
==============================================================================
NOTICE is hereby given that an Extraordinary General Meeting of the
shareholders of Turbodyne Technologies Inc. (the "Company") will be held in
the Stanley Room at The Hyatt Regency Hotel, 655 Burrard Street, Vancouver,
British Columbia, on Friday, February 27, 1998 at 2:00 p.m. for the
following purposes:
1. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that the Company make application
to the Secretary of State for the State of Delaware for a Certificate
of Domestication continuing the Company from the Canadian federal
jurisdiction and domesticating the Company under the General
Corporation Law of the State of Delaware;
2. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that the Company make application
to the Director under the CANADA BUSINESS CORPORATIONS ACT for the
issue of a Certificate of Discontinuance in connection with the
continuation of the Company to the State of Delaware.
3. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that the Company adopt the
Certificate of Incorporation in the form submitted to the meeting,
together with such amendments approved by the Board of Directors of
the Company, in substitution for the existing Certificate of
Continuance, Articles of Continuance and Articles of Amendment of the
Company upon the continuation of the Company to the State of Delaware.
4. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that the Company file the
Certificate of Incorporation with the Secretary of State for the State
of Delaware concurrently with the domestication of the Company under
the General Corporation Law of the State of Delaware.
5. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that the Company adopt the By-laws
in the form submitted to the Meeting in place of the Company's
existing By-laws upon continuation of the Company from the Canadian
federal jurisdiction and domestication under Delaware law.
<PAGE>
6. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that the authorized capital of the
Company be altered as follows upon continuance of the Company from the
Canadian federal jurisdiction and domestication under Delaware law:
(a) the common shares without par value of the Company be
redesignated as common shares with a "par value of $0.001
per share";
(b) the authorized number of common shares of the Company be
reduced from 100,000,000 common shares to 60,000,000 common
shares;
(c) the Class A Preference Shares of the Company be redesignated
as Preferred Stock with a par value of $0.001 per share and
the authorized number of shares of Preferred Stock be
reduced to 1,000,000 shares;
(d) the authorized 100,000,000 Class B Preference Shares of the
Company, none of which have been issued or are outstanding,
be canceled.
7. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that the 10,000 designated and
issued Series One Convertible Class A Preference Shares be
redesignated as Series A Preferred Stock with a par value of $0.001
per share;
8. To consider and, if deemed advisable, pass the following special
resolution:
"RESOLVED, as a special resolution, that all designated Series Two
Convertible Class A Preference Shares, if any, be redesignated as
Series B Preferred Stock with a par value of $0.001 per share.
9. To approve that the directors and officers of the Company be
authorized to do such further acts and file such further documents as
may be necessary to give full effect to the foregoing; and
10. To approve that the directors may, in their sole discretion, elect not
to act on or carry out these special resolutions without further
approval of the shareholders of the Company."
The Company will be seeking the approval of each of the above resolutions
by Special Resolution of the shareholders of the Company by the following
separate votes:
1. First, by the vote of all shareholders of the Company, including the
holders of the outstanding common shares of the Company, the holders
of Series One Convertible Class A Preference Shares and the holders of
Series Two Convertible Class A Preference Shares, if any;
Page 2
<PAGE>
2. Second, by the class vote of all shareholders of the Company holding
common shares of the Company;
3. Third, by the class vote of all shareholders of the Company holding
Series One Convertible Class A Preference Shares and Series Two
Convertible Class A Preference Shares, if any;
4. Fourth, by the series vote of all shareholders of the Company holding
Series One Convertible Class A Preference Shares;
5. Fifth, by the series vote of all shareholders of the Company holding
Series Two Convertible Class A Preference Shares, if any.
* THE COMPANY IS IN THE PROCESS OF FINALIZING A FINANCING TO BE
COMPLETED BY THE ISSUE OF UP TO 10,000 SERIES TWO CONVERTIBLE CLASS A
PREFERENCE SHARES. THE COMPANY ANTICIPATES FILING ARTICLES OF AMENDMENT
PRIOR TO THE MEETING AS REQUIRED TO DESIGNATE THE SERIES TWO CONVERTIBLE
CLASS A PREFERENCE SHARES.
TAKE NOTICE that pursuant to the CANADA BUSINESS CORPORATIONS ACT you may
until the time of the Meeting or at the Meeting give the Company a Notice
of Objection to the Special Resolutions to approve, among other things, the
continuation of the Company. Any Notice of Objection may delivered to the
registered office of the Company at Suite 1880, 1055 West Georgia Street,
Vancouver, British Columbia, Canada V6E 3P3. As a result of giving a
Notice of Objection you must, on receiving a Notice of Adoption of the
Special Resolution under Section 190 of the Act, require the Company to
purchase all your shares in respect of which the Notice of Objection was
given by complying with the procedure set forth in Section 190 of the Act.
Shareholders unable to attend the Annual General Meeting in person are
requested to read the enclosed Proxy Circular and Proxy, and then complete
and deposit the Proxy together with the power of attorney or other
authority, if any, under which it was signed or a notarially certified copy
thereof with the Company's transfer agent, Montreal Trust Company of
Canada, of 510 Burrard Street, Vancouver, British Columbia, V6C 3B9 at
least 48 hours (excluding Saturdays, Sundays and statutory holidays) before
the time of the meeting or adjournment thereof or with the chairman of the
meeting prior to the commencement thereof. Unregistered shareholders who
received the Proxy through an intermediary must deliver the Proxy in
accordance with the instructions given by such intermediary.
DATED at Vancouver, British Columbia, this 23th day of January, 1998.
ON BEHALF OF THE BOARD OF DIRECTORS
"LEON E. NOWEK"
Leon E. Nowek
Chief Financial Officer and Director
Page 3
<PAGE>
TURBODYNE TECHNOLOGIES INC .
PROXY CIRCULAR
==========================================================================
THIS PROXY CIRCULAR CONTAINS INFORMATION AS AT JANUARY 6, 1998.
I. PERSONS MAKING THIS SOLICITATION OF PROXIES
THIS PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION OF
PROXIES BY THE MANAGEMENT OF TURBODYNE TECHNOLOGIES INC. (THE "COMPANY")
FOR USE AT THE EXTRAORDINARY GENERAL MEETING (THE "MEETING") OF THE
SHAREHOLDERS OF THE COMPANY TO BE HELD AT THE TIME AND PLACE AND FOR THE
PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING, AND AT ANY
ADJOURNMENT THEREOF. It is expected that the solicitation will be
primarily by mail. Proxies may also be solicited personally by employees
of the Company. The cost of solicitation will be borne by the Company.
II. COMPLETION AND VOTING OF PROXIES
Voting at the Meeting will be by a show of hands, each shareholder having
one vote, unless a poll is requested or required (if the number of shares
represented by proxies that are to be voted against a motion are greater
than 5% of the votes that could be cast at the Meeting), in which case each
shareholder is entitled to one vote for each share held. The motions to be
approved at the Meeting require approval by the shareholders by special
resolution, being a vote of the shareholders approved by a majority of
66-2/3% of the votes cast in favour of the special resolution.
The persons named in the accompanying Proxy as proxyholders are directors
or senior officers of the Company. A SHAREHOLDER OR AN INTERMEDIARY
HOLDING SHARES AND ACTING ON BEHALF OF AN UNREGISTERED SHAREHOLDER HAS THE
RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT
ON HIS BEHALF AT THE MEETING OTHER THAN THE PERSONS NAMED IN THE PROXY AS
PROXYHOLDERS. TO EXERCISE THIS RIGHT, THE SHAREHOLDER OR INTERMEDIARY MUST
STRIKE OUT THE NAMES OF THE PERSONS NAMED IN THE PROXY AS PROXYHOLDERS AND
INSERT THE NAME OF HIS NOMINEE IN THE SPACE PROVIDED OR COMPLETE ANOTHER
PROXY.
A shareholder or intermediary acting on behalf of a shareholder may
indicate the manner in which the persons named in the enclosed Proxy are to
vote with respect to any matter by checking the appropriate space. On any
poll required by virtue of 5% or more of the outstanding shares of the
Company being represented by proxies at the Meeting that are to be voted
against a matter or by a shareholder or proxyholder requesting a poll,
those persons will vote or withhold from voting the shares in respect of
which they are appointed in accordance with the directions, if any, given
in the Proxy provided such directions are certain.
<PAGE>
If the shareholder or intermediary acting on behalf of a shareholder wishes
to confer a discretionary authority with respect to any matter, then the
space should be left blank. IN SUCH INSTANCE, THE PROXYHOLDER, IF ONE
PROPOSED BY MANAGEMENT, INTENDS TO VOTE THE SHARES REPRESENTED BY THE PROXY
IN FAVOUR OF THE MOTION. The enclosed Proxy, when properly signed, also
confers discretionary authority with respect to amendments or variations to
the matters identified in the Notice of Meeting and with respect to other
matters which may be properly brought before the Meeting. At the time of
printing this Circular, the management of the Company is not aware that any
such amendments, variations or other matters are to be presented for action
at the Meeting. If, however, other matters which are not now known to the
management should properly come before the Meeting, the Proxies hereby
solicited will be exercised on such matters in accordance with the best
judgement of the nominees.
The Proxy must be dated and signed by the shareholder or by his attorney
authorized in writing or by the intermediary acting on behalf of a
shareholder. In the case of a corporation, the Proxy must be executed
under its corporate seal or signed by a duly authorized officer or attorney
for the corporation.
COMPLETED PROXIES TOGETHER WITH THE POWER OF ATTORNEY OR OTHER AUTHORITY,
IF ANY, UNDER WHICH IT WAS SIGNED OR A NOTARIALLY CERTIFIED COPY THEREOF
MUST BE DEPOSITED WITH THE COMPANY'S TRANSFER AGENT, MONTREAL TRUST COMPANY
OF CANADA, OF 510 BURRARD STREET, VANCOUVER, BRITISH COLUMBIA, V6C 3B9, AT
LEAST 48 HOURS (EXCLUDING SATURDAYS, SUNDAYS AND STATUTORY HOLIDAYS) BEFORE
THE TIME OF THE MEETING OR ADJOURNMENT THEREOF OR DEPOSITED WITH THE
CHAIRMAN OF THE MEETING PRIOR TO THE COMMENCEMENT THEREOF. UNREGISTERED
SHAREHOLDERS WHO RECEIVED THE PROXY THROUGH AN INTERMEDIARY MUST DELIVER
THE PROXY IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN BY SUCH INTERMEDIARY.
It is not intended to use the proxies for the purpose of voting on the
Company's audited financial statements for the most recently completed
financial year, the directors' reports nor the Auditors' report.
III. REVOCATION OF PROXIES
A shareholder who or an intermediary acting on behalf of a shareholder
which has given a Proxy has the power to revoke it. Revocation can be
effected by an instrument in writing signed by the intermediary or
shareholder or his attorney authorized in writing, and, in the case of a
corporation, executed under its corporate seal or signed by a duly
authorized officer or attorney for the corporation and either delivered to
the registered office of the Company at Suite 1880, 1055 West Georgia
Street, Vancouver, British Columbia, V6E 3P3, at any time up to and
including the last
<PAGE>
business day preceding the day of the Meeting, or any adjournment
thereof, or deposited with the Chairman of the Meeting on the
day of the Meeting, prior to the hour of commencement.
IV. INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
None of the directors or senior officers of the Company, nor any person who
has held such a position since the beginning of the last completed
financial year of the Company, nor any associate or affiliate of the
foregoing persons, has any substantial or material interest, direct or
indirect, by way of beneficial ownership of securities or otherwise, in any
matter to be acted on at the Meeting.
V. VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The Company has the following classes of shares outstanding which will
entitled to be voted at the Meeting:
1. common shares without par value, of which 29,941,612 common shares are
issued and outstanding as of January 6, 1998;
2. Series One Convertible Class A Preference Shares, of which 10,000
Series One Convertible Class A Preference Shares were issued and
outstanding as of January 6, 1998.
In addition, the Company is proposing to designate and issue up to 10,000
Series Two Convertible Class A Preference Shares. Any holders of the
Series Two Convertible Class A Preference Shares will be entitled to vote
at the Meeting.
Only those holders of common shares of the Company of record on January 6,
1998 will be entitled to vote at the Meeting or any adjournment thereof.
To the knowledge of the directors and officers of the Company, only the
following persons beneficially own, directly or indirectly, or exercise
control or direction over shares carrying more than 10% of the voting
rights attached to all outstanding shares of the Company which have the
right to vote in all circumstances:
<TABLE>
<CAPTION>
Percentage of
Name and Address Number of Shares Outstanding Shares
- ---------------- ---------------- ------------------
<S> <C> <C>
March Technologies Inc.(1) 3,250,000(2) 10.85%
1050 North Cindy Lane
Carpinteria, California USA 93013
- ----------------------------
<FN>
(1) March Technologies Inc. is a company owned and controlled by the
President and Chief Executive Officer of Company, Edward M. Halimi.
(2) These shares are held in escrow by Montreal Trust Company of Canada
pursuant to an escrow agreement dated March 7, 1994 between the
Company, Montreal Trust Company of Canada, March Technologies Inc. and
Leon E. Nowek.
</FN>
</TABLE>
Page 3
<PAGE>
VI. REMUNERATION OF MANAGEMENT AND EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
- --------------------
The following table discloses the compensation paid during the previous
three financial years to the Company's Chief Executive Officer and four
highest paid executive officers (if they earned more than $100,000 per
year):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------------- -------------------------------------
Awards Payouts
--------------------------- ---------
Securities Restricted
Other Under Shares or
Name and Annual Options/ Restricted
Principal Salary Bonus Compen- SARs Share/Units LTIP All Other
Position Year ($) (U.S.) ($) sation($) Granted(#) ($) Payouts ($) Compensation($)
- ------------ ---- ---------- ----- --------- ---------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Edward M.Halimi 1997 $180,000 (1) nil 200,000 nil nil nil
President of
Turbodyne 1996 $ 60,000 nil nil nil nil nil nil
Technologies
Inc. and 1995 $ 60,000 nil nil 500,000 nil nil nil
Turbodyne
Systems, Inc.
Michael Joyce 1997 $150,000 (1) nil nil nil nil nil
President of
Pacific Baja Light 1996 $ 75,000 $ 75,000 nil 50,000 nil nil nil
Metals Corp.
1995 n/a n/a n/a n/a n/a n/a n/a
Lennart Renberg 1997 $150,000 (1) nil nil nil nil nil
Director of
Pacific Baja Light 1996 $ 75,000 $ 75,000 nil 50,000 nil nil nil
Metals Corp.
1995 n/a n/a n/a n/a n/a n/a n/a
Leon E. Nowek, 1997 $162,000 (1) nil 200,000 nil nil nil
Chief Financial
Officer 1996 $30,000 nil nil nil nil nil
1995 $30,000 nil nil nil nil nil
- -------------------------
<FN>
(1) The Company pays a bonus to each of the named executive officers equal to an amount up to 150% of the amount of the annual
salary payable, based on earnings of the Company and/or its subsidiaries. The amount of the bonus is contingent upon the amount
of earnings of the Company and/or its subsidiaries.
</FN>
</TABLE>
Page 4
<PAGE>
The following table discloses the particulars of options or stock
appreciation rights ("SARs") granted during the preceding financial year to
the Company's Chief Executive Officer and four highest paid executive
officers (if they earned more than $100,000 per year):
OPTION/SAR GRANTS
DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR
<TABLE>
<CAPTION>
% of Total Market Value
Securities Options/SARs of Securities
Under Granted to Exercise or Underlying Options/
Options/SARs Employees in Base Price /SARs on the Date Expiration
Name Year Granted (#) Financial Year ($/Security) of Grant ($/Security) Date
- ------ ---- ------------- -------------- ------------ --------------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Edward M. Halimi 1997 200,000 10.0% $4.50 (U.S.) $900,000 Jan 6, 1999
President
Michael Joyce 1997 nil n/a n/a n/a n/a
Lennart Renberg 1997 nil n/a n/a n/a n/a
Leon E. Nowek 1997 200,000 10.0% $4.50 (U.S.) $900,000 January 6, 1999
</TABLE>
The following table discloses the particulars of stock options exercised
during the preceding financial year by the Company's Chief Executive
Officer and four highest paid executive officers (if they earned more than
$100,000 per year):
AGGREGATED OPTION/SAR EXERCISES
DURING THE MOST RECENTLY COMPLETED
FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Value of Unexercised in
Unexercised Options/ the Money Options/
Securities SARs at FY-End (#) SARs at FY-End ($)
Acquired on Aggregate Value (Exercisable/ (Exercisable/
Name Year Exercise (#) Realized ($) Unexercisable) Unexercisable)
- ---- ---- ------------ --------------- --------------------- ------------------------
<S> <C> <C> <C> <C> <C>
Edward M. Halimi
President 1997 nil n/a 200,000 $625,000 (U.S.)
Michael Joyce 1997 nil n/a 50,000 $156,250 (U.S.)
Lennart Renberg 1997 nil n/a 50,000 $156,250 (U.S.)
Leon E. Nowek 1997 nil n/a 200,000 $625,000 (U.S.)
</TABLE>
Page 5
<PAGE>
INDEBTEDNESS OF DIRECTORS AND OFFICERS
- --------------------------------------
With the exception of indebtedness of Edward Halimi, as disclosed below,
none of the current or former directors, executive officers or senior
officers of the Company or persons who were directors, executive officers
or senior officers of the Company or its subsidiaries at any time during
the Company's last completed financial year. Furthermore, none of such
persons were indebted to a third party during such period where their
indebtedness was the subject of a guarantee, support agreement, letter of
credit or other similar arrangement or understanding provided by the
Company or its subsidiaries.
TABLE OF INDEBTEDNESS OF DIRECTORS,
EXECUTIVE OFFICERS AND SENIOR OFFICERS
<TABLE>
<CAPTION>
Financially
Amount Assisted
Largest Outstanding Securities
Involvement Amount as at Purchase Security
Name and Issuer or Outstanding December 31/97 During 1997 for
Principal Position Subsidiary During 1997 ($) (#) Indebtedness
(a) (b) (c) (d) (e) (f)
- ------------------ ----------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Edward M. Halimi, Loan from $112,984 $112,984 Nil Nil
President and Chief the Company
Executive Officer
Walter F. Ware Loan from $141,000 Cdn. $141,000 Cdn. Nil Nil
the Company
Leon E. Nowek, Loan from
Chief Financial the Company $315,000 Cdn $315,000 Cdn Nil Nil
Officer and Director
</TABLE>
The Company has loaned $112,984 to Edward Halimi, the President and Chief
Executive Officer of the Company. The loan is repayable on demand by the
Company and does not bear interest. The Company has loaned $225,000 to
Leon Nowek in connection with a housing loan. The Company has loaned
$100,000 to Walter Ware in connection with a housing loan.
COMPOSITION OF THE COMPENSATION COMMITTEE
- -----------------------------------------
At a meeting of the Board of Directors held on September 24, 1996, the
Company approved the formation of a compensation committee consisting of
Daniel D. Geronazzo, Wendell R. Anderson and Eugene A. Hodgson. The
mandate of the Compensation Committee is to make recommendations to the
Board with respect to compensation to be paid to the Company's directors
and senior officers of the Company. The Compensation Committee will make
comparisons to other companies in the same industry carrying on businesses
similar to those of the Company, in determining any recommendations as to
remuneration.
Page 6
<PAGE>
REPORT ON EXECUTIVE COMPENSATION
- --------------------------------
During the last financial year, the Board of Directors considered a number
of factors in fixing remuneration for directors and executive officers.
The Board of Directors primarily based such remuneration on their
determination of what level of remuneration would be necessary to attract
and retain people having the experience and ability of the executive
officers. No emphasis was given to the stock options held by such
executive officers in determining their cash remuneration. Furthermore, no
consideration was given to options presently held by such executive
officers in considering whether to grant new options to them. The
Company's financial performance was not closely related to the remuneration
paid to such executive officers.
VII. INTEREST OF MANAGEMENT AND INSIDERS IN MATERIAL TRANSACTIONS
None of the directors or senior officers of the Company, nor any person who
beneficially owns, directly or indirectly, shares carrying more than 10% of
the voting rights attached to all outstanding shares of the Company, nor
any associate or affiliate of the foregoing persons has any material
interest, direct or indirect, in any transaction since the commencement of
the Company's last completed financial year or in any proposed transaction
which, in either case, has or will materially affect the Company.
VIII. MANAGEMENT CONTRACTS
The consulting services of Lennart Renberg are provided to Pacific Baja
Light Metals pursuant to a consulting agreement between Pacific Baja, the
Company and Lykar Specialties, Inc. ( "Lykar Specialties") dated September
5, 1996. The consulting agreement has a three year term. Pacific Baja pays
a base consulting fee for Mr. Renberg's services equal to US $12,500 per
month plus an annual bonus based on the annual net operating profit of
Pacific Baja Light Metals. The maximum bonus payable is 150% of base
salary and is earned upon the annual net operating profit of Pacific Baja
Light Metals exceeding US $5,500,000. Options to purchase 50,000 shares of
the Company are also to be issued to Lykar Specialties upon each
anniversary of the term of the consulting agreement.
IX. PARTICULARS OF THE MATTERS TO BE ACTED UPON
INTRODUCTION
- ------------
For the reasons set forth below the Board of Directors believes that it is
in the best interests of the Company and its shareholders to change the
domicile of the Company from the Canadian federal jurisdiction to Delaware,
U.S.A. (the "Delaware Continuation"). The effect of the Delaware
Continuation will mean that the Company will cease to be a company under
the CANADA BUSINESS CORPORATIONS ACT (the "Canadian Corporation Law") and
will be a corporation under the General Corporation Law of the State of
Delaware (the "Delaware Corporation Law").
Page 7
<PAGE>
The Company was incorporated on May 18, 1983 under the COMPANY ACT (British
Columbia). The Company continued into the Canadian federal jurisdiction
pursuant to the CANADA BUSINESS CORPORATIONS ACT as effective on December
3, 1996. The CANADA BUSINESS CORPORATIONS ACT currently governs the
corporate affairs of the Company.
The CANADA BUSINESS CORPORATIONS ACT permits the continuation of the
Company into the State of Delaware provided approval of shareholders is
obtained by Special Resolution and provided the Director under the CANADA
BUSINESS CORPORATIONS ACT consents to the continuation.
The continuation of the Company into the State of Delaware will affect
certain of the rights of shareholders as they currently exist under the
CANADA BUSINESS CORPORATIONS ACT. The changes that will occur as a result
of the transfer of the Company's jurisdiction of incorporation from Canada
to Delaware are summarized below. This summary is not intended to be
exhaustive and shareholders should consult their legal advisers regarding
differences between the two jurisdictions as they affect their own
particular circumstances.
2. REQUIRED APPROVALS
------------------
Under the CANADA BUSINESS CORPORATIONS ACT, the continuance of the Company
into the State of Delaware requires the approval of the shareholders of the
Company by a special resolution, being "a resolution passed by a majority
of not less than 2/3 of the votes cast by the shareholders who voted in
respect of that resolution".
The Company will be seeking the approval of the shareholders of the Company
to the Delaware Continuation and to the other matters set forth in the
Notice of Meeting by the following separate votes:
(A) First, by the vote of all shareholders of the Company, including the
holders of the outstanding common shares of the Company, the holders
of Series One Convertible Class A Preference Shares and the holders of
Series Two Convertible Class A Preference Shares;
(B) Second, by the class vote of all shareholders of the Company holding
common shares of the Company;
(C) Third, by the class vote of all shareholders of the Company holding
Series One Convertible Class A Preference Shares and Series Two
Convertible Class A Preference Shares, if any;
(D) Fourth, by the series vote of all shareholders of the Company holding
Series One Convertible Class A Preference Shares;
(E) Fifth, by the series vote of all shareholders of the Company holding
Series Two Convertible Class A Preference Shares, if any.
Page 8
<PAGE>
* THE COMPANY IS IN THE PROCESS OF FINALIZING A FINANCING TO BE
COMPLETED BY THE ISSUE OF UP TO 10,000 SERIES TWO CONVERTIBLE CLASS A
PREFERENCE SHARES. THE COMPANY ANTICIPATES FILING ARTICLES OF AMENDMENT
PRIOR TO THE MEETING AS REQUIRED TO DESIGNATE THE SERIES TWO CONVERTIBLE
CLASS A PREFERENCE SHARES.
Pursuant to the CANADA BUSINESS CORPORATIONS ACT, a shareholder may at any
time until the time of the Meeting or at the Meeting give the Company a
Notice of Objection to the Special Resolution to approve the Delaware
Continuation and the other matters addressed in the Notice of Meeting. Any
Notice of Objection may delivered to the registered office of the Company
at Suite 1880, 1055 West Georgia Street, Vancouver, British Columbia,
Canada V6E 3P3. As a result of giving a Notice of Objection a shareholder
must, on receiving a Notice of Adoption of the Special Resolution under
Section 190 of the Act from the Company, require the Company to purchase
all of the shareholder's shares in respect of which the Notice of Objection
was given by complying with the procedure set forth in Section 190 of the
Act.
In the event that the special resolution is passed, the Company shall give
any shareholders who have delivered Notice of Objection notice that the
Special Resolution has been adopted within 10 days of the date after
shareholders adopt the Special Resolution. Within 10 days of receiving a
notice that the Special Resolution has been adopted, a shareholder who has
delivered a Notice of Objection must give notice to the Company requiring
the Company to purchase all his shares in respect of which the Notice of
Objection was given at the fair value thereof. The dissenting shareholder
must deliver to the Company or the Company's transfer agent the share
certificates representing such shares within 30 days of the date of
delivery of notice to the Company requiring the Company to purchase such
shares. A dissenting shareholder may apply to a court for a determination
of the price and terms of such purchase and sale.
IN VIEW OF THE STRICT REQUIREMENTS OF THE CANADA BUSINESS CORPORATIONS ACT
RELATING TO THE RIGHTS AND OBLIGATIONS OF DISSENTING SHAREHOLDERS,
SHAREHOLDERS SHOULD SEEK THEIR OWN LEGAL COUNSEL CONCERNING ANY
CONSEQUENCES WHICH MAY RESULT FROM THE FILING OF A NOTICE OF OBJECTION OR
CONCERNING THE PROCEDURES TO BE FOLLOWED TO EXERCISE SUCH RIGHTS.
Since the Board of Directors may not wish to proceed with the Delaware
Continuation in the event that shareholders holding a significant number of
shares exercise their right of dissent, thereby possibly impairing the
Company's financial resources, the Board of Directors is also seeking the
shareholders' approval to not proceed with the Delaware Continuation if, in
the directors' sole discretion, they determine it not to be in the
Company's best interests.
3. REASONS FOR THE CONTINUATION
----------------------------
The directors of the Company believe the Delaware Continuation is in the
best interests of the Company and its shareholders for the following
reasons:
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(A) The extent to which the Company presently carries on business in
Canada is relatively insignificant. The Company's head office was
relocated to Woodland Hills, California in 1997. The Company conducts
its business through its two wholly-owned subsidiaries, Turbodyne
Systems, Inc. and Pacific Baja Light Metals Corp. The head office of
Turbodyne Systems, Inc. and its research and development and
manufacturing facilities are in Carpinteria, California. Pacific
Baja Light Metals Corp. carries on its business of the manufacture of
aluminum cast automotive products in California and Mexico and has its
head office in La Mirada, California. The Company's management
anticipates that future expansion of the Company's business will be
through the expansion of the subsidiaries' businesses in the United
States. Accordingly, management believes that it is in the best
interest of the Company to transfer its jurisdiction of incorporation
to the United States.
(B) The Company anticipates that any future financings will be completed
in the United States market. Investors in the United States are
familiar with the laws of the State of Delaware which will be
applicable to the Company upon completion of the Delaware
Continuation. This familiarity may remove a perceived risk in the
minds of such investors with the result that the Company may be able
to achieve more favorable financing terms. In addition, the Company
will cease to be a foreign private issuer under United States
securities laws and will become a domestic issuer under United States
securities law. The Company will be subject to increased disclosure
and reporting requirements as a domestic issuer. Investors in the
United States may view these increased disclosure and reporting
requirements as an advantage.
(C) The Delaware Continuation will remove the requirement that at least
one third of the Company's directors consist of Canadian residents.
In view of the fact that the Company's business activities are
primarily in the United States, the Board of Directors considers it in
the best interest of the Company not be governed by this Canadian
resident requirement.
4. NO CHANGE IN THE BUSINESS, MANAGEMENT OR OPERATIONS OF THE COMPANY
------------------------------------------------------------------
The change of domicile to Delaware will effect only a change in the legal
domicile of the Company and will result in other changes of a legal nature,
the material details of which are described in this Proxy Circular. The
Delaware Continuation will not result in a change of the business,
management, fiscal year, assets, liabilities, or operations of the Company.
The Delaware Continuation will not affect the trading of the shares of the
Company on the NASDAQ Small Cap Market or on EASDAQ.
5. DOMESTICATION UNDER DELAWARE CORPORATION LAW
--------------------------------------------
The Company will be governed by the Delaware Corporation Law upon
completion of the Delaware Continuation. The Company will file a
Certificate of Incorporation with the Secretary of State for the State of
Delaware concurrently upon domestication under the Delaware Corporation
Law. The
Page 10
<PAGE>
form of Certificate of Incorporation to be filed is attached to
this Proxy Circular. In addition, the Company will be governed by By-laws
to be adopted by the Company upon completion of the Delaware Continuation.
The By-laws proposed by the Board of Directors will be available for
inspection by the shareholders at the Meeting. The Certificate of
Incorporation and the By-laws are referred to herein as the "Delaware
Constating Documents".
The Company is currently governed by its Certificate of Continuance,
Articles of Continuance and Articles of Amendment, as filed by the Company
under the CANADA BUSINESS CORPORATIONS ACT, and the By-laws of the Company
approved by the shareholders (the "Canadian Constating Documents").
6. MATERIAL CHANGES IN CONSTATING DOCUMENTS
----------------------------------------
The Delaware Constating Documents effectively amend the Canadian Constating
Documents by:
(a) redesignating the "common shares without par value" of the Company as
"common shares with a par value of $0.001 per share";
(b) reducing the authorized number of common shares of the Company from
100,000,000 common shares to 60,000,000 common shares;
(c) redesignating the Class A Preference Shares of the Company as
Preferred Stock with a par value of $0.001 per share and reducing the
authorized number of shares of Preferred Stock to 1,000,000 shares;
(d) canceling the authorized 100,000,000 Class B Preference Shares of the
Company, none of which have been issued or are outstanding.
(e) redesignating the 10,000 Series One Convertible Class A Preference
Shares as Series A Preferred Stock with a par value of $0.001 per
share;
(f) redesignating all 10,000 Series Two Convertible Class A Preference
Shares, if any, as Series B Preferred Stock with a par value of $0.001
per share.
7. COMPARISON OF SHAREHOLDER RIGHTS
--------------------------------
The Delaware Corporation Law and the Delaware Constating Documents are
similar in many respects to the CANADA BUSINESS CORPORATIONS ACT and the
Canadian Constating Documents. However, there are differences which are
material to shareholders rights. It is not practical to summarize all of
those differences in the Proxy Circular, however all of the principal
differences which could materially affect the rights of shareholders of the
Company are discussed below.
Page 11
<PAGE>
(A) QUORUM OF SHAREHOLDERS
----------------------
Under the Canadian Constating Documents, a quorum shall consist of one
member in person or by proxy holding not less than one-third of the issued
and outstanding voting shares of the Company. The Delaware Constating
Documents provide that the holders of not less than one-third of the
outstanding shares entitled to vote shall constitute a quorum.
(B) NOTICE, ADJOURNMENT AND PLACE OF SHAREHOLDERS' MEETINGS
-------------------------------------------------------
The CANADA BUSINESS CORPORATIONS ACT requires that notice of shareholders'
meetings be given at least 21 days but not more than 50 days before a
meeting unless the shareholders waive or reduce the notice period by
unanimous consent in writing. The Delaware Constating Documents require
such notice to be given not less than 10 nor more than 60 days before a
meeting.
Both the CANADA BUSINESS CORPORATIONS ACT and Delaware Corporation Law
provide for adjournments of shareholders' meetings. If the meeting is
adjourned for more than 30 days, the Canadian Constating Documents require
a minimum of 21 days' but not more than 50 days' notice of the adjournment.
The Delaware Corporation Law requires that if the adjournment is for more
than 30 days or if a new record date is fixed for the adjourned meeting,
notice must be given to the shareholders of record entitled to vote at the
meeting.
The Delaware Corporation Law provides that any action that may be taken at
a shareholders' meeting may be taken without a meeting, without prior
notice and without a vote if a consent in writing is signed and dated by
the holders of shares having at least the number of votes necessary to pass
such a resolution at a shareholders' meeting unless otherwise provided in
the certificate of incorporation. The Company's proposed Certificate of
Incorporation does not provide otherwise. The CANADA BUSINESS CORPORATIONS
ACT permits and the Canadian Constating Documents provide that the
shareholders may pass a resolution in writing, however, it must be signed
by all shareholders entitled to vote on that resolution. If written consent
of all of the shareholders is not obtained, than the resolution is not
effective and a meeting of the shareholders must be held to carry out the
business referred to in that resolution.
(C) DIRECTOR QUALIFICATIONS, ELECTION AND REMOVAL OF DIRECTORS AND
--------------------------------------------------------------
FILLING VACANCIES ON THE BOARD OF DIRECTORS
-------------------------------------------
The Canadian Constating Documents provide that the Company shall have at
least the minimum number of directors required under the CANADA BUSINESS
CORPORATIONS ACT, but the Board of Directors may appoint additional
directors between annual general meetings of shareholders, provided the
number of additional directors does not exceed one-third the number of
directors elected or appointed at the last such meeting. As the Company is
a public company, the CANADA BUSINESS CORPORATIONS ACT requires that the
Company have at least three directors. The directors may not be persons
under the age of 18, undischarged bankrupts or persons found to be mentally
incompetent.
Page 12
<PAGE>
The Delaware Constating Documents provide that the Company's board of
directors will consist of not less than two and not more than twelve
directors. The size of the Company's board of directors will be fixed by
resolution of the Board. The Certificate of Incorporation divides the
directors of the Company 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 1998 annual meeting of shareholders; the term of the
Class II directors shall terminate on the date of the 1999 annual meeting
of shareholders and the term of the Class III directors shall terminate on
the date of the 2000 annual meeting of shareholders. At each annual
meeting of shareholders beginning in 1998, 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
decrease 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 from 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.
Under both the Canadian Constating Documents and the Delaware Constating
Documents, directors are elected at each annual meeting. Both the Canadian
Constating Documents and the Delaware Constating Documents provide that,
subject to certain limitations, vacancies on the Board may be filled by the
remaining directors for the remainder of the unexpired term. The Canadian
Constating Documents, however, provide that the remaining directors must
constitute a quorum of the Board of Directors, whereas the Delaware
Constating Documents permit directors constituting less than a quorum to
fill vacancies.
Under the CANADA BUSINESS CORPORATIONS ACT, directors generally may be
removed before the expiration of their term by an ordinary resolution
approved by a majority of the votes cast on the resolution at a meeting
called for that purpose, and a replacement for the director so removed may
be appointed by an ordinary resolution approved by a majority of the votes
cast.
The Delaware Constating Documents provide that the directors may only be
removed by:
(a) a vote of the majority of all holders of voting stock, where
cause for such removal exists; or
(b) upon the unanimous vote of all of the directors, with the
exclusion of the vote of the director to be removed.
Page 13
<PAGE>
(D) RIGHT TO CALL SPECIAL MEETINGS AND NOMINATION OF DIRECTORS
----------------------------------------------------------
Under the CANADA BUSINESS CORPORATIONS ACT, shareholders holding in
aggregate not less than 5% of the shares having the right to vote at a
meeting at which directors will be elected may nominate directors by
delivering such nomination to the Company's registered office at least 90
days before the anniversary date of the previous annual meeting of
shareholders. The CANADA BUSINESS CORPORATIONS ACT also provides that the
holders of 5% of the issued shares with a right to vote at a general
meeting can requisition the calling of a general meeting. If the directors
do not, within 21 days after receiving the requisition from the
shareholders, call a meeting, any shareholder who signed the requisition
may call the meeting.
The Delaware Constating Documents provide that any shareholder may nominate
directors and bring other business before an annual shareholders meeting by
delivering written notice of the nomination or other business to the
Company's head office not later than the close of business on the sixtieth
(60) day nor earlier than the close of business on the ninetieth (90) day
prior to the first anniversary of the preceding year's annual meeting.
Under the Delaware Corporation Law, a special meeting of shareholders may
be called by the board of directors or by any other person authorized to do
so in the certificate of incorporation or the bylaws. The Delaware
Constating Documents permit a special meeting to be called only by the
President, the Chairman of the Board of Directors, a majority of the
Directors or the Chief Executive Officer.
(E) AMENDMENT TO INTERNAL AFFAIRS
-----------------------------
Under the CANADA BUSINESS CORPORATIONS ACT, any amendment to the articles
of a corporation will generally require approval by special resolution,
which is a resolution passed by a majority of not less than 66 2/3% of the
votes cast by shareholders entitled to vote on the resolution.
The Company also, by special resolution approved by 66 2/3% of the class of
shareholders whose shares are affected by such resolution (even if such
shares are non-voting), may create or add special rights or restrictions to
such class of issued shares. A separate class resolution of preferred
shareholders, if any, must be approved by a separate resolution (a)
consented to in writing by all holders of preferred shares; or (b) present
at a meeting of holders of preferred shares, called for such purpose, at
which at least two shareholders must be present at the meeting,
representing an aggregate of not less than 5% of the issued and outstanding
preferred shares carrying voting rights at the meeting and passed by the
affirmative vote of at least 66 2/3 of the votes cast. Any shareholder who
dissents from the proposal is entitled to have his shares purchased by the
Company.
The Delaware Corporation Law requires the approval of the holders of a
majority of the outstanding stock entitled to vote for any amendment to the
certificate of incorporation unless the certificate of incorporation
requires a greater vote. The proposed Certificate of Incorporation provides
that the affirmative vote of at least two-thirds of the voting power of all
of the then-outstanding shares of voting stock shall be required to amend
or repeal certain provisions; including those concerning who may call a
special meeting of shareholders, the inability of shareholders to take any
action by written
Page 14
<PAGE>
consent, the appointment and classification of the board
of directors, the sole authority of the Board of Directors to adopt, alter,
amend or rescind the Bylaws and any amendment to the provision in the
Certificate of Incorporation requiring a supermajority vote. Whether or
not provided in the certificate of incorporation, holders of the
outstanding shares of a class are entitled to vote as a class upon a
proposed amendment that would increase or decrease the aggregate number of
authorized shares of such class, increase or decrease the par value of the
shares of such class, or alter or change the powers, preferences, or
special rights of the shares of such class so as to affect them adversely.
The number of authorized shares in a class, however, may be increased or
decreased (but not below the number of shares outstanding) by the
affirmative vote of the holders of a majority of the stock of the
corporation entitled to vote without a separate class vote, if so provided
in (a) the original certificate of incorporation, (b) an amendment creating
the class or adopted before shares of the class were issued, or (c) an
amendment approved by the affirmative vote of the holders of a majority of
such class of stock.
The Delaware General Corporation law provides that a corporation's bylaws
may be amended by the corporation's shareholders, or, if so provided in the
corporation's certificate of incorporation, by the corporation's directors.
The proposed Certificate of Incorporation provides that the directors shall
have the sole authority to adopt, repeal, alter, amend or rescind the
bylaws of the corporation.
(F) ANTI-TAKEOVER PROVISIONS AND INTERESTED SHAREHOLDERS
----------------------------------------------------
Section 203 of the Delaware General Corporation Law prevents an "interested
shareholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in the Delaware General Corporation Law) with a
Delaware corporation for three years following the date such person
became an interested shareholder unless (i) before such person became an
interested shareholder, the board of directors of the corporation approved
the transaction in which the interested shareholder became an interested
shareholder or approved the business combination; (ii) upon consummation of
the transaction that resulted in the interested shareholder becoming an
interested shareholder, the interested shareholder owns at lease 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (excluding stock held by directors who are also officers of the
corporation and by employee stock plans that do not provide employees with
the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer); or (iii) following
the transaction in which such person became an interested shareholder, the
business combination is approved by the board of directors of the
corporation and authorized at a meeting of the shareholders by the
affirmative vote of the holders of two-thirds of the outstanding voting
stock of the corporation not owned by the interested shareholder. Under
Section 203, the restrictions described above also do not apply to certain
business combinations proposed by an interested shareholder following the
announcement or notification of one or more certain extraordinary
transactions involving the corporation and a person who had not been an
interested shareholder during the previous three years or who became an
interested shareholder with the approval of a majority of the corporation's
directors.
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<PAGE>
The CANADA BUSINESS CORPORATIONS ACT does not contain comparable provisions
with respect to business combinations.
(G) MERGERS, SALES OF ASSETS AND OTHER EXTRAORDINARY TRANSACTIONS
-------------------------------------------------------------
Under the CANADA BUSINESS CORPORATIONS ACT, certain extraordinary corporate
actions, such as certain amalgamations, continuances, sales, leases or
exchanges of all or substantially all the assets of a corporation and other
extraordinary corporate actions such as liquidations, dissolutions or
arrangements, are required to be approved by special resolution (a
resolution passed by a majority of not less than 66 2/3% of the votes cast
by the shareholders who voted on the resolution) and, in certain cases,
such special resolution is also required to be approved by shareholders
separately as a class or series.
The Delaware Corporation Law provides that, unless otherwise specified in a
corporation's certificate of incorporation or unless the provisions of
Section 203 of the Delaware Corporation Law relating to "business
combinations" discussed above are applicable, a sale or other disposition
of all or substantially all of the corporation's assets, a merger or
consolidation of the corporation with another corporation or a dissolution
of the corporation requires the affirmative vote of the board of directors
of each constituent corporation plus, with certain exceptions, the
affirmative vote of a majority of the outstanding stock entitled to vote on
the proposal. In a merger, approval by the shareholders of a constituent
corporation is not required if (a) the constituent corporation will be the
surviving corporation, its certificate of incorporation will not be amended
in the merger, the authorized unissued shares or the treasury shares of
common stock of the surviving corporation to be issued or delivered under
the plan of merger plus those initially issuable upon conversion of any
other shares, securities or obligations to be issued or delivered under
such plan do not exceed 20% of the shares of common stock or such
constituent corporation outstanding immediately prior to the effective date
of the merger and each share of its stock outstanding before the merger
will be an identical outstanding or treasury share after the effective date
of the merger; or (b) the corporation is a subsidiary of a parent
corporation that owns at least ninety percent 90% of each class of the
subsidiary's outstanding stock before the merger, and the parent
corporation is merging the subsidiary into itself or one (1) or more other
corporations of which the parent owns ninety percent 90% of the outstanding
stock or the parent corporation is merging itself and one or more other
corporations of which the parent owns ninety percent (90%) of each class of
outstanding stock into the subsidiary.
(H) TRANSACTIONS WITH OFFICERS AND DIRECTORS
----------------------------------------
The CANADA BUSINESS CORPORATIONS ACT provides that every director who is in
any way, directly or indirectly, interested in a proposed contract or
transaction with the Company must disclose the nature and extent of such
interest and is liable to account to the Company for any profit made as a
consequence of the Company entering into such transaction unless he (a)
disclosed his interest at the meeting where the proposed transaction was
first considered; (b) after his disclosure, the transaction was approved by
the directors and (c) he abstained from voting on such transaction; or
unless the
Page 16
<PAGE>
contract or transaction was fair and reasonable to the Company
and, after full disclosure by the director, the transaction is approved by
the directors or the shareholders.
Under the Delaware Corporation Law, contracts or transactions in which a
director or officer is financially interested are not automatically void or
voidable, if (a) the material facts as to the officer's or director's
relationship or interest and as to the contract or transaction are
disclosed or are known to the board of directors or the committee, and the
board or committee in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested directors, even
though the disinterested directors be less than a quorum; or (b) material
facts as to the officer's or director's relationship or interest and as to
the contract or transaction are disclosed or are known to the shareholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by the vote of the shareholders; or (c) the contract
or transaction is fair as to the corporation as of the time it is
authorized, approved or ratified, by the board of directors, a committee or
the shareholders. Interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorized the contract or transaction.
(I) DISSENT RIGHTS
--------------
The CANADA BUSINESS CORPORATIONS ACT provides that shareholders of a Canada
Federal Jurisdiction Corporation are entitled to exercise dissent rights
and to be paid the fair value of their shares in connection with certain
matters including (a) the continuance of the corporation into another
jurisdiction; (b) the sale, lease or disposition of substantially the whole
of the business of the corporation; (c) the alteration of the corporation's
memorandum by changing any restriction on the business to be carried on by
the corporation or on its powers; (d) any amalgamation of the corporation
with another corporation; (e) where, in the event of the corporation being
wound up, the proposal to distribute the property of the corporation in
kind (in which case a shareholder may petition the court for an order
requiring the distribution of the property of the corporation to be in
money). Shareholders who vote in favour of a resolution in connection with
the foregoing may not subsequently exercise dissent rights in respect of
that resolution. See "Shareholders Right to Dissent."
The Delaware Constating Documents will grant to shareholders dissent rights
equivalent to the dissent rights provided to shareholders under the CANADA
BUSINESS CORPORATIONS ACT. The Certificate of Incorporation provides that
these dissent rights cannot be amended or revoked by the Company within
five years of the date of the Delaware Continuation without the approval of
90% of the votes of the shareholders voting at a meeting of shareholders.
(J) DERIVATIVE ACTIONS
------------------
Under the CANADA BUSINESS CORPORATIONS ACT, a shareholder, director or any
other person who, in the opinion of the court is a proper person to apply
(a "complainant") may, with leave of the court, bring an action in the name
of and on behalf of the corporation to enforce a right, duty or obligation
owed to the corporation or to obtain damages for any breach thereof. A
complainant (as defined above) also may defend, with leave of the court, in
the name and on behalf of the corporation, any
Page 17
<PAGE>
action brought against the corporation. A shareholder or director may apply
to the court for such leave on notice to the corporation if (a) he has made
reasonable efforts to cause the directors of the corporation to commence,
diligently prosecute or defend the action; (b) he is acting in good faith;
(c) it is prima facie in the interests of the corporation that the action be
brought or defended; and (d) in the case of an application by a shareholder,
he was a shareholder of the corporation at the time of the event giving rise
to the cause of action. No action brought or defended as a derivative action
can be settled or discontinued without approval of the court.
The Delaware Constating Documents will grant to shareholders the right to
bring derivative actions in the name of and on behalf of the Company in an
equivalent manner to the derivative action rights provided to shareholders
under the CANADA BUSINESS CORPORATIONS ACT. The Certificate of
Incorporation provides that these derivative action rights cannot be
amended or revoked by the Company within five years of the date of the
Delaware Continuation without the approval of 90% of the votes of the
shareholders voting at a meeting of shareholders.
(K) OPPRESSION REMEDY
-----------------
The CANADA BUSINESS CORPORATIONS ACT contains an oppression remedy that
enables the court, if satisfied upon application by a complainant (as
defined above in "Derivative Action") that (a) the affairs of the
corporation are being conducted or the powers of the directors are being
exercised in an oppressive manner, or (b) some act of the corporation has
been done or is threatened or some resolution has been passed or is
proposed that is unfairly prejudicial, to make any order it considers
appropriate, including the cancellation of any transaction, the purchase of
shares of any shareholder, appointment of a receiver, the winding up of the
corporation, compensation to the complainant and the rectification of any
corporate record.
The Delaware Constating Documents will grant to shareholders oppression
remedies equivalent to the oppression remedies provided to shareholders
under the CANADA BUSINESS CORPORATIONS ACT. The Certificate of
Incorporation provides that these oppression remedies cannot be amended or
revoked by the Company within five years of the date of the Delaware
Continuation without the approval of 90% of the shareholders voting at a
meeting of shareholders.
(L) INDEMNIFICATION OF OFFICERS AND DIRECTORS; LIMITATION OF MONETARY
-----------------------------------------------------------------
LIABILITIES OF DIRECTORS
------------------------
Under the CANADA BUSINESS CORPORATIONS ACT and pursuant to the Canadian
Constating Documents, the Company will indemnify a director or officer, a
former director or officer or a person who acts or has acted at the
Company's request as a director or officer of a body corporate of which the
Company is or was a shareholder or creditor against all costs, charges and
expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him in respect of any civil, criminal or
administrative action or proceeding to which he is made a party by reason
of being or having been a director or officer of the Company or such body
corporate if (a) he acted honestly
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<PAGE>
and in good faith with a view to the best interests of the Company
and (b), in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he had reasonable
grounds for believing that his conduct was lawful. In respect of an
action by or on behalf of the Company or such body corporate,
a corporation may, with court approval, provide indemnification against all
costs, charges and expenses reasonably incurred by such persons in
connection with such action who fulfill the conditions set forth in (a) and
(b) immediately above. The CANADA BUSINESS CORPORATIONS ACT requires court
approval of any indemnification by a corporation.
The CANADA BUSINESS CORPORATIONS ACT permits, and the Canadian Constating
Documents provide that directors shall not be liable under certain
circumstances to the Company or its shareholders for monetary damages
unless the loss, damage or misfortune happened as a result of such
director's failure to exercise his powers and to discharge the duties of
his office honestly and in good faith with a view to the best interests of
the Company and to exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances.
The Delaware Corporation Law permits a corporation to adopt a provision in
its certificate of incorporation eliminating or limiting the personal
liability of a director to the corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, with the following
exceptions: (a) a breach of the director's duty of loyalty; (b) payment of
an unlawful stock dividend or making an unlawful stock repurchase or
redemption; (c) acts or omissions not in good faith or involving
intentional misconduct or a knowing violation of law; or (d) in any
transaction in which the director derived an improper personal benefit.
The Company's proposed Certificate of Incorporation eliminates the
liability of directors of the corporation for monetary damages to the
fullest extent permissible under Delaware law.
The Delaware Corporation Law permits a corporation to indemnify its
directors, officers, employees and other agents under circumstances similar
to those for which the Canadian Constating Documents provide. The Delaware
Constating Documents will require the Company to indemnify its directors
and officers to the fullest extent permitted by the Delaware Corporation
Law. According to the proposed By-laws, however, the Company may modify the
extent of such indemnification by individual contract, or it may deny
indemnification to 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, or (iii) such indemnification
is provided by the corporation, in its sole discretion, pursuant to the
powers vested in the corporation under the Delaware General Corporation
Law. The proposed By-laws will require the Company to advance expenses to
a director or executive officer, provided that (a) the director or
executive officer undertakes to repay amounts advanced if such person
ultimately is determined not to be entitled to indemnification, and (b) the
disinterested directors or, if a quorum of disinterested directors does not
exist, independent legal counsel has not determined in accordance with the
bylaws that the facts demonstrate clearly and convincingly that the
applicant 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.
The bylaws also permit the Company to provide indemnification under the
Delaware Corporation law to its other officers, employees and agents.
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<PAGE>
Indemnification rights conferred on a person by the Company's proposed
By-laws are deemed to be contractual, in that their repeal or modification
shall have prospective effect only and shall not affect rights in effect
under the bylaws at the time of an alleged occurrence, act or omission that
is the basis of a proceeding against the person or the corporation.
Indemnification rights to which a person becomes entitled under the
Company's proposed bylaws continue after the person ceases to be a
director, officer, employee or other agent of the Company.
Indemnification rights under the Delaware Corporation Law are not
exclusive. Accordingly, the Company's proposed bylaws will specifically
permit the Company to indemnify its directors, officers, employees and
other agents within the limits established by law and public policy,
pursuant to an express contract, bylaw provision, shareholder vote or
otherwise, any or all of which may provide indemnification rights broader
than those currently available under the Canadian Corporation Law or
Delaware indemnification statutes.
Both the Delaware Constating Documents and Canadian Constating Documents
provide that the Company, may purchase insurance on behalf of those persons
entitled to be indemnified by the Corporation.
(M) DIVIDENDS AND DISTRIBUTIONS
---------------------------
Under the CANADA BUSINESS CORPORATIONS ACT, directors of a corporation
shall not declare or pay a dividend if there are reasonable grounds for
believing that the corporation is, or would after the payment be,
insolvent.
The Delaware Corporation Law generally provides that a corporation may
declare and pay dividends out of surplus (defined as the excess, if any, of
net assets over stated capital) or, when no surplus exists, out of net
profits for the fiscal year in which the dividend is declared and/or the
preceding fiscal year, subject to any restrictions contained in a
corporation's certificate of incorporation. The Company's Certificate of
Incorporation contains no such restrictions. Dividends may not be paid out
of net profits if the stated capital of the corporation is less than the
amount of stated capital represented by outstanding preferred stock, if
any.
(N) PREEMPTIVE RIGHTS
-----------------
Neither the Delaware Corporation Law, or the CANADA BUSINESS CORPORATIONS
ACT, automatically provides for preemptive rights to acquire a
corporation's unissued stock. However, such right expressly may be granted
to the shareholders in a corporation's certificate of incorporation under
the Delaware Corporation Law. Neither the Delaware Constating Documents nor
the Canadian Constating Documents provide for preemptive rights.
Page 20
<PAGE>
(O) INSPECTION OF SHAREHOLDERS LIST
-------------------------------
The CANADA BUSINESS CORPORATIONS ACT grants to shareholders and directors
of the Company the right to inspect the shareholder list of the Company
during normal business hours. The Delaware Constating Documents provide
that the shareholders list shall be prepared by the secretary of the
Corporation at least ten days prior to any shareholders meeting and be open
to the examination of any shareholder, for any purposes germane to the
meeting, for a period of ten days prior to the meeting and during the
meeting itself.
The Delaware Corporation Law provides that any shareholder has the right to
inspect the corporation's stockledger, a list of its stockholders, and its
other books and records upon written demand under oath for a purpose
reasonably related to such person's interest as a shareholder. The
shareholder may compel inspection by court order, if the corporation
refuses to permit such inspection or does not respond within five business
days.
8. CANADIAN INCOME TAX CONSIDERATIONS
----------------------------------
Thorsteinssons, Canadian tax counsel to Turbodyne Technologies Inc. (the
"Company"), have advised that the following general summary fairly
describes the principal Canadian federal income tax consequences of the
proposed continuation of the Company to the United States of America (the
"United States") and the exercise of dissent rights as described herein to
shareholders of the Company who are resident in Canada and to whom shares
of the Company constitute capital property for the purposes of the INCOME
TAX ACT (the "ITA").
This summary is based upon the current provisions of the ITA, the
regulations thereunder in force on the date hereof (the "Regulations"), any
proposed amendments to the ITA or Regulations (the "Proposed Amendments")
previously announced by the Federal Minister of Finance and counsel's
understanding of the current administrative and assessing policies of
Revenue Canada, Customs, Excise and Taxation. This description is not
exhaustive of all possible Canadian federal income tax consequences and
does not take into account or anticipate any changes in law, whether by
legislative, governmental or judicial action other than the Proposed
Amendments, nor does it take into account provincial or foreign tax
considerations which may differ significantly from those discussed herein.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IT IS NOT INTENDED
TO BE, NOR SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE
TO ANY SHAREHOLDER OF THE COMPANY. ACCORDINGLY, SHAREHOLDERS
OF THE COMPANY SHOULD CONSULT THEIR OWN TAX ADVISERS FOR ADVICE
WITH RESPECT TO THE CANADIAN INCOME TAX CONSEQUENCES TO THEM OF
THE PROPOSED CONTINUATION AND THE EXERCISE OF DISSENT RIGHTS.
Page 21
<PAGE>
(A) CONSEQUENCES TO THE COMPANY
---------------------------
The Company will be treated as having been incorporated in the United
States jurisdiction into which it is continued immediately upon it
being granted articles of continuance (or similar constating
documents) in such jurisdiction. Accordingly, following its
continuation, it will cease to be a resident of Canada for purposes of
the ITA and, thus, will only be taxable in Canada to the extent it
carries on business there through a permanent establishment or
realizes a gain from the sale of taxable Canadian property which is
not otherwise exempt from Canadian tax by virtue of certain relieving
provisions in the CANADA-U.S. INCOME TAX CONVENTION (1980).
The "corporate emigration rules" set out in the ITA will apply upon
the continuation of the Company to the United States. Accordingly,
the Company will be deemed to have had a taxation year ended
immediately prior to it being granted articles of continuance in a
State jurisdiction within the United States. In addition, each
property owned by the Company, including any shares it holds in a U.S.
subsidiary, immediately before the deemed year end will be deemed to
have been disposed of for proceeds of disposition equal to that
property's fair market value. Any gains or losses of the Company
resulting from its deemed dispositions of such property will be taken
into account when determining the amount of the Company's taxable
income for the fiscal period which ends immediately before its
continuation. Any available non-capital loss carry forwards of the
Company from previous taxation years can be used to offset the amount
of any taxable income calculated in respect of the fiscal period of
the Company which will be deemed to have ended immediately before its
continuation.
The Company will also be required to pay a special branch tax equal to
5% of the amount by which the fair market value of its assets
(calculated immediately before the deemed taxation year) and exceeds
the aggregate of:
(a) its liabilities, including any liabilities owing under the ITA,
and
(b) the paid-up capital of its issued and outstanding stock at the
time of its continuation into the United States.
The Company has retained BDO Dunwoody to provide an estimate as to the
taxes payable on completion of the Delaware Continuation. The Company
has received a preliminary indication from BDO Dunwoody based on the
Company's third quarter financial statements for the period ending
September 30, 1997 and certain assumptions about future income of the
Company that no tax would be payable. The directors of the Company
have requested a more formal opinion from BDO Dunwoody and will review
this formal opinion prior to a determination as to whether to proceed
with the Delaware Continuation. The directors of the Company will not
approve the Delaware Continuation in the event that the formal opinion
indicates that the Company would be required to pay a material adverse
amount of tax under the ITA as a result of the Delaware Continuation.
Approval of the shareholders to the discretion of the directors of the
Company to determine not to
Page 22
<PAGE>
proceed with the Delaware Continuation notwithstanding shareholder
approval is being sought at the Meeting.
(B) NATURE OF THE SHARES OF THE COMPANY HELD BY CANADIAN SHAREHOLDERS
-----------------------------------------------------------------
The shares of the Company will generally constitute "capital property"
to a holder thereof, unless such shareholder is a trader or dealer in
securities or is engaged in an adventure in the nature of trade with
respect to such shares. Certain shareholders resident in Canada whose
shares of the Company might not otherwise qualify as "capital
property" may be entitled to obtain such qualification until the time
of the continuance by making the irrevocable election permitted by
subsection 39(4) of the ITA. ANY INDIVIDUAL CONTEMPLATING MAKING A
SUBSECTION 39(4) ELECTION SHOULD FIRST CONSULT HIS TAX ADVISORS AS THE
MAKING OF SUCH ELECTION WILL AFFECT THE INCOME TAX TREATMENT OF HIS
DISPOSITION OF OTHER CANADIAN SECURITIES.
(C) SHAREHOLDER CONSEQUENCES
------------------------
The continuation of the Company from the Canadian federal jurisdiction
to the United States will not constitute a taxable event for its
Canadian shareholders. In this regard, Canadian shareholders of the
Company will continue to hold their shares at the same "cost" for
purposes of the ITA as before the Company's continuation.
Should a shareholder initiate formal "dissent" proceedings in respect
of the proposed continuation, the Company will be required to purchase
the dissenting shareholder's shares for a cash payment (the
"redemption proceeds") equal in amount to the fair market value of the
subject shares. The receipt by the dissenting shareholder of the
redemption proceeds will generally be treated as a dividend to the
extent that such proceeds exceed the paid-up capital of the subject
shares. The balance of the redemption proceeds (i.e., the amount
equal to the paid-up capital of the subject shares) will be treated as
proceeds of disposition of the shares for capital gains purposes.
Consequently, the dissenting shareholder could realize a capital gain
(capital loss) to the extent that the paid-up capital of the subject
shares exceed (is exceeded by) the shareholder's adjusted cost base
thereof. In the event that a dissenting shareholder is a corporation
resident in Canada, the amount of the redemption proceeds received may
be treated as proceeds of disposition with the result that no dividend
would be deemed to have been paid to such dissenting shareholder and
any gain or loss realized by the dissenting corporate shareholder
would be determined by reference to the full amount of the redemption
proceeds.
Any capital loss arising on the exercise of dissent rights by a
corporate shareholder of the Company will be reduced by the amount of
dividends received or deemed to have been received, including any
deemed dividend arising from the exercise of dissent rights, on the
subject shares where the period of ownership of such shares was less
than 365 days or where the corporate holder (together with persons
with whom it did not deal at arm's length) held more than 5% of the
issued shares of any class of the Company at the time the dividends
were received or deemed to have been received.
Pabe 23
<PAGE>
Any payment received AFTER the continuation of the Company into the
United States by a Canadian resident individual as a result of a
dissent proceeding will be treated as proceeds of disposition and will
not be treated as a dividend.
Dividends paid by the Company, following its continuance, to
shareholders resident in Canada will be treated differently under the
ITA than dividends those shareholders might have previously received
from the Company. By way of summary, a Canadian shareholder who is an
individual will be required to include the gross amount of any
dividends received from the Company when computing his income for the
year of such receipt. The shareholder will not be entitled to claim
the federal dividend tax credit in respect of such dividends. A
foreign tax credit will be available under the ITA to the Canadian
shareholder to the extent of the lesser of:
(a) withholding taxes paid to the United States in respect of all
non-business income taxes paid and not deducted when computing
income (up to a maximum of 15% of certain foreign income from
property), and
(b) the Canadian taxes otherwise payable in respect of that foreign
income.
If the withholding taxes paid exceed 15% of the foreign income from
property, such excess may be deducted in computing net income. The
individual shareholder can claim the foreign withholding taxes paid
but which are not credited as a deduction when computing his income
for tax purposes.
(D) INTEREST EXPENSE
----------------
Interest incurred on money borrowed to purchase shares of the Company
and which was deductible prior to the continuation of the Company to
the United States will continue to be deductible by the shareholder
after its continuation to the United States. Generally, interest will
remain deductible only as long as the shareholder continues to own the
shares of the Company or is using the borrowed funds to earn income
from a business or property.
9. REDESIGNATION OF COMMON SHARES
------------------------------
The Delaware Constating Documents will redesignate the existing
"common shares without par value" as "common shares with a par value
of $0.001 per share". As Delaware Corporation Law imposes
incorporation fees and franchise taxes based on the par value of
authorized capital, the directors of the Company consider it in the
best interests of the Company to designate the common shares with a
nominal par value of $0.001 per share. With the exception of those
changes to the rights of shareholders summarized above, there are no
other material changes to the rights and priveleges of the common
shares.
Page 24
<PAGE>
10. REDUCTION IN THE NUMBER OF COMMON SHARES
----------------------------------------
The Delaware Constating Documents will reduce the number of authorized
common shares of the Company from 100,000,000 common shares to
60,000,000 common shares. As Delaware Corporation Law imposes
incorporation fees and franchise taxes based on the number of
authorized shares of the Company, the directors of the Company
consider it in the best interests of the Company to reduce the number
of authorized common shares.
11. REDESIGNATION OF CLASS A PREFERENCE SHARES
------------------------------------------
The Delaware Constating Documents will redesignate the Class A
Preference Shares as Preferred Stock. In addition, each share will be
redesignated with a par value of $0.001 per share and the authorized
number of such shares reduced from 100,000,000 shares to 1,000,000
shares. The rights and restrictions of Class A Preference Shares will
be amended upon their designation as Preferred Stock to remove the
requirement that all holders of Class A Preference Shares will rank
equally as to payment of dividends and return of capital on
dissolution, liquidation or winding-up. This amendment will not
affect the outstanding Series One Convertible Class A Preference
Shares and Series Two Convertible Class A Preference Shares whose
rights and restrictions will be preserved in the Certificate of
Incorporation.
The reduction of the number of authorized Preferred Stock and the
designation of the Preferred Stock with a par value of $0.001 is
considered by the directors to be in the best interests of the Company
in view of the incorporation fees and franchise fees assessed under
Delaware Corporation Law based on authorized capital and par value.
12. REDESIGNATION OF SERIES ONE CONVERTIBLE CLASS A PREFERENCE SHARES
-----------------------------------------------------------------
The Delaware Constating Documents will redesignate the Series One
Convertible Class A Preference Shares as Series A Preferred Stock. As
of the record date, there are 10,000 Series One Convertible Class A
Preference Shares issued and outstanding. The rights and restrictions
of the Series A Preferred Stock are set forth in the Certificate of
Incorporation. With the exception of those changes to the rights of
shareholders summarized above, there are no material changes to the
rights and restrictions applicable to the Series One Convertible Class
A Preference Shares.
13. REDESIGNATION OF SERIES TWO CONVERTIBLE CLASS A PREFERENCE SHARES
-----------------------------------------------------------------
The Delaware Constating Documents will redesignate any designated and
issued and outstanding Series Two Convertible Class A Preference
Shares as Series B Preferred Stock. As of the record date, the
Company is proposing to designate 10,000 Series Two Convertible Class
A Preference Shares. There are no Series Two Convertible Class A
Preference Shares outstanding as of the record date. The rights and
restrictions of the Series B Preferred Stock are set forth in the
Certificate of Incorporation. With the exception of those changes to
the rights of shareholders summarized above,
Page 25
<PAGE>
there will be no material changes to the rights and restrictions
applicable to the Series Two Convertible Class A Preference Shares.
14. CANCELLATION OF THE CLASS B PREFERENCE SHARES
---------------------------------------------
The Delaware Constating Documents will cancel the authorized
100,000,000 Class B Preference Shares of the Company. As of the
record date, the Company has not issued any Class B Preference Shares
or designated any series of Class B Preference Shares. The directors
do not consider that a separate class of preferred stock is necessary
upon completion of the Delaware Continuation due to the flexibility
available to the Company in designating rights and restrictions
applicable to additional classes of Preferred Stock.
15. OTHER MATTERS
-------------
The management does not know of any other matters to come before the
Meeting other than those referred to in the Notice of Meeting. Should
any other matters properly come before the Meeting, the shares
represented by the Proxy solicited hereby will be voted on such
matters in accordance with the best judgment of the persons voting the
Proxy.
The undersigned hereby certifies that the contents and the sending of
this management proxy circular have been approved and authorized by
the directors of the Company.
DATED at Vancouver, British Columbia this 23rd day of January, 1998.
ON BEHALF OF THE BOARD OF DIRECTORS
"LEON E. NOWEK"
Leon E. Nowek
Chief Financial Officer and Director
Page 26
<PAGE>
[ATTACHMENT TO THE PROXY CIRCULAR OF
TURBODYNE TECHNOLOGIES INC.]
CERTIFICATE OF INCORPORATION
OF
TURBODYNE TECHNOLOGIES INC.
I.
The name of the Corporation is Turbodyne Technologies Inc.
II.
The address of the Corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, Delaware 19801, County
of New Castle. The name of its registered agent at such address is
The Corporation Trust Company.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which Corporations may be organized under the General
Corporation Law of the State of Delaware (the "Delaware Law").
IV.
This Corporation is authorized to issue two classes of shares,
designated, respectively, "Preferred Stock" and "Common Stock." Each
class of stock shall have a par value of $.001 per share. The number
of shares of Preferred Stock authorized to be issued is 1,000,000 and
the number of shares of Common Stock authorized to be issued is
60,000,000. The rights, preferences, privileges and restrictions
granted to or imposed upon the first two series of Preferred Stock,
designated "Series A Convertible Preferred Stock" (the "Series A
Preferred Stock") and "Series B Convertible Preferred Stock" (the
"Series B Preferred Stock" and together with the Series A Preferred
Stock, the "Convertible Preferred Stock"), of which the Corporation is
authorized to issue 10,000 shares and 10,000 shares, respectively, are
set forth in Article V below.
Any shares of Preferred Stock, other than the Convertible
Preferred Stock, may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to fix or alter
from time to time the designation, powers, preferences and rights of
the shares of each such series and the qualifications, limitations or
restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such
series or any of them; and to increase or decrease the number of
shares of any series subsequent to the issuance of shares of that
series, but not below the number of shares of such series then
outstanding. In case the number of shares of any series shall be
decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior
to the adoption of the resolution originally fixing the number of
shares of such series.
<PAGE>
V.
The relative rights, preferences, privileges and restrictions
granted to or imposed upon the Convertible Preferred Stock and the
holders thereof are as follows:
Section 1. DIVIDENDS.
(a) Holders of the Convertible Preferred Stock shall
be entitled to receive cumulative dividends at the rate per share (as
a percentage of the Stated Value per share) equal to 7% per annum.
Such dividends shall be payable in arrears on the Conversion Date in
cash or Common Stock out of funds legally available therefore.
Dividends on the Series A Preferred Stock shall accrue daily
commencing September 8, 1997 and dividends on the Series B Preferred
Stock shall accrue daily commencing on the Series B Issue Date. No
dividends (other than those payable solely in the Common Stock of the
Corporation) shall be paid on any Common Stock of the Corporation
during any fiscal year of the Corporation until dividends in the total
amount per share (as a percentage of the Stated Value per share) equal
to 7% per annum (as adjusted for any stock dividends, combinations or
splits with respect to such shares) on the Convertible Preferred Stock
shall have been paid or declared and set apart during that fiscal year
and any prior year in which dividends accumulated but remain unpaid.
(b) So long as any Convertible Preferred Stock shall
remain outstanding, neither the Corporation nor any subsidiary
thereof, shall redeem, purchase or otherwise acquire directly or
indirectly any Junior Securities, nor shall the Corporation directly
or indirectly pay or declare any dividend or make any distribution
(other than a dividend or distribution described in Section __) upon,
nor shall any distribution be made in respect of, any Junior
Securities, nor shall any monies be set aside for or applied to the
purchase or redemption (through a sinking fund or otherwise) of any
Junior Securities unless all dividends on the Convertible Preferred
Stock for all past dividend periods shall have been paid. Each Holder
shall be deemed to have consented, for the purposes of the Delaware
Law, to repurchase of shares of Common Stock by the Corporation issued
to or held by employees or consultants upon termination of their
employment or services pursuant to pre-existing agreements between the
Corporation and such persons providing for the Corporation's rights of
said repurchase.
Section 2. VOTING RIGHTS
(a) Except as otherwise provided for herein or in the
Delaware Law, the Convertible Preferred Stock shall have no voting
rights. Notwithstanding the foregoing, so long as any shares of
Convertible Preferred Stock remain outstanding, the Corporation shall
not, (i) without the affirmative vote of the holders of a majority of
the shares of the Series A Preferred Stock then outstanding alter or
change adversely the rights, privileges, restrictions and conditions
attaching to the Series A Preferred Stock, and (ii) without the
affirmative vote of the holders of a majority of the shares of the
Series B Preferred Stock then outstanding alter or change adversely
the rights, privileges, restrictions and conditions attaching to the
Series B Preferred Stock.
<PAGE>
Section 3. LIQUIDATION
(a) Upon any liquidation, dissolution or winding-up of
the Corporation, whether voluntary or involuntary, the holders of
Convertible Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds
of the Corporation to the holders of Junior Securities by reason of
their ownership thereof, for each share of Convertible Preferred
Stock, an amount equal to the Stated Value, plus an amount equal to
accrued but unpaid dividends per share, whether declared or not, but
without interest (as adjusted for any stock dividends, combinations or
splits with respect to such shares). All of the preferential amounts
to be paid to the holders of Convertible Preferred Stock under this
Section 3(a) shall be paid or set apart for payment before the payment
or setting apart for payment of any amount for, or the distribution of
any assets of the Corporation to, the holders of the Junior Securities
in connection with any such liquidation, dissolution or winding up.
After the payment or the setting apart for payment to the holders of
Convertible Preferred Stock of the preferential amounts so payable to
them, the remaining assets of the Corporation available for
distribution shall be distributed in accordance with the provisions of
Section 3(b). If upon the occurrence of any liquidation, dissolution
or winding-up of the Corporation, the assets and funds thus
distributed among the holders of Convertible Preferred Stock shall be
insufficient to permit the payment to the Series A Holders of the
full aforesaid preferential amount, then the entire assets and funds
of the Corporation legally available for distribution shall be
distributed ratably among the holders of Convertible Preferred Stock
in proportion to the preferential amount each such holder is otherwise
entitled to receive.
(b) In the event of a liquidation, dissolution or
winding-up of the Corporation, after the distribution to holders of
Convertible Preferred Stock in the amounts set forth in Section 3(a)
above, the remaining assets of the Corporation legally available for
distribution, if any, to stockholders shall be distributed ratably to
the holders of the Common Stock then outstanding.
(c) For purposes of this Section 3, (i) any
transaction or series of related transactions in which the
stockholders of the Corporation shall own less than 50% of the voting
securities of the surviving corporation or (ii) a sale of all or
substantially all of the assets of the Corporation, shall, at the
option of the holder, be treated as a liquidation, dissolution or
winding up of the Corporation and shall entitle the holders of
Convertible Preferred Stock and Common Stock to receive at the closing
in cash, securities or other property (valued as provided in Section
__ below) amounts as specified in Sections 3(a) and 3(b) above;
provided however, that a consolidation or merger of the Corporation
with or into any other Corporation shall not be treated as a
liquidation, but instead shall be subject to the provisions of Section
4(j). The Corporation shall mail written notice of any such
liquidation, not less than 60 days prior to the payment date stated
therein, to each record holder of Convertible Preferred Stock.
Section 4. CONVERSION
(a) RIGHT TO CONVERT. Each share of Series A
Preferred Stock shall be convertible into shares of Common Stock at
the Series A Conversion Ratio at the option of the holder in whole or
in part at any time after January 5, 1998 and on or prior to the fifth
day prior to the Redemption Date, if any, as may have been fixed in
any Redemption Notice with respect to the
Page 3
<PAGE>
Series A Preferred Stock. Each share of Series B Preferred Stock shall
be convertible into shares of Common Stock at the Series B Conversion
Ratio at the option of the holder in whole or in part at any time after
the expiration of 120 days after the Series B Issue Date and on or prior
to the fifth day prior to the Redemption Date, if any, as may have been
fixed in any Redemption Notice with respect to the Series B Preferred
Stock. Any conversion under this Section 4(a) shall be of a minimum
amount of at least ten (10) shares of Convertible Preferred Stock.
(b) CONVERSION PRICE.
(i) The conversion price for each share of Series
A Preferred Stock in effect on any Conversion Date shall be the LESSER
of X or Y where:
X is the greater of:
(x) $5.00 (the "Series A Fixed Price"); or
(y) C
--------------------------------------
[(C [divided by] Series A Fixed Price) +
1.75][divided by]2
where
C = the average Per Share Market Value of the five
(5) Trading Days immediately preceding the Conversion Date; and
Y = 90% less 1% multiplied by the number of whole
calendar months from September 8, 1997 to the Conversion Date (subject
to a minimum of 80%) multiplied by the average Per Shares Market Value
of the five (5) Trading Days immediately preceding the Conversion Date
(the "Five Day Average") (e.g., if the Conversion date is five (5)
months after September 8, 1997, then Y is 85% multiplied by the Five
Day Average)(the "Series A Floating Price).
(ii) The conversion price for each share of Series
B Preferred Stock in effect on any Conversion Date shall be the LESSER
of A or B where:
A is the greater of:
(x) $110% of the Per Share Market Value on the
Trading Day immediately preceding the Series B Issue Date (the "Series
B Fixed Price"); or
(y) C
-------------------------------------
[(C [divided by] Series B Fixed Price) +
1.75][divided by] 2
where
Page 4
<PAGE>
C = the average Per Share Market Value of the five
(5) Trading Days immediately preceding the Conversion Date; and
B = 90% less 1% multiplied by the number of whole
calendar months from Series B Issued Date to the Conversion Date
(subject to a minimum of 80%) multiplied by the average Per Shares
Market Value of the five (5) Trading Days immediately preceding the
Conversion Date (the "Five Day Average") (e.g., if the Conversion date
is five (5) months after the Series B Issue Date, then Y is 85%
multiplied by the Five Day Average)(the "Series B Floating Price);
provided, however, if the registration statement to be filed by the
Corporation in accordance with the registration rights agreement
executed between the Corporation and the purchasers of the Series B
Preferred Stock (the "Series B Registration Rights Agreement") is not
declared effective by the Commission for any reason by the Effective
Date, as defined in the Series B Registration Rights Agreement, then
clauses (A) and (B) above shall be decreased by 3% on the Effective
Date and, if the registration statement shall still not be effective,
by an additional 3% on each of the 30th and 60th days following the
Effective Date (i.e., if such registration statement is declared
effective after the Effective Date and within 30 days of the Effective
Date then a 3% reduction, between 31 and 60 days then a 6% reduction,
or between 61 and 90 days, a 9% reduction).
(c) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock outstanding on September 8, 2000 shall automatically be
converted into shares of Common Stock at the then effective Series A
Conversion Ratio. Each share of Series B Preferred Stock outstanding
on January ---, 2001 shall automatically be converted into shares of
Common Stock at the then effective Series B Conversion Ratio.
(d) MECHANICS OF CONVERSION. Before any holder of
Convertible Preferred Stock shall be entitled to convert shares of
Convertible Preferred Stock into shares of Common Stock, he shall
surrender the certificate or certificates therefor, duly endorsed, at
the office of the Corporation or of any transfer agent for such stock,
and shall give written notice (the "Holder Conversion Notice") to the
Corporation at such office that he elects to convert the same and
shall state therein the name or names in which he wishes the
certificate or certificates for shares of Common Stock to be issued.
The Corporation shall, within three Trading Days after the Conversion
Date, issue and deliver to such holder, (i) a certificate or
certificates, free of restrictive legends and trading restrictions
(other than those then required by law) representing the number of
shares of Common Stock to which he shall be entitled as aforesaid; and
(ii) if the holder is converting less than all Convertible Preferred
Stock represented by the certificate or certificates tendered by the
holder, a certificate for such number of shares of Convertible
Preferred Stock as have not been converted. Such conversion shall be
deemed to have been made immediately prior to the close of business on
the date of surrender of the shares of Convertible Preferred Stock to
be converted, and the person or persons entitled to receive the shares
of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common
Stock on such date.
Page 5
<PAGE>
(e) LIMITATION ON CONVERSION. In no event shall a Holder
be entitled to convert shares of Convertible Preferred Stock in excess
of that number of shares of Convertible Preferred Stock which, upon
giving effect to such conversion, would cause the aggregate number of
shares of Common Stock Beneficially Owned by such holder and its
affiliates to exceed 4.9% of the outstanding shares of Common Stock of
the Corporation following conversion. A holder may waive the
foregoing limitations upon delivery of not less than 61 days prior
written notice to the Corporation.
(f) ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES
(i) If the Corporation, at any time while any shares
of Convertible Preferred Stock are outstanding, (a) shall pay a stock
dividend or otherwise make a distribution or distributions on shares
of Junior Securities payable in shares of its capital stock, (b)
subdivide outstanding shares of Common Stock into a larger number of
shares of Common Stock, (c) combine outstanding shares of Common Stock
into a smaller number of shares of Common Stock, or (d) issue by
reclassification of shares of Common Stock any shares of the
Corporation, then in each such case, the Conversion Price designated
in Section 4(b) shall be multiplied by a fraction the numerator of
which shall be the number of shares of Common Stock outstanding before
such event and the denominator of which shall be the number of shares
of Common Stock outstanding after such event. Any adjustment made
pursuant to this Section 4(f) shall become effective immediately after
the record date for the determination of stockholders entitled to
receive such dividend or distribution and shall become effective
immediately after the effective date in the case of a subdivision,
combination or reclassification.
(ii) If the Corporation, at any time while any shares
of Convertible Preferred Stock are outstanding, shall issue rights or
warrants to all holders of shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
less than the Per Share Market Value of a share of Common Stock at the
record date for the determination of stockholders entitled to receive
such rights or warrants, the Conversion Price designated in Section
4(b) shall be multiplied by a fraction, the denominator of which shall
be the number of shares of Common Stock (excluding treasury shares, if
any) outstanding on the date of issuance of such rights or warrants
plus the number of additional shares of Common Stock offered for
subscription or purchase, and the numerator of which shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding on the date of issuance of such rights or warrants plus
the number of shares which the aggregate offering price of the total
number of shares so offered would purchase at such Per Share Market
Value. Such adjustment shall be made whenever such rights or warrants
are issued, and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
rights or warrants. However, upon the expiration of any right or
warrant to purchase shares of Common Stock the issuance of which
resulted in an adjustment in the Conversion Price designated in
Section 4(b) pursuant to this Section 4(f) if any such right or
warrant shall expire and shall not have been exercised, the Conversion
Price designated in Section 4(b) shall immediately upon such
expiration be increased to the price which it would have been (but
reflecting any other adjustments in the Conversion Price made pursuant
to the provisions of this Section 4(f) after the issuance of such
rights or warrants) had the adjustment of the Conversion Price made
upon the issuance of such rights or warrants been made on the basis
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of offering the subscription or purchase only that number of shares of
Common Stock actually purchased upon the exercise of such rights or
warrants actually exercised.
(iii) If the Corporation at any time while shares
of Convertible Preferred Stock are outstanding, shall distribute to
all holders of shares of Common Stock (and not to holders of the
Convertible Preferred Stock) evidences of its indebtedness or assets
or right or warrants to subscribe for or purchase any security
(excluding those referred to in Section 4(f)(ii) above) then in each
such case the Conversion Price at which each share of Convertible
Preferred Stock shall thereafter be convertible shall be determined by
multiplying the Conversion Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to
receive such distribution by a fraction the denominator of which
shall be the Per Share Market Value of a share of Common Stock
determined as of the record date fixed for determination of
stockholders entitled to receive such distribution, and the numerator
of which shall be such Per Share Market Value of a share of Common
Stock less the then fair market value at such record date of the
portion of such assets or evidence of indebtedness so distributed
applicable to one outstanding share of Common Stock as determined by
the Board of Directors in good faith; provided, however, that in the
event of a distribution exceeding 25% of the net assets of the
Corporation, such fair market value shall be determined by a
nationally recognized or major regional investment banking firm or
firm of independent certified accountants of recognized standing
(which may be the firm that regularly examines the financial
statements of the Corporation) (an "Appraiser") selected in good faith
by the holders of a majority in interest of the Convertible Preferred
Stock, voting as a single class; and provided further that the
Corporation after receipt of the determination by such Appraiser shall
have the right to select an additional Appraiser, in which case the
fair market value shall be equal to the average of the determination
by each such Appraiser. In either case the adjustments shall be
described in a statement provided to all holders of Convertible
Preferred Stock of the portion of assets or evidences of indebtedness
so distributed or such subscription rights applicable on a share of
Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the
record date mentioned above.
(iv) All calculations under this Section 4(f) shall be
made to the nearest cent or the nearest 1/100th of a share, as the
case may be.
(v) Whenever the Conversion Price is adjusted pursuant
to Section 4(f)(i), (ii) or (iii), the Corporation shall promptly mail
to each holder of Convertible Preferred Stock, a notice setting forth
the Conversion Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.
(g) NO FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Convertible Preferred Stock. If
more than one certificate shall be surrendered for conversion at any
one time by the same holder, the number of full shares of Common Stock
issuable upon conversion thereof shall be computed on the basis of the
aggregate number of shares so surrendered. In lieu of any fractional
shares to which the holder would otherwise be entitled, the
Corporation at its election shall either pay cash equal to such
fraction multiplied by the then effective Per Share Market Value at
such time or issue one whole share for each fraction of a share
outstanding, after aggregating all fractional shares held by each
stockholder.
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(h) RESERVATION OF SHARES OF COMMON STOCK. The Corporation
shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of
effecting the conversion of the shares of the Convertible Preferred
Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares
of the Convertible Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the
Convertible Preferred Stock, the Corporation will take such corporate
action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient
for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary
amendment to this Certificate of Incorporation.
(i) ISSUE TAXES. The Corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of
Convertible Preferred Stock pursuant hereto; provided, however, that
the Corporation shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with
any such conversion.
(j) RECLASSIFICATION; MERGER; CONSOLIDATION. In the case
of any reclassification of shares of Common Stock, any consolidation
or merger of the Corporation with or into another Person, or the sale
or transfer of all or substantially all of the assets of the
Corporation, the holders of the Convertible Preferred Stock then
outstanding shall have the right thereafter to convert such shares
only into the shares and other securities and property receivable upon
or deemed to be held by holders of shares of Common Stock following
such reclassification, consolidation, merger, sale or transfer and the
holders of the Convertible Preferred Stock shall be entitled upon such
transfer to receive such amount of securities or property as the
shares of Common Stock of the Corporation into which such shares of
Convertible Preferred Stock could have been converted immediately
prior to such reclassification, consolidation, merger, sale or
transfer would have been entitled. The terms of any such
reclassification, consolidation, merger, sale or transfer shall
include such terms so as to continue to give to the holder of the
Convertible Preferred Stock the right to receive the securities or
property set forth in this Section 4(j) upon any conversion following
such reclassification, consolidation, merger, sale or transfer. This
provision shall similarly apply to successive reclassifications,
consolidations, mergers, sales and transfers.
(k) NOTICE OF CERTAIN EVENTS. In the event that:
(i) the Corporation declares a dividend (or any other
distribution) on its shares of Common Stock; or
(ii) the Corporation shall declare a special
nonrecurring cash dividend on or a redemption of its shares of Common
Stock; or
(iii) the Corporation shall authorize the granting
to all holders of shares of Common Stock rights or warrants to
subscribe for or purchase any shares of capital stock of any class or
of any rights; or
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(iv) the approval of any stockholders of the
Corporation shall be required in connection with any reclassification
of the shares of Common Stock of the Corporation (other than a
subdivision or combination of the outstanding shares of Common Stock)
any consolidation or merger to which the Corporation is a party or any
sale or transfer of all or substantially all of the assets of the
Corporation; or
(v) the Corporation shall authorize the voluntary or
involuntary dissolution, liquidation or winding-up of the affairs of
the Corporation including, without limitation, any of the events
described in Section 3 herein,
then the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the Convertible Preferred
Stock, and shall cause to be mailed to the holders of the Convertible
Preferred Stock at their last addresses as they shall appear upon the
share register of the Corporation, at least 30 calendar days prior to
the applicable record or effective date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the
purpose of such dividend, distribution, redemption, rights or
warrants, or if a record is not to be taken, the date as of which the
holders of shares of Common Stock of record to be entitled to such
dividend, distribution, redemption, rights or warrants are to be
determined, or (y) the date on which such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which
it is expected that holders of shares of Common Stock of record shall
be entitled to exchange entire shares of Common Stock for securities
or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or
winding-up; provided, however, if the notice referred to herein will
contain material non-public information if distributed at the time
period specified herein, then the notice shall be distributed to the
holders of the Convertible Preferred Stock on the later to occur of
(a) 30 calendar days prior to the applicable record or effective date
specified herein or (b) the date that such information is made
publicly available or (c) at such time as such information otherwise
ceases to be material non-public information; provided further that
the notice requirement to be distributed pursuant to this section
shall be distributed at least five (5) calendar days prior to the
applicable record or effective date.
(l) NOTICES. Each Holder Conversion Notice shall be given
by facsimile and by mail, postage prepaid, addressed to the attention
of the Chief Financial Officer of the Corporation at the facsimile
number and address of the principal place of business of the
Corporation. Any such notice shall be deemed given and effective upon
the earlier to occur of (i)(a) if such Holder Conversion Notice is
delivered via facsimile at the facsimile number specified in this
Section 4(l) prior to 4:30 p.m. (New York time) on any Trading Day,
such Trading Day or such later date as is specified in the Holder
Conversion Notice, and (b) if such Holder Conversion Notice is
delivered via facsimile at the facsimile number specified in this
Section 4(l) after 4:30 p.m. (New York time) on any Trading Day, the
next Trading Day or such later date as specified in the Holder
Conversion Notice, (ii) five (5) days after deposit in the United
States mails or (iii) upon actual receipt by the party to whom such
notice is required to be given.
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Section 5. REDEMPTION
(a) CORPORATION REDEMPTION. The Corporation may
redeem, from any source of funds legally available therefor, at any
time any or all shares of the Convertible Preferred Stock then
outstanding by delivering a notice (the "Redemption Notice") to the
holders of the Convertible Preferred Stock being redeemed setting
forth the date of such redemption (the "Redemption Date") (which shall
be no less than thirty days following the date of the Redemption
Notice) and paying to the holder (x) a cash payment (the "Redemption
Price") equal to the product of (i) the greater of: (a) the Per Share
Market Value on the Trading Day immediately preceding the Redemption
Date; or (b) the average of the Per Share Market Values for the five
(5) Trading Days immediately preceding the Redemption Date, (ii) the
number of shares of Convertible Preferred Stock to be redeemed, and
(iii) the Series A Conversion Ratio or the Series B Conversion Ratio,
as applicable; and (y) a warrant (the "Redemption Warrant") to
purchase a number of shares of Common Stock equal to the Stated Value
plus unpaid accrued dividends of the Convertible Preferred Stock being
redeemed divided by the Series A Fixed Price or the Series B Fixed
Price, as applicable, exercisable at the Series A Fixed Price or the
Series B Fixed Price, as applicable, with an expiration date of the
third anniversary of the Series A Issue Date or the Series B Issue
Date, as applicable. The Redemption Price shall be payable by the
Corporation on the Redemption Date. Any redemption effected pursuant
to this Section 5(a) shall be made on a pro-rata basis among the
holders of the Series A Preferred Stock and Series B Preferred Stock
in proportion to the shares of Series A Preferred Stock and Series B
Preferred Stock then held by them.
(b) HOLDER REDEMPTION. Each holder of Convertible
Preferred Stock has the right to require the Corporation to redeem any
or all of the shares of Convertible Preferred Stock then held by the
holder (a "Forced Redemption") upon the occurrence of one of the
following events (each a "Forced Redemption Event"):
(i) the registration statement required to be
filed by the Corporation pursuant to the registration rights
agreements dated September 8, 1997 and September 19, 1997 between the
Corporation and each holder of Series A Preferred Stock (the "Series A
Registration Rights Agreement") or the Series B Registration Rights
Agreement has not been filed and declared effective by the date which
is 210 days from the Series A Issue Date or the Series B Issue Date,
as applicable, or there is a lapse in the effectiveness of the
registration statement filed pursuant to the Series A Registration
Rights Agreement or the Series B Registration Rights Agreement which
continues for an aggregate of 40 Trading Days, excluding from such
time calculation any Blackout Periods, as defined in each of the
Series A Registration Rights Agreement and the Series B Registration
Rights Agreement;
(ii) the shares of Common Stock (including any of
the shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock) shall (a) cease to be listed or authorized for
trading on any of the Nasdaq National Market, the Nasdaq Small Cap
Market, the American Stock Exchange or the New York Stock Exchange
(collectively, the "Exchanges"), or (b) are suspended from trading on
any of the Exchanges, each for a consecutive 20 calendar day period;
or
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(iii) the Corporation fails to deliver stock
certificates representing the shares of Common Stock to be issued upon
conversion of the Convertible Preferred Stock within 30 Trading Days
of the Conversion Date.
In the event of a Forced Redemption, the holder will deliver written
notice to the Corporation and, within thirty (30) days of receipt of
such notice, the Corporation will redeem the shares of Convertible
Preferred Stock by paying to the holder a payment in cash, check or
wire transfer equal to the Redemption Price.
(c) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of
the holders of shares of Convertible Preferred Stock designated for
redemption in the Redemption Notice as holders of Convertible
Preferred Stock (except the right to receive the Redemption Price
without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the Corporation or be deemed
to be outstanding for any purpose whatsoever. If the funds of the
Corporation legally available for redemption of shares of Convertible
Preferred Stock on any Redemption Date are insufficient to redeem the
total number of shares of Convertible Preferred Stock to be redeemed
on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares ratably among the
holders of the Convertible Preferred Stock to be redeemed. The shares
of Convertible Preferred Stock or Series B Preferred Stock not
redeemed shall remain outstanding and entitled to all rights and
preferences provided herein. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of
shares of Convertible Preferred Stock such funds will immediately be
used to redeem the balance of the shares which the Corporation has
become obligated to redeem on an Redemption Date, but which it has not
redeemed.
Section 6. GENERAL PROVISIONS
The Corporation shall not, without first obtaining the approval
by vote or written consent, in the manner provided under applicable
law, of the holders of a majority of the Series A Preferred Stock then
outstanding create (by reclassification of an existing class or
series, or otherwise) any new class or series of shares of Preferred
Stock senior to the Series A Preferred Stock as to voting rights,
dividends, redemption or distribution of assets of the Corporation in
liquidation. The Corporation shall not, without first obtaining the
approval by vote or written consent, in the manner provided under
applicable law, of the holders of a majority of the Series B Preferred
Stock then outstanding create (by reclassification of an existing
class or series, or otherwise) any new class or series of shares of
Preferred Stock senior to the Series B Preferred Stock as to voting
rights, dividends, redemption or distribution of assets of the
Corporation in liquidation.
Section 7. DEFINITIONS
(a) "BENEFICIALLY OWNED" means and includes the number of
shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock with respect to which the determination of such
provision is being made, but shall exclude the number of shares of
Common Stock which would be issuable upon (i) conversion of the
remaining, non-converted shares of
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Convertible Preferred Stock beneficially owned by a holder and its
affiliates and (ii) exercise or conversion of the unexercised or
unconverted portion of any other securities of the Corporation
(including, without limitation, any warrants) subject to a limitation
on conversion or exercise analogous to the limitation contained herein
Beneficially Owned by a holder and its affiliates. Except as set forth
in the preceding sentence, for purposes of this definition, beneficial
ownership shall be calculated in accordance with Section 13(d) of
the Securities Exchange Act of 1934, as amended.
(b) "COMMON STOCK" means shares of common stock, par value
$.001 of the Corporation.
(c) "CONVERSION DATE" means the date of surrender of the
shares of Convertible Preferred Stock to be converted pursuant to
Section 4(d) of Article V.
(d) "JUNIOR SECURITIES" means the Common Stock and all
other equity securities of the Corporation, except the Convertible
Preferred Stock.
(e) "PER SHARE MARKET VALUE" means on any particular date
(i) the closing bid price per share of the Common Stock on such date
on the Nasdaq Stock Market or other stock exchange on which the shares
of Common Stock have been listed or if there is no such price on such
date, then the closing bid price on such exchange on the date nearest
preceding such date, or (ii) if the shares of Common Stock are no
longer publicly traded the fair market value of a share of Common
Stock as determined by an Appraiser selected in good faith by the
holders of a majority in interest of the Convertible Preferred Stock;
provided, however, that the Corporation, after receipt of
determination by such Appraiser, shall have the right to select an
additional Appraiser, in which case, the fair market value shall be
equal to the average of the determinations by each such Appraiser.
(f) "PERSON" means a corporation, association, partnership,
limited liability company, organization, business, individual,
government or political subdivision thereof or a government agency.
(g) "SERIES A CONVERSION RATIO" means, at any time, a
fraction, the numerator of which is the Stated Value plus accrued but
unpaid dividends, and the denominator of which is the Series A
Conversion Price at such time.
(h) "SERIES A ISSUE DATE" means September 8, 1997.
(i) "SERIES B CONVERSION RATIO" means, at any time, a
fraction, the numerator of which is the Stated Value plus accrued but
unpaid dividends, and the denominator of which is the Series B
Conversion Price at such time.
(j) "SERIES B ISSUE DATE" means the date of the first
issuance of any Series B Preferred Stock regardless of the number of
any particular shares of Series B Preferred Stock and regardless of
the number of certificates which may be issued to evidence such shares
of Series B Preferred Stock.
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(k) "STATED VALUE" means $1,000 per share of Convertible
Preferred Stock.
(l) "TRADING DAY" means a day on which the shares of Common
Stock are traded on the Nasdaq Stock Market or on an exchange on which
the shares of Common Stock have then been listed.
VI.
Except and to the extent designated with respect to the Preferred
Stock, all rights to vote and all voting power shall be vested in the
Common Stock and the holders thereof shall be entitled at all
elections of directors to one (1) vote per share. Special meetings of
the stockholders of the Corporation 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 Corporation.
VII.
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 1998
annual meeting of stockholders; the term of the Class II directors
shall terminate on the date of the 1999 annual meeting of stockholders
and the term of the Class III directors shall terminate on the date of
the 2000 annual meeting of stockholders. At each annual meeting of
stockholders beginning in 1998, 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.
Subject to the rights, if any, of the holders of shares of
Preferred Stock then outstanding, any or all of the directors of the
Corporation may be removed from office at any time, for cause only, by
the affirmative vote of the holders of a majority of the outstanding
shares of the Corporation then entitled to vote generally in the
election of the directors, considered for purposes of this Article
VII. as one class.
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Notwithstanding the foregoing, whenever the holders of any one or
more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders, the
election, term of office, filling of vacancies and other features of
such directorships shall be governed by the terms of this Certificate
of Incorporation or the resolution or resolutions adopted by the Board
of Directors pursuant to the second paragraph of Article V applicable
thereto, and such directors so elected shall not be divided into
classes pursuant to this Article VII. unless expressly provided by
such terms.
VIII.
Elections of directors at an annual or special meeting of
stockholders need not be by written ballot unless the Bylaws of the
Corporation shall otherwise provide.
Any action required or permitted to be taken at any annual or
special meeting of stockholders may be taken by the vote of the
stockholders at an annual or special meeting duly noticed and called,
as provided in the Bylaws of the Corporation, or by written consent of
the stockholders pursuant to the Delaware Law.
IX.
The officers of the Corporation shall be chosen in such a manner,
shall hold their offices for such terms and shall carry out such
duties as are determined solely by the Board of Directors, subject to
the right of the Board of Directors to remove any officer or officers
at any time with or without cause.
X.
The Corporation shall indemnify to the fullest extent authorized
or permitted by law (as now or hereafter in effect) any person made,
or threatened to be made, a defendant or witness to any action, suit
or proceeding (whether civil or criminal or otherwise) by reason of
the fact that she or he, her or his testator or intestate, is or was a
director, officer, employee or agent of the Corporation or by reason
of the fact that any person is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan
or enterprise. Nothing contained herein shall affect any rights to
indemnification to which employees other than directors and officers
may be entitled by law. No amendment or repeal of this paragraph of
Article X shall apply to or have any effect on any right to
indemnification provided hereunder with respect to any acts or
omissions occurring prior to such amendment or repeal.
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such a director as a director. Notwithstanding the
foregoing sentence, a director shall be liable to the extent provided
by applicable law (i) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) pursuant to Section 174 of the Delaware Law,
or (iv) for any
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transaction from which such director derived an improper personal benefit.
No amendment to or repeal of this paragraph of Article X shall apply to
or have any effect on the liability or alleged liability of any director
of the Corporation for or with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
In furtherance and not in limitation of the powers conferred by
statute:
(i) the Corporation may purchase and maintain insurance on
behalf of any person who is or was a director or officer,
employee or agent of the Corporation, or is serving at the
request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability
asserted against him or her and incurred by him or her in any
such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify
against such liability under the provisions of law; and
(ii) the Corporation may create a trust fund, grant a
security interest and/or use other means (including, without
limitation, letters of credit, surety bonds and/or other similar
arrangements), as well as enter into contract providing
indemnification to the full extent authorized or permitted by law
and including as part thereof provisions with respect to any or
all of the foregoing to ensure the payment of such amounts as may
become necessary to effect indemnification as provided therein,
or elsewhere.
XI.
In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware, the Board of Directors of the
corporation shall have the sole authority to adopt, repeal, alter,
amend or rescind the Bylaws of the Corporation.
XII.
The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation in the manner
prescribed by the laws of the State of Delaware and all rights
conferred upon stockholders are granted subject to this reservation;
PROVIDED, HOWEVER, that, notwithstanding any other provision of this
Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote, but in addition to any vote of the
holders of any class or series thereof of the stock of this
Corporation required by law or by this Certificate of Incorporation,
the affirmative vote of the holders of at least 66 2/3 percent of the
combined voting power of the outstanding shares of stock of all
classes and series thereof of the Corporation entitled to vote
generally in the election of directors, voting together as a single
class, shall be required to amend, repeal or adopt any provision
inconsistent with (i) the second sentence of Article VI, (ii) Article
VII, (iii) the second paragraph of Article VIII, (iv) Article XI or
(v) this Article XII.
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XIII.
Section 1.
In addition to the rights granted under Section 262 of the
Delaware Law, and subject to the provisions of this Article XIII, a
holder of shares of any class or series of capital stock of the
Corporation is hereby empowered to dissent, and thereafter exercise
the appraisal rights contemplated in Section 262 of the Delaware Law,
in the event that the Board of Directors resolves (i) to amend this
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 this
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 this 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 its assets; (v) to
amend the provisions of this Article XIII; or (vi) to effect any
merger or consolidation in which the Corporation is a constituent
corporation, whether or not any appraisal rights are otherwise
available under Section 262 of the Delaware Law. Upon the passage of
any such resolution, the procedures of Section 262 of the Delaware Law
shall apply as nearly as is practicable, with the provisions of
Section 262(d)(1) being applicable if the proposed action is to be
submitted for approval at a meeting of stockholders, and the provisions
of Section 262(d)(2) being applicable if such meeting or vote of
stockholders is not required to implement such action.
Section 2.
Subject to any contrary provisions of the laws of the State of
Delaware, a beneficial or record stockholder may apply to a court for
leave to institute a cause of action in the name and on behalf of the
Corporation, or to intervene in an action to which the Corporation is
a party for the purpose of prosecuting, defending or discontinuing the
action on behalf of the Corporation, provided that no such action may
be brought and no intervention in any action may be made unless the
court is satisfied that (i) the complainant has given reasonable
notice to the Board of Directors of its intention to apply to the
court to bring a derivative action if the Corporation does not itself
bring, diligently prosecute or defend or discontinue the action; (ii)
the complainant is acting in good faith; and (iii) it appears to be in
the interest of the Corporation that the action be brought,
prosecuted, defended or discontinued.
Section 3.
Subject to any contrary provisions of the laws of the State of
Delaware, a beneficial or record stockholder is hereby empowered to
apply to a court of appropriate jurisdiction for an order to remedy a
result that is oppressive or unfairly prejudicial to or that unfairly
disregards the interest of any security holder, director or officer
of the Corporation arising from (i) any act or omission of the
Corporation; (ii) the carrying on or conduct of the business or
affairs of the Corporation; or (iii) the exercise of the powers of the
Board of Directors of the Corporation. In connection with an action
brought pursuant to rights granted under this Article XIII, the court
may make an interim or final order it thinks fit including, without
limiting the generality of the foregoing:
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(a) an order restraining the conduct complained of;
(b) an order appointing a receiver or receiver-manager;
(c) an order directing an issue or exchange of securities;
(d) an order directing a corporation, subject to the last
paragraph of this Section 3, or any other person, to
purchase securities of a security holder;
(e) an order directing a corporation, subject to the last
paragraph of this Section 3, or any other person, to
pay a security holder any part of the monies paid by
him for securities;
(f) an order varying or setting aside a transaction or
contract to which a corporation is a party and
compensating the corporation or any other party to the
transaction or contract;
(g) an order requiring a corporation, within a time
specified by the court, to produce to the court or an
interested person financial statements for accounting
in such other form as the court may determine;
(h) an order compensating an aggrieved person;
(i) an order directing rectification of the stock register
or other records of the Corporation;
(j) an order liquidating and dissolving the Corporation;
(k) an order directing an investigation into the affairs of
the Corporation;
(l) an order requiring the trial of any issue;
provided, however, that the Corporation shall not be compelled to make
a payment to a stockholder under paragraph (d) or (e) above if there
are reasonable grounds for believing that the Corporation is or would
after that payment be unable to pay its liabilities as they become
due, or that the realizable value of the Corporation's assets would
thereby be less than aggregate of its liabilities.
Section 4.
The Corporation shall remain incorporated under the Delaware
General Corporation Law or any statutory modification or replacement
thereof and shall not merge or consolidate with any entity except as
provided in this Article XIII.
Page 17
<PAGE>
Section 5.
The provisions of this Article XIII may only be amended:
(a) Where the effective date of such amendment occurs on or
before a specified date which is 5 years from the date
of issue of the Director's Letter of Satisfaction, by a
resolution passed by the affirmative vote of
stockholders holding not less than 90% of the votes
cast by the holders of the shares of each class or
series of stock of the Corporation, whether or not such
class or series of stock otherwise has voting rights;
(b) Where the effective date of such amendment occurs after
a specified date which is 5 years from the date of
issue of the Director's Letter of Satisfaction, by a
resolution passed by the affirmative vote of
stockholders holding not less than 66-2/3% of the votes
cast by the holders of the shares of each class or
series of stock of the Corporation, whether or not such
class or series of stock otherwise has voting rights.
Section 6.
Notwithstanding Sections 4 and 5 of this Article XIII, the
corporation may merge or consolidate with another entity if:
(a) the entity surviving such merger or consolidation is a
corporation subject to the Delaware General Corporation
Law and its Certificate of Incorporation includes all
of the provisions of this Article XIII; or
(b) Such entity owns or operates a significant business and
is not controlled by, or under common control with, the
Corporation, and such merger or consolidation does not
have as its primary purpose, the avoidance of this
Article XIII;
and, in either case:
(c) Such merger or consolidation is approved in the same manner
and by the same majority of stockholders as is required by
the Delaware General Corporation Law; and
(d) Dissent and appraisal rights are provided to stockholders on
the same basis in respect of such merger or consolidation as
is set forth in Section 1 of this Article XIII.
Page 18
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Incorporation this __ day of February, 1998.
TURBODYNE TECHNOLOGIES INC.
--------------------------
By:
Its: Secretary
[LETTERHEAD OF MONTREAL TRUST]
February 3, 1998
To: British Columbia Securities Commission
Vancouver Stock Exchange
The NASDAQ
Dear Sirs:
Subject: TURBODYNE TECHNOLOGIES INC.
We confirm that the following material was sent by pre-paid mail on
February 2, 1998, to the registered shareholders of the subject
Corporation:
1. Notice of Extraordinary General Meeting/Information Circular
2. Proxy
3. Supplemental Mail List Return Card
4. Return Envelope
We further confirm that copies of the above mentioned material were
sent to each intermediary holding shares of the Corporation who
responded to the search procedures pursuant to Canadian Securities
Administrators' National Policy Statement No. 41 regarding shareholder
communications.
In compliance with regulations made under the Securities Act, we are
providing this material to you in our capacity as agent for the
subject Corporation.
Yours truly,
MONTREAL TRUST COMPANY OF CANADA
R. Chad Emnace
Account Administrator
STOCK TRANSFER SERVICES
TELEPHONE (604)661-9504
FAX (604)683-3694
cc: Turbodyne Technologies Inc.
O'Neill & Company - Attn: Angela O'Neill
<PAGE>
[LETTERHEAD OF O'NEILL & COMPANY]
VIA SEDAR
February 18, 1998
BRITISH COLUMBIA SECURITIES COMMISSION
Suite 200, 865 Hornby Street
Vancouver, British Columbia
V6Z 2H4
ATTENTION: STATUTORY FILINGS
Dear Sirs:
RE: TURBODYNE TECHNOLOGIES INC. (THE "COMPANY")
- EXTRAORDINARY GENERAL MEETING TO BE HELD ON FEBRUARY 27, 1998
- -----------------------------------------------------------------------
In connection with the Company's Extraordinary General Meeting to be
held on February 27, 1998, we enclose the following:
1. Montreal Trust Company of Canada's letter dated February 3, 1998,
confirming mailing of Meeting materials to all shareholders of
record of the Company;
2. Notice of Annual General Meeting/Information Circular/Certificate
of Incorporation;
3. Proxy; and
4. Supplemental Mail List Return Card.
We trust you will find the foregoing to be in order.
Yours truly,
/S/ MICHAEL H. TAYLOR
MICHAEL H. TAYLOR
/ado
Enclosures
cc. Turbodyne Technologies Inc.
Attention: Mr. Leon E. Nowek
<PAGE>
TURBODYNE TECHNOLOGIES INC.
RETURN CARD
Pursuant to National Policy No. 41, TURBODYNE TECHNOLOGIES INC. (the
"Company") shall maintain a supplemental mailing list and shall
deliver interim financial statements to security holders on that list.
If you wish to be placed on the Company's supplemental mailing list,
please print your name and address and mail this card to the Company's
registrar and transfer agent:
MONTREAL TRUST COMPANY OF CANADA
510 Burrard Street
Vancouver, British Columbia
V6C 3B9
ATTENTION: CORPORATE TRUST DEPARTMENT
--------------------------------------
I do wish to be placed on the Company's supplemental mailing list:
---------------------------------------------
NAME (please print)
---------------------------------------------
ADDRESS
---------------------------------------------
---------------------------------------------
<PAGE>
TURBODYNE TECHNOLOGIES INC.
PROXY
FOR THE EXTRAORDINARY GENERAL MEETING
TO BE HELD FEBRUARY 27, 1998
=========================================================================
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE COMPANY.
The undersigned, being a holder of common shares of Turbodyne
Technologies Inc. (the "Company"), hereby appoints Edward M. Halimi,
President and a director of the Company, or failing him, Leon E.
Nowek, Chief Financial Officer and a director of the Company, or,
alternatively, -----------, as proxyholder, to attend the
Extraordinary General Meeting of the Company to be held on Friday,
February 27, 1998 and at any adjournment thereof and to vote the
shares in the capital of the Company held by the undersigned with
respect to the matters set forth below as follows:
A. To vote as a shareholder of the Company, in a vote by all
shareholders of the Company, including the holders of the
Company's outstanding common shares, Series One Convertible Class
A Preference Shares, and Series Two Convertible Class A
Preference Shares, if any, as follows:
1. the Company make application to the Secretary of State for
the State of Delaware for a Certificate of Domestication
continuing the Company from the Canadian federal
jurisdiction and domesticating the Company under the General
Corporation Law of the State of Delaware;
IN FAVOUR AGAINST
--------- ----------
2. the Company make application to the Director under the
CANADA BUSINESS CORPORATIONS ACT for the issue of a
Certificate of Discontinuance in connection with the
continuation of the Company to the State of Delaware.
IN FAVOUR AGAINST
--------- ----------
3. the Company adopt the Certificate of Incorporation in the
form submitted to the meeting, together with such amendments
approved by the Board of Directors of the Company, in
substitution for the existing Certificate of Continuance,
Articles of Continuance and Articles of Amendment of the
Company upon the continuation of the Company to the State of
Delaware.
IN FAVOUR AGAINST
--------- ----------
<PAGE>
4. the Company file the Certificate of Incorporation with the
Secretary of State for the State of Delaware concurrently
with the domestication of the Company under the General
Corporation Law of the State of Delaware.
IN FAVOUR AGAINST
--------- ----------
5. the Company adopt the By-laws in the form submitted to the
Meeting in place of the Company's existing By-laws upon
continuation of the Company from the Canadian federal
jurisdiction and domestication under Delaware law.
IN FAVOUR AGAINST
--------- ----------
6. the authorized capital of the Company be altered as follows
upon continuance of the Company from the Canadian federal
jurisdiction and domestication under Delaware law:
(i) the common shares without par value of the Company be
redesignated as common shares with a "par value of
$0.001 per share";
IN FAVOUR AGAINST
--------- ----------
(ii) the authorized number of common shares of the Company
be reduced from 100,000,000 common shares to 60,000,000
common shares;
IN FAVOUR AGAINST
--------- ----------
(iii) the Class A Preference Shares of the Company be
redesignated as Preferred Stock with a par value
of $0.001 per share and the authorized number of
shares of Preferred Stock be reduced to 1,000,000
shares;
IN FAVOUR AGAINST
--------- ----------
(iv) the authorized 100,000,000 Class B Preference Shares of
the Company, none of which have been issued or are
outstanding, be canceled.
IN FAVOUR AGAINST
--------- ----------
7. the 10,000 designated and issued Series One Convertible
Class A Preference Shares be redesignated as Series A
Preferred Stock with a par value of $0.001 per share;
IN FAVOUR AGAINST
--------- ----------
Page 2
<PAGE>
8. all designated Series Two Convertible Class A Preference
Shares, if any, be redesignated as Series B Preferred Stock
with a par value of $0.001 per share.
IN FAVOUR AGAINST
--------- ----------
9. the directors and officers of the Company be authorized to
do such further acts and file such further documents as may
be necessary to give full effect to the foregoing; and
IN FAVOUR AGAINST
--------- ----------
10. the directors may, in their sole discretion, elect not to
act on or carry out these special resolutions without
further approval of the shareholders of the Company.
IN FAVOUR AGAINST
--------- ----------
11. With respect to the transaction of such other business as
may properly come before the Meeting, as the proxyholder, in
his sole discretion, may see fit.
COMMON SHARE CLASS VOTE
B. To vote as a holder of common shares of the Company, in a class
vote by all of the holders of common shares of the Company, for
the same matters as set out above, as follows:
(1) As set out in A.1 above. IN FAVOUR AGAINST
----- ------
(2) As set out in A.2 above. IN FAVOUR AGAINST
----- ------
(3) As set out in A.3 above. IN FAVOUR AGAINST
----- ------
(4) As set out in A.4 above. IN FAVOUR AGAINST
----- ------
(5) As set out in A.5 above. IN FAVOUR AGAINST
----- ------
(6)
(i) As set out in A.6(i) above. IN FAVOUR AGAINST
----- ------
(ii) As set out in A.6(ii) above. IN FAVOUR AGAINST
----- ------
(iii) As set out in A.6(iii) above.IN FAVOUR AGAINST
----- ------
(iv) As set out in A.6(iv) above. IN FAVOUR AGAINST
----- ------
Page 3
<PAGE>
(7) As set out in A.7 above. IN FAVOUR AGAINST
----- ------
(8) As set out in A.8 above. IN FAVOUR AGAINST
----- ------
(9) As set out in A.9 above. IN FAVOUR AGAINST
----- ------
(10) As set out in A.10 above. IN FAVOUR AGAINST
----- ------
(11) As set out in A.11 above. IN FAVOUR AGAINST
----- ------
THE UNDERSIGNED HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN.
DATED this ----- day of --------------, 1998.
- ------------------------------
Signature
- ------------------------------
Name (please print)
- ------------------------------
Number of Shares Represented
by This Proxy
Page 4
<PAGE>
NOTES
1. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED OR
WITHHELD FROM VOTING ON ANY POLL REQUESTED BY A SHAREHOLDER OR
PROXYHOLDER (PROVIDED THE INSTRUCTIONS ARE CERTAIN) OR REQUIRED BY
VIRTUE OF 5% OR MORE OF THE OUTSTANDING SHARES OF THE COMPANY BEING
REPRESENTED BY PROXIES AT THE MEETING THAT ARE TO BE VOTED AGAINST A
MATTER. IF THE SHAREHOLDER OR AN INTERMEDIARY HOLDING SHARES AND
ACTING ON BEHALF OF AN UNREGISTERED SHAREHOLDER HAS SPECIFIED A CHOICE
WITH RESPECT TO ANY OF THE ITEMS ABOVE BY MARKING AN "X" IN THE SPACE
PROVIDED FOR THAT PURPOSE THE SHARES WILL BE VOTED ON ANY POLL IN
ACCORDANCE WITH THAT CHOICE. IF NO CHOICE IS SPECIFIED, THE
PROXYHOLDER, IF ONE PROPOSED BY MANAGEMENT, INTENDS TO VOTE THE SHARES
REPRESENTED BY THE PROXY AS IF THE SHAREHOLDER HAD SPECIFIED AN
AFFIRMATIVE VOTE. IF ANY AMENDMENTS OR VARIATIONS TO MATTERS
IDENTIFIED IN THE NOTICE OF MEETING ARE PROPOSED AT THE MEETING OR IF
ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING, DISCRETIONARY
AUTHORITY IS HEREBY CONFERRED WITH RESPECT THERETO.
2. A SHAREHOLDER OR AN INTERMEDIARY HOLDING SHARES AND ACTING
ON BEHALF OF AN UNREGISTERED SHAREHOLDER HAS THE RIGHT TO APPOINT A
PERSON (WHO NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT ON HIS BEHALF
AT THE MEETING OTHER THAN THE PERSONS NAMED IN THE PROXY AS
PROXYHOLDERS. TO EXERCISE THIS RIGHT, THE SHAREHOLDER OR INTERMEDIARY
MUST STRIKE OUT THE NAMES OF THE PERSONS NAMED IN THE PROXY AS
PROXYHOLDERS AND INSERT THE NAME OF HIS NOMINEE IN THE SPACE PROVIDED
OR COMPLETE ANOTHER PROXY.
3. This Proxy will not be valid unless it is dated and signed
by the shareholder, by his attorney authorized in writing or by the
intermediary. In the case of a corporation, this Proxy must be
executed under its corporate seal or signed by a duly authorized
officer or attorney for the corporation.
4. To be effective, the Proxy together with the power of
attorney or other authority, if any, under which it was signed or a
notarially certified copy thereof must be deposited with the Company's
transfer agent, Montreal Trust Company of Canada, of 510 Burrard
Street, Vancouver, British Columbia, V6C 3B9 at least 48 hours
(excluding Saturdays, Sundays and statutory holidays) before the time
of the Meeting or adjournment thereof or deposited with the chairman
of the meeting prior to the commencement thereof. Unregistered
shareholders who received the Proxy through an intermediary must
deliver the Proxy in accordance with the instructions given by such
intermediary.
5. This Proxy is solicited on behalf of the management of the
Company.
Your name and address are shown as registered - please notify Montreal
Trust Company of Canada of any change in your address.
