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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SunBase Asia
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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SUNBASE ASIA, INC.
19/F., FIRST PACIFIC BANK CENTRE
51-57 GLOUCESTER ROAD
WANCHAI, HONG KONG
(852) 2865-1511
2240 BUENA VISTA
IRWINDALE, CALIFORNIA 91010
(818) 358-0181
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 20, 1996
To the Shareholders of Sunbase Asia, Inc.:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Meeting") of Sunbase Asia, Inc., a Nevada corporation (the "Company"),
which will be held at the U.S. office of the Company, 2240 Buena Vista,
Irwindale, California 91010, at 10:00 a.m., Pacific Standard Time, on December
20, 1996, to consider and act upon the following matters, all as more fully
described in the accompanying Proxy Statement which is incorporated herein by
this reference:
1. To elect a board of seven directors to serve until the
next annual meeting of the Company's shareholders and until their successors
have been elected and qualify;
2. To approve the 1995 Stock Option Plan;
3. To approve amendments to the Company's Bylaws; and
4. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Shareholders of record of the Company's voting stock at the close of
business on November 1, 1996, the record date fixed by the Board of Directors,
are entitled to notice of, and to vote at, the Meeting.
THOSE WHO CANNOT ATTEND ARE URGED TO SIGN, DATE, AND OTHERWISE
COMPLETE THE ENCLOSED PROXY AND RETURN IT IN THE
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ENCLOSED ENVELOPE. ANY SHAREHOLDER GIVING A PROXY HAS THE RIGHT TO REVOKE IT
ANY TIME BEFORE IT IS VOTED.
BY ORDER OF THE BOARD OF DIRECTORS
William McKay
President, Chief Executive Officer
Irwindale, California
December 2, 1996
2
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SUNBASE ASIA, INC.
19/F., FIRST PACIFIC BANK CENTRE
51-57 GLOUCESTER ROAD
WANCHAI, HONG KONG
(852) 2865-1511
2240 BUENA VISTA
IRWINDALE, CALIFORNIA 91010
(818) 358-0181
_________
PROXY STATEMENT
_________
Approximate date proxy material first sent
to shareholders: December 2, 1996
_________
The following information is in connection with the solicitation of
proxies for the Annual Meeting of Shareholders of Sunbase Asia, Inc., a Nevada
corporation (the "Company"), to be held at the U.S. office of the Company, 2240
Buena Vista, Irwindale, California 91010, at 10:00 a.m., Pacific Standard Time,
on December 20, 1996, and adjournments thereof (the "Meeting"), for the purposes
stated in the Notice of Annual Meeting of Shareholders preceding this Proxy
Statement.
SOLICITATION AND REVOCATION OF PROXIES
A form of proxy is being furnished herewith by the Company to each
shareholder, and, in each case, is solicited on behalf of the Board of Directors
of the Company for use at the Meeting. The entire cost of soliciting these
proxies will be borne by the Company. The Company may pay persons holding
shares in their names or the names of their nominees for the benefit of others,
such as brokerage firms, banks, depositories, and other fiduciaries, for costs
incurred in forwarding soliciting materials to their principals. Members of the
management of the Company may also solicit some shareholders in person, or by
telephone, telegraph or telecopy, following solicitation by this Proxy
Statement, but will not be separately compensated for such solicitation
services.
Proxies duly executed and returned by shareholders and received by the
Company before the Meeting will be voted FOR the election of all seven of the
nominee-directors specified herein, FOR the approval of the 1995 Stock Option
Plan, and FOR the approval of the amendments to the Company's Bylaws, unless a
contrary choice is specified
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in the proxy. Where a specification is indicated as provided in the proxy, the
shares represented by the proxy will be voted and cast in accordance with the
specification made. As to other matters, if any, to be voted upon, the persons
designated as proxies will take such actions as they, in their discretion, may
deem advisable. The persons named as proxies were selected by the Board of
Directors of the Company and each of them is currently a director of the
Company.
Under the Company's bylaws and Nevada law, shares represented by
proxies that reflect abstentions or "broker non-votes" (i.e., shares held by a
broker or nominee which are represented at the Meeting, but with respect to
which such broker or nominee is not empowered to vote on a particular proposal)
will be counted as shares that are present and entitled to vote for purposes of
determining the presence of a quorum, but as unvoted for purposes of determining
whether approval of the shareholders has been obtained with respect to any such
matter (and thus will have the effect of a "no" vote in connection with each
matter submitted for shareholder approval).
Your execution of the enclosed proxy will not affect your right as a
shareholder to attend the Meeting and to vote in person. Any shareholder giving
a proxy has a right to revoke it at any time by either (a) a later-dated proxy,
(b) a written revocation sent to and received by the Secretary of the Company
prior to the Meeting, or (c) attendance at the Meeting and voting in person.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
As of the close of business on November 1, 1996 (the "Record Date"),
the Company has outstanding 12,700,104 shares of Common Stock, 36 shares of
Series A Preferred Stock and 6,800 shares of Series B Preferred Stock. Only
shareholders of record on the books of the Company at the close of business on
the Record Date will be entitled to vote at the Meeting. Each share of Common
Stock is entitled to one vote; each share of Series A Preferred Stock is
entitled to 500,000 votes; and each share of Series B Preferred Stock is
entitled to 100 votes. Representation at the Meeting by the holders of a
majority of the outstanding voting stock of the Company, either by personal
attendance or by proxy, will constitute a quorum.
The following table sets forth certain information regarding the
beneficial ownership of the Company's voting stock as of the Record Date as to
(a) each director, (b) each executive officer, (c) all executive officers and
directors of the Company as a group, and (d) each person known to the Company to
beneficially own five percent or more of the outstanding shares of Common Stock.
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<TABLE>
<CAPTION>
Equity Ownership Voting Rights
---------------- -------------
Amount of Percent Amount of
Name and Beneficial of Beneficial
Address/(1)/ Ownership/(2)/ Class/(3)/ Ownership/(2)/ Percent
- ------------ ----------------- ---------- ----------------- -------
<S> <C> <C> <C> <C>
Asean Capital Limited 13,711,000/(4)/ 80.75% 28,111,000/(5)/ 80.36%
("Asean Capital")
Gunter Gao 13,711,000/(4) (6)/ 80.75% 28,111,000/(5)/ 80.36%
Chairman and Director
Glory Mansion Limited ("GML") 1,200,000/(7)/ 6.6% 1,200,000/(7)/ 3.3%
Wardley China Investment Trust 400,000/(8)/ 2.3% 400,000/(9)/ 1.1%
("Wardley")
Private Equity 1,200,000/(9)/ 6.6% 1,200,000 3.3%
Management BVI Limited ("PEM")
William McKay/(10)/ 25,000 - 25,000 -
Chief Executive Officer,
President and Director
Li Yuen Fai (Roger)/(11)/ - - - -
Chief Financial Officer,
Vice President and Director
Dickens Chang/(12)/ - - - -
Chief Accounting Officer
Lai Kwan Fai (Davis) - - - -
Corporate Secretary
Billy Kan/(13)/ - - - -
Vice Chairman and Director
Ho Cho Hing (Franco) - - - -
Director
Philip Yuen - - - -
Director
George Raffini/(14)/ - - - -
Director
Sunbase International 13,711,000 80.75% 28,111,000 80.36%
(Holdings) Limited/(15)/
("Sunbase International")
All directors and officers 13,711,000 80.75% 28,111,000 80.36%
of the Company as a Group/(16)/
</TABLE>
_________________________
* less than 1 percent
(1) The address of each of Asean Capital, Gunter Gao and Sunbase International
is 19/F, First Pacific Bank Centre, 51-57 Gloucester Road, Wanchai, Hong
Kong. The address of each of GML, Wardley and PEM is 10th Floor, Citibank
Tower, 3 Garden Road, Hong Kong.
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(2) As used in this table, "beneficial ownership" means the sole or shared
power to vote, or to direct the voting of, a security, or the sole or share
investment power with respect to a security (i.e., the power to dispose of,
or to direct the disposition of a security).
(3) Based on 16,980,104 shares of Common Stock outstanding calculated as
follows: (a) 12,700,104 shares outstanding; (b) 3,600,000 shares issuable
upon conversion of the Series A Preferred Stock and (c) 680,000 shares
issuable upon conversion of the Series B Preferred Stock. This amount
excludes shares of Common Stock issuable pursuant to conversion of the
Company's Convertible Debentures, warrants and options.
(4) Includes 10,111,000 outstanding shares of Common Stock and 3,600,000 shares
of Common Stock issuable upon conversion of the Series A Preferred Stock.
(5) Includes 10,111,000 voting rights held by way of Asean Capital's ownership
of 10,111,000 shares of Common Stock and 18,000,000 voting rights held by
way of Asean Capital's ownership of 36 shares of the Series A Preferred
Stock.
(6) Includes shares of Sunbase Common Stock and Preferred Stock beneficially
owned by Gunter Gao and Linda Yang, husband and wife, by way of the
ownership by each of Mr. Gao and Ms. Yang of 50% of the capital stock of
Sunbase International, which in turn owns 90% of the capital stock of Asean
Capital. Each of Ms. Yang and Mr. Gao disclaims beneficial ownership of the
shares held by the other, although their ownership has been aggregated for
purposes of this table.
(7) Consists of shares issuable upon conversion of the Company's Convertible
Debentures at an initial exercise price of $5.00 per share. GML is the
record owner of $6,000,000 in principal amount of Convertible Debentures.
(8) Consists of shares issuable upon conversion of the Company's Convertible
Debentures at an initial exercise price of $5.00 per share. Wardley is the
record owner of $2,000,000 in principal amount of Convertible Debentures.
(9) PEM, as the general partner of the HSBC Private Equity Fund, L.P., the
parent of GML, shares voting power and has sole investment power over
shares of Common Stock issuable to GML upon conversion of the Company's
Convertible Debentures.
(10) Does not include 800,000 shares of Common Stock issuable upon exercise of
the stock options granted to Mr. McKay (See "Compensation and Other
Information - Stock Option Plan.") or any shares issuable upon conversion
of 18 shares of Series B Preferred Stock owned by Mr. McKay.
(11) Does not include 600,000 shares of Common Stock issuable upon exercise of
stock options granted to Mr. Li. See "Compensation and Other Information -
Stock Option Plan."
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(12) Does not include 50,000 shares of Common Stock issuable upon exercise of
stock options granted to Mr. Chang. See "Compensation and Other
Information - Stock Option Plan".
(13) Does not include 600,000 shares of Common Stock issuable upon exercise of
stock options granted to Mr. Kan. See "Compensation and Other Information
- Stock Option Plan."
(14) Does not include any shares issuable upon conversion of the Convertible
Debentures owed by GML and Wardley. Mr. Raffini is an employee of HSBC and
the nominee of GML and Wardley to the Board of Directors.
(15) Consists of 10,111,000 outstanding shares of Common Stock and 3,600,000
shares of Common Stock issuable upon conversion of the Series A Preferred
Stock owned by Asean Capital, of which Sunbase International owns 90%.
(16) Consists of shares beneficially owned by Gunter Gao. See also (10), (11),
(12) and (13) above.
NOMINATION AND ELECTION OF DIRECTORS
The Company's directors are to be elected at each Annual Meeting of
Shareholders. At this Meeting, seven directors are to be elected to serve until
the next Annual Meeting of Shareholders and until their successors are elected
and qualify. The nominees for election as directors at this Meeting set forth
in the table below are all recommended by the Board of Directors of the Company.
Each nominee has indicated his intention to serve, if elected. In the
event that any of the nominees for director should become unable to serve if
elected, it is intended that shares represented by proxies which are executed
and returned will be voted for such substitute nominee(s) as may be recommended
by the Company's existing Board of Directors.
There were two meetings of the Board of Directors of the Company during
the last fiscal year of the Company. Each of the directors of the Company
attended all of the meetings of the Board of Directors held during the period in
which he was a director and the total number of meetings held by all committees
of the Board of Directors on which he served during such period.
The following table sets forth certain information concerning the
nominees for election as directors (all of such nominees being continuing
members of the Company's present Board of Directors):
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MANAGEMENT
DIRECTORS
- ---------
The Board of Directors of the Company is comprised of only one class.
The Company's current directors are listed below. The Directors are elected to
serve until the following annual shareholders' meeting.
<TABLE>
<CAPTION>
Name/(1)/ Age First Elected
- --------- --- -------------
<S> <C> <C>
Gunter Gao/(2)/ 40 1994
Billy Kan 44 1996
William McKay 42 1996
(Roger) Li Yuen Fai/(3)/ 35 1994
(Franco) Ho Cho Hing 43 1994
Philip P.Y. Yuen/(3)/ 60 1996
George Raffini/(3)/ 40 1996
</TABLE>
____________________
(1) The Company does not have a nominating committee of the Board of Directors.
The nominees for election as directors at the Meeting were selected by the
Board of Directors of the Company.
(2) Member of the compensation committee of the Board of Directors of the
Company, currently consisting of two directors, one of whom is an employee
of the Company. The compensation committee reviews the performance of
executive officers of the Company and reviews the compensation programs for
key employees, including salary and cash bonus levels and the operation and
administration of the Stock Option Plan.
(3) Member of the audit committee of the Board of Directors of the Company,
currently consisting of three directors, one of whom is an employee of the
Company. The audit committee reviews, acts on, and reports to the Board of
Directors with respect to various auditing and accounting matters,
including the selection of the Company's independent public accountants,
the scope of the annual audits, the nature of non-audit services, and fees
to be paid to the independent public accountants, the performance of the
Company's independent public accountants, and the accounting practices of
the Company.
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COMPENSATION OF DIRECTORS
None of the directors receive additional compensation for serving on
the Board of Directors. All of the directors are eligible to participate in the
1995 Stock Option Plan. See "Compensation and Other Information - "Stock Option
Plan."
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers of the Company. Each executive officer serves at the
discretion of the Board of Directors, subject to the terms of any employment
contract:
<TABLE>
<CAPTION>
Name Age Office First Elected
- ---- --- -------------
<S> <C> <C> <C>
Gunter Gao 40 Chairman 1994
Billy Kan 44 Vice Chairman 1996
William McKay 42 Chief Executive 1996
Officer and
President
(Roger) Li Yuen Fai 35 Vice President and 1994
Chief Financial Officer
(Dickens) Chang
Shing Yam 29 Chief Accounting 1995
Officer
(Davis) Lai Kwun Fai 33 Corporate Secretary 1996
</TABLE>
BUSINESS EXPERIENCE
The following section summarizes the present occupation and prior
business experience during the past five years for each director and executive
officer of the Company:
GUNTER GAO, CHAIRMAN AND DIRECTOR. Mr. Gao, a Hong Kong businessman who has
extensive business experience in China, is the Chairman of the Board and a
principal of Sunbase International, which indirectly owns a controlling position
in Sunbase Asia. Sunbase International has various industrial holdings in
China, in industries such as aviation, transportation, cement, steel and retail.
Mr. Gao is responsible for the general strategy of the Company and maintains
overall control of the Company's operations. Mr. Gao is actively and directly
involved in all operational and strategic issues that require his experience and
expertise in handling a wide variety of Chinese business transactions. During
the 1980s, Mr. Gao engaged in trading and investment activities in industries
such as food, timber, real estate, coal and textiles. Based on his success in
these activities and with the support of several banks in China, Mr. Gao has
turned Sunbase International into a leading China industrial company. Mr. Gao
is currently a member
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of China's Congress, known as the People's Political Consultative Conference.
Mr. Gao is the youngest member of the Congress and is widely respected for his
contributions to the country's development. Mr. Gao's strong reputation in
China has enabled Sunbase International to engage in and complete many difficult
transactions, including acquiring a majority interest in Harbin Bearing and
obtaining a license to create an airline in China. Now known as Northern Swan
Airlines, this airline enjoys international prominence and the financial support
of the Bank of China and the People's Construction Bank of China. Mr. Gao
serves as a Senior Economic Advisor to several Chinese municipal and provincial
governments, including the governments of Tianjin, Hebei, Xinjiang, Harbin and
Shaanxi. In addition, Mr. Gao is the deputy director of the Sino-Foreign
Entrepreneurs Cooperative Committee.
BILLY KAN, VICE CHAIRMAN AND DIRECTOR. Mr. Kan has been a director of Sunbase
Asia since the beginning of 1996 and was elected Vice Chairman on June 1, 1996.
In his capacity at Sunbase International, Mr. Kan reports directly to its Board
of Directors and serves as the communications and support link in various parts
of the world. Mr. Kan holds a Bachelor of Science Degree from the University of
East Anglia, a United Kingdom university, and is a member of The Institute of
Chartered Accountants in England & Wales as well as the Hong Kong Society of
Accountants. Prior to joining Sunbase International, Mr. Kan held many
directorships and senior management positions in a wide range of professions and
industries including banking, retailing, manufacturing, property, investment and
corporate consulting.
WILLIAM MCKAY, CHIEF EXECUTIVE OFFICER, PRESIDENT AND DIRECTOR. Mr. McKay has
recently been elected as the Chief Executive Officer, President and a Director
of Sunbase Asia, and has been a Director and President of the Company's United
States subsidiary, Southwest Products Company since 1991. Prior to becoming
President of Southwest Products, he was Southwest Products' General Manager
since 1986. Mr. McKay has substantial experience in conducting business with
China, and is very familiar with Sino-American joint venture law and policies.
Mr. McKay is responsible for the day-to-day operations of, and the long-term
planning for, the Company in the areas of product development, marketing,
financing and general operations. Prior to jointing Southwest Products, Mr.
McKay practiced law, specializing in the areas of business and real estate. Mr.
McKay holds a Juris Doctorate Degree, Masters in Business Administration and
Bachelor of Arts degree with a major in History and minor in International
Relations from the University of Southern California.
(ROGER) LI YUEN FAI, GROUP FINANCIAL CONTROLLER, CHIEF FINANCIAL OFFICER, VICE-
PRESIDENT AND DIRECTOR. Mr. Li has been the Group Financial Controller of
Sunbase International since 1994 and was elected a director of Sunbase
International in July 1995. He has been the Chief Financial Officer and a
Director of Sunbase Asia since 1995 and has recently been elected as the Vice-
President of Sunbase Asia. From 1990 to 1991 he was compliance manager of Hong
Kong Securities Clearing Company Limited. Mr. Li was employed by Coopers &
Lybrand in Hong Kong from 1980 to 1990 (his most recent position was audit
manager) and was a partner in a Hong Kong accounting firm from 1992 to 1993.
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(FRANCO) HO CHO HING, DIRECTOR. Mr. Ho has been a Director of the New China
Hong Kong Group since 1993, and a Director of Sunbase Asia since 1995. Mr. Ho
is also a registered investment advisor with the Securities and Futures
Commission in Hong Kong. Mr. Ho held executive positions with Trenomics
Securities Limited (1981 to 1983), Shun Loong Bear Stearns Asia Limited (1985 to
1988) and Best Securities Company (1991 to 1993).
PHILIP YUEN, DIRECTOR. Mr. Yuen is a solicitor of the Supreme Court of Hong
Kong. He became a practicing solicitor in 1962 and founded the solicitors' firm
Yung, Yu, Yuen & co. in 1965. He is currently the managing partner of his firm.
He has over 30 years' experience in legal practice. Mr. Yuen has been a member
of The National Committee of the Chinese People's Political Consultative
Conference since 1983 and has been a member of the China International Economic
and Trade Arbitration Commission for the past 15 years. Mr. Yuen has
established extensive relationships with businesses in the PRC and is also a
non-executive director of Tsingtao Brewery Company Limited, Henderson
Development Company Limited, Henderson (China) Investment Company Limited and
Melbourne Enterprises Limited, all of which are listed on the stock exchange of
Hong Kong Limited.
GEORGE RAFFINI, DIRECTOR. Mr. Raffini is currently the Deputy Managing Director
of HSBC Private Equity Management Limited with responsibility for managing the
investment process for projects and regional private equity investment funds
with total capital under management of approximately $500,000,000. Mr. Raffini
received his Bachelor of Science degree from The American University, a diploma
in Political and Economic Affairs from the Institut D'etudes Politiques, Paris,
France, a Master's degree in International Affairs from Columbia University and
a MBA from Harvard University.
KEY MANAGEMENT
MA JI BO, GENERAL MANAGER - HARBIN BEARING. Mr. Ma is the General Manager of
Harbin Bearing, the Company's principal operating subsidiary, and is responsible
for the day-to-day operations of Harbin Bearing as well as strategic planning in
the areas of marketing, product development and general operations. Mr. Ma has
made significant contributions relating to the design and manufacture of a broad
range of Harbin Bearing's products. Mr. Ma has been awarded various provincial
and national Chinese awards for scientific and technological progress in the
Chinese bearing industry and holds a degree in rocket science from Northwest
China Engineering University.
MEI HAI YOU, DEPUTY GENERAL MANAGER - HARBIN BEARING. Mr. Mei is the Deputy
General Manager of Harbin Bearing where he has been employed for 35 years. Mr.
Mei is the head of Harbin Bearing's manufacturing operations and has extensive
experience in the fields of research and development, product development and
manufacturing engineering. Mr. Mei is the author of a number of works on
mechanical engineering and bearings and holds a degree in mechanical engineering
from Harbin Polytechnic University.
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MR. ZHANG ZHENG BIN, DEPUTY GENERAL MANAGER - HARBIN BEARING. Mr. Zhang has
been employed by Harbin Bearing as Deputy General Manager of Sales and Marketing
for 10 years. Mr. Zhang has extensive contacts in the Chinese engineering
community and has the responsibility of penetrating existing markets and
developing new markets for Harbin Bearing. Mr. Zhang holds a degree in
engineering from Harbin Polytechnic University.
(DICKENS) CHANG SHING YAM, ASSISTANT FINANCIAL CONTROLLER AND CHIEF ACCOUNTING
OFFICER. Mr. Chang is presently the Assistant Financial Controller of Sunbase
International and has been the Chief Accounting Officer of Sunbase Asia since
1995. Mr. Chang was employed by the international accounting firm of Ernst &
Young in Hong Kong from 1989 to 1994, most recently as audit manager.
TODD STOCKBAUER, CHIEF FINANCIAL OFFICER - SOUTHWEST PRODUCTS. Mr. Stockbauer
is the Chief Financial Officer of Southwest Products and has been employed by
Southwest Products since 1991. He currently directs its financial and
administrative operations. Prior to 1991, he was employed in the public
accounting sector, specializing in bankruptcy, litigation support and business
turnarounds. Mr. Stockbauer holds a Bachelor of Arts degree in business and
economics with an emphasis in accounting from the University of California at
Santa Barbara, and is a Certified Public Accountant in the State of California.
ERNST RENEZEDER, DIRECTOR OF MANUFACTURING - SOUTHWEST PRODUCTS. Mr. Renezeder
has been the Director of Manufacturing at Southwest Products since 1992. Mr.
Renezeder has over 24 years experience in manufacturing, engineering,
management, and product research and development. Mr. Renezeder holds a
Bachelor of Science degree in Molding and Foundry, which is equivalent to a
Bachelor of Science in manufacturing engineering with an emphasis in mechanical
engineering.
JOHN LEONIAK, CHIEF ENGINEER - SOUTHWEST PRODUCTS. Mr. Leoniak has been the
Chief Engineer at Southwest Products since 1991. As Chief Engineer, Mr. Leoniak
supervises Southwest Products' engineering and research and development. Prior
to joining Southwest Products, Mr. Leoniak was employed by Grumman Aircraft
Systems as the head of its Landing Gear, Armament, Carrier Suitability and
Survivability Group. Mr. Leoniak has contributed to the writing of various US
Navy manufacturing specifications, including MIL-B-8942, MIL-B-81820, MIL-B-
81819 and MIL-STD-1599. Mr. Leoniak holds a Bachelor of Science in mechanical
engineering from the Polytechnic Institute of Brooklyn.
PETER WANG, QUALITY CONTROL MANAGER - SOUTHWEST PRODUCTS. Mr. Wang has been the
Quality Control Manager of Southwest Products since 1993 where he supervises the
Quality Control and Inspection Departments. Prior to joining Southwest
Products, Mr. Wang held positions as a mechanical engineer and a senior quality
engineer. Mr. Wang has extensive experience in quality and statistical process
control, is fluent in Mandarin and holds a Master of Science degree in
mechanical engineering from North Carolina A&T State University and a Bachelor
of Science degree in physics from Lenoir Rhyne College.
10
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(DAVIS) LAI KWUN FAI, SENIOR ASSISTANT MANAGER AND CORPORATE SECRETARY. Mr. Lai
has been the Senior Assistant Manager of Sunbase International and the Corporate
Secretary of Sunbase Asia since 1996. Mr. Lai holds a Masters of Arts degree in
economics and finance from the University of Leeds in United Kingdom.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to a Management Services Agreement dated January 1, 1994
between Sunbase International and China Bearing Holdings Limited, ("China
Bearing"), the Company's wholly owned subsidiary, Sunbase International agreed
to provide China Bearing and its affiliates, including the Company, advice and
consultation, including strategic management, business planning and development
services, accounting and financial service, human resource service, sales and
marketing service and such additional services as may be agreed upon for an
annual fee of US $30,000. China Bearing is also obligated to reimburse Sunbase
International for its direct out-of-pocket costs incurred in providing the
management services. The Agreement's term was two years and it expired on
December 31, 1995. China Bearing and Sunbase International are presently
discussing an extension of the Agreement. Sunbase International is presently
the owner of 90% of the capital stock of Asean Capital which in turn owns
10,111,000 shares of the Company's Common Stock (representing approximately
80.75% of the outstanding Common Stock assuming conversion of all of the
Company's Preferred Stock but before conversion of the Company's Convertible
Debentures and exercise of outstanding warrants and options) and 36 shares of
the Company's Series A Preferred Stock which in turn is convertible into
3,600,000 shares of Common Stock and has 18,000,000 voting rights.
In December 1994, the Company issued to Asean Capital a secured
promissory note (the "Note") in the principal amount of $5,000,000. The Note is
secured by a continuing security interest in and to all of the Company's capital
stock of China Bearing Holdings Limited. The Note is repayable on December 31,
1996 and bears interest at 8% per annum. In September 1996, the Company prepaid
$2,000,000 of the Note.
Gunter Gao, the Company's Chairman of the Board and nominee, and his
wife each own 50% of the capital stock of Sunbase International which, in turn,
owns 90% of the capital stock of Asean Capital.
George Raffini, a director and nominee of the Company, is the Deputy
Managing Director of HSBC Private Equity Management Limited, an affiliate of
HSBC Private Equity Fund, L.P. (the "Fund"). The Fund is the parent of Glory
Mansion Limited ("GML") which is the owner of $6,000,000 in principal amount of
the Company's Convertible Debentures. Mr. Raffini is also the nominee of GML
and Wardley China Investment Trust to the Company's Board of Directors. See
"Voting Securities and Principal Shareholders."
11
<PAGE>
COMPENSATION AND OTHER INFORMATION
MANAGEMENT COMPENSATION
No compensation was earned by or awarded to any of the Company's
officers or directors in 1995. In 1995, in connection with a Management and
Services Agreement between China Bearing and Sunbase International, Sunbase
International provided to the Company and its affiliates office space and
equipment, administrative services and the services of Mr. Gao and other
employees of Sunbase International (such as Mr. Li and Mr. Chang). See "Certain
Relationships and Related Transactions." In consideration of the provision of
such services, in 1995, China Bearing paid Sunbase International a total of US
$30,000 plus certain out-of-pocket expenses such as travel and entertainment.
Based on the foregoing, no executive officer of the Company received
compensation of US $100,000 or more from the Company.
STOCK OPTION PLAN
On January 2, 1996, the Company's Board of Directors adopted the 1995
Sunbase Asia, Inc. Stock Option Plan (the "Plan"). The Plan permits the grant
of options to purchase an aggregate of up to 2,500,000 Shares of the Common
Stock of the Company. Under the Plan, incentive stock options and non-qualified
stock options may be issued. Eligible participants under the Plan are those
individuals and entities that the compensation committee of the Company (the
"Committee") in its discretion determines should be awarded such incentives
given the best interests of the Company; provided, however, that incentive stock
options may only be granted to employees of the Company and its affiliates. The
Committee has the power to determine the price, terms and vesting schedule of
the options granted, subject to the express provisions of the Plan. All
incentive stock options will have option exercise prices per option share not
less than the fair market value of a share of the Common Stock on the date the
option is granted, except that in the case of incentive stock options granted to
any person possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any affiliate of the Company, the price shall
not be less than 110% of such fair market value. The Plan terminates on the
earlier of that date on which no additional shares of Common Stock are available
for issuance under the Plan or January 2, 2006.
In connection with an employment agreement entered into by and between
the Company and William R. McKay on January 16, 1996, and pursuant to the Plan,
the Company granted Mr. McKay the option to purchase an aggregate of up to
800,000 shares of Common Stock of the Company. The option is intended by the
Company and Mr. McKay to be, and will be treated as, an incentive stock option.
The options granted to Mr. McKay vest at the rate of 160,000 shares per each
full year of Mr. McKay's employment under the Agreement. Mr. McKay may exercise
the options that have vested and purchase shares of the Common Stock of the
Company at the following prices:
12
<PAGE>
<TABLE>
<CAPTION>
Exercise Price of
Full Years of Options that Vest
Employment After Each Such Year
------------- --------------------
<S> <C>
One $ 6.65
Two $ 7.75
Three $ 9.25
Four $10.75
Five $12.75
</TABLE>
All unexercised options will expire on that date which is six years
after the date on which such options have vested.
On July 1, 1996, the Committee granted stock options to the following
individuals on the following terms:
<TABLE>
<CAPTION>
Number of
Exercise Shares per
Option Holder Vesting Schedule Price/share Option Rights
- ------------- ---------------- ----------- -------------
<S> <C> <C> <C>
Billy Kan January 16, 1996 $6.375 200,000
January 16, 1997 $6.375 200,000
January 16, 1998 $6.375 200,000
-------
600,000
=======
Roger Li January 16, 1996 $6.375 200,000
January 16, 1997 $6.375 200,000
January 16, 1998 $6.375 200,000
-------
600,000
=======
Dickens Chang January 16, 1996 $6.375 15,000
January 16, 1997 $6.375 15,000
January 16, 1998 $6.375 20,000
-------
50,000
=======
</TABLE>
EMPLOYMENT AGREEMENTS
On January 16, 1996, Sunbase Asia and Southwest Products entered into
an employment agreement with William R. McKay (the "Agreement") pursuant to
which Mr. McKay is employed to serve as President and Chief Executive Officer of
Southwest Products, the Company's U.S. subsidiary, and as President and Chief
Executive Officer of Sunbase Asia. Under the terms of the Agreement, Mr. McKay
will be paid an annual base salary of $285,000.
13
<PAGE>
The base salary may be increased or decreased (to a minimum of $225,000), based
upon an annual review of Mr. McKay's performance. In addition to the base
salary, the Board of Directors of Sunbase Asia may, at its sole discretion, pay
Mr. McKay a bonus for any particular year of his employment. On January 16,
1996, in connection with the execution of the Agreement, Sunbase Asia, Southwest
Products and Mr. McKay entered into a Confidentiality and Non-Competition
Agreement pursuant to which Mr. McKay agrees to keep certain information of
Sunbase Asia, Southwest Products and their affiliates confidential, and is
prohibited from competing with Sunbase Asia, Southwest Products and their
affiliates during the term of the Agreement.
Pursuant to the terms of an Employment Agreement between the Company
and Mr. Kan dated August 1, 1996, Mr. Kan is employed as the Vice Chairman of
the Board of Directors or such other capacity of an equivalent status as the
Company may reasonably require. The term of employment commenced on August 1,
1996 and continues until terminated by either party giving to the other not less
than 12 months prior notice expiring on or at any time after the end of the
specified period. Mr. Kan's duties include the development, marketing and
promoting of the products of the Company as may be required by the Board of
Directors. Mr. Kan is to exercise such powers and functions and perform such
duties in relation to the business of the Company as may from time to time be
assigned to him by the Board. Mr. Kan will be paid a salary of HK$1,625,000 per
annum subject to review by the Board on an annual basis. Mr. Kan is also
entitled to stock options. See "-Stock Option Plan."
APPROVAL OF THE 1995 STOCK OPTION PLAN
In January 2, 1996, the Board of Directors adopted the 1995 Stock
Option Plan (the "Plan"), subject to shareholder approval at the 1996 Annual
Meeting.
The following summary describes the material features of the Plan.
Purpose
-------
The purpose of the Plan is promote the long-term success of the
Company by attracting, motivating and retaining key executives, consultants and
directors through the use of competitive long-term incentives which are tied to
shareholder value. The plan seeks to balance participants' and shareholder
interests by providing incentives to the participants in the form of stock
options which offer rewards for achieving long-term strategic and financial
objectives of the Company.
Common Stock Available
----------------------
Subject to adjustment as described below, the maximum number of shares
of Common Stock which may be awarded under the Plan may not exceed an aggregate
of 2,500,000 shares over the life of the Plan. The Plan provides for equitable
adjustment of the number of shares subject to the Plan and the number of shares
of each subsequent award of stock thereunder
14
<PAGE>
and of the unexercised portion of the stock option award described below in the
event of a change in the capitalization of the Company due to a stock split,
stock dividend, recapitalization, merger or similar event.
Eligibility
-----------
Persons who are eligible to receive stock options granted under the
Plan are those individuals and entities as the Compensation Committee (the
"Committee") in its discretion determines should be awarded such incentives
given the best interest of the Company; provided, however, that incentive stock
options ("ISO's") may only be granted to employees of the Company and its
affiliates. Additionally, any person holding capital stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
any affiliate shall not be eligible to receive ISO's unless the exercise price
per share is at least 110% of the fair market value of the stock on the date the
option is granted.
Administration
--------------
The authority to control and manage the operation and administration
of the Plan is vested in the Committee appointed by the Board of Directors (the
"Board") from time to time which is to be composed solely of two or more non-
employee directors as defined under Rule 16b-3 of the Securities Exchange Act.
Members of the Committee shall serve at the pleasure of the Board of Directors.
The Committee may from time to time determine which employees of the Company or
its affiliates or other individuals or entities may be granted options under the
Plan, the terms thereof (including without limitation determining whether the
option is an ISO and the times at which the option shall become exercisable),
and the number of shares for which an option or options may be granted. If
rights of the Company to repurchase stock are imposed, the Board or the
Committee may, in its sole discretion, accelerate, in whole or in part, the time
for lapsing of any rights of the Company to repurchase shares or forfeiture
restrictions. The Board or the Committee shall have the sole authority, in its
absolute discretion, to adopt, amend and rescind such rules and regulations,
consistent with the provisions of the Plan, as, in its opinion, may be advisable
in the administration of the Plan, to construe and interpret the Plan, the rules
and regulations, and the instruments evidencing options granted under the Plan
and to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations and interpretations
of the Committee shall be binding on all option holders under the Plan.
15
<PAGE>
Grant and Exercise of Options
-----------------------------
All ISO's will have option exercise prices per option share not less
than the fair market value of a share on the date the option is granted, except
in the case of ISO's granted to any person possessing more than 10% of the total
combined voting power of all classes of stock. The price will be not less than
110% of such fair market value. The term of each option shall be no more than
10 years, except that the term of each ISO issued to any person possessing more
than 10% of the voting power of all classes of stock shall be no more than five
years.
Any option granted under the Plan may be subject to a vesting schedule
as provided in the specific Option Agreement. All rights to exercise any option
shall lapse and be of no further effect whatsoever immediately if the option
holder's service as an employee is terminated for "cause" or if the option
holder voluntarily terminates the option holder's service as an employee. The
unvested portion of the option will lapse and be of no further effect
immediately upon any termination of employment of the option holder for any
reason. In the remaining cases where the option holder's service as an employee
is terminated by the employee voluntarily or due to death, permanent disability,
or is terminated by the Company without cause at any time, the vested portion of
the option will extend for a period of three months following the termination of
employment and shall lapse and shall be of no further effect if it is not
exercised before the end of such period.
Each option granted pursuant to the Plan shall, during the option
holder's lifetime, be exercisable only by the option holder. Neither the option
nor any right to purchase stock shall be transferred, assigned or pledged other
than by will under the laws of descent and distribution.
Payment of the purchase price shall be by (i) cash, (ii) check, (iii)
delivery of a promissory note, (iv) such other consideration as the Committee
determines or (v) any combination of the foregoing.
The Committee may, in its discretion, assist any option holder in the
exercise of options granted under the Plan, including the satisfaction of any
tax arising therefrom by (i) authorizing the extension of the loans from the
Company, (ii) permitting the option holder to pay the exercise price in
installments or (iii) authorizing a guaranty by the Company of a third party
loan to the option holder.
The Plan and all options issued under the Plan are void unless the
Plan is approved by a majority vote cast at a shareholders' meeting.
Amendment and Termination
-------------------------
The Board may at any time suspend or terminate the Plan, and may amend
it from time to time in such respects as the Board may deem advisable provided
that (i) such amendment, suspension or termination complies with all applicable
law and requirements of any stock exchange on which the stock of the Company is
then listed and (ii) the Board may not amend the Plan to increase the maximum
number of shares subject to ISO's under the Plan or change
16
<PAGE>
the description or class of persons eligible to receive ISO's under the Plan
without the consent of the shareholders in Company. The Plan shall terminate on
the earlier of (i) January 2, 2006 or (ii) the date on which no additional
shares of stock are available for issuance under the Plan.
As of November 1, 1996, options for the purchase of 2,050,000 shares
were outstanding by four employees, all of which are executive officers. See
"Executive Compensation and Other Information - Stock Option Plan".
Market Value of Underlying Securities
-------------------------------------
On November 25, 1996, the closing price for the Company's Common Stock
on the NASDAQ National Market was $7-1/16.
Federal Income Tax Information
------------------------------
Under the terms of the Plan, options may be granted as either ISO's
under Section 422 of the Internal Revenue Code of 1986 (the "Code") and the
regulations thereunder or non-incentive stock options under Section 18 of the
Code ("NSO"). In general, an optionee will not recognize taxable income upon
grant or exercise of an ISO and the Company will not be entitled to any business
expense deduction with respect to the grant of an ISO. However, upon the
exercise of an ISO, the excess of the fair market value on the date of exercise
of the shares received over the exercise price of the shares will be treated as
an adjustment to the alternative minimum taxable income. In order for the
exercise of an ISO to qualify for the foregoing tax treatment, the optionee
generally must be an employee of the Company or a subsidiary (within the meaning
of Section 422 of the Code) from the date the ISO is granted through the date
three months before the date of exercise (one year preceding the date of
exercise in the case of an optionee who is terminated due to disability).
If the optionee has held the shares acquired upon exercise of an ISO
for at least two years after the date of grant and for at least one year after
the date of exercise, upon disposition of the shares by the optionee, the
difference, if any, between the sales price of the shares and the exercise price
of the option will be treated as long-term capital gain or loss. If the
optionee does not satisfy these holding period requirements, the optionee will
recognize ordinary income at the time of the disposition of the shares,
generally in an amount equal to the excess of the fair market value of the
shares at the time the option was exercised over the exercise price of the
option. The balance of the gain realized, if any, will be long-term or short-
term capital gain, depending upon whether or not the shares were sold more than
one year after the option was exercised. If the optionee sells the shares prior
to the satisfaction of the holding period requirements but at a price below the
fair market value of the shares at the time the option was exercised, the amount
of ordinary income will be limited to the amount realized on the sale over the
exercise price of the option. The Company and its subsidiaries will be allowed
a business expense deduction to the extent the optionee recognizes ordinary
income.
In general, an optionee to whom a NSO is granted will recognize no
income at the time of the grant of the option. Upon exercise of a NSO, an
optionee will recognize ordinary
17
<PAGE>
income and the Company will be entitled to a deduction, in the amount equal to
the excess of the fair market value of the shares on the date of exercise over
the exercise price of the option. The Company's deduction is conditioned upon
withholding on the income amount.
The foregoing summary of the Plan is subject to the provisions of the
Plan which is included as Appendix A to this Proxy Statement.
The Board of Directors recommends a vote FOR approval of the Plan; an
affirmative vote by holders of a majority of the outstanding shares voting at
the Annual Meeting is required to approve the proposal.
PROPOSAL TO APPROVE
AMENDMENTS TO BYLAWS
At the Meeting, shareholders will be asked to consider and vote upon a
proposal to amend the Bylaws, a copy of which is attached as Appendix B. The
following description should be read in conjunction with, and is qualified in
its entirety by, reference to the full text of the Bylaws. Adoption of the
amendment will require the affirmative vote of the majority of the outstanding
shares on the Record Date.
The following summarizes the proposed amendments:
Authorized Number of Directors. It is proposed that Article III,
------------------------------
Section 2 be amended to provide that the authorized number of directors be a
minimum of three and maximum of ten until changed by the resolution of the Board
of Directors. Currently the Bylaws provide for a minimum of three and a maximum
of seven until changed by an amendment to Articles of Incorporation or a bylaw
adopted by the shareholders. The Company believes that the amendment will
provide more flexibility in determining the composition of the Board of
Directors.
Vice Chairman of the Board. It is proposed that Article IV, Section
--------------------------
1 be amended to provide for a Vice Chairman of the Board, and, in connection
therewith, a new Section VI(A) be adopted to provide that the Vice Chairman
shall, in the absence of the Chairman of the Board, preside at all meetings of
the Board of Directors and perform such other powers and duties as may from time
to time be assigned to him by the Board of Directors. Under the Bylaws, there
is no specific office of Vice Chairman. The Company believes that such an
office should be specifically authorized and the duties thereof set forth in the
Bylaws.
Chief Executive Officer. It is proposed that Article IV, Section 7
-----------------------
be amended to provide that, at the election of the Board, the President or such
other officer as designated by the Board, shall be the Chief Executive Officer
of this Corporation. Under the present Bylaws, it is unclear whether separate
persons may act as Chief Executive Officer and President. The amendment makes
it clear that there may be two different persons, one of whom may act as Chief
Executive Officer and the other as President.
18
<PAGE>
Amendment to the Bylaws. It is proposed that Article VI, Section 1
-----------------------
be amended by providing that the Bylaws may be amended by the Board of
Directors. Currently, the Bylaws may be only amended by the shareholders. The
Company believes that the amendment will provide greater flexibility in
governing the affairs of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENTS
TO THE BYLAWS.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and executive officers and persons who own more
than 10% of a registered class of the Company's equity securities to file
various reports with the Securities and Exchange Commission and the National
Association of Securities Dealers concerning their holdings of, and transactions
in, securities of the Company. Copies of these filings must be furnished to the
Company.
Based on a review of the copies of such forms furnished to the Company
and written representations from the Company's executive officers and directors,
the Company believes that all individual filing requirements applicable to the
Company's executive officers and directors were complied with under Section
16(a).
SHAREHOLDER PROPOSALS
Shareholders who wish to present proposals for action at the Company's
1997 Annual Meeting of Shareholders should submit their proposals in writing to
the Secretary of the Company at the address of the Company set forth on the
first page of this Proxy Statement. Proposals must be received by the Secretary
no later than January 15, 1997, for inclusion in next year's proxy statement and
proxy card.
ANNUAL REPORT TO SHAREHOLDERS
The Annual Report to Shareholders of the Company for the fiscal year
ended December 31, 1995, including audited financial statements, is being mailed
to the shareholders concurrently herewith, but such report is not incorporated
in this Proxy Statement and is not deemed to be a part of the proxy solicitation
material.
19
<PAGE>
OTHER MATTERS
The Company has not yet selected an independent public accountant for
the current fiscal year. The Company is currently considering various proposals
and will make a decision shortly, based upon such matters as responsiveness and
efficiency. The Company's current accountants are Ernst & Young, Hong Kong. It
is not expected that a representative of Ernst & Young will be present at the
Annual Meeting. The Management of the Company does not know of any other
matters which are to be presented for action at the Meeting. Should any other
matters come before the Meeting or any adjournment thereof, the persons named in
the enclosed proxy will have the discretionary authority to vote all proxies
received with respect to such matters in accordance with their collective
judgment.
ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K, as filed with the
Securities and Exchange Commission (exclusive of Exhibits), will be furnished
without charge to any person from whom the accompanying proxy is solicited upon
written request to Sunbase Asia, Inc., 2240 Buena Vista, Irwindale, California
91010, Attention: Todd Stockbauer. If Exhibit copies are requested, a copying
charge of $.20 per page will be made.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ William McKay, President and Chief
--------------------------------------
William McKay, President and Chief
Executive Officer
Irwindale, California
December 2, 1996
SHAREHOLDERS ARE URGED TO SPECIFY THEIR CHOICES AND TO DATE, SIGN, AND RETURN
THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE. PROMPT RESPONSE IS HELPFUL AND
YOUR COOPERATION WILL BE APPRECIATED.
20
<PAGE>
SUNBASE ASIA, INC.
------------------
1995 STOCK OPTION PLAN
----------------------
1. ESTABLISHMENT, PURPOSE AND DEFINITIONS.
---------------------------------------
(a) The 1995 Stock Option Plan (the "1995 Option Plan") of Sunbase
Asia, Inc., a Nevada corporation (the "Company"), is hereby adopted. The 1995
Option Plan shall provide for the issuance of incentive stock options ("ISOs")
and nonqualified stock options ("NSOs").
(b) The purpose of this 1995 Option Plan is to promote the long-
term success of the Company by attracting, motivating and retaining key
executives, consultants and directors (the "Participants") through the use of
competitive long-term incentives which are tied to stockholder value. The 1995
Option Plan seeks to balance Participants' and stockholder interests by
providing incentives to the Participants in the form of stock options which
offer rewards for achieving the long-term strategic and financial objectives of
the Company.
(c) The 1995 Option Plan is intended to provide a means whereby
Participants may be given an opportunity to purchase shares of Stock of the
Company pursuant to (i) options which may qualify as ISOs under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"), or
(ii) NSOs which may not so qualify.
(d) The term "Affiliates" as used in this 1995 Option Plan means
parent or subsidiary corporations, as defined in Section 424(e) and (f) of the
Code (but substituting "the Company" for "employer corporation"), including
parents or subsidiaries which become such after adoption of the 1995 Option
Plan.
2. ADMINISTRATION OF THE PLAN.
---------------------------
(a) The 1995 Option Plan shall be administered by the Compensation
Committee (the "Committee") appointed by the Board of Directors of the Company
from time to time (the "Board").
(b) The Committee shall consist entirely of directors qualifying as
"non-employee directors" as such term is defined in Rule 16b-3 promulgated by
the Securities and Exchange Commission (the "Committee"). Members of the
Committee shall serve at the pleasure of the Board.
Appendix A
<PAGE>
(c) The Committee may from time to time determine which employees
of the Company or its Affiliates or other individuals or entities (each an
"option holder") shall be granted options under the 1995 Option Plan, the terms
thereof (including without limitation determining whether the option is an
incentive stock option and the times at which the options shall become
exercisable), and the number of shares of Stock for which an option or options
may be granted.
(d) If rights of the Company to repurchase Stock are imposed, the
Board or the Committee may, in its sole discretion, accelerate, in whole or in
part, the time for lapsing of any rights of the Company to repurchase shares of
such Stock or forfeiture restrictions.
(e) If rights of the Company to repurchase Stock are imposed, the
certificates evidencing such shares of Stock awarded hereunder, although issued
in the name of the option holder concerned, shall be held by the Company or a
third party designated by the Committee in escrow subject to delivery to the
option holder or to the Company at such times and in such amounts as shall be
directed by the Board under the terms of this 1995 Option Plan. Share
certificates representing Stock which is subject to repurchase rights shall have
imprinted or typed thereon a legend or legends summarizing or referring to the
repurchase rights.
(f) The Board or the Committee shall have the sole authority, in
its absolute discretion, to adopt, amend and rescind such rules and regulations,
consistent with the provisions of the 1995 Option Plan, as, in its opinion, may
be advisable in the administration of the 1995 Option Plan, to construe and
interpret the 1995 Option Plan, the rules and regulations, and the instruments
evidencing options granted under the 1995 Option Plan and to make all other
determinations deemed necessary or advisable for the administration of the 1995
Option Plan. All decisions, determinations and interpretations of the Committee
shall be binding on all option holders under the 1995 Option Plan.
3. STOCK SUBJECT TO THE PLAN.
--------------------------
(a) "Stock" shall mean Common Stock of the Company or such stock as
may be changed as contemplated by Section 3(c) below. Stock shall include
shares drawn from either the Company's authorized but unissued shares of Common
Stock or from reacquired shares of Common Stock, including without limitation
shares repurchased by the Company in the open market.
(b) Options may be granted under the 1995 Option Plan from time to
time to eligible persons to purchase an aggregate of up to 2.5 million shares of
Stock. Stock options awarded pursuant to the 1995 Option Plan which are
forfeited, terminated, surrendered or cancelled for any reason prior to exercise
shall again
2
<PAGE>
become available for grants under the 1995 Option Plan (including any option
cancelled in accordance with the cancellation regrant provisions of Section 6(f)
herein).
(c) If there shall be any change in the Stock subject to the 1995
Option Plan, including Stock subject to any option granted hereunder, through
merger, consolidation, recapitalization, reorganization, reincorporation, stock
split, reverse stock split, stock dividend, combination or reclassification of
the Company's Stock or other similar events, an appropriate adjustment shall be
made by the Committee in the number of shares and/or the option price with
respect to any unexercised shares of Stock. Consistent with the foregoing, in
the event that the outstanding Stock is changed into another class or series of
capital stock of the Company, outstanding options to purchase Stock granted
under the 1995 Option Plan shall become options to purchase such other class or
series and the provisions of this Section 3(c) shall apply to such new class or
series.
(d) The Company may grant options under the 1995 Option Plan in
substitution for options held by employees of another company who become
employees of the Company as a result of merger or consolidation. The Company
may direct that substitute options be granted on such terms and conditions as
deemed appropriate by the Board or the Committee.
(e) The aggregate number of shares of Stock approved by the 1995
Option Plan may not be exceeded without amending the 1995 Option Plan and
obtaining stockholder approval within twelve months of such amendment.
4. ELIGIBILITY.
------------
Persons who shall be eligible to receive stock options granted under
the 1995 Option Plan shall be those individuals and entities as the Committee in
its discretion determines should be awarded such incentives given the best
interests of the Company; provided, however, that (i) ISOs may only be granted
to employees of the Company and its Affiliates and (ii) any person holding
capital stock possessing more than 10% of the total combined voting power of all
classes of Stock of the Company or any Affiliate shall not be eligible to
receive ISOs unless the exercise price per share of Stock is at least 110% of
the fair market value of the Stock on the date the option is granted.
5. EXERCISE PRICE FOR OPTIONS GRANTED UNDER THE PLAN.
--------------------------------------------------
(a) All ISOs will have option exercise prices per option share not
less than the fair market value of a share of the Stock on the date the option
is granted, except that in the case of ISOs granted to any person possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or any
3
<PAGE>
Affiliate the price shall be not less than 110% of such fair market value. The
price of ISOs or NSOs granted under the 1995 Option Plan shall be subject to
adjustment to the extent provided in Section 3(c) above.
(b) The fair market value on the date of grant shall be determined
based upon the closing price on an exchange on that day or, if the Stock is not
listed on an exchange, on the average of the closing bid and asked prices in the
Over the Counter Market on that day.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) Each option granted pursuant to the 1995 Option Plan shall be
evidenced by a written stock option agreement (the "Option Agreement") executed
by the Company and the person to whom such option is granted. The Option
Agreement shall designate whether the option is an ISO or an NSO.
(b) The term of each ISO and NSO shall be no more than 10 years,
except that the term of each ISO issued to any person possessing more than 10%
of the voting power of all classes of stock of the Company or any Affiliate
shall be no more than 5 years. Subsequently issued options, if Stock becomes
available because of further allocations or the lapse of previously outstanding
options, will extend for terms determined by the Board or the Committee but in
no event shall an ISO be exercised after the expiration of 10 years from the
date of its grant.
(c) In the case of ISOs, the aggregate fair market value
(determined as of the time such option is granted) of the Stock to which ISOs
are exercisable for the first time by such individual during any calendar year
(under this 1995 Option Plan and any other plans of the Company or its
Affiliates if any) shall not exceed the amount specified in Section 422(d) of
the Internal Revenue Code, or any successor provision in effect at the time an
ISO becomes exercisable.
(d) The Option Agreement may contain such other terms, provisions
and conditions regarding vesting, repurchase or other provisions as may be
determined by the Committee. To the extent such terms, provisions and
conditions are inconsistent with this 1995 Option Plan, the specific provisions
of the Option Agreement shall prevail. If an option, or any part thereof, is
intended to qualify as an ISO, the Option Agreement shall contain those terms
and conditions which the Committee determine are necessary to so qualify under
Section 422 of the Internal Revenue Code.
(e) The Committee shall have full power and authority to extend the
period of time for which any option granted under the 1995 Option Plan is to
remain exercisable following the option holder's cessation of service as an
employee, director
4
<PAGE>
or consultant, including without limitation cessation as a result of death or
disability; provided, however, that in no event shall such option be exercisable
after the specified expiration date of the option term.
(f) The Committee shall have full power and authority to effect at
any time and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the 1995 Option Plan
and to grant in substitution new options under the 1995 Option Plan covering the
same or different numbers of shares of Stock with the same or different exercise
prices.
(g) As a condition to option grants under the 1995 Option Plan, the
option holder agrees to grant the Company the repurchase rights as Company may
at its option require and as may be set forth in a separate repurchase
agreement.
(h) Any option granted under the 1995 Option Plan may be subject to
a vesting schedule as provided in the Option Agreement and, except as provided
in this Section 6 herein, only the vested portion of such option may be
exercised at any time during the Option Period. All rights to exercise any
option shall lapse and be of no further effect whatsoever immediately if the
option holder's service as an employee is terminated for "Cause" (as hereinafter
defined) or if the option holder voluntarily terminates the option holder's
service as an employee. The unvested portion of the option will lapse and be of
no further effect immediately upon any termination of employment of the option
holder for any reason. In the remaining cases where the option holder's service
as an employee is terminated by the employee voluntarily or due to death,
permanent disability, or is terminated by the Company (or its affiliates)
without Cause at any time, the vested portion of the option will extend for a
period of three (3) months following the termination of employment and shall
lapse and be of no further force or effect whatsoever only if it is not
exercised before the end of such three (3) month period. "Cause" shall be
defined in an Employment Agreement between Company and option holder and if none
there shall be "Cause" for termination if (i) the option holder is convicted of
a felony, (ii) the option holder engages in any fraudulent or other dishonest
act to the detriment of the Company, (iii) the option holder fails to report for
work on a regular basis, except for periods of authorized absence or bona fide
illness, (iv) the option holder misappropriates trade secrets, customer lists or
other proprietary information belonging to the Company for the option holder's
own benefit or for the benefit of a competitor, (v) the option holder engages in
any willful misconduct designed to harm the Company or its stockholders, or (vi)
the option holder fails to perform properly assigned duties.
(i) No fractional shares of Stock shall be issued under the 1995
Option Plan, whether by initial grants or any adjustments to the 1995 Option
Plan.
5
<PAGE>
7. USE OF PROCEEDS.
---------------
Cash proceeds realized from the sale of Stock under the 1995 Option
Plan shall constitute general funds of the Company.
8. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
-------------------------------------------------
(a) The Board may at any time suspend or terminate the 1995 Option
Plan, and may amend it from time to time in such respects as the Board may deem
advisable provided that (i) such amendment, suspension or termination complies
with all applicable state and federal requirements and requirements of any stock
exchange on which the Stock is then listed, including any applicable requirement
that the 1995 Option Plan or an amendment to the 1995 Option Plan be approved by
the stockholders, and (ii) the Board shall not amend the 1995 Option Plan to
increase the maximum number of shares of Stock subject to ISOs under the 1995
Option Plan or to change the description or class of persons eligible to receive
ISOs under the 1995 Option Plan without the consent of the stockholders of the
Company sufficient to approve the 1995 Option Plan in the first instance. The
1995 Option Plan shall terminate on the earlier of (i) January 2, 2006 or (ii)
the date on which no additional shares of Stock are available for issuance under
the 1995 Option Plan.
(b) No option may be granted during any suspension or after the
termination of the 1995 Option Plan, and no amendment, suspension or termination
of the 1995 Option Plan shall, without the option holder's consent, alter or
impair any rights or obligations under any option granted under the 1995 Option
Plan.
(c) The Committee, with the consent of affected option holders,
shall have the authority to cancel any or all outstanding options under the 1995
Option Plan and grant new options having an exercise price which may be higher
or lower than the exercise price of cancelled options.
(d) Nothing contained herein shall be construed to permit a
termination, modification or amendment adversely affecting the rights of any
option holder under an existing option theretofore granted without the consent
of the option holder.
9. ASSIGNABILITY OF OPTIONS AND RIGHTS.
------------------------------------
Each option granted pursuant to this 1995 Option Plan shall, during
the option holder's lifetime, be exercisable only by the option holder, and
neither the option nor any right to purchase Stock shall be transferred,
assigned or pledged by the option holder, by operation of law or otherwise,
other than by will upon a beneficiary
6
<PAGE>
designation executed by the option holder and delivered to the Company or the
laws of descent and distribution.
10. PAYMENT UPON EXERCISE.
----------------------
Payment of the purchase price upon exercise of any option or right to
purchase Stock granted under this 1995 Option Plan shall be made by giving the
Company written notice of such exercise, specifying the number of such shares of
Stock as to which the option is exercised. Such notice shall be accompanied by
payment of an amount equal to the Option Price of such shares of Stock. Such
payment may be (i) cash, (ii) by check drawn against sufficient funds, (iii) by
delivery to the Company of the option holder's promissory note, (iv) such other
consideration as the Committee, in its sole discretion, determines and is
consistent with the 1995 Option Plan's purpose and applicable law, or (v) any
combination of the foregoing. Any Stock used to exercise options to purchase
Stock (including Stock withheld upon the exercise of an option to pay the
purchase price of the shares of Stock as to which the option is exercised) shall
be valued in accordance with procedures established by the Committee. Any
promissory note used to exercise options to purchase Stock shall be a full
recourse, interest-bearing obligation secured by Stock in the Company being
purchased and containing such terms as the Committee shall determine. If a
promissory note is used to exercise options the option holder agrees to execute
such further documents as the Company may deem necessary or appropriate in
connection with issuing the promissory note, perfecting a security interest in
the stock purchased with the promissory note and any related terms the Company
may propose. Such further documents may include, without limitation, a security
agreement and an assignment separate from certificate. If accepted by the
Committee in its discretion, such consideration also may be paid through a
broker-dealer sale and remittance procedure pursuant to which the option holder
(I) shall provide irrevocable written instructions to a designated brokerage
firm to effect the immediate sale of the purchased Stock and remit to the
Company, out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate option price payable for the purchased Stock plus
all applicable Federal and State income and employment taxes required to be
withheld by the Company in connection with such purchase and (II) shall provide
written directives to the Company to deliver the certificates for the purchased
Stock directly to such brokerage firm in order to complete the sale transaction.
11. WITHHOLDING TAXES.
------------------
(a) Shares of Stock issued hereunder shall be delivered to an
option holder only upon payment by such person to the Company of the amount of
any withholding tax required by applicable federal, state, local or foreign law.
The
7
<PAGE>
Company shall not be required to issue any Stock to an option holder until such
obligations are satisfied.
(b) The Committee may, under such terms and conditions as it deems
appropriate, authorize an option holder to satisfy withholding tax obligations
under this Section 11 by surrendering a portion of any Stock previously issued
to the option holder or by electing to have the Company withhold shares of Stock
from the Stock to be issued to the option holder, in each case having a fair
market value equal to the amount of the withholding tax required to be withheld.
12. RATIFICATION.
-------------
This 1995 Option Plan and all options issued under this 1995 Option
Plan shall be void unless this 1995 Option Plan is or was approved or ratified
by (i) the Board; and (ii) a majority of the votes cast at a stockholder meeting
at which a quorum representing at least a majority of the outstanding shares of
Stock is (either in person or by proxy) present and voting on the 1995 Option
Plan within twelve months of the date this 1995 Option Plan is adopted by the
Board. No ISOs shall be exercisable prior to the date such stockholder approval
is obtained.
13. CORPORATE TRANSACTIONS.
-----------------------
(a) For the purpose of this Section 13, a "Corporate Transaction"
shall include any of the following stockholder-approved transactions to which
the Company is a party:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the State of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or dissolution of
the Company; or
(iii) any reverse merger in which the Company is the surviving
entity but in which beneficial ownership of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding securities are transferred to holders different from those who held
such securities immediately prior to such merger.
(b) Upon the occurrence of a Corporate Transaction, if the
surviving corporation or the purchaser, as the case may be, does not assume the
obligations of the Company under the 1995 Option Plan, then irrespective of the
vesting provisions
8
<PAGE>
contained in individual option agreements, all outstanding options shall become
immediately exercisable in full and each option holder will be afforded an
opportunity to exercise their options prior to the consummation of the merger or
sale transaction so that they can participate on a pro rata basis in the
transaction based upon the number of shares of Stock purchased by them on
exercise of options if they so desire. To the extent that the 1995 Option Plan
is unaffected and assumed by the successor corporation or its parent company a
Corporate Transaction will have no effect on outstanding options and the options
shall continue in effect according to their terms.
(c) Each outstanding option under this 1995 Option Plan which is
assumed in connection with the Corporate Transaction or is otherwise to continue
in effect shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issued to the option holder in connection with the consummation
of such Corporate Transaction had such person exercised the option immediately
prior to such Corporate Transaction. Appropriate adjustments shall also be made
to the option price payable per share, provided the aggregate option price
payable for such securities shall remain the same. In addition, the class and
number of securities available for issuance under this 1995 Option Plan
following the consummation of the Corporate Transaction shall be appropriately
adjusted.
(d) The grant of options under this 1995 Option Plan shall in no
way affect the right of the Company to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
14. LOANS OR GUARANTEE OF LOANS.
----------------------------
(a) The Committee may, in its discretion, assist any option holder
in the exercise of options granted under this 1995 Option Plan, including the
satisfaction of any Federal and State income and employment tax obligations
arising therefrom by (i) authorizing the extension of a loan from the Company to
such option holder, (ii) permitting the option holder to pay the exercise price
for the Stock in installments over a period of years or (iii) authorizing a
guarantee by the Company of a third party loan to the option holder. The terms
of any loan, installment method of payment or guarantee (including the interest
rate and terms of repayment) will be upon such terms as the Committee specifies
in the applicable option or issuance agreement or otherwise deems appropriate
under the circumstances. Loans, installment payments and guarantees may be
granted with or without security or collateral (other than to option holders who
are not employees, in which event the loan must be adequately secured by
collateral other than the purchased Stock). However, the maximum credit
available to the option holder may not exceed the exercise or purchase price of
the acquired shares
9
<PAGE>
of Stock plus any Federal and State income and employment tax liability incurred
by the option holder in connection with the acquisition of such shares of Stock.
(b) The Committee may, in its absolute discretion, determine that
one or more loans extended under this financial assistance program shall be
subject to forgiveness by the Company in whole or in part upon such terms and
conditions as the Committee may deem appropriate.
15. REGULATORY APPROVALS.
---------------------
The obligation of the Company with respect to Stock issued under the
Plan shall be subject to all applicable laws, rules and regulations and such
approvals by any governmental agencies or stock exchanges as may be required.
The Company reserves the right to restrict, in whole or in part, the delivery of
Stock under the Plan until such time as any legal requirements or regulations
have been met relating to the issuance of Stock, to their registration or
qualification under the Securities Exchange Act of 1934, if applicable, or any
applicable state securities laws, or to their listing on any stock exchange at
which time such listing may be applicable.
16. NO EMPLOYMENT/SERVICE RIGHTS.
-----------------------------
Neither the action of the Company in establishing this 1995 Option
Plan, nor any action taken by the Board or the Committee hereunder, nor any
provision of this 1995 Option Plan shall be construed so as to grant any
individual the right to remain in the employ or service of the Company (or any
parent, subsidiary or affiliated corporation) for any period of specific
duration, and the Company (or any parent, subsidiary or affiliated corporation
retaining the services of such individual) may terminate or change the terms of
such individual's employment or service at any time and for any reason, with or
without cause.
17. MISCELLANEOUS PROVISIONS.
-------------------------
(a) The provisions of this 1995 Option Plan shall be governed by
the laws of the State of Nevada, as such laws are applied to contracts entered
into and performed in such State, without regard to its rules concerning
conflicts of law.
(b) The provisions of this 1995 Option Plan shall inure to the
benefit of, and be binding upon, the Company and its successors or assigns,
whether by Corporate Transaction or otherwise, and the option holders, the legal
representatives of their respective estates, their respective heirs or legatees
and their permitted assignees.
10
<PAGE>
(c) The option holders shall have no divided rights, voting rights
or any other rights as a stockholder with respect to any options under the 1995
Option Plan prior to the issuance of a stock certificate for such Stock.
(d) If there is a conflict between the terms of any employment
agreement pursuant to which options under this Plan are to be granted and the
provisions of this Plan, the terms of the employment agreement shall prevail.
11
<PAGE>
_______________________________________________________________________________
BY-LAWS FOR THE REGULATION, EXCEPT AS OTHERWISE
PROVIDED BY STATUTE OR ITS ARTICLES OR INCORPORATION,
OF
SUNBASE ASIA, INC.
a Nevada Corporation
_______________________________________________________________________________
ARTICLE I
---------
OFFICERS
--------
SECTION 1. PRINCIPAL BUSINESS OFFICE. The principal business office
--------- -------------------------
for the transaction of the business of the Corporation is hereby fixed and
located at 1280 Terminal Way, Suite 3, in the City of Reno, County of Washoe,
State of Nevada. The Board of Directors is hereby granted full power and
authority to change said principal business office from one location to another.
Any such change shall be noted on the By-laws by the secretary, opposite this
section, or this section may be amended to state the new location.
SECTION 2. PRINCIPAL EXECUTIVE OFFICE. The principal executive
--------- --------------------------
office which shall house the corporate Minute Book, the corporate records, the
correct books and records of the Corporation is hereby fixed and located at 1280
Terminal Way, Suite 3, in the City of Reno, County of Washoe, State of Nevada,
The Board of Directors has the same
Appendix B
<PAGE>
authority and power to change this principal executive office as provided in
Section 1 above.
SECTION 3. OTHER OFFICE. Branch or subordinate offices may at any
--------- ------------
time be established by the Board of Directors of the Corporation at any place or
places where the Corporation is qualified to do business under the laws of the
state in which such office is located.
ARTICLE II
----------
MEETINGS OF SHAREHOLDERS
------------------------
SECTION 1. PLACE OF MEETINGS. The annual meeting of the shareholders
--------- -----------------
shall be held at the principal executive office of the Corporation and all other
meeting of the shareholders shall be held either at the principal executive
office or at any other place within or without the State of Nevada which may be
designated either by the Board of Directors pursuant to authority hereinafter
granted to said Board or by the written consent of all persons entitled to vote
thereat, given either before or after the meeting and filed with the secretary
of the Corporation.
SECTION 2. ANNUAL MEETINGS. The annual meetings of the shareholders
--------- ---------------
shall be held without written notice, except as hereinafter provided, on the 2nd
Tuesday in the month of March of each year, at 9:00 a.m. of said day; provided,
however, that should said day fall upon a legal
2
<PAGE>
holiday, then any such annual meeting of the shareholders shall be held at the
same time and place on the next day which is not a legal holiday. At the annual
meeting directors shall be elected, reports of the affairs of the Corporation
shall be considered, and any other business may be transacted which is within
the powers of the share holders, except that action shall not be taken on any of
the following proposals unless written notice of the general nature of the
business or proposal has been given as in the case of a special meeting, even
though notice of annual meetings is otherwise dispensed with:
(a) A proposal to sell, lease, convey, exchange, transfer, or
otherwise dispose of all or substantially all of the property or assets of
the Corporation;
(b) A proposal to merge or consolidate with another
corporation, domestic or foreign;
(c) A proposal to reduce the stated capital of the
Corporation;
(d) A proposal to amend the articles, except to extend the
term of corporate existence;
(e) A proposal to wind up and dissolve the Corporation;
(f) A proposal to adopt a plan of distribution of shares,
securities, or any consideration other than money in the process of winding
up.
When required, written notice of each annual meeting shall be given to
each shareholder entitled to vote, either personally or by mail or other means
of written communication, charges prepaid, addressed to such
3
<PAGE>
shareholder at his address appearing on the books of the Corporation or given by
him to the Corporation for the purpose of notice. If a shareholder gives no
address, notice shall be deemed to have been given if sent by mail or other
means of written communication addressed to the place where the principal
executive officers of the Corporation is situated or if published at least once
in some newspaper of general circulation in the county in which said office is
located. All such notices shall be sent to each shareholder entitled thereto
not less than ten (10) days nor more than sixty (60) days before each annual
meeting. Such notice shall state the place, date and hour of the meeting and
(i) in the case of a special meeting the general nature of the business to be
transacted, and no other business may be transacted, or (ii) in the case of the
annual meeting, those matters which the Board, at the time of the mailing of the
notice, intends to present for action by the shareholders, but, subject to the
provisions of applicable law, any proper matter may be presented at the meeting
for such action. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of the notice to be
presented by management for election.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders,
--------- ----------------
for any purpose or purposes whatsoever, may be called at any time by the
president, corporate secretary, of by any vice-president, or by the Board of
4
<PAGE>
Directors, or by one of more of the shareholders holding not less than ten
percent (10%) of the voting power of the Corporation.
Upon request in writing to the Chairman of the Board, president, vice-
president, or secretary, sent by registered mail or delivered to the officer in
person, by any person or persons entitled to call a special meeting of the
shareholders (other than the Board), the officer forthwith shall cause notice to
be given to the shareholders entitled to vote that a meeting will be held at a
time, fixed by the officer, not less than thirty-five (35) days nor more than
sixty (60) days after the receipt of the request. If the notice is not given
within twenty (20) days after the date of receipt of the request, or the date of
mailing of the request, the persons entitled to call the meeting may give the
notice or the Superior Court of the proper county shall summarily order the
giving of the notice, after notice to the Corporation giving it an opportunity
to be heard. Except as otherwise provided by statute, notice of a special
shareholders' meeting shall be given as outlined in Section 2 above, not less
than ten (10) days nor more than sixty (60) days before such meeting. Notice of
any special meeting of shareholders shall specify, in addition to the place, day
and hour of such meeting, the general nature of the business to be transacted,
and no other business may be transacted. Nothing contained in this
5
<PAGE>
section shall be construed as limiting, fixing, or affecting the time or date
when a meeting of shareholders called by action of the Board of Directors may be
held.
SECTION 4. ADJOURNED MEETING AND NOTICE THEREOF. Any shareholders'
--------- ------------------------------------
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum no other business may be transacted at such meeting.
When any shareholders' meeting, either annual or special is adjourned
for forty-five (45) days or more, notice of the adjourned meeting shall be given
as in the case of an original meeting. Save as aforesaid, it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by announcement at the
meeting at which such adjournment is taken.
SECTION 5. VOTING. Unless a record date for voting purposes be fixed
--------- ------
as provided in Section 1 of Article VII of these by-laws, then, subject to the
provisions of the Nevada Corporations Code and other applicable statutes, only
persons in whose names shares entitled to vote stand on the stock records of the
Corporation on the record date as determined by the Board of Directors prior to
any meeting of the shareholders shall be entitled to vote at such meeting.
6
<PAGE>
Such vote may be voice vote or by ballot; provided, however, that all elections
for directors must be by ballot upon demand made by a shareholder at any
election and before the voting begins.
(a) Every shareholder complying with paragraph (b) below
and entitled to vote at any election of directors may cumulate such share
holders' votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to
which the shareholders' shares are entitled, or distribute the
shareholders' votes on the same principle among as many candidates as the
shareholder thinks fit.
(b) No shareholder shall be entitled to cumulate votes (i.e,,
cast for any one or more candidates a number of votes greater than the
number of the shareholders' shares) unless such candidate or candidates'
names have been placed in nomination prior to the voting and the share
holders have given notice at the meeting. Prior to the voting of the
shareholders, intention to cumulate the shareholders' votes. If any one
shareholder has given such notice, all share holders may cumulate their
votes for candidates in nomination.
7
<PAGE>
(c) In any election of directors, the candidates receiving the
greatest number of votes of the shares entitled to be voted for them, up to
the number of directors to be elected by such shares are elected.
(d) Except as hereinabove provided, each shareholder is
entitled to one vote for each share of stock held in the Corporation. A
fraction of a share shall not be entitled to any voting rights whatsoever.
SECTION 6. RECORD DATE. The Board may fix, in advance, a record date
--------- -----------
for the determination of the shareholders entitled to notice of any meeting or
to vote or entitled to receive payment of any dividend or other distribution, or
any allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than sixty (60) days nor
less than ten (10) days prior to the date of the meeting nor more than sixty
(60) days prior to any other action. When a record date is so fixed, only
shareholders of record on that date are entitled to notice of and to vote at the
meeting or to receive the dividend, distribution, or allotment of rights, or to
exercise of the rights, as the case may be, notwithstanding any transfer of
shares on the books of the Corporation after the record date. A determination
of shareholders of record entitled to notice of or to vote at a
8
<PAGE>
meeting of shareholders shall apply to any adjournment of the meeting unless the
Board fixes a new record date if the meeting is adjourned for more than forty-
five (45) days.
If no record date is fixed by the Board, the record date for
determining shareholders shall be at the close of business on the business day
next preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held. The record date for the
determining shareholders for any purpose other than set forth in this Section 6
or Section 9 of this Article shall be at the close of business on the day on
which the Board adopts the resolution relating thereto, or the sixtieth day
prior to the date of such other action, whichever is later.
SECTION 7. QUORUM. The presence in person or by proxy of the persons
--------- ------
entitled to vote a majority of the voting shares at any meeting shall constitute
a quorum for the transaction of business. Shares shall not be counted to make
up a quorum for a meeting if voting of them at the meeting has been enjoined or
for any reason they cannot be lawfully voted at the meeting. The shareholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstand-
9
<PAGE>
ing the withdrawal of enough shareholders to leave less than a quorum.
SECTION 8. VALIDATION OF MEETINGS DEFECTIVELY CALLED OR NOTICED.
--------- ----------------------------------------------------
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, shall be as valid as though had at a meeting duly
held after regular call and notice if a quorum be present either in person or by
proxy and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice or
a consent to the holding of such meeting, or an approval of the minutes thereof.
All such waivers, consents or approvals shall be filed with the Corporate
records or made a part of the minutes of the meeting.
SECTION 9. PROXIES. Every person entitled to vote or execute
--------- -------
consents shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the Secretary of the Corporation. Any proxy duly executed
is not revoked and continues in full force and effect until an instrument
revoking it or a duly executed proxy bearing a later date is filed with the
Secretary of the Corporation; provided that no such proxy shall be valid after
the expiration of eleven (11) months from the date of its execution unless the
person executing it specifies therein the length of time for which such proxy
10
<PAGE>
is to continue in force, which in no case shall exceed seven (7) years from the
date of its execution.
A proxy is not revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of the
death or incapacity is given to the Corporation. Notwithstanding that a valid
proxy is outstanding, the powers of the proxy holder are suspended, except in
the case of a proxy coupled with an interest, which states that fact on its
face, if the person executing the proxy is present at the meeting and elects to
vote in person. A proxy which states that it is irrevocable for the period
specified therein.
SECTION 10. JOINT STOCKHOLDERS. Shares standing in the names of two
---------- ------------------
or more persons, including two or more proxies, shall be voted or represented in
accordance with the vote or consent of the majority of the persons in whose
names the shares stand. If only one such person is present in person or by
proxy, he may vote all the shares, which vote binds all, and all the shares
standing in the names of such persons are represented for the purpose of
determining a quorum.
ARTICLE III
-----------
DIRECTORS
---------
SECTION 1. POWERS. Subject to limitations of the Articles of
--------- ------
Incorporation, of these By-laws, and of the
11
<PAGE>
Nevada Corporations code, as to action to be authorized or approved by the
shareholders, and subject to the duties of directors as prescribed by the By-
laws, all corporate powers shall be exercised by or under the authority of, and
the business and affairs of the Corporation shall be controlled by, the Board of
Directors. Without prejudice to such general powers, but subject to the same
limitations, it is hereby expressly declared that the directors shall have the
following powers, to wit:
FIRST, to select and remove all the other officers, agents and
employees of the Corporation, prescribe such powers and duties for them as may
not be inconsistent with law, with the Articles of Incorporation, or the By-
laws, fix their compensation and require from them security for faithful
service.
SECOND, to conduct, manage, and control the affairs and business of
the Corporation, and to make such rules and regulations therefor not
inconsistent with law, with the Articles of Incorporation or the By-laws, as
they may deem best.
THIRD, to change the principal business office for the transaction of
the business of the Corporation and/or change the principal executive office as
depository for corporate records and documents from one location to another as
provided in Article I, Section 1 hereof, to fix and locate from time to time one
or more subsidiary offices of
12
<PAGE>
the Corporation within or without the State of Nevada, as provided in Article I,
Section 2, thereof; to designate any place within or without the State of Nevada
for the holding of any shareholders' meeting or meetings except annual meetings;
and to adopt, make and use a corporate seal, and to prescribe the forms of
certificates of stock, and to alter the form of such seal and of such
certificates from time to time, as in their judgment they may deem best,
provided such seal and such certificates shall at all times comply with the
provisions of law; provided, however, that failure to affix the corporate seal
shall not itself affect the validity of any instrument.
FOURTH, to authorize the issue of shares of stock of the Corporation
from time to time, upon such terms as may be lawful, in consideration of money
paid, labor done or services actually rendered, debts or securities canceled, or
tangible or intangible property actually received or, in the case of shares
issued as a dividend, against amounts transferred from surplus to stated
capital.
FIFTH, to borrow money and incur indebtedness for the purpose of
Corporation, and to cause to be executed and delivered therefor, in the
Corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecation or other evidences of debt and securities therefor.
13
<PAGE>
SIXTH, to appoint an Executive Committee and other committees, and to
delegate to the Executive Committee any of the powers and authority of the Board
in the management of the business and affairs of the Corporation, except the
power to declare dividends and to adopt, amend or repeal By-laws. The Board of
Directors shall have the power to prescribe the manner in which proceedings of
the Executive Committee and other committees shall be conducted. The Executive
Committee shall be composed of two or more directors.
SEVENTH, to acquire, hold, lease, encumber, convey, or otherwise
dispose of real and personal property within of without the state, and take real
and personal property by will, gift, or bequest; and to assume any obligations,
enter into any contracts, or do any acts incidental to the transaction of its
business or to the issue or sale of its securities, or expedient for the
attainment of its corporate securities,
EIGHTH, to acquire, subscribe for, hold, own, pledge, and otherwise
dispose of and represent shares of stock, bonds, and securities of any other
corporation, domestic or foreign, purchase or otherwise acquire its own bonds,
debentures, or other evidences of its indebtedness or obligations, and subject
to the provisions of its articles, redeem shares thereby made subject to
redemption.
14
<PAGE>
NINTH, to make donations for the public welfare or for charitable,
scientific, or educational purposes.
SECTION 2. NUMBER OF DIRECTORS. The authorized number of directors
--------- -------------------
of the Corporation shall be a minimum of three (3) and a maximum of seven (7)
until changed by amendment of the Articles of Incorporation or by a By-law
adopted by the shareholders amending this Section 2. However, the minimum of
three (3) directors may be reduced to a minimum of one (1) director if there is
only one (1) shareholder, or two (2) Directors, if there is only two (2)
shareholders.
SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be
--------- ---------------------------
elected at each annual meeting of shareholders, but if any such annual meeting
is not held or the directors are not elected thereat, the directors may be
elected at any special meeting of the shareholders held for that purpose. All
directors shall hold office until their respective successors are elected.
SECTION 4. VACANCIES. A vacancy of vacancies in the Board of
--------- ---------
Directors shall be deemed to exist in case of the death, resignation, or removal
of any director, or if the authorized number of directors be increased, or if
the shareholders fail, at any annual or special meeting of shareholders at which
any director or directors are elected to elect the full authorized number of
directors to be voted for at that meeting. The Board of Directors may declare
15
<PAGE>
vacant the office of a director if he is declared of unsound mind by an order of
court, or finally convicted of a felony, or if within one hundred twenty (120)
days after notice of his election he does not accept the office either in
writing or by attending a meeting of the Board of Directors.
Vacancies on the Board of Directors may be filled by a majority of the
remaining directors, although less than a quorum, or by a sole remaining
director, and each director so elected shall hold office until his successor is
elected at an annual or a special meeting of the shareholders.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the Directors. If the Board of Directors
accepts the resignation of a director tendered to take effect at a future time,
the Board or the shareholders shall have the power to elect a successor to take
over when the resignation is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
SECTION 5. REMOVAL OF DIRECTORS. The entire Board of Directors or
--------- --------------------
any individual director may be removed from office by a vote of shareholders
holding a majority of the outstanding shares entitled to vote at an election of
directors. However, unless the entire board is removed, an individual director
shall not be removed if the number of
16
<PAGE>
shares voted against the resolution of his removal exceeds the quotient arrived
at when the total number of outstanding shares entitled to vote is divided by
one plus the authorized number of directors. If any or all directors are so
removed, new directors may be elected at the same meeting. Whenever a class or
series of shares is entitled to elect one or more directors under authority
granted by the articles, the provisions of this paragraph apply to the vote of
that class or series and not to the vote of the outstanding shares as a whole.
SECTION 6. DUTIES AND LIABILITIES OF DIRECTORS. A director shall
--------- -----------------------------------
perform the duties of a director as noted in Nevada Corporation Code, including
duties as a member of any committee of the Board upon which the director may
serve, in good faith, in any manner that such director believes to be in the
best interests of the Corporation and its shareholders with such care as an
ordinarily prudent person in a like position would use under similar
circumstances.
In performing the duties of a director, a director is entitled to rely
on information, opinions, reports or statements from officers or employees of
this Corporation, counsel, independent accountants or others whom the director
believes to be reliable and competent in the matters presented.
17
<PAGE>
A director who performs the duties as described shall not be liable or
obligated to the shareholders or other directors for any of fact or judgment
made in carrying out the duties of the director, absent fraud, deceit or any
wrongful taking. Nor does monetary liability exist for any director on
financial obligations of this Corporation.
Furthermore, the liabilities of the directors of the Corporation for
mandatory damages shall be eliminated to the fullest extent permissible under
Nevada law.
SECTION 7. PLACE OF MEETINGS. Meetings of the Board of Directors
--------- -----------------
shall be held at any place within or without the state which has been designated
from time to time by resolution of the Board of Directors or by written consent
of all members of the Board. In the absence of such designation, meetings shall
be held at the principal executive office of the Corporation.
SECTION 8. REGULAR MEETINGS. Immediately following each annual
--------- ----------------
meeting of shareholders, the directors shall hold regular meetings for the
purpose of organization, election of officers and the transaction of other
business. Notice of such meeting is hereby dispensed with.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of
--------- ----------------
Directors for any purpose or purposes shall be called at any time by the
president, chief executive officer
18
<PAGE>
or, if he is absent or unable or refuses to act, by any vice-president or the
secretary, or by any two directors.
Written notice of the time and place of special meetings shall be
delivered personally to each director or sent to each director by mail or by
other form of written communication, charges prepaid, addressed to him at his
address as it is shown upon the records or if it is not readily ascertainable,
at the place in which the meetings of the directors are regularly held. In case
such notice is mailed, it shall be deposited in the United States mail in the
place in which the principal executive office of the Corporation is located at
least four (4) days prior to the time of the holding of the meeting. If such
notice is delivered personally, or by telephone, telegraph, telefax or other
similar means of communication, said notice shall be so delivered at least
forty-eight (48) hours prior to the time of the holding of the meeting. Any
delivery as above provided shall be due, legal, and personal notice to such
director.
SECTION 10. NOTICE OF ADJOURNMENT. Notice of the time and place of
---------- ---------------------
holding an adjourned meeting shall be given to absent directors if the meeting
is adjourned for more than twenty-four (24) hours.
SECTION 11. WAIVER OF NOTICE. The transactions at any meeting of the
---------- ----------------
Board of Directors, however called and noticed or wherever held, shall be as
valid as though had at
19
<PAGE>
a meeting duly held after regular call and notice, if a quorum be present and
if, either before or after the meeting, each of the directors not present signs
a written waiver of notice or a consent to holding such meeting of an approval
of the minutes thereof. All such waivers, consents, or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
SECTION 12. NOTICE. Notice of a meeting need not be given to any
---------- ------
director who signs a waiver of notice, whether before or after the meeting, or
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of such notice to such director.
SECTION 13. QUORUM. A majority of the authorized number of directors
---------- ------
shall be necessary to constitute a quorum for the transaction of business,
except to adjourn as hereinafter provided. However, if vacancies exist on the
Board of Directors, then a majority of the remaining duly elected directors, at
least one third of the authorized number of directors or at least two directors,
whichever is larger, shall constitute a quorum to transact business. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding the withdrawal of directors, if any action taken is approved by
at least a majority of the required quorum for such meeting. Every act or
decision done or made by a majority of the directors present at a meeting duly
held at which a quorum is present
20
<PAGE>
shall be regarded as the act of the Board of Directors unless a greater number
is required by law or by the Articles of Incorporation.
SECTION 14. ADJOURNMENT. A quorum of the directors may adjourn any
---------- -----------
directors' meeting to meet again at a stated day and hour; provided, however,
that in the absence of a quorum a majority of the directors present at any
directors' meeting, either regular or special, may adjourn from time to time
until the time fixed for the next regular meeting of the Board.
SECTION 15. ACTION BY WRITTEN CONSENT IN LIEU OF BOARD MEETING. Any
---------- --------------------------------------------------
action required or permitted to be taken by the Board of Directors under the
Articles of Incorpora tion and By-laws of the Corporation and under the Nevada
Corporations Code may be taken without a meeting of the Board of Directors of
the Corporation if all members of the Board shall, individually or collectively,
Consent in writing to such action. Such written consent shall be filed with the
minutes of the proceedings of the Board and shall have the same force and effect
as a unanimous vote of such directors. Any certificate or other document filed
under any provision of the Nevada Corporations Code which relates to action so
taken shall state that the action was taken by unanimous written consent of the
Board of Directors without a meeting, and that the Bylaws of this Corporation
authorize the directors to so act.
21
<PAGE>
SECTION 16. FEES AND COMPENSATION. Directors and members of
---------- ---------------------
committee may receive such compensation, if any, for their services and such
reimbursement for expenses as may be fixed or determined by resolution of the
Board.
SECTION 17. MEETING BY TELEPHONE. Any meeting of the Board of
---------- --------------------
Directors may be held by telephone conference call in which all or certain of
the directors are not physically present at the place of the meeting, but
participate in the conduct thereof by telephone, and for the purpose of
determining the presence of a quorum and for all voting purposes, such directors
shall be considered present and acting.
ARTICLE IV
----------
OFFICERS
--------
SECTION 1. OFFICERS. The officers of the Corporation shall be a
--------- --------
chief executive officer (CEO), a secretary, and a chief financial officer. The
Corporation may also have, at the discretion of the Board of Directors, a
chairman of the board, a president, one or more vice-presidents, one or more
assistant secretaries, one or more assistant financial officers, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. One person may hold two or more offices. Any vice-president,
assistant financial officer or assistant secretary, respectively, may exercise
any of the powers of
22
<PAGE>
the CEO, the chief financial officer, or secretary in their respective absences
and shall perform such other duties as are authorized and impose upon him by the
Board of Directors.
SECTION 2. ELECTION. The officers of the Corporation, except such
--------- --------
officers as may be appointed in accordance with the provisions of the Board of
Directors, shall be elected by the Board of Directors and each shall hold his
office until he shall resign or shall be removed or otherwise disqualified to
serve or his successor shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may
--------- -------------------------
appoint such other officers as the business of the Corporation may requires,
each of whom shall hold office for such period, have such authority and perform
such duties as are provided in the By-laws or as the Board of Directors may from
time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed,
--------- -----------------------
either with or without cause, by the Board of Directors at any regular or
special meeting thereof or, except in case of an officer chosen by the Board of
Directors, by an officer upon whom such power of removal may be conferred by the
Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors or to the president or to the secretary of the Corporation.
Any such resigna-
23
<PAGE>
tion shall take effect at the date of the receipt of such notice or any later
time specified therein; and, unless otherwise specified therein, the acceptance
of such resignation shall not be necessary to make effective.
SECTION 5. VACANCIES. A vacancy in any office because of death,
--------- ---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-laws for regular appointments to such office.
SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board, if
--------- ---------------------
there be such an officer, shall, if present, preside at all meetings of the
Board of Directors and exercise and perform such other powers and duties as may
from time to time be assigned to him by the Board of Directors or prescribed by
the By-laws.
SECTION 7. CHIEF EXECUTIVE OFFICER (CEO) OR PRESIDENT. Subject to
--------- ------------------------------------------
such supervisory powers, if any, as may be given by the Board of Directors to
the chairman of the Board, if there be such an officer, the CEO or President
shall be the chief officer of the Corporation. He shall preside at all meetings
of the shareholders and, in the absence of the chairman of the Board or if there
is none, at all meetings of the Board of Directors. He shall be ex officio a
member of all the standing committees, including the executive committee, if
any, and shall have the general powers and duties of management usually vested
in the office of president of a corporation and shall have such other
24
<PAGE>
powers and duties as may be prescribed by the Board of Directors or the By-laws.
SECTION 8. VICE-PRESIDENT. In the absence or disability of the CEO,
--------- --------------
the vice-presidents, in order of their rank as fixed by the Board of Directors
or if not ranked the vice-president designated by the Board of Directors, shall
perform all the duties of the president and when so acting shall have all the
powers of and bear subject to all the restrictions upon the president. The
vice-presidents shall have such other powers and perform such other duties from
time to time may be prescribed for them respectively by the Board of Directors
or the By-laws.
SECTION 9. CHIEF FINANCIAL OFFICER. The chief financial officer
--------- -----------------------
shall keep and maintain or cause to be kept and maintained adequate and correct
accounts of the properties and business transactions of the Corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares. Any surplus, including owned surplus,
paid-in surplus and surplus arising from a reduction of stated capital shall be
classified according to source and shown in a separate account. The books of
account shall at all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated
25
<PAGE>
by the Board of Directors. He shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, shall render to the CEO and directors,
whenever they request it, an account of all of his transactions as chief
financial officer and of the financial condition of the Corporation, and shall
have such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-laws.
SECTION 10. COMPENSATION. The compensation of all officers appointed
---------- ------------
by the Board of Directors shall be fixed by the Board and the Board may fix the
compensation of other employees of the Corporation; but in the absence of action
by the Board thereon the CEO shall fix the compensation of such other employees.
Any payments made to an officer of the Corporation such as a salary,
commission, bonus, interest, or rent, or entertainment expense incurred by him,
which shall be disallowed in whole or impart as a deductible expense by the
Internal Revenue Service, shall be reimbursed by such officer to the Corporation
to the full extent of such disallowance. It shall be the duty of the directors,
as a Board, to enforce payment of each amount disallowed. In lieu of payment by
the officer, subject to the determination of the directors, proportionate
amounts up to forty percent (40%) of any compensation due to such officer may be
26
<PAGE>
withheld from some future compensation payments until the amount owed to the
Corporation has been recovered.
ARTICLE V
---------
CERTIFICATES AND TRANSFER OF STOCK
----------------------------------
SECTION 1. AUTHORITY TO ISSUE. The Corporation may issue one or more
--------- ------------------
classes or series of shares or both, with full, limited, or no voting rights and
with such other rights, preference, privileges, and restrictions as are stated
or authorized in its Articles of Incorporation. No denial of limitation voting
rights shall, however, be effective unless at the time one or more classes or
series of outstanding shares or debt securities, singly or in the aggregate, are
entitled to full voting rights; and no denial or limitation of dividend or
liquidation rights shall be effective unless at the time one or more classes or
series of outstanding shares, singly or in the aggregate are entitled to
unlimited dividend and liquidation rights.
SECTION 2. EQUALITY OF RIGHTS. All shares of any one class shall
--------- ------------------
have the same voting, conversion, and redemption rights and other rights,
preferences, privileges, and restriction, unless the class is divided into
series. If a class is divided into series, all the shares of any one series
shall have the voting, conversion, and redemption rights and other rights,
preferences, privileges, and restrictions.
27
<PAGE>
SECTION 3. FORM. A certificate or certificates for shares of the
--------- ----
capital stock of the Corporation shall be issued to each shareholder when any
such shares are fully paid up. Each such certificate shall show the number of
shares represented thereby and shall be of such form as the Board of Directors
may from time to time prescribed. All such certificates shall be signed by the
CEO or vice-president and the secretary or an assistant secretary, or be
authenticated by facsimiles of the signature of the CEO and the written
signature must be countersigned by transfer agent or transfer clerk and be
registered by an incorporated bank or trust company, either domestic or foreign
as register or transfers, before issuance Certificates for shares may be issued
prior to full payment under such restrictions and for such purposes as the Board
of Directors or the By-laws may provide; provided, however, that any such
certificate so issued prior to full payment shall state on its face amount
remaining unpaid and terms of payment thereof.
SECTION 4. STOCK CERTIFICATE RECORDS. All certificates shall be
--------- -------------------------
consecutively numbered and the names and addresses of all persons owning shares
of stock in this Corporation, with the number of shares owned by each, shall be
entered in books kept for that purpose by the proper officers or agents of this
Corporation.
28
<PAGE>
In addition, if the shares of the Corporation are classified or is any
class of shares has two or more series, there shall appear on the certificate
one of the following:
(1) A statement of the rights, preferences, privileges,
and restrictions granted to or imposed on each class or series of
shares authorized to be issued and on the holders thereof.
(2) A summary of such rights, preferences, privileges and
restrictions with reference to the provisions of the Articles of
incorporation and any certificates of determination establishing the
same.
(3) A statement setting forth the office or agency of the
Corporation from which shareholders may obtain, on request and without
charge, a copy of the statement referred to in clause (1) of this
paragraph (a).
There shall also appear on the certificate statements, if any,
required by all of the following clauses to the extent applicable:
(1) The fact that the shares are subject to restrictions
on transfer.
(2) If the shares are not fully paid, the total amount of
the consideration
29
<PAGE>
to be paid therefor and the amount paid thereon.
(3) The fact that the shares are subject to a voting
agreement or an irrevocable proxy under restrictions on voting rights
contractually imposed by the Corporation.
(4) The fact that the shares are redeemable.
(5) The fact that the shares are convertible and the
period for conversion.
Unless there are restrictions on the certificate as set forth above,
there are no restrictions on the trans fer, redemption, voting or proxy without
any such actual OK.
SECTION 5. CONSIDERATION. Shares may be issued for such
--------- -------------
consideration as is determined from time to time by the Board consisting of any
or all of the following:
(1) Money paid;
(2) Labor done;
(3) Services actually rendered to the Corporation or for
its benefit or in its formation or reorganization;
(4) Debts or securities canceled; and
(5) Tangible or intangible property actually received
either by this
30
<PAGE>
Corporation or by any wholly owned subsidiary of this Corporation.
Neither promissory notes of the purchaser nor future services shall
constitute payment or part payment of shares of the Corporation.
When shares are issued for any consideration other than money, the
Board must state by resolution its determi nation of the fair value of the
consideration to the Corporation in monetary terms.
In the absence of fraud in the transaction, the judgment of the
directors as the value of the consideration for shares shall be conclusive.
SECTION 6. TRANSFER OF STOCK. Transfers of shares of the capital
--------- -----------------
stock of this Corporation shall be made only on the books of this Corporation by
the registered owner thereof, or his duly authorized attorney or with a transfer
clerk or transfer agent appointed as provided in Section 13 of this Article of
the By-laws, and on surrender of the certificate or certificates for such shares
properly endorsed and with all taxes thereon paid.
The person in whose name a share of stock stands on the books of the
Corporation shall be deemed the owner thereof for all purposes as regards this
Corporation. However, if any transfer of shares is made only for the purpose of
furnishing collateral security, and such fact is made known to the secretary of
this Corporation or to the
31
<PAGE>
Corporation's transfer clerk or transfer agent, the entry of the transfer shall
record such fact.
When a security in registered form is presented to the Corporation
with a request to register transfer, the Corporation is under a duty to register
the transfer as required if:
(a) The security is endorsed by the appropriate person or
persons;
(b) Reasonable assurance is given that those endorsements are
genuine and effective;
(c) The Corporation has no duty to inquire into adverse claims
or has discharged any such duty, and (d) Any applicable law relating to the
collection of taxes has been complied with.
Except as otherwise provided in any law relating to the collection of
taxes, the Corporation is not liable to the owner or any other person suffering
loss as a result of the registration of a transfer of a security if there were
on or with the security the necessary endorsements; and the Corporation had no
duty to inquire into adverse claims or has discharged any such duty.
SECTION 7. SHARE DIVIDEND: RECLASSIFICATION OF SHARES. Shares may
--------- ------------------------------------------
also be issued as a share dividend or on a stock split, reverse stock split,
reclassification of outstanding shares into shares of another class, exchange of
32
<PAGE>
outstanding shares for shares of another class, or other change affecting
outstanding shares.
SECTION 8. The Corporation shall not offer to sell or sell any
---------
security issued by it, whether or not through underwriters, until such offer or
sale has been qualified by the Commissioner of Corporations as required by the
Corporate Securities Law and the rules and regulations of the Commissioner and
the U.S. Securities and Exchange Commissioner (SEC) as required by law, unless
the security or transaction is exempted from such qualification and in such case
the applicable statutes and rules and regulations have been complied with.
SECTION 9. LOST, DESTROYED, OR STOLEN CERTIFICATES. No certificate
--------- ---------------------------------------
for shares of stock in this Corporation shall be issued in place of any
certification alleged to have been lost, destroyed or stolen except on
production of evidence, satisfactory to the Board of Directors as required, upon
the funding of an indemnity bond in such amount (but not to exceed twice the
value of the shares represented by the certificate) and with such terms and such
surety as the Board of Directors may, in its discretion, require.
Where a security has been lost, apparently destroyed, or wrongfully
taken and the owner fails to notify the Corporation of that fact within a
reasonable time after he or she has notice of it and the Corporation registers a
33
<PAGE>
transfer of the security before receiving such notification, the owner is
precluded from asserting against the Corporation any claim for registering the
transfer or any claim to a new security.
Where the Corporation has registered a transfer of a security to a
person not entitled to it, the Corporation demand must deliver a like security
to the true owner unless:
(a) The registration was pursuant to Section 9 of this Article
V, which the owner is precluded from asserting any claim for registering
the transfer or as such delivery that would result in overissue.
SECTION 10. FRACTIONAL SHARES. The Corporation may, if the Board so
---------- -----------------
determines, issue fractions of a share originally or on transfer.
If the Corporation issues fractions of a share originally or on
transfer, it must issue certificates for such shares as provided in Section 4,
Article V. A certificate for a fractional share shall entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the Corporation in the event of liquidation.
If the Corporation does not issue fractions of a share, it must, in
connection with any original issuance or on transfer of shares:
34
<PAGE>
(1) Arrange for the disposition of fractional interests
by those entitled to same;
(2) Pay in cash the fair value of fractions of a share as
of the time when those entitled to receive such fraction are
determined (provided, however, that the Corporation may not pay cash
for fractional shares if such action would result in the cancellation
of more that ten (10) percent of the outstanding shares of any class);
or
(3) Issue scrip or warrants in registered or bearer form
which shall entitle the holder to receive a certificate for a full
share on the surrender of such scrip or warrants aggregating a full
share. Scrip or warrants shall not, however, unless otherwise stated
therein, entitle the holder to exercise voting rights, to receive the
dividends thereon, or to participate in any of the assets of the
Corporation in the event of liquidation.
SECTION 11. PARTLY PAID SHARES. The Corporation may, if the Board so
---------- ------------------
determines, issue the whole or any part of its shares as partly paid and subject
to call for the remainder of the consideration to be paid for them. If
35
<PAGE>
shares are so issued, the Corporation shall, on the declaration of any dividend
on fully paid shares, declare a dividend on partly paid shares of the same
class, but only on the basis of the percentage of the consideration actually
paid on the shares purchased.
A subscriber to partly paid shares is liable to the Corporation, but a
person holding shares as a pledgee, executor, administrator, guardian, trustee,
receiver, or in any representative or fiduciary capacity is not personally
liable for any unpaid balance of the subscription price and the shares are
subject to sale thereof.
If the Corporation issues partly paid shares, it must issue
certificates for such shares as provided in Section 4, of this Article V.
A transferee of shares for which the full agreed consideration has not
been paid to the Corporation, who acquired them in good faith, without knowledge
that they were not paid in full or to the extent stated on the certificate
representing them, is liable only for the amount shown by the certificate to be
unpaid on the shares represented thereby, until the transferee transfers the
shares to one who becomes liable therefor. The liability of any holder of such
shares who derives title through such a transferee and who is not a party to any
fraud affecting the issue of the shares is the same as that of the transferee
through whom title was derived.
36
<PAGE>
Every transferee of partly paid shares who acquired them under a
certificate showing the fact of part payment, and every transferee of such share
(other than a transferee who derives title through a holder in good faith
without knowledge and who is not a party to any fraud affecting the issue of
such shares) who acquired them with actual knowledge that the full agreed
consideration had not been paid to the extent stated on the certificate
therefor, is personally liable to the Corporation for installments of the amount
unpaid becoming due until the shares are transferred to one who becomes liable
therefor.
In either case mentioned, the transferor shall remain liable for the
unpaid consideration if so provided in the certificate or agreed on in writing.
SECTION 12. WARRANTS. The Corporation may, if the Board so
---------- --------
determines, issue warrants, rights, or scrip in registered or bearer form which
shall entitle the holder to receive a certificate for a full share upon the full
payment of exercise price and the surrender of such warrants, rights, or scrip
aggregating a full share. Warrants, rights, or scrip shall not, however, unless
otherwise stated therein, entitle the holder to exercise voting rights, to
receive dividends therein, or to participate in any of the assets of the
Corporation in the event of liquidation.
SECTION 13. TRANSFER AGENT AND REGISTRAR. The Board of Directors may
---------- ----------------------------
appoint one or more transfer agents
37
<PAGE>
or transfer clerks and one or more registrars, and may require all certificates
for shares to bear the signature or signatures of any of them.
ARTICLE VI
----------
AMENDMENTS
----------
SECTION 1. POWERS OF SHAREHOLDERS. New by-laws may be adopted, or
--------- ----------------------
these By-laws may be amended or repealed, by the vote of the shareholders
entitled to exercise a majority of the voting power of the Corporation, or by
the written consent of such shareholders except as otherwise provided by law or
by the Articles of Incorporation.
ARTICLE VII
-----------
AMENDMENTS
----------
SECTION 1. CLOSING OF STOCK BOOKS. The Board of Directors may close
--------- ----------------------
the books of the Corporation against transfer of the shares during the whole or
any part of a period of not more than sixty (60) days prior to the date of a
shareholders' meeting, the date when the right to any dividend, distribution, or
allotment of rights vests, or the effective date of any change, conversion, or
exchange of shares.
SECTION 2. INSPECTION OF CORPORATE RECORDS. The share register or
--------- -------------------------------
duplicate share register, the books of account, and minutes of proceedings of
the shareholders and
38
<PAGE>
directors of the executive and other committees of the directors shall be open
to inspection upon the written demand of any shareholder or holder of voting
trust certificate, at any reasonable time and for a purpose reasonably related
to his interests as a shareholder or as the holder of a voting trust
certificate, and shall be exhibited at any time when required by the demand at
any shareholders' meeting of five percent (5%) of the shares in person or by an
agent or attorney and shall include the right to make extracts. Demand of
inspection other than at a shareholders' meeting shall be made in writing upon
the CEO, secretary, assistant secretary or general manager of the Corporation.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
--------- -------------------
for payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the Corporation shall be signed or endorsed by such person
or persons and in such a manner as, from time to time, shall be determined by
resolution of the Board of Directors.
SECTION 4. REPORTS TO SHAREHOLDERS. An annual written report to
--------- -----------------------
shareholders is dispensed with, except when specifically requested by a
shareholder; provided, however, that an oral report shall be made at the annual
shareholder's meeting.
39
<PAGE>
SECTION 5. CONTRACTS, ETC., HOW EXECUTED. The Board of Directors,
--------- -----------------------------
except as otherwise provided in the By-laws, may authorize any officer of
officers, or agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the Corporation, and such authority
may be general or confined to specific instances; and unless so authorized by
the Board of Directors, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or to any amount.
SECTION 6. REPRESENTATION OF STARES OF OTHER. The CEO or any vice-
--------- ---------------------------------
president and the secretary or assistant secretary of this Corporation are
authorized to vote, represent and exercise, on behalf of this Corporation, all
rights incident to any and all shares of any other corpora tion or corporations
standing in the name of this Corpora tion. The authority herein granted to said
officers to vote or represent on behalf of this Corporation any and all shares
held by this Corporation or corporations may be exercised either by such
officers in person or by any other person authorized to do so by proxy or power
of attorney duly executed by said officers.
SECTION 7. INSPECTION OF BY-LAWS. The Corpora tion shall keep in
--------- ---------------------
its principal executive office the original of a copy of the By-laws as amended
or otherwise
40
<PAGE>
altered to date, certified by the secretary, which shall be open to inspection
by the shareholders at all reasonable times during office hours.
SECTION 8. CONSTRUCTION AND DEFINITIONS. Unless the context
--------- ----------------------------
otherwise requires, the general provisions, rules of construction and
definitions contained in the Nevada Corporations Code shall govern the
construction of these By-laws. Without limiting the generality of the
foregoing, the masculine gender shall include the plural, and plural number
includes the singular; and the term "person" shall include a corporation as well
as a natural person.
41
<PAGE>
PROXY
SUNBASE ASIA, INC.
19/F., First Pacific Bank Centre
51-57 Gloucester Road 2240 Buena Vista
Wanchai, Hong Kong Irwindale, California 91706
(852) 2865-1511 (818) 358-0181
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints William McKay and Li Yuen Fai (Roger) as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them or either of them to represent and to vote as designated below, all of the
shares of common stock of Sunbase Asia, Inc., held of record by the undersigned
on November 1, 1996, at the Annual Meeting of Shareholders to be held on
December 20, 1996, or any adjournment thereof.
1. ELECTION OF DIRECTORS FOR all nominees below WITHHOLD AUTHORITY to vote
(except as marked to the contrary below). [_] for all nominees listed
below. [_]
(INSTRUCTION: To withhold authority to vote for any individual nominee mark the
box next to the nominee's name below):
[_] Gunter Gao [_] William McKay [_] Philip Yuen [_] Ho Cho Hing (Franco)
[_] Li Yuen Fai (Roger) [_] Billy Kan [_] George Raffini
2. APPROVAL OF THE 1995 STOCK OPTION PLAN.
[_] FOR [_] AGAINST [_] ABSTAIN
3. APPROVAL OF AMENDMENTS TO THE BYLAWS.
[_] FOR [_] AGAINST [_] ABSTAIN
4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>
THIS PROXY WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSALS 1, 2 AND 3.
Dated: ________, 1996
_____________________
Signature
_____________________
Signature if held
jointly
Please sign exactly
as name appears
below. When shares
are held by joint
tenants, both should
sign. When signing
as attorney, as
executor,
administrator,
trustee, or
guardian, please
give full title as
such. If a
corporation, please
sign in full
corporate name by
President or other
authorized officer.
If a partnership,
please sign in
partnership name by
authorized person.
PLEASE READ, SIGN, DATE, AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
