SETTLEMENT AGREEMENT
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THIS AGREEMENT is dated for reference the 29th day of January, 2003.
AMONG:
TURBODYNE SYSTEMS INC., of 0000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxxx, XX,
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93013
a company incorporated pursuant to the laws of the State of Nevada
("TSI")
OF THE FIRST PART
AND:
TURBODYNE TECHNOLOGIES INC., of 0000 Xxxxxxxxxxx Xxxxxx, Xxxxxxxxxxx,
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XX, 00000
("TTI")
OF THE SECOND PART
AND:
XXXX X. XXXXX, of X00-000 Xxxx 0xx Xxxxxx, Xxxxxxxxx, Xxxxxxx
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Xxxxxxxx, Xxxxxx X0X 0X0
("Nowek")
OF THE THIRD PART
AND:
L.N. FAMILY HOLDINGS INC., of Xx. Xxxxxx'x Xxxxx, Xxxxxxxxx Xxxxxx
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Steps, Nassau, Bahamas N 4805
("LN")
OF THE FOURTH PART
WHEREAS:
A. Pursuant to an Employment Agreement dated for reference August 1, 1997, as
amended July 27, 1998 (the "Employment Agreement"), Nowek was employed as
Chief Financial Officer of each of TTI and TSI.
B. In February of 2000 the Company ceased making payments to Nowek as required
by the Employment Agreement.
C. TSI and TTI wish to resolve any outstanding liability to Nowek under the
Employment Agreement.
X. Xxxxx is indebted to TTI in the amount of $225,000 in respect of an
Employee Housing Loan (the "Employee Housing Loan").
E. TTI wishes to collect the Employee Housing Loan.
X. Xxxxx claims that TTI is indebted to Nowek in the amount of $32,000 in
respect of reimbursable expenses (the "Employee Expenses").
G. TSI wishes to resolve any liability in respect of the Employee Expenses.
X. Xxxxx was a director and officer of TTI at the time it delisted from the
NASDAQ stock market (the "NASDAQ Delisting").
I. In connection with an application for listing on the proposed BBX Exchange
TTI wishes to be able to provide evidence to the BBX Exchange that none of
its directors or officers at the time of the NASDAQ delisting will have any
significant involvement in the affairs of the Company.
J. L.N. Family Holdings, a company controlled by Nowek, holds 900,000 common
shares of TTI (the "Escrow Shares"), which shares are currently held in
escrow by TTI's transfer agent, Computershare Trust Company of Canada
("Computershare").
NOW THEREFORE in consideration of the foregoing and of the mutual covenants and
agreements hereinafter provided, the parties have agreed and do hereby agree as
follows:
1. For the consideration set out in paragraph two (2) hereof, Nowek agrees
to release TTI and TSI from any and all liability under the Employment Agreement
or in respect of the Employee Expenses (the "Release of Liabilities").
2. The consideration for the Release of Liabilities shall be $938,500 to be
satisfied and paid as follows:
a. $225,000 by reduction and satisfaction of the Employee Housing Loan;
and
b. the balance by the issuance to LN of 35,675 shares of Series X
Preferred Stock of TTI at a price of $20.00 per share.
3. The shares of Series X Preferred Stock shall be identical to the common
shares of TTI save and except that they shall be non-voting (except where voting
is specifically required by the Nevada Revised Statutes) and shall be
convertible at any time at the option of the holder into common shares of TTI on
a one hundred (100) common shares for each one (1) Preferred Share basis.
4. LN agrees to cancel and surrender to TTI the Escrow Shares in
consideration of the issuance of 9,000 shares of Series X Preferred Stock.
5. Notwithstanding that the shares of Series X Preferred Stock shall be
convertible at any time into common shares, LN agrees that it will not exercise
its rights to convert any shares of Series X Preferred Stock into common shares
at any time if, after conversion, LN would own legally or beneficially more than
one half of one percent (0.5%) of the common shares of TTI then issued and
outstanding. In the event that LN wishes to convert at any time such number of
shares as shall, when aggregated with previously converted shares, be more than
one half of one percent (0.5%) of the common shares of TTI, LN shall provide to
TTI evidence that it has disposed through sales in accordance with Rule 144, or
bona fide dispositions under available exemptions, (or offshore sales in
accordance with Regulation S) the previously converted shares.
6.1 The parties acknowledge and agree that the shares of Series X
Preferred Stock to be issued are restricted shares, as contemplated under the
United States Securities Act of 1933 (the "1933 Act") which will be issued to LN
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in reliance of Regulation S of the 1933 Act without registration and that all
share certificates representing the shares of Series X Preferred Stock will be
endorsed with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"), AND HAVE BEEN ISSUED IN
RELIANCE UPON AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE ACT
PROVIDED BY REGULATION S PROMULGATED UNDER THE ACT. SUCH SECURITIES MAY NOT
BE REOFFERED FOR SALE OR RESOLD OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH THE PROVISIONS OF REGULATION S, PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER THE ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION UNDER THE ACT. HEDGING TRANSACTIONS INVOLVING THE SECURITIES
MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE ACT"
6.2 LN and Nowek represent that they are not "U.S. Persons" as defined by
Regulation S of the 1933 Act.
7.1 Closing shall take place at the offices of TTI's legal counsel, Cane
O'Xxxxx Xxxxxx, LLC at Las Vegas, Nevada, on the 5th business day following the
execution of this Agreement or at such other time and place as the parties may
mutually agree.
7.2 On the Closing Date:
(a) Nowek and LN shall deliver to TTI and TSI:
i. a release in the form attached as Schedule A hereto;
ii. such documents as may be required to effect the surrender and
cancellation of the Escrow Shares; and
iii. copy of board minutes or resolutions of LN approving the
execution of this Settlement Agreement and the cancellation of
the Escrow Shares.
(b) TTI and TSI shall deliver to Nowek and LN:
i. a release in the form attached as Schedule B hereto;
ii. share certificates representing 44,675 shares of Series X
Preferred Stock registered in the name of LN; and
iii. copy of board minutes or resolutions approving the execution of
this Settlement Agreement and the issuance of the shares of
Series X Preferred Stock
8. This Agreement constitutes the entire agreement between the parties and
there are no representations or warranties, express or implied, statutory or
otherwise, and no agreements collateral hereto other than as expressly set forth
or referred to herein.
9. Time shall be of the essence of this Agreement.
10. This Agreement shall be construed and enforced in accordance with, and
the rights of the parties shall be governed by, the laws of the State of Nevada,
and each of the parties hereto irrevocably attorns to the jurisdiction of the
courts of the State of Nevada.
11. Any notice to be given under this agreement shall be duly and properly
given if made in writing and by delivering or telecopying the same to the
addressee at the address as set out on page one of this agreement. Any notice
given as aforesaid shall be deemed to have been given or made on, if delivered,
the date on which it was delivered or, if telecopied, on the next business day
after it was telecopied. Any party hereto may change its address for notice
from time to time by notice given to the other parties hereto in accordance with
the foregoing.
12. The parties shall deliver to each other such further documentation and
shall perform such further acts as and when the same may be required to carry
out and give effect to the terms and intent of this Agreement.
13. This Agreement shall enure to the benefit of and be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns.
14. Neither this Agreement nor any provision hereof may be amended, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against whom enforcement of the amendment, waiver, discharge or
termination is sought.
15. This Agreement has been prepared by Cane O'Xxxxx Xxxxxx, LLC counsel for
TTI. The parties acknowledge that Cane O'Xxxxx Xxxxxx, LLC have advised that
they may have a conflict of interest in that Xx. Xxxxx has been a long-time
client of Cane O'Xxxxx Xxxxxx, LLC and its predecessor law firms and Xxx.
X'Xxxxx, the wife of one of the members of Cane O'Xxxxx Xxxxxx, LLC has a
minority interest in the non-voting shares of LN. The parties agree to Cane
O'Xxxxx Xxxxxx, LLC acting in drafting this agreement on
behalf of TTI notwithstanding the potential conflict of interest and acknowledge
that the obligations of TTI under this Agreement will be subject to TTI
obtaining independent legal advice. Nowek and LN acknowledge that they have also
been advised to obtain independent legal advice.
16. This Agreement may be executed in one or more counter-parts, each of
which so executed shall constitute an original and all of which together shall
constitute one and the same agreement.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year first above written.
TURBODYNE SYSTEMS INC.
By:
/s/ Xxxxxx Xxxxx
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Its duly authorized signatory
TURBODYNE TECHNOLOGIES INC.
By:
/s/ Xxxxxxx Xxxxxxx
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Its duly authorized signatory
L.N. FAMILY HOLDINGS INC.
By:
/s/ Xxxx X. Xxxxx
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Its duly authorized signatory
/s/ Xxxx X. Xxxxx
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XXXX X. XXXXX
SCHEDULE "A"
Release in favor of Turbodyne Technologies Inc. and Turbodyne Systems Inc.
SCHEDULE "B"
Release in favor of Xxxx X. Xxxxx and L.N. Family Holdings Inc.
