UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
_X_ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
-----------------
OR
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
Commission file number 0-27226
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SPINTEK GAMING TECHNOLOGIES, INC.
---------------------------------
(Exact name of small business issuer as specified in its charter)
California 33-0134823
---------- ----------
(State or other jurisdiction (IRS EmployerIdentification No.)
of incorporation or organization)
901-B Grier Drive, Las Vegas, Nevada 89119 ( 702 ) 263 - 3660
- ------------------------------------------ ----------------------
(Address of principal executive offices) (Issuer's telephone number)
Indicate by mark whether the issuer (1) filed all reports to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___
The number of shares of Common Stock, $0.002 par value, outstanding on
February 8, 1998 was 17,387,323.
<PAGE>
SPINTEK GAMING TECHNOLOGIES, INC.
(a development stage company)
FORM 10-QSB
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1997
and June 30, 1997 3
Consolidated Statements of Operations -
Three Months Ended December 31, 1997,
Six Months Ended December 31, 1997 and
From Inception to December 31, 1997 4
Consolidated Statements of Cash Flows -
Three Months Ended December 31, 1997
Six Months Ended December 31, 1997 and
From Inception to December 31, 1997 5
Notes to Financial Statements 7
Item 2. Plan of Operation 8
PART II. OTHER INFORMATION
13
Item 1. Legal Proceedings
13
Item 2. Changes in Securities
14
Item 3. Defaults on Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signature Page 16
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<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements
SPINTEK GAMING TECHNOLOGIES, INC.
(a development stage company)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
DECEMBER 31, JUNE 30,
1997 1997
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 134 $ 404
Inventories, net 167 190
Prepaid and other 624 484
-------- -------
Total current assets 925 1,078
Furniture, fixtures and equipment - net 164 131
Licenses and patents 1,019 1,019
Note receivable from related company 37 88
Other assets 28 141
------------ -------- -------
Total assets $ 2,173 $ 2,457
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Demand notes payable $ 78 $ 0
Demand notes payable to stockholders
and affiliated parties 225 334
Accounts payable 550 426
Accrued liabilities 278 129
Customer deposits 76
Interest and dividends payable 356 193
------- -------
Total current Liabilities 1,563 1,082
------- -------
Commitments
Stockholders' equity:
Preferred stock, no par value, 100,000 shares
authorized, 8,742 and 7,313 shares issued
and outstanding at December 31, 1997 and
June 30, 1997, respectively 5,690 4,825
Common stock, $.002 par value, 100,000,000
shares authorized, 18,504,652 and
17,103,772 shares issued and outstanding
at December 31, 1997 and June 30, 1997,
respectively 37 34
Additional paid in capital 5,529 5,053
Deficit accumulated during development stage (10,617) (8,508)
Treasury stock - 1,317,329 shares at cost
December 31, 1997 and June 30, 1997 (29) (29)
----------------------------------- ------- -------
Total stockholders' equity 610 1,375
------- -------
Total liabilities and stockholders' equity $ 2,173 $ 2,457
======= =======
</TABLE>
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<PAGE>
SPINTEK GAMING TECHNOLOGIES, INC.
(a development stage company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended Cumulative
December 31, December 31, March 31,1995
------------------------- ------------------------- (Inception)To
1996 1997 1996 1997 December 31, 1997
---- ---- ---- ---- -----------------
<S>
Revenues: <C> <C> <C> <C> <C>
Sales $ 0 $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0 0
---------- ----------- ---------- ---------- ------------
Gross profit 0 0 0 0 0
---------- ----------- ---------- ---------- ------------
Operating expenses:
Selling, general &
administrative 655 921 1,192 1,605 7,529
Research and development 209 303 428 468 2,355
---------- ----------- ---------- ---------- ------------
Total expenses 864 1,224 1,620 2,073 9,884
---------- ----------- ---------- ---------- ------------
Operating Loss (864) (1,224) (1,620) (2,073 (9,884)
Other income (expense):
Interest and other income 95 3 126 6 168
Depreciation & amortization ( 6) (11) ( 11) ( 20) ( 59)
Unrealized loss on
marketable securities 0 0 0 0 ( 83)
Loss on sale of securities 0 0 0 0 ( 96)
Interest expense ( 22) ( 9) ( 513) ( 21) (664)
---------- ---------- ---------- ----------- ------------
Net loss $ ( 797) $ 1,242) $ (2,018) $ (2,109) $ ( 10,617)
========== ========== ========== =========== ============
Net Loss Per Share Of
Common Stock $ (0.08) $ (0.09) $ (0.22) $ (0.14) $ (0.95)
========== ========== ========== =========== ============
Weighted Average Common
Shares Outstanding 11,399,306 17,172,096 9,510,425 16,486,883 11,550,118
========== ========== ========= ========== ==========
</TABLE>
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<PAGE>
SPINTEK GAMING TECHNOLOGIES, INC.
(a development stage company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Cumulative
Six Months Six Months March 31, 1995
Ended Ended (Inception) To
December 31, 1996 December 31, 1996 December 31, 1996
------------------ ------------------ -------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,018) $ (2,109) $ (10,617)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and Amortization 12 20 58
Non-cash interest expense 395 475
Allowance for inventory obsolescence 89 14 254
Provision for bad debts 81 60 120
Loss on sale of securities 96
Unrealized loss on marketable securities 83
Non-cash operating expenses for common stock 27 645
Royalty expenses used to reduce note
receivable from related parties 34 51 127
Changes in operating
assets and liabilities:
Decrease (increase) in assets:
Inventories (169) (154) ( 877)
Prepaid and other (448) 75 ( 317)
Increase (decrease) in liabilities:
Accounts payable (104) 124 539
Accrued liabilities (113) 150 279
Interest payable ( 70) 4 9
Customer deposits 76 76
------------ ----------- ------------
Net cash used by operating activities (2,311) (1,662) (9,050)
------------ ----------- ------------
Cash flows from investing activities:
Purchase of furniture, fixture
and equipment (49) (53) (200)
Acquisition of licenses and patents (158)
Proceeds from sale of securities 186
Note receivable from related company ( 4) (186)
------------ ----------- ------------
Net cash used by investing activities ( 53) (53) (358)
------------ ----------- ------------
Cash flows from financing activities:
Proceeds from (repayment of) demand notes
payable to related parties ( 1,308) 470 860
Proceeds-advances from stockholders 1,000
Proceeds from issuance of convertible debentures 4,375 4,375
Proceeds from issuance of common and treasury stock 1,452
Proceeds from issuance of preferred stock 975 1,855
------------ ----------- -----------
Net cash provided by financing activities 3,067 1,445 9,542
------------ ----------- -----------
Net increase in cash 703 ( 270) 134
Cash, beginning of period 121 404 0
Cash, end of period $ 824 $ 134 $ 134
============ =========== ============
</TABLE>
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<PAGE>
SPINTEK GAMING TECHNOLOGIES, INC.
(a development stage company)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Six Months March 31, 1995
Ended Ended (Inception) To
December 31, 1996 December 31, 1996 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Supplemental schedule of noncash investing
and financing activities:
Issuance of common stock for securities $ 368
Issuance of common stock for employment
contracts and prepaid services 75
Issuance of common stock exchanged for debt $ 440 $ 500 1,092
Issuance of common stock and treasury stock
for advances from stockholders 1,000
Issuance of common and treasury stock
for services related to acquisition
of public entity 1,014
Issuance of common stock in lieu of cash for
fees related to preferred stock transaction 110 110
Issuance of preferred stock in exchange for
convertible debenture, net of
unamortized debt issuance costs 4,829 4,829
Issuance of common stock in exchange for
preferred stock 243 912
Purchase of furniture, fixtures and
equipment through reduction in
receivable from related parties 22
Notes and interest payable to stockholders
forgiven by stockholders, treated as
additional paid-in capital 335 335
License and patent cost aquired through
accounts payable 12
License and patent cost acquired by issuance
of notes payable 850
Dividends payable preferred stock ( 69) ( 159) ( 347)
Supplemental disclosure of cash flow information:
Cash paid for interest $ 100 $ 11 $ 164
</TABLE>
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<PAGE>
SPINTEK GAMING TECHNOLOGIES, INC.
AND SUBSIDIARIES
(a development stage enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting only
of normal recurring adjustments necessary for a fair statement of the
results for the interim periods. The financial statements included
herein have been prepared by Spintek Gaming Technologies, Inc. ("the
Company") pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures included herein are adequate to make the information
presented not misleading. These statements should be read in
conjunction with the Company's Form 10-KSB, as amended and filed with
the Securities and Exchange Commission, for the year ended June 30,
1997.
2. Patents, Licenses and Royalty Agreements
On October 1, 1997, Spinteknology, Inc. ("Spinteknology"), a wholly
owned subsidiary of Spintek Gaming, Inc., a Georgia corporation
("Gaming") which is a wholly owned subsidiary of the Company, entered
into an Interference Settlement Agreement with Bally Gaming
International, Inc./Alliance Gaming Corporation and filed same with the
United States Patent and Trademark Office in Washington, D.C. General
conditions of the agreement acknowledged Spintek's ownership of coin
weighing patent claims associated with detection of TECHNICIAN FRAUD
(i.e., "pilferage" of coins from a slot's hopper or from hopper fill
bags) and Bally/Alliance ownership of coin weighing patent claims
associated with detection of PLAYER FRAUD (i.e., slot player cheating).
Also in the settlement, both parties have agreed to grant to one
another non-exclusive licensing of the coin weighing patent claims that
they own, including the grant of those rights to affiliates.
On July 30, 1997, Spinteknology received a patent for its proprietary
slot machine coin weighing technology from the Department of Trade and
Industry, Republic of South Africa. This patent encompasses hopper
weighing technology used by Spintek to thwart technician and player
fraud as well as drop box counting and weighing of coins.
Spinteknology has other patent applications pending in Europe for its
hopper weighing technology. These patent applications may conflict in
five European countries with patent applications filed by Azkoyen, a
Spanish company. The Company is continuing to have discussions with
Azkoyen in an attempt to resolve this matter to the mutual benefit of
both parties. Although Management believes the Company's claims are
valid and intends to vigorously assert its rights, it is unable to
estimate the outcome of any potential proceedings regarding this matter
nor the ultimate financial effect it might have on the Company.
7
<PAGE>
ITEM 2. PLAN OF OPERATION
- --------------------------
The Company has been conducting what have been considered to be
successful tests of its hopper weighing technology ("AccuHopper") at
various casinos in Las Vegas, Nevada and Atlantic City, New Jersey
during the past several months. During the tests the product continued
to be refined to meet the requests and needs of the operators at those
casinos testing the product. Management believes that the changes
incorporated as a result of input from the tests have enhanced the
product.
During the first quarter of fiscal 1998, the Company received approval
for its AccuHopper from the New Jersey Division of Gaming Enforcement
and Casino Control Commission and in early November, 1997, the Company
began a test of the product at an Atlantic City, New Jersey casino. In
January 1998, that casino indicated to Management that the system was
working well and once the interface with their slot accounting software
was completed, that they would probably initiate a purchase order for
AccuHopper retrofit kits.
AccuHopper is capable of operating on a stand alone basis, either by
means of hard wire or radio frequency transmission of data. Some of the
casinos participating in the field tests of AccuHopper have indicated
they would consider purchasing the system to operate on a stand alone
basis if an interface was not available for their slot accounting
software, while other casinos participating in the tests have indicated
that they would prefer to have such an interface. Management, with the
assistance of two of the casinos testing the system, has succeeded in
convincing a major slot accounting software company to complete an
interface to allow the data received from the AccuHopper to be
incorporated into their accounting reports. That company has indicated
that the interface should be completed by the end of March 1998 and
Beta tests are scheduled to be conducted during the month of April
1998. Management is in discussions with other slot accounting software
vendors to encourage them to consider the completion of an interface to
AccuHopper. Several of theses companies have indicated they are working
towards developing an interface for AccuHopper. Management, however is
unable to control when, or if, the completion of such interface
projects will occur, but is of the opinion that the first companies who
are able to offer the interface will have a competitive advantage in
marketing their slot accounting systems.
Management is encouraged by the results of the various field tests of
AccuHopper, the positive comments it has received from management at
those casinos and their willingness to either request a system
interface from their slot accounting software companies ot to consider
purchasing the AccuHopper on a stand alone basis
In December 1997 the Company received a purchase order from the Mohegan
Sun Casino in Connecticut for approximately 260 AccuHopper retrofit
kits and the software to run the system on a stand alone basis along
with a substantial deposit toward the purchase price.
-8-
<PAGE>
Installation of the units is scheduled to begin on February 17, 1998
and should be completed prior to the end of the Company's third
quarter which is March 31, 1998.
In addition to working with various slot accounting software companies
to incorporate the AccuHopper into their systems, the Company is also
in discussion with several of the slot machine manufacturing companies
to encourage them to incorporate the AccuHopper as an option for
factory installation in their newly manufactured slot machines. Based
on discussions with those companies, Management believes that several
of them are currently evaluating the feasibility of factory
installation of AccuHopper on their slot machines. To date IGT and
Bally Gaming are the only slot machine manufacturers to have license
agreements with the Company for AccuHopper
In January 1998, Spinteknology, Inc. entered into a joint venture with
Kinsale Developments Proprietary Limited, an Australian company to form
a company named Spintek Gaming Pty Ltd. ("SGPL") which will distribute
the Company's products in Australia, New Zealand, Macao, Singapore,
Hong Kong, China, Indonesia, Philippines, South Korea Guam, Brunei,
Thailand, Noumea, Vanuatu, Taiwan, Laos, Cambodia, Kampuchca, Vietnam,
Samoa, Fiji, Nauru, Kiribati and Tonga (the "Territory").
Spinteknology, a twenty percent joint venture participant in the joint
venture, will receive a royalty of US$50 per unit sold by SGPL in the
Territory in addition to twenty percent of the net profits of SGPL.
Employees. The Company has recently hired additional service and
installation support staff personnel to assist with the ongoing field
tests and to undergo training in anticipation of sales to be
consummated during the fourth quarter of fiscal 1998. The Company
currently has 26 full time employees and, assuming sales materialize as
expected, anticipates that it will have between thirty and thirty-five
full time employees by June 30, 1998.
Gross Margins on Initial Sales. Management has offered a discount from
the listed sales price for the AccuHopper to those casinos who have
assisted the Company in perfecting AccuHopper through field tests and
to a few other casinos who have indicated they may be willing to be one
of the first to purchase the Company's product. As a result of the
aforementioned discounts coupled with the higher initial cost of
product due to the initial relatively small quantities of inventory
ordered, the Company will undoubtedly recognize a smaller gross margin
on its first few sales than can be expected on future sales. As sales
volume increases, Management expects that the cost of its products will
decrease as a result of anticipated volume discounts expected to be
received from the Company's suppliers.
Research and Development. Until significant sales of the AccuHopper
begin and are sustained, Management does not intend to commit
significant financial resources toward the research and development of
the many non-gaming products it currently has pending. During the past
six months the Company has hired several engineering staff to continue
to develop products that enhance and/or augment the AccuHopper. Such
products include, but are not limited to, (1) a device to accurately
measure the contents of a slot machine drop bucket
-9-
<PAGE>
("AccuDrop"); a device that monitors and measures the contents of fill
bag storage compartments on a casino floor; and, a mechanism to alert
the slot floor people that the contents of a slot machine hopper is
too low, thus allowing preventative fills to be made before a time
consuming hopper empty condition exists. The Company filed and will
continue to file patent applications both domestically and worldwide
on these products and others as necessary. Based on current
engineering operating forecasts Management anticipates that it will
expend approximately $475,000 and $500,000 during the remaining six
months of fiscal 1998 and the first six months of fiscal 1999,
respectively towards research and development.
Results of Operation
- --------------------
From inception (March 31, 1995) to date, the Company has not realized
any revenue from the sale of its products. For the six months ended
December 31, 1997, the Company incurred net losses of approximately
$2,109,000 and negative cash flows from operating activities of nearly
$1,662,000, as compared to net losses of approximately $2,018,000 and
negative cash flow from operation of about $2,224,000 for the six
months ended December 31, 1996. Cumulatively, for the thirty-three
months from inception to December 31, 1997, net losses and negative
cash flows from operating activities were approximately $10,617,000 and
about $9,151,000, respectively.
For the six months ended December 31, 1997, operating expenses
increased approximately $453,000, or (27%) as compared to the same
period for the prior year. Research and Development expenses increased
approximately $40,000, while General and Administrative ("S G & A")
expenses increased about $413,000.
The S G & A increase was due to several factors. Primary among them was
payroll and related expenses which increased approximately $150,000 for
the comparative periods due mainly to added staff to support the
Company's ongoing field tests and additional administrative support
personnel. The next largest increase in S G & A was attributable to
legal and professional fees which increased approximately $100,000 over
the same period from the prior year due to additional legal expenses
that were incurred in conjunction with filing and perfecting the
Company's various patents applications; added legal expenses associated
with the Company's various financing transactions; legal expenses
incurred as a result of the Company's Joint Venture with an Australian
company; and, finally additional expenses incurred for various
litigation. The Company's bonus plan, which was implemented in June
1997 and accounted for the next largest S G & A increase over the prior
period, was attributable for approximately $76,000 as a result of
accrued expenses that were based on the increase in the market cap of
the Company's common stock from June 30, 1997 through December 31,
1997. Increases in travel, trade show and advertising expense made up
most of the remainder of the increase in S G & A expenses for the
comparative periods. In July 1997 the Company hired a Vice President of
Sales and Marketing and intensified its efforts to sell its products
not only in Nevada, but throughout the remainder of the U S as well as
abroad.
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<PAGE>
The increase in Research and Development expenses was primarily
attributable to an initial outlay of approximately $100,000 for
development costs paid to the company who will manufacture the
Company's new hopper weighing platform, a product that will augment the
Company's AccuHopper. This added expense was partially offset by a
decrease of approximately $70,000 for inventory obsolescence for the
six months ended December 1996 as compared to the six months ended
December 1997. The reduction in inventory obsolescence was primarily
attributable to Management's efforts to perfect a single product, its
hopper weighing technology, in fiscal 1998; whereas fiscal 1997 saw the
Company increasing its reserves for inventory on hand for several
different products which Management had determined were ultimately not
practical to commit the financial resources necessary to continue to
develop and market.
Interest expense decreased by approximately $408,000 for the six months
ended December 31, 1997 when compared to the six months ended December
31, 1996. Such decrease was primarily the result of the elimination of
amortization of debt discount and issuance costs as a result of the
debenture issued by the Company on July 16, 1996 having been converted
to preferred stock on October 1, 1996. The Company incurred
approximately $395,000 in interest expense as a result of debt discount
and issuance costs during the six months ended December 31, 1996.
Liquidity and Working Capital
- -----------------------------
The Company had a negative working capital position of approximately
$638,000 as of December 31,1997, and to date, absent of revenue from
operations, has funded itself primarily through equity and debt
transactions.
On August 14, 1997, the Malcolm C. Davenport V Family Trust ("the
Trust") agreed to loan an additional $500,000 to Spinteknology, to be
drawn as needed pursuant to an understanding with the trustees. The
loan was secured by a pledge of the Company's weighing technology and
as of September 30, 1997, the Company had drawn down the entire
$500,000. On October 1, 1997, the Trust elected to convert the note,
plus accrued interest of approximately $4,000 thereon, into 1,400,880
shares of the Company's $0.002 par value common stock. The conversion
price of $0.36 per share reflects a 32% discount from the closing price
of $0.53 per share on October 1, 1997. The shares issued as a result of
this conversion were issued at a discount because they are not
registered, were issued with a restrictive legend and the Trust can not
currently sell these shares in the market.
On October 22, 1997, the Company completed a Regulation S Securities
Subscription Agreement ("Agreement") for 1,428 shares of its 4% Series
A Preferred Stock ("Stock") in
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<PAGE>
the aggregate amount of $1,428,000 with RBB Bank Aktiengesellschaft
("RBB"), an offshore bank representing investors pursuant to
Regulation S promulgated under the Act. The Stock was issued at a
discount of 30%, the net proceeds of which, after discount and before
expenses, was $1,000,000 to the Company.
Expenses incurred in conjunction with the placement of the Stock
totaled $134,000, which consisted solely of commissions of $110,000 and
escrow fees of $24,000. The Company elected to pay the commissions by
issuing 200,000 shares of its $0.002 par value common stock which bears
a restrictive legend.
At December 31, 1997, there were 8,741 issued and outstanding shares of
preferred stock, all of which were in held by RBB. All such preferred
stock plus any accrued and unpaid dividends thereon can be converted to
common stock at any time at the discretion of RBB and any preferred
stock not converted prior to December 31, 1999 will automatically be
converted on that date. The conversion to common stock will be based on
an average of the closing bid prices of the common stock for the five
days ended immediately prior to the date of conversion, but not to
exceed $3 per share. All common stock issued upon conversion of the
preferred stock is subject to Registration Rights Agreements.
As of January 31, 1998, RBB held 8,741 shares of preferred stock. The
preferred stock plus unpaid dividends of approximately $376,000 at that
date would have converted into approximately 15,884,000 additional
shares of common stock of the Company based on the average closing bid
price of the shares of the Company's common stock for the five trading
days ended January 30, 1998. Had such a conversion occurred, RBB would
have held approximately 17,422,000 shares of common stock of the
Company, or approximately 50% of the common shares that would have been
issued and outstanding had such a conversion occurred.
The holder of the preferred stock has the right to cause the Company to
effect a reverse split of the common stock outstanding of the Company
since the five-day average bid price of such stock did not attain a
value of at least $3.00 per share by October 13, 1996 pursuant to the
terms and conditions of Subscription Agreement entered into by the
Company with RBB on July 16, 1996. As of the date of this document, the
holder has not caused the Company to reverse split its common stock.
Even with the receipt of the funds from the debt and equity financing
described above, the projected cost to finish production of its
weighing technology, combined with the lead time before cash flow will
begin to be received from anticipated sales, dictates that the Company
secure the availability of additional debt or equity financing. As of
February 12, 1998, Management had received a tentative commitment for
$1,000,000 of additional funding and is currently finalizing the terms
regarding such funding with the lender. Management is also negotiating
with other sources to secure additional funding, however there can be
no assurances that additional financing can be located. If such
financing is obtained it could
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<PAGE>
involve the issuance of additional stock in the Company, or the rights
to purchase additional stock in the Company. The percentage ownership
in the Company such stock would represent is unknown at this time.
Should the Company fail to secure additional financing, or fail to
begin to generate sufficient revenues to support operations, the
Company will be unable to continue as a going concern. In addition,
should extensive litigation be required for any of the current pending
matters (see Part II, Item 1 Legal Proceedings), or should any of
these proceedings result in an unfavorable outcome to the Company,
either of these matters could have a material detrimental effect on
the Company.
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
On October 1, 1997, Spinteknology entered into an Interference
Settlement Agreement with Bally Gaming International, Inc./Alliance
Gaming Corporation and filed same with the United States Patent and
Trademark Office in Washington, D.C. In settlement, both parties have
agreed to grant to one another non-exclusive licensing of the coin
weighing patent claims that they own, including the grant of those
rights to affiliates. "... Bally acknowledges Spintek's exclusive
right, priority and entitlement to TECHNICIAN FRAUD patent claims
wherever Spintek has patents or patent applications containing such
claims.... Spintek acknowledges Bally's exclusive right, priority and
entitlement to PLAYER FRAUD patent claims wherever Bally has patents
or patent applications containing such claims."
On September 25, 1996, Unique Entertainment, a Nevada corporation,
filed a complaint in the Clark County (Las Vegas), Nevada District
Court against Spintek for breach of contract and related claims. The
plaintiff is an entertainment agency. It alleges that on November 22,
1995, it and Spintek entered into a written contract whereby the
agency agreed to provide two magicians to perform on Spintek's behalf
at various gaming shows for a total of $80,000. The magicians never in
fact performed. Spintek has filed an answer denying liability,
specifically asserting that no Spintek agent or employee signed the
contract and that no such signature was or would ever have been
authorized by the Company. Spintek further contends that because the
magicians never in fact performed, its liability, if any, would be
extremely limited, and not the full contract price which the plaintiff
seeks. To date, the plaintiff has conducted virtually no discovery and
has done little to pursue the case. It is anticipated that the case
will be tried within the next six months.
On October 10, 1996, Richard M. Mathis of Reno, Nevada filed a
complaint in the Washoe County (Reno), Nevada District Court against
Spintek; Spintek International, Inc. ("International"); and Lanier M.
Davenport, who, until October 18, 1996, was Chairman and Chief
Executive Officer of the Company and is still the beneficial owner of
more than 5% of the Company's common stock. In his suit, Mr. Mathis
contends that he was forced by the Company and Davenport to transfer
to Davenport his ownership and control of the Company,
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<PAGE>
and that, with the Company's assistance, Davenport defrauded him,
breached fiduciary affairs and demands actual damages in excess of
$500,000 and punitive damages in excess of $500,000. On January 6,
1997, the Company and International filed an answer denying any
liability to Mr. Mathis. On August 26, 1997, the Company and
International filed a motion to dismiss, which is currently pending
before the Court. A ruling on the motion is expected within three
months. If the motion is denied, the Company intends to file a motion
for summary judgement.
On February 14, 1997, the Company filed a complaint in the Clark
County (Las Vegas), Nevada, Eighth Judicial District Court, against
Michael D. Fort, a former officer and director of the Company, who
resigned on February 7, 1997. The complaint claims that Mr. Fort must
return $240,000 to Spintek that was paid to him in anticipation of a
change of control in the Company that did not actually occur. Mr. Fort
filed an answer denying liability. Mr. Fort also has filed
counterclaims that he be entitled to keep the $240,000 at issue. The
parties anticipate the beginning of discovery in February, 1998.
The Company has filed suit against Sailfin Investments, Ltd.
("Sailfin"), a corporation organized under the laws of the Channel
Islands, seeking a declaratory judgement that it has already paid
Sailfin in full for services rendered in accordance with the terms of
a consulting services agreement. The Company also seeks to force
Sailfin to return certain shares of the Company's common stock that
were paid to Sailfin in accordance with the terms of the agreement on
the grounds that the services performed were so inadequate, that a
failure of consideration occurred entitling the Company to a return of
the stock. In the alternative to returning the shares of common stock,
the Company alleges that Sailfin's inadequate and substandard
performance of its obligations under the agreement constitute a breach
of contract and entitle the Company to recover the damages it suffered
as the result of said breach. Sailfin has answered the Complaint and
denied liability. Sailfin has also filed a counterclaim seeking to
force the Company, and its transfer agent, to remove the restrictive
legend from its shares of the Company's common stock, or seeking
damages in the alternative. The Company has added Mr. Fort and Mr.
James Hennen, a former officer of the Company, as additional
defendants seeking to have Company stock issued pursuant to certain
alleged agreements cancelled on the grounds, among other things, that
there was no proper corporate authority for the issuance of such stock
as well as no consideration therefor. The parties will now begin to
engage in discovery.
ITEM 2. Changes in Securities
Not applicable
ITEM 3. Defaults upon Senior Securities
Not applicable
-14-
<PAGE>
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable
ITEM 5. Other Information
In January 1998, Spinteknology, Inc. entered into a joint venture with Kinsale
Developments Proprietary Limited, an Australian company to form a company named
Spintek Gaming Pty Ltd. ("SGPL") which will distribute the Company's products in
Australia, New Zealand, Macao, Singapore, Hong Kong, China, Indonesia,
Philippines, South Korea Guam, Brunei, Thailand, Noumea, Vanuatu, Taiwan, Laos,
Cambodia, Kampuchca, Vietnam, Samoa, Fiji, Nauru, Kiribati and Tonga (the
"Territory"). Spinteknology, a twenty percent joint venture participant in the
joint venture, will receive a royalty of US$50 per unit sold by SGPL in the
Territory in addition to twenty percent of the net profits of SGPL.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Spintek Gaming PTY LTD Shareholders Agreement
10.2 Spintek Gaming PTY LTD Distribution Agreement
10.3 Spintek Gaming PTY LTD Articles of Association
11.1 Computation of earnings per share
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended December 31, 1997.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SPINTEK GAMING TECHNOLOGIES, INC.
By: /s/ GARY L. COULTER
-----------------------
Date: February 12, 1998 Gary L. Coulter
Chairman of the Board,
Chief Executive Officer
(Principal Executive Officer)
By: /s/ ROBERT E. HUGGINS
-------------------------
Date: February 12, 1998 Robert E. Huggins
Senior Vice President,
Chief Financial Officer
(Principal Financial and Accounting Officer)
By: /s/ MALCOLM C. DAVENPORT
----------------------------
Date: February 12, 1998 Malcolm C. Davenport V
Director
By: /s/ PATRICK W. MCGRATH
--------------------------
Date: February 12, 1998 Patrick W. McGrath
Director
-16-
<PAGE>
EXHIBIT 10.1
SHAREHOLDERS AGREEMENT
AGREEMENT dated _______________________________________ , 1998
BETWEEN SPINTEKNOLOGY INC, a Corporation formed under the laws of the State of
Georgia, United States of America ("Spinteknology")
KINSALE DEVELOPMENTS PTY LTD ACN 007 715 568 a Corporation incorporated
under the laws of South Australia and having its registered office at 118
Greenhill Road, Unley, South Australia ("Kinsale")
AND SPINTEK GAMING PTY LTD ACN 081 131 026 a Corporation incorporated under the
laws of South Australia and having its registered office at 118 Greenhill
Road, Unley South Australia ("Spintek")
RECITALS
A. Spinteknology and Kinsale have promoted the formation of Spintek.
B. The purpose of the formation of Spintek is to enable Spintek to act as
distributor in defined territories of products supplied to Spintek by
Spinteknology.
C. The terms and conditions under which Spintek operates as the
distributor of products supplied by Spinteknology are set out in a
Distribution Agreement dated 1998 between Spinteknology and Spintek
("Distribution Agreement").
D. Spinteknology and Kinsale intend by this agreement to record their
rights and liabilities with respect to Spintek and its operations, in
addition to, or in substitution for (as the case may be), their
respective rights and obligations as prescribed by the Articles of
Association of Spintek, and Spintek intends to give effect to this
agreement to the exclusion of its Articles of Association to the extent
that this agreement is inconsistent with the Articles of Association.
OPERATIVE PART
1. Inclusive of the capital subscribed on the incorporation of Spintek,
Spinteknology and Kinsale will subscribe further capital to Spintek so that
the issued and paid up capital of Spintek will be 100, 000 shares of $ 1.00
each held as to 80% by Kinsale and 20% by Spinteknology.
2. Spinteknology and Kinsale will each be entitled:-
2.1. to nominate, and cause to be appointed;
2.2. to remove and cause to be replaced by another nominee; at least 1
Director of Spintek. The first nominated Directors will be Graham Bruce
Hooper as the nominee of Kinsale and Gordon Dean Booth as the nominee
of Spinteknology.
3. In spite of the Articles of Association of Spintek, a resolution of the
members of Spintek passed by a majority representing 81% of the issued
shares in Spintek is required to give effect to the following:
3.1.(subject always to clause 2) the removal or replacement of either of
the first nominated Directors;
3.2.any increase in the number of directors;
3.3. the sale or encumbering of all of the substantive assets of Spintek;
3.4.the incurring of either a secured or unsecured debt in excess of AUD
$250,000.00 (or any substituted limit agreed in writing by
Spinteknology and Kinsale);
3.5.the incurring of any salary package in excess of AUD $150,000.00 per
annum (or any substituted limit agreed in writing by Spinteknology and
Kinsale) for any individual employee of Spintek;
3.6.the lease of any premises or any plant or equipment on terms other
than those which are competitive within a relative market;
3.7.the winding up, dissolution, restructuring of Spintek or any increase
or reduction in the authorised capital of Spintek;
3.8.the issue of any shares in excess of the 100,000 shares referred to in
clause 1 to any existing or prospective shareholder of Spintek.
4. In spite of the provisions of the Articles of Association of Spintek, no
transfer any shares in the capital of Spintek may be made unless the
following procedure is complied with:-
4.1. the shareholder wishing to transfer ownership of is shares
("Proposer") must submit an offer to all of the other shareholders
("Offerees") in which the Proposer must nominate the price per share
at which the Proposer's shares are offered for sale to the Offerees or
at which the Proposer will purchase all of the Offerees' shares;
4.2. the Offerees may within 30 days of receipt of the offer from the
Proposer purchase all of the shares of the Proposer at the price
specified in the offer;
4.3. if the Offerees do not within that period of 30 days purchase all the
Proposer's shares, the Proposer must purchase all of the Offerees'
shares at the nominated price;
4.4. completion of any sale and purchase of the shares must be effected
within 60 days after the date of the Proposer's offer is submitted to
the Offerees ;
4.5. at completion the purchaser will pay the vendor the nominated price
for the shares being transferred and the vendor will sign and deliver
to the purchaser a transfer of the shares in registrable form, subject
to stamp duty to be paid by the purchaser;
4.6. if the vendor of the shares neglects, refuses or otherwise falls to
sign a transfer of the shares, the secretary of Spintek is authorised
by this Agreement, by which power of attorney is granted to the
Secretary, to sign a transfer of the shares on behalf of the vendor,
and subject to the appropriate stamp duty being applied to the
transfer, Spintek is authorised to receive the transfer into the Share
Register to give effect to the transfer of the shares to the
purchaser;
4.7. the Proposer may offer the Proposer's shares for sale to a purchaser
who is not then a shareholder of Spintek ("Third Party") at any time
provided that the terms and conditions of the offer are set out in
written form ("Third Party Offer") and are first provided to all of
the other shareholders who may within 30 days after receipt of the
Third Party Offer elect to purchase the Proposer's shares on the terms
and conditions set out in the Third Party Offer;
4.8. if one or more of the other shareholders elects to purchase the
Proposer's shares, completion of that purchase will be effected in
accordance with the procedure set out in subclauses 4.4, 4.5 and (only
if the Proposer is the vendor) 4.6;
4.9. If more than one of the other shareholders elect to purchase the
Proposer's shares pursuant to sub-clause 4.8, they may do so in
proportions agreed between them, and failing any agreement they must
purchase the Proposer's shares equally, and in no event are they
permitted to purchase fewer than all of the Proposer's shares referred
to in the Third Party Notice;
4.10. if a sale is effected by the Proposer to a Third Party, completion of
the purchase must be effected within 90 days after the date of issue
of the Third Party Offer or, if the other shareholders elect, but
fall, to purchase the Proposer's shares, within 60 days after the
failure by the other shareholder or shareholders to purchase the
Proposer's shares (as the case may be);
4.11. a condition of a sale of shares by the Proposer to a Third Party must
be the requirement that the Third Party endorses and becomes a party
to this Agreement in lieu of or in addition to the Propos4.12.
transfers of shares may otherwise be effected pursuant to the Articles
of Association of Spintek.
5. If Spinteknology and Kinsale permit or cause any other entity to become a
shareholder of Spintek, they will cause that other entity to become a party
to this agreement and to be bound by it.
6. Kinsale represents to Sp'nteknology that it is ultimately controlled by
Graham Bruce Hooper and that it will not permit the registration of any
transfer of that ultimate control to any entity not ultimately controlled,
and which remains ultimately controlled, by Graham Bruce Hooper without
first obtaining the approval of Spinteknology (which approval will not be
unreasonably withheld). For the purposes of this clause, an entity or a
related group of entities is ultimately controlled by Graham Bruce Hooper
if he is, by reason of his association with the entity or related group of
entities, able to direct the decision making processes of the entity or
related group of entities.
7. In all other respects Spinteknology and Kinsale adopt and will implement
the Articles of Association with respect to the administration of the
affairs of Spintek.
8. All disputes under this agreement which are not resolved by negotiation
will be subject to binding arbitration on the written request of any one
party to the other as the sole method of resolution. Arbitration will be
conducted in London, United Kingdom, in the English language under the then
current commercial arbitration rules of the American Arbitration
Association. judgment on any arbitration award, which may include an award
of damages, may be entered in any court of competent jurisdiction.
EXECUTED as an Agreement.
SIGNED FOR AND ON BEHALF of SPINTEKNOLOGY INC.
in the presence of
/s/ GARY L. COULTER, President
- ------------------------------
SIGNED FOR KINSALE
DEVELOPMENTS PTY LTD
ACN 007 715 568
in the presence of
/s/ GRAHAM B HOOPER
- --------------------
SIGNED FOR SPINTEK GAMING
PTY LTD ACN 081 131 026
in the presence of
/s/ GRAHAM B HOOPER
- -------------------
<PAGE>
EXHIBIT 10.2
DISTRIBUTION AGREEMENT
- ----------------------
AGREEMENT dated ________________________________, 1998 BETWEEN SPINTEKNOLOGY
INC, a Corporation formed under the laws of the State of Georgia, United States
of America ("Spinteknology")
AND
SPINTEK GAMING PTY LTD ACN 081 131 026 a Corporation incorporated in the State
of South Australia and having its registered office at 118 Greenhill Road,
Unley, South Australia ("Distributor")
RECITALS
A. Spinteknology has rights of control over certain technology which it
believes can be employed in the gaming industry to detect certain
thefts of coins or tokens from coin or token operated gaming machines
("Technology") .
B. Spinteknology expects to manufacture and supply products, equipment and
services incorporating the Technology ("Products").
C . Part of the Products is comprised of devices manufactured by
Spinteknology which can be installed in existing gaming machines
manufactured by various gaming machine manufacturers on site in gaming
establishments where gaming machines are already in use ("Retrofit
Devices").
D. Spinteknology is also in the Process of the development of components
or devices (which will form part of the Products) which incorporate the
Technology and which are intended to be included in the original
manufacture, assembly or rebuilding of gaming machines by various
manufacturers of gaming machines prior to the sale of those machines to
ultimate users ("Original Components").
E. Spinteknology intends by this Agreement to appoint the Distributor as
Spinteknology's distributor of products including Retrofit Devices,
Original Components, and any other devices or components incorporating
the Technology or any improvements, enhancements or developments of the
Technology from time to time ("Future Technology"), all of which are
included in the reference to Products for the purposes of this
Agreement.
F. It is intended that Spinteknology will make any Future Technology
available to Spintek for the purposes of this agreement and to the
extent that there are any additions or amendments reasonably required
to this agreement as a consequence, Spinteknology and Spintek will
negotiate in good faith to effect those additions or amendments
consistent with the spirit and intention of this agreement.
OPERATIVIE PART
1. Spinteknology and the Distributor agree that the Recitals are to be
read with and form part of this Agreement.
2. Spinteknology appoints the Distributor as its exclusive distributor of
Products in Australia, New Zealand, Macao, Singapore, Hong Kong, China,
Indonesia, Philippines, South Korea, Guam, Brunei, Thailand, Noumea,
Vanuatu, Taiwan, Laos, Cambodia, Kampuchca, Vietnam, Samoa, Fiji,
Nauru, Kiribati and Tonga ("Territory").
3. If the Distributor does not take any steps to exploit distribution
opportunities in any one or more of the countries in the Territory
("Unexploited Countries") within 42 months of the Commencement of this
agreement, Spinteknology may in its discretion exclude the Unexploited
Countries from the Territory by notice in writing to the Distributor.
4. Distributor will use its best endeavours to exploit distribution
opportunities in the Territory during the term of this agreement. If
Spinteknology forms the reasonable opinion that Distributor is not
using its best endeavours to do so in any part of the Territory
Spinteknology may in writing advise Distributor of that opinion and
require Distributor to remedy that deficiency within 12 months of that
written notice and if Distributor fails to do so Spinteknology may
exclude that part of the Territory from the operation of this agreement
by notice in writing to Distributor.
5. Spinteknology represents, and the Distributor acknowledges:-
5.1. that the Products are designed for the detection of theft of
coins or tokens by persons who have authorised access to the
gaming machine hoppers where the coins and tokens are stored
("Technician Fraud"); and
5.2. and that the Products are not designed to detect theft or other
malfeasance by machine patrons ("Player Fraud").
6. Spinteknology represents to the Distributor, and the Distributor
acknowledges:-
6.1. that Spinteknology claims only certain patent rights with respect
to the detection of Technician Fraud ("Technician Fraud Patent
Claims"); and
6.2. that patent rights are claimed by others with the consent of
Spinteknology with respect to Technology to detect Player Fraud
("Player Fraud Patent Claims").
7. The Distributor undertakes to Spinteknology--
7.1. that no representations will be made by the Distributor in the
course of marketing the Products to the effect that the Products
may be utilized in connection with the detection of Player Fraud;
and
7.2. that sales contracts obtained by the Distributor will include a
specific disclaimer of any Player Fraud Patent Claims.
8. This Agreement does not operate to restrict any other business
operations of the Distributor, except in the case where those other
business operations involve the distribution of items which are, on a
reasonable assessment, in competition with the Products. If the
Distributor wishes to distribute items which are in competition with
the Products in the course of its business operations, it will notify
Spinteknology and request Spinteknology's consent to do so. The
Distributor will not sell or encourage the sale of competing items to
customers who have approached the Distributor for the purposes of
purchasing the Products.
9. This Agreement will remain in force for 20 years from the date of this
Agreement, and following those 20 years will continue from year to year
unless terminated by mutual consent or by written notice by one party
to the other 90 days in advance of the end of any 1 year extension
beyond the initial term of 20 years.
10. This Agreement may be terminated by either party in the case of a
breach of a substantive provision by notice in writing to the party in
breach if the party in breach has not within 14 days after being
notified in writing of the breach of this Agreement remedied that
breach.
11. Termination of this Agreement for any reason will not discharge any
liability of Spinteknology or the Distributor to the other for sales,
orders or contracts made by the Distributor prior to the date of
termination, regardless of when shipments are made or invoices
rendered.
12. On termination of this Agreement the Distributor will: -
12.1. return to Spinteknology any of the Technology and Future
Technology, or hardcopy or software representations of the
Technology and Future Technology, which it has in its custody or
control;
12.2. cause its name to be changed so as not to include the name
Spintek; and
12.3. relinquish any rights with respect to the use of the name
Spintek.
13. On termination of this Agreement Spinteknology is required to deliver
and the Distributor is required to accept only those Products ordered
by the Distributor from Spinteknology at or prior to the date of
termination.
14. On termination of this Agreement Spinteknology has an option to
re-purchase from the Distributor any Products in the possession of the
Distributor and unsold by the Distributor. The re-purchase price will
be the same as the original purchase price invoiced by Spinteknology to
the Distributor for those Products. If, or to the extent that, the
option to re-purchase is not exercised by Spinteknology, the
Distributor is at liberty to dispose of the Products in its possession
in the ordinary course of its business, during which time the
provisions of clause 12 will be suspended for a reasonable period (not
exceeding 6 months) to allow orderly disposal of the Products.
15. The exclusive distribution rights granted to the Distributor under this
Agreement do not preclude Spinteknology or its other distributors from
supplying Original Components to manufacturers of gaming machines for
the purposes of installation in gaming machines outside the Territory
provided that at all material times Spinteknology and its other
distributors are not aware that those gaming machines are intended
subsequently to be delivered to ultimate users in the Territory.
16. Spinteknology undertakes that if it engages in the business of
manufacturing or distributing gaming machines which include Original
Components, the Distributor's exclusive rights of distribution under
this Agreement will extend to any of those gaming machines in the
Territory, to the intent and with the effect that Spinteknology will
not market any of those gaming machines for installation in the
Territory except through the Distributor.
17. The prices chargeable by Spinteknology to the Distributor for each item
of the Products will be Spinteknology's direct cost of manufacture plus
US$50. Any price change due to change in the direct cost of manufacture
will only apply to orders placed by Distributor after it is notified in
writing by Spinteknology of the price change.
18. The Distributor may establish, and may vary from time to time, the
prices at which it sells the Products to its customers.
19. The Distributor must not without the prior written consent of
Spinteknology-.-
19.1. sell any Products outside the Territory; or
19.2. sell any Products within the Territory with knowledge that they
are intended by the purchaser for use or distribution outside the
Territory. The Distributor will, as far as reasonably
practicable, obtain from purchasers at the point of sale a
representation as to where the Products are intended to be used
by those purchasers.
20. Spinteknology will from time to time at no cost to the Distributor
supply to the Distributor at its place of business reasonable
quantities (as required by the Distributor) of Spinteknology's
advertising and selling literature, samples, displays, drawings,
engineering or other product data, but not including source codes or
manufacturing specifications, ("Selling Aids") as designed and made
available by Spinteknology for the purposes of assisting the
Distributor in the sale of the Products.
21. The Distributor will use its best endeavours and judgment in utilising
the Selling Aids as effectively as reasonably practicable in the
ordinary course of its business, and will not knowingly be wasteful of
the Selling Aids.
22. Spinteknology will provide the Distributor with
reasonable access to Spinteknology's personnel for technical and sales
assistance by telephone, facsimile or other electronic means of
communication. Any assistance requested by the Distributor which
cannot be provided by telephone, facsimile or other electronic means
of communication will be provided by Spinteknology to the Distributor
by sending personnel to sites nominated by the Distributor on
condition that the Distributor reimburses Spinteknology for salaries,
fringe benefits, travel, lodging and meal expenses incurred by
Spinteknology in respect of its relevant personnel allocated to the
provision, and for the duration, of the assistance. Spinteknology may
require from the Distributor advance deposits of expenses which are
reasonably estimated to exceed US$5,000, and will determine the
schedule for on-site assistance.
23. Spinteknology undertakes that it will: -
23.1. provide the Distributor with documents and particulars of all
inquiries received by Spinteknology from within the Territory in
respect of Products;
23.2. provide the Distributor with copies of any acknowledgments given
or made by Spinteknology in respect of inquiries for the Products
from within the Territory;
23.3. provide to the Distributor sales, product and technical
information (not including source codes or manufacturing
specifications), and any estimates, specifications and proposals,
which may be advantageous to the Distributor for the purposes of
dealing with inquiries from within the Territory.
24. Spinteknology will assign to Distributor the benefit of all warranties
to which Spinteknology is entitled as against the suppliers or
submanufacturers of, or with respect to, the Products or any
components of the Products.
25. The Distributor has the right to assign to its customers the benefit
of any warranties which are assigned by Spinteknology to the
Distributor with respect to the Products or any components of the
Products in accordance with clause 24.
26. Spinteknology has sole responsibility for the design, development,
supply, production and performance of Products and the protection of
its trade name or names.
27. The obligation of Spinteknology to effect shipments of Products to the
Distributor:-
27.1. is contingent on Spinteknology approving any order or contract
submitted by the Distributor; and
27.2. is subject to the effect of strikes, accidents, embargos or any
natural or unnatural cause, beyond the control of Spinteknology.
28. Spinteknology will cause Products to be shipped to the Distributor to
be available at an agreed point of departure in the country of
manufacture F.O.B.
29. The Distributor is responsible for the shipment of Products from the
country of manufacture to the Distributor's customers or to the
Distributor, as the case may be.
30. The Distributor undertakes:-
30.1. that it will not without the written authority of Spinteknology
commit Spinteknology to any obligation or liability;
30.2. that it will not use Spinteknology's name or the name Spintek in
any way not specifically authorised by this Agreement;
30.3. that it will use its best endeavours to promote the sale of
Products in the Territory in the mutual interest of the
Distributor and Spinteknology;
30.4. that it will not advertise or promote the sale of competitive
items more actively than it promotes the sale of Products if
permission is granted to distribute competitive items;
30.5. that it will effect full liability insurance on all motor
vehicles, trucks or other transportation or conveyance equipment
used by the Distributor for the purposes of carrying its business
into effect, and will indemnify Spinteknology in respect of the
consequences of any of the risks covered by that insurance (or
that would have been covered if that insurance had been obtained
or if the insurance had no exclusion for deductible amounts or
coverage limitation);
30.6. that it will maintain reasonably adequate installation and repair
capabilities, including the availability of personnel:-
30.6.1. to install Retrofit Devices at the customer's location;
30.6.2. to supervise installation by the customer's technicians;
30.6.3. to train the customer's personnel in the routine operation
and service of the Products;
30.6.4. to carry out installations and repairs in accordance with
Spinteknology's instruction manuals and technical directives
from time to time;
30.6.5. to supply replacement parts and replacement units from
inventory purchased from Spinteknology or manufactured in
accordance with Spinteknology's technical and design
requirements to preserve the performance characteristics of
the Products;
30.6.6. to maintain the capability of testing the Products to detect
defective components and to replace components which are
replaceable
30.7 that it will determine its own rate of charges for installation,
repair, training and other services to customers and make no
charge to Spinteknology for the testing of components to
determine warranty liability;
30.8 that it will bear its own costs and expenses incidental to the
operation of its own distribution business as an independent
contractor including, but not limited to, rent, supplies,
technical and clerical assistance employees, sales personnel,
wages, salaries and commissions, telephone costs, licences,
insurances and the like;
30.9 that it will not make any representations or give any guarantees
on behalf of Spinteknology;
30.10 that it will not endorse any Spinteknology cheques or commercial
papers or conduct any bank accounts in the name of Spinteknology;
30.11 that it will obtain and keep on foot any necessary permits or
licences for the importation of Products into the Territory and
to its customer's locations;
30.12 that it will comply with any regulations and obtain any approvals
which may be appropriate to the incorporation of Products into
gaming machines of customers of the Distributor;
30.13 that it will indemnify Spinteknology in respect of any claims
arising from the importation of any Products by the Distributor
in violation of import restrictions or the failure to pay any
customs charges or taxes and the consequences of any failure by
the Distributor to cause the Products sold by the Distributor to
be approved by any appropriate authorities for incorporation into
gaming machines of the Distributor's customers.
31. Spinteknology undertakes to the Distributor:-
31.1. that it is has no right or authority to commit the Distributor in
any way whatever to any liability without the prior written
consent of the Distributor, or to use the Distributor's name in
any way not specifically authorised by this Agreement (but
nothing in this agreement limits Spinteknology's right to use the
names "Spintek" or "Spinteknology" as it may choose without
prejudicing the rights of Distributor under this agreement);
31.2. that it will strive diligently to maintain and enhance the
reputation, usefulness and acceptance of the Products and
services connected with the Products, and provide reasonable
assistance to the Distributor in promoting the sale of the
Products in the Territory.
32. This Agreement is to be construed, and all disputes arising under it
are to be resolved, according to the laws of the Commonwealth of
Australia and the State of South Australia.
33. If any provision of this Agreement offends any laws within or outside
Australia and which are applicable to this Agreement, the offending
provision is to be severed from the balance of the Agreement which
will remain in full force and effect.
34. This Agreement may be terminated by Spinteknology or the Distributor
by notice in writing to the other party in the event of the other
party being wound up or being subjected to any form of administration
in insolvency.
35. The failure of either party to enforce at anytime, or for any period,
the provisions of this Agreement will not be construed as a waiver of
any provision or of a right of that party at any subsequent time to
enforce any provision of this Agreement.
36. Any notice required to be given under this Agreement may be given by
confirmed facsimile transmission as follows:- . 36.1. if to
Spinteknology: telecopier number 17022638953;
36.2. if to the Distributor: facsimile number 61884317033;
37. Written notice may otherwise be given by prepaid post addressed as
follows:
37.1. if to Spinteknology: 90 I Grier Drive, Suite B, Las Vagas Nevada
89119 United States of America;
37.2. if to the Distributor: 120A The Parade, Norwood, South Australia
5067.
38. Either party may by 3 days notice in writing to the other party notify
the other party of any change to its number or address for the service
of notices.
39. All disputes under this agreement not resolved by negotiation will be
subject to binding arbitration on the written request of one party to
the other as the sole method of resolution. Arbitration will be
conducted in London, United Kingdom, in the English language under the
then current commercial arbitration rules of the American Arbitration
Association. Judgment on an arbitration award, which may include an
award of damages, may be enforced in any court of competent
jurisdiction.
40. Spinteknology and the Distributor will each bear their own costs of
and incidental to the preparation and execution of this Agreement.
EXECUTED as an Agreement.
SIGNED FOR AND ON BEHALF of
SPINTEKNOLOGY INC
in the presence of
/s/ GARY L. COULTER, President
- ------------------------------
SIGNED ON BEHALF of
SPINTEK GAMING
PTY LTDACN 081 131 026
in the presence of
/s/ GRAHM HOOPER
- ----------------
<PAGE>
EXHIBIT 10.3
CORPORATIONS LAW
A Company Limited by Shares
MEMORANDUM OF ASSOCIATION
of
SPINTEK GAMING PTY LTD
1 The name of the Company is SPINTEK GAMING PTY LTD ("the Company").
2 The liability of the members is limited.
3 The authorised capital of the Company is ten million dollars ($
10,000,000) divided into ten million (10,000,000) shares of one
dollar ($1.00) each.
I, the person whose name, address and occupation is subscribed hereto, am
desirous of being formed into a company in pursuance of this Memorandum of
Association and I respectively agree to take the number of shares in the
capital of the Company set opposite my name.
Dated 20th December 1997
- --------------------------------------------------------------------------------
NAME, ADDRESS & OCCUPATION NO OF SHARES SIGNATURE
OF SUBSCRIBER
- --------------------------------------------------------------------------------
KINSALE DEVELOPMENT PTY LTD 1 THE COMMON SEAL OF
ACN 007 715 568 KINSALE DEVELOPMENT PTY LTD
of 118 GREENHILL ROAD ACN 007 715 568 is affixed
UNLEY SOUTH AUSTRALIA 5061
in the presence of
/s/ GRAHM HOOPER
----------------
(SEAL APPEARS HERE) Director
/s/ PETER HOBBS
---------------
Director/Secretary
<PAGE>
CORPORATIONS LAW
A Company Limited by Shares
ARTICLES OF ASSOCIATION
of
SPINTEK GAMING PTY LTD
1. PRELIMINARY
1.1 Definitions In these Articles, unless the context otherwise
requires: "Auditor" means the auditor or auditors for the time
being of the Company. "Board" means the Board of Directors of the
Company provided that where there is only one Director, "Board"
means that Director;
"Business Day" means a day which is not a Saturday, Sunday or
public holiday in the State;
"Company" means this company whatever its name may be from time
to time;
"Director" means a director for the time being of the Company
(including Alternate Director but not an Associate Director);
"Dividend" means any distribution to Members in relation to
shares as a dividend or interim dividend of any property
(including, without limitation, money and paid up shares or other
marketable securities of the Company or of any other body
corporate) and includes any bonus;
"Financial Year" means year ending on 30th June or such other
reporting period (if any) which the Company lawfully substitutes
for same under the Law;
"Law" means the Corporations Law as it applies to the Company
from time to time;
"Member" or "shareholder" or "holder" means a person whose name
is entered in the Register as the holder of a share;
"Member's Liability" means, in respect of a Member:
(a) all money due and payable by the Member to the Company;
and
(b) all money (whether payable or not) called or payable at
a fixed time in respect of shares held by that Member;
"Memorandum" means the Company's Memorandum of Association
as altered from time to time;
"Money Due" means, in respect of a call payment of the amount of
which is not made on the day specified for its payment under
Article 6.4, the amount of money payable in respect of that call
plus, subject to Article 6.10:
(a) interest on that amount at the Prescribed Rate, from
that day until payment is made; and
(b) all costs and expenses incurred by the Company as a
consequence of payment not being made on that day;
"Office" means the registered office from time to time of the
Company;
"paid up" includes credited as paid up;
"Prescribed Rate" means, in respect of any particular Article in
which that term is used, 10% per annum or any other rate
prescribed by the Board from time to time in respect of that
Article;
"Register" means the register of members kept pursuant to the
Law;
"related body corporate" means any body corporate which is deemed
to be related to the Company under the Law;
"Secretary" means a person appointed as a secretary of the
Company from time to time (including any person appointed to
perform the duties of a secretary temporarily);
"State" means the State of South Australia;
"Transmission Event" means:
(a) in respect of a Member who is a natural person, the
death or bankruptcy of the Member, or the Member becoming
mentally infirm or becoming a person who is, or whose estate
is, liable to be dealt with in any way under the laws
relating to mental health; and
(b) in respect of a Member which is a body corporate, the
dissolution of the Member or the succession by another body
corporate to the assets and liabilities of the Member;
"Voting Member" means in respect of any particular general
meeting a Member entitled to be present at that general meeting,
present in any of the ways set out in Article 13.1 and not
disqualified from voting on all business to be considered at that
meeting; and
"Voting Share" means any issued share in the capital of the
Company that confers a right to vote, not being a right to vote
that is exercisable only in limited circumstances as described in
the definition of "voting share" in section 9 of the Law.
1.2 Interpretation
In these Articles, unless the context otherwise requires:
(a) a reference to any legislation or legislative provision
includes any statutory modification or re-enactment of, or
legislative provision substituted for, and any statutory
instrument issued under, that legislation or legislative
provision;
(b) the singular includes the plural and vice versa;
(c) a word denoting, an individual or person includes a body
corporate, firm, association, authority or government and
vice versa;
(d) a word denoting, any gender includes all genders;
(e) a reference to an Article is to an article of these
Articles;
(f) a reference to any agreement or document is to that
agreement or document (and, where applicable, any of its
provisions) as amended, novated, supplemented or replaced
from time to time;
(g) an expression defined in, or given a meaning for the
purposes of, the Law (except if defined in Article 1.1) has
the same definition or meaning in these Articles where it
relates to the same matters for which it is defined, or
given a meaning, in the Law;
(h) a reference to a person is also to the legal personal
representative of that person;
(i) a reference to a matter being written includes that
matter being in any mode of representing or reproducing
words, figures or symbols in written form;
(j) where an expression is defined, another part of speech
or grammatical form of that expression has a corresponding
meaning;
(k) a reference to power is also to authority and
discretion;
(l) headings are for convenience of reference only and do
not affect interpretation;
(m) the regulations contained in Table A in Schedule 1 to
the Law do not apply to the Company.
2. PROPRIETARY COMPANY
2.1 The Company may have one or more Members.
2.2 The Company is a proprietary company limited by shares and
accordingly:
(a) the number of its Members (counting joint holders of a
particular parcel of shares as one person, and not counting
any person who is an employee of the Company or of a
subsidiary of the Company or any person who was an employee
of the Company or of a subsidiary of the Company when that
person became a member of the Company) is limited to not
more than 50; and
(b) the Company must not engage in any activity that would
require the lodgement of a prospectus under Part 7.12 of the
Law or a corresponding law (save that the foregoing does not
apply to an offer of shares to existing Members of the
Company or employees of the Company or a subsidiary of the
Company).
3. SHARES
3.1 Without prejudice to any special rights previously conferred on
the holders of any existing shares or class of shares but subject
to the Law, shares in the Company (whether forming part of the
original capital or created on any increase in capital) shall be
under the control of the Board who may allot, issue or grant
rights or options in respect of, or otherwise dispose of, shares
to such persons, for such price, upon such conditions,. at such
times and with such preferred, deferred or other special rights.
privileges or restrictions, whether with regard to dividends,
voting, return of capital, payment of calls or other-wise and at
a premium or at par or at a discount as the Board determines
provided that where any shares of a class are proposed to be
allotted or issued then such shares shall be first offered to the
existing holders of shares of the same class in proportion, as
nearly as the circumstances admit, to the number of the existing
shares of the same class of which they are the registered
holders. The offer shall be made by notice specifying the number
of shares offered and limiting a time within which the offer, if
not accepted, will be deemed to be declined and may notify the
offerees that any offeree who wishes to take shares in excess of
this proportion should in his reply state how many excess shares
he wishes to take. If any offeree does not claim his due
proportion, the unclaimed shares shall be used for or towards
satisfying those claims for excess shares as are made (if at all)
by other offerees. If any of the excess shares shall not be so
claimed, the Board may dispose of those shares in such manner as
they think most beneficial to the Company. The Board may likewise
so dispose of any shares which (by reason of the ratio which the
shares bear to shares held by persons entitled to an offer of new
shares) cannot, in the opinion of the Board, be conveniently
offered under this Article.
3.2 The Board shall have the right to settle the manner in which
fractions of a share, however arising, are to be dealt with.
3.3 Subject to the Law, the Company may issue any preference shares
that are, or at the option of the Company are to be, liable to be
redeemed.
3.4 Where a share is allotted on terms that all or any of the issue
price of that share is payable by instalments, each of those
instalments must be paid when due by the person who is at that
time the holder of that share.
3.5 Where the Company receives an application for shares signed by or
on behalf of the applicant and the Company allots shares to the
applicant as a consequence, the application is to be treated as:
(a) an agreement by the applicant to accept those shares;
(b) a request by the applicant for the Company to place the
applicant's name in the register in respect of those shares;
and
(c) an agreement by the applicant that the applicant is
bound by the Memorandum and these Articles.
3.6
(a) The Company may exercise the power to pay commission or
brokerage conferred by section 204 of the Law in
consideration of a person subscribing or agreeing to
subscribe for shares in the Company, or procuring or
agreeing to procure subscriptions for shares in the Company.
(b) The commission or brokerage may be satisfied by the
payment of cash or by the allotment of fully or partly paid
shares or other securities or partly by the payment of cash
and partly by the allotment of fully or partly paid shares
or other securities.
4. CERTIFICATES
4.1 A Member is entitled without payment to receive a certificate in
respect of the shares registered in the Member's name but, in
respect of a share or shares held jointly by several persons, the
Company is not bound to issue more than one certificate.
Likewise, the Company shall issue certificates to the holders of
options.
4.2 Where several persons are jointly entitled to any share, in the
absence of any express direction from them to the contrary, the
Company shall enter their names as members in the Register in the
order in which their names appear on the application for shares
or the instrument or other evidence of transfer or the notice of
death or bankruptcy given to the Company to establish their
entitlement to the share provided that nothing in this Article
shall prevent the Company from differentiating between the joint
holders of any share in any respect as provided for in these
Articles.
4.3 Delivery of a certificate for a share shall be effected by
delivering it personally to the holder or by posting it in a
prepaid envelope addressed to the holder at the holder's
registered address or by delivering or posting the certificate in
accordance with the written instruction of the holder. Delivery
of a certificate for a share to one of several joint holders is
sufficient delivery to all of them.
4.4 The Board may determine the number of shares to be issued in any
one certificate.
4.5 Every certificate for shares shall be issued in accordance with
the Law.
4.6 In the event that a certificate is stolen. lost or destroyed,
upon application to the Company by the holder thereof in
accordance with section 1089 of the Law and payment of such fee
as the Board requires. the Board shall, subject to that section,
issue a replacement certificate.
4.7 In the event that a certificate for shares previously issued has
been worn out or defaced and has been surrendered to the Company
for cancellation. and such fee as the Board requires has been
paid, the Company shall cancel the certificate and issue a
replacement certificate.
5. REGISTERS
5.1 Joint Holders
If two or more persons are the holders of a share, that one of
those persons whose name first appears in the Register in respect
of that share is to be treated as the sole owner of the share in
relation to all matters concerning the Company (including the
giving of notice) but not as concerns the transfer of the share,
right to vote, receipt of Dividends, delivery of certificates and
the liability for instalments or calls.
5.2 Trusts
(a) Except as required by law or otherwise required by these
Articles, the Company must treat the person whose name is
entered in the Register in respect of a share as the
absolute owner of that share and is not bound to recognise
(whether or not it has notice):
(i) that a person holds any share on trust; or
(ii) any equitable, contingent, future or partial interest in, or
unit of any share.
(b) Shares held by a trustee, may, with the consent of the
Board, be marked in the Register in such a way as to
identify them as being held subject to the relevant trust,
but nothing in this Article 5.2(b) limits the operation of
Article 5.2(a).
5.3 Register Closure
Subject to the Law, the Register and the transfer books may
be closed at any time and for any period the Board
determines.
6. CALLS ON SHARES
6.1 In accordance with the terms of issue of a share, the Board may
make calls on a Member in respect of any or all money unpaid on
the share held by him (whether in respect of nominal value of the
share or by way of premium) unless and to the extent that the
terms of issue of the share make that money payable at fixed
times.
6.2 The Board may do either or both of the following:
(a) make a call payable by instalments; and
(b) revoke or postpone any call.
6.3 Each call is treated as having been made at the time the Board
resolves to make the call.
6.4 A Member subject to a call must pay the amount in respect of the
call at the time and place specified in a notice given by the
Company to the Member which was given not less than 10 Business
Days before the time specified in it for payment of the call.
6.5 In addition to all other remedies of the Company, for as long as
the amount in respect of a call is due and payable and not paid,
the Member, in respect of any share held by the Member, is not
entitled to receive any Dividend, or be present at, be counted
among the quorum for, or vote, whether in person or by proxy,
attorney or representative, at a general meeting of the Company.
6.6 The joint holders of a share are jointly and severally liable to
pay any calls made in respect of the share.
6.7 The Board may make arrangements on the issue of shares for a
difference between the holders of those shares in the amount of
and times for payment of calls in respect of those shares.
6.8 If the terms of issue of a share provide for any amount (whether
in respect of nominal value or by way of premium and including
without limitation, any instalment) to be payable at a fixed
time:
(a) that amount is payable at that time as if a call had
been duly made in respect of it under Articles 6.1 to 6.4
specifying that time as the time for payment of a call for
that amount; and
(b) all the other provisions of these Articles in respect of
calls apply mutatis mutandis on that basis and "call" in
these Articles is to be interpreted accordingly.
6.9 If an amount payable in respect of a call is not paid on or
before the day specified for its payment, the person from whom
that amount is due must pay the Money Due in respect of that
call.
6.10 The Board may waive the payment of all or any part of the Money
Due in respect of a call which relates to interest costs and
expenses.
6.11 If on the trial or hearing, of an action for the recovery of the
Money Due for call it is proved that:
(a) the resolution of the Board making the call is duly
recorded in the books of the Company;
(b) the Member sued is entered in the Register as a holder
of the share in respect of which the call was made; and
(c) notice of the call was given to that Member in
accordance with these Articles, proof of those matters is
sufficient and conclusive proof of the debt without it being
necessary to prove any other matter (including, without
limitation, the appointment of the Directors).
6.12 The Board may:
(a) accept from a Member a sum representing all or a part of
any amount unpaid in respect of a share although no part of
that amount is then the subject of a call;
(b) authorise the payment by the Company of interest on any
sum so accepted, until that sum becomes payable at any rate
(not exceeding the Prescribed Rate) agreed between the Board
and the Member; and
(c) except where otherwise agreed between the Member and the
Company, repay the sum or any part of it,
but that sum does not by its being paid and accepted confer
any right to participate in profits and must not be
considered in ascertaining the amounts of Dividend or
surplus in winding up or distribution attributable to that
share.
7. FORFEITURE OF SHARES
7.1 If an amount payable in respect of a call is not paid on or
before the day specified for its payment, the Board may at any
time until the amount (including interest and costs and expenses
incurred by the Company by reason of the non-payment) is paid,
give the relevant Member a notice which:
(a) requires the Member to pay the Money Due;
(b) specifies a date (which is at least 10 Business Days
after the date of the notice) by which and a place at which
payment of the Money Due must be made; and
(c) states that if payment is not made on or before the date
and at the place specified, the share to which the call
relates is liable to be forfeited.
7.2 If the requirements of a notice given under Article 7.1 are not
satisfied, the share in respect of which the notice was given
may, at any time before the payment required by the notice has
been made, be forfeited by the Board by resolution to that
effect.
7.3 Forfeiture of a share under Article 7.2 includes all Dividends
declared in respect of the forfeited share but not actually paid
before forfeiture.
7.4 Where a share is forfeited under Article 7.2, the Company must
promptly give notice of the forfeiture to the Member holding the
share immediately before the resolution of the Board for its
forfeiture was passed, and the forfeiture (together with its
date) must be promptly entered in the Register.
7.5 A share forfeited under Article 7.2 immediately becomes the
property of the Company and the Board may sell, re-allot or
otherwise dispose of the share in such manner as the Board thinks
fit, and in the case of re-allotment, with or without any amount
paid up on the share by any former holder being credited as paid
up.
7.6 The forfeiture of a share under Article 7.2 may be cancelled by
the Board on any terms and conditions it determines at any time
before the share is disposed of under Article 7.5.
7.7 Where the Board is entitled to forfeit a share under Article 7.2,
it may accept the surrender of that share on any terms and
conditions it determines and a share so surrendered may be
disposed of in the same way as a share forfeited under Article
7.2.
7.8 A person who held a share which has been forfeited under Article
7.2 ceases to be a Member in respect of the forfeited share, but
remains liable to pay to the Company the Money Due and this
liability only ceases when the Company receives payment of all
the Money Due.
7.9 The Board may elect not to enforce payment, in whole or in part,
of amounts owing to the Company under Article 7.8.
7.10 A written statement declaring that the person making the
statement is a Director or Secretary and that a share was
forfeited on a date specified in the statement in accordance with
these Articles is sufficient evidence of the facts set out in the
statement as against all persons claiming to be entitled to the
share and of the title of the Company to dispose of the share.
7.11 The Company may effect a transfer in respect of a share forfeited
under Article 7.2 in favour of a person to whom it is sold,
re-allotted or disposed of and receive the consideration
furnished for that share and register the transferee as the
holder of the share.
7.12 The net proceeds of any sale, re-allotment or disposal of a share
under Article 7.5 or Article 7.7 (after payment of all costs and
expenses incurred) must be applied in or towards payment or
satisfaction of the Money Due and any residue must be paid to the
person liable referred to in Article 7.8 or as that person
directs.
7.13 Once a transfer under Article 7.11 has been effected, the title
of the transferee is not affected by any irregularity or
invalidity relating to the forfeiture or the sale, re-allotment
or disposal of the share and the remedy of any person is solely
in damages and only against the Company.
8. LIEN
8.1 The Company has a first and paramount lien on each share for all
money (whether presently payable or not) called or payable at a
fixed time in respect of that share.
8.2 The Company has, in addition to the lien described in Article
8.1, a first and paramount hen on each share registered in a
Members name in respect of all money owed to the Company by the
Member (including money payable by reason of Article 8.3).
8.3 Where at any time the law of any jurisdiction imposes or purports
to impose any immediate, future or possible liability on the
Company, or empowers or purports to empower any person to require
the Company to make any payment, on account of a Member or
referable to a share held by that Member (whether alone or
jointly) or a Dividend declared in respect of a share held by
that Member, the Company:
(a) is fully indemnified by that Member from that liability;
(b) may recover as a debt due from the Member the amount of
that liability together with interest at the Prescribed Rate
from the date of payment by the Company (if the payment is
made) to the date of repayment by the Member; and
(c) may refuse to register a transfer of any share by that
Member until the amount of the Member's Liability has been
paid to the Company, and nothing in this Article in any way
prejudices or affects any right or remedy which the Company
may otherwise have (including, without limitation, any right
of set off).
8.4 The liens described in Articles 8.1 and 8.2 extend to all
Dividends (if any) payable in respect of the share and to the
proceeds of sale of the share.
8.5 The Board may, at any time, exempt a share from the provisions of
Articles 8.1and 8.2 to the extent and on any terms and conditions
that it determines.
` 8.6 Where:
(a) the Company has a lien on a share;
(b) the sum in respect of which the lien exists is presently
payable;
(c) the Company has given notice to the Member registered in
the respect of the share requiring payment of the amount
which is presently payable in respect of which the lien
exists, and specifying a date (which is at least 10 Business
Days after the date of the notice) by which and a place at
which payment of the amount must be made; and
(d) the requirements of the notice given under Article
8.6(c) are not fulfilled,
the Company may sell the share as if it had been forfeited
under Article 7.2 and the provisions of Articles 7.5 to 7.13
inclusive apply as if the Member's Liability were the Money
Due.
9. SHARE CAPITAL AND VARIATION OF RIGHTS
9.1 Authorised Capital
The authorised capital of the Company is ten million dollars
($10,000,000) divided into ten million (10,000,000) shares of one
dollar ($1.00) each.
9.2 Alteration of Capital
The Company may from time to time by ordinary resolution in
general meeting, do any or all of the following:
(a) increase its share capital by the creation of new shares
of such amount as it thinks expedient;
(b) consolidate and divide all or any of its share capital
into shares of a larger amount than its existing shares;
(c) sub-divide all or any of its shares into shares of a
smaller amount than its existing shares but so that, in the
sub-division, the proportion between the amount paid and the
amount (if any) unpaid on each share of a smaller amount is
the same as was the case of the share from which the share
of a smaller amount is derived; and
(d) cancel shares that, at the date of passing the
resolution, have not been taken or agreed to be taken by any
person or that have been forfeited and reduce the amount of
its share capital by the amount of the shares so cancelled.
9.3 Additional Rights
Where shares are consolidated and divided under Article 9.2(b) or
subdivided under Article 9.2(c), the Company may by special
resolution determine that, as between the shares resulting
therefrom, one or more of those shares has some preference or
special advantage as regards dividends, capital, voting or
otherwise over or compared with one or more others.
9.4 Reduction of Capital
Subject to the Law, the Company may, by special resolution,
reduce its share capital, any capital redemption reserve or any
share premium account in any way.
9.5 Buy-back Authorisation
Subject to the Law the Company may buy shares and other
securities in itself on such terms and at such times as
determined by the Directors.
9.6 Variation of Rights
If at any time the issued shares are divided into different
classes. the rights attached to any class of shares (unless the
terms of issue of that class otherwise provide) may, whether or
not the Company is being wound up, be varied with either the
consent in writing of the holders of 75% of the issued shares of
that class, or the sanction of a special resolution passed at a
separate meeting of the holders of shares of that class, and. for
the purposes of this Article, the following provisions apply:
(a) in relation to any separate meeting, of the holders of
shares in a class, the provisions of these Articles which
relate to general meetings apply as far as they are capable
of application and changed as necessary except that any
holder of shares of that class present in person or by
proxy, attorney or representative may demand a poll; and
(b) the rights conferred upon the holders of the shares of
any class shall, unless otherwise expressly provided by the
terms of issue of the shares of that class, be deemed not to
be varied by the creation or issue of further shares ranking
equally with the first-mentioned shares.
10. TRANSFER OF SHARES
10.1 Instrument of Transfer
Subject to these Articles, a Member may transfer all or any of
the Member's shares by instrument in writing in registrable form
or, subject to the Law, by any other means the Board approves.
10.2 Proper Instrument
A transfer may only be registered by the Company where an
instrument satisfying Article 10.1 is delivered to the Company
and the instrument:
(a) is duly stamped, if necessary;
(b) is executed by the transferor and the transferee, except
where execution by either transferor or transferee is not
required by law or is deemed by law to be effected;
(c) (except where otherwise permitted by law), is
accompanied by the certificate for the shares the subject of
the transfer together with any other evidence the Board may
require to prove the title or right of the transferor to
transfer the shares; and
(d) relates only to shares of one class.
10.3 Transferor remains Member
The transferor of a share remains the holder of that share until
the transfer is registered and the name of the transferee is
entered in the Register in respect of that share.
10.4 Retention of Instruments
On an instrument of transfer or a purported instrument of
transfer being delivered to the Company, property to and title in
that instrument (but not the shares the subject of it) pass to
the Company which is entitled as against all persons to the
possession of the instrument.
10.5 Powers of Attorney
Where a power of attorney granted by a Member is lodged with, or
produced or exhibited to, the Company and that power of attorney
confers power on the attorney to transfer any or all of the
Member's shares, the Company is entitled to assume, as against
the Member, that the power remains in full force and effect and
may be relied on by the Company until the Company receives
express notice in writing at its registered office of either:
(a) the revocation of the power of attorney; or
(b) the death of the Member.
10.6 Restrictions on Transfer
Subject to any other restrictions agreed by the shareholders and
the Company, the following provisions apply in respect of the
transfer of shares:
(a) In every case of a proposed transfer of shares
("relevant shares") the person proposing to transfer the
relevant shares ("proposing transferor") must give notice in
writing ("transfer notice") to the Company that the
proposing transferor desires to transfer the relevant
shares. The notice must specify the sum the proposing
transferor fixes as the fair value and will constitute the
Company as the proposing transferor's agent for the sale of
the relevant shares at the price so fixed or at the option
of the purchasing Member at the fair value to be determined
by an Accountant in accordance with Article 10.6(c). A
transfer notice which includes several shares operates as if
it was a separate notice in respect of each share. A
transfer notice is not revocable except with the approval of
the Board.
(b) If the Company, within 3 calendar months from the date
of receipt by the Company of a transfer notice, finds a
Member willing to purchase all of the relevant shares
("purchasing Member") and gives notice to that effect to the
proposing transferor, the proposing transferor will be bound
on payment of the fair value fixed in accordance with
Article 10.6(a) or Article 10.6(c) to transfer the relevant
shares to the purchasing Member.
(c) In case any difference arises between the proposing
transferor and the purchasing Member as to the fair value of
a share then an Accountant to be nominated by the Company on
the application of either party will certify in writing the
sum which in the Accountant's opinion is the fair value and
that sum will be deemed to be the fair value and in so
certifying the Accountant will act as an expert and not as
arbitrator and accordingly the Commercial Arbitration Act, 1
986 will not apply.
(d) If in any case the proposing transferor, after having
become bound, makes default in transferring the relevant
shares the Company may receive the purchase money and will
cause the name of the purchasing Member to be entered in the
Register as the holder of the shares and will hold the
purchase money in trust for the proposing transferor subject
to the Company's receipt of the certificate for the relevant
shares. The receipt of the Company for the purchase money
will be a good discharge to the purchasing Member and after
the purchasing Member's name has been entered in the
Register the validity of the transaction cannot be
questioned by any person.
(e) If the Company does not, within 3 calendar months after
being served with a transfer notice, find a Member willing
to purchase all of the relevant shares and give notice to
the proposing transferor, the proposing transferor may at
any time within 3 calendar months afterwards sell and
transfer the relevant shares to any person approved by the
Board at any price.
(f) In spite of anything to the contrary contained in this
Article 10.6, the shares specified in any transfer notice
given to the Company must be offered in the first place to
the registered holders of shares of the same class (other
than to the proposing transferor) and, except as later
provided, as nearly as may be in proportion to the existing
shares of that class of which they are the registered
holders respectively, and the offer must in each case limit
the time within which the offer, if not accepted, will be
deemed to be declined and may notify the registered holders
of shares of the same class (except the proposing
transferor) that any registered holder of shares of that
class who wishes to take shares in excess of that holder's
proportion should in the reply state how many excess shares
the holder wishes to take. If any of the registered holders
of shares of that class does not claim that holder's due
proportion, the unclaimed shares will be used for or towards
satisfying those claims for excess shares as are made (if at
all) by other registered holders of share of that class. If
any shares are not capable without fractions of being
offered to the registered holders of shares of that class in
proportion to their existing holdings the shares will be
offered to the registered holders in the manner determined
by lots to be drawn by or under the direction of the Board.
In the event that the registered holders of shares of that
class do not claim any of the shares of the same class
offered to them, the excess shares of that class will be
offered in the second place to the registered holders of the
other classes of shares (other than the proposing
transferor) and the provisions of this Article 10 relating
to the offer in the first place to the registered holders of
shares of the one class will apply mutatis mutandis to the
offer in the second place to the registered holders of
shares of the other classes.
11. TRANSMISSION OF SHARES
11. 1 Death of a Member
(a) In the case of the death of a Member, the only persons
the Company will recognise as having any title to the
Member's shares are:-
(i) the personal representative of the deceased Member where the
deceased was a sole holder; and
(ii) the survivor or survivors where the deceased was a joint
holder.
(b) Nothing contained in Article 11.1 (a) releases the
estate of a deceased Member from any liability in respect of
a share, whether that share was held by the deceased solely
or jointly with other persons.
11.2 Registration on Transmission
(a) A person who becomes entitled to a share as a
consequence of the occurrence of a Transmission Event may,
upon producing the certificate for the share and such other
evidence as the Board may require to prove that person's
entitlement, be registered as the holder of the share by
signing and serving on the Company a notice in writing
stating that election or may (subject to Article 10)
transfer such share.
(b) Where two or more persons are jointly entitled to any
share in consequence of a Transmission Event, they will,
upon being registered as the holder of the share, be taken
to be joint holders of the share.
12. GENERAL MEETINGS
12.1 In addition to any other general meeting held by it, the Company
may (but without being obliged so to do) hold a general meeting
to be called the "Annual General Meeting" at least once in every
calendar year. A general meeting other than an Annual General
Meeting is to be called an "Extraordinary General Meeting".
12.2 Any Director may whenever he thinks fit convene a general meeting
of the Company and general meetings shall be convened on such
requisition or in default may be convened by such requisitionists
as provided by the Law.
12.3 Subject to the provisions of the Law as to special resolutions
and agreements to short notice of meetings, at least 14 days
notice of a general meeting must be given to the persons entitled
to receive that notice.
12.4 A notice of a general meeting must specify (in addition to such
matters as may be required by the Law):
(a) the place, day and time of the meeting; and
(b) the general nature of the business to be transacted at
the meeting,
12.5 The accidental omission to give notice of a general meeting to,
or the nonreceipt of notice of a general meeting by, a person
entitled to receive that notice does not invalidate any
resolution passed at that general meeting.
12.6 Where notice of a general meeting convened by the Board has been
given, the Board may by notice given to all persons entitled to
be given notice of the general meeting, postpone or cancel the
general meeting or relocate the general meeting, to a new venue.
12.7 Except as otherwise provided by these Articles, the chairman of a
-general meeting at which a quorum is present:
(a) may with the consent of the meeting by ordinary
resolution; and
(b) must, if so directed by the meeting by ordinary
resolution, adjourn the meeting from time to time and from
place to place.
12.8 The only business which may be transacted at an adjourned general
meeting is business which was left unfinished from the general
meeting which was adjourned.
12.9 No notice need be given of an adjourned general meeting or of the
business to be transacted at it except if a general meeting is
adjourned for more than 21 days, in which case, notice of the
adjourned meeting must be given as if it were notice of the
original meeting.
13. PROCEEDINGS AT GENERAL MEETINGS
13.1 Representation of Members
A Member may attend a general meeting at which he is entitled to
be present, in any of the following ways (if applicable to the
Member)
(a) in person;
(b) by proxy;
(c) by attorney; or
(d) by a representative appointed in respect of the general
meeting under section 249(3) of the Law;
provided that the Chairman of a general meeting, or his nominee
may refuse to admit to the meeting, or may eject from the meeting
any person:
(e) who is in possession (without the Chairman's express
permission) of any recording or photographic device; or
(f) who behaves or threatens to behave in a disorderly
manner or to disrupt the meeting, as determined in the
Chairman's discretion.
13.2 Quorum
(a) No business may be transacted at a general meeting
unless a quorum is present at the time when the meeting
proceeds to business.
(b) If the Company has two or more Voting Members, a quorum
is present for a general meeting, where two natural persons.
each of whom is or represents under Article 13.1(a), (b) or
(c) a different Voting Member, are present.
(c) If the Company has only one Member, the quorum is
constituted by that Member.
13.3 Failure of Quorum
If a quorum is not present within 15 minutes of the time notified
for a general meeting:
(a) where the meeting was convened by reason of a
requisition of Members - the meeting is dissolved; and
(b) in any other case:
(i) the meeting stands adjourned to the day, time and place that
the Board may determine and notify to the Members or, if no
determination is made, the same day in the next week at the same
time and place; and
(ii) at the adjourned meeting, if a quorum is not present within
15 minutes of the time notified for the meeting, the meeting is
dissolved.
13.4 Chairman
While a person holds office as Chairman of Directors, that person
shall preside as chairman at general meetings. During any absence
or vacancy in that office, the person (if any) who holds office
as Deputy Chairman of Directors shall preside as chairman at
general meetings.
13.5 Chairman Absent
Where a general meeting is held and either no person specified in
Article 13.4 is present within 15 minutes of the time notified
for the meeting, or that person is present but is unwilling or
unable to be the chairman of the general meeting,:
(a) the Directors present may elect one of their number to
be the chairman of the general meeting; and
(b) if there is no Director present or those present at the
meeting, are unable or unwilling to chair the general
meeting, the Voting, Members present must elect one of their
number to be the chairman of the general meeting.
13.6 Responsibilities of Chairman
The chairman of a general meeting is responsible for the general
conduct of the meeting and for this purpose may, without
limitation:
(a) make rulings;
(b) in addition to other powers to adjourn, adjourn the
meeting without the concurrence of the meeting if he
determines it is desirable for the orderly conduct of the
meeting; and
(c) determine conclusively any dispute concerning the
admission, validity or rejection of a vote.
13.7 Method of Voting
Every resolution put to a vote at a general meeting must be
determined by a show of hands unless a poll is properly demanded
either before or on the declaration of the result of the vote on
a show of hands.
13.8 Demand for Poll
In addition. to the provisions in this regard contained in the
Law, a demand for a poll may be made by:
(a) the chairman of the general meeting; or
(b) any one or more natural persons present each of whom is,
or represents under Articles 13.1(b), (c) or (d), a
different Voting Member who are together entitled to at
least 10% of the total voting rights of all the Members
having the right to vote at the meeting; or
(c) any one or more natural persons present each of whom is,
or represents under Articles 13.1(b), (c) or (d), a
different Voting Member who together hold shares in the
Company conferring a right to vote at the meeting, being
shares on which an aggregate sum has been paid up equal to
at least 10% of the total sum paid up on all the shares
conferring that right.
13.9 No Poll on Chairman
A demand for a poll may not be made in respect of the election by
the general meeting, of the chairman of the meeting.
13.10 Effect of Demand for Poll
The demand for a poll does not prevent the continuance of a
general meeting for the transaction of any business except in
respect of the resolution for which the poll is demanded.
13.11 Votes on Show of Hands
Where a resolution is determined by show of hands:
(a) a declaration by the chairman of the general meeting
that the resolution has been carried, carried unanimously,
carried without dissent, carried by a particular majority or
lost is conclusive evidence of the fact so declared without
proof of the number or proportion of votes cast for or
against that resolution; and
(b) an entry in the book containing the minutes of that
general meeting recording that declaration is conclusive
evidence of the fact that the declaration was made as so
recorded.
13.12 Conduct of Poll
If a poll is properly demanded for a resolution:
(a) if the resolution is for the adjournment of the general
meeting, the poll must be taken immediately at the place and
in the manner that the chairman of the meeting determines
and declares to the meeting;
(b) in all other cases, the poll must be taken at the time
and place and in the manner that the chairman of the general
meeting determines and declares to the meeting;
(c) the result of the poll, as disclosed by the chairman of
the general meeting at which the result is declared, is a
resolution of the general meeting at which the poll is
demanded; and
(d) an entry in the book containing the minutes of the
general meeting at which the result is declared recording
that declaration is conclusive evidence of the fact that the
declaration was made as so recorded.
13.13 Resolutions Determined by Majority
Both on a show of hands and on a poll, an ordinary resolution is
passed if the proportion that the number of votes cast in favour
of that resolution bears to the total number of votes cast on the
resolution is greater than one half.
13.14 No Casting Vote of Chairman
If there is an equality of votes, whether on a show of hands or
on a poll, the chairman of the meeting will not have a second or
casting vote, and the proposed resolution is to be taken as
having been lost.
13.15 Effect of Resolution Signed by All Members
(a) If the Company has more than one Member and all the
Members of the Company have signed a document containing a
statement that they are in favour of a prescribed resolution
in terms set out in the document, a resolution in those
terms shall be deemed to have been passed at a general
meeting of the Company held on the day on which the document
was signed and at the time at which the document was last
signed by a Member or, if the Members signed the document on
different days, on the day on which, and at the time at
which, the document was last signed by a Member and where a
document is so signed:
(i) the Company shall be deemed to have held a general meeting at
that time on that day; and
(ii) the document shall be deemed to constitute a minute of that
meeting.
(b) Paragraph (a) does not apply in relation to a document
unless the document has been signed by each person who was a
Member of the Company at the time when the document was last
signed.
(c) For the purposes of this Article 13.15:
(i) 2 or more separate documents containing statements in
identical terms each of which is signed by 1 or more Members
shall together be deemed to constitute 1 document containing a
statement in those terms signed by those Members on the
respective days on which they signed the separate documents; and
(ii) a prescribed resolution is a resolution that is required or
permitted by the Law or the Memorandum or these Articles to be
passed at a (2eneral meeting of the Company and includes a
resolution appointing an officer or auditor or approving of or
agreeing to any act, matter or thing but does not include a
resolution of which special notice is required or that is
required to be passed by a majority other than a simple majority.
(d) Any document that is attached to a document signed as
mentioned in paragraph (a) and is signed by the Member or
Members who signed the last-mentioned document shall be
deemed to have been laid before the Company at the general
meeting referred to in that paragraph.
(e) Nothing in this Article 13.15 affects or limits any rule
of law relating to the effectiveness of the assent of
Members of a company given to a document, or to any act,
matter or thing, otherwise than at a general meeting of the
company.
13.16 Resolution Where Company has Only One Member
Notwithstanding, anything contained in these Articles to the
contrary:
(a) If the Company has only one Member and the Member
records the Member's decision to a particular effect, the
recording of the decision counts as the passing by the
Member of a resolution to that effect.
(b) A record made for the purposes of paragraph (a) must be
made in writing and also has effect as minutes of the
passing of the resolution
14. ENTITLEMENT TO ATTEND AND VOTE
14.1 Entitlement to Notice and to Attend
Subject to these Articles and any terms of issue of any share,
each Member and each Director is entitled to notice of each
general meeting, and to be present and to speak at that general
meeting, and the Auditor (if any) must be given notice of each
general meeting.
14.2 Entitlement to Vote
Subject to these Articles, the Law arid the terms of issue of any
share:
(a) on a show of hands, each natural person present at a
general meeting who is a Voting Member or a proxy,
representative or attorney appointed by a Voting Member has
one vote; and
(b) on a poll, each natural person present at a general
meeting has a number of votes calculated as the aggregate of
the following:
(i) the number of fully paid shares held by the person;
(ii) the number of fully paid shares in respect of which Voting
Members holding those shares have appointed the person as proxy,
representative or attorney;
(iii) the aggregate (or if that is not a whole number, the next
highest whole number) of the amounts calculated in respect of
each partly paid share held by the person as the fraction of the
total of the issue price (being nominal value and premium) of
that share that is actually paid; and
(iv) the aggregate (or if that it not a whole number, the next
highest whole number) of the amounts calculated on the same basis
as paragraph (iii) above in respect of each partly paid share in
respect of which the Voting Member holding that share has
appointed the person as proxy, representative or attorney.
14.3 Vote of Transmittee
A person entitled to transmission of a share under Article 11
who, at least 48 hours before the time notified for a general
meeting (or an adjourned meeting), satisfies the Board of his
right to that share, may vote at that general meeting in respect
of that share as if the person were the registered holder of the
share.
14.4 Joint Holders' Votes
Where a share is held by more than one person (including, for the
purposes of this Article, the several legal personal
representatives of a deceased Member):
(a) each of those persons may tender a vote in respect of
the share either in person or by proxy, representative or
attorney, as if the person were the sole holder of the
share; but
(b) if two or more of those persons tender a vote on any
resolution, the only vote which is to be counted in respect
of that share is the vote tendered by the most senior of
those persons (seniority being conclusively ascertained by
the order of names in respect of that share in the
Register).
14.5 Proxies, Attorneys and Representatives
(a) A proxy, attorney or representative may be, but need not
be, a Member of the Company.
(b) A proxy, attorney or representative may be appointed for
all general meetings, or for any number of general meetings,
or for a particular general meeting
(c) An instrument appointing the proxy, attorney or
representative, may be in any usual form or any other form
that the Board approves.
(d) Unless otherwise provided in the instrument, an
instrument appointing a proxy, attorney or representative
will be taken to confer authority:-
(i) to agree to a meeting being convened by shorter notice than
is required by the Law or by these Articles;
(ii) to agree to a resolution being proposed and passed as a
special resolution at a meeting of which less than twenty-one
(21) days notice has been given;
(iii) even though the instrument may refer to specific
resolutions and may direct the proxy, attorney or representative
how to vote on those resolutions:-
to vote on any amendment moved to the proposed resolutions and on
any motion that the proposed resolutions not be put or any
similar motion; and
to vote on any procedural motion, including any motion to elect
the chairman, to vacate the chair or to adjourn the meeting;
(iv) to speak to any proposed resolution on which the proxy,
attorney or representative may vote; and
(v) to demand or join in demanding a poll on any resolution on
which the proxy, attorney or representative may vote.
(e) A Member may not appoint more than one proxy, attorney
or representative to vote in respect of the Member's shares.
(f) An appointment of a proxy, attorney or representative
must be in writing and
(i) in the case of a natural person, signed by the appointor,
(ii) in the case of a body corporate, executed under the common
seal of the appointor;
(iii) signed by the duly authorised attorney of the appointor; or
(iv) in the case of joint holders, be signed by all such holders
(g) An instrument of proxy which is valid and effective
except that no appointee is specified in respect of the
shares of the relevant Member is to be treated as validly
appointing the chairman of the general meeting to which it
relates in respect of all of the shares of that Member.
(h) Where a Member in a valid instrument appointing a proxy,
representative or attorney directs the appointee to vote in
a specified way in respect of a particular item of business
at the relevant general meeting:
(i) the appointee must cast or abstain from casting (as the case
may be) a vote on that item of business; and
(ii) the appointee must, on a poll, cast the votes as to which he
has a direction by reason of the instrument in accordance with
that direction,
but, if in respect of any vote in respect of that item of
business, the Member does not in the instrument indicate how the
appointee is to cast that vote, the appointee may cast, or
abstain from casting, that vote as the appointee determines.
(i) Any appointment of a proxy or attorney or representative
is effective, in respect of a particular general meeting if,
and only if, the following, instruments are actually
received (which includes receipt of a copy of those
instruments by legible facsimile transmission) by the
Company at the Office (or another place notified by the
Board) at least 24 hours before the time notified for that
meeting, (or such lesser period as may be resolved by the
Board):
(i) in the case of a proxy, the instrument of proxy and. if it is
executed by an attorneys the relevant power of attorney or an
office copy or notarially certified copy of the power of
attorney;
(ii) in the case of an attorney, the power of attorney or an
office copy or notarially certified copy of the power of
attorney; and
(iii) in the case of a representative, a certificate under
section 249(6) of the Law, or other evidence satisfactory to the
Company.
(j) Where the Company has received an instrument of proxy in
respect of a share from a Member the appointment made by
that instrument is and remains valid and effective, except
that where the Company subsequently receives:
(i) a power of attorney or office copy or notarially certified
copy of a power of attorney entitling the attorney to attend and
vote at the meeting, the appointment is revoked;
(ii) intimation in writing either of the revocation of the
appointment under the instrument of proxy or of the death of the
Member, the appointment is revoked; and
(iii) another instrument of proxy from the Member in respect of
that share, the instrument of proxy bearing the later date (or if
the instruments bear the same date, the instrument later received
by the Company) is an intimation in writing of the revocation of
the appointment under the other instrument.
(k) If a Member is present at a general meeting in either of
the ways specified in Articles 13.1(a) or (d), and a person
appointed by that Member as proxy or attorney is also
present at that meeting, that person is not entitled to
exercise the rights conferred by the instrument of proxy or
power of attorney while the Member is present.
14.6 Ruling on Entitlements and Votes
(a) An objection may be raised with the chairman of a
general meeting as to the qualification of a purported voter
or the admission or rejection of a vote by any person
present and entitled (or claiming to be entitled) to vote
but that objection may be made only at the general meeting
or adjourned meeting at which the purported voter wishes to
vote or the vote objected to is given or tendered and, in
relation to that objection:
(i) the decision of the chairman is final and conclusive; and
(ii) a vote not disallowed as a result is valid and effective for
all purposes.
(b) This Article applies to any objection as to the use or
legibility of a facsimile transmission copy of any
instrument referred to in Article 14.5(i).
(c) The Secretary, in his absolute discretion, may waive or
reduce any period of time referred to in Articles 14.3 and
14.5(i).
15. DIRECTORS
15.1 Number of Directors
(a) The number of the Directors shall be not less than one
nor (subject to Article 15.1(b)) more than nine:
(b) The Company may from time to time by ordinary resolution
increase or reduce the maximum number of Directors permitted
under Article 15. l (a). :
15.2 First Director or Directors
The first Director or Directors (as the case may be) shall
appointed by the subscriber or subscribers (as the case may be)
to the Memorandum.
15.3 No Retirement
It shall not be necessary for the Directors or any of them to
retire at an annual or other interval of time.
15.4 Qualification of Directors
A Director need not be a Member.
15.5 Appointment of Director
The Company may from time to time by ordinary resolution appoint
an additional Director or Directors but so that the number of
Directors does not at any time exceed the maximum number set
under Article 15. 1 (a).
15.6 Casual Vacancy
The Board may at any time appoint any person as a Director to
fill a casual vacancy or as an addition to the Board but so that
the number of Directors does not any time exceed the maximum
number set under Article 15.1(a) and any Director so appointed
automatically retires at the next general meeting of the Company
and is eligible for re-appointment by that general meeting (and
if not re-appointed that retirement takes effect at the
conclusion of that general meeting).
15.7 Removal of Director
(a) The Company may (in addition to any powers conferred by
the Law) by ordinary resolution remove a Director (other
than an Alternate Director) and may also by ordinary
resolution appoint a person as a replacement Director.
(b) Nothing in Article 15.7(a) deprives a person so removed
of compensation or damages payable to such person in respect
of the termination of the person's appointment as Director
or of any appointment terminating with that as Director.
15.8 Vacation of Office
The office of a Director automatically becomes vacant if the
Director:
(a) becomes an insolvent under administration;
(b) is not permitted by the Law (or an order made under the
Law) to be a Director;
(c) becomes of unsound mind or a person whose person or
estate is liable to be dealt with in any way under a law
relating to mental health;
(d) is removed as a Director under the Law or these
Articles;
(e) either by himself or by an Alternate Director appointed
by him fails to attend three consecutive Board meetings
without leave of absence from the Board; or
(f) resigns or retires either by reason of these Articles or
by notice in writing to the Company.
15.9 If Only One Director
(a) If a person who is the only Director and the only Member
of the Company:
(i) dies; or
(ii) cannot manage the Company because of the person's mental
incapacity;
and a personal representative or trustee is appointed to
administer the person's estate or property, the personal
representative or trustee may appoint a person as the director of
the Company.
(b) If:
(i) the office of the Director is vacated under Section 224(l)(c)
of the Law because of the bankruptcy of the Director; and
(ii) the person is the only Director and also the only Member of
the Company; and
(iii) a trustee in bankruptcy is appointed to the person's
property;
the trustee may appoint a person as the Director of the Company.
(c) A person who has a power of appointment under this
Article15.9 may appoint himself or herself as Director. 16.
DIRECTORS' REMUNERATION
16.1 The Directors shall be paid by way of fees for services such
remuneration as may be determined from time to time by the
Company by ordinary resolution;
16.2 All Directors' fees shall be deemed to accrue from day to day;
16.3 The Directors may also be paid an allowance for travelling, and
other expenses properly incurred by them in attending and
returning from meetings of the Directors or any committee- of the
Directors or general meetings of the Company or otherwise in
connection with the exercise of their powers and the discharge of
their duties or the business of the Company.
17. DIRECTORS' INTERESTS
17.1 Section 231 of the Law does not apply to a Director of the
Company who is the only Director of the Company and the only
Member of the Company, and the following provisions of this
Article 17 are to be read and applied subject thereto.
17.2 No Director shall be disqualified by his office from contracting
or entering into any arrangement with the Company either as
vendor, purchaser or otherwise nor shall any such contract or
arrangement entered into by or on behalf of the Company in which
any Director shall be in any way interested be avoided nor shall
any Director so contracting or entering into any arrangement or
being so interested be liable to account to the Company for any
profit realised by any such contract or arrangement by reason of
such Director holding that office or of the fiduciary
relationship thereby established but, subject always to Article
17. 1, every Director shall observe the provisions of Section 231
of the Law relating to the declaration of the interests of the
Directors in contracts or proposed contracts with the Company or
of any office or property held by the Directors which might
create duties or interests in conflict with their duties or
interests as Directors.
17.3 Subject to the provisions of the Law no Director shall be
disqualified from voting in respect of any contract, arrangement
or transaction in which he may be interested either directly or
indirectly otherwise than as a shareholder of the Company and a
Director interested as aforesaid is to be counted in a quorum
notwithstanding his interest and a Director interested as
aforesaid may (if authorised in that behalf in accordance with
these Articles) affix the seal of the Company to and/or sign or
countersign any document or instrument giving effect to or
evidencing or in any way relating to any such contract,
transaction or arrangement as aforesaid notwithstanding his
interest provided that, subject always to Article 17.1. every
such Director shall observe the provisions of Section 231 of the
Law.
17.4 A Director may hold any other office or place of profit under the
Company (except that of Auditor) in conjunction with his office
of Director and on such terms as to remuneration or otherwise as
the Board shall approve. A Director may be or become a director
of or hold any other office or place of profit under any company
promoted by the Company or in which it may be interested whether
as a vendor or shareholder or otherwise and no such Director
shall be accountable for any benefits received as a director or
member of or holder of any other office or place of profit under
such company. The Board may exercise the voting powers conferred
by the shares in any company held or owned by the Company in such
manner in all respects as the Board thinks fit (including the
exercise thereof in favour of any resolution appointing the
Directors or any of them directors of such company or voting or
providing for the payment of remuneration to the directors of
such company) and any Director of the Company may vote in favour
of the exercise of such voting rights in manner aforesaid
notwithstanding that he may be or be about to be appointed a
director of such other company and as such is or may become
interested in the exercise of such voting rights in manner
aforesaid.
The Directors or any of them may lend money to the Company at
interest with or without security or may for a commission or
profit guarantee the repayment of any money borrowed by the
Company and underwrite or guarantee the subscription of shares or
securities of the Company or of any company in which the Company
may be interested without being disqualified in respect of their
or his office and without being liable to account to the Company
for any such commission or profit.
18. ALTERNATE DIRECTORS
Subject to these Articles and to the prior approval of the
proposed appointee by a majority of the other Directors, each
Director has power from time to time to appoint any person to act
as an Alternate Director in the Director's place, whether for a
stated period or periods or until the happening of a specified
event or from time to time, whenever by absence or illness or
otherwise the Director is unable to attend to duties as a
Director. The appointment is to be in writing and signed by the
Director and a copy of the appointment is to be given by the
appointing Director to the Company by forwarding or delivering it
to the Office. The appointment takes effect immediately upon
receipt of the appointment at the Office. The following
provisions apply to any Alternate Director:
18.1 The Alternate Director may be removed or suspended from office
upon receipt at the Office of written notice, letter, telex,
facsimile transmission or other form of visible communication
from the Director by whom the Alternate Director was appointed to
the Company;
18.2 The Alternate Director is entitled to receive notice of meetings
of the Board and to attend and vote at the meetings if the
Director by whom the Alternate Director was appointed is not
present;
18.3 The Alternate Director is entitled to exercise all the powers
(except the power to appoint an Alternate Director) and perform
all the duties of a Director, insofar as the Director by whom the
Alternate Director was appointed had not exercised or performed
them;
18.4 Without prejudice to the right to reimbursement for expenses
pursuant to Article 16.2, the Alternate Director is not, unless
the Board otherwise determines, entitled to receive any
remuneration as a Director from the Company;
18.5 The office of the Alternate Director is vacated upon the death
of, or vacation of office by the Director by whom the Alternate
Director was appointed;
18.6 The Alternate Director is not to be taken into account in
determining the number of Directors pursuant to Article 15. 1;
and
18.7 The Alternate Director is, while acting as a Director,
responsible to the Company for the Alternate Director's own acts
and defaults and is not to be deemed to be the agent of the
Director by whom the Alternate Director was appointed.
19. MANAGING DIRECTOR
19.1 The Board may from time to time appoint one of the Directors to
be the Managing Director either for a fixed term (but not for
life) or without fixing a term and on any terms and conditions
that it determines.
19.2 The appointment of the Managing Director terminates if:
(a) the Managing Director ceases for any reason to be a
Director; or
(b) the Board revokes the appointment (which it is hereby
empowered to do).
19.3 The Board may fix the remuneration of the Managing Director.
19.4 The Board may, from time to time and upon any terms and
conditions and subject to any restrictions that it considers
appropriate:
(a) confer on the Managing Director any or all of the powers
of the Board (which powers may be conferred so as to be
concurrent with, or to the exclusion of, the powers of the
Board); and
(b) withdraw or alter any of the powers conferred on the
Managing Director under Article 19.4(a).
20. POWERS OF THE BOARD
20.1 Except as otherwise required by the Law or any other applicable
law or another provision of these Articles:
(a) the business of the Company is to be managed by the
Board; and
(b) the Board may exercise each and every right, power or
capacity of the Company, to the exclusion of the, Company in
general meeting and the Members.
20.2
(a) The Board by power of attorney may appoint any person to
be an attorney of the Company for the purposes, with the
powers (being powers of the Board), for the period and
subject to the conditions determined by it.
(b) Any such power of attorney may, without limitation,
contain any provisions for the protection and convenience of
persons dealing with the attorney as the Board determines,
and authorise the attorney to delegate any or all of the
powers vested in him by it.
21. PROCEEDINGS OF THE BOARD
21.1 Mode of Meeting,
The Board may meet in person or by telephone or other
instantaneous means of conferring for the dispatch of business
(or by any combination of those means) and adjourn and otherwise
regulate its meetings as it determines.
21.2 Quorum
(a) Save where there is only one Director of the Company,
the quorum of Directors required to be present at a meeting
of the Board necessary for the transaction of business at
the meeting shall be whichever is the greater of two
Directors or not less than half the number of Directors
holding office at the time. A Director must not leave the
meeting without having, previously obtained the consent of
the chairman of the meeting and will be conclusively
presumed to have been present and to have formed part of the
quorum at all times during the meeting unless that Director
has previously obtained such consent.
(b) For the purposes of this Article and Articles 21.4 and
21.10, a Director is treated as present at the meeting by
telephone or other instantaneous means of conferring if the
Director is able to hear the entire meeting and be heard by
all others attending the meeting. A Director must not leave
the meeting by deliberately disconnecting his - telephone or
other instantaneous means of conferring, without having
previously obtained the consent of the chairman of the
meeting, and will be conclusively presumed to have been
present and to have formed part of the quorum at all times
during the meeting unless that Director has previously
obtained such consent.
21.3 Notice of Meeting
Notice of each meeting of the Board, which must specify the time
and the place of the meeting but need not state the nature of the
business to be transacted:
(a) must be given to each Director and his Alternate
Director (if any); and (b) may be given by telephone or
facsimile message,
but the non-receipt of any notice of a Board meeting by a.
Director or his Alternate Director does not affect the validity
of the convening of the meeting.
21.4 Place of Meeting
Where a meeting of the Board is held solely or partly by
telephone or other instantaneous means of conferring, the meeting
is to be treated as held at the place at which at least one of
the Directors present at the meeting is physically located as is
agreed by those Directors present at the meeting.
21.5 Period of Notice
The Board may determine the period of notice for each meeting of
the Board which, until otherwise determined, is not less than 24
hours.
21.6 Convening of Board Meeting
A Director may at any time, and the Secretary must on request
from a Director, convene a meeting of the Board.
21.7 Appointment of Chairman
The Board shall elect one of the Directors to be Chairman and may
elect another to be Deputy Chairman and shall determine the
period for which each of those Directors is to hold that office.
21.8 Chairman of Board Meetings
Where a meeting of the Board is held and:
(a) a Chairman has not been appointed under article 21.7 or
the Chairman is not present within 15 minutes of the time
appointed for the holding of the meeting or is unwilling to
act; and
(b) a Deputy Chairman has not been appointed under Article
21.7 or the Deputy Chairman is not present within 15 minutes
of the time appointed for the holding of the meeting or is
unwilling to act,
the Directors present at the meeting may choose one of their
number to be chairman of that meeting.
21.9 Majority Decisions
Every question and resolution dealt with at a meeting of the
Board is to be decided by a majority of votes of the Directors
present and voting on the question or resolution.
21.10 Votes of Directors
Subject to these Articles:
(a) each Director present at a meeting of the Board has one
vote on every question or resolution at that meeting;
(b) if a Director is also an Alternate Director entitled to
be present and to vote at the meeting, that Director has one
further vote for each other Director in respect of whom that
Director is present; and
(c) if there is an equality of votes on any question or
resolution, the chairman of the meeting may not exercise a
casting vote in addition to any other vote he may have.
21.11 Exercise of Powers by Board
A power of the Board unless and while it has been conferred
exclusively under Article 19.4 or Article 20.2 or delegated
exclusively to a committee of the Board under Article 21.12. is
exercisable only:
(a) by resolution at a meeting of the Board at which a
quorum is present: or
(b) by a resolution of the Directors under Article 21.14.
21.12 Delegation to Committee
The Board may delegate any of its powers to a committee
consisting of not less than one Director and which may also
include any other persons determined by the Board and may
terminate, withdraw or alter such delegation or withdraw or alter
any powers conferred on the committee at any time.
21.13 Committee Powers and Meetings
Where a committee is created by the Board under Article 21.12:
(a) that committee must exercise the powers delegated to it
under Article 21.12 in accordance with any directions of the
Board;
(b) a power so delegated when exercised by the committee in
accordance with Article 21.13(a) is treated as exercised by
the Board;
(c) the members of the committee may elect a chairman from
among the members;
(d) where a meeting of a committee is held and:
(i) a chairman has not been elected in accordance with Article
21.13(c); or
(ii) the chairman so elected is not present at the meeting within
15 minutes of the time appointed for the holding of the meeting
or is unwilling to act,
the members of the committee present at the meeting may choose
one of their number to be chairman of the meeting;
(e) the committee may meet in person or by telephone or
other instantaneous means of conferring for the dispatch of
business (or by any combination of those means) and adjourn
and otherwise regulate its meetings as it may determine;
(f) the presence of not less than half of the members of the
committee, at least one of whom must be a Director, is
necessary to constitute a quorum; no business may be
transacted unless a quorum is present.
(g) the committee meetings are otherwise governed to the
Greatest extent practicable by the provisions of these
Articles which regulate the meetings and procedures of the
Board.
21.14 Written Resolution of Directors
(a) If each of the Directors entitled to receive notice of a
meeting of the Board and to vote on a resolution signs a
document to the effect he or she is in favour of or opposed
to or abstains with respect to the resolution (the terms of
which are set out in the document) and a majority of those
Directors state that they are in favour of that resolution,
a resolution in those terms is for all purposes treated as
having been passed at a duly convened meeting of the Board
held on the date and at the time when the document was last
signed by a Director.
(b) For the purpose of Article 21.14(a):
(i) two or more separate documents in identical terms each of
which is signed by one or more Directors are treated as one
document;
(ii) the signature by an Alternate Director of a document is not
required if the Director who appointed that Alternate Director
has signed the document;
(iii) the signature by the Director who appointed an Alternate
Director of a document is not required if that Alternate Director
has signed the document; and
(iv) a telex, facsimile transmission or other document produced
by mechanical or electronic means under the name of a Director or
Alternate Director (as the case may be) with the authority of the
Director or Alternate Director (as the case may be) is deemed to
be a document in writing signed by the Director or Alternate
Director (as the case may be).
21.15 Resolution or Declaration Where Company Has Only One Director
(a) If the Company has only one Director and the Director
records the Director's decision to a particular effect the
recording of the decision counts as the passing by the
Director of a resolution to that effect.
(b) A record made for the purposes of paragraph (a) also has
effect as minutes of the passing of the resolution.
(c) If the Company has only one Director and the Director
records the Director's declaration to a particular effect,
the recording of the declaration counts as the making of a
declaration to that effect made at a meeting of the
Company's Directors.
(d) A declaration has effect as minutes that record the
making of the declaration.
(e) A record made for the purposes of paragraph (a) or (c)
must be made in writing.
21.16 Validity of Acts of Directors
Each act, resolution or thing performed, passed or done by, or
with the participation of, a person acting as a Director or
member of a committee in respect of whom it is later discovered
there was some defect in appointment to, or continuation in,
office of that person or that the person was disqualified or not
entitled to perform, vote on or do the act, resolution or thing,
is as valid and effective as if that Director or member of
committee had been validly appointed, had validly continued in
office, had not been disqualified and was entitled so to perform,
vote or do.
22. ASSOCIATE DIRECTORS
22.1 The Board may:
(a) appoint any person to be an Associate Director;
(b) determine the term of appointment, powers, duties and
remuneration of that person as an Associate Director;
(c) vary any determination so made; and
(d) terminate or suspend any appointment of a person as an
Associate Director.
22.2 No Associate Director, by virtue of appointment as such, is:
(a) a Director;
(b) entitled to attend Board meetings without invitation;
(c) to be counted in determining if a quorum is present at a
Board meeting; or
(d) entitled to vote on any question at any Board meeting.
23. SECRETARY
The Board may:
23.1 appoint any person to be a Secretary of the Company;
23.2 determine the term of appointment, powers, duties and
remuneration of that person as a Secretary;
23.3 vary any determination so made; and
23.4 terminate or suspend any appointment of a person as a Secretary.
24. COMPANY ADMINISTRATION
24.1 Minutes to Be Made
(a) The Board must cause minutes to be made of:
(i) the names of the Directors present at each Board meeting;
(ii) the names of the committee members present at each meeting
of a committee appointed under Article 21.12;
(iii) the proceedings of each general meeting (subject always to
Articles 13.15 and 13.16);
(iv) the proceedings of each Board meeting (subject always to
Article 21.15); and
(iv) the proceedings of each meeting of a committee appointed
under Article 21.12.
(b) The Board must cause all minutes made under Article 24.
1 (a) to be entered in the relevant minute book of the
Company.
(c) The minutes of a meeting, made under Article 24. 1 (a),
if appearing on their face to be signed by the chairman of
the meeting or the chairman of the next succeeding, meeting
of the relevant body, are sufficient but not conclusive
evidence without proof of any further facts of the matters
stated in them.
24.2 Common Seal
(a) The Board must provide for the safe custody of the
common seal.
(b) The common seal may only be used with the authority of
either:
(i) the Board; or
(ii) a committee appointed under Article 21.12 empowered to
authorise the use of the common seal.
(c) Subject to Article 24.2(d), an instrument is validly
executed under the common seal where the common seal is
affixed to it in the presence of:
(i) a Director; and
(ii) another person who is either a Director, a Secretary or a
person appointed by the Board for the purpose,
and each of those persons signs the instrument to attest the
affixing of the common seal.
(d) Where there is only one Director of the Company who is
also the only Secretary of the Company, an instrument is
validly executed under the common seal where it has been
witnessed by that Director and the Director states next to
his or her signature that he or she witnesses the sealing in
the capacity of sole Director and sole Secretary of the
Company.
(e) The Company may have, for use in any place out of the
State or Territory where the common seal is kept, a
duplicate common seal (known as the official seal for that
place) whose impression must be identical to that of the
common seal but with the name of the place where it is to be
used added.
(f) The Company may by instrument under the common seal
authorise any person either generally or in specified
circumstances to affix the official seal for a particular
place in that place to any instrument to which the Company
is a party and determine any manner required for the
affixing by that person of that official seal in that place.
(g) Where an official seal is affixed to an instrument in
the place to which it relates by a person authorised and in
the circumstances authonised for that person under Article
24.2(f) in the manner described in Article 24.2(f) (if any),
that instrument is to be treated for all purposes as having-
been validly issued under the common seal.
25. ACCOUNTS, AUDIT AND RESERVES
25.1 Accountancy Records
The Board must cause:
(a) the Company to keep the accounting records and to
prepare the financial statements required by the Law; and
(b) The accounts to be sent to Members and laid before
general meetings of the Company as required by the Law.
25.2 Audit
The Board must cause the accounts of the Company to be audited by
the Auditor (if any) as required by the Law.
25.3 Accumulation of Reserves
The Board may do any or all of the following with the profits of
the Company before declaring any Dividend to the Members from
them:
(a) set aside any sum the Board determines as reserves to be
applied, in the discretion of the Board, for any purpose it
considers to be appropriate and use any sum so set aside in
the business of the Company or invest any such sum in
investments (which the Board may vary and deal with as it
determines) which the Board determines; and
(b) carry forward any amount from them which the Board
considers ought not to be distributed as dividends without
transferring those amounts to a reserve.
26. DIVIDENDS AND OTHER DISTRIBUTIONS
26.1 Declaration of Dividends and Interim Dividends The Board may:
(a) declare and authorise the distribution from the profits
of the Company a dividend to be distributed to the Members
according to their respective rights and interests,
determine the property to constitute the dividend and fix
the time for distribution; and
(b) authorise the distribution to the Members of an interim
dividend if and to the extent it appears justified by the
position of the Company, determine the property to
constitute the dividend and fix the time for distribution.
26.2 No Interest on Dividends
No Dividend (whether in money or otherwise) bears interest as
against the Company.
26.3 Obligation to Distribute
Where the Board declares a Dividend under Article 26.1 the
obligation of the Company to make the distribution only arises
where the Dividend is declared under Article 26.1(a), the Board
fixes the time for distribution and that time has arrived and, if
the Dividend is a distribution of money, no debt arises in
respect of the Dividend until that time.
26.4 Payment of Dividend in Specie
Without limitation to Article 26.1, where the Board declares or
authorises the distribution of a Dividend by a distribution of
money it may also decide that all or any part of that Dividend be
paid and satisfied by the distribution of specific assets
(including, without limitation, paid up shares or other
securities of the Company or of any other body corporate).
26.5 Capitalisation of Profits or Reserves
The Board may capitalise any amount available for distribution as
a Dividend and, having applied the amount in either or both of
the following manners, distribute that amount to the Members in
the same proportions as the Members would have been entitled to
if distributed as a Dividend:
(a) in paying up any amounts unpaid on shares already
issued; and
(b) in paying up in full (both as to par and any premium)
unissued shares.
26.6 Use of Share Premium Reserve
The Board may apply any amount to the credit of any share premium
account in any of the ways permitted by the Law.
26.7 Calculation and Apportionment
Except to the extent that the terms of issue of any shares
provide otherwise, each Dividend is payable in respect of each
share in proportion to the amount of total issue price for the
time being paid up on that share, and may be declared at a rate
per annum in respect of a specified period.
26.8 Amounts Paid on Shares
For the purposes of Article 26.7, amounts credited as paid up on
a share are treated as having been paid up on the share but
amounts paid or credited as paid in advance of a call being made
are not treated as having been paid up on the share.
26.9 Deductions from Dividends
The Board may deduct from any Dividend which is a distribution of
money payable to a Member any money presently payable by the
Member as such to the Company whether on account of a call or
otherwise.
26.10 Retention of Dividends
The Board may retain any Dividend in respect of which the Company
has a lien and:
(a) if the Dividend is a distribution of property other than
money, realise that property so that it is represented by
money; and
(b) apply the Dividend in or towards the satisfaction of the
debts or liabilities in respect of which the lien exists.
26.11 Declaration of Profits
For the purpose of Article 26.1, the declaration of the Board as
to the amount of the profits of the Company and as to the amount
of those profits available for distribution is conclusive.
26. l2 Settlement of Difficulties
The Board may settle any difficulty that may arise in respect of
any distribution under Articles 26.1 to 26.10 (inclusive) as it
considers desirable to adjust the rights of all parties and, in
particular, may (without limitation):
(a) round or disregard any fractional entitlement;
(b) set the value of each asset to be distributed;
(c) determine that money be paid to any Member instead of a
particular distribution;
(d) vest any property in trustees for any Member;
(e) issue any fractional certificate required;
(f) authorise a person to make on behalf of all Members
entitled to a distribution of shares following a
capitalisation under Article 26.5 an agreement with the
Company which will be effective against and bind all the
Members concerned for the Company to issue to them, credited
as fully paid, the shares the subject of the distribution or
for the Company to apply the sum capitalised proportionately
in paying up shares already issued to them; and
(g) appoint a person to execute as agent or attorney on
behalf of each Member entitled to a Dividend to be
distributed otherwise than as money any instrument of
transfer or other document necessary to vest in the Member
full legal and equitable title to the property the subject
of the Dividend.
26.13 Entitlement to Dividend Pending Registration
The right to any Dividend declared on a share does not pass until
the transfer of that share has been registered and the name of
the transferee is entered in the Register.
26.14 Retention of Transmittee Dividends
The Board may retain any Dividend to be distributed in respect of
a share which is subject to Article 11.1 until the name of the
person entitled to be registered under that Article is entered in
the Register as the holder of that share:
26.15 Joint Holders' Entitlement to Dividend
Where a share is held by more than one person, any one of those
joint holders may give an effective receipt for any Dividend, in
relation to that share.
26.16 Dispatch and Payment of Dividends
Any Dividend distributed as money may be paid by cheque and
notification of anv Dividend may be dispatcher to the Member
through the post directed:
(a) to the address of the Member (or, in the case of a share
held by more than one person, the address of the first-named
of those joint holders) as shown in the Register: or
(b) to any other address that the Member directs in writing.
26.17 Unclaimed Dividend
All Dividends declared but unclaimed may
a) in the case of Dividends not to be distributed as money,
be realised into money; and
b) in any case, be invested for the benefit of the Company
until claimed or until required to be dealt with under any
applicable law dealing with unclaimed money.
27. NOTICES
27.1 Service of Notices by Company
A notice required or permitted under these Articles to be given
by the Company to any Member or other person may be given either
by serving it on the person personally or by sending it by
prepaid post, telex or facsimile transmission to the person at
the address of the person.
(a) if the person is a Member, subject to Article 27.2,
shown in the Register; and
(b) if the person is not a Member, supplied by the person to
the Company for the giving of notices.
27.2 Overseas Member's Address
A Member whose address as shown in the Register is not within
Australia may give notice to the Company specifying an address
within Australia which is to be treated for the purposes of
Article 27.1 as the address of that Member shown in the Register.
27.3 Postal Notices to Overseas Members
Where the Company proposes to send a notice to a Member by
pre-paid post and the notice is to be sent outside Australia, the
notice must be sent by airmail.
27.4 Notices to Joint Holders
Where a share is held by more than one person, a notice required
to be given to those persons as joint holders of that share is
effectively given when given to the one of those persons whose
name first appears in the Register in respect of that share.
27.5 Notices When Member Dies
Any notice or document given in accordance with Article
27.1notwithstanding that the share in respect of which it is
given is then subject to Article 11.1, is to be treated as
validly given to all persons entitled to be registered in respect
of the share and all persons who claim through such person.
27.6 Binding on Others
Any person entitled to a share (whether by transfer, operation of
law or otherwise) is to be treated as having duly received every
notice in respect of that share which was duly given to the
person from whom that person derives that entitlement before the
person entitled is entered in the Register as the holder of the
share.
27.7 Signature of Notice
The signature to any notice given by the Company may be written
in any way.
27.8 Service by Post
Where a notice is given by post, that notice is treated as duly
given where the notice is contained in a properly addressed
envelope or wrapper in respect of which proper postage is paid
and which is posted and is treated as given on the second
Business Day after it was posted.
27.9 Service by Telex or Facsimile
Where a notice is given by telex or facsimile transmission, that
notice is treated as duly given where the notice is addressed in
accordance with Article 27.1 and transmitted by telex or
facsimile transmission to that address (whether it is in fact
received or not) and is treated as duly given:
(a) in the case of a telex, on the day after the sender
receives the answer back of the addressee; and
(b) in the case of a facsimile transmission, on the day
following, transmission of the notice.
27.10 Counting of Days
Where a specified period (including, without limitation, a
Particular number of days) is required to elapse or expire from
or after the giving of a notice before an action may be taken
neither the day on which the notice is given nor the day on which
the action is to be taken may be counted in reckoning the period.
27.11 Certificate of Director or Secretary
If a Director or Secretary signs a certificate that a notice was
given in the manner set out in the certificate, that certificate
is conclusive evidence of the accuracy of the matters set out in
it.
28. INSPECTION AND SECRECY
28.1 No Right to Inspect
No Member is entitled to require discovery of, inspection of, or
any information concerning the affairs of the Company, except as
provided by the Law or as permitted by the Board.
28.2 Board May Permit Inspection
Subject to the Law, the Board may determine whether any of the
books, accounts and other information of the Company is to be
available for inspection by Members and, if so, the extent, time,
place and conditions of inspection so permitted.
28.3 Obligation of Secrecy
Except in the proper course and performance of his duties, as
required by law or as required by the Board, every officer of the
Company must keep strictly secret all transactions and affairs of
and all information concerning the Company, and if so required by
the Board, sign a declaration accepting the obligation of secrecy
and undertaking not to disclose any information within his
knowledge the subject of that obligation to any person.
29. WINDING UP
29.1 Power of Board
The Board may authorise the presentation of a petition for the
winding up of the Company by the Court.
29.2 Distribution if Insufficient Assets
Subject to the terms of issue of a share, if the Company is wound
up and the assets available for distribution among the Members
(in that capacity) are insufficient to repay all the paid up
capital, those assets will be distributed so that, to the
greatest possible extent, the amount distributed to a Member in
respect of each share is proportional to the capital amount paid
up (or which at the commencement of the winding up ought to have
been paid up) on that share compared with the total paid up
capital of the Company.
29.3 Distribution of Surplus Assets
Subject to the terms of issue of a share, if the Company is wound
up and after distribution of assets to repay paid up capital
there remain assets available for distribution to the Members (in
that capacity), those assets, will be distributed so that, to the
greatest possible extent, the amount distributed to a Member in
respect of each share is proportional to the capital amount paid
up (or which at the commencement of the winding up ought to have
been paid up) on that share compared with the total paid up
capital of the Company.
29.4 Distribution in Specie
If the Company is wound up and a special resolution is passed by
the Company in general meeting authorising that it be done, the
liquidator may distribute to the Members all or any part of the
assets to be distributed to them in specie (whether they are
property of the same kind or not) and for that purpose may, if so
authorised by the special resolution:
(a) set the value of each asset to be distributed that the
liquidator considers fair; and
(b) determine how the distribution is to be carried out
(including by allocating the assets) as between the Members
or different classes of Members,
but so that no Member must accept any shares or other property in
respect of which there is any liability.
29.5 Vesting in Trustee
If so authorised by a special resolution passed by the Company in
general meeting, the liquidator of the Company may vest all or
any part of the assets to be distributed to the Members in a
trustee on terms of trust for the benefit of the Members as the
liquidator considers appropriate.
30. INDEMNITY AND INSURANCE OF DIRECTORS AND OTHERS
30.1 In this Article the expression "to the relevant extent" means:
(a) to the extent the Company is not precluded by law from
doing so; and
(b) to the extent and for the amount that the Director is
not otherwise entitled to be indemnified and is not
otherwise actually indemnified, including an indemnity under
any insurance policy or contract.
30.2 Each present and former Director of the Company shall be
indemnified out of the assets of the Company to the relevant
extent against any liability incurred by that Director as such in
the discharge of the duties of the Director to the Company
unless:
(a) the liability arises out of conduct involving a lack of
good faith; or
(b) the liability is to the Company or a related body
corporate.
30.3 Each present and former Director of the Company shall be
indemnified out of the assets of the Company to the relevant
extent against any liability for costs and expenses incurred by
that Director as such in defending any proceedings, whether civil
or criminal, in which judgment is given in favour of the Director
or in which the Director is acquitted, or in connection with any
application in relation to those proceedings in which the court
grants relief to that Director under the Law.
30.4 Nothing in this Article shall prevent the Company from
indemnifying:
(a) a present or former Director against any liability
incurred by that Director in the discharge of the duties of
the Director to any related body corporate; or
(b) a present or former Secretary, executive officer or
employee of the Company against any liability incurred by
that person in the discharge of the duties of that person to
the Company,
to the extent that the Company is not precluded by law from doing
so and otherwise upon such terms and conditions as the Board
deems fit.
30.5 To the extent that the Company is not precluded by law from doing
so, the Company may effect and maintain and pay the premiums in
respect of an insurance policy or contract which, inter alia,
insures a present or former Director, Secretary, executive
officer or employee of the Company against liability incurred by
that person in the discharge of the duties of that person to the
Company or a related body corporate.
31. SUBMISSION TO JURISDICTION
Each Member and each present and past eligible officer (as that
expression is defined in Section 180 of the Law) submits to the
non-exclusive jurisdiction of the Supreme Court of the State of
South Australia, the Federal Court of Australia and the Courts
which may hear appeals from those Courts.
32. PROHIBITION AIND ENFORCEABILITY
32.1 Any provision of, or the application of any provision of, these
Articles which is prohibited in any place is, in that place,
ineffective only to the extent of that prohibition.
32.2 Any provision of, or the application of any provision of, these
Articles which is void, illegal or unenforceable in any place
does not affect the validity, legality or enforceability of that
provision in any other place or of the remaining provisions in
that or any other place.
33. INTERPRETATION OF ARTICLES
Where any matter arises in the conduct of the affairs of the
Company which is not provided for in these Articles or where any
difficulty arises in respect to the interpretation or application
of any Article the Board shall determine the course to be
adopted.
34. GENERAL AUTHORISATION
Where the Law authorises or permits a company to do any thin- if
so authorised by its articles of association, the Company is
authorised by this Article to do that thing.
I, the subscriber hereto whose name, address and occupation is set out
below, being the subscriber to the Memorandum of Association, agree to
the foregoing, Articles of Association.
DATED 20th December 1997
NAME OF SUBSCRIBER ADDRESS SIGNATURE
------------------ ------- ---------
KINSALE DEVELOPMENTS PTY LTD
118 GREENHILL ROAD THE COMMON SEAL OF
ACN 007 715 568 UNLEY SA 5061 KINSALE DEVELOPMENTS PTY LTD
ACN 007 715 568 is affixed
In the presence of
/s/ GRAHM HOOPER
Director
/s/ PETER HOBBS
Director/Secretary
<PAGE>
<TABLE>
EXHIBIT 11.1
Computation of
<CAPTION>
Cumulative
Three Months Ended Six Months Ended March 31,1995
December 31, December 31, (Inception)To
1996 1997 1996 1997 December 31, 1997
<S>
Computation of Loss Per Share <C> <C> <C> <C> <C>
Net loss $ ( 797) $ ( 1,242) $ ( 2,018) $ ( 2,109) $ ( 10,617)
Preferred Stock Dividends ( 68) ( 85) ( 68) ( 159) ( 347)
Net Loss with Preferred Stock
Dividends $ ( 865) $ ( 1,327) $ ( 2,086) $ ( 2,268) $ ( 10,964)
Loss Per Share $ (0.08) $ (0.09) $ (0.22) $ (0.14) $ (0.95)
Weighted Average Common
Shares Outstanding 11,399,306 17,172,096 9,510,425 16,486,883 11,550,118
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUN-30-1998 JUN-30-1998
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 134 134
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 624 624
<CURRENT-ASSETS> 925 925
<PP&E> 222 222
<DEPRECIATION> 58 58
<TOTAL-ASSETS> 2173 2173
<CURRENT-LIABILITIES> 1563 1563
<BONDS> 0 0
5690 5690
0 0
<COMMON> 37 37
<OTHER-SE> (5117) (5117)
<TOTAL-LIABILITY-AND-EQUITY> 3103 3103
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 1224 2073
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9 21
<INCOME-PRETAX> (1242) (2109)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1242) (2109)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1242) (2109)
<EPS-PRIMARY> (0.08) (0.14)
<EPS-DILUTED> (0.08) (0.14)
</TABLE>
