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UNITED STATES
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20540
FORM 20-F
(MARK ONE)
[ XX ] Registration statement pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934 (Fee Required)
OR
[ ] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required)
For the fiscal year ended
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OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the transition period from to
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Commission file number
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ENVOY COMMUNICATIONS GROUP INC.
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(Exact name of Registrant as specified in its charter)
ENVOY COMMUNICATIONS GROUP INC.
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(Translation of the Registrants name into English)
British Columbia, Canada
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(Jurisdiction of incorporation or organization)
370 King Street West, Suite 800, Toronto, Ontario, Canada M5V 1J9
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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None
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Securities registered or to be registered pursuant to Section 12(g) of the Act.
COMMON EQUITY SHARES (6,245,777 shares)
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(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act.
None
Indicate the number of outstanding shares of each of the issuer's classes
of capital or common stock as of the close of the period covered by the annual
report: At September 30, 1996 there were 6,245,777 common shares outstanding.
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 NO XXX
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Indicate by check mark which financial statement item the Registrant has
elected to follows:
Item 17 Item 18 XXX
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(APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PAST FIVE YEARS.)
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO
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CURRENCY AND EXCHANGE RATES
All monetary amounts contained in this Registration Statement are, unless
otherwise indicated, expressed in Canadian dollars. On September 30, 1996 the
buying rate for Canadian Dollars was $1.00 US to $1.3619 Cdn. (see Item 8 for
further Exchange Rate information to U.S. currency.
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TABLE OF CONTENTS
Item 1. Description of Business 4
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Control of Registrant 5
Item 5. Nature of Trading Market 7
Item 6. Exchange Controls and Other Limitations Affecting Security Holders 8
Item 7. Taxation 9
Item 8. Selected Financial Data 10
Item 9. Management's Discussion and Analysis of Financial condition and
Results of Operations. 12
Item 10. Directors and Officers of Registrant 13
Item 11. Compensation of Directors and Officers 15
Item 12. Options to Purchase Securities from Registrant or Subsidiaries 16
Item 13. Interest of Management in Certain Transactions 16
PART II
Item 14. Description of Securities to be Registered 16
PART III
Item 15. Defaults upon Senior Securities 17
Item 16. Changes in Securities and Changes is Security for
Registered Securities 17
PART IV
Item 17. Financial Statements -
Item 18. Financial Statements -
Item 19. Financial Statements and Exhibits 17
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PART 1
ITEM 1. DESCRIPTION OF BUSINESS
The Registrant, Envoy Communications Group Inc., was incorporated under the
Companies Act and is a British Columbia, Canada based company which is dedicated
to building a powerful network of strategic marketing communications companies
in Canada and the United States. The company's focus, through its wholly-owned
subsidiaries, is advertising, corporate communication, meeting planning, event
marketing and incentive travel. MasterCard, Budget, Japan Camera, Cantel,
Nissan, and Toronto Transit commission comprise a portion of clients of
Registrant.
The philosophy of the business is based on the principle of "full circle"
communications - totally integrated programs strategically targeted to each key
audience segment and delivered through one consistent voice. Through total
integration companies in the 90's will successfully achieve maximum impact for
every dollar spent.
CORPORATE HISTORY
The Company was originally incorporated in Vancouver, British Columbia, Canada
under the name "Potential Mines Ltd. on December 28, 1973. Subsequent to that
time the following changes have been filed as of the date indicated:
08/20/81 Name change to Potential Resources Ltd.
05/08/84 Increase of authorized stock to 10,000,000 common shares.
04/07/86 Name changed to Skybridge International Inc.
04/30/87 Name changed to International Potential Explorations Inc.
04/12/91 Name changed to Banyan Industries International Inc.
11/19/91 Name changed to The Incentive Design Group Ltd.
08/04/92 Increased authorized stock to 100,000,000.
01/22/96 Decreased authorized stock to 50,000,000.
01/22/96 Name changed to Envoy Communications Group Inc.
01/22/96 Reverse split of common stock at the rate of 1 new share for 5
originals.
Incentive Design Communications Inc. was purchased by the Company from Christine
Genovese (spouse of Geoffrey B. Genovese) on October 16, 1991 for $375,000,
comprised of 166,667 common shares issued at a deemed value of $208,333.33 and
$166,667.67 in cash.
Business Theaters International Inc. was purchased by the Company from Christine
Genovese on October 16, 1991 for $750,000, comprised of 333,334 common shares
issued at a deemed value of $416,666.66 and $333.333.34 in cash.
Effective October 1, 1992, the Company acquired 100% of the issued and
outstanding common shares of The Communique Group Inc. (Communique). The cost
of the purchase
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was $3,058,500 comprised of 5,830,000 common shares issued at a deemed value of
$2,623,500, the transfer of all of the shares of a wholly-owned subsidiary,
Executive travel Centre Inc., at a deemed value of $375,000 to the principals of
Communique, and $60,000 in legal fees related to the acquisition.
Communique Business Communications Inc., ("CBC") was incorporated by The
Communique Group Inc., a wholly owned subsidiary of the Company, on January 19,
1995 by the subscription for 750 common shares of CBC for $75, representing 75%
of the shares of CBC. The remaining 25% of the shares of CBC are owned by
Andrew Crighton, Vice President of CBC. On March 1, 1996, The Communique Group
Inc. transferred the 750 shares of CBC to the Company for $75.
Turnstyle Design Inc. ("Turnstyle") was incorporated by The Communique Group
Inc. (wholly owned subsidiary of the Company) on February 2, 1995 by the
subscription for 800 common shares of Turnstyle for $80, representing 80% of the
shares of Turnstyle. The remaining 20% of the shares of Turnstyle are owned by
Rosanne Baker Thornley, Vice President of Turnstyle. On March 1, 1996, The
Communique Group Inc. transferred the 800 shares of Turnstyle to the Company for
$80.
Communique Incentives Inc. ("CII") was incorporated by the Company on May 14,
1996 by the subscription for 1,000 common shares of CII for $5,000 representing
100% of CII.
On September 1, 1996, the Company acquired 35% of the common share of Vertex
Communications Limited for $40,000.
ITEM 2. DESCRIPTION OF PROPERTY
The Company has no principal properties.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved as the Defendant in a suit brought by Odyssey
Promotions Limited for failure to pay commissions involved with the securing of
a travel business of Kinney Canada and Woolco Canada for a total commission of
$216,000. This suit was brought about during or about March 1992. A motion was
brought to dismiss the action against Envoy. However, Odyssey Promotions
Limited appealed to the Court of Appeal for Ontario and the appeal was
successful. The Company will likely prevail and as a result the amount of the
claim payable will be nil.
ITEM 4. CONTROL OF REGISTRANT
The Registrant's securities are recorded on the books of its transfer agent in
registered form however, the majority of such shares are registered in the name
of intermediaries such as
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brokerage firms and clearing houses on behalf of their respective clients and
the Registrant does not have knowledge of the beneficial owners thereof. The
Registrant is not directly or indirectly owned or controlled by a corporation or
foreign government.
As of September 30, 1996, the Registrant had authorized share capital of
50,000,000 common share without par value of which 6,245,777 shares were issued
and outstanding.
Title of Identity of Amount Percentage
Class Person or Group Owned Of Class
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Common CDS & Company 1,231,485 19.72%
Common Howe & Company 1,372,819 21.98%
Common Cede & Company 695,615 11.14%
Note: These shares are registered in the names of brokerage clearing houses and
management of the Registrant is unaware of the beneficial ownership of the
shares registered in the above names although certain of these figures include
shares of management registered in brokerage houses (i.e., "street form").
At September 30, 1996 the directors and officers as a group (7 persons) owned
558,816 shares of the Registrant or 8.95% of the issued and outstanding shares
of the Registrant.
In conjunction with the private placements which took place during the year,
2,631,580 share purchase warrants were issued with an exercise price of $0.38
effective through January 29, 1997 and $0.44 thereafter to January 29, 1998.
One million (1,000,000) share purchase warrants were issued subsequent to
September 30, 1996 with an exercise price of $0.85 to September 12, 1997 and
$1.00 thereafter to September 12, 1998. At September 30, 1996, 3,631,580
warrants (issued and to be issued) were outstanding. The Company has reserved
3,631,580 common shares to be issued upon the exercise of the share purchase
warrants.
During the year, $680,000 was received as an advance on 1,000,000 common shares
subscribed for pursuant to a private placement. Approval of the subscription by
the regulatory authorities was received subsequent to September 30, 1996 and the
common share were issued at a price of $0.68 per share. These shares are
subject to a one-year no-trade period which expires on January 29, 1997 and
September 12, 1997 respectively.
Under the Securities Act (British Columbia) insiders (generally officers and
directors of the Registrant) are required to file individual insider reports of
changes in their ownership in the Registrant's securities within the first 10
days of the calendar month following any trade in the Registrant's securities.
Copies of such reports are available for public inspection at the offices of the
British Columbia Securities Commission, Suite 1100, 865 Hornby Street,
Vancouver, British Columbia V6Z 2H4 (phone 604/660-4800).
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ITEM 5. NATURE OF TRADING MARKET
Since March 13, 1984 the shares of the Registrant have traded in Canada on the
VSE. Summary trading by quarter for the two most recent fiscal years for the
period ending September 30, 1996 on the VSE is as follows:
YEAR HIGH LOW CLOSE VOLUME
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1993
4th Qtr 6.25 4.00 4.75 816,564
1994
1st Qtr 6.50 3.25 3.50 304,088
2nd Qtr 4.50 2.75 3.00 254,940
3rd Qtr 2.75 1.50 1.70 294,091
4th Qtr 2.15 1.10 1.25 583,755
1995
1st Qtr 2.00 1.25 1.25 271,241
2nd Qtr 2.45 1.05 1.80 1,001,173
3rd Qtr 2.25 1.20 1.20 508,281
4th Qtr 1.30 .55 .55 520,217
1996
1st Qtr 1.50 .50 1.50 545,114
2nd Qtr 1.48 .92 1.00 437,626
3rd Qtr 2.45 .85 2.36 1,119,931
As of September 30, 1996 there were 6,245,777 outstanding shares of the company
of which 3,377,458 were held by 15 Canadian residents, 763,055 shares held by
U.S. residents, and 2,105,264 shares held by residents of other countries thus
totaling 45 shareholders of record. This does not reflect those shareholders
whose shares are being held by brokerage clearing houses and the ultimate
beneficial owners of these shares are not known to the Registrant.
CHANGE OF CAPITAL
Effective March 5, 1984, the Registrant increased its authorized capital from
5,000,000 to 10,000,000 without par value and without altering the number of
shares outstanding. Effective August 4, 1992 the Registrant again increased the
authorized capital from 10,000,000 to 100,000,000 shares. By Special Resolution
on December 20, 1995, the Company reversed the total shares by a factor of 5
thereby reducing the then authorized capital shares to 20,000,000 and the then
outstanding shares to 3,614,197. At that same meeting and subsequent to this
reversal of shares, by Resolution the authorized capital of the company was
increased to 50,000,000 shares without par value.
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ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS.
There is no law or governmental decree or regulation in Canada that restricts
the export or import of capital, or affects the remittance of dividends,
interest or other payments to a non-resident holder of Common Shares of the
Registrant, other than withholding tax requirement (see Item 7).
There is no limitation imposed by the laws of Canada, the laws of British
Columbia or by the charter or other constituent documents of the Registrant on
the right of a non-resident to hold or vote common shares of the Registrant,
other than as provided in the Investment Canada Act (Canada) (the "Investment
Act"). The following discussion summarizes the principal features of the
Investment Act for a non-resident who proposes to acquire common shares of the
Registrant. It is general only, it is not a substitute for independent advice
from an investor's own advisor, and it does not anticipate statutory or
regulatory amendments.
The Investment Act generally prohibits implementation of a reviewable investment
by an individual, government or agency thereof, corporation, partnership, trust
or joint venture that is not a "Canadian" as defined in the Investment Act (a
"non-Canadian"), unless after review the minister responsible for the Investment
Act (the "Minister') is satisfied that the investment is likely to be of net
benefit to Canada. An investment in Common Shares of the Registrant by a
non-Canadian other than an "NAFTA Investor" (as that term is defined in the
Investment Act and which term generally means American and Mexican nationals)
when the Registrant was not controlled by a NAFTA Investor, would be reviewable
under the Investment Act if it was an investment to acquire control of the
Registrant and the value of the assets of the Registrant was $5,000,000 or more,
or if an order for review was made by the Federal Cabinet on the grounds that
the investment related to Canada's cultural heritage or national identity.
(NAFTA" refers to the North American Free Trade Agreement of 1993.) An
investment in Common Shares of the Registrant by a NAFTA Investor, or by a
non-Canadian when the Registrant was controlled by a NAFTA Investor, would be
reviewable under the Investment Act if it was an investment to acquire control
of the Registrant and the value of the assets of the Registrant was not less
than a specified amount, that is, Cdn. $150,000,000 in terms of "constant 1991
dollars", which for 1993 is Cdn. $153,000,000. A non-Canadian would acquire
control of the Registrant for the purposes of the Investment Act if he acquired
a majority of the Common Shares of the Registrant would be presumed to be an
acquisition of control of the Registrant unless it could be established that, on
the acquisition, the Registrant was not controlled in fact by the acquiror
through the ownership of Common Shares.
Certain transactions relating to common shares of the Registrant would be exempt
from the Investment Act, including:
(a) an acquisition of common shares of the Registrant by a person in the
ordinary course of that person's business as a trader or dealer in securities,
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(b) an acquisition of control of the Registrant in connection with the
realization of security granted for a loan or other financial assistance and not
for a purpose related to the provision of the Investment Act, and
(c) an acquisition of control of the Registrant by reason of an
amalgamation, merger, consolidation or corporate reorganization following which
the ultimate direct or indirect control in fact of the Registrant, through the
ownership of Common Shares, remained unchanged.
Acquisitions of control by NAFTA Investors of certain Canadian businesses are
subject to review even if the value of the assets of the Canadian business do
not exceed the annual threshold applicable to NAFTA Investors (Cdn.$150 million
in constant 1991 dollars). For example, investments in the following sectors
are subject to the Cdn. $5 million threshold applicable to all non-Canadians:
oil, gas uranium, financial services (except insurance), transportation,
cultural and broadcast media (publication, distribution or sale of books,
magazines, periodicals, newspapers, music, film and video products and the
exhibition of film and video products) television and radio services. The
Minister has also issued an Interpretation Note advising that oil and gas
properties, and other mineral properties, which are only at the exploration
stage, are not considered to be a business. A producing mine, however, is
considered to be a business as is a property on which development of a mine has
been commenced for the purpose of production.
ITEM 7. TAXATION
The following summarizes the principal Canadian federal income tax
considerations applicable to the holding and disposition of common shares by a
holder of one or more common shares (the "Holder") who is resident in the United
States of America and holds common shares solely as capital property. This
summary is based on the current provisions of the Income Tax Act (Canada-U.S.
1980 Tax Convention (the "Treaty"). It has been assumed that all currently
proposed amendments to the Tax Act will be enacted as proposed and there is no
other relevant change in any governing law, although no assurance can be given
in these respects.
Every Holder is liable to pay a Canadian withholding tax on every dividend that
is or is deemed to be paid or credited to the Holder on the Holder's Common
Shares. Under the Treaty, the rate of withholding tax is, if the Holder is a
company that owns at least 10% of the voting stock of the Registrant and
beneficially owns the dividend, 10%, and in any other case 15%, of the gross
amount of the dividend.
Pursuant to the Act, a Holder will not be subject to Canadian capital gains tax
on any capital gain realized on an actual or deemed disposition of a Common
Share, including a deemed disposition on death, provided either that the Holder
did not hold the Common Share as capital property used in carrying on a business
in Canada, or that either, the Holder nor person with whom the holder did not
deal at arm's length alone or together
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owned 25% or more of the issued shares of any class of the Registrant at any
time in the five year immediately preceding the disposition.
Subject to certain limited exceptions, a Holder who otherwise would be liable
for Canadian capital gains tax in consequence of an actual or deemed disposition
of a Common Share will generally be relieved by the Treaty from such liability.
ITEM 8. SELECTED FINANCIAL DATA.
A. The following constitutes selected financial data for the Registrant for
the last five completed fiscal years. The following information must be read in
conjunction with the more detailed financial information contained in the
accompanying audited and unaudited financial statements.
September 30
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1996 1995 1994
Net Sales/
Revenues $ 16,057,276 $ 11,900,117 $ 11,433,951
Income (Loss) from
Continuing
Operations 400,055 (342,613) (5,711,147)
Income (Loss)
per share $ 0.08 (.02) (.32)
Current Assets 3,129,423 1,912,082 2,592,617
Other Assets 1,399,562 1,449,391 1,605,227
Total Assets 4,528,985 3,361,473 4,197,844
Long Term debt - 300,000 -
Shareholders
Equity 2,342,861 262,806 605,419
Retained Earnings
(deficit) $ (9,886,961) $ (10,287,016) $ (9,944,403)
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September 30
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1993 1992
Net Sales/
Revenues $ 11,082,107 $ 4,859,558
Income (Loss) from
Continuing
Operations 110,411 (2,645,297)
Income (Loss)
per share 0.01 (0.36)
Current Assets 1,946,701 594,895
Other Assets 5,206,390 1,793,090
Total Assets 7,153,091 2,387,985
Long Term debt 414,397 369,244
Shareholders
Equity 4,903,866 383,854
Retained Earnings (4,068,256) (4,178,667)
(deficit)
No cash dividends have been declared nor are any intended to be declared. The
Registrant is subject to no legal restrictions respecting the payment of
dividends (except that they may not be paid to render the Registrant insolvent)
Dividend policy will be based on the Registrant's cash resources and needs and
it is anticipated that all available cash will be needed for property
development for the foreseeable future.
EXCHANGE RATES
On September 30, 1996, the buying rate for Canadian dollars was $1.00 US;
$1.3619 Cdn.
(To September 30 only)
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
Period End 1.1840 1.2857 1.3865 1.3635 1.3619
Average 1.1917 1.2817 1.3825 1.3609 1.3669
High * 1.2037 1.2890 1.3920 1.3750 1.3747
Low * 1.1823 1.2755 1.3755 1.3480 1.3591
* The high and low buying rate figures are selected from daily high and low
figures.
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ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
LIQUIDITY AND CAPITAL RESOURCES
Envoy's financial position was enhanced considerably during the 1996 by strong
operating cash flows and the completion of two private equity placements. Cash
generated by these sources has been deployed internally to finance working
capital and continued expansion.
In January 1996 Envoy completed equity financing for $1 million through the
private placement of 2,631,580 common shares at a price of $.38 per share.
Subsequent to the fiscal year end the Company completed an additional equity
financing placement of $680,000 through the private placement of 1,000,000
common share at a price of $.68 per share.
At the year end Envoy maintained a strong liquidity position with a working
capital balance of $1,000,000 and a cash balance of $1.2 million. The Company
plans to continue to finance working capital internally through operating cash
flows. Envoy is free of any operating or term debt financing.
Senior management believes that the Company's strong balance sheet and liquidity
combine to position the Company favorably to make strategic acquisitions of
profitable business using a combination of debt and equity financing. The
acquisition strategy will buoy rates of return on equity and advance the
Company's goal of becoming a significant force in the communication industry.
RESULTS OF OPERATION
Consolidated revenue increased by 35% to $16,000,000 during the last fiscal
year. This revenue increase was essentially split with half attributed to the
Advertising business and half to the Business Communications and Design
operations. Increased revenues in the Advertising business are a product of
expanded commitments from existing clients and the annualized effects of
previous new business wins. Revenue expansion in the Business Communications
and Design segments is a result of the continued growth and contributions of
these companies incorporated in mid 1995.
Operating margins increased by 20% to $4,100,000 from $3,400,000. As a
percentage of revenue margins decreased slightly to 25% of revenue compared to
28% in the prior year. Increases in lower margin media revenues in the
Advertising segment worked to reduce gross profit in that business to 20% from
26% of revenue. Reduced margins in the Advertising operation were partially
offset by revenue growth in the relatively high margin Business Communications
and Design subsidiaries. Gross profit margins in the latter were essentially
unchanged at 40% and 55% of revenue respectively.
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Operating costs decreased significantly to 22% of revenue from 30% a year
earlier. Decreased operating costs are a direct result of productivity gains
afforded by rationalization efforts undertaken by Envoy late in the 1995 fiscal
year. Increased media revenues requiring less labor intensity have also worked
to reduce operating costs as a percentage of revenue.
Operating income increased by $740,000 to $580,000 from an operating loss of
$160,000 in the previous year. Improvements in operating profitability have
been jointly achieved through profitable new business gains and productivity
improvements.
Amortization expenses have remained virtually unchanged at $1,280,000 for the
year.
Income taxes for the period have been reduced to nil by utilizing the benefits
of unrecorded tax losses arising from previous periods.
RISKS AND UNCERTAINTIES
Envoy's diversity of operations and clients minimizes the potentially adverse
impact of the loss of any one client or contract. The Company's record of
organically growing client's businesses are a testament to the Company's ability
to provide industry leading creative and strategic services.
Envoy's management encourages and promotes the development of senior personnel
and has an excellent record of key employee retention. The Company's extremely
competitive policies regarding employee compensation mitigate the potential for
key employee turnover.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
The Directors and Officers of the Registrant are set out in the following table
which also discloses the periods of time when such directors were directors of
the Registrant.
Name Position Held Commenced Term
Month/Year
Geoffrey Genovese President & CEO 1/95
Christopher Stavenjord Vice President &
Creative Director 2/96
Andrew Crighton Vice President CBC Div. 1/95
Jeffrey Irwin Chief Financial Officer 9/96
Darlene Soper Secretary 1/95
Geoffrey Genovese Director 7/91
John Bailey Director 4/94
Albert Aimers Director 1/95
David Hull Director 1/95
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All directors have a term of office expiring at the next general meeting of the
Registrant which is anticipated to be in February, 1997 unless re-elected
thereat or unless a director's office is earlier vacated in accordance with the
Articles of the Registrant or the provision of the Company Act (British
Columbia). All officers have a term of office lasting until their removal or
replacement by the Board of Directors.
GENERAL INFORMATION RESPECTING CURRENT MANAGEMENT OF THE COMPANY.
GEOFFREY GENOVESE
President, Director, Chief Executive Officer
Mr. Genovese earned a Bachelor of Arts from Wilfred Laurier University. During
his ten years with Incentive Design Group the company grew to ten million in
sales with over 60 employees. The company and its employees won many
international awards for their work. He has acquired major clients through
diligent prospecting, disciplined preparation, client focused presentations and
aggressive closing. Since joining with Communique Group they have become one of
the country's fastest growing integrated communications companies.
CHRISTOPHER STAVENJORD
Vice President & Creative Director
Mr. Stavenjord is one of the co-founders of Communique's advertising division
and has a diploma in Applied Arts, Creative Writing and Television / Film
Production. His many awards include the New York Radio Festival Gold, Marketing
Award of Merit and the Bronze Bessie TVB Award of Merit. Mr. Stavenjord comes
to the Company with a substantial background in creative development for
existing clients and has great success in creating both retail and brand
advertising.
ANDREW CRIGHTON
VICE PRESIDENT & CREATIVE DIRECTOR
Mr. Crighton is recognized as one of the most talented creative thinkers in
communications. He is a 25-year veteran of the industry and one of the founding
partners of Communique in 1982.
JEFFREY IRWIN
CHIEF FINANCIAL OFFICER
Mr. Irwin is a Certified Management Accountant (CMA) accredited by the Society
of Management Accountants of Ontario, Canada. In his capacity as Chief
Financial Officer of Communique he is responsible for the ongoing financial,
administrative and Human Resources management of the Company. Mr. Irwin
continues to ensure proper financial and management control systems are in place
throughout the group and is also responsible for the Company's adherence to
regulatory requirements.
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Mr. Irwin has spent a number of years in senior financial management roles with
large, public, multi-national communications conglomerates. His previous
experience is international in scope and encompasses organizations with
Canadian, American and European origin.
MR. JOHN BAILEY, OUTSIDE DIRECTOR
Mr. Bailey is a Barrister & Solicitor earning a Bachelor of Commerce degree and
a Bachelor of Laws from the University of Toronto and a Master of Laws from York
University. He has had vast experience as a director and officer of both
private and public companies.
DAVID HULL, OUTSIDE DIRECTOR
Mr. Hull is the Executive Vice President of The Hull Group of Companies and
President of Hull Life Insurance Agencies Inc., having obtained his life license
in 1978. He has qualified for the Million Dollar Round Table each year since
1979, a member of the Centurion Club, and was President of Canada Life
Conference in 1989.
ALBERT AIMERS, OUTSIDE DIRECTOR
Mr. Aimers is a venture capitalist and merchant banker based in Vancouver,
British Columbia.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
During the financial year ended September 30, 1995, the Registrant had 4
executive officers, namely its President, Vice President & Creative Director,
Vice President of CBC Division and the Chief Financial Officer. During the
period in question, Mr. Genovese, the President was paid $120,000, Mr.
Stavenjord was paid $120,000, and Andrew Crighton $82,200 and Mr. Irwin was paid
$75,000. No other officers or directors were compensated with cash. In
addition, Mr. Genovese was allowed a vehicle lease of $11,700 in value.
No other cash compensation, including salaries, fees, commissions, and bonuses
was paid or is to be paid to the directors and officers of the Registrant for
services rendered for the financial year ended September 30, 1995.
No profit sharing, pension or retirement benefit plans have been instituted by
the Company and none are proposed at this time. These are no arrangements for
payments on termination of any member of management in the event of a change of
control.
The aggregate value of the Directors' and Senior Officers' options exercised
below the market price of the shares at the time of exercise for the year ended
September 30, 1996 was nil . These benefits are calculated as the difference
between the market price and
Page 15
<PAGE>
option exercise price on the date of actual disposition of such shares.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES.
The Registrant has granted to its officers and directors the following
outstanding options or warrants to purchase common shares of its capital stock.
Current Employee and Management Incentive Options Outstanding
Number Exercise Date of
Name Shares Price Expiry
- - ---- ------ ----- ------
Jeffrey Irwin 50,000 $ 1.75 Sept 24, 1998
Chris Stavenjord 125,000 .67 Feb. 25, 1998
Ardith Freethy 20,000 .67 Feb. 25, 1998
Grant MacMillian 20,000 .67 Feb. 25, 1998
Geoffrey B. Genovese 200,000 .67 Feb. 25, 1998
David Hull 10,000 .67 Dec. 31, 1996
John Bailey 20,000 .67 Dec. 31, 1996
Albert Aimers 10,000 .67 Dec. 31, 1996
Andrew Crighton 15,000 .67 Dec. 31, 1996
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
No director or senior officer, and no associate or affiliate of the foregoing
persons, and no insider has, or has had any material interest, direct or
indirect, in any transactions, or in any proposed transaction which in either
such case has materially affected or will materially affect the Registrant or
its predecessors except as disclosed herein.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
The securities of the Registrant to be registered are common shares without par
value. All common shares of the Registrant's common stock, both issued and
unissued are of the same class and rank equally as to dividends, voting powers
and participation in the assets of the Registrant on a winding-up or
dissolution. No common shares have been issued subject to call or assessment.
There are no preemptive or conversion rights, and no provisions for redemption,
purchase for cancellation, surrender of, sinking fund or purchase fund.
Provisions as to the creation or modifications, amendments or variations of such
rights or such provisions are contained in the Company Act of the province of
British Columbia,
Page 16
<PAGE>
Canada. Each common share is entitled to one vote with respect to the election
of directors and other matters to which shareholders are ordinarily entitled.
All references to "shares" or "common shares" herein refer to common shares
without par value of the Registrant or its predecessors, all of which have had
only one class or kind of security authorized or issued in the past, that being
common shares without par value.
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR REGISTERED
SECURITIES.
Not Applicable.
PART IV
ITEM 17. FINANCIAL STATEMENTS.
Not Applicable. See Item 18.
ITEM 18. FINANCIAL STATEMENTS.
The following attached audited financial statements as at September 30, 1996 and
1995 are incorporated herein:
(a) Consent of Independent Accountants
(b) Auditors' Report
(c) Statements of Loss
(d) Statements of Deficit
(e) Balance Sheets
(f) Statements of Changes in Financial Position
(g) Notes to Financial Statements
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit 99.1 Articles of Incorporation, bylaws, and amendments thereto.
Page 17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the registrant certifies that it meets all of the requirements for
filing on Form 20-F and has duly caused this registration statement (annual
report) to be signed on its behalf by the undersigned thereunto duly authorized.
Envoy Communications Group Inc.
Dated: January 17, 1997 /s/ G. B. Genovese
---------------- ----------------------------
Geoffrey B. Genovese,
President/Director
Page 18
<PAGE>
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996 and 1995
<PAGE>
ENVOY COMMUNICATIONS GROUP INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
CONTENTS
- - --------------------------------------------------------------------------------
AUDITORS' REPORT 2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets 3
Statements of Operations and Deficit 4
Statements of Changes in Financial Position 5
Summary of Significant Accounting Policies 6-7
Notes to Financial Statements 8-11
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
AUDITORS' REPORT
- - --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
ENVOY COMMUNICATIONS GROUP INC.
We have audited the consolidated balance sheets of Envoy Communications Group
Inc. as at September 30, 1996 and 1995 and the consolidated statements of
operations and deficit and changes in financial position for the years then
ended. These consolidated financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at September 30,
1996 and 1995 and the results of its operations and the changes in its financial
position for the years then ended in accordance with generally accepted
accounting principles. As required by the Companies Act (British Columbia), we
report that, in our opinion, these principles have been applied on a basis
consistent with that of the preceding year.
/s/ BDO Dunwoody
Chartered Accountants
Toronto, Canada
November 1, 1996
2
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 1996 1995
- - --------------------------------------------------------------------------------
ASSETS
CURRENT
Cash $ 1,198,876 $ 816,300
Accounts receivable (Note 1) 1,431,777 877,420
Notes receivable (Note 2) 55,000 30,000
Contract work-in-process 246,312 108,255
Prepaid expenses 148,598 49,771
Deferred charges 48,860 30,336
--------------------------------
3,129,423 1,912,082
LONG-TERM INVESTMENT (Note 3) 40,000 -
CAPITAL ASSETS (Note 4) 442,862 487,691
GOODWILL (Note 5) 916,700 961,700
--------------------------------
$ 4,528,985 $ 3,361,473
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable and accrued liabilities $ 2,013,417 $ 2,712,830
Deferred revenue 172,707 85,837
Notes payable - 300,000
--------------------------------
2,186,124 3,098,667
--------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 6) 12,229,822 10,549,822
Deficit (9,886,961) (10,287,016)
--------------------------------
2,342,861 262,806
--------------------------------
$ 4,528,985 $ 3,361,473
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
On behalf of the Board:
Director
- - --------------------------------
Director
- - --------------------------------
THE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES ARE AN
INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED SEPTEMBER 30 1996 1995
- - --------------------------------------------------------------------------------
REVENUE $ 16,057,276 $ 11,900,177
------------------------------
OPERATING EXPENSES
Cost of purchased services 11,997,293 8,529,047
Salaries and benefits 2,165,171 1,939,410
General and administrative 1,143,896 1,258,094
Occupancy costs 170,646 331,299
-------------------------------
15,477,006 12,057,850
-------------------------------
INCOME (LOSS) BEFORE AMORTIZATION OF CAPITAL
ASSETS, INCOME TAXES AND INCOME TAX REDUCTION 580,270 (157,673)
AMORTIZATION OF CAPITAL ASSETS 180,215 184,940
-------------------------------
NET INCOME (LOSS) BEFORE INCOME TAXES AND
INCOME TAX REDUCTION 400,055 (342,613)
PROVISION FOR INCOME TAXES 180,000 -
REDUCTION OF INCOME TAXES ARISING FROM THE
UTILIZATION OF PREVIOUS YEARS' LOSSES (180,000) -
-------------------------------
NET INCOME (LOSS) 400,055 (342,613)
DEFICIT, beginning of year (10,287,016) (9,944,403)
-------------------------------
DEFICIT, end of year $ (9,886,961) $ (10,287,016)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
NET INCOME (LOSS) PER SHARE
(NOTE 6) - BASIC 0.08 (0.09)
- FULLY DILUTED 0.06 ANTI-DILUTIVE
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
THE ACCOMPANYING SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NOTES ARE AN
INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
FOR THE YEARS ENDED SEPTEMBER 30 1996 1995
- - --------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
Net income (loss) $ 400,055 $ (342,613)
Items not involving cash
Amortization 180,215 184,940
--------------------------
Cash flow from operations 580,270 (157,673)
CASH FLOW FROM OPERATIONS PER SHARE (NOTE 6) 0.11 (0.04)
Net change in non-cash working capital balances
Accounts receivable (554,357) (267,350)
Contract work-in-process (138,057) 54,306
Prepaid expenses (98,827) (1,164)
Deferred charges (18,524) (30,336)
Accounts payable and accrued liabilities (699,413) (519,015)
Deferred revenue 86,870 (274,743)
Notes payable (300,000) 300,000
--------------------------
(1,142,038) (895,975)
--------------------------
FINANCING ACTIVITIES
Issuance of common shares for cash 1,000,000 -
Proceeds for common shares to be issued 680,000 -
--------------------------
1,680,000 -
--------------------------
INVESTING ACTIVITIES
Long-term investment (40,000)
Purchase of capital assets - net (90,386) (29,104)
Issuance of note receivable (25,000) -
--------------------------
(155,386) (29,104)
--------------------------
INCREASE (DECREASE) IN CASH 382,576 (925,079)
CASH, beginning of year 816,300 1,741,379
--------------------------
CASH, end of year $ 1,198,876 $ 816,300
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.
5
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SEPTEMBER 30, 1996
- - --------------------------------------------------------------------------------
NATURE OF
OPERATIONS The Company, through its subsidiaries, is involved in
advertising, corporate communication, meeting planning,
organization and incentive travel, and interactive new media.
The Company is incorporated under the Companies Act (British
Columbia).
PRINCIPLES OF
CONSOLIDATION The consolidated financial statements include the accounts of
the Company and its subsidiaries, collectively known as Envoy
Communications Group and affiliates, as follows:
% of Jurisdiction of
Company Ownership Incorporation
Business Theatres International Inc. 100% Ontario
Communique Business
Communications Inc. 75% Ontario
Communique Incentive Inc. 100% Ontario
Incentive Design Communications Inc. 100% Ontario
The Communique Group Inc. 100% Ontario
Turnstyle Design Inc. 80% Ontario
CAPITAL ASSETS Capital assets are recorded at cost and are amortized over
their estimated useful lives as follows:
Audio visual equipment 2 to 5 years straight-line
Computer equipment 30% declining balance
Furniture and equipment 20% declining balance
Shows and video 20% declining balance
Leasehold improvements Over estimated lease term
6
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SEPTEMBER 30, 1996
- - --------------------------------------------------------------------------------
REVENUE RECOGNITION Advertising revenue is recognized on a
percentage-of-completion basis and includes gross billings
for those customers for which the Company is the agency of
record. A significant portion of advertising revenue is
derived from non-refundable retainers which are billed and
recognized on a monthly basis. Revenue derived from
corporate communications, meeting planning, and organization
and incentive travel, and interactive new media is
recognized on the completed contract basis. Payments
received in excess of revenue recognized on the related
contracts have been recorded as deferred revenue. Costs
incurred in excess of billings on the related contracts have
been recorded as contract work-in-process.
GOODWILL Goodwill, representing the excess of the purchase price over
the fair market value of net assets acquired, is amortized
on a straight-line basis over 25 years from the date of
acquisition. Goodwill is written down when there is an
impairment in value that is other than temporary.
FOREIGN CURRENCY
TRANSLATION Foreign currency accounts are translated into Canadian
dollars as follows:
During the year, an asset, liability, revenue or expense
related to each project is translated into Canadian dollars
by the use of the exchange rate in effect at the date the
project was completed. At the year end date, monetary assets
and liabilities are translated into Canadian dollars by
using the exchange rate in effect at that date and the
resulting foreign exchange gains and losses are included in
results of operations in the current period.
7
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- - --------------------------------------------------------------------------------
1. RELATED PARTY TRANSACTIONS
Certain management and administrative costs totalling $75,000 (1995
$75,000) were paid during the year to a company controlled by a director.
Included in accounts receivable is $31,500 (1995 - $nil) due from a
director.
- - --------------------------------------------------------------------------------
2. NOTES RECEIVABLE
The notes receivable are non-interest bearing and due on demand.
- - --------------------------------------------------------------------------------
3. LONG-TERM INVESTMENT
On September 1, 1996, the company acquired a 35% interest in Vertex
Communications Limited for $40,000 which was $13,000 in excess of the
corresponding portion of its underlying net book value at the date of
purchase. The long-term investment is accounted for using the equity
method.
- - --------------------------------------------------------------------------------
4. CAPITAL ASSETS
1996 1995
------------------------------------------------
ACCUMULATED ACCUMULATED
COST AMORTIZATION COST AMORTIZATION
Audio visual equipment $ 270,284 $ 255,798 $ 255,103 $ 245,569
Computer equipment 228,339 143,423 182,178 116,922
Furniture and equipment 784,695 497,105 775,172 421,078
Shows and video 460,496 432,282 460,496 423,397
Leasehold improvements 92,700 65,044 73,178 51,470
------------------------------------------------
$1,836,514 $1,393,652 $1,746,127 $ 1,258,436
------------------------------------------------
------------------------------------------------
Net book value $ 442,862 $ 487,691
-----------------------------------
-----------------------------------
Certain of these capital assets have been fully amortized.
8
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,1996
- - --------------------------------------------------------------------------------
5. GOODWILL
1996 1995
-----------------------------------
Goodwill, at cost $5,562,797 $ 5,562,797
Write-down (4,100,000) (4,100,000)
-----------------------------------
1,462,797 1,462,797
Accumulated amortization (546,097) (501,097)
-----------------------------------
$ 916,700 $ 961,700
-----------------------------------
-----------------------------------
- - --------------------------------------------------------------------------------
6. SHARE CAPITAL
a) AUTHORIZED
50,000,000 (1995 - 100,000,000) common shares without par value
During the year, pursuant to Articles of Amendment, the company's
shares underwent a reverse split whereby five old shares were exchanged
for one new share. As a result, the number of authorized common shares
was reduced to 20,000,000 shares. Subsequent to the reverse split, the
company increased its number of authorized common shares to 50,000,000
shares.
b) ISSUED/TO BE ISSUED
<TABLE>
<CAPTION>
1996 1995
# $ # $
---------------------------------------------------------------
<S> <C> <C> <C> <C>
ISSUED
BALANCE, BEGINNING OF YEAR 18,070,985 10,549,822 18,070,985 10,549,822
Reverse split
(1 new share for 5 old shares) (14,456,788) - - -
---------------------------------------------------------
3,614,197 10,549,822 18,070,985 10,549,822
During the year common shares
were issued for cash, pursuant
to private placements 2,631,580 1,000,000 - -
---------------------------------------------------------
BALANCE, END OF YEAR 6,245,777 11,549,822 18,070,985 10,549,822
TO BE ISSUED 1,000,000 680,000 - -
---------------------------------------------------------
7,245,777 12,229,822 18,070,985 10,549,822
---------------------------------------------------------
---------------------------------------------------------
</TABLE>
During the year, $680,000 was received as an advance on 1,000,000
common shares subscribed for pursuant to a private placement. Approval
of the subscription by the regulatory authorities was received
subsequent to September 30, 1996 and the common shares were issued at a
price of $0.68 per share.
The above common shares issued during the year and to be issued are
subject to one-year no-trade periods which expire on January 29, 1997
and September 12, 1997 respectively.
9
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
- - --------------------------------------------------------------------------------
6. SHARE CAPITAL (continued)
c) NET INCOME (LOSS) AND CASH FLOW FROM OPERATIONS PER SHARE
Net income (loss) per share amounts are based on the weighted monthly
average number of common shares outstanding during the year of
5,149,285 - Basic (1995 - 3,614,197 after giving retroactive effect to
the share consolidation on January 22, 1996) and 6,973,123 - Fully
diluted (1995 - Anti-dilutive). Cash flow from operations per share
amounts are based on the average number of common shares outstanding of
5,149,285 (1995 - 3,614,197).
d) SHARE OPTION PLAN
The Company has reserved 724,578 common shares under its Director and
Employee Incentive Share Purchase Option Plans. At September 30, 1996,
options for 520,000 common shares (1995 - 1,292,599) were outstanding
at exercise prices ranging from $0.67 to $1.75 (1995 - $0.30 to $0.85).
Options are exercisable at any time until expiry between 1996 and 1998.
e) WARRANTS
In conjunction with the private placements which took place during the
year, 2,631,580 share purchase warrants were issued with an exercise
price of $0.38 to January 29, 1997 and $0.44 thereafter to January 29,
1998. 1,000,000 share purchase warrants were issued subsequent to
September 30, 1996 with an exercise price of $0.85 to September 12,
1997 and $1.00 thereafter to September 12, 1998. At September 30, 1996,
3,631,580 warrants (issued and to be issued) were outstanding (1995 -
nil). The company has reserved 3,631,580 common shares to be issued
upon the exercise of the share purchase warrants.
- - --------------------------------------------------------------------------------
7. MINORITY INTEREST
Minority interests are not significant.
10
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
ENVOY COMMUNICATIONS GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,1996
- - --------------------------------------------------------------------------------
8. INCOME TAXES
The potential benefit from tax losses incurred in previous years has not
been reflected in these consolidated financial statements. These losses are
available to reduce future years' taxable income and expire as follows:
YEAR AMOUNT
1998 55,000
1999 808,000
2000 281,000
2001 1,642,000
2002 172,000
2003 120,000
-------------
3,078,000
Expenses recorded in the accounts,
not yet claimed for tax purposes,
available indefinitely 61,000
-------------
$ 3,139,000
-------------
-------------
- - -------------------------------------------------------------------------------
9. COMMITMENTS
The Company has entered into agreements to lease equipment and a vehicle
for various periods and is required to make future minimum annual lease
payments as follows:
YEAR AMOUNT
1997 $ 153,000
1998 104,000
1999 33,000
2000 9,000
2001 1,000
-------------
$ 300,000
-------------
-------------
The Company has entered into a 15-month lease for its premises commencing
April 1, 1996 at a monthly rent of approximately $12,300 with a rent-free
period for the first six months.
- - --------------------------------------------------------------------------------
10. COMPARATIVE FIGURES
Certain comparative figures have been reclassified to conform to the
presentation adopted in the current year.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,198,876
<SECURITIES> 40,000
<RECEIVABLES> 1,431,777
<ALLOWANCES> 0
<INVENTORY> 246,312
<CURRENT-ASSETS> 3,129,423
<PP&E> 442,862
<DEPRECIATION> 180,215
<TOTAL-ASSETS> 4,528,985
<CURRENT-LIABILITIES> 2,186,124
<BONDS> 0
0
0
<COMMON> 12,229,822
<OTHER-SE> 2,342,861
<TOTAL-LIABILITY-AND-EQUITY> 4,528,985
<SALES> 0
<TOTAL-REVENUES> 16,057,276
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 15,477,006
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 400,055
<INCOME-TAX> 180,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 400,055
<EPS-PRIMARY> .08
<EPS-DILUTED> .06
</TABLE>
<PAGE>
EXHIBIT 99.1
ARTICLES OF INCORPORATION, BYLAWS, AND AMENDMENTS THERETO.
<PAGE>
NUMBER: 123962
[LOGO]
CERTIFIED A TRUE COPY
__________ SOLICITOR
CERTIFICATE
OF
CHANGE OF NAME
COMPANY ACT
CANADA
PROVINCE OF BRITISH COLUMBIA
I HEREBY CERTIFY THAT
THE INCENTIVE DESIGN GROUP LTD.
has this day changed its name to
ENVOY COMMUNICATIONS GROUP INC.
ISSUED UNDER MY HAND AT VICTORIA, BRITISH COLUMBIA
ON JANUARY 22, 1996
/s/ John S. Powell
[SEAL]
JOHN S. POWELL
REGISTRAR OF COMPANIES
<PAGE>
I CERTIFY THIS IS A COPY OF A
DOCUMENT FILED ON
JAN 22 1996
FORM 21
(Section 371) /s/ John S. Powell
PROVINCE OF BRITISH COLUMBIA JOHN S. POWELL
REGISTRAR OF COMPANIES
PROVINCE OF BRITISH COLUMBIA
CERTIFICATE NO.123962
COMPANY ACT
SPECIAL RESOLUTION
The following Special Resolutions were passed by the undermentioned Company on
the date stated:
Name of Company: THE INCENTIVE DESIGN GROUP LTD.
Date Resolutions passed: DECEMBER 20, 1995
RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The authorized capital of the Company be altered by consolidating all of
the 100,000,000 COMMON SHARES WITHOUT PAR VALUE, of which 18,070,985 shares
are issued and outstanding, into 20,000,000 COMMON SHARES WITHOUT PAR
VALUE, of which 3,614,197 are issued and outstanding; every FIVE of such
shares BEFORE CONSOLIDATION being consolidated into ONE CONSOLIDATED SHARE;
2. The authorized capital of the Company be increased from 20,000,000 COMMON
SHARES WITHOUT PAR VALUE, of which 3,614,197 are issued and outstanding, to
50,000,000 COMMON SHARES WITHOUT PAR VALUE of which 3,614,197 are issued
and outstanding.
3. Paragraph 2. of the Memorandum of the Company be amended to read as
follows:
"2. The authorized capital of the Company consists of 50,000,000 COMMON
SHARES WITHOUT PAR VALUE."
4. The name of the Company be changed to "ENVOY COMMUNICATIONS GROUP INC." and
that paragraph 1. of the Memorandum of the Company be altered
accordingly.
5. The Memorandum be in the form attached hereto and marked Schedule "A" so
that the Memorandum, as altered, shall at the time of filing comply with
the COMPANY ACT.
CERTIFIED a true copy this 22nd DAY OF DECEMBER, 1995.
(Signature) /s/Lee S. Tupper
--------------------
Lee S. Tupper
(Relationship to Company) Solicitor
--------------------
<PAGE>
SCHEDULE "A"
FORM 1
(Section 5)
COMPANY ACT
ALTERED MEMORANDUM
(As altered by Special Resolution passed DECEMBER 20, 1995)
We wish to be formed into a company with limited liability under the
COMPANY ACT in pursuance of this Memorandum.
1. The name of the Company is ENVOY COMMUNICATIONS GROUP INC.
2. The authorized capital of the Company consists of 50,000,000 COMMON SHARES
WITHOUT PAR VALUE.
<PAGE>
I HEREBY CERTIFY THAT THIS IS A COPY FORM 20
OF A DOCUMENT FILED WITH THE (SECTION 370)
REGISTRAR OF COMPANIES PROVINCE OF BRITISH COLUMBIA
AUG 4 1992
- - -------------------------------- Certificate of
Incorporation No. 123962
/s/V.A. Proctor
- - --------------------------------
FOR REGISTRAR OF COMPANIES
FOR THE PROVINCE OF BRITISH COLUMBIA
---------------
COMPANY ACT
---------------
SPECIAL RESOLUTION
The following Special Resolution was passed by the undermentioned Company on the
date stated:
Name of Company: THE INCENTIVE DESIGN GROUP LTD.
Date Resolution passed: March 9, 1992
RESOLVED AS A SPECIAL RESOLUTION:
1. The authorized capital of the Company be altered by increasing it from
10,000,000 common shares without par value to 100,000,000 common shares
without par value.
2. That paragraph 2. of the Memorandum of the Company be amended to read as
follows:
"2. The authorized capital of the Company consists of 100,000,000 common
shares without par value.
3. That the Memorandum be in the form attached hereto and marked Schedule "A"
so that the Memorandum, as altered, shall at the time of filing comply with
the Company Act.
CERTIFIED a true copy this 18th day of March, 1992.
(Signature) /s/Lee S. Tupper
--------------------
(Relationship to Company) Solicitor
--------------------
LEE S. TUPPER
BARRISTER & SOLICITOR
1710 - 1177 W. HASTINGS ST.
VANCOUVER, B.C.
<PAGE>
SCHEDULE "A"
FORM
(Section 5)
COMPANY ACT
ALTERED MEMORANDUM
(As altered by Special Resolution passed March 9, 1992)
We wish to be formed into a company with limited liability under the
Company Act in pursuance of this Memorandum.
1. The name of the Company is THE INCENTIVE DESIGN GROUP LTD.
2. The authorized capital of the Company consists of ONE HUNDRED MILLION
(100,000,000) common shares.
<PAGE>
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA
[LOGO]
123962
Province of British Columbia
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
BANYAN INDUSTRIES INTERNATIONAL INC.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
THE INCENTIVE DESIGN GROUP LTD.
GIVEN, UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA
THIS 19TH DAY OF NOVEMBER, 1991
[SEAL]
/s/ David W. Boyd
DAVID W. BOYD
REGISTRAR OF COMPANIES
<PAGE>
I HEREBY CERTIFY THAT THESE ARE
COPIES OF DOCUMENTS FILED WITH THE
REGISTRAR OF COMPANIES ON
NOV 19 1991
----------------------------------
/s/ (ILLEGIBLE)
----------------------------------
Certificate of
Incorporation No. 123962
FORM 20
(Section 370)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Incorporation No. 123962
-----------
COMPANY ACT
-----------
SPECIAL RESOLUTION
The following Special Resolution was passed by the undermentioned
Company on the date stated:
Name of Company: BANYAN INDUSTRIES INTERNATIONAL INC.
Date Resolution passed: SEPTEMBER 26, 1991
------------------------
RESOLVED AS A SPECIAL RESOLUTION:
1. THAT the name of the Company be changed to THE INCENTIVE DESIGN GROUP LTD.,
and that paragraph 1 of the Memorandum of the Company be altered
accordingly.
2. THAT the Memorandum of the Company be in the form attached hereto and
marked Schedule "A" so that the Memorandum, as altered, shall at the time
of filing comply with the Company Act.
CERTIFIED a true copy this 23rd day of Oct. 1991.
(Signature) /s/ Lee S. Tupper
---------------------------
LEE S. TUPPER
(Relationship to Company) BARRISTER & SOLICITOR
---------------------------
1710 - 1177 W. HASTINGS ST.
VANCOUVER, B.C.
<PAGE>
SCHEDULE "A"
FORM
(Section 5)
COMPANY ACT
ALTERED MEMORANDUM
(As altered by Special Resolution passed September 26, 1991)
We wish to be formed into a company with limited liability under the
Company Act in pursuance of this Memorandum.
1. The name of the Company is THE INCENTIVE DESIGN GROUP LTD.
2. The authorized capital of the Company consists of TEN MILLION (10,000,000)
shares without par value.
<PAGE>
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA 123962
[LOGO]
Province of British Columbia
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
INTERNATIONAL POTENTIAL EXPLORATIONS INC.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
BANYAN INDUSTRIES INTERNATIONAL INC.
GIVEN, UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA
THIS 12TH DAY OF APRIL, 1991
[SEAL]
/s/ David W. Boyd
DAVID W. BOYD
REGISTRAR OF COMPANIES
<PAGE>
I HEREBY CERTIFY THAT THIS IS A
COPY OF A DOCUMENT FILED WITH THE
REGISTRAR OF COMPANIES ON
APR 12 1991
----------------------------------
/s/ (ILLEGIBLE)
----------------------------------
ASSISTANT DEPUTY REGISTRAR OF COMPANIES
FOR THE PROVINCE OF BRITISH COLUMBIA
FORM 20
(Section 370)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Incorporation No. 123962
------
-----------
COMPANY ACT
-----------
SPECIAL RESOLUTION
The following Special Resolution was passed by the undermentioned Company on the
date stated:
NAME OF THE COMPANY: INTERNATIONAL POTENTIAL EXPLORATIONS INC.
DATE RESOLUTION PASSED: March 12, 1991.
RESOLVED AS SPECIAL RESOLUTIONS:
1. THAT the name of the Company be changed to BANYAN INDUSTRIES INTERNATIONAL
INC., and that paragraph 1 of the Memorandum of the Company be altered
accordingly.
2. THAT the Memorandum of the Company be in the form attached hereto and
marked Schedule "A" so that the Memorandum as altered, shall at the time of
filing comply with the Company Act.
CERTIFIED a true copy the 15th day of March, 1991.
(Signature) /s/ Lee S. Tupper
---------------------------
(Relationship to Company) SOLICITOR
---------------------------
<PAGE>
SCHEDULE "A"
FORM
(Section 5)
COMPANY ACT
ALTERED MEMORANDUM
(As altered by Special Resolution passed March 12, 1991)
We wish to be formed into a company with limited liability under the
Company Act in pursuance of this Memorandum.
1. The name of the Company is "BANYAN INDUSTRIES INTERNATIONAL INC."
2. The authorized capital of the Company consists of TEN MILLION (10,000,000)
common shares without par value.
<PAGE>
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA 123962
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Finance and Corporate Relations
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
SKYBRIDGE INTERNATIONAL INC.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
INTERNATIONAL POTENTIAL EXPLORATIONS INC.
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 3OTH DAY OF APRIL, 1987
[SEAL]
/s/ Roberta J. Lowdon
ROBERTA J. LOWDON
DEPUTY REGISTRAR OF COMPANIES
<PAGE>
I HEREBY CERTIFY THAT THIS IS A
COPY OF A DOCUMENT FILED WITH THE
REGISTRAR OF COMPANIES ON
APR 30 1987 19
------------------- ------
/s/ Roberta J. Lowdon
----------------------------------
ASSISTANT DEPUTY REGISTRAR OF COMPANIES
FOR THE PROVINCE OF BRITISH COLUMBIA
FORM 21
(Section 371)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Incorporation No. 123962
COMPANY ACT
SPECIAL RESOLUTION
The following special resolutions were passed by the undermentioned Company
on the date stated:
Name of Company: SKYBRIDGE INTERNATIONAL INC.
Date resolution passed: March 6, 1987
Resolution:
RESOLVED, as special resolutions,
1. THAT the name of the Company be changed from "SKYBRIDGE INTERNATIONAL
INC." to "INTERNATIONAL POTENTIAL EXPLORATIONS INC.
2. THAT the Memorandum of the Company be altered to reflect the change of
name of the Company so that it is in the form set out in Schedule "A" attached
hereto.
CERTIFIED a true copy this 6th day of March, 1987.
(Signature) (ILLEGIBLE)
-----------------------
(Relationship to Company) Solicitor
-----------------------
<PAGE>
SCHEDULE "A"
FORM 1 (Section 5)
COMPANY ACT
ALTERED MEMORANDUM
(as Altered by a Special Resolution dated March 6, 1987)
1. The name of the Company is INTERNATIONAL POTENTIAL EXPLORATIONS INC.".
2. The authorized capital of the Company consists of 10,000,000 Common Shares
without par value.
<PAGE>
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA 123962
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Consumer and Corporate Affairs
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
POTENTIAL RESOURCES LTD.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
SKYBRIDGE INTERNATIONAL INC.
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 7TH DAY OF APRIL, 1986
[SEAL]
/s/ Roberta J. Lowdon
ROBERTA J. LOWDON
DEPUTY REGISTRAR OF COMPANIES
<PAGE>
FORM 21
(SECTION 37)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Incorporation # 123962
COMPANY ACT
SPECIAL RESOLUTION
The following special resolution was passed by the undermentioned Company on the
date stated:
Name of Company: POTENTIAL RESOURCES LTD.
Date Resolution Passed: February 28, 1986
RESOLUTION:
RESOLVED, as special resolutions, that:
1. The name of the Company be changed from POTENTIAL RESOURCES LTD. to
SKYBRIDGE INTERNATIONAL INC.
2. Item 1 of the Memorandum of the Company be changed to read:
3. The Memorandum as altered by these resolutions be in the form attached
hereto and marked Schedule "A" so that the Memorandum as altered shall be
at time of filing comply with the Company Act.
CERTIFIED A TRUE COPY this 28th day of February, 1986.
(Signature) /s/ J. H. Rosner
-----------------------
(Relationship to Company) Solicitor
-----------------------
J. H. ROSNER
BARRISTER & SOLICITOR
STE. 770 - 475 W. GEORGIA ST.
VANCOUVER, B.C. V6B 4M9
PH. 487-6638
<PAGE>
SCHEDULE "A"
MEMORANDUM OF
POTENTIAL RESOURCES LTD.
(as altered by Special Resolutions
dated February 28, 1986)
I wish to be formed into a Company with limited liability under the Company Act
in pursuance of this memorandum.
1. The name of the Company is:
"POTENTIAL RESOURCES LTD."
2. The authorized capital of the Company consists of:
10,000,000 common shares without par value.
<PAGE>
ORIGINAL WAS CERTIFIED TRUE COPIES
FILED AND REGISTERED MAY 8 1984 19__
------------ ------
/s/ (ILLEGIBLE)
MAY -8 1984 ASSISTANT DEPUTY REGISTRAR OF COMPANIES
M.A. Jorre de St. Jorre FOR THE PROVINCE OF BRITISH COLUMBIA
REGISTRAR OF COMPANIES
FORM 21
(Section 371)
PROVINCE OF BRITISH COLUMBIA
Certificate of
Incorporation No. 123962
COMPANY ACT
SPECIAL RESOLUTION
The following special resolutions were passed by the undermentioned Company
on the date stated:
Name of Company: "POTENTIAL RESOURCES LTD."
Date resolution passed: March 29, 1984
Resolution:
"RESOLVED as a Special Resolution that the authorized capital
of the Company be increased from 5,000,000 common shares without
par value to 10,000,000 common shares without par value and that
the Memorandum of the Company be altered so that it shall be in
the form of Altered Memorandum attached hereto.
CERTIFIED a true copy this 3rd day of May, 1984.
(Signature) (ILLEGIBLE)
------------------
(Relationship to Company) Solicitor
------------------
<PAGE>
FORM 1 (Section 5)
COMPANY ACT
ALTERED MEMORANDUM
(as Altered by Special Resolutions dated March 29, 1984)
We wish to be formed into a company with limited liability under the Company Act
in pursuance of this Memorandum.
1. The name of the Company is "POTENTIAL RESOURCES LTD".
2. The authorized capital of the Company consists of 10,000,000 common shares
without par value.
<PAGE>
CANADA NUMBER
PROVINCE OF BRITISH COLUMBIA 123962
[LOGO]
PROVINCE OF BRITISH COLUMBIA
Ministry of Consumer and Corporate Affairs
REGISTRAR OF COMPANIES
COMPANY ACT
CERTIFICATE
I HEREBY CERTIFY THAT
POTENTIAL MINES LTD.
HAS THIS DAY CHANGED ITS NAME TO THE NAME
POTENTIAL RESOURCES LTD.
GIVEN UNDER MY HAND AND SEAL OF OFFICE
AT VICTORIA, BRITISH COLUMBIA,
THIS 20TH DAY OF AUGUST, 1981
[SEAL]
/s/ F.A. Skinner
F.A. SKINNER
ASST. DEPUTY REGISTRAR OF COMPANIES
<PAGE>
ORIGINAL WAS CERTIFIED A TRUE COPY
FILED AND REGISTERED AUG 20 1981 19__
----------------------
/s/ F.A. Skinner
AUG 20 1981 ASSISTANT DEPUTY REGISTRAR OF COMPANIES
M. A. Jorre de St. Jorre FOR THE PROVINCE OF BRITISH COLUMBIA
REGISTRAR OF COMPANIES
[LOGO]
PROVINCE OF BRITISH COLUMBIA
---------
FORM 20
(SECTION 370)
Certificate of
Incorporation No. 123,962
COMPANIES ACT
-------------
SPECIAL RESOLUTION
The following special resolution* was passed by the undermentioned company
on the date stated:
Name of company POTENTIAL MINES LTD.
--------------------------------------------------------
Date resolution passed 14 May, 1981
-------------------------------------------------------
Resolution +
RESOLVED as a special resolution that the Company change its name to "POTENTIAL
RESOURCES LTD." and that the Memorandum of the Company be altered so that it
shall be in the form set out in the attached schedule to this resolution.
Certified a true copy the 18th day of August, 1981
---- -------- ----
RECEIVED (SIGNATURE)
----------------------------
AUG 18 1981 Solicitor
----------------------------
REGISTRAR OF COMPANIES (Relationship to company )
[ILLEGIBLE] FOR DEFINITION OF "SPECIAL RESOLUTION".
+ INSERT TEXT OF SPECIAL RESOLUTION.
<PAGE>
ORIGINAL WAS
FILED AND REGISTERED
SCHEDULE
AUG 20 1981
M. A. Jorre de St. Jorre
REGISTRAR OF COMPANIES
POTENTIAL RESOURCES LTD.
As to the Special Resolution passed on 14 May, 1981
ALTERED MEMORANDUM
1. The name of the Company is
POTENTIAL RESOURCES LTD.
2. The authorized capital of the Company
consists of five million (5,000,000)
common shares without par value.
<PAGE>
ORIGINAL WAS
FILED AND REGISTERED
ARTICLES
DEC 28 1973 POTENTIAL MINES LTD.
A. H. HALL TABLE OF CONTENTS
REGISTRAR OF COMPANIES
PART ARTICLE SUBJECT
---- ------- -------
1 INTERPRETATION
1.1 Definition
1.2 & 1.3 Construction of Words
1.4 Companies Act Definitions Applicable
1.5 Table "A" Inapplicable
2 SHARES AND SHARE CERTIFICATES
2.1 Member entitled to Certificate
2.2 Replacement of Lost or Defaced
Certificate
2.3 Recognition of Trusts
2.4 Execution of Certificates
2.5 Delivery to Joint Holders
3 ISSUE OF SHARES
3.1 Directors authorized
3.2 Commissions and Discounts
4 SHARE TRANSFERS
4.1 Transferability and Instrument of
Transfer
4.2 Submission of Instruments of Transfer
4.3 Execution of Instrument of Transfer
4.4 Enquiry as to Title not required
4.5 Transfer fee
4.6 Appointment of Registrar and/or
Transfer Agent
5 ALTERATION OF CAPITAL
5.1 Ordinary Resolution required
5.2 Articles Apply to New Capital
5.3 Class Meetings of Members
6 PURCHASE OF SHARES
6.1 Company authorized to Purchase its
Shares
7 BORROWING POWERS
7.1 Powers of Directors
7.2 Negotiability of Debt Obligations
7.3 Special Rights on Debt Obligations
7.4 Registers of Debt Obligations and
Holders thereof
7.5 Execution of Debt Obligation Documents
<PAGE>
Table of Contents - 2
- - ------------------
PART ARTICLE SUBJECT
---- ------- -------
8 GENERAL MEETINGS
8.1 Classification of General Meetings
8.2 Calling of Meetings
8.3 Notice for General Meetings
8.4 Waiver of Notice
8.5 Notice of Special Business at General Meeting
9 PROCEEDINGS AT GENERAL MEETINGS
9.1 Special Business
9.2 Quorum
9.3 Requirement of Quorum
9.4 Lack of Quorum
9.5 Chairman
9.6 Alternate Director
9.7 Scrutineer and Secretary
9.8 Adjournments
9.9 Decisions by Show of Hands or Poll
9.10 Resolution need not be Seconded
9.11 Casting Vote
9.12 Manner of Taking Poll
9.13 Casting of Votes
9.14 Demand for Poll
9.15 Demand for Poll not to prevent
Continuance of Meeting
9.16 Retention of Ballots Cast on a Poll
10 VOTES OF MEMBERS
10.1 Number of Votes per Share or Member
10.2 Votes by Joint Holders
10.3 Representative of a Corporate Member
10.4 Votes by Committee of a Member
10.5 Execution of Proxy Instrument
10.6 Qualification of Proxyholder
10.7 Deposit of Proxy
10.8 Validity of Proxy Vote
10.9 Form of Proxy
11 DIRECTORS
11.1 Responsible for Management
11.2 Number of Directors
11.3 Share Qualification of Directors
11.4 Remuneration and Expenses of Directors
11.5 Directors interested in Transactions
with the Company
11.6 Right to hold Office & contract with
the Company
11.7 Director acting in Professional Capacity
11.8 Alternate Directors
12 RETIREMENT AND ELECTION OF DIRECTORS
12.1 Election at Annual General Meetings
12.2 Filling a Casual Vacancy
<PAGE>
Table of Contents - 3
- - -------------------
PART ARTICLE SUBJECT
---- ------- -------
13 PROCEEDINGS OF DIRECTORS
13.1 Meetings - Quorum - Chairman
13.2 Call and Notice of Meetings
13.3 Competence of Quorum
13.4 Appointment of Directors Committees
13.5 Committee Chairman
13.6 Committee Meetings
13.7 Validity of Meeting where Directorship
Deficient
13.8 Newly-elected Directors
13.9 Waiver of Notice of Meetings
13.10 Majority Rule
13.11 Resolution in Writing Effective
14 OFFICERS
14.1 President and Secretary Required
14.2 Directors Authority
15 EXECUTION OF DOCUMENTS
15.1 Seal optional
15.2 Official Seal
15.3 Affixation of Seal to Documents
15.4 Mechanical Reproduction of Signatures
16 DIVIDENDS
16.1 Declaration of Dividends
16.2 Proportionate to Number of Shares held
16.3 Dividend bears No Interest
16.4 Payment in Specie Permitted
16.5 Capitalization of Undistributed Surplus
16.6 Payment of Dividends
16.7 Effect of Transfer of Dividends
16.8 Fractional Shares
16.9 Reserves
17 ACCOUNTS
17.1 Accounts to be kept
17.2 Location of Accounts
18 NOTICES
18.1 Method of giving Notice
18.2 Notice to Joint Holders
18.3 Notice to Personal Representative
18.4 Notice Deemed Effective
18.5 Date Notice Deemed given
18.6 Persons to Receive Notice
19 INDEMNIFICATION AND PROTECTION OF DIRECTORS, OFFICERS, EMPLOYEES
AND CERTAIN AGENTS
19.1 Party to Legal Proceedings
19.2 Officers, Employees, Agents
19.3 Extent of Indemnification
<PAGE>
Table of Contents - 4
- - ------------------
PART ARTICLE SUBJECT
19 19.4 Persons Undertaking Liabilities
cont'd 19.5 Limitation of Liability
19.6 Directors may rely
19.7 Company may purchase Insurance
20 PROHIBITIONS
20.1 Transfers and Registers Restricted
20.2 Subscription for Shares and/or
Debt Obligations Restricted
-----------------
<PAGE>
"COMPANIES ACT"
ARTICLES
of
POTENTIAL MINES LTD.
PART 1 - INTERPRETATION
1.1 In these Articles, unless the context otherwise requires:
(a) "Board of Directors" or "Board" means the directors of the Company for
the time being;
(b) "Companies Act" means the Companies Act of the Province of British
Columbia from time to time in force and all amendments thereto and includes
all regulations and amendments thereto made pursuant to that Act;
(c) "directors" means the directors of the Company for the time being;
(d) "month" means calendar month;
(e) "register" means the register of members to be kept pursuant to the
Companies Act;
(f) "registered address" of a member shall be his address as recorded in
the register;
(g) "registered address" of a director means his address as recorded in the
Company's register of directors to be kept pursuant to the Companies Act;
(h) "seal" means the common seal of the Company, if the Company has one;
(i) "share warrant" means an instrument granting the holder thereof the
right to purchase shares or any other security or debt obligation of the
Company.
1.2 Expressions referring to writing shall be construed as including
references to printing, lithography, typewriting, photography and other modes of
representing or reproducing words in a visible form.
1.3 Words importing the singular include the plural and vice versa; and
words importing a male person include a female person and a corporation.
1.4 In these Articles, unless the context otherwise requires, expressions
defined in the Companies Act shall have the meanings so defined.
<PAGE>
- 2 -
1.5 Table "A" of the Companies Act shall not apply to the Company.
PART 2 - SHARES AND SHARE CERTIFICATES
2.1 Every member is entitled, without charge, to one certificate
representing the share or shares of each class held by him or upon paying a sum
not exceeding the amount permitted by the Companies Act, as the directors may
from time to time determine, several certificates each for one or more of those
shares; provided that, in respect of a share or shares held jointly by several
persons, the Company shall not be bound to issue more than one certificate, and
delivery of a certificate for a share to one of several joint holders or to his
duly authorized agent shall be sufficient delivery to all; and provided further
that the Company shall not be bound to issue certificates representing
redeemable shares, if such shares are to be redeemed within one month of the
date on which they were allotted. Any share certificate may be sent through the
post by registered prepaid mail to the member entitled thereto at his registered
address, and the Company shall not be liable for any loss occasioned to the
member owing to any such share certificate so sent being lost in the post or
stolen.
2.2 If a share certificate:
(a) is worn out or defaced, the directors may, upon production to them
of that certificate and upon such other terms if any, as they may think
fit, order the certificate to be cancelled and may issue a new certificate
in lieu thereof
(b) is lost, stolen or destroyed, then upon proof thereof to the
satisfaction of the directors and upon such indemnity, if any, as the
directors deem adequate being given, a new share certificate in place
thereof shall be issued to the person entitled to the lost, stolen or
destroyed certificate; or
(c) represents more than one share and the registered owner thereof
surrenders it to the Company with a written request that the Company issue
registered in his name two or more certificates each representing a
specified number of shares and in the aggregate representing the same
number of shares as the certificate so surrendered, the Company shall
cancel the certificate so surrendered and issue in place thereof
certificates in accordance with the request.
A sum, not exceeding that permitted by the Companies Act, as the directors may
from time to time fix, shall be paid to the Company for each certificate issued
under this article.
2.3 Except as required by law or statute or these articles, no person need
be recognized by the Company as holding any share upon any trust, and the
Company shall not be bound by or compelled in any way to recognize (even when
having notice thereof) any equitable, contingent, future or partial interest in
any share or any interest in any fractional part of a share or (except only as
by law or statute
<PAGE>
- 3 -
or these articles provided or as ordered by a court of competent jurisdiction)
any other rights in respect of any share except an absolute right to the
entirety thereof in the registered holder.
2.4 Every share certificate shall be signed manually by at least one
officer or director of the Company, or by or on behalf of a registrar, branch
registrar, transfer agent or branch transfer agent of the Company and any
additional signatures may be printed or otherwise mechanically reproduced and a
certificate signed in either of those fashions shall be as valid as if signed
manually, notwithstanding that any person whose signature is so printed or
mechanically reproduced on a share certificate has ceased to hold the office
that he is stated on such certificate to hold at the date of the issue of a
share certificate.
2.5 The certificates of shares registered in the name of two or more
persons shall be delivered to the person first named on the register.
PART 3 - ISSUE OF SHARES
3.1 Subject to the Companies Act, the issue of shares shall be under the
control of the directors who may, subject to the rights of the holders of the
shares of the Company for the time being issued, allot or otherwise dispose of,
and/or grant options on, shares authorized but not yet issued at such times and
to such persons, including directors, and in such manner and upon such terms and
conditions, and at such price or for such consideration, as the directors, in
their absolute discretion, may determine.
3.2 Subject to the Companies Act, the Company or the directors on behalf
of the Company may pay a commission or allow a discount to any person in
consideration of his subscribing or agreeing to subscribe, whether absolutely or
conditionally, for any shares in the Company, or procuring or agreeing to
procure subscriptions, whether absolutely or conditionally, for any such shares
provided that the rate of the commission or discount shall not in the aggregate
exceed twenty-five per cent (25%) of the subscription price of such shares, or
an amount equivalent to such percentage.
PART 4 - SHARE TRANSFERS
4.1 Subject to the restrictions, if any, set forth in these articles, any
member may transfer his shares by instrument in writing executed by or on behalf
of such member and delivered to the Company or its transfer agent. The
instrument of transfer of any share of the Company shall be in the form, if any,
on the back of the Company's form of share certificates, and in any other form
which the directors may approve. If the directors so require, each instrument of
transfer shall be in respect of only one class of share.
<PAGE>
- 4 -
4.2 Every instrument of transfer shall be executed by the transferor and
left at the registered office of the Company or at the office of its transfer
agent or registrar for registration together with the share certificate for the
shares to be transferred and such other evidence, if any as the directors or the
transfer agent or registrar may require to prove the title of the transferor or
his right to transfer the shares. All instruments of transfer where the transfer
is registered shall be retained by the Company or its transfer agent or
registrar and any instrument of transfer, where the transfer is not registered,
shall be returned to the person depositing the same together with the share
certificate which accompanied the same when tendered for registration. The
transferor shall remain the holder of the share until the name of the transferee
is entered on the register in respect of that share.
4.3 The signature of the registered owner of any shares, or of his duly
authorized attorney, upon the instrument of transfer constitutes an authority to
the Company to register the shares specified in the instrument of transfer in
the name of the person named in that instrument of transfer as transferee or, if
no person is so named, then in any name designated in writing by the person
depositing the share certificate and the instrument of transfer with the Company
or its agents.
4.4 The Company, and its directors, officers and agents are not bound to
enquire into any title of the transferee to any shares to be transferred, and
are not liable to the registered or any intermediate owner of those shares, for
registering the transfer.
4.5 There shall be paid to the Company in respect of the registration of
any transfer a sum, not exceeding that permitted by the Companies Act, as the
directors deem fit.
4.6 The Company may appoint a Trust Company as its Registrar and Transfer
Agent, or either of them and may keep its Register of Members at the office of
such Trust Company and may keep either within or without the Province of British
Columbia one or more branch Registers of Members at the office of any
corporation duly authorized to act as agent for any other corporation for the
purpose of issuing, counter-signing, signing, registering or certifying the
certificates or other documents of titles to shares, debentures or other
securities.
PART 5 - ALTERATION OF CAPITAL
5.1 The Company may by ordinary resolution amend its memorandum to
increase the share capital of the Company by:
(a) creating shares with par value or shares without par value, or both;
(b) increasing the number of shares with par value or shares without par
value, or both;
(c) increasing the par value of a class of shares with par value, if no
shares of that class are issued.
<PAGE>
- 5 -
5.2 Except as otherwise provided by conditions imposed at the time of
creation of any new shares or by these articles, any addition to the authorized
capital resulting from the creation of new shares shall be subject to the
provisions of these articles.
5.3 Unless these articles elsewhere specifically otherwise provide, the
provisions of these articles relating to general meetings shall apply, with the
necessary changes and so far as they are applicable, to a class meeting of
members holding a particular class of shares.
PART 6 - PURCHASE OF SHARES
6.1 Subject to the special rights and restrictions attached to any class
of shares, the Company may, by a resolution of the directors and in compliance
with the Companies Act, redeem or purchase any of its shares at the price and
upon the terms specified in such resolution and no redemption need be made pro
rata among members holding shares of the class or kind to be redeemed. Unless
the Company is purchasing the shares from a dissenting member pursuant to the
Companies Act or through a stock exchange, the Company shall make its offer to
purchase pro rata to every member who holds shares of the class proposed to be
purchased.
PART 7 - BORROWING POWERS
7.1 The directors may from time to time at their discretion authorize the
Company to borrow any sum of money for the purposes of the Company and may raise
or secure the repayment of that sum in such manner and upon such terms and
conditions, in all respects, as they think fit, and in particular, and without
limiting the generality of the foregoing, by the issue of bonds or debentures,
or any mortgage or charge, whether specific or floating, or other security on
the undertaking or the whole or any part of the property of the Company, both
present and future.
7.2 The directors may make any debentures, bonds or other debt obligations
issued by the Company by their terms, assignable free from any equities between
the Company and the person to whom they may be issued, or any other person who
lawfully acquires the same by assignment, purchase, or otherwise, howsoever.
7.3 The directors may authorize the issue of any share warrants or of any
debentures, bonds or other debt obligations of the Company at a discount,
premium or otherwise, and with special or other rights or privileges as to
redemption, surrender, drawings, allotment of or conversion into or exchange for
shares, attending at general meetings of the Company and otherwise as the
directors may determine at or before the time of issue.
<PAGE>
- 6 -
7.4 The Company shall keep or cause to be kept in accordance with the
Companies Act
(a) a register of its debentures and debt obligations, and
(b) a register of the holders of its bonds, debentures and other debt
obligations,
and subject to the provisions of the Companies Act may keep or cause to be kept
one or more branch registers of the holders of its bonds, debentures, or other
debt obligations within or without the Province of British Columbia as the
directors may from time to time determine and the directors may by resolution,
regulations or otherwise make such provisions as they think fit respecting the
keeping of such branch registers.
7.5 If the directors so authorize, or if any instrument under which any
bonds, debentures or other debt obligations of the Company are issued so
provides, any bonds, debentures and other debt obligations of the Company,
instead of being manually signed by the directors or officers authorized in that
behalf, may have the facsimile signatures of such directors or officers printed
or otherwise mechanically reproduced thereon and in either case, shall be as
valid as if signed manually, but no such bond, debenture or other debt
obligation shall be issued unless it is manually signed, countersigned or
certified by or on behalf of a trust company or other transfer agent or
registrar duly authorized by the directors or the instrument under which such
bonds, debentures or other debt obligations are issued so to do.
Notwithstanding that any person whose facsimile signature is so used shall have
ceased to hold the office that he is stated on such bond, debenture or other
debt obligation to hold at the date of the actual issue thereof, the bond,
debenture or other debt obligation shall be valid and binding on the Company.
PART 8 - GENERAL MEETINGS
8.1 Every general meeting, other than an annual general meeting, shall be
called an extraordinary general meeting.
8.2 The directors may whenever they think fit call a general or
extraordinary general meeting of the Company.
8.3 Not less than 21 days' notice of any general meeting specifying the
time and place of meeting and in case of special business, the general nature of
that business shall be given in the manner mentioned in Part 18 hereof, or in
such other manner, if any, as may be prescribed by ordinary resolution whether
previous notice thereof has been given or not, to any person as may by law or
under these Articles or other regulations of the Company entitled to receive
such notice from the Company. But the accidental omission to give notice of any
meeting to, or the non-receipt of any such notice by, any of such persons shall
not invalidate any proceedings at that meeting.
8.4 Persons entitled to notice of a general meeting may
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waive or reduce the period of notice convening the meeting, by unanimous consent
in writing, and may give such waiver before, during or after the meeting.
8.5 Where any special business includes the presenting, considering,
approving, ratifying or authorizing of the execution of any document, then the
portion of any notice relating to such document shall be sufficient if the same
states that a copy of the document or proposed document is or will be available
for inspection by members at a place in the Province of British Columbia
specified in such notice during specified business hours in any specified
working day or days prior to the date of the meeting.
PART 9 - PROCEEDINGS AT GENERAL MEETINGS
9.1 The following business at a general meeting shall be deemed to be
special business:
(a) all business at an extraordinary general meeting, and
(b) all business that is transacted at an annual general meeting, with the
exception of the consideration of the financial statement and the report of
the directors and auditors, the determining of the number of directors, the
election of directors, the appointment of the auditors and determination of
the remuneration of auditors and directors, and such other business as,
under these Articles, ought to be transacted at an annual general meeting,
or any business which is brought under consideration by the report of the
directors or auditors.
9.2 Save as otherwise herein provided a quorum for a general meeting shall
be one member or a proxyholder representing one member personally present at
the commencement of the meeting and holding or representing by proxy not less
than one of the issued shares of a class of shares the holders of which are
entitled to attend and to vote at such meeting.
9.3 No business, other than the election of a chairman and the adjournment
of the meeting shall be transacted at any general meeting unless the quorum
requisite was present at the commencement of the meeting.
9.4 If within one half (1/2) hour from the time appointed for a meeting a
quorum is not present, the meeting if convened by requisition of the members,
shall be dissolved; but in any other case it shall stand adjourned to the same
day in the next week at the same time and place. If at such adjourned meeting a
quorum is not present within one half (1/2) hour from the time appointed, the
members present shall be a quorum.
9.5 The Chairman of the Board, if any, or in his absence the President of
the Company shall be entitled to preside as chairman at every general meeting of
the Company.
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9.6 If at any meeting neither the Chairman of the Board, if any, nor the
President is present within fifteen (15) minutes after the time appointed for
holding the meeting or is willing to act as chairman, the directors present
shall choose some one of their number to be chairman. If no director be present
or if all the directors present decline to take the chair or shall fail to so
choose, the members present shall choose a chairman.
9.7 The chairman of the meeting shall appoint a scrutineer or scrutineers
and a secretary for the meeting. Such scrutineers need not be shareholders of
the Company.
9.8 The chairman of the meeting may, with the consent of any meeting at
which a quorum is present and shall if so directed by the meeting, adjourn the
meeting from time to time and from place to place, but no business shall be
transacted at any adjourned meeting other than the business left unfinished at
the meeting from which the adjournment took place. When a meeting is adjourned
for sixty (60) days or more, notice of the adjourned meeting shall be given as
in the case of a general meeting. Save as aforesaid, it shall not be necessary
to give any notice of an adjournment or of the business to be transacted at an
adjourned meeting.
9.9 Subject to the provisions of the Companies Act, every question
submitted to a general meeting shall be decided on a show of hands unless a poll
is, before or on the declaration of the result of the show of hands, directed by
the chairman or demanded by a member entitled to vote who is present in person
or by proxy, and the chairman shall declare to the meeting the decision on every
question in accordance with the result of the show of hands or the poll, and
such decision shall be entered in the book of proceedings of the Company. A
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority, and an entry to that effect in the book containing the minutes of the
proceedings of the Company shall be conclusive evidence of the fact without
proof of the number or proportion of the votes recorded in favour of or against
such resolution. A proxyholder shall be entitled to vote as if he were a member
on a show of hands.
9.10 No resolution proposed at a meeting need be seconded and the chairman
of any meeting shall be entitled to move or second a resolution.
9.11 In case of an equality of votes upon a resolution, the chairman shall,
either on a show of hands or on a poll, have a casting or second vote.
9.12 Subject to the provisions of Article 9.13 hereof, if a poll is duly
demanded as aforesaid, it shall be taken in such manner and at such time within
seven (7) days from the date of the meeting and place as the chairman of the
meeting directs, and either at once or after an interval or adjournment not
exceeding seven (7) days, and the result of the poll shall be deemed to be the
resolution of the meeting at which the poll is demanded. A demand for a poll may
be withdrawn. In the
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case of any dispute as to the admission or rejection of a vote, the chairman
shall determine the same and such determination made in good faith shall be
final and conclusive.
9.13 A member entitled to more than one vote need not, if he votes, use all
his votes or cast all the votes he uses in the same way.
9.14 No poll may be demanded on the election of a chairman of a meeting and
a poll demanded on a question of adjournment shall be taken at the meeting
without adjournment.
9.15 The demand of a poll shall not prevent the continuance of a meeting
for the transaction of any business other than the question on which a poll has
been demanded.
9.16 Every ballot cast upon a poll and every proxy appointing a proxyholder
who cast a ballot upon a poll shall be retained by the Secretary for the
period and be subject to the inspection as the Companies Act may provide.
PART 10 - VOTES OF MEMBERS
10.1 Subject to any special rights or restrictions for the time being
attached to any shares, on a show of hands every member present in person shall
have one vote, and on a poll every member, present in person or by proxy, shall
have one vote for each share of which he is the holder.
10.2 Where there are joint members registered in respect of any share, any
one of the joint members may vote at any meeting, either personally or by proxy,
in respect of the share as if he were solely entitled to it. If more than one of
the joint members is present at any meeting, personally or by proxy, the joint
member present whose name stands first on the register in respect of the share
shall alone be entitled to vote in respect of that share. Several executors
or administrators of a deceased member in whose sole name any share stands
shall, for the purpose of this Article, be deemed joint members.
10.3 A corporation, not being a subsidiary, that is a member may vote by
its proxyholder or by its duly authorized representative, who is entitled to
speak and vote, and in all other respects exercise the rights of a member and
any authorized representative shall be deemed to be a member for all purposes in
connection with any general meeting of the Company.
10.4 A member for whom a committee has been duly appointed may vote,
whether on a show of hands or on a poll, by his committee and his committee may
appoint a proxyholder.
10.5 A proxy or an instrument appointing a duly authorized representative
or a corporation shall be in writing, under the hand of the appointor or of his
attorney duly authorized in
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writing, or, if such appointor is a corporation, either under its seal or under
the hand of an officer or attorney duly authorized.
10.6 Any person may act as proxyholder whether or not he is entitled on
his own behalf to be present and to vote at the meeting at which he acts as
proxyholder. The proxy may authorize the person so appointed to act as
proxyholder for the appointor for the period, at such meeting or meetings and
to the extent permitted by the Companies Act.
10.7 A proxy and the power of attorney or other authority, if any, under
which it is signed or a notarially certified copy thereof shall be deposited at
the registered office of the Company or at such other place as is specified for
that purpose in the notice calling the meeting at such time as the directors may
fix by resolution, not exceeding forty eight (48) hours, excluding Saturdays and
holidays, preceding any meeting or adjourned meeting of members and in the
absence of such resolution may be deposited with the chairman of the meeting
prior to the commencement thereof. In addition to any other method of depositing
proxies provided for in these Articles, the directors may from time to time make
regulations permitting the lodging of proxies appointing proxyholders at some
place or places other than the place at which a meeting or adjourned meeting of
members is to be held and for particulars of such proxies to be cabled or
telegraphed or sent in writing before the meeting or adjourned meeting to the
Company or any agent of the Company for the purpose of receiving such
particulars and providing that proxies appointing a proxyholder so lodged may
be voted upon as though the proxies themselves were produced to the chairman of
the meeting or adjourned meeting as required by this Part and votes given in
accordance with such regulations shall be valid and shall be counted.
10.8 A vote given in accordance with the terms of a proxy shall be valid
notwithstanding the previous death or insanity of the member or revocation of
the proxy or of the authority under which the proxy was executed, or the
transfer of the share in respect of which the proxy is given, provided no
prior notice in writing of the death, insanity, revocation or transfer as
aforesaid shall have been received at the registered office of the Company or
by the chairman of the meeting or adjourned meeting at which the vote was
given.
10.9 Unless, in the circumstances, the Companies Act requires any other
form of proxy, a proxy appointing a proxyholder, whether for a specified
meeting or otherwise, shall be in the form following, or in any other form that
the directors shall approve:
(Name of Company)
The undersigned hereby appoints ___________________
or failing him_________________________________ or
______________________________ as proxyholder for
the undersigned to attend at and vote for and on
behalf of the undersigned at the general meeting
of the Company to be held on the ___ day of
_________ , 19 ____ , and at any adjournment of
that meeting.
Signed this ___ day of ____________ , 19__.
______________________________
(Signature of Member)
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PART 11 - DIRECTORS
11.1 The management of the business of the Company shall be vested in the
directors and the directors may exercise all such powers and do all such acts
and things as the Company is, by its Memorandum, Articles, the Companies Act, or
otherwise, authorized to exercise and do, but subject nevertheless to the
provisions of all laws affecting the Company and of these Articles and to any
regulations not being inconsistent with these Articles which shall from time to
time be made by the Company in general meeting; but no regulation made by the
Company in general meeting shall invalidate any prior act of the directors that
would have been valid if that regulation had not been made.
11.2 The subscribers to the Memorandum are the first directors. The
directors to succeed the first directors and the number of directors may be
determined in writing by a majority of the subscribers to the Memorandum. The
number of directors may be changed from time to time by the directors but shall
never be less than one (1) while the Company is not a reporting company and
three (3) while the Company is a reporting company.
11.3 A director shall not be required to have any share qualification but
any person not being a member of the Company who becomes a director shall be
deemed to have agreed to be bound by the provisions of the Articles to the same
extent as if he were a member of the Company.
11.4 The remuneration of the directors as such may from time to time be
determined by the directors, such remuneration to be in addition to any salary
or other remuneration paid to any officer or employee of the Company as such,
who is also a director. The directors shall be repaid such reasonable expenses
as they may incur in and about the business of the Company and if any director
shall perform any professional or other services for the Company that in the
opinion of the directors are outside the ordinary duties of a director or shall
otherwise be specifically occupied in or about the Company's business, he may be
paid a remuneration to be fixed by the Board, or, at the option of such
director, by the Company in general meeting, and such remuneration may be either
in addition to, or in substitution for, any other remuneration that he may be
entitled to receive, and the same shall be charged as part of the ordinary
working expenses. Unless otherwise determined by ordinary resolution the
directors on behalf of the Company may pay a gratuity or pension or allowance on
retirement to any director who has held any salaried office or place of profit
with the Company or to his spouse or dependents and may make contributions to
any fund and pay premiums for the purchase or provision of any such gratuity,
pension or allowance.
11.5 A director who is in any way, whether directly or indirectly,
interested in a contract or proposed contract or transaction with the Company
shall disclose the nature and extent of his interest at a meeting of the
directors in accordance with the provisions of the Companies Act. A director
shall not vote in respect of any such contract or transaction with the Company
in which he is interested and if he shall do so his vote shall not be counted,
but he may be counted in the quorum present at the meeting at which such vote is
taken.
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11.6 A director may hold any office or place of profit under the Company,
other than auditor, in conjunction with his office of director for such period
and on such terms, as to remuneration or otherwise, as the directors may
determine. Subject to compliance with the Companies Act, no director or intended
director shall be disqualified by his office from contracting with the Company
either with regard to his tenure of any such office or place of profit or as
vendor, purchaser or otherwise.
11.7 Any director may act by himself or his firm in a professional capacity
for the Company, and he or his firm shall be entitled to remuneration for
professional services as if he were not a director.
11.8 A director whose permanent place of residence is outside the city
where the registered office of the Company is situate, or who is about to leave
or is temporarily outside the said city, may appoint any person, whether a
member or director of the Company or not, to act on his behalf as an alternate
director and while such other person holds office as an alternate director, he
shall be entitled to notice of meetings of the directors and to attend and vote
thereat accordingly and he shall, if present, be included in computing the
quorum, and if he be a director, shall be entitled to two votes, one as a
director and the other as an alternate director, and shall further be empowered
to sign resolutions of the Board of Directors, and shall ipso facto vacate
office if and when the appointor vacates or is removed from office as director
and any appointment or removal under this clause shall be effected by notice
which may be in writing under the hand of the director making the same or may be
made by telegram or cable to the registered office of the Company.
PART 12 - RETIREMENT AND ELECTION OF DIRECTORS
12.1 At each annual general meeting of the Company all the directors shall
retire and the Company shall elect a Board of Directors consisting of the number
of directors for the time being fixed pursuant to these Articles. A retiring
director shall be eligible for re-election.
12.2 The directors shall have power at any time and from time to time to
appoint any person as a director, to fill a casual vacancy on the Board or a
vacancy resulting from an increase of the number of directors as determined by
them or as necessitated by the Companies Act upon the Company becoming a
reporting company. Any director so appointed shall hold office only until the
next following annual general meeting of the Company but shall be eligible for
re-election at such meeting.
PART 13 - PROCEEDINGS OF DIRECTORS
13.1 The directors may meet together at such places as they think fit for
the dispatch of business, adjourn and otherwise regulate their meetings and
proceedings, as they
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see fit. The directors may from time to time fix the quorum necessary for the
transaction of business and unless so fixed such quorum shall be a majority of
the Board. The Chairman of the Board, if any, or in his absence the President of
the Company, shall be chairman of all meetings of the Board, but if at any
meeting neither the Chairman of the Board, if any, nor the President shall be
present within thirty (30) minutes after the time appointed for holding the same
or if both the Chairman of the Board and the President, being present decline to
act, the directors present may choose some one of their number to be chairman at
such meeting. A director interested is to be counted in a quorum notwithstanding
his interest.
13.2 A director may at any time, and the Secretary, upon the written
request of a director, shall call a meeting of the directors. Notice thereof
specifying the time and place of such meeting shall be mailed, postage prepaid,
addressed to each of the directors at his registered address at least forty-
eight (48) hours before the time fixed for the meeting or such lesser period as
may be reasonable under the circumstances, or such notice may be given to each
director either personally or by leaving it at his usual business or residential
address or by telephone, telegram, telex or other method of transmitting
visually recorded messages, at least forty-eight (48) hours before such time or
such lesser period as may be reasonable under the circumstances. It shall not be
necessary to give to any director notice of a meeting of directors immediately
following a general meeting at which such director has been elected or notice of
a meeting of directors at which such director shall have been appointed.
Accidental omission to give notice of a meeting of directors to, or the non-
receipt of notice by, any director, shall not invalidate the proceedings at that
meeting.
13.3 A meeting of the directors at which a quorum is present shall be
competent to exercise all or any of the authorities, power and discretions for
the time being vested in or exercisable by the directors.
13.4 The directors may delegate any but not all of their powers to
committees consisting of such of the directors as they think fit. Any committee
so formed shall in the exercise of the powers so delegated conform to any
regulations that may from time to time be imposed on it by the directors, and
shall report every act or thing done in exercise of such powers to the earliest
meeting of the directors to be held next after the same shall have been done.
13.5 A committee may elect a chairman of its meetings; if no such chairman
is elected, or if at any meetings the chairman is not present within thirty (30)
minutes after the time appointed for holding the same, the members present may
choose one of their number to be chairman of the meeting.
13.6 The members of a committee may meet and adjourn as they think proper.
Questions arising at any meeting shall be determined by a majority of votes of
the members present and in case of an equality of votes the chairman shall have
a second or casting vote.
13.7 All acts done by any meeting of the directors or
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by a committee of directors or by any person acting as a director shall,
notwithstanding that it shall be afterwards discovered that there was some
defect in the appointment of any such director or person acting as aforesaid, or
that they or any of them were disqualified, be as valid as if every such person
had been duly appointed and was qualified to be a director.
13.8 For the first meeting of the Board to be held immediately following
the appointment or election of a director or directors at an annual or general
meeting of shareholders or for a meeting of the Board at which a director is
appointed to fill a vacancy in the Board, no notice of such meetings shall be
necessary to the newly elected or appointed director or directors in order for
the meeting to be duly constituted, provided that a quorum of directors is
present.
13.9 Any director of the Company who may be absent either temporarily or
permanently from the Province of British Columbia may file at the office of the
Company a waiver of notice which may be by letter, telegram or cable of any
meeting of the directors and may at any time withdraw such waiver, and until
such waiver is withdrawn, no notice of meetings of directors shall be sent to
such director, and any and all meetings of the directors of the Company, notice
of which shall not have been given to such director, shall, provided a quorum of
the directors is present, be valid and binding upon the Company.
13.10 Questions arising at any meeting of the directors shall be decided by
a majority of votes. In case of an equality of votes the Chairman shall have a
second, or casting vote.
13.11 A resolution in writing, signed by each director or his alternate
shall be as valid and effectual as if it had been passed at a meeting of
directors duly called and held. Such resolution may be in one or more
counterparts each signed by one or more directors or alternate directors which
together shall be deemed to constitute one resolution in writing.
PART 14 - OFFICERS
14.1 The Board of Directors shall from time to time appoint a President, a
Secretary, and such other officers of the Company as it may determine, none of
whom, save the Chairman of the Board, if any, and the President, need be
directors.
14.2 All appointments of officers shall be made upon such terms and
conditions and at such remuneration, whether by way of salary, fee, commission,
participation in profits, or otherwise, as the directors may determine, and
every such appointment shall be subject to termination at the pleasure of the
directors unless otherwise fixed by contract.
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PART 15 - EXECUTION OF DOCUMENTS
15.1 The directors may provide a common seal for the Company and for its
use and the directors shall have power from time to time to destroy the same and
substitute a new seal in place thereof.
15.2 Subject to the provisions of the Companies Act, the directors may
provide for use in any other Province, State or Country an official seal, which
shall have on its face the name of the Province, Territory, State or Country
where it is to be used.
15.3 The directors shall provide for the safe custody of the common seal of
the Company, if any, which shall not be affixed to any instrument except:
(a) by any two directors; or
(b) by any two officers; or
(c) by any one officer and one director; or
(d) by any one officer or Director of the Company as may be prescribed by
resolution of the Board of Directors or by ordinary resolution, whether
previous notice thereof has been given or not;
and such officer or officers or director or directors shall sign every
instrument to which the seal of the Company is so affixed in their presence.
15.4 The signature of any officer of the Company may, if authorized by the
directors, be printed, lithographed, engraved or otherwise mechanically
reproduced upon all instruments executed or issued by the Company or any officer
thereof; and any instrument on which the signature of any such person is so
reproduced, shall be deemed to have been manually signed by such person whose
signature is so reproduced and shall be as valid to all intents and purposes as
if such instrument had been signed manually, and notwithstanding that the person
whose signature is so reproduced may have ceased to hold office at the date of
the delivery or issue of such instrument. The term "instrument" as used in this
Article shall include deeds, mortgages, hypothecs, charges, conveyances,
transfers and assignments of property, real or personal, agreements, releases,
receipts and discharges for the payment of money or other obligations,
certificates of the Company's shares, share warrants of the Company, bonds,
debentures and other debt obligations of the Company, and all paper writings.
PART 16 - DIVIDENDS
16.1 The directors may declare dividends and fix the date of record
therefor and the date for payment thereof. No notice need be given of the
declaration of any dividend.
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16.2 Subject to the terms of shares with special rights or restrictions,
all dividends shall be declared according to the number of shares held.
16.3 No dividend shall bear interest against the Company.
16.4 The directors may direct payment of any dividend wholly or partly by
the distribution of specific assets or of paid-up shares, bonds, debentures or
other debt obligations of the Company, or in any one or more of those ways, and,
where any difficulty arises in regard to the distribution, the directors may
settle the same as they think expedient, and in particular may fix the value for
distribution of specific assets, and may determine that cash payments shall be
made to a member upon the basis of the value so fixed in place of fractional
shares, bonds, debentures or other debt obligations in order to adjust the
rights of all parties, and may vest any of those specific assets in trustees
upon such trusts for the persons entitled as may seem expedient to the
directors.
16.5 Notwithstanding anything contained in these Articles the directors may
from time to time capitalize any undistributed surplus on hand of the Company
and may from time to time issue as fully paid and non-assessable any unissued
shares or any bonds, debentures or other debt obligations of the Company as a
dividend representing such undistributed surplus on hand or any part thereof.
16.6 Any dividend, interest or other moneys payable in cash in respect of
shares may be paid by cheque or warrant sent through the post directed to the
registered address of the holder, or, in the case of joint holders, to the
registered address of that one of the joint holders who is first named on the
register or to such person and to such address as the holder or joint holders
may in writing direct. Every such cheque or warrant shall be made payable to the
order of the person to whom it is sent. Any one of two or more joint holders may
give effectual receipts for any dividends, bonuses or other moneys payable in
respect of the shares held by them as joint holders.
16.7 A transfer of a share shall not pass the right to any dividend
declared thereon before the registration of the transfer in the register.
16.8 Notwithstanding any other provisions of these Articles should any
dividend result in any shareholders being entitled to a fractional part of a
share of the Company, the directors shall have the right to pay such
shareholders in place of that fractional share, the cash equivalent thereof
calculated on the par value thereof or, in the case of shares without par value,
calculated on the price or consideration for which such shares were or were
deemed to be issued, and shall have the further right and complete discretion to
carry out such distribution and to adjust the rights of the shareholders with
respect thereto on as practical and equitable a basis as possible including the
right to arrange through a
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fiscal agent or otherwise for the sale, consolidation or other disposition of
those fractional shares on behalf of those shareholders of the Company.
16.9 The directors may, before declaring any dividend, set aside out of the
profits of the Company such sums as they think proper as appropriations from
income, which shall at the discretion of the directors, be applicable for
meeting contingencies, or for equalizing dividends, or for any other purpose to
which the profits of the Company may be properly applied, and pending such
application may, either be employed in the business of the Company or be
invested in such investments as the directors in their discretion may from time
to time determine.
PART 17 - ACCOUNTS
17.1 The directors shall cause records and books of accounts to be kept as
necessary to properly record the financial affairs and conditions of the Company
and to comply with the provisions of statutes applicable to the Company.
17.2 The directors shall determine the place at which the accounting
records of the Company shall be kept and those records shall be open to the
inspection of any director during the normal business hours of the Company.
PART 18 - NOTICES
18.1 A notice may be given to any member or director, either personally or
by sending it by post to him in a prepaid letter, envelope or wrapper addressed
to the member or director at his registered address.
18.2 A notice may be given by the Company to joint members in respect of a
share registered in their names by giving the notice to the joint member first
named in the register of members in respect of that share.
18.3 A notice may be given by the Company to the persons entitled to a
share in consequence of the death or bankruptcy of a member by sending it
through the post in a prepaid letter envelope or wrapper addressed to them by
name, or by the title of representatives of the deceased, or trustee of the
bankrupt, or by any like description, at the address, if any, supplied for the
purpose by the persons claiming to be so entitled, or until that address has
been so supplied, by giving the notice in any manner in which the same might
have been given if the death or bankruptcy had not occurred.
18.4 Any notice or document sent by post to or left at the registered
address of any member shall, notwithstanding that member is then deceased and
whether or not the Company has notice of his death, be deemed to have been duly
served in respect of any registered shares, whether held solely or
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jointly with other persons by that deceased member, until some other person is
registered in his place as the member or joint member in respect of those
shares, and that service shall for all purposes of these Articles be deemed a
sufficient service of such notice or document on his personal representatives
and all persons, if any, jointly interested with him in those shares.
18.5 Any notice sent by post shall be deemed to have been served on the
business day following that on which the letter, envelope or wrapper containing
that notice is posted, and in proving service thereof it shall be sufficient to
prove that the letter, envelope or wrapper containing the notice was properly
addressed mailed, postage prepaid.
18.6 Notice of every general meeting shall be given in the manner
authorized by these Articles, to:
(a) every member holding a share or shares carrying the right to vote at
such meetings on the record date or, if no record date was established by
the directors, on the date of the mailing;
(b) the personal representative of a deceased member; and
(c) the trustee in bankruptcy of a bankrupt member.
PART 19 - INDEMNIFICATION AND PROTECTION OF DIRECTORS,
OFFICERS, EMPLOYEES AND CERTAIN AGENTS
19.1 The Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
proceeding, whether or not brought by the Company or by a corporation or other
legal entity or enterprise as hereinafter mentioned and whether civil, criminal
or administrative, by reason of the fact that he is or was a director, officer,
employee, or agent of the Company or is or was serving at the request of the
Company as a director, officer, employee or agent of another corporation, a
partnership, joint venture, trust or other enterprise, against all costs,
charges and expenses, including legal fees and any amount paid to settle the
action or proceeding or satisfy a judgment, if he acted honestly and in good
faith with a view to the best interests of the corporation or other legal
entity or enterprise as aforesaid of which he is or was a director, officer,
employee or agent, as the case may be, and exercised the care, diligence and
skill of a reasonably prudent person, and with respect to any criminal or
administrative action or proceeding, he had reasonable grounds for believing
that his conduct was lawful; provided that the Company shall not be bound to
indemnify any such person, other than a director, officer or an employee of the
Company, who shall have notice of this Article and to have contracted with the
Company in the terms hereof solely by virtue of his acceptance of such
office or employment, if in acting as agent for the Company or as a director,
officer, employee or agent of another corporation or other legal entity or
enterprise as aforesaid, he does so by written request of the Company containing
an express reference to this Article; and provided further that no
indemnification of a director or former director of the Company,
<PAGE>
-19 -
or director or former director of a corporation in which the Company is or was a
shareholder, shall be made except to the extent approved by the Court pursuant
to the Companies Act or any other statute. The determination of any action, suit
or proceeding by judgment, order, settlement, conviction or otherwise shall not,
of itself, create a presumption that the person did not act honestly and in good
faith and in the best interests of the Company and did not exercise the care,
diligence and skill of a reasonably prudent person and, with respect to any
criminal action or proceeding, did not have reasonable grounds to believe that
his conduct was lawful.
19.2 The Company shall indemnify any person other than a director in
respect of any loss, damage, costs or expenses whatsoever incurred by him while
acting as an officer, employee or agent for the Company unless such loss,
damage, costs or expenses shall arise out of failure to comply with
instructions, wilful act or default or fraud by such person in any of which
events the Company shall only indemnify such person if the directors, in their
absolute discretion, so decide or the Company by ordinary resolution shall so
direct.
19.3 The indemnification provided by this Part shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any other Part, or any valid and lawful agreement, vote of
members or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall enure to the benefit of the heirs,
executors and administrators of such person. The indemnification provided by
this Article shall not be exclusive of any powers, rights, agreements or
undertakings which may be legally permissible or authorized by or under any
applicable law. Notwithstanding any other provisions set forth in this Part, the
indemnification authorized by this Part shall be applicable only to the extent
that any such indemnification shall not duplicate indemnity or reimbursement
which that person has received or shall receive otherwise than under this Part.
19.4 The directors are authorized from time to time to cause the Company to
give indemnities to any director, officer, employee, agent or other person who
has undertaken or is about to undertake any liability on behalf of the Company
or any corporation controlled by it.
19.5 Subject to the Companies Act, no director or officer or employee for
the time being of the Company shall be liable for the acts, receipts, neglects
or defaults of any other director or officer or employee, or for joining in any
receipt or act for conformity, or for any loss, damage or expense happening to
the Company through the insufficiency or deficiency of title to any property
acquired by order of the Board for the Company, or for the insufficiency or
deficiency of any security in or upon which any of the moneys of or belonging to
the Company shall be invested or for any loss or damages arising from the
bankruptcy, insolvency, or tortious act of any person, firm or corporation with
whom or which any moneys, securities or effects shall be lodged or deposited or
for any loss occasioned by any error of judgment or oversight on his part or for
any other loss, damage or misfortune whatever which may happen in
<PAGE>
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the execution of the duties of his respective office or trust or in relation
thereto unless the same shall happen by or through his own wilful act or
default, negligence, breach of trust or breach of duty.
19.6 Directors may rely upon the accuracy of any statement of fact
represented by an officer of the Company to be correct or upon statements in a
written report of the auditor of the Company and shall not be responsible or
held liable for any loss or damage resulting from the paying of any dividends or
otherwise acting in good faith upon any such statement.
19.7 The directors may cause the Company to purchase and maintain insurance
for the benefit of any person who is or was a director, officer, employee or
agent of the Company or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, a partnership,
joint venture, trust or other enterprise against any liability incurred by him
as a director, officer, employee or agent.
- - --------------------------------------------------------------------------------
NAME, RESIDENT ADDRESS AND OCCUPATION OF SUBSCRIBER (S)
- - --------------------------------------------------------------------------------
/s/ George John Neumann
-----------------------------
GEORGE JOHN NEUMANN
1733 Comox Street
Vancouver, B.C.
SOLICITOR
/s/ Keith Allan Christofferson
------------------------------
KEITH ALLAN CHRISTOFFERSON
3040 West 27 Avenue
Vancouver, B.C.
SOLICITOR
- - --------------------------------------------------------------------------------
DATED at Vancouver, British Columbia, this 20 day of December , 1973.
WITNESS to the above signatures:
/s/ [illegible]
------------------------------
