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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
|X| REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
OR
|_| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: _______________
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(b) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to________________________
Commission file number: ______________
EARTHPORT.COM PLC
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(Exact name of Registrant as specified in its charter)
UNITED KINGDOM
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(Jurisdiction of incorporation or organization)
5 ST. MARY ABBOT'S PLACE, LONDON W8 6LS, ENGLAND
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(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
NONE N/A
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Title of each Class Name of each exchange on which registered
Securities registered or to be registered pursuant to Section 12(g) of the Act:
ORDINARY SHARES, SERIES A ORDINARY 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
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(Title of Class)
Number of outstanding shares of each of the issuer's classes of capital
or common stock as of the close of September 17, 1999:
Ordinary Shares - 6,650,715; Series A Ordinary Shares - 520,000
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: X
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Indicate by check mark which financial statement item the registrant
has elected to follow.
Item 17 Item 18 X
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TABLE OF CONTENTS
PART I
ITEM 1. THE CORPORATION AND DESCRIPTION OF BUSINESS
ITEM 2. DESCRIPTION OF PROPERTY
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. CONTROL OF REGISTRANT
ITEM 5. NATURE OF TRADING MARKET
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY
HOLDERS
ITEM 7. TAXATION
ITEM 8. SELECTED FINANCIAL DATA
ITEM 9. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
ITEM 11. COMPENSATION OF OFFICERS AND DIRECTORS
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
DIRECTORS, OFFICERS AND EMPLOYEES.
ITEM 13. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES - NOT APPLICABLE
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS. - NOT APPLICABLE.
PART IV
ITEM 17. FINANCIAL STATEMENTS NOT APPLICABLE
ITEM 18. FINANCIAL STATEMENTS
ITEM 19 FINANCIAL STATEMENTS AND EXHIBITS
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this document constitute "forward-looking statements". Any
statements that express or involve discussions with respect to predictions,
expectations, beliefs, plans, projections, objectives, assumptions or future
events or performance (often, but not always, using words or phrases such as
"expects" or "does not expect", "is expected", "anticipates" or "does not
anticipate", "plans", "estimates" or "intends", or stating that certain actions,
events or results "may", "could", "would", "might" or "will" be taken, occur or
be achieved) are not statements of historical fact and may be "forward-looking
statements". Such statements are included, among other places, in this documents
under the heading"Description of Business", "Description of Properties" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations". Forward-looking statements are based on expectations, estimates and
projections at the time the statements are made that involve a number of risks
and uncertainties which could cause actual results or events to differ
materially from those presently anticipated. These include, but are not limited
to, dependence on growth of online commerce, limited operating history,
management of growth and dependence of relationships with strategic partners.
Additional information concerning these and other factors which could affect the
operations or financial results of the Company are included in this documents
under the heading "Description of Business - Risk Factors".
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Introduction
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EarthPort.com plc ("We" or "EarthPort" or "Company") offers services that
include processing e-commerce transactions and providing software and services
for lotteries. EarthPort operates an Internet transaction portal for clearing
such multiple on-line transactions for merchants, including stockbrokers and
Internet ready conventional merchants, and lotteries. It also supplies software
and marketing services to the only government licensed, global, interactive
lottery on the Internet. We have recorded over 100,000 people who have
transacted through EarthPort. Those who transact with EarthPort become
registered members ("Members"). We have developed a method of market
segmentation that should, in the opinion of our management, increase the number
of our Members to several million by mid-2000. We believe that the transaction
engine used by EarthPort is a robust, dynamically scaleable, cash clearing house
for e-commerce. We currently record up to 10 million Internet hits to our web
sites per week. We believe that with further marketing expenditure and the
current capacity of our technological platform, EarthPort is well positioned to
be a global branded e-commerce company.
Unless the context requires otherwise, as used herein, any reference to us,
EarthPort or the Company includes the Company's three subsidiaries, EarthPort
Entertainment Limited, Earth Ltd. and EarthPort Transaction Services AG. The
Company's ordinary shares are currently traded on the United Kingdom's ("UK")
OFEX trading facility. The Company's Series A Ordinary Shares have been approved
for listing on Bermuda Stock Exchange Mezzanine Market under a symbol "ERPT_BH",
and will begin trading shortly upon completion of our offering of up to 2
million of Series A Ordinary Shares to global investors, which occurred on
September 17, 1999.
Background of the Corporation
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EarthPort.com plc was incorporated under the Companies Act of 1985 in England
and Wales on September 3, 1997 as a private limited company, under the name
Electronic Fundraising Company Limited ("EFC"). On March 19, 1998, the Company
was re-registered as a public company under the name of Electronic Fundraising
Company plc. On May 28, 1999 the Company re-registered as a public company under
the name EarthPort.com plc. The liability of the members of EarthPort.com plc is
limited.
Prior to formation of EarthPort.com plc, Walton Consulting Limited, a UK
registered company ("Walton") owned by two of our Directors, David Vanrenen and
Alan Tucker, developed software for operating Internet based lotteries. Walton
established a high capacity server facility in Liechtenstein to operate the
International Lottery in Liechtenstein Foundation ("ILLF") lotteries on the
Internet (see "The Relationship between EarthPort and ILLF").
EarthPort acquired the assets and liabilities of Walton, for which there was no
payment to Vanrenen and Tucker, in September 1997. EarthPort was established to
market Internet lotteries and to continue to develop lottery and other software.
EarthPort, through EarthPort Entertainment Limited, earns a commission on ticket
sales for marketing Internet lotteries as well as fees for the provision of
software and transaction capabilities.
We publish our financial statements in pounds sterling. This registration
statement contains translations of certain pound sterling amounts into United
States dollar amounts. Unless otherwise indicated, all amounts expressed in
United States dollars are based upon conversions of amounts of pounds sterling
into United States dollars at the rate of $1.61 per pound sterling, the noon
buying rate in New York City for cable transfers in pounds sterling certified
for customs purposes by the Federal Reserve Bank of New York on September 8,
1999. See "Exchange Rate Information" for historical information regarding the
noon buying rate.
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BUSINESS OF THE CORPORATION
INDUSTRY BACKGROUND
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GROWTH OF THE INTERNET AND ONLINE COMMERCE
The Internet has emerged as a global medium enabling millions of people
worldwide to share information, communicate and conduct business electronically.
International Data Corporation ("IDC") estimates that the number of Web users
will grow from approximately 69 million worldwide in 1997 to approximately 320
million worldwide by the end of 2002. This growth is expected to be driven by
the large and growing number of PCs installed in homes and offices, the
decreasing cost of PCs, easier, faster and cheaper access to the Internet,
improvements in network infrastructure, the proliferation of Internet content
and the increasing familiarity and acceptance of the Internet by businesses and
consumers. The Internet possesses a number of unique characteristics that
differentiate it from traditional media: users communicate or access information
without geographic or temporal limitations; users access dynamic and interactive
content on a real-time basis; and users communicate and interact instantaneously
with a single individual or with entire groups of individuals. As a result of
these characteristics, Web usage is expected to continue to grow rapidly. The
growing adoption of the Web represents an enormous opportunity for businesses to
conduct commerce over the Internet. IDC estimates that commerce over the
Internet will increase from approximately $32 billion worldwide in 1998 to
approximately $130 billion worldwide in 2000. While companies initially focused
on facilitating and conducting transactions between businesses over the
Internet, a number of companies more recently have focused on facilitating a
wide variety of business-to- consumer transactions. These companies typically
use the Internet to offer standard products and services that can be easily
described with graphics and text and do not necessarily require physical
presence for purchase, such as books, CDs, videocassettes, automobiles, home
loans, airline tickets and online banking and stock trading. The Internet gives
these companies the opportunity to develop one-to-one relationships with
customers worldwide from a central location without having to make the
significant investments required to build a number of local retail presences,
manage a worldwide distribution infrastructure or develop the printing and
mailing infrastructure associated with traditional direct marketing activities.
The increasing functionality, accessibility and overall usage of the Internet
and on-line services have made them an attractive commercial medium. The
Internet and other on-line services are evolving into a unique sales and
marketing channel, similar to the evolution of retail stores, mail-order
catalogs and television shopping. On-line retailers can interact directly with
customers by frequently adjusting their featured selections, editorial insights,
shopping interfaces, pricing and visual presentations. The minimal cost to
publish on the Web, the ability to reach and serve a large and global group of
customers electronically from a central location, and the potential for
personalized low-cost customer interaction provide additional economic benefits
for on-line retailers. Unlike traditional retail channels, on-line retailers do
not have the burdensome costs of managing and maintaining a significant retail
store infrastructure or the continuous printing and mailing costs of catalog
marketing. Because of these advantages over traditional retailers, on-line
retailers have the potential to build large, global customer bases quickly and
to achieve superior economic returns over the long term. An increasingly broad
base of products is being sold on-line, including computers, travel services,
brokerage services, automobiles, music and books.
THE BUSINESS-TO-CONSUMER AND THE PERSON-TO-PERSON TRADING MARKET OPPORTUNITY
The exchange of goods between individuals --person-to-person trading -- has
traditionally been conducted through trading forums such as classified
advertisements, collectibles shows, garage sales and flea markets or through
intermediaries, such as auction houses and local dealer shops. These markets are
highly inefficient, making person-to-person trading difficult for buyers and
sellers. Their fragmented, regional nature makes it difficult and expensive for
buyers and sellers to meet, exchange information and complete transactions. The
localized nature of these markets also results in a limited variety and breadth
of goods available in any one location. Buyers are limited to searching through
local classified ads or to traveling to numerous geographically-dispersed flea
markets, trade shows or dealer shops in order to find items of interest. These
markets often have high transaction costs because intermediaries either mark up
goods for resale or charge a commission. Because these markets are information
inefficient, buyers and sellers lack a reliable and convenient means of
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setting prices for sales or purchases. The Internet offers for the first time
the opportunity to create a compelling global marketplace that overcomes the
inefficiencies associated with traditional person-to-person trading while
offering the benefits of Internet-based commerce to the person-to-person trading
market. An Internet- based centralized trading place facilitates buyers and
sellers meeting, listing items for sale, exchanging information, interacting
with each other and, ultimately, consummating transactions. It allows buyers and
sellers to trade directly, bypassing traditional intermediaries and lowering
costs for both parties. This trading place is global in reach, offering buyers a
significantly broader selection of goods to purchase and providing sellers the
opportunity to sell their goods efficiently to a broader base of buyers. It
offers significant convenience, allowing trading at all hours and providing
continually-updated information. By leveraging the interactive nature of the
Internet, this trading place also facilitates a sense of community through
direct buyer and seller communication, thereby enabling the interaction between
individuals with mutual interests. In addition, this community orientation,
facilitation of direct buyer and seller communication and efficient access to
information on a particular buyer or seller's trading history can help alleviate
the risks of anonymous trading. As a result, there exists a significant market
opportunity for an Internet-based centralized trading place that applies the
unique attributes of the Internet to facilitate person-to-person trading.
EARTHPORT'S TECHNOLOGY
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EarthPort operates an Internet transaction portal for clearing multiple on-line
transactions for merchants, including Internet-ready conventional merchants and
stockbrokers, and lotteries. We believe that the EarthPort transaction portal is
a robust, dynamically scaleable, cash clearing house for e-commerce. We
currently records up to 10 million Internet hits to our websites per week. We
believe that, with further marketing expenditure and the current capacity of our
technological platform, EarthPort is well positioned to be a global branded
e-commerce company.
We have developed an open standard hardware and software system that is designed
for reliability. System architecture is based on a distributed model that is
highly scaleable, flexible and modular, emphasizing extensive automation and a
high degree of redundancy that is designed to minimize single points of failure.
The systems integrate site management, network monitoring, quality assurance,
transaction processing and fulfilment services. Currently, the system can
support over 4 million hits per day, has a peak bandwidth of over 2.5 megabits
per second and can transfer 1300 megabytes of data per day.
We also employ in-house monitoring software that includes automated diagnostic
programs and intelligent agents, which test and measure system response, create
reports for evaluation by technical staff and generate pager calls in the event
of system failures. Additional software monitors abuse of the site by Members
and potential hackers. Reporting and tracking systems generate daily ETS
membership, order and campaign reports.
EarthPort operates 2 x fast web servers -- Digital Alpha server AS4100, 4 x 533
Mhz processors with 512 Mb RAM; 4 x secondary web servers -- Digital Alpha
server AS1000A, 1 x 400 Mhz processors with 384 Mb RAM. For its main database,
we operate on the platform of a Digital Alpha server AS4100, 4 x 466 Mhz
processors, with 1 Gb RAM, and a back-up database Digital Alpha AS4100 server, 2
x 300 Mhz processors with 768 Mb RAM. We also uses a Big IP2 redundant load
balancing traffic router.
INTERNET TRAFFIC
We processed 450,000 transactions for a total value of $2.5 million over the
3-month period of February through April 1999. The peak day in this period
recorded 25,660 transactions, representing $280,000 of turnover from a customer
base of approximately 100,000. We have developed a method of market segmentation
that targets specific individuals for a customized marketing program. We believe
that this campaign should result in the recruitment of several million
registered Members by mid-2000. In our opinion, this size of customer base has
the potential for EarthPort to achieve turnover in excess of $10 million per
day, although we cannot give assurances that such turnover will be achieved.
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SERVICES AND PRODUCTS
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Our services include processing e-commerce financial transactions and providing
software and services for lotteries. Our operations are conducted through our
wholly-owned subsidiaries.
EARTHPORT TRANSACTION SERVICES AG
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EarthPort Transaction Services AG ("ETS") is a wholly owned subsidiary of the
Company. ETS was established on March 16, 1999 under the laws of Principality of
Lichtenstein. ETS was also incorporated in the UK on May 27, 1999.
ETS was established in Liechtenstein as a transaction driven e-commerce portal
facilitating financial and other services over the Internet, including servicing
the global lottery. ETS seeks to bridge the gap between customer and merchant.
Customers wishing to purchase goods and services on the Internet can do so
immediately in a safe, authenticated environment as EarthPort Members. Apart
from servicing the e-commerce community, global lottery and the games for cash
market, ETS will seek transaction business in the financial services sector,
travel industry and the insurance industry. The expansion into these businesses
is a natural extension of the hardware and software installations that we have
developed and we believe this will ultimately result in a large Internet
transaction portal. ETS intends to deliver its services through its
Liechtenstein based transaction portal.
ETS is in a powerful position in having an existing, robust, high volume
transaction portal with the ability to assimilate quickly and efficiently
transactions that are more diverse than our current lottery services. It
recently acquired this transaction portal and server farm from International
Lottery in Liechtenstein Foundation ("ILLF") for (pound)3,321,500 in cash. It
now provides clearing and on-line transaction facilities for ILLF, its first
customer, and will focus on clearing for on-line merchants such as stockbrokers,
lotteries and conventional merchants. We have been approached by many Internet
operators to handle the financial transaction side of their businesses and have
now decided to pursue this Internet transaction portal ("ITP") business
aggressively through ETS. EarthPort aims, through ETS, to deliver via the
Internet a full range of financial services provided by third party brokers and
intermediaries.
We are confident that we have the expertise and the infrastructure required to
expand ETS into a leading ITP. The hardware and the software have been developed
and tested for over three years and cater for a large simultaneous transaction
load, with a high degree of fault tolerance. We cannot provide assurances,
however, that ETS will become a leading ITP.
Security of the servers and the credit card clearing systems are continually
upgraded by our technical team.
LIECHTENSTEIN
Liechtenstein and its financial centre participate as members of the European
Economic Area ("EEA"). Not only does this entitle Liechtenstein to the trading
benefits of membership of the European Union (EU), it also enabled Liechtenstein
to join the EEA without renouncing its long standing and rewarding partnership
with Switzerland. Elements of the Swiss partnership that remain intact are
fiscal sovereignty and banking and insurance secrecy. As well as benefiting from
the advantages of the Swiss economic area, Liechtenstein, as a member of the
EEA, can participate in the free movement of goods, services and capital
throughout the EU.
The currency agreement with Switzerland provides the banks in Liechtenstein with
integral access to the Swiss money, credit and securities markets. As a result
Liechtenstein's banks have seen their credit ratings rise, due notably to the
Swiss National Bank's function as lender of last resort.
The new EU compatible Investment Fund Law provides Liechtenstein with an
attractive framework, known as the Single Licence, that entitles units in
investment funds, once they have been authorised by the Liechtenstein
Government, to be marketed throughout the EU. Liechtenstein also has a Moody's
and Standard and Poor's rating of AAA.
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CORE STRATEGY
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To capitalize on our technology, we are addressing the needs of the rapidly
growing market of Internet users. We plan to apply our technology to performance
solutions for business in the emerging Intranet marketplace. Our primary
objective is to build a position as the world's leading e-commerce facility. The
key elements of our strategy are to solve this problem by unifying payment
structures for our merchants. Using the directory of merchants, EarthPort
Members will be able to frequent a huge shopping mall, where all they will need
is one method of payment in order to buy whatever they want.
EarthPort is a proven e-commerce portal that aims to provide its Members with
the opportunity to trade securities and futures, and to buy and sell goods and
services in conditions of maximum security on the net. We believe that this will
create a feeling of trust between Members and merchants.
The ability to efficiently transfer cash and immediately settle transactions
between customer and merchant will allow for significant potential for secondary
commerce. For example, each registered ETS Member customer, is the potential
customer of financial service providers and the portal will be populated by
providers of on-line services such as stock and futures trading. The
privatization of government pension liabilities in Europe and rising global
demand for private retirement savings will likely make ETS Members an attractive
market for fund managers. ETS Members will have access to approved providers of
investment products and the ability to monitor the performance of these
providers.
The ability of ETS Members to use their one account to transact and settle with
every ETS merchant will place non member merchants that are outside the portal
in a non-competitive position. Members, for example, may trade equities and
futures on-line through multiple providers, moving funds seamlessly to where
they are required.
We believe that, given relative uniformity of prices, the leading retail sites -
sites that lead for reasons other than price, such as reputation and
technological features - stand to receive a tremendous amount of the Internet's
total retail traffic in the future. We believe that these retail leaders need
not be concerned about location to attract business, as is the case in off-line
business, but only about their reputation. As the electronic facilitator for an
international government authorized and regulated lottery in Europe, we believe
that EarthPort has built a reputation for efficiency, security and integrity.
These features are an essential part of ETS's profile and image. We believe the
Company's track record in e-commerce transactions is considerable and it will be
positioned as a leading access point for financial services on the Internet. We
also believe that ETS's successful cash transfer and transaction settlement
systems, proven in transactions with Members from 220 countries, could make it a
recognized global cash-clearing house for e-commerce.
To understand the strategy more clearly, it may be helpful to compare the
similarities between ETS and some existing USA Internet companies that have used
their underlying skills and technology to expand into other areas. On a large
scale, this includes Amazon.com, an Internet bookshop now selling CDs and gifts,
and America Online (AOL.com), an online service provider that has diversified to
facilitate Internet transactions.
COMPETITION FOR ETS
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The online commerce market, particularly over the Web, is new, rapidly evolving
and intensely competitive. There are numerous companies operating portals for
processing of various e-commerce transactions on the Internet. Web search
engines such as Yahoo! and AOL, that are involved in online commerce either
directly or in collaboration with other retailers, publishers, distributors and
retail vendors of books, music, video and other products, and other large
specialty booksellers and media corporations, many of which possess significant
brand awareness, sales volume and customer bases, and traditional retailers who
currently sell, or who may sell, products or services through the Internet. We
believe that the principal competitive factors in our market are: brand
recognition, selection, personalized services, convenience, price,
accessibility, customer service, quality of search tools, quality of editorial
and other site content, and reliability and speed of fulfillment. Furthermore,
we do not believe that there are any operators that are tackling e-commerce in
the manner that ETS is positioning itself.
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As the online commerce market continues to grow, other companies may enter into
business combinations or alliances that strengthen their competitive positions.
We may not be able to compete successfully against these and future competitors.
Also, see "Risk Factors - Competition"
EARTHPORT ENTERTAINMENT LIMITED
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EarthPort Entertainment Limited ("ENT") is a wholly owned subsidiary of the
Company. ENT was established in the UK on February 10, 1999. ENT
is a provider of interactive lottery games and systems. ENT provides the
software and marketing services for the only global, government licensed,
interactive lotteries available on the Internet. These are the lotteries
operated by ILLF, PLUS Lotto and Millions2000. ENT seeks to market its Internet
lottery products and services on a scaleable basis to licensed and approved
national and state lotteries and will provide turnkey solutions for the
establishment of lotteries on the Internet. This outsourcing service will range
from the white labelling of its basic lottery engine to the provision of front
end Internet sites and a range of games and formats. The most exciting areas of
development at present are interactive television and Internet games.
ENT owns all of the entertainment and lottery intellectual property of the
Company. See "Patents and Trademarks".
EarthPort has transferred its right to receive 8% of the total value of ticket
sales of the ILLF lotteries to ENT.
LOTTERIES - INDUSTRY OVERVIEW
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The worldwide lottery market is large. Lotteries are operated by state and
foreign governmental authorities and their licensees in approximately 200
jurisdictions worldwide. Worldwide lottery ticket sales in 1997 were
approximately $116.6 billion. Worldwide expenditure on lotteries was $120
billion in 1996 (International Gaming and Wagering Bulletin) and the management
estimates that it has surpassed $140 billion in 1998. For example, in 1994, its
first year of operation, the UK Lottery generated sales of (pound)40 million a
week and it is now generating about (pound)120 million a week. Assuming that
people can be persuaded to divert some of the resources currently devoted to
sport or casino betting to lotteries, there is a potential market of a further
$600 billion and 300 million people who gamble regularly. In the United States,
there are currently 38 lotteries offering traditional on-line draw games and 39
lotteries selling instant tickets. The term "on-line," as used within the
lottery industry, does not mean that the ticket is distributed over the
Internet. Rather, it refers to the use of a network of special purpose lottery
terminals connected through dedicated phone lines to a central lottery computer.
In 1997, lottery sales in the United States were $35.5 billion. Governments have
authorized lotteries primarily as a means of generating non-tax revenues.
Lottery revenues are often a means by which to lower taxes and are frequently
set aside for particular public purposes, such as education, aid to the elderly,
conservation,transportation and economic development. As lottery ticket sales
have become a significant source of funding for such programs, many
jurisdictions have come to rely on the revenues generated by such sales. Over
the past three years, lottery ticket sales have grown at an annual rate of 1.0%
worldwide and 2.2% in the United States. Both rates reflect a slowdown from
prior years. The Company believes this trend increases the propensity of
lotteries to seek new products and services to provide revenue growth similar to
rates experienced in the past.
All of the United States jurisdictions operating traditional lotteries currently
include on-line lottery as part of their operations. Outside the United States,
many countries have government-operated or privately-licensed lotteries, most of
which have historically been off-line. Approximately 85 foreign lottery
authorities have implemented on-line lottery systems.
There are several advantages to on-line lotteries as compared to off-line
lotteries. Most importantly, wagers can be accepted and processed by an on-line
lottery system until minutes before a drawing. In cases where a large prize has
attracted substantial wagering interest, the extended sales period increases the
potential for higher lottery revenue. Unlike instant games or scratchers, where
the number of winning tickets and amount of awards must be determined in
advance, on-line lotteries allow for the rollover of lottery jackpots. In
addition, on-line lottery systems provide greater reliability and security than
either off-line numbers games or scratchers, allow a wider variety of games to
be offered, and automate accounting and administrative procedures that are
otherwise performed manually. The Company believes that instant ticket game
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revenues have been growing at a faster rate than total domestic U.S. lottery
revenues because of relatively higher payout percentages and the increasing
automation of instant ticket validation and accounting systems. Such games
compete with the lottery games electronically distributed on the Company's
systems.
Typically 50% of the gross revenues of a domestic on-line lottery is returned to
the players in the form of prizes. Approximately 15% is used to fund the
operations of the lottery, including the expenses of the lottery authority,
costs of advertising, payments to point-of-purchase retailers and payments to
vendors. The remaining amount, approximately 35%, is available to the state to
support specific public programs or as a contribution to the state's general
fund.
In the United States, products and services are typically marketed to lottery
authorities through long-term contracts, awarded through a competitive bidding
process pursuant to which the lottery vendor supplies, installs and operates the
lottery system for the state or jurisdiction in return for a percentage of
ticket sales. The vendor generally retains title to the lottery system. Once a
contract is awarded to a lottery vendor, that vendor is typically the sole
provider of on-line lottery services and operations to that jurisdiction for a
specified time period within a defined geographic territory.
The international market, as well as a minority of United States jurisdictions,
is typically characterized by on-line lottery system sales instead of long-term
contracts. In the on-line lottery system, the vendor develops and installs the
on-line lottery system and trains lottery personnel in the operation of the
system for a fixed fee. Other services, such as equipment maintenance and ticket
stock production, may be available under separate contracts.
INTERNATIONAL LOTTERY IN LIECHTENSTEIN FOUNDATION ("ILLF")
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The ILLF lotteries, which are known collectively as PLUS Lotto (pluslotto.com),
are actively supported by the International Federation of Red Cross and Red
Crescent Societies ("IFRC"), which has the right to receive and direct the
allocation of up to 25% of the total value of ticket sales pursuant to the
agreement between ILLF and IFRC. The International Foundation for the Millennium
Fund (the "Millennium Fund"), a non-profit charitable foundation established in
Liechtenstein, has been set up in co-operation with the IFRC, which has directed
that its share of the Millions2000 revenues should be allocated to this Fund. A
charitable committee established by ILLF and the Liechtenstein Government
directs the balance of the charitable revenues, amounting to a minimum of 5% of
total ticket sales. It is intended that the Millennium Fund will allocate funds
to leading international humanitarian organizations, including the World Health
Organisation (WHO) and the IFRC. A minimum of 50%, and maximum of 75%, of the
total value of ticket sales is payable in prizes.
THE RELATIONSHIP BETWEEN EARTHPORT AND ILLF
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EarthPort entered into an exclusive agreement with International Lottery in
Liechtenstein Foundation ("ILLF"), a charitable foundation, on 25 September
1997, as subsequently amended on August 3, 1998 and November 30, 1998, under
which EarthPort would establish and maintain a suitable structure to
facilitate software development, marketing and sales promotion of PLUS Lotto
products on a world-wide basis, in territories where it is legitimate for
EarthPort to do so, in return for 10% of the total value of ticket sales. The
Agreement will extend until 31 December 2010 or any longer period for which the
ILLF Licence is extended by the Liechtenstein Government. ILLF is authorized and
controlled by the Liechtenstein Government, under the supervision of Coopers &
Lybrand AG, Vaduz (Part of Coopers & Lybrand International).
IFRC AGREEMENT
- --------------
The lottery games provided by ILLF were re-branded as PLUS Lotto following an
agreement with the International Federation of Red Cross and Red Crescent
Societies ("IFRC") dated January 13, 1997. Under the terms of the IFRC Agreement
the IFRC will actively promote PLUS Lotto through the Red Cross and Red Crescent
National Societies and will receive at least 25% of the revenue generated by the
weekly lotteries. The IFRC Agreement was authorized by the Liechtenstein
Government on February 18, 1997 and PLUS Lotto went live on the Internet on
March 18, 1997. The initial term of the IFRC Agreement is for a period of five
years, although it will be renewed automatically for further five year periods
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unless either ILLF or IFRC gives six months notice to terminate it or (if
sooner) following the termination of the Licence. If the IFRC terminates the
IFRC Agreement, it will be prevented from directly or indirectly operating
lottery games on the Internet or its equivalent for five years thereafter. In
our marketing operations, we have adopted a policy of co-operating fully with
the IFRC.
PLUS LOTTO (Pluslotto.com)
PLUS Lotto operates 17 lottery games specially designed for the Internet,
ranging from a 6 ball from 49 ball lottery, with a guaranteed and insured 2
million Swiss Franc Jackpot, to interactive instant games such as bingo and
scratch-off lotteries. Its experience and existing player-base make it a leading
Internet gaming site in Europe.
MILLIONS2000 (millions2000.com)
Millions2000 is a conventional lottery game with a main prize draw that will
take place on January 1, 2000 and a number of monthly interim draws for smaller
prizes. The purchase of a single lottery ticket at a price of $US10 entitles the
holder to participate in the main and all interim prizes until 1 January 2000.
An international consortium comprising Grey Communications Group, David Paradine
Productions (Sir David Frost) EURO TV Consultancy, BDO Franchising, CLI Connect
and EarthPort.com will be responsible for promotion. The suppliers of prizes
include Ford, Dell and Thomas Cook.
CYBER SPIDERS
EarthPort has created the term "Cyber Spiders". These are individuals or
organizations whose Internet home pages have a link to the PLUS Lotto or
Millions2000 sites. They receive half of EarthPort's commission from plays
through these links. They may be owners of Cyber Cafes or Internet Service
Providers. There are currently approximately 4,000 cyber spiders linking to the
ILLF sites.
NEW GAMES
The PLUS Lotto suite of games and Millions2000 are designed to cater for a
worldwide audience. The rate of visits to PLUS Lotto web sites that are not
regularly updated reduces over time. In order to ensure that the PLUS Lotto
audience is maintained, we believe that change is not only desirable but also
necessary. Our games development team is constantly researching and building new
games. One of the concepts that we expect will become reality in the future is
our development of regional and national games to appeal to specific markets.
STRATEGY FOR LOTTERY AND GAMING OPERATIONS
- ------------------------------------------
We believe that the electronic distribution of lottery tickets through these
systems will increase sales for lotteries because the systems make the purchase
of tickets more easily accessible and because they make use of technology to
enhance the lottery gaming experience. Our lotteries website and the lotteries
will be open 24 hours a day, seven days a week, and will be able to
electronically distribute lottery tickets and games and offer lottery players
convenient and timely product fulfillment, including the ability to pay prize
winnings or cash credits on an overnight delivery option for a fee via check or
electronic funds transfer. We believe that our Internet lottery distribution
systems will encourage lottery patrons to play more frequently and will also
attract new lottery customers. We further believe that our systems provide
lotteries with numerous advantages relative to traditional means of distribution
including player tracking ability, sale of tickets over the Internet and
entertaining fast-play instant games. We believe that the combination of the
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advantages of Internet commerce and our ability to customize our systems will
result in EarthPort becoming an agent and leading provider of products and
services to the lottery industry.
Our strategy is to capitalize on our proprietary Internet lottery distribution
systems and become an agent and leading provider of products and services to the
lottery industry.
COMPETITION FOR ENT
- -------------------
In general, the lottery business is highly competitive, and we may face
competition from a number of domestic and foreign instant ticket manufacturers,
on-line lottery system providers and other competitors. In particular, there are
currently three primary lottery services competitors in the United States: GTECH
Corporation ("GTECH"), Automated Wagering International, Inc. ("AWI"), a
subsidiary of Powerhouse Technologies, Inc. ("Powerhouse"), and Scientific Games
Holdings Corp. ("Sci-Games"). We believe that these companies engage in vigorous
competition with respect to existing lottery technologies and services and have
experienced a decline in the growth of existing lottery operations. Our
objective is to provide value added lottery systems and services for the global,
international markets. These products, systems and services, we believe, can
support new methods and styles of lottery participation, providing new growth
opportunities for established state lotteries and higher margin returns for the
providers of related technologies and services.
Internationally, there are many lottery services and product suppliers that
provide competition to the Company, in addition to the companies listed above.
We believes that we have the ability to provide technologies that support new
methods and styles of lottery participation in foreign countries. In addition,
we believe that applications of our electronic lottery distribution systems,
which are based on the use of standardized components that support a variety of
hardware and software interfaces, can provide cost-effective solutions to
improve lottery operations in remote and developing nations.
Both in the domestic market and internationally, factors that influence the
award of lottery contracts in addition to price are believed to include, among
others, the ability to optimize lottery revenues through game design and
technical capability, quality of the product, dependability, production
capacity, marketing experience, financial condition and reputation of the
bidder, the security and integrity of the bidder's production operations,
products and services and the satisfaction of various other requirements and
qualifications imposed by specific jurisdictions.
We believe that we have no current competitor in the market for the specific
lottery products we have developed. Competitors have typically either
manufactured only instant tickets or provided only certain on-line services to
support conventional sales of paper lottery tickets, including software for the
management systems, marketing assistance and various other specific duties.
However, certain competitors have announced plans to market Internet-based
lottery systems. The Company has two primary international competitors in this
regard: Powerhouse, which changed its name from Video Lottery Technologies, Inc.
in 1997, and GTECH.
Furthermore, many sites on the Internet provide free games and there are
accordingly a wide variety of competitors in this "not-for-cash" market.
However, as a promoter of interactive lotteries for cash on the Internet, ENT
has a very limited number of competitors at present.
We are currently not aware of any global, government licensed, interactive,
lottery sites on the Internet, other than PLUS Lotto and Millions2000.
eLottery Inc., a NASDAQ listed company (ELOT) has a stated mission to provide
Internet lottery software to government licensed lotteries. As a result,
eLottery Inc. could become our competitor.
The national and state licensed lotteries of many countries in the world are
natural competitors of the ILLF lotteries promoted by ENT. However, they are
usually restricted in terms of their licences to marketing within their own
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borders. In this respect, PLUS Lotto and Millions2000 are unusual in that the
only territorial restrictions on their promotion, in terms of their licences,
are a prohibition on marketing in Switzerland.
We believe that our prior lottery experience will be a factor that limits our
competitors' ability to compete with us in the development of this market niche.
See "RISK FACTORS".
EARTH LTD.
- ----------
The Company received approval from the Bermuda Monetary Authority on April 20,
1999 to complete the acquisition of Earth Ltd. Earth Ltd. is a Bermuda exempt
company, established under a Private Act, known as The Earth Ltd. Act, 1996 (the
"Earth Act"). Pursuant to the Earth Act, Earth Ltd. is authorized to develop and
manage a global lottery from Bermuda, for the benefit of the Earth Foundation.
We acquired Earth Ltd. from Infinex International Inc. for stock and stock
options, pursuant to the agreement dated as of November 3, 1998 as amended on
January 11, 1999.
We plan to develop a business plan for Earth Ltd. later this year.
NEW DEVELOPMENTS
- ----------------
We are currently working on the development of software which will include the
following applications:
Package lottery software for deployment
- ---------------------------------------
EarthPort has had numbers of requests from potential and existing Internet
gaming site operators for EarthPort to make its lottery technology available. In
order to facilitate this ENT needs to package the systems so that they can be
deployed on other licensed sites.
Develop new global lotto game
- -----------------------------
ENT intends to develop a new global lotto game, which will be run under the
Liechtenstein license and be available to all operators around the world. This
game is similar in concept to Powerball.
Implement new interfaces to payment systems
- -------------------------------------------
ETS will be implementing new interfaces to payment systems in order to expand
the service beyond credit cards and bank transfers in order to encompass payment
in local country post offices, direct debit etc.
Implement ETS features
- ----------------------
We need to further implement the advanced features of the transaction portal
such as automated registration and log in at diverse sites and publishing an API
so that independent third parties can write interfaces to the systems.
Development of Interactive TV payment systems
- ---------------------------------------------
With the advent of digital TV, we are developing payment mechanisms that will
work inside set-top boxes and interact with the Internet based system.
Further development of telephone call centre based interactive payment systems
- ------------------------------------------------------------------------------
Enhancements to the existing automated call handling facilities in order to
facilitate the location of national call centers and communication via the
Internet to remote hosts for transaction processing. The implementation of these
developments will depend on the success of our offering of up to 2 million of
Series A Ordinary shares to global investors.
EARTHPORT WEB SITES
- -------------------
We have developed and maintain high profile website: EarthPort.com,enfunco.com,
pluslotto.com, millions2000.com and nowipo.com. These sites, complete with
services, product and corporate information, are where visitors can see samples
of EarthPort's services and products. We have developed well our presence into a
showcase for our services, products and technology and a gathering place for
consumers.
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RECENT OFFERING
- ---------------
EarthPort completed as of September 17, 1999, its offering of up 2,000,000
Series A Ordinary Shares to global (non-UK ) investors by selling a total of
520,000 Series A Ordinary Shares at $10 per share and raising funds of $5.2
million for EarthPort (excluding any commissions or fees). The shares issued in
the offering are represented by global share certificates. EarthPort's offering
prospectus has been approved by Bermuda Stock Exchange and EarthPort's Series A
Ordinary shares have been accepted for listing on Bermuda Stock Exchange
Mezzanine Market on August 12, 1999. The Series A Ordinary Shares rank PARI
PASSU in full for the voting, dividends and other distributions with the
Ordinary Shares. We intend to apply for listing on NASDAQ Stock Market, and upon
acceptance of the Ordinary Shares and Series A Ordinary Shares for listing,
Series A Ordinary Shares will be converted to Ordinary Shares.
EMPLOYEES
- ---------
As of August 31, 1999, we had 45 full time employees, of which 6 are based in
EarthPort's Liechtenstein office. We believe that our success will depend, in
part, on the ability to continue to attract, retain and motivate highly
qualified technical and management personnel. From time to time, we may also
employ independent contractors to support research and development, marketing
and administration. None of our employees is represented by a labor union, and
we consider our employee relations to be good.
INSURANCE
- ---------
EarthPort maintains general Employers' Liability Insurance with a limit of
(pound)10 million on employer's liability and (pound)2 million on public
liability.
RESEARCH AND DEVELOPMENT
- ------------------------
EarthPort anticipates to allocate between US$1 million to US$3 million for
software development for ETS and ENT. The adaptation of the ETS transaction
portal and cash-clearing engine to various types of merchants and products is a
continuum and requires state of the art proprietary and third party software.
The Company is also in need of working capital to ensure further development and
the provision of resources to develop ETS and ENT into profitable e-commerce
businesses.
PATENTS, TRADEMARKS AND COPYRIGHTS
- ----------------------------------
We believe that the success of EarthPort.com is in part dependent upon the
ability to design, develop and market new products and new or enhanced
applications. The patentability of such new products or applications is
evaluated and patent applications are filed in those jurisdictions where
necessary to protect unique developments. EarthPort currently has no patent
applications pending regarding the connection of key proprietary technology
elements.
We have registered our trademark "EarthPort" in the European Community and
applied to register "EarthPort" trademark in the United States. In addition, we
have the following registered trademarks in Great Britain and Northern Ireland:
"Millions 2000", "Golotto", "Earth Lottery" and "Micromedia". We may register
additional trademarks when we believe registration to be important to our
ongoing business operations. EarthPort also generally claims copyright
protection for its software and relies upon trade secret, contract and copyright
laws to protect its proprietary rights in its software, designs and
documentation.
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RISK FACTORS
- ------------
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING A DECISION
TO INVEST IN US. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY
AFFECTED. IF THAT HAPPENS, THE TRADING PRICE OF OUR SHARES COULD DECLINE, AND
YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. THIS REGISTRATION STATEMENT
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING THE RISKS
FACED BY US DESCRIBED BELOW AND ELSEWHERE HEREIN.
LIMITED OPERATING HISTORY
We commenced our business in March, 1998. Accordingly, we have a limited
operating history upon which you can evaluate our business and this registration
statement. Our historical data is of limited value in projecting future
operating results. You must consider our business in light of the risks,
expenses and problems frequently encountered by companies with a limited
operating history.
NO ASSURANCE OF PROFITABILITY
We have generated no net earnings through June 30, 1999. However, we are in the
development stage and our activities to date have been primarily related to
developing the business operations necessary to further our business plan. There
is no assurance that enough future revenues will be generated by, or that
alternative sources of funding will be available to support the furtherance of
our business plan or to meet our operating expenses. Our revenues may not
continue to grow, we may never achieve profitability and, if we do achieve
profitability, we may not be able to maintain profitability.
NO ASSURANCE OF FUTURE REVENUES - FINANCIAL RESULTS MAY FLUCTUATE
Our historical financial data is not reliable as a basis upon which to predict
our future revenues or operating expenses for a number of reasons, including our
limited operating history, the emerging nature of our Internet industry
category, and our growth strategy. Our financial results may fluctuate
significantly because of several factors, many of which are beyond our control.
These factors include:
o specific economic conditions relating to the Internet,
o usage of the Internet,
o demand for enhanced listing services on our Web site,
o changes in our distribution relationships with Internet service
providers or other third parties,
o demand for our services,
o incurrence of costs relating to acquisitions of businesses or
technologies,
o incurrence of other charges in connection with the services
offered by us and our competitors,
o introduction of enhanced services by us or our competitors,
o market acceptance of new services,
o delays in the introduction of services or enhancements provided
by us or our competitors,
o changes in our pricing policies or those of our competitors,
o capacity constraints, dependencies on
Internet/telecommunications/computer infra-structure, and related
technical difficulties, downtimes, or "Internet brownouts," and
o general economic conditions.
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The relatively new industry in which we are engaged has not been tested in a
recessionary economic environment where budget constraints and contraction in
income available for discretionary purchases could reduce the use of our
services.
Whilst we believe the potential demand for the PLUS Lotto and Millions2000
products at the present time to be high, there can be no assurance that PLUS
Lotto and Millions2000 will attract a sufficient number of customers or generate
sufficient sales to ensure the viability of EarthPort. We may need to commit
greater resources to marketing and promoting PLUS Lotto and Millions2000, than
has been currently anticipated. In such circumstances, it is possible that we
may have insufficient resources to achieve our objectives.
FUTURE CAPITAL NEEDS
We currently anticipate that the net proceeds of our offering of up to 2,000,000
Series A Ordinary Shares, in which a total of $5.2 million was raised, together
with our available funds, will be sufficient to meet our anticipated needs for
working capital, capital expenditures and business expansion through its initial
startup period and beyond (see "Management Discussion and Analysis of Financial
Results"). We may need to raise additional capital to complete our extended
business plan, depending on the amount raised in the ongoing offering.
Thereafter, we may need to raise additional funds in order to fund our
anticipated expansion, to develop new or enhanced services or products, to
respond to competitive pressures and potentially to acquire complementary
products, businesses or technologies. If such additional funds are raised
through the issuance of equity securities, the percentage ownership of the
stockholders of EarthPort will be reduced, stockholders may experience
additional dilution and such securities may have rights, preferences and
privileges senior to those of the Company's ordinary shares. There can be no
assurance that additional financing will be available on terms favorable to
EarthPort or at all. If adequate funds are not available or are not available on
acceptable terms, we may not be able to fund our expansion, take advantage of
acquisition opportunities, develop or enhance services or products or respond to
competitive pressures. Such inability could have a material adverse effect on
our business, results of operations and financial condition.
OUR E-COMMERCE BUSINESS IS INCREASINGLY COMPETITIVE
The markets for local interactive content and services are highly fragmented and
intensely competitive. There are relatively low barriers to entry so we expect
competition to intensify. We compete on the Internet with Internet service
providers, online service providers, search engine and other site aggregation
companies, services that sponsor communities of personal Web sites, and various
Web site operators and content providers with respect to processing e-commerce
transactions.
MANAGEMENT OF POTENTIAL GROWTH
We anticipate that, we may encounter rapid expansion and will be required to
address potential growth in our customer base and market opportunities. This
expansion is expected to place a significant strain on the Company's management,
operational and financial resources. To manage the expected growth of our
operations and personnel, the Company will be required to improve existing and
implement new transaction processing, operational and financial systems,
procedures and controls, and to expand, train and manage our employee base. We
also will be required to expand our finance, administrative and operations
staff. Further, we may be required to enter into relationships with various
strategic partners, Websites and other online service providers and other third
parties necessary to our business. There can be no assurance that our current
and planned personnel, systems, procedures and controls will be adequate to
support our future operations, that management will be able to hire, train,
retain, motivate and manage required personnel or that we will be able to
identify, manage and exploit existing and potential strategic relationships and
market opportunities. The failure of EarthPort to manage growth effectively
could have a material adverse effect on our business, results of operations and
financial condition.
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RISK OF INTRODUCING NEW SERVICES IN ORDER TO COMPETE
We plan to introduce new and expanded services, including E-commerce and global
lottery services,on EarthPort in order to generate additional revenues, attract
more consumers and respond to competition. There can be no assurance that we
will be able to offer any new services in a cost-effective or timely manner or
that any efforts will be successful. Furthermore, any new service we launch that
is not favorably received by consumers could damage our reputation or our brand
name. Expansion of our services in this manner will also require significant
additional expenses and development and may strain our management, financial and
operational resources. Our inability to generate revenues from expanded services
sufficient to offset their cost could have a material adverse effect on our
business, financial condition and results of operations.
ESTABLISHING AND MAINTAINING EARTHPORT BRAND RECOGNITION AND REPUTATION ARE
ESSENTIAL TO OUR SUCCESS
We believe that our success will depend to a large degree on our ability to
successfully establish and maintain our brand recognition and reputation. In
order to maintain a good reputation and strong brand name, we will need to
invest heavily in our marketing and maintain high standards for actual and
perceived quality, usefulness, reliability, security and ease of use of our
services. Even if we continue to provide good service to our customers, factors
outside of our control, including actions by organizations that are mistaken for
us, could affect our brand and the perceived quality of our services, thereby
damaging our business.
RELIANCE UPON THIRD PARTIES FOR EQUIPMENT, ASSEMBLY, INSTALLATION, MAINTENANCE
AND REPAIR
Although our portals, computer and network hardware are assembled from standard
components which may be outsourced from a number of manufacturers and
distributors, we have no equipment manufacturing capacity and will be dependent
upon the timely delivery of quality equipment by those manufacturers and
distributors. We will be dependent upon third party services for the timely,
cost-effective, and proper installation, maintenance, and repair of our
equipment and network infrastructure. Failure by any of these third parties to
perform as we require could materially adversely affect our business,
operations, and financial condition.
DEPENDENCE ON KEY PERSONNEL
Our performance is substantially dependent on the continued services and on the
performance of our Executive Directors, senior management and other key
personnel. Our performance also depends on our ability to retain and motivate
its other officers and key employees. The loss of the services of any of our
executive officers or other key employees could have a material adverse effect
on our business,results of operations and financial condition. We do not have
long-term employment agreements with any of our key personnel and maintain no
"key person" life insurance policies. Our future success also depends on our
ability to identify, attract, hire, train, retain and motivate other highly
skilled technical, managerial, marketing and customer service personnel.
Competition for such personnel is intense, and there can be no assurance that we
will be able to successfully attract, integrate or retain sufficiently qualified
personnel. The failure to retain and attract the necessary personnel could have
a material adverse effect on our business, results of operations and financial
condition. Should any of the Directors or members of senior management die or be
incapacitated, or for some other reason be unable to effectively direct the
Company, our business and results of the operations may be adversely affected.
OTHER COMPANIES MAY CLAIM WE ARE INFRINGING UPON THEIR PROPRIETARY TECHNOLOGY
Given the nature of our business, we can not give assurance that third parties
will not bring claims of copyright or trademark infringement against us or claim
that our use of certain technologies violates a patent. Further, there can be no
assurance that third parties will not claim that we have misappropriated their
creative ideas or formats or otherwise infringed on their proprietary rights in
connection with our Internet content. We are not aware of any claims. Any claims
of infringement, with or without merit, could be time consuming to defend,
result in costly litigation, divert management attention, require us to enter
into costly royalty or licensing arrangements or prevent us from using important
technologies or methods, any of which could damage our business and financial
condition.
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WE MAY BE HELD LIABLE FOR ONLINE CONTENT PROVIDED BY THIRD PARTIES
EarthPort may face potential liability for defamation, negligence, copyright,
patent or trademark infringement and other claims based on the nature and
content of the materials that appear on EarthPort. Claims of this type have been
brought, and sometimes successfully pressed, against online services. Although
we carry general liability insurance, our insurance may not cover all claims or
may not be adequate to indemnify us for any liability that may be imposed. Any
imposition of liability, particularly liability that is not covered by insurance
or is in excess of our insurance coverage, could have a material adverse effect
on our reputation, business, financial condition and results of operations.
MARKET PRICE OF SHARES MAY BE SUBJECT TO FOREIGN EXCHANGE FLUCTUATIONS
Fluctuations in the exchange rate between the British pound sterling and the
U.S. dollar are likely to affect the market price of the shares. For example,
even though our financial statements are reported in British pounds sterling, if
the value of the British pound sterling falls against the U.S. dollar, our
earnings per share in U.S. dollars would be reduced. This may adversely affect
the price at which our shares will trade on U.S. securities markets.
NO DIVIDENDS
We have not paid any dividends since inception and we do not contemplate that
any dividends will be paid in the foreseeable future.
LIMITED LIABILITY OF DIRECTORS
The Directors or other advisers, as independent legal entities, may be subject
to lawsuits or proceedings by government entities or private parties. Except in
certain limited circumstances, expenses or liabilities of EarthPort relating to
the Company arising from any suit would be borne by EarthPort.
LIMITED LIQUIDITY FOR SHARES
EarthPort's continued membership of OFEX is entirely at the discretion of JP
Jenkins Limited, which allows trading of shares of unquoted companies. OFEX is
not a regulated market and no application is currently being made for admission
of the ordinary shares to the Official List of the Alternative Investment Market
of the London Stock Exchange, market created and regulated by the London Stock
Exchange. Securities traded on OFEX are not deemed to be "quoted", listed or
dealt in on the London Stock Exchange, or subject to its rules. Membership of
OFEX should not be taken as implying that there is or will be a liquid market in
our shares. EarthPort has been accepted on Bermuda Stock Exchange Mezzanine
Market for listing of its Series A Ordinary shares, and intends to apply for
listing on NASDAQ Stock Market. No assurances can be given that such efforts
will be successful.
DEPENDENCE ON CONTINUED GROWTH OF DEVELOPING ONLINE PERSON-TO-PERSON
COMMERCE MARKET
The market for the sale of goods and services over the Internet, is a new and
emerging market. Our future revenues and profits are substantially dependent
upon the widespread acceptance and use of the Internet and other online services
as a medium for commerce by consumers. Rapid growth in the use of and interest
in the Web, the Internet and other online services is a recent phenomenon and
there can be no assurance that this acceptance and use will continue to develop
or that a sufficiently broad base of consumers will adopt, and continue to use,
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the Internet as a medium of commerce. Demand and market acceptance for recently
introduced services and products over the Internet are subject to a high level
of uncertainty, and there exist few proven services and products. Potential
growth in EarthPort's user base may rely on obtaining consumers who have
historically used traditional means of commerce to purchase goods. For EarthPort
to be successful, these consumers must accept and use novel ways of conducting
business and exchanging information.
In addition, the Internet may not be commercially viable in the long term for a
number of reasons, including potentially inadequate development of the necessary
network infrastructure or delayed development of enabling technologies,
performance improvements and security measures. To the extent that the Internet
continues to experience significant growth in the number of users, their
frequency of use or their bandwidth requirements, there can be no assurance that
the infrastructure for the Internet and other online services will be able to
support the demands placed upon them. In addition, the Internet or other online
services could lose their viability due to delays in the development or adoption
of new standards and protocols required to handle increased levels of Internet
or other online service activity, or due to increased governmental regulation.
Changes in or insufficient availability of telecommunications services to
support the Internet or other online services also could result in slower
response times and adversely affect usage of the Internet and other online
services generally and the Company service in particular. If use of the Internet
and other online services does not continue to grow or grows more slowly than
expected, if the infrastructure for the Internet and other online services does
not effectively support growth that may occur, or if the Internet and other
online services do not become a viable commercial marketplace, the Company's
business, results of operations and financial condition would be materially
adversely affected.
RISK OF CAPACITY CONSTRAINTS
EarthPort seeks to generate a high volume of traffic and transactions on the
EarthPort service. Accordingly, the satisfactory performance, reliability and
availability of our Websites, processing systems and network infrastructure are
critical to our reputation and our ability to attract and retain large
numbers of EarthPort Members while maintaining adequate customer service levels.
Our revenues depend on the volume of users and transactions that are
successfully completed. Any system interruptions that result in the
unavailability of our service or reduced customer activity would reduce the
volume of products/services completed. Interruptions of service may also
diminish the attractiveness of our services. There can be no assurance that we
will be able to accurately project the rate or timing of increases, if any, in
the use of our services or timely expand and upgrade our systems and
infrastructure to accommodate such increases in a timely manner. Any failure to
expand or upgrade our systems could have a material adverse effect on our
business, results of operations and financial condition.
RISK OF SYSTEM FAILURES
Our success, and in particular our ability to facilitate financial transactions
successfully and provide high quality customer service, will depend on the
efficient and uninterrupted operation of EarthPort's computer and communications
hardware systems. These systems and operations are generally vulnerable to
damage or interruption from earthquakes, floods, fires, power loss,
telecommunication failures, break-ins, sabotage, intentional acts of vandalism
and similar events. Since we have fully redundant systems, that should minimize
such interruptions. Despite any precautions taken by, and planned to be taken by
us, the occurrence of a natural disaster or other unanticipated problems could
result in interruptions in the services provided by EarthPort. In addition,
failure to provide the data communications capacity required by EarthPort, as a
result of human error, natural disaster or other operational disruption, could
result in interruptions in our service. Any damage to or failure of our systems
could result in reductions in, or terminations of, the EarthPort service, which
could have a material adverse effect on our business, results of operations and
financial condition. In the case of frequent or persistent system failures, our
reputation and name brand could be materially adversely affected.
Our system is also vulnerable to disruptions from computer viruses and attempts
by hackers to penetrate the network security. Hackers have not succeeded in
penetrating the network security in the past, but we expect attempts from time
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to time. We may need to devote substantial capital and resources to protect
against the threat of unauthorized penetration of the network security. Breaches
of the network security could disrupt the operation of our Web sites and
jeopardize the security of confidential information stored in our servers. The
occurrence of any of the events listed above could cause EarthPort to lose
Members and also expose EarthPort to liability and result in litigation, all of
which could have an adverse effect on our operations.
RAPID TECHNOLOGICAL CHANGE
The market in which we compete is characterized by rapidly changing technology,
evolving industry standards, frequent new service and product announcements,
introductions and enhancements and changing customer demands. These market
characteristics are exacerbated by the emerging nature of the Web and the
apparent need of companies from a multitude of industries to offer Web-based
products and services. Accordingly, our future success will depend on our
ability to adapt to rapidly changing technologies, to adapt our services to
evolving industry standards and to continually improve the performance, features
and reliability of our service in response to competitive service and product
offerings and evolving demands of the marketplace. The failure of EarthPort to
adapt to such changes would have a material adverse effect on our business,
results of operations and financial condition. In addition, the widespread
adoption of new Internet, networking or telecommunications technologies or other
technological changes could require substantial expenditures by EarthPort to
modify or adapt our services or infrastructure, which could have a material
adverse effect on our business, results of operations and financial condition.
RISKS ASSOCIATED WITH CERTAIN ACTIVITIES OF OUR SERVICE
The law relating to the liability of providers of online services for activities
of their users on the service is currently unsettled. There can be no assurance
that EarthPort will be able to prevent the unlawful exchange of goods on its
service or that it will successfully avoid civil or criminal liability for
unlawful activities carried out by users through EarthPort's service. The
imposition upon EarthPort of potential liability for unlawful activities of
users of our service could require us to implement measures to reduce our
exposure to such liability, which may require, among other things, EarthPort to
spend substantial resources and/or to discontinue certain service offerings. Any
costs incurred as a result of such liability or asserted liability could have a
material adverse effect on our business, results of operations and financial
condition.
ONLINE COMMERCE SECURITY RISKS
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. We anticipate
that a significant number of EarthPort users will authorize us to bill their
credit card accounts directly for all transaction fees charged by EarthPort. We
intend to rely on encryption and authentication technology to effect secure
transmission of confidential information, including customer credit card
numbers. There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography, or other events or developments will
not result in a compromise or breach of the technology used by us to protect
customer transaction data. If any such compromise of our security were to occur,
it could have a material adverse effect on EarthPort's reputation and,
therefore, on our business, results of operations and financial condition.
Furthermore, a party who is able to circumvent our security measures could
misappropriate proprietary information or cause interruptions in our operations.
We may be required to expend significant capital and other resources to protect
against such security breaches or to alleviate problems caused by such breaches.
Concerns over the security of transactions conducted on the Internet and other
online services and the privacy of users may also inhibit the growth of the
Internet and other online services generally, and the Web in particular,
especially as a means of conducting commercial transactions. To the extent that
activities of EarthPort involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
There can be no assurance that our security measures will prevent security
breaches or that failure to prevent such security breaches will not have a
material adverse effect on our business, results of operations and financial
condition.
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DEPENDENCE ON THE WEB INFRASTRUCTURE
The success of our services will depend in large part upon the development and
maintenance of the Web infrastructure, such as a reliable network backbone with
the necessary speed, data capacity and security, or timely development of
complementary products such as high speed modems, for providing reliable Web
access and services. Because global commerce and the online exchange of
information is new and evolving, it is difficult to predict with any assurance
whether the Web will prove to be a viable commercial marketplace in the long
term. The Web has experienced, and is expected to continue to experience,
significant growth in the numbers of users and amount of traffic. To the extent
that the Web continues to experience increased numbers of users, frequency of
use or increased bandwidth requirements of users, there can be no assurance that
the Web infrastructure will continue to be able to support the demands placed on
it by this continued growth or that the performance or reliability of the Web
will not be adversely affected. Furthermore, the Web has experienced a variety
of outages and other delays as a result of damage to portions of its
infrastructure, and could face such outages and delays in the future, including
outages and delays resulting from the inability of certain computers or software
to distinguish dates in the 21st century from dates in the 20th century. See
"--Year 2000 Implications." In addition, the Web could lose its viability due to
delays in the development or adoption of new standards and protocols to handle
increased levels of activity or due to increased governmental regulation. There
can be no assurance that the infrastructure or complementary products or
services necessary to make the Web a viable commercial marketplace for the long
term will be developed or that if they are developed, that the Web will become a
viable commercial marketplace for services such as those offered by the Company.
If the necessary infrastructure, standard or protocols or complementary
products, services or facilities are not developed, or if the Web does not
become a viable commercial marketplace, our business, results of operations and
financial condition will be materially and adversely affected. Even if the
infrastructure, standards or protocols or complementary products, services or
facilities are developed and the Web becomes a viable commercial marketplace in
the long term, the Company might be required to incur substantial expenditures
in order to adapt its service to changing Web technologies, which could have a
material adverse effect on our business, results of operations and financial
condition.
RISKS ASSOCIATED WITH INFORMATION DISSEMINATED THROUGH EARTHPORT'S SERVICE
The law relating to the liability of online services companies for information
carried on or disseminated through their services is currently unsettled. It is
possible that claims could be made against online services companies under both
United States and foreign law for defamation, libel, invasion of privacy,
negligence, copyright or trademark infringement, or other theories based on the
nature and content of the materials disseminated through their services. Several
private lawsuits seeking to impose such liability upon other online services
companies are currently pending. Our service will feature the ability to provide
reports on other users, which could include information from users regarding the
reliability of other users in promptly paying or delivering goods sold in an
auction transaction. Although all such feedback is generated by users and not by
us, it is possible that a claim of defamation or other injury could be made
against us for content posted on the service. The imposition upon us and other
online services providers of potential liability for information carried on or
disseminated through our services could require EarthPort to implement measures
to reduce its exposure to such liability, which may require EarthPort to expend
substantial resources and/or to discontinue certain service offerings. In
addition, the increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could impact the growth of Internet
use.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES
We are not currently subject to direct federal, state or local regulation, and
laws or regulations applicable to access to or commerce on the Internet, other
than regulations applicable to businesses generally. However, due to the
increasing popularity and use of the Internet and other online services, it is
possible that a number of laws and regulations may be adopted with respect to
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the Internet or other online services covering issues such as user privacy,
freedom of expression, pricing, content and quality of products and services,
taxation, advertising, intellectual property rights and information security.
U.S. Congress has recently approved legislation that is intended to regulate the
distribution of "indecent" material over the Internet. The nature of court
review of such legislation and the manner in which it may be interpreted and
enforced cannot be fully determined and, therefore, could subject us and/or our
customers to potential liability, which in turn could have an adverse effect on
our business, results of operations and financial condition. The adoption of any
such laws or regulations might also decrease the rate of growth of Internet use,
which in turn could decrease the demand for the Company's service or increase
the cost of doing business or in some other manner have a material adverse
effect on our business, results of operations and financial condition. In
addition, applicability to the Internet of existing laws governing issues such
as property ownership, copyrights and other intellectual property issues,
taxation, libel, obscenity and personal privacy is uncertain. The vast majority
of such laws were adopted prior to the advent of the Internet and related
technologies and, as a result, do not contemplate or address the unique issues
of the Internet and related technologies. There can be no assurance that a state
will not attempt to impose these regulations upon us or that, if imposed, such
imposition will not have a material adverse effect on our business, results of
operations and financial condition.
Several states have also proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission has also recently
settled a proceeding with one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues could create uncertainty in the marketplace that could reduce demand for
our services or increase the cost of doing business as a result of litigation
costs or increased service delivery costs, or could in some other manner have a
material adverse effect on our business, results of operations and financial
condition. In addition, because our services are accessible worldwide, and we
facilitate sales of goods to users worldwide, other jurisdictions may claim that
we are required to qualify to do business as a foreign corporation in a
particular state or foreign country. The failure by EarthPort to qualify as a
foreign corporation in a jurisdiction where it is required to do so could
subject us to taxes and penalties for the failure to qualify and could result in
our inability to enforce contracts in such jurisdictions. Any such new
legislation or regulation, or the application of laws or regulations from
jurisdictions whose laws do not currently apply to our business, could have a
material adverse effect on our business, results of operations and financial
condition.
Imposition of new taxes or fees by federal and foreign governments on Internet
transactions or on the use of the Internet as a means of communication could
adversely affect EarthPort.
PROTECTION AND ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
We regard the protection of our copyrights, service marks, trademarks, trade
dress and trade secrets as critical to our future success and rely on a
combination of copyright, trademark, service mark and trade secret laws and
contractual restrictions to establish and protect our proprietary rights in
products and services. There can be no assurance that these steps taken by us to
protect our intellectual property will prove sufficient to prevent
misappropriation of our technology or to deter independent third-party
development of similar technologies. Effective trademark, service mark,
copyright and trade secret protection may not be available in every country in
which our services are made available online. To date, we have not been notified
that our technologies infringe the proprietary rights of third parties, but
there can be no assurance that third parties will not claim infringement by us
with respect to past, current or future technologies. We expect that
participants in our markets will be increasingly subject to infringement claims
as the number of services and competitors in our industry segment grows. Any
such claim, whether meritorious or not, could be time-consuming, result in
costly litigation, cause service upgrade delays or require us to enter into
royalty or licensing agreements. Such royalty or licensing agreements might not
be available on terms acceptable to us or at all. As a result, any such claim
could have a material adverse effect upon our business, results of operations
and financial condition.
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YEAR 2000 IMPLICATIONS
Many current installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning on January 1, 2000 from dates prior to the year
2000. Many companies' software and computer systems may need to be upgraded or
replaced in order to correctly process dates beginning in 2000 and to comply
with the "Year 2000" requirements. We have completed a review of our internal
programs and thus far have determined that there are no significant Year 2000
issues within our systems or services. However, we intend to utilize third-party
equipment and software that may not be Year 2000 compliant. Failure of such
third-party equipment or software to properly process dates for the year 2000
and thereafter could require us to incur unanticipated expenses to remedy any
problems, which could have a material adverse effect on our business, results of
operations and financial condition.
POSSIBLE VOLATILITY OF STOCK PRICE
The trading price of the Ordinary Shares might be highly volatile and could be
subject to wide fluctuations in response to factors such as actual or
anticipated variations in our quarterly operating results, announcements of
technological innovations, or new services by EarthPort or its competitors,
changes in financial estimates by securities analysts, conditions or trends in
the Internet and online commerce industries, changes in the market valuations of
other Internet or online service companies, announcements by EarthPort or its
competitors of significant acquisitions, strategic partnerships, joint ventures
or capital commitments, additions or departures of key personnel, sales of
Ordinary Shares or other securities of EarthPort in the open market and other
events or factors, many of which are beyond our control. Further, the stock
markets in general, and the market for Internet- related and technology
companies in particular, have experienced extreme price and volume fluctuations
that have often been unrelated or disproportionate to the operating performance
of such companies. The trading prices of many comparable technology companies'
stocks are at or near historical highs and reflect valuations substantially
above historical levels. There can be no assurance that these trading prices and
valuations will be sustained. These broad market and industry factors may
materially and adversely affect the market price of the Ordinary Shares,
regardless of our operating performance. Market fluctuations, as well as general
political and economic conditions such as recession or interest rate or currency
rate fluctuations, may also adversely affect the market price of Ordinary
Shares.
COMPETITION - GAMING AND LOTTERIES
The development, licensing and management of gaming technology and the provision
of gaming entertainment are highly competitive. The gaming market is served by
state and nationally sponsored lotteries and by many domestic and foreign gaming
companies, including several large land-based casino companies. A number of
large, mature lottery services companies serve both the domestic and
international markets. All these competitors have substantially more capital,
and therefore broader based resources to apply to technology and marketing than
EarthPort. EarthPort also competes with other forms of leisure and entertainment
activities for the public's disposable income.
UNITED STATES CIVIL LIABILITIES MAY NOT BE ENFORCEABLE AGAINST THE COMPANY
All of our directors and executive officers and certain of the experts named in
this registration statement are not residents of the United States and virtually
all of the assets of these persons and virtually all of our assets are located
outside the United States. As a result, it may not be possible for you to serve
summons and complaints within the United States upon these persons. Similarly,
it may not be possible to enforce in U.S. courts, against these persons or
against us, judgments of the U.S. courts based upon civil liability provisions
of the U.S. federal or state securities laws. In addition, it may be difficult
for you in original suits or in suits for the enforcement of judgments of U.S.
courts to enforce certain civil liabilities based upon U.S. federal or state
securities laws in England against us or our directors or executive officers, or
our experts.
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UNDER U.K. LAW A VOTE OF 75% OF THE STOCKHOLDERS IS REQUIRED TO APPROVE CERTAIN
SIGNIFICANT CORPORATE TRANSACTIONS
Under English law we are required to obtain the vote or consent of holders of
75% of our outstanding ordinary shares to complete certain significant
transactions, including a merger with another corporation in some circumstances.
This may make it more difficult for us to complete a merger or sale of our
company which is deemed beneficial by our board of directors.
EXCHANGE RATE INFORMATION
We sell our products and services outside of the United States. Our
profitability is therefore subject to fluctuations in exchange rates. We do
not manage the risks related to foreign currency, interest rates or inflation by
using hedging arrangements. Our revenues are denominated in British pounds
sterling but many of the costs and revenues associated with our development of
Internet based programs will be denominated in other currencies. Changes in the
value of the currencies in which we settle relative to the British Pound could
adversely effect our financial results. The following table sets forth, for the
periods indicated, period end, average, high, and low exchange rate between
British pounds sterling and United States dollars based on the noon buying rate
(expressed in United States dollars per pound sterling). These rates are
provided solely for your convenience and are not necessarily the exchange rates
(if any) used by us in the preparation of the financial statements included
elsewhere in this registration statement.
<TABLE>
<CAPTION>
UNITED STATES DOLLARS PER BRITISH POUNDS STERLING
-------------------------------------------------
AVERAGE OF THE
RATE NOON BUYING RATE
AT END ON THE LAST BUSINESS
YEAR OF PERIOD DAY OF EACH FULL MONTH HIGH LOW
---- --------- ---------------------- ---- ---
<S> <C> <C> <C> <C>
1996...............................1.7123 1.5733 1.7123 1.4948
1997...............................1.6427 1.6397 1.7035 1.5825
1998...............................1.6628 1.6602 1.7222 1.6144
</TABLE>
On December 31, 1998, the noon buying rate was $1.6628 = (pound)1.00
(consequently, $1.00 = (pound)0.6014 at this rate).
As of September 8, 1999, the noon buying rate was $1.61370=(pound)1.00
Fluctuations in the exchange rate between British pounds sterling and U.S.
dollars will affect the U.S. dollar equivalent of the British pounds sterling
denominated prices of our ordinary shares and, as a result, will affect the
market prices of the shares in the United States.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company maintains 2 offices in London with the head office located in leased
space, consisting of approximately 1137 square feet, which is under a lease that
expires 24 July 2001, and the second office consists of 1450 square feet with a
lease that expires 20 August 2003. The Company, through EarthPort Transaction
Services AG, operates the transaction portal from the ILLF premises in
Liechtenstein. At this time, we do not pay any rent or related charges for the
transactional portal in Liechtenstein, however, there will in the future be a
rental charge, but its rate has not been determined yet. The lease payments and
related charges schedule for those properties is set forth below:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Location Sq. Ft. Rent per sq. ft. Total lease payment per
annum
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5 St. Mary Abbot's Place 1137 (pound)21.62 (pound)39,851.85*
- -----------------------------------------------------------------------------------------------------------
107 Hammersmith Road 1450 (pound)12.50 (pound)34,162**
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* The rate per square foot is (pound)8.80 and (pound)4.63 service charge.
** The rate per square foot is (pound)3.80 and (pound)7.26 service charge.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. CONTROL OF REGISTRANT
PRINCIPAL SHAREHOLDERS
The only persons who own of record, or who are known to the directors of the
Corporation to own beneficially, directly or indirectly, more than 10 percent of
the issued and outstanding Ordinary Shares, as at July 1, 1999, and the
executive directors of the Company, are:
<TABLE>
<CAPTION>
Percentage of
current issued capital
Shareholder Ordinary Shares (before exercise of options)
----------- --------------- ----------------------------
<S> <C> <C>
Infinity Investments Ltd 1,500,000 23.5
Tallulah Properties Ltd 1,814,300 28.4
Braevista Investments 854,300 13.4
Infinity Limited 151,100 2.4
Peter Chappell 70,000 1.1
Graham Newall 20,000 .3
</TABLE>
Messrs. Vanrenen and Tucker, directly and indirectly, are the beneficiaries of
approximately 70% of the Company's ordinary shares (58% after exercise of all
options granted).
Infinity Investments Limited and Infinity Limited, both incorporated in the Isle
of Man, are respectively owned 50% by Tallulah Properties Limited ("Tallulah")
and 50% by Braevista Investments Ltd. ("Braevista"), Isle of Man companies. Both
Vanrenen and Tucker are discretionary beneficiaries of the Isle of Man Trusts
that respectively own Tallulah and Braevista.
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ITEM 5. NATURE OF TRADING MARKET
TRADING HISTORY OF COMMON SHARES
The Company's Series A Ordinary Shares have been approved for listing on the
Mezzanine Market of the BSX under a symbol "ERPT_BH" on August 12, 1999, and
will begin trading shortly following the completion of our offering of up to 2
million Series A Ordinary shares, which was closed as of September 17, 1999.
OFEX
EarthPort's ordinary shares were accepted for trading on OFEX on 24 August 1998.
OFEX is a facility operated by JP Jenkins Limited, a member of the London Stock
Exchange, to allow trading in the securities of unquoted companies. OFEX
provides a facility for member firms of the London Stock Exchange to deal in the
shares of unquoted companies.
Under the OFEX arrangements, companies are provided with an independent market
maker, screen based prices and a company information and announcement system
provided by Newstrack Limited and distributed by Bloomberg, ICV-Topic, Reuters
and QST.
NASDAQ
EarthPort intends to apply for listing on NASDAQ SmallCap Market. Upon approval
for listing on NASDAQ, EarthPort will cease trading its ordinary shares on OFEX.
Once the Series A Ordinary Shares become listed on NASDAQ, the Series A Ordinary
Shares will be converted into Ordinary Shares.
PRICE RANGE OF ORDINARY SHARES
EarthPort's ordinary shares have been traded on OFEX since August 24, 1998. The
following table sets forth, for periods indicated, the high and low prices.
<TABLE>
<CAPTION>
Price Range
Low High
-------------------- --------------------
<S> <C> <C> <C> <C>
Quarter Ended September 30, 1998 ((pound)1.55) $2.50 ((pound)1.85) $2.98
Quarter Ended December 31, 1998 ((pound)1.85) $2.98 ((pound)2.55) $4.10
Quarter Ended March 31, 1999 ((pound)2.45) $3.94 ((pound)3.35) $5.39
Quarter Ended June 30, 1999 ((pound)3.25) $5.23 ((pound)6.25) $10.06
</TABLE>
NOTE: The US dollar price has been calculated at the exchange rate of(pound)1
equals $1.61 as of September 8, 1999.
As of July 1, 1999 it is estimated that there were 261 recorded shareholders.
The closing price of the Ordinary Shares of EarthPort on OFEX on August 27, 1999
was (pound)7.125 ($11.47).
As of July 31, 1999, there were 6,650,715 Ordinary Shares outstanding (excluding
the options) of which no shares were held in the U.S.
As of September 17, 1999, there were 520,000 Series A Ordinary Shares
outstanding.
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ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS
There are no governmental laws, decrees or regulations in United Kingdom
relating to restrictions on the export or import of capital into United Kingdom
which affect the remittances of interest, dividends or other payments to
non-resident holders of shares of the Company's stock. There is no longer a
withholding tax in the UK on any such remittances to US residents under the
Income Tax Act (UK) (the "Tax Act").
There are no limitations under the laws of United Kingdom, or in the charter of
any other constituent documents of the Company with respect to the right of
foreigners to hold and/or vote the shares of the Company's stock.
ITEM 7. TAXATION
General
- -------
The following report considers certain Bermuda and United Kingdom tax
considerations. We believe the following comments are pertinent to our planned
operations and are based on the understanding of and advice received on the law
and practices currently in force in Bermuda and the United Kingdom and are
subject to change. The report is a summary of our understanding of the tax
issues and does not constitute the specific professional opinion of any
particular advisor of the Company.
THE FOLLOWING COMMENTS ARE BASED ON INFORMATION RECEIVED BY THE DIRECTORS
REGARDING CURRENT LAW AND PRACTICE. INVESTORS SHOULD APPRECIATE THAT THERE ARE
TAXATION CONSEQUENCES FOR INVESTORS AND SHOULD CONSULT THEIR PROFESSIONAL
ADVISORS ON THE POSSIBLE TAX CONSEQUENCES OF THEIR SUBSCRIBING FOR, PURCHASING,
HOLDING OR SELLING SHARES UNDER THE LAWS OF THEIR COUNTRIES OF CITIZENSHIP,
RESIDENCE OR DOMICILE.
We expect that our shareholders may be resident, for tax purposes, in many
different countries and, accordingly, no attempt is made herein to summarise the
tax consequences for all investors who might become our shareholders.
Bermuda
At the date of this registration statement, there is no Bermuda income tax,
corporation tax, profits tax, withholding tax, capital gains tax, capital
transfer tax, estate duty or inheritance tax payable by the Company or its
shareholders, other than by shareholders ordinarily resident in Bermuda. We are
not subject to stamp duty in Bermuda on the issue or transfer of our shares.
United Kingdom
Corporate Tax
-------------
EarthPort will conduct a portion of its business activity in the United Kingdom.
Accordingly, as a United Kingdom managed and controlled company, the Company
will continue to be subject to United Kingdom company taxation on its entire
profits. The United Kingdom sets taxation rates each financial year commencing
April 1. The applicable standard rates for the year commencing 1 April 1999 is
30%.
There is a lower taxation rate if a company qualifies as a "small company". The
small company rates are 20% for the years 1999/2000 tax year. The small company
rates apply in the case of the Company up to profits of 300,000 Pounds Sterling
and marginal tax relief may be available where profits are not more than
1,500,000 Pounds Sterling. The level of small company relief is dependent on the
number of associated close companies.
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Other tax matters
-----------------
We have been advised that the Company is a close company for tax purposes, as
defined by the Income and Corporation Taxes Act 1988.
Advanced Corporations Tax in respect of cash dividends is no longer applicable
from April 1999 onwards. When receiving a dividend individual shareholders in
the United Kingdom will continue to qualify for notional tax credit equal to one
ninth of the cash dividend.
Other Jurisdictions
Prospective shareholders should consult their own legal or tax counsel regarding
tax law and regulations of any other jurisdiction, which may be applicable to
them.
THE TAX AND OTHER MATTERS DESCRIBED HEREIN DO NOT CONSTITUTE AND SHOULD NOT BE
CONSIDERED AS LEGAL OR TAX ADVICE TO PROSPECTIVE SHAREHOLDERS.
TAXATION OF DIVIDENDS
TAX TREATMENT OF U.K. HOLDERS. In his United Kingdom "Green" Budget announcement
made on November 25, 1997, the United Kingdom Chancellor of the Exchequer
announced a change in the taxation of dividends effective April 6, 1999, which
was confirmed in his Budget on March 17, 1998. As a result of this change the
previous system of "advance corporation tax" (ACT) has been replaced.
In respect of dividends paid on or after April 6, 1999 an individual Holder
should generally be entitled to a tax credit in respect of any dividend paid by
our company equal to one-ninth of a cash dividend. Although the credit will be
available to offset a United Kingdom resident individual's basic rate liability
to United Kingdom income tax in respect of the dividend, this tax credit will
not be refundable. United Kingdom resident individuals who pay higher rate tax
will pay tax on the grossed up amount of the dividend at the rate of 32.5%.
After taking into account the tax credit they receive, these individuals will
have an additional tax liability of 25% of the net dividend received. United
Kingdom resident trustees of discretionary trusts are liable to account for
income tax on the grossed up dividend at 25% less an appropriate Tax Credit. A
United Kingdom resident corporate Holder will not normally be liable to United
Kingdom corporation tax on any dividend received from us.
TAX TREATMENT OF U.S. HOLDERS. An Eligible United States Holder (as defined
below) is entitled under the Convention relating to income taxes (the "Income
Tax Convention") and current United Kingdom law to claim from the United Kingdom
Inland Revenue a refund (a "Treaty Payment") for an amount equal to the amount
of the tax credit to which an individual resident in the United Kingdom for
United Kingdom tax purposes would have been entitled had he received the
dividend (the "Tax Credit Amount"), subject to a United Kingdom withholding tax
of 15% of the sum of the dividend paid and the related Tax Credit Amount.
Consequent upon the change in the taxation of dividends effective from April 6,
1999 an Eligible United States Holder will effectively cease to be entitled to a
Treaty Payment in relation to dividends paid by our company because the 15%
withholding tax would exceed the Tax Credit Amount. For example if the dividend
is 80p, the reduced Tax Credit Amount would be 8.89p, less than the 15%
withholding tax of 13.33p and, therefore, no Treaty Payment would be made.
For United States federal income tax purposes, the gross amount of a dividend
plus the Tax Credit Amount (a) will be included in gross income by an Eligible
United States Holder (at the dollar value of the dividend payment, on the date
of the receipt by Bankers Trust, regardless of whether the dividend is converted
into dollars) and (b) will be treated as foreign source dividend income to the
extent paid out of our current or accumulated earnings and profits as determined
for United States federal income tax purposes. Any difference between the United
States dollar amount included in income and the United States dollars actually
received may constitute ordinary foreign currency gain or loss. Subject to
certain limitations, the United Kingdom withholding tax (which, after April 5,
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1999, equals the Tax Credit Amount) will be treated as a foreign income tax
eligible for direct credit against such Eligible United States Holder's federal
income taxes.
TAXATION OF CAPITAL GAINS
A United States Holder who is not resident or ordinarily resident or domiciled
in the United Kingdom for United Kingdom tax purposes will not be liable for
United Kingdom tax on capital gains realized on the disposal of ordinary shares,
at the time of disposal, unless the United States Holder is carrying on a trade,
profession or vocation in the United Kingdom through a branch or agency which
constitutes a permanent establishment, and the ordinary shares are or have been
used, held or acquired for the purposes of such trade, profession or vocation of
such branch or agency.
Upon the sale or other disposition of an ordinary share, a United States Holder
will generally recognize gain or loss for United States federal income tax
purposes in an amount equal to the difference between the U.S. dollar value of
the amount realized on such sale or disposition and the United States Holder's
adjusted tax basis (determined in U.S. dollars) in the ordinary share. Such gain
or loss will be capital gain or loss if the United States Holder holds our
ordinary share as a capital asset. Prospective investors should consult their
tax advisors regarding the United States federal income tax treatment of capital
gains (which may be taxed at lower rates than ordinary income for certain
taxpayers who are individuals) and losses (the deductibility of which is subject
to limitations).
A United States Holder that is liable for both United Kingdom and United States
tax on a gain on the disposal of ordinary shares will generally be entitled,
subject to certain limitations and under the terms of the Income Tax Convention,
to credit the amount of United Kingdom capital gains or corporation tax, as the
case may be, paid in respect of such gain against such United States Holder's
United States federal income tax liability in respect of such gain. United
States Holders should seek professional tax advice to determine their
entitlement to credit United Kingdom tax against their United States federal
income tax liability.
ITEM 8. SELECTED FINANCIAL DATA
The following selected consolidated financial data with respect to our
consolidated statement of operations for the ten months ended June 30, 1998
(audited) and for twelve months ended June 30, 1999 (unaudited) and with respect
to our consolidated balance sheets at June 30, 1998 audited) and June 30, 1999
(unaudited). The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and those consolidated financial statements and the notes thereto.
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
10 months ended Fiscal year ended
June 30, 1998 June 30, 1999
(audited) (unaudited)
--------------- -----------------
AMOUNTS IN POUNDS STERLING
<S> <C> <C>
Revenues............................... (pound)896,854 (pound) 1,075,071
Operating Expenses:
General and administrative.......... (1,536,426) (2,481,295)
----------- -----------
Total Operating Loss................... (639,572) (1,406,224)
Loss on ordinary activities
before taxation........................ (636,375) (1,392,144)
29
<PAGE>
Loss on ordinary activities
after taxation......................... (636,375) (1,392,144)
----------- -----------
Basic net loss per share............... (pound) (0.1709) (pound) (0.2094)
Diluted net loss per share............. (pound) (0.1633) (pound) (0.1711)
=========== ===========
Shares used in computing basic and
diluted net loss per share.......... 3,722,932 6,648,215
=========== ===========
</TABLE>
<TABLE>
SUMMARY OF BALANCE SHEET
<CAPTION>
10 months ended Fiscal year ended
June 30, 1998 June 30, 1999
(audited) (unaudited)
--------------- -----------------
AMOUNTS IN POUNDS STERLING
<S> <C> <C>
Working capital........................ (pound) 3,086,557 (pound) 8,466,019
Total Assets less Current Liabilities 3,086,557 8,466,019
------------ ------------
Total Current Liabilities ____________ ____________
Shareholders Equity (Deficit) 3,086,557 8,466,019
</TABLE>
(b) DIVIDENDS
The Company has not paid any cash dividends since its inception. The Company
does not intend to pay any cash dividends in the foreseeable future, but intends
to retain all earnings, if any, for use in its business operations.
ITEM 9. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and notes thereto.
The Company's financial statements are prepared in accordance with generally
accepted accounting principles in United Kingdom and are presented in pound
sterling.
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS INCLUDES FORWARD-LOOKING STATEMENTS WITH RESPECT TO OUR
FUTURE FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO
VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THE FACTORS DESCRIBED UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS, THAT COULD CAUSE OUR ACTUAL RESULTS
TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE CURRENTLY ANTICIPATED.
OVERVIEW
EarthPort.com plc ("We" or "EarthPort") offers services that include processing
e-commerce transactions and providing software and services for lotteries. Our
revenues represent amounts receivable for lottery revenues and other services,
net of VAT and trade discounts. EarthPort operates an Internet transaction
portal for clearing such multiple on-line transactions for merchants, including
stockbrokers and Internet ready conventional merchants, and lotteries. We also
supply software and marketing services to the only government licensed, global,
interactive lottery on the Internet. EarthPort has over 100,000 people who have
30
<PAGE>
transacted through EarthPort. Those who transact with EarthPort become
registered members ("Members"). EarthPort has developed a method of market
segmentation that should, in the opinion of the management, increase the number
of its Members to several million by mid-2000. We believe that our transaction
engine is a robust, dynamically scaleable, cash clearing house for e- commerce.
We currently record up to 10 million Internet hits to its web sites per week. We
believe that with further marketing expenditure and the current capacity of its
technological platform, we are well positioned to be a global branded e-commerce
company.
Ten months period ended June 30, 1998 (audited) compared to twelve months period
- --------------------------------------------------------------------------------
ended June 30, 1999 (unaudited).
- --------------------------------
REVENUES. The Company's operating revenues for the first ten months of 1998
totaled (pound)896,854 (US$1,443,935) Compared to (pound)1,075,071
(US$1,730,864) in the twelve months ended June 30, 1999.
OPERATING EXPENSES. The Company's operating expenses for the first ten months of
1998 totaled ((pound)1,536,426) (US$(2,473,646)) compared to
((pound)2,481,295)(US$(3,994,885)) for the twelve months period ended June 30,
1999. The increase in operating expenses was primarily due to additional costs
incurred by expansion of our services.
TOTAL OPERATING LOSS. Total operating loss for the first ten months of 1998
totaled (pound)639,572 (US$1,029,711) compared to operating loss of
(pound)1,392,144 (US$2,241,352)in the twelve months ended June 30, 1999, due
primarily to increased operating expenses.
PROVISION FOR INCOME TAXES. There has been no provision for taxes since the
Company incurred operating losses and did not report any profits for the
discussed periods.
Liquidity and Capital Resources
- -------------------------------
As of June 30, 1998 and June 30, 1999, the Company had a cash balance of
(pound)329,971 (US$531,253) and (pound)849,883 (US$1,368,312), respectively. The
Company issued 6,648,215 Ordinary Shares and no Series A Shares during the
fiscal year ended June 30, 1999. The company has no available lines of credit.
Under the terms of the Company's agreement with International Lottery in
Liechtenstein Foundation ("ILFF"), the Company is committed to pay a total
(pound)3,500,000 million (US$5,635,000) for its license fee. This amount is
being offset by transaction fees and the 10% charge the Company imposes on sales
of ILLF and any debts outstanding from ILFF will be recouped by offset against
this liability. The amount due to ILFF as of June 30, 1999, is (pound)697,674.01
(US$1,116,300), and the Company anticipates that it should be repaid within the
current financial year.
The Company anticipates that its existing cash balances, including US$5,200,000
(net of any commissions and fees) raised in its offering of a maximum of
2,000,000 Series A Ordinary Shares, in which 520,000 Series A Ordinary Shares
were sold, and future anticipated cash flows from projected increases in
revenues, will be sufficient to meet operating expenses and capital purchases of
the Company at the current negative cash flow for the next 36 months. However,
the management believes that revenues and expenses will increase and that the
Company will be cash flow positive in 12 months time. The Company may continue
to seek additional sources of capital, from time-to-time as needed, to fund
future planned operations and continued growth. Although the Company has been
successful in raising the necessary funds in the past, there can be no assurance
that the Company will have sufficient financing to meet its capital requirements
or that additional financing will be available on terms acceptable to the
Company in the future.
31
<PAGE>
Year 2000 Compliance
- --------------------
The Year 2000 Issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. Computer programs
that have sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
EarthPort conducted a comprehensive review of its computer systems to identify
the systems that could be affected by the Year 2000 issue and developed and
implemented the plan to resolve the issue. EarthPort is currently Year 2000
compliant.
EFFECTS OF THE EURO
Under the terms of the Treaty on European Economic and Monetary Union, as of
January 1, 1999, the euro was introduced as a common currency among the eleven
members of the European Union that are participating in this phase of European
Economic and Monetary Union, commonly referred to as EMU. Although the
individual currencies of these countries will continue to be used until the end
of 2001, their exchange rates with the euro are fixed. The Euro is now being
used for transactions that do not involve payment using physical notes and coins
of the participating countries. The individual currencies will be replaced with
euro notes and coins at the start of 2002 when all countries participating in
the EMU are expected to operate with the euro as their exclusive common
currency.
The current government of the United Kingdom has stated that the United Kingdom
will not participate in EMU and adopt the euro until after the next general
election, at the earliest. We are currently working on the assumption that the
next general election will be in 2001 or 2002 and that the United Kingdom will
enter the EMU shortly thereafter following confirmation of the government's
decision through a referendum. We do not currently operate in any countries that
have adopted the euro and we therefore do not face a significant currency or
competitive exposure to the euro. However, in the future we may expand into a
number of these countries.
In the event that the United Kingdom adopts the euro, we would face a number of
costs in altering our accounting-related systems for the new currency, although
at present it is too early to estimate what these costs might be. Adoption of
the euro in the United Kingdom would also create greater transparency between
prices offered to our customers in different countries that participate in EMU.
A significant amount of uncertainty exists as to the effect that the euro will
have on the marketplace. We are assessing the effect that the euro introduction
will have on our internal systems and the sale of our products and services. We
expect to take appropriate actions based on the results of this assessment.
Currently, we do not believe that the adoption of the euro by eleven countries
of the European Union will have an adverse impact on our liquidity or financial
condition.
32
<PAGE>
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
Directors and Officers
The following sets forth certain information regarding the directors (the
"Directors") and officers of EarthPort.
Directors and Officers of EarthPort.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
David Vanrenen 55 Executive Chairman, Chief Executive Officer
Alan Tucker 55 Executive Director, Chief Financial Officer
Peter Chappell 59 Executive Director, Director of Public Affairs
Adriaan Brink 36 Executive Director, Chief Technical Officer
Graham Newall 43 Executive Director, Marketing & Sales
Jan Maarten van den Broek 44 Executive Director, Chief Operating Officer
Andrew C. G. Millard 36 Executive Director
</TABLE>
DAVID VANRENEN, (Executive Chairman) aged 55. In 1975 Vanrenen joined Mathison
Hollidge, a large South African broking house and was responsible for developing
its bond-trading department to the point where it was responsible for 40% of the
turnover of the total South African bond market. He was a member of the
Johannesburg Stock Exchange Committee for 2 years. After his move to Australia
in 1982, he founded Australian Gilt Securities (AGS), a securities business, and
he was CEO from the inception of AGS until 1987 when the company was acquired by
Rand Merchant Bank. In 1983 he founded Giltnet Limited, an investment technology
company, which was listed on the Australian Stock Exchange. Giltnet supplied
information technology to Telerate, which purchased the source code from Giltnet
in 1990. In 1986 he was responsible for the establishment of the Kleinwort
Benson Fixed Income Investment Trust. In 1988, together with Reuters Limited, he
founded and was executive chairman and CEO of Equity Systems Limited, an
investment technology company. In 1992 he established Equisoft Limited a
developer of front-end quantitative analytic systems with Reuters. Reuters
acquired his share of both companies in 1994. He was then instrumental in
establishing PeopleBank as a pioneer human resource site on the Internet and
that, together with the London Mall (an early transaction portal), was acquired
by Associated Newspapers in 1995. Since then Vanrenen has led the development of
the EarthPort operations.
ALAN TUCKER BCom, CA(SA), (Executive Director), aged 55, qualified as a
chartered accountant. Tucker was managing partner of Mathison & Hollidge,
stockbrokers, from 1975 to 1982, and was a member of the Johannesburg Stock
Exchange Committee for 2 years. In 1982 he emigrated to Australia and
established Australian Gilt Securities (AGS) with David Vanrenen. From 1986 to
1988, he was a director of Asset Underwriting Pty Limited, where he was involved
in the development and sale of risk reduction software. He was then franchisee
and CEO of Thomas International Management Systems in Australia and New Zealand.
From 1990 to 1994 he was executive chairman and CEO of Giltnet Limited, a
financial software development company listed on the Australian Stock Exchange.
During this period Giltnet developed PeopleBank as a pioneer human resource site
on the Internet and that operation together with the London Mall (an early
transaction portal), was acquired by Associated Newspapers in 1995. Since 1995
Tucker has worked on the development of EarthPort.
PETER CHAPPELL, (Executive Director), aged 59, became a member of the London
Stock Exchange in 1966. In 1968 he became a partner in the stockbrokers
Sheppards and Chase, heading up the gilt department from 1972 to 1985 and the
institutional equities sales and research between 1985 and 1988. From 1989-91 he
was a senior consultant with Trimedia Communications, a Swiss based financial
public relations company. He became a Member of the Institute of Public
Relations in 1990. From 1991 to 1995 he was Chairman of The Employment Network
(UK) Limited, an innovative computerised recruitment company that moved onto the
Internet in 1993, being renamed PeopleBank. At this time he was involved with
33
<PAGE>
the establishment of London Mall, an early Internet portal which housed the
PeopleBank site amongst a range of merchants. He was a director of Walton
Consulting Limited from 1995 to 1998. Walton was absorbed into EarthPort in 1997
and since then he has been involved in building the EarthPort operations.
ADRIAAN BRINK, (Executive Director), aged 36, completed schooling in South
Africa and studied Computer Science at the University of Natal. Brink started
professional programming on ICL and UNIVAC mainframes performing statistical
analysis of large surveys in 1984. In 1989 he emigrated to Australia where he
spent 5 years in computer related work, culminating in a 3 year period as
Managing Director of Giltnet Limited - a public company listed on the Australian
stock exchange. Giltnet specialized in real time Bond analytics software,
marketed mainly through the Dow Jones-Telerate network. In 1990 Giltnet started
developing an electronic marketplace for employment that later became known as
PeopleBank. He moved to London in 1994 to introduce PeopleBank to the European
markets. Towards the end of 1994 the Internet became more popular and he started
the "London Mall", which served as an attraction to draw people to the Internet
version of PeopleBank. PeopleBank and The London Mall were acquired by the Daily
Mail newspaper group in 1995. Brink is responsible for design and development of
the ILLF and EarthPort sites and all systems associated with them. He lives in
Liechtenstein and looks after day-to-day operations of ILLF as well as directing
the UK based design and development team.
GRAHAM NEWALL, (Executive Director), aged 43, began his career in the Australian
Wool Industry as a buyer with K.V.Chapman, a wool merchant and also a founding
member of the Sydney Greasy Wool Futures Exchange. In 1978 he joined the money
market with Capel Court Corporation and in October 1979 helped launch the first
interest rate futures contract traded outside the United States. He joined
Bankers Trust Australia in 1981 as manager. Bankers Trust dominated financial
futures in Australia in the early eighties. After a period trading futures and
swaps for Grindlays Bank he was invited back to Capel Court to lead their
Futures Division. Capel Court Corporation, a part of National Mutual Royal Bank
was one of the top three traders by turnover on the Sydney Futures Exchange
until it was taken over by the ANZ Bank in 1990. Newall led a team of 25 to
found BZW Australia Futures and within three months BZW was in the top 3 on the
Exchange. In 1991 he moved to London as CEO of BZW Futures, a division of
Barclays Bank plc. BZW Futures became a large operator outside the United
States, with 13 offices in 11 countries. In early 1998 he joined Bank Austria
Creditanstalt as CEO and developed a technology driven trading platform,
executing and clearing futures and options over the Internet. In April 1999
Newall joined the EarthPort.com group as an Executive Director, responsible for
marketing and sales, with specific responsibility for EarthPort Transaction
Services AG. Newall is a former director of the London Clearing House and is a
director of the Futures Industry Association in the United States.
JAN MAARTEN VAN DEN BROEK, (Executive Director), aged 44, has a background in
marketing, advertising and communication. Since 1975 he has worked for various
companies including Marriott Hotels, Recla-Janssens Advertising (RJA), SSC&B
Lintas, J. Walter Thompson in Amsterdam and Robert Landau Associates Inc in New
York. In 1985 he set up his own company in Amsterdam, specialising in conceptual
and creative development, as well as the presentation and execution of
advertising and promotional plans designed to meet his clients' marketing
objectives. His clients included Burger King, Coca-Cola Export Corporation,
United Parcel Service, Sony (TV & Video 8), Virgin Atlantic Airways, Regional
Airports Holland, Effectenbank Stroeve and Interleven Pensioen. Special projects
included the interim management of Beaumont Bennett (Grey) sales promotion in
New York and Utrecht and the interim General Manager of Saatchi & Saatchi
Direct. In November 1998 he joined EarthPort in the position of General Manager.
ANDREW C. G. MILLARD, (Executive Director), aged 36, commenced career in the UK
Independent Radio sector having worked for many well known UK and overseas radio
stations. Joined one of the UK's first audiotex companies, BT Citycall, in 1987
as Managing Editor shortly after the introduction of the nationally available
premium rate telephone network. Moved to Telephone International Media (TIM) in
1991 to develop the business. Increased company turnover from (pound)0.5m to
(pound)7.2m. Joined the Board as Deputy Managing Director and acquired equity in
TIM, selling 100% to Scottish Power plc in 1997. Joined Media Marketing &
Promotions as a partner. The company was formed to capitalise on the rapidly
expanding new media channels available world-wide. Millard is a specialist in
providing marketing and promotional solutions across the Internet, audiotex,
email and facsimile. He is a former director of the Association of Telephone
Information and Entertainment Providers (ATIEP), director of the Information and
Communication Industry Association (ICIA), and member of Telephone Council of
the Direct Marketing Association (DMA). He has a close working relationship with
the Independent Committee for the Supervision of Telephone and Information
Services (ICSTIS) and the Office of Telecommunications (OFTEL).
Director Compensation
The Directors each receive an annual salary package of (pound)60,000. See
"Compensation of Directors and Officers".
34
<PAGE>
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS
Executive Compensation
- ----------------------
Company currently has six executive officers none of whom received, directly or
indirectly, annual compensation exceeding US$100,000. The aggregate cash
compensation paid to each of the executive officers of the Company, directly or
indirectly, during the year ended June 30, 1998 was (pound)60,000 (US$96,600).
There are no funds set aside or accrued by the Company for pension, retirement,
or similar benefits.
Compensation Summary
- --------------------
The table below sets forth information concerning the compensation of the
Corporation's Chief Executive Officer and Chief Financial Officer for the ten
months ended June 30, 1998.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
Name and All Other
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
David Vanrenen 1998 (pound)60,000 0 0
Chief Executive Officer
& Executive Director
Alan Tucker 1998 (pound)60,000 0 0
Chief Financial Officer
and Executive Director
</TABLE>
Long-Term Compensation Awards:
Securities Under Options/SARs Granted - see ITEM 12. "Options Granted".
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR SUBSIDIARIES
Share Options Issued
- --------------------
EarthPort offered share options to certain Directors and Officers, management
and staff, and professional service providers/consultants under contract with
us.
The purpose of the share options is to further the growth and development of
EarthPort by affording an opportunity for share ownership to selected employees,
Directors and consultants of EarthPort, who are responsible for the conduct and
management of the our business or who are involved in endeavours significant to
our success. The share options are administered by the Directors, who determine
recipients and types of options to be granted, including the exercise price, the
number of shares, the grant dates, and the exercisability thereof.
As of July 1, 1999, options to purchase 1,233,061 shares were outstanding. The
following are the top nine option positions granted representing all individual
option positions of 20,000 and greater.
35
<PAGE>
<TABLE>
Option Grants
- -------------
<CAPTION>
Number of
Shares
Underlying Exercise
Options Price Exercise Expiration
Name Granted (GBP) Date Date
---- ------- ----- -------- ----------
<S> <C> <C> <C> <C>
Infinex International Ltd.* 400,000 2.00 26 4 2001
Infinex International Ltd * 200,000 2.50 26 4 2001
Voyager Financial Services Ltd.** 125,000 2.50 12 months 2.5 yrs conditional
Blue Haven Properties Limited 100,000 2.50 4/26 2001
Jan Maarten van den Broek 50,000 2.50 1/1 1999 10/31 2001
Peter Chappell*** 40,000 2.50 1/1 2001 12/31 2001
Adriaan Brink 30,000 2.50 1/1 2001 12/31 2001
Matrix Corporate Finance**** 23,061 2.50 3/23 1999 11/11 2003
Adriaan Brink 20,000 1.00 3/1 1999 3/1 2001
Andrew C.G. Millard 10,000 6.25 9/30 2000 7/1 2003
</TABLE>
- -------------------------------
*Granted pursuant to the acquisition of Earth Ltd. pursuant to the agreement
between EarthPort and Infinex International Ltd., dated as of November 3, 1998,
as amended on January 11, 1999.
**Voyager Financial Services Ltd. was granted options which are conditional as
follows: (1) 62,500 options being released when the BSX listing is approved, and
(2) 62,500 options being released when the NASDAQ approval is granted.
***Peter Chappell also has 10,000 options granted with a strike price of
(pound)1.00, exercise date of 3/1/99, and expiration on 3/1/2001.
**** Matrix Corporate Finance was granted options for its assistance in raising
approximately (pound)1,153,000 for EarthPort in late 1998 and early 1999.
The option exercise prices are in Pounds Sterling.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN MATERIAL TRANSACTIONS
The directors, officers and principal shareholders of the Corporation (and the
known associates and affiliates of such persons) have had no direct or indirect
interest in any material transaction involving the Corporation during the 24
month period preceding the date hereof not otherwise disclosed herein.
Director/Officer Indebtedness: None.
36
<PAGE>
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
The Articles of Association of EarthPort provide as follows:
The Company's initial authorized share capital is (pound)100,000,000 divided
into 100,000,000 ordinary shares of (pound)1 each of which two shares were
issued at par at incorporation. The Directors pursuant to the Company's Articles
of Association adopted on February 23, 1998 are authorized and empowered to (1)
generally and unconditionally pursuant to Section 80 of the Act allot relevant
securities up to a maximum of the authorized but unissued share capital on
incorporation, such authority shall expire at the end of the 5 year period from
the date of incorporation on September 3, 1997; (2) pursuant to Section 95(1) of
the Act to allot equity securities as if Section 89(1) of the Act did not apply
to such allotment, up to the authorized share capital on incorporation of
(pound)100,000,000.
The Memorandum and Articles of Association of EarthPort comprise its
constitution.
The Memorandum and Articles of Association contain various objects of the
Company including the carrying on of the businesses described in this document.
The Memorandum and Articles of Association of the Company include the provisions
summarized below and elsewhere in this registration statement.
The Company may purchase its own shares in any manner authorised by the
Companies Act, subject to prior authority of the Company in general meeting,
unless the purchase of the shares would result in the Company having only
redeemable shares.
(2) Share Rights
------------
The authorised capital of the Company consists of one class of shares including
the Shares.
As of June 30, 1999 there were 6,648,215 ordinary shares outstanding (excluding
the options issued). The Series A Ordinary Shares will rank pari passu with the
ordinary shares, carry one vote per share, and are entitled to dividends as
declared from time to time by the Company.
Subject to disenfranchisement in default of supplying information required under
a notice pursuant to section 212 of the Companies Act, the Articles of
Association contain no restrictions on the free transferability of fully paid
shares, provided that the transfer in respect of only one class of share is
accompanied by the share certificate and any other evidence of title required by
the Directors and that the provisions in the Articles of Association relating to
the deposit of instruments for transfer have been complied with. The Directors
may in their absolute discretion refuse to register a transfer of any share
which is not fully paid or a transfer of shares, whether fully paid or not, in
favor of more than four persons jointly.
On a return of assets in a winding up or the repayment of capital, a liquidator
may, with the sanction of an extraordinary resolution of the Company, divide
amongst the holders of the Company's shares, in specie or in kind, the whole or
any part of the assets of the Company and may, with a similar sanction, decide
how such division is to be carried out.
The ordinary shares confer upon their holders the right to participate in any
profits, which the Company may from time to time decide to distribute in respect
of any financial period. Subject to the provisions of the Companies Act and if
the profits of the Company justify such payments, the Directors may declare and
pay interim dividends on shares of any class of such amounts, as and when they
think fit. No dividend or other money payable on or in respect of a share will
bear interest against the Company. The Directors may retain any dividend or
other money payable on or in respect of a share on which the Company has a lien
and may apply it towards the satisfaction of the debts, liabilities or
engagements in respect of such lien. A dividend may be retained if a shareholder
has failed to comply with the statutory disclosure requirements of the Companies
Act. Any dividend unclaimed for 12 years will be forfeited and revert to the
Company.
37
<PAGE>
All or any of the rights or privileges attached to any class of shares in the
Company may be varied or abrogated with the consent in writing of the holders of
three-fourths in nominal value of the issued shares of that class or with the
sanction of an extraordinary resolution passed at a separate general meeting of
the holders of the shares of that class. At every such separate general meeting,
except an adjourned meeting, the quorum is two persons holding, or representing
by proxy, one-third in nominal value of the issued shares of that class.
(3) Voting Rights
-------------
Except as otherwise provided by a statute or by the Memorandum and Articles of
Association, (1) Directors shall be elected by plurality of the votes cast, and;
(2) all other corporate action to be taken by vote of the shareholders shall be
authorized by a majority of votes cast at a meeting of shareholders by the
holders of ordinary shares entitled to vote thereon.
Except as otherwise provided by statute or by the Memorandum and Articles of
Association, at each meeting of shareholders, each holder of record of shares of
the Company entitled to vote, shall be entitled to vote for each share
registered in his name on the books of the Company.
Each shareholder is entitled to vote at a meeting and may do so by proxy;
provided, however, that the instrument authorizing such proxy to act shall have
been executed in writing by the shareholder himself, or by his attorney duly
authorized in writing. No proxy shall be valid after the expiration of eleven
months from the date of execution, unless the proxy shall specify the length of
time it is to continue in force. The proxy shall be delivered to the Secretary
at the meeting and shall be filed with records of the Company. Every proxy shall
be revocable at the pleasure of the shareholder executing it, except as
otherwise provided by law. The holders of shares may vote on the issue of
dissolving, winding up or liquidating the Company.
Each holder of ordinary shares present at a general meeting in person or by
proxy has one vote on a show of hands and on a poll one vote for each ordinary
share of which he is a holder or proxy.
(4) Directors
---------
The remuneration of the Directors is determined by the Company in General
Meeting. The Directors may also be paid, inter alia, for traveling, hotel and
other expenses properly incurred by them in attending meetings of the Directors
or in connection with the business of the Company. Any Director who devotes
special attention to the business of the Company may be paid such extra
remuneration as the Directors may determine. Currently Executive Directors
receive (pound)60,000 per annum.
A Director may hold any other office or place of profit under the Company (other
than the office of auditor) in conjunction with his office of Director, or may
act in a professional capacity to the Company on such terms as the Directors may
determine. No Director shall be disqualified by his office for contracting with
the Company in any capacity, nor shall any such contract or arrangement entered
into by the Company in which any Director is in any way interested be liable to
be avoided, nor shall any Director so contracting or being so interested be
liable to account to the Company for any profit realized by any such contract or
arrangement by reason of such Director holding that office if he shall declare
the nature of his interest.
A Director, notwithstanding his interest, may be counted in the quorum present
at any meeting at which he or any other Director is appointed to hold any such
office or place of profit under the Company, or at which the terms of any such
appointment are arranged, and he may vote on any such appointment or arrangement
other than his own appointment or the arrangement of terms thereof.
There is no provision in the Memorandum and Articles of Association requiring a
Director to retire by reason of any age limit, and there is no share
qualification for Directors.
38
<PAGE>
(5) Borrowing Powers
----------------
The Directors may exercise the Company's powers to borrow and to charge its
assets.
(6) Indemnities
-----------
The Company shall, to the fullest extent permitted by the Articles of
Association and Regulation 118 and provisions in the Companies Act 1985 of
England and Wales, as permitted by Law, as the same may be amended and
supplemented, indemnify and hold harmless any and all Directors and Officers of
the Company whom it shall have power to indemnify under said Article from and
against any and all expenses, liabilities, or other matters referred to in or
covered by said Article, and the indemnification provided for herein shall not
be deemed exclusive of any other rights to which those indemnified may be
entitled to under any by-law, agreement, resolution of shareholders or
directors, or otherwise, and shall continue as to a person who has ceased to be
a Director or Officer of the Company and inure to the benefit of the heirs,
executors, administrators and personal representatives of such Directors or
Officer.
39
<PAGE>
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES - Not Applicable
ITEM 16. CHANGES IN SECURITIES, CHANGES IN SECURITY FOR REGISTERED SECURITIES
AND USE OF PROCEEDS. - Not Applicable.
PART IV
ITEM 17. See Item 18
ITEM 18. FINANCIAL STATEMENTS
The Financial Statements were prepared in accordance with United Kingdom GAAP
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS
(A) Financial Statements
Report of Independent Auditors
Consolidated Balance Sheets as of June 30, 1998
Consolidated Statements of Operations and Deficit for ten months ended
June 30, 1998
Consolidated Statement of Changes in Financial Position for the Ten
months ended June 30, 1998.
Notes to Consolidated Financial Statements
Unaudited Financial Statements for the Twelve Months Ended June 30,
1999.
Letter from Ivan Sopher & Co.
(B) Exhibits
Exhibit
Number Exhibit Description
- ------- -------------------
1.1 Memorandum and Articles of Association of EarthPort.com plc.
1.2 Memorandum and Articles of Association of EarthPort
Entertainment Limited.
1.3 Memorandum and Articles of Association of Efundco.com.,
Limited.
1.4 Articles of Association of EarthPort Transaction Services AG.
1.5 Memorandum of Association and Byelaws of Earth Ltd.
3.1 Agreement between International Lottery In Liechtenstein
Stiftung (Interlotto) and Electronic Fundraising Company
Limited together with amendments.
3.2 Agreement between D. Vanrenen and A. Tucker and Electronic
Fundraising Company Limited.
3.3 Registrar and Transfer Agency Agreement.
3.4 Agreement between Electronic Fundraising Company plc and
Infinex International Ltd and Mitchell Newdelman with
amendment.
3.5 Agreement between the Foundation for the International
Federation of Red Cross and Red Crescent Societies and
International Lottery in Liechtenstein Foundation.
3.6 Confirmations of Government of Principality of Liechtenstein.
3.7 Extract of Trade Register of the International Lottery in
Liechtenstein Foundation.
40
<PAGE>
AUDITED FINANCIAL STATEMENTS FOR THE TEN MONTHS ENDED JUNE 30, 1998
42
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS OF
ELECTRONIC FUNDRAISING COMPANY PLC
We have audited the financial statements on pages 4 to 13 which have been
prepared under the historical cost convention and the accounting policies set
out on page 8.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 2 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the Directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion, we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
Included in intangible fixed assets are licence fees of (pound)1,406,251 and
generic software of (pound)187,501 at cost less amortisation. We are unable to
verify that the net realisable value of these intangible assets is at least
equal to the amount at which they are included in the financial statements. As
set out in Note 9, the Directors are unable to establish when amounts due from
ILLF amounting to (pound)1,173,860 will be paid as this is conditional upon
either the future trading results of ILLF or the successful conclusion of the
second phase of the Company's fund-raising and the subsequent recoupment of this
debt as set out in Note 15.
Except for any adjustments to the value of intangible assets that may be
necessary had we been able to verify their net realisable value and any
adjustments to trade debtors that may be necessary if the amount due were not to
prove recoverable in full, in our opinion the financial statements give a true
and fair view of the state of the Company's affairs as at 30 June 1998 and of
its loss for the period then ended and have been properly prepared in accordance
with the Companies Act 1985.
IVAN SOPHER & CO. 15 September 1998
CHARTERED ACCOUNTANTS 5 Elstree Gate
REGISTERED AUDITOR Elstree Way
Borehamwood
Herts WD6 1JD
43
<PAGE>
<TABLE>
<CAPTION>
PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 30 JUNE 1998
10 MONTHS
ENDED
30 JUNE
1998
NOTES (pound)
<S> <C> <C>
TURNOVER 896,854
Administrative expenses 2 (1,536,426)
- -----------------------------------------------------------------------------------------------------------
OPERATING LOSS 3 (639,572)
Other interest receivable and similar income 4 3,438
Interest payable and similar charges 5 (241)
- -----------------------------------------------------------------------------------------------------------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (636,375)
Tax on loss on ordinary activities 6 -
- -----------------------------------------------------------------------------------------------------------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION 12 (636,375)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
The profit and loss account has been prepared on the basis that all operations
are continuing operations. There are no recognised gains and losses other than
those passing through the profit and loss account.
44
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET
AS AT 30 JUNE 1998
10 MONTHS
ENDED
30 JUNE
1998
NOTES (pound) (pound)
<S> <C> <C> <C>
FIXED ASSETS
Intangible assets 7 1,593,752
Tangible assets 8 11,901
- ------------------------------------------------------------------------------------------------------
1,605,653
CURRENT ASSETS
Debtors 1,224,382
Cash at bank and in hand 9 329,971
- ------------------------------------------------------------------------------------------------------
1,554,353
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR 10 (73,449)
- ------------------------------------------------------------------------------------------------------
NET CURRENT ASSETS 1,480,904
- ------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 3,086,557
- ------------------------------------------------------------------------------------------------------
CAPITAL AND RESERVES
Called up share capital 11 3,722,932
Profit and loss account 12 (636,375)
- ------------------------------------------------------------------------------------------------------
SHAREHOLDERS' FUNDS - EQUITY INTERESTS 13 3,086,557
</TABLE>
The Financial statements were approved by the Board on 15 September 1998.
E A K Tucker
DIRECTOR
45
<PAGE>
<TABLE>
<CAPTION>
CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 JUNE 1998
10 MONTHS
ENDED
30 JUNE
1998
(pound)
<S> <C> <C>
NET CASH OUTFLOW FROM OPERATING ACTIVITIES
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (1,681,670)
Interest received 3,438
Interest paid (241)
- -------------------------------------------------------------------------------------------------------
Net cash inflow/(outflow) for returns on investments
and servicing of finance 3,197
CAPITAL EXPENDITURE
Payments to acquire intangible assets NOTES(1,700,000)
Payments to acquire tangible assets (14,488)
- -------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE (1,714,488)
- -------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW BEFORE MANAGEMENT OF LIQUID
RESOURCES AND FINANCING (3,392,961)
FINANCING
Issue of ordinary share capital 3,722,932
- -------------------------------------------------------------------------------------------------------
NET CASH INFLOW/(OUTFLOW) FROM FINANCING 3,722,932
- -------------------------------------------------------------------------------------------------------
Increase/(decrease) in cash in the period 329,971
- -------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
NOTES TO THE CASH FLOW STATEMENT
FOR THE PERIOD ENDED 30 JUNE 1998
1 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
1998,
(pound)
<S> <C>
Operating (loss)\profit (639,572)
Depreciation of tangible assets 2,587
Amortisation of intangible assets 106,248
Increase in debtors (1,224,382)
Increase in creditors within one year 73,449
- -------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM OPERATING ACTIVITIES (1,681,670)
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
2 ANALYSIS OF NET FUNDS/(DEBT)
OTHER
3 SEPTEMBER NON-CASH
1998 CASH FLOW CHANGES
(pound) (pound) (pound)
<S> <C> <C> <C>
NET CASH:
Cash at bank and in hand - 329,971 -
- -------------------------------------------------------------------------------------------------------
- 329,971 -
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
3 RECONSTRUCTION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS
1998
(pound)
<S> <C>
Increase in cash in the period 329,971
Cash inflow from increase in debt -
- -------------------------------------------------------------------------------------------------------
MOVEMENT IN NET FUNDS IN THE PERIOD 329,971
Opening net debt -
- -------------------------------------------------------------------------------------------------------
Closing net funds 329,971
- -------------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE>
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 30 JUNE 1998
1 ACCOUNTING POLICIES
1.1 ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost
convention.
1.2 COMPLIANCE WITH ACCOUNTING STANDARDS
The accounts have been prepared in accordance with applicable
accounting standards.
1.3 TURNOVER
Turnover represents amounts receivable for lottery revenues and
services net of VAT and trade discounts.
1.4 TANGIBLE FIXED ASSETS AND DEPRECIATION
Tangible fixed assets are stated at cost less depreciation.
Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected useful life,
as follows: Fixtures, fittings & equipment 20%-33.3% straight line
1.5 LEASING
Rentals payable under operating leases are charged against income on a
straight-line basis over the lease term.
1.6 DEFERRED TAXATION
Deferred taxation is provided at appropriate rates on all timing
differences using the liability method only to the extent that, in the
opinion of the Directors, there is a reasonable probability that a
liability or asset will crystallise in the foreseeable future.
1.7 INTANGIBLE FIXED ASSETS
Intangible fixed assets comprise licence fees and related software
costs which are amortised over the period of the licence.
2 TURNOVER
The total turnover of the Company for the period has been derived from
its principal activity wholly undertaken in the EEA.
<TABLE>
<CAPTION>
3 OPERATING LOSS
1998
(pound)
<S> <C>
OPERATING LOSS IS STATED AFTER CHARGING:
Amortisation of intangible assets 106,248
Depreciation of tangible assets 2,587
Operating lease rentals 18,441
Auditors' remuneration 9,713
Remuneration of auditors for non-audit work 15,000
- -----------------------------------------------------------------------------------------------------------
4 OTHER INTEREST RECEIVABLE AND SIMILAR INCOME
1998
(pound)
Bank interest 3,438
- -----------------------------------------------------------------------------------------------------------
5 INTEREST PAYABLE
1998
(pound)
On bank loans and overdrafts 241
- -----------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE>
6 TAXATION
There is no charge for taxation as the Company has made a loss for the period.
<TABLE>
<CAPTION>
7 INTANGIBLE FIXED ASSETS
GENERIC
SOFTWARE
COSTS GOODWILL TOTAL
(pound) (pound) (pound)
<S> <C> <C> <C>
COST
Additions 200,000 1,500,000 1,700,000
- ------------------------------------------------------------------------------------------------------------
At 30 June 1998 200,000 1,500,000 1,700,000
- ------------------------------------------------------------------------------------------------------------
AMORTISATION
Charge for period 12,499 93,749 106,248
- ------------------------------------------------------------------------------------------------------------
At 30 June 1998 12,499 93,749 106,248
- ------------------------------------------------------------------------------------------------------------
NET BOOK VALUE
At 30 June 1998 187,501 1,406,251 1,593,752
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
8 TANGIBLE FIXED ASSETS
FIXTURES,
FITTINGS &
EQUIPMENT
(pound)
<S> <C> <C>
COST
Additions 14,488
- ------------------------------------------------------------------------------------------------------------
At 30 June 1998 14,488
- ------------------------------------------------------------------------------------------------------------
DEPRECIATION
Charge for the period 2,587
- ------------------------------------------------------------------------------------------------------------
At 30 June 1998 2,587
- ------------------------------------------------------------------------------------------------------------
NET BOOK VALUE
At 30 June 1998 11,901
- ------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
9 DEBTORS
1998
(pound)
<S> <C>
Trade debtors 1,173,860
Other debtors 37,675
Prepayments and accrued income 12,847
- ------------------------------------------------------------------------------------------------------------
1,224,382
- ------------------------------------------------------------------------------------------------------------
The trade debtors are in respect of amounts from ILLF. These amounts
are interest free and no payment dates have been fixed. Electronic
Fundraising Company plc has agreed to subordinate its claims against
ILLF in respect of these amounts to the claims of other creditors
until such time as sufficient funds are available. As set out in Note
15 below, Electronic Fundraising Company plc is committed to pay a
further (pound)3.5 million licence fee to ILLF at the time of its
second phase of fund-raising. It is the understanding of the
Directors that any amounts still due to the Company by ILLF at that
time will be recouped by offset against this liability.
49
<PAGE>
10 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
1998
(pound)
Accruals and deferred income 73,449
- ------------------------------------------------------------------------------------------------------------
73,449
- ------------------------------------------------------------------------------------------------------------
11 SHARE CAPITAL
1998
(pound)
AUTHORISED
100,000,000 Ordinary Shares of (pound)1 each 100,000,000
- ------------------------------------------------------------------------------------------------------------
ALLOTTED, CALLED UP AND FULLY PAID
3,722,932 Ordinary Shares of(pound)1 each 3,722,932
- ------------------------------------------------------------------------------------------------------------
12 STATEMENT OF MOVEMENTS ON PROFIT AND LOSS ACCOUNT
PROFIT AND
LOSS ACCOUNT
(pound)
Retained loss for the period (636,375)
- ------------------------------------------------------------------------------------------------------------
13 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
1998
(pound)
Loss for the financial period (636,375)
Proceeds from issue of shares 3,722,932
- ------------------------------------------------------------------------------------------------------------
Net addition to shareholders' funds 3,086,557
Opening shareholders' funds -
- ------------------------------------------------------------------------------------------------------------
Closing shareholders' funds 3,086,557
- ------------------------------------------------------------------------------------------------------------
14 FINANCIAL COMMITMENTS
At 30 June 1998 the company had annual commitments under
non-cancellable operating leases as follows:
LAND AND
BUILDINGS
1998
(pound)
Expiry date: 18,441
- ------------------------------------------------------------------------------------------------------------
Between two and five years
15 CAPITAL COMMITMENTS
Under the terms of its agreement with ILLF, the Company is committed
to pay a further (pound)3.5 million for its licence fee at the time
of the second phase of the Company's fund-raising although no fixed
timetable has been set for this. Payment of this commitment may be
conditional upon sufficient funds being raised. As set out in Note 9
above, it is the understanding of the Directors that any debts that
remain outstanding from ILLF at that time will be recouped by offset
against this liability.
50
<PAGE>
16 DIRECTORS' EMOLUMENTS
1998
(pound)
Emoluments for qualifying services 125,000
- ------------------------------------------------------------------------------------------------------------
17 TRANSACTIONS WITH DIRECTORS
1. By an agreement dated 22 September 1997, the Company acquired
for no consideration the business of Walton Consulting
Limited, a company in which DJDVanrenen and EAKTucker have a
material interest.
2. During the period, the Company incurred certain overhead costs
on behalf of Walton Consulting Limited and these were
recharged at cost. At the balance sheet date, the Company was
owed (pound)12,656 by Walton Consulting Limited.
18 EMPLOYEES
NUMBER OF EMPLOYEES
The average monthly number of employees (including directors) during
the period was:
1998
NUMBER
Directors 3
Administration and technical 18
- ------------------------------------------------------------------------------------------------------------
21
- ------------------------------------------------------------------------------------------------------------
EMPLOYMENT COSTS (pound)
Wages and salaries 497,416
Social security costs 48,933
- ------------------------------------------------------------------------------------------------------------
546,349
- ------------------------------------------------------------------------------------------------------------
</TABLE>
19 CONTROL
The controlling shareholders of the Company are Tallulah Properties
Limited and Braevista Investments Limited, companies registered in
the Isle of Man. DJDVanrenen and EAKTucker, who are both directors of
Electronic Fundraising Company plc, are discretionary beneficiaries
of the trusts which own Tallulah Properties Limited and Braevista
Investments Limited.
51
<PAGE>
UNAUDITED FINANCIAL STATEMENTS FOR THE TWELVE MONTHS ENDED JUNE 30, 1999
<PAGE>
EARTHPORT.COM GROUP PLC
We have reviewed the consolidated information for the year ended 30th June 1999.
These consolidated financial statements include, as intangible fixed assets,
licence fees, generic software and goodwill at cost less amortisation to date.
We are unable to verify that the net realisable value of these intangible fixed
assets is at least equal to the amount at which they are included in the
financial statements. Except for any adjustments to the value of intangible
assets that may have been necessary had we been able to verify their net
realisable value in our opinion the consolidated financial information, which
does not comprise full accounts, gives a true and fair view of the state of
affairs and profit and loss account of the group at 30th June 1999.
5 ELSTREE GATE,
ELSTREE WAY,
IVAN SOPHER & CO BOREHAMWOOD,
CHARTERED ACCOUNTANTS HERTS. WD6 1JD.
9TH JULY 1999
52
PRELIMINARY CONSOLIDATED FIGURES
EARTHPORT.COM GROUP PLC
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30TH JUNE 1999
<TABLE>
- ----------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR 10 MONTHS
ENDED ENDED
30 JUNE 30 JUNE
1999 1998
(Pound) (pound)
<S> <C> <C>
TURNOVER 1,075,071 896,854
Administrative Expenses (2,481,295) (1,536,426)
------------ ------------
OPERATING LOSS (1,406,224) (639,572)
Other Interest Receivable and
Similar Income 14,080 3,438
Interest Payable and Similar Charges (241)
------------ ------------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (1,392,144) (636,375)
Tax on Loss on Ordinary Activities - -
------------ ------------
LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION (1,392,144) (636,375)
============ ============
</TABLE>
The profit and loss account has been prepared on the basis that all operations
are continuing operations.
There are no recognised gains and losses other than those passing through the
profit and loss account.
53
<PAGE>
PRELIMINARY CONSOLIDATED FIGURES
EARTHPORT.COM GROUP PLC
BALANCE SHEET
AS AT 30TH JUNE 1999
<TABLE>
- ------------------------------------------------------------------------------------------
<CAPTION>
1999 1998
(pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C>
FIXED ASSETS
Intangible Assets 5,071,828 1,593,752
Tangible Assets 3,204,943 11,901
------------ ------------
8,276,771 1,605,653
CURRENT ASSETS
Debtors 124,349 1,224,382
Cash at bank and in hand 849,883 329,971
------------ ------------
974,232 1,554,353
CREDITORS: AMOUNTS FALLING
DUE WITHIN ONE YEAR (784,984) (73,449)
------------ ------------
NET CURRENT ASSETS 189,248 1,480,904
------------ ------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 8,466,019 3,086,557
============ ============
CAPITAL AND RESERVES
Called up Share Capital 6,648,215 3,722,932
Share Premium Account 3,846,323
Profit and Loss Account (2,028,519) (636,375)
------------ ------------
SHAREHOLDERS' FUNDS 8,466,019 3,086,557
============ ============
EQUITY INTERESTS
</TABLE>
54
<PAGE>
Ivan Sopher & Co.
Chartered Accountants & Registered Auditors
5 Elstree Gate, Elstree way
Borehamwood, Herts WD6 1JD
Telephone: 0181-207 0602
Fax: 0181-207 6758
Email: [email protected]
30 September 1999
E204/SMI
The Directors
Earthport.com plc.
5 St. Mary's Abbot's Place
London W8 6LS
Dear Sirs:
Earthport.com plc (FORMERLY ELECTRONIC FUNDRAISING COMPANY PLC)
In connection with the company's proposed Form 20-F filing of the audited
accounts of the company for the year ended 30 June 1998 and the interim accounts
for the year ended 30 June 1999, we confirm that these financial statements have
been prepared in accordance with UK generally accepted accounting principles
(GAAP) and we consent to their inclusion in the application.
For the purposes of the completion of either Item 17 or Item 18 of the Form, we
are of the opinion that there are no material variations in the accounting
principles, practices and methods used in preparing these financial statements
from the principles, practices and methods generally accepted in the United
States. Accordingly, there are no material differences between reported net
income shown in these financial statements and net income according to US GAAP
and there is no any material variation between any amount appearing in the
balance sheet and their equivalent determined using US GAAP.
Yours faithfully,
/s/Ivan Sopher & Co.
- ------------------------
Ivan Sopher & Co.
"Authorized by the Institute of Chartered Accountants in England and Wales to
carry on Investment business"
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities 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 the registration statement to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: September 30, 1999 EARTHPORT.COM PLC
By: /S/ David Vanrenen
-----------------------------------------
David Vanrenen
Executive Chairman and Chief Executive
Officer
55
EARTHPORT.COM PLC
Date of Incorporation: 3 September 1997
Name on Incorporation: Electronic Fundraising Company Limited
Date of Re-Registration of a Private Company as a
Public Company: 19 March 1998
Name on Re-Registration: Electronic Fundraising Company plc
Change of Name to EarthPort.com plc on 28 May 1999
<PAGE>
[Emblem Here]
CERTIFICATE OF INCORPORATION
OF A PRIVATE LIMITED COMPANY
Company No. 3428888
The Registrar of Companies for England and Wales hereby certifies that
ELECTRONIC FUNDRAISING COMPANY LIMITED
is this day incorporated under the Companies Act 1985 as a private company and
that the company is limited.
Given at Companies House, Cardiff, the 3rd September 1997
/S/ E.P. OWEN
MRS. E.P. OWEN
For the Registrar of Companies
[LOGO HERE]
COMPANIES HOUSE
<PAGE>
[Emblem Here]
CERTIFICATE OF INCORPORATION
ON RE-REGISTRATION OF A PRIVATE COMPANY
AS A PUBLIC COMPANY
No. 3428888
I hereby certify that
ELECTRONIC FUNDRAISING COMPANY LIMITED
formerly registered as a private company has this day been re-registered under
the Companies Act 1985 as a public company under the name of
ELECTRONIC FUNDRAISING COMPANY plc
and that the company is limited.
Given under my hand at Companies House, Cardiff the 19th March 1998
/s/ C. Hardman
C. HARDMAN
An Authorised Officer
<PAGE>
[Emblem Here]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
Company No. 3428888
The Registrar of Companies for England and Wales hereby certifies that
ELECTRONIC FUNDRAISING COMPANY PLC
having by special resolution changed its name, is now incorporated
under the name of
EarthPort.com plc
Given at Companies House, London, the 28th May 1999
/s/ S. Bashar
MISS S. BASHAR
For The Registrar Of Companies
[LOGO HERE]
COMPANIES HOUSE
<PAGE>
Memorandum and
Articles of Association
ELECTRONIC FUNDRAISING COMPANY plc
NO. 3428888
INCORPORATED 3rd SEPTEMBER 1997
RE-REGISTERED AS A PUBLIC LIMITED COMPANY
ON 19TH MARCH 1998
Stanley Davis
120 East Road London N1 6AA
Telephone 0171 253 0800 Facsimile 0171 251 0602
E-mail [email protected] DX 36609 Finsbury
<PAGE>
The Companies Acts 1985 to 1989
A Public Company Limited by Shares
MEMORANDUM OF
ASSOCIATION
OF
ELECTRONIC FUNDRAISING COMPANY plc
(As amended by Special Resolutions passed 23rd February, 1998)
1. The Company's name is ELECTRONIC FUNDRAISING COMPANY plc.
2. The Company is to be a public company.
3. The Company's Registered Office is to be situated in England and
Wales.
4. The Company's objects are:
(A) (i) To raise funds and to invite and receive contributions for all
purposes by electronic means of all or any description; to carry
on the business in any part of the world the provision of
fundraising activities by way of the Internet, World-wide Web or
any other electronic vehicle or otherwise whether on the premises
of the Company or on the premises of persons and companies having
dealings with this Company; and to enter into any contracts and
other arrangements of all kinds with persons having dealings with
the Company on such terms and for such periods of time as the
Company may from time to time determine on a commission or fee
basis or otherwise; and to carry on any other trade or business
whatsoever of a like and similar nature.
(ii) To carry on business as a general commercial company.
(B) To carry on any other business which in the opinion of the
Company, may be capable of being conveniently or profitably
carried on in connection with or subsidiary to any other business
of the Company and is calculated to enhance the value of the
Company's property.
(C) To purchase or by any other means acquire freehold, leasehold or
any other property for any estate or interest whatever, movable or
immovable or any interest in such property, and to sell, lease,
let on hire, develop such property, or otherwise turn the same to
the advantage of the Company.
<PAGE>
(D) To apply for, register or by other means acquire any patents,
patent rights, brevets d'invention, licences, trademarks,
concessions and inventions and to use and turn to account the same
or to develop, sell or assign the same or grant licences or
privileges in respect thereof or otherwise turn the same to the
advantage of the Company.
(E) To build, reconstruct or generally maintain buildings and works of
all kinds, whether or not these are situate on the property of the
Company.
(F) TO invest and deal with the monies of the Company in such shares
or upon such securities and in such manner as from time to time
may be determined.
(G) To enter into arrangements for joint workings in business or
amalgamate with or enter into any partnership or arrangement for
sharing profits, union of interests, reciprocal concession or co-
operation with any company, firm or person carrying on or
proposing to carry on any business within the objects of this
Company or which is capable of being carried on so as directly or
indirectly to benefit the Company.
(H) To purchase or otherwise acquire, take over and undertake all or
any part of the business, property, liabilities and transactions
of any person, firm or company carrying on any business the
carrying on of which is calculated to benefit this Company or to
advance its interests, or possessed of property suitable for the
purposes of the Company.
(I) To sell, improve, manage, develop, turn to account, let on rent or
royalty or share of profits or otherwise, grant licences or
easements or other rights in or over, or in any other manner deal
with or dispose of the undertaking and all of any of the property
and assets for the time being of the Company for such
consideration as the Company may think fit.
(J) To subscribe for, take, purchase or otherwise acquire either for
cash, shares or debentures in this Company or any other
consideration any other company or business which, in the opinion
of the Company, may be carried on so as directly or indirectly to
benefit the Company.
(K) To sell or otherwise dispose of the whole or any part of the
business or property of the Company for any consideration, shares
or debentures as the Company may think fit.
(L) To lend and advance money or give credit on any terms and with or
without security to any company, firm or person (including without
prejudice to the generality of the foregoing any holding company,
subsidiary or fellow subsidiary of, or any other company
associated in any way with, the Company), to enter into
guarantees, contracts of indemnity and suretyships of all kinds,
to receive money on deposit or loan upon any terms, and to secure
or guarantee in any manner and upon any terms the payment of any
sum of money or the performance of any obligation by any company,
firm or person (including without prejudice to the generality of
the foregoing any such holding company, subsidiary, fellow
subsidiary or associated company as aforesaid).
(M) To borrow or raise money in any manner and to secure the repayment
of any money borrowed raised, or owing by mortgage, charge,
standard security, lien or other security upon the whole or any
<PAGE>
part of the Company's property or assets (whether present or
future), including its uncalled capital and also by a similar
mortgage, charge, standard security, lien or security to secure
and guarantee the performance by the Company of any obligation or
liability it may undertake or which may become binding on it.
(N) To draw, make, accept, endorse, discount, negotiate, execute and
issue cheques, bills of exchange, promissory notes, bills of
lading, warrants, debentures and other negotiable or transferable
instruments.
(0) To apply for, promote, and obtain any Act of Parliament, order, or
licence of the Department of Trade or other authority for enabling
the Company to carry any of its objects into effect, or for
effecting any modification of the Company's constitution, or for
any other purpose which may seem calculated directly or indirectly
to promote the Company's interests, and to oppose any proceedings
or applications which may seem calculated directly or indirectly
to prejudice the Company's interests.
(P) To support and subscribe to any funds and to subscribe to or
assist in the promotion of any charitable, benevolent or public
purpose or object for the benefit of the Company or its employees,
directors or other officers past or present and to grant pensions
to such persons or their dependants.
(Q) To distribute among the members of the Company in kind any
property of the Company of whatever nature.
(R) To pay all or any expenses in connection with the promotion,
formation and incorporation of the Company, or to contract with
any company, firm or person to pay the same, and to pay commission
to brokers and others for underwriting, placing, selling, or
guaranteeing the subscription of any shares or other securities of
the Company.
(S) To do all such other things as may be deemed incidental or
conducive to the attainment of the Company's objects or any of
them.
None of the objects set forth in any sub-clause of this Clause
shall be restrictively construed but the widest interpretation
shall be given to each such object, and none of such objects
shall, except where the context expressly so requires, be in any
way limited or restricted by reference to or inference from any
other object or objects set forth in any such sub-clause or by
reference to or inference from the terms of any other sub-clause
of this Clause, or by reference to or inference from the name of
the Company.
5. The liability of the Members is limited.
6. The Company's share capital is (pound)100,000,000 divided into
100,000,000 Shares of (pound)1 each.
<PAGE>
We, the subscribers to this Memorandum of Association, wish to be formed into a
Company pursuant to this Memorandum, and we agree to take the number of Shares
shown opposite our respective names.
- --------------------------------------------------------------------------------
Number of Shares
NAMES AND ADDRESSES OF SUBSCRIBERS taken by each
Subscriber
- --------------------------------------------------------------------------------
HALLMARK SECRETARIES LIMITED ONE
120 East Road,
London N1 6AA
HALLMARK REGISTRARS LIMITED ONE
120 East Road,
London N1 6AA
Dated the 1st August 1997
Witness to the above signatories:
DAVID ORDISH
120 East Road,
London N1 6AA
<PAGE>
THE COMPANIES ACTS 1985 TO 1989
A PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF
ASSOCIATION
OF
ELECTRONIC FUNDRAISING COMPANY plc
(As adopted by Special Resolution passed 23rd February, 1998)
PRELIMINARY
1. (a) Subject as hereinafter provided the Regulations contained in
Table A in The Companies (Table A to F) Regulations 1985 ("Table
A") shall apply to the Company.
(b) In these Articles the expression "the Act" means the Companies
Act 1985, but so that any reference in these Articles to any
provision of the Act shall be deemed to include a reference to any
statutory modification or re-enactment of that provision for the
time being in force.
2. Regulations 3, 8, 20, 41, 64, 73 to 80 inclusive and 94 to 97
inclusive of Table A shall not apply to the Company.
SHARES
3. (a) All unissued shares which are comprised in the authorised
share capital with which the Company is incorporated shall be
under the control of the directors and for the purposes of Section
80 of the Act the directors are unconditionally authorised to
exercise the power of the Company to allot shares grant options
over or otherwise dispose of the same to such persons and on such
terms as they think fit at any time or times during the period of
five years from the date of incorporation and the directors may
after that period allot any shares or grant any such rights under
this authority in pursuance of an offer or agreement made by the
Company within that period.
(b) The authority given above may be renewed revoked or varied by
ordinary resolution of the Company in general meeting.
4. In accordance with Section 95 of the Act, subsection (1) of
Section 89 of the Act shall be excluded from applying to the allotment
of equity securities (as defined in Section 94 of the Act) pursuant to
the authority contained in Article 3 above.
<PAGE>
LIEN
5. Subject to the provisions of Section 150 of the Act, the Company
shall have a first and paramount lien on every share (not being a fully
paid share) for all moneys (whether presently payable or not) payable
at a fixed time or called in respect of that share. The directors may
at any time declare any share to be wholly or in part exempt from the
provisions of this regulation. The Company's lien on a share shall
extend to any amount payable in respect of it.
FORFEITURE OF SHARES
6. If a share is forfeited pursuant to Regulation 19 of Table A it
may be sold, re-allotted or otherwise disposed of on such terms and in
such manner as the directors determine either to the person who was
before the forfeiture the holder or to any other person and at any time
before sale, re-allotment or other disposition, the forfeiture may be
cancelled on such terms as the directors think fit subject always to
the provisions of Section 146 of the Act. Where for the purposes of its
disposal a forfeited share is to be transferred to any person the
directors may authorise some person to execute an instrument of
transfer of the share to that person.
GENERAL MEETINGS
7. Every notice convening a general meeting shall comply with the
provisions of Section 372(3) of the Act as to giving information to
members in regard to their right to appoint proxies; and notices of and
other communications relating to any general meeting which any member
is entitled to receive shall be sent to the directors and to the
auditors for the time being of the Company.
8. Under Section 372(1) of the Act, a proxy appointed to attend and
vote at the general meeting does not have the right to speak at the
meeting.
9. (a) The words "at the time when the meeting proceeds to business"
shall be inserted at the end of the first sentence of Regulation
40 of Table A.
(b) If a quorum is not present within half an hour from the time
appointed for a general meeting the general meeting shall stand
adjourned to the same day in the next week at the same time and
place or to such other day and at such other time and place as the
directors may determine; and if at the adjourned general meeting a
quorum is not present within half an hour from the time appointed
therefor such adjourned general meeting shall be dissolved.
VOTES OF MEMBERS
10. If any member or other person appearing to be interested in any
shares registered in the name of such member in any account in the
register of members of the Company is in default in supplying within 28
days of the date of service of the notice from the Company requiring
such member or other person to supply to the Company in writing all or
any of such information as is referred to in Section 212 of the Act,
such member shall, for such period as default of such member or other
person shall continue, not be entitled, without the prior written
consent of all the directors, to vote or to exercise any right
conferred by membership in relation to the meetings of the Company in
respect of all the shares for the time being registered in the account
of the register of members of the Company in respect of which such
notice was served. For the purpose of this Article a person shall be
<PAGE>
treated as appearing to be interested in any shares if the member
holding such shares has given to the Company a notification under the
said Section 212 which fails to establish the identities of those
interested in the shares and if (after taking into account the said
notification and any other relevant Section 212 notification) the
Company knows or has reasonable cause to believe that the person in
question is or may be interested in the shares.
DIRECTORS
11. The first director or directors of the Company shall be the
person or persons named in the statement delivered under Section 10 of
the Act.
12. The maximum number and minimum number respectively of the
directors may be determined from time to time by ordinary resolution in
general meeting of the Company. Subject to and in default of any such
determination there shall be no maximum number of directors and in
accordance with Section 282 of the Act the minimum number of directors
shall be two.
13. (a) No person shall be appointed a director at any general meeting
unless either:
(i) he is recommended by the directors; or
(ii) not less than fourteen nor more than thirty-five clear
days before the date appointed for the general meeting,
notice executed by a member qualified to vote at the general
meeting has been given to the Company of the intention to
propose that person for appointment, together with notice
executed by that person of his willingness to be appointed.
(b) Subject to the provisions of paragraph (a) above, the Company
may by ordinary resolution in general meeting appoint any person
who is willing to act to be a director, either to fill a vacancy
or as an additional director.
(c) The directors may appoint a person who is willing to act to be
a director, either to fill a vacancy or as an additional director,
provided that the appointment does not cause the number of
directors to exceed any number determined in accordance with
Article 12 as the maximum number of directors and for the time
being in force.
14. The directors may exercise all the powers of the Company to
borrow without limit as to amount and upon such terms and in such
manner as they think fit and subject (in the case of any security
convertible into shares) to Section 80 of the Act to grant any mortgage
charge or standard security over its undertaking property and uncalled
capital or any part thereof and to issue debentures debenture stock or
any other securities whether outright or as security for any debt
liability or obligation of the Company or of any third party.
15. A director who is in any way either directly or indirectly
interested in any contract transaction or arrangement (whether actual
or proposed) with the Company or in which the Company is otherwise
interested shall declare the nature of his interest at a meeting of the
directors in accordance with Section 317 of the Act. Subject to such
disclosure a director shall be entitled to vote in respect of any such
contract transaction or arrangement (whether actual or proposed) in
which he is interested and whether or not he votes he shall be counted
in reckoning whether a quorum is present or not.
<PAGE>
THE SEAL
16. The Company may have a Seal if it so wishes. If the Company has a
Seal the Directors may determine who shall sign any instrument to which
the Seal is affixed and unless otherwise so determined it shall be
signed by a Director and by the Secretary or by a second Director. The
obligation under Clause 6 of Table A relating to the sealing of share
certificates shall apply only if the Company has a seal.
INDEMNITY
17. In addition to the indemnity conferred by Regulation 118 of Table
A and subject to the provisions of the Act every such person as is
mentioned in the said Regulation shall be entitled to be indemnified
out of the assets of the Company against all expenses losses or
liabilities incurred by him as agent of the Company or for the
Company's benefit or intended benefit or in or about the discharge or
intended discharge of his duties in relation to the Company.
EARTHPORT ENTERTAINMENT LIMITED
Date of incorporation: 10 February 1999
Name on incorporation: InterPortal Limited
Company Number: 3710737
Change of Name to: efundco.com limited on 22 February 1999
Change of Name to: EarthPort Limited on 27 April 1999
Change of Name to: EarthPort Entertainment Limited on 28 May 1999
<PAGE>
[Emblem Here]
CERTIFICATE OF INCORPORATION
OF A PRIVATE LIMITED COMPANY
COMPANY NO. 3710737
The Registrar of Companies for England and Wales hereby certifies that
InterPortal Limited
is this day incorporated under the Companies Act 1985 as a private company and
that the company is limited.
Given at Companies House, Cardiff, the 10th February 1999
[Seal Here]
THE OFFICIAL SEAL OF THE
REGISTRAR OF COMPANIES
[LOGO HERE]
COMPANIES HOUSE
<PAGE>
[Emblem Here]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
COMPANY NO. 3710737
The Registrar of Companies for England and Wales hereby certifies that
INTERPORTAL LIMITED
having by special resolution changed its name, is now incorporated under the
name of
efundco.com limited
Given at Companies House, Cardiff, the 22nd February 1999
[Seal Here]
THE OFFICIAL SEAL OF THE
REGISTRAR OF COMPANIES
[Logo Here]
COMPANIES HOUSE
<PAGE>
[Emblem Here]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
COMPANY NO. 3710737
The Registrar of Companies for England and Wales hereby certifies that
EFUNDCO.COM LIMITED
having by special resolution changed its name, is now incorporated under the
name of
EARTHPORT LIMITED
Given at Companies House, Cardiff, the 27th April 1999
[Seal Here]
THE OFFICIAL SEAL OF THE
REGISTRAR OF COMPANIES
[Logo Here]
COMPANIES HOUSE
<PAGE>
[Emblem Here]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
COMPANY NO. 3710737
The Registrar of Companies for England and Wales hereby certifies that
EARTHPORT LIMITED
having by special resolution changed its name, is now incorporated
under the name of
EarthPort Entertainment Limited
Given at Companies House, London, the 28th May 1999
/s/ S. Bashar
MISS S. BASHAR
For The Registrar Of Companies
[Logo Here]
COMPANIES HOUSE
MEMORANDUM AND
ARTICLES OF ASSOCIATION
EFUNDCO.COM LIMITED
NO. 3710737
INCORPORATED 10 FEBRUARY 1999
STANLEY DAVIS
120 East Road London N1 6AA
Telephone 0171 253 0800 Facsimile 0171 251 0602
E-mail [email protected] DX 36609 Finsbury
<PAGE>
The Companies Acts 1985 to 1989
A Private Company Limited by Shares
MEMORANDUM OF
ASSOCIATION
OF
EFUNDCO.COM LIMITED
1. The Company's name is efundco.com limited
(The name of the Company changed from InterPortal Limited on
22/02/1999)
2. The Company's Registered Office is to be situated in England and
Wales.
3. The Company's objects are:
A. (i) To carry on business of financiers, financial agents, bill
discounters, company promoters, underwriters and dealers in
stocks, shares, annuities, loans and other securities,
insurance agents and mortgage brokers, to carry on the
business of financial and investment consultants and advisers
into all aspects of commerce, finance, stock and share
dealings; to undertake and carry on any business transaction
or obligation commonly undertaken or carried on by
financiers, company promoters, concessionaires, contractors
or merchants and generally to enter into, assist or
participate in financial mercantile, commercial, industrial
and other undertakings and business of all kinds and to carry
on, develop and extend the same, or sell, dispose of and deal
with or otherwise turn to account, and to carry on any other
trade or business whatsoever which can in the opinion of the
Company be advantageously or conveniently carried on in
connection with or by way of extension of any such business
or is calculated directly or indirectly to develop any branch
of the Company's assets, property or rights.
(ii) To carry on business as a general commercial company.
(B) To carry on any other business which in the opinion of the
Company, may be capable of being conveniently or profitably
carried on in connection with or subsidiary to any other business
of the Company and is calculated to enhance the value of the
Company's property.
(C) To purchase or by any other means acquire freehold, leasehold or
any other property for any estate or interest whatever, movable or
immovable or any interest in such property, and to sell, lease,
let on hire, develop such property, or otherwise turn the same to
the advantage of the Company.
(D) To apply for, register or by other means acquire any patents,
patent rights, brevets d'invention, licences, trademarks,
concessions and inventions and to use and turn to account the same
or to develop, sell or assign the same or grant licences or
privileges in respect thereof or otherwise turn the same to the
advantage of the Company.
(E) To build, reconstruct, or generally maintain buildings and works
of all kinds, whether or not these are situate on the property of
the Company.
<PAGE>
(F) To invest and deal with the monies of the Company in such shares
or upon such securities and in such manner as from time to time
may be determined.
(G) To enter into arrangements for joint workings in business or
amalgamate with or enter into any partnership or arrangement for
sharing profits, union of interests, reciprocal concession or co-
operation with any company, firm or person carrying on or
proposing to carry on any business within the objects of this
Company or which is capable of being carried on so as directly or
indirectly to benefit the Company.
(H) To purchase or otherwise acquire, take over and undertake all or
any part of the business, property, liabilities and transactions
of any person, firm or company carrying on any business the
carrying on of which is calculated to benefit this Company or to
advance its interests, or possessed of property suitable for the
purposes of the Company.
(I) To sell, improve, manage, develop, turn to account, let on rent or
royalty or share of profits or otherwise, grant licences or
easements or other rights in or over, or in any other manner deal
with or dispose of the undertaking and all of any of the property
and assets for the time being of the Company for such
consideration as the Company may think fit.
(J) To subscribe for, take, purchase or otherwise acquire either for
cash, shares or debentures in this Company or any other
consideration any other company or business which, in the opinion
of the Company, may be carried on so as directly or indirectly to
benefit the Company.
(K) To sell or otherwise dispose of the whole or any part of the
business or property of the Company for any consideration, shares
or debentures as the Company may think fit.
(L) To lend and advance money or give credit on any terms and with or
without security to any company, firm or person (including without
prejudice to the generality of the foregoing any holding company,
subsidiary or fellow subsidiary of, or any other company
associated in any way with, the Company), to enter into
guarantees, contracts of indemnity and suretyships of all kinds,
to receive money on deposit or loan upon any terms, and to secure
or guarantee in any manner and upon any terms the payment of any
sum of money or the performance of any obligation by any company,
firm or person (including without prejudice to the generality of
the foregoing any such holding company, subsidiary, fellow
subsidiary or associated company as aforesaid).
(M) To borrow or raise money in any manner and to secure the repayment
of any money borrowed raised, or owing by mortgage, charge,
standard security, lien or other security upon the whole or any
part of the Company's property or assets (whether present or
future), including its uncalled capital and also by a similar
mortgage, charge, standard security, lien or security to secure
and guarantee the performance by the Company of any obligation or
liability it may undertake or which may become binding on it.
(N) To draw, make, accept, endorse, discount, negotiate, execute and
issue cheques, bills of exchange, promissory notes, bills of
lading, warrants, debentures and other negotiable or transferable
instruments.
(0) To apply for, promote, and obtain any Act of Parliament, order, or
licence of the Department of Trade or other authority for enabling
the Company to carry any of its objects into effect, or for
effecting any modification of the Company's constitution, or for
any other purpose which may seem calculated directly or indirectly
to promote the Company's interests, and to oppose any proceedings
or applications which may seem calculated directly or indirectly
to prejudice the Company's interests.
(P) To support and subscribe to any funds and to subscribe to or
assist in the promotion of any charitable, benevolent or public
purpose or object for the benefit of the Company or its employees,
directors or other officers past or present and to grant pensions
to such persons or their dependants.
<PAGE>
(Q) To distribute among the members of the Company in kind any
property of the Company of whatever nature.
(R) To pay all or any expenses in connection with the promotion,
formation and incorporation of the Company, or to contract with
any company, firm or person to pay the same, and to pay commission
to brokers and others for underwriting, placing, selling, or
guaranteeing the subscription of any shares or other securities of
the Company.
(S) To do all such other things as may be deemed incidental or
conducive to the attainment of the Company's objects or any of
them.
None of the objects set forth in any sub-clause of this Clause
shall be restrictively construed but the widest interpretation
shall be given to each such object, and none of such objects
shall, except where the context expressly so requires, be in any
way limited or restricted by reference to or inference from any
other object or objects set forth in any such sub-clause or by
reference to or inference from the terms of any other sub-clause
of this Clause, or by reference to or inference from the name of
the Company.
4. The liability of the Members is limited.
5. The Company's share capital is (pound)1,000,000.00 divided into
1,000,000 shares of (pound)1.00 each.
<PAGE>
We, the subscribers to this Memorandum of Association, wish to be formed into a
Company pursuant to this Memorandum; and we agree to take the number of Shares
shown opposite our respective names.
- --------------------------------------------------------------------------------
Number of Shares
NAMES AND ADDRESSES OF SUBSCRIBERS Taken by each
Subscriber
- --------------------------------------------------------------------------------
HALLMARK SECRETARIES LIMITED One
120 East Road
London N1 6AA
HALLMARK REGISTRARS LIMITED One
120 East Road
London N1 6AA
Dated the 4 January 1999
Witness to the above signatories:
DAVID ORDISH
120 East Road
London N1 6AA
<PAGE>
The Companies Acts 1985 to 1989
A Private Company Limited by Shares
ARTICLES OF
ASSOCIATION
OF
EFUNDCO.COM LIMITED
PRELIMINARY
1. (a) Subject as hereinafter provided the Regulations contained in
Table A in The Companies (Table A to F) Regulations 1985
("Table A") shall apply to the Company.
(b) In these Articles the expression "the Act" means the
Companies Act 1985, but so that any reference in these
Articles to any provision of the Act shall be deemed to
include a reference to any statutory modification or
re-enactment of that provision for the time being in force.
2. Regulations 3, 8, 24, 41, 46, 48, 64, 67, 73 to 77 inclusive and
94 to 97 inclusive of Table A shall not apply to the Company.
3. The Company is a private company and accordingly no offer or
invitation shall be made to the public (whether for cash or
otherwise) to subscribe for any shares in or debentures of the
Company nor shall the Company allot or agree to allot (whether for
cash or otherwise) any shares in or debentures of the Company with
a view to all or any of those shares or debentures being offered
for sale to the public.
SHARES
4. (a) Subject to Article 5 below all unissued shares which are
comprised in the authorised share capital with which the
Company is incorporated shall be under the control of the
directors and for the purposes of Section 80 of the Act the
directors are unconditionally authorised to exercise the
power of the Company to allot shares grant options over or
otherwise dispose of the same to such persons and on such
terms as they think fit at any time or times during the
period of five years from the date of incorporation and the
directors may after that period allot any shares or grant any
such rights under this authority in pursuance of an offer or
agreement made by the Company within that period.
(b) The authority given above may be renewed revoked or
varied by ordinary resolution of the Company in general
meeting.
5. (a) In accordance with Section 91(1) of the Act, Sections 89(1)
and 90(1) to (6) (inclusive) of the Act shall not apply to
the Company.
(b) All unissued shares which are not comprised in the
authorised share capital of the Company with which the
Company is incorporated shall be offered to the members in
proportion as nearly as may be to the number of the existing
shares held by them respectively unless the Company in
<PAGE>
general meeting shall by special resolution otherwise direct.
Such offer shall be made by written notice specifying the
number of shares offered and a period (not being less than 14
days) within which the offer if not accepted will be deemed
to be declined. After the expiration of this period or, if
earlier, on receipt of notice of non-acceptance, those shares
so declined shall be offered to the members who have within
the said period accepted all the shares offered to them in
the proportion aforesaid in like terms in the same manner and
limited by a like period as the original offer. The directors
may in accordance with the provisions of this Article allot
grant options over or otherwise dispose of such shares not
accepted pursuant to such offers together with any shares not
capable of being offered aforesaid except by way of fractions
to such persons on such terms as they think fit provided that
such shares shall not be disposed of on such terms which are
more favourable to the subscribers therefor than the terms on
which they were offered to the members. The provisions of
this Article shall be subject to Section 80 of the Act.
LIEN
6. The Company shall have a first and paramount lien on every share
(whether or not it is a fully paid share) for all moneys (whether
presently payable or not) called or payable at the fixed time in
respect of that share and the Company shall also have a first and
paramount lien on all shares (whether or not it is a fully paid
share) registered in the name of any member whether solely or one
of two or more joint holders for all such moneys presently payable
by him or his estate to the Company. However the directors may at
any time declare any share to be wholly or in part exempt from the
provisions of this Article. The Company's lien on a share shall
extend to all dividends payable thereon.
TRANSFER OF SHARES
7. (a) No share or beneficial ownership of a share shall be
transferred (otherwise than to the Company under Regulation
35 of Table A) until the rights of pre-emption hereinafter
conferred have been exhausted. Any obligation to transfer a
share pursuant to this Article is an obligation to transfer
the entire legal and beneficial interest in such share.
(b) A member who intends to transfer any share or any
interest therein (including for this purpose the assignment
of the beneficial interest in, or the creation of any charge
or other security interest over, such share or the
renunciation or assignment of any right to receive or
subscribe for such share) ("the Seller") shall give notice
("the Transfer Notice") to the directors of his intention and
the particulars of the shares ("the Transfer Shares")
together with the price per share at which he is willing to
sell ("the Specified Price"). A Transfer Notice once received
by the directors is irrevocable unless paragraphs (d) or (h)
apply.
(c) The Transfer Notice shall constitute the Company as agent
of the Seller for the sale of the Transfer Shares to the
members other than the Seller ("the Offerees") at the
Specified Price save that if the directors do not accept that
the Specified Price constitutes a fair price they shall
instruct the Auditors of the Company (who shall act as
experts and not as arbitrators so that any provision of law
or statute relating to arbitration shall not apply) to
certify in writing ("Certificate of Value") the value of the
Transfer Shares as between a willing seller and a willing
buyer. The Auditors' decision on the value of the Transfer
Shares between a willing seller and a willing buyer is within
the Auditors' complete discretion and their certification
shall be final and binding on the members. The Specified
Price in the Transfer Notice shall be substituted by the
price in the Certificate of Value. The Company upon receipt
of the Certificate of Value shall forthwith furnish a copy
thereof to the Seller. The Seller shall bear the cost of the
valuation.
(d) If upon receipt of the Certificate of Value the Seller
considers that the price decided upon by the Auditors of the
Company is not a reasonable one he shall be entitled to
revoke the Transfer Notice within 7 days of receipt of the
Certificate of Value by written notice to the directors ("the
First Revocation Period"). Thereafter the Transfer Shares
will not be offered by the directors to the Offerees or by
the Seller to any other person or persons unless at a later
<PAGE>
date the Seller serves another Transfer Notice in respect of
the Transfer Shares in which event all the provisions of this
Article shall apply.
(e) If the Seller has not revoked the Transfer Notice upon
expiry of the First Revocation Period the price (whether by
reference to the Specified Price or the Certificate of Value)
shall be fixed in the Transfer Notice as the final price
("the Final Price") and the directors shall by notice in
writing ("the Offer Notice") inform the Offerees of the
number and price of the Transfer Shares and shall invite the
Offerees to apply in writing to the Company, within 21 days
of the date of despatch of the Offer Notice (which date must
be stated therein), for a maximum number of the Transfer
Shares.
(f) If such Offerees within the period of 21 days stated in
the Offer Notice apply for all or any of the Transfer Shares
the directors will allocate the Transfer Shares applied for
to the applicant Offerees in such proportions (or as nearly
as may be and without increasing the number sold to an
Offeree beyond the number applied for by him) as their
existing holdings bear to the total of the holdings of the
applicant Offerees. The Transfer Shares not capable of being
allocated without involving fractions shall be allocated to
the applicant Offerees in such proportion as the directors
think fit. Any outstanding Transfer Shares may then be
allocated in such manner as the directors think fit to those
Offerees who applied for such Transfer Shares provided no
Offeree shall be allocated shares in excess of the number of
shares applied for by him.
(g) If upon expiry of the 21 day period specified in the
Offer Notice the directors shall have received applications
for some but not all of the remaining Transfer Shares the
directors may nominate within 14 days from the expiry of the
Offer Notice a person or persons which may (subject to the
Act) be the Company to whom the Transfer Shares not applied
for will be allocated. The directors shall give notice in
writing (the "Allocation Notice") of such allocations
pursuant to paragraph (f) and this paragraph to the Seller
and to the persons to whom the Transfer Shares have been
allocated. The Allocation Notice must specify the date of
despatch of the Allocation Notice, the name and address of
the persons to whom the allocations have been made, the price
and method of payment and number of Transfer Shares to be
allocated and the place and time for completion (which shall
be 21 days from the date of despatch) and that the Allocation
Notice is subject to the Seller's right of revocation
pursuant to paragraph (h).
(h) The Seller may revoke the Transfer Notice if after
service of the Allocation Notice not all the Transfer Shares
have been taken up. Notice must be given in writing by the
Seller to the Company within 14 days of the date of the
Allocation Notice (the "Second Revocation Period").
(i) If the Seller has not revoked the Transfer Notice upon
expiry of the Second Revocation Period the Seller shall be
bound upon payment of the purchase price due in respect
thereof to transfer the shares comprised in the Allocation
Notice to the person or persons (which may be the Company
subject to the Act) named therein on the day and at the time
specified therein.
(j) In the event that the Seller fails or refuses to transfer
the Transfer Shares having become bound so to do the Company
may receive the purchase price in trust for the Seller and
may authorise some person to execute a transfer of the
Transfer Shares in favour of the purchasers.
(k) During the 3 months following the expiry of 56 days from
the date of the Offer Notice the Seller may (subject
nevertheless to the provisions of paragraph (I)) transfer to
any person and at any price but not less than the Final Price
fixed in the Transfer Notice any of the shares comprised
therein not included in the Allocation Notice or all but not
part of the Transfer Shares comprised in the Transfer Notice
if the Seller has revoked the Transfer Notice under paragraph
(h).
(l) The directors may in their absolute discretion and
without assigning any reason therefor decline to register the
transfer of a share whether or not it is a fully paid share.
<PAGE>
GENERAL MEETINGS
8. In every notice convening a general meeting of the Company there
shall appear a statement that a member entitled to attend and vote
is entitled to appoint a proxy and the proxy need not be a member
of the Company and Regulation 38 of Table A shall be modified
accordingly.
9. (a) If the quorum prescribed by Regulation 40 of Table A is not
present within 30 minutes from the time appointed for the
meeting, the meeting shall stand adjourned to the same day in
the next week at the same time and place or such time and
place as the directors may determine.
(b) If at the adjourned meeting a quorum is not present
within 30 minutes of the time appointed for the meeting one
person entitled under Regulation 40 of Table A to be counted
in a quorum present at the meeting shall constitute a quorum.
10. (a) A resolution put to the vote of a meeting shall be decided on
a show of hands unless before or on the declaration of the
result of the show of hands a poll is duly demanded.
(b) A poll may be demanded by the chairman or by a member
(present in person or by proxy) having the right to attend
and vote at the meeting.
(c) The demand for a poll may before the poll is taken be
withdrawn.
(d) A demand so withdrawn shall not be taken to have
invalidated the result of a vote on a show of hands declared
before the demand was made.
11. A resolution in writing executed pursuant to Regulation 53 of
Table A and which is expressed to be a special resolution or an
extraordinary resolution shall have effect accordingly.
12. (a) If and for so long as the Company has only one member and
that member takes any decision which is required to be taken
in general meeting or by means of a written resolution, that
decision shall be as valid and effectual as if agreed by the
Company in general meeting save that this paragraph shall not
apply to resolutions passed pursuant to ss303 and 391 of the
Companies Act 1985.
(b) Any decision taken by a sole member pursuant to para (a)
above shall be recorded in writing and delivered by that
member to the Company for entry in the Company's minute book.
VOTES OF MEMBERS
13. The words "or by proxy" shall be inserted after the word "person"
in regulation 54 of Table A.
14. The words "Unless the directors determine otherwise" shall be
inserted at the commencement of Regulation 57 of Table A.
15. The words "30 minutes" shall be substituted for "48 hours" in
Regulation 62(a) of Table A and for "24 hours" in Regulation 62(b)
of Table A.
DIRECTORS
16. The first director or directors of the Company shall be the person
or persons named in the statement delivered under Section 10 of
the Act.
17. Unless and until otherwise determined by the Company in general
meeting there shall be no maximum number of directors and the
minimum number of directors shall be one. Whensoever there shall
be a sole director such director may exercise all the powers
<PAGE>
discretions and authorities vested in the directors by these
Articles and by Table A. The words "and unless so fixed at any
other number shall be two" shall be omitted from Regulation 89 of
Table A.
18. In any case where as a result of the death of a sole member of the
Company the Company has no members and no Directors the personal
representatives of such deceased member shall have the right by
notice in writing to appoint a person to be a Director of the
Company and such appointment shall be as effective as if made by
any means allowed under these Articles of Association for the
appointment of Directors.
19. The directors may exercise all the powers of the Company to borrow
without limit as to amount and upon such terms and in such manner
as they think fit and subject (in the case of any security
convertible into shares) to Section 80 of the Act to grant any
mortgage charge or standard security over its undertaking property
and uncalled capital or any part thereof and to issue debentures
debenture stock or any other securities whether outright or as
security for any debt liability or obligation of the Company or of
any third party.
20. (a) The words "and may also determine the rotation in which any
additional directors are to retire" shall be omitted from
regulation 78 of Table A.
(b) The second and third sentences of Regulation 79 of Table
A shall be omitted.
21. A director who is in any way either directly or indirectly
interested in any contract transaction or arrangement (whether
actual or proposed) with the Company or in which the Company is
otherwise interested shall declare the nature of his interest at a
meeting of the directors in accordance with Section 317 of the
Act. Subject to such disclosure a director shall be entitled to
vote in respect of any such contract transaction or arrangement
(whether actual or proposed) in which he is interested and whether
or not he votes he shall be counted in reckoning whether a quorum
is present or not.
NOTICES
22. The third sentence of Regulation 112 of Table A shall be omitted
and the following sentence be inserted as the final sentence "A
member whose registered address is not within the United Kingdom
is entitled to receive any notice from the Company and that such
notices be sent to the registered address by prepaid airmail".
THE SEAL
23. The Company may have a Seal if it so wishes. If the Company has a
Seal the Directors may determine who shall sign any instrument to
which the Seal is affixed and unless otherwise so determined it
shall be signed by a Director and the Secretary or by a second
Director. The obligation under Clause 6 of Table A relating to the
sealing of share certificates shall apply only if the Company has
a Seal.
INDEMNITY
24. In addition to the indemnity conferred by Regulation 118 of Table
A and subject to the provisions of the Act every such person as is
mentioned in the said Regulation shall be entitled to be
indemnified out of the assets of the Company against all expenses
losses or liabilities incurred by him as agent of the Company or
for the Company's benefit or intended benefit or in or about the
discharge or intended discharge of his duties in relation to the
Company.
<PAGE>
- --------------------------------------------------------------------------------
NAMES AND ADDRESSES OF SUBSCRIBERS
- --------------------------------------------------------------------------------
HALLMARK SECRETARIES LIMITED
120 East Road
London N1 6AA
HALLMARK REGISTRARS LIMITED
120 East Road
London N1 6AA
Dated the 4 January 1999
Witness to the above signatories:
DAVID ORDISH
120 East Road
London N1 6AA
ARTICLES OF ASSOCIATION
of the firm
EarthPort Transaction Services
Aktiengesellschaft
Vaduz/Liechtenstein
<PAGE>
-2-
I. NAME, SEAT, DURATION AND PURPOSE
--------------------------------
Art. 1
Under the name of
EARTHPORT TRANSACTION SERVICES AKTIENGESELLSCHAFT
exists a Limited Company with unlimited duration with its registered office in
Vaduz. The Company can, by decision of the General Meeting, establish branches
at home and abroad.
Art. 2
Purpose of the Company is: Conducting business on a commercial basis, investment
and management of assets of any kind, acquisition and holding of participation's
in other enterprises or other rights, purchase and sale of movable property and
real estate, any kind of commercial, financial and legal transactions.
II. CAPITAL STRUCTURE
-----------------
Art. 3
The share capital of the Company amounts to CHF *50'000.-- (in words: Swiss
Francs fifty thousand), divided into -50- bearer shares of CHF *1'000.-- and is
fully paid up.
The shares can be consolidated into certificates covering a majority of titles.
However, the Company is not obliged to issue share certificates.
<PAGE>
-3-
III. COMPANY ORGANS
--------------
Art. 4
The Organs of the Company are:
a) the General Meeting
b) the Board of Directors
c) the Auditors.
A) THE GENERAL MEETING
-------------------
Art. 5
COMPETENCE
- ----------
The General Meeting is the supreme organ of the company. Its exclusive
competence applies particularly to (art. 338 of the PGR):
a) approval of the profit-and-loss account, the Balance Sheet and the
business report based on the report of the Auditors;
b) ratification of the acts of the organs of administration;
c) decisions or the utilisation of the net profit, in particular the
determination of the dividend and the share in profits of the
administration;
d) determination of the number of the members of the Board of Directors as
well as their election and dismissal;
e) election of the Auditors;
f) decisions on the amendment of the Articles of Association, in particular
on the alteration of the share capital, dissolution or amalgamation or the
establishment of branches;
g) decisions on motions of the Board of Directors, the Auditors and the
shareholders, furthermore execution of all matters as prescribed for by
law or the Articles of Association.
<PAGE>
-4-
Art. 6
ORDINARY GENERAL MEETING/UNIVERSAL GENERAL MEETING
- --------------------------------------------------
The Ordinary General Meeting will be convened within six months after expiry of
the financial year. Extraordinary General Meetings can be convened at any time
in the manner stipulated by law.
Each share entitles the holder to one vote at the General Meeting. The
shareholders can represent their shares themselves or have themselves
represented by a third party who needs not to be a shareholder.
If all shareholders are assembled or represented and no objection is made, they
can constitute a General Meeting even without observing the formalities
otherwise prescribed for its convocation and, at this meeting, matters falling
within its competence can be validly discussed and resolutions passed.
Art. 7
CONVOCATION
- -----------
The Chairman of the Board of Directors shall convene the General Meeting in
Vaduz or another place at home or abroad.
The invitation and notification of the agenda is to be made at least 14 days
before the day of the meeting.
The Board of Directors determines the shareholder's manner of legitimation for
attending the General Meeting.
Art. 8
ORGANISATION
- ------------
<PAGE>
-5-
The Chairman of the Board of Directors presides at the General Meeting. Should
he not be able to attend, another member of the Board of Directors or a chairman
elected by the General Meeting takes the chair.
The Chairman designates the secretary and the scrutineer. The former is to
jointly sign the Minutes of the meeting with the Chairman.
Art. 9
DECISIONS AND RIGHT TO VOTE
- ---------------------------
The General Meeting takes its decisions and holds its elections with a simple
majority of votes regardless of the number of the shares represented subject to
art. 10.
Each share entitles to one vote.
Art. 10
Decisions on amendments to the Articles of Association, alterations of the share
capital, expansion or reduction of the scope of the business, dissolution or
amalgamation of the company with another company require a majority of 2/3 of
the shares represented whereby, apart from that, half of the share capital must
be represented. Should the latter not be the case then the Board of Directors
can convene a new General Meeting which has a quorum regardless of the number of
the shares represented. However, the decisions in the second meeting also
require 2/3 (two third) of the shares represented.
Art. 11
In cases of dispute concerning the competence of the individual organs the
General Meeting is presumed to be competent.
<PAGE>
-6-
B) BOARD OF DIRECTORS
------------------
Art. 12
COMPOSITION AND TERM OF OFFICE
- ------------------------------
The Board of Directors consists of one or more members elected by the General
Meeting for a term of three years. They can be re-elected after expiry of their
term of office. The Board of Directors is appointed for the first time in the
certificate of incorporation.
The Board of Directors can be increased through co-optation during its term of
office. The co-opted members of the Board of Directors have to be approved at
the next General Meeting.
Members of the Board of Directors can be removed from office at any time by the
General Meeting without justification. They are entitled to resign from office
at any time.
The relationship between the members of the Board of Directors and the Company
is not governed by the rules of the labour contract.
<PAGE>
-7-
Art. 13
COMPETENCE AND QUORUM
- ---------------------
The Board of Directors decides all matters not reserved for the General Meeting.
If justified by the course of business, the Board of Directors may, during the
business year, decide to make payments on account to the shareholders with
respect to the dividends expected. These payments sail be charged in account
with the dividends for the particular year as determined by the General Meeting
on the basis of the financial statement for the fiscal year.
The quorum is reached when the majority of the members or their representatives
are present. A simple majority of votes is decisive; in case of a tie vote, the
Chairman's vote counts double. Every absent member can be represented by another
member.
Decisions can also be taken by correspondence; however, in this case the
absolute majority of all members is necessary.
Art. 14
The Board of Directors can elect the Chairman as well as further officers from
amongst themselves for a term of office but with continuous re-eligibility. The
Board of Directors meets, at the invitation of the Chairman, as frequently as
required by business or at the request of one member.
Art. 15
One of the Board members or a third party can be entrusted by the Board of
Directors as delegate with individual branches or with the entire management of
the company. The Board of Directors can appoint directors and authorized
signatories as well as designate agents of any kind for the execution and
achievement of the company's purpose. The members of the Board are liable only
for gross negligence.
Art. 16
<PAGE>
-8-
The Board of Directors determines which persons shall have the legally binding
company signature as well as its forum unless the General Meeting has already
laid down the authority to sign when adopting members of the Board of Directors.
C) THE AUDITORS
------------
Art. 17
The Ordinary General Meeting elects one or more auditors every year as Auditors.
In their place, an auditing company can also be entrusted with the audit.
The auditors have the rights and obligations provided for by law.
IV. BALANCE OF ACCOUNTS AND DISTRIBUTION OF PROFITS
-----------------------------------------------
Art. 18
The financial year closes at the end of the calendar year, for the first time on
December 31, 1999. The Balance Sheet and the profit-and-loss-account are to be
established under observance of the legal provisions.
<PAGE>
-9-
V. DISSOLUTION AND LIQUIDATION
---------------------------
Art. 19
The dissolution and liquidation according to the legal and statutory provisions
can be decided at any time by the General Meeting. The liquidation is left to
the Board of Directors provided that the General Meeting does not transfer the
mandate to other persons.
VI. PUBLICATIONS
------------
Art. 20
The publications of the company are made according to law.
VII. REPRESENTATION
--------------
Art. 21
The legal representative in accordance with art. 239 and following PGR will be
designated for the first time at the Founder's Meeting i.e. the General Meeting,
and subsequently by the Board of Directors.
Vaduz, the 3rd May 1999/ 16th March 1999
**************
<PAGE>
-10-
This is merely a translation of the German wording of the Articles of
Association. In the event of litigation, the German wording shall be considered
authoritative.
The undersigned founder confirms that this translation conforms with the German
wording of the statutes which have been deposited at the commercial registry.
THE BOARD OF DIRECTORS:
ADRIAAN BRINK
BYE - LAWS
of
EARTH LTD.
("the Company")
Infinex International Ltd. the subscriber to the Memorandum of Association of
the Company, hereby subscribes its name to the attached Bye-Laws of the Company
and has affixed its common seal under the hands of its duly authorised officers
on the 19th day of June, 1997
The Common Seal of
Infinex International Ltd.
was affixed in the presence of
- ---------------------------
Director
- ---------------------------
Director
Bye-laws prepared by:
Ardon Management Services Ltd.
Cedarpark Centre
48 Cedar Avenue
Hamilton HM 11
Bermuda
<PAGE>
2
BYE-LAWS
OF
EARTH LTD.
INDEX
-----
Bye-Law No. Subject
- ----------- -------
1 Interpretation
2-9 Share Capital and Variation of Rights
10-13 Lien
14-20 Calls on Shares
21 Registration of Members
22-30 Transfer and Transmission of Shares
31-37 Forfeiture of Shares
38-40 Alteration of Capital
41-46 Meetings of the Company
47-53 Voting at Meetings
54-72 Directors
73 Minutes
74-76 Officers other than Directors
77-81 Dividends
82-83 Capitalization of Profits and Reserves
84-88 Borrowing Powers
<PAGE>
3
Bye-Law No. Subject
- ----------- -------
89-91 Accounts
92-95 Audit
96-99 Notices
100 Winding-up
101 Seal
102 Alteration of Bye-Laws
103 Forms
104 Indemnity
<PAGE>
4
BYE-LAWS
of
EARTH LTD.
INTERPRETATION
INTERPRETATION
1. In these Bye-Laws, the following words and expressions shall, where not
inconsistent with the context, have the following meanings respectively:
"The Act" means "The Companies Act, 1981";
"The Company" means the Company by which these Bye-Laws are approved and
confirmed;
"The Directors" mean the Directors for the time being;
"Dividend" includes bonus;
"Month" means calendar month;
"Notice" means written notice unless otherwise specifically stated;
"The Register" means the Register of Shareholders;
"The Seal" means the Common Seal of the Company;
"Secretary" means the person appointed to perform the duties of the
Secretary of the Company and includes any Assistant or Acting Secretary;
"Member" means the person or body corporate registered in the Register as
the holder of shares in the Company, and, when two or more persons are so
registered as joint holders of shares, means the person whose name stands
first in the Register as one of such joint holders;
"These Islands" mean the Islands of Bermuda;
"In writing" and "written" include printing, lithography, photography, and
other modes of representing or reproducing works in visible form;
"May" shall be construed as permissive;
<PAGE>
5
"Shall" shall be construed as imperative;
Words importing the singular number only include the plural number and vice
versa;
Words importing persons include companies or associations or bodies of
persons. whether corporate or unincorporate;
Words and expressions shall bear the same meaning as in the Act or any
statutory modification thereof in force for the time being;
Words importing the masculine gender only shall include the feminine and
neuter genders.
SHARE CAPITAL AND VARIATION OF RIGHTS
-------------------------------------
SPECIAL RIGHTS
2. (1) Any share in the Company may be issued with such preferential,
deferred, qualified or special rights, privileges or conditions as the
Company in General Meeting may from time to time determine.
(2) Subject to the provisions of Section 42 of The Companies Act, 1981, any
preference shares may, with the sanction of a resolution of the Members, be
issued on the terms that they are, or at the option of the Company are,
liable to be redeemed on such terms and in such manner as the Company
before the issue of the shares may by resolution determine.
ALTERATION OF RIGHTS
3. If at any time the share capital is divided into different classes of
shares, the rights attached to any class (unless otherwise provided by the
terms of issue of the shares of that class) may, whether or not the Company
is being wound up, be varied with the consent in writing of the holders of
three-quarters of the issued shares of that class, or with the sanction of
a resolution passed at a separate General Meeting of the holders of the
shares of the class by a majority of three-fourths of such holders voting
in person or by proxy.
EFFECT OF ISSUING SHARES RANKING PARI PASSU WITH EXISTING SHARES
4. The rights conferred upon the holders of the shares of any class issued
with preferred or other rights shall not unless otherwise expressly
provided by the terms of issue of the shares of that class, be deemed to be
varied by the creation or issue of further shares, ranking PARI PASSU
therewith.
TRUSTS NOT RECOGNIZED
5. Save as herein otherwise provided, the Company shall be entitled to treat
the registered holder of any share as the absolute owner thereof, and
accordingly shall not except as by statute required, be bound to recognize
any equitable or other claim or interest in such share on the part of any
other persons.
<PAGE>
6
RECEIPTS IN THE CASE OF JOINT HOLDERS
6. If two or more persons are registered as joint holders of any shares, then
any one of such joint holders may give effectual receipts for dividends or
other moneys payable in respect of the shares held by them as joint
holders.
CERTIFICATES
7. Every Member shall be entitled to a certificate under the Seal of the
Company, signed by the President or Vice-President, and also by the
Secretary, or by any two Directors appointed for such purpose by the
Directors, specifying the shares held by him and whether the same are fully
paid up, and, if not how much has been paid thereon.
NEW CERTIFICATES
8. If any such certificate be worn out or defaced, then upon production
thereof to the Directors, and on such reasonable indemnity as the Directors
deem adequate being given, they shall order the same to be cancelled and
shall issue a new certificate in lieu thereof. If any such certificate be
lost or destroyed, then upon proof thereof to the satisfaction of the
Directors, and on such reasonable indemnity as the Directors deem adequate
being given, a new certificate in lieu thereof shall be issued.
DELIVERY OF CERTIFICATE
9. The certificate of shares registered in the names of two or more persons
shall, unless otherwise directed by them in writing delivered to the
Secretary, be delivered to the person first named in the Register.
LIEN
----
COMPANY'S LIEN
10. The Company shall have a lien on every share (not being a fully paid share)
for all moneys (whether presently payable or not) called or payable at a
fixed time in respect of that share, and the Company shall also have a lien
on all shares (other than fully paid shares) standing registered in the
name of a single person, for all moneys presently payable by him or his
estate to the Company, but the Directors may at any time declare any share
to be wholly or in part exempt from the provisions of this Bye-Law. The
Company's lien, if any, on a share shall extend to all dividends payable
thereon.
POWER OF SALE
11. The Company may sell, in much manner as the Directors may think fit, any
shares on which the Company has a lien, but no sale shall be made unless
some sum in respect of which the lien exists, is presently payable, nor
until the expiration of fourteen days alter a notice, stating and demanding
payment of such part of the amount m respect of which the lien exists as is
presently payable, has been given to the registered holder for the time
being of the shares, or the person entitled thereto by reason of his death
or bankruptcy.
<PAGE>
7
TRANSFER ON SALE UNDER LIEN
12. To give effect to such sale the Directors may authorize some person to
transfer the shares sold to the purchaser thereof. The purchaser shall be
registered as the holder of the shares comprised in such transfer, and he
shall not be bound to see the application of the purchase money, nor shall
his title to the shares be affected by any irregularity or invalidity in
the proceedings in reference to the sale.
APPLICATION OF PROCEEDS OF SALE
13. The proceeds of the sale shall be received by the Company and applied in
payment of such part of the amount in respect of which the lien exists as
is presently payable, and the residue, if any, shall (subject to a like
lien for sums not presently payable as existed upon the shares before the
sale) be paid to the persons entitled to the shares at the date of the
sale.
CALLS ON SHARES
---------------
CALLS
14. The Directors may from time to time make calls upon the Members in respect
of any moneys unpaid on their shares and not by the conditions of the
allotment thereof made payable at fixed times. A call may be revoked or
postponed as the Directors may determine
WHEN CALL DEEMED TO BE MADE
15. A call shall be deemed to have been made at the time when the resolution of
the Directors authorising the call was passed and may be required to be
paid by instalments.
INTEREST ON CALLS
16. If a sum called in respect of a share is not paid before or on the day
appointed for payment thereof, the person from whom the sum is due shall
pay interest on the sum from the day appointed for payment thereof to the
time of actual payment at such rate not exceeding seven (7) per cent per
annum as the Directors may determine, but the Directors shall be at liberty
to waive payment of such interest wholly or in part.
SUMS PAYABLE ON ALLOTMENT DEEMED TO BE CALLS
17. Any sum which by the terms of issue of a share becomes payable on allotment
or at any fixed date shall for the purposes of these Bye-Laws be deemed to
be a call duly made and payable on the date on which by the terms of issue
the same becomes payable, and in case of non-payment all the relevant
provisions of these Bye-Laws as to payment of interest and expenses,
forfeiture or otherwise shall apply as if such sum had become payable by
virtue of a call duly made and notified.
DIFFERENTIATION BETWEEN SHAREHOLDERS
18. The Directors may, on the issue of shares, differentiate between the
holders as to the amount of calls to be paid and the times of payment.
PAYMENT IN ADVANCE
19. The Directors may, if they think fit, receive from any Member willing to
advance the same, all or any part of the moneys uncalled and unpaid upon
any shares held by him, and upon all or any of the moneys so advanced may
pay interest at such rate not exceeding seven (7) per cent per annum as may
be agreed between the Directors and the Shareholders paying such sum in
advance.
<PAGE>
8
LIABILITY OF JOINT HOLDERS
20. The joint holders of any share shall be jointly and severally liable to pay
all calls in respect thereof.
REGISTRATION OF MEMBERS
-----------------------
REGISTRATION OF MEMBERS
21. The Secretary shall enter in the Register the particulars required by
Section 65 of the Act as read with the Company's incorporation Act or
Memorandum of Association or any other provision of law and the Register
shall be kept in such manner as to show at all times the Members of the
Company for the time being and the shares respectively held by them The
Register shall be open for inspection at the office of the Company between
10:00 a.m. and 4:00 p.m. on every working day.
TRANSFER AND TRANSMISSION OF SHARES
-----------------------------------
EXECUTION OF TRANSFERS
22. The instrument of transfer of any shares shall specify the nationality,
address and occupation (if any) of the transferor and transferee
respectively and shall be signed in the presence of one witness by the
transferor and in like manner by the transferee The transferor shall be
deemed to remain the holder of such share until the name of the transferee
is entered in the Register in respect thereof.
FORM OF TRANSFER
23. The instrument of transfer shall be in writing in the form "A" in the
Schedule hereto or in such other form as the Directors shall in any special
case sanction. The instrument of transfer may be on the back of the share
certificate.
DIRECTORS MAY DECLINE TO REGISTER TRANSFERS; S. 50 OF THE ACT
24. The Directors may decline to register any share transfer upon which the
Company has a lien; and in the case of shares not fully paid may refuse to
register or transfer to a transferee of whom they do not approve, provided
that the Directors comply with the requirement of notice as stated in
Section 50 of the Act.
TRANSFER TO BE LEFT AT REGISTERED OFFICE AND EVIDENCE TO BE GIVEN
25. Every instrument of transfer shall be left at the registered office of the
Company for registration, accompanied by the certificate of the shares to
be transferred, and such other evidence as the Company may require to prove
the title of the transferor, or his right to transfer the shares.
RESTRICTION ON TRANSFER
26. (1) Except as otherwise provided, no transfer of any shares whether by way
of sale or otherwise shall be made except in accordance with the following
conditions:-
(a) the person desiring the transfer (hereinafter called "the Vendor")
shall give notice to the Secretary of:
(i) his desire to sell or otherwise dispose of the shares;
(ii) the name, address and nationality of the intended transferee; and
<PAGE>
9
(iii) the price, if any, at which he intends to sell or, if none, the
sum which be fixes as the fair value of the shares.
CONSTITUTION OF DIRECTORS AS VENDOR'S AGENTS
(b) Such notice shall constitute the Directors as the Vendor's agent for
the sale of the shares to any person of whom they approve at the price
stated in the notice or at the option of the purchaser at a fair price
to be fixed by the Company's Auditors and certified by them in
writing. The offer made by such notice shall not be revocable except
with the sanction of the Directors.
SUBMISSION OF NOTICE TO DIRECTORS
(c) Such notice shall be submitted by the Secretary to the Directors as
soon as possible after its receipt and they shall take such steps in
the matter as they consider expedient.
RIGHTS OF PRE-EMPTION
(d) If the Directors shall within a period of one month after such notice
as aforesaid has been given find a person approved as aforesaid
willing to purchase the shares and shall give notice thereof to the
Vendor, he shall be bound to transfer such shares to the purchaser,
provided that the purchaser shall sign an agreement in the form "F" in
the Schedule hereto and that such agreement shall be forwarded by the
Secretary to the Vendor with the notification of purchase.
FAILURE TO EXERCISE RIGHTS OF PRE-EMPTION
(e) If the Directors shall not within one month of the receipt of the
notice provided for in paragraph (1)(a) of this Bye-Law, give notice
to the Vendor in accordance with the provisions of the last preceding
paragraph, the Vendor shall at any time within one month after the
expiration of the said month be at liberty subject to Bye-Law 24 to
transfer the shares to the person named in the notice mentioned in
paragraph (1)(a) of this Bye-Law provided that the sale price (if any)
shall not be less than that stated in the said notice mentioned in
paragraph (l)(a) hereof.
TRANSFER TO PURCHASER
(f) If in any case the Vendor refuses or neglects on tender of the
purchase money to transfer any shares for which the Company has found
a purchaser one of the Directors or Officers of the Company duly
nominated by resolution of the Directors for that purpose shall
forthwith be deemed to be the duly appointed attorney of the Vendor
with full power to execute, complete and deliver in the name and on
behalf of the Vendor a transfer of the shares to the purchaser and the
Company may receive and give a good discharge for the purchase money
on behalf of the Vendor and enter the name of the purchaser in the
Register as the bolder by transfer of the shares purchased by him.
(2) The Directors may from time to time at their discretion declare any
particular share transfer exempt from the provisions of paragraph (1) of
this Bye-Law 26.
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10
TRANSFER AMONG JOINT HOLDERS
27. Notwithstanding the provisions of Bye-Laws 24 and 26 the joint holders of
any shares may transfer such shares or any of them to any one or more of
such joint holders.
NOTICE OF REFUSAL
28. If the Directors refuse to register a transfer they shall within two months
after the date on which the transfer was lodged with the Company send to
the transferee a notice of refusal.
DEATH OF MEMBER
29. In the case of the death of a Member the survivor or survivors where the
deceased was a joint holder, and the legal personal representatives of the
deceased where he was a sole holder shall be the only persons recognised by
the Company as having any title to his interest in the shares, but nothing
in this Bye-Law contained shall release the estate of a deceased joint
holder from any liability in respect of any share which had been jointly
held by him with any other person.
RIGHTS ON DEATH
30. Any person becoming entitled to shares in consequence of the death of a
Member upon producing such evidence as the Directors may deem sufficient,
may be registered as a Member in respect of such shares, or may, subject to
Bye-Laws 24 and 26 transfer such shares to some other person by executing
an instrument of transfer in the form "B" in the Schedule hereto.
FORFEITURE OF SHARES
--------------------
IF NOTICE OR INSTALMENT NOT PAID, NOTICE MAY BE GIVEN
31. If any Member fails to pay any call or instalment on or before the day
appointed for payment of same, the Directors may at any time thereafter,
during such time as the call or instalment remains unpaid, serve a notice
on such Member in the form "C" in the Schedule hereto requiring him to pay
the same, together with any interest that may have accrued, and all
expenses that may have been incurred by the Company by reason of such
non-payment.
FORM OF NOTICE
32. The notice shall name a day (not less than fourteen days from the date of
the notice), and a place on and at which such call or instalment and such
interest and expenses as aforesaid are to be paid. The notice shall also
state that in the event of non-payment at or before the time and at the
place appointed, the shares in respect of which the call was made or
instalment is payable will be liable to be forfeited.
IF NOTICE NOT COMPLIED WITH SHARES MAY BE FORFEITED
33. If the requirements of any such notice as aforesaid are not complied with,
any shares in respect of which such notice has been given may, at any time
thereafter, before payment of all calls or instalments, interest and
expenses due In respect thereof, be forfeited by resolution of the
Directors to that effect. Such forfeiture shall include all dividends
declared or accruing in respect of the forfeited shares and not actually
paid before forfeiture.
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11
NOTICE OF FORFEITURE
34. When any share shall have been so forfeited, notice of the resolution shall
be given to the person in whose name it stood immediately before the
forfeiture, and an entry of the forfeiture, with the date thereof, shall
forthwith be made in the Register.
FORFEITED SHARES TO BECOME PROPERTY OF COMPANY
35. Any share so forfeited shall be deemed to be the property of the Company,
and the Directors may sell, reallot, or otherwise dispose of the same in
such manner as they think fit.
POWER TO ANNUL FORFEITURE
36. The Directors may, at any time before any share so forfeited shall have
been sold, re-dotted or otherwise disposed of, annul the forfeiture thereof
upon such conditions as they think fit.
ARREARS TO BE PAID NOTWITHSTANDING FORFEITURE
37. Any person whose shares have been forfeited shall, notwithstanding be
liable to pay, and shall forthwith pay to the Company, all calls,
instalments, interest and expenses, owing upon or in respect of such shares
at the time of the forfeiture together with interest thereon from the time
of forfeiture until payment at seven (7) per cent per annum or at such
other rate as shall be determined by the Directors and permitted by the
general law for the time being in force and the Directors may enforce the
payment thereof as they think fit.
ALTERATION OF CAPITAL
---------------------
38. The Company in General Meeting may by resolution:-
CONSOLIDATION AND SUB-DIVISION OF CAPITAL
(a) consolidate and divide its share capital into shares of a larger par
value than that fixed by the Company's Incorporating Act or Memorandum
of Association (as the case may be);
INCREASE OF CAPITAL
(b) sub-divide its shares into shares of a smaller par value than that
fixed by the Company's Incorporating Act or Memorandum of Association
(as the case may be) subject, nevertheless, to the provisions of
Section 45 of the Act.
39. Subject to the provisions of Section 45 of the Act, the Company in General
Meeting may by resolution increase its share capital to such sum as the
resolution shall prescribe.
REDUCTION OF CAPITAL
40. Subject to the provisions of Section 46 of the Act, the Company in General
Meeting may by resolution reduce its share capital to such sum not less
than the minimum share capital prescribed by the Company's Incorporating
Act or Memorandum of Association (as the vase may be) as the resolution
shall prescribe.
<PAGE>
12
MEETINGS OF THE COMPANY
-----------------------
ANNUAL GENERAL MEETING
41. The Annual General Meeting of the Company shall be held in each year other
than the year of incorporation on a day and at a time and place to be fixed
by the Directors and a notice of such meeting shall be given by mail,
telex, facsimile or cable to each Member at his address as shown in the
Register, at least five (5) days before the meeting takes place, stating
the time, date and place and, so far as practicable, the objects of the
Meeting.
SPECIAL GENERAL MEETING
42. The Directors may convene a Special General Meeting of the Company whenever
in their judgment such a meeting is necessary, and such meeting shall be
convened by notice in like manner as the Annual General Meeting at least
twenty-one (21) days before the meeting takes place. Such notice shall
state the time, date and place and, as far as practicable, the objects of
the meeting.
QUORUM
43. At any General Meeting of the Company not less than two Members
representing not less than seventy-five per cent (75%) of the outstanding
shares of the capital of the Company, represented either in person or by
proxy shall form a quorum for the transaction of business provided that
where the Company has only one member, that member present in person or by
proxy constitutes a quorum at such meeting and if a quorum does not
assemble within half an hour after the time appointed for the meeting, the
meeting may be adjourned to a fixture date, of which notice shall be given
by mail, telex or cable to each Member at his address as shown in the
Register at least twenty-one (21) days before the meeting takes place.
VALIDITY OF MEETING CALLED ON SHORT NOTICE
44. A meeting of the Company shall, notwithstanding that it is called by
shorter notice than that specified in Bye-Laws 41 and 42, be deemed to have
been duly called if it is agreed:
(a) in the case of a meeting called as the Annual General Meeting, by all
the Members entitled to attend and vote thereat, and
(b) in the case of any other meeting by a majority in number of the
Members having a right to attend and vote thereat being a majority
together holding not less than ninety-five per cent (95%) in nominal
value of the shares giving the right to attend and vote at the
meeting.
POWER TO ADJOURN GENERAL MEETING
45. The Chairman of a meeting may, with the consent of the meeting, (and shall
if so directed by the meeting) adjourn the same from time to time and from
place to place, but no business shall be transacted at any adjourned
meeting other than business left unfinished at the meeting from which the
adjournment took place.
RESOLUTION IN WRITING
46. Subject to the provisions of Section 77A of the Act and notwithstanding the
foregoing anything which may be done by resolution of the Company in
general meeting or by resolution of a meeting of any class of the members
of the Company, may, without a meeting and without any previous notice
being required, be done by resolution in writing signed by, or, in the case
of a corporation whether or not a
<PAGE>
13
company within the meaning of the Act, on behalf of, all the members of the
Company who at the date of the resolution would be entitled to attend the
meeting and vote on the resolution.
VOTING AT MEETINGS
------------------
VOTING RIGHTS
47. Subject to any rights or restrictions attached to any classification of
shares, at any meeting of the Company each Member shall be entitled to one
vote fix each share held by him, and such votes may be given in person or
by proxy, but no Member shall be entitled to vote at any meeting unless he
has paid all calls upon the shares held by him.
JOINT HOLDERS
48. (1) When there are joint holders of any share, any one of such persons may
vote at any General Meeting, either personally or by proxy, in respect of
such share as if he were solely entitled thereto; and if more than one of
such joint holders be present at any General Meeting personally or by
proxy, that one of the said persons whose name stands first on the Register
in respect of such share shall alone be entitled to vote in respect
thereof. Several executors or administrators of a deceased Member in whose
name any share stands shall fix the purposes of this Bye-Law be deemed
joint holders thereof.
(2) Any corporation which is a Member of the Company may by resolution of
its Directors, a certified copy of which shall be left with the Secretary,
authorise from time to time such person as it thinks fit to act as its
representative at any meeting of the Members of the Company and the person
so authorized shall be entitled to exercise the same powers on behalf of
the corporation which he represents as that corporation could exercise if
it were an individual Shareholder of the Company and such person need not
be a Member himself.
INSTRUMENT APPOINTING PROXY TO BE IN WRITING
49. The instrument appointing a proxy shall be in writing under the hand of the
appointer or of his attorney-in-fact. The instrument appointing a proxy
shall be in whichever of the forms "D" or "E" in the Schedule hereto is
applicable.
DELIVERY OF PROXY
50. The instrument appointing a proxy shall be left with the Secretary not less
than twenty-four (24) hours before the holding of the meeting or adjourned
meeting, as the case may be, at which the person named in such instrument
proposes to vote.
MODE OF DETERMINING QUESTIONS
51. All questions proposed for consideration of the Members at any meeting
shall be determined by the majority of votes, and, except with respect to
the election of Directors, all questions shall be decided by open voting,
unless a majority of the Members present determine that any question is to
be decided by poll, in which case the poll shall be in the manner
prescribed by Bye-Law 51.
52. Where a vote is taken by poll each Member or holder of a proxy entitled to
vote shall be determined with a poll paper, on which he shall record his
vote in such
<PAGE>
14
manner as shall be determined at the meeting, having regard to the nature
of the question on which the vote is taken, and each poll shall be signed
or initialled or otherwise marked so as to identify the voter. At the
conclusion of the poll, the poll papers shall be examined by the Chairman,
with the assistance of a Member appointed for the purpose, and the result
of the poll shall be declared by the Chairman. In the case of an equality
of votes, the motion shall be lost.
DECLARATION BY CHAIRMAN
53. At any meeting, unless a matter is determined by poll, a declaration by the
Chairman of the meeting that a resolution has been carried and an entry
made to that effect in the minutes of the meeting shall be sufficient
evidence of the fact.
DIRECTORS
---------
NUMBER OF DIRECTORS
54. (1) The number of Directors shall be such number not less than two as the
Company in General Meeting may from time to time determine.
ALTERNATE DIRECTORS
(2) at any General Meeting of the Company the Shareholders present or
represented may elect a duly qualified person or persons to act as
Directors in the alternative to designated persons elected as Directors of
the Company (hereinafter referred to as "Alternate Directors") or may
authorise the Directors from time to time being in office to appoint such
Alternate Directors and any person so appointed shall have the rights and
powers of the Directors for whom they are appointed in the alternative,
save that they shall not be entitled to attend and vote at any meeting of
the Directors otherwise than in the absence of such Directors.
WHEN OFFICE OF DIRECTOR TO BE VACATED
55. The office of a Director shall ipso facto be vacated:
(a) If he becomes bankrupt or suspends payment or compounds with his
creditors;
(b) If he becomes lunatic or of unsound mind;
(c) If by notice in writing to the Company he resigns his office; and
(d) If he shall be removed from office pursuant to the provisions of
Bye-Law 72.
GENERAL POWERS OF COMPANY VESTED IN DIRECTORS
56. The business of the Company shall be managed by the Directors who may pay
all expenses incurred in promoting and incorporating the Company, and who,
in addition to the powers and authorities by these Bye-Laws or otherwise
expressly conferred upon them, may exercise all such powers and do all such
acts and things as may be exercised or done by the Company and are not
hereby or by statute expressly directed or required to be exercised or done
by the Company in General Meeting subject nevertheless to the provisions of
any Act and of these Bye-Laws
<PAGE>
15
and to any regulations from time to time made by the Company in General
Meeting.
APPOINTMENT OF ATTORNEY
57. The Directors may from time to time and at any time by power of attorney
appoint any person to be the attorney of the Company for such purposes and
with such power; authorities and discretions (not exceeding those vested in
the Directors) and for such period and subject to such conditions as they
may think fit, and such powers of attorney may contain such provisions for
the protection and convenience of persons dealing with any such attorney as
the Directors may think fit and may also authorise any such attorney to
delegate all or any of the powers, authorities and discretions vested in
him.
CASUAL VACANCY
58. The Directors shall have power from time to time and at any time to appoint
any person to fill a casual vacancy on the Board of Directors, who shall
hold office until the next election of Directors, and the continuing
Directors may act notwithstanding any vacancy in their number.
POWER TO APPOINT MANAGING DIRECTOR
59. The Directors may, from time to time, appoint one or more of their body to
be a Managing Director or Managing Directors of the Company, either for a
fixed term or without any limitation as to the period for which he or they
is or are to hold office, and may from time to time remove or dismiss him
or them from office and appoint another or others in his or their place or
places.
REMUNERATION OF MANAGING DIRECTOR
60. The remuneration of a Managing Director shall from time to time be fixed by
the Directors, and may be by way of salary, or commission, or participation
in profits, or by any or all of those modes.
POWERS OF MANAGING DIRECTOR
61. The Directors may from time to time entrust to and confer upon a Managing
Director for the time being such of the powers exercisable by the Directors
as they think fit, and may confer such for such time, and to be exercised
for such objects and purposes, and upon such terms and conditions, and with
such restrictions as they think expedient, and they may confer such powers,
either collaterally with, or to the exclusion of; and in substitution for,
all or any of the powers of the Directors in that behalf, and may from time
to time revoke, withdraw, alter, or vary all or any of such powers.
POWER TO APPOINT SUPERVISOR OF FINANCIAL AFFAIRS
62. The Directors may from time to time appoint a person to exercise a general
supervision over the financial affairs of the Company in accordance with
and subject to the directions of the Directors. Such person shall submit
all accounts and vouchers to the Directors and or to the Auditors whenever
so required and shall conform to such regulations and directions as the
Directors shall prescribe. Such person shall give to the Company such
security for the faithful performance of his, its or their duties in such
manner as the Directors shall from time to time require.
DUTIES OF DIRECTORS
63. The Directors shall exercise a general supervision over the affairs of the
Company and shall be responsible for the correct keeping of the books and
for the safe
<PAGE>
16
keeping of all moneys and securities of the Company, and shall submit their
accounts and vouchers to the Auditors whenever required so to do.
DIRECTORS' POWER TO DELEGATE TO COMMITTEES
64. The Directors may delegate any of their powers to Committees consisting of
two or more of the Directors, but every such Committee shall conform to
such directions as the Directors shall impose on it.
RIGHT TO HOLD OFFICE IN THE COMPANY
65. (1) A Director may hold any other office or place of profit in the Company
(other than the office of Auditors) in conjunction with his office of
Director for such period and on such terms (as to remuneration and
otherwise) as the Company in General Meeting may from time to time
determine and no Director or intending 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, nor shall any such contract, or any contract or arrangement
entered into by or on behalf of the Company in which any Director is in any
way interested, be liable to be voided, nor shall any Director so
contracting or being so interested be liable to account to the Company for
any profit realised by any such contract or arrangement by mason of such
Director holding that office or of the fiduciary relationship thereby
established.
RIGHT TO PAYMENT FOR SERVICES
(2) Any Director may act by himself or by 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;
provided that nothing herein contained shall authorise a Director or his
firm to act as Auditors to the Company.
REMUNERATION OF DIRECTORS
66. The remuneration of the Directors shall from time to time be determined by
the Company in General Meeting. Such remuneration shall be deemed to accrue
from day to day. The Directors may also be paid all travelling, hotel and
other expenses properly incurred by them in attending and returning from
meetings of the Directors or any Committee of the Directors or General
Meetings of the Company or in connection with the business of the Company.
MEETINGS OF DIRECTORS
67. The Directors may meet together for the despatch of business, adjourn, and
otherwise regulate their meetings as they think fit. Questions arising at
any Meeting shall be decided by a majority of votes. In the case of an
equality of votes the motion shall be deemed to have been lost. A Director
may, and the Secretary on the requisition of a Director shall, at any time
summon a Meeting of the Directors. Notice of Meetings of the Directors may
be by telephone or otherwise and shall be given both to Directors and their
Alternate Directors, if any. Such notice shall not be less than 5 days.
QUORUM
68. The quorum necessary for the transaction of the business of the Directors
may be fixed by the Directors, and unless so fixed shall be two.
PROCEEDINGS OF COMMITTEE
69. (1) The meetings and proceedings of any Committee of the Directors
appointed under Bye-Law 63 shall be governed by the provisions of these
Bye-
<PAGE>
17
Laws for regulating the meetings and proceedings of the Directors, so far
as the same are applicable thereto.
(2) A meeting of Directors or of a Committee of Directors or of the members
of any class thereof may be held by means of such telephone, facsimile
electronic or other communication facilities as permit all persons
participating in the meeting to communicate with each other simultaneously
and instantaneously, and participation in such meeting shall constitute
presence in person at such meeting.
VALIDITY OF ACTS WHERE APPOINTMENT DEFECTIVE
70. All acts done by any meeting of the Directors or by any Committee of
Directors, or by any person acting as a Director, shall, notwithstanding
that it 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.
RESOLUTION WITHOUT MEETING
71. 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 the
Directors duly called and constituted.
REMOVAL OF DIRECTOR
72. Any Director may at any time be removed from office as a Director of the
Company by resolution of the Shareholders to that effect. Any person who
may have been appointed to be an Alternate Director of the Company to a
Director who has been removed from office as hereinbefore provided shall
cease to be an Alternate Director immediately upon the removal of such
Director as aforesaid.
MINUTES
-------
MINUTES TO BE MADE
73. (1) The Directors shall cause Minutes to be duly entered in books provided
for the purpose:-
(a) of all elections and appointments of officers;
(b) of the names of the Directors or their Alternates present at each
Meeting of the Directors and of any Committee of the Directors;
(c) of all orders made by the Directors and Committees of Directors; and
(d) of all resolutions and proceedings of General Meetings and of meetings
of the Directors and Committees of Directors.
AUTHORITY OF MINUTES
(2) Any such Minutes of any meeting of the Directors, or any Committee, or
of the Company, if purporting to be signed by the Chairman of that meeting,
or by the
<PAGE>
18
Chairman of any succeeding meeting, shall be receivable as prima facie
evidence of the matters stated in such Minutes
OFFICERS OTHER THAN DIRECTORS
-----------------------------
OFFICERS
74. (1) The Officers of the Company shall consist of a President, one or more
Vice-Presidents, a Secretary and such other Officers (including a Chairman
of the Board) as the Directors may from time to time determine.
(2) The Directors shall as soon as convenient after each election of
Directors choose or elect one of their number to be the President of the
Company, another to be the Vice-President of the Company and such other
person or persons to hold any other offices (including Chairman of the
Board or one or more Vice-Presidents) which the Directors may from time to
time determine as hereinafter provided. If more than one person is proposed
for any of these offices, the election shall be by ballot or such manner as
the Directors may determine.
(3) The Secretary shall be appointed or elected by the Directors and shall
hold office during the pleasure of the Directors.
(4) A Treasurer may be appointed or elected by the Directors and shall bold
office during the pleasure of the Directors.
(5) The same person may bold the offices of Secretary and Treasurer. A
Vice-President may also be the Secretary or the Treasurer or the
Secretary-Treasurer.
WHO TO BE CHAIRMAN OF MEETING
75. The Chairman of the Board (if any) shall act as Chairman at all meetings of
the Shareholders or of the Directors at which he is present. In his absence
the President, if present, shall be Chairman and, in the absence of both of
them the Vice-President shall be Chairman. If none of these is present a
Chairman shall be appointed or elected by those present at the meeting.
DUTIES OF SECRETARY
76. The Secretary shall attend all Meetings of the Company and of the Directors
and shall keep correct Minutes of such Meetings and enter the same in
proper books provided for the purpose. He shall perform such other duties
as are prescribed by the Act or Bye-Law; or as shall be prescribed by the
Directors. The Secretary shall receive such salary as the Directors shall
from time to time determine.
(a) The Company shall keep at its registered office a register of the
directors and officers and the register shall contain the following
particulars of each director and officer:
(i) present first name and surname;
(ii) address;
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19
(iii) in the case of a local company, whether possessing Bermudian
status within the meaning of the Bermuda Immigration and
Protection Act, 1956.
DIVIDENDS
---------
DECLARATION
77. The Directors may from time to time declare dividends but no dividend shall
be payable except out of the profits of the Company.
RESERVE
78. The Directors may from time to time before declaring a dividend set aside
out of the profits of the of the Company such sums as they think proper as
a reserve fluid to be used to meet contingencies or for equalising
dividends or for any other special purpose.
DECLARATION AND PAYMENT ACCORDING TO AMOUNTS PAID OR CREDITED AS PAID ON SHARES;
APPORTIONMENT
79. Subject to the rights of persons, if any, entitled to shares with special
rights as to dividend, all dividends shall be declared and paid according
to the amounts paid or credited as paid on the shares in respect whereof
the dividend is paid, but no amount paid or credited as paid on shares in
advance of calls shall be treated for the purposes of this Bye-Law as paid
on the shares. All dividends shall be apportioned and paid proportionately
to the amounts paid or credited as paid on the shares during any portion or
portions of the period in respect of which the dividend is paid; but if any
shares are issued on terms providing that they shall rank for dividend as
from a particular date such shares shall rank for dividend accordingly.
DEDUCTION FROM DIVIDENDS
80. The Directors may deduct from the dividends payable to any Shareholder all
moneys due by him to the Company on account of calls or otherwise.
PAYMENT OTHERWISE THAN IN CASH
81. The Directors may, with the sanction of the Company in General Meeting,
distribute in kind among the Shareholders by way of dividend any assets of
the Company, and in particular any shares or securities of other companies
to which the Company is entitled; provided always that no distribution
shall be made which would amount to a reduction of capital except in the
manner prescribed by law.
CAPITALIZATION OF PROFITS AND RESERVES
--------------------------------------
POWER TO CAPITALIZE
82. The Company in General Meeting may, upon the recommendation of the
Directors, resolve that it is desirable to capitalize any undivided profits
of the Company not required for paying the dividends on any shares carrying
a fixed cumulative preferential dividend (including profits carried and
standing to the credit of any reserve or reserves or other special
account), and accordingly that the Directors be authorised and directed to
appropriate the profits resolved to be capitalized to the Members in the
proportions in which such profits would have been divisible amongst them
bad the same been applied in paying dividends instead
<PAGE>
20
of being capitalized and to apply such profits on their behalf, either in
or towards paying up the amounts, if any, for the time being unpaid on any
shares held by such Members respectively or in paying up in full unissued
shares, debentures or securities to be allotted and distributed, credited
as fully paid up, to and amongst such Members in the proportion aforesaid
or partly in the one way and partly in the other and the Directors shall
give effect to such resolution.
POWERS INCIDENTAL THERETO
33. Whenever such a resolution as aforesaid shall have been passed, the
Directors shall make all appropriations and applications of the undivided
profits resolved to be capitalized thereby, and all allotments and issues
of fully paid shares, debentures, or securities, if any, and generally
shall do all acts and things required to give effect thereto, with full
power to the Directors to make such provision by the issue of fractional
certificates or by payment in cash or otherwise as they think fit for the
cost of shares, debentures or securities becoming distributable in
fractions, and also to anthorise any person to enter on behalf of all the
Members entitled thereto into an agreement with the Company providing for
the allotment to them respectively, credited as fully paid up, of any
further shares or debentures to which they may be entitled upon such
capitalization or (as the case may require) for the payment up by the
Company on their behalf; by the application thereto of their respective
proportions of the profits resolved to be capitalized of the amounts or any
part of the amounts remaining unpaid on their existing shares, and any
agreement made under such authority shall be effective and binding on all
such Members.
BORROWING POWERS
----------------
POWER TO ISSUE SECURITIES
84. The Directors may exercise all the powers of the Company to borrow money
and to mortgage or charge all undertaking and property of the Company
(including its uncalled capital) or any part thereof and to issue
debentures, bonds, notes, and other securities, whether outright or as
security for any debt, liability or obligation of the Company or otherwise.
EXECUTION OF SECURITIES
85. Every bond, obligation, debenture or other security issued by the Company
shall be by deed under Seal.
REGISTER OF SECURITIES
86. A register of bonds, debentures and other securities shall be kept by the
Company, in which shall be entered the number and date of every bond,
debenture or other security and the sum secured thereby and the names and
parties thereto (if any) with their proper additions and all other
necessary particulars thereof.
TRANSFER OF SECURITIES
87. The Directors may from time to time make such regulations for controlling
the transfer of any bond, debenture or other security as they may deem
expedient, provided that no such regulation shall affect the bolder or
transferee of any bond, debenture or other security unless distinct notice
of such regulations shall appear thereon.
<PAGE>
21
TRANSFER OF TRUSTEES
88. The Directors may, for the purpose of securing the payment of any such
bonds, debentures, or other securities as aforesaid, or the payment with
interest of any money so borrowed as aforesaid, or- payable under contract
or otherwise, make and carry into effect any arrangement which they may
deem expedient by assigning or conveying any property of the Company,
including its uncalled capital, to trustees.
ACCOUNTS
--------
PROPER ACCOUNTS TO BE KEPT
89. The Directors shall cause true accounts to be kept of all transactions of
the Company in such manner as to show the assets and liabilities of the
Company for the time being, and the books of account shall at all times be
kept at the registered office of the Company or at such place as the
Directors may from time to time determine and shall always be open to the
inspection of the Directors.
PROFIT-AND-LOSS STATEMENT
90. Unless otherwise so agreed by all Directors and Members in accordance with
section 88 of The Act at the Annual General Meeting in each year, the
Directors shall lay before the Members a Profit-and-Loss Statement.
BALANCE SHEET
91. Unless otherwise so agreed by all Directors and Members in accordance with
section 88 of The Act the Directors shall cause to be made out in every
calendar year and to be laid before the Company in General Meeting a
Balance Sheet as at the date to which the Profit-and-Loss Statement is made
up. Every Balance Sheet laid before the Company in General Meeting shall be
signed on behalf of the Board by two of the Directors and the Auditors'
Report (if any) shall be attached to the Balance Sheet and such Report
shall be read to the meeting and shall be open to inspection by any Member.
AUDIT
-----
AUDITORS
92. Unless otherwise so agreed by all Directors and Members in accordance with
section 88 of The Act at the Annual General Meeting or at a subsequent
Special General Meeting in each year an independent representative of the
Members shall be appointed by them as Auditors of the accounts of the
Company and such Auditors shall hold office until the Members shall appoint
other Auditors. Such Auditors may be Members but no Directors or Officers
of the Company shall, during their continuance in office, be eligible to
act as Auditors.
AUDITORS
93. The remuneration of the Auditors shall be fixed by the Shareholders at the
time of their appointment or subsequently and they may delegate this duty
to the Directors.
REMUNERATION OF AUDITORS
94. If the Auditors' office becomes vacant by the resignation or death of the
Auditors or by their becoming incapable of acting by reason of illness or
absence from Bermuda at a time when their services are required, the
Directors shall, as early as
<PAGE>
22
practicable, convene a Special General Meeting to appoint Auditors to act
during the incapacity of the Auditors.
DUTY TO EXAMINE BOOKS
95. (1)The Auditors shall examine such books, accounts and vouchers as may be
necessary for the performance of their duties.
DUTY TO REPORT TO MEMBERS
(2) The Auditors shall make a report to the Members on the accounts
examined by them and on every Balance Sheet laid before the Company in
General Meeting during their tenure of office, and the report shall state:-
(a) whether or not they have obtained all the information and explanations
they have required; and
(b) whether in their opinion the Balance Sheet referred to in the report
is properly drawn up so as to exhibit a true and correct view of the
state of the Company's affairs according to the best of their
information and the explanations given to them and as shown by the
books of the Company.
REPORT TO BE READ
(3) The report of the Auditors shall be read at the General Meeting at
which the Balance Sheet is submitted.
AUDITORS TO BE FURNISHED WITH LIST OF BOOKS, ETC.
(4) The Auditors of the Company shall be furnished with a list of all books
kept by the Company and shall at all times have the right of access to the
books and accounts and vouchers of the Company, and shall be entitled to
require from the Directors and Officers of the Company such information and
explanations as may be necessary for the performance of their duties.
RIGHT TO ATTEND MEETINGS
(5) The Auditors of the Company shall be entitled to attend any General
Meeting of the Company at which any accounts which have been examined or
reported on by them are to be laid before the Company and to make any
statement or explanations they may desire with respect to the accounts, and
notice of every such meeting shall be given to the Auditors in the manner
prescribed for Shareholders.
<PAGE>
23
NOTICES
-------
HOW NOTICE SERVED
96. A notice may be served by the Company on any Member either personally or by
telex facsimile or cable or by sending it through the post prepaid in an
envelope addressed to such Shareholder at his address as registered in the
Register.
NOTICE TO JOINT HOLDERS
97. Any notice required to be given to the Members shall with respect to any
shares held jointly by two or more persons be given to all such persons.
WHEN DEEMED DELIVERED
98. Any notice served by telex facsimile or cable shall be deemed to have been
received the day following the day on which the telex facsimile or cable
was sent, and any notice served by post shall be deemed to have been served
at the time when the same would be delivered in the ordinary course of
post, and, in proving such service, it shall be sufficient to prove that
the envelope containing the notice was properly addressed and prepaid and
the time when it was posted.
MEMBERS RESIDENT ABROAD
99. All notices being posted to addresses outside these islands shall so far as
may be practicable be forwarded by air mail.
WINDING UP
----------
DISTRIBUTION IN SPECIE
100. If the Company shall be wound up the Liquidator may, with the sanction of
the Company in General Meeting divide amongst the Shareholders in specie or
kind the whole or any part of the assets of the Company (whether they shall
consist of property of the same nature or not) and may, for such purpose
set such value as he deems fair upon any property to be divided as
aforesaid and may determine how such division shall be carried out as
between the Members or different classes of Members.
The Liquidator may, with like sanction, vest the whole or any part of such
assets in trustees upon such trusts for the benefit of the contributories
as the Liquidator, with the like sanction, shall think fit, but so that no
Member shall be compelled to accept any shares or other securities whereon
there is any liability.
SEAL
----
CUSTODY OF SEAL
101. (1) The Directors shall provide for the safe custody of the Seal, which
shall only be used by the authority of the Directors or a Committee of the
Directors authorised by the Directors in that behalf; and every instrument
to which the Seal shall be affixed shall be signed by (a) any two Directors
(b) a Director and the Secretary or an Assistant Secretary; or (c) any two
persons appointed or authorized for the purpose by (i) the Directors or
(ii) a Committee of the Directors which has been authorized by the
Directors in that behalf; provided that the Secretary of the Company may
affix the Seal of the Company over his signature
<PAGE>
24
only to any authenticated copies of these Bye-laws, the Minutes of Meetings
or any other documents required to be authenticated by him.
(2) The Directors may in addition to the Seal for use in Bermuda, have for
use in any territory of place outside Bermuda one or more duplicate seals,
and a deed or other document to which such seal is affixed under the
authority of the Directors shall bind the Company as if it had been sealed
with the Company's Common Seal.
ALTERATION OF BYE-LAWS
----------------------
ALTERATION OF BYE-LAWS
102. No Bye-Law shall be rescinded, altered or amended, and no new Bye-Law shall
be made, unless the same has been proposed at a meeting of the Directors
and passed at a subsequent General Meeting.
FORMS
-----
FORMS TO BE USED
103. The forms in the Schedule shall be used, subject to such variations or
alterations to meet the special circumstances or particular cases, as may
be necessary and as the Directors may approve.
INDEMNITY
---------
104.1(1) Subject to the proviso below every Director, Secretary and other
Officer for the time being of the Company and the Trustees (if any) for the
time being acting in relation to any of the affairs of the Company and
every of their respective heirs, executors and administrators, shall be
indemnified and secured harmless out of the funds of the Company in respect
of, any loss liability or expense suffered or incurred by him by virtue of
any rule of law in respect of any negligence, default, breach of duty or
breach of trust (including but not limited to any loss or liability under
contract, tort and statute of any applicable foreign law or regulation) of
which the officer of person may be guilty in relation to the Company or any
subsidiary thereof except such (if any) as he shall incur or sustain by or
through his own dishonesty, fraud, wilful neglect or default provided
always that the indemnity contained in this Bye-Law shall not extend to any
matter which would render it void pursuant to the Act.
Subject to the provisions of the Act, the Directors may purchase and
maintain insurance at the expense of the Company for the benefit of any
Director secretary or other officer of the Company against any liability
which may attach to him or loss or expenditure which he may incur in
relation to anything done or alleged to have been done or omitted to be
done by him as a Director, Secretary or other officer.
<PAGE>
25
Every Director, Secretary and other officer for the time being acting in
relation to any of the affairs of the Company shall be indemnified out of
the funds of the Company against all liabilities incurred by him as such
Director, Secretary or officer in defending any proceedings, whether civil
or criminal, in which judgment is given in his favour, or in which he is
acquitted, or in connection with any application under the Act in which
relief from liability is granted to him by the court.
(2) Except so far as the provision of this Bye-law are avoided by any
provision of the Act, no Director, Secretary or other Officer of the
Company shall be liable for the acts, receipts, neglects, or defaults of
the other Directors or Officers or for joining in any receipt or other act
for conformity, or for any loss or expense happening to the Company through
the insufficiency or deficiency of title to any property acquired by order
of the Directors for or on behalf of the Company, or for the insufficiency
or deficiency of any security in or upon which any of the moneys of the
Company shall be invested, or for any loss or damage arising from the
bankruptcy, insolvency, or tortious act of any person with whom any moneys,
securities, or effects shall be deposited, or for any loss occasioned by
any error of judgment, omission, default, or oversight on his pert, or for
any other loss, damage, misfortune whatever which shall happen in relation
to the execution of the duties of his office or in relation thereto, unless
the same happened through his own dishonesty, wilful neglect or default.
<PAGE>
26
SCHEDULE
TO THE WITHIN-WRITTEN
BYE-LAWS OF
EARTH LTD.
<PAGE>
27
FORM "A"
TRANSFER OF SHARES
I/We (name(s) in full of transferor(s)}_________________________________________
________________________________________________________________________________
of (address(es)}________________________________________________________________
________________________________________________________________________________
(occupation(s)}_________________________________________________________________
(nationality(ies)}______________________________________________________________
in consideration of the sum of {state total consideration} _____________________
paid to me/us by (name(s)) in full of transferee} ______________________________
________________________________________________________________________________
of {address(es)}________________________________________________________________
________________________________________________________________________________
{occupation(s)}_________________________________________________________________
{nationality(ies)}______________________________________________________________
hereinafter called "the transferee(s)", do hereby transfer to the transferee(s)
(number) ____________________ shares in the joint stock company called EARTH
LTD. represented by the attached/within Certificate subject to the several
conditions on which I/we held the same immediately before the execution hereof:
and I/we the transferee(s) do hereby agree to take the said shares subject to
the conditions aforesaid.
AS WITNESS my/our hand(s) the ___________ day of_______________, ______
SIGNED by the above-named transferor(s)
in the presence of:- ________________________________
Transferor
_____________________________
Witness
________________________________
Transferor
SIGNED by the above-named transferee(s)
in the presence of: ________________________________
Transferee
<PAGE>
28
FORM "B"
TRANSFER BY PERSONAL REPRESENTATIVES
I/We (name(s) in full of transferor(s)) ________________________________________
________________________________________________________________________________
of (address(es)_________________________________________________________________
________________________________________________________________________________
Occupation(s))__________________________________________________________________
Nationality(ies))_______________________________________________________________
having become entitled in consequence of the death of (name of deceased Member)
________________________ to (number) __________ shares comprised in
certificate(s) numbered _____________ standing in the Register of Members of
EARTH LTD. in the name of the said deceased member instead of being registered
myself/ourselves, in consideration of the sum of (state total consideration)
_____________ paid to me/us by
(name(s) of transferee(s))______________________________________________________
________________________________________________________________________________
of (address(es)_________________________________________________________________
________________________________________________________________________________
Occupation(s)___________________________________________________________________
Nationality(ies)________________________________________________________________
hereinafter called "the transferee(s)", do hereby transfer to the transferee(s)
(number) ____________ share(s) in the said Company subject to the several
conditions on which the same were held immediately before the execution hereof;
and I/we the transferee(s) do hereby agree to take the said shares hereby
transferred subject to the conditions aforesaid.
AS WITNESS my/our hand(s) the ___________day of________________, _______.
SIGNED by the above-named transferor(s)
in the presence of _________________________________
Transferor
____________________________
Witness
_________________________________
Transferor
SIGNED by the above-named transferee(s)
in the presence of:- _________________________________
Transferee
____________________________
Witness
_________________________________
Transferee
<PAGE>
29
FORM "C"
Notice of Liability To Forfeiture of Shares
of
EARTH LTD
("the Company")
To: _________________
Member
I am directed to my board to require you to pay at (place payment to be made)
_______________________________________________ on or before the __________ day
of _______________ 19__ the sum of____________________ (being the amount due
from you in respect of a call made on the _________ day of _____________ last,
in respect of (number) _________ shares held by you) together with interest
thereon at the rate of seven per cent (7%) per annum from the _________ day of
______________ last (the day on which the call ought to have been paid to you)
up to the day of actual payment.
I am further directed to inform you that in the event of your not making such
payment of arrears of call and interest on or before the __________ day
of____________ 19__ the (number) _________ shares held by you (in respect of
which such call is owing) will be liable to be forfeited without further notice
in accordance with the Company's Bye-Laws.
For and on behalf of
EARTH LTD.
per____________________________
Secretary
<PAGE>
30
FORM "D"
Proxy Limited To One Meeting
of
EARTH LTD.
("the Company")
I/We (name(s) __________________________________________________________________
the holder(s) of (number) ____________________ shares in the Company hereby
appoint (name of proxy) __________________________________ or whom failing (name
of proxy) ___________________________________________ to be my/our proxy to vote
on my/our behalf at the Annual/Special General Meeting of the Members of the
said Company to be held on the day of _________________ 19__ and at any
adjournment thereof.
AS WITNESS my/our hand(s) this ___________ day of________________, 19__.
SIGNED by the above-named Member(s)
in the presence of _________________________________
Member
___________________________________
Witness
_________________________________
Member
<PAGE>
31
FORM "E"
Proxy Limited To A Specified Period
in respect of
EARTH LTD.
("the Company")
I/We (name(s) __________________________________________________________________
the holder(s) of (number) __________________ shares in the Company hereby
appoint (name of proxy) ____________________________________________________ or
whom failing (name of proxy) __________________________________________ to be
my/our proxy to vote on my/our behalf at any Annual/Special General Meeting of
the Members of the said Company that may be held during the period (state
period) __________________________________________________.
AS WITNESS my/our hand(s) this ___________ day of________________, 19___.
SIGNED by the above-named Member(s)
in the presence of _________________________________
Member
________________________________
Witness
_________________________________
Member
<PAGE>
32
FORM "F"
Agreement to Purchase a Share or Shares
of
EARTH LTD.
("the Company")
I/We (name(s)-in-fill of purchaser(s)} _________________________________________
________________________________________________________________________________
do hereby agree to purchase from the Vendor(s) {name(s) of Member(s)} __________
________________________________________________________________________________
(number) __________ share(s) standing in his/her/their name(s) in the Register
of Shares of the Company at the price of ______________________ and to complete
such purchase within one week from this date.
AS WITNESS my/our hand(s) this ____________day of________________, 19___.
SIGNED by the above-named Purchases(s)
in the presence of _________________________________
Purchaser
_______________________________
Witness _________________________________
Purchaser
SIGNED by the above-named Vendor(s)
in the presence of _________________________________
Vendor
______________________________
Witness
_________________________________
Vendor
<PAGE>
FORM NO. 2
[Emblem Here]
BERMUDA
THE COMPANIES ACT 1981
MEMORANDUM OF ASSOCIATION OF
COMPANY LIMITED BY SHARES
(SECTION 7(1) AND (2))
MEMORANDUM OF ASSOCIATION
OF
EARTH LTD.
(hereinafter referred to as "the Company")
1. The liability of the members of the Company is limited to the amount
(if any) for the time being unpaid on the shares respectively held by
them.
2. We, the undersigned, namely,
NAME ADDRESS BERMUDIAN NATIONALITY NUMBER OF DATE
STATUS SHARES OF
(YES/NO) SUBSCRIBED BIRTH
INFINEX AN EXEMPTED 51,000 ORDINARY N/A
INTERNATIONAL LTD. BERMUDA SHARES
48 CEDAR AVENUE COMPANY
HAMILTON HM 11
BERMUDA
do hereby respectively agree to take such number of shares as may be allotted
to us respectively by the provisional directors of the Company, not exceeding
the number of shares for which we have respectively subscribed, and to
satisfy such calls as may be made by the directors, provisional directors or
promoters of the Company in respect of the shares allotted to us
respectively.
<PAGE>
3. The Company is to be a exempted Company as defined by the Companies Act
1981.
EXEMPTED
4. The Company has power to hold land situated in Bermuda not exceeding in
all, including the following parcels-
N/A
5. The authorised share capital of the Company is US $103,000.00 divided
into 100,000 ordinary voting shares of US $1.00 each and 30,000 ordinary
non-voting shares of US $0.10 each. Ordinary voting shares and the
ordinary non-voting shares shall rank equally in all respects, except
that the holders of the ordinary non-voting shares shall not be entitled
to vote at any meeting of the shareholders.
6. The objects for which the Company is formed and incorporated are as set
out in the Earth Ltd. Act, 1996.
(SEE ATTACHMENT)
7. The Company shall, in addition to the powers contained in the First
Schedule to the Companies Act 1981 and the Earth Ltd. Act, 1996, have the
additional powers set forth herein.
Signed by each subscriber in the presence of at least one witness attesting the
signature thereof:
THE COMMON SEAL OF INFINEX INTERNATIONAL LTD.
WAS HEREUNTO AFFIXED IN THE PRESENCE OF:
/S/ ARNOLD A. FRANCIS
- ------------------------------------ ------------------------------------
ARNOLD A. FRANCIS - DIRECTOR
/S/ A. ROBERT MILLER
- ------------------------------------ ------------------------------------
A. ROBERT MILLER - DIRECTOR
(Subscribers) (Witnesses)
SUBSCRIBED THIS 13TH DAY OF JUNE, 1997.
[Seal Here]
<PAGE>
ADDITIONAL POWERS
(a) To borrow and raise money in any currency or currencies and to secure
or discharge any debt or obligation in any matter and in particular
(without prejudice to the generality of the foregoing) by mortgages of
or charges upon all or any part of the undertaking, property and assets
(present and future) and uncalled capital of the Company or by the
creation and issue of securities.
(b) To enter into any guarantee contract or indemnity or suretyship and in
particular (without prejudice to the generality of the foregoing) to
guarantee, support or secure with or without consideration, whether by
unsecured obligation or by mortgaging or charging all or any part of
the undertaking, property and assets (present and future) and uncalled
capital of the Company or both such methods or in any other manner, the
performance of any obligations or commitments of, and the repayment or
payment of the principal amounts of and any premiums, interest,
dividends and other moneys payable on or in respect of any securities
or liabilities of, any person including (without prejudice to the
generality of the foregoing) any company which is for the time being a
subsidiary or a holding company of the company or another subsidiary or
a holding company of the Company or otherwise associated with the
Company.
(c) To accept, draw, make, create, issue, execute, discount, endorse,
negotiate bills of exchange, promissory notes and other instruments and
securities, whether negotiable or otherwise.
(d) To sell, exchange, mortgage, charge, let on rent, share of profit,
royalty or otherwise grant licenses, easements, options, servitudes and
other rights over, and in any other manner deal with or dispose of, all
or any part of the undertaking, property and assets (present and
future) of the Company for any consideration and in particular (without
prejudice to the generality of the foregoing) for any securities.
(e) To issue and allot securities of the Company for cash or in payment or
part payment for any real or personal property purchased or otherwise
acquired by the company or any services rendered to the Company or as
security for any obligation or amount (even if less than the nominal
amount of such securities) or for any other purpose.
(f) To grant pensions, annuities, or other allowances, including allowances
on death, to any directors, officers or employees or former directors,
officers or employees of the Company or any Company which at any time
is or was a subsidiary or a holding company or another subsidiary of a
holding company of the Company or otherwise associated with the Company
or of any predecessor in business of any of them, and to the relations,
connections or dependents of any such persons, and to other persons
<PAGE>
whose service or services have directly or indirectly been of benefit
to the Company or whom the Company considers have any moral claim on
the company or to their relations, connections or dependents, and to
establish or support any associations, institutions, clubs, schools,
building and housing schemes, funds and trusts, and to make payment
toward insurance or another arrangement likely to benefit any such
persons or otherwise advance the interests of the Company or of its
Members, and to subscribe, guarantee, or pay money for any purpose
likely, directly or indirectly to further the interests of the Company
or of its Members or for any national, charitable, benevolent,
educational, social, public, general or useful object.
(g) Subject to the provisions of Section 42 of the Companies Act 1981, to
issue preference shares which at the option of the holders thereof are
to be liable to be redeemed.
(h) To purchase its own shares in accordance with the provisions of Section
42A of the Companies Act 1981.
2
<PAGE>
A BILL
entitled
"The Earth Ltd. Act, 1996"
--------------------------
[November 1996]
WHEREAS a petition has been presented to the Legislature by Infinex
International Ltd. an exempted company incorporated on 25th May, 1983, pursuant
to the Companies Act, praying that an Act may be passed to incorporate Earth
Ltd. as an exempted company with limited liability;
AND WHEREAS it is deemed expedient to grant the prayer of the said
petition:
Be it enacted by the Queen's Most Excellent Majesty, by and with the advice
and consent of the Senate and the House of Assembly of Bermuda, and by the
authority of the same as follows:
SHORT 1. This Act may be cited as The Earth Ltd. Act, 1996 and shall come
TITLE. into force on the date of Assent.
INTER- 2. In this Act, unless the context otherwise requires:
PRETATION.
(a) "auditor" means a firm of public accountants which has no
financial interest in the Company or in its business apart
from the audit, and any reference in the Companies Act to the
term auditor insofar as it relates to the Company shall be
construed accordingly;
<PAGE>
2
(b) "Certificate of Compliance" means a Certificate of Compliance
issued pursuant to the Companies Act;
(c) "the Company" means Earth Ltd.;
(d) "the Companies Act" means the Companies Act 1981 as amended
from time to time;
(e) "Earth Foundation" means a non-profit foundation to be
incorporated under the laws of Switzerland having as its
objects, the specified purposes;
(f) "expatriate" means a person who, at the material time, is
ordinarily resident in a country of which he or she is not a
citizen;
(g) "global market" means the group of persons which, at any
particular time, consists of international travellers,
expatriates, permitted purchasers, and such other person or
persons, or class or classes of persons as the Minister of
Finance may designate;
(h) "international traveller" means a person who, at the material
time, is:
(A) temporarily situate in a country in or of which he or
she is neither ordinarily resident nor a citizen; or
(B) travelling between countries.
(i) "lottery" means a lawful scheme or arrangement whereby money
or other valuable prizes are allotted or distributed by lot,
chance or skill, or any combination thereof;
(j) "Lotteries Act" means the Lotteries Act, 1944 as amended from
time to time;
(k) "may" in relation to any provision of this Act whereby a
power is conferred, shall be construed as permissive;
(l) "Minister" means the Minister of Finance;
<PAGE>
3
(m) "permitted purchaser" means a person who, at the material
time, is situate in a jurisdiction which:
(A) permits the sale or solicitation of lottery tickets, or
(B) does not prohibit the sale or solicitation of lottery
tickets;
(n) "person" includes a company, trustee, association or body of
persons, whether corporate or unincorporate;
(o) "Registrar" means the Registrar of Companies appointed under
section 3 of the Companies Act;
(p) "shall" in relation to any provision of this Act whereby a
duty is imposed, shall be construed as imperative;
(q) "similar organisation" means any company, corporation,
foundation, trust or other entity created or established for
the specified purposes;
(r) "specified purposes" means raising funds through the
mechanism of an on-going global lottery and directly or
indirectly funding projects related to the global
environment, including direct support for World Wide Fund For
Nature (International Secretariat, Switzerland), and other
worthy programmes or projects related to the environmental
aspects of health, habitat, over-population, mass migration
of refugees and others, man made and natural disasters, and
environmentally sustainable economic development, including
sustainable tourism;
(s) words or expressions imparting the singular shall include the
plural and words or expressions imparting the plural shall
include the singular.
INCORPORA- 3. If within six months after the passing of this Act a
TION. Memorandum of Association, in such form as the Registrar
shall approve, is signed and filed in accordance with the
provisions of the Companies Act, the persons who shall sign
such memorandum and the persons who shall thereafter become
members shall be a body corporate with a share capital under
the name of "Earth Ltd." with the exclusive right to use that
name in Bermuda and under that name to have perpetual
succession with power to sue and liability to be sued in its
<PAGE>
4
corporate capacity in all courts of law, and to have and use
a common seal with power to renew or change the same at
pleasure.
EXEMPTED 4. The Company shall be an exempted company for the purposes
COMPANY of the Companies Act.
OBJECTS OF 5. The principal objects and purposes of the Company shall be:
THE COMPANY.
(a) to raise funds for and on behalf of the Earth Foundation
or a similar organisation;
(b) to establish, finance, manage, operate and promote a
lottery or lotteries for and on behalf of the Earth
Foundation or a similar organisation;
(c) to carry on any other activities set out in paragraphs
(b) to (n) and (p) to (u) inclusive of the Second
Schedule to the Companies Act.
POWERS OF 6. The Company shall have the following powers:
THE COMPANY.
(a) pursuant to and in furtherance of the objects and
purposes set forth in paragraphs (a) and (b) inclusive
of Section 5:
(i) to establish, in Bermuda, a special purpose trust,
pursuant to Part II of the Trusts (Special
Provisions) Act 1989 the purposes of which shall be
the specified purposes;
(b) to carry out its objects and purposes from a principal
place of business within these Islands;
(c) to solicit and collect funds, grants, sponsorships,
contributions, endowments, and pledges in any
jurisdiction whatsoever in which such solicitations and
collections are not prohibited by law;
(d) to solicit the sale of lottery tickets and subscriptions
for the sale of lottery tickets in the global market and
in any other jurisdiction whatsoever in which such sale
or solicitation is:
(A) permitted by law; or
(B) not prohibited by law;
<PAGE>
5
(e) to accept subscriptions or orders for the purchase of
lottery tickets from a principal place of business
within these Islands;
(f) to establish such legal entities in Bermuda or elsewhere
as may be required for the objects and purposes of the
Company;
(g) to appoint, authorize, contract with or engage persons
for carrying out the objects and purposes of the Company
and the exercise of the powers of the Company;
(h) to make and carry out contracts and other arrangements
necessary for or incidental to the attainment of the
objects and purposes of the Company and the exercise of
the powers of the Company;
(i) to exercise all or any of the powers set out in the
First Schedule to the Companies Act.
COMPLIANCE 7. The Company shall comply with relevant national and
WITH RELEVANT international laws and codes of good business conduct that
LAWS may be applicable to the Company or to the business carried
on by the Company. The Company shall impose such obligations
upon the persons appointed, authorized or engaged by the
Company, as the case may be, with respect to the
administration, promotion or operation of each lottery as may
be necessary to comply with such laws and codes.
LOTTERIES 8. The provisions of the Lotteries Act shall not apply to any
ACT. person in respect of a lottery which is:
(a) conducted by or on behalf of the Company; and
(b) promoted exclusively within the global market.
COMPANIES 9. All provisions of the Companies Act which are not
ACT. inconsistent with this Act shall apply to the Company.
ACCOUNTING 10. (1) In accordance with the provisions of Section 84, 87, 89
AND AUDIT and 90 of the Companies Act, the Company shall in
PROVISIONS. respect of its business for each financial year prepare
financial statements which shall be audited by the
Company's auditor.
(2) Notwithstanding anything contained in the Companies Act
or rule of law to the contrary, the Company shall have
no power to waive the laying of annual financial
statements at a general meeting or to waive the
<PAGE>
6
auditor's report thereon or to waive the appointment of
an auditor for any financial year, and, accordingly, the
provisions of Section 88 of the Companies Act shall not
apply to the Company.
(3) (i) The Company's auditor shall, in addition to
reporting on the financial statements of the Company
generally, also report on the lottery as provided in
sub-section 10 (3)(ii).
(ii)The Company's auditor shall twelve months after the
commencement of the lottery produce to the Company
and every twelve months thereafter an audit report
relating to the affairs of the lottery which shall,
amongst other matters, report on:
(a) the proper management and conduct of the lottery
in accordance with relevant laws and
international standards and authorisations
granted; and
(b) the proper allocation and distribution of the
proceeds of the lottery.
(4) The Company shall, within three months of the date on
which it receives the reports referred to in section
10(3), file copies of such reports and audited financial
statements for the lottery with the Registrar, and, on
receipt thereof, the Registrar shall place such reports
in the Company's file that is maintained by the
Registrar and open to inspection by the public;
(5) Upon failure by the Company to comply with any of the
provisions of Section 10. the Minister may take steps to
investigate the affairs of the Company under Section 132
of the Companies Act, and in the event such failure to
comply shall, for the purposes of Section 132(8)(a) of
the Companies Act, be construed as a contravention of
the Companies Act.
(6) The Registrar shall, with respect to the issuance of a
Certificate of Compliance for the Company, take into
consideration amongst other matters the Company's
compliance with requirements of Section 10.
SAVING OF 11. Nothing in this Act shall be construed to affect the rights
RIGHTS OF of Her Majesty, Her Heirs and successors or of any body
CROWN AND politic or corporate or of any other person or persons except
OTHERS. such as are mentioned in this Act, and those claiming by,
from or under them.
AGREEMENT
made between
International Lottery in Liechtenstein Stiftung (InterLotto) represented by the
member of the Board having single signatory power Hugo Sele, attorney at law,
Vaduz
and
Electronic Fundraising Company Limited (EFO)
1.0 OVERVIEW
1.1 InterLotto is a charitable Foundation which is authorised and
controlled by the Liechtenstein Government. The Liechtenstein
Government has the right to give one year's notice to terminate the
authorisation on December 31, 2010. If the Liechtenstein Government
decides to authorise another Internet lottery after the year 2010,
InterLotto has an option to renew the licence on a first refusal basis.
The conditions under which a renewal takes place are not known at this
stage.
1.2 InterLotto has contracted with the Foundation of the International
Federation of Red Cross and Red Crescent Societies (FIFRC) to have the
InterLotto weekly international lottery redesigned and rebranded to
reflect that the benefits support the work of FIFRO (Appendix 1).
1.3 EFC has acquired the business of Walton Consulting Limited with effect
from 1 September 1997, including its contract to provide software for
InterLotto (Dated 4 April 1997), its staff, premises and hardware.
1.4 EFC wishes to undertake extended Internet marketing of the InterLotto
lotteries using its own distribution system.
1.5 EFC is free, subject to the ongoing consent of the Red Cross and Red
Crescent Societies in the territory, to promote and market the
InterLotto lotteries in any manner that is legal and conforms to the
FIFRC InterLotto agreement.
1.6 EFC is free, subject to the agreement of InterLotto, to negotiate with
an alternative charity to replace the FIFRC in the event that the FIFRC
elects not to renew its agreement with InterLotto in 2002.
/S/
<PAGE>
2
2.0 INTERLOTTO RESPONSIBILITIES
2.1 InterLotto is providing lottery games on the Internet for the period of
its licence from the Liechtenstein Government.
2.2 InterLotto will establish procedures and specify the file format for
bulk data submission where required.
2.3 InterLotto undertakes to facilitate the development of new game
software in agreement with EFC.
2.4 InterLotto will credit EFC's portion of the revenue earned on the
specified lotteries to EFC's nominee. Payment will be made in the week
following the week of receipt, net of EFC's share of any credit card
charge backs from previous weeks.
2.5 The audited statement of gross receipts and EFC's commission for the
same period will be submitted to EFC within 3 months of the end of
InterLotto's financial year.
2.6 InterLotto will give EFC access to all banking and player transaction
data via on line transmission.
3.0 EFC RESPONSIBILITIES
3.1 EFC will establish and maintain a suitable structure to facilitate
software development, marketing and sales of InterLotto products.
3.2 EFC undertakes not to bring InterLotto or FIFRC into disrepute by
marketing or selling the InterLotto lotteries in any fashion deemed to
be illegal or undesirable. EFC will present the details of its
marketing strategy to InterLotto at regular intervals, but at least
four times per year, to enable InterLotto to ensure that the proposed
strategy will not bring InterLotto or FIFRO into disrepute and to
ensure that the said strategy complies with the terms of the FIFRC
contract. EFC will comply with the alterations to this strategy which
the FIFRC deems to be necessary.
3.3 The responsibility for all costs of promotion of the InterLotto
lotteries, including all costs of promotion on the Internet, lies with
EFC.
3.4 The responsibility for financing and installation of hardware for
extended Internet sales lies with EFC.
3.5 EFC undertakes to report to InterLotto every three months on legal
difficulties associated with the marketing and distribution of
InterLotto products in all areas of extended Internet marketing.
/S/
<PAGE>
3
4.0 COMMISSION EXCLUSIVITY
4.1 EFC will receive 10% of all entry fees made via the indirect access
technology and 10 % of all entry fees from direct Internet access,
except where existing players of InterLotto receive 5% for referrals,
in which case EFC's share will be reduced accordingly.
4.2 InterLotto undertakes not to pay any distribution commission to any
party other than EFC for the duration of this agreement, other than as
disclosed in terms of clause 4.1.
4.3 EFC, its operators, agents and franchisees may mark up the cost of
entries for InterLotto games, for their own benefit, by approximately
25%, subject to the on going agreement of InterLotto.
4.4 The price of the exclusivity referred to in 4.2 is one million five
hundred thousand pounds sterling, payable at the time that this
agreement is signed, in terms of Phase 1 of EFC's prospectus. A further
three million five hundred thousand pounds sterling is payable in
accordance with Phase 2 of the prospectus, which will be used by
InterLotto to provide adequate infrastructure to cater for higher
volumes of turnover on its Internet site.
5.0 TERMINATION
5.1 This agreement will extend until 31 December, 2010 or any longer period
for which the existing licence of InterLotto is extended by the
Liechtenstein Government.
5.2 This agreement may be terminated by InterLotto in the event of EFC not
complying with FIFRC requirements in terms of clause 3.2. This clause
shall not be unreasonably invoked.
5.3 In the event that EFC defaults on this contract, operators, agents and
franchisees may negotiate independently with InterLotto to continue
their respective operations.
6.0 TERRITORY
6.1 This agreement covers all countries of the world except Liechtenstein
and Switzerland.
/S/
<PAGE>
4
7.0 LAW
7.1 This agreement will be governed by Liechtenstein law whose courts will
be the courts of jurisdiction.
Sept. 25, 1997 25th Sept. 1997
- -------------- ---------------
place/date place/date
The International Lottery in Electronic Fundraising Company Limited
Liechtenstein Foundation
/S/ Hugo Sele /S/
- ----------------------------- --------------------------------------
Hugo Sele
<PAGE>
AGREEMENT
made between
International Lottery in Liechtenstein Stiftung (InterLotto)
represented by the member of the Board
having single signatory power
Hugo Sele, attorney at law, Vaduz
and
Electronic Fundraising Company Limited
1. The parties entered into an agreement dated 25 September 1997, a copy
of which is attached hereto and initialled by each of the parties for
the purposes of identification (the "Initial Agreement").
2. The parties have agreed to vary the terms of the Initial Agreement on
the terms and subject to the conditions of this agreement.
3. The Initial Agreement shall be varied by the deletion of Clause 4.4 and
the insertion of the following in its place:
4.4 The price of the exclusivity referred to in 4.2 is one million
five hundred thousand pounds sterling, payable at the time this
Agreement is signed, in the terms of Phase 1 of EFC's prospectus dated
7 July 1998.
4.5 A further three million five hundred thousand pounds sterling (the
"Commission") will be payable by EFC to ILLF at such time as EFC has,
in the reasonable opinion of the directors of EFC after consultation
with ILLF, sufficient working capital and cash flow to make the
payment. ILLE acknowledges that EFC does not have sufficient working
capital or cashflow at the date of this agreement.
4.6 The Commission will be used by ILLF to provide adequate
infrastructure to cater for higher volumes of turnover on its Internet
site.
4. Save as provided in this agreement the Initial Agreement shall remain
of full force and effect.
5. This agreement will be governed by Liechtenstein law whose courts will
be the courts of jurisdiction.
/S/
<PAGE>
19.11.1998 London 30.11.98
- --------------------------- -------------------------------
place/date place/date
The lnternational Lottery Electronic Fundraising Company plc
in Liechtenstein Foundation
/S/ Hugo Sete /S/ Alan Tucker
- ---------------------------------- ----------------------------------
Hugo Sete Alan Tucker
AGREEMENT
made between
David Vanrenen and Alan Tucker (VT)
and
Electronic Fundraising Company Limited (EFC)
1.0 OVERVIEW
1.1 VT own all of the shares in Walton Consulting Limited (Walton), which
is contracted in terms of an agreement dated 4 April 1997, to provide
International Lottery Services Limited (ILS) with games, generic
software and testing facilities to enable ILS to comply with its
obligations under the same agreement to International Lottery in
Liechtenstein Stiftung (InterLotto).
1.2 EFC wishes to assume responsibility for the operation of the business
of Walton, including employment of the staff and the rights and
obligations in terms of the contract referred to in clause 1.1.
2.0 VT RESPONSIBILITIES
2.1 VT will use reasonable endeavours to ensure that the business of Walton
continues to operate in its current form and that it complies with its
contractual obligations in terms of the contract referred to in clause
1.1.
3.0 LAW
3.1 This agreement will be governed by English law whose courts will be the
courts of jurisdiction.
place/date 22.9.97 place/date 22.9.1997
/S/ David Vanrenen / Alan Tucker /S/
- ------------------------------------ --------------------------------------
David Vanrenen and Alan Tucker Director
Electronic Fundraising Company Limited
REGISTRAR AND TRANSFER AGENCY AGREEMENT
THIS AGREEMENT is made this 4th day of June One Thousand Nine Hundred and
Ninety-Nine
BETWEEN
EARTHPORT.COM plc a public limited company incorporated in and under the laws of
England and Wales whose registered office is at 5 Elstree Gate, Elstree Way,
Borehamwood, Hertfordshire WD6 1JD, England (hereinafter called the Company') of
the first part and
THE BANK OF BERMUDA LIMITED a company incorporated in and under the laws of
Bermuda whose registered office is at Bank of Bermuda Building, 6 Front Street,
Hamilton HM 11, Bermuda (hereinafter called the "Bank") of the second part.
WHEREAS:-
(A) The Company is desirous of appointing a Registrar and Transfer Agent of the
shares of the Company; and
(B) The Bank has agreed to act as Registrar and Transfer Agent of the shares of
the Company upon the terms and conditions hereinafter contained.
NOW IT IS HEREBY AGREED as follows:-
1. INTERPRETATION
--------------
(A) In this Agreement and in all amendments hereto the following words and
expressions shall, where not inconsistent with the context, have the
following meanings respectively:-
"Board" shall mean the board of directors of the Company.
"Articles" shall mean the Memorandum and Articles of Association of the
Company for the time being in force.
"Directors" shall mean the directors of the Company.
"Shareholders" shall mean the shareholders of the Company.
(B) Unless the context otherwise requires words and expressions contained in
this Agreement shall bear the same meaning as in the Articles.
<PAGE>
-2-
(C) Unless the context otherwise requires words importing the singular number
shall include the plural and vice versa, words importing the masculine
gender shall include the feminine and words importing persons shall include
firms and companies and vice versa.
(D) The division of this Agreement into sections, clauses and sub-clauses and
the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation hereof.
2. APPOINTMENT OF REGISTRAR AND TRANSFER AGENT
-------------------------------------------
The Company HEREBY APPOINTS the Bank to be and the Bank HEREBY AGREES to
act as Registrar and Transfer Agent for the Company from the date hereof upon
the terms and conditions hereinafter contained. The Bank may appoint a
sub-registrar and sub-transfer agent to carry out and discharge all or any of
the obligations of the Bank hereunder provided that consent to such appointment
shall be given by the Board.
3. PROVISION OF FACILITIES
-----------------------
The Bank shall provide and pay an adequate staff and shall provide suitable
office accommodation and other facilities at Bank of Bermuda Building aforesaid
or elsewhere in Bermuda as determined by the Bank and notified to the Company
for efficiently performing its functions but the Company shall not be entitled
to the exclusive use of any such accommodation or to the exclusive services of
any member of such staff.
4. DUTIES OF THE BANK
-------------------
(A) During the continuance of this Agreement the Bank shall:-
(a) be responsible for keeping the register of members of the Company (the
"Register") in accordance with the statutory provisions for the time
being in force and the Articles and all other duties incidental
thereto PROVIDED ALWAYS that the Bank shall be permitted to keep the
Register on magnetic tape or disc or in accordance with some other
mechanical or electronic system on condition that it is capable of
being produced in legible form and where any authorised person wishes
to inspect the Register pursuant to sub-clause (e) hereof whilst it is
kept in the aforesaid manner, the Bank shall provide legible evidence
of the contents of the Register;
(b) enter on the Register all issues, allotments, transfers, conversions
or redemptions of shares in accordance with the Articles for the time
being in force;
(c) issue such shares of the Company as are required upon receipt of
proper instructions from the Company;
<PAGE>
-3-
(d) take or procure that there are taken reasonable and proper precautions
for the safe custody of the Register, of the share certificates (if
any) of the Company held by the Bank pending issue, of share
certificates (if any) tendered for exchange, replacement, conversion,
redemption or transfer by the holders thereof, of cancelled share
certificates (if any) held by the Bank, of share transfer forms
tendered to the Bank and of all other documents held by it in
performance of its duties hereunder;
(e) receive, record and deal with probates, letters of administration,
powers of attorney, dividend mandates, vesting orders, certificates of
marriage or death, notices of change of name and other documents
affecting the title to shares or any dividends payable thereon
affecting the Register in accordance with the Bank's normal practice
or in accordance with the written instructions of the Company;
(f) make the Register available for inspection as required by law or the
Articles and supply copies of the Register or of any part thereof
within the period allowed by law. The Bank may charge and retain a fee
for supplying such copies, provided that such fee shall not exceed the
amount permitted by law or by the Articles;
(g) prepare and seal on behalf of the Company new certificates and balance
certificates and procure that certificates for shares in the Company
shall be issued or cancelled only in accordance with the provisions of
the Articles;
(h) in the event that share certificates are issued, prepare and seal on
behalf of the Company new share certificates and balance share
certificates and procure that certificates for shares shall be issued
or cancelled only in accordance with the provisions of the Articles
and in the case of the issue of shares only after satisfying itself
that the Company has received from all applicants all payments in
respect of such issue;
(i) in the event that shares are issued in uncertificated form, the Bank
will issue a notice to each Shareholder evidencing that shares have
been issued, but only after satisfying itself that the Company has
received from all applicants all payments in respect of such issue;
(j) prepare, on and in accordance with instructions of the Company, and
subject to being satisfied that the funds are available to meet the
same, issue warrants or cheques for dividend payments or payment of
redemption moneys on redemption of shares or arrange for payment of
dividends or such redemption moneys to or in accordance with the
instructions of the Shareholders and notify the Company of the amounts
and payees of all cheques and warrants for payments so made;
(k) at any time during the Bank's business hours permit the auditor of the
Company and any duly appointed agent or representative of the Company
at the expense of the Company to audit or inspect the Register and any
other documents or records kept by and still in the possession of the
Bank hereunder and make available all such documents and records in
its possession to such auditor, agent or representative during
business hours whenever reasonably required so to do and afford all
such information, explanations and assistance as such Auditor, agent
or representative may require;
(1) despatch all such circulars, notices of meetings, reports, financial
statements and other written material to all persons entitled to
receive the same under the Articles as the Company may require;
<PAGE>
-4-
(m) act as may be required by the Company from time to time as proxy agent
in connection with the holding of meetings of Shareholders, receive
and tabulate votes cast by proxy and communicate to the Company the
results of such tabulation accompanied by appropriate certificates;
(n) deal with and answer all correspondence from or on behalf of the
Shareholders relating to the functions of the Bank under this
Agreement; and
(o) generally perform all the duties usually performed by registrar and
transfer agents of companies including the keeping of all records
required to be kept and made under regulations in Bermuda for the time
being in force.
(B) The Bank shall be deemed to have received proper instructions or
authorisation from the Company upon receipt of written, cabled, telexed or
facsimile instructions signed by such one or more persons as the Directors
of the Company shall from time to time authorise to give such instructions.
A certified copy of the resolution of the Board shall be conclusive
evidence of the authority of any such person to act until the Bank is in
receipt of written notice to the contrary.
5. CONTROL BY DIRECTORS
--------------------
In the performance of its duties hereunder the Bank shall at all times be
subject to the control of and review by the Directors of the Company and the
Directors of the Company and shall in all respects observe and comply with the
Articles and shall comply and conform to all reasonable and proper orders,
directions and regulations of the Directors or the Company and shall well and
faithfully serve the Company and use all reasonable endeavours to promote the
interests thereof.
6. REMUNERATION OF THE BANK
------------------------
(A) The Bank shall be paid by way of remuneration for its services pursuant to
this Agreement fees at such rates as may be agreed from time to time
between the Company and the Bank and failing such agreement in accordance
with the Bank's scale of fees as shall from time to time be in force.
(B) The Bank shall also be entitled to receive from the Company an amount equal
to all out-of-pocket expenses properly incurred by the Bank in carrying out
its duties hereunder.
7. PAYMENTS
--------
Amounts payable by the Company to the Bank pursuant to Clause 6 hereof
shall be paid in United States Dollars in Bermuda at such times to be agreed in
writing from time to time between the Company and the Bank.
<PAGE>
-5-
8. DUTIES OF THE COMPANY
---------------------
The Company shall:-
(a) at all times supply or procure the supply to the Bank of blank forms
of certificates as necessary and, in the event of the same being
specially engraved, the plates for engraving the same shall during the
continuance of this Agreement be deposited for safe custody in such
manner and with such persons (and if required in the joint names of
the Company and the Bank) as the Bank may require and the same shall
not be used for the purpose of preparing any forms of certificates
without the written consent of the Bank;
(b) retain for a period of seven years after the termination of the
appointment of the Bank hereunder for any reason whatsoever all
cancelled share certificates and share transfer forms lodged during
the period of such appointment; and
(c) deliver or cause to be delivered from time to time to the Bank
properly certified or authenticated copies of its Articles and all
amendments thereto and of such resolutions, votes or other proceedings
as may be necessary for the Bank in the performance of its duties
hereunder.
9. RIGHTS OF THE BANK
------------------
The Bank may:-
(a) at its own expense employ servants or agents in performance of its
duties and the exercise of its rights hereunder;
(b) delegate its functions, powers, discretions, privileges and duties
hereunder or any of them to such person, firm or corporation on such
terms and conditions as are agreed between the Bank and the Company;
(c) use the name of the Company and sign any necessary letters or other
documents for and on behalf of the Company as Registrar and Transfer
Agent of the Company in the performance of its duties hereunder;
(d) act as registrar or transfer agent for any other company, corporation
or body of persons on such terms as may be arranged with such company,
corporation or body of persons and shall not be deemed to be affected
with notice of or to be under any duty to disclose to the Company any
fact or thing which may come to the knowledge of the Bank or any
servant or agent of the Bank in the course of so doing or in any
manner whatever otherwise than in the course of carrying out the
duties of Registrar and Transfer Agent hereunder; and
(e) acquire, hold or deal with for its own account or for the account of
any customer or other person and in its own name or in the name of
such customer or person or of a nominee any shares or securities for
the time being issued by the Company or any investment in which the
Company is authorised to invest and shall not be required to account
to the Company for any profit arising therefrom.
<PAGE>
-6-
10. RESPONSIBILITY OF BANK AND INDEMNITY BY COMPANY
-----------------------------------------------
(A) The Bank shall not incur liability by refusing in good faith to perform any
duty or obligation herein which in its judgment is improper or unauthorised
provided that in performing its duties and obligations pursuant to this
Agreement it shall not be required at any time to do or procure the doing
of anything contrary to or in breach of or which constitutes any offence
against any applicable law or regulation then in force.
(B) The Bank shall not, in the absence of negligence or wilful default on the
part of the Bank or its servants, agents or delegates, be liable to the
Company or to any Shareholder for any act or omission in the course of or
in connection with the services rendered by it hereunder or for any loss or
damage which the Company may sustain or suffer as the result or the course
of the discharge by the Bank or its servants, agents or delegates of its
duties hereunder or pursuant hereto and the Bank shall not in any event be
liable for any loss occasioned by reason only of the liquidation,
bankruptcy or insolvency of any servant, agent or delegate appointed
pursuant to the provisions hereof.
(C) The Bank shall not be responsible for the loss or damage to any documents
or other property of the Company or for any failure to fulfil its duties
hereunder if such loss, damage or failure shall be caused by or directly or
indirectly due to war, enemy action, the act of government or other
competent authority, of if any investment exchange or dealing house, riots,
civil disturbance, rebellion, storm, tempest, accident, fire, strike,
explosion, lock-out or the breakdown, failure or malfunction of any
telecommunication or computer service or any occurence or event beyond the
control of the Bank
(D) The Company agrees to indemnify the Bank from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever
(other than those resulting from the negligence or wilful default on the
part of the Bank) which may be imposed on, incurred by or asserted against
the Bank in performing its obligations or duties hereunder.
(E) The Bank shall not be liable for any loss suffered by the Company or any
Shareholder, whether caused by delays or otherwise, resulting from
illegible or unclear communications from the Company, Shareholders,
potential investors or any agents thereof.
(F) Where any Proper Instructions or notices or other documentation are given
by way of facsimile transmission the fact that a transmission report
produced by the originator of such transmission discloses that the
transmission was sent shall not be sufficient proof of receipt by the Bank.
The Company agrees to indemnify the Bank from and against any and all
actions, losses, costs, charges,
<PAGE>
-7-
expenses and demands of any and every kind which may at any time hereafter
be incurred by the Bank in consequence of accepting and acting upon such
Proper Instructions or notices or other documentation given by facsimile
transmission whether or not such instructions were given by the Company or
any other person duly authorised to give such instructions.
11. FRAUD
-----
In the absence of negligence and provided that the officers, servants or
agents of the Bank are not parties to any fraud, the Bank shall not be
responsible to the Company for registering or issuing certificates in accordance
with forged or fraudulent transfers or for the consequences of any action taken
by the Bank upon the faith of any forged or fraudulent document in any case
where, had the document not been forged or fraudulent, the action taken by the
Bank would have been the normal and reasonable action to be taken.
12. CONFIDENTIALITY AND REPUTATION
------------------------------
(A) Neither party hereto shall, unless compelled so to do by any court of
competent jurisdiction, either before or after the termination of this
Agreement, disclose to any person any information relating to the other
party to this Agreement without the consent of that other party.
(B) Neither party hereto shall do or commit any act or matter or thing which
would or might prejudice or bring into disrepute in any manner the business
or reputation of either of the parties or any Director of any such party.
13. TERMINATION
-----------
(A) This Agreement and the appointment of the Bank hereunder shall continue in
force until terminated by either the Company or the Bank giving to the
other not less than sixty days' notice in writing expiring at any time
provided that this Agreement may be determined forthwith by the Company or
the Bank by notice taking immediate or subsequent effect if:-
(a) the Bank or the Company respectively has broken or is in breach of any
of the terms of this Agreement and shall not have remedied such breach
within thirty days after service of notice requiring the same to be
remedied; or
(b) the Bank or the Company respectively shall go into liquidation (except
a voluntary liquidation for the purposes of reconstruction or
amalgamation on terms previously approved in writing by the other
party).
<PAGE>
-8-
(B) Termination of this Agreement shall be without prejudice to any claims or
rights which either of the parties hereto may have by reason of any breach
of the other party's obligations and, without prejudice to the generality
of the foregoing, any indemnity provisions and provisions limiting the
liabilities of either party shall survive termination of this Agreement.
14. DELIVERY OF DOCUMENTS
---------------------
Upon the termination of this Agreement the Bank shall hand over to the
Company the Register and all other documents in the possession of the Bank in
its capacity as Registrar and Transfer Agent or in relation to the functions
assigned to it hereunder; provided, however, that the Bank shall not be required
to make any such delivery or payment until full payment shall have been made to
the Bank of all its fees, compensation, costs and expenses due to it under the
provisions of this Agreement.
15. NOTICES
-------
Any notice, instruction or other instrument required or permitted to be
given hereunder may be delivered in person to the offices of the parties as set
forth herein during normal business hours, or delivered prepaid registered mail
or by facsimile to the parties at the following addresses or such other address
as may be notified by either party from time to time.
TO THE COMPANY: EARTHPORT.COM plc
5 Elstree Gate,
Elstree Way,
Borehamwood,
Hertfordshire WD6 1JD,
England
Attention: Company Secretary
Facsimile: 44-207-603-7481
TO THE BANK: THE BANK OF BERMUDA LIMITED
6 Front Street
Hamilton HM 11
Bermuda
Attention: General Manager, Corporate Trust
Facsimile: 441-299-6565
Such notice, instruction or other instrument shall be deemed to have been served
in the case of a registered letter at the expiration of five business days after
posting, and, in the case of facsimile, immediately on dispatch and if delivered
outside normal business hours it shall be deemed to have
<PAGE>
-9-
been received at the next time after delivery when normal business hours
commence. Evidence that the notice, instruction or other instrument was properly
addressed, stamped and put into the post shall be conclusive evidence of
posting.
16. RIGHT TO USE DATA PROCESSING RECORDS
------------------------------------
The Bank is authorised to maintain all accounts, registers, corporate books
and other documents relating to the Company or its affairs on computer records
and to produce at any time during the course of legal proceedings, copies or
reproductions of these documents made by photographic, photostatic or data
processing procedures as juridical proof thereof.
17. TELEPHONE RECORDING
-------------------
The Bank may record all telephone conversations between the Company and the
Bank or between any Shareholder or other person and the Bank in relation to the
affairs of the Company and any such tape recordings may be submitted in evidence
in any proceedings relating to this Agreement.
18. ASSIGNMENT AND AMENDMENT
------------------------
This Agreement shall not be amended or assigned by either the Bank or the
Company save with the consent of the other party hereto.
19. COUNTERPART
-----------
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts each of which when executed
and delivered shall constitute an original and all such counterparts together
constitute one and the same instrument.
20. SEVERANCE
---------
If any provision herein shall be determined to be void or unenforceable in
whole or in part for any reason whatsoever such invalidity or unenforceability
shall not affect the remaining provisions or any part thereof contained within
this Agreement and such void or unenforceable provisions shall be deemed to be
severable from any other provision or part thereof herein contained.
<PAGE>
- 10 -
21. PROPER LAW AND JURISDICTION
---------------------------
This Agreement shall be governed by and construed in accordance with the
laws of Bermuda and the courts of Bermuda shall have non-exclusive jurisdiction
to resolve any disputes relating to the terms of this Agreement.
AS WITNESS the hands of the duly authorised signatories of the parties hereto as
of the day and year first above written.
SIGNED BY Alan Tucker ) /s/ Alan Tucker
duly authorised )
for and on behalf of )
EARTHPORT.COM plc )
in the presence of: )
/s/ Denise Brooker
- -------------------------
Denise Brooker
- -------------------------
SIGNED BY Linda Sutherland ) /s/ Linda Sutherland
and Peter Borland ) /s/ Peter Borland
duly authorised )
for and on behalf of )
THE BANK OF BERMUDA LIMITED )
in the presence of: )
/s/ Will Grant
- -------------------------
- -------------------------
DATED: 4th June, 1999
-----------------------------------
BETWEEN:
EARTHPORT.COM plc
-and-
THE BANK OF BERMUDA LIMITED
------------------------------------
REGISTRAR AND TRANSFER
AGENCY AGREEMENT
------------------------------------
The Bank of Bermuda Limited
6 Front Street
Hamilton HM 11
Bermuda
DATED 3 November, 1998
EARTH LTD.
ELECTRONIC FUNDRAISING COMPANY PLC
INFINEX INTERNATIONAL LTD
AGREEMENT
Adelaide House London Bridge London EC4R 9HA
Telephone +44 171 760 1000 Fax +44 171 760 1111
<PAGE>
DATED day of 1998
PARTIES
1 EFC ELECTRONIC FUNDRAISLNG COMPANY PLC a
company incorporated in England and Wales;
and
2 Infinex INFINEX INTERNATIONAL LTD a Bermuda Exempt
Company;
3 Mitchell NewDelman MITCHELL NEWDELMAN
3 Parties EFC, INFINEX and MITCHELL NEWDELMAN
OPERATIVE PROVISIONS
1 Infinex has developed at significant expense a project known as the
"Earth Lottery" and has petitioned the Bermuda Government to pass a
special Act of Parliament entitled the "Earth Ltd. Act 1996" pursuant
to which Infinex established "Earth Ltd." in 1997 and transferred to
Earth Ltd. all right title and interest to said "Earth Lottery" project
and US$51,000 cash in return for 51,000 shares of Earth Ltd. being the
entire issued share capital of Earth Ltd. Earth Ltd. is solvent and has
no significant debts.
2 The President of Infinex, Mitchell NewDelman, has been the project
leader of the Earth Lottery(tm) project. Infinex is prepared to become
a consultant to EFC for the purpose of "seconding" Mitchell NewDelman
to EFC for a period of time in return for a further Option,
compensation contribution and other understandings as principally set
forth herein.
3 The shares of EFC referred to herein rank pari passu in all respects
with the ordinary shares of EFC referred to in EFC's prospectus issued
in July 1998.
4 The Parties fully understand the merits of having EFC acquire Earth
Ltd. and having essentially the full time and attention of Mitchell
NewDelman dedicated to the success of EFC, and therefore, the Parties
have agreed as follows:
5 Warranties
/S/ /S/ /S/ /S/
1
<PAGE>
5.1 Infinex and Mitchell NewDelman jointly and severally covenant to EFC
that all information supplied and all accompanying documents supplied
by Infinex, Infinex' s Solicitors, Mitchell NewDelman or Mitchell
NewDelman`s Solicitors to EFC or EFC's Solicitors relating to the
businesses, activities, affairs, assets or liabilities of Earth Ltd.
was when given and is true and accurate in all material respects and
materially discloses full, clear and accurate descriptions of every
matter to which they relate.
5.2 There are no material facts or circumstances in relation to the assets,
business or Financial condition of Earth Ltd. which have not been fully
and fairly disclosed to EFC or EFC's Solicitors and which, if
disclosed, might reasonably have been expected to affect the decision
of EFC to enter into this Agreement. For the avoidance of doubt Infinex
and Mitchell NewDelman jointly and severally covenant to EFC that as of
the date hereof Earth Ltd. is solvent and able to pay all of its
existing debts and to the best of their knowledge and belief Earth Ltd.
has no significant liabilities nor are they aware of any claims of any
third parties.
5.3 Infinex and Mitchell NewDelman jointly and severally covenant to EFC
that Earth Ltd. has no outstanding tax liabilities and has no trading
or other receipts which are subject to taxation.
5.4 Infinex and Mitchell NewDelman jointly and severally covenant to EFC
that:
5.4.1 Earth Ltd., per the Earth Ltd. Act 1996 has obtained the
licence and consent required to run the Earth Lottery, a
non-Internet lottery; and
5.4.2 The licence and consent, as fully set out in the Earth Ltd.
Act 996, is valid and subsisting; and
5.4.3. No party is in breach of any of the licence or consent and
there is nothing in them that might prejudice their
continuation and renewal except for the conditions stated
within the Earth Ltd. Act 1996.
6. Earth Ltd. Acquisition Transaction
EFC hereby acquires from Infinex the entire share capital of Earth LTD.
for the purchase price of Five Hundred and Fifty Thousand (550,000)
fully paid up Ordinary Shares of EFC thereby making Earth Ltd. a wholly
owned subsidiary of EFC. For the avoidance of doubt EFC is not obliged
to issue any shares to Infinex hereunder until the Conditions
Subsequent contained in clause 13.1 are satisfied.
/S/ /S/ /S/ /S/
2
<PAGE>
7 Option
7.1 EFC hereby grants a non-cancellable Option to Infinex to acquire Two
Hundred Thousand (200,000) Ordinary Shares of EFC. For the avoidance of
doubt EFC is not obliged to issue any shares to Infinex hereunder until
the Conditions Subsequent contained in clause 13.1 are satisfied.
7.2 This Option is exercisable at any time from 16 December 1998 through to
26 April 2001(30 months).
7.3 The price paid shall be Two Pounds Fifty Pence UK Sterling (2.50 GBP)
per share in cash upon exercise.
7.4 This Option may be assigned and/or exercised in whole or in part and in
multiple exercises of any lesser number of shares at any one time (but
never less than 10,000 shares for any one exercise) and not surpassing
the 200,000 share total stated herein above and not later than the
stated expiration date of said 26 April 2001.
7.5 Infinex undertakes that it shall not prior to 1 August 1999 dispose of
any of the shares issued to it under clauses 6- 7.4 inclusive.
8 Consulting Appointment of Infinex for "seconding" of Mitchell NewDelman
8.1 EFC shall pay Infinex a consulting payment of Five Thousand Pounds UK
Sterling (5,000 GBP) per month on the 15th day of each month the first
payment being made on 15 November 1998.
8.2 The consulting payment shall be payable until further notice to the
account of Infinex at UBS, Geneva Switzerland.
8.3 Subject to clause 9 and clause 10 this consulting appointment shall
automatically terminate not later than 15 May 2002 provided that EFC or
Infinex or Mitchell NewDelman may terminate this consulting appointment
on notice, such notice to be capable of taking effect at any time on or
after 15 January 2000.
/S/ /S/ /S/ /S/
3
<PAGE>
8.4 In consideration of such monthly payments Infinex hereby agrees to
"second" its Chairman and President, Mitchell NewDelman, to EFC as a
consultant at no salary or fee paid directly to Mitchell NewDelman.
8.5 Mitchell NewDelman will dedicate essentially full time to the general
non - UK managing of the global affairs of EFC along with the other
directors of EFC.
8.6 Infinex further authorises Mitchell NewDelman to become a non-Executive
Director of EFC.
8.7 Any expenses directly related to the affairs of EFC incurred by
Mitchell NewDelman concerning activities for and on behalf of EFC shall
be reimbursed to Mitchell NewDelman by EFC with the clear understanding
that all such expenses must be reasonable and either pre-approved or
subsequently approved by EFC.
8.8 Neither Infinex nor Mr NewDelman intends to become domiciled nor
resident in the UK for tax purposes. If either party does become
domiciled in the UK, then any tax payable as a consequence of such
action shall be paid in full by the recipient of the payment made under
clause 8.
8.9 It is further understood that substantially all activities of Mitchell
NewDelman concern the non-UK global activities of EFC.
9 Incapacity
9.1 If Mitchell NewDelman is prevented due to illness accident or any other
incapacity from properly performing his duties either for a period or
periods aggregating 10 working days in any 3 consecutive calendar
months resulting in an average of less than 134 hours of time per month
or for 30 consecutive working days, the consulting appointment shall
terminate on the option of Mitchell NewDelman or EFC by giving 30 days'
notice in writing. No compensation or further payment shall be made
under clause 8 after expiry of this notice.
10 Summary Termination of Employment
10.1 The consulting arrangement of Mitchell NewDelman may be terminated by
EFC without notice or payment in lieu of notice and without liability
for compensation in damages if Mitchell NewDelman:
/S/ /S/ /S/ /S/
4
<PAGE>
10.1.1 commits an act of gross misconduct or of gross neglect or a
material or repeated (following warnings) breach or
non-observance of an obligation in this agreement, or is
guilty of conduct tending to bring himself or a member of EFC
into disrepute; or
10.1.2 has an interim receiving order made against him, becomes
bankrupt or makes a composition or enters into any deed of
arrangement with his creditors; or
10.1.3 is convicted of an arrestable criminal offence (other than an
offence under road traffic legislation for which a fine or
non--custodial penalty is imposed); or
10.1.4 becomes of unsound mind or becomes a patient under the Mental
Health Act 1983; or
10.1.5 is convicted of an offence under the Part V of the Criminal
Justice Act 1 993 or under any other statutory enactment or
regulations relating to insider dealing; or
10.1.6 resigns as a director of EFC otherwise than at the request of
the Board; or
10.1.7 is disqualified from being a director of a company by reason
of an order made by a competent court; or
10.1.8 fails to reach performance requirements set by the Board after
receiving a written warning regarding poor performance from
the Company.
10.2 Following a termination under clause 10. 1, no further payment shall be
made to Infinex or expenses paid to Mitchell NewDelman as detailed in
clause 8.
10.3 The termination by EFC of the consultancy appointment shall be without
prejudice to any claim which EFC or Infinex or Mitchell NewDelman may
have for damages arising from breach this agreement.
/S/ /S/ /S/ /S/
5
<PAGE>
10.4 The termination by EFC or Mitchell NewDelman of the consultancy
appointment shall have no effect on the acquisition of Earth Ltd. for
EFC shares or on the Option granted under clause 7.
11 General Provisions
11.1 The Parties understand that Mitchell NewDelman shall continue to be
Chairman of the Board of Infinex and pursue certain projects for
Infinex none of which shall be full time nor when taken together
substantial time.
11.2 Of existing Infinex projects, several concern gaming (one of which has
been generally described and code named "ICB") but none are currently
active nor if they become active would they be directly competitive
with EFC's current activities nor would they be directly competitive
with a foreseeable implementation of the Earth Lottery.
12 Restrictive Agreement
12.1 To assure to EFC the full benefit of the business and goodwill of Earth
Ltd., Mitchell NewDelman undertakes by way of consideration for the
obligations of EFC under this Agreement, as separate and independent
agreements, that he will not without the prior written consent of EFC
(such consent to be withheld only in so far as may be reasonably
necessary to protect the legitimate interests of the company) directly
or indirectly:
12.1.1 disclose to another person, or himself use for any purpose,
and shall use all reasonable endeavours to prevent the
publication or disclosure of information concerning the
business, accounts or finances of Earth Ltd. except as
required by law or regulation of a competent authority, such
as Bermuda as concerns the Earth Ltd. Act, 1996, or their
client's or customer's transactions or affairs of which he has
knowledge; or
12.1.2 for two years after Completion, either alone or jointly with,
or as manager, agent for or employee of another person,
directly or indirectly carry on or be engaged, concerned or
interested in another lottery business similar to the business
now carried on by EFC or any other lottery business which is
competitive to the business of EFC.
/S/ /S/ /S/ /S/
6
<PAGE>
13 This Agreement is Subject to Conditions Subsequent
13.1 This Agreement in its entirety may be declared null and void by any of
the Parties if:
13.1.1 by 15 December 1998, or a subsequent date as may be mutually
agreed by the Parties, EFC has failed to raise at least half
of its current Phase 2 funds of at least Two Million Five
Hundred Thousand Pounds Sterling (2,500,000 GBP) either by the
issuance of Ordinary Shares of EFC or by alternative means,
such as debt financing or sponsorships at the entire
discretion of EFC acting reasonably: or
13.1.2 the relevant approval of the Bermuda Monetary Authority to
transfer the shares of Earth Ltd. is not granted within 21
days of its request.
13.2 If this Agreement is declared null and void, the fee payment due to
Infinex on 15 November 1998 and any subsequent monthly payments, if
any, prior to the funding condition having been met in circumstances
only where the date of 15 December 1998 as referred to in clause 13.1.1
is extended by mutual agreement shall be nevertheless paid and not
reimbursed.
14 Miscellaneous
14.1 This Agreement shall be interpreted under the Laws of England. The
Parties shall submit to the exclusive jurisdiction of the English
courts in case of a dispute not first resolvable by private commercial
arbitration in London.
14.2 The transfer of Earth Ltd. shares referred to at clause 6 above is
subject to approval of the Bermuda Monetary Authority which in the case
of a public company transferee should be approved without delay.
14.3 This Agreement represents the whole agreement between the Parties, and
shall not be removed, or varied in any way. No other express terms,
written or oral shall be incorporated in the contract.
IN WITNESS whereof the Parties have this day of 1998 executed this
Agreement
/S/ /S/ /S/ /S/
7
<PAGE>
ELECTRONIC FUNDRAISlNG COMPANY plc
/S/ Alan K. Tucker /S/ David J. D. Vanrenen
- --------------------------- ----------------------------
E. Alan K. Tucker, Director David J D Vanrenen, Director
INFINEX INTERNATIONAL LTD
/S/ Mitchell J. NewDelman /S/ Michele C. Zentner
- ------------------------------- ----------------------------
Mitchell J. NewDelman, Director Michele C. Zentner, Director
Acknowledged:
/S/ Mitchell J. NewDelman
---------------------------------
Mitchell J. NewDelman, Personally
8
<PAGE>
[ElectroFunco
Logo Here]
5 ST MARY ABBOTS PLACE
LONDON, W8 6LS
UNITED KINGDOM
TELEPHONE: +44 171 603 7737
FACSIMILE: +44 171 603 7481
[email protected]
11 January 1999
Variation to the agreement of 3 November 1998 between Infinex International Ltd
(Infinex) and Electronic Fundraising Company plc (EFC).
1.0 In view of the fact that the minimum subscription in terms of the
previous variation of 13 November 1998 was not achieved by 25 December
1998, the parties have agreed that the terms of the agreement of 3
November should be varied as follows:
Clause 6 The purchase price of Five Hundred and Fifty Thousand (550000)
fully paid up Ordinary Shares of EFC is reduced to One Hundred
and Fifty Thousand (150,000) fully paid up Ordinary Shares.
Clause 7.1 The grant of options is increased by Four Hundred Thousand
(400,000) Ordinary Shares at an exercise price of Two Pounds
(2.00 GBP) per share, which is in addition to the option on
Two Hundred Thousand (200,000) Ordinary Shares at an exercise
price of Two Pounds 50 Pence (2.50 GBP) per share.
2.0 It is further agreed that Mr Mitchell NewDelman will continue to
approach potential investors in terms of the current EFO Offer for
Subscription of 20 November 1998.
2.1 If investors introduced by Infinex invest at least (pound)2 million
under the current terms of the Offer for Subscription, the Four Hundred
Thousand Two Pound (2.00 GBP) options in terms of clause 7.1 shall be
automatically converted, without payment to EFC, into fully paid up
Ordinary Shares in the name of Infinex. Corporate sponsorships
introduced by Infinex during the period of the offer shall be treated
similarly, except that (pound)1 of corporate sponsorship shall be
regarded as having (pound)2 value for the purpose of this clause.
2.2 To the extent that investors introduced by Mr NewDelman invest less
than (pound)2 million, the number of options converted to shares in
terms of clause 2.1 above shall be reduced pro rata (for example, if
(pound)1 million is invested, or (pound)1/2 million of corporate
sponsorship is made, 200,000 options will be converted to fully paid up
shares).
On behalf of On behalf of
Infinex International Ltd Electronic Fundraising Company plc
/S/ /S/
<PAGE>
2 November 1998
Dear Sirs
Side letter - to the Agreement between Infinex International Limited/Electronic
Fund raising Company plc/Mitchell NewDelman
1 Introduction
1.1 This letter is the Side Letter to the Agreement entered into between
Infinex International Limited, Electronic Fundraising Company plc and
Mitchell NewDelman entered into today.
2 Undertaking by Infinity
2.1 Infinity has given undertakings to the effect that it cannot sell any
of its shares in Electronic Fundraising Company plc before 31 July
1998.
2.2 Notwithstanding 2.1, if any of the Family Trusts controlled by either
of us sell any shares that they hold in Electronic Fundraising Company
plc, Infinex International Limited will be released from the obligation
contained in clause 7.5 to the Agreement in respect of shares which it
owns in Electronic Fundraising Company plc to the same extent pro rata
to the number of shares sold by such Family trusts as a percentage of
the whole of the issued share capital of Electronic Fundraising Company
plc.
3 Service Agreements
3.1 We agree to the insertion into our respective service agreements with
Electronic Fundraising Company plc from time to time provisions which
mirror exactly those constraints imposed on Mitchell NewDelman in
clause 10 of the Agreement.
3.2 We agree to the insertion into our respective service agreements with
Electronic Fundraising Company plc from time to time provisions in
respect of levels of compensation which mirror exactly those imposed on
Mitchell NewDelman in clause 8.1 of the Agreement.
/S/ /S/
<PAGE>
To Infinex International Ltd
Date 2 November 1998
Page 2
Yours faithfully
/S/ Alan K. Tucker /S/ David J. D. Vanrenen
- ---------------------------------- -----------------------------------
E Alan K Tucker, Director, David J D Vanrenen, Director
Electronic Fundraising Company plc Electronic Fundraising Company plc
<PAGE>
[ElectroFunco
Logo Here]
5 ST MARY ABBOTS PLACE
LONDON, W8 6LS
UNITED KINGDOM
TELEPHONE: +44 171 603 7737
FACSIMILE: +44 171 603 7481
[email protected]
11 January 1999
Variation to the agreement of 3 November 1998 between Infinex International Ltd
(Infinex) and Electronic Fundraising Company plc (EFC).
1.0 In view of the fact that the minimum subscription in terms of the
previous variation of 13 November 1998 was not achieved by 25 December
1998, the parties have agreed that the terms of the agreement of 3
November should be varied as follows:
Clause 6 The purchase price of Five Hundred and Fifty
Thousand (550,000) fully paid up Ordinary
Shares of EFC is reduced to One Hundred and
Fifty Thousand (150,000) fully paid up
Ordinary Shares.
Clause 7.1 The grant of options is increased by Four
Hundred Thousand (400,000) Ordinary Shares at
an exercise price of Two Pounds (2.00 GBP) per
share, which is in addition to the option on
Two Hundred Thousand (200,000) Ordinary Shares
at an exercise price of Two Pounds 50 Pence
(2.50 GBP) per share.
2.0 It is further agreed that Mr Mitchell NewDelman will continue to
approach potential investors in terms of the current EFC Offer for
Subscription of 20 November 1998.
2.1 If investors introduced by Infinex invest at least (pound)2 million
under the current terms of the Offer for Subscription, the Four Hundred
Thousand Two Pound (2.00 GBP) options in terms of clause 7.1 shall be
automatically converted, without payment to EFO, into fully paid up
Ordinary Shares in the name of Infinex. Corporate sponsorships
introduced by Infinex during the period of the offer shall be treated
similarly, except that (pound)1 of corporate sponsorship shall be
regarded as having (pound)2 value for the purpose of this clause.
2.2 To the extent that investors introduced by Mr NewDelman invest less
than (pound)2 million, the number of options converted to shares in
terms of clause 2.1 above shall be reduced pro rata (for example, if
(pound)1 million is invested, or (pound)1/2 million of corporate
sponsorship is made, 200,000 options will be converted to fully paid up
shares).
On behalf of On behalf of
Infinex International Limited Electronic Fundraising Company plc
/S/ /S/
13 January 1997
AGREEMENT
Between
The Foundation for the International Federation of Red Cross and Red Crescent
Societies (The International Federation)
17, chemin des Crets, Petit-Saconnex
1211 Geneva 19, Switzerland
represented by Mr. Dwight Mihalicz
Secretary of the Board of the Foundation
signing under delegation of authority from the Chairman
on behalf of the board
and
The International Lottery in Liechtenstein Foundation (InterLotto)
Meierhofstrasse 5, 9490 Vaduz, Liechtenstein
represented by Dr. Christoph Hoffmann
Member of the Board of Foundation
having single signatory power
/S/ /S/
<PAGE>
WHEREAS
InterLotto has expertise in developing software and operating on the Internet.
It currently operates a weekly worldwide lottery on the Internet as well as
instant lottery games and wishes to redesign and to rebrand the weekly worldwide
lottery to reflect that the benefits support the work of The International
Federation of the Red Cross and Red Crescent Societies.
AND
The International Federation is willing to collaborate fully in this undertaking
in return for a major share of the gross proceeds of the lottery.
Definitions
The Board of Foundation of InterLotto
The board of InterLotto consists of Hugo Sele and Dr. Christoph
Hoffman.
The Federation Advisory Committee
Body to represent The International Federation and InterLotto with The
International Federation having a casting vote.
The Lottery
The Lottery is the current weekly worldwide lottery drawn in a public
place in Liechtenstein (for the time beeing 6 from 40 lottery drawn on
a Friday evening) and any lottery game produced specifically for The
International Federation.
The Gross Revenue
Number of tickets sold in The Lottery multiplied by the respective
price received by InterLotto
The Foundation Secretariat
The Revenue Generation department of the Secretariat of the
International Federation of the Red Cross and Red Crescent Societies
Background to InterLotto
1.0 InterLotto is licensed by the government of Liechtenstein, for a
minimum period of 15 years renewable on a first refusal basis, to
operate a lottery on the Internet.
page 2
/S/ /S/
<PAGE>
A legal description of InterLotto, including a summary of the statutes
and a summary of the licence, has been provided to The International
Federation.
1.1 The Lottery has been operating for over a year.
1.2 On the grounds of its licence InterLotto's activity on the Internet is
legal. InterLotto's server has to be located in Liechtenstein and
InterLotto is not allowed to work on the ground in countries other than
Liechtenstein. InterLotto's worldwide activity is restricted to the
Internet.
1.3 InterLotto is controlled by the Liechtenstein government and audited by
Coopers & Lybrand in terms of its licence and in terms of the
Liechtenstein lottery law.
1.4 A minimum of 5% of turnover is payable to charities at the discretion
of the Charity Committee, consisting of representatives of InterLotto
and the Liechtenstein government.
1.5 An official confirmation of the licence and the official registration
document are attached.
THE AGREEMENT
2.0 The parties agree, that InterLotto operates The Lottery on the Internet
in collaboration with The International Federation against
consideration of 25% of the gross revenue to The International
Federation.
THE FEDERATION ADVISORY COMMITTEE
3.0 To provide The International Federation's input into the structure of
InterLotto with regard to The Lottery and for co-ordination of both
parties' activities under this agreement, a Federation Advisory
Committee will be established with The International Federation having
a casting vote, to implement the present agreement as specified
hereinafter.
3.1 InterLotto will accept the decisions of the Federation Advisory
Committee as far as The International Federation's contractual rights
are concerned and in the areas named hereinafter in this contract. The
International Federation delegate representatives on the Federation
Advisory Committee have the right of veto over the use of name and
emblem of The International Federation of the Red Cross and Red
Crescent Societies and the design of the interface of The Lottery.
page 3
/S/ /S/
<PAGE>
3.2 The Federation Advisory Committee will consist of up to five members
appointed by The International Federation and up to four members
appointed by InterLotto. The chairman will be appointed by The
International Federation in consultation with InterLotto.
3.3 The Federation Advisory Committee will have an executive committee,
consisting of two persons, which will represent the Federation Advisory
Committee in implementing the decisions of the Federation Advisory
Committee and otherwise carrying on its work between meetings. One
person will be the chairman of the Federation Advisory Committee or
their designate and the other will be one of the InterLotto members or
their designate. The executive committee can draw on the membership of
the Federation Advisory Committee for expertise as required.
3.4 The Federation Advisory Committee will have specific authority in
assessing the manner in which The Lottery is marketed to the National
Societies.
3.5 The Federation Advisory Committee will meet as often as is necessary
but not less than twice per year.
3.6 The International Federation and InterLotto will bear the costs of
their respective appointees on the Federation Advisory Committee.
InterLotto will bear the costs of the executive committee.
3.7 The terms of reference of the Federation Advisory Committee shall be
developed by The International Federation in consultation with
InterLotto and in conformity with the terms of this contract.
INTERLOTTO'S RIGHTS AND RESPONSIBILITIES
4.0 InterLotto will take the lead in the redesign of The Lottery and in
marketing The Lottery on the Internet in full collaboration with The
International Federation and the Federation Advisory Committee.
4.1 InterLotto will clear all usage of The International Federation of the
Red Cross and Red Crescent Societies logos/emblems, which is guided by
the Geneva conventions, with the Federation Advisory Committee prior to
usage on its pages.
4.2 InterLotto will work closely with The International Federation and the
Federation Advisory Committee to coordinate the marketing of The
Lottery on the ground by The International Federation and the National
Societies with the marketing of The Lottery on the Internet.
4.3 If so required by The International Federation or the Federation
Advisory Committee InterLotto will use best endeavours to remove The
International Federation of the Red Cross and Red Cross Crescent
Societies identification from The Lottery in a country in the following
instances
page 4
/S/ /S/
<PAGE>
- where a country threatens in writing to withdraw existing
funding to the International Federation of the Red Cross and
Red Crescent Societies via the National Societies or directly.
- where The Lottery is causing distress or bringing The
International Federation of the Red Cross and Red Crescent
Societies into disrepute.
However InterLotto is not obliged by the terms of this contract to
restrict access in any territory.
4.4 InterLotto will not implement the concept of a worldwide weekly lottery
under the name of a third party during the existence of this agreement.
4.5 InterLotto acknowledges that National Societies have the right to
develop lotteries in their respective countries.
4.6 InterLotto recognises the importance of directing its marketing on the
lnternet at gaming type players as opposed to existing donors to The
International Federation of the Red Cross and Red Crescent Societies.
4.7 InterLotto recognises that each National Society may choose whether or
not to market The Lottery on the ground in their country.
4.8 InterLotto will work with The International Federation and the
Federation Advisory Committee to implement special lottery events for
specific disaster funds or special events such as the millennium.
4.9 InterLotto will use its best endeavours to prevent minors or gambling
addicts from playing The Lottery and to monitor and prevent, where
possible, excessive playing by any individual.
4.10 InterLotto will remit The International Federation earnings, monthly
accounts and a monthly activity report, including a break-down of
players' entries per country, to The International Federation within 30
days of the end of the respective calendar month.
4.11 InterLotto will provide a link for players to access The International
Federation of the Red Cross and Red Crescent Societies home pages.
4.12 InterLotto is solely responsible for funding The Lottery, running the
Liechtenstein based organisation and the promotion on the Internet.
page 5
/S/ /S/
<PAGE>
The INTERNATIONAL FEDERATION RIGHTS and responsibilities
5.0 The International Federation will cooperate, fully, within its charter,
to assist in the rebranding of The Lottery and the selling of tickets
in The Lottery, for which it is the major beneficiary.
5.1 The International Federation will work with the National Societies to
implement the project on the ground.
5.2 The International Federation by all appropriate means will actively
encourage National Societies to promote and support The Lottery. The
International Federation will reserve the right to cease promotion of
The Lottery in any particular territory.
5.3 The Federation Advisory Committee in collaboration with InterLotto will
develop a marketing strategy for National Societies on how best to
market The Lottery on their territory. The development work shall be
carried out by the executive committee.
5.4 The International Federation will be responsible for persuading
National Societies of the value of this form of fund-raising and for
demonstrating how it will enhance and not detract from charitable
contributions, based on marketing materials and information provided by
the executive committee.
5.5 The Foundation Secretariat will work extensively with its contacts and
wilt promote The Lottery with them.
5.6 The International Federation will identify leaders in the fund raising
field to help in the development of the market for The Lottery.
5.7 The International Federation will provide information on major projects
around the world for publicity purposes.
5.8 The International Federation will provide support to National Societies
project and publicity development and in using its own communications
and media channels as appropriate. The Foundation Secretariat will
actively encourage National Societies to support The Lottery.
5.9 The International Federation will not implement or develop nor support
an alternative global lottery on the Internet or its equivalent. The
International Federation will not compete in the same market as the
lottery at the same time.
5.10 The International Federation recognises that Interlotto's licence
extends only to the Internet. InterLotto is not permitted to market
the lottery on the ground in countries other than Liechtenstein.
page 6
/S/ /S/
<PAGE>
5.11 The costs incurred by The International Federation, the Foundation
Secretariat and the National Societies, in supporting, promoting and
marketing The Lottery are to be financed by those parties.
5.12 Federation will provide a link from its appropriate pages on the
Internet to The Lottery.
5.13 The International Federation reserves the right to receive funds from
other fund raising activities, including lotteries, which are not in
conflict with the terms of this agreement.
5.14 The International Federation will promote The Lottery through
appropriate international publications and will use best endeavours to
mobilise the full co-operation of its worldwide public relations
network.
5.15 The International Federation does not accept responsibility for loss of
revenue arising from its promotional activities in the course of and as
a result of the implementation of this contract.
Revenue
6.0 The Gross Revenue will be split as follows:
25% distribution to The International Federation
15% Costs and charity allocation
10% Jackpot enhancement pool
50% Prizes to winners
TERM OF AGREEMENT
7.0 The agreement will last for five years and will be automatically
renewed for further five year periods unless either party terminates
the agreement by giving six months notice by registered mail.
7.1 If The International Federation elected to terminate the agreement at
the end of any five year period then The international Federation would
be restricted from operating or having operated through a third party a
lottery, instant lottery games or any other lottery type game on the
Internet or its equivalent for a period of five years from that date.
page 7
/S/ /S/
<PAGE>
7.2 The agreement may be terminated by either party in the event of severe
breach of the terms of this contract.
Trademarks, software, mailing lists
8.0 The International Federation trademarks and any marks developed
specifically for The Lottery remain the property of The International
Federation and revert to The International Federation in the event of a
termination of this contract.
8.1 The Lottery software and the game concepts remain the property of
InterLotto at all times.
8.2 The mailing lists derived from The Lottery are the joint property of
both parties and can be used by each of the parties, subject to the
agreement of the Federation Advisory Committee. However, InterLotto
undertakes not to disclose the lists to another charity, or to use them
for the purposes of a single charity, in the event of a termination of
this contract, for a period of two years.
Funding
9.0 InterLotto undertakes that it has adequate funding for the purposes of
promoting its activities.
9.1 The International Federation has no responsibility for funding and does
not assume any liabilities apart from those liabilities which are
caused by its own actions.
Promotion and Marketing Plan
10.0 A promotion and marketing plan will be submitted by InterLotto prior to
the signing of this agreement.
10.1 InterLotto acknowledges the restriction on sponsors, including
association with tobacco, alcohol and arms dealing, to which The
International Federation adheres.
page 8
/S/ /S/
<PAGE>
Access to records
11.0 The International Federation and its auditors will have reasonable
access to the records of InterLotto and the right to verify the
accounts of InterLotto as far as their rights are concerned.
Implementation of the contract
12.0 Time is of the essence and the intention of the parties is that this
contract should be implemented in January 1997.
APPLICABLE LAW
13.0 This agreement is governed by Liechtenstein Law.
COURT OF ARBITRATION
14.0 All disputes arising between the parties shall be settled, under
exclusion of ordinary courts, by a court of arbitration at the
registered office of InterLotto. The decision of the court of
arbitration shall be governed by the laws of Liechtenstein. The
decisions of the court of arbitration shall be final.
Each party chooses one arbitrator and the arbitrators jointly elect the
umpire. In the event that the appointment of an arbitrator does not
take place within one month or that the arbitrators fail to reach
agreement about the election of the umpire within one month, the
appointment shall be made upon application to the Liechtenstein Court
of Justice (Furstlich Liechtensteinisches Landgericht) in Vaduz.
Approval by Liechtenstein Government
15.0 The parties recognise that the approval of the Liechtenstein government
will need to be obtained in order to implement this agreement.
page 9
/S/ /S/
<PAGE>
Geneva, January 13, 1997
/S/ Dwight Mihalicz
- -----------------------------
Mr. Dwight Mihalicz
The Foundation for the International Federation of Red Cross and Red Crescent
Societies
/S/ Christoph Hoffman
- -----------------------------
Dr. Christoph Hoffmann
The International Lottery in Liechtenstein Foundation
page 10
<PAGE>
The Foundation for the International Federation of Red Cross and Red Crescent
Societies
THE CHAIRMAN OF THE BOARD
The undersigned, Mr. George Weber, Chairman of the Board of the
Foundation for the International Federation of Red Cross and Red Crescent
Societies, in accordance with the Statutes and the Rules of the Foundation and
given the decision of the Board of the Foundation to approve the conclusion of
the agreement BETWEEN the the Foundation and The International Lottery in
Liechtenstein Foundation (InterLotto), authorizes Mr. Dwight Miha1icz, Secretary
of the Board of the Foundation, to sign the said agreement on behalf of the
Foundation.
Geneva, 13 January 1997
/S/ George Weber
-----------------------
George Weber
GOVERNMENT OF THE PRINCIPALITY OF LIECHTENSTEIN
CONFIRMATION
------------
We confirm that the government of the Principality of Liechtenstein at
its sitting on 27 June 1995 granted the International Lottery in
Liechtenstein Foundation i.Cr.* consent to operate a lottery on
Internet.
Vaduz, 21 June 1995
RA 95/2231
GOVERNMENT OF TIlE
PRINCIPALITY OF LIECHTENSTEIN
(signature)
(stamp of the Government of Liechtenstein)
(*Translator's note: in the process of foundation.)
<PAGE>
Translation
GOVERNMENT OF THE PRINCIPALITY OF LIECHTENSTEIN
CONFIRMATION
------------
We hereby confirm that in its session of 18 February 1997, the
Government of the Principality of Liechtenstein has authorised the
agreement regarding the collaboration between the Foundation for the
International Federation of the Red Cross and Red Crescent Societies
and the International Lottery Foundation in Liechtenstein, concluded on
13 January 1997 in Geneva, together with the associated amendments in
respect of approval.
Vaduz, 18 February 1997
RA 97/401
[Official Stamp]
[signed]
GOVERNMENT OF THE PRINCIPALITY OF LIECHTENSTEIN
<PAGE>
GOVERNMENT OF THE PRINCIPALITY OF LIECHTENSTEIN
The International Lottery in
Liechtenstein Foundation
Meierhofstrasse 5
9490 Vaduz
Vaduz, Juli 8,1998
RA 98/1648-7400
Confirmation concerning the participation in the Lottery by means of telephone
and tickets.
Ladies and Gentlemen
The Government, in its meeting dated July 7,1998, decided as follows:
The Government confirms that the permission granted to the International Lottery
in Liechtenstein Foundation to operate a lottery on the Internet also includes
entries for the lottery to be sold by telephone or by printed ticket, delivered
personally or by machine, or by any other means. Players from any place in the
world can take part in the lottery. However, on the grounding of the bilateral
relationship between the two countries, Switzerland is excluded.
Sincerely Yours
Government of the
Principality of Liechtenstein
signature of Mario Frick
Prime Minister
EXTRACT OF THE TRADE REGISTER
H. 959/55
Date of formation: June 30, 1995
Name of the Company: THE INTERNATIONAL LOTTERY IN
LIECHTENSTEIN FOUNDATION
DIE INTERNATIONALE LOTTERIEI IN
LIECHTENSTIEN STIFTUNG
Domicile: VADUZ
Representative: Shelter Trust Establishment, Vaduz
Purpose: The purpose of the Foundation is the
carrying-out of a lottery and the use of a
pre-set quota of the turnover for non-profit
making or charitable Liechtenstein purposes.
The lottery will be distributed through
Internet only. On the payment of a stake a
prize is promised on which acquisition and
amount a decision is made systematically by
similar methods of chance as the drawing of
lottery tickets. The carrying-out of the
lottery necessarily means the engagement in
commercial activities.
Capital: CHF 100'000.-
Foundation Council: one or more members
Signature rights: to be determined by the Board of Foundation.
Publications: to be made in statutory form
Members of the members of the the board with single
Foundation Council: signatory right:
- Dr. Christoph Hoffmann, Lawyer,
Calle Ancha 64, E-11540 Sanlucar
- Hugo Sele, lic.iur.lic.oec. HSG,
Lawyer, Vaduz
The verification of this extract is officially confirmed by the Commerce
Registry.
Vaduz, 27. DEZ.1995 [Seal of Furstentum Liechtenstein]
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<NAME> Earthport.com
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUL-30-1999
<EXCHANGE-RATE> 1.575
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0
0
<COMMON> 6,648,215
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<INCOME-PRETAX> (1,392,144)
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