- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
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Amendment No. 1
FORM U5S/A
ANNUAL REPORT
For the Fiscal Year Ended September 30, 1997
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Filed Pursuant to the
Public Utility Holding Company Act of 1935
by
National Fuel Gas Company
10 Lafayette Square, Buffalo, NY 14203
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<PAGE>
EXHIBITS
A. *(1) Annual Report on Form 10-K for fiscal year ended September 30,
1997 filed December 23, 1997 (File No. 1-3880).
(2) National Fuel Gas Company 1997 Annual Report to Shareholders (paper
copy submitted under cover of Form SE).
*(3) National Fuel Gas Company Proxy Statement, dated and filed December
31, 1997 (File No. 1-03880)
B. Articles of Incorporation, By-Laws and Partnership Agreements
(1) National Fuel Gas Company
*i Restated Certificate of Incorporation of National Fuel Gas
Company, dated March 15, 1985 (Exhibit 10-00, Form 10-K for
fiscal year ended September 30, 1991 in File No. 1-3880)
*ii Certificate of Amendment of Restated Certificate of
Incorporation, dated March 17, 1992 (Exhibit EX-3(a), Form
10-K for fiscal year ended September 30, 1992 in File No.
1-3880)
*iii National Fuel Gas Company By-Laws as amended through
September 18, 1997. (Exhibit 3.1, Form 10-K for fiscal year
ended September 30, 1997 in File No. 1-3880)
*iv Certificate of Amendment of Restated Certificate of
Incorporation of National Fuel Gas Company, dated March 9,
1987 (Exhibit 3.1, Form 10-K for fiscal year ended September
30, 1995 in File No. 1-3880)
*v Certificate of Amendment of Restated Certificate of
Incorporation of National Fuel Gas Company, dated February
22, 1988 (Exhibit 3.2, Form 10-K for fiscal year ended
September 30, 1995 in File No. 1-3880)
(2) National Fuel Gas Distribution Corporation
*i By-Laws,as amended (Exhibit 2(i), designated as Exhibit
EX-3(b) for EDGAR purposes, Form U5S for fiscal year ended
September 30, 1994)
*ii Restated Certificate of Incorporation of National Fuel Gas
Distribution Corporation, dated May 9, 1988 (Exhibit B-1 in
File No. 70-7478)
(3) National Fuel Gas Supply Corporation
*i By-Laws, as amended (Exhibit (3)i, Form U5S for fiscal year
ended September 30, 1989)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
*ii Articlesof Incorporation of United Natural Gas Company, dated
February 1, 1886 (Exhibit (3)ii, Form U5S for fiscal year
ended September 30, 1984)
*iii Certificate of Merger and Consolidation dated January 2, 1951
(Exhibit (3)iii, Form U5S for fiscal year ended September 30,
1984)
*iv Joint Agreement and Plan of Merger, dated June 18, 1974.
(Exhibit (3)iv, Form U5S for fiscal year ended September 30,
1987)
*v Certificate of Merger and Plan of Merger of Penn-York Energy
Corporation and National Fuel Gas Supply Corporation dated
April 1, 1994. (Exhibit (3)v, designated as Exhibit EX-99-3
for EDGAR purposes, Form U5S for fiscal year ended September
30, 1994)
(4) Leidy Hub, Inc. (Formerly Enerop Corporation)
*i By-Laws (Exhibit A-15, File No. 70-7478)
*ii Restated Articles of Incorporation of Enerop Corporation
dated April 13, 1988 (Exhibit B-4 in File No. 70-7478)
*iii Action by Board of Directors to amend the By-Laws dated
October 10, 1993 including a Restated Certificate of
Incorporation of Enerop Corporation dated October 15, 1993
(Exhibit (4)iii, designated as Exhibit EX-3 for EDGAR
purposes, Form U5S for fiscal year ended September 30, 1993)
*iv Partnership Agreement between Leidy Hub, Inc. and Hub
Services, Inc. dated September 1, 1994. (Exhibit (4)iv,
designated as Exhibit EX-99-1 for EDGAR purposes, Form U5S
for fiscal year ended September 30, 1994)
*v Ellisburg-Leidy Northeast Hub Company Admission Agreement
dated June 12, 1995. (Exhibit (4)v, designated as Exhibit
EX-99-1 for EDGAR purposes, Form U5S for fiscal year ended
September 30, 1995)
*vi Letter Agreement between Leidy Hub, Inc. and Hub Services,
Inc. dated June 12, 1995. (Exhibit (4)vi, designated as
Exhibit EX-99-2 for EDGAR purposes, Form U5S for fiscal year
ended September 30, 1995)
*vii Consent and waiver by Leidy Hub, Inc. dated June 12, 1995.
(Exhibit (4)vii, designated as Exhibit EX-99-3 for EDGAR
purposes, Form U5S for fiscal year ended September 30, 1995)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
*viii Limited Liability Company Agreement of Enerchange, L.L.C.
dated June 12, 1995 and related documents. (Exhibit (4)viii,
designated as Exhibit EX-99-1 for EDGAR purposes, Form U5S
for fiscal year ended September 30, 1996) [Portions of this
document are subject to a request for confidential treatment
under Rule 104(b)]
(5) Seneca Resources Corporation
*i By-Laws, as amended (Exhibit (5)i, Form U5S for fiscal year
ended September 30, 1989)
*ii Articlesof Incorporation of Mars Natural Gas Company dated
March 29, 1913 (Exhibit (5)ii, Form U5S for fiscal year ended
September 30, 1984)
*iii Secretary's Certificate dated January 4, 1918 (Exhibit
(5)iii, Form U5S for fiscal year ended September 30, 1984)
*iv Articlesof Amendment, dated March 30, 1955 (Exhibit (5)iv,
Form U5S for fiscal year ended September 30, 1984)
*v Certificate of Amendment changing name of the Mars Company to
Seneca Resources Corporation, January 29, 1976 (Exhibit (5)v,
Form U5S for fiscal year ended September 30, 1984)
*vi Certificate of Merger and Plan of Merger of Seneca Resources
Corporation and Empire Exploration, Inc. dated April 29,
1994. (Exhibit (5)vi, designated as Exhibit EX-99-2 for EDGAR
purposes, Form U5S for fiscal year ended September 30, 1994)
*(6) Limited Partnership Agreement dated November 28, 1983, between
Empire Exploration, Inc. (now Seneca Resources Corporation) as
general partner and Herman P. Loonsk as limited partner (Exhibit
(8), Form U5S for fiscal year ended September 30, 1984)
*(7) Empire 1983 Drilling Program, Limited Partnership Agreement, dated
November 28, 1983, between Empire Exploration, Inc., (now Seneca
Resources Corporation) as general partner and those parties
collectively called limited partners. (Exhibit (9), Form U5S for
fiscal year ended September 30, 1984)
*(8) Empire 1983 Joint Venture Agreement dated December 6, 1983 between
Empire Exploration, Inc. (now Seneca Resources Corporation) and
Empire 1983 Drilling Program (Exhibit (10), Form U5S for fiscal
year ended September 30, 1984)
(9) Highland Land & Minerals, Inc.
*i Certificate of Incorporation, dated August 19, 1982 (Exhibit
(11)i, Form U5S for fiscal year ended September 30, 1985)
*ii By-Laws (Exhibit (11) ii, Form U5S for fiscal year ended
September 30, 1987)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
(10) Utility Constructors, Inc.
*i Articles of Incorporation, dated December 23, 1986, and
certificate of amendment dated December 31, 1986. (Exhibit
(12)i, Form U5S for fiscal year ended September 30, 1987)
*ii By-Laws (Exhibit (12)ii, Form U5S for fiscal year ended
September 30, 1987)
(11) Data-Track Account Services, Inc.
*i Restated Articles of Incorporation, dated March 2, 1984
(Exhibit A-1, File No. 70-7512)
*ii By-Laws (Exhibit A-2, File No. 70-7512)
(12) National Fuel Resources, Inc.
*i Articles of Incorporation, dated January 9, 1991. (Exhibit
(14)i, designated as Exhibit EX-3(a) for EDGAR purposes, Form
U5S for fiscal year ended September 30, 1992)
*ii By-Laws(Exhibit (14)ii, designated as Exhibit EX-3(b) for
EDGAR purposes, Form U5S for fiscal year ended September 30,
1992)
(13) Horizon Energy Development, Inc.
*i Certificate of Incorporation. (Exhibit (13)i, designated as
Exhibit EX-3(a) for EDGAR purposes, Form U5S for fiscal year
ended September 30, 1995)
*ii By-Laws. (Exhibit (13)ii, designated as Exhibit EX-3(b) for
EDGAR purposes, Form U5S for fiscal year ended September 30,
1995)
(14) Beheeren-Beleggingmaatschappij Bruwabel B.V.
*i Articles of Incorporation. (Exhibit (14), designated as
exhibit EX-99-2 for EDGAR purposes, Form U5S for fiscal year
ended September 30, 1996)
(15) Horizon Energy Development, s.r.o. (formerly Power International,
s.r.o.)
*i Founding Notarial Deed, dated May 8, 1991. (Exhibit (15)i,
designated as Exhibit EX-99-9 for EDGAR purposes, Form U5S/A
for fiscal year ended September 30, 1996)
*ii Notarial Deed, dated December 2, 1993. (Exhibit (15)ii,
designated as Exhibit EX-99-10 for EDGAR purposes, Form U5S/A
for fiscal year ended September 30, 1996)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
*iii Notarial Deed, dated June 28, 1996. (Exhibit (15)iii,
designated as Exhibit EX-99-11 for EDGAR purposes, Form U5S/A
for fiscal year ended September 30, 1996)
*iv Notarial Deed, dated November 27, 1996. (Exhibit (15)iv,
designated as Exhibit EX-99-12 for EDGAR purposes, Form U5S/A
for fiscal year ended September 30, 1996)
(16) Power Development, s.r.o.
*i Founding Notarial Deed, dated May 4, 1994. (Exhibit (16)i,
designated as Exhibit EX-99-13 for EDGAR purposes, Form U5S/A
for fiscal year ended September 30, 1996)
*ii Notarial Deed, dated June 28, 1996. (Exhibit (16)ii,
designated as Exhibit EX-99-14 for EDGAR purposes, Form U5S/A
for fiscal year ended September 30, 1996)
*iii Notarial Deed, dated November 27, 1996. (Exhibit (16)iii,
designated as Exhibit EX-99-15 for EDGAR purposes, Form U5S/A
for fiscal year ended September 30, 1996)
(17) Teplarna Kromeriz a.s.
*i Statutes, dated June 1996. (Exhibit (17), designated as
Exhibit EX-99-16 for EDGAR purposes, Form U5S/A for fiscal
year ended September 30, 1996)
(18) KPP Investment, L.L.C.
*i LimitedLiability Company Agreement dated January 11, 1996.
(Exhibit (18)i, designated as exhibit EX-99-3 for EDGAR
purposes, Form U5S for fiscal year ended September 30, 1996)
*ii Certificate of Formation, dated January 15, 1997. (Exhibit
(18)ii, designated at Exhibit EX-99-4 for EDGAR purposes,
Form U5S for fiscal year ended September 30, 1996)
(19) Sceptre Kabirwala, L.L.C.
*i LimitedLiability Company Agreement dated January 26, 1996.
(Exhibit (19)i, designated as exhibit EX-99-5 for EDGAR
purposes, Form U5S for fiscal year ended September 30, 1996)
*ii Certificate of Formation, dated January 10, 1997. (Exhibit
(19)ii, designated as Exhibit EX-99-6 for EDGAR purposes,
Form U5S for fiscal year ended September 30, 1996)
(20) Severoceske Teplarny, a.s.
**i Articles of Association, dated April 24, 1997. Designated as
Exhibit EX-99-11 for EDGAR purposes.
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
(21) Teplarna Liberec, a.s.
**i Founding Contract, dated November 11, 1994. Designated as
Exhibit EX-99-12 for EDGAR purposes.
**ii Notarial Record, dated November 11, 1994. Designated as
Exhibit EX-99-13 for EDGAR purposes.
**iii Articles of the Association, dated June 12, 1997. Designated
as Exhibit EX-99-14 for EDGAR purposes.
(22) Energoservis Liberec, s.r.o.
**i Articles of Incorporation of Limited Liability Company
Foundation, dated August 14, 1995. Designated as Exhibit
EX-99-15 for EDGAR purposes.
**ii Notarial Record, dated January 22, 1996. Designated as
Exhibit EX-99-16 for EDGAR purposes.
(23) Zateca teplarenska, a.s.
**i Foundation Charter, dated December 4, 1995. Designated as
Exhibit EX-99-17 for EDGAR purposes.
**ii Articles of Association, dated December 4, 1995. Designated
as Exhibit EX-99-18 for EDGAR purposes.
(24) SCT SoftMaker, s.r.o.
**i Notarial Record, dated September 24, 1996. Designated as
Exhibit EX-99-19 for EDGAR purposes.
(25) Zkusebna mericu tepla a vodomeru Litomerice, s.r.o.
**i Founders Deed, dated January 22, 1996. Designated as Exhibit
EX-99-20 for EDGAR purposes.
(26) Niagara Energy Trading Inc.
i Certificate of Incorporation dated July 15, 1997. Designated
as exhibit EX-99-1 for EDGAR purposes.
ii By-Laws. Designated as exhibit EX-99-2 for EDGAR purposes.
* Incorporated herein by reference as indicated.
** Indicates item amended by this Form U5S/A. This exhibit is included as part
of this filing of Form U5S/A.
<PAGE>
EXHIBITS (Continued)
(27) Niagara Independence Marketing Company
i Certificate of Incorporation dated September 17, 1997.
Designated as exhibit EX-99-3 for EDGAR purposes.
ii By-Laws. Designated as exhibit EX-99-4 for EDGAR purposes.
iii Marketing Partnership Agreement among Coastal Gas Marketing
DirectLink Corp., MGS Marketing Corp., Niagara Independence
Marketing Company and Williams Independence Marketing
Company. Designated as exhibit EX-99-5 for EDGAR purposes.
(28) Seneca Independence Pipeline Company
i Certificate of Incorporation of Empire Oklahoma, Inc. dated
April 16, 1996. Designated as exhibit EX-99-6 for EDGAR
purposes.
ii Certificate of Amendment of Certificate of Incorporation of
Empire Oklahoma, Inc. dated July 24, 1997. Designated as
exhibit EX-99-7 for EDGAR purposes.
iii By-Laws. Designated as exhibit EX-99-8 for EDGAR purposes.
C. Indentures
* Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 2(b) in
File No. 2-51796)
* Third Supplemental Indenture dated as of December 1, 1982, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(a)(4)
in File No. 33-49401)
* Tenth Supplemental Indenture dated as of February 1, 1992, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(a),
Form 8-K dated February 14, 1992 in File No. 1-3880)
* Eleventh Supplemental Indenture dated as of May 1, 1992, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(b),
Form 8-K dated February 14, 1992 in File No. 1-3880)
* Twelfth Supplemental Indenture dated as of June 1, 1992, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(c),
Form 8-K dated June 18, 1992 in File No. 1-3880)
* Incorporated herein by reference as indicated.
<PAGE>
EXHIBITS (Continued)
* Thirteenth Supplemental Indenture dated as of March 1, 1993, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4(a)(14)
in File No. 33-49401)
* Fourteenth Supplemental Indenture dated as of July 1, 1993, to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4.1, Form
10-K for fiscal year ended September 30, 1993 in File No. 1-3880)
* Fifteenth Supplemental Indenture dated as of September 1, 1996 to
Indenture dated as of October 15, 1974, between the Company and The
Bank of New York (formerly Irving Trust Company) (Exhibit 4.1, Form
10-K for fiscal year ended September 30, 1996 in File No. 1-3880)
* Rights Agreement between National Fuel Gas Company and Marine
Midland Bank dated June 13, 1996 (Exhibit 99.1, Form 8-K dated June
13, 1996 in File No. 1-3880)
D. Tax Allocation Agreement pursuant to Rule 45(c). Designated as exhibit
EX-99-10 for EDGAR purposes.
E. (1) Employee Relocation Manual filed pursuant to Rule 48(b).
Designated as exhibit EX-99-9 for EDGAR purposes.
(2) Enerchange, L.L.C. Audited Financial Statements as of December
31, 1996. Filed in paper only under cover of Form SE as
prescribed by Rule 16(c).
F. Schedules of Supporting Items of this Report - None.
G. Financial Data Schedules. (Designated as Exhibit EX-27 for EDGAR
purposes.)
H. Not applicable.
I. Not applicable.
* Incorporated herein by reference as indicated.
<PAGE>
S I G N A T U R E
The undersigned System company has duly caused this amendment to be
signed on its behalf by the undersigned thereunto duly authorized pursuant to
the requirements of the Public Utility Holding Company Act of 1935.
NATIONAL FUEL GAS COMPANY
By: /s/ Joseph P. Pawlowski
---------------------------------
Joseph P. Pawlowski, Treasurer
and Principal Accounting Officer
Date: March 2, 1998
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<PAGE>
EXHIBIT INDEX
EX99-11 Severoceske Teplarny, a.s., Articles of Association, dated April 24,
1997.
EX99-12 Teplarna Liberec, a.s., Founding Contract, dated November 11, 1994.
EX99-13 Teplarna Liberec, a.s., Notarial Record, dated November 11, 1994.
EX99-14 Teplarna Liberec, a.s., Articles of the Association, dated June 12,
1997.
EX99-15 Energoservis Liberec, s.r.o., Articles of Incorporation, dated August
14, 1995.
EX99-16 Energoservis Liberec, s.r.o., Notarial Record, dated January 22, 1996.
EX99-17 Zateca teplarenska, a.s., Foundation Charter, dated December 4, 1995.
EX99-18 Zateca teplarenska, a.s., Articles of Association, dated December 4,
1995.
EX99-19 SCT SoftMaker, s.r.o., Notarial Record, dated September 24, 1996.
EX99-20 Zkusebna mericu tepla a vodomeru Litomerice, s.r.o., Founders Deed,
dated January 22, 1996.
North Bohemian Heating Plants
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Joint Stock Company
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Most
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ARTICLES OF ASSOCIATION
as approved by the General Meeting of Shareholders
held on April 24, 1997
<PAGE>
1. Name Registered Office, Origin and Period of the Company
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1.1 Company name: Severoceske teplarny a.s.
(North Bohemian Heating Plants JSC)
(abbreviation: SCT, a.s.)
1.2 Registered office: Most, J. Seiferta 2179
1.3 The joint stock company was founded by the Fund of National Property of
the Czech Republic as the only founder having its principal office at
Gorkeho namesti 32; Praha 1, in a single act on the basis of Foundation
Charter of 28th April 1992 comprising the Founder's decision in
accordance with Section 172 of the Law No. 513/1991 Digest. The Company
was established on 1st May 1992 and has been recorded in the Commercial
Register held with the Regional Court in Usti nad Labem.
1.4 The Company has been established for an indefinite period of time.
2. Scope of Business
-----------------
The scope of business of the Company is as follows:
- generation, distribution, purchase, and sale of heat;
- formal measurements - measurement of solid and gaseous
emissions, heat measurement;
- technical and thermal measurements on heat equipment in
addition to formal measurements;
- calibration of thermometers and pressure gauges;
- inspection and tests of stated gas equipment;
- installation of compact transit stations;
- enterprising in the field of waste management;
- advisory services in the area of organization and economy;
- rental of tangible investment property;
- automated data processing;
- administrative services;
- trading - purchase of goods to be sold and sale of goods.
<PAGE>
3. Acting on behalf of the Company
-------------------------------
The Board of Directors acts on behalf of the Company, and that either all
members of the Board of Directors jointly or one of the members who has been
authorized in writing by the Board of Directors.
Signing on behalf of the Company is carried out in such a way that either all
members of the Board of Directors jointly or Deputy Chairman and one of the
members or a single member who has been authorized to do it by the Board of
Directors put their signatures to the name or seal of the Company.
The proxy signs in such a way that he/she puts his/her signature and an addition
identifying the procuration to the written business name or seal of the Company.
Employees appointed to specific duties by the company are authorized according
to Section 15 of the Commercial Code to all transactions normally associated
with this duty.
4. Basic Capital and Shares
------------------------
4.1 Basic capital of the Company is 1,133,279 thousand CZK (in words one
billion one hundred and thirty three million two hundred and seventy
nine thousand Czech crowns) and is divided into 1,133,279 shares of
nominal value of 1,000 CZK each that have been issued as book entry
shares.
The basic capital of the Company is completely paid off.
All shares are the bearer shares and marketable in public.
4.2 The company may acquire own shares according to Section 161 and
following paragraphs of the Commercial Code only.
5. Company Bodies
--------------
The Company has the following bodies:
- - - General Meeting;
- - - Board of Directors;
- - - Supervisory Board.
<PAGE>
6. General Meeting
---------------
The General Meeting is the highest body of the Company. The shares ownership
gives the right to the shareholders to participate and vote in the general
meeting, to require and receive explanations with regard to the Company related
matters discussed at the General Meeting, providing these are not part of a
trade secret according to Section 17 of the Commercial Code, and to put forward
proposals and counterproposals pursuant with the Articles of Association.
6.1 Scope of General Meeting
6.1.1 The scope of the General Meeting includes:
(a) decision on Company business plan and its changes;
(b) decision on change in Articles of Association;
(c) decision on increase in the basic capital; the General Meeting
can entrust the Board of Directors to make a decision to
increase the basic capital under the condition given by the
Commercial Code and by these Articles;
(d) decision on decrease in the basic capital or on issue of prior
lien or exchangeable bonds;
(e) election and withdrawal of the members of Board of Directors and
Supervisory Board, with exception of the Supervisory Board's
member elected by the Company's employees;
(f) decision on remuneration of the Board of Directors and
Supervisory Board's members;
(g) approval of financial statements, decision on distribution of
profit or compensation of loss, and definition of the level and
method of payment of dividends and director's fee and allotments
to the Company's funds;
(h) decision on submission of an application for the license to
trade with Company's shares in public or on cancellation of the
public merchantability;
(i) decision on sale of the Company or its part;
(j) decision on change of type, form or character of shares that
have been issued as book entry securities to documents of title
and vice versa;
(k) decision on dissolution of the Company with liquidation and
approval of shares in the liquidation balance; decision on
transformation, consolidation, merge or division of the Company;
(l) decision on other matters assigned to the scope of the General
Meeting by relevant regulations or by these Articles.
6.2 Convocation of the General Meeting
6.2.1 The General Meeting is taking place at least once in a calendar year,
not later than eight months from the last accounting period and is
being called by the Board of Directors or by its member, providing the
Board of Directors has not ruled on its calling without undue delay,
and the Law stipulates the duty to call the General Meeting or
providing the Board of Directors does not constitute a quorum in a long
run unless stipulated otherwise by the Law.
<PAGE>
6.2.2 The shareholders who have owned the bearer shares shall be notified of
the General Meeting through a notification in the Trade Bulletin at
least 30 days prior to the stated term of the General Meeting.
6.2.3 The Board of Directors shall call the Extraordinary General Meeting in
the following cases:
(a) if it is required by a shareholder or shareholders who have the
shares or scrip certificates which nominal value exceeds ten
percent of the basic capital of the Company. The request must
include all matters to be discussed at the General Meeting; or
(b) if the Board of Directors finds out that the Company's loss has
exceeded the value of a half of the basic capital or that the
Company has become bankrupt.
6.2.4 The Board of Directors shall call the Extraordinary General Meeting
according to Article 6.2.3 (a) in such a way that it will be held not
later than 40 days from the date of receipt of the request for its
convocation. In this case the term specified in Article 6.2.2 is
shortened to 15 days.
6.2.5 The General Meeting may be also called by:
(a) the Supervisory Board, if it is in the interests of the Company.
In this case the Supervisory Board proposes necessary actions at
the General Meeting; or
(b) shareholder or shareholders who have owned the shares or scrip
certificates which nominal value exceeds 10% of the basic
capital of the Company, if the Board of Directors fails to meet
its obligation according to Article 6.2.3 of the Articles of
Association and if they are authorized by a court to call the
Extraordinary General Meeting on the basis of their claim.
6.2.6 In case that the General Meeting does not constitute a quorum according
to Article 6.3.3, the Board of Directors shall call the Reserve General
Meeting. The Reserve General Meeting is called in the way as specified
in Article 6.2.2 with the relevant term shortened to 15 days. The
notification of the Reserve General Meeting must be published within 15
days from the date of the original General Meeting at the latest. The
Reserve General Meeting shall be held within 6 weeks from the date of
the original General Meeting, shall have the unchanged agenda and a
quorum irrespective of the stipulations of Article 6.3.3 of these
Articles of Association.
6.2.7 The General Meeting notification shall include:
(a) trade name and registered office of the Company;
(b) place, date, and hour of the General Meeting;
(c) General Meeting agenda;
<PAGE>
(d) identification whether Ordinary, Extraordinary or Reserve
General Meeting is called;
(e) final date for participation in the General Meeting;
(f) other data as stated in general mandatory regulations.
6.2.8 On the request of a shareholder or shareholders as specified in Article
6.2.3 (a), the Board of Directors shall include the requested matter to
the General Meeting's agenda. If the request has been received after
notification of the General Meeting Date, the Board of Directors shall
publish the addition of the General Meeting's agenda in the way as
specified in Article 6.2.2 within 10 days prior to the General Meeting.
If such notification has not been possible, the additional matters may
be included into the agenda only in participation and with consent of
all shareholders of the Company.
6.2.9 The General Meeting may be cancelled or its date postponed provided the
change is published in the same way as valid for the General Meeting
convocation according to Article 6.2.2, and that at least one week
prior to the announced General Meeting Date. The Extraordinary General
Meeting may be cancelled or its date postponed if it is requested by
the shareholder/shareholders as specified in Article 6.2.3 (a).
6.3 Participation and Voting at the General Meeting and Decision-Making
6.3.1 Each shareholder filed in the extract from the Issuer Registry
furnished by the Company to the final day, has the right to take part
in the General Meeting. The final day for the participation in the
General Meeting is the seventh calendar day before the General Meeting
Date. For Reserve General Meeting the Company is required to provide a
new extract from the Issuer Registry.
6.3.2 A shareholder can take part in and vote at the General Meeting
personally or through a person authorized by him/her in writing. The
authorization must include names/trade names and domiciles/registered
offices of the shareholder and his/her proxy, and number of votes of
the shareholder. The signature of the shareholder must be formally
verified. If the shareholder is a natural person, the condition of
his/her registration is submission of an identity document (such as
identity card). If the shareholder is a legal entity, its statutory
body must deliver the extract from the Commercial Register or from
similar register and an identity document. In addition, the proxy of
the legal entity shall submit formally verified power of attorney. A
member of the Board of Directors or Supervisory Board cannot be the
proxy of a shareholder.
6.3.3 The shareholders present at the General Meeting put their signatures in
the List of Persons Present that must include shareholder's name/trade
name, birth certificate number or identification number of
organization, domicile/registered office, and number of shares
represented by the shareholder.If a shareholder enforces his/her rights
through a proxy, the List of Persons Present must include, in addition
to the above specified data, also the proxy's name/trade name and
domicile/registered office. The power of attorney is added to the List
of Persons Present. If the Company denies to register a certain person
in the List of Persons Present, it shall make a record of this fact
into the List of Persons Present, including the reason for the person's
omission.
<PAGE>
6.3.4 Members of the Board of Directors and Supervisory Board may take part
in the General Meeting, however, they cannot represent the
shareholders. The right to attend the General Meeting is also extended
to the auditor who verified the company's financial statement.
6.3.5 The General Meeting constitutes a quorum, if the shareholders present
personally or through their proxies have owned the shares which value
represent more than 30% of the basic capital of the Company. If the
General Meeting does not constitute a quorum within sixty minutes from
the time stated in its notification as the beginning of the General
Meeting, the Board of Directors shall inform the shareholders of the
term of the Reserve General Meeting in the way as stated in Article
6.2.6 of these Articles of Association.
6.3.6 On voting each share represents one vote. No shares or scrip
certificates that are not connected with the right to vote or regarding
to which the right to vote cannot be exercised are taken into account
on evaluation of the General Meeting's capability to make decisions.
6.3.7 The shareholders vote by means of voting slips at the General Meeting,
if it is not decided otherwise on discussing the Rule of Procedure of
the General Meeting. First it is voted on the Board of Director's
proposal, and then, if it has not passed, on other proposals in the
sequence they have been put forward.
6.3.8 The General Meeting decides by majority of votes of the shareholders
present, providing that the Commercial Code or the Articles of
Association are not calling for other majority.
6.3.9 The General Meeting rules with at least two thirds of votes of the
present shareholders about:
a) changes in the Articles of Association not relevant to changes
in the Articles of Association in consequence of basic capital
increase by the Board of Directors according to Article 10.3,
b) basic capital increase or basic capital increase entrusted to
the Board of Directors according to Article 10.3,
c) basic capital decrease or the issue of tradable or prioritized
obligations,
d) dissolution of the company through liquidation and an approval
of liquidation balance and of transformation, acquisition,
merger or company split.
<PAGE>
6.3.10 The General Meeting rules with three quarters of votes of the present
shareholders about:
a) the change of a share form or kind,
b) the cancellation of publicly tradable shares,
c) the elimination or limitation of the preferential right to gain
gradable and prioritized obligations,
d) the elimination or limitation of the preferential right to
subscribe new shares according to Section 204 of the Commercial
Code,
e) the basic capital increase with non-cash deposits.
6.3.11 A notarized record must be made of the decisions according to Articles
6.3.9 and 6.3.10.
6.4 General Meeting Procedure
6.4.1 The General Meeting elects its Chairman, Secretary, two Verifiers of
the Minutes, and a person/persons charged with counting the votes
(scrutineers). The proposal for these functions is put forward at the
beginning of the General Meeting by the Chairman of the Board of
Directors or by another authorized member of the Board of Directors
Chariman of the Board of Directors chairs the General Meeting chairs
the till the election of the Chairman of the General Meeting.
The functions of Chairman of the General Meeting, Secretary and the
person charged with counting the votes may be performed by a single
person. The function of Verifier of the Minutes is incompatible with
the other functions.
6.4.2 The shareholders ask for explanations and submit proposals and
counterproposals in writing.
6.4.3 Prior to voting on individual items of the agenda:
a) all explanations must be given and the General Meeting must be
informed about all proposals and counterproposals,
b) the Chairman of the General Meeting announces the vote count the
shareholders present on the basis of data obtained from the
registration center. If the General Meeting does not constitute
a quorum, the Meeting is adjourned for 15 minutes. If the
General Meeting is not able to vote even after that time, he
closes the Meeting. To negotiate the remaining agenda, the Board
of Directors calls an alternate General Meeting.
6.4.4 The registration center is active during the General Meeting
negotiations. The shareholder has to report to the registration center
which keeps evidence of all present shareholders, of his/her intention
to withdraw during the proceedings.
<PAGE>
6.4.5 Each shareholder, member of the Board of Directors or the Supervisory
Board has the right to alert the General Meeting of inappropriate
command by the General Meeting and to request a record of the protest
into the Minutes of the General Meeting.
6.4.6 The Minutes of the General Meeting are elaborated according to Section
188 and Section 189 of the Commercial Code. The shareholder has the
right to request from the Board a copy of the Minutes of the General
Meeting or a section of them. However, the Board of Directors can state
that the copy will be issued only after payment of related expenses,
and to state a reasonable lump sum of these expenses.
6.4.7 The expenses accrued by the General Meeting proceedings are covered by
the Company. The expenses connected with the participation in the
General Meeting are carried by the shareholder, with the exception of
expenses incurred by the fact that the Company did not maintain the
proper procedure of General Meeting cancellation or by the date change
according to Article 6.2.9 of these Articles.
6.4.8 The Rule of Procedure approved by the General Meeting details the
General Meeting matters.
7. Board of Directors
------------------
7.1 The Board of Directors is a statutory body of the Company that manages
the Company's activity and acts on its behalf according to article 3 of
the Articles of Association. If the Company was dissolved, or a
declaration of its bankruptcy filed, the Board of Directors will
perform its activity only to such extent in which it was not
transferred to the assessor or the forced administrator. It rules in
all Company matters which are not limited by the Commercial Code or
reserved by the Articles of Association of the Company for the
activities of the General Meeting or the Supervisory Board.
The Board of Directors, in particular:
a) insures business, as well as proper accounting management of the
Company,
b) calls General Meetings according to the procedures established
by the Articles of Association and secures for this purpose an
excerpt from the Issuers Registry,
c) secures and submits to the General Meeting and to the
Supervisory Board:
- a financial statement,
- proposals for profit sharing, processed under conditions given
in Section 178 of the Commercial Code, or proposals for loss
compensation,
<PAGE>
- a report on entrepreneurial activities, handling the property
and the annual report of the Company according to general
mandatory legal regulations,
- proposals to items according to article 6.1 of these Articles,
d) decides about the relations adjustment between the Company and
members of the Company's governing bodies, especially on the
basis of the General Meeting's decisions pertaining to sharing
and payment of bonuses and royalties approved by the General
Meeting,
e) appoints and recalls the General Director of the Company and
concludes a contract with him regarding the scope of his work
and his duties,
f) appoints and recalls other employees of the Company according to
Section 27 of the Labour Code,
g) proposes members of bodies into the companies with an investment
participation in the Company,
h) grants a power of attorney,
ch) selects an accounting auditor of the company,
i) files petition for bankruptcy at the appropriate court,
providing the conditions according with the special law are met,
j) secures and submits proposals for record amendments in the
Commercial Code and completes the collection of records in the
Commercial Code,
k) ensures the fulfillment of reporting duties of the Company in
accordance with general legal provisions,
l) exercises the employer's rights towards the Company's employees
in accordance with labor-law regulations,
m) approves the voting order of the Supervisory Board members
selected from the employees.
7.2 Election and Withdrawal of the Board of Directors' Members
7.2.1 The Board of Directors consists of 11 members elected and withdrawn by
the General Meeting. The Board of Directors is elected for five-year
period. The function of a member of the Board of Directors cannot be
--------------------------------------------------------------
substituted.
-----------
7.2.2 A member of the Board of Directors can withdraw from the function by
his/her written statement delivered to the Board of Directors. In such
a case his/her function expires on the date, when his/her withdrawal
has been or should have been discussed by the Board of Directors, if
both parties do not agree upon other term.
<PAGE>
7.2.3 The Board of Directors which number of members has not dropped under a
half has the right to appoint substitute members of the Board of
Directors instead of the members whose membership ceased or who have
withdrawn from their functions for the period till the next General
Meeting.
7.3 Board of Directors Function
7.3.1 The Board of Directors elects its Chairman out of its members, who
organizes its activities, chairs its meetings, and acts on behalf of
the Board of Directors outwardly. The Board of Directors has right to
withdraw its Chairman any time. Furthermore, the Board of Directors
elects the Deputy Chairman who substitutes the Chairman if the latter
is not present.
7.3.2 The meetings of the Board of Directors are called by the Chairman. If
not agreed otherwise by all members of the Board of Directors, the
meetings are called by a written notice that shall be delivered to all
members of the Board of Directors at least eight days prior to the
meeting. The notice must include the agenda of the meeting.
As a rule, the meetings are held at the place stated by the Chairman of
the Board of Directors at least quarterly. The Chairman shall call the
meeting whenever it is requested by at least two members of the Board
of Director. If the Chairman has not called the meeting, though he was
obliged to do it, any member of the Board of Directors has the right to
call it.
7.3.3 Any member of the Board of Directors has one vote on voting. Simple
majority of votes of the members present is needed to pass a decision.
In case of equality of votes, the one of the Chairman is decisive.
7.3.4 The meeting of the Board of Directors constitutes a quorum, if at least
four members of the Board of Directors are present. If a member of the
Board of Directors, who cannot take part in the meeting, wants to
express his/her opinion to a matter included on the agenda, he/she must
do it in writing, while his/her opinion is not considered the valid
vote.
7.3.5 The Board of Directors can also take decisions out of the meeting, and
that by written decision signed by all members of the Board of
Directors elected at the time. Such decision is of the same force and
effectiveness as if it would have been taken on the meeting of the
Board of Directors called and held in regular way. The signatures of
the members of the Board of Directors need not be in the same document,
if each of the members put his/her signature under the full text of the
decision.
<PAGE>
The decisions made in such a way must be put in the minutes of the
immediately following meeting of the Board of Directors.
7.3.6 A person charged by the Board of Directors elaborates the minutes of
the meeting and decisions that are signed by the Chairman of the Board
of Directors and by the person. The minutes must include the names of
the members of the Board of Directors who voted against individual
decisions of the Board of Directors or abstained.
7.3.7 The Board of Directors gives procuration, and may authorize one or more
natural persons to make a legal act or certain types of legal acts on
behalf of the Company.
7.4 Duties of the Members of the Board of Directors
7.4.1 The members of the Board of Directors shall act with due diligence on
performing their functions and to keep the confidential information and
facts which disclosure to the third persons would cause damage to the
Company secret.
7.4.2 The members of the Board of Directors have to respect the limitations
relating to the restraint of trade as follows from Section 196
paragraph 1 of the Commercial Code.
7.4.3 Consequences of breach of duties as stated in paragraphs 7.4.1 and
7.4.2 follow from general mandatory legal regulations.
7.4.4 The members of the Board of Directors shall be liable to the Company
for the damage caused by breach of his/her duties on performing his/her
function under conditions and to the extent as stated by general legal
regulations. If the damage is caused by more members of the Board of
Directors, they shall be liable for it jointly and severally.
8. Supervisory Board
-----------------
8.1 The Supervisory Board is an inspection body of the Company. It
supervises performance of the Board of Directors and implementation of
the Company's activities. Particularly, the Supervisory Board:
a) verifies the procedures relating to the Company's matters
whenever it examines accounting documents and files of the
Company;
b) puts forward proposals for discussing matters by the Board of
Directors and at the next General Meeting;
c) reviews yearly financial statements and proposals for
distribution of profit, and submits a report on the review
results to the General Meeting every year;
d) takes part in the General Meeting or sends its representative out
of its members to the General Meeting;
<PAGE>
e) represents the Company in the dispute against a member of the
Board of Directors, if any;
f) calls the General Meeting, if it is in the interest of the
Company;
g) performs further tasks designated by the Law.
8.2 Election and Withdrawal of the Supervisory Board's Members
8.2.1 The Supervisory Board has three members. Two of the members are elected
by the General Meeting, and the third one is elected and withdrawn by
the Company's employees. The Board of Directors specifies organization
and method of election of this member. The function of the Supervisory
Board's member cannot be substituted.
8.2.2 The Supervisory Board's member may withdraw from his/her function by
written notice delivered to the Supervisory Board. In this the
performance of his/her function expires on the date, when his/her
withdrawal was discussed or should have been discussed by the
Supervisory Board, if both parties have not agreed upon other term.
8.2.3 The Supervisory Board which number of members elected by the General
Meeting has not dropped under a half may appoint substitute members
till the next General Meeting.
8.2.4 A member of the Board of Directors or Company's Auditor may not become
a member of the Supervisory Board.
8.2.5 The Supervisory Board's member is elected for five years.
8.3 Supervisory Board Function
8.3.1 The Supervisory Board elects its Chairman out of its members, who
organizes the Supervisory Board activities, chairs its meetings, and
acts on its behalf outwardly. The Supervisory Board has the right to
withdraw its Chairman any time.
8.3.2 The Supervisory Board shall always decide on the meeting called and
held in compliance with the regulations of Articles 8.3.4 through
8.3.8, with the exception of the case as presupposed in the provision
of Article 8.3.3.
8.3.3 The written decision of the Supervisory Board made out of the
Supervisory Board's meeting and signed by all its members elected at
the time is of the same force and effectiveness as if it would have
been taken on the meeting of the Supervisory Board called and held in
regular way. The signatures of the members of the Supervisory Board
need not be in the same document, if each of the members put his/her
signature under the full text of the decision. The decisions made in
such a way must be put in the minutes of the next meeting of the
Supervisory Board.
<PAGE>
8.3.4 The Supervisory Board's meeting is called by its Chairman at least
twice a year. However, the meeting shall be called whenever it is
requested by two of the Supervisory Board's members in writing and with
specification of the reason.
If the Chairman has not called the meeting, though he was obliged to do
it, any member of the Supervisory Board has the right to call it.
During absence of the Supervisory Board Chairman, the meetings are
called and chaired by an authorized member of the Supervisory Board.
8.3.5 The members of the Supervisory Board must be informed of the meeting
and its agenda at least 8 days beforehand. If they are not informed in
this way, the meeting may be held only if those members who have not
received any of the above information are present and agree with the
meeting.
8.3.6 The Supervisory Board's meeting constitutes a quorum, if absolute
majority of the Supervisory Board's members is present and if all
members have been informed of the meeting in regular way and agreed
with it according to the provision as stated in Article 8.3.5.
8.3.7 Minutes of the Supervisory Board's meeting are elaborated and signed by
the Chairman of the Supervisory Board. The invitations to the meeting
shall be attached to the minutes that include brief description of the
meeting's content. The minutes must include the names of the members of
the Supervisory Board who voted against individual decisions of the
Supervisory Board or abstained.
8.3.8 Each member of the Supervisory Board has one vote on voting in the
Supervisory Board. Majority of votes of the Supervisory Board's members
is needed to pass a decision.
8.3.9 Limitations and duties as stated in Article 7.4 apply also to the
members of the Supervisory Board.
9. Economy of the Company
----------------------
Accounting period of the Company is the calendar year.
9.1 Reserve Fund
9.1.1 Reserve Fund of the Company amounted to 98,024 thousand CZK on its
establishment which is yearly replenished minimally by a sum that
represents five percent of the net profit of the Company for the last
accounting period, and that up to the level of 20% of the basic capital
of the Company at the time. The Reserve Fund thus created may only be
used to cover the losses, and the General Meeting takes the decision
about it.
<PAGE>
9.1.2 The General Meeting decides about creating the possible Reserve Fund
above the level of 20% of the basic capital.
9.1.3 If the Company shows in its accounting own shares or scrip
certificates, it has to create a Reserve Fund according to Section 161
d) paragraph 2 of the Commercial Code.
9.1.4 The sum from the basic capital decrease approved by the General
Meeting, designated to cover future losses up to 10 percent of the
basic capital, is transferred into the Reserve Fund according to
Section 216a, paragraph 1c of the Commercial Code.
9.1.5 The Board of Directors decides about the use of that part of the
Reserve Fund which was formed according to article 9.1.1 above the
level of 20%, and/or about that part of the Reserve Fund created
according to articles 9.1.3 and 9.1.4, unless stipulated by the Law or
the Articles of Association that the appropriate decision falls into
the jurisdiction of the General Meeting.
9.2 Social Fund
9.2.1 The Company creates the Social Fund in accordance with legal
regulations.
9.2.2 The level of allocation from the profit is approved by the General
Meeting. The principles of use of this Fund are approved by the Board
of Directors.
9.3 Yearly Financial Statements
9.3.1 The Board of Directors ensure elaboration of the yearly financial
statements and proposal of profit distribution. The yearly financial
statements verified by the auditor and reviewed by the Supervisory
Board are submitted to the General Meeting. At the same time, the
Supervisory Board shall submit to the General Meeting a report on
results of the review.
9.3.2 The yearly financial statements must be elaborated in the way
conforming to the general mandatory legal regulations and principles of
proper accounting in such a way that they give full information of
property and financial situation of the Company and of the level of
profit or loss achieved in the last commercial year.
9.4 Distribution of Company's Profit and Loss Compensation
9.4.1 The General Meeting decides on distribution of the Company's profit on
the basis of a Board of Directors' proposal as reviewed by the
Supervisory Board.
<PAGE>
9.4.2 The profit of the Company as achieved in relevant accounting period
shall be allocated for dividends and directors' fee after deduction of
sums allocated for taxes, allotment to the Reserve Fund and other
purposes as approved by the General Meeting. The Company has not the
right to distribute the profit (dividends) among its shareholders, to
state the profit sharing (directors' fee) for the members of the Board
of Directors and Supervisory Board or profit sharing for its employees
in the case when the net trading property of the Company as determined
from the yearly financial statements by the last day of the accounting
period is or would be, in the result of the profit distribution, lower
than the basic capital of the Company increased by the following items:
- subscribed nominal value of shares, if the shares of the Company
have been subscribed to increase the basic capital, and the new
basic capital has not been registered in the Commercial Register by
the date of elaboration of the financial statements;
- the part of the Reserve Fund formed out of the profit that can be
used only for compensation of the Company's losses;
- Reserve Fund created according to Sections 161d and 216a of the
Commercial Code.
9.4.3 This does not exclude the General Meeting's decision that a part of the
profit will be used to increase the basic capital of the Company and/or
will stay undivided.
9.4.4 The General Meeting decides about the way of loss compensation in
accordance with relevant provisions of the Commercial Code.
9.5 Dividend
9.5.1 The shareholder's right to dividend shall arise from the decision of
the General Meeting.
9.5.2 The shareholder who has been the owner of a share of the Company by the
date stated by the General Meeting that has decided on payment of the
dividend and who has been identified as the owner of the share in the
extract from the Issuer's Registry held by the Securities Centre has
the title to the dividend.
9.5.3 The due date is specified by the General Meeting that has decided on
payment of the dividend. If it has not decided, the dividend has a
three month payment term from the day when the General Meeting ruled on
profit sharing.
9.5.4 The title of dividend is forfeited after a four year prescriptive
period beginning from the due date. The dividend stored with the
Company is not put out interest.
<PAGE>
9.6 Bonuses and Royalties of the members of the Company's bodies
Based on the ruling of the General Meeting, the members of the
Company's bodies have the title to remuneration and profit sharing
(directors' fee) for performance of their functions according to
article 7.1, letter d) of these Articles. Furthermore, they have the
right to compensation for all expenses incurred in connection with
performance of their functions.
10. Increase in the Basic Capital of the Company
--------------------------------------------
10.1 Any increase in the basic capital of the Company is decided by the
General Meeting. This does not affect the competency of the Board of
Directors according to the article 10.3. The General Meeting's
notification related to the increase in the basic capital shall include
the required data according to Section 202 of the Commercial Code.
10.2 The company can increase the basic capital
a) by subscription of new shares, including the new shares according
to Section 203 of the Commercial Code, providing the shareholder
has paid in full the issue rate of prior issued shares. This
limitation does not apply if the basic capital is being increased
by share issue and the issue rate is paid in non-cash deposits.
The shares can be subscribed only by those non-cash deposits
approved by the General Meeting according to article 6.3.3 c) of
the Articles of Association and cannot be appraised in the
subscriber document with different value than approved by the
General Meeting,
Each shareholder has a priority right to subscribe a part of the
new company shares in the range of his company's basic capital
share, providing the shares are subscribed by cash deposits. In
the General Meeting resolution on an increase of the basic
capital the priority right can be deleted or limited only in a
dire interest of the company. The limited priority right can be
extended in equal measure to all shareholders. To delete the
priority right is only possible for all shareholders. For the
share subscription a procedure stated in Sections 204 and 204a of
the Commercial Code is used.
b) From the Company's own resources and after the approval of annual
or extraordinary financial statements the General Meeting can
decide that the profit, after allotment to the reserve fund, to
its part or to another own resource allocated in the annual
financial statement in liabilities, will be used for the increase
of the basic capital according to Section 208, paragraph 2 - 6 of
the Commercial Code. The shareholders are participating in the
basic capital increase according to the nominal value of their
shares. The basic capital increase is influenced by the Company's
own shares and even the shares of the Company which are in the
hands of a person controlling the Company or a person controlled
by another
<PAGE>
person. The basic capital increase is materialized by either
subscription of new shares which are divided among shareholders as
bonus shares according to the ratio of nominal value shares, or by
the increase of nominal value of existing shares. The increase
procedure is ruled by the provisions of the law Section 209,
paragraph 2 - 6 of the Commercial Code.
c) by a combined method on the basis of the General Meeting decision
according to Section 209a of the Commercial Code, when the issure
rate can be, according to the conditions in Section 209a,
paragraph 1, covered by own sources of the Company declared in the
financial statement in the liabilities of the Company. The section
158, paragraph 2 of the Commercial Code is not affected. The basic
capital increase by non-cash deposits or the deletion or
limitation of the priority right is in this instance not
acceptable. The increase procedure is ruled by the provisions of
the law Section 209 of the Commercial Code.
d) conditionally, by subscribing priority and tradable obligations
according to Section 160 of the Commercial Code, when the sum of
the conditional basic capital increase cannot exceed one half of
the basic capital. The increase procedure is ruled by the
provisions of Section 207 of the Commercial Code.
10.3 By the approval of the General Meeting the Board of Directors can be
authorized to increase the basic capital according to Section 210 of
the Commercial Code by subscription of shares, or from own Company
sources, except for non-distributed profit by up to one third of the
basic capital at the time of Board of Director's negotiations about the
basic capital increase. The Board of Directors cannot be authorized to
subscribe shares in the form of non-cash deposits. The authorization
can be granted for the period of two years from the day when the
General Meeting, which approved the authorization for the basic capital
increase, was held.
10.4 The Company is entitled to issue securities specified as equity
warrants, according to Section 217a) of the Commercial Code, to apply
the priority right according to Sections 160 and 204a) of the
Commercial Code.
10.5 Prior to recording the basic capital increase into the Commercial
Register, the Company (deposit administrator) shall issue a written
confirmation to the subscriber according to Section 168 of the
Commercial Code. After the record is completed, the company shall
substitute an scrip certificate of shares for the confirmation
according to Section 168 of the Commercial Code. The subscriber is
obliged to pay the issue rate of subscribed shares within twelve months
from the decision of the General Meeting.
10.6 The basic capital increase is effective from the day of the record of
its amount into the Commercial Register.
10.7 In case the subscriber does not pay the issure rate of the shares in
due time, he cannot exercise the right of voting connected with the
shares, and the Board of Directors has to follow Sections 177 and 182
of the Commercial Code on account of him.
<PAGE>
11. Decrease in the Basic Capital of the Company
--------------------------------------------
11.1 The General Meeting decides on decrease in the basic capital of the
Company. The invitation for or the notice about the General Meeting and
the decision of the General Meeting has to contain all particulars
according to Section 211 and/or 212 of the Commercial Code. The Board
of Directors shall submit the proposal for recording the basic capital
decrease into the General Meeting resolution according to Section 211,
paragraph 4 of the Commercial Code, as well as the proposal for
recording the basic capital decrease, according to Section 216,
paragraph 1 of the Commercial Code, into the Commercial Register. The
basic capital cannot be decreased under the limit set in Section 162 of
the Commercial Code. With the basic capital decrease the collection of
creditors' debts has not to be worsened. The Board of Directors is
obliged to inform creditors about the basic capital decrease according
to Section 215, paragraph 1 of the Commercial Code.
11.2 The basic capital decrease can be made in ways and under conditions
mentioned in provisions of Sections 213 through 216b) of the Commercial
Code.
11.3 The basic capital shall be decreased starting the day of the record in
the Commercial Register.
12. Dissolution of the Company
--------------------------
12.1 The Company may be dissolved with liquidation or without liquidation if
its basic capital has passed to a successor. Liquidation is also not
required if the proposal for bankruptcy declaration due to insufficient
property is dismissed or if no property is left after the Company
bankruptcy.
12.2 The Company is dissolved:
a) on the day of the General Meeting decision,
b) on the day of court decision concerning the company dissolution,
issued on the basis of the proposal of persons and for reasons
specified in Section 68, paragraph 6 of the Commercial Code, or
otherwise on the day when this decision becomes legally
effective,
c) by the decision of the General Meeting concerning Company
takeover, merger or splitting, or its modification into another
form of trading company or cooperative,
d) by cancellation of bankruptcy after the schedule is met or
cancellation of bankruptcy due to insufficient property of the
Company to cover bankruptcy costs, or by dismissing the proposal
for bankruptcy declaration due to insufficient property.
<PAGE>
12.3 In case the proposal for bankruptcy declaration is dismissed for other
reason than insufficient Company property, the Company is not
considered as dissolved. If some property is left after the Company
bankruptcy, the Company will be dissolved.
12.4 If company is dissolved:
a) with a legal successor, the shareholder rights shall follow
provisions of Section 220a) of the Commercial Code,
b) with liquidation, the remaining assets are distributed among the
shareholders according to Section 220 of the Commercial Code.
12.5 The Company is dissolved on the day of its deletion from the Commercial
Register.
13. Final Provisions
----------------
13.1 Origination, legal status and dissolution of the Company, as well as
all legal relations resulting from the Articles of Association and the
Company and labour and other relations within the Company are subject
to general mandatory legal regulations of the Czech Republic.
13.2 Any disputes between the shareholders and the Company, between the
Company and the members of its bodies as well as the ones between
shareholders with regard to their participation in the Company will be
settled out of court. If failed, the dispute shall be put before and
settled by relevant Czech court.
13.3 Period and Method of Storage of the Company's Documents
13.3.1 The minutes of the General Meetings along with notifications of the
General Meetings and lists of persons present, the minutes of the
meetings of the Board of Directors and Supervisory Board, as well as
the invitations to these meetings along with the lists of person
present are stored in the Company's files for the whole period of its
existence.
13.3.2 All contracts of the Company must be stored in the Company's files for
the period of at least ten years after cessation of the contractual
relation, if the general mandatory regulations do not state a longer
period. In case that the period expires in the time, when the Company
has not already existed, the duty of filing shall be transferred to the
legal successor of the Company. In case that there is no legal
successor, the liquidator shall ensure document storage in compliance
with valid regulations on filing.
<PAGE>
13.4 Announcements, publishing and records into the Commercial Register
13.4.1 The Company announces the main facts of dividend payout by the way
specified in Section 178, paragraph 10 of the Commercial Code.
13.4.2 The Company publishes the main data of the financial statement by the
way specified in article 6.2.2 and announces the time and place where
the financial statement lays open to Company shareholders inspection.
13.4.3 The Company mails an annual report to the Ministry of Finance of the
Czech Republic and to the Center of Securities according to the Act on
Securities.
13.4.4 The Company makes accessible the annual report on its premices, in
accordance with the Act on Accounting.
13.4.5 The Company makes accessible the annual report at the General Meeting,
where the financial statement is discussed, according to the Act on
Securities.
13.4.6 The duty to publish data set by the Commercial Code is completed by
their publishing in the Commercial Bulletin.
13.4.7 The facts set by general mandatory legal regulations, by the Articles
of Association and by the resolution of the General Meeting are
announced by the Company in the Commercial Bulletin.
13.4.8 The Board of Directors shall submit a proposal for the record of all
facts, specified by the Commercial Code, into the Commercial Register,
and shall secure that the documents are stored in the files of the
Commercial Register according to Section 27a) paragraph 2 of the
Commercial Code.
13.5 Interpretation
In case some of the provisions of the Articles of Association become invalid,
ineffective or disputable, either due to valid laws or due to their changes, or
in case some provisions are missing, the remaining provisions of the Articles of
Association are not affected.
The above mentioned provisions will be substituted either by a corresponding
rule of law, which is with its character and purpose, the closest to the
intended purpose of the Articles of Association, or by a common business
solution.
14. Changes in Articles of Association
----------------------------------
The Articles of Association can be changed only by a decision of the General
Meeting. Two-third majority of votes of the shareholders present is needed to
pass a decision.
<PAGE>
If the Company decides on increase/decrease in the basic capital, distribution
of shares, change of form or type of shares or limitation of transferability of
inscribed shares or its change, the change comes into force by the date of the
record of these facts in the Commercial Register. The other changes in the
Articles of Association come into force in the moment, when the General Meeting
makes the relevant decision, unless the General Meeting decision on the change
in the Articles of Association or the law state that they come into force later.
The decision must be recorded in the form of a notarial record.
FOUNDING CONTRACT
executed in accordance with Section 162 and following of the Commercial Code
F o u n d e r s
1. Severoceske teplarny a.s.
address in Most, J. Seiferta 2179
represented by the Chairman of the Board
Mr. Josef Vanzura,
and the Member of the Board
Mrs. Ing. Petra Wendelova, Csc.
ICO 46708065
DIC: 206-46708065
(hereinafter only as "SCT")
2. City Liberec
Liberec, nam. Dr. Ed. Benese 1
represented by the Mayor
Mr. Ing. Jiri Drda
ICO:
(hereinafter only as the "City")
Preamble
After the company foundation this Contract shall become an agreement of the
shareholders of the company Teplarna Liberec.
Severoceske teplarny a.s., address Most, J. Seiferta 2179, acting through
the Members of the Board Mr. Josef Vanzura and Mrs. Petra Wendelova, CSc., and
City Liberec, acting through the Mayor Mr. Ing. Jiri Drda, in accordance with
their common coincident will, are founding, in a simultaneous way, a joint-stock
company without notice to subscribe shares, on the bellow mentioned day, month,
and year in accordance with this
F o u n d n g C o n t r a c t.
<PAGE>
Article 1
The Founders are founding the joint-stock company (hereinafter only as the
"Company") under the terms set by this Founding Contract.
Article 2
The trade name of the Company is : Teplarna Liberec, a.s.
Also the abbreviation "akc. spol." can be used as an amendment specifying
the legal form of the Company.
Article 3
The address of the Company is Liberec, tr. Dr. Milady Horakove 58, 460 01
Liberec 1.
Article 4
The Company has been founded for an indefinite period.
Article 5
The purpose of business of the Company is:
- generation, distribution, purchase, sale of heat and electricity
- lease of tangible fixed assets
- engineering/investor activity within the operational and economical
field of the heating plant industry
- manufacture, repair, and installation of cold water metering devices,
warm service water metering devices, and heat consumption metering
devices
- tests of operated boilers and pressure vessels - thermal technical
measurement
- manufacture, installation, repair, reconstruction, and periodical tests
of specified pressure devices - repair and reconstruction of class 3
steam and hot-water boilers
- trade authorization - purchase of goods for resale and sale of goods
- installation, repair and maintenance of specified electrical devices
- installation, repair and maintenance of specified gas devices
Article 6
The fixed assets of the Company is 500,000,000,- CZK (in words: five
hundred million Czech crowns).
<PAGE>
Article 7
The fixed assets of the Company has been divided into 50,000 registered
shares, each share having the nominal value 10,000,- CZK.
Article 8
1. The Founders have agreed to pay by themselves the whole fixed assets of
the Company, mentioned in Article 7 by a non-cash contribution, namely:
a) SCT subscribes a non-cash contribution valued 350,000,000,- CZK
(in words: three hundred and fifty million Czech crowns).
b) The City subscribes a non-cash contribution valued 150,000,000,-
CZK (in words: one hundred and fifty million Czech crowns).
2. The contributions mentioned in Paragraph 1 will be paid by the Founders
as follows:
a) SCT shall pay the amount of 350 million CZK in form of a non-cash
contribution, namely by assets of the existing division Liberec
in a mutually agreed structure, representing a technologically
linked unit with the contributed assets of City Liberec. The
extent of contributed assets is mentioned in Appendix No. 1,
which is an integral part of this Contract.
b) The City shall pay the amount of 150 million CZK in form of a
non-cash contribution, namely:
I) by SCT shares, ISIN - CS 0008458550, in amount 106,158 shares in
nominal value 106,158 thous. CZK, which agreed price is 106
million CZK.
II) The City will make an assignment of its accounts receivable
valued 44,000 thousand CZK for unpaid acquisition price of the
heating plant (account receivable against SCT according to the
contract on future collective agreement - Article VI/1 - executed
between SCT and City Liberec dated September 7, 1994) to its
subsidiary Teplarna Liberec, a.s.
3. SCT is obligated to transfer the assets defined by Appendix No. 1 to
the Company, above the extent of the contribution into assets.
Article 9
After its foundation, the Company will issue its shares. SCT shall receive
35,000 registered shares and the City will receive 15,000 registered shares.
<PAGE>
Article 10
The Founders have agreed upon the proposal of the articles of
incorporation, which after the execution of this Founding Contract shall become
its integral part. The articles specify the way of establishment of a reserve
fund at Company founding in compliance with Section 217 Paragraph 1 of the
Commercial Code.
Article 11
The contributions paid by the Founders in compliance with Article 8
Paragraph 2 shall be administered by SCT by the time of the Company foundation.
Article 12
City Liberec is authorized to negotiate in the matter of the Company record
into Commercial Register and at the Real Estate Register in Liberec. SCT is
authorized to act in the other matters.
Article 13
A collective meeting concerning the decision of the Founders will take
place at execution of the Founding Contract in compliance with Section 172 of
the Commercial Code.
Article 14
The collective meeting of the Founders concerning the Company foundation
will be proceeded analogically with the provision of Section 171 of the
Commercial Code.
Article 15
All costs connected with the preparation, formation and foundation of the
Company will be the Company costs.
Article 16
The Founders have agreed the way of election into the Company bodies as
follows:
1. SCT shall propose 3 candidates and the City 2 candidates into the board
of directors.
2. SCT shall propose 1 candidate and the City Liberec 1 candidate into the
supervisory board.
The Founders are obligated to vote for these candidates at the election.
<PAGE>
Article 17
This Contract - agreement - is valid for the period, during which each
Founder owns more than 90% of its shares, owned by him at the time of Company
founding.
Article 18
If any of provisions of this Contract is in discrepancy with the generally
obligatory regulations, the generally obligatory regulations are valid, without
this Contract ceases to be valid.
Article 19
This Contract has been prepared in seven counterparts, each Founder shall
receive one counterpart and two counterparts of the Contract will be filed in
the Company archive. Another counterpart will be attached to the proposal of the
record of the Company into Commercial Register and one counterpart shall be
mailed to SCP (Center of Securities).
Article 20
The Founders state that they have mutually discussed the contents of this
Contract and that they arrived at a total coincidence.
In witness whereof the Founders have executed the Contract in front of a
body set for authorization.
SCT: signature
------------------------------
Severoceske teplarny Josef Vanzura
akciova spolecnost Chairman of the Board
Most
signature
------------------------------
Ing. Petra Wendelova, Csc.
Member of the Board
City: signature
------------------------------
Ing. Jiri Drda
Mayor of the City
Most, November 11, 1994
<PAGE>
Appendix No. 1
Assets contributed by Severoceske Teplarna a.s., Most
into Teplarna Liberec, a.s.
The total value of SCT, a.s. assets, administered by Division Liberec
pursuant to the expert opinion, prepared by Ing. Dr. Vlach, DrSc. in October
1994 based on the documents on assets record dated September 8, 1994, is 723.1
million CZK.
The value of the secondary distribution system is 94.2 million CZK, small
and short term tangible assets represent 1.6 million CZK. Totally 818.9 million
CZK.
Recapitulation
Value of assets administered by Division Liberec 723.1 million CZK
Value of secondary distribution system 94.2 million CZK
Small and short term tangible assets 1.6 million CZK
- - -------------------------------------------------------------------------------
Total value of administered assets 818.9 million CZK
Based on the agreement dated October 31, 1994 between City Liberec and SCT,
a.s., the following assets shall not be contributed into Teplarna Liberec, a.
s.:
Land valued 37.2 million CZK
Family houses OKAL, house Slikova 137 6.8 million CZK
- - --------------------------------------------------------------------------------
Totally remains in SCT, a.s., Most's ownership 44.0 million CZK
The total value of assigned SCT assets is 774.9 million CZK
These assets shall be represented by:
Contribution of SCT, a.s., Most into
Teplarna Liberec, a.s. 350.0 million CZK
Payment of SCT, a.s. accounts receivable
to Teplarna Liberec 44.0 million CZK
SCT, a.s. account receivable against Teplarna Liberec 380.9 million CZK
(This account receivable shall be paid within twenty years by the annual amount
19,045 thousand CZK. Within five years the payment will be increased by the
annual inflation coefficient officially issued by state. After five years the
system of payment of the account receivable shall be updated.)
Contributed and assigned assets - recapitulation
Assets administered in total 818.9 million CZK
Not assigned assets 44.0 million CZK
- - -------------------------------------------------------------------------------
Contributed and assigned assets in total 774.9 million CZK
The structure of the contributed and assigned assets is mentioned in the
list of assets dated September 8, 1994.
<PAGE>
The subject of the contribution based on the agreement with City Liberec
are not the houses, connected structures, and land of bellow mentioned record
numbers, under which they are filed in SCT, a.s., Most's bookkeeping records
dated September 8, 1994:
- - - houses OKAL 601 - 610
No. ZO600000455 to ZO600000464
- - - apartment house Slikova 137
No. ZO6000000209
- - - structures connected with houses
No. ZO600000465 to ZO600000 and ZO100001794
- - - land No. ZO100002221 to ZO100002246, ZO100002672 to ZO100002676,
ZO100002721 to ZO100002724,
ZO100002732, ZO600000605, ZO600000606
and ZO600000613.
<PAGE>
ARTICLES OF INCORPORATION
"T e p l a r n a L i b e r e c , akciova spolecnost"
Chapter I.
General statements
Section 1
Incorporation and formation of the company
1. The company was incorporated as limited liability company, founded
without notice to subscribe shares, by executing the founding contract,
by approving of these Articles of Incorporation and by election of the
company bodies.
2. The company is formatted on the day of record into the Commercial
Register, administered by the County court in Usti nad Labem, and is
incorporated for indefinite period.
Section 2
Trade name
1. The trade name of the company is: Teplarna Liberec, a.s.
2. The trade name of the company further is:
a) in German: Heizkraftwerk Liberec, AG
b) in English: District Heating Company Liberec, joint-stock comp.
Section 3
Address of the company
The address of the company is : Liberec, tr. Dr. Milady Horakove 58, 460 01
Liberec 1
Section 4
Purpose of business
1) generation, distribution, purchase, sale of heat and electricity,
2) lease of tangible fixed assets,
3) engineering/investor activity in the field of heating plant operation
and economy,
4) manufacture, repairs and installation of cold water metering devices,
warm service water metering devices and heat consumption metering
devices,
5) tests of operated boilers and pressure vessels - thermal technical
measurement,
6) manufacture, installation, repair, reconstruction and periodical tests
of specified pressure devices - repair and reconstruction of class 3
steam and hot water boilers,
<PAGE>
7) trade authorization for purchase of goods for resale and sale of goods,
8) installation, repair and maintenance of specified electrical devices,
9) installation, repair and maintenance of specified gas devices.
Section 5
Acting and signing on behalf of the company
1. The company is acting through its bodies or through its representatives.
2. Either all members of the board of directors together, or the chairman
of the board and two members of the board of directors, are entitled to
act on behalf of the company. Signing on behalf of the company is done
in such a way, that they attach their signature to the company name or
the company seal.
3. The persons mentioned in paragraph 2 certify their authorization to act
on behalf of the company by the certificate stating the legal status of
the company.
4. The company representatives prove their authorization by power of
attorney or by company organization rules.
Chapter II.
Fixed assets, shares and shareholders rights
Part one
Section 6
Fixed assets
Company fixed assets is 500,000,000,- CZK (in words: five hundred
million Czech crowns).
Section 7
Payment of fixed assets
Company fixed assets has been paid and is 500,000,000,- CZK.
Section 8
Increase of fixed assets
1. According to the Articles of Incorporation, only the general assembly,
can decide about the increase of fixed assets, based on the proposal of
the board of directors. The increase of fixed assets always requires to
change the Articles of Incorporation.
2. Fixed assets can be increased only in some of the ways mentioned by
law.
<PAGE>
Section 9
Decrease of fixed assets
1. General assembly can also decide to decrease fixed assets.
2. However, company fixed assets can not be decreased under level set by
law, i.e. to less than 1,000,000,- CZK.
Part two
Section 10
Shares
1. Company fixed assets is divided into 50 thousand booked registered
shares for public trading.
2. Nominal value of each share is 10 thousand CZK.
Section 11
Limitation of share transferability
The board of directors is obligated to keep the list of shareholders.
Transfer of shares is possible only after previous written approval of company
board of directors.
Part three
Section 12
Shareholders to company ratio
1. Every shareholder has the right to participate in company
administration and management, the right for payment of the company
share on profit, and the right to the liquidated balance at company
dissolution.
2. The shareholder does not guarantee company obligations.
3. General rights and obligations of shareholders follow the provisions of
Sections 178 through 183 inclusive, in compliance with the Commercial
Code. Some other principles concerning the rights and duties of
shareholders can be set by the general assembly.
4. When the duty to pay the nominal value of subscribed shares or of its
part is breached, the subscriber shall pay liquidated damage of 25% per
year of the amount overdue.
<PAGE>
Section 13
Enforcement of shareholders rights
Rights, belonging to shareholders according to law and these Articles
of Incorporation, are enforced by shareholders on the general assembly.
Chapter III.
Company bodies
Section 14
Company bodies
The company has the following bodies:
1. General assembly
2. Board of directors
3. Supervisory board
4. Director
Part one
Section 15
General assembly
1. The highest body of the company is the general assembly, which consists
of all present shareholders.
2. During the period, when the founders will represent the only company
shareholders, the general assembly can have a quorum when all
shareholders are present.
3. In case the ordinary or extraordinary general assembly can not have a
quorum - the Commercial Code shall be followed.
Section 16
Calling general assembly
1. The body, which calls the general assembly, calls it in accordance with
law.
2. In case the announcement on calling the general assembly is published,
it is published in Business Bulletin.
3. The requisites of the announcement are set by law.
<PAGE>
Section 17
Rights of general assembly
Above the extent set by law, the general assembly decides about the
discussion and approval of company business policy, merge of company with
another subject, approval of the company plan, issue of new shares or new type
of shares.
Section 18
The voting right of shareholders and its exercise on general assembly
1. Ownership of one share (Section 10) is connected with the right to
exercise one vote at the general assembly. Every shareholder is
entitled to exercise so many votes on the general assembly, how many
shares he owns.
2. Every shareholder is entitled to personally participate and vote at the
general assembly.
3. The right pursuant to Paragraph 2 can be exercised also by means of a
proxy, who has a written power of attorney.
Section 19
Acting at general assembly
1. The acting of the general assembly is started by a person authorized by
the board of directors. The authorized person controls the election of
the chairman of the general assembly, the election of the recording
official and two verification officials. Further the authorized person
elects the person or persons authorized to count votes.
2. After the activities mentioned in Paragraph 1 are performed, the
procedure of the general assembly is controlled by its chairman.
3. The shareholders present at the general assembly put down their
signatures on the attendance list, which contains the following:
a) name and address (eventually name and domicile) of the
shareholder,
b) at shareholders - legal persons the name and position of the
person, acting on behalf of the shareholders,
c) number of shares of the shareholder,
d) number of votes belonging to individual shareholders.
The validity of the attendance list shall be confirmed by the chairman of
the general assembly and by the recording official. The present shareholders at
the general assembly have to have their access to the attendance list possible.
<PAGE>
Section 20
The way of decision making at the general assembly
Plurality of votes of present shareholders shall be sufficient for
acceptance of the general assembly decision. Approval of 75% of present
shareholders at the general assembly is necessary in the matters of discussion
and approval of company business policy, company merge with another subject,
company plan approval, issue of new shares or a new type of shares, increase or
decrease of fixed assets and change of the Articles of Incorporation. Where law
requires two third vote majority of shareholders present at general assembly,
approval of 75% of shareholders present at general assembly is necessary.
Section 21
Minutes of the general assembly
Minutes of the general assembly shall be prepared, which shall be signed by
the chairman of the general assembly and by the recording official, and which
correctness shall be confirmed by the verification official. The requisites of
the minutes are set by law.
Part two
Section 22
Board of directors
1. The statutory body of the company is the five-member board of directors
elected by the general assembly from the ranks of both shareholders and
non-shareholders for four-year term of office.
2. However, the members of the supervisory board can not be the members of
the board of directors.
Section 23
Chairman and deputy chairman of the board of directors
1. The elected members of the board of directors vote their chairman and
deputy chairman from their ranks by public election.
2. The chairman calls and controls meetings of the board of directors. He
is submitted to law, Articles of Incorporation, decision of the general
assembly and resolution of the board of directors.
3. If the chairman is absent, the deputy chairman of the board substitutes
him in full extent.
<PAGE>
Section 24
Rights of the board of directors
1. The board of directors has all rights in such company matters, which
law or these Articles of Incorporation set neither to the general
assembly, nor to another company body.
2. The board of directors is responsible for company control and for
performance of employer's rights.
3. The operative performance of activities has been delegated to the
company director, who is responsible for performance of these delegated
operative activities to the board of directors.
4. The board of directors especially:
a) proposes conception of long-term company development to the
general assembly;
b) sets company business plan in the scope of decision of the general
assembly;
c) appoints company director and executes management agreement with
him;
d) issues organizational and working rules of the company;
e) decides on drawing of the reserve fund;
f) approves financial and general plans of the company;
g) approves changes of company organizational rules, working rules
and principles of company internal control;
h) secures proper bookkeeping and trade books;
i) in case of increase or decrease of fixed assets makes
corresponding changes in number or nominal value of shares;
j) decides about general company dislocation matters;
k) decides about executing contracts and funds collection;
1) decides about execution of contracts on participation in trade
companies;
m) submits proposals of company main development strategies to
general assembly;
n) submits proposal of changes in Articles of Incorporation to
general assembly;
o) submits proposal of changes in company purpose of business;
p) submits proposal of issue of new shares or a new type of shares,
and/or proposal of change of rights belonging to shares;
q) submits reports on business activity;
r) submits report on status of assets;
s) submits report on financial policy;
t) submits report on business policy.
Section 25
Meeting of the board of directors
1. The board of directors meets at least ones in three months, in the
first year of company existence at least once a month.
<PAGE>
2. The board of directors is called for meeting by its chairman by a
written invitation. In case the invitation does not include agenda or
any member of the board proposes to discuss a matter excluded of agenda
on the meeting, the board of directors can have a valid quorum only
when all members are present at the meeting.
3. The board of directors can have a quorum if majority of its members is
present on the meeting.
4. The resolution of the board of directors is accepted, if at least three
members vote for it. That member of the board, who did not approve the
proposal of the resolution, in case the resolution was accepted, is
entitled to require a record of his opinion.
Section 26
Procedural order
1. Details of the record concerning the meeting and acceptance of
resolutions of the board of directors can be modified in the procedural
order.
2. A written protocol shall be prepared about the meeting and resolutions
of the board of directors, which shall be signed by the chairman of the
board of directors and by the recording official.
3. The recording official has not to be a member of the board of
directors, however, he has to be subject to a confidentiality
agreement.
Part three
Section 27
Supervisory board
1. The highest supervisory body of the company is the three-member
supervisory board.
2. In other cases than the case mentioned in Section 200 of the Commercial
Code, the members of the supervisory board are elected by general
assembly for five-year term of office.
Section 28
1. The meeting of the supervisory board is called by its chairman at least
4 times a year based on the following:
a) decision of the general assembly;
b) own decision;
c) proposal of any other member of the supervisory board or
proposal of the chairman of the board of directors or based on
proposal of a shareholder, who owns shares, which nominal
value represents at least 10% of company fixed assets.
<PAGE>
2. Similar regulations of Section 24 Paragraphs 1 and 3 and Section 26
Paragraphs 2 through 4 and Section 27 Paragraphs 1 and 2 shall be used
in details for meeting and decision of the supervisory board.
Part four
Section 29
Common regulations about the board of directors and supervisory board
1. Ban on competition within the scope set in Section 196 of the
Commercial Code is valid for the members of the board of directors and
supervisory board, under provision that company general assembly can
provide an approval for the members of the board of directors or
supervisory board to perform activity of the statutory body or a member
of such or other body of another legal person. This approval is also
necessary in the case when it is a legal person, on whose business the
company participates.
2. The members of the board of directors and supervisory board get
director's fee and bonuses for their work in accordance with these
Articles of Incorporation and the decision of the general assembly.
Part five
Section 30
Director
1. The company has the position of the director, who is appointed and
recalled by the company board of directors.
2. The director is entitled to control the performance of general company
activities, especially:
a) to perform commercial management and to secure company operational
matters
b) to enforce employees' rights
c) to enforce resolution of company bodies
d) to take care of common matters of company management
e) to enforce activities, by which he was appointed by the board of
directors
f) to act on behalf of the company within the scope of written
authorization of the board of directors
g) to act as the statutory body of the company in employees'
relation, namely within the scope authorized by the board of
directors
3. The director is in working relation with the company. The membership in
the supervisory board is incompatible with the position of director.
<PAGE>
Chapter IV.
Company economy
Section 31
Financial year
1. The financial year of the company is the calendar year.
2. The first financial year of the company starts on the day of its
formation and ends on December 31 of the corresponding year.
Section 32
Company funds
1. At its formation, the company establishes the following funds in
compliance with the corresponding legal rules:
a) reserve fund;
b) social fund.
2. The general assembly can decide about establishment of other company
funds.
Section 33
Reserve fund
At its formation the company shall establish a reserve fund in the amount
of 10% of fixed assets. Annually it shall be completed minimally by 5% of net
profit, up to 20% of fixed assets.
Section 34
Company bookkeeping and financial statement
1. The board of directors is responsible to the general assembly for
securing of proper company bookkeeping.
2. Financial statements of the company are subject to control in
accordance with law. The auditors for verification of the annual or
extraordinary financial statement are chosen by the board of directors.
3. The board of directors submits to the general assembly the annual or
extraordinary financial statement for approval together with the
proposal for profit distribution, at least 30 days prior to the general
assembly. If the case mentioned in Section 15 Paragraph 3 happens, the
main data of the financial statement shall be published in the
Commercial Bulletin in the same deadline.
<PAGE>
Section 35
Way of profit distribution
The general assembly decides about the way of profit distribution based on
the proposal submitted by the board of directors to the general assembly.
1. The company profit achieved in the financial year is divided into the
subsidy into reserve fund up to the maximum creation of the reserve
fund according to Section 33 of the Articles of Incorporation and into
other purpose approved by the general assembly.
2. The general assembly sets more specifying terms of the way of dividend
payment.
Chapter V.
Final provisions
Section 36
Dissolution of company
1. The company can be dissolved, except for cases, when the court is
entitled to do so according to law, only by the decision of the general
assembly. Provision of Section 21 is also valid here.
2. If the general assembly decides on dissolution of the company with
liquidation, the general assembly appoints also a liquidator and sets
his remuneration. The general assembly can also recall the liquidator
any time.
3. By appointing the liquidator the activity of the board of directors is
finished.
4. The liquidator has to perform liquidation of the company in compliance
with law. However, he can not alienate real properties in other way
than in public auction. The liquidator shall start with company
liquidation without delay and after the liquidation is finished he
shall report to the general assembly about the status of trades and
their finishing.
5. The provisions on the general assembly and the supervisory board remain
without changes. The general assembly is called by the liquidator in
the way mentioned in Section 16.
6. The liquidator shall report on the status of liquidation to each
general assembly. Every shareholder is entitled to have a look at this
report, provided with appropriate documents, at least ten days prior to
the general assembly.
Section 37
Announcement and notices of the company
1. Announcements and notices of the company are delivered by its board of
directors to the shareholders in form of a registered letter, and they
are also published in Commercial Bulletin if it is set by law or if the
board of directors decides so.
<PAGE>
2. The board of directors can also decide that the announcement or the
notice of the company is published in newspapers or by publishing in
the company domicile, which is available for shareholders.
3. Resolutions of the company bodies, where the shareholder of the company
is the addressee, are delivered to the shareholder in form of a
registered letter to his last known address.
4. If law does not sets otherwise, one publishing is sufficient for valid
notice.
Section 38
Approval of Articles of Incorporation, their changes and amendments
1. These Articles of Incorporation are liable to the approval of the
founders in compliance with provision of Section 172 of the Commercial
Code.
2. The Articles of Incorporation can be changed and amended only by the
decision of the general assembly in accordance with Section 186
Paragraph 1 and Section 187 Paragraph 2 of the Commercial Code and
Section 20 of the Articles of Incorporation. The decision must have the
form of a notary record.
Most, November 11, 1994
JUDr. Jaroslava Mala, the notary seated in Most, Moskevska 1/14
......................................................................page 1
NZ 291/94
N/ 292/94
D U P L I C A T E
NOTARIAL RECORD
written on November 11, 1994 before me, JUDr. Jaroslava Mala, the notary seated
in Most, i. e. in the seat of Severoceske teplarny, a.s. in Most, the street of
J. Seifert.....................................................................
The present participants who as per their declaration are capable to legal acts
and whose identity has been proved pursuant to the valid official identification
are the following:.............................................................
1. Josef VANZURA, citizen's card-index number: 43 06 08/102, permanent
address: Jirkov, 5. kvetna 1512, the General Director of Severoceske
teplarny, a.s. seated in Most, J. Seifert street 2179, the Chairman of the
Board of Directors, ICO 46708065,
2. Ing. Petra WENDELOVA, CSc., citizen's card-index number: 62 56 03/0605,
permanent address: Praha 6, Khaji 889,....................................
the member of the Board of Directors of Severoceske teplarny, a.s.
..........................................................................
3. Ing. Jiri DRDA, citizen's card-index number: 47 05 26/0204, permanent
address: Liberec, Slovanske udoli 4, the mayor of the city of Liberec, Dr.
Benes square No.: 1, Liberec, ............................................
The above mentioned participants have made the following declaration
herein.........................................................................
Declaration on establishment of Teplarna Liberec, the joint-stock company
Article I
The participants have submitted the founder's contract on foundation of Teplarna
Liberec, the joint-stock company with the seat in Liberec, Dr. Milady Horakove
58, (hereinafter "the Company" only) dated November 11, 1994. In accordance with
the said founder's contract the founders of the Company are the
following:.....................................................................
1. Severoceske teplarny, a.s. seated in Most, J. Seifert street 2179,
(hereinafter "SCT" only) subscribing shares of 70% of the capital stock of
the Company in the amount of 350,000,000 CZK (three hundred and fifty
million Czech crowns),....................................................
2. The city of Liberec subscribing shares of 30% of the capital stock of the
Company amounting to 150,000,000 CZK (one hundred and fifty million Czech
crowns),.............. The founders have decided in the founder's contract
that they will pay up the whole amount of the capital stock of the Company.
.........................................................................
<PAGE>
.......................................................................page 2
The capital stock of the Company represents 500,000,000 CZK (five hundred
million Czech crowns) and it is divided into 50,000 pieces of bearer shares
each of the nominal value of 10,000 CZK. The Company shall issue the said
shares after its incorporation into the Commercial Register and SCT shall
receive 35,000 pieces of bearer shares and the city of Liberec shall
receive 15,000 pieces of bearer shares....................................
Article II
The shares stated in the Article I. shall be paid up by non-monetary investments
of founders in the following manner: .........................................
a) SCT subscribes non-monetary investment totalling 350,000,000 CZK (three
hundred and fifty million Czech crowns) ..................................
b) The city of Liberec subscribes non-monetary investment in the amount of
150,000,000 CZK (one hundred and fifty million Czech crowns)
..........................................................................
The investments shall be paid up by the founders as follows:
a) SCT shall pay up the amount of 350,000,000 CZK by the non-monetary
investment, i. e. by the assets of the current division of Liberec in
mutually agreed structure creating technologically complete entirety with
the inserted assets of the city of Liberec. The scope of inserted assets is
stated in the Annex 1 and forms an independent part of the agreement......
b) the city of Liberec shall pay up 150,000,000 CZK of non-monetary investment
as follows:
I. by SCT shares, ISIN-CS 0008458550, 106, 158 pieces in the nominal
value of 106,158,000 CZK while the agreed value of them will be
106,000,000 CZK.
II. It will transfer its outstanding debt in the amount of 44,000,000 CZK
for non-paid purchase price of heat (the claim towards SCT as per the
agreement on the future partnership agreement conclusion Article VI/1
- concluded between SCT and the city of Liberec on September 7, 1994)
to the subsidiary - Teplarna Liberec, a.s.
III. SCT undertakes to transfer to the Company the assets stated in the
Annex 1 exceeding the scope of its investment to the capital stock..
Article III
The participants have decided to establish Teplarna Liberec, a.s. upon the
conditions stated in the already mentioned founder's contract dated November 11,
1994 which is enclosed hereto.
Article IV
The participants have approved the Articles of Association of the Company in
accordance with the proposal submitted as a part of the founder's contract
without any amendments. The approved Articles of Association of the Company form
an independent part hereof.....................................................
<PAGE>
Article V
Concurrently with the decision of founders related to the joint-stock company
establishment the constituent General Meeting was convened and the following
matters have been decided upon:
1. the constituent General Meeting adopted the decision on the Company's
foundation;
2. it approved the Articles of Association;
3. it elected the following bodies of the Company:
Five members of the Board of Directors, three of them representing SCT,
a.s. Most:
1. Ing. Josef Novak, citizen's card-index number: 69 09 30/1593, permanent
address: Most, Fr. Malika 1016,
2. Zdenek Kozesnik, citizen's card-index number: 23 02 26/106, permanent
address: Liberec 25, U Libeny 605,
3. Ing. Jaroslav Richtr, citizen's card-index number: 56 12 11/2341,
permanent address: Most, Ceska 649
Mr. Zdenek Kozesnik, citizen's card-index number: 53 02 26/106, permanent
address: Liberec 25, U Libeny 605 has been elected the Chairman of the
Board of Directors.
Two members of the Board of Directors representing the city of Liberec:
4. Ing. Jiri Jezek, citizen's card-index number: 63 01 31/1764, permanent
address: Liberec 6, Kyjevske nam. 3/6,
5. Ing. Jiri Drda, citizen's card-index number: 47 05 26/0204, permanent
address: Liberec 1, Slovanske udoli 4.
At the same time the constituent General Meeting has elected two members of
the Supervisory Board, one representing SCT and one representing the city
of Liberec:
1. Ing. Dagmar Machova, citizen's card-index number: 49 58 26/036,
permanent address: Most-Sous, J. Manesa 736, representing SCT, and
2. Ing. Petr Seifert, citizen's card index number: 55 09 28/0348,
permanent address: Liberec 2, Prazska 152/38..........................
All members of the above stated bodies have given their prior approval with
their election.
The above stated matters have been included in the notarial record which has
been read to the participants and the participants have signed it in their own
hands. ........................................................................
Stamp: the city of Liberec, Ing. Drda in his own hand
Wendelova Petra in her own hand
Josef Vanzura in his own hand Stamp: Severoceske teplarny
joint-stock company
1 MOST
Signed by JUDr. Jaroslava Mala in her own hand.
I confirm hereby that the notarial record duplicate corresponds verbally and its
original dated on November 11, 1994 and it is destined for Teplarna Liberec,
a.s.
<PAGE>
A n n e x 1
The assets transferred and invested by
Severoceske teplarny, a.s., Most
into Teplarna Liberec, a.s.
The lump sum of SCT, a.s. assets administered by Liberec Division represents
723.1 million CZK as per the expert opinion prepared by Ing. Dr. Vlach, DrSc. in
October 1997 in accordance with the documents recording the value of the said
assets dated September 8, 1994.
The amount of secondary distribution system represents 94.2 million CZK, the
value of tangible fixed assets represents 1.6 million CZK. The lump sum is 818.9
million CZK.
Recapitulation
Value of assets administered by Liberec division 723.1 million CZK
Value of secondary distribution system 94.2 million CZK
Tangible fixed assets 1.6 million CZK
- - ------------------------------------------------------------------------------
The lump sum of the administered assets 818.9 million CZK
In accordance with the agreement dated October 31, 1994 concluded between the
city of Liberec and SCT, a.s. the following assets will not be invested or
transferred to Teplarna Liberec:
Land in the amount of 37.2 million CZK
Row family houses of OKAL type, the house of Slikova 137 6.8 million CZK
- - -------------------------------------------------------------------------------
The assets remaining in the property of SCT, a.s., Most 44.0 million CZK
Total amount of the transferred property of SCT represents 774.9 million CZK.
The above property shall include:
SCT, a.s., Most investment into Teplarna Liberec, a.s. 350.0 million CZK
Pay up of the outstanding debt of SCT, a.s. to
Teplarna Liberec, a.s. 44.0 million CZK
Other property of SCT, a.s. to be transferred
to Teplarna Liberec, a.s. 380.9 million CZK
(The above commitment shall be paid up with the period of 20 (twenty) years
annually amounting to 19,045 CZK. The said installment will be increased within
5 (five) years by coefficient of annual inflation officially declared by the
state. After the elapse of 5 (five) year period the system of installments will
be updated).
Invested and transferred assets - recapitulation
The lump sum of the administered property 818.9 million CZK
Non-transferred property 44.0 million CZK
- - -------------------------------------------------------------------------------
Total amount of invested and transferred property 774.9 million CZK
<PAGE>
Structure of invested and transferred assets is stated in the list of property
dated September 8, 1994.
In compliance with the agreement concluded with the city of Liberec the
following houses, constructions and lots of the below stated reference numbers
recorded in the accounting records of SCT, a.s. Most dated September 8, 1994
shall not represent the subject of investment or transfer:
- - - row family houses of OKAL type No.: 601-606
Ref. No.: ZO600000455 - ZO600000464
- - - residential building Slikova 137
Ref. No.: ZO600000209
- - - constructions related to the houses
Ref. No.: ZO600000465 - ZO600000475 and ZO100001794
- - - lots
Ref. No.: ZO100002221 - ZO100002246, ZO100002672 - ZO100002676, ZO100002721
- ZO100002724, ZO100002732, ZO600000605, ZO600000606 and ZO600000613.
TEPLARNA LIBEREC
LIBEREC COGENERATION PLANT
Joint Stock Company
ARTICLES OF THE ASSOCIATION
1
<PAGE>
1. Name, Registered Office, Origin and Period of the Company
---------------------------------------------------------
1.1 Company name: Teplarna Liberec, a.s.
1.2 Registered office: tr. Dr. Milady Horakove 641/34a, 460 01
Liberec 4.
1.3 The Company was founded without the call to subscribe shares by
concluding the Founder's Agreement of November 11, 1994 in the form of
a notary record, by approving the Articles of Association and by voting
the Company's bodies.
1.4 The company was established on February 13, 1995 and has been recorded
in the Commercial Register held with the Regional Court in Usti nad
Labem. The Company has been established for an indefinite period of
time.
2. Scope of Business
-----------------
The scope of business of the Company is as follows:
2.1 Generation, distribution, purchase and sale of heat and related
activities.
2.2 Generation, distribution and sale of electricity and related
activities.
2.3 Oil and fuel processing.
2.4 Purchase, sale and storage of oil and fuel.
2.5 Production, repairs and installation of indicators and gauges.
2.6 Production, installation, repairs, upgrading, inspection and tests of
stated pressure equipment.
2.7 Installation, repairs and inspection of gas equipment.
2.8 Installation, repairs and inspection of electrical equipment.
2.9 Purchase of goods to be sold and sale of goods.
2.10 Administration of residential and non-residential estate.
2.11 Automatic data processing.
2.12 Accounting.
2.13 Enterprising in the field of waste management.
2.14 Economic and organizational consultancy.
2.15 Rental of motor vehicles.
3. Acting on behalf of the Company
-------------------------------
3.1 Either all members of the Board of Directors jointly or Board Chairman,
or one of the Board members who has been authorized by the Board, act
on behalf of the Company. The authorization shall be in writing and
signed by at least three members of the Board. Signing on behalf of the
Company is carried out in such a way that they put their signatures to
the name or seal of the Company.
2
<PAGE>
3.2 Also the proxy or proxies sign on behalf of the Company in accordance
with granted procuration. The proxy or proxies sign in such a way that
they put their signature and an addition identifying the procuration to
the written business name or seal of the Company.
3.3 The persons given in paragraph 2 prove their authorization to act on
behalf of the Company by an extract from the Commercial Register.
3.4 Employees appointed to specific duties by the Company are authorized
according to Section 15 of the Commercial Code to all transactions
normally associated with this duty.
4. Basic capital and shares
------------------------
4.1 Basic capital of the Company is 500,000,000 CZK (in words five hundred
million Czech Crowns) and is divided into 100 shares of nominal value
of 5 million CZK per share that have been issued as book entry shares.
4.2 All shares are the registered shares and are not marketable in public.
The shares have minimum transferability, the transfer is possible with
the prior written approval of the Board of Directors only.
4.3 The company keeps a list of shareholders into which it enters the kind
and form of the share, its nominal value, the business name or title
and registered office of the legal entity or name and place of
residence of a physical entity who is a shareholder, share
identification number and changes of these data.
4.4 The Company may, under the conditions pursuant Section 161a, subsection
1 of the Commercial Code, acquire its own shares. The exceptions are
stipulated by further provisions of the Commercial Code (e.g. Section
161, subsection 2).
4.5 The basic capital of the company is completely paid off. At the
foundation of the company the original basic capital was paid off by
non-monetary contributions of the founders of the Company.
5. Company Bodies
--------------
The Company has the following bodies:
- General Meeting
- Board of Directors
- Supervisory Board.
3
<PAGE>
6. General Meeting
---------------
General Meeting is the highest body of the Company. The shares
ownership gives the right to the shareholders to participate and vote
in the General Meeting, to require and receive explanations with regard
to the Company related matters discussed at the General Meeting, and to
put forward proposals and counterproposals pursuant with the Articles
of Association.
6.1 Scope of General Meeting
6.1.1 The scope of the General Meeting includes:
a) decision on Company business plan and its changes;
b) decision on changes in the Articles of Association;
c) decision on increase in the basic capital; the General Meeting
can entrust the Board of Directors to make a decision to
increase the basic capital under conditions given by the
Commercial Code and by these articles;
d) decision on decrease in the basic capital or on issue of
priority or tradable bonds;
e) election and withdrawal of the members of Board of Directors and
Supervisory Board, with the exception of the Supervisory Board's
member elected by the Company's employees - see article 8.3.1;
f) decision on remuneration of the Board of Directors and
Supervisory Board's members;
g) approval of financial statements, decision on distribution of
profit or compensation of loss, and definition of the level and
method of payment of dividends and director's fee and allotments
to the Company's funds;
h) decision on submission of an application for the license to
trade with the Company's shares in public or on cancellation of
the public tradability;
i) decision on sale of the Company or its part;
j) decision on change of type, form or character of shares;
k) decision on dissolution of the Company with liquidation and
approval of shares in the liquidation balance; decision on
transformation, consolidation, merge or division of the Company;
1) decision on change of owner's rights;
m) decision on other matters assigned to the scope of the General
Meeting by relevant Laws or by these Articles.
6.2 Convocation of the General Meeting
6.2.1 The general Meeting is taking place at least once in a calendar year,
not later than eight months from the last accounting period and is
being called by the Board of Directors or by its member, providing the
Board of Directors has not ruled on its calling without undue delay,
and the Las stipulates the duty to call the General Meeting or
providing the Board of Directors does not constitute a quorum in a long
run, unless stipulated otherwise by the Law.
6.2.2 The shareholders who have owned the registered shares shall be notified
of the General Meeting through an notification mailed to the registered
4
<PAGE>
address or residence stated in the list of shareholders at least 30
days prior to the stated term of the General Meeting.
6.2.3 The Board of Directors shall call the Extraordinary General Meeting
without undue delay in the following cases:
a) if it is required by a shareholder or shareholders who have the
shares or scrip certificates which nominal value exceeds ten per
cent of the basic capital of the Company. The request must
include all matters to be discussed at the General Meeting;
b) if the Board of Directors finds out that the Company's loss has
exceeded the value of a half of the basic capital or that the
Company has become bankrupt.
6.2.4 The Board of Directors shall call the Extraordinary General Meeting
according to Article 6.2.3 a) in such a way that it will be held not
later than 40 days from the date of receipt of the request for its
convocation. In this case the term specified in Article 6.2.2 is
shortened to 15 days.
6.2.5 The General Meeting may be also called by:
a) the Supervisory Board, if it is in the interests of the Company.
In this case the Supervisory Board proposes necessary actions at
the General Meeting;
b) the shareholder or shareholders who have owned the shares or
scrip certificates which nominal value exceeds 10 % of the basic
capital of the Company, if the Board of Directors fails to meet
its obligation according to Article 6.2.3 of the Articles of
Association and if they are authorized by a court to call the
Extraordinary General Meeting on the basis of their claim.
6.2.6 In case that the General Meeting does not constitute a quorum according
to Article 6.3.5, the Board of Directors shall call a Reserve General
Meeting. The reserve General Meeting is called in the way as specified
in Article 6.2.2 with relevant term shortened to 15 days. The
notification of the Reserve General Meeting must be published within 15
days from the date of the original General Meeting at the latest. The
reserve General Meeting shall be held within 6 weeks from the date of
the original General Meeting, shall have the unchanged agenda and a
quorum irrespective of the stipulations of Article 6.3.5 of these
Articles of Association.
6.2.7 The General Meeting notification shall include:
a) trade name and registered office of the Company;
b) place, date and hour of the General Meeting;
c) General Meeting agenda;
d) identification whether Ordinary, Extraordinary or Reserve
General Meeting is called;
5
<PAGE>
e) final date for participation in the General Meeting;
f) other data as stated in Commercial Code.
6.2.8 On the request of a shareholder or shareholders as specified in Article
6.2.3 a), the Board of Directors shall include the requested matter to
the General Meeting's Agenda. If the request has been received after
notification of the General Meeting Date, the Board of Directors shall
publish the addition of the General Meeting's agenda in the way as
specified in Article 6.2.2 within 10 days prior to the General Meeting.
If such notification has not been possible, the additional matters may
be included into the agenda only in participation and with consent of
all shareholders of the Company.
6.2.9 The General Meeting may be cancelled or its date postponed provided the
change is published in the same way as valid for the General Meeting
convocation according to Article 6.2.2, and that at least one week
prior to the announced General Meeting date. The extraordinary General
Meeting may be cancelled or its date postponed only if it is requested
by the shareholder/shareholders as specified in Article 6.2.3 a).
6.3 Participation and Voting at the General Meeting and Decision-Making
6.3.1 Each shareholder filed in the extract from the Issuer Registry to the
final day, has the right to take part in and vote at the General
Meeting.
6.3.2 A shareholder can take part in and vote at the General Meeting
personally or through a person authorized by him/her in writing. The
condition of his/her registration is submission of an identity
document. If the shareholder is a legal entity, its statutory body must
deliver the extract from the Commercial Register or from similar
register and an identity document. In addition, the proxy of the legal
entity shall submit formally verified power of attorney. A member of
the Board of Directors or Supervisory Board of the Liberec Cogeneration
Plant cannot be the proxy of a shareholder.
6.3.3 The shareholders present at the General Meeting put their signatures in
the List of Persons Present that must include shareholder's name/trade
name, birth certificate number or identification number of
organization, domicile/registered office, and number of shares
represented by the shareholder. If a shareholder enforces his/her
rights through a proxy, the List of Persons Present must include, in
addition to the above specified data, also the proxy's name/trade name
and domicile/registered office. The power of attorney is added to the
List of Persons Present. If the Company denies to register a certain
person in the List of Persons Present, it shall make a record of this
fact into the List of Persons Present, including the reason for the
person's omission.
6.3.4 The General Meeting constitutes a quorum, if the shareholders present
personally or through their proxies have owned the shares which value
represent more than 90 % of the basic capital of the
6
<PAGE>
company. If the General Meeting does not constitute a quorum within
sixty minutes from the time stated in its notification as the beginning
of the General Meeting, the Board of Directors shall inform the
shareholders of the term of the Reserve General Meeting in the way as
stated in Article 6.2.6 of these Articles of Association.
6.3.5 On voting each share represent one vote.
6.3.6 Prior to voting on individual items of the agenda, all necessary
explanations must be given and the General Meeting must be informed
about all proposal and counterproposal.
6.3.7 Before the General Meeting decides about the election of the Board of
Directors and Supervisory Board member, the chairman will verify the
fulfillment of conditions under articles 7.2.2 and 8.2.2 of the
Articles and will inform the General Meeting about the result.
6.3.8 The shareholders vote at the General Meeting by acclamation. First it
is voted on the Board of Directors proposal, and then, if it has not
passed, on other proposals in the sequence they have been put forward.
If the proposal submitted by the Board of Directors has passed, other
proposals are not voted on. The Board of Directors member, authorized
in accordance with these Articles, is responsible for the voting
procedure, according to Article 6.4.1. of these Articles.
6.3.9 The General Meeting decides by majority of votes of the shareholders
present, except the decisions when the Law requires two thirds or three
quarters of votes. A notarized record must be made of the decisions
required by the Law.
6.3.10 Member of the Board of Directors or of the Supervisory Board has the
right to alert the General Meeting of inappropriate command by the
General Meeting and to request a record of the protest into the Minutes
of the General Meeting.
6.4 General Meeting Procedure
6.4.1 The General Meeting elects its Chairman, Secretary, two Verifiers of
the Minutes, and a person/persons charged with counting the votes
(scrutineers). The proposal for these functions is put forward at the
beginning of the General Meeting by the Chairman of the Board of
Directors or by another authorized member of the Board of Directors.
The functions of Chairman, Secretary and Scrutineer can be done at the
same time by one person only. The function of Verifier of the Minutes
is incompatible with the other functions.
6.4.2 The General Meeting proceeds according to the individual items of the
agenda. Only the person who is called upon the Chairman, takes the
floor.
6.4.3 Each participant can ask for explanations and submit proposals to the
agenda discussed at the General Meeting through an application to take
the floor which he/she receives at the registration center and hands it
over
7
<PAGE>
personally to the scrutineer before a decision to the discussed item is
adopted, and/or before the Chairman of the General meeting finishes the
discussion the relevant item.
6.4.4 If necessary, the Chairman of the General Meeting can adjourn the
Meeting for up to 30 minutes.
6.4.5 The Minutes of the General Meeting are elaborated which include:
a) name and registered office of the Company;
b) place and time of the General Meeting;
c) names of the Chairman, Secretary, verifiers and
scrutineer/scrutineers;
d) description of important events during the General Meeting, as
well as important declarations; written presentations and
declarations are enclosed to the Minutes;
e) a decision of the General Meeting stating a result;
f) the protests of the shareholder, member of the Board of
Directors or of the Supervisory Board against a particular
decision, if the protesting party requires so.
The Minutes are signed by the Secretary and Chairman of the General
Meeting. Two verifiers verify the correctness of the Minutes.
6.4.6 The Board of Directors ensures that the General Meeting Minutes are
made available by thirty days from the General Meeting. The Minutes
together with the invitation to the General Meeting and an Attendance
record are kept in the Company's archives for the whole period of its
existence. Each shareholder has the right to inspect the Minutes and to
request a copy of the Minutes. However, the Board of Directors can rule
that a copy of the Minutes will be delivered only after covering the
expenses incurred and can assess an appropriate lump part of these
expenses.
7. Board of Directors
------------------
7.1 Status and Activity of the Board of Directors
The Board of Directors is a statutory body of the Company that manages
the Company's activity and acts on its behalf according to article 3 of
the Articles of Association. If the Company was dissolved, or a
declaration of its bankruptcy filed, the Board of Directors will
perform its activity only to such extent in which it was not
transferred to the assessor or the forced administrator. It rules in
all Company matters which are not limited by the Commercial Code or
reserved by the Articles of Association of the Company for the
activities of the General Meeting or the Supervisory Board.
The Board of Directors, in particular:
a) organizes and manages the Company's activity,
b) exercises the employer's rights towards the Company's employees
in accordance with labor-law regulations,
8
<PAGE>
c) is responsible for the proper accounting and trade book
management of the Company; it selects the Company's auditor,
d) is responsible for the elaboration of proper financial statement
and of proposals for profit sharing,
e) approves the submitted financial statement and the reports on
entrepreneurial activities, on handling the property and on the
commercial policy of the Company submitted to the General
Meeting,
f) calls the General Meeting according to the procedures
established by the Articles of Association or Law and organizes
it,
g) keeps proper records into the List of Shareholders,
h) appoints and recalls the General Director of the Company and
staff directly subordinated to him included into the stated
range of functions, assigns their duties and supervises their
activities,
i) grants a power of attorney,
j) approves proposals for founding another trading companies with a
property share of Liberec Cogeneration Plant; decides on the
entry into the already founded trading companies, and/or on
terminating the participation in them; the Board of Directors is
entitled to make monetary and tangible contributions into those
companies totaling up to one third of the basic capital of the
Liberec Cogeneration Plant, in the period between the successive
General Meetings,
k) approves the plan of the Company.
7.1.2 Pursuant to Section 18 of the Commercial Code, the Board of Directors
has an exclusive right to dispose of the Company's trade secrets,
including the right to grant permission to someone else to use a
particular trade secret and to determine the conditions of such use.
7.1.3 The Board of Directors is obliged, in the year when its or Supervisory
Board's term of office expires, to put on the nearest General Meeting
agenda the election of Board of Director's and Supervisory Board's
members.
7.2 Structure, Establishment and Term of Office of the Board of Directors
7.2.1 The Board of Directors consisting of 6 members elected by the General
Meeting consisting of shareholders and non-shareholders is a statutory
body of the Company. The Board of Directors is elected for four-year
period. However, its function does not expire until a new Board of
Directors is elected; the term of office should not be longer than five
years. The function of the Board of Directors' member cannot be
substituted.
9
<PAGE>
7.2.2 A member of the Board of Directors may only be an individual (natural
person) who complies with the general conditions for the conduct of a
trade under a special law, and on whose part here is no impediment to
the conduct of a trade under a special law, irrespective of the object
of the Company's business activity.
7.2.3 A member of the Board of Directors can withdraw from the function by
his/her written statement delivered to the Board of Directors. In such
a case his/her function expires on the date, when his/her withdrawal
has been or should have been discussed by the Board of Directors, if
both parties do not agree upon other term.
7.2.4 The Board of Directors which number of members elected by the General
Meeting has not dropped under a half has the right to appoint
substitute members of the Board of Directors instead of the members
whose membership ceased or who have withdrawn from their functions for
the period till the next General Meeting.
7.2.5 If a new member of the Board of Directors has been elected by the
General Meeting during the Board's term of office, his/her function
expires with the Board's term of office.
7.3 Board of Directors Function
7.3.1 The Board of Directors elects its Chairman and Deputy Chairman out of
its members. The chairman organizes its activities, chairs its
meetings, and acts on behalf of the Board of Directors outwardly. The
Board of Directors has right to withdraw its Chairman and Deputy
Chairman any time.
7.3.2 The Deputy Chairman substitutes the Chairman in full extent if the
latter is not present.
7.3.3 The meetings of the Board of Directors are called by the Chairman. If
not agreed otherwise by all members of the Board of Directors, the
meetings are called by a written notice that shall be delivered to all
members of the Board of Directors at least eight days prior to the
meeting. The notice must include the agenda of the meeting. Any changes
or amendments of the agenda proposed by any Board of Directors' member
must be agreed on by the Board of Directors by voting. As a rule, the
meetings are held at the place stated by the Chairman of the Board of
Directors and least quarterly. The Chairman shall call the meeting
whenever it is requested by at least two members of the Board of
Directors. If the Chairman has not called the meeting, though he was
obliged to do it, any member of the Board of Directors has the right to
call it.
7.3.4 Any member of the Board of Directors has one vote on voting. Simple
majority of votes of all Board of Directors' members is needed to pass
a decision, not only those present. In case of equality of votes, the
vote of the Chairman is decisive. An approval of at least five members
of the Board of Directors is required to adopt a decision according to
Article 7. 1. 1 e), k) a n d i).
10
<PAGE>
7.3.5 The meeting of the Board of Directors constitutes a quorum, if at least
three members of the Board are present. If an absent Board member who
wishes to express his/her opinion to a particular item of the agenda,
he/she must do it in a written form, while his/her opinion is not
considered a valid vote.
7.3.6 The Board of Directors can also take decisions out of the meeting, and
that by written decision signed by all members of the Board of
Directors elected at the time. Such decision is of the same force and
effectiveness as if it would have been taken on the meeting of the
Board of Directors called and held in regular way. The signatures of
the members of the Board of Directors need not be in the same document,
if each of the members put his/her signature under the full text of the
decision.
The decisions made in such a way must be put in the minutes of the
immediately following meeting of the Board of Directors.
7.3.7 A person charged by the Board of Directors elaborates the minutes of
the meeting and decisions that are signed by the Chairman of the Board
of Directors or chairing person and by the person. The minutes must
include the names of the members of the Board of Directors who voted
against individual decisions of the Board of Directors or abstained.
7.4 Duties of the Members of the Board of Directors
7.4.1 The members of the Board of Directors shall act with due diligence on
performing their functions and to keep the confidential information and
facts which disclosure to the third persons would cause damage to the
Company secret.
7.4.2 The members of the Board of Directors have to respect the limitations
relating to the restraint of trade as follows from Section 196
paragraph 1 of the Commercial Code.
7.4.3 Consequences of breach of duties as stated in paragraphs 7.4.1 and
7.4.2 follow from general mandatory legal regulations.
7.4.4 The members of the Board of Directors shall be liable to the Company
for the damage caused by breach of his/her duties on performing his/her
function under conditions and to the extent as stated by general legal
regulations. If the damage is caused by more members of the Board of
Directors, they shall be liable for it jointly and severally.
8. Supervisory Board
-----------------
8.1 Status and Activity of the Supervisory Board
8.1.1 The Supervisory Board is an inspection body of the Company. It
supervises performance of the Board of Directors and implementation of
the Company's activities. Particularly, the Supervisory Board:
11
<PAGE>
a) verifies the procedures relating to the Company's matters
whenever it examines accounting documents and files of the
Company;
b) puts forward proposals for discussing matters by the Board of
Directors and at the next General Meeting;
c) reviews yearly financial statements and proposals for
distribution of profit, and submits a report on the review
results to the General Meeting every year;
d) represents the Company in the dispute against a member of the
Board of Directors, if any;
e) calls the General Meeting, if it is in the interests of the
Company;
f) performs further tasks designated by the Law (e.g. by Section
182 of the Commercial Code).
8.1.2 The Supervisory Board members take part in the General Meeting of the
Company and are obliged to inform the General Meeting with the results
of their supervisory activity.
8.2 Structure, Establishment and Term of Office of the Supervisory Board
8.2.1 The Supervisory Board has three members. Two of the members are elected
by the General Meeting, and the third one is elected and withdrawn by
the Company's employees. The Board of Directors specifies organization
and method of election of this member. The function of the Supervisory
Board's member cannot be substituted.
8.2.2 A member of the Supervisory Board may only be an individual (natural
person) who complies with the general conditions for the conduct of a
trade under a special law, and on whose part here is no impediment to
the conduct of a trade under a special law, irrespective of the object
of the Company's business activity.
8.2.3 A member of the Supervisory Board may withdrawn from his/her function
by written notice delivered to the Supervisory Board. In this case the
performance of his/her function expires on the date, when his/her
withdrawal was discussed or should have been discussed by the
Supervisory Board, if both parties have not agreed upon other term.
8.2.4 The Supervisory Board which has one more member elected by the General
Meeting, may appoint a substitute member till the next General Meeting,
however not as a substitute for the member elected by the employees of
the Company.
8.2.5 A member of the Board of Directors or Company's Auditor may not become
a member of the Supervisory Board.
8.2.6 The Supervisory Board's member is elected for four years. However,
his/her function does not expire until a new Supervisory Board's member
is elected; his/her term of office should not be longer than five
years.
12
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8.2.7 The term of office commences from the day of electing both Supervisory
Board's members by the General Meeting according to Article 8.2.1, the
time of the third member election is organized by the Board of
Directors in accordance with the above term.
8.2.8 If a new Supervisory Board member has been elected by the General
Meeting or by employees during the term of office according to Article
8.2.7, his/her function expires with the term of office of other
Supervisory Board members.
8.3 Supervisory Board Function
8.3.1 The Supervisory Board elects its Chairman out of its members, who
organizes the Supervisory Board activities, chairs its meetings, and
acts on its behalf outwardly. The Supervisory Board has the right to
withdraw its Chairman any time.
8.3.2 The Supervisory Board shall always decide on the meeting called and
held in compliance with the regulations of Articles 8.3.4 through
8.3.8, with the exception of the case as presupposed in the provision
of Article 8.3.3.
8.3.3 The written decision of the Supervisory Board made out of the
Supervisory Board's meeting and signed by all its members elected at
the time is of the same force and effectiveness as if it would have
been taken on the meeting of the Supervisory Board called and held in
regular way. The signatures of the members of the Supervisory Board
need not be in the same document, if each of the members put his/her
signature under the full text of the decision.
The decisions made in such a way must be put in the minutes of the next
meeting of the Supervisory Board.
8.3.4 The Supervisory Board's meeting is called by its Chairman at least
twice a year. However, the meeting shall be called whenever it is
requested by two of the Supervisory Board's members in writing and with
specification of the reason. If the Chairman has not called the
meeting, though he was obliged to do it, any member of the Supervisory
Board has the right to call it. During absence of the Supervisory Board
Chairman the meetings are called and chaired by an authorized member of
the Supervisory Board.
8.3.5 The members of the Supervisory Board must be informed of the meeting
and its agenda at least 8 days beforehand. If they are not informed in
this way, the meeting may be held only if those members who have not
received any of the above information are present and agree with the
meeting.
8.3.6 The Supervisory Board's meeting constitutes a quorum, if two members of
the Supervisory Board are present and if all members have been informed
of the meeting in regular way and agreed with it according to the
provision as stated in Article 8.3.5.
13
<PAGE>
8.3.7 Minutes of the Supervisory Board's meeting are elaborated and signed by
the Chairman of the Supervisory Board. The invitations to the meeting
shall be attached to the minutes that include brief description of the
meeting's content. The minutes must include the names of the members of
the Supervisory Board who voted against individual decisions of the
Supervisory Board or abstained.
8.3.8 Each member of the Supervisory Board has one vote on voting in the
Supervisory Board. Majority of votes of the Supervisory Board's members
is needed to pass a decision.
8.3.9 Limitations and duties as stated in Article 7.4 apply also to the
members of the Supervisory Board.
9 Economy of the Company
----------------------
Accounting period of the Company is a calendar year.
9.1 Reserve Fund
9.1.1 The Company creates the Reserve Fund from the net profit stated in the
annual accounting statement in the year when it creates profit for the
first time, amounting to 20 % of the net profit. In the next years, the
Reserve Fund is yearly replenished by 5 % of the net profit, and that
up to the level of 20 % of the basic capital of the Company. The
Reserve Fund thus created may only be used to cover the losses, and the
General Meeting takes the decision about it.
9.1.2 The General Meeting decides about creating the possible Reserve Fund
above the level of 20 % of the basic capital.
9.1.3 If the Company shows in its accounting own shares or scrip
certificates, it has to create a Reserve Fund according to Section 161
d), paragraph 2 of the Commercial Code.
9.1.4 The sum from the basic capital decrease approved by the General
Meeting, designated to cover future losses up, is transferred into the
Reserve Fund according to Section 216a, paragraph 1c of the Commercial
Code. This sum must not exceed 10 per cent of the basic capital.
9.1.5 The Board of Directors decides about the use of that part of the
Reserve Fund which was formed according to article 9.1.1 above the
level of 20 %, and/or about that part of the Reserve Fund created
according to articles 9.1.3 and 9.1.4, unless stipulated by the Law or
the Articles of Association that the appropriate decision falls into
the jurisdiction of the General Meeting.
9.2 Other Funds
9.2.1 The General Meeting can decide about creating other funds according to
the needs.
14
<PAGE>
9.3 Financial Statements
9.3.1 The Board of Directors ensure elaboration of the financial statements
and proposal of profit distribution. The financial statements verified
by the auditor and reviewed by the Supervisory Board are submitted to
the General Meeting. At the same time the Supervisory Board shall
submit to the General Meeting a report on results of the review.
9.3.2 The financial statements must be elaborated in the way conforming to
the general mandatory legal regulations and principles of proper
accounting in such a way that they give full information of property
and financial situation of the Company and of the level of profit or
loss achieved in the last commercial year.
9.4 Distribution of Company's Profit and Loss Compensation
9.4.1 The General Meeting decides on distribution of the Company's profit on
the basis of a Board of Directors' proposal as reviewed by the
Supervisory Board.
9.4.2 The profit of the Company as achieved in relevant accounting period
shall be allocated for dividends and directors' fee after deduction of
sums allocated for taxes, allotment to the Reserve Fund and other
purposes as approved by the General Meeting. The Company has not the
right to distribute the profit (dividends) among its shareholders, to
state the profit sharing (director's fee) for the members of the Board
of Directors and Supervisory Board or profit sharing for its employees
in the case when the net trading property of the Company as determined
from the yearly financial statements by the last day of the accounting
period is or would be, in the result of the profit distribution, lower
than the basic capital of the Company increased by the following items:
- subscribed nominal value of shares, if the shares of the Company
have been subscribed to increase the basic capital, and the new
basic capital has not been registered in the Commercial Register
by the date of elaboration of the financial statements;
- the part of the Reserve Fund formed out of the profit that can
be used only for compensation of the Company's losses;
- Reserve Fund created according to Section 161d and 216a of
the Commercial Code.
9.4.3 This does not exclude the General Meeting's decision that a part of the
profit will be used to increase the basic capital of the Company.
15
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9.5 Dividend
9.5.1 The shareholder's right to dividend shall arise from the decision of
the General Meeting.
9.5.2 The shareholder who has been the owner of a share of the Company by the
date stated by the General Meeting that has decided on payment of the
dividend, and who has been identified as the owner of the share in the
List of shareholders.
9.5.3 The due date is specified by the General Meeting that has decided on
payment of the dividend; otherwise the dividend is due by three months
from the day when the decision on the dividend payment was adopted by
the General Meeting.
9.5.4 The title to dividend is forfeited after a four-year prescriptive
period beginning from the due date. The dividend stored with the
Company is not put out interest. The General Meeting can set more
detailed manners of dividend payment.
9.6 Bonuses and Royalties of the members of the Company's bodies
Based on the ruling of the General Meeting, the members of the
Company's bodies have the title to remuneration and profit sharing
(directors' fee) for performance of their functions according to
article 8.1, letter d) of these Articles.
Furthermore, the members of the Company's bodies have the right to
compensation for all expenses incurred in connection with performance
of their functions.
The General Meeting decides about the total amount of bonuses, manners
of payment and due date of royalties. The rules for the remuneration
(royalties) distribution among the Board of Directors and Supervisory
Board members are set by the Board of Directors on the basis of General
Meeting decision.
9.7 Method of Covering the Loss
9.7.1 The General Meeting, based on the Board of Directors proposal, decides
about covering the losses from the previous business year.
9.7.2 Possible losses from the Company's business shall be covered, first of
all, from the Reserve Fund. The Reserve fund utilization and approval
are described in Article 9.1 of these Articles. Should the Reserve Fund
does not suffice, the remaining loss can be left uncovered, and/or the
basic capital decreased in order cover the loss.
16
<PAGE>
10. Rules for Increase and Reduction in the Basic Capital of the Company
--------------------------------------------------------------------
10.1 Any increase or reduction in the basic capital of the Company is
decided by the General Meeting under conditions given by these
Articles, general mandatory legal regulations and in manners ensuing
from them. The General Meeting's notification shall include the data
required by the Commercial Code. The General Meeting can ask the Board
of Directors, to decide, according to the Commercial Code and these
Articles, about the increase in the basic capital by subscription for
new shares or from the Company's own resources, except undistributed
profit, up to the 1/3 of the present amount of the basic capital and
for a period not longer than till the next regular General Meeting.
10.2 The basic capital increase can be effected by all forms given in the
Commercial Code, i.e. by subscription for new shares by monetary and
nonmonetary contributions, by conditional increase in the basic
capital, by basic capital increase from the Company's own resources, by
issuing new shares or by increasing the nominal value of current shares
or by combined increase in the basic capital.
10.3 The basic capital may be increased by subscription for new shares only
if the shareholders have paid in full the issue rate of all previously
subscribed shares. This restriction shall not apply if the basic
capital is to be increased by subscription for shares and their issue
price is only to be paid by nonmonetary contributions. To increase the
basic capital by share subscription, the provisions given in these
Articles are used.
10.4 Each shareholder has a priority right to subscribe a part of the new
company shares in the range of his/her company's basic capital share,
providing the shares are subscribed by monetary deposits. In the
General Meeting resolution on an increase of the basic capital the
priority right can be deleted or limited. This resolution requires
approval of at least three quarters majority of votes of the
shareholders present.
10.5 The subscription for shares can be effected in two rounds. In the first
round the existing shareholders may exercise their pre-emptive right,
and according to the General Meeting resolution, also other physical
and legal entities. In the second round, not subscribed shares are
offered for subscription to the existing shareholders according to how
they exercised their pre-emptive rights in the first round. The Board
of Directors decides about the appropriate way of offering the shares
not subscribed by pre-emptive right.
10.6 The increase in the basic capital becomes effective from the day of its
entry in the Commercial Register. The Board of Directors is obliged to
file an application for entry of the amount of basic capital in the
Commercial Register; this can be done after the shares corresponding to
the extent of its increase have been subscribed and after at least 30
per cent of their nominal value, including the share premium, in case
of monetary contributions have been paid and after all nonmonetary
contributions have been paid.
17
<PAGE>
10.7 If the subscriber breaches his duty to pay the issue rate of the
subscribed shares, or a due portion thereof, he shall pay interest on
the amount in default at an annual rate of 20 per cent.
10.8 Should a subscriber fail to pay the issue price of the subscribed
shares or the due amount, the Board of Directors shall invite him to
pay the amount within 60 days of delivery of the Board of Directors
invitation. Should this time-limit elapse in vain, the Board of
Directors shall expel the subscriber from the Company and ask him to
return his interim certificate within an appropriate time-limit, as
fixed by the Board. Should an expelled subscriber not return his
interim certificate within the fixed time-limit, the Board of Directors
shall declare it invalid. The Board of Directors shall issue in its
stead either a new interim certificate or shares to a person approved
by the General Meeting, and such person shall pay the issue rate of
these shares.
10.9 A reduction in the basic capital is carried out either by reducing the
nominal value of shares, by taking the shares off the market by drawing
or on the basis of a proposal, and/or by not issuing the shares. The
concrete conditions of manners and the amount of reduction in the basic
capital are decided by the General Meeting in accordance with the
Commercial Code. In case of reduction of the basic capital by
withdrawal of shares from the market by drawing, the drawing must be
effected at the latest within ten days of the day when the Company's
order to allocate numbers to the shares was given. The drawing
procedure and results must be certified by a notary record; the Board
of Directors shall advise of the results of drawing in a way stipulated
by the Articles of Association for convening the General Meeting and in
the extent required by the Commercial Code.
10.10 The Board of Directors shall notify the extent of the reduction in the
basic capital within 30 days of the day when the resolution on its
reduction was entered into the Commercial Register, to all known
creditors whose claims against the Company arose prior to entry of the
General Meeting's resolution into the Commercial Register. The
resolution of the General Meeting on the reduction in the basic capital
must also be made public in Obchodni vestnik (Business Journal) on no
fewer than two occasions at least 30 days apart. The Board of Directors
files an application for an entry into the Commercial Register after 90
days have passed from the second publication of the announcement on the
reduction in the basic capital. The reduction in the basic capital is
effective as of the day of its entry in the Commercial Register.
18
<PAGE>
11. Winding-up and Liquidation of Company
-------------------------------------
11.1 The Company may be dissolved with liquidation or without liquidation if
its basic capital has passed to a successor. Liquidation is also not
required if the proposal for bankruptcy declaration due to insufficient
property is dismissed or if no property is left after the Company
bankruptcy.
11.2 The Company is dissolved:
a) on the day of the General Meeting decision,
b) on the day of court ruling concerning the company dissolution,
issued on the basis of the proposal of persons and for reasons
specified in Section 68, paragraph 6 of the Commercial Code, or
otherwise on the day when this ruling becomes legally effective,
c) by the decision of the General Meeting concerning Company
takeover, merger or splitting, or its modification into another
form of trading company or cooperative,
d) by cancellation of bankruptcy after the schedule is met or by
cancellation of bankruptcy due to insufficient property of the
Company to cover bankruptcy costs, or by dismissing the proposal
for bankruptcy declaration due to insufficient property.
11.3 In case the proposal for bankruptcy declaration is dismissed for other
reason than insufficient Company property, the Company is not
considered as dissolved. If some property is left after the Company
bankruptcy, the Company will be dissolved.
11.4 If company is dissolved:
a) with a legal successor, the shareholder rights shall follow
provisions of Section 220a) of the Commercial Code,
b) with liquidation, the remaining assets are distributed among the
shareholders according to Section 220 of the Commercial Code.
11.5 If the Company is wound-up with liquidation, the liquidator must ask
for the General Meeting's approval when alienating property in a
different way than by public auction.
11.6 The Company is dissolved on the day of its deletion from the Commercial
Register.
19
<PAGE>
12. Announcements and notices of the Company
----------------------------------------
12.1 The Company's announcements are mailed to the shareholders at their
addresses given in the List of shareholders by the Board of Directors.
12.2 The Board of Directors can also decide that the Company's notices will
be published in Obchodni vestnik (Commercial Journal) or the daily
press and/or posted in the place accessible to the shareholders at
Company's headquarters.
12.3 Resolutions of the Company's bodies to be send to shareholders are
mailed to the shareholders by a registered letter to their address
given in the List of shareholders.
13. Final Provisions
----------------
13.1 Origination, legal status and dissolution of the Company, as well as
all legal relations resulting from the Articles of Association and the
Company and labor and other relations within the Company are subject to
general mandatory legal regulations of the Czech Republic.
13.2 Any disputes between the shareholders and the Company, between the
Company and the members of its bodies, as well as the ones between
shareholders with regard to their participation in the Company will be
settled out of court. If failed, the dispute shall be put before and
settled by relevant Czech court.
13.3 In case some of the provisions of the Articles of Association become
invalid, ineffective or disputable, either due to valid laws or due to
their changes, or in case some provisions are missing, the remaining
provisions of the Articles of Association are not affected.
The above mentioned provisions will be substituted either by a
corresponding rule of law, which is, with its character and purpose,
the closest to the intended purpose of the Articles of Association, or
by a common business solution.
13.4 Period and Method of Storage of the Company's Documents
13.4.1 The minutes of the General Meetings along with notifications of the
General Meetings and lists of persons present, the minutes of the
meetings of the Board of Directors and Supervisory Board, as well as
the invitations to these meetings along with the lists of persons
present are stored in the Company's files for the whole period of its
existence.
13.4.2 All contracts of the Company must be stored in the Company's files for
the period of at least ten years after cessation of the contractual
relation, if the general mandatory regulations do not state a longer
period. In case that the period expires in the time, when the Company
has not already existed, the duty of filing shall be transferred to the
legal successor of the
20
<PAGE>
Company. In case that there is no legal successor, the liquidator shall
ensure document storage in compliance with valid regulations on filing.
14. Changes in Articles of Association
----------------------------------
The Articles of Association can be changed only by a decision of the
General Meeting. Two-third majority of votes of the shareholders
present is needed to pass a decision.
If the Company decides on increase/reduction in the basic capital,
distribution of shares, change of form or type of shares or limitation
of transferability of inscribed shares or its change, the change comes
into force by the date of the record of these facts in the Commercial
Register. The other changes in the Articles of Association come into
force in the moment, when the General Meeting makes the relevant
decision, unless the General Meeting decision on the change in the
Articles of Association or the law state that they come into force
later. The decision must be recorded in the form of a notarial record.
14.3 The Board of Directors of the company is entitled to issue the Articles
in accordance with the changes and amendments.
15. Articles of Association Effective Date
--------------------------------------
These Articles of Association come into force by the approval of the
General Meeting on June 12, 1997.
21
- - -------------------------------------------------------------Page One
NZ 165/95
N 167/95
Articles of Incorporation of Limited Liability Company Foundation
COUNTERPART
NOTARIAL RECORD
written by the notary's office of Most before me, JUDr. Cenek Fuksa, notary with
his office in Most, Budovatelu 1987/4, at the same place, i.e. in the registered
office of Severoceske teplarny, a. s. Most, Jaroslava Seiferta 2179 in the
conference room of the General Manager Office the fourteenth August nineteen
hundred and ninety-five (14th August 1995).-------------------------------------
Present are the participants who have declared that they are fully competent to
undertake all legal acts, who are authorized to sign documents on behalf of the
Company according to the certificate of incorporation and whose identity was
proved by their valid official identity documents, namely: ---------------------
1. Josef Vanzura, his personal identification number: 43.06.08/102, residing at
5. kvetna 1512, Jirkov, the General Manager of Severoceske teplarny, a.s., with
its registered office at J. Seiferta 2179, Most, the Chairman of the Board of
Directors of this stock corporation, the Company's identification number:
46708065;-----------------------------------------------------------------------
2. Pavel Sustacek, his personal identification number: 47.03.29/023, residing at
Poteminova 1627/11, Teplice, a member of the Board of Directors of Severoceske
teplarny, a.s. -----------------------------------------------------------------
On request of the Board of Directors of the above mentioned stock corporation, I
came to the registered office thereof to testify the course of deliberations of
an ordinary Board of Directors meeting of the stock corporation Severoeske
teplarny, a.s. with its registered office at J. Seiferta 2179, Most, so that the
said Board of Directors shall make the following attestation in this notarial
record:-------------------------------------------------------------------------
-- attestation regarding a limited liability company incorporation --
I.
Severoceske teplarny, a.s., with its registered office at J. Seiferta
2179, Most, the Company's identification number: 46708065, is founding, as the
sole partner, a limited liability company (hereinafter called "the Company") in
accordance with the terms and conditions set forth by these Articles of
Incorporation.------------------------------------------------------------------
II.
The business name of the Company is:
Energoservis Liberec, s.r.o.
III.
The Company's identification number shall be assigned by the Court.
<PAGE>
- - ---------------------------------------------------------------------Page Two
IV.
The Company's registered office is at Dr. M. Horakove 58, Liberec.
V.
The Company's scope of business is as follows:
- locksmith's trade,
- thermal and noise insulation,
- tinsmith's trade,
- plumbery, inclusive of heating mechanics,
- metalworker's trade,
- scaffolding,
- painting and coating,
- trading - purchase of goods to be sold and sale of goods,
- constructing and assembling,
- repairs of single-purpose equipment.
VI.
The Company's registered capital amounts to 100.000 CZK (in words: one
hundred thousand Czech crowns). ------------------------------------------------
VII.
The Company's total registered capital mentioned in Section VI, shall be paid up
by the founder by the day of filing the petition to incorporate the Company in
the Commercial Register. The registered capital shall be paid in its full amount
to the account, established for this purpose at Komercni banka Liberec, and it
shall be administered by the executive, Mr. Jiri Samler, until the Company is
incorporated.------------------------------------------------------------------
VIII.
The first and sole executive of the Company and its proxy according to the
Commercial Code shall be Mr. Jiri SAMLER, his personal identification number:
44.04.21/055, residing at Aloisina vysina 436, Liberec 5. Mr. Jiri Samler
himself shall, thus, act and sign documents on behalf of the Company, i.e. he
shall add his signature to the Company's printed or written name.
- - --------------------------------------------------------------------------------
Severoceske teplarny, a.s., with its registered office in Most, assign the
procuracy office, and thus appoint Mr. Zdenek Kozesnk, his personal
identification number: 53.02.26/106, residing at U Libeny 605, Liberec, agent by
proxy of the incorporated Company. The agent by proxy puts his name to documents
in the following manner: he adds the addendum indicating the procuracy and his
signature to the Company's business name. --------------------------------------
IX.
Severoceske teplarny, a.s., as the sole partner, shall perform the
activities of the General Meeting.----------------------------------------------
<PAGE>
- - -------------------------------------------------------------------- Page Three
X.
The Company's legal relations are governed by provisions of the Commercial Code,
while the executive and the agent by proxy are not entitled to perform the
following tasks and provisions without the General Meeting's consent: ----------
a) purchase, sale, rent or encumberance of any real estate of the Company,
b) undertaking of gurrantor's obligations,
c) undertaking of other people's obligations in any form
d) undertaking or granting of loans or credits. --------------------------------
XI.
The Company shall create a reserve fund in accordance with Section 124 of the
Commercial Code.----------------------------------------------------------------
XII.
The Company has been founded for an indefinite period of time. -----------------
XIII.
These Articles of Incorporation allow for a division of the ownership interest
when other persons become the Company's partners provided any natural person or
legal entity succeeds in securing a substantial market share for this Company.
Then the founder shall agree that such entity may receive a share in the
Company's registered capital for a nominal value. -----------------------------
This notarial deed was written about this matter, read and approved by the
participants who put their names hereto. ---------------------------------------
Mr. Josef Vanzura, in his own hand
- - ---------------------------------- -----------------------------
Mr. Pavel Sustacek, in his own hand
- - ---------------------------------- ----------------------------
- - ---------------------------------- ----------------------------
JUDr. Cenek Fuksa, in his own hand
-----------------------------------
I confirm that the counterpart of this notarial record that I am giving to Mr.
Josef Vanzura, Chairman of the Board of Directors of Severoceske teplarny, a.s.,
with its registered office at J. Seiferta 2179, Most, the Company's registration
number: 46708065, residing at 5. kvetna 1512, Jirkov, today, corresponds with
the original marked NZ 16/96, word for word. ----------------------------------
<PAGE>
- - -------------------------------------------------------------------- Page Four
JUDr. Cenek Fuksa, notary in Most, the fourteenth August nineteen hundred and
ninety-five (14th August 1995). -----------------------------------------------
Round seal: JUDr. CENEK FUKSA
NOTARY IN MOST
Signed: Cenek Fuksa
Notary
Two round seals: JUDr. CENEK FUKSA
NOTARY IN MOST
JUDr, Jaroslava Mala, notary of Most in the notary's office at Moskevska 1/14
- - -------------------------------------------------------------------------------
COUNTERPART
NOTARIAL RECORD
N 16/96
NZ 16/96
written by me, JUDr. Jaroslava Mala, notary of Most, in the same place, the
registered office of Severoceske teplarny, a.s. in Most, Jaroslava Seiferta
2179, the twenty-second day of January nineteen hundred and ninety-six.--------
Present are the participants who have declared that they are fully competent to
undertake all legal acts and whose identity was proved by their valid official
identity documents, namely:
1. Josef Vanzura, his personal identification number: 43.06.08/102,
residing at 5. kvetna 1512, Jirkov, the General Manager of Severoceske
teplarny, a.s., with its registered office at Most, J. Seiferta 2179,
the Chairman of the Board of Directors of this stock corporation, the
company's identification number:
46708065;-------------------------------------------------------------
2. Zdenek Kozesnik, his personal identification number: 53.02.26/106,
residing at U Libeny 605, Liberec, a member of the Board of Directors
of Severoceske teplarny, a.s.-----------------------------------------
who declared, before me, the notary, the following matters in this notarial
record:
Amendment I
of the Articles of Incorporation as of August 14, 1995, recorded in the notarial
record NZ 165/95.
First: On 14th August 1995 the limited liability company "Energoservis Liberec,
s.r.o.", with its registered office at Dr. M. Horakove 58, Liberec, was founded.
Second: This amendment I changes the Article V - Objects Clause, which is
extended by other activities, namely:
- - - inspections and testing of the operated boilers and pressure vessels,
- - - production, assembly, repairs, reconstruction and periodical tests of the
stated pressure equipment,
- - - assembly, repairs and inspections of the stated gas equipment,
- - - installation of metering devices.
Thirdly: The other provisions of the Articles of Incorporation are not changed.-
1
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I wrote this notarial deed concerning this matter, the participants read and
approved it, and put their names hereto.
Vanzura, in his own hand
Kozesnik, in his own hand
Seal:
Severoceske teplarny
stock corporation
MOST L. S. Jaroslava Mala
notary in her own hand
I confirm that the duplicate of this notarial record corresponds with the
original as of January 22, 1996, marked NZ 16/96, word for word, and it is
intended for Mr. Josef Vanzura, General Manager of the stock corporation
Severoceske teplarny, a. s.
Round seal:
Signed: Jaroslava Mala
Notary
2
FOUNDATION CHARTER
executed in accordance with Section 162 et seq. of the Commercial Code
Founders
1. Severoceske teplarny, a.s.
Registered office: Most, J. Seiferta 2179
represented by the Chairman of the Board of Directors
Mr. Josef Vanzura
and the Member of the Board of Directors
Mr. Pavel Sustacek
ICO: 46708065
DIC: 206-46708065
(hereinafter only as "SCT")
and
2. City of Zatec
namesti Svobody 1, 438 01 Zatec
represented by the Mayor
Mr. Ing. Bohuslav Kunes
ICO: 00265781
(hereinafter only as the "City")
Preamble
After the Company's foundation this Foundation Charter shall become an agreement
of the shareholders of the joint stock company Zatecka teplarenska. Severoceske
teplarny, a.s. with its registered office in Most, J. Seiferta 2179, acting
through the Chairman of the Board of Directors, Mr. Josef Vanzura, and the City
of Zatec, acting through the Mayor, Ing. Bohuslav Kunes, in accordance with
their common coincident will, are founding, in a simultaneous way, a joint stock
company without a call to subscribe shares, on the bellow mentioned day, month
and year in accordance with this Foundation Charter.
Article 1
The Founders are founding a joint stock company (hereinafter only as
the "Company") under the terms and conditions set by this Foundation Charter.
Article 2
The business name of the Company is: Zatecka teplarenska, akciova
spolecnost.
The abbreviation "akc. spol." or "a.s." can also be used as an
amendment specifying the legal form of the Company.
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Article 3
The registered office of the Company is Zatec, Smetanovo
namesti 333, 438 34.
Article 4
The company has been founded for an indefinite period of time.
Article 5
The Company's scope of business is as follows:
- generation, distribution, purchase and sale of heat, hot service water
and other related services,
- manufacture, repair and installation of metering devices,
- trading - purchase of goods to be sold and sale of goods,
- maintenance of power equipment,
- engineering/investor activity within the operational and economical
field of the heating plant industry,
- installation, repair and maintenance of stated electrical equipment.
Article 6
The Company's registered capital amounts 100,588,000 CZK (in words: one
hundred million five hundred and eighty-eight thousand Czech crowns).
Article 7
The Company's registered capital has been divided into 100,588
registered shares, each share having the nominal value 10,000 CZK.
Article 8
1. The Founders have agreed to pay by themselves the whole registered
capital of the Company, mentioned in Article 6, namely:
a) SCT, a.s. subscribes a monetary contribution valued 34,200,000
CZK (in words: thirty-four hundred million two hundred
thousand Czech crowns).
b) The City subscribes a nonmonetary contribution valued
66,388,000 CZK (in words: sixty-six million three hundred and
eighty-eight thousand Czech crowns), according to the Annex 1
of this Foundation Charter, assessed by an expert's opinion.
2
<PAGE>
2 The contributions mentioned in Subsection 1 will be paid by the
Founders as follows:
a) SCT, a.s. shall pay the amount of 34,200,000 CZK in form of a
monetary contribution as of the day of filing the application
for recording the Company in the Commercial Register.
b) The City shall pay the amount of 66,388,000 CZK in form of a
nonmonetary contribution, namely by assets of the heat
management of the City according to the Annex 1 of this
Foundation Charter and to an expert's opinion.
3. Should one of the Founders decide to sell his contribution or its part,
he is obliged to give a written proposal of preemption to the other
Founder for buying his property share.
Article 9
After having been founded the Company shall issue its shares. SCT, a.s.
shall receive 34,200 registered shares and the City shall receive 66,388
registered shares.
Article 10
The Founders have agreed upon the Company's Articles of Association,
which after the execution of this Foundation Charter shall become its integral
part. The Articles of Association specify the way of establishment a reserve
fund upon the Company's incorporation in accordance with Section 217 subsection
1 of the Commercial Code.
Article 11
The contributions paid to a Founder, in accordance with Article 8,
subsection 2, shall be administered by Severoceske teplarny, a.s., Most by the
time of the Company's foundation.
Article 12
The following persons are authorized to act in the matter of the
Company's record in the Commercial Register and at the Real Estate Register
prior to its founding:
On behalf of SCT, a.s.: Mr. Josef Vanzura
On behalf of City of Zatec: Ing. Bohuslav Kunes
The following persons are authorized to act in other matters:
On behalf of SCT, a.s.: Mr. Josef Vanzura
On behalf of City of Zatec: Ing. Bohuslav Kunes
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<PAGE>
Article 13
On signing this Foundation Charter a common meeting concerning the
Founders' decision will take place in accordance with Section 172 of the
Commercial Code.
Article 14
At the common meeting regarding the Company's foundation, the Founders
will follow the provisions of Section 171 of the Commercial Code.
Article 15
All costs arising from preparations, the incorporation and foundation
of the Company shall be the Company's expenses.
An installation of the same information system that is used by SCT,
a.s. for bookkeeping shall represent an integral part of the know-how given by
SCT, a.s.
Article 16
The Founders have agreed upon the way of electing to the Company's
bodies as follows:
1. SCT shall propose one candidate and the City two candidates into the
Board of Directors.
2. SCT shall propose one candidate and the City of Zatec one candidate to
the Supervisory Board and one shall be elected among the Company's
employees.
The Founders undertake to support these candidates at the elections.
Article 17
Provided any provision of this Foundation Charter is in discrepancy
with generally obligatory regulations, the generally obligatory regulations are
valid without this Foundation Charter ceasing to be valid.
Article 18
This Foundation Charter has been executed in six counterparts; each Founder
shall receive one counterpart, and two counterparts shall be filed in the
Company's archives. Another counterpart shall be attached to the proposal of the
Company's record in the Commercial Register, and one counterpart shall be sent
to the Center of Securities.
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<PAGE>
Article 19
The Founders declare that they mutually discussed the contents of this
Foundation Charter and that they arrived at a total coincidence. In witness
whereof the Founders have executed the Foundation Charter before the authority
to verify their signatures.
Annex 1: An expert opinion concerning the assets of the City of Zatec
representing a nonmonetary contribution to Zatecka teplarenska
a.s.
In Zatec, December 4, 1995
On behalf of Severoceske teplarny, a.s. On behalf of City of Zatec
signature signature, seal
Josef Vanzura Ing. Bohuslav Ku n e s
Chairman of the Board Mayor
Seal
In accordance with the book of
verifications, ref. 2008 195, I attest that
Josef Vanzura, birth No. 430608/102,
address Most, 5. kvetna 1512 set his name
to this document. I identified him by means
of his identity card. In Zatec December 4,
1995, nineteen ninety-five.
Seal: JUDr. Ivana DEMUTOVA
notary in Zatec
signature
Seal
In accordance with the book of
verifications, ref. 2018 195, I attest that
Ing. Bohuslav Kunes, address Zatec 2782,
birth No. 420909/046 set his name to this
document. I identified him by means of his
identity card. In Zatec December 4, 1995,
nineteen ninety-five.
Seal: JUDr. Ivana DEMUTOVA
notary in Zatec
signature
5
ARTICLES OF ASSOCIATION
Zatecka teplarenska, joint stock company
Chapter I
Fundamental provisions
Section 1
Founding and incorporation of the Company
1. The Company has been founded as a joint stock company, established
without call to subscribe shares on the basis of a Foundation Charter,
by an approval of these Articles of Association and an election of the
Company's bodies.
2. The Company has been incorporated by a record in the Commercial
Register at the Regional Court in Usti nad Labem, and has been
established for an indefinite period of time.
Section 2
Business name
1. The business name of the Company is: Zatecka teplarenska, akciova
spolecnost.
2. The business name of the Company is as follows:
a) in German: Heizkraftwerkgesellschaft Zatec A.G.
b) in English: District Heating Company Zatec, joint-stock comp.
Section 3
Registered Office
The registered office of the Company is: Zatec, Smetanovo namesti 333, 438 34.
Section 4
Scope of Business
- - - generation, distribution, purchase and sale of heat, hot service water and
other related services, - manufacture, repair and installation of metering
devices, - trading - purchase of goods to be sold and sale of goods, -
maintenance of power equipment, - engineering/investor activity within the
operational and economical field of the heating plant industry, - installation,
repair and maintenance of stated electrical equipment.
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Section 5
Acting and signing on behalf of the Company
1. The Company acts through its bodies, or its representatives act on its
behalf.
2. All members of the Board of Directors jointly or the Board of Directors
Chairman and a representative of the other founder are entitled to act
on behalf of the Company. Signing on behalf of the Company is carried
out in such a way that their signatures are added to the Company's name
or seal.
3. The persons mentioned in Subsection 2 certify their authorization to
act on behalf of the Company by means of an excerpt from the Commercial
Register.
4. The Company's representatives prove their identity on the basis of
power of attorneys or the Company's organization regulations.
Chapter II
Registered capital, shares and shareholders' rights
Part One
Section 6
Registered capital
The registered capital of the Company amounts 100,588,000 CZK (in words: one
hundred million five hundred and eighty-eight thousand Czech crowns).
Section 7
Paying-up the registered capital
The Company's registered capital is paid off and amounts 100,588,000 CZK.
Section 8
Increase in the registered capital
1. Only the General Meeting can decide on an increase in the registered
capital following the proposal of the Board of Directors. An increase
in the registered capital always requires a change of the Company's
Articles of Association.
2. The registered capital can be increased only by some of the ways
mentioned by law.
2
<PAGE>
Section 9
Decrease in the registered capital
1. The General Meeting can also reach a decision concerning a decrease in
the registered capital.
2. The registered capital cannot be however decreased under the level
defined by law, namely to the level less than 1,000,000 CZK.
Part Two
Section 10
Shares
1. The Company's fixed assets are divided into 100,588 shares.
2. The nominal value of each share is 1,000 CZK.
3. The shares will be registered and the Company will keep a list of its
shareholders.
4. The shares will not be determined for public trading, and in accordance
with law a transfer of shares will become effective after recording the
share transfer in the list of shareholders kept in the Company.
Section 11
Limitation of share transferability
The Board of Directors is obliged to keep a list of the Company's shareholders.
A transfer of shares can be carried out only after prior written approval of the
Company's Board of Directors.
Chapter III
Company Bodies
Section 12
Company Bodies
The Company has the following bodies:
1. General Meeting,
2. Board of Directors,
3. Supervisory Board.
3
<PAGE>
Part One
Section 13
General Meeting
1. The General Meeting consisting of all shareholders is the supreme body
of the Company.
2. During the period when the founders represent the sole company
shareholders, the General Meeting can have a quorum when all
shareholders are present.
3. In case the ordinary or extraordinary General Meeting does not have a
quorum, provisions of the Commercial Code are to be followed.
Section 14
Convocation of the General Meeting
1. The body that convenes the General Meeting does so in accordance with
law.
2. In case the announcement of convening the General Meeting is published,
it is done so in the Trade Bulletin.
3. Requirements are stipulated by law.
Section 15
Rights of the General Meeting
Above the extent stipulated by law, the General Meeting decides on a
discussion and approval of the Company's business policy, merge of the Company
with another entity, approval of the Company's plans, issue of new shares or new
type of shares, establishment of procuration and appointment of a proxy.
The General meeting can also entitle the Board of Directors to appoint
a proxy.
Section 16
The shareholders' voting right and its exercising at the General Meeting
1. Ownership of one share (Section 10) is connected with the right to
exercise one vote at the General Meeting. Each shareholder is entitled
to exercise so many votes how many shares he owns.
2. Every shareholder is entitled to participate and vote personally at the
General Meeting.
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3. The right pursuant to Subsection 2 can be exercised also through a
proxy who has a written power of attorney.
Section 17
The General Meeting's session
1. The General Meeting's session is opened by the Chairman of the Board of
Directors. He controls the election of the General Meeting's chairman,
a recording official and two verifiers. Further he appoints a person or
persons authorized to count votes.
2. After the activities mentioned in Subsection 1 are performed, the
General Meeting is conducted by its chairman.
3. The shareholders present at the General Meeting put down their
signatures on the attendance list containing the following:
a) the shareholder's name and address (or name and registered
office),
b) in case of shareholders-legal entities the name and position
of the person acting on behalf of the shareholder,
c) the shareholder's number of shares
d) number of votes belonging to the individual shareholders.
The attendance list validity shall be confirmed by the General Meeting
chairman and by the recording official. The shareholders present at the General
Meeting must be allowed to look into the attendance list.
Section 18
The way of decision making at the General Meeting
Absolute majority of the shareholders present shall be sufficient for
an approval of the General Meeting decisions. An approval of 75 percent of the
shareholders' votes is necessary in the matters of discussing and approving the
Company's business policy, the Company's merge with another entity, company plan
approval, issue of new shares or a new type of shares, increase or decrease in
the registered capital, change of the Articles of Association and dismissal of
the Company.
Section 19
Minutes of the General Meeting
Minutes of the General Meeting shall be prepared, they shall be signed
by the General Meeting chairman and the recording official, and its correctness
shall be confirmed by the verifiers. The requisites of the minutes are
stipulated by law.
5
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Part Two
Section 20
Board of Directors
1. The Company's statutory body is the three-member Board of Directors
elected by the General Meeting from the ranks of both, shareholders and
non-shareholders for four-year term of office.
2. A member of the Board of Directors may resign by means of a written
statement delivered to the Board of Directors. In such a case the
performance of his position ceases on the day on which his resignation
was discussed by the Board of Directors unless the parties agreed upon
a different date.
3. The Board of Directors which has at least a half of its members is
entitled to appoint instead of its members whose membership at the
Board of Directors has ceased or who have resigned, deputy members by
the next General Meeting.
4. The Supervisory Board members cannot be members of the Board of
Directors.
Section 21
Chairman of the Board of Directors
1. The elected members of the Board of Directors elect their chairman
among their ranks by public election.
2. The chairman calls and conducts the Board of Directors' meetings. He is
submitted to law, the Articles of Association, the General Meeting's
decisions and the Board of Directors' resolutions.
3. If the chairman is absent, he is substituted by an authorized member of
the Board of Directors in full extent.
Section 22
Rights of the Board of Directors
1. The Board of Directors is entitled to decide on all matters unless
decisions thereof appertain to another company body in accordance with
law, the Articles of Association or the General Meeting's decision.
The Board of Directors, in particular:
a) organizes and manages the Company's activities,
b) exercises the employer's rights towards the Company's
employees in accordance with labor-law regulations,
6
<PAGE>
c) ensures proper accounting management of the Company,
d) secures proper drawing up of financial statements and
proposals for profit sharing,
e) submits proper financial statements, reports on the Company's
business activity, on status of assets and business policy to
the General Meeting,
f) calls General Meetings according to the Articles of
Association and law.
Section 23
Meeting of the Board of Directors
1. The Board of Directors meets at least ones in three months, in the
first year of the Company's existence at least once a month.
2. The meetings of the Board of Directors are called by its Chairman by
means of a written notice. Provided this written notice does not
include agenda of the meeting or provided any member of the Board of
Directors proposes to discuss a matter excluded from the agenda during
the meeting, the Board of Directors may approve the additional
discussed or added issues only when all members are present at the
meeting.
3. The Board of Directors can have a quorum if a majority of its members
is present at the meeting.
4. The Board of Directors' resolutions are accepted if at least three
members vote for it. The Board member who did not agree with the draft
resolution, in case it was accepted, is entitled to require a record of
his opinion.
Section 24
Procedural order
1. Details of records concerning the Board of Directors' meetings and
accepting resolutions can be modified in the procedural order.
2. The Board of Directors' meetings and resolutions are recorded in a form
of a written protocol, which shall be signed by the Chairman of the
Board of Directors and the recording official.
3. The recording official does not have to be a member of the Board of
Directors, however, he is subject to a confidentiality agreement.
7
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Part III
Section 25
Supervisory Board
1. The Company's highest inspection body is a three-member Supervisory
Board.
2. In other cases than mentioned in Section 200 of the Commercial Code,
the Supervisory Board's members are elected by the General Meeting for
two-year term of office. This term of office may be extended by another
election.
Section 26
Meeting of the Supervisory Board
1. The Supervisory Board's meetings are called by its Chairman four times
a year based on the following:
a) a decision of the General Meeting,
b) own deliberation,
c) a proposal of any other member of the Supervisory Board or a
proposal of the Chairman of the Board of Directors or based on
a proposal of a shareholder who owns shares the nominal value
of which represents at least ten percent of the Company's
registered capital.
2. Similar regulations of Section 21 subsection 1 and 3, Section 23
subsection 2 to 4 and Section 24 subsection 1 and 2 shall be applied in
details for meeting and decision making of the Supervisory Board.
Part 4
Section 27
Common provisions on the Board of Directors and Supervisory Board
1. Ban on competition within the scope set in Section 196 of the
Commercial Code is valid for the members of the Board of Directors and
Supervisory Board, under the provision that the Company's General
Meeting may provide an approval for the members of the Board of
Directors or the Supervisory Board to perform activities of the
statutory body or a member of such or other body of a different legal
entity. This approval is also necessary provided it concerns a legal
entity in the business activities in which the Company participates.
2. The members of the Board of Directors and the Supervisory Board receive
director's fees and bonuses for their work in accordance with the
General Meeting's decisions.
8
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Chapter IV
Company's economy
Section 28
Financial year
1. The financial year of the Company is the calendar year.
2. The first financial year of the Company begins on the day of its
incorporation and ends December 31 of the corresponding year.
Section 29
Company's funds
1. Upon its incorporation, the Company shall establish the following funds
in compliance with the corresponding legal rules:
a) a reserve fund,
b) a social fund.
2. The General Meeting can decide on establishment of other company funds.
Section 30
Reserve fund
Upon its incorporation, the Company shall establish a reserve fund in
accordance with Section 217 et seq. of the Commercial Code.
Section 31
Company's bookkeeping and financial statements
1. The Board of Directors is responsible to the General Meeting for proper
bookkeeping of the Company.
2. The Company's financial statements are subject to a control in
accordance with law. Auditors to verify annual or extraordinary
financial statements are chosen by the Board of Directors.
3. The Board of Directors submits to the General Meeting annual or
extraordinary financial statements to be approved together with a
proposal for profit distribution, at least 30 days prior to the General
Meeting's session. If the case mentioned in Section 13 subsection 3,
the main data of the financial statement shall be published in the
Trade Bulletin in the same deadline.
9
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Section 35
Way of profit distribution
The General Meeting decides on the way of profit distribution based on
the proposal submitted by the Board of Directors at the General Meeting.
1. The Company's profit achieved in the financial year shall be divided
into a subsidy to the reserve fund up to the maximum creation of the
reserve fund according to Section 30 of the Articles of Association and
into other purposes approved by the General Meeting.
2. The General Meeting shall set out more specifying terms regarding the
way of paying dividends and director's fees.
Chapter V
Final Provisions
Section 33
Dissolution of the Company
1. The Company may be dissolved only by the General Meeting's decision,
except for those cases when the court is entitled to do so by law. The
provision of Section 18 is to be applied here too.
2. If the General Meeting decides on dissolution of the Company with
liquidation, the General Meeting also appoints a liquidator and sets
his remuneration. The General Meeting can also recall the liquidator
any time.
3. Upon appointing the liquidator the activity of the Board of Directors
is finished.
4. The liquidator has to perform Company's liquidation according to law.
However, he cannot, without the General Meeting's approval, alienate
real property in another way than in an auction. The liquidator shall
start the Company's liquidation without delay, and after the
liquidation is finished, he shall report to the General Meeting on the
status of business and its finishing.
5. The provisions on the General Meeting and the Supervisory Board remain
without changes. The General Meeting is called by the liquidator
according to Section 14.
6. The liquidator shall report on the status of liquidation to every
General Meeting. Every shareholder is entitled to read this report and
attached documents at least ten days prior to the General Meeting.
10
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Section 34
Announcements and notices of the Company
1. Announcements and notices of the Company are delivered by its Board of
Directors to the shareholders in form of a registered letter, and they
are published in the Trade Bulletin provided it is stipulated by law or
provided the Board of Directors decides so.
2. The Board of Directors can also decide that the Company's announcements
or notices are published in newspapers or in the Company's registered
office, in a place available to shareholders.
3. Resolutions of the company bodies if the addressee is the Company's
shareholder, are delivered to the shareholders in form of a registered
letter to his last known address.
4. Unless the law determines otherwise, one publishing shall be sufficient
for a valid notice.
Section 35
Approval of the Articles of Association, their changes and amendments
1. These Articles of Association are subject to the Founders approval in
compliance with the provision of Section 172 of the Commercial Code.
2. The Articles of Association can be changed or amended only by the
General Meeting's decision in accordance with Section 186 subsection 1
and Section 187 subsection 2 of the Commercial Code and Section 18 of
the Articles of Association. The decision has to have a form of a
notarial deed.
3. The Articles of Association are an integral part of the Foundation
Charter.
Section 36
Legal relations and governing of disputes
1. The Company's incorporation, legal relations and dissolution, as well
as all legal relationships resulting from the Company's Articles of
Association and labor-law and other relationships within the Company,
including relationships resulting from social and health insurance of
the Company's employees are governed by generally binding legal
regulations of the Czech Republic.
2. Eventual disputes among the Company and its shareholders, disputes
among the Company and members of its bodies, as well as disputes among
shareholders relating to their shares in the Company shall be governed
in a peaceful settlement. Unless it is possible to govern any dispute a
peaceful settlement, it shall be heard and adjudicated by a competent
Czech court determined according to the Company's registered office -
provided provisions of generally binding procedural regulations permit.
11
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Section 37
Explanatory provision
Provided any provision of the Articles of Association becomes unvalid,
ineffective or disputable in comparison with the valid legal order or its
amendments, or provided any provision is missing, the validity of the remaining
provisions hereof shall not be influenced by this fact. Instead of the concerned
provision there shall be applied either the provision of the applicable
generally binding legal regulation that corresponds with the purpose of the
Articles of Association as for its nature and purpose, or by a solution that is
common in business unless there is any such provision of a legal regulation.
These Articles of Association have been approved by the Founders of
Zatecka teplarenska, a.s. during their mutual negotiations in compliance with
Section 13 and 14 of the Foundation Charter and Section 35 of the Articles of
Association.
Zatec, December 4, 1995
On behalf of Severoceske teplarny, a.s. On behalf of Zatec
Seal: SEVEROCESKE TEPLARNY MOST Seal: CITY OF ZATEC
Signature: Josef V a n z u r a Signature: Ing. Bohuslav Ku n e s
Chairman of the Board of Directors Mayor
12
TRANSLATION
JUDr. Jaroslava Mala, public attorney, residing in Most, Moskevska 1/14
.....................................................................Page one
NZ 392/96
N 403/96
COUNTERPART
NOTARIAL RECORD
written this eighteen day of December nineteen hundred and ninety six in front
of me, JUDr. Jaroslava Mala, public notary, with office in Most, in the office
of the public notary in Most, Moskevska 1/4.-----------------------------------
Present are the participants who have declared that they are fully competent to
undertake all legal acts and whose identity was proved by valid official
identity documents, namely:
1) Josef Vanzura, birth certificate number 43.06.08/102, residing in
Jirkov, 5. kvetna 1512, General Manager of Severoceske teplarny, a.s.
with registered office in Most, J. Seiferta 2179, Chairman of the Board
of Directors of this joint-stock company, identification number
46708065,-------------------------------------------------------------
2) Ing. Miroslav F i s e r, birth certificate number 41.10.01/094,
residing in Praha Bohnice, Lindavska 785, member of the Board of
Directors of Severoceske teplarny, a.s.-------------------------------
have made in front of me, public notary,
the following s t a t e m e n t.
F i r s t: "We declare hereby that Severoceske teplarny, a.s. with registered
office in Most, J. Seiferta 2179, on the basis of agreements on ownership
interest transfer of September 24, 1996, have become starting by September 24,
1996, a sole partner of the SCT SoftMaker s.r.o. business company with
registered office in Most, J. Seiferta 2179, which was founded by agreement on
October 25, 1994 and is recorded in the Commercial Register held with the
Regional Court in Usti nad Labem in Section C, insert number 7898.
- - -------------------------------------------------------------------------------
Considering the aforesaid, Severoceske teplarny a.s. as a sole partner of the
above given SCT SoftMaker s.r.o. business company decided to cancel the original
version of the Partnership Agreement and to replace it by a new version. The
complete text of the Partnership Agreement constitutes Appendix I of this
notarial record".--------------------------------------------------------------
S e c o n d: I affirm the above given statement of both Board of Directors
members of Severoceske teplarny a.s.-------------------------------------------
<PAGE>
Page two
About the aforesaid, this notarial record was written out by me, public notary,
read to the present participants, approved by them and signed in their own
hands. ------------------------------------------------------------------------
L. S. JUDr. Jaroslava Mala
public notary s.s.
Severoceske teplarny
Joint stock company
Vanzura s.s. Fiser s.s.
<PAGE>
Appendix I
CHANGES IN THE PARTNERSHIP AGREEMENT
Severoceske teplarny, a.s. with registered office in Most, J. Seiferta
2179, company identification number 46708065, on the basis of agreements on
ownership interest transfer of 9/24/1996 have become, starting by 9/24/1996, a
sole partner of the SCT SoftMaker s.r.o. business company with registered office
in Most, J. Seiferta 2179, which was founded on 10/25/1994 and recorded in the
Commercial Register held with the Regional Court in Usti nad Labem in Section C,
insert number 7898. -----------------------------------------------------------
Considering the aforesaid, Severoceske teplarny a.s. as a sole partner
of the above given SCT SoftMaker s.r.o. business company decided to cancel the
original version of the partnership agreement and to replace it by the following
new version:
I.
Commercial Name
The commercial name of the company is as follows: SCT SoftMaker s.r.o.
II.
Registered Office
The registered office of the company is as follows: Most, J. Seiferta
2179.
III.
Operational Period of the Company
The company has been established for an indefinite period of time.
IV.
Object of Business Activity
- providing of software (sale of programs made to order);
- business activity - purchase of goods to be sold and sale of goods.
<PAGE>
V.
Registered Capital
The company's registered capital is 200,000 CZK (in words two hundred
thousand Czech Crowns). The registered capital includes a sole partner's
contribution and is hereby totally paid up by this partner.
VI.
Company Bodies
The company bodies are the general meeting and an executive. The
supervisory board has not been established. The sole partner performs the
general meeting activity. The company has one executive. The company's executive
is:
Mr. Zdenek T a p s i k, born January 13, 1973, birth certificate number
73 01 13/2828, residing in Bilina, Teplicka 598/3.
1. The executive is a statutory body of the company. In the company's
name, he performs all the legal acts and manages its business
activities. He performs the written acts in the name of the company in
such a way that he puts his signature, as well as his position, to the
printed or written name of the company.
2. The executive shall make arrangements for the proper keeping of
accounting and prescribed records.
3. The executive is obliged to inform the partner of all company's
matters.
4. The term of office of the executive is five years. The person who
performed the executive's post, may be into this position nominated
repeatedly.
5. The sole partner, performing the General Meeting activity, may recall
the executive any time.
6. Prohibition of Competitive Conduct stipulated in Section 136 of the
Commercial Code applies to the executive in full extent.
VII.
Ownership Interest
The only partner is entitled to transfer his ownership interest partially or
completely to the third person.
<PAGE>
VIII.
Reserve Fund
The company creates a reserve fund in accordance with provisions of Section 124
of the Commercial Code.
IX.
Financial Statement
The company prepares an annual financial statement in accordance with
relevant legal regulations. The annual financial statement approved by the sole
partner performing the General Meeting's activity is a basis for the sole
partner's decision on profit distribution of the company.
X.
Company's profit use
The net profits of the company attained according to the annual
financial statement, i.e. the profits left after taxes and fees payments, are
used according to the decision of the sole partner in the following order of
priority:
a) for the allotment to the Reserve Fund of the company
b) for the allotment into other company's funds, if they are
established
c) for other purposes in accordance with the sole partner's decision.
XI.
Winding-Up and Dissolution of the Company
Winding-up and dissolution of the company is governed by provisions of
Section 68, as subsequently amended, of the Commercial Code.
XII.
Final Provisions
In all matters not detailed by this agreement, the legal relations of
the company, its bodies and the relations between the company and its sole
partner are governed by relevant provisions of the Commercial Code.
TRANSLATION
JUDr. Jaroslava Mala, public notary, with office in Most, Moskevska 1/14
- - ------------------------------------------------------------------------------
NZ 15/96
N 15/96
FOUNDER'S DEED
COUNTERPART
NOTARIAL RECORD
written this twenty second day of January nineteen hundred and ninety six in
front of me, JUDr. Jaroslava Mala, public notary, with office in Most, in the
same place, i.e. at registered office of Severoceske teplarny a.s. in Most, J.
Seiferta 2179.
Present are the participants, who have declared that they are fully competent to
undertake all legal acts and whose identity was proved by valid official
identity documents, namely:
1) Josef Vanzura, birth certificate number 43.06.08/102, residing in
Jirkov, 5. kvetna 1512, General Manager of Severoceske teplarny, a.s.
with registered office in Most, J. Seiferta 2179, Chairman of the Board
of Directors of this joint-stock company, identification number
46708065, -----------------------------------------------------------
2) Zdenek Kozesnik, birth certificate number 53.02.26/106, residing in
Liberec, U Libeny 605, member of the Board of Directors of Severoceske
teplarny, a.s. -------------------------------------------------------
have made in front of me, public notary, the following statement to be recorded
into this notarial record:
a statement on founding a limited liability company:
F i r s t: Severoceske teplarny, a. s. with registered office in Most, ul. J.
Seiferta 2179, identification number 46708065, are founding, as a sole partner,
a limited liability company (s.r.o, in Czech - translator's note) ("company") in
accordance with conditions given by this Founder's Deed
- - -------------------------------------------------------------------------------
Second: The business name of the company is as follows:
Litomerice Testing laboratory of heat and water meters, s.r.o.
<PAGE>
Page two
T h i r d: Company's identification number: will be allotted by the court.
F o u r t h:
The registered office of the company is in: Litomerice
Kvytopne 1978 ------------------
F i f t h:
The scope of business is as follows:
1. Operating of the State Metrology Center
2. Repairs and installation of indicators and gauges
3. Purchase of goods to be sold and sale of goods.
S i x t h: The registered capital of the company amounts to 100,000 CZK (in
words: one hundred thousand Czech Crowns).-------------------------------------
S e v e n t h: The founder will pay the company's entire registered capital
cited in subsection "sixth" by the day of submitting the proposal for recording
the company into the Commerical Register at the latest, in full amount to the
account opened for this purpose at Komercni banka Most. -----------------------
E i g h t h: The first and sole executive of the company and its responsible
representative in accordance with the Commercial Code is Mr. Karel Stejskal,
birth certificate number 54.09.25/4400, residing at Dlouha 23, Litomerice. It
follows that only Mr. Karel Stejskal will act and sign on behalf of the company
in such a way that he puts his signature to the printed or written name of the
company. ---------------------------------------------------------------------
The trustee of the paid investment contribution is also Mr. Karel Stejska1,
birth certificate number 540925/4400, residing at Dlouha 23, Litomerice.
- - ------------------------------------------------------------------------------
N i n t h: Severoceske teplarny, a. s. as a sole partner, performs the activity
of the General Meeting. -------------------------------------------------------
T e n t h: The legal situation of the company is governed by stipulations of the
Commercial Code under proviso that the executive is not authorized without the
General Meeting's consent to perform the following acts and to take the
following measures:------------------------------------------------------------
a) purchase, sale, renting or charge over company's property,--------
b) assumption of guarantor's obligations,----------------------------
<PAGE>
Page three
c) assumption of third party obligations in any form,-----------------
d) assumption or granting loans and credits.--------------------------
E l e v e n t h: The company shall create the reserve fund amounting to 10 per
cent of the registered capital. The reserve fund serves to covering the
company's losses. -------------------------------------------------------------
T w e l v e t h: The extension of the partnership agreement by other partners:
Providing a natural person or a legal entity succeeds in acquiring an important
part of the market for the company, then the founder will agree that this person
or entity acquires a share in the company's registered capital at a nominal
price.-------------------------------------------------------------------------
About the aforesaid, the notarial record was written out, read by the
participants, approved by them and signed in front of me. ---------------------
Seal: Severoceske teplarny Vanzura s.s
joint-stock company Kozesnik s.s.
M o s t
L. S. Jaroslava Mala
public notary s.s.
I affirm that the counterpart of this notarial record corresponds word-for-word
with the original document of January 22, 1996 NZ 15/96 and it is assigned for
Mr. Josef Vanzura, the General Director of Severoceske teplarny a.s. with
registered office in Most, J. Seiferta 2179.-----------------------------------
Seal Jaroslava Mala s.s.
public notary
