UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
|X| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
EXCHANGE ACT OF 1934
|_| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED _____________
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ TO
__________________
COMMISSION FILE NUMBER __________________
Toucan Mining Plc
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(Exact name of Registrant as specified in its charter)
Toucan Mining Plc
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(Translation of Registrant's name into English)
Isle of Man
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(Jurisdiction of incorporation or organization)
4th Floor, Celtic House, Victoria Street, Douglas, Isle of Man IM99 1QZ
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(Address of principal executive offices)
SECURITIES REGISTERED OR TO BE REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT.
Ordinary Shares
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(Title of Class)
(Title of Class)
SECURITIES FOR WHICH THERE IS A REPORTING OBLIGATION PURSUANT TO SECTION 15(D)
OF THE ACT.
None
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(Title of Class)
INDICATE THE NUMBER OF OUTSTANDING SHARES OF EACH OF THE ISSUER'S CLASSES OF
CAPITAL OR COMMON STOCK AS OF THE CLOSE OF THE PERIOD COVERED BY THE ANNUAL
REPORT.
Not Applicable
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------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes No X
--- ---
Indicate by check mark which financial statement item the registrant has elected
to follow. Item 17 X Item 18
--- ---
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST
FIVE YEARS) Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by a court. Yes _____ No _____
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
General
Toucan Mining Plc, an Isle of Man public limited company (the
"Company"), holds a single mining claim in the Cuiaba Basin of Brazil, the right
to acquire six additional claims in the same region and ordinary shares of
Minmet Plc ("Minmet"), an Irish company that engages in mining operations in
Brazil and elsewhere, whose ordinary shares are quoted on the Exploration
Securities Market of the Irish Stock Exchange. The Company is not currently
conducting mining operation but is assessing the future economic benefits of its
existing and potential claims.
The Company's parent corporation is Authoriszor Inc., formerly known as
Toucan Gold Corporation ("Parent"). Parent was organized in the State of
Delaware on July 22, 1996. Parent was formed for the purpose of reincorporating
Starlight Acquisitions, Inc., a Colorado corporation ("Starlight"), in the State
of Delaware (the "Reincorporation"). Starlight was incorporated on January 20,
1989. The Reincorporation was effected by merging Starlight into Parent (the
"Merger"), which prior to the Reincorporation was a wholly owned subsidiary of
Starlight, pursuant to an Agreement and Plan of Merger. Upon completion of the
Merger, Starlight ceased to exist, and Parent continued to operate the business
of Starlight under the name Toucan Gold Corporation. On August 25, 1999, the
Parent's Certificate of Incorporation was amended to change Parent's name from
Toucan Gold Corporation to Authoriszor Inc.
Distribution
On July 16, 1999, the Board of Directors of Parent approved the
spin-off of all of the ordinary shares (the "Ordinary Shares"), par value 10
pence (Sterling) per share, of the Company to the stockholders of Parent (the
"Distribution"). The Ordinary Shares will be distributed on a share for share
basis to holders of the common stock of Parent, par value $0.01 per share (the
"Parent Common Stock") as of the record date. The record date for the
Distribution was originally set for August 3, 1999. Pursuant to Delaware
corporate law, however, if the Distribution is not consummated within 60 days of
such date, a new record date must be selected. The consummation of the
Distribution is conditioned upon the fulfillment of the following conditions:
(i) the registration of the Ordinary Shares under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); and (ii) the furnishing of an information
statement to Parent's stockholders as of the record date describing the Company
and the Distribution that substantially complies with Regulation 14C under the
Exchange Act. As of October 3, 1999, these two conditions were not yet
satisfied. As a result, the Distribution was not consummated and a new record
date must be selected by the Company. The Company will announce the new record
date when it has more certainty as to the anticipated effective date of the
Distribution.
Pursuant to the Share Sale Agreement between Parent and the former
shareholders of ITIS Technologies Limited (the "ITIS Shareholders") in
connection with the acquisition by Parent of ITIS Technologies Limited, the ITIS
Shareholders, who currently own in the aggregate 34% of the outstanding shares
of Parent Common Stock (not including outstanding options and warrants), will
not receive shares of the Company in the Distribution.
Toucan Mining PLC
Prior to August 4, 1999, the Company was a private company, as that
term is defined under the Companies Act 1931 - 1933, operating under the name of
Toucan Mining Limited. On August 4, 1999, Toucan Mining Limited was converted
into a public limited company, at which time its name was changed to Toucan
Mining Plc. Prior to July 15, 1999, the Company conducted its operations
primarily through its wholly owned subsidiary, Mineradora de Bauxita Ltda.
("MBL"), which is an authorized mining company organized under the laws of
Brazil. Effective July 15, 1999, the Company sold all of the share capital of
MBL to Minmet. See "Minmet Transactions." The principal executive office of the
Company is located at Celtic House, Victoria Street, Douglas, Isle of Man IM99
IZQ.
1
<PAGE>
Minmet Transactions
On December 4, 1998, Parent and the Company consummated the following
transactions (the "Minmet Transactions"), involving, among other things, the
grant of an option to Minmet to purchase all of the issued share capital of MBL.
The Company granted an option (the "MBL Option") to Minmet to acquire
all of the issued share capital of MBL. The Company received 7.5 million
ordinary shares (the "Option Shares") in Minmet solely for the Company granting
the MBL Option. All of the Option Shares (except approximately 30,000 shares)
were transferred to certain of the existing creditors of Parent and/or the
Company to extinguish certain liabilities owed by Parent and/or the Company to
such creditors. On June 30, 1999, Minmet exercised the MBL Option and acquired
all of the issued share capital of MBL by issuing an additional 25 million
Minmet ordinary shares (the "Completion Shares") in the aggregate to Parent and
the Company.
The sale and distribution of the Completion Shares are restricted as
follows. The Company and Parent may sell up to 3 million of the Completion
Shares in the aggregate each of the three six (6) month periods after the
issuance thereof. Any Completion Shares not disposed of in a six (6) month
period may be added to the number of Completion Shares that may be sold in later
periods.
Minmet has agreed that the Completion Shares may be placed through
Minmet's brokers with Minmet's consent and that it will act reasonably in
respect of all such requests by Parent or the Company for the sale of the
Completion Shares.
Additionally, Parent granted an option to Minmet (the "Loan Option") to
acquire from Parent the benefit of the loans it had made to MBL in the principal
amount of $1 million. Parent received the sum of $275,000 solely for granting to
Minmet the Loan Option. On June 30, 1999, Minmet exercised the Loan Option. The
exercise of the Loan Option was consummated on July 15, 1999 and in connection
therewith, Minmet paid to Parent $250,000 and issued to Parent or its designee
warrants (the "Minmet Warrants") to subscribe for a further 7.7 million ordinary
shares of Minmet at an exercise price of 8 pence (Sterling) per share.
In connection with the Distribution, the proceeds of the Minmet
Transactions were allocated between Parent and the Company as of June 30, 1999
as follows:
<TABLE>
<CAPTION>
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AMOUNT OF ALLOCATED TO ALLOCATED TO
FORM OF PROCEEDS PROCEEDS PARENT COMPANY
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<S> <C> <C> <C>
Cash $250,000 $250,000 $0
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Minmet Shares $2,765,000 $1,493,100 $1,271,900
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Minmet Warrants $385,000 $0 $385,000
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Total $3,400,000 $1,743,100 $1,656,900
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</TABLE>
For purposes hereof, the Minmet shares were valued at 7 pence
(Sterling) per share based on the trading price of Minmet shares on the Irish
Stock Exchange at 8.25 pence (Sterling) per share as of June 30, 1999 and
discounting such price because of the restrictions on transfer of the Minmet
shares applicable to Parent and the Company. The amounts stated in the above
table were computed based on the currency exchange ratio of $1.58 per 1 pound
(Sterling). See Note C to the Company's Consolidated Financial Statements,
included herewith.
Subsequent to June 30, 1999, the Company sold 1.5 million Minmet shares
at the placing price of 8 pence (Sterling) per share. This transaction resulted
in net cash proceeds of approximately $190,000 to the Company, not including
placement commissions. As of September 10, 1999, the Company holds 10,030,000
Minmet shares.
2
<PAGE>
Parent had also sold a total of 10.5 million Minmet shares in July and
August of 1999 and as of October 1, 1999, had only 3,000,000 Minmet shares
remaining. Because the limitations on the number of Minmet shares that may be
sold by Parent and the Company are applied on aggregate basis, Parent and the
Company are precluded from selling any additional Minmet shares without Minmet's
consent until January 1, 2001, but additional Minmet shares can be sold through
Minmet's brokers with Minmet's consent.
The ITIS Transaction.
On July 22, 1999, Parent consummated the acquisition of all of the
issued and outstanding capital stock of ITIS Technologies Limited, a company
organized under the laws of the United Kingdom ("ITIS"), in exchange for
4,680,375 shares of Parent Common Stock, pursuant to a Share Sale Agreement (the
"Share Sale Agreement"), dated July 22, 1999, by and between ITIS and Parent.
The former shareholders of ITIS (the "ITIS Shareholders") now own 34% of the
issued and outstanding shares of Parent Common Stock, not including outstanding
options and warrants.
The Distribution was approved by Parent's Board of Directors in
connection with the ITIS transaction. The ITIS Shareholders advised the
management of Parent that it would not enter into an acquisition of ITIS by
Parent unless Parent divested its mining claims. Consequently, in the Heads of
Agreement relating to the ITIS transaction, Parent covenanted to effectuate a
spin-off of the stock of the Company to Parent stockholders, not including the
ITIS Shareholders. The Share Sale Agreement was executed after Parent Board of
Directors approved the Distribution. In the Share Sale Agreement, the ITIS
Shareholders consented to the Distribution and acknowledged that they would not
receive Parent Common Stock in the Distribution.
Mining Claims
As noted above, the Company owns one mining claim in the Cuiaba Basin
of Brazil and the right to acquire six additional claims in the same region. For
additional information about these claims, please see "Item 2.
Properties."
Mining Operations
The following discussion of the Company's mining operations includes a
discussion of Brazilian law. The discussion of Brazilian law matters represents
the Company's current understanding of applicable Brazilian law based on it and
its advisors' and consultants' review of information relating thereto made
available to them as of the date hereof.
Description of Exploration and Mining Concessions. Under the Brazilian
Federal Constitution, all mineral resources belong to Brazil. The government of
Brazil does not grant outright ownership of a mineral deposit to a mining
company. Exploration and mining of mineral resources may be carried out only
following the grant of an exploration permit or mining concession by the
Departamento Nacional Produca Mineral (the "DNPM"), which administers the
Brazilian Mining Code and other laws and regulations governing prospecting and
mining operations in Brazil. Mining concessions are granted only to Brazilian
companies that have been duly authorized by the Ministry of Mines and Energy to
act as a mining company. In 1995, the Brazilian government approved a
constitutional amendment that eliminated the requirement of Brazilian control of
mining companies, so that a Brazilian mining company can be 100% foreign owned
and still qualify as a mining company.
Under Brazilian law, in order to obtain a mining concession, a mining
company must first obtain an exploration permit (referred to herein as a claim).
The first step in obtaining a mining claim is filing an application with the
DNPM, which must include an exploration plan as well as comply with certain
other requirements.
3
<PAGE>
Under Brazilian law, if a claim is granted, the granting of the claim
will, in due course, be published by the Brazilian authorities in the Government
Gazette. Such publication can occur from one to twenty years from the date of
the claimant making such application with respect to such claim. Once the claim
is published in the Government Gazette an annual tax of $0.47 per Ha is payable
on the published claim.
The granting of an exploration claim conveys the right to explore the
area covered by the claim. Claims are granted for a three-year term, renewable
on request, subject to an annual fee. Exploration must begin in accordance with
the exploration plan forming part of the application within a specified period
of the claim being granted. The claim may be canceled at the discretion of the
DNPM if the claim holder suspends exploration for a period of more than three
consecutive months or 120 non-consecutive days. The holder of a terminated claim
may reapply to regain the claim area. The onus is on the claim holder to notify
the DNPM of any changes to the exploration plan. On completion of the work, a
final report must be filed with the DNPM describing the results of the
exploration program.
Mining concessions are granted only after exploration demonstrates the
existence of a mineral deposit that is economically exploitable. Therefore, the
report filed by the claimant with the DNPM must include an economic assessment
of the claim area and a feasibility analysis. Moreover, the claimant must
demonstrate to the DNPM that it has the financial capability to carry out the
proposed plan. The application for a concession must also include an
environmental plan, covering water treatment, soil erosion, air quality control,
re-vegetation and reforestation and site reclamation. Once granted, the terms of
the concession will include conditions concerning mitigating environmental
impacts, site safety, construction codes, waste disposal and site reclamation.
Following application, the DNPM may request additional information.
A mining concession grants the right to extract and process the mineral
contained in the deposit in accordance with the plan approved by the DNPM and
allows a mining company to exploit the deposit to exhaustion, usually without a
predetermined or fixed term. The concession holder also has the right to sell,
transfer or lease such rights to a third party subject to DNPM approval. After
the grant of the mining concession is published in the Government Gazette, a
concession holder has 90 days to request possession of the deposit, and initial
work in accordance with the mining plan must begin within six months of the
publishing date. Once begun, mining may not be suspended for a period of more
than six months on penalty of a possible cancellation of the concession at the
discretion of the DNPM. However, management understands that longer suspensions
have been granted by the DNPM. Annual statistical data on production must be
reported to the DNPM, which will also send representatives on periodic site
inspections. Failure to comply with regulations and mining plans may result in
penalties ranging from fines and other restitution to cancellation of the mining
concession and/or prison terms for officers of the Company.
The Brazilian Mining Code and the Federal Constitution of Brazil impose
on mining companies requirements relating to, among other things, the manner in
which mineral deposits are exploited, the health and safety of workers, the
protection and restoration of the environment, the prevention of pollution and
the promotion of the health and safety of local communities where the mines are
located. The Mining Code also imposes certain notification and reporting
requirements.
Description of Mining Area. The majority of land covered by the
Company's claim is a sandy gravely soil covered in light scrub. Cattle ranching
is the principal agricultural activity. Except where the claims fall within a
township such as Cuiaba, the majority of the land is agricultural and has a low
value.
Landowners. The Brazilian Mining Code requires a claim holder to obtain
the consent of the surface owners to access the surface of the property. This
usually entails some form of an agreement between the claim owner and the
surface owner involving the payment of compensation to the surface owners for
damage and loss of income caused by the use and occupation of their land in
connection with mining activities. In the event that an agreement cannot be
reached with the surface owner, the Company may seek legal recourse under
Brazilian law, which provides that a claim holder has the right of access if
conducting mineral exploration activities, by seeking a judicial order to
determine the amount of surface damage to the property and to grant the surface
owner a royalty on future production.
4
<PAGE>
Brief History of Previous Operations. Gold mining in the Cuiaba Basin
began around 1719. Mining activity was sporadic, tending to coincide with
periods of high gold price or technical innovations that enabled profitable
extraction of the gold. The most recent phase of activity occurred during the
1980's when a period of high gold prices coincided with the availability of
metal detectors. Miners quickly realized that by using this equipment,
near-surface gold mineralization (nuggets) could be readily located and
recovered with the help of earth moving equipment. Thousands of hectares were
stripped of soil and vegetation. Under present economic conditions, the mining
by garimpeiros of the easily located nugget fields is not feasible as near
surface quartz veins and mineralized host rock are only accessible by using bulk
earth and rock moving equipment, not generally available to the garimpeiros.
Climate. Exploration and mining operations are possible throughout the
year. The rainy season is from December through to April. There are only
occasional thunder storms from May to December. In summer (December - February)
the temperature can reach as high as 45 degrees Centigrade although the mean
temperature is 35 degrees Centigrade.
Environmental Laws. Previous miners have stripped thousands of hectares
of soil and vegetation in the Cuiaba Basin. MBL will arrange to document the
existing environmental condition of its claims to place on record with the
environmental authorities the damage done to the environment by previous
operators. Environmental regulation and protection in Brazil is based on
provisions of the Federal Constitution, and of federal, state and municipal
legislation. Mining and industrial activities require the preparation of an
environmental impact statement and the acquisition of an environmental permit.
In addition, the Mining Code requires the reclamation and restoration of mined
areas.
In March of 1998, Brazilian Federal Law No. 9605, which reclassifies
certain practices against the environment as crimes, became effective. Some of
the activities which are enumerated as "crimes against the environment" include:
(1) performing research, mining or extraction of mineral resources without
authorization and (2) inducing mortality in the animal life existing in rivers,
lakes, dams, ponds, bays or waters under Brazilian jurisdiction. Additionally,
the new law provides for the possibility of forced liquidation of any legal
entity formed or used primarily with the intent to permit, facilitate or cover
up crimes against the environment.
Gold Sales. Gold mined in Brazil must be sold (i) to the Central Bank
of Brazil (via one of their registered agents), (ii) to the Sao Paulo gold
exchange or (iii) to any registered gold buyer in Brazil. The price paid is
normally the London afternoon Gold Fix. On occasion a premium is paid of
typically 2%. The agent charges a commission that is normally between 0.5 -
1.0%. The seller of the gold is paid in U.S. Dollars.
Brazilian Taxation. In general, Brazilian mining companies are subject
to a 25% income tax and an 8% social security contribution. Dividends paid to
shareholders domiciled abroad are subject to a 15% withholding tax by the
Brazilian taxing authority.
Exchange Controls. Exchange transactions are generally controlled by
the Central Bank of Brazil which authorizes a series of banks to act in the
foreign exchange market, selling and buying currencies. There is a commercial
rate of exchange published daily by the Central Bank based upon market results
on said day. A free market, and quotation system exists, mainly dealing with
tourist activities. Both rates have been extremely close since the inception of
the stabilization plan ("Plano Real") several years ago.
Description of Present Condition of Property; Modernization and
Physical Condition of Plant and Equipment. The Company is currently assessing
the future potential of its existing and potential mining claims. The Company
does not currently have any employees. The Company may employ various
consultants, geologists, land personnel, administrative personnel and field
hands in connection if it determines to undertake future mining operations. See
"Employees" below. Alternatively, the Company may determine to enter into joint
venture or other business arrangements to develop such claims or may determine
to sell such claims.
At this time, the Company is an exploration stage company and has no
probable or proven reserves as defined by the rules and regulations of the
Securities and Exchange Commission (the "Commission").
5
<PAGE>
Exploration and Development Risks
The exploration for and development of mineral deposits involves
significant risks that even a combination of careful evaluation, experience and
knowledge may not eliminate. While the discovery of gold reserves may result in
substantial rewards, few properties that are explored are ultimately developed
into producing mines. Major expenses may be required to establish gold reserves,
to develop metallurgical processes and to construct mining and processing
facilities at a particular site. There can be no assurance that the exploration
programs being conducted by the Company will result in a profitable commercial
mining operation. There is aggressive competition within the mining industry for
the discovery and acquisition of properties considered to have commercial
potential. The Company will compete with other interests, many of which have
greater financial resources than they will have, for the opportunity to
participate in promising projects. Significant capital investment is required to
achieve commercial production from successful exploration efforts.
Whether a mineral deposit will be commercially viable depends on a
number of factors, some of which are the particular attributes of the deposit,
such as size, grade and proximity to infrastructure, as well as gold prices
which are highly cyclical and government regulations, including regulations
relating to prices, taxes, royalties, land use, importing and exporting of
minerals and environmental protection. The exact effect of these factors cannot
be accurately predicted, but the combination of these factors may result in the
Company not receiving an adequate return on investment capital.
The economic feasibility of prospective projects, such as the mineral
claims in the Cuiaba Basin, is based upon, among other things, estimates of
reserves, metallurgic characteristics, recoverability, capital and operating
costs of such projects and future gold prices. These and other prospective
projects are also subject to the successful completion of feasibility studies,
issuance of necessary permits and receipt of adequate financing.
Development projects have no operating history upon which to base
estimates of future cash operating costs and capital requirements. In
particular, estimates of reserves, metal recoveries and cash operating costs are
to a large extent based upon the interpretation of geologic data obtained from
drill holes and other sampling techniques and feasibility studies which derive
estimates of cash operating costs based upon anticipated tonnage and grades of
ore to be mined and processed, the configuration of the ore body, expected
recovery rates of various metals from the ore, comparable facility and equipment
costs, anticipated climate conditions and other factors. As a result, it is
possible that actual cash operating costs and economic returns of any and all
development projects may materially differ from the costs and returns initially
estimated.
In addition, exploration activities and mining operations generally
involve a high degree of risk. If the Company were to discover gold reserves and
bring them into production, the Company would be subject to all of the hazards
and risks normally encountered in the exploration, development and production of
gold, including unusual and unexpected geology formations, rock bursts,
cave-ins, flooding and other conditions involved in the drilling and removal of
materials, and which could result in damage to, or destruction of, mines,
equipment and other producing facilities, damage to life or property,
environmental damage and possible legal liability. Although adequate precautions
to minimize risk will be taken, mining operations are subject to hazards (such
as equipment failure or failure of retaining dams around tailings, disposal
areas), which may result in environmental pollution and consequent liability.
Employees
The Company has no employees. However, since November 1995, L. Clark
Arnold has served, and will continue to serve, as a consultant to the Company.
In his capacity as consultant, Mr. Arnold will serve the Company as the Director
of Exploration. See "Item 10. Directors and Officers of Registrant."
6
<PAGE>
Other Business Opportunities
On the Distribution Date, it is expected that more than forty percent
(40%) of the value of the total assets of the Company will be comprised of
investment securities - the Minmet shares and the Minmet Warrants. As a result,
the Company may fall within the definition of an "investment company" under the
Investment Company Act of 1940, as amended (the "Investment Act"), and be
subject to the registration provisions thereof. The Investment Act places
restrictions on companies registered thereunder, including its capital
structure, its transactions with affiliates and its business activities. The
Securities and Exchange Commission has promulgated a rule (the "Transient
Investment Company Rule") under the Investment Act that permits a company to
avoid being subject to the Investment Act for a period of up to one year despite
the holding of investment securities in excess of the 40% threshold referred to
above if, among other things, the board of directors of such company has adopted
a resolution that states that it is not such company's intention to engage
primarily in the activities of an investment company by the end of such one year
period. The Company does not intend to engage primarily in the activities of an
investment company on a long term basis and has adopted to the requisite
resolutions to invoke the Transient Investment Company Rule so as not to fall
within the definition of an investment company at the end of the one year
period, which period commenced on July 15, 1999. In connection therewith, the
Company will consider various alternatives, including, seeking to obtain
Minmet's consent to permit the Company to sell all or substantially all of its
Minmet securities; seeking, investigating and, if warranted, acquiring
non-securities assets, including operating businesses; and pursuing other
related activities intended to enhance shareholder value. The acquisition of a
business may be made by purchase, merger, exchange of stock or otherwise. The
Company has limited capital, and, it is likely that the Company will seek to use
its stock as the acquisition currency. At the present time, the Company has not
identified any business opportunity that it plans to acquire, nor has the
Company reached any agreement or understanding with any person concerning an
acquisition. Application of the provision of the Investment Act to the Company
would have a material adverse effect on the Company.
There can be no assurance that the Company will be able to dispose of
its Minmet securities and/or acquire sufficient non-securities assets within the
applicable time period to avoid becoming subject to the costly and restrictive
registration and other provisions of the Investment Act and the regulations
promulgated thereunder.
ITEM 2. PROPERTIES.
Mining Claims
In September 1996, Parent entered into an agreement (the "Claims
Agreement") to acquire from Joseph J. Haraoui twenty-five (25) priority claims
(the "Claims") in the Cuiaba Basin of Brazil. Subsequently, there was a dispute
between Parent and Mr. Haraoui relating to the Claims and the amount and nature
of the consideration that was to be paid by Parent to Mr. Haraoui in connection
with the delivery of the Claims. On June 9, 1999, Parent (and related parties)
seeking to resolve this dispute entered into an Agreement of Settlement and
Release (the "Agreement") with Haraoui and related parties (collectively
"Haraoui") to settle all disputes between Parent (and certain related parties)
and Haraoui relating to the Claims.
Pursuant to the terms of the Agreement, Haraoui released Parent and
certain related parties, including the officers and directors of Parent and the
Company, from all claims or liabilities relating to the Claims. Parent delivered
to Mr. Haraoui an aggregate of 250,000 shares of Parent Common Stock.
Pursuant to the terms of the Agreement, Haraoui delivered to the
Company the seventh (7th) claim on Exhibit A to the Agreement and agreed to use
his best efforts to deliver to the Company (or its assignee) all of the first
six (6) claims described on Exhibit A to the Agreement, certified by the DNPM,
with priority, having good, clean and transferrable title and published by the
Brazilian authorities in the Government Gazette (each a "Certified Claim" and
collectively the "Certified Claims"). Further, it was agreed that prior to June
30, 2002 (the "Termination Date"), Haraoui would not pledge, sell, give an
option to purchase, contract to sell or otherwise assign any of the
above-referenced claims to any person or entity other than the Company (or its
assignees).
7
<PAGE>
The Company agreed to pay to Haraoui or Haraoui's nominee an additional
cash payment of U.S.$20,000 for each Certified Claim that is delivered to the
Company. If a claim referenced on Exhibit A to the Agreement is not delivered to
the Company as a Certified Claim on or before the Termination Date, the Company
will have no obligation whatsoever to make any payment to Haraoui with respect
to such claim.
The Company owns no other claims or properties, except for its Minmet
shares and Minmet Warrants.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any pending legal proceeding, nor is the
Company's property the subject of a pending legal proceeding.
ITEM 4. CONTROL OF REGISTRANT.
(a) Upon the consummation of the Distribution, the
Company's Ordinary Shares will be held by the
stockholders of Parent as of the record date.
Pursuant to the Share Sale Agreement between Parent
and the ITIS Shareholders, executed in connection
with the acquisition by Parent of ITIS Technologies
Limited, the ITIS Shareholders, who currently own in
the aggregate 34% of the outstanding shares of Parent
Common Stock (not including outstanding options and
warrants), will not receive shares of the Company in
the Distribution.
(b) The following table sets forth information regarding
the beneficial ownership of Ordinary Shares on the
Distribution Date (assuming a record date of October
1, 1999) by (i) each person known by the Company to
beneficially own more than 5% of the outstanding
shares of Parent Common Stock on October 1, 1999,
(ii) each of the Company's Directors, Executive
Officers and (iii) the Company's Directors and
Executive Officers as a group.
8
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF INDIVIDUAL OR BENEFICIAL PERCENT
NUMBER OF PERSONS IN GROUP OWNER(1) OF CLASS(2)
<S> <C> <C>
Robert P. Jeffcock(3)(4)(2)(9)....................................... 250,000 2.75%
L. Clark Arnold(4)................................................... 420,000 4.62%
Francis C. Howard(9)................................................. 42,500 *
Adrian E.D. Leventhorpe(9)........................................... 0 0
Caithness Limited(5)................................................. 685,812 7.55
Zalcany Limited(6)(7)................................................ 725,334 7.82
Roy G. Williams(6)(7)................................................ 1,742,334 18.56
Reads Trustees Limited(5)............................................ 1,274,820 14.31
Igor Mousasticoshvily(8)............................................. 776,666 8.55
Directors and Executive Officers as a group (4 persons).............. 712,500 7.84
<FN>
- ---------------------------
* Less than 1%
(1) The persons named in this table have record ownership of such
shares and except as indicated in the footnotes to this table,
the persons named in the table have sole voting and
dispositive power with respect to shares shown as beneficially
owned by them. Pursuant to Rule 13d-3 under the Exchange Act,
a person has beneficial ownership of any securities as to
which such person, directly or indirectly, through any
contract, arrangement, undertaking, relationship or otherwise
has or shares voting power and/or investment power and as to
which such person has the right to acquire such voting and/or
investment power within 60 days. Percentage of beneficial
ownership as to any person as of a particular date is
calculated by dividing the number of shares beneficially owned
by such person by the sum of the number of shares outstanding
as of such date and the number of shares as to which such
person has the right to acquire voting and/or investment power
within 60 days.
(2) Based on 9,085,433 shares of Parent Common Stock outstanding
as of October 1, 1999 not including the shares of Common Stock
held by the ITIS Shareholders.
(3) Mr. Robert Jeffcock is a Director and President of Parent and
the Managing Director of the Company is included in a class of
potential beneficiaries in a Trust which owns Caithness
Limited. Does not include an option to purchase 200,000 shares
of Parent Common Stock that is presently exercisable because
such option does not entitle the holder to acquire Ordinary
Shares.
(4) Director and Officer of Parent and a consultant to the
Company. Does not include an option to purchase 50,000 shares
of Parent Common Stocks because such option does not entitle
the holder to acquire Ordinary Shares.
(5) Reads Trustees Limited, as trustee, has sole voting and
investment control with respect to the shares of Parent Common
Stock held by the following shareholders: Caithness Limited
(685,812) J.P. Jeffcock No. 2 Settlement Trust (484,008); The
Magnum Trust (105,000).
(6) Zalcany Limited is a company ultimately controlled and owned
by Mr. Williams and Mr. R. M. Harris. Together they
effectively share the voting and investment power of shares of
Parent Common Stock held by Zalcany Limited. Includes a
warrant to acquire 194,667 shares of Parent Common Stock that
is presently exercisable.
(6) The Williams' family owns the equity share capital of
Mustardseed Estates Limited. Accordingly, Mr. Williams
controls or shares voting and/or investment power over the
following shareholdings: Mr. Williams (725,334); Zalcany
Limited (725,334); and Mustardseed Estates Limited (250,000).
Also includes 69,000 shares of Parent Common Stock held by a
pension fund for Mr. Williams' benefit. Includes warrants to
acquire 68,000, 194,667 and 40,000 shares of Parent Common
Stock by Mr. Williams, Zalcany Limited and Mustardseed Estates
Limited, respectively, that are presently exercisable.
(7) Includes a warrant to acquire 133,333 shares of Parent Common
Stock that is presently exercisable.
9
<PAGE>
(8) Director of the Company. The addresses of each of the
directors of the Company may be located in Item 10 of this
Form 20-F.
</FN>
</TABLE>
10
<PAGE>
ITEM 5. NATURE OF TRADING MARKET.
There is currently no trading market for the Company's securities in
either its foreign jurisdiction or the United States. It is not anticipated that
any of the Company's Ordinary Shares will be listed on any domestic or foreign
stock exchange, Nasdaq stock exchange or on the OTC bulletin board. Nor is it
anticipated that any trading market will develop after the registration of the
Company's securities.
ITEM 6. EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY
HOLDERS.
None.
ITEM 7. TAXATION.
CERTAIN ISLE OF MAN INCOME TAX CONSEQUENCES OF OWNING AND DIS-
POSING OF COMPANY SHARES CAPITAL
The following is a summary of the material Isle of Man income tax
consequences that may be generally applicable to holders of Company shares of
capital after the Distribution. Interests in an Isle of Man public corporation
are called "share capital." Thus, for purposes of this section, the interests in
the Company shall be referred to as Company Share Capital rather than Ordinary
Shares. This summary is based on the Isle of Man Tax Laws, judicial decisions
and authoritative interpretations of the Isle of Man Tax Laws which are in
effect on the date hereof. The discussion below does not address all of the Manx
income tax consequences that may be relevant to owners of share capital entitled
to special treatment under the Isle of Man laws. Moreover, this discussion is
based on current law which is subject to change, and any such change could
modify the tax consequences discussed herein prospectively or retroactively.
Furthermore, this summary assumes that the Company Share Capital are held as
"capital assets" as defined by Isle of Man tax law. For purposes of this
summary, a "Non-Manx Holder" means a beneficial owner of an interest in the
Company which is not taxed as resident, as defined by Isle of Man tax law, of
the Isle of Man. A "Manx Holder" is a person or entity which is taxed as
resident of the Isle of Man.
Neither Parent nor the Company will seek any rulings from the Isle of
Man taxing authority with respect to any of the Isle of Man income tax
consequences of the ownership or disposition of Company Share Capital. In
addition, no tax opinion has been requested or received by Parent or the Company
with respect to the matters discussed herein. There can be no assurance that the
Manx taxing authority will not take a different position concerning the income
tax consequences of the ownership or disposition of Company Share Capital or
that any such position would not be sustained; however, Parent and the Company
believe the ownership and/or disposition of Company Share Capital will be
treated, for Manx income tax purposes, as provided below.
Dividends. A distribution will be treated as a dividend under Isle of
Man tax law to the extent it is a distribution of profits and not of share
capital. A dividend distribution with respect to the Company Share Capital paid
to Non-Manx Holders will be subject to a twenty percent (20%) withholding tax
when paid by the Company unless the Company is exempt from taxation. Parent
believes the Company will not be exempt from taxation in the immediate future.
Dividends paid to Manx Holders must be included in their assessable income;
however, it is not subject to withholding when paid by the Company.
Disposition. The Isle of Man does not tax capital gains. Consequently,
the disposition of the Company Share Capital by either a Non-Manx Holder or Manx
Holder will not result in a taxable event for purposes of Isle of Man income
taxes.
11
<PAGE>
THE FOREGOING IS A GENERAL SUMMARY OF THE MATERIAL ISLE OF MAN INCOME
TAX CONSEQUENCES OF A DIVIDEND PAID ON COMPANY SHARE CAPITAL AND/OR THE
DISPOSITION OF COMPANY SHARE CAPITAL SUBSEQUENT TO THE DISPOSITION
DESCRIBED ABOVE. THE SUMMARY IS MADE WITHOUT REGARD TO THE PARTICULAR
FACTS AND CIRCUMSTANCES OF EACH HOLDER'S TAX SITUATION AND STATUS. EACH
COMPANY SHARE CAPITAL HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING ANY SUCH SPECIFIC TAX SITUATION AND STATUS.
ITEM 8. SELECTED FINANCIAL DATA.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data is derived from the
consolidated financial statements of the Company. This data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained elsewhere herein. The data as of December
31, 1995, 1996, 1997 and 1998, and for the periods then ended are derived from
audited consolidated financial statements. The data as of June 30, 1999 and for
the six months then ended are derived from unaudited consolidated financial
statements. The unaudited data reflects all adjustments (consisting only of
normal recurring adjustments) that the Company considers necessary for a fair
presentation of the financial data. The results of operations for the six months
ended June 30, 1999 are not necessarily indicative of results to be expected in
any future period.
<TABLE>
<CAPTION>
Period from
November 3, Years ended Six months
1995 to December 31, ended
December 31, ---------------------------------------- June 30,
1995 1996 1997 1998 1999
------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Costs and expenses $ 54,173 $ 169,031 $ 81,148 $ 500,257 $ 51,527
Other income (expense) 8,830 (55,501) (109,626) (153,558) 814,983
Net earnings (loss) (45,343) (224,532) (190,774) (653,815) 763,456
Basic and diluted earnings
(loss) per share (.07) (.35) (.29) (1.01) 1.18
Weighted average shares
outstanding 647,857 647,857 647,857 647,857 647,857
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
--------------------------------------------------------- June 30,
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash 13,208 $ 3,287 $ 71,729 $ 82,485 $ 498
Working capital (deficit) (76,703) 2,563 35,066 71,000 551,398
Total assets 172,738 1,694,730 3,159,624 2,952,860 1,707,398
Total debt - 1,531,710 3,151,440 3,588,004 -
Stockholders' equity (deficit) 50,827 162,295 (28,479) (682,294) 1,707,398
</TABLE>
12
<PAGE>
ITEM 9. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company has been a development stage company, conducting its
operations in Brazil through its wholly-owned subsidiary, MBL which is an
authorized mining company organized under the laws of Brazil.
As discussed under "Description of Business", the Company sold its
interest in MBL on June 30, 1999, and recognized a gain of $886,965. As a result
of the sale, the remaining mining assets owned by the Company at June 30, 1999
are a single mining claim in the Cuiaba Basin of Brazil and the right to acquire
six additional claims in the same region. The Company's directors and
consultants are reviewing the aero-magnetic survey and other exploration data
provided during the quarter by Minmet, on the surrounding areas to the claims
owned by the Company, to evaluate its potential. Development of the claims is
dependent on the results of the reviews.
The Company's assets at June 30, 1999, consist principally of
receivables arising from the sale of MBL. The receivables are payable in 11.5
million shares of Minmet, the buyer, and warrants to purchase 7.7 million Minmet
shares. Subsequent to June 30, 1999, these receivables were collected, and the
Company sold 1.5 million Minmet shares for approximately $190,000. Because of
restrictions agreed to by the Company, the balance of the Minmet shares cannot
be sold until January 1, 2001 without the approval of Minmet.
The operations of the Company have been financed since inception by
loans from Parent. On June 30, 1999, the unpaid balance of the loan of
$1,626,236 was contributed by Parent to the capital of the Company.
Following the Distribution, the Company will be responsible for the
payment of all of its liabilities and obligations, and Parent will not make any
further loans or capital contribution to the Company. In addition, pursuant to
the Share Sale Agreement, dated July 22, 1999, in connection with the
acquisition by Parent of ITIS Technologies Limited (now named Authoriszor
Limited), Parent agreed with the former shareholder of ITIS Technologies Limited
that the Company, and not Parent, shall be responsible for all of the Company's
expenses following the date of such agreement, including all of the expenses in
connection with the Distribution.
In addition, as described under "Description of Business - Other
Business Opportunities," the Company may consider and pursue other business
opportunities to enhance shareholder value, including the acquisition of other
businesses.
Following the Distribution, the Company will be required to incur
expenses as a publicly held reporting company under the Exchange Act, including
legal fees, accounting fees, and fees for corporate administrative services.
At June 30, 1999, stockholders' equity of the Company was approximately
$1,700,000, consisting primarily of receivables payable in the form of 11.5
million Minmet shares valued at 7 pence per share and 7.7 million warrants
(exercisable at any time at 8 pence per share) valued at 5 pence per share. The
Company sold 1.5 million of these shares at 8 - 8.5 pence per share subsequent
to June 30, 1999. The 10 million remaining shares cannot be sold without Minmet
approval until January 1, 2001 under the terms of a restriction agreement. The
warrants are unrestricted and can be exercised and sold at any time.
Minmet shares are currently trading in significant volumes at 14-15
pence per share.
The Company's directors believe that proceeds from the exercise and
sale of the warrants, borrowing against (if need be) and the selling of the
remaining Minmet shares from time to time (as allowed under the restriction
agreement) will be sufficient to pay for the day to day development, operating
legal, accounting and other administrative expenses of the Company for the
foreseeable future.
Certain of the information contained in this Form 20-F constitutes
forward looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended,
13
<PAGE>
that involves certain risks, uncertainties and additional costs described in
this Form 20-F. The actual results that are achieved may differ materially from
any forward looking projections, due to such risks, uncertainties and additional
costs. Although the Company believes that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. Subsequent written and oral
forward looking statements attributable to the Company or persons acting on its
behalf are expressly qualified in their entirety by reference to such risks,
uncertainties and additional costs.
ITEM 9A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company holds no derivative financial instruments, derivative
commodity instruments or other financial instruments.
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT.
The Board of Directors currently consists of three (3) persons, Robert
P. Jeffcock, Francis C. Howard and Adrian E. D. Leventhorpe. Robert P. Jeffcock
serves as the Managing Director and Francis C. Howard serves as the Secretary.
The following table sets forth information about all Directors and executive
officers of the Company and all persons nominated or chosen to become such:
<TABLE>
<CAPTION>
YEAR FIRST
NAME AND BUSINESS ADDRESS AGE OFFICE ELECTED DIRECTOR
- ------------------------- --- ------ ----------------
<S> <C> <C> <C>
Robert P. Jeffcock 59 Managing Director 1996
2 The Promenade
Castletown
Isle of Man
United Kingdom 1M9-1BJ
Francis C. Howard 50 Director and Secretary 1997
33 Fairway Close
Onchan
Isle of Man
United Kingdom IM3 2EQ
Adrian E.D. Leventhorpe 36 Director 1999
118 Ballanorris Crescent
Ballabeg
Isle of Man
United Kingdom IM9 4EU
L. Clark Arnold 58 Consultant-Director N/A
201 East Rudusill Road of Exploration
Tuscan Arizona
</TABLE>
Robert P. Jeffcock - Mr. Jeffcock has been the Managing Director of the
Company since January 1996. Mr. Jeffcock has served as the Chairman of the Board
of Directors, Chief Financial Officer and Secretary of Parent and its
predecessor Starlight since May 10, 1996, and also served as President and Chief
Executive Officer of Parent and its predecessor Starlight from such date until
December 31, 1996. Mr. Jeffcock resumed his positions as President and Chief
Executive Officer of Parent on May 31, 1997. From 1987 until 1990 Mr. Jeffcock
was the Managing Director of Blue Angel Mining Ltd., a gold exploration company
in Ecuador and from 1990 until 1994 he was a director of Atlantis Diamonds Ltd.,
which was involved in diamond exploration and production in Brazil. From 1990
until 1994, Mr. Jeffcock was President of Rand Industries Inc., a mining
company. In 1981, Mr. Jeffcock was the co-founder and President of Isle
Resources Inc., a public oil and gas company. In 1984, Mr. Jeffcock co-founded
14
<PAGE>
Lysander Petroleum Ltd., which is now Pentex Energy PLC. Mr. Jeffcock was
educated at Bedales School and at Aiglon School Villars, Switzerland.
Francis C. Howard - Mr. Howard has served as a director and the
Secretary of the Company since December 1997. Mr. Howard qualified as a
Chartered Accountant with the firm of Binder Hamlyn in 1974 (FCA) and he has
been a member of the Chartered Institute of Taxation since 1975 (ATII). He is
the founder and principal of the Coda Corporate Services group of companies
("Coda") based in the Isle of Man. Coda specializes in the formation and
administration of companies worldwide and has its own in-house qualified legal
and accounting specialists. Mr. Howard writes and lectures extensively on
corporate and taxation matters and has advised governments of emerging countries
on taxation law.
Adrian E.D. Leventhorpe - Mr. Leventhorpe has served as director of the
Company since September 1999. From 1982 until 1995, Mr. Leventhorpe was an
insurance broker with Lloyds of London. From December 1993 to March 1995, Mr.
Leventhorpe was an insurance broker with the firm Alexander Howden. In 1995, Mr.
Leventhorpe left Alexander Howden to set up his own business which he sold in
1998 when he joined Coda. Mr. Leventhorpe currently serves as the New Business
Development Manager for Coda.
L. Clark Arnold - Mr. Arnold has served, and will continue to serve, as
a consultant to the Company and Director of Exploration for the Company. Mr.
Arnold is a director of Parent and has served as Vice President of Exploration
of Parent and Starlight since May 1996. Mr. Arnold is a registered professional
geologist in the State of Arizona. Since the mid-1970-s, Mr. Arnold has engaged
in a consulting practice located in Tucson, Arizona, focused on mineral
exploration in Southwest U.S., South America and the Southwest Pacific. Mr.
Arnold holds a MS Degree and a Pd.D. Degree in Geology, both from the University
of Arizona.
The Company is not aware of any "family relationships" (as defined in
Item 401(c) of Regulation S-B promulgated by the Commission) among directors,
executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
Except as set forth above, the Company is not aware of any event (as
listed in Item 401(d) of Regulation S-B promulgated by the Commission) that
occurred during the past five years that are material to an evaluation of the
ability or integrity of any director, person nominated to become a director,
executive officer, promoter or control person of the Company.
ITEM 11. COMPENSATION OF DIRECTORS AND OFFICERS.
The Company has paid no compensation to its Managing Director during
the fiscal years ended December 31, 1998, 1997 and 1996 and has granted no
options to its Managing Director during this time period. Neither Mr. Jeffcock
nor any other Director has received any options to purchase Ordinary Shares of
the Company. See "Item 12. Options to Purchase Securities from Registrant or
Subsidiaries." It is not anticipated that any Director, including, the Managing
Director, will receive any compensation from the Company; however, Directors,
including the Managing Director may receive reimbursement of their reasonable
expenses.
ITEM 12. OPTIONS TO PURCHASE SECURITIES FROM REGISTRANT OR
SUBSIDIARIES.
While there are no outstanding options or warrants to purchase the
Company's securities, the Company does have an obligation to issue Ordinary
Shares to holders of certain warrants (the "Distribution Warrants") to purchase
Parent Common Stock. Pursuant to certain existing and outstanding Distribution
Warrant agreements entered into by Parent, upon the issuance of a dividend on
the Parent Common Stock that is paid in securities of a company other than
Parent, the holder of the Distribution Warrant becomes automatically (without
the payment of any consideration) entitled to receive such number of the other
company's securities as such holder would receive had such holder exercised the
Distribution Warrant to purchase Parent Common Stock prior to the issuance of
the dividend. Because the Distribution is structured as a dividend on the Parent
Common Stock to be paid in Ordinary Shares, those individuals holding
Distribution Warrants to purchase the Parent Common Stock, upon the
Distribution, will be
15
<PAGE>
entitled to receive that number of Ordinary Shares that such holder would
receive had the holder of the Distribution Warrants exercised such Distribution
Warrants prior to the Distribution. As of October 1, 1999, there were
Distribution Warrants outstanding entitling the holders thereof to the right to
purchase 533,000 shares of Parent Common Stock. Since the Distribution is to be
effected by the issuance of one Ordinary Share for every one share of Parent
Common Stock, the Company will have an obligation to issue 533,000 Ordinary
Shares after the effectuation of the Distribution and upon the exercise of the
Distribution Warrants to purchase Parent Common Stock.
ITEM 13. INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS.
Mr. Howard and Mr. Leventhorpe both serve as managers with Coda. Coda
has provided, and will continue to provide after the Distribution, corporate
administrative services. For the Company's most recent fiscal year, Coda
received an annual fee of 945 pounds (Sterling) for the performance of such
services. It is estimated that the future annual fee for such services will be
2,400 pounds (Sterling). The corporate services provided by Coda include: the
preparation and filing of annual returns, the maintenance of statutory records
and a registered office, the performance of anti-money laundering due diligence
and providing director and corporate secretary services to the Company.
PART II
ITEM 14. DESCRIPTION OF SECURITIES TO BE REGISTERED.
(a) CAPITAL STOCK TO BE REGISTERED. As of the date hereof, there are
647,875 shares of 10 pence (Sterling) par value ordinary shares of the
Company issued and outstanding out of a total of 10,000,000 ordinary
shares, authorized for issuance. Each ordinary share is entitled to a
single vote. The ordinary shares have no conversion rights, liquidation
preferences, preemptive rights or any other special preferences.
Prior to the Distribution Date, Parent will be the sole beneficial
owner of all the issued and outstanding Ordinary Shares. On the
Distribution Date, the number of Ordinary Shares issued and outstanding
will be equal to the number of issued and outstanding shares of Parent
Common Stock as of the record date and will be held by the stockholders
of Parent as of the record date on a one for one share basis. See "Item
4. Control of Registrant." The Company has no warrants or options
outstanding except described in Item 12 hereof. Pursuant to the Share
Sale Agreement between Parent and the ITIS Shareholders, executed in
connection with the acquisition by Parent of ITIS Technologies Limited,
the ITIS Shareholders, who currently own in the aggregate 34% of the
outstanding shares of Parent Common Stock (not including outstanding
options and warrants), will not receive shares of the Company in the
Distribution.
The Company has no other securities of any kind.
(b) DEBT SECURITIES TO BE REGISTERED. Not Applicable.
(c) AMERICAN DEPOSITARY RECEIPTS. Not Applicable.
(d) OTHER SECURITIES TO BE REGISTERED. Not Applicable.
16
<PAGE>
PART III
ITEM 15. DEFAULTS UPON SENIOR SECURITIES.
The Company holds no debt securities.
ITEM 16. CHANGES IN SECURITIES AND CHANGES IN SECURITY FOR
REGISTERED SECURITIES.
None.
17
<PAGE>
PART IV
ITEM 17. FINANCIAL STATEMENTS.
Filed herewith beginning on page F-1 are the following audited
financial statements of the Company:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Report of Independent Certified Public Accountants..............................................................F-1
Consolidated Balance Sheets as of December 31, 1998 and 1997 and June 30, 1999 (unaudited)......................F-2
Consolidated Statements of Operations for the years ended December 31, 1998, 1997, 1996
and the period ended June 30, 1999 (unaudited)................................................................F-3
Consolidated Statements of Stockholders' Equity for the years ended December 31, 1998, 1997, 1996
and the period ended June 30, 1999 (unaudited)................................................................F-4
Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997, 1996
and the period ended June 30, 1999 (unaudited)................................................................F-5
Notes to Consolidated Financial Statements......................................................................F-6
</TABLE>
18
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Toucan Mining Plc
We have audited the accompanying consolidated balance sheets of Toucan Mining
Plc and subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholder's equity, and cash flows for
each of the three years in the period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Toucan Mining Plc
and subsidiary as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
March 5, 1999, except for the first
paragraph of Note A, as to which
the date is July 16, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
TOUCAN MINING PLC
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
ASSETS 1997 1998 1999
------ ------- ------
(unaudited)
<S> <C> <C> <C>
Cash $ 65,092 $ 82,485 $ 498
Receivables and other assets 6,637 35,665 550,900
----------- ----------- -----------
Total current assets 71,729 118,150 551,398
Noncurrent receivables - - 1,106,000
Mineral rights 3,087,895 2,834,710 50,000
----------- ----------- -----------
$ 3,159,624 $ 2,952,860 $ 1,707,398
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
Accrued expenses and other liabilities $ 21,478 $ 47,150 $ -
Amounts payable to related parties 15,185 - -
----------- ----------- -----------
Total current liabilities 36,663 47,150 -
Loans payable to parent 3,151,440 3,588,004 -
Stockholder's equity (deficit)
Common stock, (pound).10 par value per share; authorized
10,000,000 shares; issued and outstanding, 647,857
shares. 96,170 96,170 96,170
Additional paid-in capital 336,000 336,000 1,962,236
Accumulated deficit (460,649) (1,114,464) (351,008)
----------- ----------- -----------
Total stockholder's equity (deficit) (28,479) (682,294) 1,707,398
----------- ----------- -----------
$ 3,159,624 $ 2,952,860 $ 1,707,398
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
TOUCAN MINING PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
Six months
Years ended December 31, ended
---------------------------------------------- June 30,
1996 1997 1998 1999
-------------- ------------ ------------- --------------
(unaudited)
<S> <C> <C> <C> <C>
Cost and expenses
Legal and professional fees $ 52,309 $ 2,349 $ 8,351 $ 1,832
Consulting fees - 9,900 64,985 41,832
Abandoned claims - 50,000 385,420 -
Travel costs 110,451 3,999 7,413 7,531
Public relations - 1,844 24,217 -
Other 6,271 13,056 9,871 332
--------- --------- --------- ----------
Total cost and expenses 169,031 81,148 500,257 51,527
Other income (expense)
Interest income - - 86 -
Gain on sale of assets - - - 886,965
Interest expense 55,501 (109,626) (153,644) (71,982)
--------- --------- --------- ----------
Total other income
(expense) (55,501) (109,626) (153,558) 814,983
--------- --------- --------- ----------
Net earnings (loss) $(224,532) $(190,774) $(653,815) $ 763,456
========= ========= ========= ==========
Basic and diluted earnings (loss) per share $(.35) $(.29) $(1.01) $ 1.18
====== ====== ======= ======
Weighted average shares outstanding 647,857 647,857 647,857 647,857
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
TOUCAN MINING PLC
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
Common stock Additional
-------------------- paid-in Accumulated
Shares Amount capital deficit Total
------ ------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1996 647,857 $96,170 $ - $ (45,343) $ 50,827
Contribution from parent of mineral rights - - 336,000 - 336,000
Net loss - - - (224,532) (224,532)
------- ------- --------- ---------- -----------
Balance at December 31, 1996 647,857 96,170 336,000 (269,875) 162,295
Net loss - - - (190,774) (190,774)
------- ------- --------- ---------- -----------
Balance at December 31, 1997 647,857 96,170 336,000 (460,649) (28,479)
Net loss - - - (653,815) (653,815)
------- ------- --------- ---------- -----------
Balance at December 31, 1998 647,857 96,170 336,000 (1,114,464) (682,294)
Capital contribution from parent - - 1,626,236 - 1,626,236
Net earnings - - - 763,456 763,456
-------- ------- ---------- ---------- -----------
Balance at June 30, 1999 (unaudited) 647,857 $96,170 $1,962,236 $ (351,008) $ 1,707,398
======== ======= ========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
TOUCAN MINING PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months
Years ended December 31, ended
---------------------------------------------- June 30,
1996 1997 1998 1999
------ ------ ------ -----------
(unaudited)
<S> <C> <C> <C> <C>
Operating activities
Net earnings (loss) $ (224,532) $ (190,774) $ (653,815) $ 763,456
Adjustments to reconcile net earnings (loss)
to net cash used in operating activities
Gain on sale of assets - - - (886,965)
Claims written off - 50,000 385,420 -
Interest added to principal amount
of loans payable 7,159 109,626 153,644 71,982
Net changes in operating assets and liabilities
Receivables and other assets - - (35,665) 3,333
Accrued expenses and other liabilities 1,051 27,611 10,647 (10,497)
---------- --------- ---------- ----------
Net cash used in operating activities (216,322) (3,537) (139,769) (58,691)
Investing activities
Acquisition of mineral rights (1,235,912) (1,446,453) (132,393) (80,000)
Financing activities
Net borrowings from parent 1,442,313 1,511,795 292,555 56,704
----------- ----------- ---------- ----------
Net increase (decrease) in cash (9,921) 61,805 20,393 (81,987)
Cash at beginning of period 13,208 3,287 65,092 82,485
----------- ----------- ---------- ----------
Cash at end of period $ 3,287 $ 65,092 $ 82,485 $ 498
=========== =========== ========== ==========
Supplemental cash flow information
Interest paid $ 48,342 - - -
Income taxes paid - - - -
Noncash financing and investing activities:
Acquisition of mineral rights by issuance
of common stock of parent $ 336,000 - - -
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
TOUCAN MINING PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information with respect to the six months ended
June 30, 1999 is unaudited)
NOTE A - BASIS OF PRESENTATION
Toucan Mining Plc, formerly Toucan Mining, Ltd., is a wholly-owned
subsidiary of Authoriszor Inc. ("Parent"), formerly Toucan Gold Corporation.
On July 16, 1999, the Board of Directors of Parent approved the spin-off of
all of the outstanding shares of Toucan Mining Plc to the stockholders of
Parent. The record date for the spin-off will be selected by the Board of
Directors of the Company. The consummation of the spin-off is conditioned
upon the fulfillment of the following conditions (i) the registration of the
ordinary shares of the Company under the Securities and Exchange Act of
1934, as amended (the "Exchange Act"), and (ii) the furnishing of an
information statement to the stockholders of parent as of the record date
describing the Company and the spin-off that substantially complies with
Regulation 14C under the Exchange Act. The Board of Directors of the Company
will select a record date when it has more certainty as to the anticipated
effective date of the spin-off.
The consolidated financial statements as of June 30, 1999 and for the six
month period then ended contained herein are unaudited and have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, all
adjustments necessary for a fair presentation of the consolidated financial
position as of June 30, 1999, and the consolidated results of operations and
the consolidated cash flow for the six month period then ended have been
made. In addition, all such adjustments made, in the opinion of management,
are of a normal, recurring nature. The results of operations for the interim
periods are not necessarily indicative of the results to be expected for the
full fiscal year.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows:
Consolidation
The consolidated financial statements include the accounts of Toucan Mining
Plc ("Toucan"), an Isle of Man company, and its wholly-owned subsidiary,
Mineradora de Bauxita Ltda. ("MBL"), a Brazilian company (collectively, "the
Company").
Nature of Operations
The Company has been engaged in acquiring, exploring and developing mineral
rights in Brazil. No revenues have been generated. See Note C regarding sale
of the Company's mineral rights.
F-6
<PAGE>
TOUCAN MINING PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Mineral Rights
--------------
Acquisition costs of mineral rights and related exploration and development
expenditures are deferred. If deferred expenditures exceed estimated net
realizable values, the assets will be written down to their estimated net
realizable values. Costs relating to abandoned properties are written-off
when such a decision is made.
Currency Translation
--------------------
The functional currency of Toucan and MBL is the U.S. dollar. The
remeasurement of local currencies and transactions denominated in local
currencies creates translation adjustments which are included in
operations. For all periods presented, these translation adjustments were
not material.
Financial Instruments
---------------------
The carrying amounts reported in the balance sheet for cash and receivables
approximate fair value. It is not practical to determine the fair value of
loans payable to parent.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
NOTE C - SALE OF MINERAL RIGHTS
On December 3, 1998, Toucan sold an option to Minmet Plc ("Minmet"), an
Irish publicly-traded company, to purchase all of the outstanding capital
stock of MBL. The option price was 7.5 million shares of Minmet valued at
$677,500. The option had an exercise price of 25 million Minmet shares and
expired June 30, 1999. In connection with the purchase of option, Minmet
agreed to spend $500,000 on exploration of MBL's mineral claims, to make a
survey of the claims, and to pay the operating costs of MBL for the period
from November 1, 1998 to June 30, 1999. The proceeds from the sale of the
option were applied against the carrying value of the mineral rights.
Minmet also acquired from Parent for $275,000, an option to acquire
$1,000,000 of debt owed by MBL to Parent. The option exercise price was
$250,000 plus warrants to purchase 7.7 million Minmet shares at (pound).08
per share. This option also expired on June 30, 1999.
F-7
<PAGE>
TOUCAN MINING PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE C - SALE OF MINERAL RIGHTS - CONTINUED
On June 30, 1999, Minmet exercised the aforementioned options. The 25
million Minmet shares received by Toucan were valued at (pound).07 ($.1106)
per share, an aggregate value of $2,765,000. The quoted market price of
Minmet shares at June 30, 1999 of (pound).0825 per share was discounted for
accounting purposes because of restrictions agreed to by Toucan on their
sale. A gain on the sale of mineral rights of $886,965 was recognized by
Toucan in the six months ended June 30, 1999.
At June 30, 1999, the amounts due from Minmet for the option exercise are
reflected on the balance sheet as a receivable. The portion of receivable
relating to Minmet shares that cannot be sold within one year because of the
aforementioned restrictions on sale, is classified on the balance sheet as a
noncurrent receivable. In July 1999, Minmet paid to Toucan the entire amount
of consideration due.
On June 30, 1999, Toucan transferred its right to 13.5 million of the Minmet
shares to Parent as a partial payment on its debt to Parent. Parent
contributed its right to the 7.7 million warrants due from Minmet to the
capital of Toucan. The unpaid balance of Parent's loan to Toucan of
$1,626,236 was also contributed to the capital of Toucan.
NOTE D - INCOME TAXES
As an Isle of Man private company, Toucan has not been subject to taxes on
income. MBL was subject to income taxes in Brazil. However, for the period
MBL was owned by Toucan, MBL had no taxable income. As a result of Toucan's
conversion to a public limited company on August 4, 1999, Toucan will be
subject to taxes on future income.
NOTE E - COMMITMENTS
Toucan is obligated to purchase six mining claims in Brazil as settlement of
a 1996 agreement with Joseph Haraoui, at a price of $20,000 per claim. The
obligation is contingent upon Mr. Haraoui delivering to Toucan the proper
documentation prior to June 30, 2002, to enable the claims to be transferred
to Toucan.
F-8
<PAGE>
ITEM 18. FINANCIAL STATEMENTS.
Not Applicable.
ITEM 19. FINANCIAL STATEMENTS AND EXHIBITS.
Financial Statements - See Item 17.
Exhibits
1.1 Memorandum of Association of Toucan Mining PLC
1.2 Articles of Association of Toucan Mining PLC
2.1 Agreement and Settlement and Release, dated June 9, 1999, by
and between the Company, Toucan Gold Corporation and Joseph
Haraoui. (Incorporated by reference to Exhibit 10.1 of Toucan
Gold Corporation's Current Report on Form 8-K, filed by Toucan
Gold Corporation with the Securities and Exchange Commission
on July 15, 1999.)
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant certifies that it meets all of the requirements for filing
on Form 20-F and has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Toucan Mining Plc
(Registrant)
Date: October 26, 1999 By: /s/ Robert P. Jeffcock
-----------------------
Robert P. Jeffcock,
Managing Director
19
EXHIBIT 1.1
THE COMPANIES ACTS 1931- 1993
ISLE OF MAN
PUBLIC COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
TOUCAN MINING PLC
1. The name of the Company is TOUCAN MINING PLC.
2. The Company is a public Company.
3. The liability of the members is limited.
4. There are no restrictions on the exercise of the rights powers and
privileges of the Company.
5. The share capital of the Company is (pound)2000.00 divided into 2000
Ordinary Shares of (pound)1.00 each.
6. The subscribers to this Memorandum of Association:
(a) Wish to be formed into a Company pursuant to this Memorandum;
(b) agree to take the number of shares shown opposite their names;
(c) declare that all the requirements of the Companies Acts 1931 to 1993 in
respect of matters relating to registration and of matters precedent and
incidental thereto have been complied with.
EXHIBIT 1.2
THE COMPANIES ACTS 1931- 1993
ISLE OF MAN
PUBLIC COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
TOUCAN MINING PLC
Adopted by a Special Resolution of the Members dated 4th August 1999.
1. The regulations contained in Table A in the First Schedule to the
Comparison Act 1931 shall not apply to the Company.
2.
(1) In these Articles if consistent with the subject or context the following
words shall bear the following meanings:
THE ACTS: the Companies Acts 1931 to 1993 and any statutory
modification or re-enactment thereof for the time
being in force.
THESE ARTICLES: these Articles of Association of the Company as
originally framed or from time to time altered.
THE GROUP: the Company and any subsidiary or subsidiaries
for the time being of the Company.
THE HOLDER: in relation to shares the member whose name is
entered in the register of members as the holder
of the shares.
LISTING: the admission of the share capital of the Company
(or any part thereof) to the List maintained by
any recognized stock or securities exchange in
any part of the world.
OFFICE: the registered office of for the time being of
the Company.
PAID UP: paid up or credited as paid up.
<PAGE>
THE SEAL: the common seal of the Company.
SECRETARY: any person appointed by the directors to perform
the duties of the secretary of the Company
including (subject to the provisions of the Acts)
an assistant or deputy secretary.
SHARES: Ordinary Shares of (pound)0.10 each.
(2) Save as aforesaid words or expressions contained in these articles shall if
not inconsistent with the subject or context bear the same meaning as in
the Acts.
(3) Words importing the singular number shall include the plural number and
vice versa. Words importing the masculine gender shall include the feminine
and persons shall include firms or corporations and vice versa.
(4) References to writing shall include typewriting, printing, lithography,
photography and any other modes of representing or reproducing words in a
legible and non-transitory form.
(5) Where for any purpose an ordinary resolution of the Company is required a
special or extraordinary resolution shall also be effective and where for
any purpose an extraordinary resolution of the Company is required a
special resolution shall also be effective.
(6) The headings are inserted for convenience only and shall not affect the
construction of these Articles.
SHARE CAPITAL
- -------------
3.
(1) The authorized share capital of the Company at the date of adoption of
these Articles is (pound)1,000,000.00 divided into 10,000,000 shares of
(pound)0.10 each.
(2) The shares shall entitle the holders thereof to the rights and subject them
to the restrictions and provisions hereinafter appearing and shall, except
where otherwise provided herein, confer upon the holders thereof the same
rights.
4. Subject to these Articles, the Company may in accordance with and subject
to the provisions of the Acts in force for the time being:
(1) give financial assistance for the purpose of any acquisition of shares in
the Company or its holding company but only as permitted by Section 6 of
the Companies Act 1992;
<PAGE>
(2) issue shares which are to be redeemed or are liable to be redeemed at the
option of the Company or the holder thereof except that no redeemable
shares may be issued at any time when there are no issued shares of the
Company which are not redeemable Provided Always that any purchase by the
Company of redeemable shares not made through a recognized Stock Exchange
or by tender shall be limited to a maximum price determined by the Company
in General Meeting and that purchase by tender shall be available to all
shareholder alike;
(3) purchase its own shares including its own redeemable shares;
(4) make payment in respect of the redemption or purchase of any of its own
paid up shares out of the distributable profits of the Company or the
proceeds of a fresh issue of shares and as to redemption on such date or
dates (to be fixed prior to the issue of such shares) and terms and in such
manner as may be determined at any time or times by the directors Provided
Nevertheless that the amount to be paid on redemption shall be fixed on and
by the terms of issue of the shares.
Provided Always that any shares purchased or redeemed by the Company shall
be treated as canceled.
5. Subject to the provisions of these Articles, the unissued shares for the
time being in the capital of the Company shall be at the disposal of the
directors who may allot grant options over or otherwise dispose of the same
to such persons and on such terms as they think fit.
6. Without prejudice to any rights attached to any existing shares any shares
may be issued with such rights or restrictions as the Company may by
ordinary resolution determine.
7. The Company may exercise the powers of paying commission conferred by the
Acts. Subject to the provisions of the Acts, the commission may be
satisfied by the payment of cash or by the allotment of fully or partly
paid shares or partly in one and partly in the other. The Company may also
on any issue of shares capital pay such brokerage as may be lawful.
8. Except as required by law no person shall be recognized by the Company as
holding any share upon any trust and (except as by these articles or by law
otherwise provided) the Company shall not be bound by or to recognize (even
when having notice thereof) any interest in any share except an absolute
right to the entirety thereof in the holder.
VARIATION OF RIGHTS
9. Subject to the provisions of the Acts, if at any time the capital of the
Company is divided into different classes of shares the rights attached to
any class may be varied or abrogated either while the Company is a going
concern or during or in contemplation of a winding up with the consent in
writing of the holders of two-thirds in nominal value of the issued shares
of that class or with the sanction of any special resolution passed at a
separate meeting of the holders
<PAGE>
of the shares of that class but not otherwise. To every such separate
meeting the provisions of these articles relating to general meetings shall
apply but so that the necessary quorum at any such meeting shall be two
persons together holding or representing by proxy at least one-third in
nominal value of the issued shares of the class in question.
10. Unless otherwise expressly provided by the rights attached to any shares,
those rights shall be deemed to be varied by the reduction of the capital
paid upon those shares and by the creation or issues of further shares
ranking in priority for payment of a dividend or in respect of capital or
which confer on the holders voting rights more favorable than those
conferred by such first mentioned shares but shall not otherwise be deemed
to be varied by the creation or issue of further shares ranking pari passu
therewith or subsequent thereto.
SHARE CERTIFICATE
- -----------------
11.
(1) Every person whose name is entered as a member in the register of members
shall be entitled without payment to one certificate for all the shares of
each class held by him including where appropriate a balance certificate or
upon payment for every certificate after the first of such reasonable sum
as the directors may determine to several certificates each for one or more
of his shares. Every certificate shall be under the seal or an official
seal kept by virtue of the Stock Exchange (Competition of Bargains) (Isle
of Man) Act 1979 and shall specify the number class and distinguishing
numbers of the shares to which it relates and the amount or respective
amounts paid up thereon. The Company shall not be bound to issue more than
one certificate for shares held jointly by several persons and delivery of
a certificate to one joint holder shall be a sufficient delivery to all of
them.
(2) Share certificates and subject to the provisions of any instrument
constituting or securing the same certificates issued under the seal in
respect of any debentures need not be signed or counter-signed or the
signatures may be affixed thereto by such mechanical means as may be
determined by the directors.
12. If a share certificate be defaced, worn-out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnify and payment of
the expenses incurred by the Company in investigating evidence as the
directors may determine but otherwise free of charge and (in the case of
defacement or wearing-out) on delivery up of the old certificate.
13. The Company shall have a first and paramount lien in every share (not being
a fully paid share) for all moneys (whether presently payable or not)
payable at a fixed time or called in respect of that share. The directors
may at any time declare any share to be wholly or in part exempt from the
provision of this article. The Company's lien on a share shall extend to
all dividends or other moneys payable in respect of it.
14. The Company may sell in such manner as the directors determine any shares
on which the Company has a lien if a sum in respect of which the lien
exists is presently payable and is not
<PAGE>
paid within fourteen days after notice in writing demanding payment of the
sum presently payable and giving notice of intention to sell in default has
been given to the holder of the share or the person entitled to it by
reason of the death or bankruptcy of the holder.
15. To give effect to any such sale the directors may authorize some person to
execute an instrument of transfer of the shares sold to or in accordance
with the directions of the purchaser. The title of the transferee to the
shares shall not be affected by any irregularity in the proceedings in
reference to the sale.
16. The net proceeds of the sale after payment of the costs shall be applied in
payment of so much of the sum for which the lien exists as is presently
payable and any residue shall (upon surrender to the Company for
cancellation of the certificate for the shares sold and subject to a like
lien for any moneys not presently payable as existed upon the shares before
the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES AND FORFEITURES
- -------------------------------
17. Subject to the provisions of these articles, and to the terms of allotment,
the directors may from time to time make calls upon the members in respect
of any moneys unpaid on their shares (whether in respect of nominal value
or premium) and each member shall (subject to receiving at least fourteen
clear days' notice specifying when and where payment is to be made) pay to
the Company as required by the notice, the amount called on his shares. A
call may be required to be paid by installments. A call may, before receipt
by the Company of a sum due thereunder, be revoked in whole or in part and
payment of a call may be postponed in whole or part. A Member shall remain
liable for calls made upon him notwithstanding the subsequent transfer of
the shares in respect whereof the call was made.
18. A call shall be deemed to have been made at the time when the resolution of
the directors authorizing the call was passed.
19. The joint holders of a share shall be jointly and severally liable to pay
all calls in respect thereof.
20. If a call remains unpaid after it has become due and payable, the person
from whom the sum is due shall pay interest in the unpaid sum from the day
it became due until it is paid at the rate fixed by the terms of allotment
of the share or in the notice of the call or if no rate is fixed at such
rate not exceeding 10 per cent per annum as the directors may determine but
the directors shall be at liberty to waive payment of such interest wholly
or in part.
21. A sum payable in respect of a share on allotment or at any fixed date
whether in respect of nominal value or premium or as installment of a call
shall be deemed to be a call and if it is not paid the provisions of these
articles shall apply as if that sum had become due and payable by virtue of
a call.
<PAGE>
22. The directors may on the issue of shares differentiate between the holders
as to the amount of calls to be paid and the times of payment.
23. The directors may receive from any member willing to advance the same all
or any part of the money unpaid upon the shares held by him beyond the sums
actually called up thereon as a payment in advance of calls and such
payment in advance of calls shall extinguish so far as the same shall
extend the liability upon the shares in respect of which it is advanced or
so much thereof as from time to time exceeds the amount of the calls then
made upon the shares in respect of which it has been received at such rate
as the member paying such sum and the directors agree; but provided that
any such payment in advance of calls shall not entitle the holder of the
shares to participate in respect thereof in a dividend subsequently
declared.
24. If any call or installment of a call remains unpaid after it has become due
and payable the directors may give to the person from whom it is due not
less than fourteen clear days' notice requiring payment of the amount
unpaid together with any interest which may have accrued. The notice shall
name the place where payment is to be made and shall state that if the
notice is not complied with any share in respect of which it was given may
before the payment required by the notice has been made be forfeited by a
resolution of the directors and the forfeiture shall include all dividends
or other moneys payable in respect of the forfeited shares and not paid
before the forfeiture.
25. Subject to the provisions of the Acts, a forfeited share may be sold
re-allocated or otherwise disposed of on such terms and in such manner as
the directors determine either to the person who was before the forfeiture
the holder or to any other person. Where, for the purpose of its disposal a
forfeited share is to be transferred to any person, the directors may
authorize some person to execute an instrument of transfer of the share to
that person.
26. A person, any of whose shares have been forfeited, shall cease to be a
member in respect of them and shall surrender to the Company for
cancellation the certificate for the share forfeited but shall remain
liable to the Company for all moneys which at the date of forfeiture were
presently payable by him to the Company in respect of those shares with
interest at such rate as may be fixed by the terms of allotment of the
shares or in the notice of the call or if no rate is fixed at such rate not
exceeding 12 per cent per annum as the directors may determine from the
date of forfeiture until payment, but the directors may waive payment
wholly or in part or enforce payment without any allowance for the value of
the shares at the time of forfeiture or for any consideration received on
their disposal.
27. A statutory declaration by a director or the secretary that a share has
been forfeited on a specified date shall be conclusive evidence of the
facts stated in it against all persons claiming to be entitled to the share
and the declaration shall (subject to the execution of any instrument of
transfer if necessary) constitute a good title to the share and the person
to whom the share the share is disposed of shall not be bound to see to the
application of the consideration if any nor shall his title to the share be
affected by an irregularity in the proceedings in reference to the
forfeiture of disposal of the share.
<PAGE>
TRANSFER OF SHARES
- ------------------
28. The instrument of transfer of a share may be in any usual form or in any
other form which the directors may approve and shall be executed by or on
behalf of the transferor and unless the share is fully paid by or on behalf
of the transferee.
29. The directors may in their absolute discretion, and without giving any
reason, refuse to register the transfer of a share which is not fully paid;
but if they do so, they shall within two months after the date on which the
transfer was lodged with the Company or its Registrars, send to the
transferee notice of the refusal.
30. The directors may also decline to recognize an instrument of transfer
unless:
(a) it is lodged at the office or at such other place as the directors may
appoint and is accompanied by the certificate for the shares to which it
relates and such other evidence as the directors may reasonably require to
show the right of the transferor to make the transfer.
(b) it is in respect of only one class of share; and
(c) it is in favor of not more than four transferees.
31. The registration of transfers of shares or debentures or of any class of
shares or debentures may be suspected at such times and for such periods
(not exceeding thirty days in any year) as the directors may determine.
32. No fee shall be charged for the registration of any instrument of transfer
or other document relating to or affecting the title to any share of
debenture.
33. All instruments of transfer which are registered shall be retained by the
Company, but any assignment of transfer which the directors refuse to
register shall be returned to the person depositing it.
34. The company shall be entitled to destroy all instruments of transfer which
have been registered at any time after the expiration of six years from the
date of registration thereof and all dividend mandates and notifications of
change of address at any time after the expiration of two years from the
date of recording thereof and all share certificates which have been
canceled at any time after the expiration of one year from the date of the
cancellation thereof and it shall be conclusively presumed in favor of the
Company that every entry in the register purporting to have been made on
the basis of an instrument of transfer or other document so destroyed as
duly and properly made that every instrument of transfer so destroyed was a
valid and effective instrument duly and properly registered that every
share certificate so destroyed was a valid and effective certificate duly
and properly canceled and that every other document hereinbefore mentioned
so destroyed was a valid and effective document in accordance with the
recorded particulars thereof in the books or records of the Company;
provided that:
<PAGE>
(a) this article shall apply only to the destruction of a document in good
faith and without notice of any claim (regardless of the parties thereto)
to which the document might be relevant;
(b) nothing in this article shall be construed as imposing upon the Company any
liability in respect of the destruction of any such document earlier than
as set out in this article or in any other circumstances which would not
attach to the Company in the absence of this article;
(c) references in this article to the destruction of any document include
references to the disposal thereof in any manner.
35. The Company shall be entitled to sell at the best price reasonably
obtainably any share held by a member or any share to which a person is
entitled by transmission if all of the following stipulations are complied
within relation thereto:
(1) for a period of 12 years no check or warrant sent by the Company through
the post in a prepaid letter addressed to the member or to the person
entitled by transmission to the share at his registered address or at the
last known address given by the member or the person entitled by
transmission as the address to which the checks and warrants are to be sent
has been cashed and no communication has been received by the Company from
the member or person concerned:
(2) the Company has at the expiration of the said period of 12 years by
advertisement in both a leading London newspaper and in a newspaper
circulating in the area in which the address referred to in paragraph (1)
of its article located given notice of its intension to sell such share;
and
(3) the Company has not during the further period of three months after the
date of the advertisement and prior to the sale of the share received any
communication from the member or person entitled by transmission;
and for the purpose of giving effect to any such sale, the Company may
appoint any person to execute as transferor an instrument of transfer of
such shares and such instrument shall be as effective as if it had been
executed by the registered holder of or person entitled by transmission to
such share. The Company shall be liable to account without interest to the
member or other person entitled to such share for the net proceeds of such
sale and shall be deemed to be his debtor and not trustee for him in
respect of the same.
36. Nothing in these articles shall preclude the directors from recognizing a
renunciation of the allotment of any share by the allotee in favor of some
other person.
TRANSMISSION OF SHARES
- ----------------------
37. If a member dies the survivor or survivors where he was a joint holder and
his legal personal representatives where he was a sole holder or the only
survivor of joint holders shall be the only person recognized by the
Company as having any title to his interest; but nothing herein
<PAGE>
contained shall release the estate of a deceased member from any liability
in respect of any share which had been jointly held by him.
38. A person becoming entitled to a share in consequence of the death or
bankruptcy of a member or otherwise by operation of law may upon such
evidence being produced as the directors may properly require elect either
to become the holder of the share or to have some person nominated by him
registered as the transferee. If he elects to become the holder he shall
give notice to the Company to that effect. If he elects to have another
person registered, he shall execute an instrument of transfer of the share
to that person. All the provisions of these articles relating to the
transfer of shares shall apply to the notice or instrument of transfer as
if it were any instrument of transfer signed by the member and the death or
bankruptcy of the member had not occurred.
39. A person becoming entitled to a share by reason of the death or bankruptcy
of a member or otherwise by operation of law shall have the rights to which
he would be entitled if he were the holder of the share except that he
shall not, before being registered as the holder of the share, be entitled
in respect of it to attend or vote at any meeting of the Company or at any
separate meeting of the holders of any class of shares in the Company.
STOCK
- -----
40. The Company may by ordinary resolution convert any paid up shares into
stock and reconvert any stock into paid up shares of any denomination.
After the passing of any resolution converting all the fully paid up shares
of any class in the capital of the Company into stock any shares of that
class which subsequently become fully paid up and rank pari passu in all
other respects with the shares so converted shall by virtue of this article
and such resolution be converted into stock transferable in the same units
as the shares already converted.
41. The holder of stock may transfer the same or any part thereof in the same
manner and subject to the same regulation as would have applied to the
shares from which the stock arose if they had not been converted or as near
thereto as circumstances admit but the directors may from time to time as
they think fit fix the minimum amount of stock transferable but so that
such minimum shall not exceed the nominal amount of each of the shares from
which the stock arose.
42. The holder of stock shall according to the amount of the stock held by them
have the same rights privileges and advantages in all respects as if they
held shares from which the stock arose provided that no such privilege or
advantage (except participation in dividends and profits of the Company and
in the assets on a winding up) shall be conferred by an amount of stock
which would not if existing in shares have conferred such privilege or
advantage.
43. All the provisions of these articles applicable to paid up shares shall
apply to stock in all such the words "share" and "member" shall include
"stock" and "stockholder" respectively.
<PAGE>
ALTERATION OF CAPITAL
- ---------------------
44. The Company may by ordinary resolution:
(a) increase its capital by such sum to be divided into shares of such amount
as the resolution prescribes;
(b) consolidated and divide all or any of its shares into shares of larger
amount;
(c) subject to the provisions of the Acts, sub-divide its shares or any of them
into shares of smaller amount than is fixed by the memorandum and the
resolution may determine that as between the shares resulting form the
sub-division any of them may have preference or advantage as compared with
the others as the Company has power to attach to unissued or new shares;
and
(d) cancel any shares which, at the date of the passing of the resolution, have
not been taken or agreed to be taken by any person and diminish the amount
of its share capital by the amount of the shares so canceled.
45. Subject to the provisions of the Acts, the Company may by Special
Resolution reduce its share capital, any capital redemption reserve and any
share premium account in any way.
46. Whenever, as a result of any consolidation of shares, any member or members
would become entitled to fractions of a share, the directors may for the
purpose of eliminating such fractions, sell the shares representing the
fractions for the best price reasonably obtainable and distribute the
proceeds of sale in due proportion among the members who would have been
entitled to the fractions of shares and, for the purpose of any such sale,
the directors may authorize some person to execute an instrument of
transfer of the shares representing the fractions to or in accordance with
the directions of the purchaser. The transferee shall not be bound to see
to the application of the purchase money, nor shall all his title to the
shares be affected by any irregularity or invalidity in the proceedings in
reference to the sale.
GENERAL MEETINGS
- ----------------
47. Subject to the provisions of the Acts, the annual general meeting shall be
held at such time and place as the directors may determine. Not more than
fifteen months shall elapse between the date of one annual general meeting
and that of the next.
48. All general meetings, other than an annual general meeting, shall be called
extraordinary general meetings.
49. The directors may, whenever they think fit, convene an extraordinary
general meeting and, extraordinary general meetings shall also be convened
on such requisition or in default, may be convened by such requisitionists
as provided by Section113 of the Companies Act 1931. If at any time there
are not within the Isle of Man sufficient directors capable of acting to
form a quorum, any director or any two members of the Company may convene
an
<PAGE>
extraordinary general meeting in the same manner as nearly as possible as
that in which meetings may be convened by the directors.
NOTICE OF GENERAL MEETINGS
- --------------------------
50. Subject to the provisions of the Acts, an annual general meeting and an
extraordinary meeting for the passing of a special resolution shall be
called by twenty-one days' notice at the least and all other extraordinary
general meeting shall be called by fourteen days' notice at the least. The
notice shall be exclusive of the day on which it is served or deemed be
served and of the day for which it is given. Every notice shall be in
writing and shall specify the place, the day and the time of the meeting
and (in the case of special business) the general nature of such business
and in the case of an annual general meeting shall specify the meeting as
such. Notices shall be given in manner hereinafter mentioned to all the
members other than those who under the provisions of these articles, or
under the rights attached to the shares held by them, are not entitled to
receive the notice and to the auditors for the time being of the Company.
51. The accidental omission to give notice of a meeting to or the non-receipt
of notice of a meeting by any person entitled to receive notice shall not
invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
- -------------------------------
52. All business shall be deemed special that is transacted at an extraordinary
general meeting. All business that is transacted at an annual general
meeting shall also be deemed special with the exception of declaring
dividends, the consideration of the accounts and balance sheets and the
reports of the directors and auditors and other documents required to be
annexed to the balance sheet, the appointment of directors in the place of
those retiring (whether by rotation or otherwise), and the re-appointment
of the retiring auditors (other than retiring auditors who have been
appointed by the directors to fill a casual vacancy) and the fixing of the
remuneration of the auditors.
53. No business shall be transacted at any meeting unless a quorum is present.
Save as otherwise provided in these articles, three persons entitled to
vote upon the business to be transacted each being a member or a duly
authorized representative of a corporation, which is a member shall be a
quorum for all purposes.
54. If a quorum is not present within half an hour from the time appointed for
the meeting, or if during a meeting a quorum ceases to be present, the
meeting if convened on the requisition of or by members shall be dissolved.
In any other case, it shall stand adjourned to the same day in the next
week at the same time and place or to such time and place as the directors
may determine. If at the adjourned meeting a quorum is not present within
fifteen minutes from the time appointed for the meeting, the members
present shall be a quorum.
<PAGE>
55. The chairman (if any) of the Board of Directors, or in his absence, the
Deputy Chairman or in the absence of both of them some other director
nominated by the directors, shall preside as chairman at every general
meeting of the Company, but if neither the chairman, nor the deputy
chairman, nor such other director (if any) is present within fifteen
minutes after the time appointed for holding the meeting, or if any such
person who is present is unwilling to act, the directors present shall
elect one of their number present to be chairman.
56. If no director is willing to act as chairman, or if no director is present
within fifteen minutes after the time appointed for holding the meeting,
the members present and entitled to vote shall choose one of their number
to be chairman.
57. A director shall, notwithstanding that he is not a member, be entitled to
attend and speak at any general meeting and at any separate meeting of the
holders of any class of shares in the Company.
58. The Chairman may, with the consent of a meeting at which a quorum is
present (and shall if so directed by the meeting), adjourn the meeting from
time to time and from place to place but no business shall be transacted at
an adjourned meeting other than business which might lawfully have been
transacted at the Meeting; but it shall not be necessary to specify in the
notice the nature of the business to be transacted at the adjourned
meeting. Save as aforesaid, it shall not be necessary to give notice of an
adjournment.
59. If an amendment shall be proposed to any resolution under consideration but
shall in good faith be ruled out of order by the chairman of the meeting,
the proceedings on the substantive resolution shall not be invalidated by
any error in such ruling.
60. A resolution put to the vote of a meeting shall be decided on a show of
hands unless before or on the declaration of the result of the show of
hands, a poll is duly demanded. A poll may be demanded:
(a) by the chairman; or
(b) by not less than three members present in person or by proxy and having the
right to vote at the meeting; or
(c) by a member or members representing not less than one-tenth of the total
voting rights of all the members having the right to vote at the meeting;
or
(d) by a member or members holding shares of the Company conferring a right to
vote at the meeting being shares on which the aggregate sum has been paid
up equal to not less than one- twentieth of the total sum paid up on all
the shares conferring that right.
61. Unless a poll is duly demanded, a Declaration by the chairman that a
resolution has been carried or carried unanimously or by a particular
majority or lost or not carried by a particular majority and an entry to
that effect in the book containing the minutes of the meeting shall be
<PAGE>
conclusive evidence of the fact without proof of the number or proportion
of the votes recorded in favor of or against the resolution.
62. The demand for a poll may before the poll is taken be withdrawn with the
consent of the chairman and a demand so withdrawn shall not be taken to
have invalidated the result of a show of hands declared before the demand
was made.
63. Except as provided in article 66, a poll shall be taken as the chairman may
direct and he may appoint scrutineers (who need not be members) and fix a
time and place for declaring the result of the poll. The result of the poll
shall be deemed to be the resolution of the meeting at which the poll was
demanded.
64. In the case of an equality of votes whether on a show of hands or on a
poll, the chairman shall be entitled to a casting vote in addition to any
other vote he may have.
65. A poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other question
shall be taken either forthwith or at such time and place as the chairman
directs not being more than thirty days from the conclusion of the meeting.
The demand for a poll shall not prevent the continuance of a meeting for
the transaction of any business other than the question on which the poll
was demanded. If a poll is demanded before the declaration of the result of
a show of hands and the demand is duly withdrawn, the meeting shall
continue as if the demand had not been made.
66. No notice need be given of a poll not taken forthwith if the time and place
at which it is to be taken are announced at the meeting in respect of which
it is demanded. In any other case at least seven days' notice shall be
given specifying the time and place at which the poll is to be taken.
VOTES OF MEMBERS
- ----------------
67. Subject to any rights or restrictions attached to any shares on a show of
hands, every member who (being an individual) is present in person or
(being a corporation) is present by a duly authorized representative, shall
have one vote and on a poll every member shall have one vote for every
share of which he is the holder.
68. In the case of joint holders the vote of the senior who tenders a vote
whether in person or by representative or proxy shall be accepted to the
exclusion of the votes of the other joint holders and for this purpose
seniority shall be determined by the order in which the names of the
holders stand in the register of members.
69. A member in respect of whom an order has been made by any competent court
by reason of mental disorder may vote whether on a show of hands or on a
poll by his committee receiver curator bonis or other person authorized in
that behalf by that Court who may on a poll vote by proxy. Evidence to the
satisfaction of the directors of the authority of the person claiming to
exercise the right to vote shall be deposited at the office or at such
other place as is
<PAGE>
specified in accordance with these articles for the deposit of instruments
of proxy not less than 48 hours before the time appointed for holding the
meeting or adjourned meeting at which the right to vote is to be exercised
or in the case of a poll not taken on the same day as the meeting or
adjourned meeting at which it is demanded not less than 24 hours before the
time appointed for the taking of the poll and in default the right to vote
shall not exercisable.
70. Unless the directors otherwise determine, no member shall vote at any
general meeting, either in person, or by representative or proxy in respect
of any share held by him unless all moneys presently payable by him in
respect of that share have been paid.
71. No objection shall be raised to the qualification of any voter except at
the meeting or adjourned meeting at which the vote objected to is tendered
and every vote not disallowed at the meeting shall be valid for all
purposes. Any objection made in due time shall be referred to the chairman
of the meeting whose decision shall be final and conclusive.
72. On a poll, votes may be given either personally or by representative or
proxy (who need not be a member). A member entitled to more than one vote
need not, if he votes, use all his votes or cast all the votes he uses the
same way.
73. The instrument appointing a proxy shall be in writing in any usual form or
in any other form which the directors may approve and shall be executed by
or on behalf of the appointor. A corporation may execute a form of proxy
either under its common seal or under the hand of a duly authorized
officer. A member may appoint more than one proxy to attend on the same
occasion. Deposit of an instrument of proxy shall not preclude a member
from attending and voting at the meeting or at any adjournment thereof.
74. The instrument appointing a proxy, and any authority under which it is
executed, or a copy certified notarially, or in some other way approved by
the directors, shall be deposited at the office, or at such other place
within the Isle of Man as is specified in the notice convening the meeting
or in any instrument of proxy sent out by the Company in relation to the
meeting not less than 48 hours before the time for holding the meeting or
adjourned meeting at which the person named in the instrument proposes to
vote, or in the case of a poll not taken on the same day as the meeting or
adjourned meeting at which it is demanded, not less than 24 hours before
the time appointed for the taking of the poll and in default, the
instrument of proxy shall be invalid.
75. A vote given or poll demanded by proxy, or by the duly authorized
representative of a corporation, shall be valid notwithstanding the
previous determination of the authority of the person voting or demanding a
poll unless notice of the determination was received by the Company at the
office, or at such other place at which the instrument of proxy was duly
deposited before the commencement of the meeting, or adjourned meeting at
which the vote is given, or the poll demanded or (in the case of a poll not
taken on the same day as the meeting or adjourned meeting) the time
appointed for taking the poll.
<PAGE>
76. The instrument appointing a proxy to vote at a meeting shall be deemed also
to confer authority (i) to demand or join in demanding a poll (and for the
purposes of article 61, a demand by a person as proxy for a member or as
the duly authorized representative for a corporate member shall be the same
as a demand for the member); and (ii) to vote on a poll on the election of
a chairman and on a motion to adjourn a meeting.
77. If any votes are counted which ought not to have been counted or might have
been rejected, the error shall not vitiate the result of the voting unless
it is pointed out at the same meeting or at any adjournment thereof, and it
is in the opinion of the chairman of the meeting of sufficient magnitude to
vitiate the result of the meeting.
78. No instrument appointing a proxy shall be valid after the expiration of
twelve months from the date named in it as the date of its execution except
at an adjourned meeting or on a poll demanded at a meeting or an adjourned
meeting, in cases where the meeting was originally held within twelve
months from such date.
79. The directors may at the expense of the Company send by post or otherwise
to the members instrument of proxy (with or without provision for their
return prepaid) for use at any general meeting or at any separate meeting
of the holders of any class of shares of the Company either in blank or
nominating in the alternative anyone or more of the directors or any other
person. If for the purpose of any meeting invitations to appoint as proxy a
person or one of a number of persons specified in the invitations are
issued at the Company's expense, they shall be issued to all (and not to
some only) of the members entitled to be sent a notice of the meeting and
to vote thereat.
CORPORATIONS ACTING BY REPRESENTATIVES
- --------------------------------------
80. Any corporation which is a member of the Company may by resolution of its
directors or other governing body authorize such person as it thinks fit to
act as its representative at any meeting of the Company or at any separate
meeting of the holders of any class of shares of the Company. The person so
authorized shall be entitled to exercise the same power on behalf of such
corporation as that corporation could exercise if it were an individual
member of the Company and such corporation shall for the purposes of these
presents be deemed to be present in person at any such meeting if a person
so authorized is present thereat.
DIRECTORS
- ---------
81. The number of directors shall not be less than two. Subject as aforesaid,
the Company may from time to time by ordinary resolution vary the minimum
number and/or fix, and from time to time, vary a maximum number of
directors.
82. A director shall not require a share qualification.
83. Subject to ratification by the Company in general meeting, there shall be
paid to the directors as remuneration for their services as directors such
remuneration as the directors shall
<PAGE>
determine. The directors' remuneration shall be deemed to accrue from day
to day. The directors shall also be entitled to be paid all traveling hotel
and other expenses properly incurred by them in attending and returning
from meetings of the directors or of committees of the directors or general
meetings or otherwise in connection with the discharge of their duties or
the business of the Company.
84. Any director who at the request of the Board of Directors performs special
duties or provides any special services or goes or resides abroad for any
purposes of the Company, may be paid such remuneration as the Board may
determine.
ALTERNATE DIRECTORS
- -------------------
85. Any director (other than an alternate director) may appoint any other
director, or any other person approved by the directors to be an alternate
director, and may remove from office an alternate director so appointed by
him. An alternate director shall be entitled to receive notices of all
meetings of directors to attend and vote at any such meeting at which the
director appointing him is not personally present and generally to perform
all the functions of his appointor as a director in his absence. An
alternate director shall cease to be an alternate director if his appointor
ceases to be a director; but if a director retires by rotation or otherwise
but is re-appointed or deemed to have been re-appointed at the meeting at
which he retires, any appointment of an alternate director made by him
which was in force immediately prior to his retirement shall continue after
his re-appointment. Every appointment and removal of an alternate director
shall be in writing executed by the director making or revoking the
appointment and (in the case of an appointment) by the person appointed and
shall be sent to or left at the office.
86. Save as otherwise provided in these articles, an alternate director shall
be deemed for all purposes to be a director and shall alone be responsible
for his own acts and defaults and he shall not be deemed to be the agent of
the director appointing him. The remuneration of any alternate director
shall be payable out of the remuneration payable to the director appointing
him and shall consist of such part (if any) of the last-mentioned
remuneration as shall be agreed between the alternate director and the
director appointing him.
POWERS OF DIRECTORS
- -------------------
87. Subject to the provisions of the Acts and these articles and to any
directions given by special resolution, the directors may exercise all the
powers of the Company. No alteration of the articles and no such direction
shall invalidate any prior act of the directors which would have been valid
if that alteration had not been made or that direction had not been given.
The powers given by this article shall not be limited by any special power
given to the directors by the articles and a meeting of directors at which
a quorum is present may exercise all powers exercisable by the directors.
88. The directors may exercise all the powers of the Company to borrow money
and to mortgage or charge all or any part of its undertaking property and
assets (both present and future)
<PAGE>
including its uncalled capital and subject to the Acts to issue debentures
and other securities whether outright or as collateral security for any
debt liability or obligation of the Company or of any third party.
89. If any uncalled capital of the Company is included in or charged by any
mortgage or other security, the directors may delegate to the person in
whose favor such mortgage or security is executed or to any other person in
trust for him the power to make calls on the members in respect of such
uncalled capital and to sue in the name of the Company or otherwise for the
recovery of moneys becoming due in respect of calls so made and to give
valid receipts for such moneys and the power so delegated shall subsist
during the continuance of the mortgage or security notwithstanding any
change of directors and shall be assignable if expressed so to be.
90. All checks, promissory notes, draft bills of exchange and other negotiable
or transferable instruments and all receipts for moneys paid to the Company
shall be signed drawn, accepted, endorsed or otherwise executed, as the
case may be, in such manner as the directors may from time by resolution
determine.
DELEGATION OF DIRECTORS' POWERS
- -------------------------------
91. The directors may establish any councils committees, local boards or
agencies for managing any of the affairs of the Company, either in the Isle
of Man, the United Kingdom or elsewhere, and may appoint any persons to be
members of such local boards or any managers or agents and may fix their
remuneration, and may delegate to any council committee, local board manger
or agent any of the powers, authorities and discretions vested in the
directions vested in the directors with power to sub-delegate, and may
authorize the members of any local board or any of them to fill any
vacancies therein and to act notwithstanding vacancies, and any such
appointment or delegation may be made upon such terms and subject to such
conditions as the directors may think fit and the directors may remove any
person so appointed, and may annul or vary any such delegation, but no
person dealing in good faith and without notice of any such annulment or
variation shall be affected thereby.
92. The directors may from time to time, and at any time, appoint any
corporation firm or person or any fluctuating body of persons whether
nominated directly or indirectly by the directors to the agent of the
Company for such purposes and with such power authorities and discretions
(not exceeding those vested in or exercisable by the director under these
articles) and for such period and subject to such conditions as they may
think fit and any such appointment may contain such provisions for the
protection and convenience of persons dealing with any such agent as the
directors may think fit and may also authorize any such agent to
sub-delegate all or any of the powers, authorities and discretions vested
in him.
93. The Company may exercise the powers conferred upon the Company by section
104 of the Companies Act 1931 with regard to the keeping of a dominion
register, and the directors may (subject to the provisions of those
sections) make and vary such regulations as they may think fit, respecting
the keeping of any such register
<PAGE>
APPOINTMENT AND RETIREMENT OF DIRECTORS
- ---------------------------------------
94. No person shall unless recommended by the directors, be appointed a
director at any general meeting unless not less than seven nor more than
twenty-one days before the date appointed for the meeting, notice executed
by a member qualified to vote at the meeting has been given to the Company
of the intention to propose that person for appointment together with
notice executed by that person of his willingness to be appointed.
95. At a general meeting, a motion for the appointment of two or more persons
as directors by a single resolution shall not be made unless a resolution
that it shall be so made has been first agreed to by the meeting without
any vote being given against it and for the purposes of this article, a
motion for approving a person's appointment, or for nominating a person for
appointment, shall be treated as a motion for his appointment.
96. The Company may, by ordinary resolution, increase or reduce the number of
directors and may appoint a person to be a director either to fill a
vacancy, or as an additional director, may also determine the rotation in
which any additional directors are to retire.
97. The directors may appoint a person to be a director either to fill a
vacancy or as an additional director provided that the appointment does not
cause the number of directors to exceed any number fixed by or in
accordance with the articles as the maximum number of directors. A director
so appointed shall hold office only until the next following annual general
meeting and if not then re-appointed, shall vacate office and shall not be
taken into account in determining the directors who are to retire by
rotating at the meeting.
98. A director who retires at an annual general meeting may be re-appointed. If
he is not reappointed or deemed to have been re-appointed, he shall retain
office until the meeting appoints someone in his place or if it does not do
so until the end of the meeting.
99. Any contract of employment entered into by a director with the Company
shall not include a term that it is to be for a period exceeding five years
unless such term is first approved by ordinary resolution.
QUALIFICATION AND REMOVAL OF DIRECTORS
- --------------------------------------
100. Without prejudice to the provisions of the Acts, the Company may by special
resolution remove a director before the expiration of his period of office
(but such removal shall be without prejudice to any claim such director may
have for breach of any contract of service between him and the Company) and
may by ordinary resolution appoint another person in his stead. The person
so appointed shall be subject to retirement at the same time as if he had
become a director on the day on which the director in whose place he is
appointed was last appointed or re-appointed a director.
<PAGE>
101. The office of a director shall be vacated if:
(a) he ceases to be a director by virtue of any provision of the Acts or he
becomes prohibited by law from being a director; or
(b) he becomes a bankrupt or makes any arrangement or composition with his
creditors generally;
(c) an order is made by a court of competent jurisdiction by reason of his
mental disorder for his detention or for the appointment of any person to
exercise powers with respect to his property or affairs; or
(d) he resigns his office by notice in writing under his hand sent of or left
at the office or (being a director who has agreed to serve as director for
a fixed term) he offers in writing under his hand to resign and the
directors shall resolve to accept the offer; or
(e) in the case of a director who holds any executive office, his appointment
as such is terminated or expires and the directors resolve that he ceases
to be a director; or
(f) he shall for more than six months have been absent without permission of
the directors from meetings of directors held during that period and his
alternate director (if any) shall not during that period have attended any
such meeting in his stead and the directors resolve that his office be
vacated.
102. No director shall vacate his office as a director on or by reason of his
attaining or having attained the age of seventy or any other age and any
director retiring or liable to retire under the provisions of these
articles and any person proposed to be appointed a director shall be
capable of being appointed or re-appointed as a director notwithstanding
that he has attained the age of seventy and no special notice need be given
of any resolution for the appointment or re-appointment as a director of a
person who shall have attained the age of seventy and it shall not be
necessary to give to the members notice of the age of any director or
person proposed to be appointed or re-appointed as such.
EXECUTIVE DIRECTORS
- -------------------
103. The directors may from time to time appoint any one or more of their body
to be the holder of any executive office on such terms as they think fit
and may revoke or vary any such appointment. The appointment of a director
to any executive office as aforesaid shall automatically be terminated if
he ceases for any reason to be a director. Any revocation or termination of
any such appointment shall be without prejudice to any claim for breach of
any contract between the director and the Company. A director so appointed
shall be subject to retirement by rotation and shall receive such
remuneration (whether by way of salary commission participation in profits
and partly in one way and partly in another or others or otherwise) as the
directors may determine.
104. The directors may entrust to and confer upon any director appointed to any
such executive office any of the powers exercisable by them as directors
other than the power to make telephone calls or forfeit shares upon such
terms and conditions and with such restrictions as
<PAGE>
they think fit and either collaterally with or to the exclusion of their
own powers and may from time to time revoke, withdraw, alter or vary all or
any of such powers.
DIRECTORS' APPOINTMENTS AND INTERESTS
- -------------------------------------
105. A director, including an alternate director, may hold any other office or
place of profit under the Company (other than the office of auditor of the
Company or any subsidiary of the Company) in conjunction with his office of
director and may act in a professional capacity to the Company on such
terms as to tenure of office remuneration and otherwise as the directors
may determine.
106. Subject to compliance with the provisions of the Acts, no director or
intending director including an alternate director shall be disqualified by
his office from contracting with the Company either with regard to his
tenure of any other office or place of profit or as vendor, purchaser or
otherwise and subject to the interest of the director concerned being duly
declared as required by article 109, no such contract or any contract or
arrangement entered into by or on behalf of the Company in which any
director is in any way interested whether directly or indirectly shall be
liable to be avoided nor shall any director so contracting or being so
interested be liable to account to the Company for any profit realized by
such contract or arrangement by reason of such director holding that office
or of the fiduciary relation thereby established.
107. Any director including an alternate director may become or continue to be a
director or other officer or member of or otherwise interested in any other
company promoted by the Company or in which the Company may be interested
or which is a holding company of the Company or a subsidiary of any such
holding company or as a member or otherwise, and no such director shall be
accountable for any remuneration or other benefits received by him as a
director or other officer or member of or from his interest in any such
other company. The directors may exercise the voting power conferred by the
shares of any other company held or owned by the Company or exercisable by
them as directors of any such holding company or subsidiary in such manner
in all respects as they think fit (including the exercise thereof in favor
of any resolution appointing themselves or any of them directors or other
officers of such company or voting or providing for the payment of
remuneration to themselves as directors or other officers of such company).
108. A director, including an alternate director, who is to his knowledge in any
way, whether directly or indirectly interested in a contract or arrangement
or proposed contract or with the Company, shall declare the nature of his
interest at a meeting of the directors. In the case of a proposed contract
or arrangement, the declaration shall be made at the meeting of the
directors at which the question of entering into the contract is first
taken into consideration if he knows his interest then exists or if the
director was not at the date of that meeting interested in the proposed
contract or arrangement or becomes aware of his interest after it is made,
the declaration shall be made at the first meeting of the directors held
after the director becomes so interested or knows that he is or has become
so interested. In a case where the director is interested in a contract or
arrangement which has been made before he
<PAGE>
was appointed a director, the declaration shall be made at the first
meeting of the directors held after he is so appointed.
109. For the purposes of the last preceding article, a general notice given to
the directors by any director to the effect that he is a member of any
specified company or firm and is to be regarded as interested in any
contract which may after the date of the notice be made with that company
or firm shall (if such director shall give the scam at a meeting of the
directors or shall take reasonable steps to secure that it is brought up
and read at the next meeting of the directors after it is given) be deemed
a sufficient declaration of interest in relation to any contract so made.
DIRECTORS GRATUITIES AND PENSIONS
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110. The directors may establish and maintain or procure the establishment and
maintenance of any pension or superannuation funds (whether contributory or
otherwise) for the benefit of and give or procure the giving of donations,
gratuities, pensions, allowances and emoluments to any persons who are or
were at any time in the employment or service of the Company or of any
company which is a subsidiary of the Company or is allied to or associated
with the Company or any such subsidiary or of any of the predecessors in
business of the Company or any such other company as aforesaid or who may
be or have been directors or officers of the Company or of any such other
company as aforesaid and who hold or have held executive positions or
agreements for service with the Company or any such other company as
aforesaid and the wives, families and dependents of any such persons and
also establish, subsidize and subscribe to any institutions, associations,
societies, clubs or funds calculated to be for the benefit of or to advance
the interest and well-being of the Company or of any such other company as
aforesaid or of any such person as aforesaid and make payments for or
towards the insurance of any such person as aforesaid and subscribe or
guarantee money for charitable or benevolent objects or for any exhibition
or for any public general or useful object and do any of the matters
aforesaid either alone or in conjunction with any such other company as
aforesaid. Subject to particulars with respect to the proposed payment
being disclosed to the members of the Company and to the proposal being
approved by the Company by ordinary resolution, if the Acts shall so
require any director who holds or has held any such executive position or
agreement for services shall be entitled to participate in and retain for
his own benefit any such donation, pension, allowance or emolument.
PROCEEDINGS OF DIRECTORS
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111. The directors may regulate their proceedings as they think fit. A director
may, and the secretary at the request of a director shall, call a meeting
of the directors. Any director may waive notice of a meeting and any such
waiver may be retrospective. Questions arising at a meeting shall be
decided by a majority of votes. In the case of an equality of votes, the
chairman shall have a second or casting vote. A director who is also an
alternate director shall be entitled in the absence of his appointor to a
separate vote on behalf of his appointor in addition to his own vote.
<PAGE>
112. The quorum for the transaction of the business of the directors may be
fixed by the directors and unless so fixed at any other number, shall be
two. An alternate director who is not himself a director shall be counted
in the quorum.
113. The continuing directors, or a sole continuing director, may act
notwithstanding any vacancies in their number, but if the number of
directors is less than the number fixed as the quorum they may act only for
the purposes of filling vacancies or of calling a general meeting. If there
are no directors or director able and willing to act then any two members
may summon a general meeting for the purpose of appointing directors.
114. The directors may from time to time elect from their number and remove a
chairman and/or vice-chairman of the board of directors and determine the
period for which they are to hold office. The chairman, or in his absence,
the vice-chairman shall preside at all meetings of directors, but if there
is no chairman, nor the vice-chairman is present within five minutes after
the time appointed for the meeting, or if neither of them is willing to act
as chairman, the directors present may choose one of their number to be
chairman of the meeting.
115. All acts done bona fide by a meeting of directors or of a committee of
directors or by a person acting as a director shall, notwithstanding that
it may afterwards be discovered that there was a defect in the appointment
of any director or that any of them were disqualified from holding office
or were not entitled to vote, be as valid as if every such person had been
duly appointed and was qualified and had continued to be a director and had
been entitled to vote.
116. A resolution is writing signed by all the directors or of a committee of
directors shall be as valid and effectual as if it had been passed at a
meeting of directors or (as the case may be) a committee of directors duly
convened and held as may consist of several documents in the like form,
each signed by one or more directors.
117. A meeting of the directors for the time being at which a quorum is present,
shall be competent to exercise all powers and discretions for the time
being exercisable by the directors. A meeting may be held by telephone.
118. The directors may delegate any of their powers of discretion to committees
of one or more members of their body and (if thought fit) one or more other
persons as hereinafter provided. Any committee so formed shall in the
exercise of the powers so delegated conform to any regulations which may
from time to time be imposed by the directors. Any such regulations may
provide for or authorize the appointment to the committee of persons other
than directors and for such persons to have voting rights as members of the
committee but so that (i) the number of persons so appointed shall be less
than one-half of the total number of members of the committee and (ii) no
resolution of the committee shall be effective unless a majority of the
members of committee present at the meeting are directors.
119. The meetings and proceedings of any such committee consisting of two or
more members shall be governed by the provisions of these articles
regulating the meetings and proceedings
<PAGE>
of the directors so far as the same are applicable and are not superseded
by any regulations made by the directors under the last preceding article.
120. Save as otherwise provided by these articles, a director shall not vote at
a meeting of directors or of a committee of directors on any resolution
concerning a matter in respect of which he has duty which conflicts with
his duty to the Company or in which has directly or indirectly a material
interest otherwise than by virtue of his interests in shares or debentures
or other securities of or otherwise through the Company, unless his
interest arises only because the resolution relates to:
(a) the giving to him of a guarantee security or indemnity in respect of money
lent to or an obligation incurred by him for the benefit of the Company or
any of its subsidiaries:
(b) the giving to a third party of a guarantee security or indemnity in respect
of an obligation of the Company or any of its subsidiaries for which the
director has assumed responsibility in whole or part and whether alone or
jointly with others under a guarantee or indemnity or by the giving of
security:
(c) a proposal concerning the offer of any share, debentures or other
securities of the Company or any of its subsidiaries for subscription or
purchase in which he is or is to be interested as a participant in the
underwriting or sub-underwriting thereof;
(d) a retirement benefits scheme which has been approved or is conditional upon
approval by the Assessor of Income Tax or other competent authority for
taxation purposes;
(e) any arrangement for the benefit of the employees, including but without
being limited to, an employees' share scheme under the director benefits in
a similar manner as the employees and which does not accord to any director
as such any privilege or advantage not generally accorded to the employees
to whom the arrangement relates;
(f) any other Company in which he is interested directly or indirectly and
whether as an officer or shareholder or otherwise, howsoever provided that
he is not the holder of or beneficially interested in 1 per cent or more of
any class of the equity share capital of such company (or of any third
company through which his interest is derived) or of the voting rights
available to members of the relevant company (any such interest being
deemed for the purposes of this article to be a material interest in all
circumstances).
121. A director shall not be counted in the quorum present at a meeting in
relation to a resolution on which he is not entitled to vote.
122. Subject to the provisions of the Acts, the Company may by ordinary
resolution suspend or relax to any extent either generally or in respect of
any particular matter any provision of the articles prohibiting a director
from voting at a meeting of directors or of a committee of directors and
may ratify any transactions not duly authorized by reason of a
contravention of any such provision.
<PAGE>
123. Where proposals are under consideration concerning the appointment of two
or more directors to offices or employments with the Company or anybody
corporate in which the Company is interested, the proposals may be divided
and considered in relation to each director separately, and if not debarred
under the proviso to paragraph (f) of article 121, each of the directors
concerned shall be entitled to vote and be counted in the quorum in respect
of each resolution except that concerning his own appointment.
124. If a question arises at a meeting of directors or of a committee of
directors as to the materiality of a director's interest or as to the
entitlement of a director to vote, the question may before the conclusion
of the meeting be referred to the chairman of the meeting and his ruling in
relation to any director other than himself shall be final and conclusive.
MINUTES
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125. The directors shall cause minutes to be made in books kept for the purpose:
(a) of all appointment of officers made by the directors;
(b) of the names of the directors present at each meeting of directors and of
any committee of directors;
(c) of all proceedings at meetings of the Company of the holders of any class
of shares in the Company and of the directors and of committees of
directors.
Any such minute if purporting to be signed by the chairman of the meeting
at which the proceedings were held or by the chairman of the next
succeeding meeting shall be evidence of the proceedings.
SECRETARY
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126. The secretary shall be appointed in accordance with the provisions of
section 19 of the Companies Act 1982 and may be removed by the directors.
127. Anything by the Acts required or authorized to be done by or to the
secretary may, if the office is vacant or there is for any other reason no
secretary capable of acting, be done by or to any assistant or deputy
secretary, or if there is no assistant or deputy secretary capable of
acting by or to any officer of the Company authorized generally or
specially in that behalf by the directors; provided that any provision of
the Acts or of these articles requiring or authorizing a thing to be done
by or to a director and secretary shall not be satisfied by its being done
by or to the same person acting both as director and as or in the place of
the secretary.
<PAGE>
THE SEAL
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128. The directors shall provide for the safe custody of the seal, which shall
be used only by the authority of a resolution of the directors or of a
committee of the directors authorized in that behalf by the directors. The
directors may from time to time make such regulations as they think fit
(subject to the provisions of these articles in relation to share and
debenture certificates) determining the persons and the number of such
persons who shall sign every instrument to which the seal is affixed and
until otherwise so determined, every such instrument shall be signed by one
director and shall be countersigned by the secretary or another director.
129. The Company may have an official seal for use abroad under section 32 of
the Companies Act 1931 where and as the directors shall determine and the
Company may by writing under the seal appoint any agent or committee abroad
to be the duly authorized agent of the Company for the purpose of affixing
the seal and may impose such restrictions on the use thereof as shall be
thought fit. Wherever in these articles reference is made to the seal, the
reference shall, when and so far as may be applicable, be deemed to include
any such official seal as aforesaid.
DIVIDENDS
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130. The Company may by ordinary resolution declare dividends in accordance with
the respective rights of the members, but no dividend shall exceed the
amount recommended by the directors. No dividend shall be paid otherwise
than out of profits.
131. The directors may, if they think fit, pay interim dividends if it appears
to them that they are justified by the profits of the Company. If the share
capital is divided into different classes, the directors may pay interim
dividends on shares which confer deferred or non-preferred preferential
rights with regard to dividend but no interim dividend shall be paid on
shares carrying deferred or non-preferred rights is, at the time of
payment, any preferential dividend is in arrear. The directors may also pay
at intervals settled by them any dividend payable at a fixed rate, if it
appears to them that the profits for distribution justify the payment.
Provided that the directors act in good faith, they shall not incur any
liability to the holders of shares conferring preferred rights for any loss
they may suffer by the lawful payment of an interim dividend on any shares
having deferred or non-preferred rights.
132. Except as otherwise provided by the rights attached to shares, all
dividends shall be declared and paid according to the amounts paid up
(otherwise than in advance of calls) on the shares on which the dividend is
paid. Subject as aforesaid, all dividends shall be apportioned and paid
proportionately to the amounts paid up on the shares during any portions or
portions of the period in respect of which the dividend is paid.
