SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999
OR
|_| 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: 0-20828
DANKA BUSINESS SYSTEMS PLC
-----------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ENGLAND 98-0052869
- ------------------------------ -----------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
11201 DANKA CIRCLE NORTH
ST. PETERSBURG, FLORIDA 33716
- ---------------------------------------- ------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 727-576-6003
NOT APPLICABLE
------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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 |X| No |_|
The registrant had 233,714,838 Ordinary shares outstanding as of December 31,
1999.
<PAGE>
INDEX
PAGE
----
PART I - FINANCIAL INFORMATION
Item 1 - Consolidated Financial Statements
Consolidated Statements of Operations for the three months ended
December 31, 1999 and 1998 (Unaudited) 3
Consolidated Statements of Operations for the nine months ended
December 31, 1999 and 1998 (Unaudited) 4
Condensed Consolidated Balance Sheets as of December 31, 1999
(Unaudited) and March 31, 1999 (Audited) 5
Consolidated Statements of Cash Flows for the nine months
ended December 31, 1999 and 1998 (Unaudited) 6
Consolidated Statements of Shareholders' Equity for the nine months
ended December 31, 1999 and 1998 (Unaudited) 7
Notes to Consolidated Financial Statements (Unaudited) 8
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations 17
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 34
Item 2 - Changes in Securities and Use of Proceeds 34
Item 3 - Defaults upon Senior Securities 35
Item 4 - Submission of Matters to a Vote of Security Holders 36
Item 5 - Other Information 36
Item 6 - Exhibits and Reports on Form 8-K 37
Signature 41
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per American Depositary Share ("ADS") amounts)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
------------------------------
DECEMBER 31, DECEMBER 31,
1999 1998
- ------------------------------------------------------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUE:
Retail equipment sales $ 180,416 $ 188,426
Retail service, supplies and rentals 399,144 479,960
Wholesale 34,925 55,488
- ---------------------------------------------------------- ----------- -----------
Total revenue 614,485 723,874
- ---------------------------------------------------------- ----------- -----------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 122,834 171,942
Special charges, cost of retail equipment sales -- 47,191
Retail service, supplies and rental costs 246,170 302,192
Special charges, retail service, supplies and rental costs -- 25,991
Wholesale costs of revenue 28,232 47,993
Selling, general and administrative expenses 172,018 246,837
Special charges, general and administrative expenses -- 17,000
Amortization of intangible assets 3,621 5,131
Write-off of goodwill and other long-lived assets -- 107,858
Commitment to Kodak under R&D agreements -- 12,500
Restructuring charges -- 38,174
- ---------------------------------------------------------- ----------- -----------
Total costs and operating expenses 572,875 1,022,809
- ---------------------------------------------------------- ----------- -----------
EARNINGS (LOSS) FROM OPERATIONS 41,610 (298,935)
Interest expense and other, net 27,878 21,923
- ---------------------------------------------------------- ----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 13,732 (320,858)
Provision (benefit) for income taxes 3,845 (46,849)
- ---------------------------------------------------------- ----------- -----------
NET EARNINGS (LOSS) $ 9,887 $ (274,009)
========================================================== =========== ===========
BASIC EARNINGS (LOSS) PER ADS:
Net earnings (loss) per ADS $ 0.17 $ (4.82)
Weighted average ADSs 57,936 56,896
DILUTED EARNINGS (LOSS) PER ADS:
Net earnings (loss) per ADS $ 0.16 $ (4.82)
Weighted average ADSs 62,114 56,896
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<CAPTION>
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER AMERICAN DEPOSITARY SHARE ("ADS") AMOUNTS)
FOR THE NINE MONTHS ENDED
-----------------------------
DECEMBER 31, DECEMBER 31,
1999 1998
- ------------------------------------------------------------ ------------ -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUE:
Retail equipment sales $ 526,897 $ 587,091
Retail service, supplies and rentals 1,264,793 1,458,825
Wholesale 88,783 177,201
- ------------------------------------------------------------ ---------- ----------
Total revenue 1,880,473 2,223,117
- ------------------------------------------------------------ ---------- ----------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 369,387 462,193
Special charges, cost of retail equipment sales -- 47,191
Retail service, supplies and rental costs 761,853 908,915
Special charges, retail service, supplies and rental costs -- 25,991
Wholesale costs of revenue 70,672 149,662
Selling, general and administrative expenses 551,095 691,402
Special charges, general and administrative expenses -- 17,000
Amortization of intangible assets 10,705 15,510
Write-off of goodwill and other long-lived assets -- 107,858
Commitment to Kodak under R&D agreements -- 37,500
Restructuring charges -- 38,174
- ------------------------------------------------------------ ---------- ----------
Total costs and operating expenses 1,763,712 2,501,396
- ------------------------------------------------------------ ---------- ----------
EARNINGS (LOSS) FROM OPERATIONS 116,761 (278,279)
Interest expense and other, net 76,638 55,867
- ------------------------------------------------------------ ---------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES 40,123 (334,146)
Provision (benefit) for income taxes 11,234 (51,793)
- ------------------------------------------------------------ ---------- ----------
NET EARNINGS (LOSS) $ 28,889 $(282,353)
============================================================ ========== ==========
BASIC EARNINGS (LOSS) PER ADS:
Net earnings (loss) per ADS $ 0.50 $ (4.96)
Weighted average ADSs 57,324 56,881
DILUTED EARNINGS (LOSS) PER ADS:
Net earnings (loss) per ADS $ 0.49 (4.96)
Weighted average ADSs 59,137 56,881
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
DANKA BUSINESS SYSTEMS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 1999
- --------------------------------------------------------------------- ------------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 78,758 $ 66,095
Accounts receivable, net 551,889 571,470
Inventories 343,338 356,139
Prepaid expenses, deferred income taxes
and other current assets 60,552 56,951
Assets of business held for sale -- 62,791
- --------------------------------------------------------------------- ----------- -----------
TOTAL CURRENT ASSETS 1,034,537 1,113,446
Equipment on operating leases, net 228,396 264,625
Property and equipment, net 94,612 92,963
Intangible assets, net 317,936 337,441
Deferred income taxes and other assets 82,326 96,667
- --------------------------------------------------------------------- ----------- -----------
TOTAL ASSETS $ 1,757,807 $ 1,905,142
===================================================================== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt and notes payable $ 93,138 $ 89,732
Accounts payable 174,768 162,294
Accrued expenses and other current liabilities 236,319 333,446
Deferred revenue 46,225 51,818
Liabilities of business held for sale -- 17,240
- --------------------------------------------------------------------- ----------- -----------
TOTAL CURRENT LIABILITIES 550,450 654,530
6.75% convertible subordinated notes 200,000 200,000
Long-term debt and notes payable, less current maturities 572,735 852,415
Other long-term liabilities 27,369 27,033
- --------------------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES 1,350,554 1,733,978
- --------------------------------------------------------------------- ----------- -----------
6.50% CONVERTIBLE PARTICIPATING SHARES - REDEEMABLE:
$1.00 stated value; 500,000 authorized; 218,000
issued and outstanding 204,630 --
----------- -----------
SHAREHOLDERS' EQUITY:
Ordinary shares, 1.25 pence stated value; 500,000,000
authorized; 233,714,838 issued and outstanding 4,875 4,758
Additional paid-in capital 314,808 304,436
Retained earnings (deficit) (45,015) (72,815)
Accumulated other comprehensive income (loss) (72,045) (65,215)
- --------------------------------------------------------------------- ----------- -----------
TOTAL SHAREHOLDERS' EQUITY 202,623 171,164
- --------------------------------------------------------------------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,757,807 $ 1,905,142
===================================================================== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
----------------------------
DECEMBER 31, DECEMBER 31,
1999 1998
- ------------------------------------------------------------------------ ------------ -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ 28,889 $(282,353)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 119,790 129,130
Loss on sale of property and equipment and
equipment on operating leases 8,383 4,776
Proceeds from sale of rental equipment 11,208 26,162
Restructuring and other special charges -- 236,214
Loss on sale of Omnifax business 2,061 --
Changes in assets and liabilities:
Accounts receivable 10,237 38,476
Inventories 14,319 47,470
Prepaid expenses, deferred income taxes
and other current assets (8,299) 8,984
Other noncurrent assets 12,650 19,958
Accounts payable 35,695 (120,796)
Accrued expenses (110,481) (56,441)
Deferred revenue (5,604) (4,599)
Other long-term liabilities (1,007) (73,239)
- ------------------------------------------------------------------------- --------- ---------
NET CASH PROVIDED (USED IN) BY OPERATING ACTIVITIES 117,841 (26,258)
- ------------------------------------------------------------------------- --------- ---------
INVESTING ACTIVITIES
Capital expenditures (95,114) (156,635)
Proceeds from sale of property and equipment 1,377 2,955
Proceeds from sale of Omnifax business 45,000 --
Payment for purchase of subsidiaries (809) (1,534)
- ------------------------------------------------------------------------- --------- ---------
NET CASH USED IN INVESTING ACTIVITIES (49,546) (155,214)
- ------------------------------------------------------------------------- --------- ---------
FINANCING ACTIVITIES
Net (payments) borrowings under line of credit agreements (251,771) 201,415
Principal payments on other long-term debt (4,035) (2,726)
Proceeds from stock options exercised 87 251
Capital contributions 204,630 --
Dividends -- (5,952)
- ------------------------------------------------------------------------- --------- ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (51,089) 192,988
- ------------------------------------------------------------------------- --------- ---------
EFFECT OF EXCHANGE RATES (4,543) 485
- ------------------------------------------------------------------------- --------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 12,663 12,001
Cash and cash equivalents, beginning of period 66,095 34,653
- ------------------------------------------------------------------------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 78,758 $ 46,654
========================================================================= ========= =========
</TABLE>
6
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
DANKA BUSINESS SYSTEMS PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL CURRENCY
ORDINARY PAID-IN RETAINED TRANSLATION
SHARES CAPITAL EARNINGS ADJUSTMENT TOTAL
- ------------------------------- ------------ ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1999 $ 4,758 $ 304,436 $ (72,815) $ (65,215) $ 171,164
Net earnings 28,889 28,889
Currency translation adjustment (6,830) (6,830)
---------
Comprehensive income 22,059
Shares issued under employee
stock and options plans 117 9,283 9,400
Beneficial conversion of
participating shares 1,089 (1,089) --
- ------------------------------- --------- --------- ------------ ----------- -------------
BALANCES AT DECEMBER 31, 1999 $ 4,875 $ 314,808 $ (45,015) $ (72,045) $ 202,623
=============================== ========= ========= ============ =========== =============
</TABLE>
<TABLE>
<CAPTION>
ADDITIONAL CURRENCY
ORDINARY PAID-IN RETAINED TRANSLATION
SHARES CAPITAL EARNINGS ADJUSTMENT TOTAL
- ------------------------------- ------------ ----------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT MARCH 31, 1998 $ 4,746 $ 304,197 $ 227,917 $ (56,553) $ 480,307
Net loss (282,353) (282,353)
Currency translation adjustment 818 818
----------
Comprehensive loss (281,535)
Dividends (5,952) (5,952)
Shares issued under employee
stock and options plans 12 239 251
- ------------------------------- --------- --------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1998 $ 4,758 $ 304,436 $ (60,388) $ (55,735) $ 193,071
=============================== ========= ========= ========= ========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
DANKA BUSINESS SYSTEMS PLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The accompanying condensed consolidated balance sheet as of December
31, 1999, consolidated statements of operations for the three months and nine
months ended December 31, 1999 and 1998, the consolidated statements of
shareholders' equity for the nine months ended December 31, 1999 and 1998, and
the consolidated statements of cash flows for the nine months ended December 31,
1999 and 1998 are unaudited. In the opinion of management, all adjustments,
consisting of normal recurring accruals, necessary for a fair presentation of
the results of operations for the interim periods presented have been reflected
herein. The results of operations for the interim periods are not necessarily
indicative of the results that may be expected for the entire fiscal year. The
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the notes thereto included in Danka
Business Systems PLC's (the "Company") Annual Report for the year ended March
31, 1999. Certain prior year amounts have been reclassified to conform to the
current year presentation (See Note 9 for fiscal 1999 quarterly statements of
operations which reflect such reclassifications).
NOTE 2. RESTRUCTURING CHARGES
FISCAL 1999 CHARGE:
The Company recorded pre-tax restructuring charges totaling $42.7
million for the third and fourth quarters of fiscal 1999. The restructuring
charges were related to the Company's worldwide cost reduction program initiated
in the third quarter of fiscal 1999 with the goal of reducing selling, general
and administrative expenses and improving profitability. The restructuring
charges were for headcount reductions, the elimination of excess facilities and
the write-down of assets. The Company has substantially completed the planned
reduction of 1,400 positions. Generally, severance is paid out to individuals
over a period of time rather than one lump sum payment. The lease obligations
relating to the closure of 60 facilities are expected to continue beyond the
year 2001. Unutilized accruals of $1.9 million relating to fiscal 1998 and 1997
restructuring charges were adjusted during the third quarter of fiscal 1999,
resulting in a net charge of $40.8 million for the twelve months ended March 31,
1999. The following table summarizes the restructuring charge and related cash
outlays:
1999 RESTRUCTURING CHARGE:
<TABLE>
<CAPTION>
---------------------------------------------------------------
TOTAL THIRD QTR.
FISCAL RESERVE AT THIRD QTR. OTHER RESERVE AT
1999 SEPT. 30, CASH NON-CASH DECEMBER 31,
(in 000's) EXPENSE 1999 OUTLAYS CHANGES 1999
----------------------------------------------------------------
<S> <C> <C> <C> <C>
Severance $ 19,820 $ 4,903 ($ 2,230) -- $ 2,673
Future lease obligations on facility
Closures 19,790 13,960 (1,426) -- 12,534
Write-off of leasehold improvements
on facility closures 3,084 -- -- -- --
-------- -------- -------- ------ --------
Total restructuring charge $ 42,694 $ 18,863 ($ 3,656) -- $ 15,207
-------- -------- -------- ------ --------
</TABLE>
8
<PAGE>
FISCAL 1997 RESTRUCTURING CHARGE:
In December 1996, the Company recorded a $35.0 million pre-tax
restructuring charge, related to the integration of the Office Imaging division
acquired from Kodak and the related transition to the Company's Market Based
Approach in North America. As of December 31, 1999, approximately $3.8 million
remained in accrued liabilities, primarily for lease obligations for the closure
of duplicate facilities. Cash outlays relating to these facility closures for
the three months ended December 31, 1999 totaled $0.4 million.
NOTE 3. 6.50% SENIOR CONVERTIBLE PARTICIPATING SHARES
On December 17, 1999, the Company completed $218.0 million in
investments for an aggregate 218,000 new 6.50% senior convertible participating
shares of Danka Business Systems PLC. Equity funds managed by affiliates of The
Cypress Group LLC ("Cypress") invested $200.0 million in 200,000 new convertible
participating shares of Danka. In addition, The Prudential Assurance Company
Limited ("Prudential"), a subsidiary of Prudential Corporation plc, invested
$18.0 million for an additional 18,000 new shares of the same issue. The net
proceeds to the Company for the share subscription by Cypress and Prudential
totaled approximately $204.6 million, after deducting estimated transaction
expenses. Eighty-five percent (85%) of the net proceeds, or approximately $174.0
million, of the share subscription was used to make a required repayment of
Danka's existing bank indebtedness and the remainder will be used for general
corporate purposes.
The new participating shares are entitled to dividends equal to the
greater of 6.50% per annum and ordinary share dividends on an as converted
basis. Dividends will be paid in the form of additional participating shares for
the first five years. The participating shares are convertible into ordinary
shares at a conversion price of $3.125 per Ordinary Share (equal to $12.50 per
ADS), subject to adjustment in certain circumstances to avoid dilution of the
interests of participating shareholders. The new issued participating shares
(218,000) have voting rights on an as converted basis, initially corresponding
to approximately 23% of the total voting power of the Company's capital stock.
The terms of the participating shares are set out in full in the articles of
association of the Company, which were adopted at the extraordinary general
meeting of its shareholders on December 17, 1999. Details of the terms of the
shares are also included in the circular sent to Danka's shareholders and the
proxy statement sent to Danka's U.S. shareholders and American Depositary
shareholders on November 24, 1999.
On or after December 17, 2003, and prior to December 17, 2010, the
Company has the option to redeem the participating shares, in whole but not in
part and subject to compliance with applicable laws, for cash at the greater of
(a) the redemption price per share as set out in the table below (based on the
liquidation return per participating share described below) and (b) the then
market value of the ordinary shares into which the participating shares are
convertible, in each case plus accumulated and unpaid dividends from the most
recent dividend payment date. Instead of redemption in cash at the price set out
in (b) above, the Company may decide to convert the participating shares into
the number of Ordinary Shares into which they are convertible.
PERCENTAGE OF
YEAR LIQUIDATION RETURN
------------------------------------------------------
2003-2004 103.250%
2004-2005 102.167%
2005-2006 101.083%
2006 and thereafter 100.000%
9
<PAGE>
In the event of liquidation of the Company, participating shareholders
shall be entitled to receive a distribution equal to the greater of (a) the
liquidation return per share (initially $1,000 and subject to upward adjustment
on certain default events by the Company) plus any accumulated and unpaid
dividends accumulating from the most recent dividend date, and (b) the amount
that would have been payable on each participating share if it had been
converted into Ordinary Shares.
If by December 17, 2010, the participating shares have not been
converted or otherwise redeemed by the Company, the Company is required, subject
to compliance with applicable laws, to redeem the participating shares for cash
at the greater of (a) the then liquidation value and (b) the then market value
of the Ordinary Shares into which the participating shares are convertible, in
each case plus accumulated and unpaid dividends from the most recent dividend
payment date. Instead of redemption in cash at the price set out in (b) above,
the Company may decide to convert the participating shares into the number of
Ordinary Shares into which they are convertible.
10
<PAGE>
NOTE 4. EARNINGS PER SHARE
The following table reconciles the numerator and denominator of the
basic and diluted earnings (loss) per ADS computations for the three months and
nine months ended December 31, 1999 and 1998:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE THREE MONTHS ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------------------- -----------------------------------------
(In 000's except per share amounts) INCOME SHARES PER-SHARE INCOME (LOSS) SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ----------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net earnings (loss) $9,887 ($274,009)
BASIC EARNINGS (LOSS) PER ADS:
Income available to shareholders 9,887 57,936 $ 0.17 (274,009) 56,896 ($4.82)
======== =======
EFFECT OF DILUTIVE SECURITIES:
6.5% convertible participating 2,843 --
shares
Stock options 1,335 --
--------- -------
DILUTED EARNINGS (LOSS) PER ADS:
Income available to shareholders
Plus assumed conversion $ 9,887 62,114 $ 0.16 ($274,009) 56,896 ($4.82)
======== ========= ======== ======== ======= =====
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE NINE MONTHS ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------------------- -----------------------------------------
(In 000's except per share amounts) INCOME SHARES PER-SHARE INCOME (LOSS) SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ----------- -----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net earnings (loss) $28,889 ($282,353)
BASIC EARNINGS (LOSS) PER ADS:
Income available to shareholders 28,889 57,324 $ 0.50 (282,353) 56,881 ($4.96)
======== =======
EFFECT OF DILUTIVE SECURITIES:
6.5% convertible participating 951 --
shares
Stock options 862 --
--------- -------
DILUTED EARNINGS (LOSS) PER ADS:
Income available to shareholders
Plus assumed conversion $ 28,889 59,137 $ 0.49 ($282,353) 56,881 ($4.96)
======== ========= ======== ======== ======== =====
</TABLE>
The effect of the Company's $200.0 million of 6.75% Convertible
Subordinated Notes are not included in the computation of diluted earnings per
share for the three and nine months ended December 31, 1999 and 1998 because
they are not dilutive.
11
<PAGE>
NOTE 5. SEGMENT REPORTING
The Company's reportable segments include Danka Americas, Danka
International and Danka Services International (DSI). Danka Americas distributes
photocopiers, facsimiles and other related office imaging equipment together
with related parts, supplies and services on a direct basis to retail customers.
The geographical areas covered by Danka Americas include the United States,
Canada and Latin America. Danka International distributes photocopiers,
facsimiles and other related office imaging equipment. These products, together
with related services, parts and supplies, are marketed primarily on a direct
basis to retail customers. Danka International also provides photocopiers,
facsimiles and other related office imaging equipment on a wholesale basis to
independent dealers. Danka International has an extensive sales and service
network throughout Europe and additional operations in Australia and New
Zealand. DSI is the Company's worldwide document outsourcing business, which
provides a wide range of document management solutions, including the management
of central reprographics departments, the placement and maintenance of
convenience copiers, print-on-demand operations, document archiving and
retrieval services and document management consulting. The Company measures
segment performance as earnings from operations, which is defined as earnings
before interest expense and other, net and income taxes, as shown on the
Company's consolidated statements of operations. Other items are shown for
purposes of reconciling to the Company's total consolidated amounts as shown in
the following tables for the three and nine months ended December 31, 1999 and
1998:
<TABLE>
<CAPTION>
DANKA
DANKA DANKA SERVICES CONSOLIDATED
THREE MONTHS ENDED DECEMBER 31 AMERICAS INTERNATIONAL INTERNATIONAL OTHER TOTAL
- -----------------------------------------------------------------------------------------------------------------
(in 000's)
<S> <C> <C> <C> <C> <C>
1999
Total revenue $333,707 $209,340 $71,438 -- $614,485
Earnings (loss) from operations 30,230 6,236 6,964 ($1,820) 41,610
Interest expense & other, net 27,878 27,878
Provision for income taxes 3,845 3,845
Net earnings 9,887
- -----------------------------------------------------------------------------------------------------------------
1998
Total revenue $404,647 $247,357 $71,870 -- $723,874
Earnings (loss) from operations before
restructuring and other special
charges (53,934) 5,018 8,192 ($21,997) (298,935)
Restructuring and other special charges 236,214 236,214
Interest expense & other, net 21,923 21,923
Provision (benefit) for income taxes (46,849) (46,849)
Net loss (274,009)
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
DANKA
DANKA DANKA SERVICES CONSOLIDATED
NINE MONTHS ENDED DECEMBER 31 AMERICAS INTERNATIONAL INTERNATIONAL OTHER TOTAL
- -----------------------------------------------------------------------------------------------------------------
(in 000's)
<S> <C> <C> <C> <C>
1999
Total revenue $1,042,918 $626,863 $210,692 -- $1,880,473
Earnings (loss) from operations 89,933 19,759 19,276 ($12,207) 116,761
Interest expense & other, net 76,638 76,638
Provision for income taxes 11,234 11,234
Net earnings 28,889
- -----------------------------------------------------------------------------------------------------------------
1998
Total revenue $1,300,550 $714,500 $208,067 -- $2,223,117
Earnings (loss) from operations before
Restructuring and other special
charges (39,516) 22,209 21,470 ($46,228) (42,065)
Restructuring and other special charges 236,214 236,214
Interest expense & other, net 55,867 55,867
Provision (benefit) for income taxes (51,793) (51,793)
Net loss (282,353)
</TABLE>
NOTE 6. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) for the three months ended December 31,
1999 and 1998 was $4.8 million and ($278.0) million, respectively.
NOTE 7. NEW ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES:
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for the first quarter of
the fiscal year beginning after June 15, 2000. Statement No. 133 establishes
accounting and reporting requirements for derivative instruments and hedging
activities, and modifies disclosures previously required under other accounting
standards. The Company does not expect the adoption of Statement No. 133 to have
a material impact on its results of operations.
NOTE 8. PENDING LITIGATION
The Company, former directors and former officers are defendants in a
purported class action lawsuit. A consolidated class action complaint (the
"Complaint") was filed in the United States District Court for the Middle
District of Florida, Tampa Division on or about June 18, 1998. The Complaint
alleges, principally, that the Company and the other defendants issued
materially false and misleading statements related to the progress of the
Company's integration of its acquisition of Kodak's Office Imaging and
outsourcing businesses, engaged in improper accounting practices and that
certain former officers utilized
13
<PAGE>
insider information, in violation of Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. The plaintiffs seek
to certify their complaints as class actions on behalf of all purchasers of the
Company's American Depositary Receipts in the period between May 13, 1997 and
December 15, 1997, and seek an award of an unspecified amount of monetary
damages, including punitive damages, to all of the members of the purported
class. The Company filed its motion to dismiss the Complaint on or about July
29, 1998 and all briefs have been submitted to the Court. The Company has not
received a ruling from the Court on its motion. The case is in the early stages
and while it is impossible to predict the outcome or impact of such litigation,
management believes this litigation is without merit and is vigorously defending
the lawsuit.
In February 1999, the Company was served with a complaint, filed in the
United States District Court, Southern District of New York, alleging breach of
contract, breach of duty of good faith and fair dealing, conversion and
violation of the Uniform Commercial Code. More particularly, the plaintiffs
allege that in December 1997, they attempted to sell approximately one million
restricted American Depositary Shares at approximately $35.00 per share and that
the Company and its attorneys wrongfully refused and/or unreasonably delayed in
registering the transfer of the plaintiffs' restricted shares. The complaint
further states that the plaintiffs were unable to complete the sale of shares
and were later forced to sell the shares in February 1998 at approximately
$17.00 per share. The plaintiffs are attempting to recover the difference from
the Company and its attorneys. The Company filed its motion to dismiss the
complaint on or about May 17, 1999. The Company has not received a ruling from
the Court on its motion. This case is in the early stages and while it is
impossible to predict the outcome or impact of such litigation, management
believes this litigation is without merit and is vigorously defending the
lawsuit.
The Company is subject to other legal proceedings and claims, which
arise, in the ordinary course of its business that will not have a material
adverse effect upon the Company's financial position, results of operations or
liquidity.
14
<PAGE>
NOTE 9. RECLASSIFICATIONS
Certain amounts in the Company's prior year statements of operations
have been reclassified to conform to the fiscal 2000 presentation. The impact of
these changes did not affect earnings (loss) from operations or net earnings
(loss). The reclassifications primarily related to freight and fringe benefit
costs which were moved from general and administrative expenses to the
respective cost categories including the cost of retail equipment sales and
retail service, supplies and rental costs. The following table reflects the
dollar amounts for the reclassified statements of operations for each of the
quarters and fiscal year represented by the twelve month period ended March 31,
1999:
<TABLE>
<CAPTION>
THREE THREE THREE THREE TWELVE
MONTHS MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, MARCH 31,
(in 000's) 1998 1998 1998 1999 1999
- ------------------------------------------------------------------------------------------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Retail equipment sales $194,668 $203,997 $188,426 $168,394 $755,485
Retail service, supplies and rentals 502,547 476,318 479,960 461,996 1,920,821
Wholesale 68,184 53,529 55,488 43,713 220,914
- ------------------------------------------------------------------------------------------------------------
Total revenue 765,399 733,844 723,874 674,103 2,897,220
- ------------------------------------------------------------------------------------------------------------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 141,065 149,186 171,942 122,286 584,479
Special charges, cost of retail equipment
sales -- -- 47,191 (16,482) 30,709
Retail service, supplies and rental costs 302,084 304,639 302,192 279,412 1,188,327
Special charges, retail service,
supplies & rental costs -- -- 25,991 1,153 27,144
Wholesale costs of revenue 57,750 43,919 47,993 39,599 189,261
Special charges, wholesale costs -- -- -- 514 514
Selling, general and administrative expenses 223,225 221,340 246,837 228,495 919,897
Special charges, general and administrative
expenses -- -- 17,000 (195) 16,805
Amortization of intangible assets 5,372 5,007 5,131 4,204 19,714
Write-off of goodwill and other long-lived
assets -- -- 107,858 1,616 109,474
Commitment to Kodak under R&D agreements 12,500 12,500 12,500 15,934 53,434
Restructuring charges -- -- 38,174 2,644 40,818
- -------------------------------------------------------------------------------------------------------------
Total costs and operating expenses 741,996 736,591 1,022,809 679,180 3,180,576
- -------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FROM OPERATIONS 23,403 (2,747) (298,935) (5,077) (283,356)
Interest expense and other, net 15,424 18,520 21,923 18,330 74,197
- ------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 7,979 (21,267) (320,858) (23,407) (357,553)
Provision (benefit) for income taxes 2,968 (7,912) (46,849) (10,980) (62,773)
- -------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $5,011 ($13,355) ($274,009) ($12,427) ($294,780)
==============================================================================================================
</TABLE>
15
<PAGE>
The following table reflects the percentage of total revenue
represented by each item for the reclassified statements of operations for each
of the quarters and fiscal year represented by the twelve month period ended
March 31, 1999:
<TABLE>
<CAPTION>
THREE THREE THREE THREE TWELVE
MONTHS MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED ENDED
JUNE 30, SEPT. 30 DEC. 31, MARCH 31, MARCH 31,
(As a percentage of total revenue) 1998 1998 1998 1999 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE:
Retail equipment sales 25.4 % 27.8 % 26.0 % 25.0 % 26.1 %
Retail service, supplies and rentals 65.7 64.9 66.3 68.5 66.3
Wholesale 8.9 7.3 7.7 6.5 7.6
- ------------------------------------------------------------------------------------------------------------------
Total revenue 100.0 100.0 100.0 100.0 100.0
- ------------------------------------------------------------------------------------------------------------------
COSTS AND OPERATING EXPENSES:
Cost of retail equipment sales 18.4 20.3 23.8 18.1 20.2
Special charges, cost of retail equipment
sales -- -- 6.5 (2.4) 1.1
Retail service, supplies and rental costs 39.5 41.5 41.7 41.4 41.0
Special charges, retail service, supplies &
rental costs -- -- 3.6 0.2 0.9
Wholesale costs of revenue 7.5 6.0 6.6 5.9 6.5
Special charges, wholesale costs -- -- -- 0.1 --
Selling, general and administrative expenses 29.2 30.2 34.1 33.9 31.8
Special charges, general and administrative
expenses -- -- 2.3 -- 0.6
Amortization of intangible assets 0.7 0.7 0.7 0.6 0.7
Write-off of goodwill and other long-lived
assets -- -- 14.9 0.2 3.8
Commitment to Kodak under R&D agreements 1.6 1.7 1.7 2.4 1.8
Restructuring charges -- -- 5.3 0.4 1.4
- ------------------------------------------------------------------------------------------------------------------
Total costs and operating expenses 96.9 100.4 141.3 100.8 109.8
- ------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) FROM OPERATIONS 3.1 (0.4) (41.3) (0.8) (9.8)
Interest expense and other, net 2.0 2.5 3.0 2.7 2.5
- ------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES 1.1 (2.9) (44.3) (3.5) (12.3)
Provision (benefit) for income taxes 0.4 (1.1) (6.4) (1.7) (2.1)
- ------------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) 0.7 % (1.8) % (37.9) % (1.8) % (10.2) %
==================================================================================================================
</TABLE>
The following tables reflect the gross profit margins for the
reclassified statements of operations for each of the quarters and fiscal year
represented by the twelve month period ended March 31, 1999. The tables present
the gross profit margins both before and after special charges taken during the
third and fourth quarters of fiscal 1999.
<TABLE>
AFTER SPECIAL CHARGES:
<S> <C> <C> <C> <C> <C>
Retail equipment sales 27.5 % 26.9 % (16.3) % 37.2 % 18.6 %
Retail service, supplies and rentals 39.9 36.0 31.6 39.3 36.7
Wholesale 15.3 18.0 13.5 8.2 14.1
- --------------------------------------------------------------------------------------------
Combined gross profit 34.6 32.2 17.8 36.7 30.3
- --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
BEFORE SPECIAL CHARGES:
<S> <C> <C> <C> <C> <C>
Retail equipment sales 27.5 % 26.9 % 8.7 % 27.4 % 22.6 %
Retail service, supplies and rentals 39.9 36.0 37.0 39.5 38.1
Wholesale 15.3 18.0 13.5 9.4 14.3
- --------------------------------------------------------------------------------------------
Combined gross profit 34.6 32.2 27.9 34.5 32.3
- --------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Danka Business Systems PLC together with its Subsidiaries ("Danka" or
the "Company") is one of the world's largest independent suppliers of
photocopiers and other related office imaging equipment. The Company primarily
markets these products and related services, parts and supplies on a direct
basis to retail customers. The Company principally distributes the products of
Canon, Heidelberg, Ricoh and Toshiba. It also distributes Konica and Minolta
products in certain markets. In addition, the Company markets private label
photocopiers and facsimile machines and related supplies on a direct basis under
the Company's Infotec trademark. The Company also markets photocopiers and
related parts and supplies on a wholesale basis to independent dealers through
its international operations.
The Company provides worldwide document management services through its
outsourcing business, Danka Services International ("DSI"). Services provided by
DSI range from on- and off-site document management services, including the
management of central reprographics departments, the placement and maintenance
of convenience copiers, print-on-demand operations and document archiving and
retrieval services.
17
<PAGE>
THE COMPARISON ANALYSIS IS BASED ON THE COMPANY'S RESULTS BEFORE THE EFFECT OF
RESTRUCTURING AND OTHER SPECIAL CHARGES, WHICH OCCURRED DURING THE QUARTER AND
NINE MONTHS ENDED DECEMBER 31, 1998. BELOW IS A SUMMARY OF THE SPECIAL CHARGES.
REFER TO NOTE 2 ON PAGE 8 FOR DETAILS ON THE RESTRUCTURING CHARGE. TO REVIEW THE
EFFECTS OF SUCH CHARGES ON THE COMPANY'S OPERATIONS FOR THE QUARTER AND NINE
MONTHS ENDED DECEMBER 31, 1998, REFER TO THE TABLES ON PAGES 19-21
.
SPECIAL CHARGES (PRE-TAX):
<TABLE>
<CAPTION>
-------------------
THREE AND NINE
(in thousands) MONTHS ENDED
DECEMBER 31, 1998
-------------------
<S> <C>
Special charges to cost of retail equipment (1):
Kodak equipment valuations $ 46,059
Write-off of other assets 1,132
-----------
Total 47,191
Special charges to cost of retail service, supplies and rentals (2):
Write-off of terminated Kodak agreements 23,991
Write-off of other assets 2,000
-----------
Total 25,991
Special charges to selling, general and administrative expenses (3):
Write-off of terminated Kodak agreements 15,000
Write-off of other assets 2,000
-----------
Total 17,000
FAS 121 impairment of long-lived assets (4) 107,858
-----------
Total special charges $ 198,040
===========
</TABLE>
(1) Special charges to the cost of retail equipment sales primarily consisted
of $46.1 million for a decline in the estimated market value of the
Company's Kodak branded inventory as well as additional amounts related to
the termination of certain agreements between the Company and Kodak. See
(2) below for the note on termination of agreements.
(2) Special charges to the cost of retail service, supplies and rentals
primarily consisted of $24.0 million for the write-off of terminated
Supply Agreements between the Company and Kodak. On December 17, 1998,
the Company announced the termination of its Research and Development
Agreement with Kodak, as well as the termination of certain supply and
other agreements that required the Company to make minimum purchases
of equipment from Kodak
(3) Special charges to selling, general and administrative expenses primarily
consisted of $15.0 million for the write-off of certain terminated
agreements between the Company and Kodak. See (2) above for the note on
termination of agreements.
(4) In connection with the Company's restructuring plan implemented in
December 1998, the Company reviewed its investment in goodwill and other
long-lived assets for impairment. The Company determined that based on
changes in the business environment and an analysis of projected cash
flows, the carrying amount of goodwill and other long-lived assets,
primarily in the U.S. and Canada, would not be recoverable. The resulting
impairment necessitated a write-down of $107.9 million, which is comprised
of $89.5 million in the U.S. and $18.4 million in Canada.
18
<PAGE>
The following tables set forth for the periods indicated the dollar
amounts and percentage of total revenue represented by certain items in the
Company's Consolidated Statements of Operations before and after restructuring
and other special charges which occurred during the three and nine months ended
December 31, 1998:
AFTER RESTRUCTURING AND OTHER SPECIAL CHARGES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
DOLLAR AMOUNTS IN MILLIONS
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Retail equipment sales.......................... $ 180.4 $ 188.4 $ 526.9 $ 587.1
Retail service, supplies and rentals............ 399.2 480.0 1,264.8 1,458.8
Wholesale....................................... 34.9 55.5 88.8 177.2
-------- -------- ---------- ----------
Total revenue.............................. 614.5 723.9 1,880.5 2,223.1
Cost of revenue................................. 397.3 595.3 1,201.9 1,593.9
-------- -------- ---------- ----------
Gross profit.................................... 217.2 128.6 678.6 629.2
Selling, general and administrative expenses.... 172.0 263.8 551.1 708.4
Amortization of intangible assets............... 3.6 5.1 10.7 15.5
Write-off of goodwill and long-lived assets..... -- 107.9 -- 107.9
Commitment to Kodak under R&D agreements........ -- 12.5 -- 37.5
Restructuring charges........................... -- 38.2 -- 38.2
-------- -------- ---------- ----------
Earnings (loss) from operations............ 41.6 (298.9) 116.8 (278.3)
Interest expense and other, net................. 27.9 21.9 76.6 55.8
-------- -------- ---------- ----------
Earnings (loss) before income taxes........ 13.7 (320.8) 40.1 (334.1)
Provision (benefit) for income taxes............ 3.8 (46.8) 11.2 (51.8)
-------- -------- ---------- ----------
Net earnings (loss)........................ $ 9.9 ($ 274.0) $ 28.9 ($ 282.3)
======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
PERCENTAGE OF TOTAL REVENUE
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Retail equipment sales........................ 29.4 % 26.0 % 28.0 % 26.4 %
Retail service, supplies and rentals.......... 65.0 66.3 67.3 65.6
Wholesale..................................... 5.6 7.7 4.7 8.0
------ ------ ------ ------
Total revenue............................. 100.0 100.0 100.0 100.0
Cost of revenue................................. 64.6 82.2 63.9 71.7
------ ------ ------ ------
Gross profit.................................... 35.4 17.8 36.1 28.3
Selling, general and administrative expenses.... 28.0 36.4 29.3 31.9
Amortization of intangible assets............... 0.6 0.7 0.6 0.7
Write-off of goodwill and long-lived assets..... -- 14.9 -- 4.9
Commitment to Kodak under R&D agreements........ -- 1.7 -- 1.7
Restructuring charges........................... -- 5.3 -- 1.6
------ ------- ------ ------
Earnings (loss) from operations........... 6.8 (41.3) 6.2 (12.5)
Interest expense and other, net................. 4.6 3.0 4.1 2.5
------ ------ ------ ------
Earnings (loss) before income taxes....... 2.2 (44.3) 2.1 (15.0)
Provision (benefit) for income taxes............ 0.6 (6.4) 0.6 (2.3)
------ ------ ------ ------
Net earnings (loss)....................... 1.6 % (37.9) % 1.5 % (12.7) %
====== ====== ====== ======
</TABLE>
19
<PAGE>
BEFORE RESTRUCTURING AND OTHER SPECIAL CHARGES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
DOLLAR AMOUNTS IN MILLIONS
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Retail equipment sales.................................... $ 180.4 $ 188.4 $ 526.9 $ 587.1
Retail service, supplies and rentals...................... 399.2 480.0 1,264.8 1,458.8
Wholesale................................................. 34.9 55.5 88.8 177.2
-------- -------- ---------- ----------
Total revenue......................................... 614.5 723.9 1,880.5 2,223.1
Cost of revenue............................................. 397.3 522.2 1,201.9 1,520.8
-------- -------- ---------- ----------
Gross profit................................................ 217.2 201.7 678.6 702.3
Selling, general and administrative expenses................ 172.0 246.8 551.1 691.4
Amortization of intangible assets........................... 3.6 5.1 10.7 15.5
Commitment to Kodak under R&D agreements.................... -- 12.5 -- 37.5
Restructuring charges....................................... -- -- -- --
-------- -------- ---------- ----------
Earnings (loss) from operations....................... 41.6 (62.7) 116.8 (42.1)
Interest expense and other, net............................. 27.9 21.9 76.6 55.8
-------- -------- ---------- ----------
Earnings (loss) before income taxes................... 13.7 (84.6) 40.1 (97.9)
Provision (benefit) for income taxes........................ 3.8 (4.7) 11.2 (9.7)
-------- -------- ---------- ----------
Net earnings (loss)................................... $ 9.9 ($ 79.9) $ 28.9 ($ 88.2)
======== ======== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
PERCENTAGE OF TOTAL REVENUE
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Retail equipment sales........................................ 29.4 % 26.0 % 28.0 % 26.4 %
Retail service, supplies and rentals.......................... 65.0 66.3 67.3 65.6
Wholesale..................................................... 5.6 7.7 4.7 8.0
----- ----- ----- -----
Total revenue............................................. 100.0 100.0 100.0 100.0
Cost of revenue................................................. 64.6 72.1 63.9 68.4
----- ----- ----- -----
Gross profit.................................................... 35.4 27.9 36.1 31.6
Selling, general and administrative expenses.................... 28.0 34.2 29.3 31.1
Amortization of intangible assets............................... 0.6 0.7 0.6 0.7
Commitment to Kodak under R&D agreements........................ -- 1.7 -- 1.7
Restructuring charges........................................... -- -- -- --
----- ----- ----- -----
Earnings (loss) from operations........................... 6.8 (8.7) 6.2 (1.9)
Interest expense and other, net................................. 4.6 3.0 4.1 2.5
----- ----- ----- -----
Earnings (loss) before income taxes....................... 2.2 (11.7) 2.1 (4.4)
Provision (benefit) for income taxes............................ 0.6 (0.7) 0.6 (0.4)
----- ----- ----- -----
Net earnings (loss)....................................... 1.6 % (11.0) % 1.5 % (4.0) %
===== ===== ===== =====
</TABLE>
20
<PAGE>
The following tables set forth for the periods indicated the dollar
gross profit margin and the percentage for each of the Company's revenue
classifications before and after restructuring and other special charges which
occurred during the three and nine months ended December 31, 1998:
AFTER RESTRUCTURING AND OTHER SPECIAL CHARGES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
DOLLAR AMOUNTS IN MILLIONS 1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Retail equipment sales........................... $ 57.6 ($ 30.7) $ 157.5 $ 77.7
Retail service, supplies and rentals............. 152.9 151.8 503.0 524.0
Wholesale........................................ 6.7 7.5 18.1 27.5
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
AS PERCENTAGE OF EACH REVENUE CLASSIFICATION 1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Retail equipment sales........................... 31.9 % (16.3) % 29.9 % 13.2 %
Retail service, supplies and rentals............. 38.3 31.6 39.8 35.9
Wholesale........................................ 19.2 13.5 20.4 15.5
</TABLE>
BEFORE RESTRUCTURING AND OTHER SPECIAL CHARGES:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
DOLLAR AMOUNTS IN MILLIONS 1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Retail equipment sales......................... $ 57.6 $ 16.5 $ 157.5 $ 124.9
Retail service, supplies and rentals........... 152.9 177.7 503.0 549.9
Wholesale...................................... 6.7 7.5 18.1 27.5
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AS PERCENTAGE OF EACH REVENUE CLASSIFICATION DECEMBER 31, DECEMBER 31,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Retail equipment sales......................... 31.9 % 8.7 % 29.9 % 21.3 %
Retail service, supplies and rentals........... 38.3 37.0 39.8 37.7
Wholesale...................................... 19.2 13.5 20.4 15.5
</TABLE>
21
<PAGE>
QUARTER ENDED DECEMBER 31, 1999 COMPARED TO QUARTER ENDED DECEMBER 31, 1998:
REVENUE
Revenue declined 15% to $614.5 million for the three months ended
December 31, 1999 ("third quarter of fiscal 2000") compared to $723.9 million
for the three months ended December 31, 1998 ("third quarter of fiscal 1999").
Total revenue for the third quarter of fiscal 2000 was affected by the sale of
the Company's Omnifax business effective July 30, 1999 and the closure of the
Company's U.S. wholesale division effective March 31, 1999. The Omnifax business
reported total revenue of $27.5 million for the third quarter of fiscal 1999. In
addition, the Company's U.S. wholesale division reported revenue of $19.2
million for the third quarter of fiscal 1999.
The Company's retail equipment sales declined 4% to $180.4 million for
the third quarter of fiscal 2000 compared to $188.4 million for the third
quarter of fiscal 1999. In fiscal 1999, the Company entered into several key
strategic vendor alliances and expanded its worldwide product portfolio to add
new products in color, digital and high-volume. As discussed above, the sale of
the Omnifax business also affected retail equipment sales.
The Company's retail service, supplies and rentals revenue declined 17%
to $399.1 million in the third quarter of fiscal 2000 from $480.0 million in the
third quarter of fiscal 1999. The decline was primarily due to the sale of
non-core operations including the Company's Omnifax business, as well as
declines in the Company's low-volume analog machine base due to shifts in the
industry and product mix to mid- and high-volume digital and color equipment.
Wholesale revenue declined 37% to $34.9 million in the third quarter of
fiscal 2000 from $55.5 million in the third quarter of fiscal 1999 primarily due
to the closure of the Company's U.S. wholesale operations effective March 31,
1999. As mentioned above, the U.S. wholesale division reported revenue of $19.2
million for the third quarter of fiscal 1999.
Approximately 40% of the Company's revenue is generated in countries
outside of the United States. As in prior periods, foreign exchange rate
fluctuations have negatively impacted the Company's comparable financials
results. Excluding the effect of foreign currency fluctuations, total revenue
for the third quarter of fiscal 2000 would have been approximately $24.0 million
higher.
GROSS PROFIT
Gross profit increased 8% to $217.2 million for the third quarter of
fiscal 2000 from $201.7 million for the third quarter of fiscal 1999. The gross
profit margin as a percentage of total revenue increased to 35.4% for the third
quarter of fiscal 2000 from 27.9% for the third quarter of fiscal 1999. The
increase in the combined gross profit margin was due to improvements in the
gross profit margin for each of the Company's revenue segments. Including the
effect of special charges to cost of retail equipment sales and cost of retail
service, supplies and rentals, gross profit was $128.6 million, or 17.8% of
revenue, for the third quarter of fiscal 1999.
Gross profit as a percentage of retail equipment sales increased to
31.9% for the third quarter of fiscal 2000 from 8.7% for the third quarter of
fiscal 1999. Changes in the current product mix resulting from new, higher
margin products in color, digital and high-volume positively affected the retail
equipment margin for the third quarter of fiscal 2000. The margin for the third
quarter of fiscal 1999 was
22
<PAGE>
negatively affected by the write-down of certain of the Company's non-Kodak
branded inventory to estimated market value and continued efforts to reduce
out-of-box inventories. The net impact of these factors was approximately $25.0
million. Negative press regarding the Company's financial situation led to price
discounting to customers, which also impacted the margin last year. Including
the effect of special charges, the Company reported a loss of 16.3% on its
retail equipment sales margin for the third quarter of fiscal 1999.
As a percentage of revenue, the gross profit margin on retail service,
supplies and rentals increased to 38.3% for the third quarter of fiscal 2000
from 37.0% for the third quarter of fiscal 1999, primarily attributable to
improvements in U.S. service productivity. Including the special charges to
retail service, supplies and rental costs, the Company reported a gross profit
margin of 31.6% for the third quarter of fiscal 1999.
As a percentage of revenue, the gross profit margin on wholesale sales
increased to 19.2% for the third quarter of fiscal 2000 from 13.5% for the third
quarter of fiscal 1999 primarily due to the closure of the Company's U.S.
wholesale operations effective March 31, 1999. The U.S. wholesale operations
generated a lower gross profit margin than the Company's international wholesale
business. The Company's wholesale margin for the third quarter of fiscal 1999
was also affected by the write-down of its U.S. wholesale inventory to estimated
market value.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") decreased 30% to
$172.0 million for the third quarter of fiscal 2000 from $246.8 million for the
third quarter of fiscal 1999. The decrease was due to cost savings achieved
through the Company's restructuring initiatives and worldwide cost reduction
program implemented in December 1998 as well as the closure of the Company's
U.S. wholesale division in March 1999 and the sale of Omnifax in July 1999. As a
percentage of revenue, SG&A expenses decreased to 28.0% for the third quarter of
fiscal 2000 from 34.2% for the third quarter of fiscal 1999. Including the
effect of special charges, the Company reported total SG&A expenses of $263.8
million for the third quarter of fiscal 1999.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets decreased to $3.6 million for the
third quarter of fiscal 2000 from $5.1 million for the third quarter of fiscal
1999. During the third quarter of fiscal 1999, the Company wrote-off a total of
$107.9 million in goodwill and other long-lived assets, the majority of which
related to goodwill in the U.S. and Canada. The Company determined that based on
changes in the business environment and an analysis of projected cash flows, the
carrying amount of certain goodwill and other long-lived assets would not be
recoverable.
COMMITMENT TO KODAK UNDER R&D AGREEMENTS
In connection with the acquisition of Kodak's office imaging and
outsourcing businesses in December 1996, the Company was providing funding to
Kodak for ongoing research and development of certain electrophotographic
equipment. Effective December 15, 1998 the research and development agreement
was terminated. The Company entered into a new agreement during the fourth
quarter of
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fiscal 1999 under which Kodak was required to finish the development of the
DigiSource 9110 and the Company paid Kodak $23.0 million. The Company has no
further commitments to Kodak for research and development. In the comparable
third quarter of fiscal 1999, the Company recorded research and development
commitments totaling $12.5 million.
RESTRUCTURING CHARGES
The Company recorded a $40.1 million pre-tax restructuring charge
during the third quarter of fiscal 1999 related to the Company's worldwide cost
reduction program with the goal of reducing selling, general and administrative
expenses. The fiscal 1999 restructuring charge was reduced by $1.9 million for
remaining liabilities unused from prior restructuring charges in fiscal 1998 and
1997.
EARNINGS (LOSS) FROM OPERATIONS
The Company reported earnings from operations of $41.6 million for the
third quarter of fiscal 2000 compared to an operating loss of $62.7 million for
the third quarter of fiscal 1999. The increase was attributable to gross profit
improvements, reductions in SG&A expenses, lower amortization expense and the
elimination of research and development commitments to Kodak. Including
restructuring and other special charges, the Company reported an operating loss
of $298.9 million for the third quarter of fiscal 1999.
INTEREST EXPENSE AND OTHER, NET
Interest expense and other, net increased to $27.9 million for the
third quarter of fiscal 2000 compared to $21.9 million for the third quarter of
fiscal 1999. Excluding foreign exchange losses of 0.3 million, interest expense
totaled $27.6 million. The interest expense increase was attributable to a
higher interest rate as well as waiver fees paid by the Company, relating to
amendments to the Company's Credit Agreement effective June 15, July 9 and
December 1, 1999. See - "Liquidity and Capital Resources."
INCOME TAXES
Income taxes increased to $3.8 million for the third quarter of fiscal
2000 compared to a tax benefit of $4.7 million for the third quarter of fiscal
1999. The increase was primarily due to higher levels of earnings. The combined
effective income tax rate was 28.0% for the third quarter of fiscal 2000 as
compared to a 5.6% tax benefit for the third quarter of fiscal 1999. The
reduction from the statutory UK tax rate of 31.0% in the current fiscal year is
due to utilization of tax loss carry-forwards. The effective tax rate for the
third quarter of fiscal 1999 was impacted by non-tax deductible items, primarily
the write-off of goodwill and other long-lived assets, valuation allowances
established as a result of uncertainties about the ability to utilize net
operating loss carry-forwards in certain jurisdictions, principally the UK and
Canada, and the magnitude of the loss. Including the effect of restructuring and
other special charges during the third quarter of fiscal 1999, the Company's
effective tax rate increased to 14.6%.
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NET (LOSS) EARNINGS
As a result of the above factors, net earnings increased to $9.9
million for the third quarter of fiscal 2000 compared to a net loss of $79.9
million for the third quarter of fiscal 1999. As a percentage of revenue, net
earnings rose to 1.6% for the third quarter of fiscal 2000 compared to a net
loss for the same period last year. With effect of restructuring and other
special charges, the Company reported a net loss of $274.0 million for the third
quarter of fiscal 1999.
NINE MONTHS ENDED DECEMBER 31, 1999 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1998:
REVENUE
Revenue declined 15% to $1.9 billion for the nine months ended December
31, 1999 compared to $2.2 billion for the nine months ended December 31, 1998.
Total revenue for the nine months ended December 31, 1999 was affected by the
sale of the Company's Omnifax business effective July 30, 1999 and the closure
of its U.S. Wholesale division effective March 31, 1999. Results for the nine
months ended December 31, 1999 include $35.7 million in revenue from the Omnifax
business compared to $85.0 million for the nine months ended December 31, 1998.
In addition, the U.S. wholesale operations reported total revenue of $82.0
million for the nine months ended December 31, 1998.
The Company's retail equipment sales declined 10% to $526.9 million for
the nine months ended December 31, 1999 compared to $587.1 million for the nine
months ended December 31, 1998. In fiscal 1999, the Company entered into several
key strategic vendor alliances and expanded its worldwide product portfolio to
add new products in color, digital and high-volume. As noted above, retail
equipment sales were also impacted for the nine months ended December 31, 1999
by the sale of the Omnifax business.
The Company's retail service, supplies and rentals revenue declined 13%
to $1.3 billion for the nine months ended December 31, 1999 from $1.5 billion
for the nine months ended December 31, 1998. The decline was due to the sale of
non-core operations including the Company's Omnifax business in July 1999, as
well as declines in the Company's low-volume analog machine base due to shifts
in the industry and product mix to mid- and high-volume digital and color
equipment.
Wholesale revenue for the nine months ended December 31, 1999 declined
50% to $88.8 million from $177.2 million for the nine months ended December 31,
1998 primarily due to the sale of the Company's U.S. wholesale division
effective March 31, 1999. As mentioned above, the U.S. wholesale division
reported revenue of $82.0 million for the nine months ended December 31, 1998.
Approximately 40% of the Company's revenue is generated in countries
outside of the United States. As in prior periods, foreign exchange rate
fluctuations have negatively impacted the Company's comparable financials
results. Excluding the effect of foreign currency fluctuations, total revenue
for the nine months ended December 31, 1999 would have been approximately $45.0
million higher.
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GROSS PROFIT
Gross profit declined 3% to $678.6 million for the nine months ended
December 31, 1999 from $702.3 million for the nine months ended December 31,
1998. The gross profit margin as a percentage of total revenue increased to
36.1% for the nine months ended December 31, 1999 from 31.6% for the nine months
ended December 31, 1998. The increase in the Company's combined gross profit
margin was due to improvements in the gross margin for each of the Company's
revenue segments. Including the effect of special charges to cost of retail
equipment sales and cost of retail service, supplies and rentals, gross profit
was $629.2 million, or 28.3% of revenue, for the nine months ended December 31,
1999.
Gross profit as a percentage of retail equipment sales increased to
29.9% for the nine months ended December 31, 1999 from 21.3% for the nine months
ended December 31, 1998. Changes in the current product mix resulting from new,
higher margin products in color, digital and high-volume, positively affected
the retail equipment margin for the nine months ended December 31, 1999. The
retail equipment margin for the nine months ended December 31, 1998 was affected
by the write-down of certain of the Company's non-Kodak branded inventory to
estimated market value during the third quarter of fiscal 1999 and continued
efforts to reduce out-of-box inventories. The net impact of these factors was
approximately $25.0 million. Negative press regarding the Company's financial
situation led to price discounting to customers, which also affected the margin
last year. Including the effect of special charges, gross profit as a percentage
of retail equipment sales was 13.2% for the nine months ended December 31, 1999.
As a percentage of revenue, the gross profit margin on retail service,
supplies and rentals, increased to 39.8% for the nine months ended December 31,
1999 from 37.7% for the nine months ended December 31, 1998 primarily
attributable to improvements in U.S. service productivity. Including special
charges to retail service, supplies and rental costs, the Company reported a
gross profit margin of 35.9% for the nine months ended December 31, 1998.
As a percentage of revenue, the gross profit margin on wholesale sales
increased to 20.4% for the nine months ended December 31, 1999 from 15.5% for
the nine months ended December 31, 1998 primarily due to the closure of the
Company's U.S. wholesale operations effective March 31, 1999. The U.S. wholesale
operations generated a lower gross profit margin than the Company's
international wholesale business. The Company's wholesale margin for the nine
months ended December 31, 1998 was also affected by the write-down of its U.S.
wholesale inventory to estimated market value.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses declined 20% to $551.1
million for the nine months ended December 31, 1999 from $691.4 million for the
nine months ended December 31, 1998. The decrease was due to cost savings
achieved through the Company's restructuring initiatives and worldwide cost
reduction program implemented in December 1998 as well as the closure of the
Company's U.S. wholesale division in March 1999 and the sale of Omnifax in July
1999. As a percentage of revenue, SG&A expenses decreased to 29.3% for the nine
months ended December 31, 1999 from 31.1% for the nine months ended December 31,
1998. Including the effect of special charges, the Company reported total SG&A
expenses of $708.4 million for the nine months ended December 31, 1998.
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AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets decreased to $10.7 million for the
nine months ended December 31, 1999 from $15.5 million for the nine months ended
December 31, 1998. During the third quarter of fiscal 1999, the Company
wrote-off a total of $107.9 million in goodwill and other long-lived assets, the
majority of which related to goodwill in the U.S. and Canada. The Company
determined that based on changes in the business environment and an analysis of
projected cash flows, the carrying amount of certain goodwill and other
long-lived assets would not be recoverable.
COMMITMENT TO KODAK UNDER R&D AGREEMENTS
In connection with the acquisition of Kodak's office imaging and
outsourcing businesses in December 1996, the Company was providing funding to
Kodak for ongoing research and development of certain electrophotographic
equipment. Effective December 15, 1998 the research and development agreement
was terminated. The Company entered into a new agreement during the fourth
quarter of fiscal 1999 under which Kodak was required to finish the development
of the DigiSource 9110 and the Company agreed paid Kodak $23.0 million. The
Company has no further commitments to Kodak for research and development. In the
comparable nine months ended December 31, 1998, the Company recorded research
and development commitments totaling $37.5 million.
RESTRUCTURING CHARGES
The Company recorded a $40.1 million pre-tax restructuring charge
during the third quarter of fiscal 1999 related to the Company's worldwide cost
reduction program with the goal of reducing selling, general and administrative
expenses. The fiscal 1999 restructuring charge was reduced by $1.9 million for
remaining liabilities unused from prior restructuring charges in fiscal 1998 and
1997.
EARNINGS (LOSS) FROM OPERATIONS
Earnings from operations increase to $116.8 million for the nine months
ended December 31, 1999 from an operating loss of $42.1 million for the nine
months ended December 31, 1998. Earnings from operations were positively
impacted by the higher combined gross profit, lower SG&A expenses, lower
amortization expense and the elimination of research and development commitments
to Kodak. Including restructuring and other special charges, the Company
reported an operating loss of $278.3 million for the nine months ended December
31, 1998.
INTEREST EXPENSE AND OTHER, NET
Interest expense and other, net increased to $76.6 million for the nine
months ended December 31, 1999 compared to $55.8 million for the nine months
ended December 31, 1998. The increase is related to several factors, including a
loss of $2.1 million related to the sale of the Company's Omnifax business in
July 1999 and foreign exchange losses of $1.0 million. Excluding these losses,
the interest expense totaled $73.5 million for the nine months ended December
31, 1999. The interest expense increase was primarily due to a higher interest
rate as well as waiver fees paid by the Company, relating to amendments to the
Company's Credit Agreement effective June 15, July 9 and December 1, 1999. See
"Liquidity and Capital Resources".
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INCOME TAXES
Income taxes increased to $11.2 million for the nine months ended
December 31, 1999 compared to a tax benefit of $9.7 million for the nine months
ended December 31, 1998. The increase was primarily due to a higher level of
earnings. The combined effective income tax rate was 28.0% for the nine months
ended December 31, 1999 compared to a 9.9% tax benefit for the nine months ended
December 31, 1998. The reduction from the statutory UK tax rate of 31.0% in the
current fiscal year is due to utilization of tax loss carry-forwards. The
effective tax rate for the nine months ended December 31, 1998 was impacted by
non-tax deductible items, primarily the write-off of goodwill and other
long-lived assets, valuation allowances established as a result of uncertainties
about the ability to utilize net operating loss carry-forwards in certain
jurisdictions, principally the UK and Canada, and the magnitude of the loss.
Including the effect of restructuring and other special charges, the Company's
effective tax rate for the nine months ended December 31, 1998 increased to
15.5%.
NET (LOSS) EARNINGS
As a result of the above factors, the Company reported net earnings of
$28.9 million for the nine months ended December 31, 1999 compared to a net loss
of $88.2 million for the nine months ended December 31, 1998. As a percent of
revenue, net earnings rose to 1.5% for the nine months ended December 31, 1999
compared to a net loss for the same period a year ago. Including the effect of
restructuring and other special charges, the Company reported a net loss of
$282.3 million for the nine months ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company has a credit agreement with a consortium of international
bank lenders (the "Credit Agreement"). As amended on December 1, 1999, the
Credit Agreement requires minimum levels of adjusted consolidated net worth,
cumulative consolidated EBITDA and a ratio of consolidated EBITDA to interest
expense, each as defined in the Credit Agreement. Recent amendments continue
waiver of compliance with the requirements imposed under certain other financial
covenants, which were waived by the bank lenders pursuant to waivers granted to
the Company in October 1998 and February 1999 after a prior amendment of the
covenants effective June 30, 1998.
Terms of the most recent amendment include an aggregate commitment by
the lenders of $730.0 million. The amendment required the Company to use
approximately 85% of the net proceeds of the new issue by the Company of the
participating shares to repay indebtedness outstanding under the Credit
Agreement. As described below, approximately $174.0 million (85%) of the net
proceeds of subscriptions for new participating shares was used to pay
outstanding indebtedness under the Credit Agreement on December 17, 1999. The
amendment to the Credit Agreement also amends the minimum net worth covenant
contained in the Credit Agreement, among other things, to make the covenant less
restrictive during the period from July 31, 2000 to June 30, 2001 and provides
that the indebtedness under the Credit Agreement matures on March 31, 2002. The
amendment also removed any obligation of the Company to use its best efforts to
sell the Company's outsourcing division, Danka Services
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International, and provided that the $10.0 million payment, which would have
been due upon such sale, became due upon the completion of the new issue of
participating shares to equity funds managed by affiliates of The Cypress Group
LLC. The $10.0 million payment was made on December 17, 1999. The Company paid a
fee of $2.4 million related to amounts outstanding under the Credit Agreement on
October 31, 1999 and $3.7 million on December 31, 1999. A payment of
approximately $7.3 million becomes due on March 31, 2000, if any amounts remain
outstanding under the Credit Agreement on that date. With respect to the period
from October 1, 1999 through December 31, 1999, the Company was required to pay
a fee of $1.6 million (equating to 0.75% annual interest on the average
outstanding loans under the Credit Agreement). During the period from January 1,
2000 through March 31, 2000 this fee will be increased to equate to 1.25% if the
average outstanding loans in that period exceed $650.0 million and decreased to
equate to 0.50% if they do not. Those rates increase to 1.50% and 0.75%,
respectively, during the period from April 1, 2000 through July 31, 2000.
Indebtedness under the Credit Agreement is secured by substantially all
of the Company's U.S. assets and the Credit Agreement contains negative and
affirmative covenants which place restrictions on Danka regarding the
disposition of assets, capital expenditures, additional indebtedness and
permitted liens, prohibit the payment of dividends (other than payment-in-kind
dividends on the Company's participating shares) and require the Company to
maintain certain financial ratios. The adjustable interest rate on indebtedness
under the Credit Agreement is at the option of the Company, 2.0% per annum plus
either (i) the applicable Interbank Rate periods of one, two, three or six
months or (ii) an alternative base rate, consisting of the higher of the lead
bank's prime rate or the Federal Funds rate plus 0.5%. The Company is not
permitted to make any acquisitions of businesses, except with the approval of
the bank lenders. The Company is required to apply 90% of any net proceeds
received for any asset dispositions after October 31, 1999 to repay outstanding
indebtedness under the Credit Agreement.
As of December 31, 1999, the Credit Agreement had an outstanding
balance of $504.4 million under the revolving component and $146.8 million under
the term loan, incurring interest at a weighted average rate of 8.9% and 6.2%
per annum, respectively, including additional leverage fees as outlined above.
While the Company is generally prohibited from incurring new
indebtedness other than under the Credit Agreement, the Company is permitted to
borrow up to $40.0 million at any one time outside of the Credit Agreement to
finance the purchase of high-volume digital copiers and to secure such loans
with liens upon the financed equipment.
The lease pursuant to which certain real property used by the Company
is leased incorporates covenants from the Credit Agreement and contains certain
additional covenants and agreements.
On January 18, 2000, the Company announced that it entered into a
commitment with Bank of America, N.A. and Banc of America Securities LLC, as
agents, who will fully underwrite a new five-year $800.0 million senior credit
facility. The loan will be syndicated to a group of financial institutions.
Proceeds of the facility will be used to refinance the Company's existing bank
indebtedness under the current Credit Agreement and for general corporate
purposes. The Company expects closing to occur on the new credit agreement by
the end of March 2000, subject to customary contingencies.
On December 17, 1999, the Company completed $218.0 million in
investments for an aggregate 218,000 new 6.50% senior convertible participating
shares of Danka Business Systems PLC. Equity funds managed by affiliates of The
Cypress Group LLC ("Cypress") invested $200.0 million in 200,000 new convertible
participating shares of the Company. In addition, The Prudential Assurance
Company
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<PAGE>
Limited ("Prudential"), a subsidiary of Prudential Corporation plc, invested
$18.0 million for an additional 18,000 new shares of the same issue.
The net proceeds to the Company for the share subscriptions by Cypress
and Prudential totaled approximately $204.6 million, after deducting estimated
transaction expenses. Eighty-five percent (85%) of the net proceeds, or
approximately $174.0 million, of the share subscription was used to make a
required repayment of Danka's existing bank indebtedness under the current
Credit Agreement and the remainder will be used for general corporate purposes.
The new participating shares are entitled to dividends equal to the
greater of 6.50% per annum and Ordinary Share dividends on an as converted
basis. Dividends will be paid in the form of additional participating shares for
the first five years. The participating shares are convertible into Ordinary
Shares at a conversion price of $3.125 per Ordinary Share (equal to $12.50 per
ADS), subject to adjustment in certain circumstances to avoid dilution of the
interests of participating shareholders. The new issued participating shares
(218,000) have voting rights, on an as converted basis, initially corresponding
to approximately 23% of the total voting power of the Company's capital stock.
The terms of the participating shares are set out in full in the articles of
association of the Company, which were adopted at the extraordinary general
meeting of its shareholders on December 17, 1999. Details of the terms of the
shares are also included in the circular sent to Danka's shareholders and the
proxy statement sent to Danka's U.S. shareholders and American Depositary
shareholders on November 24, 1999.
The Company's cash flow provided by (used in) operating activities was
$117.8 million and ($26.3) million for the nine months ended December 31, 1999
and 1998, respectively. The increase in operating cash flow for the nine months
ended December 31, 1999 was favorably impacted by an increase in net earnings as
well as increases in accounts payable which were partially offset by decreases
in accrued expenses. Accounts payable increased primarily due to the
availability of better credit terms with the Company's vendors as compared to
the same period last year. Cash flow used in investing activities was $49.5
million and $155.2 million for the nine months ended December 31, 1999 and 1998,
respectively. The decrease in investing activities was due to the Company's
reduction in capital expenditures and the $45.0 million in cash proceeds
received from the sale of the Omnifax business during the second quarter. Cash
(used in) provided by financing activities was ($51.1) million and $193.0
million for the nine months ended December 31, 1999 and 1998, respectively. The
decline in cash provided by financing activities was primarily attributable to
changes in the level of borrowings.
As a result of the Company's recent amendments to its Credit Agreement,
which increases the Company's tiered margin spread and requires fee payments as
discussed above, the Company's interest expense has increased.
The Company's last dividend to shareholders was paid on July 28, 1998.
The Company is not permitted to pay dividends (other than payment-in-kind
dividends on its participating shares) under the Credit Agreement and does not
anticipate that the payment of a dividend on an Ordinary Share will be
reinstated upon refinancing the indebtedness outstanding thereunder.
The Company believes cash flow from internally generated funds, the
availability under the most recent amendment to the Credit Agreement and the net
proceeds received for the share subscription by Cypress and Prudential, will be
sufficient to support its operations during the next twelve months.
The Internal Revenue Service has completed an examination of the
Company's federal income tax returns for the fiscal years ended March 31, 1996
and 1995. The Company received a notice of proposed deficiency in November 1999.
The principal adjustments relate to the timing of certain deductions associated
with leased equipment financing. The Company disagrees with these adjustments
and will be filing a protest and requesting a conference with the Appellate
Division of the Internal
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<PAGE>
Revenue Service. If the Internal Revenue Service were to prevail, net operating
losses available for carryback to these years would increase by corresponding
amounts. The Company believes, however, that it will prevail on this issue on
the merits. The Company believes the resolution will not have a material adverse
impact upon the Company's consolidated results of operations, liquidity or
financial position.
EXCHANGE RATES
Fluctuations in the exchange rate between the pound sterling and the
U.S. dollar affect the dollar equivalent of the pound sterling market price of
the Ordinary Shares of the Company on the London Stock Exchange and, as a
result, are likely to affect the market price of the ADSs. The Company operates
in 30 countries worldwide, and therefore, fluctuations in exchange rates between
the U.S. dollar and the currencies in each of the countries in which the Company
operates, will affect the results of the Company's international operations
reported in U.S. dollars and the value of such operations' net assets reported
in U.S. dollars. The results of operations, financial condition and competitive
position of the Company's business are affected by the relative strength of its
currencies in countries where its products are currently sold. The Company's
results of operations and financial condition can be adversely affected by
fluctuations in foreign currencies and by translations of the financial
statements of the Company's foreign subsidiaries from local currencies into U.S.
dollars.
YEAR 2000 READINESS DISCLOSURE
Many computer systems, including several used by the Company, could
experience problems processing information beyond the Year 1999. As a result,
certain computer systems, including the hardware, software and embedded
technologies needed to be modified prior to the Year 2000 in order to remain
functional. The Company has a Year 2000 Worldwide Program office that developed
an overall Year 2000 plan to address the possible impact of Year 2000 on the
processing of date sensitive information by computer systems. The Company's Year
2000 Worldwide Program office is comprised of senior executives, legal counsel,
outside advisers, and program managers. Through the date of this report, the
Company has not experienced any significant problems arising from the effects of
the Year 2000 issue.
MARKET RISK MANAGEMENT
INTEREST RATE RISK
The Company has a Credit Agreement with a consortium of international
banks, which matures on March 31, 2002. As of December 31, 1999, the Credit
Agreement had an outstanding balance of $504.4 million under the revolving
component and $146.8 million under the term loan, incurring interest at a
weighted average rate of 8.9% and 6.2% per annum, respectively, including
additional leverage fees as outlined above in "Liquidity and Capital Resources."
Interest rates on these borrowings are at the option of the Company, 2.0% per
annum plus either (i) the applicable Interbank Rate for periods of one, two,
three or six months or (ii) an alternative base rate, consisting of the higher
of the lead bank's prime rate or the Federal
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<PAGE>
Funds rate plus 0.5%. Additionally, the Company has various notes payable
bearing interest from prime to 12.0%, maturing principally over the next five
years, with an outstanding balance of $14.7 million as of December 31, 1999.
Based on the outstanding balance under the current Credit Agreement, a change of
1% in the average interest rate, with all other variables remaining constant,
would cause a change in interest expense of approximately $6.5 million on an
annual basis not considering the offset of the interest rate swap agreements
discussed below. Approximately 46% of the Company's total long-term debt is
fixed rate.
The Company offsets its interest rate risk by holding both fixed and
variable debt as well as interest rate swap agreements. Under its current Credit
Agreement, the Company is required to enter into arrangements that provide
protection from the volatility of variable interest rates for a portion of the
outstanding principal balance on the Credit Agreement. At December 31, 1999, the
Company had interest rate swap agreements with four financial institutions,
effectively converting variable rate principal balances to fixed rates for
periods of two to three years. At December 31, 1999, the company maintained
interest rate swaps on notional amounts of DEM65.1 million ($33.4 million),
NLG93.6 million ($42.6 million), FRF166.9 million ($25.5 million), and
U.S.$100.0 million, with weighted average fixed rates of approximately 5.3%.
Based on the U.S. dollar balances maintained on the swap agreements, a 1% change
in the interest rate, with all other variables remaining constant, would result
in gains/losses on these derivatives of approximately $2.0 million.
In March 1995, the Company issued $200.0 million of fixed rate 6.75%
Convertible Subordinated Notes at par, due April 2002. The estimated fair value
of the Notes at December 31, 1999 was approximately $150.0 million, based on the
quoted market price of the Notes.
CURRENCY EXCHANGE RISK
Foreign exchange risk arises as a normal course of conducting business
as a multinational corporation. The Company minimizes this risk by transacting
its international business in local currencies. In this manner, assets and
liabilities are matched in the local currency, thereby reducing the need for
U.S. dollar conversion. Additionally, at December 31, 1999, approximately 31% of
the Company's long-term debt is non-U.S. dollar denominated. Any foreign
currency impact on translating assets and liabilities into U.S. dollars is
included as a component of shareholders' equity.
The Company occasionally enters into forward and option contracts with
major banks to manage its exposure to foreign currency fluctuations. At December
31, 1999, there were no outstanding forward contracts or option contracts to buy
or sell foreign currency. For the three years ended March 31, 1999 and the nine
months ended December 31, 1999, gains and losses included in Consolidated
Statements of Operations on forward contracts and option contract were not
material.
SEASONALITY
The Company has experienced some seasonality in its business. The
Company's European and Canadian operations have historically experienced lower
revenue for the three month period ended September 30 due to increased vacation
time by Europeans and Canadians during July and August. This has resulted in
reduced sales activity and reduced usage of photocopiers, facsimiles and other
office imaging equipment during such period.
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SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements contained in this Form 10-Q, or otherwise made by
officers of the Company, including statements related to the Company's future
performance and the Company's outlook for its businesses and respective markets,
projections, statements of management's plans or objectives, forecasts of market
trends and other matters, are forward-looking statements, and contain
information relating to the Company that is based on the beliefs of management
as well as assumptions, made by, and information currently available to,
management. The words "goal", "anticipate", "expect", "believe" and similar
expressions as they relate to the Company or the Company's management, are
intended to identify forward-looking statements. No assurance can be given that
the results in any forward-looking statement will be achieved. For the
forward-looking statements, the Company claims the protection of the safe harbor
for forward-looking statements provided for in the Private Securities Litigation
Act of 1995. Such statements reflect the current views of the Company with
respect to future events and are subject to certain risks, uncertainties and
assumptions that could cause actual results to differ materially from those
reflected in the forward-looking statements. Factors that might cause such
actual results to differ materially from those reflected in any forward looking
statements include, but are not limited to (i) any inability to finalize the
proposed $800 million senior credit facility, (ii) any material adverse change
in financial markets or Danka, (iii) any inability to maintain achieved cost
savings, (iv) increased competition resulting from other high-volume and digital
copier distributors and the discounting of such copiers by competitors, (v) any
inability by the Company to procure, or any inability by the Company to continue
to gain access to and successfully distribute new products, including digital
products and high-volume copiers, or to continue to bring current products to
the marketplace at competitive costs and prices, (vi) the ultimate outcome and
impact of the pending class action lawsuit or any other lawsuit, (vii) any
negative impact from the loss of any key upper management personnel, (viii) any
significant assessment, pursuant to the review by the Internal Revenue Service
(ix) fluctuations in foreign currencies and (x) other risks including those
risks identified in any of the Company's other filings with the Securities and
Exchange Commission. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect management's analysis only as of the
date they are made. The Company undertakes no obligation and does not intend to
update these forward-looking statements to reflect events or circumstances that
arise after the date such statements are made. Furthermore, as a matter of
policy, the Company does not generally make any specific projections as to
future earnings nor does it endorse any projections regarding future
performance, which may be made by others outside the Company.
33
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Reference is made to the report on legal proceedings made in the Form
10-Q filed by the Company in respect of the quarter ended September 30, 1999.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
The rights of the holders of the Company's Ordinary Shares and American
depositary shares representing Ordinary Shares were modified by the creation and
issue on December 17, 1999 of a new class of 6.50% senior convertible
participating shares of $1.00 stated value in the capital of the Company (the
"Participating Shares"). The rights attaching to the Participating Shares are
set out in the new articles of association of the Company adopted at an
extraordinary general meeting of the Company's shareholders held on December 17,
1999. The following is a summary of certain of the principal rights attaching to
the Participating Shares and the principal effects of the creation and issue of
the Participating Shares on the rights attaching to the Company's ordinary
shares.
The Participating Shares are entitled to a preferential dividend
payable quarterly and equivalent to a rate of 6.50% per annum of the liquidation
preference of the Participating Shares of an initial amount of $1,000 (subject
to upward adjustment on certain default events by the Company). The dividend
shall be paid in the form of additional participating shares until the fifth
anniversary of the initial issue date of the Participating Shares and cash
thereafter (unless prohibited by the terms of the Company's then existing
principal indebtedness). The Participating Shares are entitled to participate in
any Ordinary Share dividend to the extent that the deemed per annum amount of
the Ordinary Share dividend declared in any quarter exceeds the amount of the
dividend that would otherwise be payable for such quarter on the Participating
Shares. The Participating Shares are entitled to a preferential return of assets
of the Company on its liquidation equal to the liquidation preference plus
accumulated and unpaid dividends from the most recent dividend payment date.
Each Participating Share is convertible at any time at the option of
the holder into Ordinary Shares (or American depositary receipts representing
ordinary shares) at a conversion price of $3.125 per ordinary share (equal to
320 Ordinary Shares, or 80 American depositary receipts, per Participating
Share). The conversion price is subject to adjustment in certain circumstances
to avoid dilution of the interests of holders of the Participating Shares.
The Company has the right to redeem the Participating Shares at any
time following the fourth anniversary of their initial issue date and, subject
to compliance with applicable laws, must redeem the Participating Shares on the
eleventh anniversary of their initial issue date. In certain circumstances, the
Company may require conversion of the Participating Shares into Ordinary Shares
instead of redemption.
Special provisions apply which entitle the holders of Participating
Shares to exercise redemption and conversion rights and, in certain instances,
to the payment by the Company of a premium, in the event of certain change of
control events affecting the Company.
Holders of Participating Shares are entitled to vote at general
meetings of the Company's shareholders. Each Participating Share carries so many
votes as the number of Ordinary Shares in to
34
<PAGE>
which it may convert, except that the total voting rights of the Participating
Shares held by The Cypress Group LLC and its affiliates may not exceed more than
29.99% of the total voting rights of shareholders from time to time. In
addition, holders of Participating Shares are entitled to vote at separate class
meetings on matters which affect the rights attaching to the Participating
Shares.
Subject to certain limitations, the holders of the Participating Shares
are entitled to appoint two directors to the board of the Company, and may
appoint an additional two directors when the Company is in default of certain of
its obligations in relation to the Participating Shares.
The entitlement of holders of the Company's Ordinary Shares to
dividends and distributions on a liquidation of the Company are subordinated to
the rights of the holders of Participating Shares. Dividends may not be paid on
Ordinary Shares unless the dividends payable on the Participating Shares have
been paid in full and the Company is not in default of its obligations to redeem
any Participating Shares. The Company may not make purchases of any of its
Ordinary Shares while any Participating Shares are outstanding and may not
reduce its issued share capital without approval by extraordinary resolution of
a separate class meeting of the holders of the Participating Shares. The amounts
payable by the Company on redemption, or in certain cases, conversion, of
Participating Shares may reduce the amount of the profits of the Company
otherwise available for distribution to holders of Ordinary Shares.
The voting rights attaching to the Ordinary Shares are diluted by the
voting rights attaching to the Participating Shares. Holders of ordinary shares
are not entitled to vote on the appointment of the directors appointed by the
holders of the Participating Shares, but the holders of the Participating Shares
are entitled to vote on the appointment and removal of other members of the
board of directors.
The Company issued and sold 218,000 new Participating Shares for cash
at a price of $1,000 per share in private placements on December 17, 1999. Of
these shares, 200,000 new Participating Shares were issued and sold in a private
placement to equity funds managed by affiliates of The Cypress Group LLC for an
aggregate subscription price of $200,000,000. The Company paid a commission of
$4,000,000 to affiliates of The Cypress Group LLC in respect of the
subscription. The remaining 18,000 new Participating Shares were issued and sold
in a private placement to The Prudential Assurance Company Limited for an
aggregate subscription price of $18,000,000. The Company paid a commission of
$320,000 to affiliates of The Prudential Assurance Company Limited in respect of
the subscription. The transactions were exempt from registration under of the
safe harbor provided by Rule 506 of Regulation D under section 4(2) of the
Securities Act of 1933, as amended, as the placement of the securities involved
no public offering or public solicitation to the purchasers who were accredited
investors as defined in Rule 501 of Regulation D.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
35
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual General Meeting of shareholders of the Company was held on
October 19, 1999. The actions taken by the shareholders at that meeting and
details of the relevant shareholder votes are set out in the Form 10-Q filed by
the Company in respect of the quarter ended September 30, 1999. An Extraordinary
General Meeting of shareholders of the Company was held on December 17, 1999. At
the meeting, the following actions were taken by the shareholders:
1. Approval of new Articles of Association of the Company. The voting
on the resolution was as follows:
FOR 115,669,605
AGAINST 2,998,204
ABSTAINED 33,159
2. Approval to increase the authorized share capital of the Company
to(pound)6,250,000 and U.S.$500,000 by the creation of 500,000 6.50% senior
convertible participating shares of U.S. $1.00 each.
FOR 117,698,431
AGAINST 969,378
ABSTAINED 33,159
3. The Board of Directors of the Company was granted the authority to
allot securities up to an aggregate nominal amount of (pound)1,400,000 and
U.S.$350,000. The voting on the resolution was as follows:
FOR 117,341,725
AGAINST 1,326,084
ABSTAINED 33,159
4. The Board of Directors of the Company was granted the authority to
allot equity securities for cash up to an aggregate nominal amount of
U.S.$350,000 without providing certain pre-emptive rights. The voting on the
resolution was as follows:
FOR 117,369,669
AGAINST 1,298,140
ABSTAINED 33,159
ITEM 5. OTHER INFORMATION.
Not applicable.
36
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT
NUMBER EXHIBIT
- ------- -------
2.1* Asset Purchase Agreement between Eastman Kodak Company and
Danka Business Systems PLC dated as of September 6, 1996,
including Exhibit 5.19 (a) which is the form of Amended and
Restated Supply Agreement by and between Eastman Kodak
Company and _______________________ dated as of
____________________, 1996. (Exhibit 2.1 to the Company's
Form 8-K dated November 14, 1996.)
2.2* Amendment No. 1 to Asset Purchase Agreement between Eastman
Kodak Company and Danka Business Systems PLC dated December
20, 1996 (Excluding schedules and similar attachments).
(Exhibit 2.2 to the Company's Form 8-K dated January 15,
1997).
4.1* Memorandum of Association of the Company, including
paragraphs 5 and 6. (Exhibit 2.1 of the Company's
Registration Statement on Form 20-F, No. 0-20828,
filed on November 10, 1992 (the "1992 Registration
Statement").
4.2 Articles of Association of the Company, including sections
relating to Shares, Variation of Rights and Votes of
Members.
4.3* Deposit Agreement dated June 25, 1992, Amendment No. 1
dated February 26, 1993 and Amendment No. 2 dated July 2,
1993 (Exhibit 4.9 of the Company's Form S-1 Registration
Statement No. 33-68278 (the "1993 Form S-1")., and
Amendment No. 3 dated August 16, 1994 between The Bank of
New York, the Company and Owners and Holders of American
Depositary Receipts.
4.4* Indenture dated March 13, 1995 between the Company and The
Bank of New York as Depositary and the Company. (Exhibit 2
to the Company's Form 8-K dated March 21, 1995).
4.5* Deposit and Custody Agreement dated March 13, 1995, between
The Bank of New York as Depositary and the Company.
(Exhibit 3 to the Company's Form 8-K dated March 21, 1995).
4.6* Registration Rights Agreement dated as of March 13, 1995
relating to $175 million in Aggregate Principal Amount of
6.75% Convertible Subordinated Notes Due 2002 by and among
the Company and Prudential Securities Incorporated and
Smith Barney, Inc. and Robert W. Baird & Co. and Raymond
James & Associates, Inc. (Exhibit 4.12 to the Company's
Form 10-K dated June 16, 1995).
4.8* Credit Agreement dated December 5, 1996, by and among Danka
Business Systems PLC, Dankalux Sarl & Co. SCA, Danka
Holding Company, the several financial institutions from
time to time a party and NationsBank, N.A., as agent
(Exhibit 4 to the Company's Form 8-K December 16, 1996).
4.9* First Amendment to Credit Agreement dated December 5, 1997
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, NationsBank, National
Association, each other Bank signatory thereto and
NationsBank, National Association, as agent. (Exhibit 4.9
to the Company's Form 10-Q February 12, 1998).
37
<PAGE>
4.10* Second Amendment to Credit Agreement dated July 28, 1998
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, NationsBank, National
Association, each other Bank signatory thereto and
NationsBank, National Association, as agent. (Exhibit 4.10
to the Company's Form 8-K July 28, 1998).
4.11* Waiver dated October 20, 1998, of certain financial
covenants contained in the Credit Agreement among Danka
Business Systems PLC, Dankalux Sarl & Co., SCA and Danka
Holding Company, NationsBank, N.A., each other Bank
signatory to the Credit Agreement and NationsBank, N.A., as
agent. (Exhibit 4.11 to the Company's Form 8-K October 21,
1998).
4.15* Waiver dated February 26, 1999, of certain financial
covenants contained in the Credit Agreement among Danka
Business Systems PLC, Dankalux Sarl & Co., SCA and Danka
Holding Company, NationsBank, N.A., each other Bank
signatory to the Credit Agreement and NationsBank, N.A., as
agent. (Exhibit 4.12 to the Company's Form 8-K March 5,
1999).
4.16* Fifth Amendment to Credit Agreement dated June 15, 1999
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, NationsBank, National
Association, each other Bank signatory thereto and
NationsBank, National Association, as agent. (Exhibit 4.16
to the Company's Form 8-K July 15, 1999).
4.17* Sixth Amendment to Credit Agreement dated July 9, 1999
among Danka Business Systems PLC, Dankalux Sarl & Co., SCA,
and Danka Holding Company, NationsBank, National
Association, each other Bank signatory thereto and
NationsBank, National Association, as agent. (Exhibit 4.17
to the Company's Form 8-K July 15, 1999).
4.18 Seventh Amendment to Credit Agreement dated December 1,
1999 among Danka Business Systems PLC, Dankalux Sarl & Co.,
SCA, and Danka Holding Company, NationsBank, National
Association, each other Bank signatory thereto and
NationsBank, National Association, as agent.
4.19* Subscription Agreement dated November 2, 1999 among Danka
Business Systems PLC, Cypress Merchant Banking Partners II
L.P., a Delaware limited partnership, Cypress Merchant
Banking II C.V., a limited partnership organized and
existing under the laws of The Netherlands, and 55th Street
Partners II L.P., a Delaware limited partnership. (Exhibit
99.1 to the Company's Form 8-K November 2, 1999).
4.20* Amendment, dated December 16, 1999, to Subscription
Agreement dated November 2, 1999 among Danka Business
Systems PLC, Cypress Merchant Banking Partners II L.P., a
Delaware limited partnership, Cypress Merchant Banking II
C.V., a limited partnership organized and existing under
the laws of The Netherlands, and 55th Street Partners II
L.P., a Delaware limited partnership. (Exhibit 99.2 to the
Company's Form 8-K December 17, 1999).
38
<PAGE>
4.21* Registration Rights Agreement dated December 17, 1999,
among Danka Business Systems PLC, Cypress Merchant Banking
Partners II L.P., a Delaware limited partnership, Cypress
Merchant Banking II C.V., a limited partnership organized
and existing under the laws of The Netherlands, and 55th
Street Partners II L.P., a Delaware limited partnership.
(Exhibit 99.3 to the Company's Form 8-K December 17, 1999).
10.5* Employment Agreement dated August 1, 1998 among Danka
Office Imaging Company and F. Mark Wolfinger. (Exhibit 10.5
to the Company's Form 10-Q December 31, 1998).
10.6* Amendments dated February 2, 1999 to the Employment
Agreement among the Company, Danka Business Systems PLC and
F. Mark Wolfinger (original agreement dated August 1,
1998). (Exhibit 10.6 to the Company's Form 10-Q December
31, 1998).
10.7* Employment Agreement dated July 27, 1998 among Danka Office
Imaging Company and David P. Berg. (Exhibit 10.7 to the
Company's Form 10-Q June 30, 1999).
10.8* Amendments dated February 2, 1999 to the Employment
Agreement among the Company, Danka Business Systems PLC and
David P. Berg (original agreement dated July 27, 1998).
(Exhibit 10.8 to the Company's Form 10-Q June 30, 1999).
10.9* Change of Control Agreement dated November 6, 1998 among
the Company, Danka Business Systems PLC and David P. Berg.
(Exhibit 10.9 to the Company's Form 10-Q June 30, 1999).
10.10* Change of Control Agreement dated November 6, 1998 among
the Company, Danka Business Systems PLC and Larry K.
Switzer. (Exhibit 10.10 to the Company's Form 10-Q June 30,
1999).
10.11* Change of Control Agreement dated November 6, 1998 among
the Company, Danka Business Systems PLC and Brian L.
Merriman. (Exhibit 10.11 to the Company's Form 10-Q June
30, 1999).
10.12* Change of Control Agreement dated November 6, 1998 among
the Company, Danka Business Systems PLC and F. Mark
Wolfinger. (Exhibit 10.12 to the Company's Form 10-Q June
30, 1999).
10.13* Amended and Restated Employment Agreement dated September
20, 1999 among the Company, Danka Business Systems PLC and
Larry K. Switzer (original agreement dated August 28, 1998
and amendment dated February 2, 1999). (Exhibit 10.13 to
the Company's Form 10-Q September 30, 1999).
10.14* Amended and Restated Employment Agreement dated September
20, 1999 among the Company, Danka Business Systems PLC and
Brian L. Merriman (original agreement dated August 1, 1998
and amendment dated February 2, 1999). (Exhibit 10.14 to
the Company's Form 10-Q September 30, 1999).
10.15* Distribution Agreement by and between Nexpress Solutions
and Danka Holding Company dated October 6, 1999. (Exhibit
10.15 to the Company's Form 10-Q September 30, 1999).
39
<PAGE>
10.16* Distribution Agreement by and between Nexpress Solutions
and Danka Group B.V. dated October 6, 1999. (Exhibit 10.16
to the Company's Form 10-Q September 30, 1999).
27.1 Financial Data Schedule (for SEC purposes only)
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K, the earliest event occurring on
November 2, 1999, announcing a definitive agreement between the Company and The
Cypress Group LLC whereby equity investment funds managed by Cypress agreed to
invest $200 million in 200,000 of convertible participating shares of Danka.
The Company filed a report on Form 8-K, the earliest event occurring on
December 17, 1999, announcing the completion of a $200 million investment by
equity funds managed by affiliates of The Cypress Group LLC for 200,000 in new
convertible participating shares of Danka and completion of a $18 million
investment by The Prudential Assurance Company Limited for 18,000 new shares of
the same class.
40
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DANKA BUSINESS SYSTEMS PLC
--------------------------
(Registrant)
Date: FEBRUARY 11, 2000 /s/ F. MARK WOLFINGER
----------------------- ---------------------------
F. Mark Wolfinger, Executive Vice
President and Chief Financial
Officer (Principal Accounting
Officer)
41
EXHIBIT 4.18
EXECUTION COPY
SEVENTH AMENDMENT TO CREDIT AGREEMENT
THIS SEVENTH AMENDMENT TO CREDIT AGREEMENT (this "Seventh Amendment") is
made and entered into as of December 1, 1999 among DANKA BUSINESS SYSTEMS PLC, a
limited liability company incorporated in England and Wales (Registered Number
1101386) ("Danka PLC"), DANKALUX SARL & CO. SCA, a Luxembourg company
("Dankalux"), and DANKA HOLDING COMPANY, a Delaware corporation ("Danka
Holding") (Danka PLC, Dankalux and Danka Holding are herein each a "Company" and
collectively the "Companies"), AMERICAN BUSINESS CREDIT CORPORATION, AMERITREND
CORPORATION, CORPORATE CONSULTING GROUP, INC., D.I. INVESTMENT MANAGEMENT, INC.,
DANKA IMAGING DISTRIBUTION, INC., DANKA MANAGEMENT COMPANY, INC., DANKA OFFICE
IMAGING COMPANY, DYNAMIC BUSINESS SYSTEMS, INC., HERMAN ENTERPRISES, INC. OF
SOUTH FLORIDA, QUALITY BUSINESS, INC. (collectively with Danka Holding, the
"Grantors") the entities listed on the signature pages hereof as International
Swing Line Borrowers (collectively the "International Borrowers" and together
with the Grantors and the Companies, the "Danka Parties"), BANK OF AMERICA,
NATIONAL ASSOCIATION (formerly known as NationsBank, National Association, a
national banking association formerly known as NationsBank, National Association
(Carolinas)), each other Bank listed on the signature pages hereof (each
individually, a "Bank" and collectively, the "Banks"), and BANK OF AMERICA,
NATIONAL ASSOCIATION (formerly known as NationsBank, National Association), in
its capacity as agent for the Banks (in such capacity, the "Agent"):
W I T N E S S E T H:
WHEREAS, the Companies, the Banks and the Agent have entered into a
Credit Agreement as of December 5, 1996, as amended and supplemented by a First
Amendment dated as of December 5, 1997, a Second Amendment dated as of July 28,
1998, a Third Amendment dated as of December 31, 1998, a Fourth Amendment dated
as of March 29, 1999 (the "Fourth Amendment"), a Fifth Amendment dated as of
June 15, 1999 (the "Fifth Amendment"), a Sixth Amendment dated as of July 9,
1999 (the "Sixth Amendment"), a Waiver Letter Agreement dated as of October 20,
1998 (the "October Waiver Letter Agreement") and a Waiver Letter Agreement dated
as of February 18, 1999 (the "February Waiver Letter Agreement" and, together
with the October Waiver Letter
<PAGE>
Agreement, the "Waiver Letter Agreements") (as further amended hereby and as
from time to time further amended, supplemented or modified, the "Credit
Agreement"), pursuant to which the Banks agreed to make certain revolving
credit, term loan and letter of credit facilities available to the Companies;
and
WHEREAS, pursuant to a certain Subscription Agreement dated as of
November 2, 1999 (the "Subscription Agreement"), between Danka PLC and Cypress
Merchant Banking Partners III UP., a Delaware limited partnership, Cypress
Merchant Banking II C.V., a limited partnership organized and existing under the
laws of The Netherlands, and 55th Street Partners II L.P., a Delaware limited
partnership, Danka PLC has agreed to issue 6.50% Senior Convertible
Participating Shares (together with any other reasonably similar equity
interests issued by Danka PLC from time to time, the "Participating Shares")
which are convertible into ordinary shares of Danka PLC.
NOW, THEREFORE, in consideration of the mutual covenants set forth
herein and other good and sufficient consideration, receipt of which is hereby
acknowledged, the Danka Parties and the banks do hereby agree as follows:
1. DEFINITIONS. Any capitalized terms used herein without definition
shall have the meaning set forth in the Credit Agreement.
2. AMENDMENT OF CREDIT AGREEMENT. Subject to the terms and
conditions set forth herein, the Credit Agreement is amended as follows:
(a) The definition of "Consolidated Fixed Charge Coverage Ratio" in
Section 1.1 of the Credit Agreement is hereby amended by adding the following
parenthetical after the phrase "dividends for such period": "(but excluding any
dividends on Participating Shares paid in the form of additional Participating
Shares)."
(b) A new definition of "Participating Shares" is hereby added to
Section 1.1 of the Credit Agreement immediately following the definition of
"Participant", which new definition shall read as follows:
"Participating Shares" means the 6.50% Senior Convertible
Participating Shares of Danka PLC, which are convertible
into ordinary shares, nominal value 1.25 pence per share, of
Danka PLC and are issued pursuant to the Subscription
Agreement and any other reasonably similar equity interests
issued by Danka PLC from time to time.
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<PAGE>
(c) A new definition of "Subscription Agreement" is hereby added to
Section 1.1 of the Credit Agreement immediately following the definition of
"Spot Rate"), which new definition shall read as follows:
"Subscription Agreement" means the Subscription Agreement,
dated as of November 2, 1999, between Danka PLC and Cypress
Merchant Banking Partners II L.P., a Delaware limited
partnership, Cypress Merchant Banking Partners II C.V., a
limited partnership organized and existing under the laws of
The Netherlands, and 55th Street Partners II L.P., a
Delaware limited partnership.
(d) The definition of "Termination Date" in Section 1.1 of the Credit
Agreement is hereby amended by replacing the date "December 5, 2002" with the
date "March 31, 2002."
(e) Clause (ii) of Section 8.3 is hereby amended to read in its
entirety as follows:
"(1) At any time (a) on and after September 30, 1999 and on
or prior to December 30, 1999, the Adjusted Consolidated Net
Worth (which term, as used in this Section 8.3(ii), shall
exclude the impact of the $10,000,000 waiver extension fee
provided for in the first sentence of Section 9 of the Sixth
Amendment and Section 4(b) of the Seventh Amendment to
Credit Agreement dated as of December 1, 1999 (the "Seventh
Amendment")) of Danka PLC and its Subsidiaries to be less
than $158,000,000; (b) on and after December 31, 1999 and on
or prior to March 30, 2000 the Adjusted Consolidated Net
Worth of Danka PLC and its Subsidiaries to be less then
$206,962,000; (c) on and after March 31, 2000 and on or
prior to June 29, 2000, the Adjusted Consolidated Net Worth
of Danka PLC and its Subsidiaries to be less than
$218,286,000, (d) on and after June 30, 2000 and on or prior
to September 29, 2000, the Adjusted Consolidated Net Worth
of Danka PLC and its Subsidiaries to be less than
$237,103,000, (e) on and after September 30, 2000 and on
or prior to December 30, 2000 the Adjusted Consolidated Net
Worth of Danka PLC and its Subsidiaries to be less than
$254,289,000, (f) on and after December 31, 2000 and on
-3-
<PAGE>
or prior to March 30, 2001 the Adjusted Consolidated Net
Worth of Danka PLC and its Subsidiaries to be less than
$272,988,000, (g) on and after March 31, 2001 and on or
prior to June 30, 2001 the Adjusted Consolidated Net Worth
of Danka PLC and its Subsidiaries to be less than
$295,144,000, and (h) on and after July 1, 2001 the Adjusted
Consolidated Net Worth of Danka PLC and its Subsidiaries to
be less than the sum of (A) an amount equal to the Adjusted
Consolidated Net Worth of Danka PLC and its Subsidiaries on
June 30, 2001 plus (B) an amount equal to 75% of the
consolidated net income of Danka PLC and its Subsidiaries
(if positive) for each calendar quarter commencing on or
after July 1, 2001 (on a cumulative basis); provided, that
if any time after September 30, 1999, Danka PLC issues an
equity interest (including, without limitation, any
Participating Shares, but expressly excluding any equity
interests issued in connection with contributions to
employee pension or profit sharing plans), each of the
minimum requirements set forth above for each day on or
after such date of issuance will be increased by an amount
equal to 75% of the cash proceeds, less the actual,
reasonable direct out-of-pocket expenses of such issuance
(or the Net Subscription Proceeds (as defined in the Seventh
Amendment) with respect to the Participating Shares), of the
equity interest issued by Danka PLC after September 30,
1999."
(f) The first paragraph of Section 8.5 is hereby amended to read in its
entirety as follows:
"RESTRICTED PAYMENTS, ETC. On and at all times after the
date hereof Danka PLC will not, and will not permit any of
its Subsidiaries to, declare, pay or make any dividend or
distribution (in cash, property or obligations) on any
shares of any class of capital stock or share capital (now
or hereafter outstanding) of Danka PLC or on any warrants,
options or other rights with respect to any shares of any
class of capital stock or share capital (now or hereafter
outstanding) of Danka PLC (other than FIP Holder Payments
and dividends or distributions payable
-4-
<PAGE>
in shares of any class of its capital stock or share capital
or warrants to purchase its capital stock or share capital
or splitups or reclassifications of its capital stock or
share capital into additional or other shares of any class
of its capital stock or share capital), or apply, or permit
any of its Subsidiaries to apply, any of its funds, property
or assets to the purchase, redemption, sinking fund or other
retirement of, or agree or permit any of its Subsidiaries to
purchase or redeem, any shares of any class of capital stock
or share capital (now or hereafter outstanding) of Danka
PLC, or warrants, options or other rights with respect to
any shares of any class of capital stock or share capital
(now or hereafter outstanding) of Danka PLC, other than FIP
Holder Payments."
(g) Schedule 2.1 to the Credit Agreement is hereby amended by reducing
the aggregate amount of all "Term Loan Commitments" for all of the Banks to
$363,800,000 and by reducing the "Term Loan Commitment" of each Bank
proportionately.
3. CHARACTERIZATION OF PARTICIPATING SHARES. It is agreed that for
purposes of the Credit Agreement, any Participating Shares sold by Danka PLC
pursuant to the Subscription Agreement, and any Participating Shares sold by
Danka PLC from time to time which are substantially identical to the
Participating Shares sold by Danka PLC pursuant to the Subscription Agreement,
shall be deemed to constitute shareholders' equity and shall not be deemed to
constitute Indebtedness (notwithstanding any other treatment of the
Participating Shares that may be required under GAAP).
4. AMENDMENT OF THE SIXTH AMENDMENT. Subject to the terms and
conditions set forth herein,
(a) Section 6 of the Sixth Amendment is hereby amended by deleting the
text therein in its entirety and replacing it with "Intentionally Omitted."
(b) The first sentence of Section 9 of the Sixth Amendment is hereby
amended by deleting the "and" before "(c)" and adding the following after the
phrase "DSI Sale": "and (d) the date of original issuance of any Participating
Shares." For the avoidance of doubt, no other fee shall be payable as a
condition to the effectiveness of this Seventh Amendment other than
reimbursement of the
-5-
<PAGE>
Banks' and Agent's expenses as provided in Section 7 of this Seventh Amendment,
but the foregoing shall not affect any other fee payable pursuant to the Sixth
Amendment.
(c) The last sentence of Section 10 of the Sixth Amendment is hereby
amended by adding the following clause immediately before the period: ";
provided, that Danka PLC may pay dividends or make distributions on the
Participating Shares in the form of additional Participating Shares.
Except as amended hereby, the Sixth Amendment shall remain in full force and
effect in accordance with its terms.
5. NET SUBSCRIPTION PROCEEDS. Notwithstanding any provisions to the
contrary in the Credit Agreement, 85% of the Net Subscription Proceeds (as
defined herein) received by Danka PLC or any of its Subsidiaries from the
issuance of all Participating Shares shall be paid to the Agent on behalf of the
Banks within one Business Day after such receipt of such proceeds to repay or
otherwise permanently reduce Term Loan Outstandings in inverse order of
maturity, or if there are no Term Loan Outstandings, Revolving Loan Outstandings
(with a simultaneous reduction in Revolving Commitments). The term "Net
Subscription Proceeds" shall mean the cash proceeds from the issuance and sale
of any Participating Shares, less the actual, reasonable direct out-of-pocket
expenses of such issuance and sale (including, without limitation, the
commission to be paid pursuant to the Subscription Agreement).
6. ADDITIONAL INDEBTEDNESS; ACQUISITIONS; INVESTMENTS. Notwithstanding
any provision to the contrary in the Loan Documents, including, without
limitation, Section 8.13 of the Credit Agreement and Section 14 of the February
Waiver Letter, the Companies may incur additional unsecured Indebtedness (in
addition to Indebtedness permitted under Section 7 of the Sixth Amendment) in an
aggregate principal amount not in excess of $10,000,000 at any time outstanding;
provided, that the Companies shall be in compliance with Section 8.3(iii) of the
Credit Agreement after giving effect to such additional Indebtedness. Neither
the Companies nor any of their Subsidiaries shall make any Acquisitions. Neither
the Companies nor any of their Subsidiaries will make any Investments, except as
permitted by the Fourth Amendment.
7. INTEREST RATE; EXCESS LEVERAGE FEE; EXPENSES. During the Waiver Term
(as defined in the Sixth Amendment), the interest rates and Leverage Fees
applicable to the Credit Agreement shall be those provided for pursuant to
Section 3(a) of the Sixth Amendment. After the Waiver Term and until the
-6-
<PAGE>
Termination Date, (i) the "Applicable Margin" for all Base Rate Loans and
Offshore Rate Loans shall be 2.75% and (ii) the Companies shall pay to the Agent
for distribution to the Banks, promptly upon calculation by the Agent of the
actual Average Outstanding Balance for any period (or portion thereof in
existence prior to the repayment in full of all Obligations) of three months
commencing on or after August 1, 2000 (a "Subject Period") during which the
Average Outstanding Balance equals or exceeds $650,000,000 (where the term
"Average Outstanding Balance" shall mean the sum of the average daily
outstanding principal amounts of all Term Loan Outstandings, Revolving Loan
Outstandings and International Swing Line Outstandings during the Subject
Period), a fee (the "Excess Leverage Fee") equal to (A) the actual Average
Outstanding Balance for the Subject Period, TIMES (B) a fraction, the numerator
of which is the number of days in the Subject Period and the denominator of
which is 360, TIMES (C) seventy-five (75) basis points. The Danka Parties agree
promptly to pay or reimburse the members of the Steering Committee of Banks for
such members' reasonable expenses (including the reasonable fees and expenses of
outside counsel for each member of the Steering Committee) incurred in
connection with the Credit Agreement and the other Loan Documents.
8. EFFECTIVENESS. This Seventh Amendment shall become effective as of
December 1, 1999 upon (a) receipt by the Agent of an executed copy of this
Seventh Amendment (which may be signed in counterparts and may be received by
facsimile transmission) signed by the Danka Parties and the Majority Banks and
(b) receipt by the Danka Parties (with a copy to the Agent) of a duly executed
waiver or amendment effective for the period after the Waiver Term (as defined
in the Sixth Amendment) and until the Termination Date (i) of all violations and
reasonably expected violations of the financial covenants incorporated into the
tax retention operating lease documents to which certain of the Danka Parties
are party, and (ii) waiving any required principal payments under such lease
documents during such period (other than certain cash collateralization payments
required by such lease documents upon any sale of assets by the Danka Parties
(including, without limitation, any sale of collateral securing obligations
under such lease documents), and other than any payments required by such lease
documents on or after the date on which the Companies shall have paid all
Obligations in full and shall have terminated all Revolving Loan Commitments and
Term Loan Commitments of the Banks and all International Swing Line Commitments
of the International Swing Line Banks). Notwithstanding the foregoing or
anything to the contrary contained herein, in the event that prior to July 31,
2000 Danka PLC or any of its Subsidiaries shall not have received (and paid to
the Agent on behalf of the Banks to the extent required by Section 5 above)
the Net Subscription Proceeds from the issuance of the
-7-
<PAGE>
Participating Shares pursuant to the Subscription Agreement, all of the
provisions of this Seventh Amendment shall be null and void and of no further
force and effect.
9. Acknowledgment; Release.
(a) The Companies and the Grantors acknowledge that they have no
existing defense, counterclaim, offset, cross-complaint, claim or demand of any
kind or nature whatsoever that can be asserted to reduce or eliminate all or any
part of any of their respective liability to pay the full indebtedness
outstanding under the terms of the Credit Agreement and any other documents
which evidence, guaranty or secure the Obligations. The Companies and the
Grantors hereby release and forever discharge the Agent, the International Swing
Line Banks, the Banks and all of their officers, directors, employees,
attorneys, consultants and agents from any and all actions, causes of action,
debts, dues, claims, demands, liabilities and obligations of every kind and
nature, both in law and in equity, known or unknown, whether matured or
unmatured, absolute or contingent.
(b) The International Swing Line Borrowers acknowledge that they have
no existing defense, counterclaim, offset, cross-complaint, claim or demand or
any kind or nature whatsoever that can be asserted to reduce or eliminate all or
any part of their respective liability to pay the full indebtedness owed by any
of them under the terms of the International Swing Line Agreement or any
separate facility which has been made available to any of them by any
International Swing Line Bank or a Designated Local Lender (as defined in the
International Swing Line Agreement) and any agreements related thereto. The
International Swing Line Borrowers hereby release and forever discharge the
Agent, the International Swing Line Banks and the Designated Local Lenders (as
defined in the International Swing Line Agreement) and all of their officers,
directors, employees, attorneys, consultants and agents from any and all
actions, causes of action, debts, dues, claims, demands, liabilities and
obligations of every kind and nature, both in law and in equity, known or
unknown, whether matured or unmatured, absolute or contingent.
10. ENTIRE AGREEMENT. This Seventh Amendment sets forth the entire
understanding and agreement of the parties hereto in relation to the subject
matter hereof and supersedes any prior negotiations and agreements among the
parties relative to such subject matter.
11. DEEMED AMENDMENT OF OTHER LOAN DOCUMENTS; FULL FORCE AND EFFECT. To
the extent necessary to give effect to the provisions hereof, the International
Swing Line Agreement and Security Agreement shall be deemed
-8-
<PAGE>
amended and supplemented by the terms hereof. Except as hereby specifically
amended, modified or supplemented, the Credit Agreement and all other Loan
Documents are hereby confirmed and ratified in all respects and shall remain in
full force and effect according to their respective terms.
12. COUNTERPARTS. This Seventh Amendment may be executed in any number
of counterparts (including, without limitation, counterparts sent by facsimile
transmission), each of which shall be deemed an original as against any party
whose signature appears thereon and all of which shall together constitute one
and the same instrument.
13. GOVERNING. This Seventh Amendment shall in all respects be
governed by the laws and judicial decisions of the State of Florida.
14. ENFORCEABILITY. Should any one or more of the provisions of this
Seventh Amendment be determined to be illegal or unenforceable as to one of the
parties hereto, all other provisions nevertheless shall remain effective and
binding on the parties hereto.
15. AUTHORIZATION. This Seventh Amendment has been duly authorized,
executed and delivered by the parties hereto and constitutes a legal, valid and
binding obligations of the parties hereto, except as may be limited by general
principles of equity or by the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
WITNESS: DANKA BUSINESS SYSTEMS PLC
By:______________________________________
Name:____________________________________
Title:___________________________________
-9-
<PAGE>
DANKA HOLDING COMPANY
By:______________________________________
Name:____________________________________
Title:___________________________________
DANKALUX SARL & CO. SCA
BY: DANKALUX SARL, COMMANDITE
By:______________________________________
Name:____________________________________
Title:___________________________________
AMERICAN BUSINESS CREDIT CORPORATION
AMERITREND CORPORATION
CORPORATE CONSULTING GROUP, INC.
D.J. INVESTMENT MANAGEMENT, INC.
DANKA IMAGING DISTRIBUTION, INC.
DANKA MANAGEMENT COMPANY, INC.
DANKA OFFICE IMAGING COMPANY
DYNAMIC BUSINESS SYSTEMS, INC.
HERMAN ENTERPRISES, INC. OF SOUTH
FLORIDA
By:______________________________________
Name:____________________________________
Title:___________________________________
QUALITY BUSINESS, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
-10-
<PAGE>
INTERNATIONAL SWINGLINE BORROWERS
DANKA CHILE COMERCIAL LTDA
DANKA DO BRASIL LIMITADA
DANKA MEXICANA S DE RL DE CV
DANKA DE PANAMA S.A.
DANKA DE COLOMBIA
PUERTO RICO DANKA INC.
DANKA DE VENEZUELA S.A.
DANKA AUSTRALIA PTY LIMITED &
DANKA NEW ZEALAND LIMITED
DANKA OFFICE IMAGING (JAPAN)
DANKA PHILIPPINES INC.
DANKA FRANCE S.A.R.L.
DANKA FRANCE S.A.
DANKA OFFICE PRODUCTS B.V.
DANKA OFFICE IMAGING GMBH,
DANKA DEUTSCHLAND GMBH,
DANKA DISTRIBUTION GMBH,
DANKA DEUTSCHLAND HOLDING GMBH
DANKA OFFICE PRODUCTS B.V.
DANKA ITALIA S.P.A., BASSILLICHI INFOTEC
S.P.A., DANKA S.P.A. & DANKA OFFICE
IMAGING S.P.A.
DANKA HOLDINGS BV, DANKA EUROPE BV,
DANKA DISTRIBUTION BV (FKA INFOTEC
EUROPE BY), INFOTEC NEDERLAND BV,
DANKA GROUP BV, DANKA SERVICES
INTERNATIONAL BV, DANKA OFFICE PRODUCTS
BV, INFOTEC PARTICIPATIE BV, AND DANKA
NEDERLAND BV
DANKA PRODUCTS BV
DANKA BUSINESS SYSTEMS PLC,
DANKALUX SARL & CO. SCA &
DANKA HOLDING COMPANY
By:_____________________________________
Name: F. Mark Wolfinger
Title: Director
-11-
<PAGE>
BANK OF AMERICA, NATIONAL ASSOCIATION.
(formerly known as NationsBank, N.A.),
as Agent and Issuing Bank
By:_____________________________________
Name:___________________________________
Title:__________________________________
BANK OF AMERICA, NATIONAL ASSOCIATION
(formerly known as NationsBank, N.A,),
as a Bank (Trade)
By:_____________________________________
Name:___________________________________
Title:__________________________________
BANK OF AMERICA, NATIONAL ASSOCIATION
(formerly known as NationsBank, N.A.),
as a Bank
By:_____________________________________
Name:___________________________________
Title:__________________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION, as
International Swing Line Bank
By:_____________________________________
Name:___________________________________
Title:__________________________________
- 12-
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as a Bank
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE BANK OF NOVA SCOTIA
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE BANK OF NEW YORK
By:_____________________________________
Name:___________________________________
Title:__________________________________
CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
CIBC INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
-13-
<PAGE>
PNC BANK, KENTUCKY, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
FIRST UNION NATIONAL BANK
By:_____________________________________
Name:___________________________________
Title:__________________________________
SUN TRUST BANK TAMPA BAY
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE FUJI BANK AND TRUST COMPANY
By:_____________________________________
Name:___________________________________
Title:__________________________________
ABN AMRO BANK N.V.
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
-14-
<PAGE>
PARIBAS
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
DEUTSCHE BANK AG
New York Branch and/or Cayman Island
Branch
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
HIBERNIA NATIONAL BANK
By:_____________________________________
Name:___________________________________
Title:__________________________________
SAN PAOLO IMI SPA
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
-15-
<PAGE>
LLOYDS BANK PLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE SUMITOMO BANC LIMITED
By:_____________________________________
Name:___________________________________
Title:__________________________________
BANCA COMMERCIALE ITALIANA
New York Branch
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
AMSOUTH BANK OF FLORIDA
By:_____________________________________
Name:___________________________________
Title:__________________________________
-16-
<PAGE>
THE BANK OF TOKYO-MITSUBISHI, LTD.,
NEW YORK BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
BANKERS TRUST COMPANY
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE DAI-ICHI KANGYO BANK, LIMITED
By:_____________________________________
Name:___________________________________
Title:__________________________________
NATIONAL AUSTRALIA BANK LIMITED
ACN 004044937
By:_____________________________________
Name:___________________________________
Title:__________________________________
SANWA BANK LIMITED
By:_____________________________________
Name:___________________________________
Title:__________________________________
-17-
<PAGE>
THE TOKAI BANK LIMITED, NEW YORK
BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
WACHOVIA BANK OF GEORGIA, N.A.
By:_____________________________________
Name:___________________________________
Title:__________________________________
NATIONAL WESTMINSTER BANK PLC
By:_____________________________________
Name:___________________________________
Title:__________________________________
BANCA NAZIONALE DEL LAVORO S.p.A.
LONDON BRANCH
By:_____________________________________
Name:___________________________________
Title:__________________________________
CREDIT AGRICOLE INDOSUEZ
By:_____________________________________
Name:___________________________________
Title:__________________________________
By:_____________________________________
Name:___________________________________
Title:__________________________________
-18-
<PAGE>
STATE STREET BANK AND TRUST COMPANY
By:_____________________________________
Name:___________________________________
Title:__________________________________
THE CHASE MANHATTAN BANK
By:_____________________________________
Name:___________________________________
Title:__________________________________
LAZARD BROTHERS & CO., LIMITED
By:_____________________________________
Name:___________________________________
Title:__________________________________
SOUTHTRUST BANK, N.A.
By:_____________________________________
Name:___________________________________
Title:__________________________________
-19-
EXHIBIT 4.2
No. 1101386
THE COMPANIES ACTS 1948 TO 1989
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
DANKA BUSINESS SYSTEMS PLC
<PAGE>
THE COMPANIES ACTS 1948 TO 1989
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
DANKA BUSINESS SYSTEMS PLC
(ADOPTED PURSUANT TO A SPECIAL RESOLUTION
PASSED ON 17 DECEMBER 1999)
PRELIMINARY
1. The regulations contained in Table A in the First Schedule to the
Companies Act 1948, in Table A in the Schedule to the Companies (Tables A to F)
Regulations 1985 and in any Table A applicable to the Company under any former
enactment relating to companies shall not apply to the Company except insofar as
they are repeated or contained in these Articles.
2. In these Articles, unless the context otherwise requires:
"these Articles" means these Articles of Association or other
the articles of association of the Company from time to time in force;
"the Auditors" means the Auditors for the time being of the
Company;
"clear days" in relation to the period of a notice means that
period excluding the day when notice is given or deemed to be given and
the day for which it is given or on which it is to take effect;
"the Combined Code" means the principles of good governance
and code of best practice derived by the Committee on Corporate
Governance chaired by Sir Ronald Hampel and appended to the Listing
Rules of the London Stock Exchange;
"the Directors" means the Directors for the time being of the
Company or, as the case may be, the Board of Directors for the time
being of the Company or the Directors present at a duly convened
meeting of the Directors or any duly authorised committee at which a
quorum is present;
"dividend" includes bonus;
"holder" in relation to shares means the Member whose name is
entered in the Register as the holder of the shares;
"month" means calendar month;
"the Office" means the registered office for the time being of
the Company;
"paid up" includes credited as paid up;
1
<PAGE>
"the Register" means the Register of Members required to be
kept by the Statutes;
"the Seal" means the common seal of the Company;
"Secretary" includes a deputy of assistant secretary, and any
person appointed by the Directors to perform the duties of the
Secretary;
"the Statutes" means the Companies Act 1985 (as amended by the
Companies Act 1989), the Companies Act 1989 and every statutory
modification or re-enactment thereof for the time being in force;
"the United Kingdom" means Great Britain and Northern Ireland;
"in writing" and "written" includes printing, lithography,
typewriting, photography, telex, facsimile transmission and other modes
of representing or reproducing words in visible form or partly one and
partly another;
"year" means calendar year;
Words importing the singular number only shall include the
plural, and vice versa;
Words importing the masculine gender only shall include the
feminine gender;
Words importing individuals and words importing persons shall
include bodies corporate and unincorporated associations;
The expressions "debenture" and "debenture holder" shall
respectively include "debenture stock" and "debenture stockholder";
The expressions "recognised clearing house" and "recognised
investment exchange" shall mean any clearing house or investment
exchange (as the case may be) granted recognition under the Financial
Services Act 1986.
A Special or Extraordinary Resolution shall be effective for any
purpose for which an Ordinary Resolution is expressed to be required under any
provision of these Articles.
Any reference herein to the provisions of any Act shall extend to and
include any amendment or re-enactment of or substitution for the same effected
by any subsequent statute.
Subject as aforesaid, and unless the context otherwise requires, words
and expressions defined in the Statutes shall bear the same meanings in these
Articles.
Headings are inserted for convenience only and shall not affect the
construction of these Articles.
SHARES
3. The authorised capital of the Company as at the date of the adoption
of these Articles as the Articles of Association of the Company is
(pound)6,250,000 and US$500,000 divided into:
3.1 500,000,000 ordinary shares of 1.25 pence each (the"ORDINARY
SHARES"); and
3.2 500,000 6.50% senior convertible participating shares of US$1.00
each (the "PARTICIPATING SHARES").
2
<PAGE>
4. Without prejudice to any special rights previously conferred on the
holders of any existing shares or class of shares, any share in the Company may
be issued with such preferred, deferred or other special rights or such
restrictions, whether in regard to dividend, voting, return of capital or
otherwise as the Company may from time to time by Ordinary Resolution determine
(or, in the absence of any such determination, as the Directors may determine).
If requisite, the Company shall in accordance with the Statutes within one month
from allotting shares deliver a statement in the prescribed form containing
particulars of special rights.
5. Subject to the provisions of the Statutes:
(1) any shares may be issued on the terms that they are to be
redeemed or are liable to be redeemed at the option of the Company or
the shareholder on such terms and in such manner as may be provided by
these Articles; and
(2) subject to Article 10A(C)(xiii) the Company may purchase
its own shares (including any redeemable shares) provided that the
Company shall not purchase its own shares if at the time of such
purchase there are outstanding any convertible shares of the Company
which remain capable of being converted, unless such purchase has been
sanctioned by an Extraordinary Resolution passed at a separate Meeting
of the holders of each class of such convertible shares in accordance
with Articles 16 and 17.
6. The Company shall not give any financial assistance for the
acquisition of shares in the Company except and in so far as permitted by the
Statutes.
7. The shares of the Company shall not be allotted at a discount and
save as permitted by the Statutes shall not be allotted except as paid up at
least as to one-quarter of their nominal value and the whole of any premium
thereon.
8. The Company may exercise the powers of paying commissions conferred
by the Statutes to the full extent thereby permitted. The Company may also on
any issue of shares pay such brokerage as may be lawful.
9.(A) Save as otherwise provided in the Statutes or in these Articles,
all unissued shares (whether forming part of the original or any
increased capital) shall be at the disposal of the Directors who may
(subject to the provisions of the Statutes) allot (with or without
conferring a right of renunciation), grant options over, offer or
otherwise deal with or dispose of them to such persons at such times
and generally on such terms and conditions as they may determine. The
Directors may at any time after the allotment of any share but before
any person has been entered in the Register as the holder recognise a
renunciation thereof by the allottee in favour of some other person and
may accord to any allottee of a share a right to effect such
renunciation upon and subject to such terms and conditions as the
Directors may think fit to impose.
(B)(i) Pursuant to and in accordance with Section 80 of the
Companies Act 1985 (as amended) the Directors shall be
generally and unconditionally authorised to exercise for each
Section 80 prescribed period all the powers of the Company to
allot relevant securities up to an aggregate nominal amount
equal to the Section 80 Amount; and
(ii) Pursuant to and within the terms of the said
authority the Directors shall be empowered during each Section
89 prescribed period to allot equity securities wholly for
cash (a) pursuant to a Scrip Dividend Offer; (b) in connection
with a rights issue; and (c) otherwise than in connection with
a Scrip Dividend Offer or a rights issue up to an aggregate
nominal amount equal to the Section 89 Amount as if Section
89(1) of the Companies Act 1985 did not apply to such
allotment; and
(iii) During each Section 80 prescribed period and
each Section 89 prescribed period the Company and its
Directors by such authority and power may make offers or
agreements which would or might require equity securities or
other relevant securities to be allotted after the expiry of
such period; and
(iv) For the purposes of this Article 9(B):
3
<PAGE>
(a) "rights issue" means an offer of equity
securities open for acceptance for a period fixed by
the Directors to holders of equity securities on the
register on a fixed record date in proportion to
their respective holdings of such securities or in
accordance with the rights attached thereto (but
subject to such exclusions or other arrangements as
the Directors may deem necessary or expedient in
relation to fractional entitlements, record dates or
legal or practical problems under the laws of, or the
requirements of any recognised regulatory body or any
stock exchange in any territory or as regards shares
held by any approved depositary or otherwise
howsoever);
(b) "Scrip Dividend Offer" has the meaning
as ascribed in Article 137 below;
(c) "Section 80 prescribed period" means any
period not exceeding 5 years for which the authority
conferred under sub-paragraph (1) is renewed by
Ordinary or Special Resolution stating the Section 80
Amount;
(d) "Section 89 prescribed period" means any
period (not exceeding 5 years on any occasion) for
which the power conferred under sub-paragraph (ii) is
renewed by Special Resolution stating the Section 89
Amount;
(e) "the Section 80 Amount" shall for any
Section 80 prescribed period be that stated in the
relevant Ordinary or Special Resolution;
(f) "the Section 89 Amount" shall for any
Section 89 prescribed period be that stated in the
relevant Special Resolution;
(g) the nominal amount of any securities
shall be taken to be, in the case of rights to
subscribe for or to convert any securities into
shares of the Company, the nominal amount of such
shares which may be allotted pursuant to such rights;
and
(h) words and expressions defined in or for
the purposes of Part IV of the Companies Act 1985 (as
amended) shall bear the same meanings herein.
10A 6.50% SENIOR CONVERTIBLE PARTICIPATING SHARES
(A) ENCUMBRANCES
All Participating Shares (including any Participating Shares issued as
a dividend or by way of bonus issue pursuant to Article 10A(C)) shall, when
issued, be free from any option, charge, lien, equity, encumbrance, right of
pre-emption or any other third party rights and free from any taxes and charges
with respect to the issue thereof.
(B) RANKING
The Participating Shares shall, with respect to dividend rights and
rights on a return of capital (whether on a liquidation, winding-up, dissolution
or otherwise), on the terms set out in the following provisions of this Article
10A, rank in priority to the Ordinary Shares and each other class of Share
Capital of the Company created after the date of adoption of these Articles
which does not expressly provide that it ranks in priority to or on a par with
the Participating Shares as to dividend rights and rights on a return of capital
(collectively, the "JUNIOR SECURITIES"). The Participating Shares shall, with
respect to dividend rights and rights on a return of capital, rank on a par with
each other class of shares of the Company hereafter created which expressly
provides that it ranks on a par with the Participating Shares as to dividend
rights and rights on a return of capital (collectively, the "PARITY
SECURITIES"); PROVIDED, that any such securities not issued in accordance with
Article 10A(D)(iv) hereof shall be deemed to be Junior Securities. The
Participating Shares shall, with respect to dividend rights and rights on a
return of capital, rank junior to each class of shares of the Company hereafter
created which expressly provides that it ranks in priority to the Participating
4
<PAGE>
Shares as to dividend rights and rights on a return of capital (collectively,
the "SENIOR SECURITIES"); PROVIDED, that any such securities not issued in
accordance with Article 10A(D)(iv) hereof shall be deemed to be Junior
Securities.
5
<PAGE>
(C) DIVIDENDS
(i) For each Dividend Period (as defined below), the holders
of Participating Shares shall be entitled to receive with respect to
their holdings of Participating Shares, in priority to the transfer of
any sum to reserves or any rights of holders of Junior Securities, out
of the distributable profits of the Company legally available therefor,
cumulative preferential dividends calculated based on the then
effective Liquidation Return per Participating Share at a rate per
annum equal to the greater of (i) the Stated Dividend Rate and (ii) the
Ordinary Share Equivalent Rate with respect to such Dividend Period.
(ii) In the period prior to the fifth anniversary of the Issue
Date (as defined below) the Company's obligations to pay dividends on
the Participating Shares pursuant to Article 10A(C)(i) above (including
in respect of all accumulated and unpaid dividends) shall be satisfied
solely by the issue to the holders of the Participating Shares of
additional Participating Shares, credited as fully paid up for cash, as
provided below. In the period commencing on the fifth anniversary of
the Issue Date, dividends in respect of the Participating Shares
(including all accumulated and unpaid dividends in respect of prior
Dividend Periods which are payable in such period) shall be payable in
cash; PROVIDED, that the Company's obligations to pay dividends on the
Participating Shares pursuant to Article 10A(C)(i) above in such period
shall be satisfied by the issue to the holders of the Participating
Shares of additional Participating Shares, credited as fully paid up
for cash, to the extent that the terms of the Company's then existing
principal indebtedness (whether under its principal bank credit
facilities or pursuant to debt securities issued in an aggregate
principal amount in excess of U.S.$50 million in a bona fide
underwritten public or bona fide private offering) prohibits the
payments of such dividends in cash. The number of Participating Shares
to be issued to the holders of Participating Shares when dividends are
to be satisfied by the issue of Participating Shares shall equal the
amount of the dividend expressed in cash divided by the then effective
Liquidation Return per Participating Share, rounded down to the nearest
full share after taking into account all Participating Shares owned by
the holder thereof. If dividends are to be satisfied by the issue of
Participating Shares in accordance with this Article 10A(C)(ii), the
holders of the Participating Shares shall be deemed to have irrevocably
authorised and instructed the Directors to apply the dividend payable
to such holders in subscribing in cash for such Participating Shares
and the Company irrevocably undertakes to apply the same in accordance
with such instructions.
(iii) Dividends shall be payable in arrears on each February
15, May 15, August 15 and November 15, unless such day is not a
Business Day, in which event dividends shall be payable on the next
succeeding Business Day (each such date being hereinafter referred to
as a "DIVIDEND PAYMENT DATE"), commencing on the first Dividend Payment
Date in respect of Participating Shares which is at least seven days
after the issuance thereof. For Participating Shares issued on the
original issue date of the Participating Shares in accordance with
these Articles (the "ISSUE DATE"), the first dividend payment shall be
for the period from and including the Issue Date up to but excluding
the date of the first Dividend Payment Date, and each dividend payment
thereafter shall be for the period from and including the most recent
Dividend Payment Date to but excluding the first Dividend Payment Date
thereafter. For Participating Shares issued subsequent to the Issue
Date, the first dividend payment shall be for the period from and
including the date of issuance thereof to but excluding the date of the
first Dividend Payment Date thereafter, and each dividend payment
thereafter shall be for the period from and including the most recent
Dividend Payment Date to but excluding the first Dividend Payment Date
thereafter. Each quarterly period beginning on February 16, May 16,
August 16 and November 16 in each year and ending on and including the
day next preceding the first day of the next such quarterly period
shall be a "DIVIDEND PERIOD". The amount of dividends payable for each
full Dividend Period shall be computed by dividing the applicable
dividend rate per annum by four. Dividends (or amounts equal to
accumulated and unpaid dividends) payable on Participating Shares for
any period less than a full quarterly Dividend Period will be computed
on the basis of a 360-day year of twelve 30-day months and the actual
number of days elapsed in any period less than one month. The record
date for determination of holders of Participating Shares entitled to
receive payment of a dividend or distribution thereon shall be, with
respect to the dividend payable on February 15, May 15, August 15 and
November 15 of each year, the preceding January 15, April 15, July 15
and October 15, respectively, or such other record date as may be fixed
by the Directors from time to time, which other record date shall be no
less than 30 and no more than 60 calendar days prior to the relevant
Dividend Payment Date. Dividends and distributions shall be payable to
holders of record as they shall appear on the records of the Company on
the applicable record date.
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(iv) When the Company's dividend obligations are to be
satisfied by the issue of Participating Shares in accordance with
Article 10A(C)(ii) above (whether prior to the fifth anniversary of the
Issue Date or thereafter), then to the extent that the Company has
insufficient distributable profits legally available in accordance with
the Statutes for the payment of such dividends on any Dividend Payment
Date, the Company shall (to the extent that it has reserves or sums in
its share premium account legally available therefor in accordance with
the Statutes) issue to the holders of the Participating Shares, by way
of bonus issue, additional Participating Shares, except to the extent
prohibited by the Company's then existing indebtedness (whether under
its principal bank credit facilities or pursuant to debt securities
issued in an aggregate principal amount in excess of US$50 million in a
bona fide underwritten public or bona fide private offering). The
number of additional Participating Shares to be so issued and the
rights and obligations attaching thereto shall be the same as if the
Company had issued such Participating Shares as a dividend in
accordance with Article 10A(C)(ii). Any Participating Shares issued by
way of a bonus issue under this Article 10A(C)(iv) shall be in lieu of
dividends and the provisions of this Article 10A shall apply as if such
Participating Shares had been issued as dividends. The rights to
receive Participating Shares by way of bonus issue pursuant to this
Article 10A(C)(iv) shall accrue to the holders of the Participating
Shares and not to any other holder of Share Capital.
(v) The cash equivalent of dividends on account of arrears in
respect of each Participating Share for any particular Dividend Period
in which dividends were not paid or a bonus issue was not made on the
applicable Dividend Payment Date (including, without limitation, as a
result of the Company not having available sufficient distributable
profits, reserves or sums in its share premium account available for a
bonus issue, or as a result of the rounding down of the number of
Participating Shares issuable in the payment of dividends as provided
above in Article 10A(C)(ii)) shall be automatically added to the then
effective Liquidation Return on the relevant Dividend Payment Date. Any
amounts so added to the then effective Liquidation Return in respect of
such Participating Share shall be subject to reduction as provided
below in Article 10A(C)(vi).
(vi) To the extent the Company has profits or reserves legally
available for distribution, an amount equal to accumulated and unpaid
dividends for any past Dividend Period may be declared by the Directors
and paid as a dividend (in Participating Shares or cash, as the case
may be, as provided above in Article 10A(C)(ii)) or by way of a bonus
issue in lieu of such dividend in accordance with Article 10A(C)(iv) on
any subsequent Dividend Payment Date to all holders of Participating
Shares of record on the record date for such subsequent Dividend
Payment Date (including, without limitation, holders of Participating
Shares issued after the record date for the Dividend Payment Date for
such past Dividend Period). Each such payment shall automatically
reduce the then effective Liquidation Return by an amount equal to the
aggregate amount of such payment divided by the total number of
Participating Shares outstanding on such record date for such
subsequent Dividend Payment Date; PROVIDED, HOWEVER, that the
Liquidation Return shall not be reduced below U.S.$1,000 per share.
(vii) Dividends on the Participating Shares shall accumulate
on a daily basis. Dividends shall cease to accumulate in respect of
Participating Shares on the date of actual conversion or redemption
thereof. The amount of the dividend due on each Dividend Payment Date
shall, subject to Article 10A(C)(iv), be paid out of the profits of the
Company available for distribution in accordance with the Statutes,
without the need for any resolution of the Directors or of the Members
in General Meeting.
(viii) To the extent that the Company is legally permitted to
do so but save where a majority of the Directors decides bona fide that
to do so would be materially prejudicial to the business of any
subsidiary undertaking, the Company shall use its best efforts to
procure the distribution to the Company by its subsidiary undertakings
in respect of each financial year by way of dividend or otherwise
(except by the reduction of capital or own-share purchase) of
sufficient of the profits, if any, of its subsidiary undertakings to
enable the Company to pay the dividends on the Participating Shares.
(ix) Dividends paid on the Participating Shares in an amount
less than the total amount of such dividends at the time accumulated
and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such
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<PAGE>
shares at the time outstanding, and any remainder not paid as provided
above in respect of each Participating Share shall be added to the
Liquidation Return as provided above in Article 10A(C)(v) hereof.
(x) As long as any Participating Shares are outstanding, no
dividends or other distributions (other than dividends or other
distributions payable in shares of, or warrants, rights or options
exercisable for or convertible into shares of, Junior Securities and
cash in lieu of fractional shares of such Junior Securities in
connection with any such dividends) will be paid on any Junior
Securities unless:
(a) full cumulative dividends on all outstanding
Participating Shares and any outstanding Parity Securities
have been paid, or declared and set aside for payment, for all
Dividend Periods terminating on or prior to the payment date
of such dividend or distribution and for the current Dividend
Period;
(b) the Company has paid or set aside all amounts, if
any, then or theretofore required to be paid or set aside for
all redemption reserves, if any, for any outstanding
Participating Shares or Parity Securities; and
(c) the Company is not in default of any of its
obligations to redeem any outstanding Participating Shares
or Parity Securities.
(xi) As long as any Participating Shares are outstanding, no
Junior Securities may be purchased, redeemed or otherwise acquired by
the Company or any of its subsidiaries (except in connection with a
reclassification or exchange of any Junior Securities through the
issuance of shares of, or warrants, rights or options exercisable for
or convertible into shares of, other Junior Securities (and cash in
lieu of fractional shares of such Junior Securities in connection
therewith) or the purchase, redemption or other acquisition of any
Junior Securities with any shares of, or warrants, rights or options
exercisable for or convertible into shares of, other Junior Securities
(and cash in lieu of fractional shares of such Junior Securities in
connection therewith)), nor may any funds be set aside or made
available for any redemption reserve for the purchase or redemption of
any Junior Securities.
(xii) As long as any Participating Shares are outstanding, no
dividends or other distributions (other than dividends or other
distributions payable in shares of, or warrants, rights or options
exercisable for or convertible into shares of, Junior Securities and
cash in lieu of fractional shares of such Junior Securities in
connection with any such dividends) will be paid on any Parity
Securities unless such dividends or other distributions are declared
and paid pro rata so that the amounts of any such dividends or other
distributions declared and paid per share on outstanding Participating
Shares and each other share of such Parity Securities will in all cases
bear to each other the same ratio that the then effective Liquidation
Return per share of outstanding Participating Shares and the amount
payable per share of such other outstanding shares of Parity Securities
on a solvent winding up of the Company bear to each other.
(xiii) As long as any Participating Shares are outstanding, no
Parity Securities may be purchased, redeemed or otherwise acquired by
the Company or any of its subsidiaries (except with shares of, or
warrants, rights or options exercisable for or convertible into shares
of, Junior Securities and cash in lieu of fractional shares of such
Junior Securities in connection therewith) unless the Participating
Shares and such Parity Securities are purchased, redeemed or otherwise
acquired pro rata so that the Fair Market Value of the consideration
applied to the purchase, redemption or other acquisition of each
Participating Share and each share of such Parity Securities will in
all cases bear to each other the same ratio that the then effective
Liquidation Return per outstanding Participating Share and the amount
payable per share of such other outstanding Parity Securities on a
solvent winding up of the Company bear to each other.
(xiv) As long as any Participating Shares are outstanding, no
resolution to reduce the Company's issued share capital or any uncalled
liability thereon shall be effective unless such resolution is
sanctioned by an extraordinary resolution of the holders of the
Participating Shares held at a separate meeting of such holders.
(xv) Subject to the provisions described above in this Article
10A(C), such dividends or other distributions (payable in cash,
property or Junior Securities) as may be determined from time to time
by the Directors may be declared and paid on the shares of any Junior
Securities and/or Parity Securities and from time to time Junior
Securities
8
<PAGE>
and/or Parity Securities may be purchased, redeemed or otherwise
acquired by the Company or any of its subsidiaries. In the event of
the declaration and payment of any such dividends or other
distributions, the holders of such Junior Securities and/or Parity
Securities, as the case may be, will be entitled, to the exclusion of
holders of any outstanding Participating Shares, to share therein
according to their respective interests.
9
<PAGE>
(D) VOTING RIGHTS
(i) The holders of the Participating Shares (in addition to
their rights set forth in this Article 10A(D) and otherwise provided by
applicable law) shall be entitled from time to time to such number of
votes for each Participating Share held as equals the number of
Ordinary Shares into which such Participating Share is convertible on
the record date set for determining the persons entitled to vote on any
matter and shall, if they shall exercise such entitlement, vote
together with the holders of the Ordinary Shares (and any other class
or series of Share Capital, if any, similarly entitled to vote), as a
single class, on all matters to be voted on by holders of the Ordinary
Shares. Notwithstanding the preceding sentence, the aggregate voting
rights attaching to the Participating Shares held by Cypress and
Affiliates of Cypress shall in no circumstances exceed 29.99% of all
voting rights from time to time exercisable by the Members of the
Company in General Meeting. If the voting rights attaching to the
Participating Shares held by Cypress and Affiliates of Cypress when
calculated in accordance with this Article 10A(D)(i) exceed 29.99%,
then the aggregate voting rights of the Participating Shares held by
Cypress and Affiliates of Cypress shall be deemed to be 29.99%, and
such voting rights shall be exercisable by Cypress (if it is a holder
of Participating Shares) and Affiliates of Cypress that are holders of
Participating Shares on a pro rata basis according to the number of
issued Participating Shares held by each such holder.
(ii) In addition to the voting rights set forth in Article
10A(D)(i), holders of the Participating Shares shall be entitled to
vote as a separate class on matters which require (under these Articles
or applicable law) a separate class vote of the Participating Shares
and shall have such other voting rights as are set forth in this
Article 10A(D).
(iii) If at any time:
(a) the Company shall have failed to redeem any
outstanding Participating Shares in accordance with these
Articles; or
(b) dividends payable in cash on Participating Shares
as provided in Article 10A(C)(ii) hereof (i.e., dividends
payable in the period commencing on the fifth anniversary of
the Issue Date) have not been paid in full in cash for six
consecutive Dividend Periods regardless of whether or not the
Company shall have paid dividends in additional Participating
Shares pursuant to the proviso in the second sentence of
Article 10A(C)(ii) hereof, or by way of bonus issue pursuant
to Article 10A(C)(iv) hereof,
thereafter and until, in the case of Article 10A(D)(iii)(a)
above, the date that the Company shall have fulfilled its
redemption obligations or, in the case of Article
10A(D)(iii)(b) above, until the date that all accumulated and
unpaid dividends payable as provided in Article 10A(C)(ii)
hereof (i.e., dividends payable on and after the fifth
anniversary of the Issue Date), whether or not declared, on
the outstanding Participating Shares shall have been paid in
full and the Company shall have paid dividends in full in cash
for four additional consecutive fiscal quarters thereafter,
the number of Directors then constituting the Board of
Directors of the Company shall be increased by two and the
holders of Participating Shares, acting as a class, shall be
entitled to elect the two additional Directors to serve on the
Board of Directors by majority vote at a class meeting of the
holders of the Participating Shares to be held immediately
prior to any annual meeting of shareholders or extraordinary
meeting held in place thereof, or by majority vote at an
extraordinary meeting of the holders of the Participating
Shares called as hereinafter provided, or by majority vote of
the holders of the Participating Shares as set forth in a
written document signed by all such holders. The remaining
Directors of the Company shall be elected by the classes of
Share Capital, including the Participating Shares, entitled to
vote therefor, voting together, at each meeting of
shareholders held for the purpose of electing Directors, all
in accordance with the terms and procedures set forth in these
Articles. As soon as, in the case of Article 10A(D)(iii)(a)
above, the Company shall have fulfilled its redemption
obligation and, in the case of Article 10A(D)(iii)(b) above,
all accumulated and unpaid dividends payable as provided in
Article 10A(C)(ii) hereof, whether or not declared, on the
outstanding Participating Shares shall have been paid in full
and the Company shall have paid dividends in full in cash for
four additional consecutive fiscal quarters thereafter, then
the right of the holders of the Participating Shares to elect
such additional Directors pursuant to this Article 10A(D)(iii)
shall
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<PAGE>
immediately cease, the term of office of any person elected
as Director by the holders of the Participating Shares shall
forthwith terminate (and the holders of the Participating
Shareholders shall take all steps necessary to procure the
resignation of such Directors) and the number of Directors
comprising the board of Directors shall be reduced
accordingly. At any time after voting power to elect a
Director shall have become vested and be continuing in the
holders of Participating Shares pursuant to this Article
10A(D)(iii) or if a vacancy shall exist in the office of a
Director elected by the holders of Participating Shares, the
Directors may, and upon the written request of the holders of
record of at least 25% of the Participating Shares then
outstanding addressed to the Secretary of the Company shall,
call an extraordinary meeting of the holders of Participating
Shares, for the purpose of electing the Directors which such
holders are entitled to elect. If such meeting shall not be
called by the Directors within 20 days after personal service
of written request upon the Secretary of the Company, or
within 20 days after mailing the same by a reputable overnight
air courier service, addressed to the Secretary of the Company
at its principal executive offices, then the holders of at
least 25% of the outstanding Participating Shares may
designate in writing one of their number to call such meeting
at the expense of the Company. Such meeting may be called by
the person so designated, or the Directors (as the case may
be) upon the notice required for the Annual General Meeting of
shareholders of the Company and shall be held at the place for
holding the Annual General Meeting of shareholders. Any holder
of Participating Shares so designated shall have, and the
Company shall provide, access to the lists of shareholders to
be called pursuant to the provisions hereof. The rights of the
holders of the Participating Shares to elect two additional
Directors pursuant to this Article 10A(D)(iii) shall be in
addition to the right to appoint Directors set forth in
Article 10A(H) hereof.
(iv) As long as any Participating Shares are outstanding,
subject to applicable law, the Company shall not, without consent of
the holders of at least a majority of the number of Participating
Shares at the time outstanding, voting as a single class, given in
person or by proxy, either in writing or by vote at an extraordinary
meeting of that class called for the purpose:
(a) increase the number of authorized Participating
Shares or issue any additional Participating Shares, other
than as contemplated by the terms of the Participating Shares;
(b) amend or modify the relative rights, powers,
preferences or limitations of the Participating Shares or
amend, alter or repeal any of the provisions of the Company's
Memorandum of Association or these Articles so as to eliminate
the Participating Shares or otherwise affect adversely the
relative rights, powers, preferences or limitations of the
holders of Participating Shares; or
(c) other than Participating Shares, create,
authorize, issue or permit to exist any class of Share Capital
or series of preferred shares that ranks as Senior Securities
or Parity Securities with respect to the Participating Shares,
or reclassify any class or series of any Junior Securities
into Senior Securities or Parity Securities or reclassify any
class or series of any Parity Securities into Senior
Securities, or authorize any securities exchangeable for,
convertible into or evidencing the right to purchase any such
class or series of Senior Securities or Parity Securities.
(v) The holders of the Participating Shares shall be entitled
to relinquish their rights to the tax gross-up provided for in Article
10A(I) at an extraordinary meeting of the holders of the Participating
Shares duly convened on 14 days notice. If the holders of the
Participating Shares present in person or by proxy at such meeting
resolve by majority vote to relinquish such tax gross-up rights, the
Participating Shares shall thereafter have no such rights and the
Company shall not have the right to redeem the Participating Shares in
accordance with Article 10A(E)(iv).
(E) REDEMPTION
(i) Subject to the provisions of the Statutes and these
Articles, the Company may redeem the Participating Shares and make
payment in respect of the Participating Shares in accordance with the
Statutes whether out of its distributable profits or out of the
proceeds of a fresh issue of shares made for the purposes of such
redemption or
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otherwise. For the purposes of any redemption under Articles 10A(E)(v)
or 10A(E)(vii), the Company shall use its best efforts to complete a
fresh issue of shares (taking into account then prevailing market
conditions and other factors deemed reasonable by a majority of the
Directors) if and to the extent that the Company does not have
sufficient distributable profits to make such redemption without such a
fresh share issue, but save to the extent that such fresh issue is
prohibited by the Company's then existing indebtedness (whether under
its principal bank credit facilities or pursuant to debt securities
issued in an aggregate principal amount in excess of U.S.$50 million in
a bona fide underwritten public offering or bona fide private
offering).
(ii) The Company shall not have the right to redeem the
Participating Shares prior to the fourth anniversary of the Issue Date,
except in the limited circumstances set forth in Articles 10A(E)(iv).
(iii) On and after the fourth anniversary of the Issue Date
and prior to the eleventh anniversary of the Issue Date, the Company
shall have the right to redeem the Participating Shares, in whole but
not in part, at a redemption price per share in cash equal to the
greater of:
(a) the amount set forth below (expressed as a
percentage of the then effective Liquidation Return), if
redeemed during the twelve-month period beginning on the
anniversary of the Issue Date in the years indicated below:
PERCENTAGE OF
THEN EFFECTIVE
YEAR LIQUIDATION RETURN
- ---- ------------------
2003 ............................................... 103.250%
2004 ............................................... 102.167
2005 ............................................... 101.083
2006 and thereafter ................................ 100.000; and
(b) the aggregate Market Value of the Ordinary Shares
into which such Participating Shares are convertible (in
accordance with Article 10A(F)) on the date of redemption,
in each case plus accumulated and unpaid dividends for the period from
and including the most recent Dividend Payment Date through and
including the date of redemption. Notwithstanding the preceding
sentence, the Company may, at its option (exercisable by resolution of
the Directors), elect to cause the Participating Shares to be converted
(in lieu of redemption in cash at the price referred to in Article
10A(E)(iii)(b)) into such number of Ordinary Shares as are issuable
upon conversion of the relevant Participating Shares on the date fixed
for redemption (the number of Ordinary Shares issuable on conversion
being calculated in accordance with Article 10A(F)(ii)).
(iv) Prior to the fourth anniversary of the Issue Date, the
Company shall have the right to redeem the Participating Shares, in
whole but not in part, at the same redemption price applicable for
redemptions during the twelve-month period beginning on the anniversary
of the Issue Date in 2003 (as set forth in Article 10A(E)(iii)), but
only in the event that the Company has or will become obliged to pay
Additional Amounts in respect of the Participating Shares under the
provisions of Article 10A(I) at a rate of withholding or deduction in
excess of 7.5% of the amounts otherwise payable but for such Article
10A(I) as a result of any change in, or amendment to, the laws (or any
rules, regulations or ruling promulgated thereunder) of the United
Kingdom, which change or amendment becomes effective after the Issue
Date. Prior to the giving of any notice of redemption of the
Participating Shares under this Article 10A(E)(iv), the Company will
deliver to the holders of the Participating Shares (a) a certificate,
executed by the Company's chief financial officer, stating that the
Company is entitled to effect such redemption pursuant to this Article
10A(E)(iv) and setting forth in reasonable detail a statement of facts
showing that the conditions precedent to the right of the Company so to
redeem have occurred; and (b) a written opinion of independent English
legal advisors, of recognised standing, to the effect that the Company
has or will become obliged to pay such Additional Amounts as a result
of such change or amendment. Notwithstanding the preceding sentences of
this Article 10A(E)(iv), the Company shall not have any rights to
redeem the Participating Shares pursuant to this Article 10A(E)(iv) in
the event that the
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holders of the Participating Shares vote pursuant to Article 10A(D)(v)
to relinquish their rights to the tax gross-up provided for in Article
10A(I).
(v) Subject to the Statutes, on the eleventh anniversary of
the Issue Date (or as soon thereafter as the Company is permitted by
the Statutes), the Company shall redeem all outstanding Participating
Shares or, failing which, the maximum number of outstanding
Participating Shares that can lawfully be so redeemed in accordance
with the Statutes on such date, if any, at a redemption price per share
in cash equal to the greater of (a) the then effective per share
Liquidation Return and (b) the aggregate Market Value of the Ordinary
Shares into which such Participating Shares are convertible (in
accordance with Article 10A(F)) on the date of redemption, in each case
plus accumulated and unpaid dividends for the period from and including
the most recent Dividend Payment Date through and including the date of
redemption. Notwithstanding the previous sentence, the Company may, at
its option (exercisable by resolution of the Directors), elect to cause
the Participating Shares to be converted (in lieu of redemption in cash
at the price referred to in Article 10A(E)(v)(b)) into such number of
Ordinary Shares as are issuable upon conversion of the relevant
Participating Shares on the date fixed for redemption (the number of
Ordinary Shares issuable on conversion being calculated in accordance
with Article 10A(F)(ii)). In case the Company is unable to so redeem
all outstanding Participating Shares on the eleventh anniversary of the
Issue Date, it shall do so pro rata on a share-by-share basis among the
holders of all such Participating Shares.
(vi) A notice to redeem the Participating Shares pursuant to
Article 10A(E)(iii), 10A(E)(iv) or 10A(E)(v) hereof (the "REDEMPTION
NOTICE") shall be sent by or on behalf of the Company, by a reputable
overnight air courier service, to holders of record of Participating
Shares at their respective addresses as they shall appear on the
records of the Company, not less than 30 days nor more than 60 days
prior to the date fixed for redemption:
(a) notifying such holders of the election of the
Company to redeem such shares, the number of shares to be
redeemed, and of the date fixed for redemption;
(b) stating that the Participating Shares may be
converted in accordance with Article 10A(F) hereof, until the
close of business (London time) on the Business Day prior to
the date of redemption by surrendering to the Company or the
registrar (who shall act as transfer agent for the
Participating Shares) the certificate or certificates for the
shares to be converted, accompanied by written notice
specifying the number of shares to be converted, and stating
the name and address of the registrar;
(c) stating the place or places at which the shares
called for redemption shall, upon presentation and surrender
of the certificates evidencing such shares, be redeemed, and
the redemption price to be paid therefor; and
(d) stating that dividends shall cease to accumulate
on the date of redemption unless the Company defaults in the
payment of the redemption price.
(vii)(a) Subject to the provisions of the Statutes, in the
event of any Change of Control, each holder of the Participating Shares
shall have the right, at such holder's option, subject to the terms and
conditions hereof, to require the Company to redeem its Participating
Shares, in whole or in part, on a Business Day that is no earlier than
30 days nor later than 60 days after the occurrence of such Change of
Control (the "CHANGE OF CONTROL REPURCHASE DATE") at a redemption price
per Participating Share in cash equal to the greater of (1) 101% of the
then effective per share Liquidation Return and (2) the aggregate
Market Value of the Ordinary Shares into which such Participating
Shares are convertible (in accordance with Article 10A(F)) on the date
of redemption, in each case plus accumulated and unpaid dividends in
respect of each Participating Share being redeemed for the period from
the most recent Dividend Payment Date through and including the date of
redemption, plus the sum of any remaining dividend payments that would
have otherwise been payable on such Participating Shares (assuming that
the Stated Dividend Rate would have been the applicable rate throughout
such period) up to and including the date which is three and one-half
years after the Issue Date (the "CHANGE OF CONTROL REPURCHASE PRICE").
Notwithstanding the preceding sentence, the Company may, at its option
(exercisable by resolution of the Directors), elect to cause the
Participating Shares to be converted (in lieu of
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<PAGE>
redemption in cash at the price referred to in Article 10A(E)(vii)(a)
(2)) into such number of Ordinary Shares as are issuable upon
conversion of the relevant Participating Shares on the date fixed for
redemption (the number of Ordinary Shares issuable on conversion being
calculated in accordance with Article 10A(F)(ii)), except that the
Company shall pay in cash such sum of any remaining dividend payments
referred to in the preceding sentence.
(b) In the event of any Change of Control, each
holder of Participating Shares may, alternatively, convert its
Participating Shares, in whole or in part, into Ordinary
Shares in accordance with Article 10A(F) and, if converted
after such Change of Control but prior to or at the close of
business on the 60th day after the Change of Control Notice,
subject to the provisions of the Statutes, such holder shall
receive on the date of conversion an additional cash payment
equal to the sum of any remaining dividend payments that would
have otherwise been payable on such converted Participating
Shares (assuming that the Stated Dividend Rate would have been
the applicable rate throughout such period) through and
including the date which is three and one-half years after the
Issue Date (the "ADDITIONAL CHANGE OF CONTROL PAYMENT").
(c) If the Company is unable lawfully to redeem in
accordance with the Statutes all Participating Shares as to
which holders have, at their option, required the Company to
redeem in accordance with Article 10A(E)(vii)(a), then it
shall do so pro rata on a share-by-share basis among all such
shares of the relevant holders. Similarly, if the Company is
unable lawfully to pay any Additional Change of Control
Payment set forth in Article 10A(E)(vii)(b), then it shall do
so pro rata on a share-by-share basis among all such shares of
the relevant holders. For purposes of the preceding two
sentences, the redemption of Participating Shares pursuant to
Article 10(E)(vii)(a) shall have priority over the payment of
any Additional Change of Control Payment pursuant to Article
10A(E)(vii)(b).
(d) Notwithstanding Articles 10A(E)(vii)(a) or
10A(E)(vii)(b), to the extent that the Company is prohibited
by the Statutes from paying the Change of Control Repurchase
Price set forth in Article 10A(E)(vii)(a) and/or any
Additional Change of Control Payment set forth in Article
10A(E)(vii)(b) to the relevant holder of any Participating
Share, respectively, then the Change of Control Adjustment
Amount, if applicable, shall be added to the Liquidation
Return of each such Participating Share that will not be
redeemed or converted in accordance with such Articles and
each such Participating Share not so redeemed or converted
shall remain outstanding after any corresponding Change of
Control Repurchase Date and/or the 60th day after the
corresponding Change of Control Notice, as the case may be.
(e) The Company shall comply with the requirements of
Rule 14e-1 under the U.S. Securities Exchange Act of 1934 and
any other securities laws and regulations to the extent such
Rule and such laws and regulations are applicable in
connection with the redemption of Participating Shares as a
result of a Change of Control in accordance with Article
10A(E)(vii)(a).
(f) The Company shall not be required to redeem
Participating Shares in the event of the occurrence of a
Change of Control in accordance with Article 10A(E)(vii)(a) if
any other Person acquires all Participating Shares in respect
of which a Change of Control Repurchase Notice has been
validly tendered and not withdrawn in the manner and at the
times required by, and otherwise in compliance with, Article
10A(E)(ix) and Article 10A(E)(x).
(viii) A notice of a Change of Control (the "CHANGE OF CONTROL
NOTICE") shall be sent by or on behalf of the Company, by a reputable
overnight air courier service, to each holder of Participating Shares
of record at its respective address as it appears on the records of the
Company not more than 10 days after the Change of Control:
(a) describing the transaction that constitutes the
Change of Control;
(b) stating the date by which any Change of Control
Repurchase Notice (as defined below) must be received by the
Company or the registrar from such holder and any Change of
Control Repurchase Date;
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<PAGE>
(c) stating the procedures for withdrawing any
Change of Control Repurchase Notice;
(d) stating that the Participating Shares may be
converted in accordance with Article 10A(F) until the close of
business on the Business Day prior to any Change of Control
Repurchase Date by surrendering to the Company or its
registrar the certificate or certificates for the
Participating Shares to be converted, accompanied by written
notice specifying the number of shares to be converted, and
stating the name and address of the transfer agent for the
Participating Shares, if any;
(e) stating any Additional Change of Control
Payment;
(f) stating the place or places at which the shares
called for redemption shall, upon presentation and surrender
of the certificates evidencing such shares, be redeemed, and
any Change of Control Repurchase Price to be paid therefor;
and
(g) stating that dividends shall cease to accumulate
on any Change of Control Repurchase Date unless the Company
defaults in payment of any Change of Control Repurchase Price.
(ix) To exercise its rights, if any, pursuant to Article
10A(E)(vii)(a), a holder of Participating Shares must deliver written
notice (a "CHANGE OF CONTROL REPURCHASE NOTICE") to the Company, of the
exercise of such right prior to the close of business on the Business
Day immediately prior to the Change of Control Repurchase Date. The
Change of Control Repurchase Notice must state (a) the number of
Participating Shares to be redeemed and (b) that such Participating
Shares will be submitted for redemption by the Company on the Change of
Control Repurchase Date.
(x) Any Change of Control Repurchase Notice may be withdrawn
by a holder of Participating Shares by a written notice of withdrawal
received by the Company prior to or at the close of business (London
time) on the Business Day immediately prior to the Change of Control
Repurchase Date. The notice of withdrawal must state the number of
Participating Shares as to which the withdrawal notice relates and the
number of Participating Shares, if any, which remains subject to the
original Change of Control Repurchase Notice.
(xi) Neither failure to mail any Redemption Notice or Change
of Control Notice, as the case may be, nor any defect in any Redemption
Notice or Change of Control Notice, as the case may be, to one or more
holders of Participating Shares shall affect the sufficiency of the
proceedings for redemption as to other holders. Subject to compliance
with the provisions of this Article 10A(E), the Company shall forthwith
upon the date fixed for redemption pay the redemption monies to the
appropriate holders of the Participating Shares.
(xii) On redemption the Company shall cancel the share
certificate of the applicable holder of Participating Shares and, in
the case of a redemption of part of the Participating Shares included
in such certificate, without charge issue a new certificate to such
holder for the balance of Participating Shares not redeemed.
(xiii) To the extent the Company is legally permitted to do so
and save where a majority of the Directors decides bona fide that to do
so would be materially prejudicial to the business of any subsidiary
undertaking, the Company shall use its best efforts to procure the
distribution to the Company by its subsidiary undertaking in respect of
each financial year by way of dividend or otherwise (except by the
reduction of capital or own-share purchases) of sufficient of the
profits, if any, of its subsidiary undertakings to enable the company
to redeem the Participating Shares in accordance with this Article
10A(E).
(xiv) If a Redemption Notice or a Change of Control Notice
shall have been given as hereinbefore provided, then each holder of
Participating Shares shall be entitled to all relative rights, powers,
preferences and limitations accorded to holders of the Participating
Shares until and including the date of redemption. Provided that the
Company shall have complied with its obligations pursuant to this
Article 10A(E), from and after the date of redemption, the
Participating Shares the subject of such redemption shall no longer be
deemed to be outstanding, and all rights of the
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<PAGE>
holders of such shares shall cease and terminate, except the right of
the holders of such shares, upon surrender of certificates therefor, to
receive the monies to be paid under this Article 10A(E).
(xv) Any redemption monies unclaimed by the holders of the
Participating Shares entitled thereto for a period of 30 days following
the requisite payment date shall promptly be deposited by the Company
in a third party bank account to be held in trust for such holders.
(xvi) If a holder whose Participating Shares are to be
redeemed under this Article 10A(E) fails to deliver the certificate (or
certificates) for those shares to the Company, the Company may retain
the redemption monies payable to such holder pending delivery of such
certificate(s). No person shall, prior to delivery of such
certificate(s), have any claim against the Company for redemption
monies retained under this Article 10A(E)(xvi), and the Company shall
not be liable for interest in respect thereof.
(xvii) The Directors may, pursuant to the authority given by
the adoption of this Article 10A(E), consolidate and sub-divide the
share capital available for issue as a consequence of a redemption of
Participating Shares into Ordinary Shares or any other class of shares
into which the authorised share capital of the Company is then divided,
each of a like nominal amount as the shares of that class then in
issue, or into unclassified shares of the same nominal amount as the
Participating Shares. The Directors may issue shares in anticipation of
redemption to the extent permitted by the Statutes and these Articles.
(F) CONVERSION RIGHTS
(i) Subject to and upon compliance with the provisions of this
Article 10A(F), the holder of any Participating Shares shall have the
right, at any time and from time to time, at such holder's option, to
convert all or part (having an aggregate Liquidation Return of at least
U.S.$1 million) of such holder's Participating Shares into Ordinary
Shares, and the Company shall have the limited ability in accordance
with Article 10A(E)(iii), Article 10A(E)(v) and Article 10A(E)(vii) to
elect to cause the Participating Shares to be converted into Ordinary
Shares. If a Redemption Notice or a Change of Control Repurchase Notice
has been given as hereinbefore provided, such right of conversion shall
terminate at the close of business on the Business Day prior to the
date fixed for redemption.
(ii) Each Participating Share as a whole (and not a fraction
thereof) shall be converted into the number of Ordinary Shares as is
equal to the number determined by dividing (i) the sum of the
Liquidation Return on the date of conversion plus accumulated and
unpaid dividends for the period from and including the most recent
Dividend Payment Date up to and including the date of conversion (in
respect of such Participating Share) by (ii) the Conversion Price in
effect on the date of conversion.
(iii) Conversion of such Participating Shares as are due to be
converted ("RELEVANT SHARES") shall be effected in such manner as may
be authorised by applicable law and, without prejudice to the rights of
the holders of the Participating Shares under this Article 10A(F), as
the Directors may in their absolute discretion from time to time
determine for effecting the exercise of the conversion rights attaching
to the relevant Participating Shares (unless the holders of the
Participating Shares pass an extraordinary resolution at a class
meeting of the holders of the Participating Shares electing a
particular manner of conversion (which extraordinary resolution is in
effect prior to or at the time of delivery of the Conversion Notice
relating to the Shares to be converted) in which case conversion shall
be effected in such manner, provided that such manner complies with
these Articles and the Statutes). Without limiting the foregoing, the
conversion of the Participating Shares may be effected by any of the
methods set out below (and the Directors shall be authorised for all
relevant purposes pursuant to the authority given by the resolution
adopting these Articles to so convert the Participating Shares):
(a) Conversion may be effected by the redemption of
the Relevant Shares (or any of them) on the relevant
conversion date for a sum equal to the Liquidation Return on
the date of conversion plus accumulated and unpaid dividends
for the period from and including the most recent Dividend
Payment Date up to and including the conversion date, out of
distributable profits of the Company. In that event, the
Relevant Shares
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<PAGE>
confer upon the holders thereof the right and obligation to
subscribe for the appropriate number of Ordinary Shares to
which such holder is entitled in accordance with Article
10A(F)(ii), at such aggregate premium, if any, as represents
the amount by which the redemption monies payable in respect
of the Relevant Shares exceeds the nominal amount of such
number of Ordinary Shares. If redemption is to be made in
accordance with this Article 10A(F)(iii)(a), the Conversion
Notice given by or relating to a holder of Relevant Shares
shall be deemed irrevocably to authorise and instruct the
Directors to apply the redemption monies payable to such
holder in subscribing in such holder's name for such Ordinary
Shares at such premium.
(b) Conversion may be effected by the redemption of
the Relevant Shares (or any of them) on the relevant
conversion date, for a sum equal to the Liquidation Return on
the conversion date plus accumulated and unpaid dividends for
the period from and including the most recent Dividend Payment
Date up to and including the conversion date, out of the
proceeds of a fresh issue of shares made for the purposes of
redemption or in any other manner allowed by the Statutes and
these Articles. In that event, the Relevant Shares confer on
the holders thereof the right and obligation to subscribe for
the appropriate number of Ordinary Shares to which that holder
is entitled in accordance with Article 10A(F)(ii), at such
aggregate premium, if any, as represents the amount by which
the redemption monies payable in respect of the Relevant
Shares exceeds the nominal amount of such number of Ordinary
Shares. If redemption is to be made out of the proceeds of a
fresh issue of shares made for the purposes of the redemption
the Conversion Notice given by or relating to a holder of
Relevant Shares shall be deemed irrevocably:
(1) to have appointed any Person selected by
the Directors as such holder's agent with authority
to apply an amount equal to the redemption monies in
respect of that holder's Relevant Shares in
subscribing and paying on that holder's behalf for
the number of Ordinary Shares to which such holder is
entitled in accordance with Article 10A(F)(ii); and
(2) to have authorised and instructed the
Directors to pay following the allotment of such
Ordinary Shares such redemption monies to such agent
who shall be entitled to retain the same for the
agent's own benefit without being accountable
therefor to such holder.
(c) Conversion may be effected by means of
consolidation and sub-division to the extent that such
consolidation and sub-division can lawfully be effected in
accordance with the provisions of the Statutes (or other
applicable laws) and these Articles. In such case, the
requisite consolidation and sub-division shall be effected
pursuant to the authority given by the resolution adopting
these Articles as follows. All the Relevant Shares held by any
holder or joint holders in respect of which a Conversion
Notice shall have been delivered shall be consolidated into
one share having a nominal value equal to the aggregate
nominal value of the Relevant Shares. Such consolidated share
shall be sub-divided and redesignated into such number of
Ordinary Shares of 1.25p each (or such other nominal value as
may be appropriate as a result of any consolidation or
sub-division of the Ordinary Shares), as is equal to the
number of Ordinary Shares to which such holder is entitled
pursuant to such Conversion Notice (fractional entitlements to
an Ordinary Share being disregarded) and such number of
special deferred shares of 0.001p each, if any, as have an
aggregate nominal value equal to the amount, if any, by which
the aggregate nominal value of such Ordinary Shares issued on
conversion is less than the aggregate nominal value of such
consolidated share. Any such special deferred shares will have
the rights set out in Article 10A(F)(iv). The Directors shall
be authorised for all relevant purposes pursuant to the
authority given by the resolution adopting these Articles to
make such arrangements for the attribution of value to reflect
the redesignation of a U.S. dollar denominated share as a
sterling denominated share.
(d) Provided it is lawful to do so in accordance with
the Statutes (or other applicable laws) and the Articles,
conversion may be effected by means of the issue of Ordinary
Shares to the holders of the Relevant Shares credited as paid
up in full out of distributable profits or reserves, sums in
the Company's share premium account or otherwise legally
available therefor. In such case, the number of Ordinary
Shares to be issued shall be the number of Ordinary Shares to
which such holder is entitled in accordance with Article
10A(F)(ii). In such event, upon the issue of such Ordinary
Shares the Relevant Shares shall be subdivided and
redesignated
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<PAGE>
by the Directors pursuant to the authority given by the
resolution adopting these Articles into special deferred
shares of U.S. 0.001 cents each having the rights set out in
Article 10A(F)(iv) below.
(e) If and to the extent that conversion in
accordance with the above means (or any other means) would
result in an illegal reduction of capital or the issue of
shares at a discount then the Company shall take such action
as may be lawful to issue such number of Ordinary Shares to
the holders of the Relevant Shares as may be required by the
foregoing provisions of this Article 10A(F)(iii) including by
way of the issue of bonus shares to the holders of the
Relevant Shares or otherwise (but in no event shall the
holders of the Relevant Shares receive a number of Ordinary
Shares exceeding their entitlement under Article 10A(F)(ii)).
(iv) In the case of a conversion effected pursuant to either
Article 10A(F)(iii)(c) or (d) the special deferred shares arising as a
result thereof shall on a return of capital in a winding-up or
otherwise entitle the holder only to the repayment of the amounts paid
up on such shares after repayment of the capital paid up on the
Ordinary Shares plus the payment of an additional (pound)50,000 on each
Ordinary Share and shall not entitle the holder to the payment of any
dividend nor to receive notice of or to attend or vote at any General
Meeting of the Company and such conversion shall be deemed to confer
irrevocable authority on the Company at any time thereafter to appoint
any person to execute on behalf of the holders of such shares an
instrument of transfer thereof and/or an agreement to transfer the
same, without making any payment to the holders thereof, to such person
as the Directors may determine as custodian thereof and to agree to the
cancellation and/or purchase by the Company of the same (in accordance
with the provisions of the Statutes) for a price of 1p for all the
special deferred shares without obtaining the sanction of the holder
thereof and pending such transfer and/or agreement to transfer and/or
cancel and/or purchase to retain the certificate for such shares (if
any certificate has been issued in respect thereof).
The Company may at its option (exercisable by resolution of the
Directors) at any time after the creation of any special deferred
shares redeem all or any of the special deferred shares then in issue
for 1p for all the special deferred shares redeemed, at any time upon
giving the registered holders of such share or shares not less than 28
days' previous notice in writing of its intention so to do, such notice
fixing a time and place for redemption of such shares.
(v) The holder of any Participating Shares may exercise the
conversion right specified in Article 10A(F)(i) by surrendering to the
Company at its registered office or its registrar the certificate or
certificates for the Participating Shares to be converted, accompanied
by written notice specifying the number of shares to be converted with
any evidence the Directors may reasonably require to prove title of the
person exercising the right to convert (the "CONVERSION NOTICE"). If
the Company has exercised its limited ability in accordance with
Article 10A(E)(iii), Article 10A(E)(v) or Article 10A(E)(vii) to elect
to cause the Participating Shares to be converted into Ordinary Shares
then a Conversion Notice shall be deemed to have been given upon such
exercise.
(vi) Allotments of Ordinary Shares arising from conversion
shall be made within 10 Business Days of the delivery of the Conversion
Notice to the Company. Subject to the provisions of Article
10A(F)(ix)(h) hereof, as promptly as practicable thereafter, the
Company shall issue and deliver to or upon the written order of each
holder of Relevant Shares a new certificate or certificates for the
number of Ordinary Shares to which such holder is entitled, a new
certificate for any unconverted Participating Shares comprised in any
certificate(s) surrendered by such holder, and a cheque or cash with
respect to any fractional interest in an Ordinary Share, as provided in
Article 10A(F)(viii) hereof. In the meantime, transfers of new Ordinary
Shares shall be certified against the register.
(vii) Subject to the provisions of Article 10A(F)(ix)(h)
hereof, the person in whose name the certificate or certificates for
Ordinary Shares are to be issued shall be entered into the Company's
register of Members as a holder of record of such Ordinary Shares
immediately prior to the close of business on the date of conversion. A
Conversion Notice may only be withdrawn by notice by the holder(s) of
the Relevant Shares delivered to the Company not less than two Business
Days prior to the date of conversion.
(viii) No fractions of Ordinary Shares shall be issued upon
conversion of Participating Shares. If more than one Participating
Share shall be surrendered for conversion at any one time by the same
holder, the number of full
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<PAGE>
Ordinary Shares issuable upon conversion thereof shall be computed on
the basis of the aggregate number of Participating Shares so
surrendered. If as a result of conversion holders become entitled to
fractions of an Ordinary Share, the Directors may on behalf of the
holders deal with the fractions as they reasonably deem to be
appropriate. Without limiting the generality of the preceding sentence,
the Directors may aggregate and sell the fractions to a person
(including, subject to the provisions of the Statutes, the Company) for
the best price reasonably obtainable and distribute the net proceeds of
sale in due proportions amongst the holders.
(ix) The Conversion Price shall be subject to adjustment from
time to time as follows, provided that in the event that the holders of
Participating Shares carrying more than 50% of the voting rights of
that class exercise their preemptive rights in a transaction to which
Section 89 of the Companies Act 1985 applies, then the adjustment in
the Conversion Price provided for in Article 10A(F)(ix)(a) only shall
not be given effect.
(a) ORDINARY SHARES ISSUED AT LESS THAN MARKET VALUE.
If the Company shall issue any Ordinary Shares, other than
Excluded Shares or Ordinary Shares issued in an Excluded
Transaction, without consideration or for a consideration per
share less than the Market Value immediately prior to such
issuance, the Conversion Price in effect immediately prior to
each such issuance shall immediately (except as provided
below) be reduced to the price determined by multiplying the
Conversion Price in effect immediately prior to such issuance
by a fraction (A) the numerator of which is the sum of (1) the
number of Ordinary Shares outstanding immediately prior to
such issuance and (2) the number of Ordinary Shares that the
aggregate consideration, if any, received by the Company upon
such issuance, would purchase at such Market Value and (B) the
denominator of which is the total number of Ordinary Shares
outstanding immediately after such issuance.
For the purposes of any adjustment of the Conversion Price
pursuant to this Article 10A(F)(ix)(a), the following
provisions shall be applicable.
(1) CASH. In the case of the issuance of Ordinary
Shares for cash, the amount of the consideration received by
the Company shall be deemed to be the amount of the cash
proceeds received by the Company for such Ordinary Shares
before deducting therefrom any discounts, commissions, taxes
or other expenses allowed, paid or incurred by the Company for
any underwriting or otherwise in connection with the issuance
and sale thereof.
(2) CONSIDERATION OTHER THAN CASH. In the case of the
issuance of Ordinary Shares (otherwise than upon the
conversion of shares of Share Capital or other securities of
the Company) for a consideration in whole or in part other
than cash, including securities acquired in exchange therefor
(other than securities by their terms so exchangeable), the
consideration other than cash shall be deemed to be either:
(A) the amount determined by an independent
valuation undertaken in accordance with Section 108
of the Companies Act 1985; and
(B) in the absence of such valuation, the
Fair Market Value thereof, irrespective of any
accounting treatment.
(3) OPTIONS AND CONVERTIBLE SECURITIES. In the case
of the issuance of (x) options, warrants or other rights to
purchase or acquire Ordinary Shares (whether or not at the
time exercisable) (but any adjustment pursuant to this
provision shall be made only to the extent any adjustment
shall have not been made pursuant to Article 10A(F)(ix)(d)(4)
hereof), (y) securities by their terms convertible into or
exchangeable for Ordinary Shares (whether or not at the time
so convertible or exchangeable) or (z) options, warrants or
rights to purchase such convertible or exchangeable securities
(whether or not at the time exercisable):
(A) the aggregate maximum number of Ordinary
Shares deliverable upon exercise of such options,
warrants or other rights to purchase or acquire
Ordinary Shares shall be deemed to have been
19
<PAGE>
issued at the time such options, warrants or rights
were issued and for a consideration equal to the
consideration (determined in the manner provided in
subclauses (1) and (2) above), if any, received by
the Company upon the issuance of such options,
warrants or rights plus the minimum purchase price
provided in such options, warrants or rights for the
Ordinary Shares covered thereby;
(B) the aggregate maximum number of Ordinary
Shares deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities,
or upon the exercise of options, warrants or other
rights to purchase or acquire such convertible or
exchangeable securities and the subsequent conversion
or exchange thereof, shall be deemed to have been
issued at the time such convertible or exchangeable
securities were issued or such options, warrants or
rights were issued and for a consideration equal to
the consideration, if any, received by the Company
for any such convertible or exchangeable securities
or options, warrants or rights (excluding any cash
received on account of accumulated interest or
accumulated dividends), plus the additional
consideration (determined in the manner provided in
subclauses (1) and (2) above), if any, to be received
by the Company upon the conversion or exchange of
such securities, or upon the exercise of any related
options, warrants or rights to purchase or acquire
such convertible or exchangeable securities and the
subsequent conversion or exchange thereof;
(C) on any change in the number of Ordinary
Shares deliverable upon exercise of any such options,
warrants or rights or conversion or exchange of such
convertible or exchangeable securities or any change
in the consideration to be received by the Company
upon such exercise, conversion or exchange (but
excluding any change resulting solely from the
operation of the anti-dilution provisions thereof if,
and only if, such anti-dilution provisions would not
require an adjustment to the exercise price or
conversion price thereof in the event of any change
to the Conversion Price pursuant to the provisions of
this Article 10A(F)), the Conversion Price as then in
effect shall forthwith be readjusted to such
Conversion Price as would have been obtained had an
adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to
such change, or of such convertible or exchangeable
securities not converted or exchanged prior to such
change, upon the basis of such change;
(D) on the expiration or cancellation of any
such options, warrants or rights that are
unexercised, or the cancellation or redemption of, or
the termination of the right to convert or exchange
such convertible or exchangeable securities, if the
Conversion Price shall have been adjusted upon the
issuance thereof, the Conversion Price shall
forthwith be readjusted to such Conversion Price as
would have been obtained had an adjustment been made
upon the issuance of such options, warrants, rights
or such convertible or exchangeable securities on the
basis of the issuance of only the number of Ordinary
Shares actually issued upon the exercise of such
options, warrants or rights, or upon the conversion
or exchange of such convertible or exchangeable
securities; and
(E) if the Conversion Price shall have been
adjusted upon the issuance of any such options,
warrants, rights or convertible or exchangeable
securities no further adjustment of the Conversion
Price shall be made for the actual issuance of
Ordinary Shares upon the exercise, conversion or
exchange thereof.
(b) EXCLUDED SHARES. All Excluded Shares shall be
deemed to be issued and outstanding for all purposes of
computations under Article 10A(F)(ix)(a).
(c) SHARE DIVIDENDS, SUBDIVISIONS, RECLASSIFICATIONS
OR COMBINATIONS. If the Company shall (1) declare a dividend
or make a distribution on its Ordinary Shares in additional
Ordinary Shares which is not paid or made on an equal and
ratable basis to all holders of Participating Shares, (2)
subdivide, split or reclassify (by merger, consolidation or
otherwise) the outstanding Ordinary Shares into a greater
number of
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<PAGE>
shares, (3) combine or reclassify (by merger, consolidation or
otherwise) the outstanding Ordinary Shares into a smaller
number of shares or (4) issue any Ordinary Shares in a
reclassification (by merger, consolidation or otherwise), the
Conversion Price in effect at the time of the record date for
such dividend or distribution or the effective date of such
subdivision, combination, reclassification or issuance shall
be proportionately adjusted so that the holder of any
Participating Shares surrendered for conversion after such
date shall be entitled to receive the number of Ordinary
Shares which such holder would have owned or been entitled to
receive had such Participating Shares been converted
immediately prior to such date. Successive adjustments in the
Conversion Price shall be made whenever any event specified
above shall occur.
(d) OTHER DISTRIBUTIONS. In case the Company shall
fix a record date for the making of a distribution to all
holders of Ordinary Shares which is not paid or made on an
equal and ratable basis to all holders of Participating
Shares, (1) of shares of any class other than its Ordinary
Shares or (2) of evidence of indebtedness of the Company or
any subsidiary or (3) of assets or other property, including,
without limitation, securities issued by subsidiaries or
others (excluding regular cash dividends, and dividends or
distributions referred to in Article 10A(F)(ix)(c) above), or
(4) of options, warrants or other rights, in each such case
the Conversion Price in effect immediately prior thereto shall
be reduced immediately thereafter to the price determined by
dividing (A) an amount equal to the difference resulting from
(1) the number of Ordinary Shares outstanding on such record
date multiplied by the Conversion Price per Ordinary Share on
such record date less (2) the Fair Market Value of such shares
or evidences of indebtedness or assets or rights or warrants
to be so distributed, by (B) the number of Ordinary Shares
outstanding on such record date. Such adjustment shall be made
successively whenever such a record date is fixed. In the
event that such distribution is not so made, the Conversion
Price then in effect shall be readjusted, effective as of the
date when the Directors determine not to distribute such
shares, evidences of indebtedness, assets, property, options,
rights or warrants, as the case may be, to the Conversion
Price which would then be in effect if such record date had
not been fixed.
(e) CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE.
In case of any consolidation, amalgamation, or merger of the
Company with or into another corporation or entity, or in case
of any sale, lease or conveyance to another corporation or
entity of the assets of the Company as an entirety or
substantially as an entirety, each Participating Share shall
after the date of such consolidation, amalgamation, merger,
sale, lease or conveyance be convertible into the number of
shares of stock or other securities or property (including
cash) to which the Ordinary Shares issuable (immediately prior
to the time of such consolidation, merger, sale, lease or
conveyance) upon conversion of each such Participating Shares
would have been entitled upon such consolidation,
amalgamation, merger, sale, lease or conveyance, and in any
such case, if necessary, the provisions set forth herein with
respect to the rights and interests thereafter of the holders
of the Participating Shares shall be appropriately adjusted so
as to be applicable, as nearly as may reasonably be possible,
to any shares of stock or other securities or property
thereafter deliverable on the conversion of the Participating
Shares.
(f) ROUNDING OF CALCULATIONS. All calculations under
this Article 10A(F)(ix) shall be made to the nearest U.S. cent
or to the nearest one ten thousandth of a share, as the case
may be.
(g) ADJUSTMENTS FOR AMERICAN DEPOSITARY SHARES. All
computations and calculations under this Article 10A(F)(ix)
shall, at the time of determination, give effect to the then
applicable ratio of Ordinary Shares to American depositary
shares representing such Ordinary Shares at the time of
determination and shall be adjusted accordingly (it being
recognized that such ratio is four Ordinary Shares per
American depositary share on the Issue Date). Without limiting
the generality of the preceding sentence, the computations and
calculations relating to Market Value in Article 10A(F)(ix)(a)
shall be based on the Market Value for American depositary
shares representing Ordinary Shares of the Company as adjusted
by then applicable ratio of Ordinary Shares to American
depositary shares (it being recognized that Market Value
initially is to be divided by 4 to reflect the ratio of four
Ordinary Shares per American depositary share on the Issue
Date).
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(h) TIMING OF ISSUANCE OF ADDITIONAL ORDINARY SHARES
UPON CERTAIN ADJUSTMENTS. In any case in which the provisions
of this Article 10A(F)(ix) shall require that an adjustment
shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such
event (1) issuing to the holder of any Participating Shares
converted after such record date and before the occurrence of
such event the additional Ordinary Shares issuable upon such
conversion by reason of the adjustment required by such event
over and above the Ordinary Shares issuable upon such
conversion before giving effect to such adjustment and (2)
paying to such holder any amount of cash in lieu of any
fractional Ordinary Shares, PROVIDED, that the Company, upon
request, shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to
receive such additional Ordinary Shares, and such cash, upon
the occurrence of the event requiring such adjustment.
(x) Whenever the Conversion Price shall be adjusted, the
Company shall forthwith file, at the office of the registrar, at the
registered office of the Company, and at the principal office of the
Company in the United States, a statement showing in detail the facts
requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment, and the Company shall also cause a copy
of such statement to be sent by reputable overnight air courier
service, to each holder of Participating Shares at its address
appearing on the Company's records.
(xi) In the event the Directors have, or the Company has,
agreed or otherwise formally determined to take any action of the type
described in clause (a) (but only if the action of the type described
in clause (a) would result in an adjustment in the Conversion Price),
(c), (d) or (e) of Article 10A(F)(ix) hereof, the Company shall give
notice to each holder of Participating Shares, in the manner set forth
in Article 10A(F)(ix) hereof, which notice shall specify the record
date, if any, with respect to any such action and the approximate date
on which such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary to
indicate the effect of such action (to the extent such effect may be
known at the date of such notice) on the Conversion Price and the
number, kind or class of shares or other securities or property which
shall be deliverable upon conversion of Participating Shares. In the
case of any action which would require the fixing of a record date,
such notice shall be given at least ten days prior to the date so
fixed, and in case of all other action, such notice shall be given at
least ten days prior to the taking of such proposed action. Failure to
give such notice, or any defect therein, shall not affect the legality
or validity of any such action.
(xii) The Company shall pay all U.K. documentary, stamp,
transfer or similar taxes, plus any fees of the depositary for American
depositary shares, attributable to the issuance or delivery of Ordinary
Shares or American depositary shares representing Ordinary Shares upon
conversion of any Participating Shares, PROVIDED that the Company shall
not be required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate for
such shares in a name other than that of the holder of the
Participating Shares in respect of which such shares are being issued.
(xiii) The Company shall at all times so long as any
Participating Shares remain outstanding, have sufficient authorised
Share Capital available for allotment and issue (i) to permit the
issuance of additional Participating Shares as dividends or by way of
bonus issue on the Participating Shares and (ii) to permit the
conversion of all Participating Shares in issue from time to time into
Ordinary Shares in accordance with these Articles.
(xiv) If any Ordinary Shares to be issued for the purpose of
conversion of Participating Shares require registration with or
approval of any governmental authority under any U.S. federal or state,
English or other non-U.S. law before such shares may be validly issued
or delivered upon conversion, then the Company will in good faith and
as expeditiously as possible endeavour to secure such registration or
approval, as the case may be. If, and so long as, any Ordinary Shares
into which the Participating Shares are then convertible are listed or
quoted on any U.S., U.K. or other securities exchange or market, the
Company will, if permitted by the rules of such securities exchange or
market, list and keep listed or quoted on such securities exchange or
market, upon official notice of issuance, all such shares issuable upon
conversion.
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(xv) All Ordinary Shares that may be issued upon conversion of
the Participating Shares will upon issuance by the Company be duly and
validly issued, fully paid and non-assessable, not issued in violation
of any preemptive rights arising under law or contract, and free from
all taxes, liens and charges with respect to the issuance thereof, and
the Company shall take no action which will cause a contrary result
(including without limitation, any action which would cause the
Conversion Price to be less than the nominal value, if any, of the
Ordinary Shares).
(xvi) Notwithstanding the foregoing provisions of this Article
10A(F) (and subject to the terms of the relevant American depositary
receipt agreement), if the holder of any Participating Shares so
specifies in the Conversion Notice, the Company shall cause to be
delivered to the holder of the said Participating Shares, upon
conversion of the specified Participating Shares, American depositary
receipts evidencing the number of American depositary shares
representing the Ordinary Shares into which such Participating Shares
have been converted. Any American depositary shares that may be issued
upon such conversion shall upon issuance be duly and validly issued and
entitled to the benefits specified therein and in the deposit agreement
relating to such American depositary shares, and the Company shall take
no action which will cause a contrary result. For the purposes of this
Article 10A(F) (including without limitation, Articles 10A(F)(vii),
10A(F)(ix) and 10A(F)(xv)) all references to Ordinary Shares shall be
deemed, to the fullest extent possible, to apply to the American
depositary shares representing such Ordinary Shares and all references
to share certificates to the American depositary receipts representing
such American depositary shares.
(G) LIQUIDATION RETURN
(i) In the event of the liquidation, winding-up or dissolution
of the Company, whether voluntary or involuntary, the holders of
Participating Shares then outstanding, after payment or provision for
payment of the debts and other liabilities of the Company, and before
any distribution to holders of any Junior Securities of the Company,
shall be entitled to be paid out of the assets of the Company available
for distribution to its shareholders an amount per Participating Share
in cash equal to the greater of (a) the then effective Liquidation
Return per share plus accumulated and unpaid dividends from and
including the most recent Dividend Payment Date through and including
the date of liquidation, winding-up or dissolution and (b) the amount
that would be payable to the holders of the Participating Shares if the
Participating Shares had been converted into Ordinary Shares
immediately prior to such liquidation, winding-up or dissolution. In
the event the assets of the Company available for distribution to the
holders of the Participating Shares upon any dissolution, winding-up or
liquidation of the Company shall be insufficient to pay in full the
liquidation payments payable to the holders of outstanding
Participating Shares and of all other Parity Securities, the holders of
Participating Shares and all other Parity Securities shall share in
such distribution of assets on a pro rata basis in proportion to the
amount which would be payable on such distribution if the amounts to
which the holders of outstanding Participating Shares and the holders
of outstanding shares of such Parity Securities were paid in full.
(ii) For the purposes of this Article 10A(G), none of the
following transactions shall be deemed to be a voluntary or involuntary
liquidation, dissolution or winding-up of the Company (provided that
the same shall be effected by way of a bona fide transaction on arm's
length terms):
(a) the sale, lease, transfer or exchange of all or
substantially all of the assets of the Company; or
(b) the consolidation, amalgamation, or merger of the
Company with or into one or more other corporations or other
Persons (whether or not the Company is the corporation
surviving such consolidation or merger).
(H) SPECIAL RIGHT TO APPOINT DIRECTORS
(i) Beginning on the Issue Date and continuing as long as the
holders of the Participating Shares own Voting Shares of the Company
and debt securities or Share Capital convertible into or exercisable
for Voting Shares of the Company where all such Voting Shares represent
at least 10% of the Company's total voting power, such holders shall be
entitled pursuant to this Article 10A(H) to appoint two Directors to
serve on the board of Directors of the Company.
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In the event that such holders own, on such a basis, Voting Shares
representing less than 10%, but more than 5%, of the Company's total
voting power, such holders shall be entitled pursuant to this Article
10A(H) to designate one Director.
(ii) In the event that Cypress and/or Affiliates of Cypress
shall transfer some or all of their Participating Shares to another
Person (other than an Affiliate of Cypress or its Affiliates) without
the written consent of the Directors of the Company (which consent
shall not be unreasonably withheld), and as a result of such transfer
Cypress and Affiliates of Cypress hold in the aggregate less than
50.01% of the total number of Participating Shares outstanding at that
time, then the holders of the Participating Shares shall,
notwithstanding Article 10A(H)(i), be entitled thereafter to appoint
only a maximum of one Director (it being recognised that Cypress and
its Affiliates and any other holders of the Participating Shares shall
not be subject to any restriction hereunder on their ability to
transfer all or part of their Participating Shares to any other Person
and that this Article 10A(H)(ii) relates solely to the power to appoint
Directors).
(iii) Each committee of the Directors shall include at least
one Director designated by such holders as provided above; PROVIDED,
that this requirement shall not apply with respect to the appointment
of any particular designee to a committee in the event that the rules
or regulations of any securities exchange or market on which the
Ordinary Shares or American depositary shares representing such
Ordinary Shares are then listed, quoted or traded (including, in the
case of the London Stock Exchange, the Combined Code or any successor
thereto), or applicable law, prohibits the appointment of such Director
to such committee.
(iv) The Company and the Directors shall take all actions
necessary to effect such designation to the board of Directors
(including, without limitation, increasing the size of the board of
Directors and/or removing Directors) and to each committee thereof.
(v) The Directors to be designated by the holders of the
Participating Shares shall be elected by such holders by majority vote
at a class meeting of the holders of the Participating Shares to be
held immediately prior to any annual meeting of shareholders or
extraordinary meeting held in place thereof, or by majority vote at a
duly convened extraordinary meeting of the holders of the Participating
Shares.
(vi) The special right to appoint Directors set forth in this
Article 10A(H) shall be in addition to the rights of the holders of the
Participating Shares to exercise voting rights pursuant to Article
10A(D) hereof (including, without limitation, with respect to the
election of Directors of the Company generally).
(vii) If any Director appointed by the holders of the
Participating Shares pursuant to this Article 10A(H) resigns, retires
or is removed by the Company while the holders of the Participating
Shares continue to have the right to appoint such Director, then,
notwithstanding anything contained in these Articles, such holders
shall be entitled to appoint a replacement Director in the same manner
as appointment of the predecessor Director.
(I) TAX GROSS-UP
Subject as provided in Article 10A(D)(v), all payments by the Company
in respect of the Participating Shares shall be made without withholding or
deduction for or on account of any present or future taxes, duties, assessments
or other governmental charges of whatsoever nature imposed or levied by or on
behalf of the United Kingdom or any political subdivision or authority thereof
or therein having power to tax, unless the Company is required by law to
withhold such taxes, duties, assessments or other governmental charges. In such
event, the Company shall make the required withholding or deduction, make
payment of the amount so withheld or deducted to the appropriate government
authority and pay such additional amounts ("ADDITIONAL AMOUNTS") as may be
necessary to ensure that the net amounts received by the holders of the
Participating Shares (taking into account any tax credits received by such
holders from the United Kingdom) after such withholding or deduction shall equal
the respective amounts of dividends and other amounts which would have been
received in respect of the Participating Shares in the absence of such
withholding or deduction; PROVIDED, HOWEVER, that no such Additional Amounts
shall be payable:
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(i) to any holder who is subject to such taxes, duties,
assessments or other governmental charges in respect of the
Participating Shares by reason of such holder being a resident of the
United Kingdom and otherwise than solely by the holding of such
Participating Shares or by the receipt of dividends and other amounts
in respect thereof; or
(ii) to the extent that the taxes, duties, assessments or
other governmental charges would not have been imposed but for the
failure of such holder to comply with any certification, identification
or other reporting requirements concerning the nationality, residence,
identity or connection with the United Kingdom of such holder if (a)
such compliance is required or imposed by law as a precondition to
exemption from all or a part of such tax, duty, assessment or other
governmental charge and (b) at least 30 days prior to the first
Dividend Payment Date with respect to which the Company will apply this
clause (ii), the Company shall have notified all holders of the
Participating Shares that such holders will be required to comply with
such requirement.
(J) DEFINITIONS
For the purposes of this Article 10A only, the following definitions
shall apply:
"Affiliate" means, with respect to any Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, such
specified Person, for so long as such Person remains so associated to
the specified Person. The term "control" shall have the meaning for
such term as used in Rule 12b-2 under the U.S. Securities Exchange Act
of 1934.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in New York City or London are
authorized or required by law to close.
"Change of Control" means the occurrence at any time of any of
the following:
(i) any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the U.S. Securities Exchange
Act of 1934) (excluding for purposes of this clause (i),
Cypress and any of its Affiliates, individually and in the
aggregate), in a single transaction or through a series of
related transactions, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the U.S. Securities Exchange Act
of 1934, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has
the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
indirectly, of more than 29.9% of the total Voting Shares of
the Company;
(ii) the Company consolidates or merges with or into
another corporation or petitions the court for any scheme of
compromise or arrangement within the meaning of section 425 of
the Companies Act 1985 or conveys, transfers or leases all or
substantially all of its assets to any Person, or any
corporation consolidates or mergers with or into the Company,
in any such event pursuant to a transaction in which the
issued Voting Shares of the Company are changed into or
exchanged for cash, securities not issued in violation of
Article 10A(D)(iv) or other property, other than (a) any such
transaction in which (1) the issued Voting Shares of the
Company are changed into or exchanged for Voting Shares of the
surviving corporation or its parent corporation and (2) the
holders of the Voting Shares of the Company immediately prior
to such transaction own, directly or indirectly, not less than
50.01% of the Voting Shares of the surviving corporation or
its parent corporation immediately after such transaction or
(b) any such transaction with, into or to any Affiliate of
Cypress;
(iii) during any period of 24 consecutive months,
individuals who at the beginning of such period constituted
the board of Directors of the Company (together with any new
Directors whose election by such board of Directors or whose
nomination for election by the shareholders of the Company was
approved by a vote of at least 66 2/3% (sixty-six and two
thirds percent) of the Directors then still in office who were
either Directors at the beginning of such period or whose
election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
Directors of the Company then in office (but any
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additional Directors elected by the holders of the
Participating Shares pursuant to Article 10A(D)(iii) shall be
excluded from the calculations for the purposes of this
definition); or
(iv) the Company is voluntarily or involuntarily
wound up or dissolved or adopts a plan of liquidation, other
than a voluntary winding up pursuant to which the whole of the
Company's business is proposed to be transferred or sold to
another company and the issued Voting Shares of the Company
are changed into or exchanged for Voting Shares of that other
company or its parent company, such Voting Shares having
rights equal to or greater than the rights attached to the
Voting Shares in the Company.
"Change of Control Adjustment Amount" means an amount (if a
positive number only) equal to (i) the difference between (a) 101% of
the then effective Liquidation Return per share and (b) the aggregate
Market Value of the Ordinary Shares into which each Participating Share
was convertible on the date immediately preceding first public
announcement of the transaction giving rise to the Change of Control,
multiplied by (ii) a fraction the numerator of which is the deficiency
in monies lawfully available for redemption and the denominator of
which is the total amount of monies necessary to pay the redemption
price in full upon a Change of Control as set forth in Article
10A(E)(vii)(a), in the case of this paragraph (ii) assuming that all
holders of Participating Shares determined to require the Company to
redeem their Participating Shares in accordance with Article
10A(E)(vii)(a).
"Conversion Price" means an amount in U.S. dollars per
Ordinary Share, determined by the Directors on the Issue Date, being
not more than US$3.125 per Ordinary Share, subject to adjustment in
accordance with the provisions of Article 10A(F) hereof.
"Cypress" means The Cypress Group LLC or any successor entity.
"Excluded Shares" means Ordinary Shares issued or issuable by
the Company or American depositary shares representing such Ordinary
Shares (i) upon conversion of the Participating Shares, (ii) upon
conversion of the outstanding U.S.$200 million aggregate principal
amount of the Company's 6.25% Convertible Subordinated Notes due 2002,
or (iii) pursuant to bona fide stock option or other employee or
officer benefit plans, PROVIDED, that such shares are issued at an
exercise price or for consideration equal to or greater than the Fair
Market Value thereof on the date of grant or award (and, in each case,
including any American depositary shares representing such Ordinary
Shares).
"Excluded Transaction" means (i) an underwritten public
offering of Ordinary Shares or American depositary shares representing
Ordinary Shares or (ii) the issuance of Ordinary Shares or American
depositary shares representing Ordinary Shares solely in exchange for
assets or all of the shares of another Person (whether by merger,
exchange or otherwise) in a transaction in which an independent
internationally recognized investment banking firm has advised the
Company that the transaction is fair and reasonable to the Company from
a financial point of view.
"Fair Market Value" means, with respect to any securities, the
Market Value thereof and of any consideration other than cash or
securities shall mean the amount which a willing buyer would pay to a
willing seller in an arm's length transaction as determined by an
independent internationally recognized investment banking or appraisal
firm experienced in the valuation of such securities or property
selected in good faith by the Directors.
"in cash" shall mean in U.S. dollars, unless otherwise
specified.
"Liquidation Return" means, on any date, the sum of U.S.$1,000
per Participating Share, plus (i) accumulated and unpaid dividends
added to the Liquidation Return in respect of such Participating Share
in accordance with Article 10A(C)(v) hereof and (ii) the amount, if
any, added to the Liquidation Return in respect of such Participating
Share in accordance with Article 10A(E)(vii)(d) hereof.
"Market Value," with respect to any security, means the
average of the daily closing prices of such security for the 20 trading
day period ending on the relevant date of determination. The closing
price for each day shall be the last reported sales price regular way
or, in case no such reported sale takes place on such day, the average
of the reported
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closing bid and asked prices regular way, in either case on the New
York Stock Exchange, or, if such security is not listed or admitted to
trading on the New York Stock Exchange, on the American Stock Exchange,
or, if such security is not listed or admitted to trading on the
American Stock Exchange, the average of the closing bid and asked
prices of such security in the over-the-counter market as reported on
the NASDAQ National Market System of the National Association of
Securities Dealers, Inc. or if such security is not so quoted, the
average of the closing bid and asked price of such security in the
over-the-counter market as furnished by any U.S. nationally recognized
New York Stock Exchange member firm selected by the Company for such
purpose (it being recognized that on the Issue Date American depositary
shares representing Ordinary Shares of the Company are quoted on the
NASDAQ National Market System). If such security is not so listed,
quoted or traded, the closing price shall be the last reported closing
price for such security on the London Stock Exchange or, if not so
listed, any other non-U.S. securities exchange or market on which such
security is listed, quoted or traded (translated to U.S. dollars using
the then prevailing exchange rate on such date of determination). If
such security is not so listed, quoted or traded on any non-U.S.
securities exchange or market, the closing price shall mean the amount
which a willing buyer would pay to a willing seller in an arm's length
transaction as determined by an independent internationally recognized
investment banking or appraisal firm experienced in the valuation of
such securities or property selected in good faith by the board of
directors of the issuer of such security. Notwithstanding the foregoing
(and subject to Article 10A(F)(ix)(g)), the Market Value of the
Ordinary Shares shall be determined by reference to closing prices for
the American depositary shares representing such Ordinary Shares so
long as such American depositary shares are listed, quoted or traded on
the New York Stock Exchange, the American Stock Exchange or the NASDAQ
National Market System (adjusted to take into account the then
prevailing ratio of Ordinary Shares per one American depositary share).
"Ordinary Share Equivalent Rate" means, with respect to any
Dividend Period, the quotient of (a) the product of (i) all dividends
declared during such Dividend Period with respect to one Ordinary
Share, (ii) the Applicable Period Adjustment Factor and (iii) the
number of Ordinary Shares issuable upon conversion of one Participating
Share on the last day of such Dividend Period, divided by (b) the
Liquidation Return of one Participating Share on the first day of such
Dividend Period. For purposes of the preceding sentence, "Applicable
Period Adjustment Factor" means two (if such dividends are declared and
paid on a semi-annual basis), four (if such dividends are declared and
paid on a quarterly basis) or such other number as reflects the fiscal
periods as to which such dividends are declared and paid, as the case
may be.
"Ordinary Shares" means the Ordinary Shares referred to in
Article 3, and shall also include (i) Share Capital of the Company of
any other class (regardless of how denominated) issued to the holders
of Ordinary Shares upon any reclassification thereof in which the
Ordinary Shares are converted into a new class of Share Capital and
(ii) shares of common stock of any successor or acquiring corporation
received by or distributed to the holders of Ordinary Shares.
"Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of
such entity.
"Share Capital" means any and all shares, interests,
participations, rights in or other equivalents (however designated and
whether voting or non-voting), and any and all rights (other than any
evidence of indebtedness), warrants or options exchangeable for or
convertible into such shares, interests, participations, rights in or
other equivalents, including, to the fullest extent applicable,
American Depository Receipts or similar instruments representing any
such share capital.
"Stated Dividend Rate" means 6.50% per annum; PROVIDED, that
if at any time the Company shall be in default of its obligation to
redeem any shares of the Participating Shares, the then effective
Stated Dividend Rate shall increase by 2.00% per annum.
"Voting Shares" means shares of the class or classes of Share
Capital (including, in the case of the Company, the Ordinary Shares and
the Participating Shares) pursuant to which the holders thereof have
the general voting power to vote at meetings of shareholders
(irrespective of whether or not at the time shares of any other class
or classes shall have or might have voting power by reason of the
happening of any contingency).
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(K) In the event of any conflict between the provisions of this Article 10A and
any other provision of these Articles, this Article 10A shall prevail except
where such construction would result in manifest error.
10B
(A) The Directors may refuse to register an allotment of shares
(whether fully paid or not) in favour of more than four persons jointly. If the
Directors refuse to register an allotment they shall within two months after the
date on which the letter of allotment was lodged with the Company send to the
allottee notice of the refusal.
(B) Except as required by law or pursuant to the provisions of these
Articles, no person shall be recognised by the Company as holding any share upon
any trust, and (except only as by these Articles or by law otherwise provided or
under an order of a court of competent jurisdiction) the Company shall not be
bound by or be compelled in any way to recognise (even when having notice
thereof) any equitable, contingent, future or partial interest in any shares or
any interest in any fractional part of a share or any other rights in respect of
any share except an absolute right to the entirety thereof in the registered
holder.
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SHARE CERTIFICATES
11. Every share certificate shall be issued in accordance with Article
126 and shall specify the number and class and the distinguishing number (if
any) of the shares to which it relates and the amount paid up thereon. No
certificate shall be issued relating to shares of more than one class.
12. Every person (other than a recognised clearing house or a nominee
of a recognised clearing house or of a recognised investment exchange in respect
of whom the Company is not by law required to complete and have ready for
delivery a certificate) whose name is entered as a Member on the Register shall
be entitled without payment to receive within one month after allotment or
lodgement of transfer (or within such other period as the conditions of issue
shall provide) one certificate for all the shares registered in his name or, in
the case of shares of more than one class being registered in his name, a
separate certificate for each class of shares so registered, and where a Member
transfers part of the shares of any class registered in his name he shall be
entitled without payment to one certificate for the balance of shares of that
class retained by him. If a Member shall require additional certificates he
shall pay for each additional certificate such reasonable sum (if any) as the
Directors may determine.
13. In respect of shares of one class held jointly by more than one
person the Company shall not be bound to issue more than one certificate, and
delivery of a certificate for such shares to the person first named on the
Register in respect of such shares shall be sufficient delivery to all such
holders.
14. If any certificate be worn out or defaced then upon delivery
thereof to the Directors they may order the same to be cancelled, and may issue
a new certificate in lieu thereof; and if any certificate be lost or destroyed,
then upon proof thereof to the satisfaction of the Directors and on such
indemnity as the Directors deem adequate being given, a new certificate in lieu
thereof shall be given to the party entitled to such lost or destroyed
certificate.
15. Every certificate issued under the last preceding Article shall be
issued without payment, but there shall be paid to the Company any exceptional
out-of-pocket expenses of the Company in connection with the request as the
Directors think fit and a sum equal to the costs incurred by the Company of any
such indemnity and security as is referred to in that Article.
VARIATION OF RIGHTS
16. If at any time the share capital is divided into different classes
of shares, the rights attached to any class or any of such rights may, subject
to the provisions of the Statutes, whether or not the Company is being or is to
be wound up, be modified, abrogated or varied (i) in such manner (if any) as may
be provided by such rights or (ii) in the absence of any such provision either
with the consent in writing of the holders of three-fourths of the issued shares
of that class, or with the sanction of an Extraordinary Resolution passed at a
separate General Meeting of the holders of the shares of the class.
17. To every such separate General Meeting the provisions of Sections
369, 370, 376 and 377 of the Companies Act 1985 and the provisions of these
Articles relating to General Meetings shall, mutatis mutandis, so far as
applicable apply, subject to the following provisions, namely:
(a) the necessary quorum at any such meeting other then an
adjourned meeting shall be two persons holding or representing by proxy
at least one-third in nominal value the issued shares of the class in
question and at an adjourned meeting two persons holding shares of the
class in question or his proxy; and
(b) any holder of shares of the class in question present in
person or by proxy may demand a poll.
18. The rights attached to any class of shares shall, unless otherwise
expressly provided by the terms of issue of the shares of that class or by the
terms upon which such shares are for the time being held, be deemed to be varied
or abrogated by the reduction of the capital paid up on such shares or by the
allotment of further
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shares ranking in priority thereto for payment of a dividend or repayment of
capital but be deemed not to be modified, abrogated or varied by the creation or
issue of further shares ranking PARI PASSU in all respects (save as to the date
from which such new shares shall rank for dividend) with or subsequent to those
already issued.
CALLS ON SHARES
19. The Directors may, subject to the terms of allotment thereof, from
time to time make such calls upon the Members as they think fit in respect of
any moneys unpaid on their shares (whether on account of the nominal value of
the shares or by way of premium) and each Member shall (subject to receiving at
least 21 days' notice specifying the time or times and place of payment) pay to
the Company at the time or times and place so specified the amount called on his
shares. A call may be revoked or postponed, in whole or in part, as the
Directors may determine.
20. A call shall be deemed to have been made at the time when the
resolution of the Directors authorising the call was passed and may be required
to be paid by instalments.
21. The joint holders of a share shall be jointly and severally liable
to pay all calls in respect thereof.
22. If a sum payable in respect of any call or instrument is not paid
on or before the day appointed for payment thereof, the holder for the time
being of the share in respect of which the call shall have been made, or the
instrument be due, shall pay interest on the sum at such reasonable rate as the
Directors' shall determine, or failing such determination at the rate of 14% per
annum from the day appointed for the payment thereof until the actual payment
thereof, and all expenses that may have been incurred by the Company by reason
of such non-payment; but the Directors may, if they shall think fit, waive the
payment of such interest and expenses or any part thereof.
23. Any sum which by the terms of issue of a share becomes payable on
allotment or at any fixed date, whether on account of the nominal value of the
share or by way of premium, shall for the purposes of these Articles be deemed
to be a call duly made and payable on the date on which by the terms of issue
the same becomes payable, and in case of non-payment all the relevant provisions
of these Articles as to payment of interest and expenses forfeiture or otherwise
shall apply as if such sum had become payable by virtue of a call duly made and
notified.
24. The Directors may, on the issue of shares, make arrangements for a
difference between the holders of such shares in the amounts of calls to be paid
and in the times of payment of such calls.
25. The Directors may, if they think fit, receive from any Member
willing to advance the same all or any part of the moneys, whether on account of
the nominal value of the shares or by way of premium, uncalled and unpaid upon
any shares held by him; and upon all or any of the moneys so paid in advance the
Directors may (until the same would, but for such advance, become presently
payable) pay interest at such rate not exceeding (unless the Company in General
Meeting shall otherwise direct) 10 per cent. per annum, as may be agreed upon
between the Directors and the Member paying such moneys in advance.
FORFEITURE AND LIEN
26. If any Member fails to pay any call or instalment in full on or
before the day appointed for payment thereof, the Directors may, at any time
thereafter during such time as any part of the call or instalment remains
unpaid, serve a notice on him requiring him to pay so much of the call or
instalment as is unpaid together with any interest which may have accrued and
any expenses incurred by the Company by reason of such non-payment.
27. The notice shall name a further day (not earlier than the
expiration of seven days from the date of service of the notice) on or before
which and the place where such call or instalment and such interest and expenses
as aforesaid are to be paid. The notice shall also state that in the event of
non-payment at or before the time and at the place appointed, the shares in
respect of which such call or instalment is payable will be liable to be
forfeited.
28. If the requirements of any such notice as aforesaid are not
complied with, any share in respect of which such notice has been given may at
any time thereafter, before the payment required by the notice has been made, be
forfeited by a resolution
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of the Directors to that effect. Such forfeiture shall extend to all dividends
declared in respect of the shares so forfeited and not actually paid before such
forfeiture. Forfeiture shall be deemed to occur at the time of the passing of
the said resolution of the Directors. The Directors may accept a surrender of
any share liable to be forfeited hereunder upon such terms and conditions as may
be agreed.
29. When any share has been forfeited notice of the forfeiture shall be
served upon the person who was before forfeiture the holder of the share, or the
person entitled to the share by transmission, and an entry of the forfeiture or
surrender, with the date thereof, shall forthwith be made in the Register, but
no forfeiture shall be invalidated by any failure to give such notice or make
such entry as aforesaid.
30. A share so forfeited or surrendered shall be deemed to be the
property of the Company, and may be sold, re-allotted or otherwise disposed of
in such manner, either subject to or discharged from all calls made or
instalments due prior to the forfeiture or surrender, as the Directors think
fit: Provided that the Company shall not exercise any voting rights in respect
of such share and any such share not disposed of in accordance with the
foregoing within a period of three years from the date of its forfeiture or
surrender shall thereupon be cancelled in accordance with the provisions of the
Statutes. For the purpose of giving effect to any such sale or other disposition
the Directors may authorise some person to transfer the share so sold or
otherwise disposed of to the purchaser thereof or other person becoming entitled
thereto.
31. The Directors may, at any time before any share so forfeited or
surrendered shall have been cancelled or sold, re-allotted or otherwise disposed
of, annul the forfeiture or surrender upon such terms as they think fit.
32. Any person whose shares have been forfeited or surrendered shall
cease to be a Member in respect of those shares, but shall, notwithstanding,
remain liable to pay to the Company all moneys which, at the date of the
forfeiture or surrender, were presently payable by him to the Company in respect
of the shares, together with interest thereon at such rate, not exceeding 15 per
cent. per annum, as the Directors may determine from the time of forfeiture or
surrender until the time of payment, but his liability shall cease if and when
the Company shall have received payment in full of all such moneys in respect of
the shares, together with interest as aforesaid. The Directors may enforce
payment without any allowance for the value of the shares at the time of
forfeiture or surrender or for any consideration received on their disposal or
waive payment in whole or in part.
33. The Company shall have a first and paramount lien on every share
(not being a fully paid share) for all moneys (whether presently payable or not)
called or payable at a fixed time in respect of such share; but the Directors
may at any time waive any lien which has arisen and may declare any share to be
wholly or in part exempt from the provisions of this Article. The Company's
lien, if any, on a share shall extend to all dividends payable thereon.
34. The Company may sell, in such manner as the Directors think fit,
any share on which the Company has a lien, but no sale shall be made unless a
sum in respect of which the lien exists is presently payable, nor until the
expiration of seven days after a notice in writing, (i) stating, and demanding
payment of, the sum presently payable, and (ii) giving notice of intention to
sell in default of such payment, has been given to the registered holder for the
time being of the share, or the person entitled thereto by reason of his death
or bankruptcy.
35. The net proceeds of such sale, after payment of the costs thereof,
shall be received by the Company and applied in or towards satisfaction of such
part of the amount in respect of which the lien exists as is presently payable.
The residue, if any, shall (subject to a like lien for sums not presently
payable as existed upon the shares before the sale) be paid to the person
entitled to the shares at the date of sale. For giving effect to any such sale
the Directors may authorise some person to transfer the shares sold to the
purchaser.
36. A statutory declaration in writing that the declarant is a Director
or the Secretary of the Company and that a share has been duly forfeited or
surrendered or sold to satisfy a lien of the Company on a date stated in the
declaration shall be conclusive evidence of the facts stated therein against all
persons claiming to be entitled to the share. Such declaration and the receipt
of the Company for the consideration (if any) given for the share on the sale,
re-allotment or disposal thereof together with the share certificate delivered
to a purchaser or allottee thereof shall (subject to the execution of a transfer
if the same be required) constitute a good title to the share and the person to
whom the share is sold, re-allotted or disposed of shall be
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registered as the holder of the share and shall not be bound to see to the
application of the purchase money (if any) nor shall his title to the share be
affected by any irregularity or invalidity in the proceedings in reference to
the forfeiture, surrender, sale, re-allotment or disposal of the share.
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TRANSFER OF SHARES
37. The instrument of transfer of any share in the Company shall be
signed by or on behalf of the transferor (and, in the case of a share which is
not fully paid, shall be signed by or on behalf of the transferee) and the
transferor shall be deemed to remain the holder of the share until the name of
the transferee is entered in the Register in respect thereof.
38. All transfers of shares shall be effected by instrument in writing
in any usual or common form or any other form which the Directors may approve.
39. Subject to Article 76 and the requirements of the London Stock
Exchange, the Directors may, in their absolute discretion and without assigning
any reason therefor, refuse to register any transfer of any share which is not a
fully paid share or the transfer of a share on which the Company has a lien. If
that share has been admitted to the Official List of the London Stock Exchange,
the Directors may not refuse to register the transfer if this would prevent
dealings in the share from taking place on an open and proper basis. The
Directors may likewise refuse to register any transfer of a share, whether fully
paid or not, in favour of more than four persons jointly.
40. The Directors may decline to recognise any instrument of transfer
unless:
(a) the instrument of transfer is left duly stamped at the
Office, or at such other place as the Directors may from time to time
determine, to be registered, accompanied by the certificate(s) of 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 (and, if the instrument of transfer is executed by some other
person on his behalf, the authority of that person so to do); and
(b) the instrument of transfer is in respect of only one class of
share provided that, in the case of a transfer by a recognised clearing
house or a nominee of a recognised clearing house or of a recognised
investment exchange, the lodgement of share certificates will only be
necessary if and to the extent that certificates have been issued in
respect of the shares in question.
41. If the Directors refuse to register a transfer they shall within
two months after the date on which the transfer was lodged with the Company send
to the transferee notice of the refusal and (except in the case of fraud) return
to him the instrument of transfer. All instruments of transfer which are
registered may be retained by the Company.
42. No fee shall be charged by the Company on the registration of any
instrument of transfer, probate, letters of administration, certificate of death
or marriage, power of attorney, stop notice or other document relating to or
affecting the title to any shares or otherwise for making any entry in the
Register affecting the title to any shares.
43. The registration of transfers may be suspended at such times and
for such periods as the Directors may from time to time determine and either
generally or in respect of any class of shares: Provided always that such
registration shall not be suspended, either generally or otherwise, for more
than thirty days in any year.
44. The Company shall be entitled to destroy:
(i) any instrument of transfer which has been registered, at
any time after the expiration of six years from the date of
registration thereof;
(ii) any dividend mandate or any variation or cancellation
thereof or may any notification of change of address, at any time after
the expiration of two years from the date of recording thereof;
(iii) any share certificate which has been cancelled, at any
time after the expiration of one year from the date of such
cancellation; and
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(iv) any other document on the basis of which entry in the
Register is made, at any time after the expiration of six years from
the date an entry in the Register is first made in respect thereof;
and it shall conclusively be presumed in favour 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 was 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 certificate duly and
properly cancelled and that every other document destroyed hereunder
was a valid and effective document in accordance with the recorded
particulars thereof in the books or records of the Company: Provided
always that:
(a) the provisions aforesaid shall apply only to the
destruction of a document in good faith and without express notice to
the Company that the preservation of such document was relevant to any
claim (regardless of the parties thereto);
(b) nothing contained 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 aforesaid or in any case where the
conditions of proviso (a) above are not fulfilled; and
(c) references in this Article to the destruction of any
document include references to its disposal in any manner.
TRANSMISSION OF SHARES
45. In case of the death of a Member, the survivor or survivors where
the deceased was a joint holder, and the legal personal representatives of the
deceased where he was a sole or only surviving holder, shall be the only persons
recognised by the Company as having any title to his interest in the shares; but
nothing herein contained shall release the estate of a deceased Member from any
liability in respect of any share which had been held by him (whether solely or
jointly with other persons).
46. Any person becoming entitled to a share in consequence of the death
or bankruptcy of a Member may, upon such evidence being produced as may from
time to time properly be required by the Directors and subject as hereinafter
provided, elect either to be registered himself as holder of the share or to
have some person nominated by him registered as the transferee thereof, but the
Directors shall, in either case, have the same right to decline or suspend
registration as they would have had in the case of a transfer of the share by
that Member before his death or bankruptcy, as the case may be.
47. If the person so becoming entitled shall elect to be registered
himself, he shall deliver or send to the Company a notice in writing signed by
him stating that he so elects. If he shall elect to have another person
registered he shall testify his election by executing to that person a transfer
of the share. All the limitations, restrictions and provisions of these Articles
relating to the right to transfer and the registration of transfers of shares
shall be applicable to any such notice or transfer as aforesaid as if the death
or bankruptcy of the Member had not occurred and the notice or transfer were a
transfer signed by that Member.
48. Save as otherwise provided by or in accordance with these Articles,
a person becoming entitled to a share by reason of the death or bankruptcy of
the holder shall, upon supplying to the Company such evidence as the Directors
may reasonably require to show his title to the share, be entitled to the same
dividends and other advantages to which he would be entitled if he were the
registered holder of the share, except that he shall not, before being
registered as a Member in respect of the share, be entitled in respect of it to
exercise any right conferred by membership in relation to meetings of the
Company: Provided always that the Directors may at any time give notice
requiring any such person to elect either to be registered himself or to
transfer the share, and if the notice is not complied with within 90 days the
Directors may thereafter withhold payment of all dividends, bonuses or other
moneys payable in respect of the share until the requirements of the notice have
been complied with.
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CONVERSION OF SHARES INTO STOCK
49. The Company may by Ordinary Resolution convert any of its fully
paid up shares into stock of the same class as the shares so converted, and
reconvert such stock into fully paid up shares of the same class and of any
denomination.
50. The several holders of stock may transfer the same, or any part
thereof, in the same manner, and subject to the same regulations, as and subject
to which the shares from which the stock arose might previously to conversion
have been transferred, or as near thereto as circumstances admit; and the
Directors may from time to time fix the minimum amount of stock transferable but
so that such minimum shall not exceed the nominal amount of the shares from
which the stock arose.
51. The several holders of such stock shall, according to the amount of
stock held by them and the class thereof, have the same rights, privileges and
advantages as regards dividends, voting at meetings of the Company and other
matters as if they held the shares from which the stock arose, but no such
privilege or advantage (except participation in the dividend and profits of the
Company and in the assets on winding up) shall be conferred by an amount of
stock which would not, if existing in shares, have conferred that privilege or
advantage.
52. Such of the provisions of these Articles as are applicable to fully
paid up shares shall apply to stock and the words "share" and "shareholder"
therein shall include "stock" and "stockholder".
ALTERATION OF CAPITAL
53. The Company may from time to time by Ordinary Resolution increase
its share capital by such sum, to be divided into shares of such amount, as the
resolution shall prescribe. All new shares shall be subject to the provisions of
these Articles with reference to allotment, payment of calls, forfeiture, lien,
transfer and transmission and otherwise.
54. The Company may by Ordinary Resolution:
(a) consolidate and divide all or any of its share capital
into shares of larger amount than its existing shares;
(b) sub-divide its existing shares, or any of them, into
shares of smaller amount than is fixed by the Memorandum of
Association, provided that;
(i) in the sub-division the proportion between the
amount paid and the amount, if any, unpaid on each reduced
share shall be the same as it was in the case of the share
from which the reduced share is derived; and
(ii) the resolution whereby any share is sub-divided
may determine that as between the resulting shares one or more
of such shares may be given any preference or advantage as
regards dividend, capital, voting or otherwise over the others
or any other of such shares;
(c) 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 cancelled.
55. Subject to any direction by the Company in General Meeting,
whenever as the result of any consolidation and division or sub-division of
shares Members of the Company are entitled to any issued shares of the Company
in fractions, the Directors may deal with such fractions as they shall determine
and in particular may sell the shares to which Members are so entitled in
fractions to any person for the best price reasonably obtainable and pay and
distribute to and amongst the Members entitled to such shares in due proportions
the net proceeds of the sale thereof. For the purpose of giving effect to any
such sale the Directors may nominate some person to execute a transfer of the
shares sold on behalf of the Members so entitled to the purchaser thereof and
may cause the name of the purchaser to be entered in the Register as the holder
of the shares comprised in any such transfer and he shall not be bound to see to
the application of the purchase money nor shall his title to the shares be
affected by any irregularity or invalidity in the proceedings in reference to
the sale.
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56. Subject to any consent required by law, the Company may by Special
Resolution reduce its share capital, any capital redemption reserve and any
share premium account in any manner and with, and subject to, any incident
authorized, and consent required, by law.
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GENERAL MEETINGS
57. The Company shall in each year hold a General Meeting as its Annual
General Meeting in addition to any other meetings in that year, and not more
than fifteen months shall elapse between the date of one Annual General Meeting
of the Company and that of the next. The Annual General Meeting shall be held at
such time and place as the Directors shall appoint.
58. All General Meetings other than Annual General Meetings shall be
called Extraordinary General Meetings.
59. 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 the Statutes. If at any time there are not
within the United Kingdom sufficient Directors capable of acting to form a
quorum the Directors in the United Kingdom capable of acting, or if there are no
Directors capable and willing so to act, any two Members of the Company, may
convene an 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 MEETING
60. An Annual General Meeting and a meeting called for the passing of a
Special Resolution shall be called by not less than twenty-one days' notice in
writing, and a meeting of the Company other than an Annual General Meeting or a
meeting for the passing of a Special Resolution shall be called by not less than
fourteen days' notice in writing. The notice shall be exclusive of the day on
which it is served or deemed to be served and of the day for which it is given,
and shall specify the place, the day and the hour of meeting and, in case of
special business, the general nature of that business. It shall be given, in
manner hereinafter mentioned or in such other manner, if any, as may be
prescribed by the Company in General Meeting, to such persons as are, under
these Articles, entitled to receive such notices from the Company and shall
comply with the provisions of the Statutes as to informing Members of their
right to appoint proxies. A notice calling an Annual General Meeting shall
specify the meeting as such and a notice convening a meeting to pass an
Extraordinary Resolution or a Special Resolution as the case may be shall
specify the intention to propose the resolution as such.
61. A meeting of the Company shall, notwithstanding that it is called
by shorter notice than that specified in the last preceding Article, be deemed
to have been duly called if it is so agreed:
(a) in the case of a meeting called as the Annual General
Meeting, by all the Members entitled to attend and vote thereat; and
(b) in the case of any other meeting, by a majority in number
of the Members having a right to attend and vote at the meeting, being
a majority together holding not less than ninety-five per cent. in
nominal value of the shares giving that right.
62. 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. In cases where instruments
of proxy are sent out with notices, the accidental omission to send such
instrument of proxy to or non-receipt of such instrument of proxy by any person
entitled to receive notice shall not invalidate the proceedings at the meeting.
PROCEEDINGS AT GENERAL MEETINGS
63. All business shall be deemed special that is transacted at an
Extraordinary General Meeting, and also all that is transacted at an Annual
General Meeting, with the exception of:
(a) declaring dividends:
(b) receiving and/or adopting the accounts, balance sheets,
reports of the Directors and Auditors and any other documents required
by law to be attached or annexed to the balance sheets;
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(c) appointing or re-appointing Directors to fill vacancies
arising at the meeting on retirement whether by rotation or otherwise;
(d) re-appointing the retiring Auditors(unless they were last
appointed otherwise than by the Company in General Meeting);
(e) fixing of the remuneration of the Auditors or determining
the manner in which such remuneration is to be fixed.
64. No business shall be transacted at any General Meeting unless a
quorum of Members is present at the time when the meeting proceeds to business;
save as herein otherwise provided, three Members present in person or by proxy
shall be a quorum. The appointment of a Chairman in accordance with the
provisions of these Articles shall not be treated as part of the business of the
meeting. If within thirty minutes from the time appointed for the meeting a
quorum be not present, the meeting, if convened by or upon the requisition of
Members, shall be dissolved. In any other case it shall stand adjourned to such
other day and such time and place as may have been specified for the purpose in
the notice convening the meeting or (if not so specified) as the Chairman of the
meeting may determine and in the latter case not less than seven days' notice of
the adjourned meeting shall be given in like manner as in the case of the
original meeting. If at such adjourned meeting a quorum be not present within
fifteen minutes from the time appointed therefor, the Member or Members present
in person or by proxy and entitled to vote shall be a quorum and shall have
power to decide upon all matters which could properly have been disposed of at
the meeting from which the adjournment took place.
65. The Chairman of the Board of Directors, failing whom the Deputy
Chairman, shall preside as Chairman at every General Meeting of the Company. If
there be no such Chairman or Deputy Chairman, or if at any General Meeting
neither shall be present within ten minutes after the time appointed for holding
the meeting and willing to act as Chairman, the Directors present shall select
one of their number to be Chairman; or if no Director be present and willing to
take the chair the Members present and entitled to vote shall choose one of
their number to be Chairman of the meeting.
66. The Chairman of the meeting may, with the consent of any meeting at
which a quorum is present (and shall if so directed by the meeting), adjourn the
meeting from time to time and from place to place; but no business shall be
transacted at any adjourned meeting other than the business left unfinished at
the meeting from which the adjournment took place. When a meeting is adjourned
for fourteen days or more, not less than seven clear days' notice in writing of
the adjourned meeting shall be given specifying the day, the place and the time
of the meeting as in the case of an original meeting, but it shall not be
necessary to specify in such notice the nature of the business to be transacted
at the adjourned meeting. Save as aforesaid it shall not be necessary to give
any notice of an adjournment.
67. If at any General Meeting 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. In the case of a resolution duly
proposed as a Special or Extraordinary Resolution no amendment thereto (other
than an amendment to correct a patent error) may in any event be considered or
voted upon and in the case of a resolution proposed as an Ordinary Resolution no
amendment thereto (other than an amendment to correct a patent error) may be
considered or voted upon unless at least forty-eight hours prior to the time
appointed for holding the meeting or adjourned meeting at which such resolution
is to be proposed notice in writing of the terms of the amendment and intention
to move the same has been lodged at the Office.
68. At any General Meeting a resolution put to the vote of the meeting
shall be decided on a show of hands unless a poll is (before or on the
declaration of the result of the show of hands) demanded:
(a) by the Chairman of the meeting; or
(b) by at least three Members present in person or by proxy
and entitled to vote; or
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(c) by any Member or Members present in person or by proxy and
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 in the Company
conferring a right to vote at the meeting being shares on which an
aggregate sum has been paid up equal to not less than one-tenth of the
total sum paid up on all shares conferring that right.
Unless a poll be so demanded a declaration by the Chairman of the meeting that a
resolution has on a show of hands been carried or carried unanimously, or by a
particular majority, or lost and an entry to that effect in the book containing
the minutes of the proceedings of the Company shall be conclusive evidence of
the fact without proof of the number or proportion of the votes recorded in
favour of or against such resolution.
69. Except as provided in Article 71, if a poll is duly demanded it
shall be taken in such manner (including the use of ballot or voting papers or
tickets) as the Chairman of the meeting directs, and the result of the poll
shall be deemed to be the resolution of the meeting at which the poll was
demanded. The Chairman of the meeting may (and if so directed by the meeting
shall) appoint scrutineers and may adjourn the meeting to some place and time
fixed by him for the purpose of declaring the result of a poll.
70. In the case of an equality of votes, whether on a show of hands or
on a poll, the Chairman of the meeting at which the show of hands takes place or
at which the poll is demanded, shall be entitled to a second or casting vote.
71. A poll demanded on the election of a Chairman of the meeting or on
the question of an adjournment shall be taken forthwith. A poll demanded on any
other question shall be taken either immediately or at such subsequent time (not
being more than thirty days after the date of the meeting or adjourned meeting
at which the poll is demanded) and place as the Chairman of the meeting may
direct. No notice need be given of a poll not taken immediately. Any business
other than that upon which a poll has been demanded may be proceeded with
pending the taking of the poll. The demand for a poll may be withdrawn at any
time before the conclusion of the meeting; but, if a demand is withdrawn, the
Chairman of the meeting or other Members entitled may himself or themselves
demand a poll.
VOTES OF MEMBERS
72. Subject to any rights or restrictions for the time being attached
to any class or classes of shares, on a show of hands every Member present in
person shall have one vote, and on a poll every Member shall have one vote for
each share of which he is the holder.
73. In the case of joint holders of a share the vote of the senior who
tenders a vote, whether in person or by 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 stand in the
Register in respect of the share.
74. A Member in respect of whom an order has been made by any court
having jurisdiction (in the United Kingdom or elsewhere) in matters concerning
mental disorder may vote, whether on a show of hands or on a poll, by his
receiver curator bonis or other person authorised in that behalf appointed by
that court, and such receiver curator bonis or other person may, on a poll, vote
by proxy: Provided that such evidence as the Directors may require of the
authority of the person claiming to vote shall have been deposited at the Office
not less than forty-eight hours before the time appointed for holding the
meeting or adjourned meeting or for taking the poll at which it is desired to
vote.
75. No Member shall, unless the Directors otherwise determine, be
entitled, in respect of any share in the capital of the Company held by him, to
be present or to vote on any question, either in person or by proxy, at any
General Meeting or meeting of the holders of any class of shares of the Company,
or upon any poll, or to be reckoned in a quorum, or to exercise any other right
or privilege conferred by membership in relation to General Meetings of the
Company or meetings of the holders of any class of shares of the Company if any
call or other sum presently payable by him to the Company in respect of such
share remains unpaid.
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76. (A) If any Member, or any other person appearing to be interested
in shares held by such Member, has been duly served with a notice under
Section 212 of the Companies Act 1985 (as amended by the Companies Act
1989) and is in default for the prescribed period in supplying to the
Company the information thereby required, then, subject to the
requirements of the London Stock Exchange, the Directors may in their
absolute discretion at any time thereafter by a notice (a "direction
notice") to such Member direct that, in respect of the shares in
relation to which the default occurred (the "default shares" which
expression shall include any further shares which are issued in respect
of such shares), the Member shall not be entitled to be present or to
vote either personally or by proxy at a General Meeting of the Company
or a meeting of the holders of any class of shares of the Company or to
exercise any other right conferred by membership in relation to General
Meetings of the Company or meetings of the holders of any class of
shares of the Company.
(B) Where the default shares represent at least 0.25 per cent of
the issued shares of that class, then the direction notice may
additionally direct:
(i) that any dividend or part thereof or other money
which would otherwise be payable in respect of the default
shares shall be retained by the Company without any liability
to pay interest thereon when such money is finally paid to the
Member; and/or
(ii) that no transfer of any of the shares held by
such Member shall be registered unless:
(a) the Member is not himself in default as
regards supplying the information required and the
transfer is of part only of the Member's holding
which, when presented for registration, is
accompanied by a certificate by the Member in a form
satisfactory to the Directors to the effect that
after due and careful inquiry the Member is satisfied
that none of the shares the subject of the transfer
are default shares; or
(b) the transfer is an approved transfer.
(C) The Company shall send to each other person appearing to
be interested in the shares the subject of any direction notice a copy
of the notice, but the failure or omission by the Company to do so
shall not invalidate such notice.
(D) The sanctions under this Article 76 shall cease to apply
seven days after the earlier of:
(i) receipt by the Company of notice of an approved
transfer, but only in relation to the shares transferred; and
(ii) receipt by the Company, in a form satisfactory
to the Directors, of all the information required by the
direction notice.
(E) For the purposes of this Article:
(i) a person shall be treated as appearing to be
interested in any shares if the Member holding such shares has
given to the Company a notification under the said Section 212
which either (a) names such person as being so interested or
(b) fails to establish the identities of those interested in
the shares and (after taking into account the said
notification and any other relevant Section 212 notification)
the Company knows or has reasonable cause to believe that the
person in question is or may be interested in the shares;
(ii) the prescribed period is 28 days from the date
of service of the notice under the said Section 212 except
where the default shares represent at least 0.25 per cent. of
the issued shares of that class in which case the prescribed
period is 14 days from such date; and
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(iii) a transfer of shares is an approved transfer if:
(a) it is a transfer of shares to an offeror
by way or in pursuance of acceptance of a takeover
offer for a company (as defined in Section 428(1) of
the Companies Act 1985); or
(b) the Directors are satisfied that the
transfer is made pursuant to a sale of the whole of
the beneficial ownership of the shares to a party
unconnected with the transferring Member and/or with
any other person appearing to be interested in such
shares; or
(c) the transfer results from a sale made
through a recognized investment exchange or any stock
exchange outside the United Kingdom on which the
Company's shares are normally traded.
77. No objection shall be raised to the qualification of any voter or
as to whether any votes have been counted which ought not to have been counted
or which might have been rejected, or as to whether any votes have not been
counted which ought to have been counted, except at the meeting or adjourned
meeting at which the vote objected to is given or tendered or at which the vote
which might have been counted is not counted, or (in the case of a poll) on or
within 24 hours of the declaration of the result of the poll, and every vote not
disallowed at such meeting shall be valid for all purposes. Any such objection
made in due time shall be referred to the Chairman of the meeting, whose
decision shall be final and conclusive.
78. On a poll votes may be given personally or by proxy and a Member
entitled to more than one vote need not, if he votes, use all his votes or cast
all the votes he uses in the same way.
79. The instrument appointing a proxy shall be in writing in any usual
or common form, or any other form which the Directors may approve, under the
hand of the appointor or of his attorney duly authorized in writing, or if the
appointor is a corporation, either under seal, or under the hand of an officer
or attorney duly authorized. The Directors may, but shall not be bound to,
require evidence of the authority of any such attorney or officer. The signature
on such instrument need not be witnessed. A proxy need not be a Member of the
Company. 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 in person at the meeting or any adjournment thereof.
80. An instrument appointing a proxy and the power of attorney or other
authority, if any, under which it is signed, or a notarially certified copy or a
copy certified in accordance with the Powers of Attorney Act 1971 of that power
or authority shall be deposited at the Office or at such other place (if any)
within the United Kingdom as is specified for that purpose in or by way of note
to the notice convening the meeting, not less than forty-eight 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 taken otherwise than
at or on the same day as the meeting or adjourned meeting, not less than
twenty-four hours before the time appointed for the taking of the poll at which
it is to be used, and in default the instrument of proxy shall not be treated as
valid.
81. An instrument appointing a proxy shall, unless the contrary is
stated thereon, be valid as well for any adjournment of the meeting to which it
relates. An instrument of proxy may relate to more than one meeting (including
any adjournment thereof) and having once been so delivered for the purpose of
any meeting shall not require to be delivered in relation to any subsequent
meeting to which it relates. No instrument of proxy shall be valid after the
expiration of twelve months from the date of its execution except at an
adjourned meeting or on a poll demanded at a meeting or adjourned meeting in
cases where the meeting was originally held within twelve months from that date.
82. The instrument appointing a proxy shall be deemed to confer
authority to demand or join in demanding a poll.
83. A vote given in accordance with the terms of an instrument of proxy
shall be valid notwithstanding the previous death or insanity of the principal
or revocation of the proxy or of the authority under which the proxy was
executed, or the transfer of the share in respect of which the proxy is given,
provided that no intimation in writing of such death, insanity, revocation or
transfer shall have been received by the Company at the Office or such other
place (if any) as is specified for
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depositing the instrument of proxy before the commencement of the meeting or
adjourned meeting or the holding of a poll subsequently thereto at which such
vote is given.
84. Subject to the provisions of the Statutes, a resolution in writing
signed by all the Members for the time being entitled to receive notice of and
to attend and vote at General Meetings (or being corporations by their duly
authorised representatives) shall be as valid and effective as if the same had
been passed at a General Meeting of the Company duly convened and held, and may
consist of two or more documents in like form each signed by one or more of the
Members.
85. Any corporation which is a Member of the Company may by resolution
of its directors or other governing body authorise such person as it thinks fit
to act as its representative at any meeting of the Company or of any class of
Members of the Company, and the person so authorised shall be entitled to
exercise the same powers on behalf of the corporation which he represents as
that corporation could exercise if it were an individual member of the Company.
DIRECTORS
86. Unless and until the Company in General Meeting shall otherwise
determine, the number of Directors shall be not fewer than two.
87. A Director shall not be required to hold any shares in the capital
of the Company. A Director who is not a Member shall nevertheless be entitled to
receive notice of and attend and speak at all General Meetings of the Company
and all separate General Meetings of the holders of any class of shares in the
capital of the Company.
88. Any provisions of the Statutes which, subject to the provisions of
these Articles, would have the effect of rendering any person ineligible for
appointment as a Director or liable to vacate office as Director on account of
his having reached any specified age or of requiring special notice or any other
special formality in connection with the appointment of any Director over a
specified age, shall not apply to the Company.
89. A Director of the Company may be or continue as or become a
director or other officer servant or member of, or otherwise interested in, any
company promoted by the Company or in which the Company may be interested as
shareholder or otherwise, and no such Director shall be accountable to the
Company for any remuneration or other benefits received or receivable by him as
a director or other officer servant or member of, or from his interest in, such
other company.
90. (1) The Directors (other than any Director who shall for the time
being hold an executive office or employment under the Company or a
subsidiary of the Company) shall be paid out of the funds of the
Company by way of fees for their services as Directors such sums (if
any) as the Directors may from time to time determine (not exceeding in
the aggregate an annual sum of (pound)150,000 or such larger amount as
the Company may by Ordinary Resolution determine). Such remuneration
shall be deemed to accrue from day to day.
(2) The Directors may also be paid all reasonable travelling,
hotel and other expenses properly incurred by them in attending and
returning from meetings of the Directors or any committee of the
Directors or General Meetings or otherwise in connection with the
business of the Company.
91. Any Director who is appointed to any executive office or who serves
on any committee or who devotes special attention to the business of the
Company, or who otherwise performs services which in the opinion of the
Directors are outside the scope of the ordinary duties of a Director, may be
paid such remuneration or extra remuneration by way of salary, percentage of
profits or otherwise as the Directors may determine.
92. The Company shall in accordance with the provisions of the Statutes
duly keep a register showing, as respects each Director, interests of his in
shares in, or debentures of, the Company or associated companies.
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ALTERNATE DIRECTORS
93. (A) Each Director shall have the power at any time to appoint as an
alternate Director either (i) another Director or (ii) any other person
approved for that purpose by a resolution of the Directors, and, at any
time, to terminate such appointment. Every appointment and removal of
an alternate Director shall be in writing signed by the appointor and
(subject to any approval required) shall (unless the Directors agree
otherwise) only take effect upon receipt of such written appointment or
removal at the Office or at a meeting of the Directors. An alternate
Director shall not be required to hold any shares in the capital of the
Company and shall not be counted in reckoning the maximum and minimum
number of Directors allowed or required by Article 86.
(B) An alternate Director so appointed shall not be entitled as
such to receive any remuneration from the Company except only such
part (if any) of the remuneration otherwise payable to his appointor as
such appointor may by notice in writing to the Company from time to
time direct, but shall otherwise be subject to the provisions of these
Articles with respect to Directors. An alternate Director shall during
his appointment be an officer of the Company and shall not be deemed to
be an agent of his appointor.
(C) An alternate Director shall (subject to his giving to the
Company an address within the United Kingdom at which notices may be
served upon him) be entitled to receive notices of all meetings of the
Directors and of any committee of the Directors of which his appointor
is a member and to attend and vote as a Director at any such meeting at
which his appointor is not personally present and generally in the
absence of his appointor to perform and exercise all functions, rights,
powers and duties as Director of his appointor, and to receive notice
of all General Meetings.
(D) The appointment of an alternate Director shall
automatically determine on the happening of any event which if he were
a Director would cause him to vacate such office or if his appointor
shall cease for any reason to be a Director otherwise than by retiring
and being re-appointed at the same meeting.
(E) A Director or any other person may act as alternate
Director to represent more than one Director and an alternate Director
shall be entitled at meetings of the Directors or any committee of the
Directors to one vote for every Director whom he represents in addition
to his own vote (if any) as a Director, but shall count as only one for
the purpose of determining whether a quorum be present.
BORROWING POWERS
94. (A) Subject as hereinafter provided, the Directors may exercise all
the powers of the Company to borrow money, and to mortgage or charge
its undertaking, property and uncalled capital, and to issue
debentures, debenture stock and other securities whether outright or as
collateral security for any debt, liability or obligation of the
Company or of any third party.
(B) The Directors shall restrict the borrowings of the Company
and exercise all voting and other rights or powers of control
exercisable by the Company in relation to its subsidiary companies (if
any) so as to ensure (so far, as regards subsidiary companies as by
such exercise they can secure), that the aggregate amount for the time
being remaining undischarged of all moneys borrowed by the Company and
any of its subsidiary companies (exclusive of moneys for the time being
owing by any subsidiary to the Company or to another subsidiary or by
the Company to any subsidiary) shall not without the previous sanction
of an Ordinary Resolution of the Company exceed an amount equal to four
times the Adjusted Total of Capital and Reserves. For the purpose of
the said limit, the issue of debentures shall be deemed to constitute a
borrowing notwithstanding that the same may be issued in whole or in
part for a consideration other than cash.
(C) The expression "Adjusted Total of Capital and Reserves"
means the aggregate of:
(i) the amount paid up or credited as paid up on the
issued share capital of the Company; and
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(ii) the amounts standing to the credit of the
capital, special and revenue reserves (including any share
premium account, capital redemption reserve fund and profit
and loss account) of the Company;
all as shown in the latest audited Balance Sheet of the
Company after:
(i) deducting an amount equivalent to any
distribution by the Company, or by any of its subsidiaries
otherwise than in favour of the Company out of profits down to
the date of such Balance Sheet of the Company which may have
been declared, recommended or made since that date except in
so far as such distribution is provided for in such Balance
Sheet of the Company;
(ii) making such adjustments as may be appropriate to
reflect any variation in the paid up share capital of the
Company or in the said capital reserves which has taken place
since the date of such Balance Sheet of the Company or which
would result from any transaction contemplated at the time
when the Adjusted Total of Capital and Reserves is being
calculated or from any transaction connected therewith.
(D) A certificate in writing by the Auditors for the time
being of the Company as to the amount of the Adjusted Total of Capital
and Reserves or as to the amount deemed to be outstanding as borrowed
moneys at any date shall be conclusive for all purposes as to the
matters thereby certified.
(E) No lender or other person dealing with the Company or any
of its subsidiary companies shall be concerned to see or inquire
whether the limit imposed by this Article is observed, and no debt
incurred or security given in excess of such limit shall be invalid or
ineffectual unless the lender or the recipient of the security had at
the time when the debt was incurred or security given express notice
that the said limit had been or would thereby be exceeded.
POWERS AND DUTIES OF DIRECTORS
95. The business of the Company shall be managed by the Directors, who
may exercise all such powers of the Company as are not, by the Statutes or by
these Articles, required to be exercised by the Company in General Meeting,
subject, nevertheless, to the provisions of these Articles and of the Statutes,
and to such directions, being not inconsistent with any provisions of these
Articles and of the Statutes, as may be given by the Company in General Meeting:
Provided that no direction given by the Company in General Meeting shall
invalidate any prior act of the Directors which would have been valid if such
direction had not been given. The general powers conferred upon the Directors by
this Article shall not be deemed to be abridged or restricted by any specific
authority or power conferred upon the Directors by any other Article.
96. (A) The Directors may procure the establishment and maintenance of
or participate in, or contribute to any non-contributory or
contributory pension or superannuation fund, scheme or arrangement or
life assurance scheme or arrangement for the benefit of, and pay,
provide for or procure the grant of donations, gratuities, pensions,
allowances, benefits or emoluments to, any persons who are or shall
have been at any time Directors of the Company or in the employment or
service of the Company or of any company which is or was a subsidiary
of or allied to or associated with the Company or of the predecessors
in business of the Company or any such subsidiary or associated company
or the wives, widows, families, relatives or dependants of any such
persons and so that any Director shall be entitled to receive and
retain for his own benefit any such pension, annuity, gratuity,
allowance or other benefit (whether under any such fund or scheme or
otherwise).
(B) The Directors may also procure the establishment and
subsidy of or subscription to and support of any institutions,
associations, clubs, funds or trusts calculated to be for the benefit
of any such persons as aforesaid or otherwise to advance the interests
and well-being of the Company or of any such other company as
aforesaid, or its members, and may take or procure payments for or
towards the insurance of any such persons as aforesaid and
subscriptions or guarantees for charitable or benevolent objects or for
any exhibition or for any public, general or useful object.
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(C) Without prejudice to the provisions of Article 154 the
Directors shall have power to purchase and maintain insurance for or
for the benefit of any persons who are or were at any time Directors,
officers or employees or auditors of the Company, or of any other
company which is its holding company or in which the Company or such
holding company or any of the predecessors of the Company or of such
holding company has any interest whether direct or indirect or which is
in any way allied to or associated with the Company, or of any
subsidiary undertaking of the Company or of any such other company, or
who are or were at any time trustees of any pension fund in which any
employees of the Company or of any such other company or subsidiary
undertaking are interested, including (without prejudice to the
generality of the foregoing) insurance against any liability incurred
by such persons in respect of any act or omission in the actual or
purported execution and/or discharge of their duties and/or in the
exercise or purported exercise of their powers and/or otherwise in
relation to their duties, powers or offices in relation to the Company
or any such other company, subsidiary undertaking or pension fund. For
the purposes of this Regulation "holding company" and "subsidiary
undertaking" shall have the same meanings as in the Companies Act 1989.
(D) Without prejudice to the generality of the foregoing
paragraphs of this Article, the Directors may exercise any of the
powers conferred by the Statutes to make provision for the benefit of
any such persons as aforesaid in connection with the cessation or the
transfer to any person of the whole or part of the undertaking of the
Company or any of its subsidiaries.
(E) The Directors may procure any of the matters aforesaid to
be done by the Company either alone or in conjunction with any other
company.
97. The Directors may make such arrangements as they think fit for the
management and transaction of the Company's affairs in the United Kingdom and
elsewhere and may from time to time and at any time establish any local boards
or agencies for managing any of the affairs of the Company in any specified
locality, and may appoint any persons to be members of such local board, or any
managers or agents, and may fix their remuneration. And the Directors from time
to time, and at any time, may delegate to any person so appointed any of the
powers, authorities, and discretions for the time being vested in the Directors
(other than the powers of borrowing and of making calls), with power to
sub-delegate, and may authorise the members for the time being of any such local
board, or any of them, to fill up any vacancies therein, and to act
notwithstanding vacancies; and any such appointment or delegation may be made on
such terms and subject to such conditions as the Directors may think fit, and
the Directors may at any time remove any person so appointed, and may annul or
vary any such delegation.
98. The Directors may from time to time and at any time by power of
attorney appoint any company, firm or person or body of persons, whether
nominated directly or indirectly by the Directors, to be the attorney or
attorneys of the Company for such purposes and with such powers, authorities and
discretions (not exceeding those vested in or exercisable by the Directors under
these Articles) and for such period and subject to such conditions as they may
think fit, and any such powers of attorney may contain such provisions for the
protection and convenience of persons dealing with any such attorney as the
Directors may think fit and may also authorise any such attorney to sub-delegate
all or any of the powers, authorities and discretions vested in him.
99. The Company may exercise the powers conferred by the Statutes with
regard to having an official seal for use abroad and the powers conferred by
Section 40 of the Companies Act 1985 with regard to having an official seal for
sealing and evidencing securities, and such powers shall be vested in the
Directors.
100. The Company may exercise the powers conferred upon the Company by
the Statutes with regard to the keeping of an overseas branch register, and the
Directors may (subject to the provisions of the Statutes) make and vary such
regulations as they may think fit respecting the keeping of any such register.
101.(A) Subject to the provisions of the Statutes, a Director may hold
any other office or place of profit under the Company, except that of
Auditor, in conjunction with the office of Director and may act by
himself or through his firm in a professional capacity for the Company,
and in any such case on such terms as to remuneration and otherwise as
the Directors may arrange. Any such remuneration shall be in addition
to any remuneration provided for by any other Article. No Director or
intending Director shall be disqualified by his office from entering
into any contract,
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arrangement, transaction or proposal with the Company either with
regard to his tenure of any such other office or place of profit or any
such acting in a professional capacity or as a vendor, purchaser or
otherwise. Subject to the provisions of the Statutes and save as
therein provided no such contract, arrangement, transaction or proposal
entered into by or on behalf of the Company in which any Director or
person connected with him is in any way interested, whether directly or
indirectly, shall be liable to be avoided, nor shall any Director who
enters into any such contract, arrangement, transaction or proposal or
who is so interested be liable to account to the Company for any profit
realised by any such contract, arrangement, transaction or proposal by
reason of such Director holding that office or of the fiduciary
relation thereby established, but he shall declare the nature of his
interest in accordance with the Statutes.
(B) Save as herein provided, a Director shall not vote in respect
of any contract, arrangement, transaction or any other proposal
whatsoever in which he has any material interest otherwise than by
virtue of his interests in shares or debentures or other securities of
or otherwise in or through the Company. A Director shall not be counted
in the quorum at a meeting in relation to any resolution on which he is
debarred from voting.
(C) A Director shall (in the absence of some other material
interest than is indicated below) be entitled to vote (and be counted
in the quorum) in respect of any resolution concerning any of the
following matters, namely:
(i) the giving of any security or indemnity to him in
respect of money lent or obligations incurred by him at the
request of or for the benefit of the Company or any of its
subsidiaries;
(ii) the giving of any security or indemnity to a
third party in respect of a debt or obligation of the Company
or any of its subsidiaries for which he himself has assumed
responsibility in whole or in part under a guarantee or
indemnity or by the giving of security;
(iii) any proposal concerning an offer of shares or
debentures or other securities of or by the Company or any of
its subsidiaries for subscription or purchase in which offer
he is or is to be interested as a participant in the
underwriting or sub-underwriting thereof;
(iv) any contract, arrangement, transaction or other
proposal concerning any other body corporate 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 one per cent. or
more of any class of the equity share capital of such body
corporate (or of a third body corporate through which his
interest is derived) or of the voting rights available to
members of the relevant body corporate (any such interest
being deemed for the purposes of this Article to be a material
interest in all circumstances);
(v) any contract, arrangement, transaction or other
proposal concerning the adoption, modification or operation of
a superannuation fund or retirements death or disability
benefits scheme under which he may benefit and which relates
to both employees and Directors of the Company and which does
not accord to any Director as such any privilege or advantage
not generally accorded to the employees to whom such scheme or
fund relates;
(vi) any contract, arrangement, transaction or other
proposal concerning the adoption, modification or operation of
any scheme for enabling employees including full-time
Executive Directors of the Company and/or any subsidiary to
acquire shares of the Company or any arrangement for the
benefit of employees of the Company or any of its subsidiaries
under which the Director benefits in a similar manner to
employees and which does not accord to any Director as such
any privilege or advantage not generally accorded to the
employees to whom the scheme relates; and
(vii) any proposal concerning any insurance which the
Company is empowered to purchase and/or maintain for or for
the benefit of any Directors of the Company or for persons who
include Directors of the Company.
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(D) A Director shall not vote or be counted in the quorum on
any resolution concerning his own appointment as the holder of any
office or place of profit with the Company or any company in which the
Company is interested including fixing or varying the terms of his
appointment or the termination thereof.
(E) Where proposals are under consideration concerning the
appointment (including fixing or varying the terms of appointment) of
two or more Directors to offices or employments with the Company or any
company in which the Company is interested, such proposals may be
divided and considered in relation to each Director separately and in
such cases each of the Directors concerned (if not debarred from voting
under paragraph (C)(iv) of this Article) shall be entitled to vote (and
be counted in the quorum) in respect of each resolution except that
concerning his own appointment.
(F) If any question shall arise at any meeting as to the
materiality of a Director's interest or as to the entitlement of any
Director to vote and such question is not resolved by his voluntarily
agreeing to abstain from voting, such question shall be referred to the
Chairman of the meeting and his ruling in relation to any other
Director shall be final and conclusive except in a case where the
nature or extent of the interests of the Director concerned have not
been fairly disclosed.
(G) Subject to the provisions of the Statutes the Company may
by Ordinary Resolution suspend or relax the provisions of this Article
to any extent or ratify any transaction not duly authorised by reason
of a contravention of this Article.
102. The Directors may exercise or procure the exercise of the voting
rights conferred by the shares in any other company held or owned by the
Company, and may exercise any voting rights to which they are entitled as
Directors of such other company, in such manner as they shall in their absolute
discretion think fit, including the exercise thereof in favour of any resolution
appointing themselves or any of them as directors, officers or servants of such
other company, and fixing their remuneration as such, and may vote as Directors
of this Company in connection with any of the matters aforesaid.
103. All cheques, promissory notes, drafts, bills of exchange and other
negotiable 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 shall from time to time determine.
104.(A) The Directors shall cause minutes to be made in books provided
for the purpose:
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors present at each meeting of
the Directors and of any committee of the Directors;
(c) of all resolutions and proceedings at all meetings of the
Company, and of the Directors, and of committees of Directors.
It shall not be necessary for Directors present at any meeting of
Directors or committee of Directors to sign their names in the Minute
Book or other book kept for recording attendance. Any such minute as
aforesaid, if purporting to be signed by the Chairman of the meeting at
which the proceedings were had, or by the Chairman of the next
succeeding meeting, shall be receivable as prima facie evidence of the
matters stated in such minutes without any further proof.
(B) Any Director or the Secretary or any person appointed by
the Directors for the purpose shall have power to authenticate any
documents affecting the constitution of the Company and any resolutions
passed by the Company or the Directors or any committee, and any books,
records, documents and accounts relating to the business of the
Company, and to certify copies thereof or extracts therefrom as true
copies or extracts; and where any books, records, documents or accounts
are elsewhere than at the Office the local manager or other officer of
the Company having the custody thereof shall be deemed to be a person
appointed by the Directors as aforesaid. A document purporting to be a
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copy of a resolution, or an extract from the minutes of a meeting, of
the Company or of the Directors or any committee which is certified as
aforesaid shall be conclusive evidence in favour of all persons dealing
with the Company upon the faith thereof that such resolution has been
duly passed or, as the case may be, that any minute so extracted is a
true and accurate record of proceedings at a duly constituted meeting.
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DISQUALIFICATION OF DIRECTORS
105. The office of a Director shall be vacated in any of the following
events, namely:
(a) if he becomes bankrupt or a receiving order is made
against him or he makes any arrangement or composition with his
creditors generally;
(b) if he becomes prohibited by law from acting as a Director;
(c) if in England or elsewhere an Order is made by any Court
claiming jurisdiction in that behalf on the ground (however formulated)
of mental disorder for his detention or for the appointment of a
guardian or receiver or other person to exercise powers with respect to
his property or affairs;
(d) if he resigns his office by notice in writing under his
hand to the Company or offers in writing under his hand to resign and
the Directors resolve to accept such offer;
(e) if not having leave of absence from the Directors, he and
his alternate (if any) fail to attend the meetings of the Directors for
six successive months, unless prevented by illness, unavoidable
accident or other cause which may seem to the Directors to be
sufficient, and the Directors resolve that his office be vacated;
(f) if all the other Directors unanimously resolve that he be
removed as a Director.
ROTATION OF DIRECTORS
106. At each Annual General Meeting of the Company one-third of the
Directors for the time being, or, if their number is not three or a multiple of
three, then the number nearest to but (except when less than three directors are
subject to retirement) not exceeding one-third, shall retire from office. A
Director retiring at a meeting shall retain office until the dissolution of such
meeting.
107. The Directors to retire by rotation shall include (so far as
necessary to obtain the number required) any Director who wishes to retire and
not to offer himself for re-election. Any further Directors so to retire, shall
be those who have been longest in office since their last election, but as
between persons who became Directors on the same day those to retire shall
(unless they otherwise agree among themselves) be determined by lot. A retiring
Director shall be eligible for re-election.
108. The Company at the meeting at which a Director retires under any
provision of these Articles may by Ordinary Resolution fill up the vacated
office by electing thereto the retiring Director or some other person eligible
for appointment. In default the retiring Director shall be deemed to have been
re-elected except in any of the following cases, namely if:
(a) at such meeting it is expressly resolved not to fill up
such vacated office or a resolution for the re-election of such
Director is put to the meeting and lost; or
(b) such Director has given notice in writing to the Company
that he is unwilling to be re-elected; or
(c) the default is due to the moving of a resolution in
contravention of the next following Article.
109. A single resolution for the appointment of two or more persons as
Directors shall not be put at any General Meeting, unless a resolution that it
shall be so put has first been agreed to by the meeting without any vote being
given against it.
110. No person other than a Director retiring at the meeting shall,
unless recommended by the Directors, be eligible for election or re-election to
the office of Director at any General Meeting unless not less than seven nor
more than twenty-one days before the date appointed for the meeting there shall
have been left at the Office notice in writing, signed by a Member (other
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than the person proposed) duly qualified to attend and vote at such meeting, of
his intention to propose such person for election, and also notice in writing
signed by that person of his willingness to be elected or re-elected.
111. The Company may from time to time by Ordinary Resolution increase
or reduce the number of Directors then in office, and may also determine in what
rotation the increased or reduced number is to go out of office.
112. The Directors shall have power at any time, and from time to time,
to appoint any person to be a Director of the Company, either to fill a casual
vacancy or as an addition to the existing Directors, but so that the total
number of Directors shall not at any time exceed the maximum number, if any,
fixed by or pursuant to these Articles. Any Director so appointed shall hold
office only until the next following Annual General Meeting, and shall then be
eligible for re-election but shall not be taken into account in determining the
Directors who are to retire by rotation at such meeting.
113. The Company may by Ordinary Resolution, of which special notice
has been given in accordance with the provisions of the Statutes, remove any
Director before the expiration of his period of office notwithstanding anything
in these Articles or in any agreement between the Company and such Director.
Such removal shall be without prejudice to any claim such Director may have for
damages for breach of any contract of service between him and the Company.
114. The Company may by Ordinary Resolution appoint another person in
place of a Director removed from office under the immediately preceding Article,
and without prejudice to the powers of the Directors under Article 112 the
Company in General Meeting may appoint any person to be a Director either to
fill a casual vacancy or as an additional Director. A person appointed in place
of a Director so removed or to fill such a vacancy 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 elected a Director.
PROCEEDINGS OF DIRECTORS
115.(A) The Directors may meet together for the despatch of business,
adjourn and otherwise regulate their meetings, as they think fit, and
determine the quorum necessary for the transaction of business. Until
otherwise determined two Directors shall constitute a quorum. Questions
arising at any meeting shall be decided by a majority of votes. In case
of an equality of votes, the Chairman shall have a second or casting
vote. A Director may, and the Secretary on the requisition of a
Director shall, at any time summon a meeting of the Directors. Any
Director may waive notice of any meeting and any such waiver may be
retroactive.
(B) All or any of the Directors or any committee thereof may
participate in a meeting of the Directors or that committee by means of
a conference telephone or any communication equipment which allows all
persons participating in the meeting to hear each other. Any person so
participating shall be deemed to be present in person at the meeting
and shall be entitled to vote or be counted in a quorum accordingly.
Such a meeting shall be deemed to take place where the largest group of
those participating is assembled, or, if there is no such group, where
the Chairman of the meeting is then present.
116. Notice of a meeting of the Directors shall be deemed to be duly
given to a Director if it is given to him personally or by word of mouth or sent
in writing to him at his last known address or any other address given by him to
the Company for this purpose. It shall not be necessary to give notice of a
meeting of the Directors to (a) any Director for the time being absent or
intending to be absent from the United Kingdom unless such Director has
requested the Company that notice of meetings of the Directors shall during his
absence be sent in writing to him at his last known address or any other address
given by him to the Company for this purpose, whether or not out of the United
Kingdom or (b) to any alternate Director who has not given to the Company an
address within the United Kingdom at which notice may be served upon him.
117. The continuing Directors or sole continuing Director may act
notwithstanding any vacancy in their body, but, if and so long as their number
is reduced below the number fixed by or pursuant to these Articles as the
necessary quorum of Directors, the continuing Directors or Director may act for
the purpose of increasing the number of Directors to that number, or of
summoning a General Meeting of the Company, but for no other purpose. If there
be no Directors or Director able or willing to act, then any two Members may
summon a General Meeting for the purpose of appointing Directors.
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118. The Directors may elect from their number a Chairman and a Deputy
Chairman of their meetings and determine the period for which each is to hold
office; but if no such Chairman or Deputy Chairman be elected, or if at any
meeting no Chairman or Deputy Chairman shall be present within five minutes
after the time appointed for holding the same, the Directors present shall
choose one of their number to be Chairman of such meeting.
119. The Directors may from time to time and always in compliance with
Article 10A(H)(iii) appoint committees consisting of one or more members of
their body as they think fit and may co-opt one or more other persons as
hereinafter provided. The Directors may delegate any of their powers or
discretions to any such committee and from time to time revoke any such
delegation and discharge any such committee wholly or in part. Insofar as any
such power or discretion is so delegated any reference in these Articles to the
exercise of discretion by the Directors of such power or discretion shall be
read and construed as if it were a reference to such committee. Any committee so
formed shall in the exercise of the powers so delegated conform to any
regulations that may be imposed by the Directors in default of which proceedings
of a committee consisting of more than one member shall be regulated mutatis
mutandis like the proceedings of the Directors. Any such regulations may provide
for or authorise the co-option to the committee of persons other than Directors
and for such co-opted members to have voting rights as members of the committee
but so that (a) the number of co-opted members shall be less than one-half of
the total number of members of the committee and (b) no resolution of the
committee shall be effective unless a majority of the members of the committee
present throughout the meeting are Directors.
120. All acts done by any meeting of the Directors or of a committee of
the Directors or by any person acting as a Director shall, notwithstanding that
it be afterwards discovered that there was some defect in the appointment or
continuance in office of any of the persons acting as aforesaid, or that any of
such persons were or was disqualified from holding office or not entitled to
vote, or had in any way vacated office, be as valid as if every such person had
been duly appointed or had duly continued in office and was qualified and had
continued to be a Director or member of the committee and was entitled to vote.
121. A resolution in writing, signed by all the Directors for the time
being entitled to receive notice of a meeting of the Directors, shall be as
valid and effective for all purposes as a resolution of the Directors passed at
a meeting duly convened and held, and may consist of two or more documents in
like form each signed by one or more of the Directors: Provided that such a
resolution need not be signed by an alternate Director if it is signed by the
Director who appointed him.
MANAGING AND EXECUTIVE DIRECTORS
122. Subject to the provisions of the Statutes the Directors may from
time to time appoint one or more of their body to be the holder of any executive
office (including, where considered appropriate, the office of Chairman or
Deputy Chairman), for such period and on such terms as they think fit, and,
subject to the terms of any service contract entered into in any particular case
and without prejudice to any claim for damages such Director may have for breach
of any such service contract, may revoke or vary the terms of such appointment.
The appointment of a Director to such office shall, without prejudice, to any
claim for damages such Director may have for breach of any service contract
between him and the Company, be automatically determined if he ceases from any
cause to be a Director.
123. The salary or remuneration of any Director holding any executive
office shall, subject as provided in any contract, be such as the Directors may
from time to time determine, and may either be a fixed sum of money, or may
altogether or in part be governed by the business done or profits made, and may
include the making of provisions for the payment to him, his widow or other
dependants, of a pension on retirement from the office or employment to which he
is appointed and for the participation in pension and life assurance benefits,
or may be upon such other terms as the Directors determine.
124. The Directors may entrust to and confer upon any Director holding
any executive office any of the powers exercisable by them upon such terms and
conditions and with such restrictions as they may 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.
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SECRETARY
125.(A) Subject to the provisions of the Statutes the Secretary shall
be appointed by the Directors for such term, at such remuneration and
upon such conditions as they think fit; and any Secretary so appointed
may (without prejudice to any claim for breach of damages for breach of
any contract between him and the Company) be removed by them.
(B) A provision of the Statutes or these Articles requiring or
authorising a thing to be done by or to a Director and the Secretary
shall not be satisfied by its being done by or to the same person
acting both as Director and as, or in place of, the Secretary.
(C) The Directors may, at any time and from time to time,
appoint any person to be Assistant or Deputy Secretary and anything
required or authorised to be done by or to the Secretary may be done by
or to any Assistant or Deputy Secretary so appointed; and any Assistant
or Deputy Secretary may (without prejudice to any claim for damages for
breach of any contract between him and the Company) be removed by the
Directors.
THE SEAL
126. (A) The Directors shall provide for the safe custody of the Seal
and any official seal under Section 40 of the Companies Act 1985, and
the Company may exercise the powers conferred by the Statutes with
regard to having an official seal for use in any territory outside the
United Kingdom, and such powers shall be vested in the Directors.
Whenever 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.
(B) Where the Statutes so permit, any instrument signed by one
Director and the Secretary or by two Directors and expressed to be
executed by the Company shall have the same effect as if executed under
the Seal.
(C) The Seal shall not be affixed to any instrument and no
instrument shall be executed having the same effect as if executed
under the Seal except by the general or special authority of a
resolution of the Directors, or of a committee of the Directors
authorised in that behalf. The Directors may from time to time make
such regulations as they think fit (subject to the provisions of these
Articles) determining the persons and the number of such persons who
shall sign every instrument to which the Seal is affixed. Until
otherwise so determined, every such instrument shall be signed by a
Director and countersigned by the Secretary or another Director, and in
favour of any purchaser or person bona fide dealing with the Company,
the signatures of such persons shall be conclusive evidence of the fact
that the Seal has been properly affixed.
(D) Every certificate of shares, debentures, debenture stock
or representing any other form of security of the Company (other than
letters of allotment, receipts for securities or certificates of
deposit) shall be issued under the Seal or under any official seal kept
by the Company pursuant to Section 40 of the Act or in such other
manner having the same effect as if issued under the Seal.
(E) Each certificate to which the Seal shall be affixed shall
bear the autographic signatures of at least one Director and the
Secretary or other person acting in the place of the Secretary,
provided that the Directors may by resolution determine (either
generally or in any particular case or cases) that such signatures
shall be dispensed with, or shall be affixed by means of some method of
system of mechanical signature.
(F) Each certificate to which such official seal as is
referred to in paragraph (D) of this Article shall be affixed need not
bear any signatures.
RESERVE
127. Subject to Article 10A(C)(i), the Directors may, before
recommending any dividend, set aside out of the profits of the Company such sums
as they think proper as a reserve or reserves which shall, at the discretion of
the Directors, be applicable for any purpose to which the profits of the Company
may be properly applied, and pending such application may, at the like
discretion, either be employed in the business of the Company or be invested in
such investments as the Directors think fit. The
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Directors may divide the reserve into such special funds as they think fit, and
may consolidate into one fund any special funds or any parts of any special
funds into which the reserve may have been divided as they think fit. The
Directors may also without placing the same to reserve carry forward any profits
which they may think prudent not to divide.
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DIVIDENDS
128. The profits of the Company available for dividend and resolved to
be distributed shall be applied in the payment of dividends to the Members in
accordance with their respective rights and priorities. The Company in General
Meeting may declare dividends, but no dividend shall exceed the amount
recommended by the Directors. Dividends regarding the Participating Shares shall
be paid only in accordance with Article 10A(C).
129. The Directors may if they think fit from time to time pay to the
Members such interim dividends as appear to the Directors to be justified by the
profits of the Company. If at any time the share capital of the Company is
divided into different classes the Directors may pay such interim dividends in
respect of those shares in the capital of the Company which confer on the
holders thereof deferred or non-preferred rights as well as in respect of those
shares which confer on the holders thereof preferential rights with regard to
dividend and provided that the Directors act bona fide they shall not incur any
responsibility to the holders of shares conferring a preference for any damage
that they may suffer by reason of the payment of an interim dividend on any
shares having deferred or non-preferred rights. The Directors may also pay the
fixed dividend payable on any shares of the Company half-yearly or otherwise on
fixed dates, whenever such profits, in the opinion of the Directors, justify
that course.
130. No dividend or interim dividend shall be paid otherwise than in
accordance with the provisions of the Statutes which apply to the Company.
131. Subject to the rights of persons, if any, entitled to shares with
any priority, preference or special rights as to dividend, all dividends shall
be declared and paid according to the amounts paid up on the shares in respect
whereof the dividend is paid, but no amount paid up on a share in advance of
calls shall be treated for the purpose of this Article as paid up on the share.
All dividends shall be apportioned and paid proportionately to the amounts paid
up on the shares during any portion or portions of the period in respect of
which the dividend is paid; but if any share is issued on terms providing that
it shall rank for dividend as if paid up in full or in part from a particular
date, whether past or future, such share shall rank for dividend accordingly.
132. (1) The Directors may deduct from any dividend or other moneys
payable to any Member on or in respect of a share all sums of money (if
any) presently payable by him to the Company on account of calls or
otherwise in relation to shares of the Company.
(2) The waiver in whole or in part of any dividend on any share
by any document (whether or not under seal) shall be effective only
if such document is signed by the shareholder (or the person
entitled to the share in consequence of death or bankruptcy of the
holder or otherwise by operation of law) and delivered to the Company
and if or to the extent that the same is accepted as such or acted upon
by the Company.
133. Any General Meeting declaring a dividend may, upon the
recommendation of the Directors, by Ordinary Resolution direct payment of such
dividend wholly or in part by the distribution of specific assets and in
particular of paid up shares or debentures of any other company, and the
Directors shall give effect to such direction. Where any difficulty arises in
regard to such distribution, the Directors may settle the same as they think
expedient, and in particular may issue fractional certificates and fix the value
for distribution of such specific assets or any part thereof and may determine
that cash payments shall be made to any Members upon the footing of the value so
fixed in order to adjust the rights of all parties, and may vest any such
specific assets in trustees as may seem expedient to the Directors.
134. (A) All dividends and interest shall belong and be paid (subject
to any lien of the Company) to those Members whose names shall be on
the Register at the date at which such dividend shall be declared or at
the date on which such interest shall be payable respectively, or at
such other date as the Company by Ordinary Resolution or the Directors
may determine notwithstanding any subsequent transfer or transmission
of shares. The Company may pay any dividend, interest or other moneys
payable in cash in respect of shares, by direct debit, bank transfer,
cheque, dividend warrant or money order and may remit the same by post
directed to the registered address of the holder or, in the case of
joint holders, to the registered address of the joint holder whose name
stands first in the Register, or to such person
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and to such address as the holder or joint holders may in writing
direct, and the Company shall not be responsible for any loss of any
such cheque, warrant or order. Every such cheque, warrant or order
shall be made payable to the order of the person to whom it is sent, or
to such person as the holder or joint holders may in writing direct,
and the payment of such cheque, warrant or order shall be a good
discharge to the Company. If any such cheque, warrant or order has or
shall be alleged to have been lost, stolen or destroyed, the Directors
may, on request of the person entitled thereto, issue a replacement
cheque, warrant or order subject to compliance with such conditions as
to evidence and indemnity and the payment of out of pocket expenses of
the Company in connection with the request as the Directors may think
fit. Any one of two or more joint holders may give effectual receipts
for any dividends or other moneys payable in respect of the share held
by him as joint holder.
(B) If on two consecutive occasions (or following one such
occasion, where reasonable enquiries have failed to establish another
address or account of the person entitled to the payment) cheques
warrants or orders in payment of dividends or other moneys payable in
respect of any share have been sent through the post in accordance with
the provisions of this Article but have been returned undelivered or
left un-cashed during the periods for which the same are valid, the
Company need not thereafter despatch further cheques or warrants in
payment of dividends or other moneys payable in respect of the share in
question until the Member or other person entitled thereto shall have
communicated with the Company and supplied in writing to the Office an
address for the purpose. The Company shall not be responsible for any
cheque or warrant lost in transmission.
135. No dividend or other moneys payable on or in respect of a share
shall bear interest against the Company.
136. All dividends, interest or other sums payable unclaimed may be
invested or otherwise made use of by the Directors for the benefit of the
Company until claimed and so that the Company shall not thereby be constituted a
trustee in respect thereof. All dividends, interest or other sums unclaimed for
a period of twelve years (or such shorter period as may be approved under any
regulations from time to time made by The Stock Exchange and to which the
Company is subject) after their date of payment shall be forfeited and shall
revert to the Company. The payment of any unclaimed dividend, interest or other
sum payable by the Company on or in respect of any share into a separate account
shall not constitute the Company a trustee thereof.
CAPITALISATION OF PROFITS AND SCRIP DIVIDENDS
137. Subject to the provisions of Article 138, the Directors may
capitalise any part of the amount for the time being standing to the credit of
any of the Company's reserve accounts (including any share premium account and
capital redemption reserve) or to the credit of the profit and loss account (in
each case, whether or not such amounts are available for distribution), and
appropriate the sum resolved to be capitalised either:
(i) to the holders of Ordinary Shares who would have been
entitled thereto if distributed by way of dividend and in the same
proportions; and the Directors shall apply such sum on their behalf
either in or towards paying up the amounts, if any, for the time being
unpaid on any shares held by such holders of Ordinary Shares
respectively or in paying up in full at par unissued shares or
debentures of the Company to be allotted credited as fully paid up to
such holders of Ordinary Shares in the proportion aforesaid, or partly
in the one way and partly in the other;
(ii) to such holders of Ordinary Shares who may, in relation
to any dividend or dividends, validly accept an offer or offers on such
terms and conditions as the Directors may determine (and subject to
such exclusions or other arrangements as the Directors may consider
necessary or expedient to deal with legal or practical problems in
respect of overseas shareholders) to receive new Ordinary Shares,
credited as fully paid up, in lieu of the whole or any part of any such
dividend or dividends (any such offer being called a "Scrip Dividend
Offer"); and the Directors shall apply such sum on their behalf in
paying up in full at par unissued shares (in accordance with the terms,
conditions and exclusions or other arrangements of the Scrip Dividend
Offer) to be allotted credited as fully paid up to such holders
respectively;
(iii) to the holders of the Participating Shares for the issue
of bonus shares in accordance with Article 10A(C)(iv), 10A(F)(iii)(d)
or 10A(F)(iii)(e).
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138. (1) The authority of the Company in General Meeting shall be
required before the Directors implement any Scrip Dividend Offer (which
authority may extend to one or more offers), but for the avoidance of
doubt shall not be required in relation to the issue of bonus shares to
the holders of the Participating Shares in accordance with Article
10A(C)(iv).
(2) The authority of the Company in General Meeting shall be
required for any capitalisation pursuant to paragraph (i) of Article
137 above.
(3) A share premium account and a capital redemption reserve
and any other amounts which are not available for distribution may only
be applied in the paying up of unissued shares to be allotted to
holders of Ordinary Shares of the Company credited as fully paid up, or
for the issue of bonus shares to the holders of the Participating
Shares in accordance with Article 10A(C)(iv), 10A(F)(iii)(d) or
10A(F)(iii)(e).
(4) The Directors may in their discretion suspend or terminate
any Scrip Dividend Offer which is in operation, but for the avoidance
of doubt may not suspend or terminate the issue of bonus shares to the
holders of the Participating Shares in accordance with Article
10A(C)(iv), 10A(F)(iii)(d) or 10A(F)(iii)(e).
139. Whenever a capitalisation requires to be effected, the Directors
may do all acts and things which they may consider necessary or expedient to
give effect thereto, with full power to the Directors to make such provision as
they think fit for the case of shares or debentures becoming distributable in
fractions (including provisions whereby fractional entitlements are disregarded
or the benefit thereof accrues to the Company rather than to the Members
concerned) and also to authorise any person to enter on behalf of all Members
concerned into an agreement with the Company providing for any such
capitalisation and matters incidental thereto and any agreement made under such
authority shall be effective and binding on all concerned.
ACCOUNTS
140. The Directors shall cause accounting records to be kept in
accordance with the provisions of the Statutes.
141. The accounting records shall be kept at the Office or, subject to
the provisions of the Statutes, at such other place or places as the Directors
think fit, and shall always be open to the inspection of the officers of the
Company.
142. The Directors shall from time to time determine whether and to
what extent and at what times and places and under what conditions or
regulations the accounting records of the Company or any of them shall be open
to the inspection of Members not being Directors, and no Member (not being a
Director) shall have any right of inspecting any account or book or document of
the Company except as conferred by statute or authorised by the Directors or by
the Company in General Meeting.
143. The Directors shall from time to time in accordance with the
provisions of the Statutes, cause to be prepared and to be laid before the
Company in General Meeting such profit and loss accounts, balance sheets, group
accounts (if any) and reports as are referred to in the Statutes.
144. A printed copy of every balance sheet (including every document
required by law to be annexed thereto) which is to be laid before the Company in
General Meeting, together with a copy of the Auditors' report and Directors'
report, shall not less than twenty-one days before the date of the meeting be
sent to every Member (whether or not he is entitled to receive notices of
General Meetings of the Company) and every holder of debentures of the Company
(whether or not he is so entitled) and to every other person who is entitled to
receive notices of meetings from the Company under the provisions of the
Statutes or these Articles, provided that this Article shall not require a copy
of those documents to be sent to any person of whose address the Company is not
aware or to more than one of the joint holders of any shares or debentures and
provided further that if the Statutes so permit the company need not send copies
of such documents to members who do not wish to receive them but may send them
such summary financial statement or other documents as may be authorised by the
Statutes.
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AUDIT
145. Auditors shall be appointed and their duties regulated in
accordance with the provisions of the Statutes.
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NOTICES
146. Any notice or document (including a stock or share certificate)
may be given by the Company to any Member either personally or by sending it by
post to him or to his registered address, or (if he has no registered address
within the United Kingdom) to the address, if any, within the United Kingdom
supplied by him to the Company for the giving of notice to him. A Member who has
no registered address within the United Kingdom, and has not supplied an address
within the United Kingdom as aforesaid, shall not be entitled to receive any
notice from the Company.
147. (A) If at any time by reason of the suspension or any curtailment
of postal services in the United Kingdom the Company is unable
effectively to convene a General Meeting by notices sent through the
post, a General Meeting may be convened by a notice advertised on the
same date in at least two daily newspapers with national circulation
and such notice shall be deemed to have been duly served on all members
entitled thereto on the day when the advertisement appears. In any such
case the Company shall send confirmatory copies of the notice by post
if at least seven days prior to the date of the Meeting the posting of
notices to addresses throughout the United Kingdom again becomes
practicable.
(B) Any notice to the bearer of a warrant or to any other
person who holds or is interested in shares in the Company in bearer
form or any related coupons or talons shall be sufficiently given if
advertised in at least two daily newspapers with a national circulation
in the United Kingdom and any such notice shall be deemed given on the
day when the advertisement appears.
(C) Any notice required to be given by the Company to the
Members or any of them, and not provided for by or pursuant to these
Articles shall be sufficiently given if given by advertisement which
shall be inserted once in at least one daily newspaper with a national
circulation in the United Kingdom. Such a notice given by advertisement
shall be deemed to have been served on the day on which the
advertisement appears.
148. Where a notice or other document is sent by post, service of the
notice shall be deemed to be effected by properly addressing, prepaying, and
posting a letter containing the notice, and to have been effected at the latest
on the day following that on which the letter containing the same is posted (by
whatever class); and in proving such service it shall be sufficient to prove
that the letter containing the same was properly addressed, stamped and posted.
149. A notice may be given by the Company to the joint holders of a
share by giving the notice to the joint holder first named in the Register in
respect of the share.
150. A notice may be given by the Company to the persons entitled to a
share in consequence of the death or bankruptcy of a Member by sending it
through the post in a prepaid letter addressed to them by name, or by the title
of representatives of the deceased, or trustee of the bankrupt, or by any like
description, at the address, if any, within the United Kingdom supplied for the
purpose by the persons claiming to be so entitled, or (until such an address has
been so supplied) by giving the notice in any manner in which the same might
have been given if the death or bankruptcy had not occurred.
151. Subject to such restrictions affecting the right to receive notice
as are for the time being applicable to the holders of any class of shares,
notice of every General Meeting shall be given in any manner hereinbefore
authorised to:
(a) every Member except those Members who (having no
registered address within the United Kingdom) have not supplied to the
Company an address within the United Kingdom for the giving of notices
to them;
(b) the Auditor for the time being of the Company;
(c) the Directors and (if any) alternate Directors.
No other person shall be entitled to receive notices of General Meetings.
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152. Every person who becomes entitled to a share shall be bound by a
notice in respect of that share which, before his name is entered in the
Register, has been duly given to a person from whom he derives his title
provided that no person who becomes entitled to a share shall be subject to the
provisions of Article 76 by reason of any notice served under Section 212 of the
Companies Act 1985 on the person from whom he derives his title before his name
is entered in the Register.
WINDING UP
153. If the Company shall be wound up the Liquidator may, with the
sanction of an Extraordinary Resolution of the Company and any other sanction
required by the Statutes, divide amongst the Members in specie or kind the whole
or any part of the assets of the Company (whether they shall consist of property
of the same kind or not) and may, for such purpose, set such value as he deems
fair upon any property to be divided as aforesaid and may determine how such
division shall be carried out as between the Members or different classes of
Members. The Liquidator may, with the like sanction, vest the whole or any part
of such assets in trustees upon such trusts for the benefit of the
contributories as the Liquidator, with the like sanction, shall think fit, but
so that no Member shall be compelled to accept any shares or other securities
whereon there is any liability.
INDEMNITY
154. Subject to the provisions of the Statutes, every Director or other
officer or Auditor for the time being of the Company shall be indemnified out of
the assets of the Company against all costs, charges, expenses, losses or
liabilities which he may sustain or incur in or about the actual or purported
execution of the duties of his office or otherwise in relation thereto,
including (without prejudice to the generality of the foregoing) any liability
incurred by him in defending any proceedings, whether civil or criminal, in
which judgment is given in his favour or in which he is acquitted or in
connection with any application in which relief is granted to him by the Court
from liability for negligence, default, breach of duty or breach of trust in
relation to the affairs of the Company.
UNTRACED SHAREHOLDERS
155.(A) The Company shall be entitled to sell at the best price
reasonably obtainable at the time of sale shares of a Member or shares
to which a person is entitled by transmission if and provided that:
(i) during the period of twelve years prior to the date of the
publication of the advertisements referred to in paragraph
(ii) below (or, if published on different dates, the first
thereof) no cheque 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 shares at his address
on the Register or other the last known address given by the
Member or the person entitled by transmission to which cheques
and warrants are to be sent has been cashed and no
communication has been received by the Company from the Member
or the person entitled by transmission and at least three
dividends whether interim or final on or in respect of the
shares in question have become payable and no such dividend
has been claimed; and
(ii) the Company shall on expiry of the said period of twelve
years have inserted advertisements in both a leading national
daily newspaper and in a newspaper circulating in the area in
which the address referred to in paragraph (i) above is
located giving notice of its intention to sell the said
shares; and
(iii) during the said period of twelve years and the period of
three months following publication of the advertisements the
Company shall have received no communication from such Member
or person; and
(iv) notice shall have been given to the Quotations Department
of The Stock Exchange in London of its intention to make such
sale.
(B) To give effect to any such sale the Company may appoint any person
to execute as transferor an instrument of transfer of the said shares
and such instrument of transfer shall be as effective as if it had been
executed by the registered holder of or person entitled by transmission
to such shares and the title of the transferee shall not be affected
59
<PAGE>
by any irregularity or invalidity in the proceedings relating thereto.
The net proceeds of sale shall belong to the Company which shall be
obliged to account to the former member or other person previously
entitled as aforesaid for an amount equal to such proceeds and shall
enter the name of such former member or other person in the books of
the Company as a creditor for such amount which shall be a permanent
debt of the Company. No trust shall be created in respect of the debt,
no interest shall be payable in respect of the same and the Company
shall not be required to account for any money earned on the net
proceeds, which may be employed in the business of the Company or
invested in such investments (other than shares of the Company or its
holding company if any) as the Directors may from time to time think
fit.
60
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
LEGEND: The schedule contains summary financial information extracted from the
consolidated financial statements of Danka Business Systems PLC and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 78,758
<SECURITIES> 0
<RECEIVABLES> 551,889
<ALLOWANCES> 49,123
<INVENTORY> 343,755
<CURRENT-ASSETS> 1,044,868
<PP&E> 703,922
<DEPRECIATION> 380,914
<TOTAL-ASSETS> 1,757,807
<CURRENT-LIABILITIES> 550,450
<BONDS> 800,104
204,630
0
<COMMON> 4,875
<OTHER-SE> 197,748
<TOTAL-LIABILITY-AND-EQUITY> 1,757,807
<SALES> 1,880,473
<TOTAL-REVENUES> 1,880,473
<CGS> 1,201,912
<TOTAL-COSTS> 1,201,912
<OTHER-EXPENSES> 561,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 746,638
<INCOME-PRETAX> 40,123
<INCOME-TAX> 11,234
<INCOME-CONTINUING> 28,889
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,889
<EPS-BASIC> 0.50
<EPS-DILUTED> 0.49
</TABLE>
