United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 28, 2003
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 0-31983
----------------
GARMIN LTD.
(Exact name of Company as specified in its charter)
Cayman Islands 98-0229227
(State or other jurisdiction (I.R.S. Employer identification no.)
of incorporation or organization)
5th Floor, Harbour Place, P.O. Box 30464 SMB, N/A
103 South Church Street (Zip Code)
George Town, Grand Cayman, Cayman Islands
(Address of principal executive offices)
Company's telephone number, including area code: (345) 946-5203
No Changes
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Company (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 Company was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [x] NO [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). YES [x] NO [ ]
Number of shares outstanding of the Company's common shares as of
August 8, 2003: Common Shares, $.01 par value - 108,037,137.
Garmin Ltd.
Form 10-Q
Quarter Ended June 28, 2003
Table of Contents
Part I - Financial Information Page
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Introductory Comments 3
Condensed Consolidated Balance Sheets at June 28, 2003
and December 28, 2002 4
Condensed Consolidated Statements of Income for the
13- and 26-weeks ended June 28, 2003 and June 29, 2002 5
Condensed Consolidated Statements of Cash Flows for the
13- and 26-weeks ended June 28, 2003 and June 29, 2002 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 22
Item 4. Controls and Procedures 22
Part II - Other Information
Item 1. Legal Proceedings 23
Item 2. Changes in Securities and Use of Proceeds 23
Item 3. Defaults Upon Senior Securities 23
Item 4. Submission of Matters to a Vote of Security Holders 23
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 24
Signature Page 25
Index to Exhibits 26
Garmin Ltd.
Form 10-Q
Quarter Ended June 28, 2003
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited)
Introductory Comments
The Condensed Consolidated Financial Statements of Garmin Ltd. ("Garmin" or
the "Company") included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the United States Securities and
Exchange Commission. Certain information and note disclosures normally included
in financial statements prepared in accordance with accounting principles
generally accepted in the United States have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures are adequate to enable a reasonable understanding of the information
presented. These Condensed Consolidated Financial Statements should be read in
conjunction with the audited financial statements and the notes thereto for the
year ended December 28, 2002. Additionally, the Condensed Consolidated Financial
Statements should be read in conjunction with Item 2 of Management's Discussion
and Analysis of Financial Condition and Results of Operations included in this
Form 10-Q.
The results of operations for the 13- and 26-week periods ended June 28,
2003 are not necessarily indicative of the results to be expected for the full
year 2003.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Balance Sheets
(In thousands, except share information)
--------------------------------------
(Unaudited)
June 28, December 28,
2003 2002
--------------------------------------
Assets
Current assets:
Cash and cash equivalents $266,479 $216,768
Marketable securities 75,016 113,336
Accounts receivable, net 60,720 58,278
Inventories 66,846 57,507
Deferred income taxes 15,150 14,847
Prepaid expenses and other current assets 4,765 4,490
---------------- ----------------
Total current assets 488,976 465,226
Property and equipment, net 78,013 74,440
Marketable securities 183,318 132,372
Restricted cash 1,599 1,598
Other assets, net 21,696 24,479
---------------- ----------------
Total assets 773,602 698,115
================ ================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 27,873 32,446
Salaries and benfits payable 2,757 4,178
Warranty reserve 6,131 5,949
Other accrued expenses 13,983 12,752
Income taxes payable 23,918 18,080
---------------- ----------------
Total current liabilities 74,662 73,405
Long-term debt - 20,000
Deferred income taxes 1,939 2,211
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000 authorized, none issued - -
Common stock, $0.01 par value, 500,000,000, shares authorized:
Issued and outstanding shares - 107,919,766 as of 1,081 1,080
December 28, 2002 and 108,034,281 as of
June 28, 2003
Additional paid-in capital 131,133 129,431
Retained earnings 596,625 507,884
Accumulated other comprehensive loss (31,838) (35,896)
---------------- ----------------
Total stockholders' equity 697,001 602,499
---------------- ----------------
Total liabilities and stockholders' equity $773,602 $698,115
================ ================
See accompanying notes.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended 26-Weeks Ended
-------------------------------------- -------------------------------------
June 28, June 29, June 28, June 29,
2003 2002 2003 2002
-------------------------------------- -------------------------------------
Net sales $143,495 $122,838 $267,283 $223,694
Cost of goods sold 59,838 55,176 108,970 101,540
---------------- ---------------- ---------------- ---------------
Gross profit 83,657 67,662 158,313 122,154
Selling, general and
administrative expenses 13,935 11,099 27,529 22,338
Research and development
expense 9,607 7,476 18,403 15,449
---------------- ---------------- ---------------- ---------------
23,542 18,575 45,932 37,787
---------------- ---------------- ---------------- ---------------
Operating income 60,115 49,087 112,381 84,367
Other income (expense):
Interest income 1,819 1,755 3,741 3,380
Interest expense (236) (346) (510) (717)
Foreign currency (1,272) (9,005) (2,049) (9,737)
Other (1,368) 95 (1,409) 165
---------------- ---------------- ---------------- ---------------
(1,057) (7,501) (227) (6,909)
---------------- ---------------- ---------------- ---------------
Income before income taxes 59,058 41,586 112,154 77,458
Income tax provision 11,812 9,440 23,413 18,551
---------------- ---------------- ---------------- ---------------
Net income $47,246 $32,146 $88,741 $58,907
================ ================ ================ ===============
Net income per share:
Basic $0.44 $0.30 $0.82 $0.55
Diluted $0.43 $0.30 $0.81 $0.54
Weighted average common
shares outstanding:
Basic 107,995 107,788 107,972 107,782
Diluted 109,038 108,215 108,888 108,172
See accompanying notes.
Garmin Ltd. And Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
26-Weeks Ended
-------------------------------------------
June 28, June 29,
2003 2002
-------------------------------------------
Operating Activities:
Net Income $88,741 $58,906
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,315 6,339
Loss on sale of property and equipment 65 -
Provision for doubtful accounts 321 377
Deferred income taxes (1,058) (324)
Foreign currency transaction losses 1,669 610
Changes in operating assets and liabilities:
Accounts receivable (2,728) (5,009)
Inventories (9,132) 16,700
Other current assets (250) (1,798)
Accounts payable (4,777) (1,515)
Other current liabilities 1,004 4,173
Income taxes 5,297 187
------------------ ------------------
Net cash provided by operating activities 88,467 78,646
Investing Activities:
Purchases of property and equipment (8,110) (5,448)
Purchase of intangible assets (781) (12,876)
Purchase of marketable securities, net (13,115) (102,581)
Proceeds from asset sale 10 -
Other - (177)
------------------ ------------------
Net cash used in investing activities (21,996) (121,082)
Financing Activities:
Payments on long term debt (20,000) (12,231)
Proceeds from issuance of common stock 1,703 -
------------------ ------------------
Net cash used in financing activities (18,297) (12,231)
Effect of exchange rate changes on cash and cash equivalents 1,537 8,400
------------------ ------------------
Net increase (decrease) in cash and cash equivalents 49,711 (46,267)
Cash and cash equivalents at beginning of period 216,768 192,842
------------------ ------------------
Cash and cash equivalents at end of period $266,479 $146,575
================== ==================
See accompanying notes.
Garmin Ltd.
Notes to Condensed Consolidated Financial Statements (Unaudited)
June 28, 2003
(In thousands, except share and per share information)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the 13- and 26-week period ended June 28,
2003 are not necessarily indicative of the results that may be expected for the
year ended December 27, 2003.
The condensed consolidated balance sheet at December 28, 2002 has been derived
from the audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for completed financial statements. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 28, 2002.
The Company's fiscal year is based on a 52-53 week period ending on the last
Saturday of the calendar year. Therefore the financial results of certain fiscal
years, and the associated 14-week quarters, will not be exactly comparable to
the prior and subsequent 52-week fiscal years and the associated quarters having
only 13 weeks. The quarters ended June 28, 2003 and June 29, 2002 both contain
operating results for 13 weeks.
2. Inventories
The components of inventories consist of the following:
June 28, December 28,
2003 2002
-----------------------------------------
Raw materials $25,080 $24,177
Work-in-process
11,623 10,936
Finished goods
39,918 31,818
Inventory reserves
(9,775) (9,424)
-----------------------------------------
Inventory, net of reserves $66,846 $57,507
=========================================
3. Long Term Debt
During 2000, Garmin International Inc. entered into an agreement with the City
of Olathe, Kansas to finance the Company's expansion of its manufacturing
facilities through the issuance of Series 2000 Industrial Revenue Bonds (the
2000 Bonds) totaling $20,000. During the second quarter of 2003, the Company
retired this debt by purchasing the bonds on our own account, so at June 28,
2003, outstanding principal under the 2000 Bonds was $0.
4. Earnings Per Share
The following table sets forth the computation of basic and diluted net income
per share (in thousands, except per share information):
13-Weeks Ended
---------------------------------
June 28, June 29,
2003 2002
---------------------------------
Numerator:
Numerator for basic and diluted net income
per share - net income $47,245 $32,146
=================================
Denominator:
Denominator for basic net income per share- 107,995 107,788
weighted-average common shares
Effect of dilutive securities-
employee stock options 1,043 427
---------------------------------
Denominator for diluted net income per share-
adjusted weighted-average common shares
109,038 108,215
=================================
Basic net income per share $0.44 $0.30
=================================
Diluted net income per share $0.43 $0.30
=================================
26-Weeks Ended
---------------------------------
June 28, June 29,
2003 2002
---------------------------------
Numerator:
Numerator for basic and diluted net income
per share - net income $88,741 $58,907
=================================
Denominator:
Denominator for basic net income per share - 107,972 107,782
weighted-average common shares
Effect of dilutive securities -
employee stock options 916 390
---------------------------------
Denominator for diluted net income per share -
adjusted weighted-average common shares
108,888 108,172
=================================
Basic net income per share $0.82 $0.55
=================================
Diluted net income per share $0.81 $0.54
=================================
At June 28, 2003, all options to purchase the shares of common stock were
included in the computation of diluted earnings per share because the options
exercise price was in all cases less than the average market price of the common
shares. Therefore, there was no anti-dilutive effect of these options during the
13-week or 26-week period ended June 28, 2003.
5. Comprehensive Income
Comprehensive income is comprised of the following:
13-Weeks Ended
--------------------------------------
June 28, June 29,
2003 2002
--------------------------------------
Net income $47,246 $32,146
Translation adjustment 2,255 14,162
Change in fair value of effective portion of
Cash flow hedges, net of deferred taxes 637 (58)
Change in fair value of available-for-sale
Marketable securities, net of deferred losses 47 -
--------------------------------------
Comprehensive income $50,185 $46,250
======================================
26-Weeks Ended
--------------------------------------
June 28, June 29,
2003 2002
--------------------------------------
Net income $88,741 $58,907
Translation adjustment 3,270 15,124
Change in fair value of effective portion of
cash flow hedges, net of deferred taxes 637 (95)
Change in fair value of available-for-sale
marketable securities, net of deferred losses 151 -
--------------------------------------
Comprehensive income $92,799 $73,936
======================================
6. Segment Information
Revenues and income before income taxes for each of the Company's reportable
segments are presented below:
13-Weeks Ended
---------------------------------------------------------------
June 28, 2003 June 29, 2002
---------------------------------------------------------------
Consumer Aviation Consumer Aviation
Sales to external customers $114,298 $29,197 $93,745 $29,093
Income before income taxes 47,102 11,956 29,566 12,020
---------------------------------------------------------------
26-Weeks Ended
---------------------------------------------------------------
June 28, 2003 June 29, 2002
---------------------------------------------------------------
Consumer Aviation Consumer Aviation
Sales to external customers $209,607 $57,676 $168,492 $55,202
Income before income taxes 87,268 24,886 54,714 22,744
---------------------------------------------------------------
Revenues and long-lived assets (property and equipment) by geographic area are
as follows for the 26-week periods ended June 28, 2003 and June 29, 2002:
North
America Asia Europe Total
--------------------------------------------------------------------
June 28, 2003
Sales to external customers $185,565 $11,177 $70,541 $267,283
Long-lived assets 45,329 32,249 435 78,013
June 29, 2002
Sales to external customers $161,377 $9,103 $53,214 $223,694
Long-lived assets 40,332 32,277 493 73,102
7. Stock Compensation Plans
Accounting for Stock-Based Compensation
At June 28, 2003, the Company has two stock-based employee compensation
plans. The Company accounts for those plans under the recognition and
measurement principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations. No stock-based employee compensation
cost is reflected in net income, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on the
date of grant. The following table illustrates the effect on net income and
earnings per share if the company had applied the fair value recognition
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.
13-Weeks Ended
-------------------------------------
June 28, June 29,
2003 2002
-------------------------------------
Net income as reported $47,246 $32,146
Deduct: Total stock-based employee compensation expense
Determined under fair-value based method for all awards,
net of tax effects (762) (557)
-------------------------------------
Pro forma net income $46,484 $31,589
=====================================
Net income per share as reported:
Basic $0.44 $0.30
Diluted $0.43 $0.30
Pro forma net income per share:
Basic $0.43 $0.29
Diluted $0.43 $0.29
26-Weeks Ended
-------------------------------------
June 28, June 29,
2003 2002
-------------------------------------
Net income as reported $88,741 $58,907
Deduct: Total stock-based employee compensation expense
Determined under fair-value based method for all awards,
net of tax effects (1,516) (1,110)
-------------------------------------
Pro forma net income $87,225 $57,797
=====================================
Net income per share as reported:
Basic $0.82 $0.55
Diluted $0.81 $0.54
Pro forma net income per share:
Basic $0.81 $0.54
Diluted $0.80 $0.53
2000 Non-employee Directors' Option Plan
In October 2000, the stockholders adopted a stock option plan for
non-employee directors (the Directors Plan) providing for grants of options for
up to 50,000 common shares of the Company's stock. The term of each award is ten
years. All awards vest evenly over a three-year period.
2000 Equity Incentive Plan
Also in October 2000, the stockholders adopted an equity incentive plan
(the Plan) providing for grants of incentive and nonqualified stock options and
"other" stock compensation awards to employees of the Company and its
subsidiaries, pursuant to which up to 3,500,000 shares of common stock are
available for issuance. The stock options generally vest over a period of five
years or as otherwise determined by the Board of Directors or the Compensation
Committee and generally expire ten years from the date of grant, if not
exercised. Option activity under the Plan during 2003 is summarized below. There
have been no "other" stock compensation awards granted under the Plan.
A summary of the Company's stock option activity and related information
under the Plan and the Directors' Plan for the period ended June 28, 2003 and
years ended December 28, 2002 and December 29, 2001 is provided below:
Weighted-Average
Exercise Price Number of Shares
------------------------------------------
(In Thousands)
Outstanding at December 28, 2002 $18.90 1,874
Granted - 0
Exercised $14.95 (45)
Canceled $15.93 (8)
----------------------
Outstanding at March 29, 2003 $19.17 1,821
Granted $44.84 10
Exercised $14.75 (69)
Canceled $19.78 (4)
----------------------
Outstanding at June 28, 2003 $19.49 1,758
======================
There were 9,648 and 10,558 options granted during the 13-week periods
ended June 28, 2003 and June 29, 2002, respectively.
The weighted-average remaining contract life for options outstanding at
June 28, 2003 is approximately 8.2 years. Options outstanding at June 28, 2003
have exercise prices ranging from $14.00 to $49.35. At June 28, 2003, options to
purchase 336,213 shares are exercisable.
8. Warranty Reserves
The Company's products sold are generally covered by a warranty for periods
ranging from one to two years. The Company's estimate of costs to service its
warranty obligations are based on historical experience and expectation of
future conditions and are recorded as a liability on the balance sheet. The
following reconciliation provides an illustration of changes in the aggregate
warranty reserve.
13-Weeks Ended
------------------------------------
June 28, June 29,
2003 2002
--------------- --------------
Balance - beginning of the period $ 5,705 $ 5,000
Accrual for products sold
during the period 2,557 2,223
Expenditures (2,131) (1,601)
--------------- --------------
Balance - end of the period $ 6,131 $ 5,622
=============== ==============
26-Weeks Ended
------------------------------------
June 28, June 29,
2003 2002
--------------- --------------
Balance - beginning of the period $ 5,949 $ 4,777
Accrual for products sold 4,493 3,735
during the period
Expenditures (4,311) (2,890)
--------------- --------------
Balance - end of the period $ 6,131 $ 5,622
=============== ==============
9. Subsequent Events
On July 23, 2003, the board of directors of the Company approved a $.50/share
annual dividend payable to shareholders of record on December 1, 2003.
On July 24, 2003, the Company's subsidiary, Garmin International, Inc.,
announced a definitive agreement to acquire the stock of UPS Aviation
Technologies for $38 million in cash. The acquisition is subject to customary
closing conditions, and is expected to close in the third quarter of 2003. UPS
Aviation Technologies designs and manufactures multiple lines of communication,
navigation, and surveillance products for general aviation and air transport
customers.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion set forth below, as well as other portions of this Quarterly
Report, contains statements concerning potential future events. Such
forward-looking statements are based upon assumptions by our management, as of
the date of this Quarterly Report, including assumptions about risks and
uncertainties faced by the Company. Readers can identify these forward-looking
statements by their use of such verbs as expects, anticipates, believes or
similar verbs or conjugations of such verbs. If any of our assumptions prove
incorrect or should unanticipated circumstances arise, our actual results could
materially differ from those anticipated by such forward-looking statements. The
differences could be caused by a number of factors or combination of factors
including, but not limited to, those factors identified in the Company's Annual
Report on Form 10-K for the year ended December 28, 2002. This report has been
filed with the Securities and Exchange Commission (the "SEC" or the
"Commission") in Washington, D.C. and can be obtained by contacting the SEC's
public reference operations or obtaining it through the SEC's web site on the
World Wide Web at http://www.sec.gov. Readers are strongly encouraged to
consider those factors when evaluating any forward-looking statement concerning
the Company. The Company will not update any forward-looking statements in this
Quarterly Report to reflect future events or developments.
The information contained in this Management's Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with
the Condensed Consolidated Financial Statements and Notes thereto included in
this Form 10-Q and the audited financial statements and notes thereto in the
Company's Annual Report on Form 10-K for the year ended December 28, 2002.
The Company is a leading worldwide provider of navigation, communications
and information devices, most of which are enabled by Global Positioning System,
or GPS, technology. We operate in two business segments, the consumer and
aviation markets. Both of our segments offer products through our network of
independent dealers and distributors. However, the nature of products and types
of customers for the two segments vary significantly. As such, the segments are
managed separately. Our consumer segment includes portable GPS receivers and
accessories for marine, recreation, land and automotive use sold primarily to
retail outlets. Our aviation products are portable and panel-mount avionics for
Visual Flight Rules and Instrument Flight Rules navigation and are sold
primarily to retail outlets and certain aircraft manufacturers.
Results of Operations
The following table sets forth our results of operations as a percentage of
net sales during the periods shown:
13-Weeks Ended
-------------------------------------------
June 28, 2003 June 29, 2002
-------------------------------------------
Net sales 100.0% 100.0%
Cost of goods sold 41.7% 44.9%
-------------- ------------
Gross profit 58.3% 55.1%
Research and development 6.7% 6.1%
Selling, general and administrative 9.7% 9.0%
-------------- --------------
Total expenses 16.4% 15.1%
-------------- --------------
Operating income 41.9% 40.0%
Other income, net (0.7%) (6.1%)
-------------- --------------
Income before income taxes 41.2% 33.9%
Provision for income taxes 8.3% 7.7%
-------------- --------------
Net income 32.9% 26.2%
============== ==============
26-Weeks Ended
------------------------------------------
June 28, 2003 June 29, 2002
------------------------------------------
Net sales 100.0% 100.0%
Cost of goods sold 40.8% 45.4%
-------------- --------------
Gross profit 59.2% 54.6%
Research and development 6.9% 6.9%
Selling, general and administrative 10.3% 10.0%
-------------- --------------
Total expenses 17.2% 16.9%
-------------- --------------
Operating income 42.0% 37.7%
Other income, net 0.0% (3.1%)
-------------- --------------
Income before income taxes 42.0% 34.6%
Provision for income taxes 8.8% 8.3%
-------------- --------------
Net income 33.2% 26.3%
============== ==============
The following table sets forth our results of operations for each of our
two segments through income before income taxes during the periods shown. For
each line item in the table, the total of the consumer and aviation segments'
amounts equals the amount in the condensed consolidated statements of income
included in Item 1.
13-Weeks Ended
-----------------------------------------------------------
June 28, 2003 June 29, 2002
-----------------------------------------------------------
Consumer Aviation Consumer Aviation
Net sales $114,298 $29,197 $93,745 $29,093
Cost of good sold 49,357 10,481 44,053 11,123
---------- ---------- ---------- -----------
Gross profit 64,941 18,716 49,692 17,970
Operating expenses:
Selling, general and 11,420 2,515 8,590 2,509
administrative
Research and development 5,647 3,960 4,247 3,229
---------- ---------- ---------- -----------
Total operating expenses 17,067 6,475 12,837 5,738
---------- ---------- ---------- -----------
Operating income 47,874 12,241 36,855 12,232
Other income (expense), net (772) (285) (7,289) (212)
---------- ---------- ---------- -----------
Income before income taxes $47,102 $11,956 $29,566 $12,020
========== ========== ========== ===========
26-Weeks Ended
-----------------------------------------------------------
June 28, 2003 June 29, 2002
-----------------------------------------------------------
Consumer Aviation Consumer Aviation
Net sales $209,607 $57,676 $168,492 $55,202
Cost of good sold 88,924 20,046 80,134 21,406
---------- ---------- ---------- -----------
Gross profit 120,683 37,630 88,358 33,796
Operating expenses:
Selling, general and 22,108 5,421 17,490 4,848
adminisrative
Research and development 11,196 7,207 9,222 6,227
---------- ---------- ---------- -----------
Total operating expenses 33,304 12,628 26,712 11,075
---------- ---------- ---------- -----------
Operating income 87,379 25,002 61,646 22,721
Other income (expense), net (111) (116) (6,932) 23
---------- ---------- ---------- -----------
Income before income taxes $87,268 $24,886 $54,714 $22,744
========== ========== ========== ===========
Comparison of 13-Weeks Ended June 28, 2003 and June 29, 2002
Net Sales
Net sales increased $20.7 million, or 16.8%, to $143.5 million for the
13-week period ended June 28, 2003, from $122.8 million for the 13-week period
ended June 29, 2002. The increase for the 13-week period ended June 28, 2003 was
primarily due to the success of new products that were introduced during the
previous twelve months and overall demand for our consumer products associated
with strong portable automotive and recreation sales during the quarter. Sales
from our consumer products accounted for 80% of net sales for the second quarter
of 2003 compared to 76% during the second quarter of 2002. Sales from our
aviation products accounted for 20% for the second quarter of 2003 compared to
24% during the second quarter of 2002. Total consumer and aviation unit sales
increased 32% to 513,000 in 2003 from 389,000 in 2002. The higher unit
sales volume in the second quarter of fiscal 2003 was primarily attributable to
the introduction of new products in the prior twelve months, as well as strength
in our existing product lines, which resulted in higher volume in our consumer
segment.
Net sales for the consumer segment increased $20.6 million, or 21.9%, to
$114.3 million for the 13-week period ended June 28, 2003, from $93.7 million
for the 13-week period ended June 29, 2002. The increase for the 13-week period
ended June 28, 2003 was primarily due to the success of the new consumer
products introduced during the prior twelve months and overall demand for our
consumer products associated with a strong portable automotive and recreation
sales during the quarter.
Net sales for the aviation segment were flat at $29.2 million for the
13-week period ended June 28, 2003, when compared with $29.1 million for the
13-week period ended June 29, 2002. Increases due to revenues from new product
releases were offset by a weakened general aviation industry and increased
competition within the aviation market for the 13-week period ended June 28,
2003.
Gross Profit
Gross profit increased $16.0 million, or 23.6%, to $83.7 million for the
13-week period ended June 28, 2003, from $67.7 million for the 13-week period
ended June 29, 2002. Increased demand for our products resulted in increased
production volumes at our Taiwan factory, resulting in improved manufacturing
efficiencies and reduced factory overhead per unit. In addition, reduced raw
material component costs, coupled with our vertical integration strategy,
resulted in gross margin improvement during the quarter. The increase in gross
profit is also attributable to a favorable product mix during the quarter
relative to the same quarter in 2002. Gross profit as a percentage of net sales
increased to 58.3% for the 13-week period ended June 28, 2003 compared to 55.1%
for the 13-week period ended June 29, 2002.
Gross profit for the consumer segment increased $15.2 million, or 30.7%, to
$64.9 million for the 13-week period ended June 28, 2003, from $49.7 million for
the 13-week period ended June 29, 2002. This increase is primarily attributable
to the increase in consumer revenue, improved manufacturing efficiencies on many
of our new products introduced during fiscal year 2002, and a reduction of raw
material costs. The increase in gross profit is also attributable to a favorable
product mix during the quarter. Gross profit as a percentage of net sales
increased to 56.8% during the 13-week period ended June 28, 2003 compared to
53.0% for the 13-week period ended June 29, 2002.
Gross profit for the aviation segment increased $0.7 million, or 4.2%, to
$18.7 million for the 13-week period ended June 28, 2003, from $18.0 million for
the 13-week period ended June 29, 2002. Gross profit as a percentage of net
sales increased to 64.1% for the 13-week period ended June 28, 2003 from 61.8%
for the 13-week period ended June 29, 2002. These improvements were attributable
to manufacturing cost savings and a favorable product mix during the quarter.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $2.8 million, or
25.6%, to $13.9 million (9.7% of net sales) for the 13-week period ended June
28, 2003, from $11.1 million (9.0% of net sales) for the 13-week period ended
June 29, 2002. Selling, general and administrative expenses increased $2.8
million, or 32.9%, in the consumer segment and were flat at $2.5 million in the
aviation segment. The increase in expense was driven primarily by increased call
center expenses, insurance premiums, and ORACLE implementation costs.
Research and Development Expense
Research and development expenses increased $2.1 million, or 28.5%, to $9.6
million (6.7% of net sales) for the 13-week period ended June 28, 2003, from
$7.5 million (6.1% of net sales) for the 13-week period ended June 29, 2002.
Research and development expenses increased $1.4 million, or 33%, in the
consumer segment and $0.7 million, or 22.6%, in the aviation segment. The
increase in expense was due to ongoing development activities for new products
within our consumer segment during the quarter, and the
addition of 38 new engineering personnel to our staff in both the consumer and
aviation segments during the last quarter as a result of our continued emphasis
on product innovation.
Operating Income
Operating income for the 13-week period ended June 28, 2003 increased to
$60.1 million from $49.1 million for the 13-week period ended June 29, 2002.
Operating income as a percentage of net sales increased to 41.9% for the 13-week
period ended June 28, 2003, from 40.0% for the 13-week period ended June 29,
2002, due to the significant improvement in gross profit partially offset by
overall increases in operating expenses.
Other Income (Expense)
Other income (expense) principally consists of interest income, interest
expense and foreign currency exchange gains and losses. Other expense for the
13-week period ended June 28, 2003 amounted to $1.1 million compared to a $7.5
million expense for the 13-week period ended June 29, 2002. Interest income for
the 13-week period ended June 28, 2003 amounted to $1.8 million compared to
$1.75 million for the 13-week period ended June 29, 2002, the slight increase
being attributable to an increase in cash and investments during the last 12
months. The average taxable equivalent interest rate return on invested cash
during the quarter was 1.4% compared to 2.2% during the same quarter of 2002.
Interest expense decreased to $0.2 million for the 13-week period ended June 28,
2003 from $0.3 million for the 13-week period ended June 29, 2002.
We recognized a foreign currency exchange loss of $1.3 million for the
13-week period ended June 28, 2003 compared to a loss of $9.0 million for the
13-week period ended June 29, 2002. The $1.3 million loss was due to the
weakness of the U.S. Dollar compared to the Taiwan Dollar during the second
quarter of fiscal 2003, when the exchange rate decreased to 34.61 TD/USD at June
28, 2003 from 34.79 TD/USD at March 29, 2003. The $9.0 million loss was due to
the weakness of the U.S. Dollar compared to the Taiwan Dollar during the second
quarter of fiscal 2002, when the exchange rate decreased to 33.56 TD/USD at June
29, 2002 from 35.00 TD/USD at March 30, 2002.
Due to the retirement of all outstanding debt during the quarter, two
outstanding interest rate swaps were terminated. The termination of these swaps
caused the Company to realize approximately $0.8 million in other expense. The
Company also amortized $0.6 million of related bond issuance costs that had been
capitalized in prior periods.
Income Tax Provision
Income tax expense increased by $2.4 million, to $11.8 million, for the
13-week period ended June 28, 2003 from $9.4 million for the 13-week period
ended June 29, 2002 due to our higher taxable income. The effective tax rate
fell to 20.0% due to additional tax benefits granted by the Taiwan government
from increased production in our Taiwan facility.
Net Income
As a result of the above, net income increased 47.0% for the 13-week period
ended June 28, 2003 to $47.2 million compared to $32.1 million for the 13-week
period ended June 29, 2002.
Comparison of 26-Weeks Ended June 28, 2003 and June 29, 2002
Net Sales
Net sales increased $43.6 million, or 19.5%, to $267.3 million for the
26-week period ended June 28, 2003, from $223.7 million for the 26-week period
ended June 29, 2002. The increase for the 26-week period ended June 28, 2003 was
primarily due to the success of new products that were introduced during the
previous twelve months and overall demand for our consumer products associated
with strong automotive and recreation sales during the period. Sales from our
consumer products accounted for 78% of net sales for the first half of 2003
compared to 75% during the first half of 2002. Sales from our aviation products
accounted for 22% for the first half of 2003 compared to 25% during the first
half of 2002. Total consumer and aviation unit sales increased 37% to 959,000 in
2003 from 702,000 in 2002. The higher unit volume sales in the first half of
2003 was primarily attributable to the introduction of new products in the prior
twelve months, as well as strength in our existing product lines, which resulted
in higher volume in our consumer segment.
Net sales for the consumer segment increased $41.1 million, or 24.5%, to
$209.6 million for the 26-week period ended June 28, 2003, from $168.5 million
for the 26-week period ended June 29, 2002. The increase for the 26-week period
ended June 28, 2003 was primarily due to the success of the new consumer
products introduced during the prior twelve months and overall demand for our
consumer products associated with strong automotive and recreation sales during
the period.
Net sales for the aviation segment increased $2.5 million, or 4.5%, to
$57.7 million for the 26-week period ended June 28, 2003, when compared with
$55.2 million for the 26-week period ended June 29, 2002. Increases due to
revenues from new product releases were offset to some extent by a weakened
general aviation industry and increased competition within the aviation market
for the 26-week period ended June 28, 2003.
Gross Profit
Gross profit increased $36.2 million, or 29.6%, to $158.3 million for the
26-week period ended June 28, 2003, from $122.2 million for the 26-week period
ended June 29, 2002. Increased demand for our products resulted in increased
production volumes at our Taiwan factory, resulting in improved manufacturing
efficiencies and reduced factory overhead per unit. In addition, reduced raw
material component costs, coupled with our vertical integration strategy,
resulted in gross margin improvement during the 26-week period. The increase in
gross profit is also attributable to a favorable product mix during the period
relative to the same period in 2002. Gross profit as a percentage of net sales
increased to 59.2% for the 26-week period ended June 28, 2003 compared to 54.6%
for the 26-week period ended June 29, 2002.
Gross profit for the consumer segment increased $32.3 million, or 36.6%, to
$120.7 million for the 26-week period ended June 28, 2003, from $88.4 million
for the 26-week period ended June 29, 2002. This increase is primarily
attributable to the increase in consumer revenue, improved manufacturing
efficiencies on many of our new products introduced during fiscal year 2002, and
a reduction of raw material costs. The increase in gross profit is also
attributable to a favorable product mix during the period. Gross profit as a
percentage of net sales increased to 57.6% during the 26-week period ended June
28, 2003 compared to 52.4% for the 26-week period ended June 29, 2002.
Gross profit for the aviation segment increased $3.8 million, or 11.3%, to
$37.6 million for the 26-week period ended June 28, 2003, from $33.8 million for
the 26-week period ended June 29, 2002. Gross profit as a percentage of net
sales increased to 65.2% for the 26-week period ended June 28, 2003 from 61.2%
for the 26-week period ended June 29, 2002. These improvements were attributable
to manufacturing cost savings and a favorable product mix during the period.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $5.2 million, or
23.2%, to $27.5 million (10.3% of net sales) for the 26-week period ended June
28, 2003, from $22.3 million (10.0% of net sales) for the 26-week period ended
June 29, 2002. Selling, general and administrative expenses increased $4.6
million, or 26.4%, in the consumer segment and increased $0.6 million, or 11.8%,
in the aviation segment. The increase in expense was driven primarily by
increased call center expenses, insurance premiums, and ORACLE implementation
costs.
Research and Development Expense
Research and development expenses increased $3.0 million, or 19.1%, to
$18.4 million (6.9% of net sales) for the 26-week period ended June 28, 2003,
from $15.4 million (6.9% of net sales) for the 26-week period ended June 29,
2002. Research and development expenses increased $2.0 million, or 21.4%, in the
consumer segment and $1.0 million, or 15.7%, in the aviation segment. The
increase in expense was due to ongoing development activities for new products
within our consumer segment during the quarter, and the addition of 57 new
engineering personnel to our staff in both the consumer and aviation segments
during the first half of 2003 as a result of our continued emphasis on product
innovation.
Operating Income
Operating income for the 26-week period ended June 28, 2003 increased to
$112.4 million from $84.4 million for the 26-week period ended June 29, 2002.
Operating income as a percentage of net sales increased to 42.0% for the 26-week
period ended June 28, 2003, from 37.7% for the 26-week period ended June 29,
2002, due to the significant improvement in gross profit partially offset by
overall increases in operating expenses.
Other Income (Expense)
Other income (expense) principally consists of interest income, interest
expense and foreign currency exchange gains and losses. Other expense for the
26-week period ended June 28, 2003 amounted to $0.2 million compared to a $6.9
million expense for the 26-week period ended June 29, 2002. Interest income for
the 26-week period ended June 28, 2003 amounted to $3.7 million compared to $3.4
million for the 26-week period ended June 29, 2002, the increase being
attributable to an increase in cash and investments during the last 12 months.
The average taxable equivalent interest rate return on invested cash during the
period was 1.4% compared to 2.2% during the same period of 2002. Interest
expense decreased to $0.5 million for the 26-week period ended June 28, 2003
from $0.7 million for the 26-week period ended June 29, 2002.
We recognized a foreign currency exchange loss of $2.0 million for the
26-week period ended June 28, 2003 compared to a loss of $9.7 million for the
26-week period ended June 29, 2002. The $2.0 million loss was due to the
weakness of the U.S. Dollar compared to the Taiwan Dollar during the first half
of fiscal 2003, when the exchange rate decreased to 34.61 TD/USD at June 28,
2003 from 35.1 TD/USD at December 28, 2002. The $9.7 million loss was due to the
weakness of the U.S. Dollar compared to the Taiwan Dollar during the first half
of fiscal 2002, when the exchange rate decreased to 33.56 TD/USD at June 29,
2002 from 35.17 TD/USD at December 29, 2001.
Due to the retirement of all outstanding debt during the period, two
outstanding interest rate swaps were terminated. The termination of these swaps
caused the Company to realize approximately $0.8 million in other expense. The
Company also amortized $0.6 million of related bond issuance costs that had been
capitalized in prior periods.
Income Tax Provision
Income tax expense increased by $4.9 million, to $23.4 million, for the
26-week period ended June 28, 2003 from $18.6 million for the 26-week period
ended June 29, 2002 due to our higher taxable income. The effective tax rate
decreased to 20.9% during the 26-week period ended June 28, 2003 from 23.9%
during the 26-week period ended June 29, 2002, due to additional tax benefits
granted by the Taiwan government from increased production in our Taiwan
facility.
Net Income
As a result of the above, net income increased 50.6% for the 26-week period
ended June 28, 2003 to $88.7 million from $58.9 million for the 26-week period
ended June 29, 2002.
Liquidity and Capital Resources
Net cash generated by operating activities was $88.5 million for the
26-week period ended June 28, 2003 compared to $78.6 million for the 26-week
period ended June 29, 2002. We operate with a strong customer driven approach
and therefore carry sufficient inventory to meet customer demand. Because we
desire to respond quickly to our customers and minimize order fulfillment time,
our inventory levels are generally adequate to meet most demand. We also attempt
to carry sufficient inventory levels on key components so that potential
supplier shortages have as minimal an impact as possible on our ability to
deliver our finished products. We experienced a $9.1 million increase in
inventory at June 28, 2003 when compared to inventory on December 29, 2002.
Inventory levels were increased to mitigate possible supply issues related to
SARS, and to support the anticipated ramp up of new products (specifically the
iQue 3600 and StreetPilot 2610/2650) slated for the second half of 2003.
Cash flow from investing activities during the 26-week period ending June
28, 2003 was a $22.0 million use of cash. Cash flow used in investing activities
principally related to $8.1 million in capital expenditures, $0.8 million in
purchases of intangible assets, and the net purchase of $13.1 million of fixed
income securities associated with the investment of our on-hand cash balances.
It is management's goal to invest the on-hand cash consistent with the Company's
investment policy, which has been approved by the Board of Directors. The
investment policy's primary purpose is to preserve capital, maintain an
acceptable degree of liquidity, and maximize yield within the constraint of
maximum safety. The Company's average taxable equivalent return on its
investments during the period was approximately 1.4%.
Cash flow from financing activities during the period was an $18.3 million
use of cash, which represents the $20 million debt retirement, net of the $1.7
million of proceeds from the issuance of common stock related to our Company
stock option plan.
We currently use cash flow from operations to fund our capital
expenditures, to repay debt and to support our working capital requirements. We
expect that future cash requirements will principally be for capital
expenditures and working capital requirements.
We believe that our existing cash balances and cash flow from operations
will be sufficient to meet our projected capital expenditures, working capital
and other cash requirements at least through the end of fiscal 2003.
Contractual Obligations and Commercial Commitments
On April 25, 2003, Garmin International, Inc. signed an agreement with
Turner Construction Company engaging Turner as the construction manager on a
future facility expansion in Olathe, Kansas. The estimated cost of completion on
this expansion project is approximately $60.0 million with estimated completion
of September 2004.
On March 23, 2000, Garmin International, Inc. completed a $20.0 million
20-year Taxable Industrial Revenue Bond issuance (the "2000 Bonds") for the
expansion of its Olathe, Kansas facility. In June of 2003 all $20 million of
these bonds were purchased and retired, extinguishing all outstanding long-term
debt.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market Sensitivity
We have market risk primarily in connection with the pricing of our
products and services and the purchase of raw materials. Product pricing and raw
material costs are both significantly influenced by semiconductor market
conditions. Historically, during cyclical industry downturns, we have been able
to offset pricing declines for our products through a combination of improved
product mix and success in obtaining price reductions in raw material costs.
Inflation
We do not believe that inflation has had a material effect on our business,
financial condition or results of operations. If our costs were to become
subject to significant inflationary pressures, we may not be able to fully
offset such higher costs through price increases. Our inability or failure to do
so could adversely affect our business, financial condition and results of
operations.
Foreign Currency Exchange Rate Risk
The operation of the Company's subsidiaries in international markets
results in exposure to movements in currency exchange rates. The potential of
volatile foreign exchange rate fluctuations in the future could have a
significant effect on our results of operations.
The principal currency involved is the Taiwan Dollar. Garmin Corporation,
located in Shijr, Taiwan uses the local currency as its functional currency. The
Company translates all assets and liabilities at year-end exchange rates and
income and expense accounts at average rates during the year. In order to
minimize the effect of the currency exchange fluctuations on our operations, we
have elected to retain most of our cash at our Taiwan subsidiary in U.S.
dollars. As discussed above, the exchange rate decreased 0.3% during 2003 and
resulted in a foreign currency loss of $2.0 million. If the exchange rate
increased by a similar percentage, a comparable foreign currency gain would be
recognized.
Interest Rate Risk
As of June 28, 2003, we no longer have interest rate risk in connection
with our industrial revenue bonds (the 2000 Bonds) that bear interest at a
floating rate, as these bonds have been retired.
Item 4. Controls and Procedures
As of June 28, 2003, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-15(b). Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are effective as of June 28, 2003. There has been no
change in the Company's internal controls over financial reporting (as defined
in Exchange Act Rule 13a-15(f)) that occurred during the Company's fiscal
quarter ended June 28, 2003 that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
Part II - Other Information
Item 1. Legal Proceedings
From time to time the Company may be involved in litigation arising in
the course of its operations. As of August 8, 2003, the Company was
not a party to any material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its Annual General Meeting of Shareholders on June 6,
2003. Proxies for the meeting were solicited pursuant to Regulation
14A. There was no solicitation in opposition to the Board of
Directors' nominees for election as directors as listed in the Proxy
Statement and all such nominees were elected. Listed below is each
matter voted on at the Company's Annual General Meeting. All such
matters were approved. A total of 105,468,697 common shares or
approximately 98% of the common shares outstanding on the record date,
were present in person or by proxy at the Annual General Meeting.
These shares were voted as follows:
1) Election of Two Directors of the Company:
Nominee For Withheld
Gary L. Burrell 105,269,124 199,573
Min H. Kao 105,274,429 194,268
The terms of office of Directors Gene M. Betts and Thomas A. McDonnell
will continue until the Annual General Meeting of Shareholders in
2004. The term of office of Director Donald H. Eller will continue
until the Annual General Meeting in 2005. The terms of office of
Directors Gary L. Burrell and Min H. Kao will continue until the
Annual General Meeting of Shareholders in 2006.
2) Appointment of Ernst & Young LLP as Independent Auditors for
the 2003 Fiscal Year at Remuneration to be Approved by the
Board of Directors:
For Against Abstain Broker non-votes
104,376,993 1,077,739 13,965 N/A
3) Amendment of the Company's Articles of Association:
For Against Abstain Broker non-votes
105,441,557 12,120 15,020 N/A
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 3.1 Memorandum and Articles of Association of
Garmin Ltd. (as amended)
Exhibit 10.1 Second Amendment to Garmin Ltd. Employee Stock
Purchase Plan
Exhibit 31.1 Certification of Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 31.2 Certification of Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
Exhibit 32.1 Certification of Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
Exhibit 32.2 Certification of Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
b. Reports on Form 8-K
The Company furnished under Item 9 of Form 8-K the Company's
Form 8-K dated April 30, 2003 reporting the announcement of
financial results for the fiscal quarter ended March 29, 2003.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GARMIN LTD.
By /s/ Kevin Rauckman
Kevin Rauckman
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Dated: August 13, 2003
INDEX TO EXHIBITS
Exhibit No. Description Page
Exhibit 3.1 Memorandum and Articles of Association of Garmin Ltd.
as amended) 27
Exhibit 10.1 Second Amendment to Garmin Ltd. Employee Stock Purchase
Plan 67
Exhibit 31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 69
Exhibit 31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 70
Exhibit 32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 71
Exhibit 32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 72
EXHIBIT 3.1
Conformed Copy 6 June, 2003
CAYMAN ISLANDS
The Companies Law (2003 Revision)
Company Limited by Shares
-----------------
MEMORANDUM OF ASSOCIATION
OF
GARMIN LTD.
1. The name of the Company is Garmin Ltd.
2. The Registered Office of the Company shall be at the offices of
Maples and Calder, P.O. Box 309, Ugland House, South Church Street,
George Town, Grand Cayman, Cayman Islands, British West Indies or at
such other place in the Cayman Islands as the Board may from time to
time decide.
3. The objects for which the Company is established are unrestricted
and the Company shall have full power and authority to carry out any
objective not prohibited by any law as provided by Section 7 (4) of
the Companies Law (2003 Revision).
4. Except as prohibited or limited by the Companies Law (2003
Revision), the Company shall have full power and authority to carry
out any object not prohibited by any law as provided by Section 7(4)
of the Companies Law (2003 Revision) and shall have and be capable of
from time to time and at all times exercising any and all of the
powers at any time or from time to time exercisable by a natural
person or body corporate, irrespective of any question of corporate
benefit, in doing in any part of the world whether as principal,
agent, contractor or otherwise whatever may be considered by it
necessary for the attainment of its objects and whatever else may be
considered by it as incidental or conducive thereto or consequential
thereon, including, but without in any way restricting the generality
of the foregoing, the power to make any alterations or amendments to
this Memorandum of Association and the Articles of Association of the
Company considered necessary or convenient in the manner set out in
the Articles of Association of the Company, and the power to do any of
the following acts or things, viz: to pay all expenses of and
incidental to the promotion, formation and incorporation of the
Company; to register the Company to do business in any other
jurisdiction; to sell, lease or dispose of any property of the
Company; to draw, make, accept, endorse, discount, execute and issue
promissory notes, debentures, debenture stock, loans, loan stock, loan
notes, bonds,
convertible bonds, bills of exchange, bills of lading, warrants and
other negotiable or transferable instruments; to lend money or other
assets and to act as guarantors; to borrow or raise money on the
security of the undertaking or on all or any of the assets of the
Company including uncalled capital or without security; to invest
monies of the Company in such manner as the Directors determine; to
promote other companies; to sell the undertaking of the Company for
cash or any other consideration; to distribute assets in specie to
members of the Company; to contract with persons for the provision of
advice, the management and custody of the Company's assets, the
listing of the Company's shares and its administration; to make
charitable or benevolent donations; to pay pensions or gratuities or
provide other benefits in cash or kind to Directors, officers,
employees, past or present and their families; to purchase Directors
and officers liability insurance; to carry on any trade or business
and generally to do all acts and things which, in the opinion of the
Company or the Directors, may be conveniently or profitably or
usefully acquired and dealt with, carried on, executed or done by the
Company in connection with the business aforesaid PROVIDED THAT the
Company shall only carry on the businesses for which a licence is
required under the laws of the Cayman Islands when so licensed under
the terms of such laws.
5. The liability of each member is limited to the amount from time to time
unpaid on such member's shares.
6. The share capital of the Company is US$6,000,000 divided into
500,000,000 Common Shares of a nominal or par value of US$0.01 each
and 1,000,000 Preferred Shares of a nominal or par value of US$1.00
each with power for the Company insofar as is permitted by law, to
redeem or purchase any of its shares and to increase or reduce the
said capital subject to the provisions of the Companies Law (2003
Revision) and the Articles of Association and to issue any part of its
capital, whether original, redeemed or increased with or without any
preference, priority or special privilege or subject to any
postponement of rights or to any conditions or restrictions and so
that unless the conditions of issue shall otherwise expressly declare
every issue of shares whether declared to be preference or otherwise
shall be subject to the powers hereinbefore contained.
7. If the Company is registered as exempted, its operations will be
carried on subject to the provisions of Section 193 of the Companies
Law (2003 Revision) and, subject to the provisions of the Companies
Law (2003 Revision) and the Articles of Association, it shall have the
power to register by way of continuation as a body corporate limited
by shares under the laws of any jurisdiction outside the Cayman
Islands and to be deregistered in the Cayman Islands.
DATED the 24th day of July, 2000.
SIGNATURE and ADDRESS NUMBER OF SHARES
OF EACH SUBSCRIBER TAKEN BY EACH
/s/ Rebecca Steller
- ----------------------------------
Rebecca Steller, Attorney-at-Law One
PO Box 309, Grand Cayman
/s/ Graham Lockington
- ----------------------------------
Graham Lockington, Attorney-at-Law One
PO Box 309, Grand Cayman
/s/ Diann Green
- ----------------------------------
Witness to the above signatures
I, Renda S. Cornwall Asst. Registrar of Companies in and for the Cayman Islands
HEREBY CERTIFY that this is a true and correct copy of the Memorandum of
Association of this Company duly incorporated on the 24th day of July, 2000.
/s/ Renda S. Cornwall
----------------------
REGISTRAR OF COMPANIES
Conformed Copy 6 June, 2003
CAYMAN ISLANDS
The Companies Law (2003 Revision)
Company Limited by Shares
----------------
ARTICLES OF ASSOCIATION
OF
GARMIN LTD.
TABLE A
1. The regulations contained in Table A in the First Schedule to the Companies
Law shall not apply to the Company.
INTERPRETATION
2. In these Articles, unless there be something in the subject or context
inconsistent therewith:
(a) "these Articles" shall mean the present Articles of Association and
all supplementary, amended or substituted Articles for the time being
in force;
(b) "Audit Committee" shall mean the audit committee established pursuant
to Article 141;
(c) "Auditors" shall mean the persons for the time being performing
the duties of auditors of the Company;
(d) "Board" shall mean the majority of the Directors present and
voting at a meeting of Directors at which a quorum is present;
(e) "capital" shall mean the share capital from time to time of the
Company;
(f) "the Chairman" shall mean the Chairman appointed pursuant to
Article 99 and includes Co-Chairman;
(g) "Common Shares" means the Common Shares in the capital of the Company
of par value US$0.01 each;
(h) "the Company" or "this Company" shall mean Garmin Ltd.;
(i) "the Companies Law" or "the Law" shall mean the Companies Law (2003
Revision) of the Cayman Islands and any amendments thereto or
re-enactments thereof for the time being in force and includes every
other law incorporated therewith or substituted therefor;
(j) "Directors" shall mean the directors from time to time of the Company;
(k) "dividend" shall include bonus dividends and distributions permitted
by the Law to be categorised as dividends;
(l) "dollars" and "US$" shall mean dollars legally current in the
United States;
(m) "electronic transmission" shall include telephone, telegram, telex,
cable, facsimile and electronic mail;
(n) "Exchange" shall mean any securities exchange or other system on which
the shares of the Company may be listed or otherwise authorised for
trading from time to time;
(o) "Independent Director" shall mean a person recognised as such by the
rules and regulations of the Exchange;
(p) "month" shall mean a calendar month;
(q) "ordinary resolution" shall mean a resolution passed by a simple
majority of the votes of such members of the Company as, being
entitled to do so, vote in person or, where proxies are allowed, by
proxy or, in the case of corporations, by their duly authorised
representatives, at a general meeting held in accordance with these
Articles;
(r) "paid up" shall mean paid up and/or credited as paid up;
(s) "Preferred Share" shall mean a Preferred Share in the capital of the
Company with a nominal or par value of US$1.00 having designations,
powers, preferences, privileges and participating, optional or special
rights, and the qualifications, limitations or restrictions thereof,
including, without limitations, dividend rights, conversion rights,
voting rights, terms of redemption and liquidation preferences as the
Directors shall in their sole discretion determine and the "Series A
Preferred Shares" shall mean the first series of Preferred Shares
authorised and issued by the Board;
(t) "principal register" shall mean the register of members of the
Company maintained at such place within or outside the Cayman Islands
as the Board shall determine from time to time;
(u) "the register" shall mean the principal register and any branch
registers;
(v) "registration office" shall mean the registered office for the time
being of the Company;
(w) "seal" shall include the common seal of the Company, the securities
seal or any duplicate seal adopted by the Company pursuant to these
Articles;
(x) "Secretary" shall mean the person appointed as company secretary
by the Board from time to time;
(y) "share" shall mean a share in the capital of the Company;
(z) "shareholders" or "members" shall mean the persons who are duly
registered as the holders from time to time of shares in the register
including persons who are jointly so registered;
(aa) "special resolution" shall mean a resolution passed by not less than
seventy five per cent of the votes of such members of the Company as,
being entitled to do so, vote in person or, where proxies are allowed,
by proxy or, in the case of corporations, by their duly authorised
representatives, at a general meeting of which notice specifying the
intention to propose the resolution as a special resolution has been
duly given;
(bb) "subsidiary" and "holding company" shall have the meanings ascribed to
such terms in the Companies Act of the United Kingdom;
(cc) subject as aforesaid, any words defined in the Law shall, if not
inconsistent with the subject and/or context, bear the same meanings
in these Articles;
(dd) "writing" or "printing" shall include writing, printing, lithograph,
photograph, type-writing and every other mode of representing words or
figures in a legible and non-transitory form;
(ee) words importing either gender shall include the other gender and the
neuter;
(ff) words importing persons and the neuter shall include companies and
corporations and vice versa; and
(gg) words denoting the singular shall include the plural and words
denoting the plural shall include the singular.
3. The business of the Company may be commenced as soon after incorporation as
the Directors shall see fit, notwithstanding that part only of the shares
may have been allotted.
4. The Directors may pay, out of the capital or any other monies of the
Company, all expenses incurred in or about the formation and establishment
of the Company including the expenses of registration.
SHARE CAPITAL
5. The capital of the Company at the date of the adoption of these Articles is
US$6,000,000 divided into 500,000,000 Common Shares of a nominal or par
value of US$0.01 each and 1,000,000 Preferred Shares of a nominal or par
value of US$1.00 each.
6. (a) Subject to the provisions of these Articles and to any direction that
may be given by the Company in general meeting and without prejudice to any
special rights conferred on the holders of any existing shares or attaching
to any class of shares, any share including the Preferred Shares may be
issued with or have attached thereto such preferred, deferred, qualified or
other special rights or restrictions, whether in regard to dividend,
voting, return of capital or otherwise, and to such persons at such times
and for such consideration as the Board may determine.
(b) (i) Preferred Shares may be issued from time to time in one or more
series, each of such series to have such voting powers (full or
limited or without voting powers), designations, preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof as are stated and
expressed, or in any resolution or resolutions providing for the issue
of such series adopted by the Board of Directors as hereinafter
provided.
(ii) Authority is hereby granted to the Board of Directors, subject to
the provisions of the Memorandum of Association, these Articles
and applicable law, to create one or more series of Preferred
Shares and, with respect to each such series, to fix by
resolution or resolutions, without any further vote or action by
the members of the Company providing for the issue of such
series:
(a) the number of shares to constitute such series and the
distinctive designation thereof;
(b) the dividend rate on the shares of such series, the dividend
payment dates, the periods in respect of which dividends are
payable ("dividend periods"), whether such dividends shall
be cumulative and, if cumulative, the date or dates from
which dividends shall accumulate;
(c) whether the shares of such series shall be convertible into,
or exchangeable for, shares of any other class or classes or
any other series of the same or any other class or classes
of shares of the Company and the conversion price or prices
or rate or rates, or the rate or rates at which such
exchange may be made, with such adjustments, if any, as
shall be stated and expressed or provided in such resolution
or resolutions;
(d) the preferences, if any, and the amounts thereof, which the
shares of such series shall be entitled to receive upon the
winding up of the Company;
(e) the voting power, if any, of the shares of such series;
(f) transfer restrictions and rights of first refusal with
respect to the shares of such series; and
(g) such other terms, conditions, special rights and provisions
as may seem advisable to the Board of Directors.
Notwithstanding the fixing of the number of shares
constituting a particular series upon the issuance thereof,
the Board of Directors at any time thereafter may authorise
the issuance of additional shares of the same series subject
always to the Law and the Memorandum of Association.
(iii)No dividend shall be declared and set apart for payment on any
series of Preferred Shares in respect of any dividend period
unless there shall likewise be or have been paid, or declared and
set apart for payment, on all Preferred Shares of each other
series entitled to cumulative dividends at the time outstanding
which rank senior or equally as to dividends with the series in
question, dividends ratably in accordance with the sums which
would be payable on the said shares through the end of the last
preceding dividend period if all dividends were declared and paid
in full.
(iv) If, upon the winding up of the Company, the assets of the Company
distributable among the holders of any one or more series of
Preferred Shares which (i) are entitled to a preference over the
holders of the Common Shares upon such winding up, and (ii) rank
equally in connection with any such distribution, shall be
insufficient to pay in full the preferential amount to which the
holders of such shares shall be entitled, then such assets, or
the proceeds thereof, shall be distributed among the holders of
each such series of the Preferred Shares ratably in accordance
with the sums which would be payable on such distribution if all
sums payable were discharged in full.
7. The Company in general meeting may, from time to time, whether or not all
the shares for the time being authorised shall have been issued and whether
or not all the shares for the time being issued shall have been fully paid
up, by ordinary resolution, increase its share capital by the creation of
new shares, such new capital to be of such amount and to be divided into
shares of such respective amounts as the resolution shall prescribe.
MODIFICATION OF RIGHTS
8. If at any time the share capital of the Company is divided into different
classes of shares, all or any of the rights attached to any class of shares
for the time being issued (unless otherwise provided for in the terms of
issue of the shares of that class) may, subject to the provisions of the
Law, be varied or abrogated with the consent in writing of the holders of
not less than two-thirds in nominal value of the issued shares of that
class or, in respect of the Series A Preferred Shares, with the consent of
not less than three fourths in nominal value of the issued Series A
Preferred Shares, or with the sanction of a special resolution passed at a
separate meeting of the holders of shares of that class. To every such
separate meeting all the provisions of these Articles relating to general
meetings shall mutatis mutandis apply, but so that the quorum for the
purposes of any such separate meeting and
of any adjournment thereof shall be a person or persons together holding
(or representing by proxy) at the date of the relevant meeting not less
than one-third in nominal value of the issued shares of that class, and
that any holder of shares of the class present in person or by proxy may
demand a poll.
9. The special rights conferred upon the holders of shares of any class shall
not, unless otherwise expressly provided in the rights attaching to or the
terms of issue of such shares, be deemed to be varied by the creation or
issue of further shares ranking pari passu therewith.
REDEMPTION AND REPURCHASE OF SHARES
10. Subject to the Law and to any rights conferred on the holders of any class
of shares, the Company shall have the power (i) to purchase or otherwise
acquire all or any of its own shares (which expression as used in this
Article includes redeemable shares), provided either:-
(a) that the manner of purchase has first been authorised by the Company
in general meeting, or
(b) such purchases are made in open market transactions on a recognized
stock exchange on which the Company's shares are listed; or
(c) such purchases may be effected from time to time, as authorised by the
Board of Directors, at a price per share no higher than the average of
the closing prices of said shares on a recognized stock exchange on
which said shares are listed, for the five days on which said shares
are traded immediately preceding any such purchase (the "Average
Market Price"); or
(d) such purchases may be effected from time to time, as authorised by the
Board of Directors at a price per share in excess of the Average
Market Price, provided that: the shares thus to be purchased shall be
in blocs consisting of a number equal to or greater than five per cent
of the number of shares then outstanding and the price to be paid
therefor shall have been found to be fair in a written opinion of
independent investment bankers who have been selected for the purpose
by a disinterested committee of Directors; or
(e) an offer is made to all shareholders of the Company to purchase a
specified number of shares at a specified price, all tenders of shares
made in response to such offer to be accepted pro rata in the event
that more shares are to be tendered than the Company has offered to
purchase, except that all tenders of 99 shares or less may be accepted
in full at the discretion of the Directors,
(ii) to purchase or otherwise acquire warrants for the subscription or
purchase of its own shares and (iii) to give, directly or indirectly,
by means of a loan, a guarantee, a gift, an indemnity, the provision
of security or otherwise howsoever, financial
assistance for the purpose of or in connection with a purchase or
other acquisition made or to be made by any person of any shares or
warrants in the Company. The Company may pay for such shares or
warrants in any manner authorised or not prohibited by law, including
out of capital. Should the Company purchase or otherwise acquire its
own shares or warrants, neither the Company nor the Board shall be
required to select the shares or warrants to be purchased or otherwise
acquired rateably or in any other manner as between the holders of
shares or warrants of the same class or as between them and the
holders of shares or warrants of any other class or in accordance with
the rights as to dividends or capital conferred by any class of
shares.
11. Subject to the provisions of the Law and the Memorandum of Association
of the Company, and to any special rights conferred on the holders of
any shares or attaching to any class of shares, shares may be issued
on the terms that they may be, or at the option of the Company or the
holders are, liable to be redeemed on such terms and in such manner,
including out of capital, as the Board may deem fit.
12. The holder of the shares being purchased, surrendered or redeemed
shall be bound to deliver up to the Company at its registered office
or such other place as the Board shall specify the certificate(s)
thereof for cancellation and thereupon the Company shall pay to him
the purchase or redemption monies in respect thereof.
ISSUE OF SHARES AND WARRANTS
13. Subject to the provisions of the Law, of the Memorandum of Association
of the Company, and of these Articles relating to new shares, the
unissued shares in the Company (whether forming part of its original
or any increased capital) shall be at the disposal of the Board, which
may offer, allot, grant options over or otherwise dispose of them to
such persons, at such times and for such consideration, and upon such
terms, as the Board shall determine. No shares shall be issued to
bearer and all shares shall be issued fully paid.
14. The Board may issue warrants to subscribe for any class of shares or
other securities of the Company on such terms as it may from time to
time determine. No warrants shall be issued to bearer.
COMMISSION ON SHARES
15. The Company may, unless prohibited by law, at any time pay a
commission to any person for subscribing or agreeing to subscribe
(whether absolutely or conditionally) for any shares in the Company or
procuring or agreeing to procure subscriptions (whether absolute or
conditional) for any shares in the Company, but so that the conditions
and requirements of the Law shall be observed and complied with.
NON-RECOGNITION OF TRUSTS
16. Except as otherwise expressly provided by these Articles or as
required by law or as ordered by a court of competent jurisdiction, no
person shall be recognised by the Company as holding any share upon
any trust and 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.
REGISTER OF MEMBERS AND SHARE CERTIFICATES
17. The Board shall cause to be kept at such place within or outside the
Cayman Islands as they deem fit a principal register of the members
and there shall be entered therein the particulars of the members and
the shares issued to each of them and other particulars required under
the Law.
18. If the Board considers it necessary or appropriate, the Company may
establish and maintain a branch register or registers of members at
such location or locations within or outside the Cayman Islands as the
Board thinks fit. The principal register and the branch register(s)
shall together be treated as the register for the purposes of these
Articles.
19. The Board may, in its absolute discretion, at any time transfer any
share upon the principal register to any branch register or any share
on any branch register to the principal register or any other branch
register.
20. The Company shall as soon as practicable and on a regular basis record
in the principal register all transfers of shares effected on any
branch register and shall at all times maintain the principal register
in such manner as to show at all times the members for the time being
and the shares respectively held by them, in all respects in
accordance with the Companies Law.
21. The register may be closed at such times and for such periods as the
Board may from time to time determine, either generally or in respect
of any class of shares, provided that the register shall not be closed
for more than 10 days in any year (or such longer period as the
members may by ordinary resolution determine provided that such period
shall not be extended beyond 20 days in any year).
22. Every person whose name is entered as a member in the register shall
be entitled without payment to receive, within 20 days, after
allotment or lodgment of transfer (or within such other period as the
conditions of issue shall provide), one certificate for all his shares
of each class or, upon payment of such reasonable fee as the Board
shall prescribe, such number of certificates for shares held as that
person may request, provided that in respect of a share or shares held
jointly by several persons the Company shall not be bound to issue a
certificate or certificates to each such person, and the issue and
delivery of a certificate or certificates to one of several joint
holders shall be sufficient delivery to all such holders.
23. Every certificate for shares or debentures or representing any other
form of security of the Company shall be issued under the seal of the
Company, which shall only be affixed with the authority of the Board.
24. Every share certificate shall specify the number of shares in respect
of which it is issued and the amount paid thereon or the fact that
they are fully paid, as the case may be, and may otherwise be in such
form as the Board may from time to time prescribe.
25. The Company shall not be bound to register more than four persons as
joint holders of any share. If any share shall stand in the names of
two or more persons, the person first named in the register shall be
deemed the sole holder thereof as regards service of notices and,
subject to the provisions of these Articles, all or any other matters
connected with the Company, except the transfer of the share.
26. If a share certificate is defaced, lost or destroyed, it may be
replaced on payment of such reasonable fee, if any, as the Board may
from time to time prescribe and on such terms and conditions, if any,
as to publication of notices, evidence and indemnity, as the Board
thinks fit and where it is defaced or worn out, after delivery up of
the old certificate to the Company for cancellation.
TRANSFER OF SHARES
27. All transfers of shares may be effected by an instrument of transfer
in the usual common form or in such other form as the Board may
approve. All instruments of transfer must be left at the registered
office of the Company or at such other place as the Board may appoint
and all such instruments of transfer shall be retained by the Company.
28. The instrument of transfer shall be executed by or on behalf of the
transferor and by or on behalf of the transferee PROVIDED that the
Board may dispense with the execution of the instrument of transfer by
the transferee in any case which it thinks fit in its discretion to do
so. The instrument of transfer of any share shall be in writing and
shall be executed with a manual signature or facsimile signature
(which may be machine imprinted or otherwise) by or on behalf of the
transferor and transferee PROVIDED that in the case of execution by
facsimile signature by or on behalf of a transferor or transferee, the
Board shall have previously been provided with a list of specimen
signatures of the authorized signatories of such transferor or
transferee and the Board shall be reasonably satisfied that such
facsimile signature corresponds to one of those specimen signatures.
The transferor shall be deemed to remain the holder of a share until
the name of the transferee is entered in the register in respect
thereof.
29. The Board may, in its absolute discretion, and without assigning any
reason, refuse to register a transfer of any share which is not fully
paid up or on which the Company has a lien. The Board may also decline
to register any transfer of any shares unless:
(a) the instrument of transfer is lodged with the Company accompanied
by the certificate for the shares to which it relates (which shall
upon registration of the transfer be cancelled) and such other
evidence as the Board may reasonably require to show the right of the
transferor to make the transfer;
(b) the instrument of transfer is in respect of only one class of
shares;
(c) the instrument of transfer is properly stamped (in circumstances
where stamping is required);
(d) in the case of a transfer to joint holders, the number of joint
holders to which the share is to be transferred does not exceed four;
(e) the shares concerned are free of any lien in favour of the
Company; and
(f) a fee of such maximum amount as the Exchange (if any) may from
time to time determine to be payable (or such lesser sum as the Board
may from time to time require) is paid to the Company in respect
thereof.
30. If the Board shall refuse to register a transfer of any share, it
shall, within two months after the date on which the transfer was
lodged with the Company, send to each of the transferor and the
transferee notice of such refusal.
31. No transfer shall be made to an infant or to a person in respect of
whom an order has been made by an competent court or official on the
grounds that he is or may be suffering from mental disorder or is
otherwise incapable of managing his affairs or under other legal
disability.
32. Upon every transfer of shares the certificate held by the transferor
shall be given up to be cancelled, and shall forthwith be cancelled
accordingly, and a new certificate shall be issued without charge to
the transferee in respect of the shares transferred to him, and if any
of the shares included in the certificate so given up shall be
retained by the transferor, a new certificate in respect thereof shall
be issued to him without charge. The Company shall also retain the
instrument(s) of transfer.
33. The registration of transfers may be suspended and the register closed
at such times for such periods as the Board may from time to time
determine, provided always that such registration shall not be
suspended or the register closed for more than 10 days in any year (or
such longer period as the members may by ordinary resolution determine
provided that such period shall not be extended beyond 20 days in any
year).
TRANSMISSION OF SHARES
34. In the case of the death of a member, the survivor or survivors where
the deceased was a joint holder, and the legal personal
representatives of the deceased where he was a sole holder, shall be
the only persons recognised by the Company as having any title to his
interest in the shares; but nothing herein contained shall release the
estate of a deceased holder (whether sole or joint) from any liability
in respect of any share solely or jointly held by him.
35. Any person becoming entitled to a share in consequence of the death or
bankruptcy or winding-up of a member may, upon such evidence as to his
title being produced as may from time to time be required by the Board
and subject as hereinafter provided, either be registered himself as
holder of the share or elect to have some other person nominated by
him registered as the transferee thereof.
36. 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 his nominee registered he shall testify his
election by executing in favour of his nominee a transfer of such
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 or winding-up of the member
had not occurred and the notice or transfer were a transfer executed
by such member.
37. A person becoming entitled to a share by reason of the death or
bankruptcy or winding-up of the holder shall be entitled to the same
dividends and other advantages to which he would be entitled if he
were the registered holder of the share. However, the Board may, if it
thinks fit, withhold the payment of any dividend payable or other
advantages in respect of such share until such person shall become the
registered holder of the share or shall have effectually transferred
such share, but, subject to the requirements of Article 64 being met,
such a person may vote at meetings.
ALTERATION OF CAPITAL
38. The Company may from time to time by ordinary resolution:
(a) consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares. On any
consolidation of fully paid shares and division into shares of
larger amount, the Board may settle any difficulty which may
arise as it thinks expedient and in particular (but without
prejudice to the generality of the foregoing) may as between the
holders of shares to be consolidated determine which particular
shares are to be consolidated into each consolidated share, and
if it shall happen that any person shall become entitled to
fractions of a consolidated share or shares, such fractions may
be sold by some person appointed by the Board for that purpose
and the person so appointed may transfer the shares so sold to
the purchaser thereof and the validity of such transfer shall not
be questioned, and so that the net proceeds of such sale (after
deduction of the expenses of such sale) may either be distributed
among the persons who would otherwise be entitled to a fraction
or fractions of a consolidated share or shares rateably in
accordance with their rights and interests or may be paid to the
Company for the Company's benefit;
(b) 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 subject to the provisions of
the Law; and
(c) sub-divide its shares or any of them into shares of smaller
amount than is fixed by the Memorandum of Association of the
Company, subject nevertheless to the provisions of the Law, and
so that the resolution whereby any share is sub-divided may
determine that, as between the holders of the shares resulting
from such sub-division, one or more of the shares may have any
such preferred or other special rights, over, or may have such
deferred rights or be subject to any such restrictions as
compared with the others as the Company has power to attach to
unissued or new shares.
39. The Company may by special resolution reduce its share capital, any
capital redemption reserve or any share premium account in any manner
authorised and subject to any conditions prescribed by Law.
BORROWING POWERS
40. The Board may from time to time at its discretion exercise all the
powers of the Company to raise or borrow or to secure the payment of
any sum or sums of money for the purposes of the Company and to
mortgage or charge its undertaking, property and assets (present and
future) and uncalled capital or any part thereof.
41. The Board may raise or secure the payment or repayment of such sum or
sums in such manner and upon such terms and conditions in all respects
as it thinks fit and, in particular, by the issue of debentures,
debenture stock, bonds or other securities of the Company, whether
outright or as collateral security for any debts, liability or
obligations of the Company or of any third party.
42. Debentures, debenture stock, bonds and other securities may be made
assignable free from any equities between the Company and the person
to whom the same may be issued.
43. Any debentures, debenture stock, bonds or other securities may be
issued at a discount, premium or otherwise and with any special
privileges as to redemption, surrender, drawings, allotment of shares,
attending and voting at general meetings of the Company, appointment
of Directors and otherwise.
44. The Board shall cause a proper register to be kept, in accordance with
the provisions of the Law, of all mortgages and charges specifically
affecting the property of the Company and shall duly comply with the
requirements of the Law in regard to the registration of mortgages and
charges therein specified and otherwise.
45. If the Company issues debentures or debenture stock (whether as part
of a series or as individual instruments) not transferable by
delivery, the Board shall cause a proper register to be kept of the
holders of such debentures.
46. Where any uncalled capital of the Company is charged, all persons
taking any subsequent charge thereon shall take the same subject to
such prior charge, and shall not be entitled, by notice to the members
or otherwise, to obtain priority over such prior charge.
GENERAL MEETINGS
47. The Company shall in each year hold a general meeting as its annual
general meeting in addition to any other meeting in that year and
shall specify the meeting as such in the notices calling it; and not
more than 15 months shall elapse (or such longer period as the
Exchange may authorise) between the date of one annual general meeting
of the Company and that of the next. So as long as the first annual
general meeting of the Company is held within 15 months from the date
of its incorporation, it need not be held
in the year of its incorporation. The annual general meeting shall be
held at such time and place as the Board shall appoint.
48. All general meetings other than annual general meetings shall be
called extraordinary general meetings.
49. The Board may, whenever it thinks fit, convene an extraordinary
general meeting.
50. An annual general meeting and any extraordinary general meeting shall
be called by not less than 10 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
time, place, and agenda of the meeting, particulars of the resolutions
to be considered at the meeting and in the case of special business
(as defined in Article 55) the general nature of that business. The
notice convening an annual general meeting shall specify the meeting
as such, and the notice convening a meeting to pass a special
resolution shall specify the intention to propose the resolution as a
special resolution. Notice of every general meeting shall be given to
all members other than such as, under the provisions hereof or the
terms of issue of the shares they hold, are not entitled to receive
such notice from the Company.
51. Notwithstanding that a meeting of the Company is called by shorter
notice than that referred to in Article 50, it shall be deemed to have
been duly called if it is so agreed:
(a) in the case of a meeting called as an annual general meeting, by
all the members of the Company entitled to attend and vote
thereat or their proxies; 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 95 per cent in nominal
value of the shares giving that right.
52. There shall appear with reasonable prominence in every notice of
general meetings of the Company a statement that a member entitled to
attend and vote is entitled to appoint a proxy to attend and, on a
poll, vote instead of him and that a proxy need not be a member of the
Company.
53. The accidental omission to give any such notice to, or the non-receipt
of any such notice by, any person entitled to receive notice shall not
invalidate any resolution passed or any proceeding at any such
meeting.
54. In cases where instruments of proxy are sent out with notices, the
accidental omission to send such instrument of proxy to, or the
non-receipt of such instrument of proxy by, any person entitled to
receive notice shall not invalidate any resolution passed or any
proceeding at any such meeting.
PROCEEDINGS AT GENERAL MEETINGS
55. All business shall be deemed special that is transacted at an
extraordinary general meeting and also all business shall be deemed
special that is transacted at an annual
general meeting with the exception of the following, which shall be
deemed ordinary business:
(a) the declaration and sanctioning of dividends;
(b) the consideration and adoption of the accounts and balance sheets
and the reports of the Directors and Auditors and other documents
required to be annexed to the balance sheet;
(c) the election of Directors in place of those retiring;
(d) the appointment of Auditors;
(e) the fixing of, or the determining of the method of fixing of, the
remuneration of the Directors and of the Auditors;
56. For all purposes the quorum for a general meeting shall be one or more
members present in person or by proxy holding not less than a majority
of the issued shares of the Company entitled to vote at the meeting in
question. No business shall be transacted at any general meeting
unless the requisite quorum shall be present at the commencement of
the business.
57. If within one hour from the time appointed for the meeting a quorum is
not present, the meeting shall stand adjourned to the same day in the
next week and at such time and place as shall be decided by the Board,
and if at such adjourned meeting a quorum is not present within one
hour from the time appointed for holding the meeting, the member or
members present in person or by proxy shall be a quorum and may
transact the business for which the meeting was called.
58. The Chairman shall take the chair at every general meeting, or, if
there be no such Chairman or, if at any general meeting such Chairman
shall not be present within one hour after the time appointed for
holding such meeting or is unwilling to act, the Directors present
shall choose another Director as chairman of the meeting, and if no
Director be present, or if all the Directors present decline to take
the chair, or if the Chairman chosen shall retire from the chair, then
the members present shall choose one of their own number to be
chairman of the meeting.
59. The Chairman may, with the consent of any general meeting at which a
quorum is present, and shall, if so directed by the meeting, adjourn
any meeting from time to time and from place to place as the meeting
shall determine. Whenever a meeting is adjourned for 14 days or more,
at least seven clear days' notice, specifying the place, the day and
the hour of the adjourned meeting shall be given in the same manner 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, no member shall be entitled
to any notice of an adjournment or of the business to be transacted at
any adjourned meeting. No business shall be transacted at any
adjourned meeting other than the business which might have been
transacted at the meeting from which the adjournment took place.
60. At any general meeting a resolution put to the vote of the meeting
shall be decided on a poll.
61. A poll shall (subject as provided in Article 68) be taken in such
manner (including the use of ballot or voting papers or tickets) and
at such time and place, not being more than 10 days from the date of
the meeting or adjourned meeting at which the poll was demanded as the
Chairman directs. No notice need be given of a poll not taken
immediately. The result of the poll shall be deemed to be the
resolution of the meeting at which the poll was demanded.
62. In the case of an equality of votes, the Chairman of the meeting shall
be entitled to a second or casting vote.
VOTES OF MEMBERS
63. Subject to any special rights, privileges or restrictions as to voting
for the time being attached to any class or classes of shares, at any
general meeting on a poll every holder of Common Shares present in
person (or, in the case of a member being a corporation, by its duly
authorised representative) or by proxy shall have one vote for each
Common Share registered in his name in the register. On a poll a
member entitled to more than one vote is under no obligation to cast
all his votes in the same way.
64. Any person entitled under Article 35 to be registered as a holder of
Common Shares may vote at any general meeting in respect thereof in
the same manner as if he were the registered holder of such shares,
provided that at least 48 hours before the time of the holding of the
meeting or adjourned meeting (as the case may be) at which he proposed
to vote, he shall satisfy the Board of his right to be registered as
the holder of such shares or the Board shall have previously admitted
his right to vote at such meeting in respect thereof.
65. Where there are joint registered holders of any share carrying a right
to vote, any one of such persons may vote at any meeting, either
personally or by proxy, in respect of such share as if he were solely
entitled thereto; but if more than one of such joint holders be
present at any meeting personally or by proxy, that one of the said
persons so present being the most or, as the case may be, the more
senior shall alone be entitled to vote in respect of the relevant
joint holding and, for this purpose, seniority shall be determined by
reference to the order in which the names of the joint holders stand
on the register in respect of the relevant joint holding. Several
executors or administrators of a deceased member in whose name any
share stands shall for the purposes of this Article be deemed joint
holders thereof.
66. Save as expressly provided in these Articles or as otherwise
determined by the Board, no person other than a member duly registered
shall be entitled to be present or to vote (save as proxy for another
member), or to be reckoned in a quorum, either personally or by proxy
at any general meeting.
67. In the case of any dispute as to the admission or rejection of any
vote, the Chairman of the meeting shall determine the same and such
determination shall be final and conclusive.
PROXIES
68. Any member of the Company entitled to attend and vote at a meeting of
the Company shall be entitled to appoint another person (who must be
an individual) as his proxy to attend and vote instead of him and a
proxy so appointed shall have the same right as the member to speak at
the meeting. Forms of proxy shall be sent by the Company to each
member together with the notice convening each annual and general
meeting of the Company. On a poll votes may be given either personally
or by proxy. A proxy need not be a member of the Company. A member may
appoint any number of proxies to attend in his stead at any one
general meeting (or at any one class meeting).
69. The instrument appointing a proxy shall be in writing under the hand
of the appointor or of his attorney authorised in writing, or if the
appointor is a corporation, either under its seal or under the hand of
an officer, attorney or other person duly authorised to sign the same.
The appointment of a proxy may be made by electronic transmission.
70. The instrument appointing a proxy and (if required by the Board) the
power of attorney or other authority (if any) under which it is
signed, or a notarially certified copy of such power or authority,
shall be delivered to the Secretary at any time before the polls for
the general meeting close or may be delivered at the registered office
of the Company (or at such other place as may be specified in the
notice convening the meeting or in any notice of any adjournment or,
in either case, in any document sent therewith) not less than 24 hours
before the time appointed 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 subsequently to the date of a meeting or
adjourned meeting, not less than 24 hours before the time appointed
for the taking of the poll, and in default the instrument of proxy
shall not be treated as valid provided always that the Chairman of the
meeting may at his discretion direct that an instrument of proxy shall
be deemed to have been duly deposited upon receipt of electronic
transmission from the appointor that the instrument of proxy duly
signed is in the course of transmission to the Company. No instrument
appointing a proxy shall be valid after the expiration of 12 months
from the date named in it as the date of its execution. Delivery of
any instrument appointing a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned and,
in such event, the instrument appointing a proxy shall be deemed to be
revoked.
71. Every instrument of proxy, whether for a specified meeting or
otherwise, shall be in common form or such other form as the Board may
from time to time approve, provided that it shall enable a member,
according to his intention, to instruct his proxy to vote in favour of
or against (or in default of instructions or in the event of
conflicting instructions, to exercise his discretion in respect of)
each resolution to be proposed at the meeting to which the form of
proxy relates.
72. The instrument appointing a proxy to vote at a general meeting shall:
(a) be deemed to confer authority to demand or join in demanding a
poll and to vote on any amendment of a resolution put to the
meeting for which it is given as the proxy thinks fit; and
(b) unless the contrary is stated therein, be valid as well for any
adjournment of the meeting as for the meeting to which it
relates, provided that the meeting was originally held within 12
months from such date.
73. A vote given in accordance with the terms of an instrument of proxy or
resolution of a member shall be valid notwithstanding the previous
death or insanity of the principal or revocation of the proxy or power
of attorney or other authority under which the proxy or resolution of
a member was executed or revocation of the relevant resolution or the
transfer of the share in respect of which the proxy was given,
provided that no intimation in writing of such death, insanity,
revocation or transfer as aforesaid shall have been received by the
Company at its registered office, or at such other place as is
referred to in Article 59, at least two hours before the commencement
of the meeting or adjourned meeting at which the proxy is used.
CORPORATE REPRESENTATIVES
74. Any corporation which is a member of the Company may, by resolution of
its directors or other governing body or by power of attorney,
authorise such person as it thinks fit to act as its representative at
any meeting of the Company or of members of any class of shares 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 and where a corporation is so represented, it shall be treated
as being present at any meeting in person.
BOARD OF DIRECTORS
75. So long as the shares of the Company are listed on the Exchange, the
Company shall maintain a minimum of three Independent Directors on its
Board. The Board shall consist of not less then one nor more than ten
persons (exclusive of alternate Directors) PROVIDED HOWEVER, that the
Company may from time to time by resolution passed by not less 75 per
cent of the issued shares increase or reduce the limits in the number
of Directors.
76. The first Directors of the Company shall be determined in writing by,
or appointed by a resolution of, the subscribers to the Memorandum of
Association.
77. The Directors shall be divided into three classes, designated Class I,
Class II and Class III. All classes shall be as nearly equal in number
as possible. The Directors as initially classified shall hold office
for terms as follows:
(a) the Class I Directors shall hold office until the date of the
annual general meeting of shareholders in 2001 or until their
successors shall be elected and qualified;
(b) the Class II Directors shall hold office until the date of the
annual general meeting of shareholders in 2002 or until their
successors shall be elected and qualified; and
(c) the Class III Directors shall hold office until the date of the
annual general meeting or shareholders in 2003 or until their
successors shall be elected and qualified.
Upon expiration of the term of office of each class as set forth above,
the Directors in each class shall be elected for a term of three years
to succeed the Directors whose terms of office expire.
78. Each Director shall hold office until the expiration of his term and
until his successor shall have been elected and qualified.
79. The Board shall have power from time to time and at any time to
appoint any person as a Director either to fill a casual vacancy or as
an addition to the Board. Any Director so appointed shall hold office
only until the next following annual general meeting of the Company
and shall then be eligible for re-election at that meeting.
80. The Company may by special resolution at any time remove for cause any
Director (including an executive officer) before the expiration of his
period of office notwithstanding anything in these Articles or in any
agreement between the Company and such Director and may by ordinary
resolution elect another person in his stead.
81. Nothing in Article 80 should be taken as depriving a Director removed
under any provisions of that Article of compensation or damages
payable to him in respect of the termination of his appointment as
Director or of any other appointment or office as a result of the
termination of his appointment as Director or as derogatory from any
power to remove a Director which may exist apart from the provision of
that Article.
82. The Company shall keep at its office a register of directors and
officers containing their names and addresses and occupations and any
other particulars required by the Law and shall send to the Registrar
of Companies of the Cayman Islands a copy of such register and shall
from time to time notify to the Registrar of Companies of the Cayman
Islands any change that takes place in relation to such Directors as
required by the Law.
83. A Director need not hold any qualification shares. No Director shall
be required to vacate office by reason only of his having attained any
particular age.
ALTERNATE DIRECTORS AND PROXIES FOR DIRECTORS
84. A Director may at any time by notice in writing delivered to the
registered office of the Company or at a meeting of the Board, appoint
another Director to be his alternate Director in his place during his
absence and may in like manner at any time determine such appointment.
No more than two alternate Directors may attend any meeting of the
Board.
85. The appointment of an alternate Director shall determine on the
happening of any event which, were he a Director, would cause him to
vacate such office or if his appointor ceases to be a Director.
86. An alternate Director shall be entitled to receive and waive (in lieu
of his appointor) notices of meetings of the Directors and shall be
entitled to attend and vote as a Director and be counted in the quorum
at any such meeting at which the Director appointing him is not
personally present and generally at such meeting to perform all the
functions of his appointor as a Director and for the purposes of the
proceedings at such meeting the provisions of these Articles shall
apply as if he (instead of his appointor) were a Director. If he shall
be himself a Director or shall attend any such meeting as an alternate
for more than one Director his voting rights shall be cumulative and
he need not use all his votes or cast all the votes he uses in the
same way. To such extent as the Board may from time to time determine
in relation to any committee of the Board, the foregoing provisions of
this Article shall also apply mutatis mutandis to any meeting of any
such committee of which his appointor is a member. An alternate
Director shall not, save as aforesaid, have power to act as a Director
nor shall he be deemed to be a Director for the purposes of these
Articles.
87. An alternate Director shall be entitled to contract and be interested
in and benefit from contracts or arrangements or transactions and to
be repaid expenses and to be indemnified to the same extent mutatis
mutandis as if he were a Director, but he shall not be entitled to
receive from the Company in respect of his appointment as alternate
Director any remuneration 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.
88. In addition to the foregoing provisions of this Article, a Director
may be represented at any meeting of the Board (or of any committee of
the Board) by a proxy appointed by him, in which event the presence or
vote of the proxy shall for all purposes be deemed to be that of the
Director. A proxy must be a Director and the provisions of Articles 68
to 73 shall apply mutatis mutandis to the appointment of proxies by
Directors save that an instrument appointing a proxy shall not become
invalid after the expiration of twelve months from its date of
execution but shall remain valid for such period as the instrument
shall provide or, if no such provision is made in the instrument,
until revoked in writing and save also that no more than two proxies
may attend any meeting.
REMUNERATION OF DIRECTORS
89. The Directors shall be entitled to receive by way of remuneration for
their services such sum as shall from time to time be determined by
the Company in general meeting or by the Board, as the case may be,
such sum (unless otherwise directed by the resolution by which it is
determined) to be divided amongst the Directors in such proportions
and in such manner as they may agree, or failing agreement, equally,
except that in such event any Director holding office for less than
the whole of the relevant period in respect of which the remuneration
is paid shall only rank in such division in proportion to the time
during such period for which he has held office. Such remuneration
shall be in addition to any other remuneration to which a Director who
holds any salaried employment or office in the Company may be entitled
by reason of such employment or office.
90. The Board may grant special remuneration to any Director, who shall
perform any special or extra services at the request of the Company.
Such special remuneration may be made payable to such Director in
addition to or in substitution for his ordinary
remuneration as a Director, and may be made payable by way of salary,
commission or participation in profits or otherwise as may be agreed.
91. The remuneration of an Executive Director or a Director appointed to
any other office in the management of the Company shall from time to
time be fixed by the Board and may be by way of salary, commission, or
participation in profits or otherwise or by all or any of those modes
and with such other benefits (including share option and/or pension
and/or gratuity and/or other benefits on retirement) and allowances as
the Board may from time to time decide. Such remuneration shall be in
addition to such remuneration as the recipient may be entitled to
receive as a Director.
92. The Directors shall be entitled to be paid all expenses, including
travel expenses, reasonably incurred by them in or in connection with
the performance of their duties as Directors including their expenses
of travelling to and from Board meetings, committee meetings or
general meetings or otherwise incurred whilst engaged on the business
of the Company or in the discharge of their duties as Directors.
VACATION OF OFFICE OF DIRECTOR
93. The office of a Director shall be vacated:
(a) if he resigns his office by notice in writing to the Company at
its registered office;
(b) if an order is made by any competent court or official on the
grounds that he is or may be suffering from mental disorder or is
otherwise incapable of managing his affairs and the Board
resolves that his office be vacated;
(c) if, without leave, he is absent from meetings of the Board
(unless an alternate Director or proxy appointed by him attends
in his place) for a continuous period of 12 months, and the Board
resolves that his office be vacated;
(d) if he becomes bankrupt or has a receiving order made against him
or suspends payment or compounds with his creditors generally;
(e) if he ceases to be or is prohibited from being a Director by law
or by virtue of any provisions in these Articles;
(f) if he shall be removed from office by notice in writing served
upon him signed by not less than three-fourths in number (or, if
that is not a round number, the nearest lower round number) of
the Directors (including himself) then in office; or
(g) if he shall be removed from office by a special resolution of the
members of the Company pursuant to Article 80.
INTERESTED DIRECTORS
94. No Director or proposed Director shall be disqualified by his office
from contracting with the Company either as vendor, purchaser or
otherwise nor shall any such contract or any contract or arrangement
entered into by or on behalf of the Company with any person, company
or partnership of or in which any Director shall be a member or
otherwise interested be capable on that account of being avoided, nor
shall any Director so contracting or being any member or so interested
be liable to account to the Company for any profit so realised by any
such contract or arrangement by reason only of such Director holding
that office or the fiduciary relationship thereby established,
provided that such Director shall, if his interest in such contract or
arrangement is material, declare the nature of his interest at the
earliest meeting of the Board at which it is practicable for him to do
so, either specifically or by way of a general notice stating that, by
reason of the facts specified in the notice, he is to be regarded as
interested in any contracts of a specified description which may
subsequently be made by the Company.
95. Any Director may continue to be or become a director, managing
director, joint managing director, deputy managing director, executive
director, manager or other officer or member of any other company in
which the Company may be interested and (unless otherwise agreed
between the Company and the Director) no such Director shall be liable
to account to the Company or the members for any remuneration or other
benefits received by him as a director, managing director, joint
managing director, deputy managing director, executive director,
manager or other officer or member of any such other company. The
Directors may exercise the voting powers conferred by the shares in
any other company held or owned by the Company, or exercisable by them
as directors of such other company in such manner in all respects as
they think fit (including the exercise thereof in favour of any
resolution appointing themselves or any of them directors, managing
directors, joint managing directors, deputy managing directors,
executive directors, managers or other officers of such company) and
any Director may vote in favour of the exercise of such voting rights
in manner aforesaid notwithstanding that he may be, or is about to be,
appointed a director, managing director, joint managing director,
deputy managing director, executive director, manager or other officer
of such a company, and that as such he is or may become interested in
the exercise of such voting rights in the manner aforesaid.
96. A Director may hold any other office or place of profit with the
Company (except that of Auditor) in conjunction with his office of
Director for such period and upon such terms as the Board may
determine, and may be paid such extra remuneration therefor (whether
by way of salary, commission, participation in profit or otherwise) as
the Board may determine, and such extra remuneration shall be in
addition to any remuneration provided for by or pursuant to any other
Article.
97. No person shall be disqualified from the office of Director or
alternate Director or prevented by such office from contracting with
the Company, either as vendor, purchaser or otherwise, nor shall any
such contract or any contract or transaction entered into by or on
behalf of the Company in which any Director or alternate Director
shall be in any way interested be or be liable to be avoided, nor
shall any Director or alternate Director so contracting or being so
interested be liable to account to the
Company for any profit realised by any such contract or transaction by
reason of such Director holding office or of the fiduciary relation
thereby established. A Director (or his alternate Director in his
absence) shall be at liberty to vote in respect of any contract or
transaction in which he is so interested as aforesaid provided however
that the nature of the interest of any Director or alternate Director
in any such contract or transaction shall be disclosed by him or the
alternate Director appointed by him at or prior to its consideration
and any vote thereon.
98. A general notice or disclosure to the Directors or otherwise contained
in the minutes of a Meeting or a written resolution of the Directors
or any committee thereof that a Director or alternate Director is a
shareholder of any specified firm or company and is to be regarded as
interested in any transaction with such firm or company shall be
sufficient disclosure under Article 97 and after such general notice
it shall not be necessary to give special notice relating to any
particular transaction.
EXECUTIVE OFFICERS
99. The Board may from time to time appoint one or more Chairman of the
Board, President, Chief Executive Officer, Chief Financial Officer and
such other officers as it considers necessary in the management of the
business of the Company and as it may decide for such period and upon
such terms as it thinks fit and upon such terms as to remuneration as
it may decide in accordance with these Articles.
100. Every Director appointed to an office under Article 99 hereof shall,
without prejudice to any claim for damages that such Director may have
against the Company or the Company may have against such Director for
any breach of any contract of service between him and the Company, be
liable to be dismissed or removed therefrom by the Board. A Director
appointed to an office under Article 99 shall be subject to the same
provisions as to removal as the other Directors of the Company, and he
shall, without prejudice to any claim for damages that such Director
may have against the Company or the Company may have against such
Director for any breach of any contract of service between him and the
Company, ipso facto and immediately cease to hold such office if he
shall cease to hold the office of Director for any cause.
MANAGEMENT
101. (a) The management of the business of the Company shall be vested in
the Board which, in addition to the powers and authorities by these
Articles expressly conferred upon it, may exercise all such powers and
do all such acts and things as may be exercised or done or approved by
the Company and are not hereby or by the Law expressly directed or
required to be exercised or done by the Company in general meeting,
but subject nevertheless to the provisions of the Law and of these
Articles and to any regulation from time to time made by the Company
in general meeting not being inconsistent with such provisions or
these Articles, PROVIDED THAT no regulation so made shall invalidate
any prior act of the Board which would have been valid if such
regulation had not been made.
(b) The Board of Directors may authorize any officer, officers, agent
or agents to enter into any contract or agreement of any nature
whatsoever, including, without
limitation, any contract, deed, bond, mortgage, guarantee, agreement,
or any other document or instrument of any nature whatsoever, and to
execute and deliver any such contract, agreement, document or other
instrument of any nature whatsoever for and in the name of and on
behalf of the Company, and such authority may be general or confined
to specific instances.
102. (a) Subject to the provisions of the Law and except as otherwise
expressly provided in this Article, a special resolution of the
shareholders shall be required to approve:
(i) any merger or consolidation of the Company or any subsidiary
with (i) any Interested Shareholder (as hereinafter defined
in this Article) or (ii) any other company or other entity
(whether or not itself an Interested Shareholder) which is,
or after such merger or consolidation would be, an Affiliate
of an Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of
transactions) to or with any Interested Shareholder, or any
Affiliate of any Interested Shareholder, of any assets of
the Company or any subsidiary having an aggregate Fair
Market Value (as hereinafter defined in this Article)
equaling or exceeding twenty-five percent (25%) of the Fair
Market Value of the combined assets immediately prior to
such transfer of the Company and its subsidiaries; or
(iii)the issuance or transfer by the Company or any subsidiary
(in one transaction or a series of transactions) to any
Interested Shareholder or any Affiliate of any Interested
Shareholder in exchange for cash, securities or other
property (or a combination thereof), of any securities of
the Company or any subsidiary having an aggregate Fair
Market Value equaling or exceeding twenty-five percent (25%)
of the Fair Market Value of the combined assets immediately
prior to such transfer of the Company and its subsidiaries
except pursuant to an employee benefit plan of the Company
or any subsidiary thereof; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Company proposed by or on behalf of any
Interested Shareholder or any Affiliate of any Interested
Shareholder; or
(v) any reclassification of securities of the Company (including
any reverse share split), recapitalization of the Company,
merger or consolidation of the Company with any of its
subsidiaries or other transaction (whether or not with or
into or otherwise involving an Interested Shareholder),
which has the effect, directly or indirectly, of increasing
the proportionate share of the outstanding shares of any
class of equity or convertible securities of the Company or
any subsidiary which is directly or indirectly owned by any
Interested
Shareholder or any Affiliate of any Interested Shareholder
(a "Disproportionate Transaction"); provided, however, that
no such transaction shall be deemed a Disproportionate
-------- ------- Transaction if the increase in the
proportionate ownership of the Interested Shareholder or
Affiliate as a result of such transaction is no greater than
the increase experienced by the other stockholders
generally.
The term "Business Combination" as used in this Article shall mean any
transaction which is referred to in any one or more of paragraphs (i) through
(v) of Article 102 (a).
(b) The provisions of Article 102 (a) requiring a special resolution of
shareholders shall not be applicable to any particular Business
Combination, and such Business Combination shall require only such vote as
is required by the Law or by these Articles of Association (other than
Article 102 (c) (ii)), whichever is greater, if the Business Combination
shall have been approved by a majority of the Disinterested Directors (as
hereinafter defined in this Article).
(c) For the purposes of this Article:
(i) "Affiliate" means with respect to any person, any other person
controlling or controlled by or under common control with such
specified person. For the purposes of this definition, "control",
when used with respect to any specified person, means the power
to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
(ii) "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Shareholder and
who was a member of the Board of Directors prior to the time that
the Interested Shareholder became an Interested Shareholder, and
any director who is thereafter chosen to fill any vacancy on the
Board of Directors or who is elected and who, in either event, is
unaffiliated with the Interested Shareholder, and in connection
with his or her initial assumption of office is recommended for
appointment or election by a majority of Disinterested Directors
then on the Board of Directors.
(iii)"Interested Shareholder" shall mean any person (other than the
Company) and any holding company thereof who or which:
(1) is the beneficial owner directly or indirectly, of more than
twenty per cent (20%) of the voting power of the outstanding
shares of the Company; or
(2) is an Affiliate of the Company and at any time within the
two-year period immediately prior to the date in
question was the beneficial owner, directly or indirectly,
of twenty per cent (20%) or more of the voting power of the
then-outstanding shares; or
(3) is an assignee of or has otherwise succeeded to any shares
which were at any time within the two-year period
immediately prior to the date in question beneficially owned
by any Interested Shareholder, if such assignment or
succession shall have occurred in the course of a
transaction or series of transactions not involving a public
offering.
A person shall not be deemed an Interested Shareholder if such person
would become an Interested Shareholder solely as a result of a
reduction of the number of shares of the Company outstanding,
including repurchases of outstanding shares of the Company by the
Company, which reduction increases the percentage of outstanding
shares of the Company of which such person is the beneficial owner,
until such person shall thereafter become the beneficial owner of any
additional shares.
(iv) "Fair Market Value" means: (a) in the case of shares, the highest
closing sale price of a share during the 30-day period
immediately preceding the date in question of such share admitted
to trading on an Exchange or any other system then in use, the
Fair Market Value shall be the highest closing sale price
reported by the Exchange or such other system during the 30-day
period preceding the date in question, or, if no such quotations
are available, the Fair Market Value on the date in question of
such share as determined by the Board of Directors in good faith,
in each case with respect to any class of share, appropriately
adjusted for any dividend or distribution in shares or any
combination or reclassification of outstanding shares of such
share into a smaller number of shares, and (b) in the case of
property other than cash or shares, the Fair Market Value of such
property on the date in question as determined by the Board of
Directors in good faith.
(d) A majority of the Disinterested Directors of the Company shall
have the power and duty to determine for the purposes of this
Article, on the basis of information known to them after
reasonable inquiry, (a) whether a person is an Interested
Shareholder; (b) the number of shares of which any person is the
beneficial owner; (c) whether a Person is an Affiliate of
another; and (d) whether the assets which are the subject of any
Business Combination have, or any securities to be issued or
transferred by the Company or any Subsidiary in any Business
Combination have, an aggregate Fair Market Value equaling or
exceeding twenty-five percent (25%) of the Fair Market Value of
the combined assets immediately prior to such transfer of the
Company and its subsidiaries. A majority of the Disinterested
Directors shall
have the further power to interpret all of the terms and provisions of
this Article.
PROCEEDINGS OF DIRECTORS
103. The Board may meet together for the despatch of business, adjourn and
otherwise regulate its meetings and proceedings as it thinks fit in
any part of the world and may determine the quorum necessary for the
transaction of business. Unless otherwise determined two Directors
shall be a quorum provided always that if there at any time be only a
sole Director the quorum shall be one. For the purposes of this
Article an alternate Director shall be counted in a quorum in place of
the Director who appointed him and an alternate Director who is an
alternate for more than one Director shall for quorum purposes be
counted separately in respect of himself (if he is a Director) and in
respect of each Director for whom he is an alternate (but so that
nothing in this provision shall be construed as authorising a meeting
to be constituted when only one person is physically present except if
at any time there is only a sole Director where the quorum shall be
one). A meeting of the Board or any committee of the Board may be held
by means of a telephone or tele-conferencing or any other
telecommunications facility provided that all participants are thereby
able to communicate contemporaneously by voice with all other
participants and participation in a meeting pursuant to this provision
shall constitute presence in person at such meeting.
104. The Chairman, President or a majority of the Directors may at any time
summon a meeting of the Board. 24 hours notice thereof shall be given
to each Director either in writing or by electronic transmission at
the address or telephone, facsimile or telex number from time to time
notified to the Company by such Director or in such other manner as
the Board may from time to time determine.
105. Questions arising at any meeting of the Board shall be decided by a
majority of votes, and in case of an equality of votes the Chairman
shall have a second or casting vote.
106. The Chairman of the Board shall act as chairman of the meetings of the
Board; but if no such Chairman is elected, or if at any meeting the
Chairman is not present within 15 minutes after the time appointed for
holding the same, the Directors present may choose one of their number
to be Chairman of the meeting.
107. A meeting of the Board for the time being at which a quorum is present
shall be competent to exercise all or any of the authorities, powers
and discretions by or under these Articles for the time being vested
in or exercisable by the Board generally.
108. The Board may delegate any of its powers to committees consisting of
such member or members of the Board (including alternate Directors in
the absence of their appointers) as the Board thinks fit, and it may
from time to time revoke such delegation or revoke the appointment of
and discharge any committees either wholly or in part, and either as
to persons or purposes, but every committee so formed shall in the
exercise of the powers so delegated conform to any regulations that
may from time to time be imposed upon it by the Board.
109. All acts done by any such committee in conformity with such
regulations and in fulfilment of the purposes for which it is
appointed, but not otherwise, shall have the
like force and effect as if done by the Board, and the Board shall
have power, with the consent of the Company in general meeting, to
remunerate the members of any such committee, and charge such
remuneration to the current expenses of the Company.
110. The meetings and proceedings of any such committee consisting of two
or more members of the Board shall be governed by the provisions
herein contained for regulating the meetings and proceedings of the
Board so far as the same are applicable thereto and are not replaced
by any regulations imposed by the Board pursuant to Article 108.
111. The Board shall cause minutes to be made of:-
(a) all appointments of officers made by the Board;
(b) the names of the Directors present at each meeting of the Board
and any of committees of the Board;
(c) all declarations made or notices given by any Director of his
interest in any contract or proposed contract or of his holding
of any office or property whereby any conflict of duty or
interest may arise; and
(d) all resolutions and proceedings at all meetings of the Company
and of the Board and of such committees.
112. Any such minutes shall be conclusive evidence of any such proceedings
if they purport to be signed by the chairman of the meeting or by the
chairman of the succeeding meeting.
113. All acts bona fide done by any meeting of the Board or by a committee
of Directors or by any person acting as Director shall,
notwithstanding that it shall be afterwards discovered that there was
some defect in the appointment of such Director or persons acting as
aforesaid or that they or any of them were disqualified, be as valid
as if every such person had been duly appointed and was qualified to
be a Director or member of such committee as the case may be.
114. The continuing Directors 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 Director or Directors 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.
115. A resolution in writing signed by each and every one of the Directors
(or their respective alternates) shall be as valid and effectual as if
it had been passed at a meeting of the Board duly convened and held
and may consist of several documents in like form each signed by one
or more of the Directors or alternate Directors.
SECRETARY
116. A Secretary may be appointed by the Board for such term, at such
remuneration and upon such conditions as it may think fit, and any
Secretary so appointed may be removed by the Board. Anything by the
Law or these Articles required or authorised to be done by or to the
Secretary, if the office is vacant or there is for any other reason no
Secretary capable of acting, may be done by or to any assistant or
deputy Secretary appointed by the Board, or if there is no assistant
or deputy Secretary capable of acting, by or to any officer of the
Company authorised generally or specifically in that behalf by the
Board.
117. A provision of the Law or of 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.
GENERAL MANAGEMENT AND USE OF SEAL
118. The Board shall provide for the safe custody of the seal which shall
only be used by the authority of the Board or of a committee of the
Board authorised by the Board in that behalf, and every instrument to
which such seal shall be affixed shall be signed by a Director and
shall be countersigned by the Secretary or by a second Director or by
some other person appointed by the Board for the purpose. The
securities seal which shall be a facsimile of the common seal with the
word "Securities" engraved thereon shall be used exclusively for
sealing securities issued by the Company and for sealing documents
creating or evidencing securities so issued. The Board may either
generally or in any particular case resolve that the securities seal
or any signatures or any of them may be affixed to certificates for
shares, warrants, debentures or any other form of security by
facsimile or other mechanical means specified in such authority or
that any such certificates sealed with the securities seal need not be
signed by any person. Every instrument to which the seal is affixed as
aforesaid shall, as regards all persons dealing in good faith with the
Company, be deemed to have been affixed to that instrument with the
authority of the Directors previously given.
119. The Company may have a duplicate seal as and where the Board shall
determine, and the Company may by writing under the seal appoint any
agents or agent, committees or committee abroad to be the agents of
the Company for the purpose of affixing and using such duplicate seal
and they may impose such restrictions on the use thereof as may be
thought fit. Wherever in these Articles reference is made to the seal,
the reference shall, when and so far as may be applicable, be deemed
to include any such duplicate seal as aforesaid.
120. 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, indorsed or otherwise
executed, as the case may be, in such manner as the Board shall from
time to time by resolution determine. The Company's banking accounts
shall be kept with such banker or bankers as the Board shall from time
to time determine.
121. The Board may from time to time and at any time, by power of attorney
under the seal or by document executed as a deed, appoint any company,
firm or person or any fluctuating body of persons, whether nominated
directly or indirectly by the Board, 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 Board
under these Articles) and for such period and subject to such
conditions as it may think fit, and any such power of attorney may
contain such provisions for the protection and convenience of persons
dealing with any such attorney as the Board may think fit, and may
also authorize any such attorney to sub-delegate all or any of the
powers, authorities and discretions vested in him.
122. The company may, by writing under its seal or by document executed as
a deed, empower any person, either generally or in respect of any
specified matter, as its attorney to execute deeds and instruments on
its behalf in any part of the world and to enter into contracts and
sign the same on its behalf and every deed signed by such attorney on
behalf of the Company and, if required, under his seal shall bind the
Company and have the same effect as if it were under the seal of the
Company.
PENSION FUNDS
123. The Board may establish and maintain or procure the establishment and
maintenance of any contributory or non-contributory pension or
provident or superannuation funds or (with the sanction of an ordinary
resolution) employee or executive share option schemes for the benefit
of, or give or procure the giving of donations, gratuities, pensions,
allowances or emoluments to any persons who are or were at any time in
the employment or service of the Company, or of any company which is a
subsidiary of the Company, or is allied or associated with the Company
or with any such subsidiary company, or who are or were at any time
directors or officers of the Company or of any such other company as
aforesaid, and holding or who have held any salaried employment or
office in the Company or such other company, and the wives, widows,
families and dependents of any such persons. The Board may also
establish and subsidise or subscribe to any institutions,
associations, clubs or funds calculated to be for the benefit of or to
advance the interests and well-being of the Company or of any such
other company as aforesaid, and may make payments for or towards the
insurance of any such persons as aforesaid, and subscribe or guarantee
money for charitable or benevolent objects or for any exhibition or
for any public, general or useful object. The Board may do any of the
matters aforesaid, either alone or in conjunction with any such other
company as aforesaid. Any Director holding any such employment or
office shall be entitled to participate in and retain for his own
benefit any such donation, gratuity, pension, allowance or emolument.
CAPITALISATION OF RESERVES
124. The Company in general meeting may upon the recommendation of the
Board by ordinary resolution resolve that it is desirable to
capitalize all or any part of the amount for the time being standing
to the credit of any of the Company's reserve accounts or funds or to
the credit of the profit and loss account or otherwise available for
distribution (and not required for the payment or provision of
dividend on any shares with a preferential right to dividend) and
accordingly that such sums be set free for
distribution amongst the members who would have been entitled thereto
if distributed by way of dividend and in the same proportion on
condition that the same be not paid in cash but be applied either in
or towards paying up any amounts for the time being unpaid on any
shares held by such members respectively or paying up in full unissued
shares, debentures or other securities of the Company to be allotted
and distributed credited as fully paid up to and amongst such members
in proportion aforesaid or partly in one way and partly in the other,
and the Board shall give effect to such resolution, provided that a
share premium account and a capital redemption reserve and any reserve
or fund representing unrealised profits may, for the purposes of this
Article, only be applied in paying up unissued shares to be issued to
members of the Company as fully paid up shares or paying up calls or
installments due or payable on partly paid securities of the Company
subject always to the provisions of the Law.
125. Wherever such a resolution as referred to in Article 124 shall have
been passed the Board shall make all appropriations and applications
of the undivided profits resolved to be capitalised thereby, and all
allotments and issues of fully paid up shares, debentures or other
securities, if any, and generally shall do all acts and things
required to give effect thereto, with full power to the Board:
(a) to make such provision by the issue of fractional certificates or
by payment in cash or otherwise (including provisions whereby, in
whole or in part, fractional entitlements are aggregated and sold
and the net proceeds distributed to those entitled, or are
disregarded or rounded up or down or whereby the benefit of
fractional entitlements accrues to the Company rather than to the
members concerned) as they think fit in cases where shares,
debentures or other securities become distributable in fractions;
(b) to exclude the right of participation or entitlement of any
member with a registered address outside any territory where in
the absence of a registration statement or other special or
onerous formalities the circulation of an offer of such right or
entitlement would or might be unlawful or where the Board
consider the costs, expense or possible delays in ascertaining
the existence or extent of the legal and other requirements
applicable to such offer or the acceptance of such offer out of
proportion to the benefits of the Company; and
(c) to authorise any person to enter on behalf of all members
entitled thereto into an agreement with the Company providing for
the allotment to them respectively, credited as fully paid up, of
any further shares, debentures or other securities to which they
may be entitled upon such capitalisation, or, as the case may
require, for the payment up by the Company on their behalf, by
the application thereto of their respective proportions of the
profits resolved to be capitalised, of the amounts or any part of
the amounts remaining unpaid on their existing shares, and any
agreement made under such authority shall be effective and
binding on all such members.
126. The Board may, in relation to any capitalisation sanctioned under
these Articles in its absolute discretion specify that, and in such
circumstances and if directed so to do by a
member or members entitled to an allotment and distribution credited
as fully paid up of unissued shares or debentures in the Company
pursuant to such capitalisation, shall allot and distribute credited
as fully paid up the unissued shares, debentures or other securities
to which that member is entitled to such person or persons as that
member may nominate by notice in writing to the Company, such notice
to be received not later than the day for which the general meeting of
the Company to sanction the capitalisation is convened.
DIVIDENDS, DISTRIBUTIONS AND RESERVE
127. Subject to the Law, the Directors may from time to time declare
dividends (including interim dividends) and distributions on shares of
the Company outstanding and authorise payment of the same out of the
funds of the Company lawfully available therefor.
128. The Directors may, before declaring any dividends or distributions,
set aside such sums as they think proper as a reserve or reserves
which shall at the discretion of the Directors, be applicable for any
purpose of the Company and pending such application may, at the like
discretion, be employed in the business of the Company.
129. No dividend or distribution shall be payable except out of the profits
of the Company, realised or unrealised, or out of the share premium
account or as otherwise permitted by the Law.
130. Subject to the rights of persons, if any, entitled to shares with
special rights as to dividends or distributions, if dividends or
distributions are to be declared on a class of shares they shall be
declared and paid according to the amounts paid or credited as paid on
the shares of such class outstanding on the record date for such
dividend or distribution as determined in accordance with these
Articles but no amount paid or credited as paid on a share in advance
of calls shall be treated for the purpose of this Article as paid on
the share.
131. The Directors may deduct from any dividend or distribution payable to
any member all sums of money (if any) presently payable by him to the
Company on account of calls or otherwise.
132. The Directors may declare that any dividend or distribution be paid
wholly or partly by the distribution of specific assets and in
particular of paid up shares, debentures, or debenture stock of any
other company or in any one or more of such ways and 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 members and may vest any
such specific assets in trustees as may seem expedient to the
Directors.
133. Any dividend, distribution, interest or other monies payable in cash
in respect of shares may be paid by cheque or warrant sent through the
post directed to the registered address of the holder or, in the case
of joint holders, to the holder who is first named on the register of
Members or to such person and to such address as such
holder or joint holders may in writing direct. Every such cheque or
warrant shall be made payable to the order of the person to whom it is
sent. Any one of two or more joint holders may give effectual receipts
for any dividends, bonuses, or other monies payable in respect of the
share held by them as joint holders.
134. No dividend or distribution shall bear interest against the Company.
DOCUMENT DESTRUCTION
135. The Company shall be entitled to destroy all instruments of transfer,
probate, letters of administration, stop notices, powers of attorney,
certificates of marriage or death and other documents relating to or
affecting title to securities in or of the Company ("Registrable
Documents") which have been registered at any time after the
expiration of six years from the date of registration thereof and all
dividend mandates and notifications of change of address at any time
after the expiration of two years from the date of recording thereof
and all share certificates which have been cancelled at any time after
the expiration of one year from the date of the cancellation thereof
and it shall conclusively be presumed in favour of the Company that
every entry in the register if purporting to have been made on the
basis of an instrument of transfer or Registrable Document so
destroyed was duly and properly made and every instrument of transfer
or Registrable Document so destroyed was a valid and effective
instrument or document duly and properly registered and every share
certificate so destroyed was a valid and effective certificate duly
and properly cancelled and every other document hereinbefore mentioned
so destroyed was a valid and effective document in accordance with the
recorded particulars thereof in the books or records of the Company,
provided always that:
(a) the provisions aforesaid shall apply only to the destruction of a
document in good faith and without express notice of the Company
of any claim (regardless of the parties thereto) to which the
document might be relevant;
(b) nothing herein contained 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 other circumstances
which would not attach to the Company in the absence of this
Article; and
(c) references herein to the destruction of any document include
references to the disposal thereof in any manner.
ACCOUNTS
136. The books of account shall be kept at such place or places as the
Board thinks fit and shall always be open to the inspection of the
Directors.
137. The Board shall from time to time determine whether, to what extent,
at what times and places and under what conditions or regulations, the
accounts and books of the Company, or any of them, shall be open to
the inspection of the members (other than officers of the Company) and
no member shall have any right of inspecting any accounts or books or
documents of the Company except as conferred by the Law or any
other relevant law or regulation or as authorised by the Board or by
the Company in general meeting.
138. The Board shall, commencing with the first annual general meeting
cause to be prepared and to be laid before the members of the Company
at every annual general meeting a profit and loss account for the
preceding financial year together with a balance sheet as at the last
day of the preceding financial year and a report for the period
covered by the profit and loss account and the state of the Company's
affairs as at the end of such period, an Auditors' report on such
accounts prepared pursuant to Article 137 and such other reports and
accounts as may be required by law.
139. Printed copies of those documents to be laid before the members of the
Company at an annual general meeting shall not less than 10 days
before the date of the meeting be sent to every member of the Company
and every holder of debentures of the Company, provided that the
Company shall not be required to send printed copies of those
documents 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.
AUDIT
140. The appointment of and provisions relating to Auditors shall be in
accordance with applicable law and the relevant rules and regulations
of the Exchange on which the Company's shares are listed. In the event
that the Company's shares are not listed on an Exchange, the
appointment of and provisions relating to Auditors shall be in
accordance with applicable law and the Board may appoint the Auditors
who shall hold office until removed from office by a resolution of the
Board and the Board may determine the remuneration of the Auditors.
AUDIT COMMITTEE
141. For so long as the shares of the Company are quoted on the Exchange,
it shall establish and maintain an Audit Committee as a committee of
the Board PROVIDED ALWAYS THAT unless otherwise permitted by
applicable law and the rules of the Exchange there shall be a minimum
of three members of the Audit Committee and all of the members of the
Audit Committee shall be Independent Directors. The Audit Committee
shall comply with the rules or regulations of the Exchange as
promulgated from time to time so long as the shares of the Company are
listed on the Exchange. The responsibilities of the Audit Committee
shall include all such matters as are required by applicable law and
the rules and regulations of the Exchange.
SERVICE OF NOTICES AND OTHER DOCUMENTS
142. Any notice or other document may be served on or delivered to any
member by the Company either personally or by sending it through the
post in a prepaid letter addressed to such member at his registered
address as appearing in the principal register or by delivering it to
or leaving it at such registered address addressed as aforesaid. In
the case of joint holders of a share, service or delivery of any
notice or other document on or to one of the joint holders shall for
all purposes be deemed a sufficient service on or delivery to all the
joint holders.
143. Any such notice or other document, if sent by post, shall be deemed to
have been served or delivered on the day after the day when it was put
in the post (if sent to an address in the same country) and on the
fifth day after the day when it was put in the post (if sent from one
country or territory to an address in another country), and in proving
such service or delivery it shall be sufficient to prove that the
notice or document was properly addressed, stamped and put in the
post. Any notice or other document delivered or left at a registered
address otherwise than by post shall be deemed to have been served or
delivered on the day it was so delivered or left.
144. Any notice or other document delivered or sent by post to or left at
the registered address of any member in pursuance of these Articles
shall, notwithstanding that such member is then dead or bankrupt or
that any other event has occurred, and whether or not the Company has
notice of the death or bankruptcy or other event, be deemed to have
been duly served or delivered in respect of any share registered in
the name of such member as sole or joint holder unless his name shall,
at the time of the service or delivery of the notice or document, have
been removed from the Register as the holder of the share and such
service or delivery shall for all purposes be deemed a sufficient
service or delivery of such notice or document on all persons
interested (whether jointly with or as claiming through or under him)
in the share.
145. The signature to any notice to be given by the Company may be written
or printed by means of facsimile.
INFORMATION
146. No member shall be entitled to require discovery of or any information
in respect of any detail of the Company's trading or any matter which
is or may be in the nature of a trade secret or secret process which
may relate to the conduct of the business of the Company and which in
the opinion of the Board would not be in the interests of the members
or the Company to communicate to the public.
147. The Board shall be entitled to release or disclose any information in
its possession, custody or control regarding the Company or its
affairs to any of its members including, without limitation,
information contained in the register of members and transfer books of
the Company.
WINDING UP
148. If the Company shall be wound up (whether the liquidation is
voluntary, under supervision or by the court) the liquidator may, with
the authority of a special resolution of the Company and any other
sanction required by the Law divide among the members in specie or
kind the whole or any part of the assets of the Company (whether the
assets shall consist of property of one kind or shall consist of
properties of different kinds) and may for such purpose set such value
as he deems fair upon any property to be divided 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 authority or
sanction vest the whole or any part of such assets in trustees upon
such trusts for the benefit of the members as the liquidator, with the
like authority or sanction and subject to the Law, shall think fit,
and the liquidation of the Company may be closed and the Company
dissolved, but so that no member shall be compelled to accept any
assets, shares or other securities in respect of which there is a
liability.
149. (a) The Company shall indemnify, to the full extent now or hereafter
permitted by law, any person (including his heirs, executors
and administrators) who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in
the right of the Company), by reason of his acting as, or having
in the past acted as, a Director, officer, employee or agent of,
or his acting in any other capacity for or on behalf of, the
Company, (including his serving for, on behalf of or at the
request of the Company as a Director, officer employee or agent
of another company, partnership, joint venture, trust or other
enterprise, or in a fiduciary or other capacity with respect to
any employee benefit plan maintained by the Company) against any
expense (including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such
person (or his heirs, executors and administrators) in
respect thereof. The Company shall advance the expenses of
defending any such action, suit or proceeding (including appeals)
in accordance with and to the full extent now or hereafter
permitted by law.
(b) The Board of Directors may, notwithstanding any interest of the
directors in such action, authorize the Company to purchase and
maintain insurance on behalf of any person described in Article
149 (a), against any liability asserted against him and incurred
by him in any such capacity, or arising out of his status as
such, whether or not the Company would have the power to
indemnify him against such liability under the provisions of this
Article 149.
(c) Directors of the Company shall have no personal liability to the
Company or its members for monetary damages for breach of
fiduciary or other duties as a director, except (i) for any
breach of a director's duty of loyalty to the Company or its
members, (ii) for act or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, or
(iii) for any transaction from which a director derived an
improper personal benefit.
(d) The provisions of this Article 149 shall be applicable to all
actions, claims, suits or proceedings made or commenced after the
adoption hereof, whether arising from acts or omissions to act
occurring before or after its adoption. The provisions of this
Article 149 shall be deemed to be a contract between the Company
and each director, officer, employee or agent who serves in such
capacity at any time while this Article and the relevant
provisions of the law, if any, are in effect, and any repeal or
modification thereof shall not affect any rights or obligations
then existing with respect to any state of facts or any action,
suit or proceeding then or theretofore existing, or any action,
suit or proceeding thereafter brought or threatened based in
whole or in part on any such state of facts. If any provision of
this Article 149 shall be found to be invalid or limited in
application by reason of any law or regulation, it shall not
affect any other application of such provision or the validity of
the remaining provisions hereof. The rights of indemnification
and advancement of expenses provided in this Article shall
neither be exclusive of, nor be deemed in limitation of, any
rights to
which any such officer, director, employee or agent may otherwise
be entitled or permitted by contract, vote of members or
directors or otherwise, or as a matter of law, both as to actions
in his official capacity and actions in any other capacity while
holding such office, it being the policy of the Company that
indemnification of the specified individuals shall be made to the
fullest extent permitted by law.
FINANCIAL YEAR
150. The financial year of the Company shall be as prescribed by the Board
from time to time.
REGISTERED OFFICE
151. The registered office of the Company shall be at such place in the
Cayman Islands as the Board shall from time to time appoint.
AMENDMENT OF MEMORANDUM AND ARTICLES
152. Subject to the Law, the Company may at any time and from time to time
by special resolution alter or amend its Memorandum of Association and
Articles of Association in whole or in part.
153. For the purpose of determining Members entitled to notice of or to
vote at any meeting of Members or any adjournment thereof, or Members
entitled to receive payment of any dividend, or in order to make a
determination of Members for any other proper purposes, the Directors
of the Company may provide that the register of Members shall be
closed for transfers for a stated period but not to exceed in any case
forty days. If the register of Members shall be so closed for the
purpose of determining Members entitled to notice of or to vote at a
meeting of Members such register shall be so closed for at least ten
days immediately preceding such meeting and the record date for such
determination shall be the date of the closure of the register of
Members.
154. In lieu of or apart from closing the register of Members, the
Directors may fix in advance a date as the record date for any such
determination of Members entitled to notice of or to vote at a meeting
of the Members and for the purpose of determining the Members entitled
to receive payment of any dividend the Directors may, at or within 90
days prior to the date of declaration of such dividend fix a
subsequent date as the record date for such determination.
155. If the register of Members is not so closed and no record date is
fixed for the determination of Members entitled to notice of or to
vote at a meeting of Members or Members entitled to receive payment of
a dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such
determination of Members. When a determination of Members entitled to
vote at any meeting of members has been made as provided in this
section, such determination shall apply to any adjournment thereof.
DATED 24th day of July, 2000.
/s/ Rebecca Steller
- ------------------------------------
Rebecca Steller
PO Box 309, Grand Cayman
/s/ Graham Lockington
- ------------------------------------
Graham Lockington
PO Box 309, Grand Cayman
/s/ Diann Green
- ------------------------------------
Witness to the above signatures
I, Renda S. Cornwall Asst. Registrar of Companies in and for the Cayman Islands
HEREBY CERTIFY that this is a true and correct copy of the Articles of
Association of this Company duly incorporated on the 24th day of July, 2000
/s/ Renda S. Cornwall
----------------------------
Asst. Registrar of Companies
EXHIBIT 10.1
SECOND AMENDMENT TO THE
GARMIN LTD. EMPLOYEE STOCK PURCHASE PLAN
The Garmin Ltd. Employee Stock Purchase Plan is amended, effective June 9,
2003, as follows:
I.
Section 2.11 is amended to read as follows:
2.11 "Eligible Employee" means an Employee, including an employee
on an Authorized Leave of Absence (as defined in Section 10.3),
eligible to participate in the Plan in accordance with Article V.
II.
Section 2.12 is amended to read as follows:
2.12 "Employee" means an individual who performs services for the
Company or a Participating Subsidiary pursuant to an employment
relationship described in Treasury Regulations Section
31.3401(c)-1 or any successor provision, or an in individual who
would be performing such services but for such individual's
Authorized Leave of Absence (as defined in Section 10.3).
III.
Sub-sections 5.2(b) and (c) are amended to read as follows:
(b) Employees (other than individuals on Authorized Leave of
Absence (as defined in Section 10.3)) who are customarily
employed by the Company or a Participating Subsidiary for not
more than 20 hours per week; or
(c) Employees (other than individuals on Authorized Leave of
Absence (as defined in Section 10.3)) who are customarily
employed by the Company or a Participating Subsidiary for not
more than five (5) months in any calendar year.
IV.
Section 10.3 is amended to read as follows:
10.3 Leaves of Absence.
(a) If a Participant takes a leave of absence (other than an
Authorized Leave of Absence) without terminating
employment, such Participant will be deemed to have discontinued
contributions to the Plan in accordance with Section 8.3, but
will remain a Participant in the Plan through the balance of the
Accumulation Period in which his or her leave of absence begins,
so long as such leave of absence does not exceed 90 days. If a
Participant takes a leave of absence (other than an Authorized
Leave of Absence) without terminating employment, such
Participant will be deemed to have withdrawn from the Plan in
accordance with Section 10.1 on the 91st day of such leave of
absence.
(b) An Employee on an Authorized Leave of Absence shall remain a
Participant in the Plan and, in the case of a paid Authorized
Leave of Absence, shall have deductions made under Section 8.1
from payments that would, but for the Authorized Leave of
Absence, be Base Earnings. An Employee who does not return from
an Authorized Leave of Absence on the scheduled date (or, in the
case of Qualified Military Leave, prior to the date such
individual's reemployment rights under the Uniformed Services
Employment and Reemployment Rights Act of 1994 have expired or
terminated) shall be deemed to have terminated employment on the
last day of such Authorized Leave of Absence (or, in the case of
Qualified Military Leave, the date such reemployment rights
expire or are terminated).
(c) An "Authorized Leave of Absence" means (a) a Qualified
Military Leave, and (b) an Employee's absence of more than 90
days which has been authorized, either pursuant to a policy of
the Company or the Participating Subsidiary that employs the
Employee, or pursuant to a written agreement between the employer
and the Employee, which policy or written agreement guarantees
the Employee's rights to return to employment.
V.
Except as amended herein, the Plan shall remain in full force and
effect.
Executed this 9th day of June, 2003.
GARMIN LTD.
By: /s/ Min H. Kao
Min H. Kao
Title: Co-Chairman and CEO
EXHIBIT 31.1
CERTIFICATION
I, Min H. Kao, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Garmin Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected or is reasonably likely to
materially affect the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 13, 2003 By /s/ Min H. Kao
---------------------------
Min H. Kao
Co-Chairman and Chief
Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Kevin Rauckman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Garmin Ltd.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;.
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report is
being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of
the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the registrant's internal control
over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected or is reasonably likely to
materially affect the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to
the registrant's auditors and the audit committee of the registrant's board
of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control
over financial reporting.
Date: August 13, 2003 By /s/ Kevin Rauckman
-------------------------
Kevin Rauckman
Chief Financial Officer
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Garmin Ltd. (the "Company") on
Form 10-Q for the period ending June 28, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Min H. Kao,
Co-Chairman and Chief Executive Officer of the Company, certify, pursuant
to 18 U.S.C. ss. 1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley
Act of 2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results
of operations of the Company.
Date: August 13, 2003 By /s/ Min H. Kao
-------------------------
Min H. Kao
Co-Chairman and Chief
Executive Officer
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of Garmin Ltd. (the "Company") on
Form 10-Q for the period ending June 28, 2003 as filed with the Securities
and Exchange Commission on the date hereof (the "Report"), I, Kevin
Rauckman, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss. 1350, as adopted pursuant to ss.906 of the Sarbanes-Oxley Act of
2002, that:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results
of operations of the Company.
Date: August 13, 2003 By /s/ Kevin Rauckman
------------------------
Kevin Rauckman
Chief Financial Officer