SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 3, 2000
INTERNET HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
UTAH 0-26888 13-3758042
(State or Other (Commission (IRS Employer
Jurisdiction) File Number) Identification No.)
16 Curzon Street, Mayfair, London, United Kingdom W1Y 7FF
(Address of principal executive offices)
Registrant's telephone number, including area code: 011 44 207 409 1600
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
A. Offer to Acquire Radical Technology Plc
On March 3, 2000, Internet Holdings, Inc. (the "Company") offered to
acquire all of the issued and outstanding shares of Radical Technology Plc
("RadTech") in a stock-for-stock transaction (the "Offer"). Pursuant to the
Offer, the Company offered 50 shares of its common stock (the "Exchange Stock")
for every 143 shares of capital stock of RadTech. Assuming full acceptance of
the offer, 1,281,714 shares of the Company will be issued, constituting
approximately 7.7% of the Company's outstanding shares. The Exchange Stock will
not be registered under the Securities Act of 1933, as amended (the "Securities
Act"). However, as a condition of the Offer, within twelve months of the date of
issue of the Exchange Stock, the Company shall file a registration statement
with the Securities and Exchange Commission (the "Commission") covering the
Exchange Stock. Furthermore, during this twelve month period, the Company shall
not file a registration statement covering any shares held by STG Holdings Plc,
the largest single shareholder of the Company. As of May 19, 2000, shareholders
holding approximately 85.35% of the RadTech shares have irrevocably undertaken
to accept the Offer, making the acquisition unconditional.
RadTech is a publicly quoted English company whose shares are traded on the
London Stock Exchange OFEX market. RadTech is a computer software developer,
business systems integrator and package software supplier. The majority of its
current products and services are Internet/Intranet related, primarily utilizing
Microsoft(R) development tools. The Company's management believes that RadTech
will serve as the Company's base for incubation facilities. Furthermore,
management expects that RadTech can offer `value added' investment to incubator
businesses by immediately supplying office space, operational assistance,
capital support, industry experience and access to a strategic network of
business relationships.
Stefan Allesch-Taylor, the President and Chief Executive Officer of the
Company, is also a non-executive director of RadTech.
B. Acquisition of Ferman AG
On May 3, 2000, the Company entered into a Heads of Terms contract to
acquire 51% of the equity of Ferman AG ("Ferman"), a Swiss investment company,
from Dr. Alexander Nill and Fortman Cline AG (collectively, the "Vendors").
Pursuant to the contract, the Company will issue to the Vendors 3,360,000 shares
of common stock. The closing of this transaction is subject to certain
conditions and it is anticipated that the transaction will be completed by July
31, 2000. The Vendors have guaranteed that upon closing of the transaction the
value of 51% of the net assets of Ferman to be acquired by the Company will be
not less than $42 million. Such guaranty will be secured by cash and/or
marketable securities.
2
<PAGE>
Ferman is an independent investment company that invests in public and
privately held growth companies. In selecting its investments, Ferman focuses on
Internet companies who develop Internet enabling software, e-commerce, software,
telecommunications, and multimedia. Ferman's principal holdings are primarily
comprised of European Internet and software companies including Top Tier
Software, SGA Research and Newtron.
Ferman seeks to take minority stakes in companies with an average
investment size of Euro 1 to 5 million. If an investment syndicate is
established, the investment size may reach up to Euro 10 million. Ferman
typically maintains its investments in portfolio companies for a period of 1 to
4 years.
Ferman considers itself to be an entrepreneurial partner and, apart from
capital, provides its portfolio companies with comprehensive advice and a
widespread network of contacts. Based on a strong position in Switzerland, the
vision of the Company is to become a leading venture capital company within the
next three years. Ferman will continue to differentiate itself from comparable
companies by pursuing synergistic investments and actively harvesting these
synergies through its management involvement.
Unlike typical venture capital firms, Ferman's management team blends
critical experience in finance and banking, business development, consulting,
investor relations, and marketing. Although Ferman does not consider itself to
be an early stage incubator, its management team has already helped some of its
portfolio companies to set up critical business contacts, placing talent,
advising on initial public offerings and acting as a sounding board for business
ideas. Ferman has established critical systems and procedures to ensure prudent
investment selection and optimal support.
The Company has appointed Dr. Nill to serve on its board of directors.
ITEM 5. OTHER EVENTS.
A. Exercise of Warrants Issued to Panther Capital Ltd
On January 28, 2000, the Company entered into an underwriting agreement
with Panther Capital Ltd ("Panther") to sell shares of common stock and warrants
of the Company pursuant to an exemption from registration under Regulation S of
the Securities Act. Under the underwriting agreement, the Company sold 5,000,000
shares of its common stock, at a price of $1.00 per share, to certain
sub-underwriters named in the agreement, for whom Panther acted as lead
underwriter. In consideration for such underwriting, Panther received warrants
to purchase up to 1,000,000 shares of common stock of the Company. As of May 12,
2000, Panther exercised all 1,000,000 warrants at $1.00 per share.
3
<PAGE>
B. Appointment of New Directors
On May 12, 2000, the board of directors of the Company appointed Martin
Lechner, Rajeev Misra, Dr. Alexander Nill and Dr. Stefan Fleissner as directors
of the Company, effective immediately.
Dr. Alexander Nill has 5 years of experience in private equity investment
in the Internet and technology sectors. In 1996, Dr. Nill joined Sparta
Beteiligungen AG where he built up and headed the private equity division. He
was appointed to the Board of Directors in 1997. In 1999, Dr. Nill was appointed
President and Chief Executive Officer of Sparta UK Ltd in London. Dr. Nill is
Chairman of the advisory board for Red Cube AG and Vice Chairman of the advisory
board for IQ Capital AG. Dr. Nill received a BA from Maximilian University, an
MBA from the European University in Munich, and a PhD in Economics from Oxford
University.
Martin Lechner is a Co-Founder of IQ Capital AG and Executive Board Member
of IQ Capital SGA, respectively German and Swiss venture capital corporations.
From 1991 to 1996, he gained extensive investment banking and fund management
experience, having served in numerous capacities at Dresdner Kleinwort Benson
(Frankfurt), Keppler Asset Management (New York), and Foreign & Colonial
(London). He currently serves on the Supervisory Board of several US and
European companies including TopTier Software, a San Jose based software
solution provider via the Internet, and Open Mind Systems, a Swiss software
content management provider. Mr. Lechner received his degree as Dipl. Kfm. in
Economics at the University of Passau.
Rajeev Misra is currently a managing director at Deutsche Bank, having
joined the Fixed Income Division in July 1995. He is responsible for building
Deutsche Bank's structured credit (credit derivatives, securitization, tax, and
repackaging) distribution effort in Western and Eastern Europe. Mr. Misra has
seven years of Investment Banking experience in Europe, and has established
numerous senior management relationships with financial institutions and money
managers. From 1986 to 1989, he worked as a manager for a software development
team at Microsoft Corp. Mr. Misra has a Bachelors degree in Computer Science
from the University of Pennsylvania and an MBA from the Sloan School of
Management at the Massachusetts Institute of Technology.
Dr. Stefan Fleissner founded IMAGES Communications and New Media AG, an
Internet and multimedia design agency, in 1991. He served as Chief Executive
Officer, focusing mainly on strategic planning, brand marketing and investor
relations. In 1999, he became an Executive Board member of IQ Capital AG, a
Swiss venture capital company with responsibilities for equity management,
e-commerce and corporate planning. Dr. Fleissner is a director of IQ Capital
Asia PLC in Singapore and a member of the advisory board of Internet-schule.com
in Munich. He has an honors degree in business management from Munich University
and a doctorate in Economics from Innsbruck University.
4
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO-FORMA INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired*
(b) Pro-Forma Financial Information*
(c) Exhibits
Number Description
2.1 Offering Document to acquire shares of Radical Technology Plc.
2.2 Heads of Terms Agreement by and among Internet Holdings, Inc., Dr.
Alexander Nill and Fortman Cline A.G. to acquire Ferman A.G., dated May 3,
2000.
- ----------
* To be filed by amendment.
5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERNET HOLDINGS, INC.
May 23, 2000 By: /s/ Jason Forsyth
----------------------
Jason Forsyth,
Chief Financial Officer
6
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in
any doubt about the action you should take, you are recommended to seek your own
independent financial advice from your stockbroker, solicitor, accountant or
other independent financial adviser authorised under the Financial Services Act
1986.
This document should be read in conjunction with the accompanying Form of
Acceptance.
If you have sold or transferred all your Ordinary Shares in Radical Technology
plc, please send this document and the accompanying Form of Acceptance and
reply-paid envelope as soon as possible to the purchaser or transferee, or to
the stockbroker, bank or other agent through whom the sale or transfer was
effected, for transmission to the purchaser or transferee.
Corporate Synergy PLC, which is regulated by the Securities and Futures
Authority, is acting for Internet Holdings, Inc. in connection with the Offer
and no-one else and will not be responsible to anyone other than Internet
Holdings, Inc. for providing the protection afforded to customers of Corporate
Synergy PLC nor for providing advice in relation to the Offer.
Capital Strategy Plc, which is regulated by the Securities and Futures
Authority, is acting for Radical Technology plc in connection with the Offer and
no one else, and will not be responsible to any person other than Radical
Technology plc for providing the protection afforded to customers of Capital
Strategy Plc or for providing advice in relation to the Offer.
Recommended Offer for
Radical Technology plc
by
Corporate Synergy PLC
on behalf of
Internet Holdings, Inc
A letter of recommendation to accept the Offer from Philip Roberts, an
independent director of Radical is set out in Part 2 of this document.
ACCEPTANCES SHOULD BE DESPATCHED AS SOON AS POSSIBLE, AND IN ANY EVENT SO AS TO
BE RECEIVED NO LATER THAN 3.00 P.M ON 20 APRIL 2000. The procedure for
acceptance of the Offer is set out in Part 3 of this document and in the
accompanying Form of Acceptance.
<PAGE>
The New Internet Shares described in this document have not been registered
under the United States Securities Act of 1933. Internet is offering the New
Internet Shares to Radical Shareholders in a transaction exempt from the
registration requirements of the Securities Act under section 4(2) and
Regulation D promulgated under it or Regulation S promulgated under it. The New
Internet Shares may not be offered or sold in the United States unless
registered under the Securities Act or an exemption from registration is
available. Further, hedging transactions with regard to the New Internet Shares
may not be conducted unless in compliance with the Securities Act. Please refer
to Part 3 of this document for further details.
Throughout this document, dollar amounts have been converted into pounds at a
rate of $1.59 : (pound)1.
PART 1
LETTER FROM THE INDEPENDENT DIRECTORS OF _INTERNET HOLDINGS, INC.
Directors:
Stefan P Allesch-Taylor (Executive Chairman)
116 John Street
Nicholas H Thistleton (Executive Director)
Suite 1313
Sir Euan A-G Calthorpe Bt (Non-executive Director)
New York
NY 10038
USA
30 March 2000
Dear Radical Shareholder
<PAGE>
Recommended offer for Radical
On 3 March 2000, we announced the terms of a recommended offer to be made by
Corporate Synergy on our behalf, to acquire the whole of the issued ordinary
share capital of Radical. Stefan Allesch-Taylor is a director of both Internet
and Radical and has taken no part in Internet's directors' or Radical's
directors' deliberations. I am writing on behalf of the independent directors of
Internet, being Sir Euan A-G-Calthorpe and myself, to explain certain factors
why the Internet board decided to make the Offer.
Internet was originally incorporated in the State of Utah, USA with file number
07363 on 8 March 1977, under the name Trolley Enterprises, Inc. Over the last 20
years Internet has been involved in a number of reverse acquisitions in each
case changing its name to the reverse acquirer. The name Internet Holdings, Inc
was adopted on 12th July 1996. It is the only company in the world with the
ticker symbol HTTP. A ticker symbol identifies the stock of a company on its
relevant market.
In December 1999, Internet appointed its current board and in January 2000
raised US$4.95 million, net of expenses, to pursue its strategy of investing in,
partnering and acquiring businesses involved in the internet, business
e-commerce and telephony.
Internet is an internet company actively seeking to establish partnerships and
acquire companies primarily involved in the business to business e-commerce and
telephony industries. The directors of Internet intend to specialise in the
European internet market, but will seek to draw on the financial and operational
expertise available through a wide variety of contacts established by the board
of Internet in the more mature internet market of the USA. It is intended to
appoint further directors to the board very shortly.
Internet will partner those companies where it believes there can be a cross
fertilisation of ideas and where sharing resources can be quickly established.
The directors of Internet believe it will be able to provide operational
assistance, financial support, industry and individual European economy
expertise and provide a strategic link between each business designed to bring
our partners under one intellectual and economic umbrella. The directors of
Internet intend that each of Internet's partnering companies will ultimately
contribute to Internet's financial and intellectual core. Internet will
emphasise that they are not investors nor venture capitalists, but partners with
the companies they acquire.
The directors of Internet wish to establish Internet as one of the premier
e-commerce and telephony companies in Europe and is seeking to do this by:
1. -acquiring or partnering companies at an embryonic level of their life-cycle,
seeking external finance for the first time. The directors of Internet intend
that the technologies of these companies will range from early research and
development projects to pre-prototype stage;
2. -acquiring or partnering companies seeking funding for the completion of
technology and product development and the commencement of marketing and sales
drives. It is intended that these companies would typically have established
small sales revenues and require assistance to establish a presence in the
market;
<PAGE>
3. -acquiring or partnering companies that have already established a market
presence, primarily in the USA, who are seeking to expand their operations to
the European market. The directors of Internet believe that by modifying already
successful US internet businesses to a European model they will have the benefit
of the experiences of those companies at the early stage of their respective
development and they will have the benefit of the expertise of the directors and
officers of Internet in the European countries chosen for expansion;
4. -acquiring or partnering companies involved in the telephone business, with a
particular emphasis on wireless access to the internet; and
5. -acquiring or partnering companies involved in software solutions and
supplying services to the internet industry. The directors of Internet seek to
establish a core turnover quickly, as part of their strategic and financial
model. It will be through the involvement with these businesses that support can
be given to new internet businesses thereby establishing economies of scale and
mitigating potentially significant risks.
Radical will form the core technical base in Europe for Internet's internet,
e-commerce and software development activities and the experience and expertise
of the management team at Radical will substantially assist Internet in
achieving its goals.
Yours sincerely
Nicholas Thistleton
Independent director
PART 2
LETTER OF RECOMMENDATION FROM THE INDEPENDENT DIRECTORS OF RADICAL
Directors:
G Robert Boot (Executive Chairman and Finance Director)
Julian A Burns (Managing Director)
Philip Roberts (Support Director)
Stefan P Allesch-Taylor (Non-executive Director)
30 March 2000
Dear Radical Shareholder,
<PAGE>
Recommended offer for Radical
1. Introduction
On 3 March 2000 Internet announced the terms of a recommended offer to be made
by Corporate Synergy on behalf of Internet to acquire the whole of the issued
ordinary share capital of Radical. The consideration is to be satisfied by the
issue of New Internet Shares. Assuming full acceptance, the Offer will result in
the issue of up to 1,281,714 New Internet Shares to Radical Shareholders,
representing 7.7 per cent of the issued share capital of Internet.
G Robert Boot, chairman of Radical, is a shareholder in STG which is acting in
concert with Internet and he has therefore taken no part in the deliberations of
the directors of Radical. Stefan Allesch-Taylor is a director of both Internet
and Radical and has therefore taken no part in the Internet directors' or
Radical directors' deliberations.
I am writing on behalf of the independent directors of Radical (being Julian
Burns and myself) to explain the background to the Offer and the reasons why the
Independent Directors, having been so advised by Capital Strategy, consider the
terms of the Offer to be fair and reasonable and recommend that you accept the
Offer.
The formal Offer is set out in the letter from Corporate Synergy in Part 3 of
this document.
2. Terms of the Offer
The Offer is on the following basis:
for every 143 Radical Shares 50 New Internet Shares
and so in proportion to any other number of Radical Shares held. Fractions of
New Internet Shares will not be issued.
The directors of Radical and their immediate families have irrevocably
undertaken to accept the Offer in respect of their current beneficial holdings
of Radical Shares, totalling 1,780,000 Radical Shares, representing
approximately 48.6 per cent. of Radical's current issued share capital. In
addition, certain other shareholders have irrevocably undertaken to accept the
Offer in respect of 294,500 Radical Shares, representing approximately 8.0 per
cent. of Radical's current issued share capital. In total, therefore,
irrevocable acceptances have been received for shareholders holding
approximately 56.6 per cent of Radical's Shares.
THE NEW INTERNET SHARES WILL BE UNREGISTERED AND WILL NOT BE PUBLICLY TRADABLE
FOR A MINIMUM PERIOD OF 12 MONTHS FROM THE DATE OF THEIR ISSUE.
Capital Strategy holds an option over 88,190 Radical Shares which is exercisable
at 100p per Radical Share and intends to exercise its option and accept the
Offer in respect of those Radical Shares.
3. New Internet Shares
Apart from being unregistered (as explained below) the New Internet Shares to be
issued will be issued credited as fully paid and will, when issued, rank pari
passu in all respects with the Internet Shares now in issue, including the right
to receive all dividends and other distributions declared, made or paid
hereafter. Neither Radical nor Internet has declared a dividend nor intends to
do so in the foreseeable future.
<PAGE>
Although the Internet Shares are currently traded on the NASD bulletin board,
THE NEW Internet shares to be issued pursuant to the offer will be unregistered.
FULL DETAILS OF THE RIGHTS ATTACHING TO THE NEW INTERNET SHARES ARE SET OUT IN
PARAGRAPH 4 OF APPENDIX V.
Internet has undertaken to the directors of Radical to file a registration
statement with the SEC no later than 12 months from the date of issue of the New
Internet Shares. Internet has also undertaken that during this period it will
not file a registration statement with the SEC in respect of Internet Shares
owned by STG, a company of which Stefan Allesch-Taylor and Sir Euan Calthorpe
are also directors, as well as of Internet, and which for the purposes of the
Offer is regarded as acting in concert with Internet, prior to filing the
registration statement in respect of the Internet shares to be issued to Radical
shareholders.
Your attention is drawn to the fact that the Offer is a share for share exchange
and that no loan note or cash alternative is being provided.
4. Background to and reasons for the Offer
Based on the statements made by the Internet directors, Radical's directors
believe that shareholder value can be enhanced by the combination of Radical's
technical skills and Internet's access to funds and its strategy in markets in
which Radical's directors are familiar and experienced.
5. Employees
The directors of Internet have confirmed that the existing employment rights of
all management and employees of Radical will be fully safeguarded.
6. Taxation
Your attention is drawn to Appendix IV set out in this document. If you are in
any doubt as to your own tax position, you should consult your independent
professional adviser immediately.
Radical Shareholders will lose any EIS relief and capital gains tax deferral
relief if they accept the Offer. Radical has applied to the Inland Revenue under
section 138 of the Taxation of Chargeable Gains Act 1992 for confirmation that
sections 135 and 136 will apply to Radical Shareholders who accept the Offer.
7. Action to be taken
Radical Shareholders wishing to accept the Offer should complete and return the
enclosed Form of Acceptance in accordance with the instructions contained
therein and return it to Connaught St. Michaels Limited, PO Box 30, Cresta
House, Alma Street, Luton, Beds LU1 2PU, so as to arrive by not later than 3.00
p.m. on 20 April 2000. The procedure for acceptance is set out in paragraph 12
of the letter from Corporate Synergy in Part 3 of this document and in the Form
of Acceptance.
8. Further information
The directors of Radical requested the lifting of the suspension of trading in
Radical Shares as soon as the detailed announcement of the Offer was made. This
also provided an opportunity for those shareholders not wishing to accept the
Offer to sell their Radical Shares on the OFEX market if they so wish.
<PAGE>
Your attention is drawn to the information set out in the remainder of this
document and in particular to the letter from Corporate Synergy setting out the
Offer and the procedures for acceptance.
9. Recommendation
The Independent Directors, being Philip Roberts and Julian Burns, who have been
so advised by Capital Strategy, consider the terms of the Offer to be fair and
reasonable and in the interests of Radical Shareholders. In advising the
Independent Directors, Capital Strategy has taken into account the Independent
Directors' commercial assessment of the Offer. The Independent Directors
recommend Radical Shareholders to accept the Offer as they have undertaken to do
in respect of their aggregate holdings of 1,086,000 Radical Shares, representing
30.4 per cent. of the issued share capital of Radical.
Yours sincerely
Philip Roberts
Independent Director
PART 3
LETTER FROM CORPORATE SYNERGY PLC
30 March 2000
Dear Radical Shareholder,
Recommended offer for Radical on behalf of Internet
1. Introduction
On 3 March 2000 Internet announced the terms of a recommended offer to be made
by Corporate Synergy on behalf of Internet to acquire the whole of the issued
ordinary share capital of Radical. The consideration is to be satisfied by the
issue of New Internet Shares. Assuming full acceptance, the Offer will result in
the issue of 1,281,714 New Internet Shares to Radical Shareholders, representing
7.7 per cent of the issued share capital of Internet.
The purpose of this letter is to set out the terms of the recommended offer by
Corporate Synergy on behalf of Internet to acquire the entire issued share
capital of Radical. This letter contains the formal Offer, which is now being
made on behalf of Internet.
<PAGE>
Your attention is drawn to the letter from the Independent Directors, in Part 2
of this document, which sets out the reasons why the Independent Directors
consider the terms of the Offer to be fair and reasonable and in the interests
of Radical Shareholders and recommend the acceptance of the Offer, and also to
the letter from the independent directors of Internet in Part 1 of this
document, setting out why they are making the Offer.
2. Terms of the Offer
On behalf of Internet, we offer to acquire, on the terms and subject to the
conditions set out or referred to in Appendix I to this document, all the
Radical Shares in issue on the following basis:
for every 143 Radical Shares 50 New Internet Shares
and so in proportion to any other number of Radical Shares held. Fractions of
New Internet Shares will not be issued.
THE NEW INTERNET SHARES WILL BE UNREGISTERED AND WILL NOT BE PUBLICLY TRADABLE
FOR A MINIMUM PERIOD OF 12 MONTHS FROM THE DATE OF THEIR ISSUE.
The Radical Shares will be acquired by Internet under the Offer fully paid and
free of all liens, equities, charges and encumbrances, rights of pre-emption and
any other third party rights or interests of any nature whatsoever and together
with all rights attaching to them, including the right to receive and retain all
dividends and other distributions hereafter declared, made or paid.
Capital Strategy holds an option over 88,190 Radical Shares which is exercisable
at 100p per Radical Share and intends to exercise its option and accept the
Offer in respect of those Radical Shares.
The directors of Radical and their immediate families have irrevocably
undertaken to accept the Offer in respect of their current beneficial holdings
of Radical Shares, totalling 1,780,000 Radical Shares, representing
approximately 48.6 per cent of Radical's current issued share capital. In
addition, certain other shareholders have irrevocably undertaken to accept the
Offer in respect of 294,500 Radical Shares, representing approximately 8.0 per
cent of Radical's current issued share capital. In total, therefore, irrevocable
acceptances have been received for shareholders holding approximately 56.6 per
cent of Radical's Shares.
Acceptances of the Offer should be despatched as soon as possible and, in any
event, so as to be received not later than 3 pm on 20 April 2000. Instructions
on how to accept the Offer are set out in paragraph 13 below and in the Form of
Acceptance.
3. New Internet Shares
Apart from being unregistered (as explained below) the New Internet Shares will
be issued credited as fully paid and will rank pari passu in all respects with
the Internet Shares now in issue, including the right to receive all dividends
and other distributions declared, made or paid hereafter. Neither Radical nor
Internet has declared a dividend nor expects to do so in the foreseeable future.
Although the Internet Shares are currently traded on the NASD bulletin board,
THE NEW INTERNET SHARES WILL BE UNREGISTERED. FULL DETAILS OF THE RIGHTS
ATTACHING TO THE NEW INTERNET SHARES ARE SET OUT IN PARAGRAPH 11 BELOW.
<PAGE>
Internet has undertaken to the directors of Radical to file a registration
statement with the United States Securities and Exchange Commission no later
than 12 months from the date of issue of the New Internet Shares. Internet will
notify its shareholders when the registration is complete. Internet has also
undertaken that during this period it will not file a registration statement
with the United States Securities and Exchange Commission in respect of Internet
Shares owned by STG, a company of which Stefan Allesch-Taylor and Sir Euan
Calthorpe are also directors, as well as of Internet, and which for the purposes
of the Offer is regarded as acting in concert with Internet, prior to filing the
registration statement in respect of the New Internet Shares to be issued to
Radical Shareholders.
4. Background to and reasons for the Offer
The letter from the independent directors of Internet in Part 1 explains the
background and reasons for the Offer.
5. Information on Internet
Internet was incorporated in the State of Utah, USA, on 8 March 1977 and its
stock is traded in the USA on the NASD Bulletin Board. Internet disposed of its
operating business in December 1997 and currently has no operations other than
an investment in The MDA Group PLC.
Internet intends to make strategic acquisitions in internet and internet related
businesses in Europe, the United States and other regions as these markets
expand. Internet intends to effect these acquisitions through the purchase of
both minority and majority interests, joint ventures, partnerships and
alliances. Internet intends to take an active role in the management and
development of investee companies.
The proposed acquisition of Radical will provide Internet with an operating
business through which it intends to build further relationships.
6. Information on STG
STG was incorporated in England and Wales on 22 November 1998 as Flowgilt PLC
under the Act as a public limited company with registered number 2320261. It
subsequently changed its name to Worthing Premier Properties (Holdings) PLC and
then to STG Holdings PLC. The registered office of STG is 42-46 High Street,
Esher, Surrey KT10 9QY and its principal place of business is 16 Curzon Street,
Mayfair, London W1Y 7FF. The directors of STG are Stefan Allesch-Taylor, Sir
Euan Calthorpe, Luke Chapman and Anthony Berk and David Venus is company
secretary. There are currently 5,428,604 STG Shares in issue. Details of its
directors' shareholdings are set out in paragraph 3 of Appendix V.
STG is an investment company and has the following subsidiaries:
o - Miller STG (NI) Limited - Miller STG (NI) Limited holds an option to
acquire a 100,000 square foot former factory in Londonderry city centre
opposite the 228,000 square foot Foyleside Shopping Centre. It was granted
detailed planning permission for a 100,000 square foot shopping centre in
July 1999.
o - Landmark STG Limited - Landmark STG Limited has exchanged conditional
contracts to acquire a 4.1 acre site on Bradford Road, just off junction 27
of the M62. The company was granted planning permission in August 1999 to
build a 45,000 square foot B1 office park on the site.
<PAGE>
o -Metropolitan STG (Newry) Limited - this company purchased a site in Newry,
Northern Ireland in October 1999. The site has the benefit of outline
planning consent for 80,000 square feet of commercial leisure development.
STG has equity stakes in the following companies:
o -The MDA Group PLC - STG holds 3,898,206 ordinary shares of 10p pence each
in The MDA Group PLC representing 13.7 per cent of the issued share
capital.
o -Internet - STG holds 6,480,000 Internet Shares representing 39.1 per cent
of the issued share capital of Internet. Stefan Allesch-Taylor and Sir Euan
Calthorpe are directors of both STG and Internet and for the purposes of
the Offer, STG and Internet are regarded as acting in concert.
STG was admitted to trading on OFEX in December 1997. Its shares are currently
suspended. In the year ended 31 March 1999, STG made a loss before tax of
(pound)171,260 on nil turnover. In the year ended 31 March 1998, STG made a loss
of (pound)268,132 on turnover of (pound)965. At 31 March 1999, STG had net
assets of (pound)378,522 and at 31 March 1998 it had net assets of
(pound)446,939.
7. Information on Radical
Radical was founded in 1998 by the directors and senior staff of MDA Computing
Limited to effect the management buy-out of the business of MDA Computing
Limited.
Radical is a bespoke computer software developer, a business systems integrator
and package software supplier. The majority of its current products and services
are internet/intranet related, primarily utilising Microsoft(R)1 development
tools.
Radical was admitted to OFEX, a facility operated by J P Jenkins Limited, a
member of the London Stock Exchange Limited, to allow trading in unquoted
companies, on 1 December 1999 and, at the same time, raised approximately
(pound)600,000 net of expenses in order to develop its software products and to
finance the initial development of an internet portal for the UK health sector.
Radical announced on 14 January 2000 that it had received an approach which may
or may not lead to an offer and its shares were suspended at 97.5p.
The directors of Radical have warranted to Internet that, except for certain
disclosures made to Internet, to the best of their knowledge and belief, the
information in the prospectus issued by Radical and dated 28 October 1999 was,
at the date of the announcement of the Offer, in accordance with the facts and
was not misleading.
The suspension of the trading of Radical Shares on OFEX was lifted with effect
from 6 March 2000, following the announcement of the Offer.
8. Financial effects of the Offer
The following table shows, for illustrative purposes only, and on the bases and
assumptions set out in the notes below, the financial effects of accepting the
Offer for a holder of Radical Shares.
<PAGE>
Notes Consideration
(pound)
Market value of 143 Radical Shares (i) 228.80
Market value of 50 New Internet Shares (ii) 353.77
An increase of 54.6%
Notes:
(i) -The market value of the Radical Shares represent the closing middle market
quotation of 160p as derived from Newstrack Limited at the close of business on
28 March 2000, being the latest practicable date prior to the publication of
this document.
(ii) -In the view of Corporate Synergy, based on the closing bid price of the
Internet Shares of $12.50 on 28 March 2000 and assuming the New Internet Shares
will be registered in 12 months, the value of one New Internet Share was not
less than $11.25. The market value of 50 New Internet Shares makes this
assumption. For accounting purposes the acquisition will be valued at the
pre-suspension price of the Radical Shares on OFEX.
(iii) -No account has been taken of any liability to taxation.
The directors of Internet do not believe that a meaningful comparison of gross
income for an accepting Radical Shareholder can be made because neither Internet
of Radical has paid a dividend and the directors of Internet do not propose that
Internet should do so in the foreseeable future.
9. Radical's management and employees
The board of Internet holds the existing management and employees of Radical in
high regard and looks forward to working alongside them.
Robert Boot will be appointed Finance Director of STG_following the Offer being
declared unconditional as to acceptances.
The directors of Internet have confirmed that the existing employment rights of
all management and employees of Radical will be fully safeguarded.
10. Current Trading and Prospects
Internet does not own an operating business. The directors of Internet plan to
acquire internet businesses in Europe, the United States and other regions as
the markets expand. The size of the acquisitions will vary according to the
stage of the business and the involvement but Internet will generally play an
active role in the management of businesses in which it invests.
On 24 March 2000, Internet entered into a definitive agreement to acquire 100
per cent. of the equity of Core Ventures Limited, a privately owned internet
venture company. The consideration is to be satisfied by the issue to the
current owner of Core Ventures Limited, Troy Limited, of 1,800,000 Internet
Shares, valuing it at approximately $25,000,000.
The directors of Internet intend to look at investment opportunities and will
seek to strengthen the board of Internet. The directors of Internet believe that
the prospects for the enlarged group are encouraging.
<PAGE>
11. Non-Registration of New Internet Shares
Internet has not registered the New Internet Shares under the Securities Act.
Internet is offering and selling the New Internet Shares to US Radical
Shareholders in a transaction exempt from the registration requirements of the
Securities Act under 4(2) and Regulation D promulgated under it and to non-US
shareholders in offers and sales that occur outside the US to persons other than
US persons ("foreign purchasers") in offshore transactions meeting the
requirements of Rule 903 of Regulation S under the Securities Act. In this
paragraph, the terms "offshore transaction", "US and US person" have the
meanings given to them in Regulation S.
New Internet Shares which are held by non-US persons may be transferred (i) to
other non-US persons in transactions that occur outside the US within the
meaning of Regulation S under the Securities Act; (ii) pursuant to an effective
registration statement, or (iii) any time after one year from the date of issue,
to US persons pursuant to any available exemption from the registration
requirements of the Securities Act, and subject to the same restriction of Rule
144 of the Securities Act as set out below.
New Internet Shares which are held by US persons are (i) publicly tradable after
one year, subject to the volume, manner of sale and other restrictions of Rule
144 of the Securities Act, and (ii) may be sold (A) pursuant to an effective
registration statement or (B) pursuant to any other available exemption from the
registration requirements of the Securities Act.
In addition, New Internet Shares which are held for two years by non-affiliates
of Internet, who have held such status for at least 90 days, are freely tradable
pursuant to Rule 144(K) of the Securities Act.
Internet accredited investor requirements for US Radical Shareholders
Holders of Radical Shares who are US residents, citizens or are otherwise
subject to the federal and state securities law of the United States will, if
they have not already done so, be required to complete an accredited investment
questionnaire so that Internet may ascertain whether the issue of New Internet
Shares to US shareholders of Radical would be exempt from registration under
section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated
under it.
The availability of such exemption is dependent in part on the "investment
intent" of each US Radical Shareholder receiving New Internet Shares. Each US
Radical Shareholder by accepting New Internet Shares will be required to
represent to Internet that he is acquiring the New Internet Shares for
investment purposes only and without a view to resell or distribute them.
Regulation S requirements for non-US Radical Shareholders
INTERNET IS OFFERING THE NEW INTERNET SHARES TO NON-US RADICAL SHAREHOLDERS IN
OFFERS AND SALES THAT OCCUR OUTSIDE THE US TO PERSONS OTHER THAN US PERSONS
("FOREIGN PURCHASERS") IN OFFSHORE TRANSACTIONS MEETING THE REQUIREMENTS OF RULE
903 OF REGULATION S UNDER THE SECURITIES ACT. EACH NON-US RADICAL SHAREHOLDER,
BY ACCEPTING NEW INTERNET SHARES, WILL BE REQUIRED TO REPRESENT TO INTERNET
THAT:
(i) -he is not a US person and is not acquiring New Internet Shares for the
account or benefit of any US person;
<PAGE>
(ii) -he agrees to resell such securities only in accordance with the provisions
of Regulation S pursuant to an effective registration statement under the
Securities Act, or pursuant to another available exemption from registration,
and he will conduct hedging in transactions involving the New Internet Shares
only in compliance with the Securities Act.
12. Taxation
Set out in Appendix IV "UK and US Tax Considerations" is a general guide to the
tax position under the current UK and US law. Any person who is in any doubt as
to his tax position, or who is subject to tax in a jurisdiction other than the
UK, should consult his own professional adviser.
13. Procedure for acceptance of the Offer
This section should be read in conjunction with Part C of Appendix I.
(i) To accept the Offer
To accept the Offer in respect of all your Radical Shares, you must complete
Boxes 1 and 3 of the enclosed Form of Acceptance. In all cases you must sign Box
2 in the presence of a witness, who should also sign in accordance with the
instructions printed in it.
(ii) Return of Form of Acceptance
The Form of Acceptance, duly completed and signed, should be completed and
returned to Connaught St Michaels Limited, P.O. Box 30, Cresta House, Alma
Street, Luton, Bedfordshire LU1 2PU as soon as possible, but in any event, so as
to be received no later than 3.00 p.m. on 20 April 2000.
If you have any questions on how to complete the Form of Acceptance, please
telephone Connaught St. Michaels on 01582 405333.
A reply paid envelope is enclosed for your convenience and may be used by
Radical Shareholders for returning the Form of Acceptance within the UK. No
acknowledgement of receipt of document will be given. The instructions printed
on the Form of Acceptance are deemed to form part of the terms of the Offer.
(iii) Documents of title
A completed and signed Form of Acceptance must be accompanied by the relevant
share certificate(s) and or/other document(s) of title and should be returned by
post or hand to Connaught St Michaels Limited. If for any reason the relevant
share certificate(s) and/or other document(s) of title is/are not readily
available or is/are lost, you should nevertheless complete, sign and lodge the
Form of Acceptance as stated above so as to be received by Connaught St Michaels
Limited not later than 3.00 pm on 20 April 2000 accompanied by a letter stating
that the balance will follow as soon as possible or that you have lost one or
more of your share certificate(s) and/or document(s) of title. You should then
arrange for the relevant share certificate(s) and/or documents of title to be
lodged with Connaught St Michaels Limited. In the case of loss, you should then
write to the registrars of Radical, Harford Registrars at Harford House, 101-103
Great Portland Street, London W1N 6LL, for a letter of indemnity for the lost
share certificate(s) and/or document(s) of title which, when completed in
accordance with the instructions given, should be sent by post to Connaught St
Michaels Limited, P.O. Box 30, Cresta House, Alma Street, Luton, Bedfordshire
LU1 2PU.
<PAGE>
Acceptance of the Offer where your Radical Shares are in uncertificated form,
that is, in CREST
To accept the Offer, the Form of Acceptance must be completed in accordance with
the instructions on it and returned by hand or by post to Connaught St Michaels,
PO Box 30, Cresta House, Alma Street, Luton, Bedfordshire LU1 2PU as soon as
possible, but in any event to be received no later than 3.00 pm on 20 April
2000.
If your Radical Shares are in uncertificated form, you should insert in box 4 of
the Form of Acceptance the participant ID and member account ID under which such
Radical Shares are held by you in CREST and otherwise complete and return the
Form of Acceptance as described above. In addition, you should take, or procure
to be taken, the action set out below to transfer the Radical Shares in respect
of which you wish to accept the Offer to an escrow balance, specifying Connaught
St Michaels, in its capacity as a CREST participant under Connaught St Michaels
participant ID referred to below as the escrow agent, as soon as possible and in
any event so that the transfer to escrow settles no later than 3.00 pm on 20
April 2000.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before taking any action. Your CREST sponsor will be able to confirm details of
your participant ID and the member account ID under which your Radical Shares
are held. In addition, only your CREST sponsor will be able to send the TTE
instruction to CRESTCo which must be properly authenticated in accordance with
CRESTCo's specifications and which must contain, in addition to the other
information that is required for a TTE instruction to settle in CREST, the
following details:
o -the number of Radical Shares to be transferred to an escrow balance;
o -your member account ID which must be the same member account ID as
inserted in box 4 of the Form of Acceptance;
o -your participant ID which must be the same participant ID as inserted in
box 4 of the Form of Acceptance;
o -the participant ID of the escrow agent. This is 7RA02; o the member
account ID of the escrow agent. This is RADICAL;
o -the Form of Acceptance Reference Number which is the reference number that
appears on page 3 of the Form of Acceptance. This Reference Number should
be inserted in the first eight characters of the shared note field on the
TTE instruction. Such insertion will enable Connaught St Michaels to match
the transfer to escrow to your Form of Acceptance. You should keep a
separate record of the Reference Number for future reference;
o -the intended settlement date which should be as soon as possible and in
any event not later than 3.00 pm on 20 April 2000; and
o -the corporate action number for the Offer. This is allocated by CRESTCo
and can be found by viewing the relevant corporate action details in CREST.
After settlement of the TTE instruction, you will not be able to access the
Radical Shares concerned in CREST for any transaction or charging purposes. If
the Offer becomes or is declared unconditional in all respects, the escrow agent
will transfer the Radical Shares concerned to itself in accordance with
paragraph 6 of appendix 1 of part B of this document.
You are recommended to refer to the CREST manual published by CRESTCo for
further information on the CREST procedures outlined above. For ease of
processing, you are requested, wherever possible, to ensure that a Form of
Acceptance relates to only one transfer to escrow.
<PAGE>
If no Form of Acceptance Reference Number, or an incorrect Form of Acceptance
Reference Number, is included on the TTE instruction, Internet may treat any
amount of Radical Shares transferred to an escrow balance in favour of the
escrow agent specified above from the participant ID and member account ID
identified in the TTE instruction as relating to any Form(s) of Acceptance which
relate(s) to the same member account ID and participant ID up to the amount of
Radical Shares inserted or deemed to be inserted on the Form(s) of Acceptance
concerned.
You should note that CRESTCo does not make available special procedures in CREST
for any particular corporate action. Normal system timings and limitations will
therefore apply in connection with a TTE instruction and its settlement. You
should therefore ensure that all necessary action is taken by you, or by your
CREST sponsor, to enable a TTE instruction relating to your Radical Shares to
settle prior to 3.00 pm on 20 April 2000. In this connection, you are referred
in particular to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
(iv) Validity of acceptances
Internet and Corporate Synergy reserve the right, subject to the terms of the
Offer and the City Code, to treat as valid in whole or in part any acceptance of
the Offer which is not entirely in order or is not accompanied by the relevant
share certificate(s) and/or other documents of title. In that event, the New
Internet Shares will not be despatched until after the relevant share
certificate(s) and/or document(s) of title or indemnities satisfactory to
Internet and Corporate Synergy has/have been received.
(v) Overseas shareholders
The attention of Radical Shareholders who are citizens or residents of
jurisdictions outside the UK and of any person, including, without limitation,
any custodian, nominee or trustee who may have an obligation to forward this
document outside the UK, is drawn to appendix IV to this document.
The availability of the Offer to persons not resident in the UK may be affected
by laws of the relevant jurisdiction. Persons who are not resident in the UK
should inform themselves about and observe any applicable requirements.
If you are a resident in any jurisdiction other than the UK, you are advised to
consult an independent professional adviser immediately.
14. Settlement
Subject to the Offer becoming or being declared unconditional in all respects,
definitive share certificates for the New Internet Shares to which any Radical
Shareholder is entitled under the Offer will be issued (i) in the case of
acceptances received, valid and complete in all respects, by the date on which
the Offer becomes or is declared unconditional in all respects, within 14 days
of such date, or (ii) in the case of acceptances received, valid and complete in
all respects, after the date on which the Offer becomes or is declared
unconditional in all respects but while the Offer remains open for acceptance,
within 14 days of such receipt.
Definitive certificates for the New Internet Shares will be dispatched by first
class post or airmail.
<PAGE>
If the Offer does not become or is not declared unconditional in all respects
the completed Form of Acceptance, share certificate(s) and/or document(s) of
title will be returned by post (or by such other method as may be approved by
the Panel) within 14 days of the Offer lapsing, to the person or agent whose
name and address are set out in Box 3 of the Form of Acceptance or, if none is
set out, to the first named holder at his address, All documents and remittances
sent by, to or from Radical Shareholders or their agents will be sent at their
own risk.
15. Further information
Your attention is drawn to the further information in the Appendices which form
part of this document.
Yours faithfully
Justin Lewis
Director
Appendix I
Part A: Conditions of the Offer
1. Conditions of the Offer
The Offer (which in this Appendix, save where the context otherwise requires) is
subject to the following conditions:
(a) -valid acceptances being received (and not, where permitted, withdrawn) by
no later than 3.00 p.m. on 20 April 2000 or such later time(s) and/or date(s) as
Internet may, subject to the rules of the City Code, decide for Radical Shares
carrying more than 50 per cent. of the voting rights currently exercisable at a
general meeting of Radical by all Radical shareholders, including for the
purpose of this condition, to the extent (if any) required by the Panel, any
such voting rights attaching to any Radical Shares that may be unconditionally
allotted or issued before the Offer becomes or is declared unconditional as to
acceptances (whether pursuant to the exercise of any outstanding conversion or
subscription rights or otherwise), and, for this purpose, Radical Shares which
have been unconditionally allotted will be deemed to carry the voting rights
which they will carry on issue;.
(b) -the Office of Fair Trading not indicating that it is the intention of the
Secretary of State to refer the proposed acquisition of Radical by Internet, or
any matters arising there from, to the Competition Commission;
(c) -no government or governmental, quasi-governmental, supranational,
statutory, regulatory or investigative body, authority (including any national
antitrust or merger control authorities), court or any other person or body
whatsoever in any jurisdiction (each a "Third Party") having, prior to the date
on which the Offer becomes or is declared unconditional in all respects, done
anything which, in each case, would or might:
<PAGE>
(i) -make the Offer or its implementation, or the acquisition or proposed
acquisition by Internet or any of its subsidiary undertakings or associated
undertakings (including any joint venture, partnership, firm or company in which
any member of the Internet Group (aggregating their interests) has a substantial
interest) (together, the "Wider Internet Group") of any shares in, or control
of, Radical or any of Radical's subsidiary undertakings or associated
undertakings (including any joint venture, partnership, firm or company in which
Radical and/or any such undertaking (aggregating their interests) has a
substantial interest) (together, the "Wider Radical Group"), or any of the
assets of such a member, void, illegal or unenforceable under any jurisdiction,
or otherwise, directly or indirectly, restrain, prohibit, restrict or delay the
same, impede or impose additional conditions or obligations with respect
thereto, or otherwise challenge or interfere to a material extent therewith;
(ii) -impose any limitation on, or result in a delay in, the ability of any
member of the Wider Internet Group to acquire, or to hold or to exercise
effectively, directly or indirectly, all or any rights of ownership in shares or
other securities (or the equivalent) in, or to exercise voting or management
control over, any member of the Wider Radical Group;
(iii) -save pursuant to the Offer or Part XIIIA of the Companies Act 1985,
require any member of the Wider Internet Group or the Wider Radical Group to
acquire, or to offer to acquire, to a material extent, any shares or other
securities (or the equivalent) in, or any asset owned by, any member of the
Wider Radical Group owned by any third party; (iv) -require any member of the
Wider Radical Group and/or the Wider Internet Group to sell, or offer to sell,
any shares or other securities (or the equivalent) in, or any asset owned by,
any member of the Wider Radical Group and/or the Wider Internet Group;
(v) -otherwise adversely affect to a material extent the business, profits,
financial or trading positions or prospects of any member of the Wider Internet
Group or any member of the Wider Radical Group;
(d) -all applicable waiting periods and any other time periods during which any
Third Party could, in respect of the Offer or the acquisition or proposed
acquisition of any shares or other securities (or the equivalent thereof) in, or
under the control of, Radical or any member of the Wider Radical Group by any
member of the Wider Internet Group institute, implement or threaten any action,
proceedings, suit, investigation, enquiry or reference under the laws of any
jurisdiction, having expired, lapsed or been terminated;
(e) -save as disclosed in the audited report and accounts of Radical for the
year ended 31 March 1999 or in the interim announcement for the period ended 30
September 1999 or as disclosed in writing by Radical to Internet on or before 2
March 2000 there being no provision of any arrangement, agreement, licence,
franchise, facility, lease or other instrument to which any member of the Wider
Radical Group is a party or by or to which any such member or any of its assets
may be bound, entitled or be subject and which, in consequence of the Offer or
the acquisition or proposed acquisition by any member of the Wider Internet
Group of some or all of the share capital or assets of Radical or any member of
the Wider Radical Group or because of a change in the control or management of
Radical or any member of the Wider Radical Group or otherwise, would or might
reasonably be expected to result in, to a material extent;
(i) -any monies borrowed by, or any indebtedness or liability (actual or
contingent) of any member of the Wider Radical Group being, or becoming capable
of being declared repayable immediately or prior to their or its stated maturity
or the ability of any such member to borrow monies or incur any indebtedness
being withdrawn or inhibited;
<PAGE>
(ii) -the creation of any mortgage, charge or other security interest
wherever existing or having arisen over the whole or any part of the business
property or assets of any member of the Wider Radical Group or any such security
interest becoming enforceable;
(iii) -any such arrangement, agreement, licence or other instrument being
terminated or adversely modified or any onerous obligation or liability arising
there under;
(iv) -any assets or interests of, any member of the Wider Radical Group
being or falling to be disposed of or charged, or any right arising under which
any such asset or interest could be required to be disposed of or charged
otherwise than in the ordinary course of business;
(v) -any member of the Wider Radical Group ceasing to be able to carry on
business under any name under which it presently does so;
(vi) -the interests or business of any member of the Wider Radical Group in
or with any person, firm or body or the business of any member of the Wider
Radical Group with any person, firm or body (or any arrangement or arrangements
relating to any such interest or business) being terminated, or adversely
modified or affected;
(vii) -the value of, or financial or trading position or prospects of, any
member of the Wider Radical Group being prejudiced or adversely affected; or
(viii) -the creation of material liabilities (actual or contingent) by any
member of the Wider Radical Group;
(f) -no member of the Wider Radical Group having, since 31 March 1999, being the
date to which the last published audited report and accounts of Radical were
made up, save as disclosed in such report and accounts or in the interim
announcement for the period ended 30 September 1999 or otherwise disclosed in
writing to Internet on or before 2 March 2000:
(i) -issued or agreed to issue, or authorised or proposed the issue of,
additional shares of any class, or securities convertible into or exchangeable
for, or rights, warrants or options to subscribe for or acquire, any such shares
or convertible securities (save for issues to Radical or wholly-owned
subsidiaries of Radical) or redeemed, purchased or reduced any part of its share
capital;
(ii) -recommended, declared, paid or made or proposed to recommend,
declare, pay or make any bonus, dividend or other distribution other than
dividends lawfully paid to another member of the Radical Group;
(iii) -made or authorised or proposed or announced its intention to propose
any change in its loan capital;
(iv) -implemented, authorised, proposed or announced its intention to
propose any merger, demerger, reconstruction, amalgamation, scheme, commitment
or acquisition or disposal of assets or shares (or the equivalent thereof) in
any undertaking or undertakings, other than, in the case of a disposal, in the
ordinary course of business, which is material in the context of the Wider
Radical Group taken as a whole, or entered into or changed or made any offer
(which remains open for acceptance) to enter into or change the terms of any
contract with any director or senior executive of any member of the Wider
Radical Group;
(v) -issued, authorised or proposed, or announced an intention to authorise
or propose, the issue of any debentures or incurred any indebtedness or
contingent liability other than in the ordinary course of business to a material
extent;
<PAGE>
(vi) -save for transactions between members of the Radical Group, merged
with any body corporate, partnership or interest (other than in the ordinary
course of business) or disposed of, transferred, mortgaged or encumbered any
assets or any right, title or interest in any asset (including shares and trade
investments) or authorised, proposed or announced its intention to do so;
(vii) -entered into or varied any contract, transaction, arrangement or
commitment (whether in respect of capital expenditure or otherwise) which is of
a long term, or unusual nature, or which involves or could involve an obligation
of such a nature or magnitude which is material in the context of the Wider
Radical Group or which is or will be restrictive on the business of any member
of the Wider Internet Group or the Wider Radical Group or which could be so
restrictive to a material extent;
(viii) -entered into or materially varied or authorised, proposed or
announced its intention to enter into or vary any contract, transaction or
arrangement otherwise than in the ordinary course of business;
(ix) -waived or compromised any claim which is material in the context of
the Wider Radical Group;
(x) -been unable, or admitted in writing that it is unable, to pay its
debts or having stopped or suspended (or threatened to stop or suspend) payment
of its debts generally or ceased or threatened to cease carrying on all or a
substantial part of any business;
(xi) -proposed any voluntary winding up;
(xii) -entered into, or varied the terms of, any agreement with any of its
directors;
(xiii) -made any amendment to its memorandum or articles of association; or
(xiv) -entered into an agreement or passed any resolution or made any
proposal or announcement with respect to, or to effect, any of the transactions,
matters or events referred to in this condition (f);
(g) -since 31 March 1999, save as disclosed by Radical in its report and
accounts made up to that date or otherwise disclosed in writing to Internet on
or before 2 March 2000:
(i) -there having been no material adverse change, and no contingent
liability or other circumstance having arisen which would or is likely to result
in any material adverse change or deterioration in the business, assets,
financial or trading position or profits or prospects of Radical or any member
of the Wider Radical Group;
(ii) -no material litigation, arbitration proceedings, prosecution or other
legal proceedings to which any member of the Wider Radical Group is or may
become a party (whether as plaintiff or defendant or otherwise) and no
investigation by any Third Party against or in respect of any member of the
Wider Radical Group having been threatened, announced or instituted or remaining
outstanding by, against or in respect of any member of the Wider Radical Group
which in any such case might adversely affect any member of the Wider Radical
Group; and
<PAGE>
(iii) -there having been no receiver, administrative receiver or other
encumbrances appointed over any of the assets of the Wider Radical Group or any
analogous proceedings or steps taking place in any jurisdiction and there having
been no petition presented for the administration of any member of the Wider
Radical Group or any analogous proceedings or steps taking place in any
jurisdiction.
-For the purposes of the above conditions:
(i) -"parent undertaking," "subsidiary undertaking", "associated
undertaking" and "undertaking" have the meanings given by the Companies Act
1985, but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A of the
Companies Act 1985; and
(ii) -"substantial interest" means a direct or indirect interest in 20 per
cent. or more of the voting equity capital of an undertaking.
-Subject to the requirements of the Panel, Internet reserves the right (but
shall be under no obligation) to waive, in whole or in part, all or any of the
above conditions apart from condition (a). If Internet is required by the Panel
to make an offer for Radical Shares under the provisions of Rule 9 of the City
Code, Internet may make such alterations to the above conditions of the Offer,
including condition (a), as are necessary to comply with the provisions of that
Rule.
-The Offer will lapse unless all of the conditions set out above (other
than condition (a)) have been fulfilled or (if capable of waiver) waived by
midnight on whichever is the later of 21 days after (i) 20 April 2000 and (ii)
the date on which condition (a) is fulfilled (or such later date as Internet may
with the consent of the Panel decide). Internet shall not be obliged to waive
(if capable of waiver) or to treat as satisfied any condition until the latest
date for the fulfilment of all conditions referred to in the previous sentence,
notwithstanding that the other conditions of the Offer may at such earlier date
have been waived or fulfilled and that there are at such earlier date no
circumstances indicating that any of such conditions may not be capable of
fulfilment.
2. Further terms of the Offer
Save with the consent of the Panel, the Offer will lapse if the proposed
acquisition of Radical by Internet is referred to the Competition Commission
before the later of 3.00 p.m. on 20 April 2000 and the date on which the Offer
becomes, or is declared, unconditional as to acceptances. In such circumstances,
the Offer will cease to be capable of further acceptance and persons accepting
the Offer and Internet shall thereupon cease to be bound by acceptances
delivered on or before the date on which the Offer so lapse.
Part B: Further Terms of the Offer
Unless the context otherwise requires, any reference in Parts B or C of this
Appendix I and in the Form of Acceptance:
(i) -to the "Offer" shall include any revision, variation or renewal or
extension of the Offer (as the case may be);
(ii) -to the "acceptance condition" means the condition set out in paragraph
1(a) of Part A of this Appendix I;
<PAGE>
(iii) -to the "Offer becoming unconditional" means the acceptance condition
becoming or being declared satisfied whether or not any other condition of the
Offer remains to be fulfilled and references to the Offer having become or not
becoming unconditional shall be construed accordingly;
(iv) -to "acceptances of the Offer" shall include deemed acceptances of the
Offer; and
(v) -"Offer Period" means, in relation to the Offer, the period commencing on 14
January 2000 until whichever of the following dates shall be the latest: (i)
3.00 p.m. on 20 April 2000, (ii) the time and date at which the Offer lapses,
and (iii) the time and date at which the Offer become unconditional.
1. Acceptance period
(a) -The Offer will initially be open for acceptance until 3.00 p.m. on 20 April
2000. Although no revision is envisaged, if the Offer is revised it will remain
open for acceptance for a period of at least 14 days from the date on which
written notification of the revision is posted to Radical Shareholders. Except
with the consent of the Panel, no revision of the Offer may be made or posted
after 15 May 2000 or, if later, the date falling 14 days prior to the last date
on which the Offer is capable of becoming unconditional.
(b) -The Offer, whether revised or not, shall not (except with the consent of
the Panel) be capable of becoming unconditional after midnight on 29 May 2000
(or any earlier time and/or date beyond which Internet has stated that the Offer
will not be extended and in respect of which it has not, where permitted,
withdrawn that statement), nor of being kept open for acceptance after that time
or date, unless it has previously become unconditional, provided that Internet
reserves the right, with the permission of the Panel, to extend the Offer to (a)
later time(s) and/or date(s). Except with the consent of the Panel, Internet may
not, for the purpose of determining whether the acceptance condition has been
satisfied, take into account acceptances received or purchases of Radical Shares
made after 1.00 p.m. on 29 May 2000 (or any earlier time and/or date beyond
which Internet has stated that the Offer will not be extended and in respect of
which it has not withdrawn, where permitted, that statement) or, if the Offer is
so extended, any such later time(s) and/or date(s) as may be agreed with the
Panel. If the latest time at which the Offer may become unconditional is
extended beyond midnight on 29 May 2000, acceptances received and purchases of
Radical Shares made in respect of which all relevant documents are received by
Connaught St. Michaels Limited after 1.00 p.m. on 29 May 2000 may (except where
the City Code otherwise permits) only be taken into account with the agreement
of the Panel.
(c) -If the Offer becomes unconditional, it will remain open for acceptance for
not less than 14 days from the date on which it would otherwise have expired. If
the Offer has become unconditional and it is stated by or on behalf of Internet
that the Offer will remain open until further notice, then not less that 14
days' notice in writing will be given prior to the closing of the Offer to those
Radical Shareholders who have not accepted the Offer.
(d) -If a competitive situation arises after Internet has made "no extension"
statement and/or a "no increase" statement in relation to the Offer, Internet
may, if it specifically reserved the right to do so at the time such statement
was made, or otherwise with the consent of the Panel, withdraw that statement
provided that it complies with the requirements of the City Code and, in
particular, that:
(i) -it announces such withdrawal as soon as possible (and in any event
within four business days of the announcement of the competing offer or other
competitive situation) and Radical Shareholders are informed in writing of such
withdrawal at the earliest practicable opportunity or, in the case of Radical
Shareholders with registered addresses outside the UK or whom Internet knows to
be a nominee, trustee or custodian holding Radical Shares for such persons, by
announcement in the UK; and
<PAGE>
(ii) -any Radical Shareholders who accepted the Offer after the date of the
"no extension" or "no increase" statement are given a right of withdrawal in
accordance with paragraph 3(c) of this Part B.
-Internet may, if it has reserved the right to do so, choose not to be
bound by a "no increase" or a "no extension" statement if it would otherwise
prevent the posting of an increased or improved offer (either as to the value or
nature of the consideration offered or otherwise) which is recommended for
acceptance by the Board of Radical or in other circumstances permitted by the
Panel.
(e) -For the purpose of determining at any particular time whether the
acceptance condition has been satisfied Internet shall be entitled to take
account only of those Radical Shares carrying voting rights which have been
unconditionally allotted or issued before that time and written notice of
allotment or issue of which, containing all the relevant details, has been
received before that time by Connaught St. Michaels Limited from Radical or its
agents at the address specified in paragraph 3(a) of this Part B. Telex, e-mail
or facsimile transmission will not be sufficient.
2. Announcements
(a) -By 8.00 a.m. on the business day (the "relevant day") next following the
day on which the Offer is due to expire or become unconditional or is revised or
extended, as the case may be (or such later time(s) or date(s) as the Panel may
agree), Internet will despatch a letter to Radical Shareholders containing an
appropriate announcement of the position. Such announcement will also state
(unless otherwise permitted by the Panel) the total number of Radical Shares and
rights over Radical Shares (as nearly as practicable):
(i) -for which acceptances of the Offer have been received;
(ii) -acquired or agreed to be acquired by or on behalf of Internet or any
person acting in concert with it during the course of the Offer Period;
(iii) -held by or on behalf of Internet or any person acting in concert
with it prior to the Offer Period; and
(iv) -for which acceptances of the Offer have been received from any person
acting in concert with Internet, and will specify the percentage of Radical
Shares represented by each of these figures.
(b) -Any decision to extend the time and/or date by which the acceptance
condition has to be fulfilled may be made at any time up to, and will be
announced not later than, 8.00 a.m. on the relevant day (as defined in paragraph
2(a) of this Part B) or such later time(s) and/or date(s) as the Panel may agree
and the announcement will (unless the Offer is then unconditional, in which case
a statement may instead be made that the Offer will remain open until further
notice) state the next expiry date. In computing the number of Radical Shares
represented by acceptances and/or purchases, there may be included or excluded
for announcement purposes acceptances and purchases which are not complete in
all respects or which are subject to verification save that those which could
not be counted towards fulfilment of the acceptance condition under Notes 4 and
5 of Rule 10 of the City Code shall not (unless agreed by the Panel) be
included.
(c) -In this Appendix I, references to the making of an announcement or the
giving of notice by or on behalf of Internet include the release of an
announcement by Corporate Synergy to the press or the posting of an announcement
by or on behalf of Internet to Radical Shareholders.
3. Rights of withdrawal
<PAGE>
(a) -If Internet, having announced the Offer to be unconditional, fails to
comply by 3.30 p.m. on the relevant day (or such later time(s) and/or date(s) as
the Panel may agree) with any of the other requirements specified in paragraph
2(a) of this Part B, an accepting Radical Shareholder may (unless the Panel
agrees otherwise) immediately thereafter withdraw his acceptance of the Offer by
written notice received by hand (during normal business hours) or by post to
Connaught St. Michaels Limited, P.O. Box 30, Cresta House, Alma Street, Luton,
Bedfordshire LU1 2PU on behalf of Internet. Subject to paragraph 1(b) of this
Part B this right of withdrawal may be terminated not less than eight days after
the relevant day (as defined in paragraph 2(a) of this Part B) by Internet
confirming, if that be the case, that the Offer is still unconditional, and
complying with the other requirements specified in paragraph 2(a) of this Part
B. If any such confirmation is given, the first period of 14 days referred to in
paragraph 1(c) of this Part B will run from the date of such confirmation and
compliance.
(b) -If by 3.00 p.m. on 20 April 2000 (or such later time(s) and/or date(s) as
the Panel may agree) the Offer has not become unconditional, an accepting
Radical Shareholder may immediately thereafter withdraw his acceptance at any
time thereafter in the manner referred to in paragraph 3(a) of this Part B
before the earlier of (i) the time when the Offer becomes unconditional, and
(ii) the final time for lodgement of acceptances which can be taken into account
in accordance with paragraph 1(b) of this Part B.
(c) -If a "no extension" statement and/or a "no increase" statement has been
withdrawn in accordance with paragraph 1(d) of this Part B any Radical
Shareholder who accepted the Offer after that date of such a statement may
withdraw his acceptance thereafter in the manner referred to in paragraph 3(a)
of this Part B not later than the eighth day after the date on which written
notice of such withdrawal is posted to the relevant Radical Shareholder.
(d) -Except as provided by this paragraph 3, acceptances and elections shall be
irrevocable.
(e) -In this paragraph 3, "written notice" (including any letter of appointment,
direction or authority) means notice in writing bearing the original
signature(s) of the relevant accepting Radical Shareholder(s) or his/their
agent(s) duly appointed in writing (evidence of whose appointment is produced
with the notice in a form reasonably satisfactory to Internet). Telex, e-mail or
facsimile transmissions or copies will not be sufficient to constitute written
notice.
4. Revised offer
<PAGE>
(a) -No revision of the Offer is envisaged. However, if the Offer (in its
original or any previously revised form) is revised (either in its terms and
conditions or in the value or nature of the consideration offered or otherwise)
and such revision represents on the date on which such revision is announced (on
such basis as Corporate Synergy may consider appropriate) an improvement or no
diminution in the value of the Offer as so revised compared with the
consideration or terms previously offered or in the overall value received
and/or retained by a Radical Shareholder (under the offer or otherwise), the
benefit of the revised Offer will, subject to paragraphs 4(c), 4(d) and 7 of
this Part B, be made available to any Radical Shareholder who has accepted the
Offer in its original or any previously revised form (hereinafter called a
"previous acceptor"). The acceptance of the Offer by or on behalf of a previous
acceptor in its original or any previously revised form(s) shall, subject as
provided in paragraphs 4(c), 4(d) and 7 of this Part B, be treated as an
acceptance of the Offer as so revised and shall also constitute the separate
appointment of Internet and each of the Directors and Corporate Synergy and each
of its directors as his attorney and/or agent with authority (i) to accept any
such revised offer on behalf of such previous acceptor, (ii) if such revised
offer include alternative forms of consideration, to make such elections for
and/or accept such alternative forms of consideration in the proportions such
attorney and/or agent in his absolute discretion thinks fit, and (iii) to
execute on behalf of and in the name of such previous acceptor all such further
documents (if any) as may be required to give effect to such acceptances and/or
elections.
-In making any such election and/or acceptance, such attorney and/or agent
shall take into account the nature of any previous acceptances made by or on
behalf of the previous acceptor and such other facts or matters as he may
reasonably consider relevant.
(b) -The authorities conferred by this paragraph 4 and any acceptance of a
revised offer and/or any election(s) pursuant thereto shall be irrevocable
unless and until the previous acceptor becomes entitled to withdraw his
acceptance under paragraph 3 of this Part B and duly does so.
(c) -The deemed acceptance referred to in paragraph 4(a) of this Part B shall
not apply, and the authorities conferred by that paragraph shall be ineffective,
to the extent that a previous acceptor shall lodge with Connaught St. Michaels
Limited, within 14 days of the posting of the document containing the revised
offer, a form in which he validly elects to receive the consideration receivable
by him in some other manner.
(d) -The deemed acceptance referred to in paragraph 4(a) of this Part B shall
not apply, and the authorities conferred by that paragraph shall not be
exercised if as a result thereof the previous acceptor would (on such basis as
Corporate Synergy may consider appropriate) thereby receive less in aggregate in
consideration under the revised Offer than he would have received in aggregate
as a result of acceptance of the Offer in the form in which it was previously
accepted by him or on his behalf. The authorities conferred by paragraph 4(a) of
this Part B shall not be exercised in respect of any election available under
the revised Offer save in accordance with this paragraph 4.
<PAGE>
(e) -Internet and Corporate Synergy reserve the right to treat an executed Form
of Acceptance (in respect of the Offer in its original or any previously revised
form(s)) which is received dated after the announcement of any revised Offer as
a valid acceptance of the revised offer and/or where applicable, a valid
election for or acceptance of any of the alternative forms of consideration.
Such acceptances shall constitute an authority in the terms of paragraph 4(a) of
this Part B, mutatis mutandis, on behalf of the relevant Radical Shareholder.
5. Acceptances and purchases
Except as otherwise agreed by the Panel:
(a) -an acceptance of the Offer shall not be treated as valid for the purposes
of the acceptance condition unless the requirements of Note 4 and, if
applicable, Note 6 of Rule 10 of the City Code are satisfied in respect of it;
(b) -a purchase of Radical Shares by Internet or any person acting in concert
with it or its or their nominees will only be treated as valid for the purposes
of the acceptance condition if the requirements of Note 5 and, if applicable,
Note 6 of Rule 10 of the City Code are satisfied in respect of it; and
(c) -before the Offer may become unconditional, Connaught St. Michaels Limited
must have issued a certificate to Internet and/or to Corporate Synergy which
states the number of Radical Shares in respect of which acceptances have been
received and which comply with paragraph 5(a) of this Part B, and the number of
Radical Shares otherwise acquired, whether before or during the Offer Period,
which comply with paragraph 5(b) of this Part B. Copies of such certificate will
be sent to the Panel and to the financial advisers of Radical as soon as
possible after issue. Internet will use its reasonable endeavours to procure the
issue of such certificate.
6. General
(a) -Save with the consent of the Panel, the Offer will lapse unless all of the
conditions have been satisfied or (if capable of waiver) waived or, where
appropriate, have been determined by Internet in its reasonable opinion to be or
remain satisfied in each case by midnight on 29 May 2000 or by midnight on the
date which is 21 days after the date on which the Offer becomes unconditional,
whichever is the later, or such later date(s) as Internet may, with the consent
of the Panel, decide. If the Offer lapses for any reason, then it shall cease to
be capable of further acceptance and Internet, Corporate Synergy and Radical
Shareholders shall thereupon cease to be bound by prior acceptances. Internet
shall be under no obligation to waive (if capable of waiver) or treat as
satisfied any condition listed in Part A of this Appendix I by a date earlier
than the latest date specified above for the satisfaction thereof
notwithstanding that the other conditions of the Offer may at such earlier date
have been waived or fulfilled and that there are at such earlier date no
circumstances indicating that any of such conditions may be capable of
fulfilment.
(b) -The Offer will lapse if before 3.00 p.m. on 20 April 2000 or the time or
date when the Offer becomes unconditional, whichever is the later, either the
acquisition of Radical by Internet is referred to the Competition Commission or
its successor.
(c) -Except with the consent of the Panel, settlement of the consideration to
which any Radical Shareholder is entitled under the Offer will be implemented in
full in accordance with the terms of the Offer without regard to any lien, right
of set-off, counterclaim or other analogous right to which Internet or
<PAGE>
Corporate Synergy, may otherwise be, or claim to be, entitled as against such
Radical Shareholder and will be effected in the manner described in the letter
from Corporate Synergy contained in this document.
(d) -The Offer is made on 30 March 2000 and is capable of acceptance thereafter.
Copies of this document, the form of Acceptance and any related documents are
available from Connaught St. Michaels Limited, at the address set out in
paragraph 3(a) of this Part B.
(e) -The terms, provisions, instructions and authorities contained in or deemed
to be incorporated in the Form of Acceptance constitute part of the terms of the
Offer. Words and expressions defined in this document have the same meanings
when used in the Form of Acceptance, unless the context otherwise requires.
(f) -The Offer and all acceptances of it and all elections pursuant to it and
the Form of Acceptance and all contracts made pursuant to the Offer and action
taken or made or deemed to be taken or made under any of the foregoing shall be
governed by and construed in accordance with English law. In respect of matters
relating to the Offer, Internet hereby submits to the jurisdiction of the Courts
of England. Execution by or on behalf of a Radical Shareholder of a Form of
Acceptance will constitute his submission, in relation to all matters arising
out of or in connection with the Offer and the Form of Acceptance, to the
jurisdiction of the Courts of England and his agreement that nothing shall limit
the right of Internet or Corporate Synergy to bring any action, suit or
proceeding arising out of or in connection with the Offer and the Form of
Acceptance in any other manner permitted by law or in any court of competent
jurisdiction.
(g) -Any reference in this document and in the Form of Acceptance to 20 April
2000 shall, except in paragraphs 1(a) and 6(b) of this Part B and where the
context otherwise requires, be deemed, if the expiry date of the Offer be
extended, to refer to the expiry date of the Offer as so extended.
(h) -Any omission to despatch this document or the Form of Acceptance or any
notice required to be despatched under the terms of the Offer to, or any failure
to receive the same by, any person to whom the Offer are made, or should be
made, shall not invalidate the Offer in any way or create any implication that
the Offer has not been made to any such person. The Offer extends to any such
person and to all Radical Shareholders to whom this document, the Form of
Acceptance and any related documents may not be despatched and who may not
receive such documents, and such persons may collect copies of those documents
from Connaught St. Michaels Limited at the address set out in paragraph 3(a) of
this Part B.
(i) -If the Offer does not become unconditional in all respects, the share
certificate(s) and/or other document(s) of title will be returned by post (or by
such other method as may be approved by the Panel) within 14 days of the Offer
lapsing, at the risk of Radical Shareholder concerned, to the person or agent
whose name and address is set out in the relevant box of the Form of Acceptance
or, if none is set out, to the first-named holder at his registered address.
(j) -All powers of attorney, appointments as agent and authorities on the terms
conferred by or referred to in this Appendix I or in the Form of Acceptance are
given by way of security for the performance of the obligations of the Radical
Shareholders concerned and are irrevocable (in respect of powers of attorney in
accordance with Section 4 of the Powers of Attorney Act 1971) except in the
circumstances where the donor of such power of attorney, appointment or
authority is entitled to withdraw his acceptance in accordance with paragraph 3
of this Part B and duly does so.
<PAGE>
(k) -Without prejudice to any other provisions of this Part B, Internet and
Corporate Synergy reserve the right to treat acceptances of the Offer as valid
if received by or on behalf of either of them at any place or places or in any
manner determined by either of them otherwise than as set out in this document
or in the Form of Acceptance.
(l) -All communications, notices, certificates, documents of title and
remittances to be delivered by or sent to or from any Radical Shareholders will
be delivered by or sent to or from them (or their designated agents) at their
risk. No acknowledgement of receipt of any Form of Acceptance, communication,
notice, share certificate(s) and/or other document(s) of title will be given by
or on behalf of Internet.
(m) -Internet and Corporate Synergy reserve the right to notify any matter
(including the making of the Offer) to all or any Radical Shareholder(s) (i)
with registered addresses outside the UK or (ii) whom Internet or Corporate
Synergy know to be nominees, trustees or custodians for such Radical
Shareholder(s) with registered addresses outside the UK by announcement or paid
advertisement in any daily newspaper published and circulate in the UK or any
part thereof, in which case such notice shall be deemed to have been
sufficiently given notwithstanding any failure by any such Radical Shareholders
to receive or see such notice, and all references in this document to notice in
writing (other than in paragraph 3 of this Part B) shall be construed
accordingly.
(n) -Due completion of a Form of Acceptance will constitute an instruction to
Internet that, on the Offer becoming unconditional in all respects, all mandates
and other instructions or notices recorded in Radical's records immediately
prior to the Offer becoming so unconditional.
(o) -If Internet is required by the Panel to make an offer for Radical Shares
under the provisions of Rule 9 of the City Code, Internet may make such
alterations to the conditions of the Offer as are necessary to comply with the
provisions of that Rule.
(p) -All references in this Appendix I to any statute or statutory provision
shall include a statute or statutory provision which amends, consolidates or
replaces the same (whether before or after the date hereof).
(q) -All references to time in this document and in the Form of Acceptance are
to London time.
<PAGE>
7. Overseas shareholders
(a) -The making of the Offer in, or to persons resident in, or to nationals or
citizens of, jurisdictions outside the United Kingdom or to nominees of, or
custodians or trustees for, such persons ("overseas shareholders") may be
affected by the laws of the relevant jurisdictions. Such overseas shareholders
should inform themselves about and observe any applicable legal requirements. It
is the responsibility of any overseas shareholder wishing to accept the Offer to
satisfy himself as to the full observance of the laws and regulatory
requirements of the relevant jurisdiction in connection therewith, including the
obtaining of any governmental, exchange control or other consents which may be
required, or the compliance with other necessary formalities needing to be
observed and the payment of any issue, transfer or other taxes or duties due in
such jurisdiction. Any such overseas shareholder will be responsible for any
such issue, transfer or other taxes or other payments due in such jurisdiction
by whomsoever payable and Internet and Corporate Synergy (and any person acting
on behalf of either of them) shall be entitled to be fully indemnified and held
harmless by such overseas shareholder for any such issue, transfer or other
taxes or duties as Internet and Corporate Synergy (and any person acting on
behalf of either of them) may be required to pay.
(b) -If you are an overseas shareholder and you are in doubt about your
position, you should consult your independent professional adviser.
Part C: Form of Acceptance
Each Radical Shareholder by whom, or on whose behalf, the Form of Acceptance is
executed (and lodged with Connaught St. Michaels Limited), irrevocably
undertakes, represents, warrants and agrees to and with Internet, Corporate
Synergy and Connaught St. Michaels Limited (so as to bind him, his heirs,
successors and assigns) to the following effect:
1. -that the execution of the Form of Acceptance shall constitute (as
appropriate):
(a) -if Box 2 is completed, an acceptance of the basic terms of the Offer
in respect of the number of Radical Ordinary Shares inserted, or deemed to be
inserted, in Box 1; and
(b) -an undertaking to execute any further documents and give any further
assurances which may be required in connection with any of the foregoing,
-in each case on and subject to the terms and conditions set out or
referred to in this document and in the Form of Acceptance and that, subject to
the rights of withdrawal set out or referred to in paragraph 3 of Part B of
Appendix I, each such acceptance and election shall be irrevocable provided that
if (i) no boxes are completed; or (ii) the total number of Radical Shares
inserted in Box 1 is greater than the number of Radical Shares comprised in the
acceptance; or (iii) the acceptance is otherwise completed incorrectly, but the
Form of Acceptance is signed, it will be deemed to be an acceptance of the basic
terms of the Offer in respect of all of the Radical Shares comprised in the
acceptance.
-For the purposes of this Appendix I and the Form of Acceptance, the phrase
"Radical Shares comprised in the acceptance" shall mean the number of Radical
Shares inserted in Box 1 of the Form of (as appropriate) or, if no number(s)
is/are inserted (or if the greater of (i), (ii) and (iii) below is lower than
the number of Radical Shares inserted in Box 1 of the Form of Acceptance), the
greater of:
<PAGE>
(a) -the relevant Radical Shareholder's entire registered holding of
Radical Shares as disclosed by details of the register of members made available
to Connaught St. Michaels Limited prior to the time the relevant Form of
Acceptance is processed by them;
(b) -the relevant Radical Shareholder's entire registered holding of
Radical Shares as disclosed by details of the register of members made available
to Connaught St. Michaels Limited prior to the latest time for receipt of Forms
of Acceptance which can be taken into account for determining whether the Offer
is unconditional; or
(c) -the number of Radical Shares in respect of which certificates or an
indemnity in lieu thereof is received;
2. -that the Radical Shares in respect of which the Offer are accepted or deemed
to be accepted are sold fully paid and free from all liens, charges, equitable
rights, encumbrances, rights of pre-emption and any other third party rights or
interests of any nature whatsoever and together with all rights attaching
thereto on or after 30 March 2000 including without limitation, the right to
receive and retain all dividends and other distributions, if any, declared, made
or paid on or after two business days following the day on which the Offer are
declared wholly unconditional in all respects;
3. -that the execution of the Form of Acceptance and its delivery to Connaught
St. Michaels Limited will, subject to the Offer becoming unconditional in all
respects in accordance with its terms and the person accepting the Offer not
having validly withdrawn his acceptance, constitute the irrevocable appointment
of Internet or Corporate Synergy as such shareholder's attorney and/or agent and
an irrevocable instruction to the attorney and/or agent to complete and execute
all or any form(s) of transfer and/or other document(s) at the discretion of the
attorney and/or agent in relation to the Radical Shares referred to in
paragraphs 1 and 2 of this Part C in favour of Internet or such other person or
persons as Internet or its agents may direct and to deliver such form(s) of
transfer and/or other document(s) in the attorney's discretion and/or the
certificate(s) and/or other document(s) of title relating to such Radical Shares
for registration within six months of the Offer becoming unconditional in all
respects and to execute all such other documents and to do all such other acts
and things as may in the opinion of such attorney be necessary or expedient for
the purpose of, or in connection with, the acceptance of the Offer and to vest
in Internet or its nominees such Radical Shares;
4. -that the execution of the Form of Acceptance and its delivery to Connaught
St. Michaels Limited will constitute, subject to the Offer becoming
unconditional in all respects in accordance with its terms and to an accepting
Radical Shareholder not having validly withdrawn his acceptance, an irrevocable
authority and request:
(a) -to Radical or its agents to procure the registration of the transfer
of the Radical Shares pursuant to the Offer and the delivery of the share
certificate(s) and/or other document(s) of title in respect thereof to Internet
or as it may direct;
(b) -subject to the provisions of paragraph 7 of Part B of this Appendix I,
to Internet or its agents to procure the despatch by post (or by such other
methods as may be approved by the Panel) of a cheque or cash and/or the relevant
definitive certificate(s) and/or other document(s) of title to which an
accepting Radical Shareholder may become entitled pursuant to his acceptance of
the Offer, at the risk of such Radical Shareholder.
5. -that the execution of the Form of Acceptance and its delivery to Connaught
St. Michaels Limited, will constitute the irrevocable appointment of Internet or
Corporate Synergy as such shareholder's attorney and/or agent (the "attorney")
within the terms of paragraph 4 of Part B of this Appendix I and this Part C
with authority to execute any further documents and give any further assurances
which may be required in connection with the matters referred to in paragraph 4
of Part B of this Appendix I and this Part C;
<PAGE>
6. -that, after the Offer becomes or is declared unconditional in all respects
(or if the Offer will become unconditional in all respects or lapse immediately
upon the outcome of the resolution in question) and pending registration:
(a) -Internet shall be entitled to direct the exercise of any votes and any
or all other rights and privileges (including the right to requisition the
convening of a general meeting of Radical or of any class of its shareholders)
attaching to any Radical Shares in respect of which the Offer have been accepted
or is deemed to have been accepted and not validly withdrawn (but for the
avoidance of doubt, not including any dividend paid or payable on or before the
business days following the day on which the Offer are declared wholly
unconditional in all respects); and
(b) -the execution of a Form of Acceptance by a Radical Shareholder in
respect of the Radical Shares comprised in such acceptance and in respect of
which such acceptance has not been validly withdrawn:
(i) -constitutes an authority to Radical from such Radical Shareholder to
send any notice, warrant, document or other communication which may be required
to be sent to him as a member of Radical (including any share certificate(s)) to
Internet at its registered office;
(ii) -constitutes an irrevocable authority to Internet or any director of
Internet to sign any consent to short notice on his behalf and/or attend and/or
execute a form of proxy in respect of such Radical Shares and/or, where
appropriate, any appointment pursuant to Section 735 of the Companies Act,
appointing any person nominated by Internet to attend general meetings and
separate class meetings of Radical or its members (or any of them) (and any
adjournments thereof) and to exercise or refrain from exercising (but subject to
the City Code) the votes attaching to such shares on his behalf, where relevant,
such votes to be cast so far as possible to satisfy any outstanding condition of
the Offer; and
(iii)-will also constitute the agreement of such Radical Shareholder not to
exercise any of such rights without the consent of Internet and the irrevocable
undertaking of such Radical Shareholder not to appoint a proxy to attend and not
himself to attend any such general meeting or separate class meeting;
-This authority will cease to be valid if the acceptance is withdrawn in
accordance with paragraph 3 of Part B of Appendix I;
7. -that he is irrevocably and unconditionally entitled to transfer the Radical
Shares in respect of which the Form of Acceptance is completed and the entire
beneficial interest in such Radical Shares in respect of which the Offer are
accepted or deemed to be accepted under the Offer will be acquired;
8. -that he will deliver to Connaught St. Michaels Limited, at either of the
addresses referred to in paragraph 3(a) of Part B of this Appendix I, his share
certificate(s) or other document(s) of title in respect of all Radical Shares
held by him in respect of which the Offer have been accepted or are deemed to
have been accepted and not validly withdrawn, or an indemnity acceptance to
Internet in lieu thereof, as soon as possible and in any event within six months
of the Offer becoming unconditional in all respects;
9. -that the terms and conditions of the Offer contained in this document shall
be deemed to be incorporated in, and form part of, the Form of Acceptance which
shall be read and construed accordingly;
<PAGE>
10. -that, if he accepts the Offer, he will do all such acts and things as shall
be necessary or expedient to vest in Internet or its nominee(s) or such other
persons as it may decide the Radical Shares in respect of which such acceptance
is made and all such acts and things as may be necessary or expedient to enable
Connaught St. Michaels Limited to perform its functions as escrow agent for the
purposes of the Offer;
11. -that he agrees to ratify each and every act or thing which may be done or
effected by Internet or Corporate Synergy or Connaught St. Michaels Limited
and/or any director of Internet and/or any director of Corporate Synergy and/or
any director of Connaught St. Michaels Limited and/or by any of their respective
agents and/or by Radical or its agents, as the case may be, in the exercise of
any of his powers and/or authorities hereunder;
12. -that the execution of the Form of Acceptance constitutes his submission, in
relation to all matters arising out of the Offer and the Form of Acceptance, to
the jurisdiction of the courts of England;
13. -that on execution the Form of Acceptance shall take effect as a deed;
14. -that if any provision of Part B of this Appendix I or this Part C shall be
unenforceable or invalid or shall not operate so as to afford Internet or
Corporate Synergy or Connaught St. Michaels Limited, or any director of any of
them or Radical or any of their respective agents the benefit or authority
expressed to be given therein, he shall with all practicable speed do all such
acts and things and execute all such documents that may be required to enable
Internet and/or Corporate Synergy and/or Connaught St. Michaels Limited and/or
any director of either of them and/or Radical and/or any of their respective
agents to secure the full benefits of Part B of Appendix I and this Part C; and
15. -that if he accepts the Offer, he does so on the basis of the information
set out in this document.
-References in this Part C to a Radical Shareholder shall include
references to the person or persons executing a Form of Acceptance, and, in the
event of more than one person executing a Form of Acceptance, the provisions of
this Part C shall apply to them jointly and to each of them.
-The terms of acceptance in this Part C are without prejudice to the
obligation of Internet pursuant to the final sub-paragraph of paragraph 1 of
Appendix 1 Part A: Conditions of the Offer.
Appendix II
Financial Information on Radical
Introduction
The following information, comprising Consolidated Profit and Loss Accounts for
the two periods ended 31 March 1999, has been extracted from the audited
financial statements of Radical and the unaudited interim announcement for the
six months ended 30 September 1999. The financial information has been derived
from, but does not constitute, statutory accounts within the meaning of Section
240 of the Act.
<PAGE>
The financial statements of Radical for the two periods ended 31 March 1999 have
been audited by Messrs Lees and the auditors' reports were unqualified and did
not contain a statement under Section 237(2) or (3) of the Act. Statutory
accounts for the period ended 31 March 1998 and the year ended 31 March 1999
have been delivered to the registrar of companies.
PROFIT AND LOSS ACCOUNTS
Year Period
Ended Ended
Notes 31 March 31 March
1999 1998
(pound) (pound)
Turnover 1,150,995 --
Change in Work in progress 17,980 --
Own work capitalised 19,693 --
---------- ----------
1,188,668 --
Staff costs (795,787) --
Depreciation (5,493) --
Other operating charges (398,992) --
---------- ----------
(1,200,272) --
---------- ----------
Operating Loss (11,604) --
Interest Payable and Similar Charges (872) --
Loss on Ordinary Activities Before Taxation 1 (12,476)
Tax on loss on Ordinary Activities 2 -- --
---------- ----------
Loss for the financial year (12,476) --
---------- ----------
There were no recognised gains or losses other than those recorded in the profit
and loss accounts.
All of the above amounts are in respect of the results of continuing operations.
BALANCE SHEETS
<TABLE>
<CAPTION>
31 March 1999 31 March 1998
Notes (pound) (pound) (pound) (pound)
<S> <C> <C> <C> <C> <C>
Fixed Assets
Intangible Assets 3 36,693 --
Tangible Assets 4 26,297 --
-------- --------
62,990 --
Current Assets
Work in progress 17,980 -- --
Debtors 5 227,446 2
Cash at bank and in hand 358 --
-------- --------
245,784 2
-------- --------
Creditors: Amounts falling due within one year 6 192,750 --
-------- --------
192,750 --
-------- --------
Net Current Assets 53,034 2
-------- --------
Total Assets less Current Liabilities 116,024 2
-------- --------
Capital and Reserves
Called up share capital 7 128,500 2
Profit and loss account 8 (12,476) --
-------- --------
Equity Shareholders' Funds 9 116,024 2
-------- --------
</TABLE>
<PAGE>
STATEMENT OF CASH FLOWS
Reconciliation of operating profit to net cash inflow from operating activities
<TABLE>
<CAPTION>
Year Period
Ended Ended
31 March 31 March
1999 1998
Notes (pound) (pound)
<S> <C> <C> <C>
Operating Loss (11,604) --
Depreciation Charges 5,493 --
Increase in Stocks (17,980) --
Increase in Debtors (227,444) (2)
Increase in Creditors 150,358 --
-------- --------
Net cash outflow from operating activities (101,177) (2)
-------- --------
Cash Flow Statement
Net cash outflow from operating Activities (101,177) (2)
Returns on investment and servicing_ of income 10 (872) --
Capital Expenditure 10 (68,483) --
-------- --------
Financing 10 (170,532) (2)
Net decrease in cash 10 128,498 2
-------- --------
(42,034) --
-------- --------
Reconciliation of net cash movement to movement in net debt
Decrease in cash in the period 11 (42,034) --
Opening net debt -- --
-------- --------
Closing net debt (42,034) --
-------- --------
</TABLE>
<PAGE>
NOTES TO THE FINANCIAL INFORMATION
1. Loss on Ordinary Activities
Year Period
Ended Ended
31 March 31 March
1999 1998
(pound) (pound)
This is stated after charging
Auditor's remuneration 2,000 --
Depreciation 4,493 --
Rent 19,177 --
Amortisation 1,000 --
Interest on bank overdraft 872 --
Computer operating lease charges 42,803 --
2. Tax on Profit/(Loss) on Ordinary Activities
There is no corporation tax charge based on loss for the year.
3. Intangible Assets
Developed Software
(pound)
Cost
At 1 April 1998 --
Additions 37,693
--------
At 31 March 1999 37,693
--------
Depreciation
At 1 April 1998 --
Charge for the Year 1,000
--------
At 31 March 1999 1,000
--------
Net Book Values
At 31 March 1999 36,693
--------
At 31 March 1998 --
--------
<PAGE>
4. Tangible Fixed Assets
Fixtures Computer Bought in
& Fittings Hardware Software Total
(pound) (pound) (pound) (pound)
Cost
At 1 April 1998 -- -- -- --
Additions 14,252 7,036 9,502 30,790
-------- -------- -------- --------
At 31 March 1999 14,252 7,036 9,502 30,790
-------- -------- -------- --------
Depreciation
At 1 April 1998 -- -- -- --
Charge for the year 1,992 924 1,577 4,493
-------- -------- -------- --------
At 31 March 1999 1,992 924 1,577 4,493
-------- -------- -------- --------
Net Book Value
At 31 March 1999 12,260 6,112 7,925 26,297
-------- -------- -------- --------
At 31 March 1998 -- -- -- --
-------- -------- -------- --------
5. Debtors
31 March 31 March
1999 1998
(pound) (pound)
Trade Debtors 150,450 --
Prepayments 76,996 --
Other Debtors -- 2
-------- --------
227,446 2
-------- --------
6. Creditors: Amounts Falling Due Within One Year
31 March 31 March
1999 1998
(pound) (pound)
Bank Overdraft (secured) 42,392 --
Trade Creditors 49,483 --
Other taxes and social security costs 80,394 --
Accruals and deferred income 20,481 --
-------- --------
192,750 --
-------- --------
In respect of the bank overdraft the security given represents a first fixed and
floating charge over all assets of Radical.
<PAGE>
7. Share Capital
31 March 31 March
1999 1998
(pound) (pound)
Authorised Ordinary shares of(pound)1 each 1,000,000 1,000
--------- ---------
Allotted, called up and fully paid
Ordinary shares of(pound)1 each 128,500 2
--------- ---------
During the period ended 31 March 1998 two shares were issued at par to form the
initial capital of Radical and during the year ended 31 March 1999 128,498
ordinary shares were issued at par to increase the capital base of Radical.
8. Statement of Movements on Profit and Loss Account
Year Period
Ended Ended
31 March 31 March
1999 1998
(pound) (pound)
At beginning of year- -- --
Retained loss for the year (12,476) --
At 31 March 1999 (12,476) --
-------- --------
9. Reconciliation of Movements in Shareholders' Funds
31 March 31 March
1999 1998
(pound) (pound)
Loss for the financial year (12,476) --
Issue of share capital 128,498 2
-------- --------
Net addition to shareholders funds 116,022 2
Opening shareholders' funds at 1 April 1998 2 --
-------- --------
Closing shareholders' funds at 31 March 1999 116,024 2
-------- --------
<PAGE>
10. Gross Cash Flows
Year Period
Ended Ended
31 March 31 March
1999 1998
(pound) (pound)
Returns on investments and service of finance
Interest paid (872) --
-------- --------
Capital Expenditure
Payments to acquire intangible fixed assets (37,693) --
Payments to acquire tangible fixed assets (30,790) --
-------- --------
(68,483) --
-------- --------
Financing
Issuing of ordinary share capital 128,498 2
-------- --------
11. Analysis of Changes in Net Debt
At 1 April Cash Other at 31 March
1998 Flows Changes 1999
(pound) (pound) (pound) (pound)
Cash at bank and in hand -- 358 -- 358
Overdrafts -- (42,392) -- (42,392)
-------- -------- -------- --------
Total net debt -- (42,034) -- (42,034)
-------- -------- -------- --------
12. Commitments
Annual commitments under operating leases are as follows:
31 March 1999 31 March 1998
Land & Land &
Buildings Other Buildings Other
Date of Expiry
Within one year -- 26,904 -- --
Between two and five years 29,679 20,568 -- --
-------- -------- -------- --------
29,679 47,472 -- --
-------- -------- -------- --------
<PAGE>
13. Contingent Liabilities
As at the balance sheet dates there were no contingent liabilities.
14. Directors' Emoluments
Year Period
Ended Ended
31 March 31 March
1999 1998
(pound) (pound)
Remuneration as executives 172,374 --
-------- --------
15. Transaction with Related Party
A director of Radical, Mr G R Boot, received fees of (pound)16,200 and
disbursements of (pound)8,406 in respect of services provided to Radical prior
to completion of the purchase of the business of MDA Computing Ltd.
16. Employment Costs
Year Period
Ended Ended
31 March 31 March
1999 1998
(pound) (pound)
Wages and salaries 548,758 --
Social security costs 74,655 --
-------- --------
623,413 --
-------- --------
Average number of employees
(including executive directors) 27 --
-------- --------
<PAGE>
17. Accounting Policies
a. Accounting Convention
-The financial statements are prepared under the historical cost convention
and in accordance with applicable accounting standards.
b. Depreciation
-Depreciation is provided on all tangible fixed assets at rates calculated
to write off the cost of each asset over its expected useful life as follows:
Fixtures and fittings 15% per annum on reducing balance
Computer Hardware 25% per annum on straight line
Bought in software 20% per annum on a straight line
c. Developed Software
-Expenditure is charged as incurred, with the exception of software
development expenditure on an individual project where the future recoverability
can be foreseen with reasonable assurance. Any expenditure carried forward is
amortised in line with the expected sales from the related project.
<PAGE>
d. Turnover
-Turnover represents the value of work executed for clients during the year
excluding value added tax.
e. Stocks and work in Progress
-Stocks and work in progress are stated at the lower level of cost and net
realisable value. Cost includes all production overheads and an attributable
proportion of indirect overhead expenses.
f. Long term Contracts
-Amounts recoverable on contracts, which are included in debtors, comprise
costs plus attributable profit less provision for foreseeable losses. Cost
includes direct staff costs and outlays, together with attributable overheads.
Attributable profit is only added where the contract can be reasonably assessed
before its conclusion and consideration is also given to the percentage of
contract completed. Fees rendered on account are deducted from amounts
recoverable on contracts and, to the extent that they exceed the value of work
done, are included in creditors as payment on account.
g. Foreign Currency
-Assets and liability denominated in foreign currencies are translated at
the rate of exchange ruling at the balance sheet date.
-Transactions in foreign currencies are translated into sterling and
recorded at the rate ruling at the date of the transaction. All exchange
differences are dealt with in the profit and loss account.
h. Leasing and Hire Purchase Commitments
-Assets obtained under finance leases and hire purchase contracts are
capitalised in the balance sheet and are depreciated over their useful lives.
-The interest element of the lease and hire purchase contracts is charged
to the profit and loss account at a constant rate over the period of the
agreement.
-Rentals paid under operating leases are charged to the profit and loss
account on a straight line basis over the lease term.
i. Deferred Taxation
-The company provides for deferred taxation on the liability method and
provision is made to the extent that there is a reasonable probability that a
liability will crystallise in the foreseeable future.
j. Pension Costs
-The company does not operate a pension scheme.
Set out below is the unaudited profit and loss account and unaudited balance
sheet for the six month period to 30 September 1999 contained in the unaudited
interim announcement of Radical published on 4 January 2000.
<PAGE>
Unaudited Profit and Loss Account for the 6 months ended 30 September 1999
30 Sep 1999 30 Sep 1998
(pound) (pound)
Turnover 566,345 622,594
Cost of Sales 27,478 9,895
------- -------
GROSS PROFIT 538,867 612,699
Administrative Expenses (533,701) (632,868)
------- -------
OPERATING PROFITS (LOSS) 5,166 (20,169)
Interest Payable (4,768) (2,221)
------- -------
PROFIT (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 398 (22,390)
Tax on Profit on Ordinary Activities -- --
------- -------
PROFIT FOR THE HALF YEAR 398 (22,390)
Dividends -- --
------- -------
Retained Profit for the Half Year 398 (222,390)
------- -------
Earnings per share 0.03p (17.63p)
Unaudited Balance Sheet as at 30 September 1999
30 Sep 1999 30 Sep 1998
(pound) (pound)
FIXED ASSETS
Tangible assets 18,635 41,590
Intangible assets 203,814 --
------- -------
TOTAL FIXED ASSETS 222,449 41,590
CURRENT ASSETS
Work in progress 3,358 24,800
Debtors 211,234 223,801
Cash at Bank and in Hand 501 447
------- -------
215,093 249,048
CREDITORS: amounts falling due within one year (321,120) (186,028)
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 116,422 104,610
CREDITORS: amounts falling due after more than one year -- --
------- -------
116,422 104,610
------- -------
CAPITAL AND RESERVES:
Share Capital 128,500 127,000
Profit and Loss Account (12,078) (22,290)
------- -------
Shareholders' Funds 116,422 104,610
------- -------
<PAGE>
Appendix III
Financial Information on Internet
Introduction
The Internet financial information for the period ended 31 December 1999 has
been extracted without material adjustment from the audited financial statements
of Internet included in its Form 10-K for the year ended 31 December 1999 filed
with the SEC. Such financial statements have been prepared in accordance with US
generally accepted accounting principles and the rules and regulations of the
SEC. The unqualified audit opinion of Callaghan Nawrocki, independent auditors
of Internet, is also included in such Form 10-K.
The Internet financial information for the years ended 31 December 1998 and 31
December 1997 has been extracted, without material adjustment, from the audited
financial statements of Internet included in its Form 10-K for the years ended
31 December 1998 and 31 December 1997 filed with the SEC. Such financial
statements have been prepared in accordance with US generally accepted
accounting principles and the rules and regulations of the SEC. The unqualified
audit opinion of Callaghan Nawrocki, independent auditors of Internet, is also
included in such Form 10-K.
A. Years ended 31 December 1997 and 31 December 1998
Balance Sheets
31 December 31 December
1997 1998
ASSETS
Current Assets
Cash $1,600 $271
Accrued Interest Receivable
Other Receivable $34,000
Prepaid Expenses
---------- ----------
Total Current Assets $35,600 $271
Total Assets $35,600 $271
---------- ----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $20,380 $13,520
Total Current Liabilities $20,380 $13,520
Total Liabilities $20,380 $13,520
Stockholders' Equity
Common Stock issued $2,119 $2,119
Additional Paid-in capital $5,723,560 $5,723,560
Retained Earnings ($5,710,459) ($5,738,928)
---------- ----------
Total Stockholders' Equity $15,220 ($13,249)
$35,600 $271
---------- ----------
Profit and Loss Accounts
31 December 31 December
1997 1998
REVENUES $3,813 $79
EXPENSES $130,974 $28,548
---------- ----------
Net Loss from continuing operations ($127,161) ($28,469)
Loss from Discontinued Operations ($2,359,612) $0
---------- ----------
Net Loss ($2,486,773) ($28,469)
---------- ----------
Cash Flow Statements
Internet Holdings, Inc.
Statement of Cash Flow
31 December 31 December
1997 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($2,486,773) ($28,469)
Adjustments to reconcile net loss to to net
cash provided by operating activities:
Loss from discontinued operations $2,359,612 $0
Increase in accrued interest receivable $0 $0
(Decrease)/Increase in other receivable ($34,000) $34,000
Decrease in prepaid expenses $0 $0
Decrease in accounts payable
and accrued expenses ($87,239) ($6,860)
---------- ----------
Net cash provided by operating activities ($248,400) ($1,329)
CASH FLOWS FROM FINANCING ACTIVITIES
Shares issued for cash $0 $0
Shares issued in private placement $2,375,000 $0
Proceeds from convertible loan note $125,000 $0
---------- ----------
Net cash provided by financing activities $2,500,000 $0
CASH FLOWS FROM INVESTING ACTIVITIES ($2,250,000) $0
NET INCREASE/(DECREASE) IN CASH $1,600 ($1,329)
CASH, BEGINNING OF YEAR $0 $1,600
---------- ----------
CASH, END OF YEAR $1,600 $271
---------- ----------
<PAGE>
Notes to Financial Statements
(1) Business and organisation
-Internet Holdings, Inc. (the "Company") was originally incorporated in the
State of Utah on 22 July 1977, under the name of Western Corn Dog Factories. The
Company has had a series of mergers with other companies, all accounted for as
reverse acquisitions, with the Company in each case changing its name to that of
or similar to the reverse acquiror. In this regard, the Company's previous names
were: _ -Resources West, Inc., Magma Resources, Inc., Cellular
Telecommunications & Technologies, Inc. and China Biomedical Group, Inc. The
name Internet Holdings, Inc. was adopted on 12 July 1996.
-In 1993, the Company acquired Cellular Payphones, Inc., ("CPI"), (a
Delaware Corporation), whereby all of the issued and outstanding shares of CPI
were exchanged for approximately 90 per cent. of the issued and outstanding
stock of the Company. This transaction was accounted for as a reverse
acquisition purchase, in which CPI was the acquiring corporation, and the
Company was the acquired corporation. The Company accounted for this transaction
as a recapitalisation of CPI, with the issuance of 2,625,000 shares of common
stock for the net assets of the Company. Following the 1993 acquisition, the
Company was engaged in the business of (i) installation and servicing of
cellular credit-card pay telephones in taxicabs, radio-cabs, limousines, rental
cars, trains, ferries, hotels, and business conference centers, and (ii) the
data processing and development of streamline software specialising in credit
card authorisation processing with real-time billing functions. The Company
ceased such operations in October 1994 due to substantial losses. Effective 3
April 1995, the Company acquired C.B. Marketing and Investment Limited, a
privately-held English corporation engaged in the business of medical market
research and the manufacture of pharmaceuticals and contraceptives in the
Peoples' Republic of China. On 22 April 1996, the Company entered into a
divestiture agreement with respect to C.B. Marketing and Investment Limited.
During 1996, the Company was reorganised to invest in internet and ISDN
("International Standard Digital Network") related technologies.
-On 22 May 1997, the Company acquired Chiron Systems Ltd. ("CSL"), a
privately-held English Corporation engaged in the business of designing and
developing ISDN related products. During 1997, the Company, through CSL provided
hardware and software products and services for internet and ISDN applications.
CSL had expected to confirm several substantial orders from the Far East during
the last quarter of 1997 based upon a new range of products. However, these
orders never materialised due to alleged specification failure, resulting in a
need for additional funding. The Company decided not to make any further
investment in CSL and, effective 19 December 1997, exercised its right to divest
CSL under the terms of the acquisition agreement. CSL was subsequently placed
into liquidation by its creditors. During its ownership of CSL, the Company
invested in joint ventures in Asia and West Africa in connection with the
delivery of products and services being developed by CSL. As a result of the
failure of CSL to develop the requisite products and technology, and the
corresponding divestiture of CSL, the Company became engaged in various legal
proceedings with its joint venture partners which was finally settled in October
1999.
<PAGE>
-The Company presently has no revenue producing operations or activities
and has suffered recurring losses from operations. Management's plans include
seeking an acquisition candidate in the internet and related technology fields.
In connection with such a transaction, which, similar to the Company's previous
mergers will actually be a reverse acquisition, the Company may seek to raise
proceeds from the sale of its securities. On 27 October 1999 the Company filed a
Form _8-K setting out a contingent acquisition which, if consummated, would
provide the Company with $2,160,000 in cash and liquid securities. This
agreement is conditional on the settlement of all outstanding litigation, the
filing of outstanding reports and the maintenance of the Company's quotation on
the NASD Bulletin Board.
(2) Summary of significant accounting policies:
Foreign currency translation -
-Gains and losses from foreign currency transactions are reflected in
current operating results. Exchange adjustments resulting from the translation
of financial statements have been reflected as a separate component of
stockholders' equity. The cumulative adjustment was eliminated upon the
divestiture of foreign operations.
Revenue and cost recognition -
-Revenues are generally recognised as earned and expenses are recognised
when incurred under the accrual basis of accounting.
Net loss per share -
-Net loss per share was computed by dividing net loss by the weighted
average number of common shares issued and outstanding during the period.
Income taxes -
-The Company has adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes", to account for deferred income taxes.
Deferred taxes are computed based on the tax liability or benefit in future
years of the reversal of temporary differences in the recognition of income or
deduction of expenses between financial and tax reporting purposes. The net
difference, if any, between the provision for taxes and taxes currently payable
is reflected in the balance sheet as deferred taxes. Deferred tax assets and/or
liabilities, if any, are classified as current and noncurrent based on the
classification of the related asset or liability for financial reporting
purposes, or based on the expected reversal date for deferred taxes that are not
related to an asset or liability.
(3) Discontinued operations
-On 19 December 1997, the Company's Board of Directors approved a
divestiture agreement whereby the Company delivered to certain shareholders who
had previously owned Chiron Systems Ltd., ("CSL") all the outstanding shares in
this corporation, which had been acquired by the Company on _22 May 1997. In
return, the CSL shareholders transferred to the Company 1,320,157 shares
(2,640,313 shares pre-reverse split) of the Company's common stock. In
connection therewith, the Company recognised $361,641 of losses relating
primarily to unrecoverable loans receivable from this divested corporation.
<PAGE>
-In conjunction with its ownership of CSL, the Company entered into joint
ventures in Asia and West Africa for the delivery of products and services being
developed by CSL. During the year ended _31 December 1997, the Company invested
$2,250,000 in certain assets purchased from joint venture partners. As a result
of the failure of CSL to develop the requisite products and technology, and the
corresponding divestiture of CSL, the Company became engaged in various legal
proceedings with its joint venture partners. In October 1999, a comprehensive
settlement agreement was reached by the Company with its joint venture partners.
By this agreement, the Company agreed not to pursue claims against certain
assets purchased from the joint venture partners, the joint venture partners
agreed not to pursue claims against the Company relating to negligence and
breach of contract and the Company was released from debts totalling $252,029.
This resulted in a net write-off to the Company of $1,997,971, which is
reflected as a loss from discontinued operations for the year ended 31 December
1997.
(4) Accounts payable and accrued liabilities
-As of 31 December 1997, accounts payable and accrued liabilities consist
primarily of obligations for legal and professional fees.
(5) Stockholders' equity
-On 11 March 1997, the Board of Directors approved a 1-for-8 reverse stock
split of the issued and outstanding shares of the Company's common stock.
-On 22 May 1997, the Company acquired Chiron Systems Ltd., a privately-held
English Corporation in a stock-for-stock exchange. As a result of such
transaction, the Company issued 2,640,313 shares of its authorised but unissued
shares of its common stock to the shareholders of Chiron Systems Ltd. On _19
December 1997 the Company exercised its right to divest Chiron Systems Ltd.,
under the terms of the acquisition agreement. Accordingly, 1,320,157 (post
1-for-2 reverse stock split) shares were returned to the Company and immediately
cancelled.
-On 22 May 1997, the Board of Directors approved the issuance of 150,000
shares of the Company's common stock in satisfaction of obligations in the
amount of $37,500.
-On 9 June 1997, the Board of Directors approved a 1-for-2 reverse stock
split of the issued and outstanding shares of the Company's common stock.
-On 20 June 1997, the Company sold pursuant to a private placement under
Regulation S, 1,483,935 shares of common stock for proceeds of $2,375,000. The
proceeds are net of $147,689 of placement costs.
-On 12 August 1997, 250,000 shares of the Company's common stock were
issued pursuant to the conversion of a loan note in the amount of $125,000.
-On 19 December 1997, the Board of Directors approved the issuance of
203,304 shares of the Company's common stock in satisfaction of obligations in
the amount of $35,000.
(6) Income taxes
-The income tax provision is summarised as follows for the year ended 31
December 1997 and 1996:
<PAGE>
Year Ended
31 December
1997
Federal $0
State and local 0
----------
Total $0
----------
Statutory rates of income tax 40% Income tax effect related to the
following items:
Net operating losses (40)
----------
Total 0
----------
Effective rate of income tax 0%
----------
-The Company has net operating loss carryforwards to offset future taxable
income of approximately $5 million expiring in the years 2009 through 2013. As
it is not more likely than not that the resulting deferred tax benefits will be
realised, a valuation allowance has been recognised for such deferred tax
assets.
(7) Commitments and contingencies
-The Company has not filed federal nor state income tax returns for the
past several years, and is currently working with the Internal Revenue Service
and state taxing authorities to ensure filings of all requisite returns are made
as soon as possible. In management's opinion, there are no material liabilities
as a result of the delay in filing these returns.
(8) Legal proceedings and subsequent events
-During the period subsequent to 31 December 1998 various legal proceedings
were settled. Reference is made to Note 3 for details as to such resolution.
<PAGE>
Period ended 31 December 1999
Balance Sheet
Internet Holdings Inc.
& Subsidiary
(A Development
Stage Enterprise)
Consolidated Balance
Sheet
31 December 1999
ASSETS
Current Assets
Cash $506,149
Accrued Interest Receivable $1,474
Prepaid Expenses $194,445
----------
Total Current Assets $702,068
Investments, at cost $666,406
----------
Total Assets $1,368,474
----------
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and accrued expenses $85,591
Total Current Liabilities $85,591
Convertible Note, subsequently converted $50,000
Total Liabilities $135,591
Stockholders' Equity
Common Stock issued $11,359
Additional Paid-in capital $1,217,362
Retained Earnings $4,162
----------
Total Stockholders' Equity $1,232,883
$1,368,474
----------
<PAGE>
Profit and Loss Accounts
Internet Holdings Inc.
& Subsidiary
(A Development
Stage Enterprise)
For the Period
from Inception
(Oct 18-Dec 31)
1999
REVENUES $10,971
EXPENSES $6,809
----------
Net Income $4,162
----------
Cash Flow Statement
Internet Holdings Inc.
& Subsidiary
(A Development
Stage Enterprise)
Consolidated Statement
of Cash Flow
For the Period
from Inception
(Oct 18-Dec 31)
1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $4,162
Adjustments to reconcile net loss to to net
cash provided by operating activities:
Increase in accrued interest receivable ($1,474)
(Increase) decrease in other receivable $0
Decrease in prepaid expenses $5,555
Increase (Decrease) in accounts payable
and accrued expenses $1,214
----------
Net cash provided by operating activities $9,457
CASH FLOWS FROM FINANCING ACTIVITIES
Shares issued for cash $496,692
Shares issued in private placement $0
Proceeds from convertible loan note $0
----------
Net cash provided by financing activities $496,692
CASH FLOWS FROM INVESTING ACTIVITIES $0
NET INCREASE (DECREASE) IN CASH $506,149
CASH, BEGINNING OF YEAR $0
----------
CASH, END OF YEAR $506,149
----------
<PAGE>
Notes to Consolidated Financial Statements
(1) Organisation and basis of presentation
-Internet Holdings, Inc. (the "Company") is the successor consolidated
entity formed by the reverse acquisition on 22 December 1999 by Fairfax Equity,
Ltd, of Internet Holdings, Inc. a publicly-held company originally incorporated
in Utah in 1977, under the name, Trolley Enterprises, Inc. Fairfax Equity, Ltd,
("Fairfax") which is treated as the accounting acquirer in the transaction, was
incorporated in the United Kingdom on 18 October 1999. The accompanying
financial statements are those of Fairfax from its inception with the former
Internet Holdings, Inc. consolidated from the date of acquisition.
-Prior to its reverse acquisition by Fairfax, control of the former
Internet Holdings, Inc., as well as the corporate name, had changed many times.
All prior operations had previously been discontinued and all claims and
counterclaims were settled, the last of which settlements occurred in October
1999.
-Pursuant to the reverse acquisition, Fairfax's shareholders were issued
8,640,000 shares of the Company, then constituting 80.3 per cent. of outstanding
common shares. At the time of acquisition, the majority stockholder of Fairfax
represented the value of its cash and investment assets to be not less than
$2,160,000. In the event that when the investment is realised, the net proceeds,
together with cash at the date of acquisition, total less than $2,160,000, the
majority stockholder of Fairfax has guaranteed to contribute additional cash to
bring the total amount up to $2,160,000.
-The Company is presently in the development stage, and is seeking and/or
negotiating the acquisition of more than one internet/e-commerce related
businesses. (See Note 6).
(2) Summary of significant accounting policies:
o Cash and cash equivalents
-The Company considers investments with original maturities of three months
or less to be cash equivalents.
o Investments
-Investments consist of a 14 per cent. equity position in a corporation
established in England, which is stated at historical cost.
o Foreign currency translation
-Gains and losses from foreign currency transaction are reflected in
current operating results.
o Income taxes
-The Company did not incur any income taxes in its initial period.
o Earnings per share
-Net income per share was computed by dividing net income by the weighted
average number of common shares issued and outstanding during the period.
o Comprehensive income
-Other than net income, the Company has no items of comprehensive income as
defined by generally accepted accounting principles.
(3) Consulting agreement
-In connection with the acquisition agreement with Fairfax Equity Ltd. on
22 December 1999, the Company entered into a consulting agreement with an
unrelated company to assist the Company with its strategy, expansion and
financing. Upon signing of the agreement, the Company issued the consultant
600,000 shares of common stock for services to be rendered in the upcoming year.
The shares were valued at $200,000 and were recorded as prepaid expense at the
date of the agreement.
(4) Accounts payable and accrued liabilities
-As of 31 December 1999, accounts payable and accrued liabilities consist
primarily of obligations for legal and professional fees.
(5) Convertible loan note
-On 25 October 1999, Internet Holding, Inc. raised $50,000 through the
issuance of a convertible loan note (the "Note"). The Note was offered pursuant
to an exemption from registration under Section 4(2) of the Securities Act of
1933, as amended, and/or Regulation S promulgated by the Securities and Exchange
Commission. The purpose of this funding was to enable the Company to file all
outstanding reports required by the Securities Exchange Act of 1934, as amended,
and to search for suitable acquisition candidates in the internet related
fields. The Note bore interest at 5.5 per cent. per annum. The Note is
convertible upon demand by the Noteholder into common stock in the Company at
the rate of $0.25 per share. (See Note 6).
<PAGE>
(6) Subsequent events:
o Issuance of common stock
-On 24 January 2000, the $50,000 convertible loan note was converted into
200,000 shares of the Company's common stock.
-On 28 January 2000, the Company sold 5,000,000 shares of its common stock
at a price of $1.00 per share pursuant to Regulation S. The Company received the
full $5,000,000 and estimates that its expenses for this issue will be less than
$50,000. The Company has agreed to register 25 per cent. of the shares under the
Securities Act of 1933, as amended.
-In consideration for underwriting the issue in full, the underwriter
received warrants to purchase up to 1,000,000 shares of common stock of the
Company. The warrants are exercisable at $1.00 per share if exercised within one
year of the "first closing of the underwriting agreement" and $10.00 per share
if exercised within two years of the "first closing of the underwriting
agreement". Warrants which have not been exercised within two years will expire
automatically.
Corporate acquisition
-On 3 March 2000, the Company entered into an agreement to acquire Radical
Technology PLC ("Radical"). In connection therewith, it is anticipated that the
Company will issue approximately 1,281,714 shares of common stock, then
constituting approximately 7.7 per cent. of its outstanding shares, to the
stockholders of Radical in order to acquire 100 per cent. of the issued capital
stock of Radical.
Appendix IV
UK and US Tax Considerations
1. UK considerations
THE FOLLOWING COMMENTS ARE INTENDED AS A GENERAL GUIDE TO THE POSITION UNDER UK
LEGISLATION AND INLAND REVENUE PRACTICE AS AT THE DATE OF THIS DOCUMENT AND
RELATE ONLY TO CERTAIN LIMITED ASPECTS OF THE UNITED KINGDOM TAXATION POSITION
OF RADICAL SHAREHOLDERS. IN PARTICULAR, THEY DO NOT ADDRESS CERTAIN TAXATION
CONSEQUENCES APPLICABLE TO RADICAL SHAREHOLDERS WHO HOLD THEIR SHARES OTHERWISE
THAN AS AN INVESTMENT. ANY RADICAL SHAREHOLDER WHO IS IN ANY DOUBT ABOUT HIS/HER
OWN TAX POSITION SHOULD CONSULT HIS/HER PROFESSIONAL ADVISER.
(a) UK tax on chargeable gains
-Liability to tax on chargeable gains will depend on the individual
circumstances of Radical shareholders.
<PAGE>
(i) Acquisition of New Internet Shares
1. -A Radical individual or corporate Shareholder who, either alone or
together with person connected with him, does not hold more than five per cent
of the shares in Radical, should not be treated as having made a disposal of his
Radical Shares for the purposes of UK tax on chargeable gains to the extent that
he receives New Internet Shares in exchange for his Radical Shares under the
Offer. Any gain or loss which would otherwise have arisen on a disposal of
Radical Shares may be "rolled-over" into the New Internet Shares and the New
Internet Shares will be treated as the same asset as his Radical Shares,
acquired at the same time and for the same consideration as he acquired his
Radical Shares.
2. -Provided that the UK Inland Revenue consider that the exchange of
Radical Shares for New Internet Shares took place for bona fide commercial
reasons and not as part of a scheme or arrangement for the avoidance of tax a
Radical individual or corporate shareholder who either alone or together with
persons connected with him holds more than five per cent of the shares in
Radical will also not be treated as having made a disposal of his Radical shares
for the purpose of calculating his UK tax liability on chargeable gains. Any
gain or loss which would otherwise have arisen on a disposal of Radical Shares
may be "rolled over" into the New Internet Shares and the New Internet Shares
will be treated as the same and for the same consideration as he acquired his
Radical Shares. An application for advance clearance under section 138 Taxation
of Chargeable Gains Act 1992 has been submitted to the UK Inland Revenue.
(ii) Disposal of New Internet Shares
-A subsequent disposal of all or any of the New Internet Shares may,
depending on individual circumstances, give rise to a liability to UK tax on
chargeable gains.
-Any disposal of New Internet Shares by an individual shareholder who is
resident or ordinarily resident in the UK will give rise to a chargeable gain or
an allowable loss. This is calculated taking into account the allowable original
cost to the shareholder of acquiring his Radical Shares. For individual
shareholders and trustees indexation allowance should be available to uplift the
original cost when calculating any chargeable gain (but not any allowable loss)
in respect of the period of ownership of the Radical Shares up to 5 April 1998.
After that, some taper relief may be available to reduce the amount of
chargeable gains realised on the subsequent disposal of the New Internet Shares
depending on the complete number of years for which the Radical Shares and the
New Internet Shares have been held at the date of disposal. For corporate
shareholders indexation relief continues to be available after 5 April 1998 and
was not replaced by taper relief.
(b) Taxation of dividends
-The gross amount of dividends paid on shares to individuals who are
resident in the UK for UK tax purposes is subject to UK tax at the rate of 32.5
per cent. in the hands of individuals who pay the higher rate of UK tax and 10
per cent. in the hands of individuals who pay UK tax at lower rates. Dividends
paid on shares to UK companies are subject to UK corporation tax.
-The rate of UK withholding tax on dividends paid to individuals who
qualify as resident in the UK or to a UK company which controls less than 10 per
cent. of the voting stock of the company is reduced under the terms of the US/UK
treaty to 15 per cent. and to 5 per cent. for companies which control more than
10 per cent. of the voting stock.
<PAGE>
-The US tax withheld may be claimed as a credit against UK income tax or
corporation tax as the case may be, charged in respect of the gross dividend
received, but no refund of any excess withholding tax may be claimed.
(c) UK Stamp duty and stamp duty reserve tax (SDRT)
-No stamp duty or SDRT will be payable by Radical Shareholders as a result
of accepting the Offer.
(d) Enterprise Investment Scheme (EIS) Your attention is drawn to paragraph 6
of Part 2 of this document.
2. Certain US Federal Income Tax Considerations
THE FOLLOWING SUMMARY IS INCLUDED HEREIN FOR GENERAL INFORMATION. IT IS LIMITED
TO US FEDERAL TAX CONSIDERATIONS AND DOES NOT ADDRESS THE SPECIFIC CIRCUMSTANCES
OF A PARTICULAR RADICAL OR INTERNET SHAREHOLDER. ACCORDINGLY EACH RADICAL
SHAREHOLDER IS URGED TO CONSULT A TAX ADVISOR WITH RESPECT TO THE US FEDERAL TAX
CONSEQUENCES OF THE OFFER AND THE HOLDING AND DISPOSING OF INTERNET SHARES, AS
WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY US STATE,
LOCAL OR NON-US TAXING JURISDICTION.
In this summary "US Holder" means any person that is (1) a citizen or resident
of the US, (2) a corporation or partnership created or organized in the US under
the laws of the US or of any state, (3) an estate whose income is includable in
gross income for US federal income tax purposes regardless of its source, or (4)
a trust if a court within the US is able to exercise primary supervision over
the administration of the trust and one or more US persons have the authority to
control all substantial decisions of the trust. A "Non US Holder" is any person
other than a US Holder. For the purposes of this summary, it is assumed that
Radical Shareholders hold their Radical Shares, and will hold New Internet
Shares received in exchange for their Radical Shares, as capital assets within
the meaning of section 1221 of the Internal Revenue Code of 1986 as amended (the
"Code").
(a) The Offer
-It is expected that the exchange of Radical Shares for New Internet Shares
pursuant to the Offer will qualify as a reorganization within the meaning of
section 368(a) of the Code assuming the exchange so qualifies:
(i) -Radical Shareholders will recognize no gain or loss on the exchange of
their Radical Shares for New Internet Shares. Generally, a Non US Holder of
Radical Shares will not be subject to US federal income tax on such gain unless
an exception described in paragraph 2 (b) (ii) below under "Sale, exchange,
redemption or other disposition" applies to the Non US Holder or the information
reporting and back-up withholding requirements described in paragraph 2(b)(iv)
under "Information reporting and backup withholding" are not met.
<PAGE>
(ii) -Notwithstanding the foregoing, if any of the New Internet Shares are
received by a Radical Shareholder more than one year after the exchange, a
portion of the value of such shares will be treated as interest income in the
year the shares are received. For US Holders, such interest will be taxed at
ordinary income tax rates. For Non US Holders, such interest may be subject to
withholding of US federal income tax at a rate of 30 per cent. unless such rate
is reduced by an applicable tax treaty. However, if the interest income is US
trade or business income (as defined below in paragraph 2(b) to a Non US Holder,
it generally will be subject to tax at ordinary income tax rates. In general,
the amount of interest income will be the excess of the value of the New
Internet Shares at the time they are received over the value of such shares
discounted at a prescribed interest rate.
(iii) -The tax basis of New Internet Shares received by Radical
shareholders will be the same as the tax basis of the Radical Shares exchanged
for such New Internet Shares, except that the tax basis of any New Internet
Shares treated as interest will be the amount of such interest; and
(iv) -The holding period for the New Internet Shares received by Radical
Shareholders will be the same as the holding period of the Radical Shares
exchanged for such New Internet Shares, except that the holding period for any
New Internet Shares treated as interest will begin on the date of the receipt of
such shares.
-If the exchange of Radical Shares for New Internet Shares pursuant to the
Offer does not qualify as a reorganization within the meaning of section 368(a)
of the Code, a Radical Shareholder will recognize gain or loss in an amount
equal to the difference between (1) the sum of the fair market value of the New
Internet Shares and (2) the Radical shareholder's tax basis in the Radical
Shares surrendered in the exchange. Such gain or loss will be long-term or short
term depending on whether the Radical Shares have been held for more than one
year at the time of the exchange. Generally, Non US Holders of Radical Shares
will not be subject to US federal income tax on any such gain unless an
exception described in paragraph 2(b) (ii) below under "Sale, exchange,
redemption or other disposition" applies to the Non US Holder or the information
reporting and back-up withholding requirements described in paragraph 2 (b) (iv)
below under "Information reporting and backup withholding" are not met.
(b) The holding and disposition of New Internet Shares by Non US Holders
-For purposes of the following discussion, dividends and gain on the sale,
exchange or other disposition of New Internet Shares will be considered to be
"US trade or business income" if such income or gain is (1) effectively
connected with the conduct of a US trade or business or (2) in the case of a
treaty country resident, attributable to a permanent establishment (or, in the
case of an individual, a fixed base) in the US.
<PAGE>
(i) Dividends
-In general, dividends paid to a Non US Holder of New Internet Shares will
be subject to withholding of US federal income tax at a 30 per cent. rate unless
such rate is reduced by an applicable tax treaty. Dividends that are US trade or
business income are generally subject to US federal income tax on a net basis at
regular income tax rates, and are not generally subject to the 30 per cent.
withholding tax if the Non US Holder provides a Form W-8ECI or successor form to
the payor. Any US trade or business income received by a Non US Holder that is a
corporation may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30 per cent. rate or such lower rate as may be
applicable under a tax treaty. Under current tax rules, dividends paid to an
address in a foreign country generally are presumed (absent actual knowledge to
the contrary) to be paid to a resident of such country for purposes of the
withholding discussed above and for purposes of determining the applicability of
a tax treaty to reduce the rate. Under US Treasury Regulations generally
effective 1 January 2001, ("the Final Regulations"), a Non US Holder of New
Internet Shares who wishes to claim the benefit of an applicable treaty rate
will be required to satisfy certain certification and other requirements, which
will include the requirement that the Non US Holder file a Form W-8BEN
containing the holder's name and address and may require the Non US Holder to
provide certain documentary evidence issued by foreign governmental authorities
as proof of residence in the foreign country. A Non US Holder of New Internet
Shares who is eligible for a reduced rate of US withholding tax pursuant to a
tax treaty may obtain a refund of any excess amounts currently withheld by
filing an appropriate claim for a refund with the Internal Revenue Service.
(ii) Sale, exchange, redemption or other disposition
-Subject to the information below under "Information reporting and backup
withholding", a non-U.S. Holder of New Internet Shares generally will not be
subject to U.S. Federal Income Tax in respect of gain recognised on a sale,
exchange or disposition unless (a) if an income tax treaty does not apply, the
gain is effectively connected with a trade or business conducted by the Non-U.S.
Holder in the United States, or, if an income tax treaty applies, the gain is
attributable to a United States permanent establishment maintained by the
Non-U.S. Holder, (b) in the case of an individual Non-U.S. Holder, such holder
is present in the United States for at least 183 days in the taxable year of the
disposition and either the income from the disposition is attributable to an
office or other fixed place of business maintained by the holder in the United
States or the holder has a "tax home" in the United States, or (c) the U.S.
Holder is subject to tax pursuant to the provisions of the U.S. Federal Income
Tax Laws applicable to certain United States expatriates.
(iii) Federal estate tax
-New Internet Shares owned or treated as owned by an individual Non US
Holder who is not a citizen or resident of the US for US federal estate tax
purposes will be included in such individual's gross estate for US federal
estate tax purposes unless an applicable estate tax treaty otherwise provides.
<PAGE>
(iv) Information reporting and backup withholding
-Internet must report annually to the Internal Revenue Service and to each
Non US holder any dividend income that is subject to withholding of US tax.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the Non US Holder resides. Under current law, backup
withholding at the rate of 31 per cent. generally will not apply to dividends
paid to a Non US Holder at an address outside the US (absent actual knowledge
that the payee is a US person). Under the Final Regulations, however, a Non US
Holder will be subject to backup withholding unless a Form W-8BEN is provided
and certain other requirements are met. The payment of proceeds from the
disposition of common stock to or through the US office of any broker, US or
foreign, will be subject to information reporting and possible backup
withholding unless the owner certifies as to its non US status under penalty of
perjury or otherwise establishes its entitlement to an exemption from
information reporting and backup withholding, and the broker does not have
actual knowledge that the holder is a US person or that the conditions of an
exemption are not, in fact, satisfied. The payment of proceeds from the
disposition of New Internet Share to or through a non US office of a non-US
broker that is not a "US related person" will not be subject to information
reporting or backup withholding. For this purpose, "US related person" is a
foreign person with one or more enumerated relationships with the US. In the
case of the payment of proceeds from the disposition of New Internet Shares to
or through a non-US office of a broker that is either US person or a US related
person, the regulations require information reporting on the payment unless the
broker has documentary evidence in this files that the owner is a Non US Holder
and the broker has no knowledge to the contrary. Backup withholding will not
apply to payments made through the foreign office of a broker that is a US
person or a US related person (absent actual knowledge that the payee is a US
person). Any amounts withheld under the backup withholding rules from a payment
of a Non US Holder will be allowed as a refund or a credit against such Non US
Holder's US federal income tax liability provided the requisite procedures are
followed.
Appendix V
Additional Information
1. Responsibility
The directors of Internet, whose names are set out in paragraphs 2 below, accept
responsibility for the information contained in this document (other than that
relating to Radical, the directors of Radical and their immediate families and
related trusts). To the best of the knowledge and belief of the directors of
Internet (who have taken all reasonable care to ensure that such is the case),
the information contained in this document for which they are responsible is in
accordance with the facts and does not omit anything likely to affect the import
of such information.
<PAGE>
The directors of Radical, whose names are set out in paragraph 2 below, accept
responsibility for the information contained in this document relating to
Radical, the directors of Radical and their immediate families and related
trusts. To the best of the knowledge and belief of the directors of Radical (who
have taken all reasonable care to ensure that such is the case), the information
contained in this document for which they are responsible is in accordance with
the facts and does not omit anything likely to affect the import of such
information.
2. Directors
(a) The directors of Internet are as follows:
Stefan Paul Allesch-Taylor Executive Chairman
Nicholas Harvey Thistleton Executive Director
Sir Euan Anstruther-Gough Calthorpe Bt Non Executive Director
-The business address of all the directors of Internet is 16 Curzon Street,
London W1Y 7FF, the principal place of business of Internet is 116 John Street,
Suite 1313, New York, NY 10038, USA, and the registered agent of Internet is HIQ
Corporate Services Inc, 1108 E. South Union Avenue, Midvale, Utah 84047.
(b) The directors of Radical are as follows:
George Robert Boot Executive Chairman
Julian Amory Burns Managing Director
Philip Roberts Support Director
Stefan Paul Allesch-Taylor Non-executive Director
-The business address of all the directors of Radical is Jessop House, 100
Tamworth Road, Croydon, Surrey CR0 1XX, being the registered address of Radical.
3. Disclosure of Shareholding and Dealings
For the purposes of this Appendix V:
-"disclosure period" means the period commencing on 14 January 1999 (the
date twelve months prior to the commencement of the Offer period) and ended on
28 March 2000 (the latest practicable date prior to the posting of this
document).
"associate" means:
(aa) -subsidiaries and associated companies of Radical and companies with
which any such subsidiaries or associated companies are associated;
(bb) -banks, financial and other professional advisers (including
stockbrokers) to Radical or a company covered in paragraph (aa) above, including
persons controlling, controlled by or under the same control as such banks,
financial or other professional advisers;
(cc) -the directors of Radical and the directors of any company covered in
paragraph (aa) above (together in each case with any member of their immediate
family or related trusts); and
(dd) -the pension funds of Radical or a company covered in paragraph (aa)
above;
<PAGE>
-"relevant securities" means Radical Shares, Internet Shares, STG Shares
and securities convertible into, rights to subscribe for, options (including
traded options) in respect thereof and derivatives referenced thereto;
-a "bank" does not apply to a bank whose sole relationship with a member of
Radical is the provision of normal commercial banking services or such
activities in connection with the Offer as handling acceptances and other
registration work.
A. Interests and dealings in the share capital of Radical
(a) Interests
(i) -At the close of business on 28 March 2000 (the latest practicable date
prior to the posting of this document), the interests in Radical Shares, all of
which are beneficial unless otherwise stated, of the directors of Radical, the
directors of Internet, their immediate families and their connected persons,
which have been notified to Radical pursuant to sections 324 or 328 of the
Companies Act or are required to be entered in the register referred to in
section 325 of the Companies Act, were as follows:
Number of Radical Shares held
G Robert Boot 694,000
Julian A Burns 486,000
Philip Roberts 600,000
Stefan P Allesch-Taylor Nil
Nicholas H Thistleton Nil
Sir Euan A-G-Calthorpe Nil
(ii) -On 26 October 1999, Capital Strategy was granted an option to
subscribe for up to 88,190 Radical Shares at a price of 100p per Radical share
at any time or times during a period of three years commencing 1 December 1999.
(b) Dealings
-The directors of Radical, the directors of Internet, their immediate
families or connected persons have dealt for value in the Radical shares during
the disclosure period as follows:
(i) -on 8 October 1999 G R Boot, J A Burns and P Roberts were each allotted
2000 Radical Shares at 5p per share as part of a general issue to staff under
the staff motivation policy;
(ii) -on 1 December 1999, at the request of JP Jenkins Limited, the
directors of Radical made available some of their Radical Shares in order to
assist liquidity on the OFEX market and as a result G R Boot sold 8,000 Radical
Shares, J A Burns sold 16,000 Radical Shares and P Roberts sold 2,000 Radical
Shares.
<PAGE>
B. Interests and dealings in the share capital of Internet
(a) Interests
(i) -At the close of business on 28 March 2000 (the latest practicable date
prior to the publication of this document), the interests in Internet Shares,
all of which are beneficial unless otherwise studied, of the directors of
Radical, the directors of Internet, their immediate families and their connected
persons, which would have been notified to Internet pursuant to sections 324 or
328 of the Companies Act or would be required to be entered in the register
referred to in section 325 of the Companies Act, were as follows:
Number of Options/
Internet shares warrants
G Robert Boot Nil Nil
Julian A Burns Nil Nil
Philip Roberts Nil Nil
Stefan P Allesch-Taylor Nil Nil
Nicholas H Thistleton Nil Nil
Sir Euan A-G-Calthorpe Nil Nil
(ii) -STG owns 6,480,000 Internet shares. The directors of STG are Stefan P
Allesch-Taylor, Anthony A Berk, Sir Euan A-G-Calthorpe and Luke D Chapman.
C. Interests and dealings in the share capital of STG
(a) Interests
(i) -At the close of business on 28 March 2000 (the latest practicable date
prior to the posting of this document), the interests in STG Shares, all of
which are beneficial unless otherwise stated, of the directors of Radical, the
directors of Internet, their immediate families and their connected persons,
which have been notified to STG pursuant to sections 324 or 328 of the Companies
Act or are required to be entered in the register referred to in section 325 of
the Companies Act, were as follows:
Number of Number of
STG Shares STG options
G Robert Boot (1) 333,714 Nil
Julian A Burns Nil Nil
Philip Roberts Nil Nil
Stefan Allesch-Taylor (2) 2,576,236 359,083
Nicholas H Thistleton Nil Nil
Sir Euan A-G-Calthorpe 731,744 Nil
(1) Of G Robert Boot's shareholding in STG 114,846 STG Shares are held by
him as trustee.
(2) -2,321,712 STG Shares are registered in the name of The Dependable
Foundation Limited, of which Stefan Allesch-Taylor and his family are
beneficiaries. A further 152,860 STG Shares are registered in the name of Semley
Holdings Limited, a company of which Stefan Allesch-Taylor is a director.
<PAGE>
(b) Dealings
(i) -On 29 January 1999, Sir Euan Calthorpe subscribed for 33,428 STG
Shares at a price of 70 pence per share. on 15 February 1999 he was issued with
a convertible loan note for (pound)76,600 for cash consideration. This loan note
was convertible at 70p per STG Share, and no interest was payable on it. He
converted this loan note into 109,428 STG Shares on 10 June 1999. on 14 June
1999, he was issued with 200,000 STG Shares for cash consideration of 75p per
STG Share. on 7 December 1999 he was issued with 388,888 STG Shares for cash
consideration of 90p per STG Share.
(ii) -_on 2 July 1999, The Dependable Foundation Limited was issued with
convertible loan stock for (pound)1,665,000. This represented its interest in
the profit share of STG subsidiary and joint venture companies. The loan stock
was convertible at 90p per share and interest was payable on it at the rate of
4% per annum. On 8 October 1999, it converted (pound)384,300 together with
interest on that sum to that date, into 431,585 STG Shares at 90p per share. The
balance of the loan stock was converted into 1,451,226 STG Shares on 23 December
1999.
(iii) -On 2 July 1999 Semley Holdings Limited was issued with convertible
loan stock for (pound)135,000. This represented its interest in the profit share
of STG subsidiary and joint venture companies. The loan stock was convertible at
90p per share and interest was payable on it at the rate of 4% per annum. on 23
December 1999 it converted the loan stock together with interest on it to that
date, into 152,975 STG Shares.
(iv) -on 30 April 1999, Robert Boot was issued with convertible loan notes
for a total of (pound)254,788.07. of this amount, (pound)86,137.07 was held by
him as trustee. These loan notes were converted into 339,714 STG Shares on 29
September 1999. of that number, 114,846 STG Shares are held by him as trustee.
(v) _-on 12 February 1999, Capital Strategy were issued with a convertible
loan note for (pound)5,000 for cash consideration. This loan note was
convertible at 70p per STG Share and no interest was payable on it. It was
converted on 10 June 1999 into 6,666 STG Shares.
(vi) -Mark Warde Norbury, a director of Capital Strategy, purchased 6,560
STG Shares at a price of 75p per share on 22 January 1999. on 12 February 1999
he was issued with a convertible loan note for (pound)10,000, for cash
consideration convertible at 72p per share with interest payable at the rate of
8% per annum. on 10 June 1999 he converted the sum of (pound)10,000 together
with interest into 14,266 STG Shares. He purchased 5,000 STG Shares at a price
of 72p per share on 15 July 1999. on 7 December 1999 he subscribed for 55,555
STG Shares for cash consideration at a price of 90p per share.
(vii) -Anthony Drury, a director of Capital Strategy purchased 1,400 STG
Shares at a price of 73p per share on 16 July 1999.
(viii) -On 14 July 1999, Corporate Synergy sold 10,000 STG Shares at 60p
per share and on 15 July 1999 it sold 5,106 STG Shares, also at 60p per share.
Corporate Synergy no longer holds any STG Shares.
<PAGE>
D. General
(a) -Save as disclosed above, neither Internet nor any of its subsidiaries,
nor any of the directors of Internet or directors of Radical, nor any member of
their immediate families nor, so far as the directors of Internet or Radical are
aware (having made due and careful enquiry), and connected person, nor any
person deemed to be acting in concert with Internet, owns, controls or (in the
case of the Directors of Internet or directors of Radical, their immediate
families and connected persons) is interested, directly or indirectly, in any
relevant securities, nor has any such person dealt for value therein during the
disclosure period.
(b) -Save as disclosed above, neither Radical nor any of its subsidiaries,
nor any of the directors of Radical, nor any member of their immediate families
nor, so far as the directors of Radical are aware (having made due and careful
enquiry), any connected person, nor any person deemed to be acting in concert
with Radical, owns, controls or (in the case of the directors of Radical, their
immediate families and connected persons) is interested, directly or indirectly,
in any relevant securities, nor has any such person dealt for value therein
during the disclosure period.
(c) -Save as disclosed above and so far as Radical is aware, no banker,
stockbroker, financial or other professional adviser to Radical, nor any firm in
which any of them is a partner, nor any subsidiary or associated company of
Radical, nor any person controlling, controlled by or under the same control of
such banker, stockbroker, financial or other professional adviser, nor any
pension fund of Radical or any of its subsidiaries, nor any person whose
investments are managed on a discretionary basis by fund managers (other than
exempt fund managers) connected with Radical, owns, controls or is interested,
directly or indirectly, in any relevant securities, nor has any such person
dealt for value therein during the disclosure period.
(d) -No arrangement exists between any person and Internet, any person
acting in concert with Internet, Radical or any associate of Internet or Radical
in relation to relevant securities including, in addition to indemnity and
option arrangements, any agreement or understanding, formal or informal, of
whatever nature, which may be an inducement to deal or refrain from dealing nor
has any such person dealt for value therein during the disclosure period.
4. Rights attaching to the New Internet Shares
(a) -Internet has not registered its issue of the New Internet Shares or the
resale of those shares. Accordingly, Radical Shareholders who receive New
Internet Shares in this Offer (and each subsequent purchaser of the New
Internet Shares) may not, and agree not to, offer, sell or otherwise
transfer publicly the New Internet Shares prior to:
(i) -the date which is one year after the date of the issuance of the New
Internet Shares in this Offer, in which case the New Internet Shares may only be
sold pursuant to the volume, manner of sale and other limitations contained in
Rule 144 under the Securities Act; or
<PAGE>
(ii) -the date which is two years (or such shorter period of time as
permitted by Rule 144(k) under the Securities Act or any successor provision
thereunder) after the date of the issue of the New Internet Shares in this
Offer;
-unless such offer, sale or transfer is made pursuant to a registration
statement which has been declared effective under the Securities Act non US
persons who acquire New Internet Shares in the Offer may transfer to other non
US person in transactions that occur outside the US within the meaning of
Regulation S under the Securities Act, or is pursuant to any other available
exemption from the registration requirements of the Securities Act.
(b) -The resale of the New Internet Shares pursuant to an exemption from the
Securities Act is contingent upon Internet receiving an opinion of counsel (at
the cost of Radical Shareholders) reasonably satisfactory to Internet stating
that any sale, transfer, assignment or hypothecation is exempt from the
registration and prospectus delivery requirements of the Securities Act. In no
event will a sale or transfer be permitted if, in the opinion of Internet or its
counsel, such sale or transfer would violate the Securities Act or state
securities laws, including investor suitability standards.
(c) -The Radical Shareholders understand that, except if registered pursuant to
the Registration Rights Agreement described below. Internet has undertaken to
the directors of Radical to file a registration statement with the United States
Securities and Exchange Commission no later than 12 months from the date of
issue of the New Internet Shares. Internet has also undertaken that during this
period it will not file a registration statement with the United States
Securities and Exchange Commission in respect of Internet Shares owned by STG
which for the purposes of the Offer are acting in convert with Internet, as well
as of Internet, and which for the purposes of the Offer is regarded as acting in
concert with Internet, prior to filing the registration statement in respect of
the Internet Shares to be issued to Radical Shareholders. Each certificate
representing the New Internet Shares will be endorsed with the legends in
substantially the following form:
-THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES OR THE TRANSFER IS MADE IN COMPLIANCE
WITH RULE 144 OR ANOTHER EXEMPTION PROMULGATED UNDER SUCH ACT AND INTERNET
RECEIVES AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO INTERNET, STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
(d) -Holders of New Internet Shares, which are "common stock" are entitled to
one vote per share on all matters to be voted upon by the stockholders of
Internet, and the holders of common stock vote together as a single class on all
matters to be voted upon by the stockholders.
<PAGE>
-The holders of common stock are entitled to receive ratably such dividends
when, as and if declared from time to time by the directors of Internet out of
the assets of Internet available for the payment of dividends to the extent
permitted by law, subject to preferences that may be applicable to any
outstanding preferred stock and any other provisions of Internet' certificate of
incorporation. Internet does not, however, anticipate paying any cash dividends
in the foreseeable future.
-Holders of common stock have no pre-emptive or other rights to subscribe
for additional shares. No shares of common stock are subject to redemption
or a sinking fund. Holders of common stock also do not have cumulative
voting rights, which means the holder or holders of more than half of the
shares voting for the election of directors can elect all the directors
then being elected.
(e) -In the event of any liquidation, dissolution or winding up or Internet,
whether voluntary or involuntary, after payment of the debts and other
liabilities of Internet, and subject to the rights of holders of shares of
preferred stock, holders of common stock are entitled to share pro rata in any
distribution of remaining assets to the stockholders. All of the outstanding
shares of common stock are fully paid and non-assessable.
5. Market Quotations
The following table shows the middle market prices of Radical Shares as derived
from Newstrack Limited 1 December 1999, being the date of their admission to
trading on OFEX and the first dealing day of each subsequent month, and 28 March
2000 (the latest practicable date prior to posting of this document) and_2 March
2000 being the latest date prior to the posting of the announcement of the terms
of the Offer:
1 December 1999 117.5p
4 January 2000 82.5p
1 February 2000 97.5p*
1 March 2000 97.5p*
2 March 2000 97.5p*
28 March 2000 160.0p
*Radical Shares were suspended between 14 January 2000 and 6 March 2000.
6. Material Contracts
6.1 Radical
-The following contracts have been entered into by Radical, not being
contracts entered into in the ordinary course of business, within the 2 years
immediately prior to the Offer Period which are or may be material:
(a) -agreement made 15 May 1998 between MDA Computing Ltd (1), Radical (2)
and Messrs G R Boot, J A Burns, S Khan and P Roberts (Investors) (3) whereby the
Company purchased the MDA Computing business for an aggregate consideration of
(pound)7,004 plus additional consideration.
(b) -agreement made 7 June 1999 between M Segal and G R Boot (1) and
Radical (2) for the use and sale by the Company of a Job Costing System whereby
50 per cent of the sale proceeds of Job Costing Systems (as invoiced by Radical)
is payable to Messrs Segal and Boot when the sale proceeds are received by
Radical.
<PAGE>
(c) -agreement made 27 September 1999 between Radical (1) and Capital
Strategy (2) whereby Capital Strategy agreed to arrange for the flotation of
Radical on the OFEX market in consideration of a fee of (pound)20,000, 5 per
cent. of the funds raised in the offer and the option to subscribe for Ordinary
Shares referred to in sub-paragraph 6.1(d) below.
(d) -agreement made 26 October 1999 between Radical (1) and Capital
Strategy (2) whereby Capital Strategy were granted an option to subscribe for up
to 88,190 Ordinary Shares at a price of 100p per Radical Share for a period of
three years from completion.
(e) -agreement made 3 March 2000 between MDA Computing Limited (1) Radical
(2) and the Investors (3) whereby the parties agreed how the additional
consideration obligations of the Investors under the contract referred to in
sub-paragraph 6.1.(a) would be satisfied by the Investors.
6.2 Internet
-The following contracts have been entered into by Internet or a subsidiary
of Internet, not being contracts entered into in the ordinary course of
business, within the 2 years immediately prior to the Offer Period which are or
may be material:
(a) -acquisition agreement and Plan of Reorganisation dated 28 October 1999
between Internet (1) Fairfax Equity Limited (2) and STG Holdings PLC and TH
Investments Limited (3) whereby Internet purchased the issued share capital of
Fairfax Equity Limited in exchange for the issue by Internet of a total of
8,640,000 Internet Shares at US$0.25 a share representing 80.2 per cent. of
Internet's capital after the acquisition;
(b) -a settlement agreement dated 25 November 1999 between Internet (1)
Agritech Holdings Limited (2) and Ghanagricola Limited pursuant to which
disputes relating to W S Clarke Limited and Chiron Systems Limited were settled;
(c) -a private placement agreement dated 17 January 2000 between Internet
(1) and Panther Capital Limited (2) pursuant to which 5,000,000 Internet Shares
were placed at $1 per share. The entire 5,000,000 Internet Shares were taken up
by Panther Capital Limited.
(d) -a conditional agreement dated 24 March 2000 by which Internet agreed
to acquire the entire outstanding capital stock of Core Ventures Limited, a
company incorporated in England, from Troy Limited, a Cayman Corporation, for a
consideration of the issue of 1,800,000 Internet Shares.
7. Service Contracts
(a) -Service agreements have been entered into between Radical and the directors
of Radical, the principal terms of which are summarised below:
Pension
Current contribution Annual
Effective of contract per cent
Directors Date remuneration of salary Position
G Robert Boot 1.10.99 (pound)70,000 Nil Executive Chairman
Julian A Burns 1.10.99 (pound)64,000 Nil Managing Director
Philip Roberts 1.10.99 (pound)50,000 Nil Support Director
(b) -G R Boot's contract is terminable on twelve month's written notice by
either party and allows G R Boot to reduce his time spent working for the
company to a minimum of three days per week with a proportionate reduction of
salary.
<PAGE>
(c) -J A Burns' and P Roberts' contracts are terminable on six month's notice by
either party.
(d) There is no employment agreement with S P_Allesch-Taylor.
(e) -There are no service agreements existing or proposed between the directors
and Internet or Radical which are not terminable within one year by Internet or
Radical respectively without payment of compensation.
(f) -There is no arrangement under which any director of Internet or of Radical
has agreed to waive future emoluments.
(g) -Save for the agreements referred to above, there are no existing or
proposed service agreements between any of the directors of Radical or the
directors of Internet and any member of Internet or Radical.
(h) -Save for the salaries or fees to be paid to the directors of Radical, there
will be no variation in the total emoluments received by the directors of
Internet or the directors of Radical as a result of the Offer.
8. Other Information
(a) -No proposal exists in connection with the Offer that any payment be made to
any person as compensation for loss of office or as consideration for, or in
connection with, his retirement from office.
(b) -Save as disclosed elsewhere in this document, no agreement, arrangement or
understanding exists between Internet or any party acting in concert with
Internet for the purposes of the Offer and any of the directors, recent
directors, shareholders or recent shareholders of Radical having any connection
with or dependence upon the Offer.
(c) -No agreement, arrangement or understanding exists whereby the beneficial
ownership of any of the Radical Shares acquired in pursuance of the Offer will
be transferred to any other person, save that Internet reserves the right to
transfer any Radical Shares so acquired to any other member of the Internet
Group.
(d) -Corporate Synergy and Capital Strategy have given and not withdrawn their
written consents to the issue of this document with the inclusion of their
respective opinions and recommendations, and the references to their respective
names in the form and context in which they appear.
(e) -Other than as disclosed in parts 1 and 3 of this document there has been no
material change in the financial or trading position of Internet since 31
December 1999 (the date to which the last accounts of Internet were prepared).
(f) -Other than as disclosed in Part 2 of this document there has been no
material change in the financial or trading position of Radical since 31 March
1999 (the date to which the last audited accounts of Radical were prepared).
9. Documents Available for Inspection
Copies of the following documents will be available for inspection at the
offices of Fladgate Fielder, 25 North Row, London, W1R 1DJ, during usual
business hours on any weekday (Saturdays and public holidays excepted) while the
Offer remain open for acceptance:
(a) the memorandum and articles of association of Radical;
(b) the articles of incorporation and bylaws of Internet;
(c) -the published audited consolidated accounts of Radical for the two
financial periods ended 31 March 1998 and 31 March 1999;
<PAGE>
(d) the published audited accounts of Internet of the three financial years
ended 31 December 1999;
(e) the material contracts referred to in paragraph 6 of this Appendix V;
(f) the written consents referred to in paragraph 8(d) of this Appendix V;
(g) the service contracts referred to in paragraph 7 of this Appendix V;
(h) this document and the Form of Acceptance; and
(i) -the irrevocable undertakings to accept the Offer described in the letter
from the Independant Directors.
30 March 2000
Appendix VI
Definitions
The following definitions apply throughout this document and in the accompanying
Form of Acceptance, unless the context otherwise requires.
"Act" the Companies Act 1985 (as amended)
"Capital Strategy" Capital Strategy Plc, financial adviser to Radical,
which is regulated by the Securities and Futures
Authority Limited
"City Code" the City Code on Takeovers and Mergers
"Corporate Synergy" Corporate Synergy PLC, financial adviser to Internet
which is regulated by the Securities and Futures
Authority Limited
"Form of Acceptance" the form of acceptance, authority and election
relating to the Offer
"Independent Directors" the independent directors of Radical being Philip
Roberts and Julian Burns
"Internet" Internet Holdings Inc
"Internet Shareholders" holders of Internet Shares
"Internet Shares" ordinary shares of common stock in Internet of
US$0.001
"New Internet Shares" the new unregistered common stock
of US$0.001 each in Internet to be issued, credited
as fully paid pursuant to the Offer
"Offer" the Offer for Radical being made by Corporate
Synergy on behalf of Internet as described in this
document
"Panel" the Panel on Takeovers and Mergers
<PAGE>
"Receiving Agent" Connaught St. Michaels Limited
"Radical" Radical Technology plc
"Radical Shareholders" holders of Radical Shares
"Radical Shares" ordinary shares of 5p each in Radical
"SEC" United States Securities and Exchange Commission
"Securities Act" United States Securities Act of 1933
"STG" STG Holdings PLC
"STG Shares" ordinary shares of 50p in the capital of STG
HEADS OF TERMS
DATE
INTERNET HOLDINGS INC
ACQUISITION OF
FERMAN A.G.
FROM
(1) DR. ALEXANDER NILL
(2) FORTMAN CLINE AG
<PAGE>
HEADS OF TERMS
This Agreement is entered into this 3rd day of May 2000 by and between:-
1. Internet Holdings Inc, a Utah Corporation, US Tax ID Number 13-3758042
(hereinafter called "the Acquirer") and
2. Dr Alexander Nill of 2 Roberts Mews, London, SW1X 8DA, United Kingdom
and FORTMAN CLINE AG a Company incorporated in Switzerland and whose
registered office is situate at Farberstrasse 33, 8008 Zurich,
Switzerland (hereinafter called "the Vendors") and together referred to
as "the parties".
1. PURCHASE OF FERMAN A.G.
1.1 The Acquirer hereby agrees to purchase and the Vendor agrees to sell 51%
of the outstanding capital stock of Ferman AG, a Company incorporated in
Seestrasee 65, 6052 Hergiswil, Switzerland (hereinafter called "the
Acquiree") subject to the completion of the various matters set out in
Clause 2 below.
1.2 The consideration payable by the Acquirer shall be $42,000,000 (Forty
Two Million United States Dollars) to be paid in the form of 3,360,000
(Three Million, Three Hundred and Sixty Thousand)
2
<PAGE>
shares of the Acquirer's Common Stock, to be treated as fully paid.
2. The Share exchange set out above is conditional on the completion of the
following actions:-
2.1 The production of a set of audited accounts for the Acquiree by the
Vendor is a form satisfactory to the Acquirer, showing, inter alia,
assets consisting of at least US$83,000,000 (Eighty Three Million United
States Dollars).
2.2 The execution of a guarantee by the Vendor and the Vendor's shareholders
in a form acceptable to the Acquirer that 51% of the realisable value of
the assets of the Acquiree will be not less than $42,000,000 (Forty Two
Million United States Dollars) and that in the case that 51% of the
assets are less than $42,000,000 that the Vendor will make up any
difference between the actual realisable value of the assets and the sum
of $42,000,000 in cash or in the form of equity securities acceptable to
the Acquirer.
2.3 The execution by the parties of a purchase contract in a form to be
agreed between the parties containing the usual representations and
warranties regarding the Parties
3
<PAGE>
and the proposed transaction provided always that this agreement shall
be deemed binding upon the parties who shall collectively take all
reasonable steps as are necessary to give effect to all the provisions
of this agreement. Neither party shall deliberately do any act or omit
from doing any act with the intent to delay or prevent any of the
matters referred to herein and agreed to be done by the parties from
being done and the transactions contemplated by this agreement being
fully completed. For the purpose of this agreement time shall be deemed
to be of the essence.
3. Termination
3.1 This Agreement may be terminated by the action of the Board of Directors
of the Acquirer or by the action of the Board of Directors of the Vendor
at any time prior to closing subject to and only if:
3.1.1 There shall be any actual or threatened action or proceeding by or
before any Court or any other governmental body which shall seek to
restrain, prohibit, or invalidate the transactions contemplated by this
Agreement and which, in the Judgment of such Board of Directors made in
good faith and based upon the advice of Legal Counsel, makes it
inadvisable to proceed with the transactions contemplated by this
Agreement; or
4
<PAGE>
3.1.2 The Closing shall not have occurred prior to May 30, 2000 or such later
date as shall have been approved by the parties hereto, other than for
reasons set forth below;
3.1.3 There shall have been any material adverse change in the assets,
properties, business or financial condition of the Acquiree taken as a
whole, which could have a materially adverse effect on the value of the
Acquiree (but subject to the provisions of Clause 2.2 above);;
3.1.4 In the event of termination pursuant to this Clause no obligation, right
or liability shall arise hereunder and each party shall bear all of the
expenses incurred by them in connection with the negotiation, drafting
and execution of this Agreement and the consummation of the transactions
herein contemplated.
4. General
4.1 Any notice required or permitted to be given by either party to the
other under these Conditions shall be in Writing addressed to that other
party at its registered office or principal place of business or last
known address or such other address as may at the relevant time have
been notified pursuant to this provision to the party giving the notice
or to the respective parties solicitors as defined herein.
5
<PAGE>
4.2 No waiver by either party of any breach of this Agreement shall be
considered as a waiver of any subsequent breach of the same or any other
provision.
4.3 If any provision of these Conditions is held by any competent authority
to be invalid or unenforceable in whole or in part the validity of the
other provisions of these Conditions and the remainder of the provision
in question shall not be affected thereby.
4.4 This Agreement and these Conditions shall be governed by the laws of
England and the parties consent to the exclusive jurisdiction of the
English courts in all matters regarding this Agreement and these
Conditions.
4.5 Unless the context otherwise requires, words importing one gender
include all other genders and words importing the singular include the
plural and vice versa. The Headings incorporated into this agreement are
solely for the purpose of identification only and each clause contained
herein shall be construed by reference to the meaning of the wording
used.
4.6 This Agreement is confidential to the parties to the Agreement and may
not be disclosed to any third party except as required by the law
applicable to this Agreement without the permission of the other party.
6
<PAGE>
5. CONTINUING DISPUTES ARBITRATION
5.1 In the event of there being any dispute that has not been resolved in
accordance with the provisions of clause 14 above then in the continued
absence of agreement (which for this purpose shall be deemed conclusive
if either the Grantor or the grantee should serve a notice on the other
calling for the dispute to be arbitrated upon) the matter shall be
referred to arbitration. Such dispute shall be determined by a single
Arbitrator to be agreed upon by the parties but in default of such
agreement shall be nominated on the application of either party by the
President of the Law Society for the time being in accordance with and
subject to the provisions of the Arbitration Act 1950 or any statutory
modification or re-enactment thereof for the time being in force. Upon
every such reference the arbitrator shall have power to take the opinion
of Counsel as he may think fit and to act upon any opinion so taken and
to obtain the assistance of such accountants or a valuer or other
experts as he may think fit and to act upon any statement of accounts,
valuation or expert assistance so obtained.
6. CANCELLATION
6.1 This agreement shall not be varied or cancelled unless such variation or
cancellation shall be expressly agreed in writing by the parties hereto.
7
<PAGE>
7. CONTINUING EFFECT OF AGREEMENT
7.1 If any of the provisions of this agreement is found by an arbitrator,
court or other competent authority to be void or unenforceable such
provision shall be deemed to be deleted from this agreement and the
remaining provisions of this agreement shall remain in full force and
effect. Notwithstanding the foregoing the parties hereto shall thereupon
negotiate in good faith in order to agree the terms of a mutually
satisfactory provision to be substituted for the provision so found to
be void or unenforceable.
8. NO PARTNERSHIP
8.1 Nothing in this agreement shall be deemed to constitute a partnership
between the parties to this agreement nor constitute any party, the
agent of the other party or otherwise entitle any party to have
authority to bind the other party for any purpose.
9. No conflict with other Instruments.
9.1 The execution of this Agreement will not violate or breach any document,
instrumental, agreement, contract or commitment of the Acquiree to which
Acquiree or Vendor.
8
<PAGE>
10. Signatories are duly authorised.
10.1 The signatories to this Agreement have been duly authorised by all
appropriate and necessary action by their respective organisations to
sign and enter into this agreement.
IN WITNESS WHEREOF the parties have executed this Agreement the day and year
first above written.
Signed for and on behalf of Internet Holdings Inc
By /S/ Stefan Allesch-Taylor
President
Witnessed
Signed by Dr Alexander Nill /s/ Dr Alexander Nill
Witnessed
Signed for and on behalf of Fortman Cline AG
By /s/ Paul Schuler
Witnessed
9
