<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1998
REGISTRATION NO. 333-63755
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7375
(STATE OF INCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
ANDREAS EDER
STEFAN-GEORGE-RING 19-23
81929 MUNICH, GERMANY
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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<S> <C> <C>
MICHAEL H. CHANIN, ESQ. HUBERT BESNER GUIDO SANDLER
POWELL, GOLDSTEIN, FRAZER BESNER KREIFELS WEBER BERLINER EFFEKTENBANK AG
& MURPHY LLP WIDENMAYERSTR 41 KURFUERSTENDAMM 119
1001 PENNSYLVANIA AVENUE, 80538 MUNICH, GERMANY 10711 BERLIN, GERMANY
N.W.
WASHINGTON, D.C. 20004
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
---------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE OFFERING PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock (par
value $.001 per
share)............... 3,500,000 shares $20 $70,000,000 $20,650(2)
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee.
(2) Paid to the Commission on September 18, 1998.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
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<PAGE> 2
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CROSS-REFERENCE SHEET
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<S> <C> <C>
I. Forepart of the Registration Statement and Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus Outside Front Cover Page of Prospectus
II. Inside Front and Outside Back Cover Pages Inside Front and Outside Back Cover Pages
of Prospectus of Prospectus
III. Summary Information, Risk Factors and Prospectus Summary; Selected Consolidated
Ratio of Earnings to Fixed Charges Financial Data and Risk Factors (Ratio
of Earnings to Fixed Charges not
applicable)
IV. Use of Proceeds Use of Proceeds
V. Determination of Offering Price Underwriting, Outside Front Cover of
Prospectus
VI. Dilution Dilution
VII. Selling Security Holders Not Applicable
VIII. Plan of Distribution Front Cover Page of Prospectus;
Underwriting
IX. Description of Securities to be Registered Description of Capital Stock
X. Interest of Named Experts and Counsel Experts; Legal Matters
XI. Information with Respect to the Registrant Business; Legal Matters; Price Range of
Range of Common Stock; Consolidated
Financial Statements; Prospectus
Summary; Selected Consolidated Financial
Data; Management's Discussion and
Analysis of Financial Condition and
Results of Operations; Management;
Principal Stockholders
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED
PROSPECTUS
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
3,500,000 SHARES OF COMMON STOCK
------------------------------
This Prospectus relates to the offering (the "Offering") of 3,500,000
shares of common stock, $0.001 par value per share (the "Common Stock" or the
"Shares") of Cybernet Internet Services International, Inc., a Delaware
corporation (the "Company"), all of which are being offered by the Company
outside of the United States on a "best efforts, all or none" basis. The Common
Stock currently is quoted on the Nasdaq OTC Bulletin Board (the "Bulletin
Board") under the symbol "ZNET". On August 26, 1998, the last reported sale
price of the Common Stock on the Bulletin Board was $20 per share. The Common
Stock is also traded on the Freiverkehr of the Berlin and Munich Stock Exchanges
under the security number 906623. On August 26, 1998, the last reported sale of
the Common Stock on the Berlin Stock Exchange was $22.60 per share and $22.74
per share on the Munich Stock Exchange (assuming an exchange rate of 1.75
Deutsche Marks for each $1.00)--see page 4, footnote 1. It is anticipated that
applications will be made to include the Common Stock for listing on the Neue
Markt of the Frankfurt Stock Exchange.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK
AND IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS".
------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATES SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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<S> <C> <C> <C>
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UNDERWRITING PROCEEDS TO
PRICE TO PUBLIC DISCOUNT(1) COMPANY(2)(3)
<S> <C> <C> <C>
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Per Share.................................. $ $ $
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Total...................................... $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Shares are offered by the Underwriter, as agent for the Company, on a
"best efforts, all or none" basis, for a period of 45 days from the
effective date of the registration statement of which this Prospectus forms
a part (the "Registration Statement"). All funds received by the Underwriter
will be deposited no later than noon on the next business day following
their receipt by the Underwriter in a separate account, to be held in escrow
by the Underwriter as agent for the subscribers of the Shares. If no closing
takes place during the offering period (or any extension thereof), then all
funds promptly will be returned to the subscribers thereof without any
deduction therefrom or interest therein.
-----------------------------------
The Common Stock is being offered by the Berliner Effektenbank AG (the
"Underwriter"), as agent for the Company on a "best efforts, all or none" basis,
subject to prior sale, withdrawal, or cancellation of the Offering without
notice. The initial Price to the Public and the Underwriting Discount will be
determined by agreement between the Company and the Underwriter. The initial
Price to the Public will not be higher than the last sale price reported on the
Berlin Exchange immediately prior to such determination. The Underwriter
reserves the right to reject any order for the Common Stock offered hereby, in
whole or in part. It is expected that delivery of the certificates evidencing
the Common Stock offered hereby will be made at the offices of Berliner
Effektenbank AG, Berlin, Germany, at the closing of the Offering.
BERLINER EFFEKTENBANK AG
The date of this Prospectus is , 1998
<PAGE> 4
[PICTURE OF A PORTION OF THE EARTH WITH COMPANY LOGO]
AVAILABLE INFORMATION
The Company is not subject to the informational requirements of the
Securities Exchange Act of 1934, as amended. The Company intends to furnish its
stockholders with annual reports containing financial statements audited by its
independent certified public accountants and quarterly reports for the first
three quarters of each fiscal year containing unaudited interim financial
information.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Common Stock
offered hereby. In accordance with the rules and regulations of the Commission,
this Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and the shares of Common Stock offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules filed as a part thereof, copies of which may be obtained from the
Commission upon payment of the fees prescribed therefore or examined without
charge at the Commission's offices at 450 Fifth Street N.W., Washington, D.C.
20549.
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes appearing elsewhere in this
Prospectus including the information under "Risk Factors".
THE COMPANY
The Company is a leading provider of international Internet backbone and
access services and network business solutions to companies in Germany, Austria
and Northern Italy. In addition to backbone and access, it offers a full range
of solutions and services, which business customers are likely to require to
establish and maintain their Internet related systems. Among the specific
services and solutions offered by the Company are virtual private networks,
web-hosting, co-location services, security solutions, electronic commerce
solutions and services, Intranet solutions and workflow solutions. The Company
offers consulting, complete design and installation, training, technical
support, operation and monitoring of systems. In addition, the Company sells on
a turnkey basis customer premise equipment required to connect to the Internet,
such as routers, servers and other hardware.
The Company maintains geographically distributed, state-of-the-art Internet
nodes connected to a redundant high performance backbone infrastructure.
Utilizing a combination of leased and Company owned lines and equipment, it
helps businesses reduce telecommunications costs by offering access to the world
wide Internet through dedicated leased lines at more than 100 nodes. For smaller
enterprises, it offers a system of more than 90 dial-up nodes with ISDN or
analog modem ports. These nodes permit local dial-up access to a majority of the
population of Germany and Austria. As of August 15, 1998, the Company had
approximately 6,000 customers, an increase from approximately 4,300 customers at
December 31, 1997, 3,000 customers at June 30, 1997, and 1,460 customers at
December 31, 1996.
To a significant extent, the Company has grown through acquisitions, and
the Company continues to seek additional acquisitions which will permit
expansion of the type and quality of the services offered, of the geographical
areas in which those services are offered, and increased penetration of the
Company's current markets. Significant acquisitions to date include the
acquisition of Artwise GmbH ("Artwise"), a wholly-owned German company which
provides Intranet messaging and workflow solutions, and whose operations have
been fully integrated with the Company's; Eclipse s.r.l. ("Eclipse"), a 66%
owned Internet Service Provider ("ISP") in Northern Italy; Vianet EDV
Dienstleistungs GmbH ("Vianet"), a wholly-owned ISP in Austria; and Open:Net
Internet Solutions GmbH ("Open:Net"), a wholly-owned ISP in southwest Germany.
The Company's business began with the formation of Cybernet Internet
Dienstleistungen AG ("Cybernet AG"), a privately held German stock company.
Cybernet AG was organized in December, 1995, and commenced significant
operations in 1996. On September 17, 1997, Cybernet AG was acquired by Cybernet
Internet Services International, Inc., a Utah corporation, organized on
September 27, 1983 ("Cybernet Utah"). Contemporaneously with the closing of this
Offering, Cybernet Utah will be merged into the Company, and the Company will be
the surviving entity of the merger. Unless the context otherwise requires, the
term "Company" or "Cybernet" refers to Cybernet Internet Services International,
Inc., its consolidated subsidiaries and its Utah and German predecessors. The
Company has agreed to purchase all of the issued and outstanding shares of
capital stock of Vianet, which acquisition (the "Vianet Acquisition") will be
consummated concurrently with consummation of the sale of the shares offered
hereby. The information presented in this Prospectus assumes that the Vianet
Acquisition has been consummated.
The Company's principal executive offices are located at Stefan-George-Ring
19-23, 81929 Munich, Germany, and the Company's registered address in the United
States is CSC, 1013 Centre Road, Wilmington, Delaware 19805. The Company
maintains various sites on the Internet's world wide web. Information contained
in the Company's world wide web sites shall not be deemed to be part of this
Prospectus.
3
<PAGE> 6
THE OFFERING
Common Stock offered................ 3,500,000 shares
Common Stock to be outstanding after
the Offering........................ 20,787,111 shares
Use of proceeds..................... The Company will apply $4.3 million of
the net proceeds to pay the cash
portion of the purchase price of the
Vianet Acquisition and $585,750 to make
the remaining cash payment required by
the Open:Net acquisition(1). The
Company will utilize the balance: to
make additional acquisitions; to expand
infrastructure and to acquire
equipment, including the equipment
necessary to become licensed as a
telephone carrier in Germany; and, for
working capital.
Listings............................ The Common Stock is quoted on the
Bulletin Board under the symbol "ZNET".
It is also traded on the Freiverkehr of
the Berlin and Munich Stock Exchanges.
It is anticipated that the Common Stock
will also be listed on the Neue Markt
of the Frankfurt Stock Exchange.
- ---------------
(1) The purchase agreements provide for payment of the cash portion of the
purchase prices in Deutsche Marks ("DM"). For purposes of this Prospectus,
foreign currency amounts not presented in the audited, unaudited or pro
forma financial statements contained herein, or derived from such financial
statements, are translated into U.S. dollars at an exchange rate of 1.75 DM
for each U.S. dollar. Foreign currency amounts presented in the audited,
unaudited or pro forma financial statements are translated into U.S. dollars
in the manner described in Note 2 of Notes to the Consolidated Financial
Statements.
RISK FACTORS
Before purchasing shares of Common Stock offered hereby, investors should
consider the matters set forth under "Risk Factors".
4
<PAGE> 7
SUMMARY FINANCIAL INFORMATION
SUMMARY HISTORICAL AND PRO FORMA SELECTED CONSOLIDATED FINANCIAL STATEMENT DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------- ---------------------------
PRO FORMA PRO FORMA
1996 1997 1997(1) 1997 1998 1998(2)
----- ------ --------- ----- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue
Internet Projects................... $ 217 $1,598 $ 4,026 $ 446 $ 1,863 $ 2,209
Network Services.................... 91 716 3,441 150 1,489 3,126
----- ------ ------- ----- ------- -------
Total revenue.................. 308 2,314 7,467 596 3,352 5,335
Operating profit (loss).................. (55) (180) 2,001 (50) (24) 937
Net loss................................. (284) (984) (2,371) (340) (1,606) (2,338)
Basic and diluted loss per share......... $(.12) $ (.12) $ (.13) $(.02) $ (.07) $ (.13)
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1998
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PRO
ACTUAL FORMA(3)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)................................ $ (3,851) $ 68,268
Total assets................................................ 20,449 108,113
Long-term debt (including lease obligations)................ 1,134 1,221
Shareholders' equity........................................ 8,631 94,743
</TABLE>
- ---------------
(1) Gives effect to the following as if each had occurred January 1, 1997: (i)
acquisitions completed during the year ended December 31, 1997 (the "1997
Acquisitions"), (ii) the pending acquisition of Vianet and the acquisition
of Open:Net (the "1998 Acquisitions"), and (iii) this Offering and the
application of the net proceeds to the Company therefrom. See "Use of
Proceeds" and the Pro Forma Consolidated Financial Statements and related
notes included elsewhere in this Prospectus.
(2) Gives effect to the following as if each had occurred on January 1, 1998:
(i) the 1998 Acquisitions, and (ii) this Offering and the application of the
net proceeds to the Company therefrom.
(3) Gives effect to the following as if each had occurred on June 30, 1998: (i)
the 1998 Acquisitions, and (ii) the sale of 700,000 shares of Common Stock
completed in July 1998, and (iii) this Offering and the application of the
net proceeds to the Company therefrom.
5
<PAGE> 8
RISK FACTORS
Before purchasing shares of Common Stock offered hereby, a prospective
investor should consider, among other things, the following factors:
No Dividends. The Company has never paid cash dividends on its Common
Stock. It intends to retain future earnings to fund growth of its business and
does not anticipate paying any cash dividends on shares of Common Stock in the
foreseeable future. If and when the Company determines to pay cash dividends, it
will rely upon its subsidiaries to generate the necessary cash. See "Dividend
Policy".
Limitation of Liability; Indemnification of Directors and Officers. The
Company's Certificate of Incorporation: (i) eliminates the personal liability of
the directors of the Company to the fullest extent permitted by the General
Corporation Law of the State of Delaware (the "GCL"), and (ii) provides that the
Company shall indemnify, to the fullest extent permitted by the GCL, any and all
persons whom it shall have the power to indemnify under the GCL from all
expenses, liabilities or other matters referred to in, or covered by, the GCL.
No Commitment to Purchase Securities; Escrow of Subscription
Proceeds. Under the terms of the Offering, the Underwriter is offering the
Shares on a "best efforts, all or none" basis. Unless subscriptions are received
for all of the Shares, none of the Shares will be issued and the Offering will
be withdrawn. No person is committed to purchase any of the Shares. Under the
terms of the Offering, subscribers' funds will be returned to subscribers,
without interest thereon or deduction therefrom, if subscriptions for all of the
Shares are not received during the 45 day offering period (which period may be
extended for an additional 30 days.) During the Offering, subscribers will have
no right to the return of their subscriptions. See "Underwriting".
History of Losses. The Company started operations in 1996. The Company has
incurred net losses since its inception, and management expects to incur
significant additional losses as the Company continues its investment and
acquisition program, as well as the building of its infrastructure. Prospective
investors have limited operating and financial data about the Company upon which
to base an evaluation of the Company's performance and an investment in the
Common Stock offered hereby. For the years ended December 31, 1996, and December
31, 1997, the Company reported net losses of $283,778 and $983,840,
respectively. For the six months ended June 30, 1998, the Company reported a net
loss of $1,605,685. For the two years ending December 31, 1997, the Company
reported cumulative cash used by operating activities of $2,069,665. The Company
expects to generate negative operating cash flow for at least the next several
years while it continues to make acquisitions and invest in telecommunications
infrastructure. The extent to which the Company experiences negative cash flow
will depend upon a number of factors, including the number and size of its
acquisitions and investments, the ability to generate increasing revenues and
cash flow, the amount of expenditures incurred, and any adverse developments.
The Company may be dependent on various financing sources to fund its growth as
well as continued losses from operations. There can be no assurance that the
Company will achieve or sustain positive operating cash flow or generate net
income in the future. To achieve profitability, the Company must, among other
things, develop and market products and services which are accepted on a broad
commercial basis. Given the Company's limited operating history, there can be no
assurance that the Company will ever achieve broad commercial acceptance or
profitability.
Availability or Reliability of Information about Acquisitions. Businesses
which the Company may acquire typically do not have audited financial statements
and have varying degrees of internal controls and detailed financial
information. The pro forma financial information in this Prospectus includes
financial information concerning one recently completed acquisition for which
audited financial statements are not presently available. While the Company
believes such information to be reliable, the Company has only recently acquired
that company. There can be no assurance that a subsequent audit will not reveal
matters of significance, including with respect to liabilities, contingent or
otherwise. The Company's business strategy involves continued and potentially
rapid acquisitions. While the Company is not currently party to any acquisition
agreements, the Company is seeking additional acquisition candidates.
Accordingly, the Company expects that, from time to time in the future, it will
enter into additional acquisition agreements, the pro forma effect of which is
not known, cannot be predicted and has not been included herein. The Company's
completion of additional acquisitions may have a material impact on the
financial information set forth herein.
6
<PAGE> 9
There can be no assurance as to the number, timing or size of future
acquisitions, if any, or the effect any such acquisitions would have on the
Company's operating or financial results.
Requirements for Additional Capital. The Company's operations have
required and will continue to require substantial capital for investments,
including additional acquisitions, the deployment of the Company's
infrastructure, and the funding of capital expenditures for expansion of
services. In order to continue funding the Company's investment and acquisition
program, as well as product development, marketing, sales and customer support
capabilities over the longer term, the Company may require substantial funds in
addition to the proceeds of the sale of Common Stock offered hereby. The Company
would need to meet its additional capital needs with sales of additional equity
securities and borrowings. The failure to raise and generate sufficient
additional funds could require the Company to delay or abandon some of its
planned future expansion or expenditures, which could have a material adverse
effect on the Company's growth and its ability to compete in the Internet and
telecommunications industry. No assurance can be given that the Company will
have sufficient cash flow or capital available to maintain its current or future
growth plans or operations.
Management of Growth; Integration of Acquisitions and Investments;
Challenges of Growth by Acquisitions. The Company is currently experiencing a
period of rapid expansion. The rapid growth of the Company's business and its
product and service offerings has placed, and is likely to continue to place, a
significant strain on the Company's managerial, operating, financial and other
resources. In addition, the Company may be required to manage multiple
relationships with a growing number of third parties as it seeks to increase its
service offerings. The Company's future performance will depend, in part, upon
its ability to manage its growth effectively. The Company's ability to manage
its growth effectively will require it to continue to expand its operating and
financial procedures and controls, to replace or upgrade its operational,
financial and management information systems, and to attract, train, motivate,
manage and retain key employees. Failure to develop adequate operational and
control systems or to attract and retain highly qualified management, financial,
technical, sales and marketing and customer service personnel could materially
adversely affect the Company's ability to integrate the companies it has
acquired and will continue to acquire, and could have a material adverse effect
on the Company's business, financial condition and results of operations. While
the Company anticipates that it will recognize various economies and
efficiencies of scale as a result of acquisitions and the integration of the
businesses it has acquired and may acquire in the future, the process of
consolidating the businesses and implementing the strategic integration, even if
successful, may take a significant period of time, will place a significant
strain on the Company's resources, and could subject the Company to additional
expenses during the integration process. There can be no assurance that the
Company will be able to integrate the companies it has acquired successfully or
in a timely manner in accordance with its strategic objectives, or that the
Company's management, personnel, systems, procedures and controls will be
adequate to support the Company's existing and future operations. The Company's
business strategy is dependent, in part, upon its ability to continue to
successfully identify and acquire ISPs and other businesses that meet the
Company's criteria in order to optimize its market presence in the regions it
currently serves and to expand to other European countries. In pursuing such
acquisitions, the Company may compete with other companies with similar
acquisition strategies, many of which may be larger and have greater financial
and other resources than the Company. Competition for acquisitions is based on a
number of factors, including price, terms and conditions, size and access to
capital, ability to offer cash, stock, or other forms of consideration and other
matters. No assurance can be given that the Company will be able to successfully
identify suitable companies or, once identified, will be able to consummate
acquisitions of those targets on terms and conditions acceptable to the Company.
Competition; Pricing Fluctuation. Other companies, including
telecommunications carriers and other ISPs, may offer competitive products and
services at lower prices, which could affect the Company's ability to maintain
its price structure and its ability to generate profits. See
"Business -- Competition".
Dependence upon Implementation of Network Infrastructure. The Company's
success will depend upon its ability to complete the implementation of and to
continue to expand its network infrastructure and support services in order to
supply sufficient geographic reach, capacity, reliability and security at an
acceptable cost. The continued development and expansion of the Company's
network will require that it either enter into additional agreements, on
acceptable terms and conditions, with the various providers of infrastructure
7
<PAGE> 10
capacity and equipment and support services or independently develop such
infrastructure. No assurance can be given that any or all of the requisite
agreements can be obtained on satisfactory terms and conditions or that the
Company will have the necessary capital and regulatory clearances to develop the
infrastructure.
Following current industry practice, the Company has peering arrangements
with a number of other ISPs, by which the ISPs agree to carry each other's
traffic without paying transit costs. Although unlikely, this industry practice
may change and companies that have previously offered peering may cut back or
eliminate peering relationships, establishing new and more restrictive criteria
for peering. Furthermore, if additional requirements associated with maintaining
peering with the major ISPs develop, the Company may have to comply with those
additional requirements in order to continue to maintain its peering
relationships. Thus, the Company would incur additional costs, which would
reduce its profit margin.
The Company also anticipates that future expansions and adaptations of its
network infrastructure may be necessary in order to respond to growth in the
number of customers served, increased demands to transmit larger amounts of data
and changes to its customers' product and service requirements. The expansion
and adaptation of the Company's network infrastructure will require substantial
financial, operational and managerial resources. There can be no assurance that
the Company will be able to expand or adapt its network infrastructure to meet
the industry's evolving standards or its customers' growing demands and changing
requirements on a timely basis, at a commercially reasonable cost, or at all, or
that the Company will be able to deploy successfully any expanded and adapted
network infrastructure. Moreover, there is no assurance that the Company will be
able to integrate its network as anticipated. Thus, the Company may not realize
the expected cost savings or such cost savings may be delayed, adversely
affecting profits.
Entry by the Company into a new telecommunications market may place the
Company in direct competition with the providers of telecommunications services
to the Company in some areas, adversely affecting the Company's relationship
with such carriers and endangering the Company's business to serve customers.
Dependence on Key Personnel; Limited Senior Management Resources. The
Company is highly dependent upon the efforts of its senior management team, the
loss of any of whom could impede the achievement of product development and
marketing objectives and could have a material adverse effect on the Company. A
number of persons on the management team and key employees have entered into
employment agreements with the Company. However, those agreements, except for
certain directors, do not contain non-compete clauses. The Company believes that
its future success will depend, in large part, on its ability to attract and
retain qualified technical and marketing personnel. Competition for such
personnel is intense in the areas of the Company's activities. There can be no
assurance that the Company will be able to attract and retain the personnel
necessary for the development and integration of its business. Delays in hiring
such personnel could delay the achievement of development and marketing
objectives. The loss of the services of key personnel, or the failure to attract
additional personnel as required, could have a material adverse effect on the
Company's business, financial condition and results of operations. The Company
does not maintain any key person insurance for its executives. See
"Business -- Management".
Risk of System Failure. The Company's operations are dependent upon its
ability to protect its network infrastructure and customers' equipment against
damage from human error, fire, earthquakes, floods, power loss,
telecommunications failures, sabotage, intentional acts of vandalism and similar
events. Despite precautions taken by and planned to be taken by the Company, the
occurrence of a natural disaster or other unanticipated problems at one or more
of the Company's centers could result in interruptions in the services provided
by the Company or significant damage to customer equipment. In addition, failure
of any of the Company's telecommunications providers to provide the data
communications capacity required by the Company, as a result of human error, a
natural disaster or other operational disruption, could result in interruptions
in the Company's services. Any damage to, or failure of, the systems of the
Company or service providers upon which it relies, could result in reductions
in, or terminations of, services supplied to the Company's customers, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, the Company's reputation could
be materially adversely affected.
8
<PAGE> 11
With respect to its electronic commerce activities, the Company's success,
in particular its ability to successfully receive and fulfill orders and provide
high quality customer service, largely depends on the efficient and
uninterrupted operation of its computer and communications hardware systems. The
Company does presently have a number of redundant and mission-critical systems,
but does not have a formal disaster recovery plan and does not carry business
interruption insurance. Despite the implementation of network security measures
by the Company, its servers are vulnerable to computer viruses, physical or
electronic break-ins and similar disruptions, which could lead to interruptions,
delays, loss of data or the inability to accept and fill customer orders. The
occurrence of any of the foregoing risks could have a material adverse effect on
the Company's business, prospects, financial condition and results of
operations.
Security Risks. SYSTEM SECURITY RISKS -- A significant barrier to
electronic commerce and communications is the secure transmission of
confidential information over public networks. Certain of the Company's services
rely on encryption and authentication technology licensed from third parties to
provide the security and authentication necessary to effect secure transmission
of confidential information. Despite the Company's design and implementation of
a variety of network security measures, there can be no assurance that
unauthorized access, computer viruses, accidental or intentional actions and
other disruptions will not occur.
There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography, or other events or developments will
not result in a compromise or breach of the algorithms used by the Company to
protect customer transaction data. If any such compromise of the Company's
security were to occur, it could have a material adverse effect on the Company's
reputation, business, prospects, financial condition and results of operations.
A party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the Company's
operations.
The costs required to eliminate computer viruses and alleviate other
security problems could be prohibitive and the efforts to address such problems
could result in interruptions, delays or cessation of service to the Company's
customers, which could have a material adverse effect on the Company's business,
results of operations and financial condition.
GLOBAL SECURITY RISKS -- Concerns over the security of the Internet and
other online transactions and the privacy of users may also inhibit the growth
of the Internet and other online services generally, especially as a means of
conducting commercial transactions. To the extent that activities of the Company
or third-party contractors involve the storage and transmission of proprietary
information, such as credit card numbers, security breaches could damage the
Company's reputation and expose the Company to a risk of loss or litigation and
possible liability.
Dependence on the Internet; Uncertain Adoption of Internet as a Medium of
Commerce and Communications. The Company's products and services are targeted
toward users of the Internet. Use of the Internet has experienced rapid growth.
As is typical in the case of a new and rapidly evolving industry characterized
by rapidly changing technology, evolving industry standards and frequent new
product and service introductions, demand and market acceptance for recently
introduced products and services are subject to a high level of uncertainty.
While the Company believes that European companies will adopt this new
technology with the same enthusiasm as in the United States, there is no
assurance that the European market will develop in the same manner. In addition,
critical issues concerning the commercial use of the Internet remain unresolved
and may impact the growth of Internet use, especially in the business market
targeted by the Company. Despite growing interest in the many commercial uses of
the Internet, many businesses have been deterred from purchasing Internet access
services for a number of reasons including, among others, inconsistent quality
of service, lack of availability of cost effective, high speed options, a
limited number of local access points for corporate users, inability to
integrate business applications on the Internet, the need to deal with multiple
and frequently incompatible vendors, inadequate protection of the
confidentiality of stored data and information moving across the Internet, and a
lack of tools to simplify Internet access and use. In particular, numerous
published reports have indicated that a perceived lack of security of commercial
data, such as credit card numbers, has significantly impeded commercial
exploitation of the Internet to date, and there can be no assurance that
encryption or other technologies will be developed that satisfactorily address
these security
9
<PAGE> 12
concerns. Published reports have also indicated that capacity constraints caused
by growth in the use of the Internet may, unless resolved, impede further
development of the Internet to the extent that users experience delays,
transmission errors and other difficulties. Further, the adoption of the
Internet for commerce and communications, particularly by those individuals and
enterprises which have historically relied upon alternative means of commerce
and communication, generally requires the understanding and acceptance of a new
way of conducting business and exchanging information.
The Company is also at risk as a result of fundamental technological
changes in the way Internet solutions may be marketed and delivered. Integrating
technological advances may require substantial time and expense, and there can
be no assurance that the Company will succeed in adapting its network
infrastructure. While the Company believes that its plan of combining
telecommunications and Internet services offers significant advantages for
medium sized companies, there can be no assurance that commerce and
communications over the Internet will become widespread, or that the Company's
offered Internet access and telecommunications services will be widely adopted
for these purposes. The failure of the market for business related Internet
solutions to continue to develop would adversely impact the Company's business,
financial condition and results of operations.
In addition, new technologies or industry standards have the potential to
replace or provide lower cost alternatives to the Company's existing products
and services. The adoption of such new technologies or industry standards could
render the Company's existing products and services obsolete and unmarketable.
If the market for Internet access services fails to develop, develops more
slowly than expected, or becomes saturated with competitors, or if the Internet
access and services offered by the Company are not broadly accepted, the
Company's business, operating results and financial condition will be materially
adversely affected.
Rapid Technological Change; Evolving Industry Standards. The Company's
future success will depend, in part, on its ability to offer services that
incorporate leading technology, address the increasingly sophisticated and
varied needs of its current and prospective customers, and respond to
technological advances and emerging industry standards and practices on a timely
and cost effective basis. The market for the Company's services is characterized
by rapidly changing and unproven technology, evolving industry standards,
changes in customer needs, emerging competition and frequent new service
introductions. There can be no assurance that future advances in technology will
be beneficial to, or compatible with, the Company's business or that the Company
will be able to incorporate such advances on a cost effective and timely basis
into its business. Moreover, technological advances may have the effect of
encouraging certain of the Company's current or future customers to rely on
in-house personnel and equipment to furnish the services currently provided by
the Company. In addition, keeping pace with technological advances in the
Company's industry may require substantial expenditures and lead time.
The Company believes that its ability to compete successfully is also
dependent upon the continued compatibility and interoperability of its services
with products, services and architectures offered by various vendors. There can
be no assurance that industry standards will be established or that, if they
become established, the Company will be able to conform to these new standards
in a timely fashion and maintain a competitive position in the market. The
failure of the Company to conform to a prevailing standard, or the failure of a
common standard to emerge, could have a material adverse effect on the Company's
business, results of operations and financial condition. In addition, there can
be no assurance that products, services or technologies developed by others will
not render the Company's services non-competitive or obsolete.
If the Company is unable, for technical, legal, financial or other reasons,
to adapt in a timely manner in response to changing market conditions or
customer requirements, its business, prospects, financial condition and results
of operations would be materially adversely affected. See "Business -- The
Internet in Germany and Europe".
Potential Liability for Information Disseminated over Networks; Regulatory
Matters. The law relating to liability of ISPs for information carried on or
disseminated through networks is currently unsettled. A number of lawsuits have
sought to impose such liability for material deemed to be socially harmful. In
particular, one lower court in Germany, where the majority of the Company's
operations are located, has
10
<PAGE> 13
recently found the manager of an ISP liable for the contents of materials which
were not removed from an ISP's news-server, despite requests from government
authorities.
The imposition of potential liability for materials carried on or
disseminated through the Company's network could require the Company to
implement measures to reduce its exposure to such liability. Such measures may
require the expenditure of substantial resources or the discontinuation of
certain product or service offerings, any of which could have a material adverse
effect on the Company's business, operating results and financial condition.
Dependence Upon Suppliers. The Company relies on other companies to supply
certain key components of its network infrastructure, including
telecommunications services and networking equipment which, in the quantities
and quality demanded by the Company, are available only from limited sources.
For example, the Company currently relies on Cisco Systems to supply routers
critical to the Company's network, and the Company could be adversely affected
if routers from Cisco were to become unavailable on commercially reasonable
terms. Info AG, a potential competitor, and Deutsche Telekom, a competitor, are
the Company's primary providers of data communications facilities and network
capacity. The Company is also dependent upon telecommunications carriers, which
often are competitors of the Company, to provide telecommunications services and
lease physical space to the Company for routers, modems and other equipment.
There can be no assurance that, on an ongoing basis, the Company will be able to
obtain such services on the scale and within the time frames required by the
Company at a commercially reasonable cost, or at all. Failure to obtain or to
continue to make use of such services would have a material adverse effect on
the Company's business, operating results and financial condition.
Anti-Takeover Provisions. Certain provisions of Delaware law and the
Company's Certificate of Incorporation (the "Certificate of Incorporation") and
Bylaws (the "Bylaws") may have the effect of delaying, deterring or preventing a
future takeover or change in control of the Company unless such takeover or
change in control is approved by the Company's Board of Directors. Such
provisions also may render the removal of directors and management more
difficult. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Company's Common Stock. These
provisions of Delaware law and the Company's Certificate of Incorporation and
Bylaws may also have the effect of discouraging or preventing certain types of
transactions involving an actual or threatened change of control of the Company
(including unsolicited takeover attempts), even though such a transaction may
offer the Company's stockholders the opportunity to sell their stock at a price
above the prevailing market price. The Company's Certificate of Incorporation
places certain restrictions on who may call a special meeting of stockholders.
In addition, the Company's Board of Directors has the authority to issue up
to 50,000,000 shares of undesignated Preferred Stock, of which 7,760,000 shares
were issued and outstanding at June 30, 1998, and to determine the price,
rights, preferences, and privileges of those shares without any further vote or
actions by the stockholders. The rights of the holders of Common Stock are
subject to, and may be adversely affected by, the rights of the holders of the
Preferred Stock and any holders of Preferred Stock that may be issued in the
future. The issuance of additional shares of Preferred Stock, while potentially
providing desirable flexibility in connection with possible acquisitions and
serving other corporate purposes, could have the effect of making it more
difficult for a third party to acquire, or may discourage a third party from
attempting to acquire, a majority of the outstanding voting stock of the
Company.
In addition, the Company is subject to the anti-takeover provisions of
Section 203 of the GCL, which prohibits the Company from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 of the GCL also could have the effect of delaying
or preventing a change of control of the Company. In addition, the Company's
Certificate of Incorporation provides that, upon consummation of the Offering,
the Board of Directors will be divided into three classes of directors serving
staggered terms, and all stockholder actions must be effected at a duly called
meeting and not by a consent in writing. The classification provision and the
prohibition on stockholder action by written consent could have the effect of
discouraging a third party from
11
<PAGE> 14
making a tender offer or otherwise attempting to gain control of the Company.
Additionally, certain federal regulations require prior approval of certain
transfers of control which could also have the effect of delaying, deferring or
preventing a change of control. See "Description of Capital
Stock -- Anti-Takeover Provisions".
Dilution. The public offering price is substantially higher than the book
value per outstanding share of Common Stock. Accordingly, purchasers in this
Offering will suffer an immediate and substantial dilution of $15.98 per share
in the net tangible book value of the Common Stock from the public offering
price. See "Dilution".
Year 2000 Issue. Currently, many computer and software products are coded
to accept two-digit entries in the date code field. These date code fields will
need to accept four-digit entries to distinguish 21(st) century dates from
20(th) century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced, in order to comply with Year 2000
requirements. The Company and numerous third parties with which the Company does
business rely on numerous computer programs in their day-to-day operations. The
Company is evaluating the Year 2000 issue as it relates to the Company's
internal computer systems and third-party computer systems with which the
Company interacts. With regard to the internal computer systems, the Company has
concluded that the internal networking equipment related to its German operation
is Year 2000 compliant. It is continuing to evaluate the internal systems of
Vianet, Open:Net and Eclipse. It has also instituted procedures to assure that
systems installed in 1998 and 1999 will be Year 2000 compliant. With regard to
third parties, the Company has instituted procedures to assure that newly
acquired systems will be Year 2000 compliant. In addition, the Company is in the
process of contacting suppliers, vendors and customers to determine whether
existing systems upon which the Company relies for products and services are
Year 2000 compliant. This process has not been completed. To date, the Company
has received assurances from the respective suppliers that the following are all
Year 2000 compliant: Cisco routers, used in connection with leased telephone
line communications; Sun Workstations, the Company's main Internet servers;
network facilities supplied by Info AG; and, electric power supplied by
Stadtwerke Munich to the Company's main offices and several of its nodes. The
Company is in the process of determining whether its other major suppliers are
Year 2000 compliant. These include lessors of leased telephone lines, suppliers
of telephone service and electric power and suppliers of routers for dial-up
service. To date, the Company's costs in connection with its Year 2000
evaluation have been limited to internal staff costs, which have been expensed
as incurred. The Company does not presently anticipate utilizing outside
consultants and cannot predict whether the continuing evaluation of the Year
2000 compliance matter will require an upgrade or replacement of systems or
equipment. Should such an upgrade or replacement be required, it could represent
a significant cost to the Company. There can be no assurance that the Company
will be successful in identifying and planning for all Year 2000 issues. To the
extent that the Company is not successful, disruptions of the Company's
operations could result and the Company's revenues, results of operations and
financial conditions could be materially and adversely affected.
Discretionary Authority Over Use of Net Proceeds; No Specific Use of
Proceeds. Management will retain a significant amount of discretion over the
application of the net proceeds of the Offering. Because of the number and
variability of factors that determine the Company's use of the net proceeds of
the Offering, there can be no assurance that such applications will not vary
substantially from the Company's current intentions. Pending such utilization,
the Company intends to invest the net proceeds of the Offering in low risk, high
liquidity instruments. See "Use of Proceeds".
In addition to the payment of the consideration to the stockholders of
Vianet in the amount of $4.3 million, and to stockholders of Open:Net in the
amount of $585,750, the Company has set aside $23 million of the net proceeds to
finance future acquisitions. The Company expects to use the remaining net
proceeds for the purchase of telecommunications and networking equipment, for
the acquisition and development of software, and working capital. In the
ordinary course of business, the Company expects to evaluate potential
acquisitions of complementary businesses, products or technologies. Management
will have significant flexibility in applying the net proceeds of this Offering.
The failure of management to apply such funds effectively could have a material
adverse effect on the Company's business, prospects, financial condition and
results of operations. See "Use of Proceeds".
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<PAGE> 15
Forward-looking Statements. The statements contained in this Prospectus
that are not historical fact are "forward-looking statements". These statements
can often be identified by the use of forward-looking terminology such as
"estimates," "projects," "believes," "expects," "may," "will," "should,"
"intends," or "anticipates" or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. Management wishes to caution the reader that these
forward-looking statements, such as the timing, costs and scope of its
acquisition of, or investments in, existing businesses, the revenue and
profitability levels of such businesses, and other matters contained above and
herein in this Prospectus regarding matters that are not historical facts, are
only predictions. No assurance can be given that the future results indicated,
whether expressed or implied, will be achieved. While sometimes presented with
numerical specificity, these projections and other forward-looking statements
are based upon a variety of assumptions relating to the business of the Company
which, although considered reasonable by the Company, may not be realized.
Because of the number and range of the assumptions underlying the Company's
projections and forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond the reasonable
control of the Company, some of the assumptions inevitably will not materialize
and unanticipated events and circumstances may occur subsequent to the date of
this Prospectus. These forward-looking statements are based on current
expectations, and the Company assumes no obligation to update this information.
Therefore, the actual experience of the Company and results achieved during the
period covered by any particular projections or forward-looking statements may
differ substantially from those projected. Consequently, the inclusion of
projections and other forward-looking statements should not be regarded as a
representation by the Company or any other person that these estimates and
projections will be realized, and actual results may vary materially. There can
be no assurance that any of these expectations will be realized or that any of
the forward-looking statements contained herein will prove to be accurate.
Risks Associated with Business Expansion; Uncertainty of Acceptance of
Services. The Company's strategy is to expand the breadth and depth of products
and services offered and to expand its market presence in the countries in which
it is presently operating and to new countries. In addition, the Company may
pursue the acquisition of complementary businesses, products or technologies,
although it has no present understandings, commitments or agreements with
respect to any material acquisitions or investments. There can be no assurance
that the Company would be able to expand its efforts and operations in a cost
effective or timely manner or that any such efforts would increase overall
market acceptance. Furthermore, new products or services launched by the Company
that were not favorably received by customers could damage the Company's
reputation. Expansion of the Company's operations in this manner would also
require significant additional expenses and could strain the Company's
management, financial and operational resources. The lack of market acceptance
of such efforts or the Company's inability to generate satisfactory revenues
from such expanded services or products to offset their cost could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations.
Shares Eligible for Future Sale. Sales of substantial amounts of the
Company's Common Stock in the public market after this Offering could adversely
affect prevailing market prices for the Common Stock. The shares of Common Stock
offered hereby will be freely tradable without restriction under the Securities
Act. Taking into account restrictions imposed by the Securities Act, rules
promulgated by the Commission thereunder, and lock-up agreements relating to
certain stockholders, substantial additional shares will be available for sale
in the public market, subject in some cases to the volume and other restrictions
of Rule 144 under the Securities Act.
The Company, its directors, and its executive officers who held, as of
September 10, 1998, approximately 1,906,537 shares of Common Stock, or preferred
stock convertible into Common Stock, that would have been otherwise salable on
January 1, 1999, have agreed not to sell any shares of Common Stock for a period
of six months from the date of the closing of this Offering.
Sales of a substantial amount of Common Stock in the public market, or the
perception that such sales may occur, could adversely affect the market price of
the Common Stock prevailing from time to time in the public market and could
impair the Company's ability to raise additional capital through the sale of its
equity securities. See "Shares Eligible for Future Sale".
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<PAGE> 16
Risk Associated with International Operations. A component of the
Company's long-term strategy is to expand into a number of European markets.
Revenue generated by any current or future international operations needs to
offset the expense of establishing and maintaining any such international
operation, or the Company's business, results of operations and financial
condition could be materially adversely affected. There can be no assurance that
the Company will be able to market, sell and deliver successfully its services
outside Germany and the areas presently served. In addition to the uncertainty
as to the Company's ability to expand into new international markets, there are
certain risks inherent in conducting business internationally, such as
unexpected changes in regulatory requirements, export restrictions, tariffs and
other trade barriers, challenges in staffing and managing foreign operations,
differing technology standards, employment laws and practices in foreign
countries, longer payment cycles, problems in collecting accounts receivable,
political instability and, to a lesser extent, because of the unification of
Europe, fluctuations in currency exchange rates, imposition of currency exchange
controls, seasonal reductions in business activity and potentially adverse tax
consequences, any of which could adversely affect the Company's international
operations. Certain foreign governments, including certain countries in Europe,
have enforced laws and regulations related to content distributed over the
Internet that are more strict than those currently in place in the United
States. There can be no assurance that one or more of these factors will not
have a material adverse effect on the Company's current or future international
operations and, consequently, on the Company's business, results of operations
and financial condition. In addition, there can be no assurance that the Company
will be able to obtain the necessary telecommunications infrastructure in a cost
effective manner or compete effectively in international markets. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
All of the Company's activities are located overseas. All of the Company's
revenues are in European currencies (DM, Lira and Austrian Schilling, and Euro
after January 1, 1999.) Fluctuation in currency exchange rates could cause the
Company's profits to vary, even though such a risk is mitigated by the adoption
of a unified currency throughout the European Union. If the Company were to pay
dividends to holders of the Common Stock, the fluctuation in currency exchange
could also adversely affect the U.S. shareholders. The Company purchases a large
portion of its equipment from U.S. manufacturers in U.S. dollars, and
fluctuation in currency exchange may adversely affect the Company's operating
results and financial condition. The Company has not engaged in hedging
activities to reduce its currency exchange rate exposure.
Possible Volatility of Stock Price. The trading price of the Common Stock
is likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as actual or anticipated variations in quarterly
operating results, announcements of technological innovations, new sales formats
or new products or services by the Company or its competitors, changes in
financial estimates by securities analysts, conditions or trends in the Internet
and online commerce industries, changes in the market valuations of other
Internet, online service or retail companies, announcements by the Company of
significant acquisitions, strategic partnerships, joint ventures or capital
commitments, additions or departures of key personnel, sales of Common Stock and
other events or factors, many of which are beyond the Company's control. In
addition, the market for Internet related and technology companies in particular
has experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of such companies.
The trading prices of many technology companies' stocks are at or near
historical highs and reflect price earnings ratios substantially above
historical levels. There can be no assurance that these trading prices and price
earnings ratios will be sustained. These broad market and industry factors may
materially and adversely affect the market price of the Common Stock, regardless
of the Company's operating performance.
Uncertainty Regarding Protection of Proprietary Rights. The Company has
applied to the European Union for a trademark for the name "Cybernet". In
addition, the Company relies on a combination of copyright, service mark and
trade secret laws and contractual restrictions to establish and protect certain
proprietary rights in its products and services. The Company has no patented
technology that would preclude or inhibit competitors from entering the
Company's market. The Company has entered into confidentiality and invention
assignment agreements with its employees and non-disclosure agreements with its
suppliers, distributors and appropriate customers in order to limit access to
and disclosure of its proprietary information. There can be no assurance that
these contractual arrangements or the other steps taken by the Company to
protect its intellectual property will prove sufficient to prevent
misappropriation of the Company's technology
14
<PAGE> 17
or to deter independent third-party development of similar technologies. The
laws of different countries may not protect the Company's products, services or
intellectual property rights in similar manners or to the same extent.
To date, the Company has not been notified that the Company's products
infringe the proprietary rights of third parties, but there can be no assurance
that third parties will not claim infringement by the Company with respect to
current or future products. The Company expects that participants in its markets
will be increasingly subject to infringement claims as the number of products
and competitors in the Company's industry segment grows. Any such claim, whether
meritorious or not, could be time consuming, result in costly litigation, cause
product installation delays, or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements might not be
available on terms acceptable to the Company or at all. As a result, any such
claim could have a material adverse effect upon the Company's business, results
of operations and financial condition. See "Business -- Intellectual Property
Rights".
Control By Principal Stockholders, Executive Officers and Directors. Upon
completion of this Offering, the Company's executive officers and directors (and
their affiliates) will, in the aggregate, own approximately 40.6% of the
Company's outstanding voting stock (including Common Stock and voting Series A
Preferred Stock). In all likelihood, such persons acting together, will have the
ability to control matters submitted to stockholders of the Company for approval
(including the election and removal of directors and any merger, consolidation
or sale of all or substantially all of the Company's assets), and to control the
management and affairs of the Company. Accordingly, such concentration of
ownership may have the effect of delaying, deferring or preventing a change in
control of the Company, impede a merger, consolidation, takeover or other
business combination involving the Company or discourage a potential acquirer
from making a tender offer or otherwise attempting to obtain control of the
Company, which in turn could have an adverse effect on the market price of the
Company's Common Stock. See "Management" and "Principal Stockholders".
15
<PAGE> 18
NEW UNDERWRITER
The Underwriter was organized in October, 1997, and has completed at least
four unrelated offerings since that time. The Underwriter is 40% owned by
Berliner Freiverkehr AG, a publicly held financial institution in which Holger
Timm, a Director of the Company, is a controlling shareholder.
USE OF PROCEEDS
The net proceeds to the Company from the sale of 3,500,000 shares of Common
Stock offered by the Company hereby are estimated to be approximately
$66,000,000 million after deducting the underwriting discount and estimated
Offering expenses payable by the Company.
The Company anticipates utilizing approximately $28 million for
acquisitions, including the cash payments of $4.3 million for the Vianet
Acquisition and $585,750 for the Open:Net acquisition; $15.6 million for the
purchase of telecommunications and networking equipment, including the equipment
required in order to become licensed as a telecommunications carrier in Germany;
$3.8 million for software acquisition and development. The remainder of $18.6
million would be available as working capital, including payment of fees
required for licensing as a carrier.
Pending application of the net proceeds as described above, the Company
intends to invest the net proceeds in low risk, high liquidity instruments.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock. It intends
to retain future earnings to fund growth of its business and does not anticipate
paying any cash dividends on shares of Common Stock in the foreseeable future.
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the Bulletin Board under the symbol "ZNET"
and on the Freiverkehr of the Berlin and Munich Stock Exchanges under the
security number 906623. The closing sale price of the Common Stock on a recent
date as reported on these Exchanges is set forth on the cover page of this
Prospectus. The following table sets forth the range of high and low closing
sale prices for the Common Stock, as reported by Nasdaq for the indicated
periods.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
1998
Third Quarter (through August 24, 1998)................ $29.875 $19
Second Quarter......................................... $28.75 $20
First Quarter.......................................... $34.5 $11.5
</TABLE>
<TABLE>
<S> <C> <C>
1997
Fourth................................................. $16.25 $7.75
Third Quarter.......................................... $11.125 $9.3125
Second Quarter......................................... $13.625 $0.625
First Quarter.......................................... $ 3.125 $0.625
</TABLE>
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<PAGE> 19
The following table sets forth the range of high and low closing sale
prices for the Common Stock, as reported on the Berlin and Munich Exchanges.
<TABLE>
<CAPTION>
BERLIN MUNICH
------------- -------------
HIGH LOW HIGH LOW
----- ----- ----- -----
<S> <C> <C> <C> <C>
1998
Third Quarter (through July 31, 1998).................. 28.50 22.02 28.29 22.17
Second Quarter......................................... 29.14 21.94 28.86 21.26
First Quarter.......................................... 25.71 12.63 25.14 12.57
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
1997
Fourth Quarter......................................... 14.80 8.29 14.51 8.06
Third Quarter.......................................... 11.77 9.49 11.80 9.26
Second Quarter......................................... 13.71 8.06 -- --
</TABLE>
DILUTION
At June 30, 1998, the Company had a net tangible book value of $7,355,461
or $.50 per share of Common Stock. "Net tangible book value per share"
represents the tangible book value of the Company (total tangible assets less
total liabilities) divided by the number of shares of Common Stock outstanding.
Without taking into account any changes in such net tangible book value as of
June 30, 1998, other than to give effect to the sale by the Company of the
3,500,000 shares of Common Stock offered hereby at an assumed public offering
price of $20 per share and after deducting the estimated underwriting discounts
and commissions and offering expenses payable by the Company, the pro forma net
tangible book value of the Company at June 30, 1998, would have been $73,355,461
or $4.02 per share. This represents an immediate increase in the net tangible
book value per share of $3.52 to existing stockholders and an immediate dilution
of the net tangible book value per share of $15.98 to persons purchasing the
Common Stock offered hereby (the "New Investors"). The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ $20.00
Net tangible book value per share before the Offering....... .50
Increase per share attributable to New Investors............ 3.52
-----
Pro forma as adjusted net tangible book value per share
after the Offering........................................ 4.02
------
Dilution per share to New Investors......................... $15.98
======
</TABLE>
17
<PAGE> 20
CAPITALIZATION
The following table sets forth, as of June 30, 1998, (i) the actual
capitalization of the Company and (ii) the capitalization of the Company (a) pro
forma to reflect consummation of the 1998 Acquisitions and (b) as further
adjusted to reflect the sale of 700,000 shares of Common Stock completed in July
1998 and the sale of 3,500,000 shares of Common Stock offered hereby by the
Company and the application of the net proceeds therefrom, all as if they
occurred on June 30, 1998. See "Use of Proceeds" and "Pro Forma Consolidated
Financial Statements".
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
---------------------------------
(IN THOUSANDS)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
<S> <C> <C> <C>
Overdrafts and short-term borrowings(3)..................... $ 4,496 $ 4,638 $ 4,638
======= ======= =======
Long-term debt(3)........................................... $ 1,134 $ 1,221 $ 1,221
Minority interest........................................... 89 89 89
Stockholders' equity:
Common stock, 50,000,000 shares authorized; 14,754,511
shares issued and outstanding; 15,113,336 shares
issued and outstanding, pro forma(1); 19,313,336
shares issued and outstanding pro forma as
adjusted(2).......................................... 15 15 19
Preferred stock, 20,000,000 shares authorized 7,760,000
shares issued and outstanding........................ 8 8 8
Additional paid-in capital............................. 11,674 20,286 97,782
Cumulative translation adjustment...................... (189) (189) (189)
Accumulated deficit.................................... (2,877) (2,877) (2,877)
------- ------- -------
Total stockholders' equity........................ 8,631 17,243 94,743
------- ------- -------
Total capitalization.............................. $ 9,854 $18,553 $96,053
======= ======= =======
</TABLE>
- ---------------
(1) Includes the issuance of 358,825 shares of Common Stock in the 1998
Acquisitions.
(2) Includes 700,000 shares of Common Stock issued in July 1998 and 3,500,000
shares of Common Stock offered hereby.
(3) Including capital lease obligations.
18
<PAGE> 21
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of December 31, 1996
and 1997, and for each of the two years then ended, are derived from the audited
consolidated financial statements of the Company included elsewhere in this
Prospectus. The selected consolidated financial data as of June 30, 1998, and
for the six months ended June 30, 1997 and 1998, are unaudited, but have been
prepared on the same basis as the audited financial data, and in the opinion of
management, contain all adjustments, consisting only of normal recurring
accruals, necessary for a fair presentation of the results of operations for
such periods. The results of operations for the six months ended June 30, 1998,
are not necessarily indicative of results to be expected for the full year. The
pro forma consolidated financial data as of June 30, 1998, for the year ended
December 31, 1997 and the six months ended June 30, 1998, respectively, are
derived from the Pro Forma Consolidated Financial Information included elsewhere
in this Prospectus. The data should be read in conjunction with the Consolidated
Financial Statements, related notes and other financial information included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------- -----------------------------
PRO FORMA PRO FORMA
1996 1997 1997 1997 1998 1998
------ ------- --------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue
Internet Projects................ $ 217 $ 1,598 $ 4,026 $ 446 $ 1,863 $ 2,209
Network Services................. 91 716 3,441 150 1,489 3,126
------ ------- ------- ------- ------- --------
Total revenue............... 308 2,314 7,467 596 3,352 5,335
Cost of Revenue....................... 363 2,494 5,466 646 3,376 4,398
------ ------- ------- ------- ------- --------
Operating profit (loss)............... (55) (180) 2,001 (50) (24) 937
General and administrative expenses... 269 497 1,601 228 669 888
Marketing expenses.................... 172 1,221 2,045 514 1,714 2,366
Research and development.............. 187 367 631 -- 1,051 1,185
Amortization of goodwill.............. -- 19 1,367 -- 45 684
------ ------- ------- ------- ------- --------
628 2,104 5,644 742 3,479 5,123
Interest expense, net................. 2 39 58 14 110 117
------ ------- ------- ------- ------- --------
Loss before taxes..................... (686) (2,323) (3,701) (806) (3,613) (4,303)
Income tax benefit.................... 402 1,339 1,319 466 2,007 1,965
Minority interest..................... -- -- 11 -- -- --
Net loss.............................. $ (284) $ (984) $(2,371) $ (340) $(1,606) $ (2,338)
====== ======= ======= ======= ======= ========
Basic and diluted loss per share...... $ (.12) $ (.12) $ (.13) $ (.02) $ (.07) $ (.13)
====== ======= ======= ======= ======= ========
BALANCE SHEET DATA:
Working capital (deficiency).......... $ 339 $ 891 $(1,682) $(3,851) $ 68,268
Total assets.......................... 2,511 15,154 4,045 20,449 108,113
Long-term debt(1)..................... -- 42 -- 1,134 1,221
Total stockholders' equity............ 1,790 9,643 1,279 8,631 94,743
</TABLE>
- ---------------
(1) Including lease obligations
19
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the "Selected Consolidated Financial Data" and the historical and pro forma
financial statements and notes thereto appearing elsewhere in this Prospectus.
Certain statements set forth below constitute "forward-looking statements"
within the meaning of the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"). The safe harbor provisions provided in
Section 27A of the Securities Act and Section 21E of the Exchange Act do not
apply to forward-looking statements made in connection with an initial public
offering. Such forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Given these uncertainties, prospective
investors are cautioned not to place undue reliance on such forward-looking
statements. See "Risk Factors -- Forward-looking Statements".
OVERVIEW
The Company commenced significant operations in 1996. Between the
commencement of operations and December, 1997, the Company concentrated its
operations entirely in Germany. It rapidly established a state-of-the-art
network of Internet nodes connected to a redundant high performance backbone
infrastructure that offers dedicated leased lines access to the Internet at more
than 100 nodes, and the availability of local dial-up access to the Internet to
a majority of the population of Germany. In order to establish this network
rapidly, the Company relied heavily on leased equipment and outside personnel,
particularly equipment and personnel provided pursuant to an agreement with Info
AG, a German carrier (the "Info AG Agreement"), which also acts as a reseller of
the Company's services. As the Company has grown and established its identity
and presence in the German market, it has, to an increasing extent, purchased or
leased its own equipment, hired its own personnel, established independent nodes
and other facilities, and replaced the network facilities leased from Info AG.
Effective July, 1999, the Company has given notice, terminating the Info AG
Agreement, although the Company anticipates that it will continue to maintain a
working relationship with Info AG.
By acquiring Artwise in September, 1997, and by investing in personnel and
research and development, the Company developed the capability to be a sole
source supplier of most solutions and services that a business customer is
likely to require in connection with its use of the Internet. See
"Business -- Services and Products". The Company attempts to differentiate
itself from competitors by marketing its high level of technical expertise and
its ability to be a sole source supplier of Internet related solutions and
services to large and medium sized businesses, particularly businesses with
limited technical resources.
In December, 1997, the Company acquired a 66% interest in Eclipse, an ISP
in Northern Italy. In August, 1998, the Company acquired Open:Net, an ISP in
southwest Germany. Concurrent with the closing of this Offering, the Company
will acquire Vianet, an Austrian ISP.
The Company's revenues are derived from two principal sources: Network
Services and Internet Projects. Network Services consist of access to, and usage
of, the Company's network. These include an initial one-time setup fee and
recurring monthly service charges. Revenues from Network Services are recognized
when provided. Internet Projects include telecommunications and systems
integration solutions and services provided by the Company. Typically, the
Company charges a flat fee for Internet Projects, which fee is payable in three
installments: upon contracting for the project; upon completion; and upon
customer acceptance. Revenues from Internet Projects are recognized upon
customer acceptance.
The Company incurs substantial costs in connection with the development of
products that will be sold to customers, such as the Company's electronic
commerce and Intranet platforms. These costs, including direct labor, related
overhead and third-party costs related to establishing network systems, are
expensed as research and development until technological feasibility has been
established. Once technological feasibility has been established, costs are
capitalized until an individual product is commercially available. Commencing in
the month of a product's release, the amount attributable to that product is
thereafter amortized, using the straight-line method, over a period not to
exceed four years.
20
<PAGE> 23
Substantially all of the Company's revenues are derived from sales outside
the United States and are paid in foreign currencies, principally the DM and, to
a lesser extent, the Austrian Schilling and the Italian Lira. See "Risk
Factors -- Risks Associated with International Operations". For purposes of the
Company's statement of operations, items are translated into U.S. dollars at
average currency exchange rates prevailing during the period. Assets and
liabilities on the Company's balance sheet are translated into U.S. dollars at
currency exchange rates prevailing at the balance sheet dates. The Company
purchases a large portion of its equipment from U.S. manufacturers, and
fluctuations in currency exchange rates may adversely affect the Company's
operating results and financial condition. The Company has not engaged in
hedging activities to reduce its currency exchange rate exposure.
A significant part of the operating costs of any ISP represents the cost of
leasing telephone lines and the cost of access to the global Internet. In
Germany, the Company currently leases telephone lines from several
telecommunications carriers and resellers in order to obtain the lowest
available rates. However, the rates charged by carriers to end users, such as
the Company, are generally higher than the rates charged to other carriers. The
Company intends to become licensed as a carrier in Germany in order to benefit
from lower rates. See "Business -- The Internet in Europe and Germany". In
addition, the Company intends to make use of alternative technologies as they
become available, in order to reduce the costs of international
telecommunications and the cost of access to the global Internet.
Currently, many computer and software products are coded to accept
two-digit entries in the date code field. These date code fields will need to
accept four-digit entries to distinguish 21(st) century dates from 20(th)
century dates. As a result, many companies' software and computer systems may
need to be upgraded or replaced in order to comply with Year 2000 requirements.
The Company and numerous third parties with which the Company does business rely
on numerous computer programs in their day-to-day operations. The Company is
evaluating the Year 2000 issue as it relates to the Company's internal computer
systems and third-party computer systems with which the Company interacts. With
regard to the internal computer systems, the Company has concluded that the
internal networking equipment related to its German operation is Year 2000
compliant. It is continuing to evaluate the internal systems of Vianet, Open:Net
and Eclipse. It has also instituted procedures to assure that systems installed
in 1998 and 1999 will be Year 2000 compliant. With regard to third parties, the
Company has instituted procedures to assure that newly acquired systems will be
Year 2000 compliant. In addition, the Company is in the process of contacting
suppliers, vendors and customers to determine whether existing systems, upon
which the Company relies for products and services, are Year 2000 compliant.
This process has not been completed. To date, the Company has received
assurances from the respective suppliers that the following are all Year 2000
compliant: Cisco routers, used in connection with leased telephone line
communications; Sun Workstations, the Company's main Internet servers; network
facilities supplied by Info AG; and, electric power supplied by Stadtwerke
Munich to the Company's main offices and several of its nodes. The Company is in
the process of determining whether its other major suppliers are Year 2000
compliant. These include lessors of leased telephone lines, suppliers of
telephone service and electric power and suppliers of routers for dial-up
service. To date, the Company's costs in connection with its Year 2000
evaluation have been limited to internal staff costs, which have been expensed
as incurred. The Company does not presently anticipate utilizing outside
consultants and cannot predict whether the continuing evaluation of the Year
2000 compliance matter will require an upgrade or replacement of systems or
equipment. Should such an upgrade or replacement be required, it could represent
a significant cost to the Company.
21
<PAGE> 24
HISTORICAL RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
----------------------- -----------------------
1996 1997 1997 1998
---------- ---------- ---------- ----------
(IN 000'S) (IN 000'S) (IN 000'S) (IN 000'S)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..........................................
Internet Projects........................... 217 1,598 446 1,863
Network Services............................ 91 716 150 1,489
----- ------- ----- -------
Total revenue.......................... 308 2,314 596 3,352
Cost of revenues................................. 363 2,494 646 3,376
----- ------- ----- -------
Operating loss................................... (55) (180) (50) (24)
General and administrative expenses......... 269 497 228 669
Marketing expenses.......................... 172 1,221 514 1,714
Research and development.................... 187 367 -- 1,051
Amortization................................ -- 19 -- 45
----- ------- ----- -------
Total.................................. 628 2,104 742 3,479
Interest expense................................. 2 39 14 110
----- ------- ----- -------
Loss before taxes................................ (686) (2,323) (806) (3,613)
Income tax benefit............................... 402 1,339 466 2,007
----- ------- ----- -------
Net loss......................................... (284) (984) (340) 1,606
===== ======= ===== =======
Basic and diluted loss per share................. $(.12) $ (.12) $(.02) $ (.07)
===== ======= ===== =======
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Total revenues increased 463% from $595,571 in 1997 to $3,352,487 in 1998.
Absent the impact of the revenues associated with consolidating Artwise and
Eclipse in 1998, revenues would have increased approximately $1,257,000 or 211%
in 1998 compared to 1997. Internet Project revenue totaled $1,863,075 in 1998 or
55% of total revenues, compared to $445,330 in 1997 or 75% of total revenues.
This change in mix of revenues is principally due to the continuing addition of
new network customers. Network Services revenue increased from $150,241 in 1997
to $1,489,412 in 1998, principally as a result of these new customers and
partially as a result of the Eclipse acquisition. At June 30, 1998, the Company
had approximately 5,800 customers.
Cost of revenues increased 423% from $645,943 in 1996 to $3,376,112 in
1997. As a percentage of revenues, cost of revenues decreased from 108% to 101%
as a result of a higher level of Network Services revenue.
General and administrative increased 194% from $227,759 in 1997 to $668,542
in 1998, principally as a result of adding additional personnel in 1998, as well
as the impact of consolidating Artwise and Eclipse in the 1998 period.
Marketing expenses increased 234% from $513,793 in 1997 to $1,713,782 in
1998, principally as a result of substantial investments by the Company in
marketing activities, including trade fairs, product literature and related
expenditures. The increase was also influenced by the impact of consolidating
Artwise and Eclipse in the 1998 period.
Research and development expenditures began in the second half of 1997, as
the Company started significant operations. The 1998 research and development
expenditures result from the increase in personnel and related costs to develop
Internet Projects for sale to customers.
Amortization in 1998 represents the amortization of the goodwill associated
with the Artwise and Eclipse acquisitions made in the second half of 1997.
22
<PAGE> 25
Interest expense increased 669% from $14,359 in 1997 to $110,393 as a
result of a significant increase in overdrafts and short-term borrowings in 1998
to fund the Company's working capital needs during its early growth stages.
Income tax benefit in both 1997 and 1998 represents the capitalization of
the losses generated by the Company.
Net loss increased from $340,156 in 1997 to $1,605,685 as a result of the
factors discussed above.
FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1996
Total revenues increased 652% from $307,673 in 1996 to $2,314,021 in 1997.
Internet Project revenues increased 635% from $217,296 to $1,597,869 and Network
Services revenues increased 692% from $90,377 to $716,152. These increases are
primarily related to the fact that 1997 was a full operational year, as opposed
to 1996 when the Company was in the initial stages of marketing and selling its
services and projects. The Company had approximately 4,300 customers at December
31, 1997, compared to 1,460 customers at December 31, 1996. Revenues were also
partially influenced by the acquisition of Artwise effective September 1, 1997.
Cost of revenues increased 587% from $363,120 in 1996 to $2,493,738 in
1997. As a percentage of revenues, cost of revenues decreased from 118% to 108%.
Cost of revenues did not increase as much as revenues, due to the fact that
installation costs for customers represent a proportionately higher cost at the
beginning of the related service contract. After installation, the cost of
Network Services principally represents network lease and maintenance costs.
General and administrative costs increased 85% from $268,762 in 1996 to
$496,950 in 1997. The increase is principally attributable to costs of adding
additional personnel in 1997, increased costs for more office space and
increased costs related to consulting, legal and financial advice related to the
growth of the Company.
Marketing expenses increased 609% from $172,209 in 1996 to $1,221,508 in
1997. This increase is the result of the Company's efforts to build its sales
organization with additional personnel, as well as costs associated with
advertising, firm brochures and participation in trade fairs in 1997.
Research and development expenses increased 96% from $187,130 in 1996 to
$366,829 in 1997. This increase represents efforts by the Company to develop and
improve the range and qualities of products offered for sale, as well as the
addition of personnel.
Amortization of goodwill in 1997 represents the amortization of the
goodwill associated with the Artwise acquisition in September, 1997.
Interest expense increased from $2,079 in 1996 to $39,550 in 1997,
principally due to the higher level of overdrafts and short-term borrowings in
1997 compared to 1996 in order to fund the Company's working capital
requirements.
Income tax benefit in both 1996 and 1997 represents the capitalization of
the losses generated by the Company.
Net loss increased from $283,778 to $983,840 as a result of the factors
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations through the
private placement of securities, short-term borrowing, and cash from operations.
The Company has made the following placements of its securities:
Effective September 16, 1997, the Company issued 5,160,000 shares of common
stock, 1,200,000 shares of Series A Preferred Stock, and 5,160,000 shares of
Series B Preferred Stock in exchange for all of the issued and outstanding
shares of the common stock of Cybernet AG.
23
<PAGE> 26
Effective September 1, 1997, the Company issued 72,620 shares of its common
stock in payment of $689,196 of the purchase price of Artwise.
In September, 1997, the Company completed the sale of 1,400,000 shares of
its Series C Preferred Stock for gross proceeds of approximately $9,800,000.
In December, 1997, the Company also agreed to issue 27,000 shares of common
stock to Eiderdown Trading, Ltd. in connection with the purchase of Eclipse.
In July, 1998, the Company completed the sale of 700,000 shares of its
common stock for gross proceeds of approximately $12,600,000.
In June, 1998, the Company agreed to issue 300,000 shares of common stock
to the selling shareholders of Vianet to fund a portion of acquisition price for
all of the stock of Vianet.
In August, 1998, the Company agreed to issue 58,825 shares of common stock
to the selling shareholders of Open:Net to fund a portion of the acquisition
price for all of the stock of Open:Net.
The Company anticipates that the net proceeds of the Offering will be
approximately $66 million. The Company anticipates utilizing approximately $28
million for acquisitions, including the cash payments of $4.3 million for the
Vianet acquisition, and $585,750 for the Open:Net acquisition; $15.6 million for
the purchase of telecommunications and networking equipment, including the
equipment required in order to become licensed as a telecommunications carrier
in Germany; and $3.8 million for software acquisition and development. The
remainder of $18.6 million would be available as working capital, including
payment of fees required for licensing as a carrier.
The Company's primary sources of short-term liquidity will be the proceeds
of the Offering and cash from operations. The Company anticipates that these
sources will be sufficient to fund the anticipated growth of the Company, to
allow the Company to continue its acquisition program, and to reach
profitability. During the year ended December 31, 1997, the Company used cash
for operations of $1.5 million. Investing activities used cash of $4.7 million,
primarily for the purchase of infrastructure, product development and
acquisitions of businesses. Financing activities provided $8.6 million,
primarily from the private placement of equity securities and short-term
borrowing. As of December 31, 1997, the Company had working capital of
approximately $891,000.
During the six months ended June 30, 1998, the Company used cash in
operations of $3,518,286. Investing activities used cash of $2,160,959,
primarily for the purchase of infrastructure and product development. Financing
activities provided $3,567,131, primarily from borrowings. As of June 30, 1998,
the Company had a working capital deficiency of $3,851,241.
24
<PAGE> 27
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited Pro Forma Consolidated Statement of Operations
for the year ended December 31, 1997, is based on the historical consolidated
financial statements of the Company, adjusted as if the following events
occurred on January 1, 1997: (i) the 1997 Acquisitions, (ii) the 1998
Acquisitions, and (iii) the sale of the Common Stock offered hereby by the
Company at an assumed public offering price of $20 per share and the application
of the net proceeds therefrom. The Pro Forma Consolidated Statement of
Operations for the six months ended June 30, 1998, is based on the historical
consolidated financial statements of the Company, adjusted as if the following
events occurred on January 1, 1998: (i) the 1998 Acquisitions, and (ii) the sale
of Common Stock offered hereby by the Company at an assumed public offering
price of $20 per share, and the application of the net proceeds therefrom. The
unaudited Pro Forma Consolidated Balance Sheet, as of June 30, 1998, is based on
the historical consolidated financial statements of the Company, adjusted as if
the following events occurred on June 30, 1998: (i) the 1998 Acquisitions, (ii)
the sale of 700,000 shares of Common Stock completed in July 1998; and (iii) the
sale of 3,500,000 shares of Common Stock offered hereby by the Company at an
assumed public offering price of $20 per share, and the application of the net
proceeds therefrom.
The unaudited Pro Forma Consolidated Statements of Operations combine the
historical results of the Company with the historical results of the 1997
Acquisitions or the 1998 Acquisitions, as the case may be, prior to the dates
the Company made such acquisitions, using the purchase method of accounting.
These Pro Forma Consolidated Financial Statements are not necessarily indicative
of the operating results that would have been achieved had such transactions
occurred at the beginning of each period presented. These statements are based
on the assumptions set forth in the notes to such statements and should be read
in conjunction with the related financial statements and notes thereto of the
Company and Vianet included elsewhere in this Prospectus.
25
<PAGE> 28
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
PRO
HISTORICAL 1997 1998 FORMA AS
COMPANY ACQUISITIONS ACQUISITIONS ADJUSTED
---------- ------------ ------------ --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue
Internet Projects............................ $ 1,598 $1,766 (a) $ 662 (a) $ 4,026
Network Services............................. 716 156 (a) 2,569 (a) 3,441
------- ------ ------- -------
Total revenues.......................... 2,314 1,922 3,231 7,467
Cost of revenues
Internet Projects............................ 1,564 1,277 (b) 263 (b) 3,104
Network Services............................. 930 146 (b) 1,286 (b) 2,362
------- ------ ------- -------
Total cost of revenues.................. 2,494 1,423 1,549 5,466
------- ------ ------- -------
Operating profit (loss)........................... (180) 499 1,682 2,001
General and administrative expenses............... 497 275 (b) 829 (b) 1,601
Marketing expenses................................ 1,221 199 (b) 625 (b) 2,045
Research and development.......................... 367 70 (b) 194 (b) 631
Amortization...................................... 19 71 (c) 1,277 (c) 1,367
------- ------ ------- -------
2,104 615 2,925 5,644
Interest income................................... -- -- 2 (b) 2
Interest expense.................................. 39 3 (b) 18 (b) 60
------- ------ ------- -------
Loss before taxes................................. (2,323) (119) (1,259) (3,701)
Income tax (expense) benefit...................... 1,339 -- (20)(b) 1,319
Minority interest................................. -- 11 (b) -- 11
------- ------ ------- -------
Net loss.......................................... $ (984) $ (108) $ (1,279) $ (2,371)
======= ====== ======= =======
Basic and diluted loss per share.................. $ (.12) $ (.13)
======= =======
</TABLE>
26
<PAGE> 29
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO
HISTORICAL 1998 FORMA AS
COMPANY ACQUISITIONS ADJUSTED
---------- ------------ --------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
<S> <C> <C> <C>
Revenue
Internet Projects...................................... $ 1,863 $ 346(a) $ 2,209
Network Services....................................... 1,489 1,637(a) 3,126
------- ------ -------
Total revenues.................................... 3,352 1,983 5,335
Cost of revenues
Internet Projects...................................... 1,660 190(b) 1,850
Network Services....................................... 1,716 832(b) 2,548
------- ------ -------
Total cost of revenues............................ 3,376 1,022 4,398
------- ------ -------
Operating profit (loss)..................................... (24) 961 937
General and administrative expenses......................... 669 219(b) 888
Marketing expenses.......................................... 1,714 652(b) 2,366
Research and development.................................... 1,051 134(b) 1,185
Amortization................................................ 45 639(c) 684
------- ------ -------
3,479 1,644 5,123
Interest income............................................. -- 1(b) 1
Interest expense............................................ 110 8(b) 118
------- ------ -------
Loss before taxes........................................... (3,613) (690) (4,303)
Income tax (expense) benefit................................ 2,007 (42)(b) 1,965
------- ------ -------
Net loss.................................................... $(1,606) $ (732) $(2,338)
======= ====== =======
Basic and diluted loss per share............................ $ (.07) $ (.13)
======= =======
</TABLE>
27
<PAGE> 30
PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL 1998 AS
COMPANY ACQUISITIONS OFFERING ADJUSTED
---------- ------------ -------- ---------
<S> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
<S> <C> <C> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents................. $ 148 $ 102(d) $72,554(f)(g) $ 72,804
Short-term investments.................... 104 -- 104
Inventories............................... -- 5(d) 5
Trade accounts receivable................. 1,921 836(d) 2,757
Other receivables......................... 820 50(d) 870
Prepaid expenses and other current
assets.................................. 1,416 37(d) 1,453
------- ------- ------- --------
Total current assets................. 4,409 1,030 72,554 77,993
Property and equipment, net............... 5,162 524(d) 5,686
Product development costs, net............ 3,595 -- 3,595
Goodwill, net............................. 1,275 10,706(d) 11,981
Other intangible assets................... -- 2,826(d) 2,826
Deferred income taxes..................... 5,977 -- 5,977
Other assets.............................. 31 24(d) 55
------- ------- ------- --------
TOTAL ASSETS................................... $20,449 $15,110 $72,554 $108,113
======= ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Overdrafts and short term borrowings...... $ 3,983 $ 141(d) $ 4,124
Trade accounts payable.................... 1,715 664(d) 2,379
Other accrued liabilities................. 1,030 333(d) 1,363
Deferred purchase obligations............. 358 4,946(e) (4,946)(f) 358
Deferred income........................... -- 249(d) 249
Accrued personnel costs................... 661 77(d) 738
Current portion capital lease
obligations............................. 514 -- 514
------- ------- ------- --------
Total current liabilities............ 8,261 6,410 (4,946) 9,725
Long-term debt............................ 40 88(d) 128
Capital lease obligations................. 1,093 -- 1,093
Deferred income taxes..................... 2,335 -- 2,335
Minority interest......................... 89 -- 89
STOCKHOLDERS' EQUITY:
Common stock.............................. 15 -- 4(f)(g) 19
Preferred stock........................... 8 -- 8
Additional paid-in capital................ 11,674 8,612(e) 77,496(f)(g) 97,782
Accumulated deficit....................... (2,877) -- (2,877)
Cumulative translation adjustment......... (189) -- (189)
------- ------- ------- --------
TOTAL STOCKHOLDERS' EQUITY..................... 8,631 8,612 77,500 94,743
------- ------- ------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $20,449 $15,110 $72,554 $108,113
======= ======= ======= ========
</TABLE>
28
<PAGE> 31
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) Includes the revenues of the companies acquired in the 1997
Acquisitions for the periods in 1997 prior to their respective
acquisition dates and the revenues of the 1998 Acquisitions for the
full year 1997 and the six months ended June 30, 1998.
(b) Includes the cost of revenues and other expenses of the companies
acquired in the 1997 Acquisitions for the periods in 1997 prior to
their respective acquisition dates and the cost of revenues and other
expenses of the companies acquired in the 1998 Acquisitions for the
full year 1997 and the six months ended June 30, 1998.
(c) Includes amortization of goodwill and other intangible assets resulting
from the 1997 Acquisitions for the periods in 1997 prior to the
respective acquisition dates and for the 1998 Acquisitions for the full
year 1997 and the six months ended June 30, 1998. Amortization on a
straight-line basis is reflected over the following periods:
<TABLE>
<S> <C>
Goodwill 15 years
Other intangible assets:
Customer base 5 years
Management contracts 3 years
</TABLE>
(d) Includes the net assets acquired in the 1998 Acquisitions. The
following represents the preliminary allocation of the excess of the
purchase price over the historical net book value of the acquired net
assets:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Purchase price......................................... $13,558
Acquired net assets at book value (June 30, 1998)...... 26
-------
Excess of purchase price over acquired net assets...... $13,532
=======
Allocated to:
Goodwill............................................... $10,706
Customer base.......................................... 2,314
Management............................................. 512
-------
$13,532
=======
</TABLE>
(e) Reflects the purchase price of the 1998 Acquisitions consisting of:
<TABLE>
<S> <C>
Deferred purchase price................................ $ 4,946
Common stock........................................... --
Additional paid-in capital............................. 8,612
-------
$13,558
=======
</TABLE>
A total of 358,825 shares of Common Stock are to be issued. These
shares have been valued at $24 per share, the approximate average of
the high and low prices of the Company's Common Stock during the second
quarter of 1998.
(f) To reflect the offering of 3,500,000 shares at $20 per share and the
receipt of the net proceeds of $66 million and the further application
of the proceeds to the payment of the deferred purchase price of the
1998 Acquisitions.
(g) To reflect the completion in July 1998 of the sale of 700,000 shares of
Common Stock for net proceeds of approximately $11,500,000.
29
<PAGE> 32
BUSINESS
OVERVIEW
The Company is a leading provider of international Internet backbone and
access services and network business solutions to companies in Germany, Austria
and Northern Italy. In addition to backbone and access, it offers a full range
of solutions and services which business customers are likely to require to
establish and maintain their Internet related systems. Among the specific
services and solutions offered by the Company are virtual private networks,
web-hosting, co-location services, security solutions, electronic commerce
solutions and services, and Intranet workflow solutions. The Company offers
consulting, complete design and installation, training, technical support,
operation and monitoring of systems. In addition, the Company sells on a turnkey
basis customer premise equipment required to connect to the Internet, such as
routers, servers and other hardware.
The Company maintains geographically distributed, state-of-the-art Internet
nodes connected to a redundant high performance backbone infrastructure.
Utilizing a combination of leased and Company owned lines and equipment, it
helps businesses reduce telecommunications costs by offering access to the world
wide Internet through dedicated leased lines at more than 100 nodes. For smaller
enterprises, it offers a system of more than 90 dial-up nodes with ISDN or
analog modem ports. These nodes permit local dial-up access to a majority of the
population of Germany and Austria. As of August 15, 1998, the Company had
approximately 6,000 customers, an increase from approximately 4,300 customers at
December 31, 1997, 3,000 customers at June 30, 1997, and 1,460 customers at
December 31, 1996.
To a significant extent, the Company has grown through acquisitions and the
Company continues to seek additional acquisitions which will permit expansion of
the type and quality of the services offered, of the geographical areas in which
those services are offered, and increased penetration of the Company's current
markets. Significant acquisitions to date include the acquisitions of Artwise,
Eclipse, and Open:Net.
The Company's business goals are:
(1) To take advantage of the convergence of Internet Protocol ("IP")
technology and telecommunications services, so as to offer businesses a
portfolio of advanced telecommunications services;
(2) To develop and manage a network of its own which links Europe's
principal business centers by exploiting the Company's high level of
networking expertise;
(3) To become Europe's supplier of choice for business customers in
conceiving, developing, and operating network based solutions, such as
electronic commerce and corporate intranet or workflow solutions;
(4) To become Europe's leading supplier of sophisticated hosting and
electronic commerce services.
To achieve these goals, the Company has adopted and intends to maintain a
flexible organizational structure which enables efficient marketing of its
products and services; cultivation of long-term relationships with key
customers; and rapid exploitation of opportunities for acquisitions or other
expansion of operations into additional European business centers. The Company
intends to maintain a growth rate greater than that of its market and to realize
additional economies of scale.
THE INTERNET
The Internet is a world wide connection of tens of thousands of networks
belonging to many owners which communicate using IP. Established in 1969, it was
originally designed to electronically link military, government and research
sites. Beginning in the early 1990s, other uses of the Internet expanded
rapidly, with commercial uses as a significant part of the expansion. Among the
entities commercially involved in the Internet are ISPs, backbone providers, and
telecommunications carriers. ISPs provide access to the Internet to individuals
and business customers, combine computer processing, information storage,
protocol conversion and routing with transmission to enable users to access
Internet content and services. Backbone providers
30
<PAGE> 33
supply high speed networks that interconnect smaller independent networks, route
traffic between ISPs, and interconnect with other backbone providers. Like the
Company, many ISPs are also backbone providers. Telecommunications carriers
provide the infrastructure used to enable the traffic of Internet communication.
Telecommunications carriers and resellers sell or lease capacity on their
facilities to ISPs, backbone providers, or other service providers. In Europe,
there is currently a trend towards Internet companies offering
telecommunications services and telecommunications carriers and resellers
companies offering Internet services.
As use of the Internet grows, businesses are increasing the number and
types of products and services offered over the Internet. Internet based
businesses now offer products and services in areas such as finance, banking,
entertainment, education and advertising. Other businesses have begun to use the
Internet for an expanding variety of applications, including advertising and
public relations, sales, purchasing, distribution, customer service, employee
training and communications. Internet operations are mission-critical for
virtually all Internet based businesses and are becoming increasingly
mission-critical for more traditional enterprises. Loss of the availability of
mission-critical Internet sites can result in losses of revenue and impairment
of customer goodwill. The proliferation of Internet services offered and the
growth in mission-critical Internet applications increase the complexity of
commercial Internet sites. In order to ensure the quality, reliability,
availability and redundancy of these Internet operations, businesses must either
make substantial investments in developing Internet expertise and infrastructure
or enter into outsourcing arrangements with providers such as the Company who
offer consulting, complete design and installation, training, web-hosting,
co-location services, security solutions, virtual private networks, electronic
commerce solutions and services, Intranet workflow solutions, technical support
and monitoring of systems. Enterprises relying on outsourcing demand expert
customer service, rapid adaptation of solutions and services to technological
developments, and redundant network facilities.
THE INTERNET IN GERMANY AND EUROPE
The Internet relies upon leased telecommunications infrastructure provided
by telecommunications carriers in each country in which it is operated. Due to
the regulated nature of the telecommunications industry in Europe, including
Germany, Austria and Italy, fees for the usage of this infrastructure have
traditionally been very high. Those rates have been much higher than the rates
charged in countries with competing suppliers of telecommunications. Therefore,
the telecommunications infrastructure costs are a major component of the overall
cost of Internet services. The Company believes that these high costs have
slowed the growth of the Internet in each of these countries. These costs have
begun to come down as Germany, Austria, Italy and other European countries, have
each moved towards permitting competing suppliers of telecommunications. That
process is farthest along in Germany. Effective January 1, 1998, the
Regulierungsbehoerde fuer Telekommunikation und Post ("Reg TP"), the German
governmental agency charged with deregulating the telecommunications industry,
mandated that licensed carriers, other than Deutsche Telekom AG ("DT"), be
allowed to offer telecommunications services in competition with DT. The Reg TP
further set interconnection fees which DT is permitted to charge new carriers
for the interconnection with the DT network that all competing German carriers
require in order to exchange traffic and reach end users. As a result, a new
generation of competing carriers has entered the market and access charges and
the total cost of Internet usage have come down.
The Company believes that, because of these cost reductions, European
businesses will rapidly increase their usage of the Internet. Datamonitor (1998
Datamonitor, Corporate Internet Services in Europe, Electronic Commerce
Integration Services) estimates that, in 1998, Internet services to business
customers in Europe will generate a total of $4.8 billion of which $1.89 billion
will be generated by Internet connectivity services. Datamonitor further
forecasts that, in the year 2000, total revenues will grow to $16.2 billion of
which $4.3 billion will be for connectivity services including $2.6 billion for
access and set up services, $546 million for hosting and $1.12 billion for value
added services, such as consulting, security, systems integration, voice
services and virtual private networks. Electronic commerce set up and
facilitating services will grow to $12 billion.
31
<PAGE> 34
The Company's goal is to become a full service ISP and provider of
telecommunications services to business customers in Europe. To achieve that
goal, the Company intends to expand the geographical area in which its customer
base is located through acquisitions, increase penetration of the Company's
current markets, and expand the range of products and services offered through
internal development and acquisitions.
In Germany, ISPs are also beginning to reduce telecommunications costs by
acquiring the necessary infrastructure and becoming licensed as
telecommunications carriers. Once licensed as carriers, they lease lines from DT
or others at the lower rates available to carriers. The same infrastructure
enables the ISPs who become carriers to use IP technology to offer
telecommunications services such as voice and fax at competitive rates without
significant additional capital investment. Thus, the Company believes that, to
an increasing extent, telecommunications services will be offered by the same
providers as Internet services, and the Internet will provide the future
platform for an increasing portion of business telecommunications services. The
Company intends to utilize a portion of the proceeds of the Offering to acquire
the necessary infrastructure and to pay the other costs necessary in order to
become a carrier and reduce its telecommunications costs. Thereafter, as
reasonably priced equipment which improves the quality of voice transmissions
utilizing IP technology becomes available, the Company intends to offer voice,
fax and other telecommunications services to business customers.
Because the market for additional services is just beginning to develop, it
is difficult to predict which products and services will become available or to
identify the ones which the Company will offer. Additionally, the availability
of some or all such additional services will depend upon agreements for
standardization and specification which have not been developed. However, the
Company does believe that a variety of new products will become available and
intends to fully exploit this opportunity by offering the maximum number of such
services reasonable under the circumstances.
SERVICES AND PRODUCTS
The Company's two main sources of revenue are Network Services and Internet
Projects. Network Services consist of access to and usage of the Company's
network. These include an initial one-time setup fee and recurring monthly
charges. Internet Projects are the solutions and services which the Company
provides in addition to access. Typically, the Company charges a flat fee for
Internet Projects, which fee is payable in three installments: upon contracting;
upon completion; and, upon customer acceptance. The following table sets forth
certain historical revenue data relating to the Company.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1996 DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------- ----------------
<S> <C> <C> <C>
Network Services.............................. $ 90,377 $ 716,152 $1,489,412
Internet Projects............................. $217,296 $1,597,869 $1,863,075
</TABLE>
The Company strives to differentiate itself from competitors by offering a
full range of solutions and services which business customers are likely to
require in connection with their use of the Internet. The Company believes that,
to the extent it can be a customer's sole provider of such solutions and
services, quality and performance are enhanced because complexities are reduced,
fewer interfaces are required and integration of the customer's system is
optimized. The Company dedicates a significant part of its technical staff to
the evaluation of technological product development and incorporation of
advances into the business. In addition, the Company develops software for use
by customers and for its own use in delivering solutions and services. In
particular, dedicated teams develop software for use in connection with the
Company's electronic commerce and Intranet and workflow solutions. Approximately
22 of the Company's 125 employees are principally devoted to research and
development of the types described above. In addition, the Company frequently
utilizes its other technical personnel for similar research and development
projects. The Company incurred $187,130, $366,824, and $1,051,264 in research
and development expenses during the years ended December 31, 1996 and 1997, and
6 months ended June 30, 1998, respectively.
32
<PAGE> 35
The principal solutions and services currently offered by the Company are:
- Connectivity. The Company currently offers a variety of
connectivity solutions, which include Internet access and
third-party software and hardware implementation and configuration
services, which are offered in bundled and unbundled packages.
Internet access currently includes ISDN and analog technologies. The
Company also offers a selection of software products, including
electronic mail, news and other solutions that permit customers to
navigate and utilize the Internet.
- Web-Hosting and Co-Location. Web-hosting and Co-Location give
business customers a presence on the Internet for purposes such as
marketing, customer service, and dissemination of internal company
information. These services include web-hosting, web site
maintenance, operations and maintenance, back-up, software up-date
and ongoing consulting services.
- Security Solutions. Corporate networks and systems need to be
protected against unauthorized access and use. The Company currently
offers a comprehensive set of firewall products from Trusted
Information Systems (Gauntlet, Firewall), Checkpoint (Firewall-1)
and SunSoft (SunScreen), with services such as security consulting,
installation support, on-the-job training of customers' system
administrators, hotline support (24 hours, 7 days) and security
audits. To assure the security of communication and business
transactions between users of networks, the Company integrates
state-of-the-art software, technologies and standards such as
SecureID (Security Dynamics), ATMP, VPos and VGate (VeriFone) and
SET.
- Virtual Private Networks. ("VPN"). Many companies today have
private data communication networks, which are often referred to as
corporate networks. These are built on expensive leased lines and
are used to transfer proprietary data between office locations. VPNs
utilize the Internet as a cost effective alternative to corporate
networks to provide secure transmission of private IP and to provide
authorized users with secure remote access to the corporate
networks. VPN products are available in hardware, software, and
firewall formats.
- National and International Roaming. Roaming provides access to the
Internet locally, i.e., at local phone tariffs as users travel.
Outside the countries in which the Company operates, roaming is
offered in cooperation with more than 350 international ISPs and
telecommunications companies which have joined the Global Reach
Internet Connection(TM).
- Electronic Commerce. Electronic Commerce is the execution of
commercial transactions on the Internet. This may include retail
sales or business-to-business transactions. The system necessary to
conduct electronic commerce is complex and involves several
different components. The Company designs and implements dedicated
electronic commerce systems or any component part which a customer
may require. These systems are based on the Company's electronic
commerce platform which integrates systems and technologies of
third-party vendors, such as Microsoft, Sun, HP, Intershop, Brokat,
VeriFone, SAP and others. A dedicated electronic commerce solution
may require a significant investment. For customers reluctant to
undertake such an up-front expenditure, the Company maintains its
own electronic commerce system which it provides on a lease basis.
Through working arrangements with content providers and media
companies, the Company also assists customers utilizing electronic
commerce for retail and wholesale sales in marketing products to
targeted groups on the Internet. This enables a customer to
establish a distribution channel for products or a channel for
purchasing, and to determine whether to invest in a dedicated
system.
- Intranet and Workflow Solutions. Internet technologies can be
utilized in a customer's internal information technology system. The
Company offers a platform which, when introduced into an Intranet,
enhances the capabilities, efficiencies and functionality of the
system, speeds the development of new applications, reduces the cost
of developing and maintaining applications, and allows the
integration of existing systems and databases; thus, customers can
preserve their investment in existing systems.
33
<PAGE> 36
The Company constantly works to enhance its products and services. In
particular, it is currently engaged in efforts to improve the functionality and
capabilities of its security solutions, VPN, communications services, and
electronic commerce platforms.
SALES AND MARKETING
The Company intends to conduct its operations and marketing under the
"Cybernet" brand name, although subsidiaries' brand names are used for
transition periods after acquisitions. The Company has undertaken public
relations efforts to raise the awareness and visibility of the "Cybernet" name
in its target markets.
The Company markets its products and services directly through a force of
35 sales representatives. Sales offices are located in Munich, Neu-Ulm,
Frankfurt, Stuttgart and Hamburg, Germany, in Vienna, Austria, and Rovereto,
Italy. Each sales representative is required to have a strong Internet technical
background and an understanding of local telecommunications tariffs, the needs
of the business community and the companies in his or her respective territory.
The Company also maintains industry sales teams which are responsible for
marketing customized turnkey solutions to larger accounts. The Company has
developed regional programs to attract and train high quality, motivated sales
representatives that have the necessary technical skills, consultative sales
experience and knowledge of their local markets.
The Company is also building a network of accredited resellers of its
standardized products and solutions. These include software suppliers, systems
integrators and ISPs. The Company also attempts to utilize its relationships
among these resellers to gain access to customers for the sale of additional
products and services.
CUSTOMERS
As of August 15, 1998, the Company had approximately 6,000 customers, an
increase from approximately 4,300 as of December 31, 1997, approximately 3,000
as of June 30, 1997, and approximately 1,460 as of December 31, 1996. The
Company provides sophisticated technical services and customized solutions to
prominent businesses such as Germany's leading MasterCard credit card processor,
several of Germany's largest financial institutions, Germany's largest
nationwide network for the travel industry and the German government. However,
the Company believes that mainstream medium sized businesses represent an
attractive target market because of their expanding Internet needs and their
willingness to adopt new technology. In addition, their limited internal
technical resources create a demand for the type of high quality turnkey
solutions and the customized support, maintenance and training services which
the Company provides. Thus, to a significant extent, the Company focuses its
efforts on large and medium sized business customers who utilize both the
Company's systems integration and networking capabilities. For smaller
businesses, the Company offers a range of standardized products and services.
No single customer or group of customers accounted for more than 10% of the
Company's revenues in the year ended December 31, 1997, or in the period ended
June 30, 1998.
PRODUCT DEVELOPMENT
The Company's future success will depend, in part, on its ability to offer
services that incorporate leading technology, address the increasingly
sophisticated and varied needs of its current and prospective customers and
respond to technological advances and emerging industry standards and practices
on a timely and cost effective basis. The market for the Company's services is
characterized by rapidly changing and unproven technology, evolving industry
standards, changes in customer needs, emerging competition and frequent
introductions of new services. There can be no assurance that future advances in
technology will be beneficial to, or compatible with, the Company's business or
that the Company will be able to incorporate such advances on a cost effective
and timely basis into its business. Moreover, technological advances may have
the effect of encouraging certain of the Company's current or future customers
to rely on in-house personnel and equipment to furnish the services currently
provided by the Company. In addition, keeping pace with technological advances
may require substantial expenditures and lead time. The Company incurred
$187,130,
34
<PAGE> 37
$366,829, and $1,051,264 in research and development expenses during the years
ended December 31, 1996 and 1997, and 6 months ended June 30, 1998,
respectively.
INTELLECTUAL PROPERTY RIGHTS
The Company has applied to the European Union for a trademark for the name
"Cybernet". In addition, the Company relies on a combination of copyright,
service mark and trade secret laws and contractual restrictions to establish and
protect certain proprietary rights in its products and services. The Company has
no patented technology that would preclude or inhibit competitors from entering
the Company's market. The Company has entered into confidentiality and invention
assignment agreements with its employees, and non-disclosure agreements with its
suppliers, distributors and appropriate customers in order to limit access to
and disclosure of its proprietary information. There can be no assurance that
these contractual arrangements or the other steps taken by the Company to
protect its intellectual property will prove sufficient to prevent
misappropriation of the Company's technology or to deter independent third-party
development of similar technologies. The laws of the countries where the Company
operates may not protect the Company's products, services or intellectual
property rights to the same extent as do the laws of the United States. To date,
the Company has not been notified that the Company's products infringe the
proprietary rights of third parties, but there can be no assurance that third
parties will not claim infringement by the Company with respect to current or
future products. The Company expects that participants in its markets will be
increasingly subject to infringement claims as the number of products and
competitors in the Company's industry segment grows. Any such claim, whether
meritorious or not, could be time consuming, result in costly litigation, cause
product installation delays or require the Company to enter into royalty or
licensing agreements. Such royalty or licensing agreements might not be
available on terms acceptable to the Company or at all. As a result, any such
claim could have a material adverse effect upon the Company's business, results
of operations and financial condition.
GENERAL REGULATORY ENVIRONMENT
The Company's Internet operations are not currently subject to direct
regulation by governmental agencies in which the Company operates (other than
regulations applicable to businesses generally). As the Internet becomes more
widely used, countries in which the Company now operates or expects to operate,
may adopt regulations relating to prices charged users, content, privacy,
intellectual property protection, libel or other matters. If adopted, such
regulations could significantly affect the results of operations of the Company
and its competitors. See "Risk Factors -- Potential Liability for Information
Disseminated over Networks; Regulatory Matters".
The Company also intends to become licensed as a telecommunications carrier
in Germany. See "Business -- The Internet in Germany and Europe". To qualify for
that license, the Company will have to demonstrate good character, in addition
to the financial resources and expertise needed to meet German regulatory
requirements.
COMPETITION
The business of providing Internet connectivity, solutions and services is
highly competitive and there are no substantial barriers to entry. The Company
believes that competition will intensify in the future and its ability to
successfully compete depends on a number of factors including, market presence;
the capacity, reliability and security of its network; the pricing structure of
its services; the Company's ability to adapt its product services to new
technological developments and principal market and economic trends. The
Company's competitors consist of (a) ISPs, (b) telecommunications carriers and
(c) system integrators/computer manufacturers.
The Company strives to differentiate itself from other ISPs by offering a
full range of solutions and services which business customers are likely to
require in connection with their use of the Internet. Most of the Company's
competitors offer fewer services focused on connectivity. However, some
competitor ISPs have greater resources and larger communications and network
infrastructure than the Company. The Company's ISP competitors include: European
Computer-Industry Research Center, Xlink, PSINet, UUNet and Nacamar.
35
<PAGE> 38
Telecommunications carriers tend to be large organizations for whom
Internet services are not their main business. The Company's main carrier
competitors are: DT; Arcor (a consortium of Deutsche Bahn, Mannesmann, AT&T, and
Unisource); Viag Interkom (a joint venture of Viag and British Telecom); and
O.tel.o (a joint venture of Veba and RWE). The Company competes with these
organizations by focusing on the Internet and offering flexible decision making
and execution, responsive customer service, recognized technical expertise, and
high quality products.
When the Company begins to utilize IP technology for telephone service, the
Company will compete directly with carriers, including large carriers such as
Arcor, DT and Viag Interkom. Most of these competitors are significantly larger
and have substantially greater market presence, financial, technical,
operational, marketing and other resources and experience than the Company. In
addition, carriers have greater resources to engage in various forms of price
competition, such as bundling Internet services with other telecommunications
services, thereby offering lower prices for the Internet services. Increased
price competition could force the Company to reduce its prices and profit
margins. In addition, increased competition for new customers could result in
increased sales and marketing expenses and related customers acquisition costs
and could materially adversely affect the Company's profitability.
Major systems integrators and computer manufacturers, such as IBM, SNI
Andersen Consulting and Digital Equipment Corp., provide information technology
solutions to their clients and have expanded their offerings to include Internet
related products and solutions. Many of these companies have established
customer relationships and recognized technical expertise, and some have
significantly greater resources than the Company. However, most do not offer
connectivity services and solutions. The Company competes by offering a more
complete Internet related service and product line. In addition, some system
integrators and computer manufacturers utilize the Company's connectivity
services and solutions to complement their own line of products and services.
BILLING AND COLLECTION
Network Services are billed monthly, based on a customer's use. Internet
Projects are typically payable in three increments. Presently, the Company's
subsidiaries in each country bill customers on a country by country basis. In
Germany, the Company generates a single bill to each customer for all services
provided. As the Company begins to offer telecommunications services, the
Company plans to outsource its billing and collection to centralize billing and
facilitate the integration of access service charges, voice and data telephony
charges and project billing.
PROPERTIES
The Company leases the real estate where its business offices and certain
nodes containing servers, routers and other equipment are located. The largest
leasehold property is the Company's main office in Munich with approximately
20,450 square feet (1,900 square meters). Other leasehold properties are located
in Neu-Ulm, Frankfurt, Stuttgart and Hamburg, Germany, Vienna, Austria and
Rovereto, Italy. The Company believes that none of these leases is critical to
operations and that relocation of any of the leased premises would be feasible
on acceptable terms, if necessary.
Dedicated telephone lines are leased by the Company from telecommunications
carriers and resellers. Assets relating to its operations, including servers and
routers, are leased or owned. See Note 6 of Notes to Financial Statements.
EMPLOYEES
At August 15, 1998, the Company had a total of approximately 125 employees:
48 of whom were in sales and marketing; 53 in research and development and
engineering, and 24 in administration. There are no collective bargaining
agreements in effect. The Company believes that relations with its employees are
satisfactory.
LEGAL PROCEEDINGS
The Company is not presently party to any material legal proceeding.
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<PAGE> 39
MANAGEMENT
The following table sets forth the names, ages and positions of the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Andreas Eder.......................... 38 Director
Chairman, President, CEO
Head of Managing Board of Cybernet AG
Rudolf Strobl......................... 39 Member of Managing Board of Cybernet
AG
Alessandro Giacalone.................. 47 Member of Managing Board of Cybernet
AG
Chairman of Board of Directors of
Eclipse
Christian Moosmann.................... 36 Treasurer
Chief Financial Officer
Tristan Libischer..................... 29 Director
Managing Director of Vianet
Alexander Wiesmueller................. 29 Managing Director of Vianet
Holger Timm........................... 40 Director
Member of Supervisory Board of
Cybernet AG
Dr. Hubert Besner..................... 35 Director
Member of Supervisory Board of
Cybernet AG
G.W. Norman Wareham................... 44 Director
Secretary
Robert Fratarcangelo.................. 59 Director
</TABLE>
37
<PAGE> 40
ANDREAS EDER
Mr. Eder, a co-founder of Cybernet AG, has been Chairman, President, Chief
Executive Officer and Head of the Managing Board of Cybernet AG since its
formation and has been Chairman of the Board of Directors, President and Chief
Executive Officer of the Company since it acquired Cybernet AG. Before founding
Cybernet AG, Mr. Eder held management positions with Siemens-Nixdorf and The
Boston Consulting Group. Mr. Eder holds a Masters degree in Business
Administration from the University of Munich.
RUDOLF STROBL
Mr. Strobl is a co-founder of Cybernet AG, and has been an Executive
Officer of Cybernet AG since February, 1996, and of the Company since it
acquired Cybernet AG. Before founding Cybernet AG, Mr. Strobl worked for Digital
Equipment Corp. He also co-founded ARTICON, a systems integration company in
Munich. Mr. Strobl holds a Masters degree in Engineering from the University of
Munich.
ALESSANDRO GIACALONE
Mr. Giacalone has been a Member of the Managing Board of Cybernet AG since
October, 1997. From 1990 to 1997, Mr. Giacalone was Research Group Leader,
Research Director and subsequently Managing Director of the European
Computer-Industry Research Centre in Munich, where he was responsible for
building the Internet operations. From 1984 to 1990, he taught computer science
at the State University of New York. Mr. Giacalone holds an undergraduate degree
and Masters of Science in Computer Science from the University of Pisa, and a
Doctorate in Computer Science from Brown University.
CHRISTIAN MOOSMANN
Christian Moosmann is Treasurer and Chief Financial Officer of the Company,
having joined the Company in 1997. Before joining the Company, he held
management positions with European Computer Research Center from 1995 to 1997
and with Siemens from 1990 to 1995. He holds a degree in accounting from
Rosenheim College.
TRISTAN LIBISCHER
Mr. Libischer is a Director of the Company and a Managing Director and
co-founder of Vianet. He has been a Managing Director of Vianet since 1994. From
1992 to 1994, he held various positions with Bark Computer. From 1990 to 1992,
he was a senior consultant and sales engineer with 3C Group.
ALEXANDER WIESMUELLER
Mr. Wiesmueller is a co-founder of Vianet and has been a Managing Director
of Vianet since 1994. Prior to 1994, he was technical manager for B.O.T. Bura
Organization Team-Metro and held various technical positions with
Grafotron-Berthold & Stempel, and with Bohmann, Druck und Verlag (New Media).
HOLGER TIMM
Mr. Timm, a Director of the Company, is a co-founder and member of the
Supervisory Board of Cybernet AG, and Chief Executive Officer of Cybermind
Interactive Europe AG ("Cybermind"). Mr. Timm is Head of the Managing Board and
Chief Executive Officer and a controlling shareholder of Berliner Freiverkehr
(Aktien) AG, an investment bank which owns approximately 40% of the Underwriter.
He is also a member of the Board of the Berlin Stock Exchange. He holds a law
degree from the Free University, Berlin.
HUBERT BESNER
Dr. Besner is a Director of the Company and a member of the Supervisory
Board of Cybernet AG. Since 1994, he has been a partner in the law firm of
Besner Kreifels Weber, Munich, Germany. From 1992 to 1994, he was the head of
the legal department of Schneider AG, a German real estate development company.
He
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<PAGE> 41
currently is a director of Marine Shuttle Operations, Inc., a member of the
supervisory board of Schuller Industrieentsorgung AG, and the head of the
supervisory board of PIPECAD Integrierte Softwaresysteme AG. Dr. Besner received
his First State Exam in Law from Ludwig-Maximilians-Universitat in 1986, and his
doctorate magna cum laude from Ludwig-Maximilians-Universitat in 1988.
G.W. NORMAN WAREHAM
Mr. Wareham is Secretary and a Director of the Company. He is a certified
general accountant and has been engaged in the public practice of accounting for
over twenty years. Mr. Wareham has been Vice President, Chief Financial Officer,
and a director of ZMAX Corporation since September, 1996. He is also a director
and officer of Intercap Resources Management Corp., an oil and gas exploration
and development company, and President of Wareham Management Ltd., which
provides management consulting and accounting service to Canadian and American
public companies. From 1994 to April 1995, Mr. Wareham served as the President
of Global Financial Corporation, a Turks and Caicos investment company.
ROBERT FRATARCANGELO
Mr. Fratarcangelo has been a Director of the Company since September, 1997.
He has previously held management positions with IBM. He is President and Chief
Executive Officer of Criminal Investigative Technologies, Inc. in Virginia.
No family relationship exists between any director or executive officer and
any other director or executive officer.
BOARD COMPOSITION
The Company currently has authorized 6 directors. In accordance with the
terms of the Company's Certificate of Incorporation, the terms of office of the
Board of Directors will be divided into three classes: Class A, whose term will
expire at the annual meeting of stockholders to be held in 1999; Class B, whose
term will expire at the annual meeting of stockholders to be held in 2000; and
Class C, whose term will expire at the annual meeting of stockholders to be held
in 2001. The Class A directors are Messrs. Besner and Fratarcangelo, the Class B
directors are Messrs. Timm and Wareham, and the Class C directors are Messrs.
Eder and Libischer. At each annual meeting of stockholders after the initial
classification, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election. Any additional directorships resulting from
an increase in the number of directors will be distributed among the three
classes so that, as nearly as possible, each class will consist of one-third of
the directors. Directors may be removed for cause by the affirmative vote of the
holders of a majority of the voting power of all outstanding shares of Company
entitled to vote generally, voting together as a single class.
The Company's executive officers are appointed by the Board of Directors
and serve until their successors are elected or appointed.
BOARD COMMITTEES
The Board of Directors has three committees: an Executive Committee, an
Audit Committee, and a Compensation Committee. The Committees were created
contemporaneously with the Company's re-incorporation in Delaware. The Board's
Executive Committee consists of Messrs. Andreas Eder, Hubert Besner and Holger
Timm. The Board's Audit Committee consists of Messrs. Holger Timm, Robert
Fratarcangelo, and G.W. Norman Wareham. The Audit Committee reviews the
Company's accounting processes, financial controls and reporting systems, as
well as the selection of the Company's independent auditors and the scope of the
audits to be conducted.
The Compensation Committee consists of Messrs. Holger Timm, Robert
Fratarcangelo, and G.W. Norman Wareham. It reviews executive compensation and
organization structure. The Compensation Committee also administers the
Company's Stock Option Plan. Prior to the creation of the Compensation
39
<PAGE> 42
Committee, all decisions concerning salaries, incentives and other forms of
compensation of directors, officers and other employees of the Company were made
by the whole Board of Directors.
None of the members of the Compensation Committee of the Board of Directors
is currently, or has been at any time since the formation of the Company, an
officer or employee of the Company. No executive officer of the Company serves
as a member of the board of directors or compensation committee of any entity
that has one or more executive officers serving on the Company's Board of
Directors or Compensation Committee.
DIRECTOR COMPENSATION
Directors, who are not also employees of the Company ("Outside Directors"),
receive $15,000 annually (the "Annual Director Fee") and are reimbursed for
out-of-pocket expenses incurred in connection with their serving on the Board.
Each Outside Director will elect to receive his Annual Director Fee in cash,
stock options or a combination thereof. The value of the stock options will be
determined pursuant to the Black-Sholes method, and the options will be fully
vested at the date of grant.
EMPLOYMENT CONTRACTS
Messrs. Andreas Eder and Rudolf Strobl have employment agreements with the
Company. The three-year terms of these agreements commenced on February 16,
1998. The agreements provide for base annual compensation of $103,000. Messrs.
Eder and Strobl also have non-compete agreements that prohibit them from
engaging, directly or indirectly, in the business of Internet access and related
services to commercial and business entities in the United States and Europe
until September 16, 2002. Mr. Giacalone has a three-year employment agreement
with the Company, commencing on October 1, 1997, and providing for base annual
compensation of $128,600. Each employment agreement provides for a year-end
bonus in an amount to be determined pursuant to an incentive bonus plan. Unless
terminated by the Company at least one year prior to the end of the three-year
term, or by the employee with six months notice, the term of each agreement is
automatically extended for two additional years.
Mr. Moosmann entered into an employment agreement with the Company,
commencing on April 28, 1997, and providing for base annual compensation of
$80,000. That agreement is terminable by either the Company or Mr. Moosmann with
six months prior notice.
SUMMARY COMPENSATION TABLE
The following table sets forth the current annual compensation of the Chief
Executive Officer and the Company's five most highly compensated executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------
NAME AND PRINCIPAL POSITION SALARY BONUS(1) OTHER
--------------------------- -------- -------- -----
<S> <C> <C> <C>
Andreas Eder................................................ $103,000 $25,700 (2)
Chairman, President and Chief Executive Officer
Head of Managing Board of Cybernet AG
Alessandro Giacalone........................................ $128,600 $ 8,600 (2)
Member of Managing Board of Cybernet AG
Rudolf Strobl............................................... $103,000 $25,700 (2)
Member of Managing Board of Cybernet AG
Tristan Libischer........................................... $103,000 $25,700 (2)
Managing Director of Vianet
Alexander Wiesmueller....................................... $103,000 $25,700 (2)
Managing Director of Vianet
</TABLE>
- ---------------
(1) Maximum amount payable to executive upon achievement of specified business
targets; lower amounts may be paid.
(2) The Company provides leased automobiles and cellular telephones to
executives. The amounts attributable to personal use of these items are less
than 10% of each Executive's total compensation.
40
<PAGE> 43
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation limits the liability of
directors and executive officers to the maximum extent permitted by Delaware
law. Delaware law provides that directors of a corporation will not be
personally liable for monetary damages for breach of their fiduciary duties as
directors, except liability for (i) breach of their duty of loyalty to the
corporation or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unlawful payments of dividends or unlawful stock repurchases or redemptions, or
(iv) any transaction from which the director derived an improper personal
benefit. Such limitation of liability does not apply to liability arising under
the federal or state securities laws and does not affect the availability of
equitable remedies such as injunctive relief or rescission.
The Company's Bylaws provide that the Company shall indemnify its
directors, officers, employees and other agents to the fullest extent permitted
by law. The Company believes that indemnification under its Bylaws covers at
least negligence and gross negligence on the part of indemnified parties. The
Company has also secured insurance on behalf of any officer, director, employee
or other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the Bylaws permit such indemnification.
At present, there is no pending litigation or proceeding involving a
director or officer of the Company in which indemnification is required or
permitted, and the Company is not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.
STOCK OPTION PLAN
The Company has adopted a Stock Option Plan (the "Stock Option Plan") to
further the growth and development of the Company by encouraging and enabling
employees of the Company to obtain a proprietary interest in the Company through
the ownership of stock and to attract persons of outstanding quality to the
Company's service. Options granted under the Stock Option Plan may be either
incentive stock options, as defined in Section 422 of the Internal Revenue Code
of 1986, as amended, or non-qualified stock options. The Company has reserved
2,000,000 shares of Common Stock for issuance under the Stock Option Plan. The
Company will grant options to purchase a total of 285,000 shares in varying
amounts under the Stock Option Plan to 95 employees, none of whom are members of
management.
The Stock Option Plan is administered by the Compensation Committee of the
Board, which has the power to determine the terms of any options granted,
including the exercise price, the number of shares subject to the option, and
the exercisability thereof. Options granted under the Stock Option Plan
generally are not transferable, and each option is exercisable during the
lifetime of the optionee only by such optionee.
Non-qualified Options. The non-qualified option grants are evidenced by a
written agreement which will contain the following general conditions:
Initial Grant. An initial grant to each eligible employee is made,
which vests ratably based on continuing employment over a designated number
of years.
Annual Grant. In addition to the initial grant, the Compensation
Committee will annually grant to management employees additional stock
options, based upon performance. This grant will be an option to purchase a
number of shares with a value per share at the date of grant equal to a
percentage of the employee's bonus. The annual option grants will contain a
vesting schedule, which requires the employee to work a designated number
of years before vesting.
Exercise During Employment. Stock options can be exercised any time
before expiration after they are vested, as long as the employee remains
employed.
Exercise After Termination of Employment. Upon termination of
employment, all unvested options will terminate and any vested options that
have not yet been exercised will be exercisable for 90 days after
termination unless the employee is terminated for cause or violates a
non-solicitation, non-compete, or confidentiality requirement.
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<PAGE> 44
Expiration. Any stock options, which have not previously been
exercised or forfeited, will terminate ten years after the date of grant.
Option Cash-Out. The Company retains the right, in the event of a
merger or sale of over 50% of the Company's assets or similar event, to
cancel any outstanding options in exchange for paying the optionee the
excess over the exercise price of the fair market value of the shares
purchasable with the vested portion of the option.
42
<PAGE> 45
PRINCIPAL STOCKHOLDERS
The following table sets forth, certain information as of September 10,
1998, regarding beneficial ownership of Common Stock and Preferred Stock by (i)
each stockholder known by the Company to be the beneficial owner of more than
five percent (5%) of the outstanding shares of Common Stock; (ii) each director
of the Company; (iii) each executive officer of the Company; and (iv) all of the
Company's current executive officers and directors as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED PRIOR TO OFFERING
---- ----------------------------------------
NUMBER OF NUMBER OF NUMBER OF PERCENTAGE PERCENTAGE PERCENTAGE
COMMON SERIES A SERIES B OF COMMON OF SERIES A OF SERIES B
EXECUTIVE OFFICERS AND DIRECTORS STOCK(6) PREFERRED(6) PREFERRED(6) STOCK PREFERRED PREFERRED
- -------------------------------- ---------- ------------ ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Holger Timm.................... 1,044,900(2) 721,500(2) 5,160,000(5) 6.2% 60.1% 100%
Trabener Strasse 12
14193, Berlin, Germany
Andreas Eder................... 1,528,645(1) 177,749(1) 9% 14.8%
Stefan-George-Ring 19
81929 Munich, Germany
Alessandro Giacalone........... 309,600(3) 36,000(3) 1.8% 3%
Stefan-George-Ring 19
81929 Munich, Germany
Rudolf Strobl.................. 460,724 53,572 2.7% 4.5%
Stefan-George-Ring 19
81929 Munich, Germany
Christian Moosmann............. 154,800(3) 18,000(3) * 1.5%
Stefan-George-Ring 19
81929 Munich, Germany
Hubert Besner.................. 7,261(4) *
Widenmayerstr. 41
80538 Munich, Germany
Tristan Libischer.............. 150,000 *
Mariannengasse 14
1090 Vienna, Austria
Alexander Wiesmueller.......... 150,000 *
Mariannengasse 14
1090 Vienna, Austria
All executive officers and
directors as a group (8
persons)..................... 3,805,930 1,006,821 5,160,000 22.5% 83.9% 100%
* less than 1%.................
Principal Stockholders other
than directors and officers...
Franz Eder..................... 621,350 72,250 3.7% 6%
Pariser Strasse 12
10719 Berlin, Germany
Thomas Schulz.................. 614,282 71,428 3.6% 6%
Pfaffing 15
83339 Chieming, Germany
<CAPTION>
SHARES BENEFICIALLY
NAME OWNED AFTER OFFERING
---- -----------------------
NUMBER OF PERCENTAGE
COMMON OF COMMON
EXECUTIVE OFFICERS AND DIRECTORS STOCK STOCK
- -------------------------------- ---------- ----------
<S> <C> <C>
Holger Timm.................... 1,044,900(2) 5.0%
Trabener Strasse 12
14193, Berlin, Germany
Andreas Eder................... 1,528,645(1) 7.4%
Stefan-George-Ring 19
81929 Munich, Germany
Alessandro Giacalone........... 309,600(3) 1.5%
Stefan-George-Ring 19
81929 Munich, Germany
Rudolf Strobl.................. 460,724 2.2%
Stefan-George-Ring 19
81929 Munich, Germany
Christian Moosmann............. 154,800(3) *
Stefan-George-Ring 19
81929 Munich, Germany
Hubert Besner.................. 7,261(4) *
Widenmayerstr. 41
80538 Munich, Germany
Tristan Libischer.............. 150,000 *
Mariannengasse 14
1090 Vienna, Austria
Alexander Wiesmueller.......... 150,000 *
Mariannengasse 14
1090 Vienna, Austria
All executive officers and
directors as a group (8
persons)..................... 3,805,930 18.3%
* less than 1%.................
Principal Stockholders other
than directors and officers...
Franz Eder..................... 621,350 3%
Pariser Strasse 12
10719 Berlin, Germany
Thomas Schulz.................. 614,282 3.0%
Pfaffing 15
83339 Chieming, Germany
</TABLE>
- ---------------
(1) Includes (i) 323,620 shares of Common Stock and 37,630 shares of Series A
Preferred Stock held by Mr. Eder's spouse, Verena Czerny, for which shares
Ms. Czerny has the sole investment and voting power, and Mr. Eder disclaims
any beneficial ownership, and (ii)(A) 165,500 shares of Common Stock and
14,400 shares of Series A Preferred Stock subject to an agreement between
Andreas Eder and Dave Morton, an employee of the Company, by which Mr.
Morton has the option to acquire, (a) 25% of the total number of shares
starting on January 1, 1999 and ending June 30, 1999, (b) 25% of the total
number of shares starting on January 1, 2000 and ending June 30, 2000, and
(c) 50% of the total number of shares starting on January 1, 2001, and
ending June 30, 2001 and (B) 96,600 shares of Common Stock and 8,400 shares
of Series A Preferred Stock subject to an agreement between Andreas Eder and
Todd Ferguson, an employee of the Company or its subsidiary, by which Mr.
Ferguson has the option to acquire such shares at the same price and under
terms as for Mr. Morton.
(2) Does not include shares of Common Stock and Series A Preferred Stock sold by
Mr. Timm to Alessandro Giacalone, Christian Moosmann and Hans Bergbreiter
(each, individually, the "Purchaser") pursuant to Stock Purchase Agreements
dated April 28, 1997, which provide that such Shares shall revert back to
Mr. Timm if the Purchaser's employment with the Company terminates for any
reason except termination without cause by the Company or if the Company
breaches its employment agreement with the Purchaser; includes 600,000
shares held by Cybermind, a German company of which Mr. Timm is Chief
Executive Officer and Head of the Managing Board and a controlling
shareholder.
(3) Includes shares purchased from Mr. Timm pursuant to Stock Purchase
Agreements dated April 28, 1997. See Note 2 above.
(4) These shares are held by Ms. Katharina Besner, Mr. Hubert Besner's spouse,
and Mr. Besner disclaims any beneficial ownership in such shares.
(5) All of the Series B Preferred Stock is held by Cybermind (See Note 2 for
control and ownership of Cybermind.)
(6) All the shares of capital stock listed are subject to a Pooling Trust
Agreement restricting the beneficial owner from selling the shares prior to
specified dates (unless the transferee is also subject to such
restrictions), but without affecting the vote of the shares, if entitled to
vote.
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<PAGE> 46
DESCRIPTION OF CAPITAL STOCK
The following description of the capital stock of the Company and certain
provisions of the Company's Certificate of Incorporation and Bylaws is a summary
and is qualified in its entirety by the provisions of the Certificate of
Incorporation, Bylaws, and resolutions creating the Series A, Series B and
Series C Preferred Stock (as defined below), which have been filed as exhibits
to the Company's Registration Statement of which this Prospectus is a part.
Upon the closing of the Offering, the authorized capital stock of the
Company will be 100,000,000 shares of capital stock, consisting of 50,000,000
shares of Common Stock, par value $0.001 per share, and 50,000,000 shares of
Preferred Stock, par value $0.001 per share (the "Preferred Stock"). The
Certificate of Incorporation of Cybernet Utah authorized 20,000,000 shares of
preferred stock. Upon reincorporation of the Company in Delaware, the authorized
amount was increased to 50,000,000.
COMMON STOCK
As of a recent date, there were approximately 16,901,286 shares of Common
Stock outstanding held of record by 209 stockholders. 20,787,111 shares of
Common Stock will be issued and outstanding if the Offering is fully subscribed.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. In the event of
the liquidation or dissolution of the Company, subject to the rights of the
holders of Preferred Stock, the holders of Common Stock are entitled to share
pro rata in any balance of corporate assets available for distribution after
payment of all creditors. Holders of Common Stock have no preemptive rights or
rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are, and all shares of Common Stock to be
outstanding upon completion of the Offering will be, fully paid and
non-assessable. The rights of holders of Common Stock are subject to, and may be
adversely affected by, the rights of any series of Preferred Stock which the
Company may issue in the future. The Company may pay dividends if, when and as
declared by the Board of Directors from funds legally available therefore,
subject to the dividend provisions of any outstanding shares of Preferred Stock
and restrictions that may be set forth in the Company's debt instruments.
PREFERRED STOCK
As of July 22, 1998, there were 6,477,510 shares of Preferred Stock
outstanding, of which 1,200,000 shares are issued and outstanding as Series A
Preferred Stock (the "Series A Preferred Stock") and held of record by 9
stockholders, 5,160,000 shares are issued and outstanding as Series B Preferred
Stock (the "Series B Preferred Stock") and held of record by 1 stockholder, and
117,510 shares are issued and outstanding as Series C Preferred Stock (the
"Series C Preferred Stock") and held of record by 61 stockholders.
SERIES A PREFERRED STOCK
Dividends. The holders of the Series A Preferred Stock are entitled to
receive out of the surplus or net profits of the Company legally available for
dividends, whether or not declared, dividends at a rate equal to $0.01 per share
per annum, and no more, before any dividends are paid or set apart for payment
upon any other series of preferred stock of the Company, other than Series B
Preferred Stock or Series C Preferred Stock, or on the Common Stock of the
Company. Commencing with the fiscal year beginning on January 1, 1998, the
dividend on the Series A Preferred Stock will be paid for each fiscal year
within five months of the end of each fiscal year, subject to the availability
of surplus or net profits therefore. Any dividends paid on the Series A
Preferred Stock in an amount less than the total amount of dividends at the time
payable on the shares will be allocated pro rata in accordance with the number
of shares then outstanding.
The dividends on the Series A Preferred Stock are not cumulative. Following
payment of the dividends on the Series A Preferred Stock, the holders of the
Series A Preferred Stock shall share pari passu on a per
44
<PAGE> 47
share basis of the distribution in any dividends by the Company, with the
holders of shares of Common Stock of the Company and shares of any other class
of stock of the Company entitled to share therein.
Voting Rights. The holders of the Series A Preferred Stock are not
entitled to receive notice of, or to vote on, any matter that is the subject of
a vote of the stockholders of the Company, except as otherwise required by the
laws of the State of Delaware.
Redemption and Put. The shares of Series A Preferred Stock may be redeemed
by the Company at any time after January 1, 2000, upon ten (10) days' prior
written notice to the holder thereof of the Company's intention to redeem the
Series A Preferred Stock at a redemption price of one share of Common Stock for
each share of Series A Preferred Stock, plus payment of any unpaid dividends
earned thereon through the date of redemption; provided, that all and not less
than all of the shares of Series A Preferred Stock are so redeemed and, provided
further, that, if the Company has not redeemed the Series A Preferred Stock by
December 31, 2001, a holder of Series A Preferred Stock may at any time,
commencing January 1, 2002, require the Company to purchase all of the shares of
the Series A Preferred Stock held by him for a purchase price of $3.00 per
share, plus any dividends earned but unpaid on such shares.
Conversion. A holder of Series A Preferred Stock may convert each share
held into one share of the Common Stock of the Company upon ten (10) days'
written notice to the Company; provided, that (1) no conversion may occur prior
to January 1, 1999; (2) no more than 25% of the Series A Preferred Stock held by
any holder may be converted prior to January 1, 2000; (3) no more than an
additional 25% of the Series A Preferred Stock held by the holder may be
converted prior to January 1, 2001; (4) the remainder of the Series A Preferred
Stock held by such holder may be converted commencing January 1, 2001; and (5)
any conversion may not be for less than all of the Series A Preferred Stock held
by the converting shareholder eligible for conversion at the time of the notice.
Liquidation, Dissolution or Winding Up. Upon the liquidation, dissolution
or winding up, whether voluntary or involuntary, of the Company, the holders of
the Series A Preferred Stock will be entitled to be paid the sum of $3.00 per
share, plus an amount equal to any unpaid dividends before any amount is paid to
the holder of any other series of Preferred Stock, other than the Series B
Preferred Stock or the Series C Preferred Stock, or to the Common Stock of the
Company. After payment of these amounts to the holders of the Series A Preferred
Stock, the remaining assets of the Company will be distributed to the holders of
the Common Stock, subject to any other preferences granted to the holders of any
other series of Preferred Stock as created by the Board of Directors of the
Company prior to such time.
Preemptive Rights. The holders of the Series A Preferred Stock have no
preemptive right by virtue of their holding the Series A Preferred Stock to
subscribe for or purchase any shares of stock or any other securities that may
be issued by the Company.
Transferability. The Series A Preferred Stock may not be transferred by
the holder except in compliance with applicable securities laws.
Variation of Rights. Any amendment to the Certificate of Incorporation of
the Company (including any certificates of designation pursuant to a resolution
of the Board of Directors) to delete or vary the rights, powers, privileges,
preferences, designations, qualifications, limitations, restrictions or
conditions attaching to the Series A Preferred Stock must be approved by the
affirmative vote of the holders of a majority of the shares of Series A
Preferred Stock then outstanding, given in person or by proxy whether in writing
or at a meeting at which the holders of the shares of Series A Preferred Stock
are entitled to vote separately as a class.
Exclusion of Other Rights. Except as may otherwise be required by law and
for the equitable rights and remedies that may otherwise be available to the
holders of the Series A Preferred Stock, the Series A Preferred Stock do not
have any rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions or conditions other than as specifically set forth in
the Series A Preferred Stock Certificate of Designation, as the same may be
amended and/or restated from time to time.
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<PAGE> 48
SERIES B PREFERRED STOCK
Dividends. The holders of the Series B Preferred Stock are entitled to
receive out of the surplus or net profits of the Company legally available for
dividends, whether or not declared, dividends at a rate equal to $0.01 per share
per annum, and no more, before any dividends are paid or set apart for payment
upon any other series of preferred stock of the Company other than the Series C
Preferred Stock, or on the Common Stock of the Company. Commencing with the
fiscal year beginning on January 1, 1998, the dividend on the Series B Preferred
Stock will be paid for each fiscal year within five months of the end of each
fiscal year, subject to the availability of surplus or net profits therefore.
Any dividends paid on the Series B Preferred Stock in an amount less than the
total amount of dividends at the time payable on the shares will be allocated
pro rata in accordance with the number of shares then outstanding.
The dividends on the Series B Preferred Stock are not cumulative. Following
payment of the dividends on the Series B Preferred Stock, the holders of the
Series B Preferred Stock shall share pari passu on a per share basis of the
distribution of any dividends by the Company with the holders of shares of
Common Stock of the Company and shares of any other class of stock of the
Company entitled to share therein.
Voting Rights. The holders of the Series B Preferred Stock are entitled to
receive notice of, and to vote on, any matter that is the subject of a vote of
the stockholders of the Company.
Redemption. The shares of Series B Preferred Stock may be redeemed by the
Company at any time after January 1, 2000, upon ten (10) days' prior written
notice to the holder thereof of the Company's intention to redeem the Series B
Preferred Stock at a redemption price of one share of the Common Stock of the
Company for each share of Series B Preferred Stock, plus any unpaid dividends
earned thereon through the date of redemption; provided, that all and not less
than all of the shares of Series B Preferred Stock are so redeemed.
Conversion. A holder of Series B Preferred Stock may convert each share
held into one share of the Common Stock of the Company upon ten (10) days'
written notice to the Company; provided, that (1) no conversion may occur prior
to January 1, 1999; (2) no more than 25% of the Series B Preferred Stock held by
the holder may be converted prior to January 1, 2000; (3) no more than an
additional 25% of the Series B Preferred Stock held by the holder may be
converted prior to January 1, 2001; (4) the remainder of the Series B Preferred
Stock held by the holder may be converted commencing January 1, 2001; and (5)
any conversion may not be for less than all of the Series B Preferred Stock held
by the converting shareholder eligible for conversion at the time of the notice.
Liquidation, Dissolution or Winding Up. Upon the liquidation, dissolution
or winding up, whether voluntary or involuntary, of the Company, the holders of
the Series B Preferred Stock will be entitled to be paid the sum of $3.00 per
share, plus an amount equal to any unpaid dividends before any amount is paid to
the holder of any other series of Preferred Stock other than the Series C
Preferred Stock or to the Common Stock of the Company. After payment of these
amounts to the holders of the Series B Preferred Stock, the remaining assets of
the Company will be distributed to the holders of the Common Stock, subject to
any other preferences granted to the holders of any other series of Preferred
Stock as created by the Board of Directors of the Company prior to such time.
Preemptive Rights. The holders of the Series B Preferred Stock have no
preemptive right to subscribe for or purchase any shares of stock or any other
securities that may be issued by the Company by virtue of their holding the
Series B Preferred Stock.
Transferability. The Series B Preferred Stock may not be transferred by
the holder except in compliance with applicable securities laws.
Variation of Rights. Any amendment to the Certificate of Incorporation of
the Company (including any certificates of designation pursuant to a resolution
of the Board of Directors) to delete or vary the rights, powers, privileges,
preferences, designations, qualifications, limitations, restrictions or
conditions attaching to the Series B Preferred Stock must be approved by the
affirmative vote of the holders of a majority of the
46
<PAGE> 49
shares of Series B Preferred Stock then outstanding, given in person or by proxy
whether in writing or at a meeting at which the holders of the shares of Series
B Preferred Stock are entitled to vote separately as a class.
Exclusion of Other Rights. Except as may otherwise be required by law and
for the equitable rights and remedies that may otherwise be available to the
holders of the Series B Preferred Stock, the Series B Preferred Stock do not
have any rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions or conditions other than as specifically set forth in
the Series B Preferred Stock Certificate of Designation, as the same may be
amended and/or restated from time to time.
SERIES C PREFERRED STOCK
Dividends. The holders of the Series C Preferred Stock are entitled to
receive out of the surplus or net profits of the Company dividends at a rate
equal to $0.56 per share per annum, and no more, before any dividends are paid
or set apart for payment upon any other series of Preferred Stock or on the
Common Stock of the Company. Dividends began to accrue on January 1, 1998.
Commencing with the fiscal year beginning on January 1, 1998, the dividend on
the Series C Preferred Stock will be paid for each fiscal year within five
months of the end of each fiscal year, subject to the availability of surplus or
net profits therefore. Any dividends paid on the Series C Preferred Stock in an
amount less than the total amount of dividends at the time accrued and payable
on the shares will be allocated pro rata in accordance with the number of shares
then outstanding.
At the election of the Board of Directors, dividends may be paid in the
form of the Common Stock. The number of shares of Common Stock to be issued in
payment of such dividends, with respect to each share of Series C Preferred
Stock, is equal to the quotient derived by dividing the fair value of a share of
Common Stock (as determined by the Board of Directors on the date the dividend
is declared) into the dollar amount of the dividend being declared.
The dividends on the Series C Preferred Stock are cumulative so that, if
for any period the dividend is not paid, the right to such dividend will
accumulate and all arrears so accumulated will be paid before any dividends are
paid to any other series of Preferred Stock or the Common Stock of the Company.
Voting Rights. The holders of the Series C Preferred Stock are not
entitled to receive notice of, or to vote on, any matter that is the subject of
a vote of the stockholders of the Company, except as otherwise required by the
laws of the State of Delaware.
Redemption and Exchange. The shares of Series C Preferred Stock may be
redeemed by the Company at any time upon ten (10) days' prior written notice to
the holder thereof of the Company's intention to redeem the Series C Preferred
Stock at a redemption price of 100% of the $7.00 per share purchase price paid
to the Company for such shares, plus any unpaid accrued dividends thereon
through the date of redemption so long as prior to the date of redemption the
following has occurred:
(i) The Company must have offered to exchange on the terms set forth
below (the "Exchange Offer") each share of Series C Preferred Stock for (a)
one share of the Company's Common Stock, plus (b) one warrant to purchase
the number of shares of Common Stock equal in the aggregate to one-half the
number of shares of Common Stock received in the Exchange Offer, which
warrant will be exercisable at any time through the first anniversary of
the date of issuance of the warrant at a purchase price equal to $8.00 per
share. The Exchange Offer will remain open for at least twenty (20) days;
and
(ii) A registration statement under the Securities Act must be in
effect registering the issuance of the Common Stock and warrants pursuant
to the Exchange Offer.
Conversion. A holder of Series C Preferred Stock may convert each share
held by him into one share of the Common Stock of the Company upon ten (10)
days' written notice to the Company anytime after May 31, 1998; provided,
however, that any conversion be of all the Series C Preferred Stock held by the
shareholder. As of July 22, 1998, 1,282,490 shares of Series C Preferred Stock
had been converted into Common Stock by the holders thereof and 117,510 shares
of Series C Preferred Stock remained outstanding.
47
<PAGE> 50
Liquidation, Dissolution or Winding Up. Upon the liquidation, dissolution
or winding up, whether voluntary or involuntary, of the Company, the holders of
the Series C Preferred Stock are entitled to be paid the sum of $7.00 per share,
plus an amount equal to any unpaid accrued dividends before any amount is paid
to the holder of any other series of Preferred Stock or to the Common Stock of
the Company. After payment of these amounts to the holders of the Series C
Preferred Stock, the remaining assets of the Company will be distributed to the
holders of the Common Stock, subject to any other preferences granted to the
holders of any other series of Preferred Stock as created by the Board of
Directors of the Company prior to such time.
Preemptive Rights. The holders of the Series C Preferred Stock have no
preemptive right to subscribe for or purchase any shares of stock or any other
securities that may be issued by the Company by virtue of their holding the
Series C Preferred Stock.
Transferability. The Series C Preferred Stock may be transferred by the
holder only after the Company relinquishes its right of first refusal to
purchase the shares on the same terms and conditions as the holder of the Series
C Preferred Stock proposes to dispose of the shares in accordance with the
Company's Certificate of Incorporation. Any attempted transfers that do not
comply with the Company's right of first refusal will not be recognized by the
Company or its stock transfer agent.
Variation of Rights. Any amendment to the Certificate of Incorporation of
the Company (including any certificates of designation pursuant to a resolution
of the Board of Directors) to delete or vary the rights, powers, privileges,
preferences, designations, qualifications, limitations, restrictions or
conditions attaching to the Series C Preferred Stock must be approved by the
affirmative vote of the holders of a majority of the shares of Series C
Preferred Stock then outstanding, given in person or by proxy whether in writing
or at a meeting at which the holders of the shares of Series C Preferred Stock
will be entitled to vote separately as a class.
Exclusion of Other Rights. Except as may otherwise be required by law and
for the equitable rights and remedies that may otherwise be available to the
holders of the Series C Preferred Stock, the Series C Preferred Stock do not
have any rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions or conditions other than as specifically set forth in
Series C Preferred Stock Certificate of Designation, as the same may be amended
and/or restated from time to time.
ANTI-TAKEOVER PROVISIONS
GENERAL
Certain provisions of the GCL and the Company's Certificate of
Incorporation and Bylaws could have the effect of delaying, deterring or
preventing a future takeover or change in control of the Company, unless such
takeover or change in control is approved by the Company's Board of Directors.
Such provisions also may render the removal of directors and management more
difficult. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Company's Common Stock. These
provisions of Delaware law and the Company's Certificate of Incorporation and
Bylaws also may have the effect of discouraging or preventing certain types of
transactions involving an actual or threatened change of control of the Company
(including unsolicited takeover attempts), even though such a transaction may
offer the Company's stockholders the opportunity to sell their stock at a price
above the prevailing market price. See "Risk Factors -- Anti-Takeover
Provisions".
CERTIFICATE OF INCORPORATION AND BYLAWS
Certain provisions of the Certificate of Incorporation and Bylaws could
have the effect of discouraging potential acquisition proposals or delaying or
preventing a change of control of the Company. In particular, effective upon
consummation of the Offering, all stockholder actions must be effected at a duly
called annual or special meeting and not by a consent in writing. Except as
otherwise required by law and subject to the rights of the holders of any
Preferred Stock, special meetings of stockholders for any purpose may be called
only by the Board of Directors pursuant to a resolution stating the purpose
thereof approved by a majority of
48
<PAGE> 51
the total number of directors which the Board of Directors of the Company would
have if there were no vacancies or by the Chairman of the Board of Directors,
and any power of stockholders to call a special meeting is specifically denied.
No business other than that stated in the notice may be transacted at any
special meeting. Furthermore, the Company's Bylaws require advance written
notice, which must be received by the Secretary of the Company not less than 30
days nor more than 60 days prior to the meeting, by a stockholder of a proposal
or director nomination which such stockholder desires to present at a meeting of
stockholders. An affirmative vote of the holders of at least 80% of the voting
stock, voting together as a single class, is required to amend this provision.
The Board of Directors is divided into three classes of directors, as
nearly equal in number as is reasonably possible, serving staggered terms so
that directors' initial terms will expire at the annual meetings of the
stockholders in 1999, 2000, and 2001, respectively. At each such succeeding
annual meeting of stockholders, directors elected to succeed those directors
whose terms are expiring at such meeting shall be elected for a term of office
to expire at the third succeeding annual meeting of stockholders following such
election. The number of the directors of the Company may be fixed from time to
time exclusively pursuant to a resolution adopted by a majority of the total
number of directors which the Board of Directors of the Company would have if
there were no vacancies (but may not be less than two). An affirmative vote of
the holders of at least 80% of the voting stock, voting together as a single
class, is required to amend this provision.
The Company believes that a classified board of directors will help to
assure the continuity and stability of the Board of Directors and the Company's
business strategies and policies, since a majority of the directors at any given
time will have had prior experience as directors of the Company. The Company
believes that this, in turn, will permit the Board of Directors to more
effectively represent the interests of stockholders. With a classified board of
directors, at least two annual meetings of stockholders, instead of one, will
generally be required to effect a change in the majority of the Board of
Directors. As a result, provisions relating to a classified Board of Directors
may discourage proxy contests for the election of directors or purchases of a
substantial block of the Common Stock, because its provisions could operate to
prevent obtaining control of the Board of Directors in a relatively short period
of time. The classification provision and the prohibition on stockholder action
by written consent could also have the effect of discouraging a third party from
making a tender offer or otherwise attempting to obtain control of the Company.
Under the GCL, a director on a classified board may be removed by the
stockholders of the corporation only for cause, and the Company's Certificate of
Incorporation permits stockholders to remove directors only for cause pursuant
to a majority vote of all stockholders entitled to vote. An affirmative vote of
the holders of at least 80% of the voting stock, voting together as a single
class, is required to amend this provision.
The Company's Certificate of Incorporation does not include a provision for
cumulative voting in the election of directors. Under cumulative voting, a
minority stockholder holding a sufficient number of shares may be able to ensure
the election of one or more directors. The absence of cumulative voting may have
the effect of limiting the ability of minority stockholders to effect changes in
the Board of Directors and, as a result, may have the effect of deterring a
hostile takeover or delaying or preventing changes in control or management of
the Company.
The Company's Certificate of Incorporation provides that newly created
directorships resulting from any increase in the number of directors and any
vacancies on the Board of Directors will be filled by the affirmative vote of a
majority of the remaining directors then in office, although less than a quorum
and not by the stockholders unless authorized by the Board of Directors at a
special meeting of the stockholders. An affirmative vote of the holders of at
least 80% voting stock, voting together as a single class, is required to amend
this provision.
The Certificate of Incorporation allows the Company to issue up to
50,000,000 shares of undesignated Preferred Stock with rights senior to those of
the Common Stock and that otherwise could adversely affect the interests of
holders of Common Stock, of which 6,477,510 shares were issued and outstanding,
as of July 22, 1998. The issuance of additional shares of Preferred Stock could
further decrease the amount of earnings or assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of Common Stock. In certain
circumstances, such issuance
49
<PAGE> 52
could have the effect of decreasing the market price of the Common Stock, as
well as having the anti-takeover effect discussed above.
The Company's Certificate of Incorporation allows the Bylaws of the Company
to be altered or repealed and new Bylaws to be adopted either: (i) at any annual
or special meeting of stockholders, by the affirmative vote of a majority of the
voting stock, provided that in the case of any such stockholder action at a
special meeting of stockholders, notice of the proposed alteration, repeal or
adoption of any Bylaws must be contained in the notice of such special meeting;
or (ii) by the vote of a majority of the total number of directors which the
Board of Directors of the Company would have if there were no vacancies. An
affirmative vote of at least 80% of the voting stock, voting together as a
single class, is required to amend this provision.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and in the policies
formulated by the Board of Directors and to discourage certain types of
transactions that may involve an actual or threatened change of control of the
Company. These provisions are designed to reduce the vulnerability of the
Company to an unsolicited acquisition proposal and to discourage certain tactics
that may be used in proxy fights. Such provisions could have the effect of
discouraging others from making tender offers for the Company's shares and may
inhibit fluctuations in the market price of the Company's shares that could
otherwise result from actual or rumored takeover attempts. Such provisions also
may have the effect of preventing changes in the management of the Company. See
"Risk Factors -- Anti-Takeover Provisions".
DELAWARE TAKEOVER STATUTE
The Company is subject to Section 203 of the GCL ("Section 203") which,
subject to certain exceptions, prohibits a Delaware corporation from engaging in
a "business combination" with an "interested stockholder" for a period of three
years following the date that such stockholder became an interested stockholder,
unless: (i) prior to such date, the board of directors of the corporation
approved either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder; (ii) upon consummation of the
transaction that resulted in the stockholder becoming an interested stockholder,
the interested stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced, excluding for
purposes of determining the number of shares outstanding those shares owned (x)
by persons who are directors and also officers and (y) by employee stock plans
in which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) on or subsequent to such date, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) subject to certain
exceptions, any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (iv)
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (v) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
TRANSFER AGENT AND REGISTRAR
Interwest Transfer Company is the transfer agent and registrar for the
Company's capital stock.
50
<PAGE> 53
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement between
the Company and Berliner Effektenbank AG (the "Underwriter"), the Company has
retained the Underwriter as its exclusive agent to conduct an offering of
3,500,000 shares of Common Stock on a best efforts, all-or-none basis.
The Underwriting Agreement provides that the obligations of the Underwriter
are subject to various conditions. The Underwriter is not obligated to purchase
any shares of the Common Stock.
The Underwriter proposes to offer the shares of Common Stock directly to
the public, but only to non-U.S. persons, at the public offering price set forth
on the cover page of this Prospectus, and to certain dealers to whom it may
allow such concessions out of the underwriting commission as the Underwriter may
determine.
The Offering will be conducted for a period of 45 days and may be extended
for an additional 30 days by mutual agreement of the Company and the Underwriter
(the "Offering Period"). If, during the Offering Period, subscriptions are
received for all of the Shares, then the Company and the Underwriter may conduct
a closing to accept such subscriptions. At the closing, all funds received, less
the Underwriter's commissions, will be delivered to the Company, and
certificates representing the Shares purchased will be delivered to, or for the
account of, the subscribers thereof. If no closing takes place during the
Offering Period, all funds will be promptly returned to the subscribers without
any deduction therefrom or interest thereon. Until such time as funds have been
released from escrow and the Shares have been delivered to, or for the account
of, the subscribers therefore, subscribers will not be deemed to be holder of
the Shares.
Payments for Shares shall be made either by check or by wire transfer. All
checks for subscriptions of the shares of Common Stock are to be made payable to
"Berliner Effektenbank AG".
Pending the closing, all funds received by the Underwriter will be
deposited in an escrow account no later than noon on the next business day
following receipt by the Underwriter, to be held by the Underwriter as agent for
the subscribers of the Shares.
Holger Timm, a Director of the Company, is a controlling shareholder and
the Head of the Managing Board, President, and Chief Executive Officer of
Berliner Freiverkehr (Aktien) AG, a financial institution which owns
approximately 40% of the Underwriter.
The Executive Officers and Directors and certain persons who acquired stock
in the Company from those persons and certain affiliates have agreed that, for a
period of six months following the closing of the Offering, they will not sell
or offer to sell their shares in the Company, pursuant to a lock-up agreement.
The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act.
CERTAIN TRANSACTIONS
DIRECTOR LOAN
In May 1997, Mr. Timm advanced DM 1.5 million, on an interest free basis,
to Cybernet AG with repayment due on July 31, 1997. On October 7, 1997, Cybernet
AG repaid the loan.
The firm of Besner Kreifels Weber, of which Hubert Besner, a Director of
the Company, is a partner, acts as regular counsel to the Company, for which it
has received fees in the approximate amount of $85,000 during 1998.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding
20,787,111 shares of Common Stock. All shares sold in the Offering (other than
shares which may be acquired by an affiliate) will be fully tradable in the
public market under the Securities Act. Part of the acquisition price of
Cybernet AG, Eclipse,
51
<PAGE> 54
Artwise, Vianet and Open:Net has or will be paid in shares of Common Stock and
Preferred Stock of the Company. The total number of such shares is 5,618,445
shares of Common Stock, 1,200,000 shares of Series A Preferred and 5,160,000
shares of Series B Preferred. In each case, the shares are subject to a pooling
agreement restricting the owners of those shares from selling the shares prior
to some specified dates. On the following dates, the following number of shares
will be salable pursuant to each of the pooling agreements, subject to the
provisions of Rule 144 under the Securities Act:
<TABLE>
<CAPTION>
SERIES A SERIES B
COMMON STOCK PREFERRED PREFERRED
------------ --------- ---------
<S> <C> <C> <C>
January 1, 1999(1)................................. 1,306,537 300,000 1,290,000
February 10, 1999.................................. 14,706
August 10, 1999.................................... 14,706
September 1999..................................... 6,750
January 1, 2000.................................... 1,313,287 300,000 1,290,000
February 10, 2000.................................. 14,706
August 10, 2000.................................... 14,706
January 1, 2001.................................... 2,626,574 600,000 2,580,000
</TABLE>
- ---------------
(1) These shares are included in a lock-up agreement with the Underwriter -- see
Underwriter.
In addition, 60,000 shares of Common Stock issued in the Vianet Acquisition
will be released on each of the first five anniversaries of the closing of the
Vianet Acquisition. The closing of the Vianet Acquisition is scheduled to occur
contemporaneously with the closing of the Offering.
The Shares sold in the Offering will be freely tradable without restriction
or further registration under the Securities Act, except for any Shares
purchased by an affiliate of the Company, which will be subject to the
limitations of Rule 144 under the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned his or her restricted
securities (as that term is defined in Rule 144) for at least one year from the
date such securities were acquired from the Company or an affiliate of the
Company would be entitled to sell within any three-month period a number of
shares that does not exceed the greater of (i) one percent of the then
outstanding shares of the Common Stock and (ii) the average weekly trading
volume of the common stock during the four calendar weeks preceding a sale by
such person. Sales under Rule 144 are also subject to certain manner-of-sale
provisions, notice requirements and the availability of current public
information about the Company. Under Rule 144, however, a person who has held
shares for a minimum of two years from the later of the date such securities
were acquired from the Company or an affiliate of the Company and who is not,
and for the three months prior to the sale of such shares has not been, an
affiliate of the Company is free to sell such shares without regard to the
volume, manner-of-sale and certain other limitations contained in Rule 144.
In general, under Rule 701 of the Securities Act as currently in effect,
any employee, officer, director, consultant or advisor of the Company who
purchased shares from the Company in connection with a compensatory stock or
option plan or written employment agreement is eligible to resell such shares 90
days after the effective date of this Offering in reliance on Rule 144, but
without compliance with certain restrictions, including the holding period
contained in Rule 144.
Prior to the Offering, there has been only a limited market for the Common
Stock in the United States and no predictions can be made about the effect, if
any, that market sales of Common Stock or the availability of such shares for
sale will have on the market price prevailing from time to time. Nevertheless,
the actual sale of, or the perceived potential for the sale of, Common Stock in
the public market may have an adverse effect on the market price for the Common
Stock.
52
<PAGE> 55
LEGAL MATTERS
The validity of the Shares offered hereby and general corporate legal
matters will be passed upon for the Company by Powell, Goldstein, Frazer &
Murphy LLP.
EXPERTS
The consolidated financial statements of the Company at December 31, 1997
and 1996, and for the two years then ended, appearing in this Prospectus and
Registration Statement, have been audited by Schitag Ernst & Young AG,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
The consolidated financial statements of Vianet at December 31, 1997 and
1996, and for the two years then ended, appearing in this Prospectus and
Registration Statement, have been audited by Ernst & Young,
Wirtschaftsprufungs-Und, Steuerberatungsgesellschaft MBH, independent auditors,
as set forth in their report thereon appearing elsewhere herein, and are
included in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is not currently subject to the information requirements of the
Exchange Act. When the Commission declares effective the Registration Statement
on Form S-1, the Company will be required to file reports and other information
with the Commission pursuant to the informational requirements of the Exchange
Act. Such reports and other information can be inspected and copied at the
Public Reference Section of the Commission and at the Commission's regional
offices at the addresses given below.
As permitted by the rules and regulations of the Commission, this
Prospectus omits certain information, exhibits, schedules and undertakings set
forth elsewhere in this Registration Statement. For further information
pertaining to the Company and the securities offered hereby, reference is made
to such Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents or provisions of any
documents referred to herein are not necessarily complete and, in each instance,
reference is made to the copy of the document filed as an exhibit to this
Registration Statement. The Company will issue annual and quarterly reports.
Annual reports will include audited financial statements prepared in accordance
with accounting principles generally accepted in the United States and a report
of its independent auditors with respect to the examination of such financial
statements. In addition, the Company will issue to its security holders such
other unaudited quarterly or other interim reports as it deems appropriate.
This Registration Statement may be inspected without charge at the office
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies may
be obtained from the Commission at prescribed rates from the Public Reference
Section of the Commission at such address, and at the Commission's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. In addition, registration statements and certain other filings
made with the Commission through its Electronic Data Gathering, Analysis and
Retrieval ("EDGAR") system are publicly available through the Commission's site
on the Internet's World Wide Web, located at http://www.sec.gov.
53
<PAGE> 56
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
Report of Schitag Ernst & Young AG, Independent
Auditors............................................... F- 2
Consolidated Balance Sheets December 31, 1997 and 1996.... F- 3
Consolidated Statements of Loss and Comprehensive Loss
years ended December 31, 1997 and 1996................. F- 4
Consolidated Statements of Cash Flows years ended December
31, 1997 and 1996...................................... F- 5
Consolidated Statements of Shareholders' Equity years
ended December 31, 1997 and 1996....................... F- 6
Notes to Consolidated Financial Statements................ F- 7
Consolidated Balance Sheets December 31, 1997 and June 30,
1998 (unaudited)....................................... F-15
Consolidated Statements of Loss and Comprehensive Loss for
the six months ended June 30, 1997 and 1998 (unaudited) F-16
Consolidated Statements of Cash Flows for the six months
ended June 30, 1997 and 1998 (unaudited)............... F-17
Notes to Consolidated Unaudited Interim Financial
Statements............................................. F-18
VIANET EDV DIENSTLEISTUNGS GMBH
Independent Public Auditors' Report....................... F-19
Balance Sheets December 31, 1997 and 1996................. F-20
Statements of Operations and Retained Earnings years ended
December 31, 1997 and 1996............................. F-21
Statements of Cash Flows years ended December 31, 1997 and
1996................................................... F-22
Notes to the Financial Statements......................... F-23
Balance Sheets December 31, 1997 and June 30, 1998
(unaudited)............................................ F-27
Statements of Operations for the six months ended June 30,
1997 and 1998 (unaudited).............................. F-28
Statements of Cash Flows for the six months ended June 30,
1997 and 1998 (unaudited).............................. F-29
Notes to Unaudited Financial Statements................... F-30
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Cybernet Internet Services International, Inc.:
We have audited the accompanying consolidated balance sheets of Cybernet
Internet Services International, Inc. and its subsidiaries ("the Company") as of
December 31, 1997 and 1996, and the related consolidated statements of loss and
comprehensive loss, cash flows and changes in shareholders' equity for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Company as
of December 31, 1997 and 1996, and the consolidated results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
/s/ Schitag Ernst & Young
Deutsche Allgemeine Treuhand AG
Munich, Germany
May 6, 1998
F-2
<PAGE> 58
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents.............................. $ 27,889 $ 2,238,909
Short-term investments (Note 4)........................ 453,698 817,913
Accounts receivable -- trade, net of allowance for
doubtful accounts of $15,161 and $33,417 at December
31, 1996 and 1997, respectively....................... 183,513 1,130,981
Other receivables...................................... 84,675 285,432
Prepaid expenses and other assets...................... 10,607 59,906
---------- -----------
Total current assets.............................. 760,382 4,533,141
Property and equipment, net (Note 5)................... 630,760 2,284,793
Product development costs, net......................... 426,996 2,818,069
Goodwill, net.......................................... -- 1,322,566
Deferred income taxes (Note 11)........................ 692,694 3,454,606
Other assets........................................... -- 5,679
---------- -----------
TOTAL ASSETS................................................ $2,510,832 $14,418,854
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Overdrafts and short-term borrowings (Note 8).......... $ 71,881 $ 413,625
Trade accounts payable................................. 226,379 1,373,901
Other accrued liabilities.............................. 40,953 480,228
Deferred purchase obligations (Note 3)................. -- 980,693
Accrued personnel costs................................ 81,816 393,667
---------- -----------
Total current liabilities......................... 421,029 3,642,114
Long-term debt (Note 9)................................ -- 41,691
Deferred income taxes (Note 11)........................ 299,717 1,801,797
Minority interest...................................... -- 24,937
SHAREHOLDERS' EQUITY
Common stock $.001 per value, 50,000,000 shares
authorized, 5,160,000 and 14,681,891 shares issued and
outstanding at December 31, 1996 and 1997,
respectively.......................................... 5,160 14,682
Preferred stock $.001 par value, 20,000,000 shares
authorized, 6,360,000 and 7,760,000 issued and
outstanding at December 31, 1996 and 1997,
respectively.......................................... 6,360 7,760
Subscription receivable................................ -- (735,000)
Additional paid in capital............................. 2,065,899 11,102,257
Accumulated deficit.................................... (287,196) (1,271,036)
Cumulative translation adjustment...................... (137) (210,348)
---------- -----------
Total shareholders' equity............................. 1,790,086 8,908,315
---------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $2,510,832 $14,418,854
========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 59
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997
---------- ------------
<S> <C> <C>
Revenue
Internet Projects...................................... $ 217,296 $ 1,597,869
Network Services....................................... 90,377 716,152
--------- -----------
Total revenues.............................................. 307,673 2,314,021
Cost of revenues:
Internet Projects...................................... 243,823 1,564,072
Network Services....................................... 119,297 929,666
--------- -----------
Total cost of revenues...................................... 363,120 2,493,738
--------- -----------
Operating loss.............................................. (55,447) (179,717)
General and administrative expenses......................... 268,762 496,950
Marketing expenses.......................................... 172,209 1,221,508
Research and development.................................... 187,130 366,829
Amortization of goodwill.................................... -- 18,693
--------- -----------
628,101 2,103,980
Interest expense............................................ 2,079 39,550
--------- -----------
Loss before taxes........................................... (685,627) (2,323,247)
Income tax benefit.......................................... 401,849 1,339,407
--------- -----------
Net loss.................................................... (283,778) (983,840)
Other comprehensive loss:
Foreign currency translation adjustments............... (5,089) (210,211)
--------- -----------
Comprehensive loss.......................................... $(288,867) $(1,194,051)
========= ===========
Basic and diluted loss per share............................ $ (.12) $ (.12)
========= ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 60
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $ (283,778) $ (983,840)
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred tax credit......................................... (401,849) (1,348,932)
Depreciation and amortization............................... 47,031 200,565
Provision for losses on accounts receivable................. 15,456 33,417
Changes in operating assets and liabilities:
Trade accounts receivable................................... (203,112) (475,300)
Other receivables........................................... (69,583) (136,141)
Prepaid expenses and other current assets................... (10,847) (32,120)
Trade accounts payable...................................... 231,490 (401,835)
Other accrued expenses and liabilities...................... 40,826 1,377,685
Accrued personnel costs..................................... 83,663 247,539
----------- -----------
Total adjustments...................................... 72,437 579,828
----------- -----------
Net cash used in operating activities.................. (550,703) (1,518,962)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments.......................... (463,941) (349,002)
Purchase of property and equipment.......................... (552,104) (1,707,843)
Product development costs................................... (576,567) (2,377,782)
Acquisition of businesses, net of cash acquired............. -- (269,316)
----------- -----------
Net cash used in investing activities.................. (1,592,612) (4,703,943)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of common stock, net.................... 2,051,997 8,070,402
Proceeds from borrowings.................................... 73,505 700,000
Repayments of borrowings.................................... -- (126,266)
----------- -----------
Net cash provided by financing activities.............. 2,125,502 8,644,136
----------- -----------
Net (decrease) increase in cash and cash equivalents........ (17,813) 2,421,231
Cash and cash equivalents at beginning of year.............. 49,143 27,889
Translation adjustments..................................... (3,441) (210,211)
----------- -----------
Cash and cash equivalents at end of year.................... $ 27,889 $ 2,238,909
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 61
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL ACCUMULATED OTHER
-------------------- ------------------ SUBSCRIPTION PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNTS SHARES AMOUNT RECEIVABLE CAPITAL DEFICIT LOSS
---------- ------- --------- ------ ------------ ----------- ----------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance
January 1, 1996..... 161,250 $ 161 6,360,000 $6,360 -- $ 57,995 $ (3,418) $ 4,952
Issuance of shares
for cash............ 4,998,750 4,999 2,007,904
Net loss............. -- -- (283,778)
Currency translation
adjustment.......... -- (5,089)
---------- ------- --------- ------ --------- ----------- ----------- ---------
Balance December 31,
1996................ 5,160,000 $5,160 6,360,000 $6,360 -- $ 2,065,899 $ (287,196) $ (137)
Issuance of shares in
reverse
acquisition......... 9,521,891 9,522 232,331
Issuance of shares
for cash............ 1,400,000 1,400 (735,000) 8,804,027
Currency translation
adjustment.......... (210,211)
Net loss............. (983,840)
---------- ------- --------- ------ --------- ----------- ----------- ---------
Balance December 31,
1997................ 14,681,891 $14,682 7,760,000 $7,760 $(735,000) $11,102,257 $(1,271,036) $(210,348)
========== ======= ========= ====== ========= =========== =========== =========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
Balance
January 1, 1996..... $ 66,050
Issuance of shares
for cash............ 2,012,903
Net loss............. (283,778)
Currency translation
adjustment.......... (5,089)
----------
Balance December 31,
1996................ $1,790,086
Issuance of shares in
reverse
acquisition......... 241,853
Issuance of shares
for cash............ 8,070,427
Currency translation
adjustment.......... (210,211)
Net loss............. (983,840)
----------
Balance December 31,
1997................ $8,908,315
==========
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE> 62
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
Cybernet Internet Services International, Inc. ("the Company") (formerly
known as New Century Technologies Corporation) was incorporated under the laws
of the State of Utah on September 27, 1983. Effective September 16, 1997 the
Company acquired Cybernet Internet Dienstleistungen AG ("Cybernet AG"), a German
stock corporation which offers a variety of Internet related telecommunication
and systems integration services to corporate customers. Cybernet AG was founded
in December 1995, and commenced significant operations in 1996. The acquisition
has been accounted for as a reverse acquisition whereby the Company is
considered to be the acquiree even though legally it is the acquiror.
Accordingly, the accompanying financial statements present the historical
financial statements of Cybernet AG from January 1, 1996, through the
acquisition date of September 16, 1997 and the consolidated financial statements
of the Company and Cybernet AG since that date. Since the fair value of the net
assets of the Company were equal to their net book value on September 16, 1997,
the assets and liabilities of the Company remained at their historical cost
following the acquisition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of all
majority-owned subsidiaries of the Company. All significant intercompany
investments, accounts, and transactions have been eliminated.
Foreign Currency
The assets and liabilities for the Company's international subsidiaries are
translated into U.S. dollars using current exchange rates at the balance sheet
dates. Statement of operations items are translated at average exchange rates
prevailing during the period. The resulting translation adjustments are recorded
in the foreign currency translation adjustment account in equity. Foreign
currency transaction gains or losses are included in net earnings (loss).
Revenue Recognition
The Company offers Internet telecommunication and systems integration
products and network access services. Telecommunication and system integration
products consist of the development of customized business solutions,
installation of hardware and software and production support. Ongoing Network
Services consist of monthly user fees for network access and related services.
Revenues from telecommunication and systems integration products are
recognized upon completion of the related project and customer acceptance.
Revenues from ongoing network access services are recognized when provided to
customers.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful life of the asset, which ranges
from 4 years (computer equipment and software) to 10 years (leasehold
improvements and furniture and fixtures).
Product Development Costs
The Company capitalizes costs incurred related to the development of
products that will be sold to customers. Costs capitalized include direct labor
and related overhead and third party costs related to establishing network
systems. All costs in the development process are classified as research and
development and expensed as incurred until technological feasibility has been
established. Once technological feasibility has
F-7
<PAGE> 63
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
been established, such costs are capitalized until the individual products are
commercially available. Amortization, which began in 1997, is provided using the
straight-line method over the lesser of four years or the economic life of the
related product, commencing the month after the date of product release. The
carrying value of product development costs is regularly reviewed by the Company
and a loss recognized when the net realizable value falls below the unamortized
cost. No such losses have been recognized to date. Accumulated amortization
amounted to $75,494 at December 31, 1997.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Short Term Investments
In accordance with Statement of Financial Accounting standard ("SFAS") No.
115 "Accounting for Certain Investments in Debt and Equity Securities"
available-for-sale securities are carried at fair value, with unrealized gains
and losses reported as a separate component of stockholder's equity.
Realized gains and losses and declines in value judged to be other than
temporary on available-for-sale securities are included in other income. The
Company has classified all debt and equity securities as available-for-sale.
Income Taxes
The Company accounts for income taxes using the liability method. Under
this method, deferred income taxes are recognized for temporary differences
between financial statement and income tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse. The effect of a change in tax rates on deferred tax assets and
liabilities is recognized in the period that includes the enactment date.
Deferred tax assets are reduced by a valuation allowance when the Company cannot
make the determination that it is more likely than not that some portion or all
of the related tax asset will be realized.
Fair Value of Financial Instruments
The carrying value of financial instruments such as cash, accounts
receivable, short term investments and accounts payable approximate their fair
value based on the short-term maturities of these instruments. The carrying
value of bank debt approximates fair value based on quoted market prices for the
same or similar issues as well as the current rates offered to the Company.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. BUSINESS ACQUISITIONS
On September 16, 1997, the Company acquired all of the outstanding shares
of the common stock of Cybernet AG in exchange for the issuance of 5,160,000
shares of common stock of the Company, 1,200,000 shares of Series A preferred
stock of the Company and 5,160,000 shares of Series B preferred stock of the
F-8
<PAGE> 64
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. BUSINESS ACQUISITIONS (CONTINUED)
Company, such shares representing the outstanding shares of the Company at that
date. Generally accepted accounting principles require that the Company be
considered the acquired company for financial statement purposes (a reverse
acquisition) even through the entity will continue to be called Cybernet
Internet Services International, Inc. Therefore, the acquisition has been
recorded as a recapitalization of Cybernet AG. The effects of the reverse
acquisition have been reflected for all share amounts in the accompanying
financial statements. The Company had no operations at the time of the reverse
acquisition.
Effective September 16, 1997, the Company acquired 100% of the outstanding
shares of Artwise GmbH ("Artwise"), for a total consideration of DM 1,710,040
($954,263). DM 475,000 ($265,067) of the purchase price was paid in cash with
the remainder settled in exchange for the issuance of 72,620 shares of the
common stock of the Company in February, 1998. The acquisition has been
accounted for using the purchase method of accounting and accordingly the
accompanying financial statements reflect Artwise's results of operations for
the period September 16, 1997 through December 31, 1997. Goodwill, representing
the excess of the purchase price over the fair market value of the net assets
acquired, of DM 1,507,493 ($841,188) is being amortized over 15 years.
Effective December 11, 1997, the Company acquired 66% of the outstanding
shares of Eclipse s.r.l. ("Eclipse"), for a total consideration of DM 982,763
($548,386). DM 334,764 ($186,799) of the purchase price was paid in cash with
the remainder to be settled in exchange for the issuance of 27,000 shares of the
common stock of the Company in 1998. The acquisition has been accounted for
using the purchase method of accounting. Eclipse's results of operations for the
period December 4, 1997 through December 31, 1997 are not included in the
accompanying financial statements due to immateriality. Goodwill, representing
the excess of the purchase price over the fair market value of the net assets
acquired, of DM 909,418 ($507,459) is being amortized over 15 years.
Accumulated amortization of goodwill at December 31, 1997 amounted to
$18,693.
The following unaudited pro forma consolidated results of operations for
the years ended December 31, 1996 and 1997 assume the Artwise and Eclipse
acquisitions occurred as of January 1, 1996:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1996 1997
---------- -----------
<S> <C> <C>
Revenue................................................. $2,143,488 $ 4,223,813
Net loss................................................ $ (362,974) $(1,071,948)
Basic and diluted loss per share........................ $ (.15) $ (.13)
</TABLE>
4. SHORT-TERM INVESTMENTS
Short term investments at cost consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1997
-------- --------
<S> <C> <C>
BHF Bank Accugeld Fund...................................... $453,698 $ --
BHF Bank US Dollar Plus Fund................................ -- 802,759
Commerzbank Geld Market Fund................................ -- 15,154
-------- --------
$453,698 $817,913
======== ========
</TABLE>
At December 31, 1996 and 1997 the estimated fair value of short-term
investments approximated cost.
F-9
<PAGE> 65
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
-------- ----------
<S> <C> <C>
Computer equipment and software............................. $444,695 $1,942,485
Leasehold improvements...................................... 30,452 75,796
Furniture and fixtures...................................... 201,606 478,504
-------- ----------
676,753 2,496,785
Less accumulated depreciation and amortization.............. (45,993) (211,992)
-------- ----------
Net property and equipment.................................. $630,760 $2,284,793
======== ==========
</TABLE>
6. LEASES
The Company leases facilities and equipment under long-term operating
leases. Future minimum payments under non-cancellable operating leasing with
initial terms of one year or more are as follows:
<TABLE>
<S> <C>
Year ending December 31
1998................................................... $396,804
1999................................................... $421,492
2000................................................... $421,492
2001................................................... $181,947
2002................................................... $ 52,737
Thereafter.................................................. $ --
</TABLE>
The Company's rental expense under operating leases in the years ended
December 31, 1996 and 1997 totaled approximately $56,508 and $176,687
respectively.
7. COMMITMENTS
The Company has entered into long term data and voice communications
agreements with several vendors. The agreements enable the Company and its
customers to access data networks necessary for the use of its products and
services. The minimum payments under the agreements aggregate $1,890,195 and
$991,205 for the years ending December 31, 1998 and 1999, respectively. Amounts
paid under these agreements in the years ended December 31, 1996, and 1997,
amounted to approximately $117,630 and $1,593,145, respectively.
8. OVERDRAFTS AND SHORT-TERM BORROWINGS
Overdrafts represent temporary overdrafts of bank balances. The overdrafts
are not subject to formal agreements with the banks and generally are not
subject to interest.
As of December 31, 1997, the Company had established short-term unsecured
overdraft facilities under which the Company and its subsidiaries could borrow
up to DM 330,000. The facilities are denominated in Deutsche Mark as to DM
200,000 and Italian Lire as to DM 130,000. The interest rate fluctuates based on
current lending rates and was 8.5% and 8.25% at December 31, 1996 and 1997,
respectively. As of December 31, 1997, $46,006 of the overdraft facility was
used.
F-10
<PAGE> 66
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. LONG-TERM DEBT
Long-term debt consists of an unsecured promissory notes due in varying
amounts of principal and interest through 2001. The interest rate on the note is
variable. At December 31, 1997 the interest rate was 5.15%.
10. STOCKHOLDERS' EQUITY
Common Stock
The Company is authorized to issue 50,000,000 shares of Common Stock.
Holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of stockholders. The Common Stock is not redeemable and has
no conversion or preemptive rights.
Preferred Stock
The Company is authorized to issue 20,000,000 shares of Preferred Stock
with relative rights, preferences and limitations determined at the time of
issuance. As of December 31, 1997, the Company has issued Series A, B and C
Preferred Stock.
Series A Preferred Stock
The holders of the Series A Preferred Stock are entitled to receive
dividends at a rate equal to $0.01 per share per annum before any dividends are
paid or set apart for payment upon any other series of Preferred Stock of the
Company, other than Series B or Series C Preferred Stock, or on the Common Stock
of the Company. Commencing with the fiscal year beginning on January 1, 1998,
the dividend on the Series A Preferred Stock will be paid for each fiscal year
within five months of the end of each fiscal year, subject to the availability
of surplus or net profits therefor. The dividends on the Series A Preferred
Stock are not cumulative. The holders of the Series A Preferred Stock are not
entitled to vote.
The shares of Series A Preferred Stock may be redeemed by the Company at
any time after January 1, 2000, at a redemption price of one share of the Common
Stock of the Company for each share of Series A Preferred Stock plus any unpaid
dividends earned thereon; provided that all and not less than all of the shares
of Series A Preferred Stock are so redeemed and provided further that if the
Company has not redeemed the Series A Preferred Stock by December 31, 2001, a
holder of Series A Preferred Shares may at any time commencing January 1, 2002,
require the Company to purchase all of the shares of the Series A Preferred
Stock held by him for a purchase price of $3.00 per share plus any dividends
earned but unpaid on such shares.
A holder of Series A Preferred Stock may convert each share held by him
into one share of the Common Stock of the Company; provided, however, that (1)
no conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series A Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series A Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series A Preferred Shares held by the holder may be converted commencing
January 1, 2001; and (5) any conversion may not be for less than all of the
Series A Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
Upon the liquidation, dissolution or winding up, whether voluntary or
involuntary, of the Company, the holders of the Series A Preferred Stock will be
entitled to be paid the sum of $3.00 per share plus an amount equal to any
unpaid accrued dividends before any amount is paid to the holder of any other
series of Preferred Stock, other than the Series B Preferred Stock or the Series
C Preferred Stock, or to the Common Stock of the Company. After payment of these
amounts to the holders of the Series A Preferred Stock, the remaining assets of
the Company will be distributed to the holders of the Common Stock.
F-11
<PAGE> 67
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY (CONTINUED)
Series B Preferred Stock
The holders of the Series B Preferred Stock are entitled to receive
dividends at a rate equal to $0.01 per share per annum before any dividends are
paid or set apart for payment upon any other series of Preferred Stock of the
Company other than the Series C Preferred Stock or on the Common Stock of the
Company. Commencing with the fiscal year beginning on January 1, 1998, the
dividend on the Series B Preferred Stock will be paid for each fiscal year
within five months of the end of each fiscal year, subject to the availability
of surplus or net profits therefor. The dividends on the Series B Preferred
Stock will not be cumulative. The holders of the Series B Preferred Stock are
entitled to one vote per share.
The shares of Series B Preferred Stock may be redeemed by the Company at
any time after January 1, 2000, at a redemption price of one share of the Common
Stock of the Company for each share of Series B Preferred Stock plus any unpaid
dividends earned thereon through the date of redemption; provided that all and
not less than all of the shares of Series B Preferred Stock are so redeemed.
A holder of Series B Preferred Stock may convert each share held by him
into one share of the Common Stock of the Company provided, however, that (1) no
conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series B Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series B Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series B Preferred Shares held by the holder may be converted commencing
January 1, 2001; and (5) any conversion may not be for less than all of the
Series B Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
Upon the liquidation, dissolution or winding up, whether voluntary or
involuntary, of the Company, the holders of the Series B Preferred Stock will be
entitled to be paid the sum of $3.00 per share plus an amount equal to any
unpaid accrued dividends before any amount is paid to the holder of any other
series of Preferred Stock other than the Series C Preferred Stock or to the
Common Stock of the Company. After payment of these amounts to the holders of
the Series B Preferred Stock, the remaining assets of the Company will be
distributed to the holders of the Common Stock.
Series C Preferred Stock
The holders of the Series C Preferred Stock are entitled to receive
dividends at a rate equal to $ .56 per annum, and no more, before any dividends
are paid or set apart for payment upon any other series of Preferred Stock or on
the Common Stock of the Company. Dividends will begin to accrue on January 1,
1998. Commencing with the fiscal year beginning on January 1, 1998, the dividend
on the Series C Preferred Stock will be paid for each fiscal year within five
months of the end of each fiscal year, subject to the availability of surplus or
net profits therefor. The dividends of the Series C Preferred Stock are
cumulative.
The holders of the Series C Preferred Stock are not entitled to receive
notice of or to vote on any matter that is the subject of a vote of the
stockholders of the Company, except as otherwise required by the laws of the
State of Delaware.
The shares of Series C Preferred Stock may be redeemed by the Company at
any time at a redemption price of 100% of the $7.00 purchase price paid to the
Company for such shares plus any unpaid accrued dividends thereon so long as
prior to the date of redemption the Company has offered to exchange each share
of Series C Preferred Stock for (a) one share of the Company's Common Stock,
plus (b) one warrant ("Warrant") to purchase the number of shares of Common
Stock equal in the aggregate to one-half the number of shares of Common Stock
received in the exchange, which Warrant will be exercisable at any time through
the first anniversary of the date of issuance of the Warrant at a purchase price
equal to $8.00 per share and a registration statement is in effect registering
the issuance of the Common Stock and Warrants.
F-12
<PAGE> 68
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. STOCKHOLDERS' EQUITY (CONTINUED)
A holder of Series C Preferred Stock may convert each share held by him
into one share of the Common Stock of the Company anytime after July 31, 1998;
provided, however, that any conversion be of all the Series C Preferred Shares
held by the shareholder.
Upon the liquidation, dissolution or winding up, whether voluntary or
involuntary, of the Company, the holders of the Series C Preferred Stock will be
entitled to be paid the sum of $7.00 per share before any amount is paid to the
holder of any other series of Preferred Stock or to the Common Stock of the
Company. After payment of these amounts to the holders of the Series C Preferred
Stock the remaining assets of the Company will be distributed to the holders of
the Common Stock.
11. PROVISION FOR INCOME TAXES
The Company's principal operations are currently located in Germany. Pretax
(loss) for the years ended December 31, 1996 and 1997 was generated in the
following jurisdictions:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
--------- -----------
<S> <C> <C>
Germany.................................................. $(685,627) $(2,303,448)
United States............................................ -- (19,799)
--------- -----------
$(685,627) $(2,323,247)
========= ===========
</TABLE>
The components of the provision for income taxes, all of which relates to
Germany, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
--------- -----------
<S> <C> <C>
Current.................................................. $ -- $ 9,525
Deferred................................................. (401,849) (1,348,932)
--------- -----------
Income tax benefit....................................... $(401,849) $(1,339,407)
========= ===========
</TABLE>
The Company has net deferred tax assets as of December 31, 1996 and 1997 as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
-------- ----------
<S> <C> <C>
Deferred tax assets
Net operating losses................................... $692,694 $3,454,606
-------- ----------
692,694 3,454,606
======== ==========
Deferred tax liabilities
Product development costs.............................. 251,038 1,625,857
Depreciation and amortization.......................... 44,195 175,454
Other.................................................. 4,484 486
-------- ----------
299,717 1,801,797
======== ==========
Net deferred tax assets..................................... $392,977 $1,652,809
======== ==========
</TABLE>
As of December 31, 1997, the Company and its subsidiaries had available
combined cumulative tax loss carryforwards of approximately $6.2 million all of
which relates to Germany. Under German tax laws, these loss carryforwards have
an indefinite life. The tax loss carryforwards have been generated during the
establishment of the Company's operations. Management believes that the Company
will generate sufficient
F-13
<PAGE> 69
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. PROVISION FOR INCOME TAXES (CONTINUED)
future taxable income to realize the entire deferred tax asset and that the
realization of the $1,652,809 net deferred tax asset is more likely than not.
However, if the Company is unable to generate sufficient taxable income in the
future through operating results a valuation allowance will be required to be
established through a charge to income.
A reconciliation of income taxes determined using the United States
statutory federal income tax rate of 35% to actual income taxes provided is as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
--------- -----------
<S> <C> <C>
Income tax benefit at statutory rate..................... $(239,969) $ (813,136)
Higher foreign tax rates................................. (157,694) (529,793)
Other.................................................... (4,186) 3,522
--------- -----------
Income tax benefit....................................... $(401,849) $(1,339,407)
========= ===========
</TABLE>
12. EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
--------- ---------
<S> <C> <C>
Numerator:
Net loss -- numerator for basic and diluted loss per
share.............................................. $(283,778) $(983,840)
========= =========
Denominator:
Denominator for basic and diluted loss per
share -- weighted average shares................... 2,465,782 8,342,297
========= =========
Basic and diluted loss per share.......................... $ (.12) $ (.12)
========= =========
</TABLE>
The denominator for diluted earnings per share excludes the convertible
preferred stock because treatment of the preferred stock as if converted would
have an anti-dilutive effect. For additional disclosures regarding the
outstanding preferred stock, see Note 10.
13. RELATED PARTY TRANSACTION
On May 30, 1997, a principal shareholder of Cybernet AG advanced Cybernet
AG an interest free loan of DM 1.5 million ($837,895) due July 31, 1997. On
October 7, 1997, Cybernet AG repaid the loan.
14. RECENT PRONOUNCEMENT
On October 27, 1997 the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
97-2 Software Revenue Recognition ("SOP 97-2") that supercedes prior guidance
for software revenue recognition. The new rules are effective for transactions
entered into in fiscal years beginning after December 15, 1997. The Company does
not believe the impact of SOP 97-2 will be significant to its accounting
policies.
F-14
<PAGE> 70
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents.............................. $ 2,238,909 $ 147,685
Short-term investments................................. 817,913 104,063
Accounts receivable.................................... 1,130,981 1,921,033
Accounts receivable -- share issuance.................. 735,000 --
Other receivables...................................... 285,432 820,164
Prepaid expenses and other assets...................... 59,906 1,416,494
----------- -----------
Total current assets.............................. 5,268,141 4,409,439
Property and equipment, net............................ 2,284,793 5,161,606
Product development costs, net......................... 2,818,069 3,594,692
Goodwill, net.......................................... 1,322,566 1,275,246
Deferred income taxes.................................. 3,454,606 5,976,923
Other assets........................................... 5,679 31,233
----------- -----------
TOTAL ASSETS................................................ $15,153,854 $20,449,139
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Overdrafts and short-term borrowings................... $ 413,625 $ 3,982,508
Trade accounts payable................................. 393,208 1,714,737
Other accrued liabilities.............................. 1,460,921 1,030,348
Deferred purchase obligations.......................... 980,693 358,268
Accrued personnel costs................................ 393,667 660,905
Current portion capital lease obligation............... -- 513,914
----------- -----------
Total current liabilities......................... 3,642,114 8,260,680
Long-term debt......................................... 41,691 39,939
Capital lease obligation............................... -- 1,093,824
Deferred income taxes.................................. 1,801,797 2,334,903
Minority interest...................................... 24,937 89,086
SHAREHOLDERS' EQUITY
Common stock........................................... 14,682 14,755
Preferred stock........................................ 7,760 7,760
Additional paid in capital............................. 11,102,257 11,674,371
Accumulated deficit.................................... (1,271,036) (2,876,721)
Cumulative translation adjustment...................... (210,348) (189,458)
----------- -----------
Total shareholders' equity............................. 9,643,315 8,630,707
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. $15,153,854 $20,449,139
=========== ===========
</TABLE>
F-15
<PAGE> 71
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
---------- ------------
<S> <C> <C>
Revenue
Internet Projects...................................... $ 445,330 $ 1,863,075
Network Services....................................... 150,241 1,489,412
--------- -----------
Total revenues.............................................. 595,571 3,352,487
Cost of revenues:
Internet Projects...................................... 324,070 1,660,034
Network Services....................................... 321,873 1,716,078
--------- -----------
Total cost of revenues...................................... 645,943 3,376,112
--------- -----------
Operating loss.............................................. (50,372) (23,625)
General and administrative expenses......................... 227,759 668,542
Marketing expenses.......................................... 513,793 1,713,782
Research and development.................................... -- 1,051,264
Amortization................................................ -- 44,955
--------- -----------
741,552 3,478,543
Interest expense............................................ 14,359 110,393
--------- -----------
Loss before taxes........................................... (806,283) (3,612,561)
Income tax benefit.......................................... 466,127 2,006,876
--------- -----------
Net loss.................................................... (340,156) (1,605,685)
Other comprehensive income (loss):
Foreign currency translation adjustments............... (171,365) 20,890
--------- -----------
Comprehensive loss.......................................... $(511,521) $(1,584,795)
========= ===========
Basic and diluted loss per share............................ $ (.02) $ (.07)
========= ===========
</TABLE>
F-16
<PAGE> 72
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1997 1998
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... (340,156) (1,605,685)
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred tax credit......................................... (416,735) (1,989,211)
Depreciation and amortization............................... 56,461 860,708
Provision for losses on accounts receivable................. 40,804 45,121
Changes in operating assets and liabilities:
Trade accounts receivable................................... (335,713) (835,173)
Other receivables........................................... (3,686) 174,215
Prepaid expenses and other current assets................... 896 (1,356,588)
Trade accounts payable...................................... 264,057 1,337,752
Other accrued expenses and liabilities...................... 4,292 (416,663)
Accrued personnel costs..................................... 102,400 267,238
--------- ----------
Total adjustments...................................... 32,246 (829,219)
--------- ----------
Net cash used in operating activities.................. (627,380) (3,518,286)
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of short-term investments.............................. 453,698 713,850
Purchase of property and equipment.......................... (185,132) (1,742,537)
Product development costs................................... (964,081) (1,132,272)
--------- ----------
Net cash used in investing activities.................. (695,515) (2,160,959)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings.................................... 1,468,227 3,567,131
--------- ----------
Net cash provided by financing activities.............. 1,468,227 3,567,131
--------- ----------
Net (decrease) increase in cash and cash equivalents........ 145,332 (2,112,114)
Cash and cash equivalents at beginning of year.............. 27,889 2,238,909
Translation adjustments..................................... (171,365) 20,890
--------- ----------
Cash and cash equivalents at end of year.................... 1,856 147,685
========= ==========
</TABLE>
F-17
<PAGE> 73
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED UNAUDITED
INTERIM FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles ("GAAP") for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of financial position and results
of operations have been included. Operating results for the six month period
ended June 30, 1998 are not necessarily indicative of results to be expected for
the full year ended December 31, 1998.
2. BUSINESS ACQUISITIONS
On June 17, 1998 the Company entered into a Stock Purchase Agreement to
purchase Vianet EDV Dienstleistungs GmbH, an Austrian Internet provider, for a
total consideration of DM 7,500,000 and 300,000 shares of common stock of the
Company. The closing of the sale is expected to take place contemporaneously
with the closing of the Offering.
Effective August 15, 1998 the Company purchased Open:Net Internet Solutions
GmbH, a German Internet provider, for a total consideration of DM 1,445,000 and
58,825 shares of common stock of the Company.
3. FINANCING
In May 1998 the Company offered for sale 700,000 shares of common stock at
an offering price of $18 per share in an offshore private placement. The net
proceeds from the sale of approximately $11.5 million was received in July,
1998.
In January, 1998, the Company acquired approximately $1.6 million in fixed
assets financed through lease arrangements which have been accounted for as
capital lease obligations.
F-18
<PAGE> 74
REPORT OF INDEPENDENT AUDITORS
To the Shareholder
VIANET EDV Dienstleistungs GmbH
We have audited the accompanying balance sheets of VIANET EDV
Dienstleistungs GmbH as of December 31, 1997 and 1996 and the related statements
of operations and retained earnings and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of VIANET EDV Dienstleistungs
GmbH as of December 31, 1997 and 1996 and the results of their operations and
their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
Ernst & Young
Wirtschaftsprutungs-und
Steuerberatungs gesellschaft mbH
(Gerd Haberfehlner)
(Edith Schmit)
Vienna, Austria
July 31, 1998
F-19
<PAGE> 75
VIANET EDV DIENSTLEISTUNGS GMBH
BALANCE SHEET
(ALL AMOUNTS IN ATS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997
--------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................. 655,174 100,025
Recoverable taxes and other receivables (Note 2)....... 130,747 126,087
Trade accounts receivable (Note 3)..................... 2,943,991 5,573,461
Inventories (Note 4)................................... 109,099 37,404
Prepaid expenses (Note 5).............................. 135,770 246,373
--------- ----------
Total current assets.............................. 3,974,781 6,083,350
Deposits and Other Assets................................... 170,000 241,846
Fixed Assets (Note 6)
Leasehold improvements................................. 219,220 219,220
Office furniture and equipment......................... 2,745,313 6,470,090
--------- ----------
2,964,533 6,689,310
Accumulated depreciation............................... (669,029) (1,952,565)
========= ==========
2,295,504 4,736,745
Deferred tax asset (Note 12)................................ 18,899 --
TOTAL ASSETS................................................ 6,459,184 11,061,941
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... 3,103,262 5,911,889
Overdraft (Note 7)..................................... -- 634,636
Accrued expenses (Note 8).............................. 938,000 1,906,500
Corporate tax (Note 12)................................ 7,500 139,200
Other payables......................................... 1,069,554 1,015,162
Deferred income (Note 9)............................... 841,983 953,178
--------- ----------
Total current liabilities......................... 5,960,299 10,560,565
Deferred tax liability (Note 12)............................ -- 26,024
Accrued employee benefits (Note 10)......................... 25,000 61,000
--------- ----------
25,000 61,000
SHAREHOLDERS' EQUITY (Note 11)
Share capital.......................................... 250,000 250,000
Retained earnings...................................... 223,885 164,352
--------- ----------
473,885 414,352
--------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. 6,459,184 11,061,941
========= ==========
</TABLE>
See accompanying notes to financial statements
F-20
<PAGE> 76
VIANET EDV DIENSTLEISTUNGS GMBH
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(ALL AMOUNTS IN ATS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
TOTAL REVENUES.............................................. 16,174,241 27,390,233
COSTS AND EXPENSES
Costs of products sold................................. 8,588,569 12,403,754
General and administrative expenses.................... 2,504,500 4,929,219
Marketing expenses..................................... 5,008,998 9,858,437
---------- ----------
16,102,067 27,191,410
OPERATING PROFIT............................................ 72,174 198,823
Interest income............................................. 23,389 20,972
Interest expense............................................ (3,726) (86,212)
---------- ----------
19,663 (65,240)
Income before income taxes.................................. 91,837 133,583
Provision for income taxes (Note 12)........................ 3,899 (193,116)
---------- ----------
NET INCOME (LOSS)........................................... 95,736 (59,533)
Retained earnings, beginning................................ 128,149 223,885
---------- ----------
Retained earnings, ending................................... 223,885 164,352
---------- ----------
</TABLE>
See accompanying notes to financial statements
F-21
<PAGE> 77
VIANET EDV DIENSTLEISTUNGS GMBH
STATEMENT OF CASH FLOWS
(ALL AMOUNTS IN ATS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)........................................... 95,736 (59,533)
Adjustments to reconcile net earnings to net cash provided
by
operating activities:
Depreciation........................................... 499,165 1,283,536
Deferred taxes......................................... -- 44,923
Change in accounts receivable, recoverable taxes and
other receivables..................................... (145,264) (2,624,810)
Change in deposits and other assets.................... -- (71,846)
Change in inventories.................................. 34,781 71,695
Change in prepaid expenses............................. (12,004) (110,603)
Change in accounts payable, accrued expenses and
other current liabilities............................ 1,624,620 4,001,630
---------- ----------
Net cash used by operating activities....................... 2,097,034 2,534,992
CASH FLOWS FROM INVESTING ACTIVITIES
Expenditures for property, plant and equipment......... (2,059,575) (3,724,777)
---------- ----------
Net cash (used in) investing activities..................... (2,059,575) (3,724,777)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings............................... -- 634,636
---------- ----------
Net cash provided by financing activities................... -- 634,636
(Decrease) Increase in cash and cash equivalents............ 37,459 (555,149)
Cash and cash equivalents at beginning of year.............. 617,715 655,174
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... 655,174 100,025
---------- ----------
</TABLE>
See accompanying notes to financial statements
F-22
<PAGE> 78
NOTES TO THE FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
United States generally accepted accounting principles ("U.S. GAAP"). The
Company maintains its financial records in accordance with the Austrian
Commercial Code, which represents generally accepted accounting principles in
Austria ("Austrian GAAP"). Generally, accepted accounting principles in Austria
vary in certain significant respects from U.S. GAAP. Accordingly, the Company
has recorded certain adjustments in order that these financial statements be in
accordance with U.S. GAAP.
BUSINESS
VIANET EDV Dienstleistungs Gesellschaft mbH ("the Company"), an Austrian
limited liability company, was established in 1994. The Company provides
Internet services and connections.
CASH AND CASH EQUIVALENTS
Highly-liquid investments, with an original maturity of three months or
less from the date of purchase, are classified as cash equivalents. Overdraft
balances are considered cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost or market, with cost determined
on an actual basis.
PROPERTY, PLANT AND EQUIPMENT
The Company records fixed assets at cost less accumulated depreciation.
Depreciation, which begins when assets are placed in service, is calculated on a
straight-line basis over estimated service lives.
REVENUE RECOGNITION
The Company's revenues consist of the basic fee that is paid three months
in advance and current fees which are invoiced after the relevant period.
Prepaid amounts are deferred under deferred income and are released into revenue
over the period of three months. Current fees are recognized as income
immediately.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments such as cash, accounts
receivable and accounts payable approximate their fair value based on the
short-term maturities of these instruments. The carrying value of bank debt
approximates fair value based on quoted market prices for the same or similar
issues as well as the current rates offered to the Company.
ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-23
<PAGE> 79
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1997
NOTE 2. RECOVERABLE TAXES AND OTHER RECEIVABLES
Recoverable taxes and other receivables consist of (in ATS):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Capital gains tax receivable................................ 41,150 8,646
Value added tax............................................. 26,998 38,310
Employee loans.............................................. 40,000 40,000
Other....................................................... 22,599 39,131
------- -------
130,747 126,087
======= =======
</TABLE>
NOTE 3. TRADE ACCOUNTS RECEIVABLE
Total amount of accounts receivable is as follows (in ATS):
<TABLE>
<CAPTION>
1996 1997
--------- ----------
<S> <C> <C>
Trade accounts receivable -- domestic....................... 3,542,557 7,419,133
Provision for bad debts..................................... (598,566) (1,845,672)
--------- ----------
2,943,991 5,573,461
========= ==========
</TABLE>
Provisions for bad debts were made for accounts receivable on a specific
risk of collection.
NOTE 4. INVENTORY
Merchandise refers only to hardware devices which are sold to various
customers. Valuation is done at cost (purchase price). In both the financial
years 1996 and 1997, there was no need to make any provision for obsolete goods.
NOTE 5. PREPAID EXPENSES
In the FY 1997 this position includes mainly prepaid telecommunication fees
and rent expenses for a trade fair site.
NOTE 6. FIXED ASSETS
The range of estimated useful lives for different asset categories are as
follows:
<TABLE>
<S> <C>
Leasehold investments....................................... 10 years
Hardware equipment.......................................... 4-8 years
Office equipment............................................ 4-8 years
Intangible assets........................................... 4-7 years
</TABLE>
During the first year of usage depreciation is either calculated on a one
year basis, when usage begins prior to half year-end, or with a half year rate
in the case usage begins after half year-end.
NOTE 7. OVERDRAFT
Overdrafts represent temporary overdrafts to bank balances. The Company has
a total overdraft limit, which was not subject to formal agreements, of ATS
750,000. This line was used as of December 31, 1997 with ATS 634,636.
F-24
<PAGE> 80
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1997
NOTE 8. ACCRUED EXPENSES
Accruals for the following costs have been provided (in ATS):
<TABLE>
<CAPTION>
1996 1997
------- ---------
<S> <C> <C>
Unused holidays............................................. 111,300 177,600
Telecommunication fees...................................... 469,000 435,500
Professional fees........................................... 127,700 629,000
Warranties.................................................. -- 210,000
Payroll taxes............................................... -- 224,400
Services not yet invoiced and other Accruals................ 230,000 230,000
------- ---------
938,000 1,906,500
======= =========
</TABLE>
NOTE 9. DEFERRED INCOME
The Company is an Internet provider and concludes contracts with various
private and business customers. Amounts on invoices consist of two parts: the
basic fee that has to be paid three months in advance and current fees which are
invoiced after the relevant period. Prepaid amounts are deferred under deferred
income.
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Deferred revenue (in ATS)................................... 841,983 953,178
</TABLE>
NOTE 10. ACCRUED EMPLOYEE BENEFITS
According to Austrian labor law employees are entitled to receive a
termination payment in case of termination of the employment contract by the
employer or in case of retirement. The calculation of this payment amount
depends on the service time by the employee. The amount ranges from two months
compensation for three months of services to 12 months compensation for services
of 25 years or longer.
The Company has recorded a provision for termination payments amounting to
ATS 25,000 for FY 1996 and ATS 61,000 for FY 1997. The calculation was carried
out according to Austrian Commercial Code prescribing application of a
discounting method (discount rate 6%, retirement age 55/60 for women/men).
NOTE 11. SHAREHOLDERS' EQUITY
The Company is a limited liability company (herafter "GmbH") under Austrian
law. Shareholders are generally not liable for a GmbH's obligations, except to
the extent of their capital investment. Share capital of a GmbH is not in the
form of shares and does not represent negotiable securities.
As of December 31, 1997 VIANET's common stock of ATS 500,000 has been paid
up to an amount of ATS 250,000.
The shareholders are also the general managers of VIANET.
Dividends may only be declared and paid from the accumulated retained
earnings (after deduction of certain reserves) shown in the Company's annual
Austrian statutory unconsolidated accounts. Such amounts differ from the total
of retained earnings as shown in the accompanying financial statements in
accordance with U.S. GAAP. As of December 31, 1997, the Company's Austrian
statutory unconsolidated accounts reflected no accumulated earnings available
for distribution, and accordingly, the Company's ability to pay dividends in the
future will depend on the future earnings of the Company.
F-25
<PAGE> 81
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
AS OF DECEMBER 31, 1997
NOTE 12. PROVISION FOR INCOME TAXES
The components of the provisions for income taxes are as follows (in ATS):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Current..................................................... 15,000 148,193
Deferred.................................................... (18,899) 44,923
------- -------
Income tax (benefit)........................................ (3,899) 193,116
======= =======
</TABLE>
The Company has net deferred tax assets as of December 31, 1996 and net
deferred tax liability as of December 31, 1997 (in ATS):
<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Deferred tax assets
Net operating loss..................................... 55,283 --
Accrued employee benefits.............................. 8,500 20,740
------ -------
63,783 20,740
====== =======
Deferred tax liability
Depreciation........................................... 44,884 46,764
====== =======
Net deferred tax asset (liability).......................... 18,899 (26,024)
====== =======
</TABLE>
Reconciliation of income taxes determining the Austrian statutory federal
income tax rate of 34% to actual income taxes provided is as follows (in ATS):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Income tax at statutory rate................................ 31,225 45,418
Permanent differences....................................... (31,438) 166,409
Other....................................................... (3,686) (18,711)
------- -------
(3,899) 193,116
======= =======
</TABLE>
NOTE 13. COMMITMENTS
The Company has operating leases. The commitment for future minimum lease
payments is:
<TABLE>
<S> <C> <C>
1998........................................................ ATS 1,136,203
1999........................................................ ATS 759,040
2000........................................................ ATS 258,133
2001........................................................ ATS 53,179
</TABLE>
Rent expense for operating leases approximated ATS 747,484,56 and ATS
535,563,42 for the years ended December 31, 1997 and 1996, respectively.
NOTE 14. CONTINGENCIES
TUV Technischer Uberwachungsdienst Osterreich (TUV) filed a lawsuit against
the Company on December 1, 1997. TUV claimed ATS 210,000 for technical
malfunction of Cisco Routers which were installed and programmed by the Company.
TUV claims that the malfunction resulted in substantially increased telephone
charges. According to the company's lawyer, TUV could claim up to ATS 1,535,000.
Costs have been estimated by the lawyers with ATS 600,000. Management believes
that the lawsuit will be settled with cost of maximal ATS 250,000 from which an
amount of ATS 210,000 is accrued in the balance sheet.
F-26
<PAGE> 82
VIANET EDV DIENSTLEISTUNGS GMBH
CONSOLIDATED BALANCE SHEETS
(ALL AMOUNTS IN ATS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................. 1,289,466 100,025
Recoverable taxes and other receivables................ 359,302 126,087
Accounts receivable.................................... 7,947,413 5,573,461
Inventories............................................ 71,680 37,404
Prepaid expenses....................................... 301,720 246,373
---------- ----------
Total current assets.............................. 9,969,581 6,083,350
Deposits and Other Assets................................... 300,846 241,846
Fixed Assets:
Leasehold improvements................................. 219,220 219,220
Office furniture and equipment......................... 7,232,708 6,470,090
---------- ----------
7,451,928 6,689,310
Accumulated depreciation............................... (2,760,153) (1,952,565)
---------- ----------
4,691,775 4,736,745
========== ==========
TOTAL ASSETS................................................ 14,962,202 11,061,941
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................... 6,781,241 5,911,889
Overdrafts............................................. 0 634,636
Accrued expenses....................................... 1,413,800 1,906,500
Corporate tax.......................................... 673,300 139,200
Other payables......................................... 1,743,320 1,015,162
Deferred income........................................ 3,172,679 953,178
---------- ----------
Total current liabilities......................... 13,784,340 10,560,565
Deferred tax liability...................................... 6,178 26,024
Accrued employee benefits................................... 87,000 61,000
---------- ----------
87,000 61,000
SHAREHOLDERS' EQUITY
Share capital.......................................... 250,000 250,000
Retained earnings...................................... 834,684 164,352
---------- ----------
1,084,684 414,352
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................. 14,962,202 11,061,941
========== ==========
</TABLE>
F-27
<PAGE> 83
VIANET EDV DIENSTLEISTUNGS GMBH
STATEMENTS OF OPERATIONS
(ALL AMOUNTS IN ATS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1998 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
TOTAL REVENUES.............................................. 17,266,356 12,873,347
COSTS AND EXPENSES
Costs of revenues...................................... 8,426,021 6,847,761
General and administrative expenses.................... 2,541,150 2,056,546
Marketing expenses..................................... 5,082,300 4,113,093
---------- ----------
16,049,471 13,017,400
OPERATING PROFIT............................................ 1,216,885 (144,053)
Interest income............................................. 7,998 5,334
Interest expense............................................ (23,063) (647)
---------- ----------
(15,065) 4,687
Earnings before income taxes................................ 1,201,820 (139,366)
Provision for income taxes.................................. (531,488) (20,959)
---------- ----------
NET INCOME (LOSS)........................................... 670,332 (160,325)
---------- ----------
</TABLE>
F-28
<PAGE> 84
VIANET EDV DIENSTLEISTUNGS GMBH
STATEMENTS OF CASH FLOWS
(ALL AMOUNTS IN ATS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1998 1997
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings................................................ 670,332 (160,325)
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation........................................... 807,588 406,590
Deferred taxes......................................... (19,846) --
Change in accounts receivable, recoverables taxes and
other receivables..................................... (2,607,167) (2,759,469)
Change in inventories.................................. (34,276) --
Change in prepaid expenses:............................ (55,347) --
Change in deposits and other assets.................... (59,000) --
Change in accounts payable, accrued expenses
and other liabilities................................ 3,249,775 3,200,259
---------- ----------
Net cash provided by operating activities................... 1,952,059 687,055
INVESTING ACTIVITIES
Expenditures for property, plant and equipment......... (762,618) (1,252,032)
---------- ----------
Net cash (used in) investing activities..................... (762,618) (1,252,032)
---------- ----------
(Decrease) Increase in cash and cash equivalents............ 1,189,441 (564,977)
Cash and cash equivalents at beginning of year.............. 100,025 655,174
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. 1,289,466 90,197
========== ==========
</TABLE>
F-29
<PAGE> 85
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with United States generally accepted accounting principles ("U.S.
GAAP") for interim financial information. Accordingly, they do not include all
of the information and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of financial
position and results of operations have been included. Operating results for six
month period ended June 30, 1998 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998. All amounts in the
accompanying unaudited condensed financial statements are presented in ATS. For
further information, refer to the financial statements and footnotes thereto for
the year ended December 31, 1997.
Effective for companies with fiscal years beginning after December 15,
1997, comprehensive income and its components are required to be reported in the
financial statements in accordance with Statement of Financial Accounting
Standard No 130, Reporting Comprehensive Income. For the periods presented, the
Company has no comprehensive income.
NOTE 2. SALE OF THE COMPANY
On June 17, 1998 the Company's shareholders entered into a Stock Purchase
Agreement to sell their share capital to Cybernet Internet Services
International, Inc. ("Cybernet") for a total consideration of DM 7,500.000 and
300,000 shares of common stock of Cybernet. The closing of the sale is expected
to take place in October, 1998.
F-30
<PAGE> 86
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY
SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS NOT
LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. 2
Prospectus Summary.................... 3
The Company........................... 3
The Offering.......................... 4
Risk Factors.......................... 6
Use of Proceeds....................... 16
Dividend Policy....................... 16
Price Range of Common Stock........... 16
Dilution.............................. 17
Capitalization........................ 18
Selected Consolidated Financial
Data................................ 19
Management's Discussion and Analysis
of Financial Position and Results of
Operations.......................... 20
Business.............................. 30
Management............................ 37
Principal Stockholders................ 43
Description of Capital Stock.......... 44
Anti-Takeover Provisions.............. 48
Transfer Agent........................ 50
Underwriting.......................... 51
Certain Transactions.................. 51
Shares Eligible for Future Sale....... 51
Legal Matters......................... 53
Experts............................... 53
Additional Information................ 53
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
3,500,000 SHARES
[LOGO]
CYBERNET
INTERNET
SERVICES
INTERNATIONAL,
INC.
-------------------
PROSPECTUS
-------------------
BERLINER
EFFEKTENBANK AG
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 87
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses in connection with the issuance and distribution of the
securities being registered, other than underwriting discounts and commissions,
are set forth in the following table. All amounts except the Securities and
Exchange Commission registration fee are estimated.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $20.650
Printing and engraving expenses............................. *
Legal fees of Registrant.................................... *
Accountants' fees and expenses.............................. *
Miscellaneous............................................... *
-------
Total............................................. $ *
</TABLE>
- ---------------
* To be supplied by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law, Section 145, provides that a
corporation shall have the power to indemnify a director, officer, employee or
agent of the corporation, consistent with law, as may be provided by its
articles of incorporation, bylaws, general or specific action of its board of
directors or contract. The Company's Articles of Incorporation and bylaws
provide for indemnification of directors, officers, employees or agents of the
Company and limit the liability of the directors of a corporation. The Company
does maintain directors and officer's insurance coverage.
II-1
<PAGE> 88
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the years ended December 31, 1995, 1996 and 1997, and the eight
months ended August 30, 1998, the Company sold shares of Common Stock, Class A
Preferred, Class B Preferred and Class C Preferred, as follows:
<TABLE>
<S> <C> <C> <C> <C>
Securities Sold
Purchasers Consideration Exemption
Date Number of Shares
Class of Stock
June 1997 5,160,000 Series Cybermind Shares of Section 4(2)
B Preferred Cybernet AG
June 1997 1,200,000 Series 600,000 Cybermind Shares of Section 4(2)
A Preferred 262,500 Andreas Eder Cybernet AG
18,750 Roland Manger
75,000 Thomas Schulz
56,250 Rudolf Strobl
187,500 Holger Timm
June 1997 5,160,000 Common 2,257,500 Andreas Eder Shares of Section 4(2)
Stock 161,250 Roland Manger Cybernet AG
645,000 Thomas Schulz
483,750 Rudolf Strobl
1,612,500 Holger Timm
June 23, 1997 1,400,000(1) Private Placement $9,800,000 Regulation S
Series C Investors
Preferred
September 1, 1997 72,620 Common Stefan Heiligensetzer $619,106 Section 4(2)
Stock Lothar Bernecker Purchase of
Frank Marchewicz Artwise
Gerhard Schoenenberger
Rolf Strehle
December 1997 27,000 Common Eiderdown Trading Ltd Payment in Section 4(2)
Stock connection
with the
Eclipse
acquisition
August 1998 58,825 Common Open:Net Sellers Shares of Section 4(2)
Stock Thomas Egner Open:Net
Uwe Hagenmeier valued at
Markus Kress $94,286
Oliver Schaeffer
May 1998 700,000 Common Private Placement $12,600,000 Regulation S
Stock Investors
Closing of the 300,000 Common Vianet Sellers: Shares of Section 4(2)
Vianet Stock Tristan Libischer Vianet
Acquisition Alexander Wiesmueller
</TABLE>
(1) Between May 31, 1998 and July 22, 1998, 1,282,490 shares of Series C
Preferred Stock were converted to the same number of shares of Common Stock
by the holders thereof.
II-2
<PAGE> 89
ITEM 16(A). EXHIBITS
<TABLE>
<C> <S>
1.1* Underwriting Agreement
2.1* Agreement and Plan of Merger between the Registrant and
Cybernet Internet Services International, Inc., a Utah
corporation, dated , 1998
3.1 Certificate of Incorporation
3.2 Bylaws
5.1* Opinion of Powell, Goldstein, Frazer & Murphy, LLP
10.1 Sale and Assignment of Business Shares of Artwise GmbH
Software Solutions
10.2 Sale and Assignment of Shares in Open:Net Internet Solutions
GmbH
10.3 Sale of Eclipse srl
10.4 Stock Purchase Agreement; Vianet
10.5 Stock Purchase Agreement; Cybernet AG
10.6 Pooling Agreement (Cybernet AG Acquisition)
10.7 Pooling Agreement (Artwise Acquisition)
10.7.1 Schedule of Additional Artwise Pooling Agreements
10.8 Consulting Agreement (Eclipse Acquisition)
10.9 Employment Agreement (Andreas Eder)
10.10 Employment Agreement (Alessandro Giacalone)
10.11 Employment Agreement (Christian Moosmann)
10.12 Employment Agreement (Rudolf Strobl)
10.13 Lease Munich
10.14 Form of Miller Leasing Agreement
10.15 Info AG Agreement
10.16 Ebone Agreement
10.17 Feratel Agreement
10.18* Stock Option Plan
10.19* Director Stock Option Plan
21.1 Subsidiaries
23.1* Consent of Powell, Goldstein, Frazer & Murphy LLP (included
in Exhibit 5.1)
23.2 Consent of Schitag Ernst & Young AG
23.3 Consent of Ernst & Young Wirtschaftsprufungs-und
Steuerberatungsgesellschaft m.b.H
24 Power of Attorney
</TABLE>
- ---------------
* To be filed by amendment
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE> 90
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing of Amendment No. 2 to Form S-1 and has duly caused this
Registration Statement, or amendment thereto, to be signed on its behalf by the
undersigned, thereunto duly authorized, on September 18, 1998.
CYBERNET INTERNET SERVICES, INC.
By: /s/ ANDREAS EDER
------------------------------------------
Chairman, Chief Executive Officer and
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement, or amendment thereto, has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ANDREAS EDER Chairman of the Board September 18, 1998
- ------------------------------------------------ of Directors, Chief
Andreas Eder Executive Officer
/s/ TRISTAN LIBISCHER Director September 16, 1998
- ------------------------------------------------
Tristan Libischer
Director September , 1998
- ------------------------------------------------
Holger Timm
/s/ HUBERT BESNER Director September 18, 1998
- ------------------------------------------------
Hubert Besner
/s/ G.W. NORMAN WAREHAM Director September 18, 1998
- ------------------------------------------------
G.W. Norman Wareham
/s/ ROBERT FRATARCANGELO Director September 18, 1998
- ------------------------------------------------
Robert Fratarcangelo
/s/ CHRISTIAN MOOSMANN Principal Accounting September 18, 1998
- ------------------------------------------------ and Financial Officer
Christian Moosmann
</TABLE>
II-4
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CYBERNET INTERNET SERVICES INTERNATIONAL INC.
THE UNDERSIGNED, in order to form a corporation for the purposes
hereinafter stated, under and pursuant to the provisions of the General
Corporation Law of the State of Delaware ("DGCL"), does hereby certify as
follows:
FIRST: The name of the corporation is Cybernet Internet
Services International, Inc.
SECOND: The registered office of the corporation in the State
of Delaware is to be located at 1013 Centre Road, in the City of Wilmington,
County of New Castle, 19805. The name of its registered agent at that address
is Corporation Service Company.
THIRD: The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized under the DGCL.
FOURTH: The name and mailing address of the incorporator is
John E. Bagwell, III, Powell, Goldstein, Frazer & Murphy LLP, Sixth Floor, 1001
Pennsylvania Avenue, N.W., Washington, D.C. 20004.
FIFTH: The total number of shares of stock which the
corporation has authority to issue is One Hundred Million (100,000,000) shares,
of which Fifty Million (50,000,000) shares shall be Common Stock, par value
$0.001 per share (the "Common Stock) and Fifty Million (50,000,000) shares
shall be Preferred Stock, par value $.001 per share (the "Preferred Stock").
The corporation shall be entitled to treat the person in whose name any share
of its stock is registered as the owner thereof for all purposes and shall not
be bound to recognize any equitable or other claim to, or interest in, such
share on the part of any other person, whether or not the corporation shall
have notice thereof, except as expressly provided by applicable law. The
shares of the Preferred Stock and Common Stock, respectively, shall have the
following express terms:
<PAGE> 2
SECTION 1. PREFERRED STOCK.
1.1 Designated Series of Preferred Stock. There shall be
1,200,000 shares of Preferred Stock designated as Series A Preferred Stock
which shall have the following terms:
SERIES A PREFERRED STOCK
DIVIDENDS. The holders of the Series A Preferred Stock are entitled to
receive out of the surplus or net profits of the corporation legally available
for dividends whether or not declared, dividends at a rate equal to US$0.01 per
share per annum, and no more, before any dividends are paid or set apart for
payment upon any other series of preferred stock of the corporation, other than
Series B or Series C Preferred Stock, or on the Common Stock of the
corporation. Commencing with the fiscal year beginning on January 1, 1998, the
dividend on the Series A Preferred Stock will be paid for each fiscal year
within five months of the end of each fiscal year, subject to the availability
of surplus or net profits therefor. Any dividends paid on the Series A
Preferred Stock in an amount less than the total amount of dividends at the
time accrued and payable on the shares will be allocated pro rata in accordance
with the number of shares then outstanding.
The dividends on the Series A Preferred Stock are not cumulative, so
that if, for any period the surplus or net profit of the corporation is not
sufficient to allow payment of the dividends, only that portion as to which
surplus or net profits is sufficient, if any, shall be paid and any dividend
not so payable shall accrue. Following payment of the dividends on the Series
A Preferred Stock, the holders of the Series A Preferred Stock shall share pari
passu on a per share basis of the distribution in any dividends by the
corporation with the holders of shares of Common Stock of the corporation and
shares of any other class of stock of the corporation entitled to share
therein.
2
<PAGE> 3
VOTING RIGHTS. The holders of the Series A Preferred Stock are not
entitled to receive notice of or to vote on any matter that is the subject of a
vote of the stockholders of the corporation, except as otherwise required by
the laws of the State of Delaware.
REDEMPTION AND PUT. The shares of Series A Preferred Stock may be
redeemed by the corporation at any time after January 1, 2000, upon ten (10)
days' prior written notice (the "Redemption Notice") to the holder thereof of
the corporation's intention to redeem the Series A Preferred Stock at a
redemption price of one share of Common Stock for each share of Series A
Preferred Stock plus payment of any unpaid dividends earned thereon through the
date of redemption; provided, that all and not less than all of the shares of
Series A Preferred Stock are so redeemed and, provided further, that, if the
corporation has not redeemed the Series A Preferred Stock by December 31, 2001,
a holder of Series A Preferred Shares may at any time commencing January 1,
2002, require the corporation to purchase all of the shares of the Series A
Preferred Stock held by him for a purchase price of $3.00 per share plus any
dividends earned but unpaid on such shares.
CONVERSION. A holder of Series A Preferred Stock may convert each
share held into one share of the Common Stock of the corporation upon ten (10)
days' written notice to the corporation; provided, that (1) no conversion may
occur prior to January 1, 1999; (2) no more than 25% of the Series A Preferred
Shares held by any holder may be converted prior to January 1, 2000; (3) no
more than an additional 25% of the Series A Preferred Shares held by the holder
may be converted prior to January 1, 2001; (4) the remainder of the Series A
Preferred Shares held by such holder may be converted commencing January 1,
2001; and (5) any conversion may not be for less than all of the Series A
Preferred Shares held by the converting shareholder eligible for conversion at
the time of the notice.
LIQUIDATION, DISSOLUTION OR WINDING UP. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
corporation, the holders of the Series A Preferred Stock will be entitled to be
paid the sum of US$3.00 per share plus an amount equal to any unpaid accrued
dividends before any amount is paid to the holder of any other
3
<PAGE> 4
series of Preferred Stock, other than the Series B Preferred Stock or the
Series C Preferred Stock, or to the Common Stock of the corporation. After
payment of these amounts to the holders of the Series A Preferred Stock, the
remaining assets of the corporation will be distributed to the holders of the
Common Stock, subject to any other preferences granted to the holders of any
other series of preferred stock as created by the Board of Directors of the
corporation prior to such time.
PREEMPTIVE RIGHTS. The holders of the Series A Preferred Stock have no
preemptive right to subscribe for or purchase any shares of stock or any other
securities that may be issued by the corporation by virtue of their holding the
Series A Preferred Stock.
TRANSFERABILITY. The Series A Preferred Stock may not be transferred
by the holder except in compliance with applicable securities laws.
VARIATION OF RIGHTS. Any amendment to the Certificate of Incorporation
of the corporation (including any certificates of designation pursuant to a
resolution of the Board of Directors) to delete or vary the rights, powers,
privileges, preferences, designations, qualifications, limitations,
restrictions or conditions attaching to the Series A Preferred Stock must be
approved by the affirmative vote of the holders of a majority of the shares of
Series A Preferred Stock then outstanding, given in person or by proxy whether
in writing or at a meeting at which the holders of the shares of Series A
Preferred Stock are entitled to vote separately as a class.
EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series A Preferred Stock, the Series A Preferred Stock do
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth in the Series A Preferred Stock Certificate of
Designation, as the same may be amended and/or restated from time to time.
4
<PAGE> 5
There shall be 5,160,000 shares of Preferred Stock designated as
Series B Preferred Stock which shall have the following terms:
SERIES B PREFERRED STOCK
DIVIDENDS. The holders of the Series B Preferred Stock are entitled
to receive out of the surplus or net profits of the corporation legally
available for dividends, whether or not declared, dividends at a rate equal to
US$0.01 per share per annum, and no more, before any dividends are paid or set
apart for payment upon any other series of preferred stock of the corporation
other than the Series C Preferred Stock, or on the Common Stock of the
corporation. Commencing with the fiscal year beginning on January 1, 1998, the
dividend on the Series B Preferred Stock will be paid for each fiscal year
within five months of the end of each fiscal year, subject to the availability
of surplus or net profits therefor. Any dividends paid on the Series B
Preferred Stock in an amount less than the total amount of dividends at the
time accrued and payable on the shares will be allocated pro rata in accordance
with the number of shares then outstanding.
The dividends on the Series B Preferred Stock are not cumulative, so
that if, for any period the surplus or net profit of the corporation are not
sufficient to allow payment of the dividends, only that portion as to which
surplus or net profits are sufficient, if any, shall be paid and any dividend
not so payable shall accrue. Following payment of the dividends on the Series
B Preferred Stock, the holders of the Series B Preferred Stock shall share pari
passu on a per share basis of the distribution of any dividends by the
corporation with the holders of shares of Common Stock of the corporation and
shares of any other class of stock of the corporation entitled to share
therein.
VOTING RIGHTS. The holders of the Series B Preferred Stock are
entitled to receive notice of and to vote on any matter that is the subject of
a vote of the stockholders of the corporation, except as otherwise required by
the laws of the State of Delaware.
5
<PAGE> 6
REDEMPTION. The shares of Series B Preferred Stock may be redeemed by
the corporation at any time after January 1, 2000, upon ten (10) days' prior
written notice (the "Redemption Notice") to the holder thereof of the
corporation's intention to redeem the Series B Preferred Stock at a redemption
price of one share of the Common Stock of the corporation for each share of
Series B Preferred Stock plus any unpaid dividends earned thereon through the
date of redemption; provided, that all and not less than all of the shares of
Series B Preferred Stock are so redeemed.
CONVERSION. A holder of Series B Preferred Stock may convert each
share held into one share of the Common Stock of the corporation upon ten (10)
days' written notice to the corporation; provided, that (1) no conversion may
occur prior to January 1, 1999; (2) no more than 25% of the Series B Preferred
Shares held by the holder may be converted prior to January 1, 2000; (3) no
more than an additional 25% of the Series B Preferred Shares held by the holder
may be converted prior to January 1, 2001; (4) the remainder of the Series B
Preferred Shares held by the holder may be converted commencing January 1,
2001; and (5) any conversion may not be for less than all of the Series B
Preferred Shares held by the converting shareholder eligible for conversion at
the time of the notice.
LIQUIDATION, DISSOLUTION OR WINDING UP. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
corporation, the holders of the Series B Preferred Stock will be entitled to be
paid the sum of US$3.00 per share plus an amount equal to any unpaid accrued
dividends before any amount is paid to the holder of any other series of
Preferred Stock other than the Series C Preferred Stock, or to the Common Stock
of the corporation. After payment of these amounts to the holders of the
Series B Preferred Stock, the remaining assets of the corporation will be
distributed to the holders of the Common Stock, subject to any other
preferences granted to the holders of any other series of Preferred Stock as
created by the Board of Directors of the corporation prior to such time.
PREEMPTIVE RIGHTS. The holders of the Series B Preferred Stock have
no preemptive right to subscribe for or purchase any shares of stock or any
other securities that may be issued by the corporation by virtue of their
holding the Series B Preferred Stock.
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TRANSFERABILITY. The Series B Preferred Stock may not be transferred
by the holder except in compliance with applicable securities laws.
VARIATION OF RIGHTS. Any amendment to the Certificate of
Incorporation of the corporation (including any certificates of designation
pursuant to a resolution of the Board of Directors) to delete or vary the
rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions or conditions attaching to the Series B Preferred
Stock must be approved by the affirmative vote of the holders of a majority of
the shares of Series B Preferred Stock then outstanding, given in person or by
proxy whether in writing or at a meeting at which the holders of the shares of
Series B Preferred Stock are entitled to vote separately as a class.
EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series B Preferred Stock, the Series B Preferred Stock do
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth in the Series B Preferred Stock Certificate of
Designation, as the same may be amended and/or restated from time to time.
There shall be 1,500,000 shares of Preferred Stock designated as
Series C Preferred Stock which shall have the following terms:
SERIES C PREFERRED STOCK
DIVIDENDS. The holders of the Series C Preferred Stock are entitled
to receive out of the surplus or net profits of the corporation dividends at a
rate equal to $0.56 per share per annum, and no more, before any dividends are
paid or set apart for payment upon any other series of Preferred Stock or on
the Common Stock of the corporation. Dividends began to accrue on January 1,
1998. Commencing with the fiscal year beginning on January 1, 1998, the
dividend on the Series C Preferred Stock will be paid for each fiscal
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year within five months of the end of each fiscal year, subject to the
availability of surplus or net profits therefore. Any dividends paid on the
Series C Preferred Stock in an amount less than the total amount of dividends
at the time accrued and payable on the shares will be allocated pro rata in
accordance with the number of shares then outstanding.
At the election of the Board of Directors, dividends may be paid in the
form of the Common Stock. The number of shares of Common Stock to be issued in
payment of such dividends, with respect to each share of Series C Preferred
Stock, is equal to the quotient derived by dividing the fair value of a share
of Common Stock (as determined by the Board of Directors on the date the
dividend is declared) into the dollar amount of the dividend being declared.
The dividends on the Series C Preferred Stock are cumulative so that,
if for any period the dividend is not paid, the right to such dividend will
accumulate and all arrears so accumulated will be paid before any dividends are
paid to any other series of Preferred Stock or the Common Stock of the
corporation.
VOTING RIGHTS. The holders of the Series C Preferred Stock are not
entitled to receive notice of, or to vote on, any matter that is the subject of
a vote of the stockholders of the corporation, except as otherwise required by
the laws of the State of Delaware.
REDEMPTION AND EXCHANGE. The shares of Series C Preferred Stock may
be redeemed by the corporation at any time upon ten (10) days' prior written
notice to the holder thereof of the corporation's intention to redeem the
Series C Preferred Stock at a redemption price of 100% of the $7.00 per share
purchase price paid to the corporation for such shares, plus any unpaid accrued
dividends thereon through the date of redemption so long as prior to the date
of redemption the following has occurred:
(i) The corporation must have offered to exchange on the
terms set forth below (the "Exchange Offer") each share of
Series C Preferred Stock for (a) one share of the
corporation's Common Stock, plus (b) one warrant
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to purchase the number of shares of Common Stock equal in the
aggregate to one-half the number of shares of Common Stock
received in the Exchange Offer, which warrant will be
exercisable at any time through the first anniversary of the
date of issuance of the warrant at a purchase price equal to
$8.00 per share. The Exchange Offer will remain open for at
least twenty (20) days; and
(ii) A registration statement under the Securities Act of
1933, as amended, must be in effect registering the issuance
of the Common Stock and warrants pursuant to the Exchange
Offer.
CONVERSION. A holder of Series C Preferred Stock may convert each
share held by him into one share of the Common Stock of the corporation upon
ten (10) days' written notice to the corporation anytime after May 31, 1998;
provided, however, that any conversion be of all the Series C Preferred Stock
held by the shareholder.
LIQUIDATION, DISSOLUTION OR WINDING UP. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
corporation, the holders of the Series C Preferred Stock are entitled to be
paid the sum of $7.00 per share, plus an amount equal to any unpaid accrued
dividends before any amount is paid to the holder of any other series of
Preferred Stock or to the Common Stock of the corporation. After payment of
these amounts to the holders of the Series C Preferred Stock, the remaining
assets of the corporation will be distributed to the holders of the Common
Stock, subject to any other preferences granted to the holders of any other
series of Preferred Stock as created by the Board of Directors of the
corporation prior to such time.
PREEMPTIVE RIGHTS. The holders of the Series C Preferred Stock have
no preemptive right to subscribe for or purchase any shares of stock or any
other securities that may be issued by the corporation by virtue of their
holding the Series C Preferred Stock.
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TRANSFERABILITY. Subject to compliance with applicable securities
laws, a holder of Series C Preferred Stock may sell such stock or otherwise
transfer it for valuable consideration; provided, that the corporation has a
right of first refusal. A holder of Series C Preferred Stock who receives a
Qualified Offer to buy such stock and who wishes to sell such stock ("Offered
Stock"), must promptly send a written notice to the corporation (Sale Notice"),
and offer (or be deemed to have offered), to sell the Offered Stock to the
corporation at the same price and on the same terms as the Qualified Offer.
(For these purposes, a "Qualified Offer" is a legally enforceable written offer
that is made at arm's length by a party that is not an affiliate of the holder
and that is financially capable of carrying out the terms of the written
offer.) The Sale Notice must include the identity of the proposed transferee,
the terms of the transfer, and the price offered by the proposed transferee for
the Offered Stock. The holder must be bound to the terms of the Qualified
Offer as stated in the Sale Notice and must keep the corporation informed of
any material changes in the proposed transfer. The holder must also provide
the corporation with any other information regarding the Qualified Offer and
the proposed transfer as the corporation may reasonably request.
The corporation will have an option for thirty (30) days from the
receipt of the Sale Notice to elect to purchase all, but not less than all, of
the Offered Stock. The corporation may exercise its option by sending a
written notice to the holder containing a statement that it is exercising its
option. The purchase price of the Offered Stock will be the price contained in
the Qualified Offer. The purchase price of the Offered Stock will be paid on
the same terms as the terms contained in the Qualified Offer.
If the corporation does not exercise its option to purchase the
Offered Stock, the holder may sell the Offered Stock to the proposed transferee
at a price and on terms and conditions no less favorable than those set forth
in the Sale Notice. The corporation, on the request of the holder, will
provide written evidence to the holder that it has waived its option, so as to
permit the transfer of the Offered Stock. If the holder fails to make the sale
to the proposed transferee within thirty (30) days following the corporation's
waiver of its option to purchase the Offered Stock, the waiver for such sale
will lapse and any
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subsequent proposed transfer to the proposed transferee or another transferee
will be subject to the corporation's right of first refusal. A transfer is
consummated when the corporation has been given notice that legal title to the
shares of the Offered Stock has been transferred, subject to recordation on the
books of the corporation. Any person or entity acquiring Series C Preferred
Stock will take the Offered Stock subject to any applicable securities laws.
VARIATION OF RIGHTS. Any amendment to the Certificate of
Incorporation of the corporation (including any certificates of designation
pursuant to a resolution of the Board of Directors) to delete or vary the
rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions or conditions attaching to the Series C Preferred
Stock must be approved by the affirmative vote of the holders of a majority of
the shares of Series C Preferred Stock then outstanding, given in person or by
proxy whether in writing or at a meeting at which the holders of the shares of
Series C Preferred Stock will be entitled to vote separately as a class.
EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series C Preferred Stock, the Series C Preferred Stock do
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth in Series C Preferred Stock Certificate of Designation,
as the same may be amended and/or restated from time to time.
1.2 Other Series of Preferred Stock. With regard to any other
shares of Preferred Stock authorized herein, the Board of Directors of the
corporation is hereby expressly granted authority, to the full extent now or
hereafter permitted herein or by the DGCL, at any time or from time to time, by
resolution or resolutions, to create one or more series of Preferred Stock, to
fix the authorized number of shares of any such series (which number of shares
may vary as between series and be changed from time to time by like action),
and to fix the terms of such series, including but not limited to, the
following:
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(i) the designation of such series, which may be by
distinguishing number, letter or title;
(ii) the rate or rates at which shares of such series
shall be entitled to receive dividends; whether dividends are to be
paid in the form of common stock of the corporation; the periods in
respect of which dividends are payable; the conditions upon, and times
of payment of, such dividends; the relationship and preference, if
any, of such dividends to dividends payable on any other class or
classes or any other series of stock; whether such dividends shall be
cumulative and, if cumulative, the date or dates from which such
dividends shall accumulate; and the other terms and conditions
applicable to dividends upon shares of such series;
(iii) the rights of the holders of the shares of such
series in case the corporation be liquidated, dissolved or wound up
(which may vary depending upon the time, manner or voluntary or
involuntary nature or other circumstances of such liquidation,
dissolution or winding up) and the relationship and preference, if
any, of such rights to rights of holders of shares of stock of any
other class or classes or any other series of stock;
(iv) the right, if any, of the corporation to redeem
shares of such series at its option, including any limitation of such
right, and the amount or amounts to be payable in respect of the
shares of such series in case of such redemption (which may vary
depending on the time, manner or other circumstances of such
redemption), and the manner, effect and other terms and conditions of
any such redemption;
(v) the obligation, if any, of the corporation to
purchase, redeem or retire shares of such series and/or amounts to be
payable from time to time for such purpose or into any fund created
for such purpose, or the number of shares to be purchased, redeemed or
retired, the per share purchase price or prices, and the other terms
and conditions of any such obligation or obligations;
(vi) the voting rights, if any, which, if granted, may be
full, special, or limited, to be given the shares of such series,
including, without limiting the generality of the foregoing, the
right, if any, as a series or in conjunction with other
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series or classes, to elect one or more members of the Board of
Directors either generally or at certain times or under certain
circumstances, and restrictions, if any, on particular corporate acts
without a specified vote or consent of holders of such shares (such
as, among others, restrictions on modifying the terms of such series
or of the Preferred Stock, restricting the permissible terms of other
series or the permissible variations between series of the Preferred
Stock, authorizing or issuing additional shares of the Preferred
Stock, creating debt, or creating any class of stock ranking prior to
or on a parity which the Preferred Stock or any series thereof as to
dividends, or assets remaining for distribution to the stockholders in
the event of the liquidation, dissolution, or winding up of the
corporation);
(vii) the right, if any, to exchange or convert the shares
into shares of any other series of the Preferred Stock or into shares
of any other class of stock of the corporation or the securities of
any other corporation, and the rate or basis, time, manner, terms and
conditions of exchange or conversion or the method by which the same
shall be determined; and
(viii) the other special rights, if any, and the
qualifications, limitations or restrictions thereof, of the shares of
such series.
The Board of Directors shall fix the terms of each series of the
Preferred Stock by resolution or resolutions adopted at any time prior to the
issuance of the shares thereof, and the terms of each such series may, subject
only to restrictions, if any, imposed by this Certificate of Incorporation or
by applicable law, vary from the terms of other series to the extent determined
by the Board of Directors from time to time and provided in the resolution or
resolutions fixing the terms of the respective series of the Preferred Stock.
1.3 Status of Certain Shares. Shares of any series of the
Preferred Stock, whether provided for herein or by resolution or resolutions of
the Board of Directors, which have been redeemed (whether through the operation
of a sinking fund or otherwise) or which, if convertible or exchangeable, have
been converted into or exchanged for shares of stock of any other class or
classes, or which have been purchased or otherwise acquired by the corporation,
shall have the status of authorized and unissued shares of the Preferred Stock
of the same series and may be reissued as a part of the series of which they
were originally a part or may be reclassified and reissued as part of a new
series of
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the Preferred Stock to be created by resolution or resolutions of the Board of
Directors or as part of any other series of the Preferred Stock, all subject to
the conditions or restrictions on issuance set forth herein or in the
resolution or resolutions adopted by the Board of Directors providing for the
issue of any series of the Preferred Stock.
1.4 Changes in Number of Authorized Shares. The number of
authorized shares of Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the outstanding Common Stock, without a vote of
the holders of the Preferred Stock, or of any series thereof, unless a vote of
any such holders is required pursuant to the express terms of the Preferred
Stock or any series thereof as fixed or determined pursuant to this Section 1
of this Article FIFTH.
SECTION 2. COMMON STOCK.
2.1 Issuance, Consideration and Terms. Any unissued or treasury
shares of the Common Stock may be issued from time to time for such
consideration as may be fixed from time to time by the Board of Directors. The
Common Stock shall be subject to the express terms of the Preferred Stock and
any series thereof. Each share of Common Stock shall be of equal rank and
shall be identical to every other share of Common Stock. Holders of Common
stock shall have such rights as are provided herein and by law.
2.2 Voting Rights. Except as expressly required by law or as
provided in or fixed and determined pursuant to Section 1 of this Article
FIFTH, the entire voting power and all voting rights shall be vested
exclusively in the Common Stock. Each holder of shares of Common Stock shall
be entitled to one (1) vote for each share standing in such holder's name on
the books of the corporation.
2.3 Dividends. Subject to Section 1 of this Article FIFTH, the
holders of Common Stock shall be entitled to receive, and shall share equally
share for share, when and as declared by the Board of Directors, out of the
assets of the corporation which are by law available therefor, dividends or
distributions payable in cash, in property or in securities of the corporation.
SIXTH: Any action required or permitted to be taken by the
stockholders of the corporation must be effected at a duly called annual or
special meeting of such holders and may not be effected by any consent in
writing by such holders. Except as otherwise
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required by law, special meetings of stockholders of the corporation for any
purpose or purposes may be called only by the Board of Directors pursuant to a
resolution stating the purpose or purposes thereof approved by a majority of
the total number of directors which the Board of Directors of the corporation
would have if there were no vacancies (the "Whole Board") or by the Chairman of
the Board of Directors of the corporation and any power of stockholders to call
a special meeting is specifically denied. No business other than that stated
in the notice shall be transacted at any special meeting. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80% of the voting power of all
outstanding shares of the corporation entitled to vote generally (the "Voting
Stock"), voting together as a single class, shall be required to alter, amend,
or adopt any provision inconsistent with or repeal this Article SIXTH.
SEVENTH: The following provisions of this Article SEVENTH
shall apply with respect to the Board of Directors of the corporation:
SECTION 1. NUMBER, ELECTION AND TERMS.
Except as otherwise fixed by or pursuant to the provisions of Article
FIFTH hereof relating to the rights of the holders of any shares of the
Preferred Stock or any series thereof having a preference over the Common Stock
as to dividends or upon liquidation to elect additional directors under
specified circumstances, the number of the directors of the corporation shall
be fixed from time to time exclusively pursuant to a resolution adopted by a
majority of the Whole Board (but shall not be less than two). So long as there
shall be more than two directors, the directors, other than those who may be
elected by the holders of any shares of Preferred Stock or series thereof
having a preference over the Common Stock as to dividends or upon liquidation,
shall be classified, with respect to the time for which they severally hold
office, into, three classes, as nearly equal in number as possible, one class
to be originally elected for a term expiring at the first annual meeting of
stockholders, another class to be originally elected for a term expiring at the
second annual meeting of stockholders, and another class to be originally
elected for a term expiring at the third annual meeting of stockholders, with
each class to hold office until its successor is duly elected and qualified.
At each succeeding annual meeting of stockholders, directors elected to succeed
those directors whose terms then expire shall be
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elected for a term of office to expire at the third succeeding annual meeting
of stockholders after their election, with each director to hold office until
such person's successor shall have been duly elected and qualified. Election
of directors need not be by written ballot unless and to the extent that the
Bylaws of the corporation so provide.
SECTION 2. STOCKHOLDER NOMINATIONS AND PROPOSALS.
Advance notice of stockholder nominations for the election of
directors and of the proposal of business by stockholders shall be given in the
manner provided in the Bylaws of the corporation, as amended and in effect from
time to time.
SECTION 3. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Except as otherwise provided for or fixed by or pursuant to the
provisions of Article FIFTH hereof relating to the rights of the holders of any
class or series of the Preferred Stock having a preference over the Common
Stock as to dividends or upon liquidation, to elect directors under specified
circumstances, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of the Board of Directors, unless such Board of
Directors determines that such newly created directorships or vacancies shall
be filled by the stockholders at a special meeting of the stockholders called
pursuant to the terms of Article SIXTH hereof. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been duly elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 4. REMOVAL.
Any director may be removed from office only for cause by the
affirmative vote of the holders of at least a majority of the Voting Stock,
voting together as a single class.
SECTION 5. AMENDMENT, REPEAL, ETC.
Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the Voting Stock, voting
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together as a single class, shall be required to alter, amend, adopt any
provision inconsistent with or repeal this Article SEVENTH.
EIGHTH: The Bylaws of the corporation may be altered or
repealed and new Bylaws may be adopted either: (i) at any annual or special
meeting of stockholders, by the affirmative vote of the holders of a majority
of the Voting Stock, provided that in the case of any such stockholder action
at a special meeting of stockholders, notice of the proposed alteration, repeal
or adoption of the new Bylaw or Bylaws must be contained in the notice of such
special meeting; or (ii) by the affirmative vote of a majority of the Whole
Board.
Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the Voting Stock, voting together as a single class, shall be required
to alter, amend, adopt any provision inconsistent with, or repeal this Article
EIGHTH.
NINTH: The corporation reserves the right at any time and
from time to time to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, and any other provisions authorized by the
laws of the State of Delaware at the time in force may be added or inserted, in
the manner now or hereafter prescribed by law; and, except as set forth in
Article TWELFTH, all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article
NINTH. Notwithstanding anything contained in this Certificate of Incorporation
to the contrary, the affirmative vote of the holders of at least 80% of the
Voting Stock, voting together as a single class, shall be required to alter,
amend, adopt any provision inconsistent with or repeal Articles SIXTH, SEVENTH,
EIGHTH or NINTH hereof.
TENTH: A director of the corporation shall not be personally
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for such liability as is expressly not
subject to limitation under the DGCL as the same exists or hereafter may be
amended. Neither the amendment nor repeal of this Article TENTH shall
eliminate or reduce the effect of this Article TENTH in respect of
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any matter occurring, or any cause of action, suit or claim that, but for this
Article TENTH would accrue or arise, prior to such amendment or repeal.
ELEVENTH: Whenever a compromise or arrangement is proposed
between the corporation and its creditors or any class of them and/or between
the corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in
a summary way of the corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for the corporation
under the provisions of Section 291 of the DGCL or on the application of
trustees in dissolution or of any provisions of Section 279 of the DGCL, order
a meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the said
compromise or arrangement, the said reorganization shall, if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.
TWELFTH: The corporation shall indemnify the persons described
in the following provisions of this Article TWELFTH to the extent set forth
herein:
SECTION 1. INDEMNIFICATION.
Each person who was or is made a party to, or is threatened to be made
a party to, or who was or is made a nonparty witness or otherwise involved as a
nonparty in, any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereafter a
"proceeding") by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was or has agreed to become a director
or officer of the corporation, or is or was serving or has agreed to serve at
the request of the corporation as a director, officer, trustee, employee, or
agent of another corporation, partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such action, suit or proceeding is alleged in an official capacity
as a director, officer, employee, agent or
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trustee or in any other capacity while serving as a director, officer,
employee, agent or trustee, shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the DGCL (as the same now
exists or hereafter may be amended, but in the event of any such amendment only
to the extent that such amendment authorizes broader indemnification rights
than the DGCL permitted prior to such amendment) from and against any and all
liability, loss and expense (including attorneys' fees, judgments, fines, ERISA
excise taxes and penalties and amounts paid or to be paid in settlement)
actually and reasonably incurred or suffered by such person in connection with
such proceeding and any appeal therefrom and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and administrator of such person; provided that, except as provided in
Section 2 of this Article TWELFTH, the corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this Section 1 of this Article TWELFTH shall be a
contract right and shall include the right to have the corporation pay the
expenses incurred in defending any such proceeding in advance of its final
disposition; any advance payments to be paid by the corporation shall be paid
within 30 calendar days after the receipt by the corporation of a statement or
statements from the claimant requesting such advance or advances from time to
time; provided, however, that, if and to the extent the DGCL requires, the
payment of such expenses incurred by a director or officer in such person's
capacity as a director or officer (and not in any other capacity) in advance of
the final disposition of a proceeding, shall be made only upon delivery to the
corporation of an undertaking, by or on behalf of such director or officer, to
repay all amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this Article
TWELFTH or otherwise. The corporation may, to the extent authorized from time
to time by the Board of Directors, grant rights to indemnification, and rights
to have the corporation pay the expenses incurred in defending any proceeding
in advance of its final disposition, to any employee or agent of the
corporation to the fullest extent of the provisions of this Article TWELFTH
with respect to the indemnification and advancement of expenses of directors
and officers of the corporation.
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SECTION 2. RIGHT OF CLAIMANT TO BRING SUIT.
If a claim under Section 1 of this Article TWELFTH is not paid in full
by the corporation within 30 calendar days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred
in defending any proceeding in advance of its final disposition where the
required undertaking, if any is required, has been tendered to the corporation)
that the claimant has not met the standard of conduct which makes it
permissible under the DGCL for the corporation to indemnify the claimant for
the amount claimed, but the burden of providing such defense shall be on the
corporation. Neither the failure of the corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the claimant has met the
applicable standard of conduct set forth in the DGCL, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
SECTION 3. NON-EXCLUSIVITY OF RIGHTS.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
Article TWELFTH shall not be exclusive of any other right which any person may
have or hereafter acquire under any statute, provision of this Certificate of
Incorporation or any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise. No repeal or modification of this Article TWELFTH
shall in any way diminish or adversely affect the rights herein conferred on
any director or officer of the corporation, or any other person specified
herein, in respect of any occurrence or matter arising prior to any such repeal
or modification.
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SECTION 4. INSURANCE.
The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability
or loss under the DGCL.
SECTION 5. SEVERABILITY.
If any provision or provisions of this Article TWELFTH shall be held
to be invalid, illegal or unenforceable for any reason whatsoever: (i) the
validity, legality and enforceability of the remaining provisions of this
Article TWELFTH (including, without limitation, each portion of any paragraph
of this Article TWELFTH containing any such provision held to be invalid,
illegal or unenforceable, that is not itself held to be invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (ii)
to the fullest extent possible, the provisions of this Article TWELFTH
(including, without limitation, each such portion of any paragraph of this
Article TWELFTH containing any such provision held to be invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
[Signature appears on the following page]
21
<PAGE> 22
IN WITNESS WHEREOF, the undersigned, being the sole incorporator of
the above named corporation, has hereunto signed this Certificate of
Incorporation, this____day of September, 1998.
-------------------------------------
John E. Bagwell, III, Incorporator
22
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
<PAGE> 2
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
A Delaware Corporation
BYLAWS
------------------------
ARTICLE I
STOCKHOLDERS
SECTION 1.1 ANNUAL MEETING. An annual meeting of stockholders
for the purpose of electing directors and of transacting such other business as
may come before it shall be held each year at such date, time, and place,
either within or without the State of Delaware, as may be specified by the
Board of Directors.
SECTION 1.2 SPECIAL MEETINGS. Special meetings of stockholders
for any purpose or purposes may be held at any time exclusively upon call of
the Chairman or a majority of the total number of directors which the Board of
Directors of the corporation would have if there were no vacancies (the "Whole
Board"), at such time and place either within or without the State of Delaware
as may be stated in the notice.
SECTION 1.3 NOTICE OF MEETING. Written notice of stockholders'
meetings, stating the place, date, and hour thereof, and, in the case of a
special meeting, the purpose or purposes for which the meeting is called, shall
be given by the President or the Secretary to each stockholder entitled to vote
thereat at least ten days but not more than sixty days before the date of the
meeting, unless a different period is prescribed by law. Stockholders wishing
to submit a proposal or director nomination for consideration at a meeting of
the stockholders must provide advance written notice of such proposal to the
<PAGE> 3
Secretary of the corporation of not less than 30 days nor more than 60 days
prior to the meeting.
SECTION 1.4 QUORUM. Except as otherwise provided by law or in
the Certificate of Incorporation or these Bylaws, at any meeting of
stockholders, the holders of a majority of the outstanding shares of each class
of stock entitled to vote at the meeting shall be present or represented by
proxy in order to constitute a quorum for the transaction of any business. In
the absence of a quorum, a majority in interest of the stockholders present or
the chairman of the meeting may adjourn the meeting from time to time in the
manner provided in Section 1.5 of these Bylaws until a quorum shall attend.
SECTION 1.5 ADJOURNMENT. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting, the corporation may transact any business
which might have been transacted at the original meeting. If the adjournment
is for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
SECTION 1.6 ORGANIZATION. The Chairman shall call to order
meetings of stockholders and shall act as chairman of such meetings. The Board
of Directors or, if the Board fails to act, the stockholders may appoint any
stockholder, director, or officer of the corporation to act as chairman of any
meeting in the absence of the Chairman. The Secretary shall act as secretary
of all meetings of stockholders, but, in the absence of the
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<PAGE> 4
Secretary, the chairman of the meeting may appoint any other person to act as
secretary of the meeting.
SECTION 1.7 VOTING. Except as otherwise provided by law or in
the Certificate of Incorporation or these Bylaws and except for the election of
directors, at any meeting duly called and held at which a quorum is present, a
majority of the votes cast at such meeting upon a given question by the holders
of outstanding shares of stock of all classes of stock of the corporation
entitled to vote thereon who are present in person or by proxy shall decide
such question. At any meeting duly called and held for the election of
directors at which a quorum is present, directors shall be elected by a
plurality of the votes cast by the holders (acting as such) of shares of stock
of the corporation entitled to elect such directors.
ARTICLE II
BOARD OF DIRECTORS
SECTION 2.1 NUMBER AND TERM OF OFFICE. The business, property,
and affairs of the corporation shall be managed by a Board of Directors
consisting of no less than two directors. The number of directors may be fixed
from time to time exclusively pursuant to a resolution adopted by a majority of
the Whole Board (but may not be less than two). The Board of Directors shall
be divided into three classes, which are hereby designated Class A, Class B and
Class C. The term of office of the initial Class A directors shall expire at
the next annual meeting of stockholders, that of the initial Class B directors
at the second succeeding annual meeting of stockholders, and that of the
initial Class C directors at the third succeeding annual meeting of
stockholders. At each annual meeting after the initial classification of
directors, directors to replace those whose
3
<PAGE> 5
terms expire at such annual meeting shall be elected to hold office until the
third succeeding annual meeting. The directors shall be elected by the holders
of shares entitled to vote thereon at the annual meeting of stockholders, and
each shall serve until his respective successor has been elected and qualified.
Directors need not be stockholders.
SECTION 2.2 MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board. Special meetings of the Board of Directors shall be
held at such time and place as shall be designated in the notice of the meeting
whenever called by the President or by one of the directors then in office.
SECTION 2.3 NOTICE OF SPECIAL MEETINGS. The Secretary, or in his
absence any other officer of the corporation, shall give each director notice
of the time and place of holding of special meetings of the Board of Directors
at least twenty-four hours before the meeting, whether by mail, telegram,
cable, radiogram, telecopier, electronic mail, courier, or personal service.
No business may be transacted at any meeting without specification of such
business in the notice.
SECTION 2.4 QUORUM AND ORGANIZATION OF MEETINGS. A majority of
the total number of members of the Board of Directors as constituted from time
to time shall constitute a quorum for the transaction of business, but, if at
any meeting of the Board of Directors (whether or not adjourned from a previous
meeting) there shall be less than a quorum present, a majority of those present
may adjourn the meeting to another time and place, and the meeting may be held
as adjourned without further notice or waiver. Except as otherwise provided by
law or in the Certificate of Incorporation or these
4
<PAGE> 6
Bylaws, a majority of the directors present at any meeting at which a quorum is
present may decide any question brought before such meeting. Meetings shall be
presided over by the Chairman, or in the absence of the Chairman, by such other
person as the directors may select. The Secretary of the corporation shall act
as secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
SECTION 2.5 EXECUTIVE COMMITTEE. The Board, by resolution
adopted by a majority of the Board, may designate an Executive Committee of one
or more directors, which committee shall have all the powers and authority of
the Board except as otherwise provided in such resolution, Delaware General
Corporation Law, or any other applicable law. The members of the Executive
Committee shall serve at the pleasure of the Board. All action of the
Executive Committee shall be reported to the Board at its next meeting.
SECTION 2.6 OTHER COMMITTEES. The Board of Directors may, by
resolution passed by a majority of the Board, designate one or more other
committees, each committee to consist of one or more of the directors of the
corporation. Such committees shall have such powers as the Board of Directors
shall assign from time to time. The Board may designate one or more directors
as alternate members of any such committee, who may replace any absent or
disqualified member at any meeting of the committee. Each such committee which
may be established by the Board of Directors pursuant to these Bylaws may fix
its own rules and procedures. Notice of meetings of committees, other than of
regular meetings provided for by the rules, shall be given to committee
members. All action taken by committees shall be recorded in minutes of the
meetings.
5
<PAGE> 7
SECTION 2.7 ACTION WITHOUT MEETING. Nothing contained in these
Bylaws shall be deemed to restrict the power of members of the Board of
Directors or any committee designated by the Board to take any action required
or permitted to be taken by them without a meeting.
SECTION 2.8 TELEPHONE MEETINGS. Nothing contained in these
Bylaws shall be deemed to restrict the power of members of the Board of
Directors, or any committee designated by the Board, to participate in a
meeting of the Board, or committee, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
ARTICLE III
OFFICERS
SECTION 3.1 EXECUTIVE OFFICERS. The executive officers of the
corporation shall be a President, one or more Vice Presidents, a Treasurer, and
a Secretary, each of whom shall be elected by the Board of Directors. The
Board of Directors may elect or appoint such other officers (including a
Controller and one or more Assistant Treasurers and Assistant Secretaries) as
it may deem necessary or desirable. Each officer shall hold office for such
term as may be prescribed by the Board of Directors from time to time. Any
person may hold at one time two or more offices.
SECTION 3.2 POWERS AND DUTIES. The Chairman shall preside at all
meetings of the stockholders and of the Board of Directors. In the absence of
the Chairman, the President, or a Vice President appointed by the President or,
if the President fails to make such appointment, by the Board, shall perform
all the duties of the Chairman. The officers and agents of the corporation
shall each have such powers and authority and shall
6
<PAGE> 8
perform such duties in the management of the business, property, and affairs of
the corporation as generally pertain to their respective offices, as well as
such powers and authorities and such duties as from time to time may be
prescribed by the Board of Directors.
ARTICLE IV
RESIGNATIONS, REMOVALS, AND VACANCIES
SECTION 4.1 RESIGNATIONS. Any director or officer of the
corporation, or any member of any committee, may resign at any time by giving
written notice to the Board of Directors, the President, or the Secretary of
the corporation. Any such resignation shall take effect at the time specified
therein or, if the time be not specified therein, then upon receipt thereof.
The acceptance of such resignation shall not be necessary to make it effective.
SECTION 4.2 REMOVALS. (a) The board of Directors, by majority
vote, at any meeting thereof, or by written consent, at any time, may, to the
extent permitted by law, remove with or without cause from office or terminate
the employment of any officer or member of any committee and may, with or
without cause, disband any committee.
(b) Any director or the entire Board of Directors may be
removed with cause by the holders of a majority of all outstanding shares of
the corporation entitled to vote generally, voting together as a single class.
SECTION 4.3 VACANCIES. Any vacancy in the office of any director
or officer through death, resignation, removal, disqualification, or other
cause, and any additional directorship resulting from increase in the number of
directors, may be filled at any time
7
<PAGE> 9
by a majority of the directors then in office (even though less than a quorum
remains); provided, however, that in the case of any newly created directorship
or vacancy in the office of any director, the Board of Directors may require
that such newly created directorship or vacancy be filled by the stockholders
at a special meeting of the stockholders. Subject to the provisions of this
Article IV, the person so chosen shall hold office until his successor shall
have been elected and qualified, or, if the person so chosen is a director
elected to fill a vacancy, he shall (subject to the provisions of this Article
IV) hold office for the unexpired term of his predecessor.
ARTICLE V
CAPITAL STOCK
SECTION 5.1 STOCK CERTIFICATES. The certificates for shares of
the capital stock of the corporation shall be in such form as shall be
prescribed by law and approved, from time to time, by the Board of Directors.
SECTION 5.2 TRANSFER OF SHARES. Shares shall be transferable only
on the corporation's books, upon surrender of the certificate for the shares,
properly endorsed. The Board may require satisfactory surety before issuing a
new certificate to replace a certificate claimed to have been lost or
destroyed.
SECTION 5.3 FIXING RECORD DATE. In order that the corporation
may determine the stockholders entitled to notice of or to vote at any meeting
of stockholders or any adjournment thereof, or entitled to receive payment of
any dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion, or exchange of stock,
or for the purpose of any other lawful action, the Board of Directors may fix,
in advance, a record date, which, unless otherwise provided by law,
8
<PAGE> 10
shall not be more than sixty nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action.
SECTION 5.4 LOST CERTIFICATES. The Board of Directors or any
transfer agent of the corporation authorized by the Board of Directors may
direct a new certificate or certificates representing stock of the corporation
to be issued in place of any certificate or certificates theretofore issued by
the corporation, alleged to have been lost, stolen, or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate to
be lost, stolen, or destroyed. When authorizing such issue of a new
certificate or certificates, the Board of Directors (or any transfer agent of
the corporation authorized to do so by a resolution of the Board of Directors)
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to give the corporation a bond in
such sum as the Board of Directors (or any transfer agent so authorized) shall
direct to indemnify the corporation against any claim that may be made against
the corporation with respect to the certificate alleged to have been lost,
stolen, or destroyed or the issuance of such new certificates, and such
requirement may be general or confined to specific instances.
SECTION 5.5 REGULATIONS. The Board of Directors shall have power
and authority to make all such rules and regulations as it may deem expedient
concerning the issue, transfer, registration, cancellation, and replacement of
certificates representing stock of the corporation.
ARTICLE VI
MISCELLANEOUS
9
<PAGE> 11
SECTION 6.1 CORPORATE SEAL. The corporate seal shall have
inscribed thereon the name of the corporation and shall be in such form as may
be approved from time to time by the Board of Directors.
SECTION 6.2 FISCAL YEAR. The fiscal year of the corporation
shall begin on the 1st day of January in each year and terminate on the 31st
day of December in each succeeding year.
SECTION 6.3 NOTICES AND WAIVERS THEREOF. (a) Whenever any
notice whatever is required by law, the Certificate of Incorporation, or these
Bylaws to be given to any stockholder, director, or officer, such notice,
except as otherwise provided by law, may be given personally, by mail, or by
courier or, in the case of directors or officers, by telecopier, electronic
mail, telegram, cable, courier, or radiogram, addressed to such address as
appears on the books of the corporation. Any notice given by telecopier,
electronic mail, telegram, cable, or radiogram shall be deemed to have been
given when it shall have been transmitted and any notice given by mail or
courier shall be deemed to have been given when it shall have been deposited in
the United States mail with postage thereon prepaid or delivered to such
courier.
(b) Whenever any notice is required to be given by law, the
Certificate of Incorporation, or these Bylaws, a written waiver thereof, signed
by the person entitled to such notice, whether before or after the meeting or
the time stated therein, shall be deemed equivalent in all respects to such
notice to the full extent permitted by law.
SECTION 6.4 STOCK OF OTHER CORPORATIONS OR OTHER INTERESTS.
Unless otherwise ordered by the Board of Directors, the President, the
Secretary, or such attorneys or agents of the corporation as may be from time
to time authorized by the
10
<PAGE> 12
Board of Directors or the President shall have full power and authority on
behalf of this corporation to attend and to act and vote in person or by proxy
at any meeting of the holders of securities of any corporation or other entity
in which this corporation may own or hold shares or other securities, and at
such meetings shall possess and may exercise all the rights and powers incident
to the ownership of such shares or other securities which this corporation, as
the owner or holder thereof, might have possessed and exercised if present.
The President, the Secretary, or such attorneys or agents, may also execute and
deliver on behalf of this corporation powers of attorney, proxies, consents,
waivers, and other instruments relating to the shares or securities owned or
held by this corporation.
ARTICLE VII
AMENDMENTS
Except as otherwise provided by law or in the Certificate of
Incorporation or these Bylaws, the Bylaws of the corporation may be altered or
repealed and new Bylaws may be adopted either: (a) at any annual or special
meeting of stockholders, by the affirmative vote of the holders of a majority
of the voting power of the stock issued and outstanding and entitled to vote
thereat, provided that in the case of any such stockholder action at a special
meeting of stockholders, notice of the proposed alteration, repeal or adoption
of the new Bylaw or Bylaws must be contained in the notice of such special
meeting; or (b) by the affirmative vote of a majority of the Whole Board.
11
<PAGE> 1
Certified translation from the German language
page 1 of 14
Official Copy
/coat of arms/
OF THE DEED OF SEPTEMBER 18, 1997
OF THE NOTARY PUBLIC
DR. SIEGMAR MOSSNER
ULM (DANUBE)
FOR
CYBERNET Internet-Dienstleistungen AG, Berlin
________________________________________________________________________________
Register of Deeds No. 1218/1997
<PAGE> 2
Certified translation from the German language
page 2 of 14
Register of Deeds No. 1218/1997
Sale and Assignment of Business Shares
of the Artwise GmbH Software Losungen
On this day, September the eighteenth,
nineteen hundred and ninety seven
-09/18/1997-
there appeared before me,
Dr. Siegmar Mossner,
Notary Public in Ulm (Danube),
in my office rooms in Bahnhofstrassse 1 in Ulm (Danube):
1. Mr. Stefan Heiligensetzer, resident in Ottacker 17, 87477 Sulzberg,
2. Mr. Frank Marchewicz, resident in Wacholderweg 1, 73340 Amstetten,
3. Mr. Rolf Strehle, resident in Lindenstr. 5, 89194 Schnurpflingen,
4. Mr. Gerhard Schonenberger, resident in Jagerweg 13, 89264 Weissenhorn,
5. Mr. Lothar Bernecker, resident in Ludwig-Thoma-Str. 3, 89231 Neu-Ulm, and
6. Mr. Andreas Eder, with business address in Stefan-George-Ring 19, 81929
Munich.
The persons appearing identified themselves by means of official identification
papers with photographs.
The persons appearing under 1. to 5. declared to be acting on their own
behalves.
The persons appearing under 1. to 3. declared to be acting hereinafter with
regard to SECTION 9 of the present Deed not only on their own behalves, but
also on behalf of the Artwise GmbH Software Solutions with seat in Neu-Ulm,
registered in the Commercial Register of the Local Court of Memmingen under HRB
7269, in their capacities as its Managers having joint power of representation.
A certified extract from the register is annexed to this Deed as Appendix 1.
<PAGE> 3
Certified translation from the German language
page 3 of 14
The person appearing under 6. declared to be acting hereinafter not on his own
behalf, but on behalf of
1. CYBERNET Internet-Dienstleistungen AG with seat in Berlin, registered in the
Commercial Register of the Local Court of Charlottenburg under HRB 60318, in
his capacity as a Member of the Managing Board having joint power of
representation together with the Member of the Managing Board Rudof Strobl
represented by proxy. A certified extract from the register is annexed to
this Deed as Appendix 2, and
2. CYBERNET Internet-Beteiligungs GmbH under foundation, established by the
Deed of the Notary Public Dr. Martin Schuck in Munich of September 17, 1997
(Register of Deeds No. 2177/1997), in his capacity as a Manager having joint
power of representation together with the Manager Rudof Strobl represented
by proxy, expressly excluding the liability of the persons acting according
to Section 11 subsection 2 of the GmbHG, which the parties to this Deed
consent to.
Upon request of the parties simultaneously present, the Notary Public has drawn
up the present Deed:
SECTION 1 - SUBJECT MATTER
The persons appearing under 1. to 5. are the sole shareholders of the firm
Artwise GmbH Software Losungen (hereinafter referred to as the "Company")
having its seat in Neu-Ulm, registered in the Commercial Register of the Local
Court of Memmingen under HRB 7269. The Company has a registered share capital
of altogether DM 115,000.00, of which
<TABLE>
<CAPTION>
<S> <C>
Mr. Stefan Heiligensetzer holds a business share to the nominal amount of DM 35,000.00,
Mr. Frank Marchewicz holds a business share to the nominal amount of DM 35,000.00,
Mr. Rolf Strehle holds a business share to the nominal amount of DM 35,000.00,
Mr. Gerhard Schonenberger holds a business share to the nominal amount of DM 5,000.00,
and Mr. Lothar Bernecker holds a business share to the nominal amount of DM 5,000.00.
</TABLE>
The payments on the initial contributions have been fully made.
<PAGE> 4
Certified translation from the German language
page 4 of 14
SECTION 2 - SALE AND ASSIGNMENT
1. Hereby
MR. STEFAN HEILIGENSETZER,
MR. FRANK MARCHEWICZ,
MR. ROLF STREHLE,
MR. GERHARD SCHONENBERGER, and
MR. LOTHAR BERNECKER
-hereinafter individually or jointly referred to as the "Sellers"-
sell their business shares in the Company mentioned in Section 1 above to
CYBERNET INTERNET-DIENSTLEISTUNGEN AG
and
CYBERNET INTERNET-BETEILIGUNGS GmbH
-hereinafter individually or jointly referred to as the "Buyers"-
namely,
- - the persons appearing under 1. to 4. sell business shares to a nominal amount
of altogether DM 110,000.00 to CYBERNET Internet-Dienstleistungen AG, and
- - the person appearing under 5. sells his business share to the nominal amount
of DM 5,000.00 to CYBERNET Internet-Beteiligungs GmbH.
2. The persons appearing under 1. to 4. hereby assign business shares to a
nominal amount of altogether DM 110,000.00 to CYBERNET
Internet-Dienstleistungen AG and the person appearing under 5. hereby assigns
a business share to the nominal amount of DM 5,000.00 to CYBERNET
Internet-Beteiligungs GmbH. The Buyers hereby accept the assignments. The
assignments are subject to the condition precedent of paying the part of the
purchase price according to Section 3 Item 2.1 below to the amount of DM
475,500.00 and handing over the guarantees according to Section 3 Item 2.4
below to the Sellers.
Amount changed before the authentication./signature/(Mossner)
<PAGE> 5
Certified translation from the German language
page 5 of 14
3. Sale and assignment are made with effect from September 1, 1997 on
(hereinafter referred to as the "fixed date of transfer") and with all
rights and obligations. The profit right passes over to the Buyers with
effect from September 1, 1997 on. This shall also apply to all of the
other rights and duties in the internal relationships among the parties.
SECTION 3 - PURCHASE PRICE
1. The purchase price for the business shares mentioned in Section 1 above
to the nominal amount of altogether DM 115,000.00 amounts to
DM 1,585,000.00
(amount in words: one million five hundred and eighty-five thousand German
Marks)
Of said amount, a purchase price amounting to DM 1,521,600.00 for business
shares to a nominal amount of DM 110,000.00 shall be attributed to CYBERNET
Internet-Dienstleistungen AG and a purchase price amounting to DM
63,400.00 for business shares to a nominal amount of DM 5,000.00 shall be
attributed to CYBERNET Internet-Beteiligungs GmbH.
2. The purchase price shall be due and payable as follows.
2.1 A part of the purchase price amounting to DM 475,500.00 shall be due and
payable to a bank account to be jointly specified by the Sellers within
two weeks after the signing of this Contract.
2.1 A part of the purchase price amounting to DM 524,500.00 shall be due on
June 30, 1988. Instead of paying the amount, the Buyers can choose to
settle that part of the purchase price by transferring 30,853 shares of
Cybernet Internet Services International, Inc., Utah (listed on the outside
market of Berlin and Munich under the security identification number 906
623). The parties understand that the shares received by the Sellers can be
sold to an amount of 25% only after January 1, 1999, to an amount of
another 25% only after January 1, 2000, and to an amount of the remaining
50% only after January 1, 2001. The parties shall ensure the compliance
with these holding periods by concluding a trust agreement.
<PAGE> 6
Certified translation from the German language
page 6 of 14
2.3 A part of the purchase price amounting to DM 585,000.00 shall be due
within four weeks after the approval of the annual financial
statements of the Company as per December 31, 1997, according to Item
2.3.1 below, in any case not earlier than on June 30, 1998. That part
of the purchase price amounting to DM 585,000.00 may be reduced
according to Item 2.3.2 below, if applicable, and can be paid
according to Item 2.3.3 below.
2.3.1 The annual financial statements as per December 31, 1997 (hereinafter
referred to as the "financial statements of 1997") shall be audited by
Coopers & Lybrand Wirtschaftsprufungs GmbH in accordance with the
principles of proper accounting and immediately submitted to the
parties involved. Within a period of four week after the receipt of
the financial statements of 1997, Seller and Buyer can raise written
objections to the financial statements of 1997 with the respective
other party. If neither Buyer nor Seller raise any objections or if
the objections are recognized by the respective other party, the
financial statements of 1997 shall be considered approved by common
consent upon expiration of the 4-week period. Otherwise, an auditor
shall be nominated, upon the request of one of the parties, by the
Auditors' Institute e.V., Dusseldorf, who shall approve the financial
statements of 1997 with binding effect for both parties.
2.3.2 The part of the purchase price amounting to DM 585,000.00 may be
reduced, if applicable, according to the financial statements of 1997
approved under Item 2.3.1 above, as follows:
- If the net sales (without turnover tax) of the Company shown in
the financial statements of 1997 fall below the amount of DM
3,600,000.00, 50 per cent of the difference shall be deducted
from the part of the purchase price amounting to DM 585,000.00.
- If the annual deficit (without a possible value adjustment Look!,
Section 4.1) before taxes on income and proceeds exceeds the
amount of DM 58,000, 50 per cent of the difference shall be
deducted from the part of the purchase price amounting to DM
585,000.00.
Added before the authentication. /signature/ (Mossner)
The Buyers shall be obliged to run the Company's business till
December 31, 1997 to the best of their abilities. The business taken
over from Look! Multimedia GmbH shall be included into the annual
financial statements of the Company with effect from September 1, 1997
on.
<PAGE> 7
Certified translation from the German language
page 7 of 14
2.3.3 The part of the purchase price amounting to DM 585,000.00 or a part of
the purchase price as reduced under Item 2.3.2 above, if applicable,
shall be settled according to Item 2.2 above, the parties fixing,
already today, a value of DM 17.00 per share for the shares to be
transferred. Indivisible differences shall be settled cash.
2.4 In order to secure the parts of the purchase price under Items 2.2 and
2.3 above, the Buyers shall hand bank guarantees of the BHF-Bank AG
Berlin to the amounts of DM 524,500.00 and 585,000.00, respectively,
over to the Sellers within two weeks after signing this Sales Contract.
The bank guarantees thus handed over shall be returned to the buyer step
by step against the settlement of the respective part of the purchase
price.
SECTION 4 - WARRANTY
1. Within the meaning of an independent warranty promise, the Sellers
guarantee the Buyers the following (Section 305 of the BGB) as per the
fixed date of transfer (September 1, 1997) and this day of the
authentication of this Contract:
a) The business shares to be transferred exist and are not subject to any
encumbrance, sub-participation, restraint on disposal or other
obligations. The Sellers are unrestrictedly entitled to dispose of the
sold business shares. All approvals and permits for the conclusion and
execution of this Contract are present. All payments on the initial
contributions have been fully made.
b) The Company exists under the Shareholders' Agreement as amended on
June 5, 1992 and the addenda of August 16, 1995 and December 14, 1995
(Register of Deeds Nos. 639/1992, 1089/1995 and 1693/1995,
respectively, of the Notary Public Dr. Siegmar Mossner in Ulm/Danube);
that agreement including the above-mentioned addenda is complete,
there are no collateral agreements with regard to the company
relationship, except for the contracts with the dormant partners Dr.
Heinz Widmaier of February 10, 1996, Karl-Heinz Tropf of February 10,
1996 and Lothar Bernecker of February 1, 1996.
<PAGE> 8
Certified translation from the German language
page 8 of 14
c) The annual financial statements as per December 31, 1994, December 31,
1995, and December 31, 1996, handed over to the Buyer were prepared
according to the generally accepted principles of proper accounting
and balancing, preserving balance consistency, and approved by the tax
consultant Dr. Christof Coucoulis. These annual financial statements
and the business analyses handed over are accurate and complete and
give a correct picture of the financial situation as well as the
business results as per the respective dates of the balance sheets and
for the respective periods under review. The current values of the
individual assets corresponds at least to the amount stated in the
balance sheet (except for the claims against the Look! Multimedia
GmbH, cf. Letter e) below). The Company does not have any liabilities,
including imminent ones, other than the liabilities stated or covered
by reserves. During the period from January 1, 1997 to the fixed date
of transfer or this day of authentication, the Company has been
exclusively active within the framework of proper business dealings.
d) The Company disposes of a usable shareholders' equity under
corporation tax according to the separate declaratory decision of the
tax office of Neu-Ulm of January 2, 1996. Since the establishment of
the Company, there has not been any distribution of profits of the
Company. The last share of profits was paid out in 1995 for the year
of 1993 to an amount of about DM 145,000.00.
e) The Company is the owner of the assets stated in the financial
statements as per December 31, 1996 as well as of the assets that have
been acquired since that date of the balance sheet, with the exception
of those assets that were sold within the framework of proper business
dealings after December 31, 1996. The Company's assets are
unrestrictedly owned by the Company and are free from any third
party's rights. The Sellers do not guarantee the stability of the
value of the claims against the Look Multimedia GmbH amounting to ca.
DM 35,000.00 on the fixed day (DM 27,609.01 as per December 31, 1996)
and with regard to the claim under Letter l).
f) The Sellers handed the originals or copies of all contracts relevant
to the Company completely and correctly over to the Buyers.
Additions made before the authentication./signature/(Mossner)
<PAGE> 9
Certified translation from the German language
page 9 of 14
- --------------------------------------------------------------------------------
g) With the exception of the employment contracts with the persons
appearing regarding the persons appearing under 1 to 5 and the dormant
partners, there do not exist any contracts or agreements between the
Company and the Sellers or persons close to them.
h) The Company has not concluded any contracts involving profit- or
sales-related remuneration, shares in profit, etc., except for the
distribution agreement with the firm Maximilian Pothmann Computerdienst
of August 29, 1996 and the commission agreement with the firm Attinger,
Riess und Partner EDV Losungen of July 3/August 20, 1996. There do not
exist any commercial agency contracts or similar agreements under or
according to Section 89b of the HGB(1).
i) The Sellers handed the originals or copies of all employees' contracts
with the Company completely and correctly over to the Buyers. There do
not exist any other employment relationships, other agreements, works
agreements or obligations under works practice, except for those with
two part-time workers.
j) There do not exist any guarantees, sureties or similar encumbrances for
the Company. The Company is not liable due to a provision of securities
for third parties' liabilities. The Company has not made any promise to
grant a loan.
k) The Company is in the possession of all permissions and concessions or
licenses under public and private law required to carry on its business
operations as it does at present.
l) At present, the Company does not prosecute any actions, except for the
proving of a debt in bankruptcy (ref.-no. 2 N 126/97 of the Local Court
of Goppingen). There are neither pendant nor to be expected any
proceedings before administrative authorities or official investigative
proceedings against the Company.
m) The Company has filed all tax returns properly and in due time and paid
all due taxes or set aside sufficient tax reserves. Apart from that,
the Company does not have any tax arrears or tax risks. The wage taxes
and compulsory insurance contributions to be paid for the employees
have been properly determined, accounted and paid.
- -------------------
(1) Commercial Code
<PAGE> 10
Certified translation from the German language
page 10 of 14
- --------------------------------------------------------------------------------
n) The Company is not subject to any liabilities outside the ordinary
business transactions.
o) The spouses of the Sellers have consented to this Contract according to
Section 1365 of the BGB(2). The spouses' respective statements are
annexed to this Deed as Appendix 4.
2. In case of any inaccuracy or violation of one of the above-mentioned
warranties, the Sellers have to put the Buyers and the Company in such a
position as the Buyers and the Company would be in if the warranty was
accurate or not violated.
3. Without prejudice to Item 2 above, the Sellers have to indemnify the
Company against claims under any liability in connection with the
inaccuracy or violation of the above-mentioned warranties.
4. The Buyers can assert claims resulting from Items 2. and 3. above, if any,
until December 31, 1998, and in addition to that, they can assert claims
in connection with the execution of a tax field audit at the Company
within six months after the receipt of the legally valid assessment of
such tax field audit. For observing the deadline, it shall be sufficient
to inform the Seller about the claims in writing. After the receipt of
such notice, there shall run a one-year limitation period.
5. The provisions of Items 2. and 3. above shall not limit or exclude the
Buyers' legal claims and rights.
6. The above-mentioned obligations of the Sellers towards the Company
constitute a non-genuine contract for the benefit of the Company.
SECTION 5 - DUTY TO COOPERATE
1. Even after the fixed date of transfer, the Sellers shall assist the Buyers
to the best of their ability in taking over the enterprise. The Buyer or
the Company shall not pay to the Sellers a separate remuneration for such
assistance.
- --------------------
(2) German Civil Code
<PAGE> 11
Certified translation from the German language
page 11 of 14
2. As for the rest, both Sellers and Buyers are obliged to give all
information and to take part in all transactions and legal acts that are
necessary to perform this Contract.
3. The Sellers shall refrain from doing anything that might affect the
Company's right to use the firm name "Artwise GmbH" with or without any
additions.
SECTION 6 - PROHIBITION OF COMPETITION
1. The Sellers undertake, for a period of three years starting on the date of
authentication of this Contract, to refrain from any competition with the
Company or the Buyer in the previous territorial and material areas of
activity of the Company's object, in particular not to participate, whether
directly or indirectly, in competing enterprises, not to start to work with
a competing enterprise or promote such enterprise in any way, whether
directly or indirectly, by advise or action. For the purpose of this
prohibition of competition, the territorial area of activity shall mean the
Federal Republic of Germany, Austria and Switzerland; the material area of
activity, for the purpose of this prohibition of competition, shall mean
internet access services, internet system integration, internet
communication products and internet branch solutions.
2. The adherence to the prohibition of competition shall be compensated by the
payment of the purchase price.
3. Unless imperatively provided otherwise by law, the provisions of Section 74
ff.HGB shall not apply to this prohibition of competition.
4. In case of an infringement of the above-mentioned prohibition of
competition, the infringing Seller shall have to pay to the Buyers a
contractual penalty to the amount of DM 100,000.00. If such infringement is
continued in spite of a written warning given by the Buyers, a contractual
penalty amounting to DM 20,000.00 shall by payable for every further
started month of the infringement. This shall not affect the Buyer's rights
to claim compensation for further damage, if any, and to compel the Seller
to refrain from further acting against the prohibition.
<PAGE> 12
Certified translation from the German language
page 12 of 14
5. The above regulations shall not apply to individual Sellers if and to such
extent as the employment contract simultaneously concluded between the
respective Sellers and CYBERNET Internet-Dienstleistungen AG is terminated
or otherwise ended at the instigation of CYBERNET Internet-Dienstleistungen
AG before the end of 3 years after the conclusion of the contract, unless
CYBERNET Internet-Dienstleistungen AG has the right to an exceptional
termination of the employment contract.
SECTION 7 - JOINT AND SEVERAL OBLIGATION AND AUTHORIZED RECIPIENT
1. The Sellers are jointly and severally liable for the obligations under
Section 4 of this Deed. The CYBERNET Internet-Dienstleistungen AG is
jointly and severally liable for the obligations of the CYBERNET
Internet-Beteiligungs GmbH. As for the rest, the parties to this Contract
shall not be jointly and severally liable.
2. The Sellers hereby irrevocably authorize the
Lawyers Muhlbacher & Partner, Insel 13, 89231, Neu-Ulm,
to accept all declarations, in particular also services, and to receive
performance in connection with this Contract.
2. The Buyers hereby irrevocably authorize the
Lawyers Besner Kreifels Weber, Widenmayerstr. 41, 80538 Munich,
to accept all declarations, in particular also services, and to receive
performance in connection with this Contract.
SECTION 8 - GUARANTEES
The Buyers undertake that, by October 15, 1997, the Sellers under 1. to 3. will
be released from the guarantees to the amount of DM 210,000.00 given to the
Commerzbank Neu-Ulm.
<PAGE> 13
Certified translation from the German language
page 13 of 14
SECTION 9 - CONSENT TO THE ASSIGNMENT OF BUSINESS SHARES
The Company hereby declares its consent to the assignment of business
shares contained in this Deed, according to Section 10 of the Company's
Articles of Incorporation and the Shareholders' Resolution annexed to this Deed
in Appendix 3.
SECTION 10 - CONFIDENTIALITY
The parties shall be obliged to observe strict secrecy with regard to the
conclusion and the contents of this agreement, unless they are forced to
disclosure by law or according to this agreement.
SECTION 11 - RESCISSION OF PRELIMINARY CONTRACTS
This Contract shall replace any written or verbal declarations of intent
of the parties given in connection with contract negotiations, if any, even if
such declarations should deviate from the content of the above Contract.
SECTION 12 - COSTS
Either party shall bear itself the costs and fees of its advisers. The
costs of the notarization of this Contract shall be borne by the Buyer.
SECTION 13 - PLACE OF JURISDICTION
The place of jurisdiction and the place of performance is Munich as far as
this can be permissibly agreed.
<PAGE> 14
Certified translation from the German language
page 14 of 14
SECTION 14 - SAFEGUARDING CLAUSE
If any individual provisions of this agreement should be or become
partially or completely ineffective or unenforceable, this shall not affect the
remaining parts of the agreement. Instead of the ineffective or unenforceable
provision, a provision shall be regarded as agreed that comes as close as
possible to the meaning and purpose of the ineffective or unenforceable
provision, in particular to its intended economic purpose. The same shall
respectively apply to any gap in this Contract.
SECTION 15 - COPIES
-The parties to this Contract, and
-the Company
shall receive one certified copy of this Deed each, and
-the Munich Tax Office for Corporations
shall receive a simple copy of it.
Read to the persons appearing, approved and signed in person by them as
follows:
/signature/(Gerhard Schonenberger)
/signature/(Stefan Heiligensetzer) /signature/(Andreas Eder)
/signature/(Frank Marchewicz)
/signature/(Rolf Strehle)
/signature/(Lothar Bernecker)
I HEREBY CERTIFY THAT THIS IS A TRUE AND
COMPLETE TRANSLATION OF THE PRESENTED
GERMAN DOCUMENT (COPY). THIS TRANSLATION
CONTAINS 14 PAGES.
Berlin, September 3, 1998
Jochen Wendt
Graduate Interpreter/Translator for German, English, Portuguese
Generally Sworn Interpreter for the Courts and Notaries of Berlin
[NOTARY SEAL]
<PAGE> 1
[Stamped:] Certified copy
[Manuscript addition:] for REG
Register of deeds no. 2059/1998
SALE AND ASSIGNMENT OF SHARES IN
OPENNET INTERNET SOLUTIONS GmbH
1. Mr Thomas Egner, residing at Pfauengasse 10, 89073 Ulm/Donau,
2. Mr Uwe Hagenmeier, residing at Nelly-Sachs-Str. 44, 89134 Blaustein,
3. Mr Markus Kress, residing at Goerdelerweg 11, 89079 Ulm,
4. Mr Oliver Schaffer, residing at Leopoldstr. 109, 80802 Munich,
5. Mr Rudolf Strobl, whose business address is Stefan-George-Ring 19,
81929 Munich,
6. Mr Andreas Eder, whose business address is Stefan-George-Ring 19,
81929 Munich and
7. Mrs Dagmar Hagenmeier, resident at (see no. 2.).
appeared before me.
Dr. Hubert Grader
officially appointed representative of
Dr. Martin Schuck, (German) Notary, Munich
at his premises at Residenzstr. 19/20 in Munich,
on this, the twelfth day of August, nineteen hundred and ninety-eight
-12.08.1998-.
Those appearing proved their identity by presenting their official ID cards
containing a photograph.
The parties present as named under 1. to 4. declared that they were acting on
their own behalf.
[SEAL]
<PAGE> 2
2
The parties present as named under 5. and 6. declared that they were acting not
on their own behalf, but on behalf of
a) Cybernet Internet Dienstleistungen AG, with its registered office in
Berlin, entered in the commercial register [Handelsregister] at the Local
Court [Amtsgericht] of Charlottenburg under HRB 60318, as members of the
executive board with joint powers of representation; a certified extract
from the register WILL BE SUBMITTED LATER; and
b) Cybernet Internet-Beteiligungs GmbH, with its registered office in Munich,
entered in the commercial register at the Local Court [Amtsgericht] of
Munich under HRB 118164, as managing directors [Geschaftsfuhrer] with joint
powers of representation; a certified extract from the register WILL BE
SUBMITTED LATER.
At the request of the parties present at the same time, the notary recorded the
following memorandum of agreement:
SECTION 1 SUBJECT
1. The parties present as named under 1. to 4. are the sole shareholders of
Messrs. OpenNet Internet Solutions GmbH (hereinafter referred to as the
"company"), which has its registered office in Ulm and is entered in the
commercial register of the Local Court of Ulm under HRB 3109. The
registered share capital of the company totals DM 82,500, in which the
party present as named under no. 1. has share capital with a nominal value
of DM 25,000, the party present as named under no. 2. has share capital
with a nominal value of DM 25,000, the party present as named under no. 3
has share capital with a nominal value of DM 25,000 and the party present
as named under no. 4 has share capital with a nominal value of DM 7,500.
2. The initial capital contribution is fully paid-up.
SECTION 2 SALE AND ASSIGNMENT
1. The parties present as named under 1. to 4. (hereinafter referred to
individually or jointly as the "vendors") hereby sell their shares in the
company as specified under Section 1.
[SEAL]
<PAGE> 3
3
above, with a nominal total value of DM 82,500, to Cybernet Internet
Dienstleistungen AG and Cybernet Internet-Beteiligungs GmbH (hereinafter
also referred to individually or jointly as the "purchasers"), whereby the
parties present as named under 1. to 3. sell their shares with a nominal
value of DM 25,000 each to Cybernet Internet Dienstleistungen AG and the
party present as named under 4. sells his shares with a nominal value of DM
7,500 to Cybernet Internet Beteiligungs GmbH.
2. The vendors hereby assign their shares specified under Section 1
above, with a nominal total value of DM 82,500, to the purchasers, whereby
the parties present as named under 1. to 3. assign their shares with a
nominal value of DM 25,000 each to Cybernet Internet Dienstleistungen AG
and the party present as named under 4. assigns his shares with a nominal
value of DM 7,500 to Cybernet Internet Beteiligungs GmbH. The assignments
are conditional on payment of the purchase price in accordance with Section
3 below. The purchasers accept the assignments.
3. The sale and assignment are effective from 15 August 1998 (hereinafter
referred to as the "reference date of transfer"), with all rights and
obligations. The right to participate in profits for the current financial
year will be transferred to the purchasers with effect from 1 January
1998. Any profit for the 1997 financial year will be carried forward and
not paid out to the vendors. The company will pay any taxes.
4. The parties present as named under 1. and 2. have receivables from loans
totalling DM 125,000 against the company. The receivables from loans are
hereby assigned to the purchasers, on condition that the purchase price is
paid in accordance with Section 3 below. The purchasers accept the
assignment.
SECTION 3 PURCHASE PRICE
1. The purchase price for the shares specified in Section 1 above, with a
nominal total value of DM 82,500, is to be settled by the purchasers by
payment of a cash amount totalling
DM 1,445,000
(IN WORDS: ONE MILLION, FOUR HUNDRED AND FORTY-FIVE THOUSAND DEUTSCHMARKS)
[SEAL]
<PAGE> 4
4
and by transferring a total of 58,825 shares (common stock) in Cybernet
Internet Services International, Inc., Utah, quoted in semi-official
trading in Berlin and Munich under security identification no. 906 623
(hereinafter referred to as "Cybernet shares" to the vendors, in accordance
with Appendix 1.
2. A DM 420,000 instalment of the cash amount of DM 1,445,000 will be due for
payment to an account to be specified jointly by the vendors, within two
weeks of receipt by the purchaser of a shareholders' resolution in
accordance with Section 9 below, and a further instalment of DM 1,025,000
will be due on 30 November 1998.
3. The Cybernet shares must be assigned by the purchasers to the HYPO-Bank Ulm
as trustee within six weeks of receipt by the purchasers of a shareholders'
resolution in accordance with Section 9 below. The parties agree that the
quantity of 25% of Cybernet shares received from the vendors may not be
assigned or sold until after 10 February 1999, nor a further 25% until
after 10 August 1999, nor a further 25% until after 10 February 2000, nor
the remaining 25% until after 10 August 2000. The parties will guarantee
compliance with the minimum periods for holding the shares by concluding a
trust agreement with the trustee. Assignment of the shares to the trustee
will be deemed fulfilment within the meaning of Section 2 no. 2 sentence 2
above, i.e. the suspensive condition thus becomes effective (subject to
payment of a cash amount in accordance with no. 2 above).
4. The purchase price for the receivables from loans specified in Section 2
no. 4 above is DM 125,000 and will be due as soon as the receivable of the
party present as named under 4. totalling DM 124,600 has been paid by the
company.
SECTION 4 GUARANTEE
1. The vendors guarantee the purchasers the following within the meaning of an
independent guarantee undertaking (Section 305 of the German Civil Code
[BGB] by the reference date of assignment (15 August 1998), and by the date
specified below:
a) The shares to be assigned do not comprise and are not subject to any
charges, indirect holdings, restrictions on disposal or other
obligations. The vendors are entitled to dispose of the shares sold,
without restriction. All agreements and
[SEAL]
<PAGE> 5
5
approvals for the conclusion and implementation of this contract are
available or will be provided by the vendors in accordance with
Section 9 of this deed. The initial capital contribution has been
fully paid-up.
b) The company exists on the basis of the memorandum and articles of
association in the version of 30 June 1998 (register of deeds no.
S 1254 of Hartmut Stache, German Notary, Gunzburg). This contract and
the aforementioned supplements are complete. There are no subsidiary
agreements in respect of the company.
c) The annual accounts to 31 December 1996 and the management figures to
31 December 1997 and 30 June 1998 (including a trial total and
balance) have been drawn up in accordance with generally accepted
accounting and balance sheet principles, observing the principle of
balance sheet consistency, and the annual accounts to 31 December 1996
have been audited by Werner Baumann, Uhl und Partner GmbH,
Accountants, Gunzburg. The annual accounts and management figures are
accurate and complete and reflect the financial position and trading
results on the reference date of the balance sheet and for the
specified periods correctly. This applies to the management figures
purely within the scope of customary diligence. The company has no
other liabilities, and none looming, other than those shown or covered
by reserves. The company has operated in the period from 30 June 1998
to the reference date of assignment or the present date of
notarisation exclusively within the scope of proper business
activities. The company's bank loans on the reference date of
assignment totalled around DM 250,000. The purchasers have received a
summary of loans/liabilities and their balancing receivables.
d) The audited annual accounts to 31 December 1998 drawn up in
accordance with existing accounting principles show sales revenue of
approx. DM 3,000,000 and no balance sheet loss, conditional upon
unhampered business trends.
e) The company owns the assets required for normal business activities,
with the exception of those which were sold after 30 June 1998 within
the scope of ordinary business transactions and which are leased by
the company under standard agreements. The company's assets are in its
unrestricted ownership, unencumbered by third party rights.
[seal]
<PAGE> 6
6
f) The vendors have surrendered all contracts essential to the company
(ECRC contract, leases, deed of purchase pertaining to Messrs. Allgau
Connect) to the purchasers in full and correctly, as originals or
copies. The list of corporate clients submitted to the purchasers by
the vendors is complete and correct.
g) No contracts or agreements exist between the company and the vendors
or persons associated with them, with the exception of contracts of
employment and vehicle leasing contracts.
h) The company has concluded no contracts with profit- or
turnover-dependent remuneration, bonuses, etc., with the exception of
the agreements with Jochen Stricker, Martin Winter and Anton
Wurflingsdobler and the contracts of employment with the parties
present as named under 1. and 2. No sales representative or similar
agreements exist with future claims under or in accordance with
Section 89 b of the German Commercial Code [HGB].
i) The vendors have submitted a comprehensive, accurate list of all
employees of the company to the purchasers, specifying the job title
and annual salary. No other contracts of employment, other
agreements, labour-management agreements or obligations based on
operational practice exist.
j) No guarantees, bonds or similar encumbrances exist for the company,
with the exception of a guarantee for around Dm 40,000 in respect of
the leased company premises. The company has no liabilities arising
from the provision of securities for third party liabilities. The
company has not provided any loan commitments.
k) The company has all approvals, concessions and licences under public
and civil law for conducting its current business operations.
l) The company is not conducting any lawsuits at present, with the
exception of one action (assertion of claims against another party)
before the Munich Local Court. No proceedings before administrative
authorities or official examining proceedings against the company are
either pending or anticipated.
m) The company has submitted all tax returns properly and in good time,
and paid all taxes due, or created adequate tax reserves. Nor does
the company have any tax arrears, nor has it incurred any tax risks.
Income tax payments and social
[seal]
<PAGE> 7
7
security contributions to be made for staff have been properly assessed,
deducted and paid.
n) The company has no liabilities beyond the scope of normal business
activities.
o) The wife of the party present as named under 2., Mrs Dagmar Hagenmeier,
consents to the contract in accordance with Section 1365 of the German
Civil Code [BGB].
2. Should any of the above guarantees be incorrect or infringed, the vendors
must place the purchasers and the company in the position in which they would
have been if the guarantee had not been incorrect or infringed.
3. Notwithstanding the provision of no. 2. above, the vendors must indemnify
the company against any claim arising from liabilities relating to the
incorrectness or infringement of the above guarantees.
4. The purchasers may assert any claims arising from nos. 2. and 3. above until
30 June 1999. In addition, claims relating to implementation of an external
tax audit in respect of transactions prior to the reference date of the
takeover must be asserted with the company within six months of receipt of
the legally-valid information based on such an external tax audit. For the
deadline to be met, it is sufficient if the vendors are advised of the claims
in writing and the claims are asserted before the courts within a further
period of three months.
5. The stipulation of nos. 2. and 3. above does not restrict or preclude the
purchaser's statutory claims and rights.
6. Claims by the purchaser under the above stipulations are limited to the
amount of the purchase price, if and insofar as this has been paid (in
respect of the Cybernet shares, the current spot price on the Munich Stock
Exchange is decisive.)
SECTION 5 DUTY TO COOPERATE
1. The vendors will support the purchasers appropriately, even after the
reference transfer date. No separate remuneration will be paid by the
purchasers or the company to the
[SEAL]
<PAGE> 8
8
vendors for this, beyond the scope of any contracts of employment for
managing directors.
2. The vendors and purchasers will be otherwise obliged to provide any
information and cooperate in all transactions and lawful acts required
for implementation of this contract.
3. The vendors will refrain from doing anything which could adversely
affect the right of the company or the purchasers to use the firm name
"OpenNet" with or without any additions.
SECTION 6 PROHIBITION OF COMPETITION
1. The vendors undertake to refrain from any competition with the company or
the purchasers for a period of two years from the date of notarisation of
this contract, in the existing geographical and technical fields of activity
of the purpose of the company, particularly from taking a direct or indirect
holding in competing companies, from entering the services of a competing
company or from supporting such a company directly or indirectly in any other
way with advice or assistance. The geographical field of activity within the
meaning of this prohibition of competition is the Federal Republic of
Germany, Austria and Switzerland. The technical field of activity within the
meaning of this prohibition of competition is Internet access services,
Internet systems integration, Internet communications products and Internet
sectoral solutions. This prohibition of competition does not include the
activities and shareholdings of the vendors in Openshop Internet Software
GmbH and companies associated therewith at present or in future in the field
of software development for electronic commerce and associated project
developments.
2. Compliance with the prohibition of competition will be discharged by payment
of the purchase price.
3. In the absence of any legal stipulation to the contrary, the provisions of
Section 74 et seq. of the German Civil Code [BGB] will not apply to this
prohibition of competition.
4. Should the vendor infringe this prohibition of competition, it must pay the
purchaser a contractual penalty of DM 100,000 each and every case of
infringement. Should
[SEAL]
<PAGE> 9
9
infringement continue, despite a written warning from the purchaser, a
contractual penalty of DM 20,000 will be payable for each further month of
infringement, or part thereof. The purchaser's claims for compensation for any
further losses and for forbearance from any further behaviour which infringes
the prohibition will remain unaffected.
SECTION 7 JOINT AND SEVERAL LIABILITY
The vendors on one hand and the purchasers on the other will be jointly and
severally liable for the obligations arising from this deed. The liability of
the vendors, however, will be restricted to the purchase price which they have
received in accordance with Appendix 1. The vendors will not be jointly and
severally liable for their obligations arising from Section 6 above.
SECTION 8 GUARANTEES
The purchasers undertake to ensure that the vendors are discharged from their
guarantees for the company's bank loans from the Ulmer Volksbank or for leasing
agreements by 30 November 1998.
SECTION 9 CONSENT TO ASSIGNMENT OF THE SHARES
Under Section 8 of the memorandum and articles of association of the company,
the assignments of shares covered by this deed require a shareholders'
resolution of consent, a copy of the record of which is appended hereto as
Appendix 2.
SECTION 10 CONFIDENTIALITY
The parties will be obliged to observe the strictest confidentiality of the
conclusion and content of this agreement, unless they are required to make any
disclosure by law or on the basis of this agreement or the parties agree
something different in individual cases.
[SEAL]
<PAGE> 10
10
SECTION 11 CANCELLATION OF THE PROVISIONAL CONTRACT
This contract replaces all written and verbal declarations of intent by the
parties pertaining to any contractual negotiations, including insofar as such
declarations may deviate from the content of this contract.
SECTION 12 COSTS
Each party will bear the costs and fees for its advisers itself. The purchasers
will bear the costs of notarisation of this contract.
SECTION 13 COURT OF JURISDICTION
The court of jurisdiction and the place of performance in Munich, insofar as
such an agreement is admissible.
SECTION 14 SEVERANCE CLAUSE
Should individual provisions of this agreement be or become invalid or
impractical in whole or in part, the validity of the remainder of the agreement
will remain unaffected. A stipulation which reflects the sense and purpose of
the invalid or impractical stipulation as far as possible, particularly the
economic purpose thereby intended, will be deemed to be agreed in place of the
invalid or impractical one. This will apply analogously to any omissions from
this contract.
SECTION 15 COPIES
A certified copy of the deed shall be handed out to
- - the contracting parties
- - the company,
[SEAL]
<PAGE> 11
11
and a simple copy to
- - the Ulm Tax Office for Corporations
SECTION 16 MISCELLANEOUS
Pursuant to the Vendor's statement the company does not own any real property.
Memorandum of agreement together with two
appendices read aloud by the deputy notary,
approved by the persons involved and
signed in person:
[illegible signature] [illegible signature]
[illegible signature] [illegible signature]
[illegible signature]
[illegible signature] [illegible signature]
[illegible signature] Deputy Notary
[round stamp: Dr. Martin Schuck,
German Notary, Munich]
[SEAL]
<PAGE> 12
SALE AND ASSIGNMENT OF SHARES IN OPEN/NET INTERNET SOLUTIONS GMBH TO CYBERNET
AG AND TO CYBERNET BETEILIGUNGS GMBH
Purchase price for the shares with a nominal value of DM 82,500.--
DM 1,445,000.--(ONE MILLION, FOUR HUNDRED AND FORTY-FIVE THOUSAND) IN CASH
AND A TOTAL OF 58,825 SHARES OF STOCK
of Cybernet Internet Services International, Inc.
(security identification number 906 623).
The apportionment of the purchase price to the shareholders in accordance with
their shares and in accordance with their own ideas with regard to the cash and
shares of stock.
Thomas Egner:
Share with a nominal value of DM 25,000, purchase price DM 310,000.-- cash and
20660 shares of stock.
Uwe Hagenmeier:
Share with a nominal value of DM 25,000, purchase price DM 310,000 cash and
20660 shares of stock.
Markus Kress:
Share with a nominal value of DM 25,000.--, purchase price DM 825,000 cash and
9200 shares of stock.
Oliver Schaffer:
Share with a nominal value of DM 7,500.--, purchase price 8332 shares of stock
[SEAL]
<PAGE> 13
MINUTES OF A SHAREHOLDERS' MEETING OF
OPENNET INTERNET SOLUTIONS GmbH
We, the undersigned Thomas Egner, Uwe Hagenmeier, Markus Kress and Oliver
Schaffer are the sole shareholders of OpenNet Internet Solutions GmbH, with its
registered office in Ulm, entered in the commercial register of the Ulm Local
Court [Amtsgericht] under HRB 3109.
Waiving any and all requirements as to form and deadlines we hold a
shareholders' meeting and pass the following unanimous resolution:
1. The assignment of all shares with a nominal value of DM 82,500 in total to
Cybernet Internet Dienstleistungen AG and to Cybernet Internet Beteiligungs
GmbH with the deed of the German Notary, Dr. Martin Schuck dated 12 August
1998 (register of deeds no. 2059/1998) shall hereby be approved.
2. The company and all shareholders hereby waive their right of purchase
pursuant to Section 8 of the company's by-laws.
The shareholders' meeting is closed.
Munich, 12 August 1998
[illegible signature] [illegible signature]
Thomas Egner Uwe Hagenmeier
[illegible signature] [illegible signature]
Markus Kress Oliver Schaffer
[SEAL]
<PAGE> 14
CERTIFICATE OF REPRESENTATION
as to the document of the German Notary, Dr. Martin Schuck
dated 12 August 1998 - Register of deeds no. 2059/1998
With regard to the above document I, German Notary, certify - after having
inspected the commercial register at the Munich Local Court [Amtsgericht] today
- - that
Cybernet Internet-Beteiligungs GmbH
with its registered office in Munich
has been registered in the commercial register HRB-No. 118164 and has been
represented during recording by Mr. Rudolf Strobel and Mr. Andreas Eder as its
managing directors [Geschaftsfuhrer] with legal effect.
Munich, 13 August 1998
[round stamp:
Dr. Martin Schuck,
German Notary, Munich] [illegible signature]
German Notary
Dr. Schuck
[SEAL]
<PAGE> 15
Certified to be a true copy of the original.
Munich, 14 August 1998
[illegible signature]
Dr. Schuck
German Notary
[SEAL]
<PAGE> 16
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court of Landshut
(Landgericht Landshut) I hereby certify that the foregoing is a true and
complete English translation of a photocopy of the document in the German
language submitted to me.
Als vom Prasidenten des Landgerichts Landshut offentlich bestellte und allgemein
beeidigte Ubersetzerin fur die englische Sprache bestatige ich: Vorstehende
englische Ubersetzung der mir in Photokopie vorgelegten, in deutscher Sprache
abgefassten Urkunde ist richtig und vollstandig.
Landshut, Federal Republic of Germany,
26 August 1998
/s/ Birgit Pleier
- -------------------------
Birgit Pleier
Sworn translator
[SEAL]
<PAGE> 1
PRIVATE AGREEMENT
FOR THE SALE OF COMPANY SHAREHOLDINGS
AND INCREASE OF SHARE CAPITAL
In the year 1997, on this fourth day of the month of December, in Munich
(Germany) between the undersigned parties Cybernet Internet Dienstleistung ag,
resident in Munich (Germany) in Stefan George Ring, in the person of Mr.
Alessandro Giacalone, by virtue of the power of attorney of the Board of
Cybernet conferred on 27.11.1997, subsequently indicated as Cybernet or the
Buyer for brevity;
on one side and
Mr. Roberto Loro, born in Vicenza and resident in Rovereto (TN) in Via
Firmian 4, tax identification No.
Stefano Longano, born in Bolzano (BZ) on 8th July 1962, resident in Rovereto
(TN) Viale Trento 1, tax identification No.
Domenico Loro, born in Dolce (VR) on 29th September 1938, resident in Rovereto
(TN), Via Firmian 4, tax identification No.
Angelo Longano, born in Trento (TN) on 21st July 1933, resident in Rovereto
(TN) Viale Trento 1, tax identification No.
Emma Pontara, born in Rovereto (TN) on 08.05.1938, resident in Rovereto (TN),
Via Firmian 4, tax identification No.
Maria Teresa Francesconi, born in Brentonico (TN) on 29th January 1934,
resident in Rovereto (TN) Viale Trento 1, tax identification No.
Mauro Longano, born in Bolzano (BZ) on 29th August 1963, resident in Rovereto
(TN) Via Salita del Dosso 50, tax identification No.
subsequently indicated as the sellers, on the other side.
PREFACE
A) that Cybernet is interested in acquiring 66% of the shares of Eclipse Srl
with registered offices in Rovereto (TN) in Via Salita del Dosso, 50,
registered No. 131332 at the Trento Chamber of Commerce, Industry and
Agriculture;
b) that Eclipse srl currently has a fully paid up share capital of Italian Lire
60,000,000.-(sixty million);
<PAGE> 2
c) that Patrizia Loro, Roberto Loro e Stefano Longano are the owners of a total
of 58% of the shares of Eclipse srl;
d) that the remaining 42% of the company shares, already owned by third
parties, have been bought by Domenico Loro, Angelo Longano, Emma Pontara, Maria
Teresa Francesconi e Mauro Longano in the interests of and in agreement with
Patrizia Loro, Roberto Loro, Stefano Longano through an act dated 17.11.1997
(acts dated 17.11.1997 of the notary Bombardelli, Bolzano, files
73664-73665-73666);
e) that the buying price of the 42% of the company shares was altogether
Italian Lire 120.000.000. = and the current composition of the share capital is
as follows: Stefano Longano 34% (20,400 shares), Roberto Loro 20%, Patrizia
Loro 4%, Domenico Loro 9%, Angelo Longano 9%, Emma Pontara 9%, Maria Teresa
Francesconi 9%, Mauro Longano 6%.
Given the foregoing,
WE AGREE AND STIPULATE AS FOLLOWS
A) SALE OF THE COMPANY SHARES
1. Domenico Loro, Angelo Longano, Emma Pontara, Maria Teresa Francesconi e Mauro
Longano undertake to sell to Cybernet, who accepts, the entire shareholding
which they own, 42% of the total.
2. Roberto Loro e Stefano Longano undertake to sell to Cybernet which accepts,
part of their shareholding, to the extent of 24% of the total.
3. the sale of the shareholding at the previous points 1 and 2 will take place
contextually and without postponement by and not after 30.12.1997 by act of the
Notary Falqui, Rovereto; the date of 30.12.1997 replaces and extends
definitively to all effects the previous date established as 30.11.1997.
4. The sum to be paid for the sale of 66% of the shares is agreed at Italian
Lire 303.600.000 to be paid as follows:
4.1 Italian Lire 120.000.000 on the first working day after the signing of this
act via credit transfer to current account No. 10196/2 of the Cassa Rurale di
Rovereto Bank, Rovereto branch (TN), Via Manzoni, 1 ABI 08210-CAB 20800;
<PAGE> 3
4.2 The balance of Italian Lire 183,600,000 will be transferred by the day
after the signing of the share sale act. The transfer of the shares shall be
considered final and definitive only at the moment when the sum is credited at
the Banca Italiana bank.
5. Once the sale of the shares has been completed the parties undertake to
convene an extraordinary shareholders' meeting to deliberate:
- - the modification of the business purpose and statute;
- - the transformation of the company from srl to spa;
- - the increase in share capital;
- - the resignation of the sole director and the election of a board of directors;
- - the election of the executive committee.
The Board of Directors will be composed of the chairman (from Cybernet) and six
directors (three from Cybernet, three from Eclipse one of whom with the powers
of managing director).
The executive committee will be composed of three members (from Eclipse).
6) The sellers declare and guarantee as follows:
6.1 The Eclipse company is in possession of all the requisites required by
Italian Law to operate on the market, its company structure complies with the
norms in force, it possesses 32% of the share capital of Sextant with
registered offices in Bologna for which negotiations are going on for the sale
of the shares, there are no share or other agreements which could affect or
condition the business.
6.2 The share capital of Eclipse underwritten and fully paid up, comes to a
total of Italian Lire 60,000,000. = and has not suffered reductions.
6.3 The shareholdings of the present undertaking are the full and exclusive
property of the sellers, are not under any seizure order or affected by any
restrictions.
6.4 The balance sheets comply with Italian standards and the accounting books
are formally and substantially reliable, so that the situation which emerges as
regards profit and loss is absolutely truthful. At 31st December 1997 it is
presumed that the balance sheet will close in the following position:
capitalisation: Italian Lire 73,468,000 =
(share capital 60,000,000 = and reserves 13,468,000)
<PAGE> 4
- - turnover Italian Lire 1,200,000,000.=
- - gross profit Italian Lire 50,000,000.=
6.5 There are no disputes or lawsuits pending.
6.6 All contracts underwritten and obligations undertaken by the company are
listed in the attachments 2-3-4-5-6-7-8-9.
6.7 All the software owned by the company, or used by it under licence for its
business, and the relative contracts, are listed in attachment 10.
6.8 Eclipse Srl does not own any real estate property. Any and all rental
contract copies are delivered to the buyer.
6.9 Eclipse Srl is the owner or tenant of all the goods and equipment used for
its business.
6.10 Eclipse Srl has regularly presented all the declarations of a fiscal nature
due under Italian Law and has consequently regulated each related situation.
There are no matters pending of a fiscal nature of any kind.
6.11 The list of employees supplied by Eclipse (Attachment 1) is complete and
exhaustive and no other work relationships of an employed nature are in force.
6.12 There are no outstanding salary back payments, severance payments,
pensions, bonuses or benefits of any kind to employees or freelance workers.
6.13 Eclipse Srl does not own trademarks, patents, authors rights etc.
6.14 None of the selling shareholders have granted or grant their goods,
services or advantages to Eclipse in relation to its business purpose, beyond
their own work.
<PAGE> 5
7. The sellers shall indemnify the buyer for any damage, loss or expense
deriving from false declarations, violations of guarantee or non compliance
with the agreements which should take place within one year of the definitive
sale of the shares.
8. The sellers will respond, for a period of five years from the sale of the
shares, for any damage, loss, expense or taxation expense which should derive
from previous business.
9. For a period of 3 (three) years from the act of sale of the shares Patrizia
Loro, Robert Loro e Stefano Longano shall not carry on business in direct or
indirect competition with Eclipse either on their own account or with a company
in which they are co-owners or administrators. For the same period the non
competition agreement must also be observed by the buyers.
For each violation of the non competition agreement the non complying seller
shall pay a penalty of Italian Lire 100,000,000. (one hundred million) to the
buyer; each two week period of continued violation will be considered an
independent case of violation.
10. Cybernet and those giving him cause, since they hold the majority on the
board of directors of Eclipse srl, undertake to employ directly or have
Patrizia Loro, Robert Loro and Stefano Longano employed by Eclipse for a period
of at least three years, that is from 01.01.1998 to 31.12.2000, as directors of
the company, with a net initial salary of not less than Italian Lire 57,000,000.
= (fifty seven million) per annum, excluding expenses and any other benefits
which the shareholders of Eclipse Srl may wish to confer following good business
results. The contract may be reviewed on annually on the basis of the cost of
living index (ISTAT index) and the results of the company management.
At least six months before the expiry of the three year period the Board of
Directors of Eclipse shall communicate with each individual director regarding
the extension or not of the working relationship after the end of the three
year period.
<PAGE> 6
11. Until 31.12.2000 Cybernet undertakes not to make any changes to the company
statute, not to increase the share capital, not to transfer the registered
offices and whatever else is not necessary to protect the interests of the
company, if the decision is not approved by at least 80% (eighty) of the
shareholdings.
B) INCREASE IN SHARE CAPITAL
1. The parties, with the exception of the outgoing shareholders, undertake to
underwrite, contextually at the act of sale, 66% of the company shares to the
buyer, an increase in share capital of Eclipse.
2. The new share capital is agreed in the amount of Italian Lire
600,000,000-=(six hundred million), so that the outlay of Cybernet will come to
Italian Lire 356,400,000.=(three hundred and fifty six million, four hundred
thousand), and the outlay of Patrizia Loro, Roberto Loro e Stefano Longano will
be Italian Lire 183,600,000.=(one hundred and eighty three million six hundred
thousand) altogether.
3. Payment of the above capital shall be made in successive phases by the
31.12.1998, as deliberated at the shareholders' meeting, bearing in mind the
financial requirements of Eclipse.
Read, approved and undersigned.
signatures
Domenico Loro
who acts on his own and as solicitor for:
Longano Angelo, born in Trento (TN) on 21st July 1933, resident in Rovereto
(TN) Viale Trento 1, pensioner, tax identification No.
Francesconi M. Teresa, born in Brentonico (TN) on 29th January 1934, resident
in Rovereto (TN) Viale Trento 1, pensioner, tax identification No.
<PAGE> 7
on the special attorney dated 2nd December 1997 No, 124333 of the notary public
Dr, Guido Falqui-Massidda of Rovereto;
Roberto Loro, born in Vicenza (VI) on 19th November 1965, resident in Rovereto
(TN), Via Firmian 4, tax identification No.
Longano Stefano, born in Bolzano (BZ) on 8th July 1962, resident in Rovereto
(TN) Viale Trento 1, tax identification No.
Loro Patrizia, born in Rovereto (TN) on 20th December 1967, resident in
Rovereto (TN), Via Firmian 4, tax identification No.
La traduttrice
/s/ Patrizia Loro
- ------------------
Patrizia Loro
[SEAL]
PRETURA CIRCONDARIALE DI ROVERETO
VERBALE DI ASSEVERAZIONE
Il giorno 6/08/1998 avanti al sottoscritto Collaboratore di Cancelleria della
Pretura di Rovereto e personalmente comparsa la Signorina Patrizia Loro, nata a
Rovereto (TN) il 20.12.1967 ed ivi residente in Via Firmian n.4, la quale mi
chiede di asseverare mediante giuramento la suestesa traduzione. Ammonita ai
sensi di legge la stessa presta il giuramento di rito, ripetendo la formula:
"Giuro di avere bene e fedelmente proceduto alle operazioni affidatemi al solo
scopo di far conoscere al Giudice la verita".
Del che e redatto il presente verbale che previa lettura e conferma viene
sottoscritto come appresso.
La Traduttrice
/s/ Patrizia Loro
- -------------------
Patrizia Loro
[SEVERAL SEALS]
<PAGE> 8
SALE OF HOLDING IN A LIMITED COMPANY
Parties:
Domenio Loro, born in Dolce (VR) on 29th September 1938, resident in Rovereto
(TN), Via Firmian 4, accountant, tax identification No. who acts on his
own and as solicitor for:
Emma Pontara, born in Rovereto (TN) on 8th May 1938, resident in Rovereto (TN),
Via Firmian 4, teacher, tax identification No.
Angelo Longano, born in Trento (TN) on 21st July 1933, resident in Rovereto (TN)
Viale Trento 1, pensioner, tax identification No.
Maria Teresa Francesconi, born in Brentonico (TN) on 29th January 1934, resident
in Rovereto (TN) Viale Trento 1, pensioner, tax identification No.
Mauro Longano, born in Bolzano (BZ) on 29th August 1963, resident in Rovereto
(TN) Via Salita del Dosso 50, teacher, tax identification No. on the
special attorney dated 2nd December 1997 No, 124333 of the notary public Dr,
Guido Falqui-Massidda of Rovereto;
Roberto Loro, born in Vicenza (VI) on 19th November 1965, resident in Rovereto
(TN), Via Firmian 4, tax identification No.
Stefano Longano, born in Bolzano (BZ) on 8th July 1962, resident in Rovereto
(TN) Viale Trento 1, tax identification No.
Patrizia Loro, born in Rovereto (TN) on 20th December 1967, resident in Rovereto
(TN) Via Firmian 4, tax identification No.
Cybernet Ag Public Limited Company (SpA), with registered offices in Berlin,
entered in the register of companies of the court of Charlottenburg at No. HRB
60318, by means of the attorney:
Alessandro Giacalone born in Pesaro on 4th July 1951, resident in Munich
(Germany) Kirchseeon 85614, Hubertus Strasse 19, company director; authorised
special attorney on 10th December 1997 No. 3071/1997 ANR 25792 - 25793 with
asseverated translation with minutes bearing today's date No. 124465 file of
notary Dr. Guido Falqui Massidda, currently being registered as within terms;
attorney issued by the managing directors in turn authorised with statutory
powers in the acts of the register of companies at the court of Charlottenburg
No. HRB 60318.
******
Given that:
Pontara Emma is the owner of a shareholding of the nominal value of Italian
Lire 5.400.000.= representing 9% of the share capital;
1
[Three Seals]
<PAGE> 9
Longano Angelo is the owner of a shareholding of the nominal value of Italian
Lire 5.400.000 - representing 9% of the share capital;
Francesconi Maria Teresa is the owner of a shareholding of the nominal value of
Italian Lire 5.400.000 - representing 9% of the share capital;
Longano Mauro is the owner of a shareholding of the nominal value of
Italian Lire 3.600.000 - representing 6% of the share capital;
Loro Domenico is the owner of a shareholding of the nominal value of
Italian Lire 5.400.000 - representing 9% of the share capital;
Loro Roberto is the owner of a shareholding of the nominal value of
Italian Lire 12.000.000 - representing 20% of the share capital;
Longano Stefano is the owner of a shareholding of the nominal value of
Italian Lire 20.400.000 - representing 34% of the share capital;
Loro Patrizia is the owner of a shareholding of the nominal value of
Italian Lire 2.400.000 - representing 4% of the share capital, of the limited
company
"Eclipse Srl" with registered offices in Rovereto (TN), Salita del Dosso 50,
share capital Italian Lire 60,000,000 (sixty million) entered in the register of
companies at the Trento Chamber of Commerce (Court of Rovereto) at No. 5099;
tax identification No. and VAT No. 01340360229;
the above intend to sell, some entirely, some partially, their shareholdings in
the company to Patrizia Loro and the Cybernet AG
Given the foregoing, it is agreed and stipulated between the parties as follows:
1) Pontara Emma sells to Cybernet Ag, which accepts, her shareholding in the
company described above, with all inherent active and passive rights and
duties, for the sum of Italian Lire 83,300,000 (eighty-three million three
hundred thousand);
2) Longano Angelo sells to Cybernet AG, which accepts, his shareholding in the
company described above, with all inherent active and passive rights and duties,
for the sum of Italian Lire 48,200,000 (forty-eight million two hundred
thousand);
3) Francesconi Maria Terresa sells Cybernet AG, which accepts, her shareholding
in the company described above, with all inherent active and passive rights and
duties, for the sum of Italian Lire 83,300,000 (eighty-three million three
hundred thousand);
2
<PAGE> 10
4) Longano Mauro sells to Cybernet AG, which accepts, his shareholding in the
company described above, with all inherent active and passive rights and
duties, for the sum of Italian Lire 8,100,000 (eight million one hundred
thousand);
5) Loro Domenico sells to Cybernet AG, which accepts, his shareholding in the
company described above, with all inherent active and passive rights and
duties, for the sum of Italian Lire 48,200,000 (forty-eight million two hundred
thousand);
6) Loro Roberto sells Cybernet AG and to Loro Patrizia which accept, part of
his shareholding in the company described above in the following proportions:
- - to Cybernet AG Italian Lire 798,000 of nominal value representing 1.33% of
the share capital for the sum of Italian Lire 1,800,000 (one million eight
hundred thousand);
- - to Loro Patrizia Italian Lire 4,398,000 of nominal value representing 7.33%
of the share capital for the sum of Italian Lire 4,398,000 (four million three
hundred and ninety-eight thousand) already paid and for which a receipt is
issued;
the shareholding is sold with all inherent active and passive rights and duties;
7) Longano Stefano sells to Cybernet Ag, which accepts, part of his
shareholding in the company described above Italian Lire 13,602,000 of nominal
value representing 22.67% of the share capital of the company, with all inherent
active and passive rights and duties, for the sum of Italian Lire 30,700,000
(thirty million seven hundred thousand).
Payment of the sums due from the sale to Cybernet Ag will be made by an order
which the SpA will deliver to its bank the day after the signing of the present
act.
With respect to Cybernet Ag, the act will thus be effective and the sales of
the shareholdings will be considered complete from the moment in which payment,
on an Italian bank named by the sellers, of the sum of Italian Lire 303,600,000
is credited in favour of the sellers themselves.
As a result of this the share capital holdings will then stand in the
following proportions:
- - Cybernet Internet Diensleistungen AG, a shareholding of 39,600,000,
representing 66% of the share capital;
3
<PAGE> 11
- - Longano Stefano, a shareholding of 6,798,000 representing 11.33% of the share
capital;
- - Loro Roberto, a shareholding of 6,804,000 representing 11.34% of the share
capital;
- - Loro Patrizia, a shareholding of 6,798,000 representing 11.33% of the share
capital;
the rest unchanged.
It is highlighted here that all measures with respect to the exercise of the
first refusal rights of the previous shareholders have been taken.
Under the terms and to the effects of Law No. 151 of 19th May 1975, the parties
declare that the company portions are personal goods.
Under the terms of the Legislative Decree (D.L.) No. 27 of 28th January 1991,
converted to Law No. 102 on 25th March 1991, the selling parties declare:
- - as regards Pontara Emma, Longano Angelo, Francesconi Maria Teresa, Longano
Mauro, Loro Domenico, Loro Roberto, who intend to make use of the special
dispositions contained in article 3 of the decree cited (forfeit system) opting
expressly for this system;
- - that the compliances and payments required by the law will be made;
- - that the present sales represent the first sale of shareholdings between the
parties in the current year.
As regards Longano Stefano, as the sale of more than 10% (ten per cent) of the
share capital under the terms of No. 5 of article 3 of the D.L. No. 27 of 28th
January 1991, the option described at No. 1 of article 3 of the same D.L. may
not be exercised and the stamp duty will be paid as per No. 4 of article 2 of
the nominated D.L. converted to Law No. 102 of 25th March 1991.
All expenses relating to the present act and its dependents are to be met by
the selling parties, in fact, entirely by Cybernet AG, read, accepted and
undersigned.
Rovereto, Via Paoli 21, 11th December 1997.
File No. 124466
AUTHENTICATION
4
<PAGE> 12
In Rovereto in my offices located at Via Paoli, No. two, I the undersigned Dr.
Guido Falqui-Massidda, notary with registered offices in Rovereto, member of
the register of Notaries of the united districts of Trento and Rovereto,
certify that after foresaking with my consent the presence of witnesses, and
having the legal requisites, and I notary being certain of the personal
identity of the signatories, the preceding act is undersigned in my sight and
presence by:
Loro Domenico, born in Dolce (VR) on 29th September 1938, resident in Rovereto
(TN), Via Firmian 4, accountant;
who acts on his own and as solicitor for:
Pontara Emma, born in Rovereto (TN) on 8th May 1938, resident in Rovereto (TN),
Via Firmian 4, teacher,
Longano Angelo, born in Trento (TN) on 21st July 1933, resident in Rovereto
(TN) Viale Trento 1, pensioner,
Francesconi Maria Teresa, born in Brentonico (TN) on 29th January 1934,
resident in Rovereto (TN) Viale Trento 1, pensioner,
Longano Mauro, born in Bolzano (BZ) on 29th August 1963, resident in Rovereto
(TN) Via Salita del Dosso 50, teacher,
on the special attorney dated 2nd December 1997 No, 124333 of the notary public
Dr. Guido Falqui-Massidda of Rovereto, which is attached to the present act
under the letter A/;
Loro Roberto, born in Vicenza (VI) on 19th November 1965, resident in Rovereto
(TN), Via Firmian 4,
Longano Stefano, born in Bolzano (BZ) on 8th July 1962, resident in Rovereto
(TN) Viale Trento 1,
Loro Patrizia, born in Rovereto (TN) on 20th December 1967, resident in
Rovereto (TN), Via Firmian 4,
Cybernet AG, with registered offices in Berlin, entered in the register of
companies of the court of Charlottenburg at NO. HRB 60318, by means of the
attorney:
Giacalone Alessandro born in Pesaro on 4th July 1951, resident in Munich
(Germany) Kirchseeon 85614, Hubertus Strasse 19, company director; authorised
special attorney on 10th December 1997 No. 3071/1997 ANR 25792 - 25793 with
asseverated translation with minutes bearing today's date No. 124465 file of
notary Dr. Guido Falqui Massidda, currently being registered as within terms;
attorney issued by the managing directors in
5
[Seal]
<PAGE> 13
turn authorised with statutory powers in the acts of the register of companies
at the court of Charlottenburg No. HRB 60318, Rovereto, eleventh of December
nineteen ninety-seven.
11th December 1997.-
--------------------
signature
stamp
La traduttrice
/s/ Patrizia Loro
- ---------------------
Patrizia Loro
PRETURA CIRCONDARIALE DI ROVERETO
VERBALE DI ASSEVERAZIONE
Il giorno 6/08/98 avanti al sottoscritto Collaboratore di Cancelleria della
Pretura di Rovereto e personalmente comparsa la Signorina Patrizia Loro, nata a
Rovereto (TN) il 20.12.1967 ed ivi residente in Via Firmian n.4, la quale mi
chiede di asseverare mediante giuramento la suestesa traduzione. Ammonita ai
sensi di legge la stessa presta il giuramento di rito, ripetendo la formula:
"Giuro di avere bene e fedelmente proceduto alle operazioni affidatemi al solo
scopo di far conoscere al Giudice la verita".
Del che e redatto il presente verbale che previa lettura e conferma viene
sottoscritto come appresso.
La Traduttrice
/s/ Patrizia Loro
- ---------------------
Patrizia Loro
[SEALS]
<PAGE> 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
June 17, 1998, among
CYBERNET INTERNET SERVICES INTERNATIONAL, INC., a Utah corporation ("CYBERNET"),
and
TRISTAN LIBISCHER, resident of Austria,
ALEXANDER WIESMULLER, resident of Austria,
being the holders of all the issued and outstanding share capital of Vianet EDV
Dienstleistungs Ges.m.b.H., an Austria corporation (individually, a "VIANET
Stockholder" and collectively, the "VIANET Stockholders").
BACKGROUND:
Due to CYBERNET's group policy CYBERNET intends to purchase shares in a stock
corporation. Accordingly, the VIANET Stockholders have agreed to convert Vianet
EDV Dienstleistungs Ges.m.b.H. into an Austrian Aktiengesellschaft ("VIANET").
After the conversion, all of the issued and outstanding share capital par value
ATS 1,000,000 of VIANET (the "VIANET Stock") will be owned by the VIANET
Stockholders.
The VIANET Stockholders have agreed to sell to CYBERNET and CYBERNET has
agreed to purchase the VIANET Stock from the VIANET Stockholders on the terms
and conditions set forth in this Agreement.
In consideration of the mutual representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
<PAGE> 2
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STATEMENT OF TERMS:
SECTION 1
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE OF STOCK. VIANET Stockholders will sell to CYBERNET
and CYBERNET will purchase from VIANET Stockholders all of the VIANET
Stockholders' right, title and interest in the VIANET Stock.
1.2 CONSIDERATION; STOCK EXCHANGE. At the Closing (as defined in Section
2.1 below), upon transfer and assignment of the VIANET Stock to CYBERNET,
CYBERNET (i) will pay an amount of DM 7,500,000 to the VIANET Stockholders and
(ii) will cause 300,000 shares of the common voting stock, par value $0.001 of
CYBERNET (the "CYBERNET Stock") to be issued to the Pooling Trustee (as defined
in Section 2.2 (b) below) on behalf of the VIANET Stockholders (collectively,
the "Consideration"). As a result of the sale of the VIANET Stock and the
payment of the Consideration, VIANET will be a wholly-owned subsidiary of
CYBERNET.
1.3 PAYMENT, DELIVERY OF CYBERNET STOCK TO THE VIANET STOCKHOLDERS. At
the Closing, the VIANET Stockholders will receive an amount of DM 7,500,000 in
cash and the Pooling Trustee (as defined in Section 2.2 (b) below) will receive
stock certificates evidencing shares which amount to an aggregate of 300,000
and being the number of shares of CYBERNET for each VIANET Stockholder as shown
next to its name at the end of this Agreement.
1.4 NO FURTHER OWNERSHIP RIGHTS IN VIANET STOCK. The Payment of DM
7,500,000 to the VIANET Stockholders and the issuance of the 300,000 shares of
common voting stock of CYBERNET to be delivered to the Pooling Trustee at the
Closing will be deemed to have been given in full satisfaction of all rights
pertaining to the VIANET Stock.
1.5 RETRANSFER OF CYBERNET STOCK. The CYBERNET Stock received by the
Pooling Trustee (as defined in Section 2.2 (b) below) on behalf of each VIANET
Stockholder and to the extent as not released by the Pooling Trustee (as
provided for in Section 2.2(b) below) will be retransferred from the Pooling
Trustee to CYBERNET if (i) the Employment Agreement (as defined in Section 2.2
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(j) below) with the respective VIANET Stockholder is terminated by VIANET or
CYBERNET for cause according to Section 75 para 4 of the Austrian Stock
Corporation Act ("Aktiengesetz") or Section 27 of the Austrian Employment Act
("Angestelltengesetz") or (ii) the respective VIANET Stockholder resigns.
SECTION 2
CLOSING; CLOSING CONDITIONS
2.1 CLOSING. The parties to this Agreement will hold a closing (the
"Closing") for the purpose of consummating the transactions contemplated by
this Agreement at 10:00 a.m. on October 31, 1998 or such other date and time
mutually agreed upon by the parties. The Closing will be held at the offices of
VIANET. The date on which the Closing actually occurs is hereinafter referred
to as the "Closing Date." At the Closing, the parties will execute and exchange
the documents, items, certificates and instruments described in this Section 2.
2.2 CONDITIONS TO CLOSING OF CYBERNET. CYBERNET's obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the conditions set forth below and/or the delivery of all of
the documents, items, certificates and instruments described below, all of
which documents, items, certificates and instruments must be in form and
substance satisfactory to CYBERNET, unless such condition is waived by CYBERNET
at the Closing. The Closing of the transactions contemplated by this Agreement
will be deemed to mean a waiver of all conditions to Closing.
(a) TRANSACTION DOCUMENTS. The VIANET Stockholders will have executed
this Agreement and delivered all of the issued and outstanding shares of the
VIANET Stock to CYBERNET as provided in Section 1.2 above.
(b) POOLING TRUST AGREEMENT. The VIANET Stockholders will have executed a
pooling trust agreement (the "Pooling Trust Agreement"), substantially
acceptable to CYBERNET, with the notary public Dr. Willibald Bartl, Praterstr.
40, 1020 Wien (the "Pooling Trustee") providing that the CYBERNET Stock making
up a part of the Purchase Price shall be held by the Pooling Trustee subject to
Section 1.5 hereof and not sold until released by the Pooling Trustee, that
twenty percent (20%)
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of such CYBERNET shares shall be released on the first anniversary of the
Closing date, that twenty percent (20%) of such CYBERNET shares shall be
released on the second anniversary of the Closing date, that twenty percent
(20%) of such CYBERNET shares shall be released on the third anniversary of the
Closing date, that twenty percent (20%) of such CYBERNET shares shall be
released on the fourth anniversary of the Closing date, and that twenty percent
(20%) of such CYBERNET shares shall be released on the fifth anniversary of the
Closing date.
(c) Consents. CYBERNET will have received duly executed copies of all
third-party consents and approvals contemplated by this Agreement.
(d) Shareholder Approval. The acquisition of the VIANET Stock as provided
in this Agreement will have been approved by the shareholders of CYBERNET.
(e) Representations and Warranties. The representations and warranties of
the VIANET Stockholders set forth in this Agreement will be true, correct and
complete in all respects as of the Closing Date, as though made on and as of
the Closing Date.
(f) No Action. No suit, action, or proceeding will be pending or
threatened before any governmental or regulatory authority wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge would
(1) prevent consummation of any of the transactions contemplated by this
Agreement; (2) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation; or (3) adversely affect the right of
VIANET to own, operate or control the business or assets of VIANET.
(g) No Material Adverse Change. Since December 31, 1997, no VIANET
Material Adverse Effect will have occurred.
(h) Due Diligence Review. CYBERNET will be satisfied in all respects with
its due diligence investigation of VIANET which has to be completed on or
before July 31, 1998.
(i) Business Plan. VIANET will have performed its financial projections
for the time period January 1, 1998 to September 31, 1998 as defined in Exhibit
1.
<PAGE> 5
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(j) Employment Agreement of VIANET Stockholders. The VIANET Stockholders
and VIANET will have executed Employment Agreements, substantially acceptable
to CYBERNET, which agreements shall provide that the VIANET Stockholders will
serve as managing directors of VIANET for a time period of at least five years
commencing on the Closing date.
(k) Conversion into an Aktiengesellschaft. Vianet EDV Dienstleistungs
Ges.m.b.H. will have been converted into an Austrian Aktiengesellschaft and all
of the issued and outstanding shares of par value ATS 1,000,000 will be owned
by the VIANET Stockholders.
2.3 Conditions to Closing of the VIANET Stockholders. The VIANET
Stockholders' obligation to consummate the transactions contemplated by this
Agreement is subject to the satisfaction of the conditions set forth below
and/or the delivery of all of the documents, items, certificates and
instruments described below, all of which documents, items, certificates and
instruments must be in form and substance satisfactory to the VIANET
Stockholders, unless such condition is waived by the VIANET Stockholders at the
Closing. The Closing of the transactions contemplated by this Agreement will be
deemed to mean a waiver of all conditions to Closing.
(a) Transaction Documents. CYBERNET will have (i) executed this
Agreement, (ii) paid an amount of DM 7,500,000 to the VIANET Stockholders and
(iii) delivered the CYBERNET Stock to the Pooling Trustee as provided in
Section 1.3 above.
(b) Copies of Resolutions. CYBERNET will have furnished the VIANET
Stockholders with certified copies of resolutions duly adopted by the Board of
Directors and the shareholders of CYBERNET approving the execution and delivery
of this Agreement and the other documents to be executed and delivered in
connection with this Agreement and consummation of the transactions
contemplated hereby and thereby.
(c) Representations and Warranties. The representations and warranties of
CYBERNET set forth in this Agreement will be true, correct and complete in all
respects as of the Closing Date, as though made on and as of the Closing Date.
(d) No Action. No suit, action, or proceeding will be pending or
threatened before any governmental or regulatory authority wherein an
unfavorable judgment, order, decree, stipulation,
<PAGE> 6
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injunction or charge would (1) prevent consummation of any of the transactions
contemplated by this Agreement; (2) cause any of the transactions contemplated
by this Agreement to be rescinded following consummation; or (3) adversely
affect the right of CYBERNET to own, operate or control the business or assets
of CYBERNET.
(e) Due Diligence Review. The VIANET Stockholders will be satisfied in all
respects with its due diligence investigation of CYBERNET which has to be
completed on or before July 31, 1998.
(f) Employment Agreement of VIANET Stockholders. The VIANET Stockholders
and VIANET will have executed Employment Agreements, substantially acceptable
to VIANET Stockholders, which agreements shall provide that the VIANET
Stockholders will serve as managing directors of VIANET for a time period of at
least five years commencing on the Closing date.
2.4. MEMBER OF THE BOARD OF DIRECTORS OF CYBERNET. Immediately after the
Closing the Board of Directors of CYBERNET will elect one person to be named
by the VIANET Stockholders prior to the Closing as a Member of the Board of
Directors of CYBERNET.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE VIANET STOCKHOLDERS
The VIANET Stockholders, jointly and severally, represent and warrant to
CYBERNET:
3.1 CORPORATE ORGANIZATION AND GOOD STANDING. VIANET is an Austrian
corporation ("Aktiengesellschaft") duly organized and validly existing under
the laws of Austria, with all requisite corporate power and authority to own,
operate and lease its properties and to carry on its business as it is now
being conducted. VIANET is qualified or licensed to do business in each
jurisdiction in which the ownership or leasing of property by it or the
conduct of its business requires such licensing or qualification, except where
the failure to be so qualified or licensed or in good standing will not have a
VIANET Material Adverse Effect. VIANET has no subsidiaries. For purposes of
this Agreement, "VIANET Material Adverse Effect" means any materially adverse
change in or effect on the business, operations, properties, assets,
liabilities, financial condition, results of operations or prospects of VI-
<PAGE> 7
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ANET or its ability to carry out its obligations under this Agreement, but does
not mean any losses, adverse developments or other conditions suffered by
VIANET arising from normal operations or market, political or economic
conditions affecting the business of VIANET as a whole. As of the date of this
Agreement Vianet EDV Dienstleistungs Ges.m.b.H. is entered in the commercial
register of Vienna. All facts relating to Vianet EDV Dienstleistungs Ges.m.b.H.
and eligible for registration in the commercial register are actually entered
in the commercial register under FN 118870i. Its articles of association are
those dated September 15, 1994.
3.2 DUE EXECUTIONS; ENFORCEABILITY. This Agreement has been, and all other
documents, agreements and instruments to be executed in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
the "VIANET Transaction Documents") will be, duly executed and delivered by the
VIANET Stockholders and this Agreement is, and the other VIANET Transaction
Documents when executed and delivered by the VIANET Stockholders as
contemplated by this Agreement will be, the valid and binding obligation of the
VIANET Stockholders enforceable in accordance with their respective terms,
except (1) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, and (2) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
3.3 CAPITALIZATION. The entire authorized share capital and other equity
securities of VIANET consists of a share capital par value ATS 1,000,000 (the
"VIANET Shares") all of which shares are issued and outstanding. All of the
issued and outstanding VIANET Shares have been duly authorized, are validly
issued, were not issued in violation of any preemptive rights and are fully paid
and nonassessable, are not subject to preemptive rights and were issued in full
compliance with all federal, state and local laws, rules and regulations. Each
VIANET Stockholder owns beneficially and of record all of the shares of the
VIANET issued to such shareholder. There are no outstanding options, warrants,
subscriptions, conversion rights, or other rights, agreements, or commitments
obligating VIANET to issue any additional VIANET Shares, or any other securities
convertible into, exchangeable for, or evidencing the right to subscribe for or
acquire from VIANET any VIANET Shares. There are no agreements purporting to
restrict the transfer of the VIANET shares, no voting agreements, voting
trusts, or other arrangements restricting or affecting the voting of the VIANET
Shares.
<PAGE> 8
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3.4 TITLE TO VIANET SHARES. The VIANET Shares are lawfully owned by the
VIANET Stockholders in the respective amounts set forth opposite his or its name
by its signature below, free of preemptive rights and free and clear of all
claims, liens, charges, security interest, encumbrances and other restrictions
or limitations of any kind. Each VIANET Stockholder has the full power, right,
and authority to transfer the VIANET Shares held by him pursuant to this
Agreement.
3.5 FINANCIAL STATEMENTS. Attached to this Agreement as Disclosure
Schedule 3.5 are true, correct, and complete copies of (i) unaudited VIANET
Balance Sheets and Income Statements for the period ending December 31, 1996,
and (ii) unaudited VIANET Balance Sheets and Income Statements for the period
ending December 31, 1997 (the "VIANET Reference Balance Sheet") (collectively,
the "VIANET Financial Statements"). The VIANET Financial Statements (a) are in
accordance with the books and records of VIANET and (b) present fairly the
financial condition of VIANET as of the respective dates indicated and the
results of operations for such periods. VIANET has not received any advice or
notification from its independent certified public accountants that VIANET has
used any improper accounting practice that would have the effect of not
reflecting or incorrectly reflecting in the VIANET Financial Statements or the
books and records of VIANET, any properties, assets, liabilities, revenues, or
expenses. The books, records, and accounts of VIANET accurately and fairly
reflect, in reasonable detail, the transactions, assets and liabilities of
VIANET. VIANET has not engaged in any transaction, maintained any bank account,
or used any funds of VIANET, except for transactions, bank accounts, and funds
which have been and are reflected in the normally maintained books and records
of VIANET.
3.6 ABSENCE OF CERTAIN CHANGES. Since the date of the VIANET Reference
Balance Sheet, except as set forth in Disclosure Schedule 3.6, VIANET has not
suffered any VIANET Material Adverse Effect.
3.7 FILINGS, CONSENTS AND APPROVALS. Except for any filings required by
applicable law and as otherwise set forth on Disclosure Schedule 3.7, no filing
or registration with, no notice to and no permit, authorization, consent, or
approval of any public or governmental body or authority or any other person or
entity is necessary for the consummation by the VIANET Stockholders of the
transactions contemplated by this Agreement or to enable VIANET to continue to
conduct its business after the Closing Date in a manner consistent with that in
which it is presently conducted.
<PAGE> 9
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3.8 NONCONTRAVENTION. Neither the execution, delivery and performance of
the VIANET Transaction Documents, nor the consummation of the transactions
contemplated thereby nor compliance with the provisions thereof, will:
(1) Except as set forth in Disclosure Schedule 3.8, conflict with,
result in a violation of, cause a default under (with or without notice,
lapse of time or both) or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of
any material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties or
assets of VIANET under any term, condition or provision of any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to VIANET or its properties
or assets;
(2) Violate any provision of the articles of incorporation or bylaws
of VIANET; or
(3) Violate any order, writ, injunction, decree, statute, rule, or
regulation of any court or governmental or regulatory authority applicable
to VIANET or any of its properties or assets.
3.9 LITIGATION. Except as set forth on Disclosure Schedule 3.9, there is
no claim, charge, arbitration, grievance, action, suit, investigation or
proceeding by or before any court, arbiter, administrative agency or other
governmental authority now pending or, to the VIANET Stockholders' knowledge,
threatened against VIANET or which involves any of the business, or the
properties or assets of VIANET that, if adversely resolved or determined, would
have a VIANET Material Adverse Effect. To the VIANET Stockholders' knowledge,
there is no reasonable basis for any claim or action that, based upon the
likelihood of its being asserted and its success if asserted, would have a
VIANET Material Adverse Effect.
3.10 MATERIAL CONTRACTS AND TRANSACTIONS. Disclosure Schedule 3.10
contains copies of all material contracts, agreements, licenses, leases for
real property or personal property, permit, arrangements, commitments,
instruments, understanding or contracts, whether written or oral, express or
implied, contingent, fixed or otherwise, to which VIANET is a party
(collectively, the "VIANET
<PAGE> 10
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Contracts"). Except as shown on Disclosure Schedule 3.10, VIANET is not a party
to any written or oral:
(1) contract for the purchase, sale or lease of any material capital
assets, or continuing contracts for the purchase or lease of any material
supplies, materials, equipment or services;
(2) agreement to pay material commissions or sales representative
agreements;
(3) agreement for the employment or consultancy or any person or entity
except those routinely entered into with employees and contracts with members of
the Board of Directors and Officers of VIANET;
(4) note, debenture, bond, trust agreement, letter of credit agreement,
loan agreement, or other contract or commitment for the borrowing or lending of
money, or agreement or arrangement for a line of credit or guarantee, pledge, or
undertaking of the indebtedness of any other person;
(5) agreement, contract, or commitment for any charitable or political
contribution;
(6) agreement, contract, or commitment limiting or restraining VIANET in
its business or any successor thereto from engaging or competing in any manner
or in any business or from hiring any employees, nor, to the Stockholders'
knowledge, is any employee or independent contractor of VIANET subject to any
such agreement, contract, or commitment;
(7) material agreement, contract, or commitment not made in the ordinary
course of business;
(8) agreement establishing or providing for any joint venture,
partnership, or similar arrangement between VIANET and any other person or
entity; or
(9) power of attorney or similar authority to act for VIANET.
<PAGE> 11
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Each VIANET Contract is in full force and effect, and there exists no material
breach or violation of or default by VIANET under any VIANET Contract nor, to
the Stockholders' knowledge, by any other party to a VIANET Contract, or any
event that with notice or the lapse of time, or both, will create a material
breach or violation thereof or default under any VIANET Contract by VIANET nor,
to the Stockholders' knowledge, by any other party to a VIANET Contract. Except
as set forth on Disclosure Schedule 3.10, the continuation, validity, and
effectiveness of each VIANET Contract will in no way be affected by this
Agreement. Except as indicated on Disclosure Schedule 3.10, there exists no
actual or, to the Stockholders' knowledge, any threatened termination,
cancellation, or limitation of, or any amendment, modification, or change to any
VIANET Contract, which would have a VIANET Material Adverse Effect. A true,
correct and complete copy (and if oral, a description of material terms) of each
VIANET Contract, as amended to date, is contained in Disclosure Schedule 3.10.
3.11 INTELLECTUAL PROPERTY. Disclosure Schedule 3.11 contains a list of all
intellectual property rights owned, licensed or used by VIANET in the conduct of
its business (collectively, the "VIANET Intellectual Property") and a list of
all agreements and contracts giving VIANET a license or other rights to the
VIANET Intellectual Property. No use by VIANET of any VIANET Intellectual
Property violates and no use by VIANET of the VIANET Intellectual Property as
contemplated will violate the terms of any agreement pursuant to which such
VIANET Intellectual Property is licensed. No claim is pending, or, to the
Stockholders' knowledge, threatened, which alleges that the ownership of, rights
as licensee to, or other right to use any VIANET Intellectual Property is
invalid or unenforceable by VIANET, nor is there any basis known to the
Stockholders for any such claim. Except as shown on Disclosure Schedule 3.11, no
royalties or fees are payable by VIANET to anyone for use of the VIANET
Intellectual Property. A true, correct, and complete copy of each agreement
listed on Disclosure Schedule 3.11, as such agreement have been amended to date,
has been furnished to CYBERNET. All such agreements are in full force and
effect and, there are no existing material defaults or events of default, real
or claimed, or events which with or without notice or lapse of time or both
would constitute material defaults under such agreements that would give the
non-defaulting party a right to terminate such agreement or a right to receive
any payment pursuant to such agreement and all of such agreements will in no way
be affected by the consummation of the transactions contemplated by this
Agreement. VIANET has no registered or unregistered, foreign or Austrian
patents, utility models, trademarks, trade names, trade styles, and service
marks and copyrights, trade secrets or know-how, except as listed on Disclosure
Schedule 3.11.
<PAGE> 12
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3.12 REAL PROPERTY AND REAL PROPERTY LEASES. VIANET does not own any real
property. Disclosure Schedule 3.12 sets forth the name, parties, and date of
each lease and sublease of real property that is occupied by VIANET ("VIANET
Leases"), and the address of each parcel of leased real property and a list of
all amendments to such VIANET Leases. Each VIANET Lease is in full force and
effect and there is no default asserted thereunder by any party thereto and, to
the VIANET Stockholders' knowledge, there are no unasserted defaults (including
any events which with the passage of time or giving of notice or both would
constitute a default). True, correct and complete copies of all of the VIANET
Leases, as amended to date, have been delivered to CYBERNET. VIANET has not been
notified that the use and operation of any of the real properties leased by
VIANET does not conform to applicable building, zoning, safety, environmental,
and other laws, ordinances, regulations, codes, permits, licenses, and
certificates and all restrictions and conditions affecting title, except where
the failure to conform would not have an VIANET Material Adverse Effect.
3.13 PERSONAL PROPERTY AND PERSONAL PROPERTY LEASES. Except as set forth
on Disclosure Schedule 3.13, VIANET owns or leases the use of, all material
equipment, furniture, fixtures and other material tangible personal property and
assets necessary for the continued operation of the business of VIANET as
presently conducted and where the absence of such property and assets would have
a VIANET Material Adverse Effect. All of such personal properties are in good
operating condition (normal wear and tear excepted), and are reasonably fit for
the purposes for which the such personal property is presently used.
3.14 COMPLIANCE WITH LAW. VIANET holds and is in compliance with all
permits, certificates, licenses, approvals, registrations and authorizations
necessary for the conduct of its business or the ownership of its properties or
assets, except where the failure to hold or comply could not have a VIANET
Material Adverse Effect, and all of such permits, certificates, licenses,
approvals, registrations, and authorizations are in full force and effect.
VIANET is in compliance with all applicable laws, statutes, ordinances, rules
and regulations (including without limitation those relating to environmental
protection, occupational safety and health, and equal employment practices) and
all orders, judgments and decrees, except where the failure to comply would not
have a VIANET Material Adverse Effect.
<PAGE> 13
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3.15 TAXES. Except as set forth in Disclosure Schedule 3.15, VIANET has
timely filed with the appropriate taxing authorities all returns required to be
filed on or prior to the date hereof in respect of all taxes of VIANET, and has
paid all such taxes, including interest, penalties, and additions in connection
therewith shown to have become due on such returns or for which a notice of
assessment or demand for payment has been received. All such returns have been
prepared in accordance with all applicable laws and requirements. Any accruals
for such taxes reflected in the VIANET Reference Balance Sheet are sufficient to
satisfy the accrued liability for such taxes as of the date of the VIANET
Reference Balance Sheet. No material tax issues have been raised by the
competent tax authorities in connection with any of the tax returns referred to
above, and no waivers of statutes of limitations or extensions of time within
which to file any tax return or with respect to a tax assessment or deficiency
have been given or requested with respect to VIANET. No constructive dividends
("verdeckte Gewinnausschuttungen") have been made by VIANET to any of its
Stockholders.
3.16 LABOR RELATIONS. Disclosure Schedule 3.16 sets forth the name,
occupation and annual salary of each of VIANET's employees and the respective
date of each employment agreement entered into by VIANET. A true, correct and
complete copy of each employment agreement listed on Disclosure Schedule 3.16,
as such employment agreements have been amended to date, has been furnished to
CYBERNET. There is no unfair labor practice charge or other labor related
grievance pending or, to the Stockholders' knowledge, threatened against
VIANET that might have a VIANET Material Adverse Effect. VIANET has in relation
to each of its employees and to each of its former employees complied in all
material respect with all its obligations under statute and otherwise
concerning the health and safety at work of each of the employees and has not
incurred any liability to any employee in respect of any accident or injury
which is not fully covered by insurance.
3.17 PENSION AND EMPLOYEE BENEFIT PLANS AND COMPENSATION. VIANET
maintains no employee pension benefit plans, welfare benefit plans, bonus,
share purchase, share ownership, share option, deferred compensation,
incentive, severance, termination or other compensation plan or arrangement,
and other material employee fringe benefit plans. No salary or other payment
due to the VIANET Stockholders remains unpaid by VIANET and the salaries have
been completely paid for past services rendered to VIANET, other than current
unpaid salary and current business expenses to be paid or reimbursed by VIANET
in the ordinary course of business.
<PAGE> 14
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3.18 INSURANCE. Set forth in Disclosure Schedule 3.18 is a list of all
insurance policies that relate to VIANET's business. The coverage under each
such policy is in full force and effect, and no notice of cancellation or non
renewal with respect to, or disallowance of any claim under, any such policy
has been received by VIANET. The VIANET Stockholders have no knowledge of any
facts or the occurrence of any event that reasonably might form the basis of
any claim against VIANET relating to its business or operations or any of its
assets or properties covered by any of such policy that may materially increase
the insurance premiums payable under any such policy.
3.19 AFFILIATE TRANSACTIONS. Except as disclosed in Disclosure Schedule
3.19, no officer, director, stockholder or affiliate of VIANET provides any
assets, services or facilities used or held for use in connection with VIANET's
business and VIANET does not provide or cause to be provided any assets,
services or facilities to any such officer, director, stockholder or affiliate.
3.20 CORRECTNESS OF REPRESENTATIONS. No representation or warranty of the
VIANET Stockholders in this Agreement or in any exhibit, certificate, or
schedule attached to this Agreement or furnished pursuant to this Agreement
contains, or at the Closing Date will contain, any untrue statement of fact or
omits, or at the Closing Time will omit, to state any material fact necessary
in order to make the statements contained therein not misleading, and all such
statements, representations, warranties, exhibits, certificates, and schedules
shall be true and complete in all material respects on and as of the Closing
Time as though made on that date.
SECTION 4
REPRESENTATIONS AND WARRANTIES
OF CYBERNET
CYBERNET represents and warrants to the VIANET Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING. CYBERNET is a corporation duly
organized, validly existing and in good standing under the laws of Utah and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Except for
Cybernet Internet Dienstleistungen AG, Germany, and its subsidiaries, CYBERNET
has no subsidiaries.
<PAGE> 15
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4.2 CAPITAL STRUCTURE. The entire authorized capital stock and other equity
securities of CYBERNET consists of 50,000,000 shares of $0.001 par value common
stock of which as of the date of this Agreement 14,681,891 shares are issued and
outstanding and 10,000,000 shares of preferred stock of which as of the date of
this Agreement 7,760,000 are issued and outstanding. All of the issued and
outstanding shares of CYBERNET Stock have been duly authorized, are validly
issued fully paid and nonassessable and, are not subject to preemptive rights.
4.3 AUTHORITY. CYBERNET has all requisite corporate power and authority to
enter into this Agreement and the Transaction Documents to which it is a party
and to perform its obligations thereunder and to consummate the transactions
contemplated thereby. The execution and delivery of this Agreement and each of
the Transaction Documents to which it is a party by CYBERNET and the
consummation by CYBERNET of the transactions contemplated thereby, have been
duly authorized by the board of directors and approved by the shareholders of
CYBERNET and no other corporate proceedings on the part of CYBERNET are
necessary to authorize such documents or to consummate the transactions
contemplated thereby. This Agreement has been, and all the other Transaction
Documents to which it is a party when executed and delivered by CYBERNET as
contemplated by this Agreement will be, duly executed and delivered by CYBERNET
and this Agreement is, and the other Transaction Documents when executed and
delivered by CYBERNET as contemplated hereby will be, the valid and binding
obligation of CYBERNET enforceable in accordance with their respective terms,
except (1) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, and (2) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies.
4.4 FINANCIAL STATEMENTS. Attached to this Agreement as Disclosure Schedule
4.4 are true, correct, and complete copies of audited CYBERNET Balance Sheets
and Income Statements for the period ending December 31, 1997 (collectively, the
"CYBERNET Financial Statements"). The CYBERNET Financial Statements are in
accordance with the books and records of CYBERNET and present fairly the
financial condition of CYBERNET as of the respective dates indicated and the
results of operations for such periods. CYBERNET has not received any advice or
notification from its independent certified public accountants that CYBERNET has
used any improper accounting practice that would have the effect of not
reflecting or incorrectly reflecting in the CYBERNET Financial
<PAGE> 16
-16-
Statements or the books and records of CYBERNET, any properties, assets,
liabilities, revenues, or expenses. The books, records, and accounts of
CYBERNET accurately and fairly reflect, in reasonable detail, the transactions,
assets, and liabilities of CYBERNET has not engaged in any transaction,
maintained any bank account, or used any funds of CYBERNET, except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of CYBERNET
4.5 NONCONTRAVENTION. Neither the execution, delivery and performance of
the Transaction Documents, nor the consummation of the transactions contemplated
thereby nor compliance with the provisions thereof, will:
(1) Conflict with, result in a violation of, cause a default under
(with or without notice, lapse of time or both) or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
the material properties or assets of CYBERNET under any term, condition or
provision of any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to CYBERNET
or its material properties or assets;
(2) Violate any provision of the articles or certificate of
incorporation or by-laws of CYBERNET; or
(3) Violate any order, writ, injunction, decree, statute, rule, or
regulation of any court or governmental or regulatory authority applicable
to CYBERNET or any of its properties or assets.
4.6 LITIGATION. There is no claim, charge, arbitration, grievance, action,
suit, investigation or proceeding by or before any court, arbiter,
administrative agency or other governmental authority now pending or, to
CYBERNET's knowledge, threatened against CYBERNET, or which involves any of the
business, or the properties or assets of CYBERNET that, if adversely resolved or
determined, would have a material adverse effect on CYBERNET. There is no
reasonable basis for any claim or
<PAGE> 17
-17-
action that, based upon the likelihood of its being asserted and its success if
asserted, would have a material adverse effect.
4.7 FILINGS, CONSENTS AND APPROVALS. Except for any filings required by
applicable laws, no filing or registration with, no notice to and no permit,
authorization, consent, or approval of any public or governmental body or
authority or other person or entity is necessary for the consummation by
CYBERNET of the transactions contemplated by this Agreement or to enable
CYBERNET to continue to conduct its business after the Closing Date in a manner
which is consistent with that in which it is presently conducted.
SECTION 5
SURVIVAL AND INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants made by the parties shall survive the Closing for a
period of six (6) months from the Closing Date.
5.2 INDEMNIFICATION BY VIANET STOCKHOLDERS. The VIANET Stockholders,
jointly and severally, agree to indemnify CYBERNET and its officers, directors,
Stockholders, employees, agents and affiliates (other than the Stockholders
themselves) in respect of, and hold each of them harmless from and against, any
and all damages, fines, fees, penalties, deficiencies, losses and expenses
(including without limitation interest, court costs, fees of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment) suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
the VIANET Stockholders contained in this Agreement.
5.3 INDEMNIFICATION BY CYBERNET CYBERNET agrees to indemnify the VIANET
Stockholders in respect of, and hold each of them harmless from and against, any
and all damages, fines, fees, penalties, deficiencies, losses and expenses
(including without limitation interest, court costs, fees of attorneys,
accountants and other experts or other expenses of litigation or other
<PAGE> 18
-18-
proceedings or of any claim, default or assessment) suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation, breach of warranty
or nonfulfillment of or failure to perform any covenant or agreement on the
part of CYBERNET contained in this Agreement.
5.4 PROCEDURES FOR INDEMNIFICATION FOR THIRD PARTY CLAIMS. Whenever
indemnification is sought under this Section 5 in connection with a claim or
demand brought by a third party, the party seeking indemnification (the
"Indemnitee") will promptly notify the party from whom indemnification is
sought (the "Indemnitor"), specifying the nature of such claims, the amount or
estimated amount of such claim and attaching copies of all relevant information
concerning the underlying claim of liability. Within ten days of receipt of
such notice, the Indemnitor will notify the Indemnitee promptly whether it
disputes its indemnification obligation. If the indemnification obligation is
not so disputed, the Indemnitor, at the option of the Indemnitee, will, at the
Indemnitor's cost and expense, defend any such claim. If the Indemnitee so
elects for the Indemnitor to defend any claim, the Indemnitor will have full
control over the conduct of such proceeding, although the Indemnitee will have
the right to retain legal counsel at its own expense and will have the right
to approve any settlement of any claim, provided that such approval may not be
withheld unreasonably. If the Indemnitee does not elect for the Indemnitor to
assume the defense of such claim, the Indemnitee will have the right to
defend the claim at the reasonable cost and expense of the Indemnitor. The
Indemnitor will not be obligated to indemnify the Indemnitee with respect to
such third party claim to the extent that the Indemnitor's ability to defend
has been irreparably prejudiced by the failure or delay of the Indemnitee to
give Indemnitor the notice required by this Section 5.4. Any dispute of an
indemnification obligation under this Agreement may be resolved by litigation
in a court of competent jurisdiction.
5.5 PROCEDURES FOR INDEMNIFICATION FOR NON-THIRD PARTY CLAIMS. If any
Indemnitee has a claim under Section 5 against any Indemnitor that does not
involve a third party claim as described in Section 5.4 above, the Indemnitee
will promptly notify the Indemnitor of such claim, specifying the nature of
such claim and the amount of any loss incurred by the Indemnitee. The failure
by any Indemnitee to give such notice will not impair such party's rights under
this Agreement except to the extent that the Indemnitor demonstrates that it
has been irreparably prejudiced thereby. If the Indemnitor notifies the
Indemnitee that it does not dispute the claim described in such notice or fails
to notify the Indemnitee within 30 days its receipt of such notice, the loss in
the amount specified in the notice will be conclusively deemed a liability of
the Indemnitor under Section 6 and the Indemnitor
<PAGE> 19
-19-
will pay the amount of such loss to the Indemnitee on demand. If the Indemnitor
has timely disputed its liability with respect to such claim, the Indemnitor
and the Indemnitee will proceed in good faith to negotiate a resolution of such
dispute, and if not resolved through negotiations within 60 days after the
Indemnitor's receipt of the initial claim notice, such dispute may be resolved
by litigation in a court of competent jurisdiction.
5.6 INDEMNIFICATION FOR FEES AND COMMISSIONS. Each party to this
Agreement is responsible for paying any broker, finder or investment banker
that is entitled to receive any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of such party and indemnifies and holds
harmless the other parties from any such fees or commissions.
SECTION 6
MISCELLANEOUS PROVISIONS
6.1 ACTIONS BY VIANET STOCKHOLDERS. Any action or remedy of the VIANET
Stockholders under this Agreement, including without limitation, a request for
arbitration or indemnification, must be exercised jointly by the VIANET
Stockholders.
6.2 EFFECTIVENESS OF REPRESENTATIONS. Each party is entitled to rely on
the representations, warranties and agreements of each of the other parties and
all such representation, warranties and agreement will be effective regardless
of any investigation that any party has undertaken or failed to undertake.
6.3 TERMINATION. This Agreement may be terminated at any time prior to
the Closing of the transactions contemplated hereby by:
(a) Mutual agreement of CYBERNET and VIANET Stockholders;
(b) CYBERNET, if there has been a breach by VIANET Stockholders of
any material representation, warranty, covenant or agreement set forth in
this Agreement on the part of VIANET Stockholders that is not cured, to the
reasonable satisfaction of CYBERNET,
<PAGE> 20
-20-
within ten business days after notice of such breach is given by CYBERNET
(except that no cure period will be provided for a breach by VIANET
Stockholders that by its nature cannot be cured);
(c) VIANET Stockholders, if there has been a breach by CYBERNET of
any material representation, warranty, covenant or agreement set forth in
this Agreement on the part of CYBERNET that is not cured by the breaching
party, to the reasonable satisfaction of Stockholders, within ten business
days after notice of such breach is given by Stockholders (except that no
cure period will be provided for a breach by CYBERNET that by its nature
cannot be cured);
(d) CYBERNET or VIANET Stockholders, if the transactions contemplated
by this Agreement has not been consummated prior to December 31, 1998,
unless the parties agree to extend such date; or
(e) CYBERNET or VIANET Stockholders if any permanent injunction or
other order of a governmental entity of competent authority preventing the
consummation of the transactions contemplated by this Agreement has become
final and nonappealable.
6.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 6.3, this Agreement will be of no further
force or effect, provided, however, that no termination of this Agreement will
relieve any party of liability for any breaches of this Agreement that are
based on a wrongful refusal or failure to perform any obligations. Upon
termination of this Agreement, each party will, upon request, destroy all
documents, work papers and other materials of the other parties relating to the
transaction contemplated by this Agreement, whether obtained before or after
execution of this Agreement.
6.5 FURTHER ASSURANCES. Each of the parties hereto will cooperate with
the other and execute and deliver to the other parties hereto such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by any other party hereto as necessary to carry
out, evidence, and confirm the intended purposes of this Agreement.
<PAGE> 21
-21-
6.6 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party. Expenses for the conversion of Vianet EDV Dienstleistungs
Ges.m.b.H. into an Austrian Aktiengesellschaft (such as legal, accounting and
registration fees and applicable capital contribution tax) and applicable share
capital transfer tax will be borne by CYBERNET.
6.7 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as CYBERNET and the VIANET
Stockholders mutually determine. Unless consented to by CYBERNET in advance or
required by law, prior to the Closing VIANET Stockholders will keep this
Agreement strictly confidential and may not make any disclosure of this
Agreement to any person or entity. VIANET Stockholders and CYBERNET will
consult with each other concerning the means by which the VIANET's employees,
customers, and suppliers and others having dealings with VIANET will be
informed of the transactions contemplated by this Agreement, and CYBERNET will
have the right to be present for any such communication.
6.8 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, CYBERNET and the VIANET Stockholders will maintain in confidence, and
will cause the directors, officers, employees, agents, and advisors of CYBERNET
and VIANET to maintain in confidence, and not use to the detriment of another
party or VIANET any written, oral, or other information obtained in confidence
from another party or VIANET in connection with this Agreement or the
transactions contemplated hereby, unless (a) such information is already known
to such party or to others not bound by a duty of confidentiality or such
information becomes publicly available through no fault of such party, (b) the
use of such information is necessary or appropriate in making any filing or
obtaining any consent or approval required for the consummation of the
transactions contemplated hereby, or (c) the furnishing or use of such
information is required by legal proceedings. If the Closing is not
consummated, each party will return or destroy as much of such written
information as the other party may reasonably request.
<PAGE> 22
-22-
6.9 AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
6.10 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement and (c) waive
compliance with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver will be
valid only if set forth in a written instrument and signed by the party granting
such extension or waiver.
6.11 ENTIRE AGREEMENT. This Agreement, the Exhibits, Schedules attached
hereto and the other Transaction Documents contain the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
arrangements and understandings, both written and oral, expressed or implied,
with respect thereto.
6.12 SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, in the event that any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, will be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn so
as not to be invalid, prohibited or unenforceable in such jurisdiction, it will,
as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
6.13 NOTICES. All notices and other communications required or permitted
under to this Agreement must be in writing and will be deemed given if sent by
personal delivery, fax with electronic confirmation of delivery,
internationally-recognized overnight courier company that is able to provide
proof or receipt of delivery, or registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as may be specified by like notice):
<PAGE> 23
-23-
If to VIANET Mr. Tristan Libischer and Mr. Alexander Wiesmuller
Stockholders Mariannengasse 14, 1090 Wien, Austria
Tel. 43-1-404020
Fax 43-1-4040240
With a copy to: Dr. Thomas Herndl
Tulpengasse 2, 1080 Wien, Austria
Tel. 43-1-4027844
Fax 43-1-402784455
If to CYBERNET: Cybernet Internet Services International; Inc.
Attn.: Mr. Andreas Eder
Stefan-George-Ring 19, 81929 Munich, Germany
Tel: 49-89-993150
Fax: 49-89-99315199
With a copy to: Besner Kreifels Weber
Attn.: Dr. Hubert Besner
Widenmayerstr 41, 80538 Munich, Germany
Tel: 49-89-2199920
Fax: 49-89-21999233
All such notices and other communications will be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery, (b)
in the case of a fax, when the party sending such fax has received electronic
confirmation of its delivery, (c) in the case of delivery by
internationally-recognized overnight courier, on the business day following
dispatch and (d) in the case of mailing, on the third business day following
mailing.
6.14 HEADINGS. The headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.
6.15 BENEFITS. None of the provisions of this Agreement is or will be
construed as for the benefit of or enforceable by any person not a party to this
Agreement.
<PAGE> 24
-24-
6.16 ASSIGNMENT. This Agreement may not be assigned by any party, by
operation of law or otherwise.
6.17 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the Republic of Austria applicable to contracts
made and to be performed therein, without regard to conflicts of laws
principles.
6.18 CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party. Any reference to
any federal, state, local, or foreign statute or law will be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein will have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
6.19 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
[SIGNATURES ON FOLLOWING PAGE]
<PAGE> 25
-25-
Munich, this day of June 18, 1998
CYBERNET, Inc.
By:
---------------------------
Name: Andreas Eder
Title: President and CEO
VIANET Stockholders: Shares of Shares of
VIANET Stock CYBERNET Stock
/s/ Tristan Libischer
- ----------------------------- 500,000 150,000
Tristan Libischer
/s/ Alexander Wiesmuller
- ----------------------------- 500,000 150,000
Alexander Wiesmuller
<PAGE> 26
STOCK PURCHASE AGREEMENT
between
Cybernet Internet Services International, Inc, and
Tristan Libischer and Alexander Wiesmuller,
DISCLOSURE SCHEDULES
Disclosure Schedule 3.5
Financial Statements of
Vianet EDV Dienstleistungs Ges.m.b.H. as of December 31, 1996 and 1997
see attached
Disclosure Schedule 3.6 (Material Adverse Effect)
None
Disclosure Schedule 3.7 (Filings, Consents, and Approvals)
None
Disclosure Schedule 3.8 (Noncontravention)
None
Disclosure Schedule 3.9 (Litigation)
<PAGE> 27
-2-
Disclosure Schedule 3.10 (Material Agreements)
None
Disclosure Schedule 3.11 (Intellectual Property)
trademark "Vianet", registered as of January 20, 1997
trademark "Intranet", registered as of July 30, 1997
trademark "Businesslink", registered as of July 30, 1997
Disclosure Schedule 3.12 (Real Property Leases)
LEASE AGREEMENT WITH CA IMMOBILIEN-ANLAGEN AG,
DATED JANUARY 8, 1996
Disclosure Schedule 3.13 (Personal Property)
None
Disclosure Schedule 3.15 (Taxes)
None
Disclosure Schedule 3.16 (Labor Relations)
Tristan Libischer, Managing Director, ATS 1,980,000 p.a.
Alexander Wiesmuller, ATS 1,980,000 p.a.
Kristana Abjornsson, New Media Group, ATS 350,000 p.a.
Michaela Altenburger, Accounting, ATS 280,000 p.a.
Thomas Blumenschein, Marketing, ATS 378,000 p.a.
Martin Dunkl, Teamleader Sales, ATS 490,000 p.a.
Heinz Duschanek, Teamleader New Media Group, ATS 532,000 p.a.
Irene Gansbacher, Accounting, Administration, ATS 322,000 p.a.
<PAGE> 28
-3-
Nick Gazey, Network, ATS 525,000 p.a.
Stefan Geiger, Development, ATS 406,000 p.a.
Gunther Graf, Support, ATS 308,000 p.a.
Claudia Grunwald, Teamleader Accounting, Administration, ATS 490,000 p.a.
Paul Haberfellner, Support, Network, ATS 385,000 p.a.
Dusan Mitrovic, Teamleader Network, ATS 616,000 p.a.
Brigitte Schmatz, Secretary, ATS 322,000 p.a.
Peter Schmid, Teamleader Development, ATS 616,000 p.a.
Alina Weinrich, Assistant Sales, ATS 322,000 p.a.
DISCLOSURE SCHEDULE 3.18 (INSURANCE)
None
DISCLOSURE SCHEDULE 3.19 (AFFILIATE TRANSACTIONS)
None
DISCLOSURE SCHEDULE 4.4
Financial Statements of Cybernet Internet Services International, Inc.
as of December 31, 1997,
see attached
<PAGE> 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
June 11, 1997, among Cybernet Internet Services International, Inc., a Delaware
corporation ("Cyber U.S."); and Cybermind Interactive Europe AG, a German
corporation, and Rudolf Strobl, Roland Manger, Thomas Schulz, Andreas Eder and
Holger Timm, all residents of Germany, being the holders of all the issued and
outstanding capital stock of Cybernet Internet-Dienstleistungen AG, a German
stock corporation ("Cybernet") (individually, a "Stockholder" and collectively,
the "Stockholder").
BACKGROUND:
All of the issued and outstanding capital stock of Cybernet, consisting of
640,000 shares of voting common stock, par value 5.00DM (the "Cybernet Stock")
is owned by the Stockholders.
The Stockholders have agreed to sell to Cyber U.S. and Cyber U.S. has
agreed to purchase from the Stockholders the Cybernet Stock on the terms and
conditions set forth in this Agreement.
In consideration of the mutual representations, warranties, covenants and
agreements contained in this Agreement, the parties agree as follows:
STATEMENT OF TERMS:
SECTION 1
PURCHASE AND SALE OF STOCK
1.1 PURCHASE AND SALE OF STOCK. Stockholders will sell to Cyber U.S. and
Cyber U.S. will purchase from Stockholders all of the Stockholders' right,
title and interest in the Cybernet Stock.
1.2 CONSIDERATION: STOCK EXCHANGE. At the Closing (as defined in Section
2.1 below), upon surrender of the certificates evidencing 640,000 shares of
the Cybernet Stock duly endorsed for transfer to Cyber U.S., Cyber U.S. will
cause 5,160,000 shares of the common voting stock, par value $0.001 of Cyber
U.S. ("Cyber Common"), 1,200,000 shares of the redeemable, convertible
preferred non-voting stock, Series A of Cyber U.S. having substantially the
rights and preferences set forth on Exhibit "A" to this Agreement ("Cyber A
Preferred") and 5,160,000 shares of the redeemable, convertible preferred
voting stock, Series B of Cyber U.S. having substantially the rights and
preferences set forth in Exhibit "B" to this Agreement ("Cyber B Preferred")
(collectively, the "Cyber U.S. Stock") (the "Consideration") to be issued to
the Stockholders pursuant to Section 1.5 of this Agreement. As a result of the
sale of the Cybernet Stock and the payment of the Consideration, Cybernet will
be a wholly-owned subsidiary of Cyber U.S.
<PAGE> 2
1.3 ISSUANCE OF CYBER U.S. STOCK TO STOCKHOLDERS. At the Closing, the
Pooling Trustee (as defined in Section 2.3(e) below) will receive stock
certificates for each Stockholder in the name of the Pooling Trustee for the
number of shares of Cyber Common Cyber A Preferred and Cyber B Preferred
respectively shown next to the name such Stockholder at the end of this
Agreement, being an exchange of 18 shares of Cyber U.S. Stock for each share of
Cybernet Stock being sold by each Stockholder and an aggregate of 11,520,000
shares of Cyber U.S. Stock.
1.4 NO FURTHER OWNERSHIP RIGHTS IN CYBER U.S. STOCK. The issuance of the
11,520,000 shares of Cyber U.S. Stock to be delivered to the Pooling Trustee at
Closing will be deemed to have been given in full satisfaction of all rights
pertaining to the Cybernet Stock and in full payment of the Consideration.
1.5 FINANCING. As a part of and subject to the Closing, Cyber U.S. agrees
to provide, on or before July 30, 1997, financing to Cybernet in the amount of
$6,750,000 net of all costs, expenses, fees and commissions related to such
financing through the issuance of up to 1,500,000 exchangeable preferred shares
Series C of Cyber U.S. (the "Financing") which shares shall have substantially
the right and powers set forth on Exhibit "C" to this Agreement, subject to
such modifications as may be required to comply with applicable securities laws
and to give effect to the Financing and the transactions among the parties as
mutually desired under Generally Accepted Accounting Principles and applicable
tax laws.
SECTION 2
CLOSING; CLOSING CONDITIONS
2.1 CLOSING. The parties to this Agreement will hold a closing (the
"Closing") for the purpose of consummating the transactions contemplated by
this Agreement at 10:00 am on July 30, 1997 or such other date and time
mutually agreed upon by the parties. The Closing will be held at the offices of
Rinderknecht, Glaus and Stadelhofer, Beethovenstrasse 7, Zurich Switzerland.
The date on which the Closing actually occurs is hereinafter referred to as the
"Closing Date." At the Closing, the parties will execute and exchange the
following documents, items, certificates and instruments described in this
Section 2.
2.2 CONDITIONS TO CLOSING OF CYBER U.S. Cyber U.S.'s obligation to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the conditions set forth below and/or the delivery of all of
the documents, items, certificates and instruments described below, all of
which documents, items, certificates and instruments must be in form and
substance satisfactory to Cyber U.S., unless such condition is waived by Cyber
U.S. at the Closing. The Closing of the transactions contemplated by this
Agreement will be deemed to mean a waiver of all conditions to Closing.
-2-
<PAGE> 3
(a) Transaction Documents. The Stockholders will have executed this
Agreement and delivered all of the issued and outstanding shares of Cyber
Stock as provided in Section 1.2 above.
(b) Representations and Warranties. The representations and warranties of
the Stockholders set forth in this Agreement will be true, correct and complete
in all respects as of the Closing Date, as though made on and as of the Closing
Date. The Stockholder will have given such representations and warranties as
Cybernet U.S. or its counsel may reasonably require to assure compliance with
applicable securities laws, including without limitation Regulation S
promulgated under the U.S. Securities Act of 1933, as amended.
(c) No Action. No suit, action, or proceeding will be pending or
threatened before any governmental or regulatory authority wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge would
(1) prevent consummation of any of the transactions contemplated by this
Agreement; (2) cause any of the transactions contemplated by this Agreement to
be rescinded following consummation; or (3) adversely affect the right of
Cybernet to own, operate or control the business or assets of Cybernet.
(d) Consents. Cybernet will have received duly executed copies of all
third-party consents and approvals contemplated by this Agreement.
(e) Shareholder Approval. The merger of New Century Technology, Inc.
(also known as "Cybernet Internet Services International, Inc."), a Utah
corporation ("Cyber Utah"), and the acquisition of all of the issued and
outstanding shares of Cybernet by Cyber U.S. as provided in this Agreement will
have been approved by the shareholders of Cyber Utah and Cyber U.S. and such
merger shall have become effective.
(f) Pooling Trust Agreement. The Stockholders will have executed a
pooling trust agreement (the "Pooling Trust Agreement"), substantially
acceptable to Cyber U.S., with Dr. Hubert Besner, Rechtsanwalt (the "Pooling
Trustee") providing that the Cyber U.S. shares making up the Consideration and
any Cyber U.S. Stock issued in connection therewith shall be held by the
Pooling Trustee and not sold, except to another Stockholder, until released by
the Pooling Trustee, that twenty-five percent (25%) of such Cyber U.S. shares
shall be released on January 1, 1999, that an additional 25% of such shares
shall be released on January 1, 2000, that the remainder of such shares shall
be released on January 1, 2001 and that the Stockholders shall have a right
pari passu of first refusal to purchase any of the shares held by the Pooling
Trustee that a Stockholder desires to sell.
(g) No Material Adverse Change. Since December 31, 1996, no "Cybernet
Material Adverse Effect" (as defined in Section 3.1 below) will have occurred.
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(h) OPINION OF COUNSEL. The Stockholders will furnish Cyber U.S. with an
opinion, dated the Closing Date, of counsel satisfactory to Cyber U.S. in form
and substance satisfactory to Cyber U.S. and its counsel.
(i) FINANCING CLOSING. The Financing shall close simultaneously with and
as a part of the Closing.
(j) DUE DILIGENCE REVIEW. Cyber U.S. will be satisfied in all respects with
its due diligence investigation of Cybernet.
2.3 CONDITIONS TO CLOSING OF THE STOCKHOLDERS. The Stockholders' obligation
to consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the conditions set forth below and/or the delivery of all of the
documents, items, certificates and instruments described below, all of which
documents, items, certificates and instruments must be in form and substance
satisfactory to the Stockholders, unless such condition is waived by the
Stockholders at the Closing. The Closing of the transactions contemplated by
this Agreement will be deemed to mean a waiver of all conditions to Closing.
(a) TRANSACTION DOCUMENTS. Cyber U.S. will have executed this Agreement and
delivered the shares of Cyber U.S. Stock as provided in Section 1.3 above.
(b) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Cyber U.S. set forth in this Agreement will be true, correct and complete in all
respects as of the Closing Date, as though made on and as of the Closing Date.
(c) NO ACTION. No suit, action, or proceeding will be pending or threatened
before any governmental or regulatory authority wherein an unfavorable judgment,
order, decree, stipulation, injunction or charge would (1) prevent consummation
of any of the transactions contemplated by this Agreement; (2) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation; or (3) adversely affect the right of Cyber U.S. to own, operate or
control the business or assets of Cyber U.S.
(d) FINANCING CLOSING. The Financing shall close simultaneously with and as
a part of the Closing.
(e) POOLING TRUST AGREEMENT. All of the Stockholders will have executed the
Pooling Trust Agreement with the Pooling Trustee providing that the Cyber U.S.
shares making up the Consideration shall be held by the Pooling Trustee and not
sold, except to another Stockholder, until released by the Pooling Trustee, that
twenty-five percent (25%) of such Cyber U.S. shares shall be released on January
1, 1999, that an additional 25% of such shares shall be released on January 1,
2000, that the remainder of such shares shall be released on January 1, 2001 and
that the Stockholders shall have a right pari passu of first
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refusal to purchase any of the shares held by the Pooling Trustee that a
Stockholder desires to sell.
(f) OPINION OF COUNSEL. Cyber U.S. will furnish the Stockholders with an
opinion, dated the Closing Date, of its counsel, in form and substance
satisfactory to the Stockholders and their counsel.
(g) COPIES OF RESOLUTIONS: SHAREHOLDERS APPROVAL. Cyber U.S. will have
furnished the Stockholders with certified copies of resolutions duly adopted by
the Board of Directors of Cyber U.S. approving the execution and delivery of
this Agreement and the other documents to be executed and delivered in
connection with this Agreement and consummation of the transactions contemplated
hereby and thereby. The merger of Cyber Utah and the acquisition of all of the
issued and outstanding shares of Cybernet by Cyber U.S. as provided in this
Agreement will have been approved by the shareholders of Cyber Utah and Cyber
U.S. and such merger shall have become effective.
(h) DUE DILIGENCE REVIEW. The Stockholders will be satisfied in all
respects with its due diligence investigation of Cyber U.S.
2.4 DIRECTORS AND OFFICERS.
(a) DIRECTORS AND OFFICERS OF CYBER U.S. Effective immediately after the
Closing, any persons other than those listed below who are directors or officers
of Cyber U.S. on the Closing will immediately elect or confirm the election of
the following individuals as directors of Cyber U.S. (the "New Directors") and
resign:
Andreas Eder
Holger Timm
One person to be named by Cybernet
prior to the Closing
Two persons named by Cyber U.S.
prior to the Closing
Immediately thereafter, the New Directors will appoint or confirm the
appointment of the following individuals as officers of Cyber U.S.:
Andreas Eder, Chairman, President and
Chief Executive Officer
One person each named by Cyber U.S. as Vice
President and Secretary/Treasurer
The Stockholders and Cyber U.S. agree that Cybernet may name a new director and
Chairman/CEO of Cyber U.S. as soon as is permissible.
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(b) Aufsichtsrat and Vorstand of Cybernet. Following the Closing,
Holger Timm (as Vorsitzender), Hubert Bosner and Wolfgang Hermanni shall remain
the members of the Aufsichtsrat of Cybernet; provided that prior to the
Closing, Cyber U.S. may designate one person to serve as a member of the
Aufsichtsrat. Following the Closing, Andreas Eder (as Vorzitzender), Thomas
Schulz and Rudolf Strobl shall remain members of the Vorstand of Cybernet;
provided that the Aufsichtsrat may change the members thereof and it is
understood that a new nominee may join the Vorstand.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
The Stockholders, jointly and severally, represent and warrant in the form
of a legally independent guarantee that the following is true and correct at
the Closing Date to Cyber U.S.:
3.1 CORPORATE ORGANIZATION AND GOOD STANDING. Cybernet is a German stock
corporation ("Aktiengesellschaft") duly organized, validly existing and in good
standing under the laws of Germany, with all requisite corporate power and
authority to own, operate and lease its properties and to carry on its business
as it is now being conducted. Cybernet is qualified or licensed to do business
and is in good standing in each jurisdiction in which the ownership or leasing
of property by it or the conduct of its business requires such licensing or
qualification, except where the failure to be so qualified or licensed or in
good standing will not have a Cybernet Material Adverse Effect. Cybernet has no
subsidiaries. For purposes of this Agreement, "Cybernet Material Adverse
Effect" means any materially adverse change in or effect on the business,
operations, properties, assets, liabilities, financial condition, results of
operations or prospects of Cybernet or its ability to carry out its obligations
under this Agreement, but does not mean any losses, adverse developments or
other conditions suffered by Cybernet arising from normal operations or market,
political or economic conditions affecting the internet service provider
industry as a whole. Cybernet is entered in the commercial register of the
County Court of Berlin-Charlottenburg under no. 60318. All facts relating to
Cybernet and eligible for registration in the commercial register are actually
entered in the commercial register. Its articles of association are those
recorded by the notary public Ernst Mittenzwie, February 2, 1996, as his deeds
numbered M767 and M769 and by the notary public Dr. Bernhard Murawo, September
13, 1996, as his deed numbered 292; the parties are well familiar with
Cybernet's articles of association and dispensed with them being read out when
this Agreement was recorded. No shareholders' agreements or any other side
agreements to the constitution or organization of Cybernet exist. The business
of Cybernet has been carried out at all times in accordance with German law
and custom and with the care and diligence of a prudent businessman.
3.2 DUE EXECUTION: ENFORCEABILITY. This Agreement has been, and all other
documents, agreements and instruments to be executed in connection with the
consummation of the transactions contemplated by this Agreement (collectively,
the "Transaction Documents") will be, duly executed and delivered by the
Stockholders and this Agreement is,
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<PAGE> 7
and the other Transaction Documents when executed and delivered by the
Stockholders as contemplated by this Agreement will be, the valid and binding
obligation of the Stockholders enforceable in accordance with their respective
terms, except (1) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (2) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
3.3 CAPITALIZATION. The entire authorized capital stock and other equity
securities of Cybernet consists of 640,000 shares of 5.00DM par value stock (the
"Cybernet Shares") all of which shares are issued and outstanding. All of the
issued and outstanding Cybernet Shares have been duly authorized, are validly
issued, were not issued in violation of any preemptive rights and are fully paid
and nonassessable, and have not been repaid or otherwise reduced or agreed to be
reduced, are not subject to preemptive rights and were issued in full compliance
with all national, federal, state and local laws, rules and regulations. Each
Stockholder owns beneficially and of record all of the shares of Cybernet Shares
issued to such Stockholder as set forth on the Cybernet share transfer ledger.
There are no outstanding options, warrants, subscriptions, conversion rights, or
other rights, agreements, or commitments obligating Cybernet to issue any
additional Cybernet Shares, or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire from
Cybernet any Cybernet Shares. There are no agreements purporting to restrict the
transfer of the Cybernet Shares, no voting agreements, voting trusts, or other
arrangements restricting or affecting the voting of the Cybernet Shares.
3.4 TITLE TO CYBERNET STOCK. The Cybernet Stock is lawfully owned by the
Stockholders in the respective amounts set forth opposite his or its name by
its signature below, free of preemptive rights and free and clear of all
claims, liens, charges, security interest, encumbrances and other restrictions
or limitations of any kind. Each Stockholder has the full power, right, and
authority to transfer the Cybernet Stock held by him pursuant to this Agreement.
3.5 FINANCIAL STATEMENTS. Attached to this Agreement as Disclosure
Schedule 3.5 are true, correct, and complete copies of (i) an audited Cybernet
Income Statement for the period ending December 31, 1996, and an unaudited
Cybernet Income Statement for the period ending March 31, 1997, and (ii) an
audited Cybernet Balance Sheet (including the balance sheet, the profit and
loss statement, the notes and the management report if required by law) for the
period ending December 31, 1996 (the "Cybernet Reference Balance Sheet")
(collectively, the "Cybernet Financial Statements"). The Cybernet Financial
Statements (a) are in accordance with the books and records of Cybernet and
have been prepared in accordance with the generally accepted accounting and
bookkeeping principles under German commercial law observing the principle of
balance sheet consistency as well as the principle of
lower-of-cost-or-market-value as well as the principle of conservatism and have
been certified without qualification by Cybernet's auditor, and (b) present
fairly the financial condition of Cybernet as of the respective dates indicated
and the results of operations for such periods. Cybernet has not received any
advice or notification from its independent
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certified public accountants that Cybernet has used any improper accounting
practice that would have the effect of not reflecting or incorrectly reflecting
in the Cybernet Financial Statements or the books and records of Cybernet, any
properties, assets, liabilities, revenues, or expenses. The books, records, and
accounts of Cybernet accurately and fairly reflect, in reasonable detail, the
transactions, assets, and liabilities of Cybernet. Cybernet has not engaged in
any transaction, maintained any bank account, or used any funds of Cybernet,
except for transactions, bank accounts, and funds which have been and are
reflected in the normally maintained books and records of Cybernet. Cybernet
does not have any liabilities or obligations that are not shown on the financial
statements although they would have had to be shown in the financial statements
or mentioned in the notes thereto under any mandatory provision of German
commercial law. The financial statements completely and accurately reflect all
potential liabilities of Cybernet, especially under warranties or guarantees
issued on behalf of third parties. There is no necessity to provide for any
reserves in addition to those shown in the financial statements. The reserves
set aside are sufficient and adequate to cover all contingent obligations or
liabilities. Cybernet has made sufficient and adequate provisions for all
existing pension obligations.
3.6 ABSENCE OF CERTAIN CHANGES. Since the date of the Cybernet Reference
Balance Sheet, except as set forth in Disclosure Schedule 3.6, Cybernet has not
suffered any Cybernet Material Adverse Effect. During the period between the
date of the Cybernet Reference Balance Sheet and the signing of this Agreement,
Cybernet has been managed in accordance with its former business policies and
with the care and diligence of a prudent businessman; Cybernet shall continue
to be managed in that way up to the Closing Date.
3.7 FILINGS, CONSENTS AND APPROVALS. Except for any filings required by
applicable securities laws and as otherwise set forth on Disclosure Schedule
3.7, no filing or registration with, no notice to and no permit, authorization,
consent, or approval of any public or governmental body or authority or any
other person or entity is necessary for the consummation by the Stockholders of
the transactions contemplated by this Agreement or to enable Cybernet to
continue to conduct its business after the Closing Date in a manner consistent
with that in which it is presently conducted.
3.8 NONCONTRAVENTION. Neither the execution, delivery and performance
of the Transaction Documents, nor the consummation of the transactions
contemplated thereby nor compliance with the provisions thereof, will:
(1) Except as set forth in Disclosure Schedule 3.8, conflict with,
result in a violation of, cause a default under (with or without notice,
lapse of time or both) or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of
any material benefit under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the material properties or
assets of Cybernet under any term, condition or provision of any loan or
credit agreement, note, bond, mortgage, indenture, lease or other
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<PAGE> 9
agreement, instrument, permit, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Cybernet or its properties
or assets;
(2) Violate any provision of the articles of incorporation or bylaws
of Cybernet; or
(3) Violate any order, writ, injunction, decree, statute, rule, or
regulation of any court or governmental or regulatory authority applicable
to Cybernet or any of its properties or assets.
3.9 LITIGATION. There is no claim, charge, arbitration, grievance,
action, suit, investigation or proceeding by or before any court, arbiter,
administrative agency or other governmental authority now pending or, to the
Stockholders' knowledge, threatened against Cybernet or which involves any of
the business, or the properties or assets of Cybernet that, if adversely
resolved or determined, would have a Cybernet Material Adverse Effect. There is
no reasonable basis for any claim or action that, based upon the likelihood of
its being asserted and its success if asserted, would have a Cybernet Material
Adverse Effect.
3.10 MATERIAL CONTRACTS AND TRANSACTIONS. Disclosure Schedule 3.10
contains a list of all material contracts, agreements, licenses, leases for
real property or personal property, permit, arrangements, commitments,
instruments, understanding or contracts, whether written or oral, express or
implied, contingent, fixed or otherwise, to which Cybernet is a party
(collectively, the "Cybernet Contracts"). Except as listed on DISCLOSURE
SCHEDULE 3.10, Cybernet is not a party to any written or oral:
(1) contract for the purchase, sale or lease of any material capital
assets, or continuing contracts for the purchase or lease of any material
supplies, materials, equipment or services;
(2) agreement to pay material commissions or sales representative
agreements;
(3) agreement for the employment or consultancy or any person or
entity except those routinely entered into with employees and contracts
with members of the Vorstand expiring February 15, 1998;
(4) note, debenture, bond, trust agreement, letter of credit
agreement, loan agreement, or other contract or commitment for the
borrowing or lending of money, or agreement or arrangement for a line of
credit or guarantee, pledge, or undertaking of the indebtedness of any
other person;
(5) agreement, contract, or commitment for any charitable or
political contribution;
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(6) agreement, contract, or commitment limiting or restraining
Cybernet in its business or any successor thereto from engaging or
competing in any manner or in any business or from hiring any employees,
nor, to the Stockholders' knowledge, is any employee or independent
contractor of Cybernet subject to any such agreement, contract, or
commitment;
(7) material agreement, contract, or commitment not made in the
ordinary course of business;
(8) agreement establishing or providing for any joint venture,
partnership, or similar arrangement between Cybernet and any other person
or entity; or
(9) power of attorney or similar authority to act for Cybernet.
Each Cybernet Contract is in full force and effect, and there exists no material
breach or violation of or default by Cybernet under any Cybernet Contract nor,
to the Stockholders' knowledge, by any other party to a Cybernet Contract, or
any event that with notice or the lapse of time, or both, will create a material
breach or violation thereof or default under any Cybernet Contract by Cybernet
nor, to the Stockholders' knowledge, by any other party to a Cybernet Contract.
Except as set forth on Disclosure Schedule 3.10, the continuation, validity, and
effectiveness of each Cybernet Contract will in no way be affected by the
consummation of the transactions contemplated by this Agreement. Except as
indicated on Disclosure Schedule 3.10, there exists no actual or, to the
Stockholders' knowledge, any threatened termination, cancellation, or limitation
of, or any amendment, modification, or change to any Cybernet Contract, which
would have a Cybernet Material Adverse Effect. A true, correct and complete copy
(and if oral, a description of material terms) of each Cybernet Contract, as
amended to date, has been furnished to Cyber U.S.
3.11 Software. Disclosure Schedule 3.11 contains a list of all computer
software (other than word processing, spreadsheet, and database software of a
type generally available to the public through retail sales) owned, licensed or
used by Cybernet in the conduct of its business (collectively, the "Cybernet
Software") and a list of all agreements and contracts giving Cybernet a license
or other rights to the Cybernet Software. No use by Cybernet of any Cybernet
Software violates and no use by Cybernet of the Cybernet Software as
contemplated to provide internet services will violate the terms of any
agreement pursuant to which such Cybernet Software is licensed. No claim is
pending, or, to the Stockholders' knowledge, threatened, which alleges that the
ownership of, rights as licensee to, or other right to use any Cybernet
Software is invalid or unenforceable by Cybernet, nor is there any basis known
to the Stockholders for any such claim. Except as shown on Disclosure Schedule
3.11, no royalties or fees are payable by Cybernet to anyone for use of the
Cybernet Software. A true, correct, and complete copy of each agreement listed
on Disclosure Schedule 3.11, as such agreement have been amended to date), has
been furnished to Cyber U.S. All such agreements are in full force and effect
and, there are no existing material defaults or events of default, real or
claimed, or events which with or without notice
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or lapse of time both would constitute material defaults under such agreements
that would give the non-defaulting party a right to terminate such agreement or
a right to receive any payment pursuant to such agreement and all of such
agreements will in no way be affected by the consummation of the transactions
contemplated by this Agreement.
3.12 REAL PROPERTY AND REAL PROPERTY LEASES. Cybernet does not own any
real property. Disclosure Schedule 3.12 sets forth the name, parties, and date
of each lease and sublease of real property that is occupied by Cybernet
("Cybernet Leases"), and the address of each parcel of leased real property and
a list of all amendments to such Cybernet Leases. Each Cybernet Lease is in
full force and effect and there is no default asserted thereunder by any party
thereto and, to the Stockholders' knowledge, there are no unasserted defaults
(including any events which with the passage of time or giving of notice or
both would constitute a default). True, correct and complete copies of all the
Cybernet Leases, as amended to date, have been delivered to Cyber U.S. Cybernet
has not been notified that the use and operation of any of the real properties
leased by Cybernet does not conform to applicable building, zoning, safety,
environmental, and other laws, ordinances, regulations, codes, permits,
licenses, and certificates and all restrictions and conditions affecting title,
except where the failure to conform would not have an Cybernet Material Adverse
Effect.
3.13 PERSONAL PROPERTY AND PERSONAL PROPERTY LEASES. Except as set forth
on Disclosure Schedule 3.13, Cybernet owns or leases the use of, all material
equipment, furniture, fixtures and other material tangible personal property
and assets necessary for the continued operation of the business of Cybernet as
presently conducted and where the absence of such property and assets would
have a Cybernet Material Adverse Effect. All of such personal properties are in
good operating condition (normal wear and tear excepted), and are reasonably
fit for the purposes for which the such personal property is presently used.
3.14 COMPLIANCE WITH LAW. To the knowledge of the Stockholders, Cybernet
holds and is in compliance with all permits, certificates, licenses, approvals,
registrations and authorizations necessary for the conduct of its business or
the ownership of its properties or assets, except where the failure to hold or
comply could not have a Cybernet Material Adverse Effect, and all of such
permits, certificates, licenses, approvals, registrations, and authorizations
are in full force and effect. To the knowledge of the Stockholders, Cybernet is
in compliance with all applicable laws, statutes, ordinances, rules and
regulations (including without limitation those relating to environmental
protection, occupational safety and health, and equal employment practices) and
all orders, judgments and decrees, except where the failure to comply would not
have a Cybernet Material Adverse Effect.
3.15 TAXES. Except as set forth in Disclosure Schedule 3.15, Cybernet has
timely filed with the appropriate taxing authorities all returns required to be
filed on or prior to the date hereof in respect of all taxes of Cybernet, and
has paid all such taxes, including interest, penalties, and additions in
connection therewith shown to have become due on such returns or for which a
notice of assessment or demand for payment has been received. All such
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returns have been prepared in accordance with all applicable laws and
requirements. Any accruals for such taxes reflected in the Cybernet Reference
Balance Sheet are sufficient to satisfy the accrued liability for such taxes as
of the date of the Cybernet Reference Balance Sheet. No material tax issues have
been raised by the relevant taxing authorities in connection with any of the tax
returns referred to above, and no waivers of statutes of limitations or
extensions of time within which to file any tax return or with respect to a tax
assessment or deficiency have been given or requested with respect to Cybernet.
No constructive dividends ("verdeckte Gewinnausschutzungen") have been made by
Cybernet to any of its shareholders.
3.16 LABOR RELATIONS. None of Cybernet's employees is represented by any
union or other labor organization in regard to its employment by Cybernet. There
is no unfair labor practice charge or other labor related grievance pending or,
to the Stockholders' knowledge, threatened against Cybernet that might have a
Cybernet Material Adverse Effect. Cybernet has in relation to each of its
employees and to each of its former employees complied in all material respects
with all its obligations under statute and otherwise concerning the health and
safety at work of each of the employees and has not incurred any liability to
any employee in respect of any accident or injury which is not fully covered by
insurance. Except as set forth on Disclosure Schedule 3.15, all employees of
Cybernet are employed under agreements substantially in the form of the example
employment agreement provided by Cybernet on May 30, 1997. No employment
contracts between Cybernet and the employees of the upper executive level can be
terminated or modified by the employees on grounds of this stock purchase
agreement having been entered into, nor are there any other reasons jeopardizing
the continued existence of these employment contracts. Cybernet is not party to
any shop agreements (Betriebsvereinbarungen) or collective bargaining agreements
(Tarifvertrag) other than those listed in Disclosure Schedule 3.16.
3.17 PENSION AND EMPLOYEE BENEFIT PLANS AND COMPENSATION. Cybernet
maintains no employee pension benefit plans, welfare benefit plans, bonus, stock
purchase, stock ownership, stock option, deferred compensation, material or
substantial incentive, severance, termination or other compensation plan or
arrangement, and other material employee fringe benefit plans. No salary or
other payment due to the Stockholder remains unpaid by Cybernet and the
Stockholders have been completely paid for past services rendered to Cybernet,
other than current unpaid salary and current business expenses not to exceed
400,000 DM in the aggregate to be paid or reimbursed by Cybernet in the ordinary
course of business.
3.18 OTHER INTELLECTUAL PROPERTY. Cybernet has no registered or
unregistered, foreign or United States trademarks, trade names, trade styles,
and service marks and copyrights; trade secrets or know-how, except as listed on
Disclosure Schedule 3.18. To the best knowledge of the Stockholders, Cybernet
owns or has those rights to all the Intellectual Property Rights needed to
conduct its business and holds such rights free from any challenges to their use
by Cybernet.
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3.19 INSURANCE. Set forth in Disclosure Schedule 3.19 is a list of all
insurance policies that relate to Cybernet's business. The coverage under each
such policy is in full force and effect, and no notice of cancellation or
nonrenewal with respect to, or disallowance of any claim under, any such policy
has been received by Cybernet. The Stockholders have no knowledge of any facts
or the occurrence of any event that reasonably might form the basis of any
claim against Cybernet relating to its business or operations or any of its
assets or properties covered by any of such policy that may materially increase
the insurance premiums payable under any such policy.
3.20 AFFILIATE TRANSACTIONS. Except as disclosed in Disclosure Schedule
3.20, no officer, director, affiliate of Cybernet provides any assets, services
or facilities used or held for use in connection with Cybernet's business and
Cybernet does not provide or cause to be provided any assets, services or
facilities to any such officer, director, or affiliate.
3.21 STOCKHOLDERS' ASSETS. The Stockholders are not hereby disposing of
their entire assets nor of a substantial part thereof (Section 419 German Civil
Code, "Burgerliches Gesetzbuch").
3.22 CORRECTNESS OF REPRESENTATIONS. No representation or warranty of
Cybernet in this Agreement or in any exhibit, certificate, or schedule attached
to this Agreement or furnished pursuant to this Agreement contains, or at the
Closing Date will contain, any untrue statement of fact or omits, or at the
Closing Date will omit, to state any material fact necessary in order to make
the statements contained therein not misleading, and all such statements,
representations, warranties, exhibits, certificates, and schedules shall be
true and complete in all material respects on and as of the Closing Date as
though made on that date.
SECTION 4
REPRESENTATIONS AND WARRANTIES
OF CYBER U.S.
Cyber U.S. represents and warrants to the Stockholders as follows:
4.1 ORGANIZATION AND GOOD STANDING. Cyber U.S. is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Cyber U.S. has
no validly existing subsidiaries.
4.2 CAPITAL STRUCTURE. The entire authorized capital stock and other
equity securities of Cyber U.S. at the Closing Date shall consist of 10,000,000
shares of $0.001 par value preferred stock of which none are issued or
outstanding and 40,000,000 shares of $0.001 par value common stock of which no
more than 9,546,891 shares will be issued and outstanding following
consummation of the merger between Cyber Utah and Cyber U.S. All of the issued
and outstanding shares of Cyber U.S. Stock will be duly authorized, validly
issued, fully paid and nonassessable and will not be subject to preemptive
rights. Disclosure
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Schedule 4.2 sets forth the percentage holdings of the Stockholders in Cyber
U.S. after giving effect to the transactions contemplated by this Agreement.
4.3 AUTHORITY. Subject to the approval of the shareholders of Cyber Utah
and Cyber U.S., (a) Cyber U.S. has all requisite corporate power and authority
to enter into this Agreement and the Transaction Documents to which it is a
party and to perform its obligations thereunder and to consummate the
transactions contemplated thereby; (b) the execution and delivery of this
Agreement and each of the Transaction Documents to which it is a party by Cyber
U.S. and the consummation by Cyber U.S. of the transactions contemplated
thereby, have been duly authorized by the board of directors of Cyber U.S. and
no other corporate proceedings on the part of Cyber U.S. are necessary to
authorize such documents or to consummate the transactions contemplated
thereby; and (c) this Agreement has been, and all the other Transaction
Documents to which it is a party when executed and delivered by Cyber U.S. as
contemplated by this Agreement will be, duly executed and delivered by Cyber
U.S. and this Agreement is, and the other Transaction Documents when executed
and delivered by Cyber U.S. as contemplated hereby will be, the valid and
binding obligation of Cyber U.S. enforceable in accordance with their
respective terms, except (1) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (2) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.
4.4 FINANCIAL STATEMENTS. Attached to this Agreement as Disclosure
Schedule 4.4 are true, correct, and complete copies of audited Cyber Utah
Financial Statements for the period ending December 31, 1996 and the years
ending August 31, 1996, 1995 and 1994 (collectively, the "Cyber U.S. Financial
Statements"). The Cyber U.S. Financial Statements (a) are in accordance with
the books and records of Cyber U.S. and (b) present fairly the financial
condition of Cyber U.S. as of the respective dates indicated and the results of
operations for such periods. Cyber U.S. has not received any advice or
notification from its independent certified public accountants that Cyber U.S.
has used any improper accounting practice that would have the effect of not
reflecting or incorrectly reflecting in the Cyber U.S. Financial Statements or
the books and records of Cyber U.S., any properties, assets, liabilities,
revenues, or expenses. The books, records, and accounts of Cyber U.S.
accurately and fairly reflect, in reasonable detail, the transactions, assets,
and liabilities of Cyber U.S. Cyber U.S. has not engaged in any transaction,
maintained any bank account, or used any funds of Cyber U.S., except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of Cyber U.S.
4.5 NONCONTRAVENTION. Neither the execution, delivery and performance of
the Transaction Documents, nor the consummation of the transactions
contemplated thereby nor compliance with the provisions thereof, will:
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<PAGE> 15
(1) Conflict with, result in a violation of, cause a default under
(with or without notice, lapse of time or both) or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
the material properties or assets of Cyber U.S. under any term, condition
or provision of any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Cyber U.S. or its material properties or assets;
(2) Subject to approval of the shareholders of Cyber Utah and Cyber
U.S., violate any provision of the articles or certificate of incorporation
or by-laws of Cyber U.S.; or
(3) Violate any order, writ, injunction, decree, statute, rule, or
regulation of any court or governmental or regulatory authority applicable
to Cyber U.S. or any of its properties or assets.
4.6 LITIGATION. There is no claim, charge, arbitration, grievance,
action, suit, investigation or proceeding by or before any court, arbiter,
administrative agency or other governmental authority now pending or, to Cyber
U.S.'s knowledge, threatened against Cyber U.S., or which involves any of the
business, or the properties or assets of Cyber U.S. that, if adversely resolved
or determined, would have a material adverse effect on Cyber U.S. There is no
reasonable basis for any claim or action that, based upon the likelihood of its
being asserted and its success if asserted, would have a material adverse
effect.
4.7 FILINGS, CONSENTS AND APPROVALS. Except for any filings required by
applicable securities laws, no filing or registration with, no notice to and no
permit, authorization, consent, or approval of any public or governmental body
or authority or other person or entity is necessary for the consummation by
Cyber U.S. of the transactions contemplated by this Agreement or to enable
Cyber U.S. to continue to conduct its business after the Closing Date in a
manner which is consistent with that in which it is presently conducted.
SECTION 5
SURVIVAL AND INDEMNIFICATION
5.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations,
warranties and covenants made by the parties shall survive the Closing for a
period of six (6) months from the Closing Date.
5.2 INDEMNIFICATION BY STOCKHOLDERS. The Stockholders, jointly and
severally, agree to indemnify Cyber U.S. and its officers, directors,
shareholders, employees, agents and affiliates (other than the Stockholders
themselves) in respect of, and hold each of them
- 15 -
<PAGE> 16
harmless from and against, any and all damages, fines, fees, penalties,
deficiencies, losses and expenses (including without limitation interest, court
costs, fees of attorneys, accountants and other experts or other expenses of
litigation or other proceedings or of any claim, default or assessment)
suffered, incurred or sustained by any of them or to which any of them becomes
subject, resulting from, arising out of or relating to any misrepresentation,
breach of warranty or nonfulfillment of or failure to perform any covenant or
agreement on the part of the Stockholders contained in this Agreement.
5.3 INDEMNIFICATION BY CYBER U.S. Cyber U.S. agrees to indemnify the
Stockholders in respect of, and hold each of them harmless from and against, any
and all damages, fines, fees, penalties, deficiencies, losses and expenses
(including without limitation interest, court costs, fees of attorneys,
accountants and other experts or other expenses of litigation or other
proceedings or of any claim, default or assessment) suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to any misrepresentation, breach of warranty or
nonfulfillment of or failure to perform any covenant or agreement on the part of
Cyber U.S. contained in this Agreement.
5.4 PROCEDURES FOR INDEMNIFICATION FOR THIRD PARTY CLAIMS. Whenever
indemnification is sought under this Section 5 in connection with a claim or
demand brought by a third party, the party seeking indemnification ( the
"Indemnitee") will promptly notify the party from whom indemnification is
sought (the "Indemnitor"), specifying the nature of such claims, the amount or
estimated amount of such claim and attaching copies of all relevant information
concerning the underlying claim of liability. Within ten days of receipt of
such notice, the Indemnitor will notify the Indemnitee promptly whether it
disputes its indemnification obligation. If the indemnification obligation is
not so disputed, the Indemnitor, at the option of the Indemnitee, will, at the
Indemnitor's cost and expense, defend any such claim. If the Indemnitee so
elects for the Indemnitor to defend any claim, the Indemnitor will have full
control over the conduct of such proceeding, although the Indemnitee will have
the right to retain legal counsel at its own expense and will have the right to
approve any settlement of any claim, provided that such approval may not be
withheld unreasonably. If the Indemnitee does not elect for the Indemnitor to
assume the defense of such claim, the Indemnitee will have the right to defend
the claim at the reasonable cost and expense of the Indemnitor. The Indemnitor
will not be obligated to indemnify the Indemnitee with respect to such third
party claim to the extent that the Indemnitor's ability to defend has been
irreparably prejudiced by the failure or delay of the Indemnitee to give
Indemnitor the notice required by this Section 5.4. Any dispute of an
indemnification obligation under this Agreement may be resolved by litigation
in a court of competent jurisdiction.
5.5 PROCEDURES FOR INDEMNIFICATION FOR NON-THIRD PARTY CLAIMS. If any
Indemnitee has a claim under Section 5 against any Indemnitor that does not
involve a third party claim as described in Section 5.4 above, the Indemnitee
will promptly notify the Indemnitor of such claim, specifying the nature of
such claim and the amount of any loss
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<PAGE> 17
incurred by the Indemnitee. The failure by any Indemnitee to give such notice
will not impair such party's rights under this Agreement except to the extent
that the Indemnitor demonstrates that it has been irreparably prejudiced
thereby. If the Indemnitor notifies the Indemnitee that it does not dispute the
claim described in such notice or fails to notify the Indemnitee within 30 days
its receipt of such notice, the loss in the amount specified in the notice will
be conclusively deemed a liability of the Indemnitor under Section 5 and the
Indemnitor will pay the amount of such loss to the Indemnitee on demand. If the
Indemnitor has timely disputed its liability with respect to such claim, the
Indemnitor and the Indemnitee will proceed in good faith to negotiate a
resolution of such dispute, and if not resolved through negotiations within 60
days after the Indemnitors receipt of the initial claim notice, such dispute may
be resolved by litigation in a court of competent jurisdiction.
5.6 INDEMNIFICATION FOR FEES AND COMMISSIONS. Each party to this
Agreement is responsible for paying any broker, finder or investment banker
that is entitled to receive any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of such party and indemnifies and holds
harmless the other parties from any such fees or commissions.
SECTION 6
MISCELLANEOUS PROVISIONS
6.1 ACTIONS BY STOCKHOLDERS. Any action or remedy of the Stockholders
under this Agreement, including without limitation, a request for arbitration
or indemnification, must be exercised jointly by the Stockholders.
6.2 EFFECTIVENESS OF REPRESENTATIONS. Each party is entitled to rely on
the representations, warranties and agreements of each of the other parties and
all such representation, warranties and agreement will be effective regardless
of any investigation that any party has undertaken or failed to undertake.
6.3 TERMINATION. This Agreement may be terminated at any time prior to
the Closing of the transactions contemplated hereby by:
(a) Mutual agreement of Cyber U.S. and Stockholders;
(b) Cyber U.S., if there has been a breach by Cybernet or
Stockholders of any material representation, warranty, covenant or agreement
set forth in this Agreement on the part of Cybernet or Stockholders that is
not cured, to the reasonable satisfaction of Cyber U.S., within ten business
days after notice of such breach is given by Cyber U.S. (except that no cure
period will be provided for a breach by Cybernet or Stockholders that by its
nature cannot be cured);
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<PAGE> 18
(c) Stockholders, if there has been a breach by Cyber U.S. of any
material representation, warranty, covenant or agreement set forth in this
Agreement on the part of Cyber U.S. that is not cured by the breaching party,
to the reasonable satisfaction of Stockholders, within ten business days after
notice of such breach is given by Stockholders (except that no cure period will
be provided for a breach by Cyber U.S. that by its nature cannot be cured);
(d) Cyber U.S. or Stockholders, if the transactions contemplated by
this Agreement have not been consummated prior to August 15, 1997, unless the
parties agree to extend such date; or
(e) Cyber U.S. or Stockholders if any permanent injunction or other
order of a governmental entity of competent authority preventing the
consummation of the transactions contemplated by this Agreement has become
final and nonappealable.
6.4 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 6.3, this Agreement will be of no further
force or effect, provided, however, that no termination of this Agreement will
relieve any party of liability for any breaches of this Agreement that are
based on a wrongful refusal or failure to perform any obligations. Upon
termination of this Agreement, each party will, upon request, destroy all
documents, work papers and other materials of the other parties relating to the
transaction contemplated by this Agreement, whether obtained before or after
execution of this Agreement.
6.5 FURTHER ASSURANCES. Each of the parties hereto will cooperate with the
other and execute and deliver to the other parties hereto such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by any other party hereto as necessary to carry
out, evidence, and confirm the intended purposes of this Agreement and to
further structure the transactions contemplated hereby as may be necessary to
comply with applicable laws.
6.6 EXPENSES. Except as otherwise expressly provided in this Agreement,
each party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the transactions contemplated hereby, including all fees and expenses of
agents, representatives, counsel, and accountants. In the event of termination
of this Agreement, the obligation of each party to pay its own expenses will be
subject to any rights of such party arising from a breach of this Agreement by
another party.
6.7 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity
with respect to this Agreement or the transactions contemplated hereby will be
issued, if at all, at such time and in such manner as Cyber U.S. and the
Cybernet mutually determine. Unless consented to by Cyber U.S. in advance or
required by law, prior to the Closing Cybernet will keep this Agreement
strictly confidential and may not make any disclosure of this
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<PAGE> 19
Agreement to any person or entity. Cybernet and Cyber U.S. will consult with
each other concerning the means by which the Cybernet's employees, customers,
and suppliers and others having dealings with the Cybernet will be informed of
the transactions contemplated by this Agreement, and Cyber U.S. will have the
right to be present for any such communication.
6.8 CONFIDENTIALITY. Between the date of this Agreement and the Closing
Date, Cyber U.S., the Principal Stockholders and Cybernet will maintain in
confidence, and will cause the directors, officers, employees, agents, and
advisors of Cyber U.S. and Cybernet to maintain in confidence, and not use to
the detriment of another party or Cybernet any written, oral, or other
information obtained in confidence from another party or Cybernet in
connection with this Agreement or the transactions contemplated hereby, unless
(a) such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the transactions contemplated hereby, or (c) the
furnishing or use of such information is required by legal proceedings. If the
Closing is not consummated, each party will return or destroy as much of such
written information as the other party may reasonably request.
6.9 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties.
6.10 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations
or other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in this Agreement and (c) waive
compliance with any of the agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver
will be valid only if set forth in a written instrument and signed by the party
granting such extension or waiver.
6.11 ENTIRE AGREEMENT. This Agreement, the exhibits, schedules attached
hereto and the other Transaction Documents contain the entire agreement between
the parties with respect to the subject matter hereof and supersede all prior
arrangements and understandings, both written and oral, expressed or implied,
with respect thereto. The Offer to Purchase between New Century Technologies
Corporation (now, Cyber U.S.) and the Stockholders dated April 3, 1997 is
expressly superseded and terminated by this Agreement.
6.12 SEVERABILITY. It is the desire and intent of the parties that the
provisions of this Agreement be enforced to the fullest extent permissible
under the law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of this
Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, will be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or
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<PAGE> 20
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it will, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
such provision in any other jurisdiction.
6.13 NOTICES. All notices and other communications required or permitted
under to this Agreement must be in writing and will be deemed given if sent by
personal delivery, fax with electronic confirmation of delivery,
nationally-recognized overnight courier company that is able to provide proof
or receipt of delivery, or registered or certified mail (return receipt
requested), postage prepaid, to the parties at the following addresses (or at
such other address for a party as may be specified by like notice):
If to Cybernet or the
Principal Stockholders: Andreas Eder
Cybernet Internet -
Dienstleistungen AG
Stefan-George-Ring 19
D-81929 Munich, Germany
Tel: 49-89-993-150
Fax: 49-89-993-15-199
With a copy to: Dr. Hubert Besner
Besner, Kreifels, Weber
Widenmayerstr 41
80538 Munich, Germany
Tel: 49-89-21-99-920
Fax: 49-89-21-99-9233
If to Cyber U.S.: Mr. Norman Wareham
Suite 1818
1177 West Hastings Street
Vancouver, British Columbia V6E 2K3
Canada
Tel: 604-683-9161
Fax: 604-687-6755
With a copy to: Powell, Goldstein, Frazer & Murphy
1001 Pennsylvania Avenue, N.W.
Sixth Floor South
Washington, D.C. 2004
Attention: Michael H. Chanin
Tel: 202-624-7235
Fax: 202-624-7222
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<PAGE> 21
All such notices and other communications will be deemed to have been
received (a) in the case of personal delivery, on the date of such delivery,
(b) in the case of a fax, when the party sending such fax has received
electronic confirmation of its delivery, (c) in the case of delivery by
nationally-recognized overnight courier, on the business day following dispatch
and (d) in the case of mailing, on the third business day following mailing.
6.14 HEADINGS. The headings contained in this Agreement are for reference
purposes only and will not affect in any way the meaning or interpretation of
this Agreement.
6.15 BENEFITS. None of the provisions of this Agreement is or will be
construed as for the benefit of or enforceable by any person not a party to
this Agreement.
6.16 ASSIGNMENT. This Agreement may not be assigned by any party, by
operation of law or otherwise.
6.17 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of Delaware applicable to contracts made and to be
performed therein, without regard to conflicts of laws principles.
6.18 CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party. Any reference to
any federal, state, local, or foreign statute or law will be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The parties intend that each representation, warranty, and
covenant contained herein will have independent significance. If any party has
breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels
of specificity) which the party has not breached will not detract from or
mitigate the fact that the party is in breach of the first representation,
warranty, or covenant. Unless otherwise expressly provided, the word
"including" does not limit the preceding words or terms.
6.19 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
6.20 FAX EXECUTION. This Agreement may be executed by delivery of executed
signature pages by fax and such fax execution will be effective for all
purposes.
6.21 NON-COMPETITION. Without the prior approval of Cyber U.S., during
a period of 5 years after the Closing Date, no Stockholder and no companies in
which such Stockholder maintains a proprietary interest (other than companies
in which a stockholder has an interest of less than 1%) shall directly or
indirectly compete with or assist in the
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<PAGE> 22
competition with Cybernet as to the present subject matter of Cybernet and the
present area of its business. The company's business area within the meaning of
this covenant shall be Europe and the United States of America and the subject
matter of its business within the meaning of this covenant shall be the
provision of Internet access and related services to commercial and
business entities. For every case of a violation of the covenant not to compete
the defaulting Stockholder shall pay a contractual penalty of DM 100,000 to
Cyber U.S. Each period of 2 weeks of a continued violation shall be deemed an
independent case of violation. The right to claim damages for breach of
contract or specific enforcement shall not be effected by the payment of the
contractual penalty. The amount of the contractual penalty will be credited to
the amount of damages.
[SIGNATURES ON FOLLOWING PAGE]
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<PAGE> 23
EXECUTED on June 11, 1997.
Cybernet Internet Services International, Inc.
By: /s/ David Lehmberg
--------------------
Name: David Lehmberg
Title: President
Shares of Shares of
STOCKHOLDERS: Cybernet Stock Cyber U.S. Stock
Cybermind Interactive Europe AG -------------- ---------------------
By:
---------------------------- 320,000 5,160,000 Preferred B
Name: 600,000 Preferred A
Title:
- ------------------------------- 30,000 483,750 Common
Rudolf Strobl 56,250 Preferred A
- ------------------------------- 10,000 161,250 Common
Roland Manger 18,750 Preferred A
- ------------------------------- 40,000 645,000 Common
Thomas Schulz 75,000 Preferred A
- ------------------------------- 140,000 2,257,500 Common
Andreas Edef 262,500 Preferred A
- ------------------------------- 100,000 1,612,500 Common
Holger Timm 187,500 Preferred A
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<PAGE> 24
EXECUTED on June 11, 1997.
Cybernet Internet Services International, Inc.
By:
-------------------------------------
Name:
Title:
Shares of Shares of
STOCKHOLDERS: Cybernet Stock Cyber U.S. Stock
-------------- ----------------
Cybermind Interactive Europe AG
By: /s/ Holger Timm
---------------------------- 320,000 5,160,000 Preferred B
Name: Holger Timm 600,000 Preferred A
Title: President
/s/ Rudolf Strobl
- -------------------------------- 30,000 483,750 Common
Rudolf Strobl 56,250 Preferred A
/s/ Roland Manger
- -------------------------------- 10,000 161,250 Common
Roland Manger 18,750 Preferred A
/s/ Thomas Schulz
- -------------------------------- 40,000 645,000 Common
Thomas Schulz 75,000 Preferred A
/s/ Andreas Eder
- -------------------------------- 140,000 2,257,500 Common
Andreas Eder 262,500 Preferred A
/s/ Holger Timm
- -------------------------------- 100,000 1,612,500 Common
Holger Timm 187,500 Preferred A
-23-
<PAGE> 25
EXHIBIT A TO STOCK PURCHASE AGREEMENT
FORM OF PREFERRED SHARE RESOLUTION, SERIES A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CERTIFICATE TO DESIGNATION, PREFERENCES AND RIGHTS OF THE
SERIES A PREFERRED STOCK
Cybernet Internet Services International, Inc., a Delaware corporation
(the "Corporation"), submits the following Certificate of Designation in
accordance with Section 151 of the Delaware General Corporation Law.
The undersigned certifies that pursuant to the authority conferred upon
the Board of Directors by the Corporation's Articles of Incorporation, the
Board of Directors has duly adopted resolutions providing for the establishment
of a series of preferred stock consisting of 1,200,000 shares, with a par value
of $0.001 and designated as the "Series A Preferred Stock" (the "Series A
Preferred Stock"), which resolutions are set forth below in their entirety;
NOW, THEREFORE, IT IS RESOLVED, that the Corporation's Board of Directors
approves the designation of a series of preferred shares of the Corporation
consisting of 1,200,000 shares with a par value of $0.001, to be designated as
the "Series A Preferred Stock." The rights, powers, privileges, preferences,
designations, qualifications, limitations, restrictions and conditions
attaching to the Series A Preferred Stock will be as set forth in the attached
Schedule A which is incorporated herein and made a part hereof by this
reference.
FURTHER, RESOLVED, that the President and the Secretary of the
Corporation, are each authorized and directed, in the name and on behalf of the
Corporation, to execute, acknowledge, file and record with the appropriate
officials at the office of the Secretary of State of the State of Delaware, a
certificate of designation setting forth a copy of these resolutions and such
additional information as required by Section 151 of the Delaware General
Corporation Law.
FURTHER, RESOLVED, that the proper officers of the Corporation are
authorized and directed to take all such other actions and to execute, deliver
and file all such further documents, certificates, notices or instruments as
may be required or as such officers may deem necessary or appropriate in
furtherance of or in connection with the foregoing resolutions and to
effectuate fully the purposes and intents thereof.
[Signatures on following page]
<PAGE> 26
IN WITNESS WHEREOF, the undersigned has caused the execution of this
Certificate of Designation on ____________, 1997.
_________________________________
President
ATTEST:
____________________________
Secretary
<PAGE> 27
SCHEDULE A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS AND CONDITIONS OF THE
SERIES A PREFERRED STOCK
The rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions and conditions attaching to the Series A Preferred
Stock (the "Series A Preferred Stock") of Cybernet Internet International
Services, Inc., a Delaware corporation (the "Corporation"), are as follows:
A. Issuance. The Series A Preferred Stock will be issued to shareholders
of Cybernet Internet-Dienstleistungen AG, a German stock corporation, as
partial consideration for the purchase of all of the shares thereof.
B. Dividends. The holders of the Series A Preferred Stock will be entitled
to receive out of the surplus or net profits of the Corporation legally
available for dividends whether or not declared, dividends at a rate equal to
U.S. $0.01 per share per annum, and no more, before any dividends are paid or
set apart for payment upon any other series of preferred stock of the
Corporation, other than the Series B and Series C Preferred Stock of the
Corporation, or on the common stock of the Corporation. Commencing for the
fiscal year beginning on January 1, 1998, the dividend on the Series A
Preferred Stock will be paid for each fiscal year within five months of the end
of each fiscal year, subject to the availability of surplus or net profits
therefor. Any dividends paid on the Series A Preferred Stock in an amount less
than the total amount of dividends at the time payable on the shares will be
allocated pro rata in accordance with the number of shares then outstanding.
The dividends on the Series A Preferred Stock will not be cumulative, so
that if for any period the surplus or net profit of the Corporation are not
sufficient to allow payment of the dividend, only that portion as to which
surplus or net profits are sufficient, if any, shall be paid and any dividend
not so payable shall not accrue. Following payment of the dividends on the
Series A Preferred Stock, the holders of the Series A preferred stock shall
share pari passu on a per share basis in the distribution of any dividends by
the Corporation with the holders of shares of the common stock of the
Corporation and shares of any other class of stock of the Corporation entitled
to share therein.
C. No Voting Rights. The holders of the Series A Preferred Stock are not
entitled to receive notice of or to vote on any matter that is the subject of a
vote of the stockholders of the Corporation, except as is otherwise required by
the laws of the State of Delaware.
D. Redemption and Put. The shares of Series A Preferred Stock may be
redeemed by the Corporation at any time after January 1, 2000, upon ten (10)
days prior written notice (the "Redemption Notice") to the holder thereof of
the Corporation's intention to redeem the Series A Preferred Stock at a
redemption price of one share of the common stock of the Corporation for each
share of Series A Preferred Stock plus any unpaid dividends earned thereon
through the date of redemption; provided that all and not less than all of the
shares of Series A Preferred Stock are so redeemed and provided further that if
the Corporation has not redeemed the Series A Preferred Stock by December 31,
2002, a holder of Series A Preferred Shares may at any time commencing January
1, 2002, require the Corporation to purchase all of
<PAGE> 28
the shares of the Series A Preferred Stock held by him for a purchase price of
$3.00 per share plus any dividends earned but unpaid on such shares.
E. Conversion. A holder of Series A Preferred Stock may convert each
share held by him into one share of the common stock of the Corporation upon
ten (10) days written notice to the Corporation; provided, however, that (1) no
conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series A Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series A Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series A Preferred Shares held by the holder may be converted commencing
January 1, 2001; and (5) any conversion may not be for less than all of the
Series A Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
F. Liquidation, Dissolution or Winding Up. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
Corporation, the holders of the Series A Preferred Stock will be entitled to be
paid the sum of U.S.$3.00 per share plus an amount equal to any unpaid earned
dividends before any amount is paid to the holder of any other series of
preferred stock other than the Series B Preferred Stock of the Corporation or
the common stock of the Corporation. After payment of these amounts to the
holders of the Series A Preferred Stock, the remaining assets of the
Corporation will be distributed to the holders of the common stock, subject to
any other preferences granted to the holders of any other series of preferred
stock as created by the Board of Directors of the Corporation prior to such
time.
G. Preemptive Rights. The holders of the Series A Preferred Stock will
not have any preemptive right to subscribe for or purchase any shares of stock
or any other securities that may be issued by the Corporation by virtue of
their holding the Series A Preferred Stock.
H. Transferability. The Series A Preferred Stock may not be transferred
by the holder except in compliance with applicable securities laws.
I. Variation of Rights. Any amendment to the Articles of Incorporation
of the Corporation (including any certificates of designation pursuant to a
resolution of the Board of Directors) to delete or vary the rights, powers,
privileges, preferences, designations, qualifications, limitations,
restrictions or conditions attaching to the Series A Preferred Stock must be
approved by the affirmative vote of the holders of a majority of the shares of
Series A Preferred Stock then outstanding, given in person or by proxy whether
in writing or at a meeting at which the holders of the shares of Series A
Preferred Stock will be entitled to vote separately as a class.
J. Exclusion of Other Rights. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series A Preferred Stock, the Series A Preferred Stock will
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth above in this Certificate of Designation, as the same may
be amended and/or restated from time to time.
<PAGE> 29
EXHIBIT B TO STOCK PURCHASE AGREEMENT
FORM OF PREFERRED SHARE RESOLUTION, SERIES B
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE
SERIES B PREFERRED STOCK
Cybernet Internet Services International, Inc., a Delaware corporation (the
"Corporation"), submits the following Certificate of Designation in accordance
with Section 151 of the Delaware General Corporation Law.
The undersigned certifies that pursuant to the authority conferred upon the
Board of Directors by the Corporation's Articles of Incorporation, the Board of
Directors has duly adopted resolutions providing for the establishment of a
series of preferred stock consisting of 1,200,000 shares, with a par value of
$0.001 and designated as the "Series B Preferred Stock" (the "Series B Preferred
Stock"), which resolutions are set forth in their entirety:
NOW, THEREFORE, IT IS RESOLVED, that the Corporation's Board of Directors
approves the designation of a series of preferred shares of the Corporation
consisting of 5,160,000 shares with a par value of $0.001, to be designated as
the "Series B Preferred Stock." The rights, powers, privileges, preferences,
designations, qualifications, limitations, restrictions and conditions attaching
to the Series B Preferred Stock will be as set forth in the attached Schedule A
which is incorporated herein and made a part hereof by this reference.
FURTHER, RESOLVED, that the President and the Secretary of the Corporation,
are each authorized and directed, in the name and on behalf of the Corporation,
to execute, acknowledge, file and record with the appropriate officials at the
office of the Secretary of State of the State of Delaware, a certificate of
designation setting forth a copy of these resolutions and such additional
information as required by Section 151 of the Delaware General Corporation Law.
FURTHER, RESOLVED, that the proper officers of the Corporation are
authorized and directed to take all such other actions and to execute, deliver
and file all such further documents, certificates, notices or instruments as may
be required or as such officers may deem necessary or appropriate in furtherance
of or in connection with the foregoing resolutions and to effectuate fully the
purposes and intents thereof.
[Signatures on following page]
<PAGE> 30
IN WITNESS WHEREOF, the undersigned has caused the execution of this
Certificate of Designation on ________________ , 1997.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
President
ATTEST:
XXXXXXXXXXXXXXXXXXXXXXXX
Secretary
<PAGE> 31
SCHEDULE A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS AND CONDITIONS OF THE
SERIES B PREFERRED STOCK
The rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions and conditions attaching to the Series B Preferred
Stock (the "Series B Preferred Stock") of Cybernet Internet International
Services, Inc., a Delaware corporation (the "Corporation"), are as follows:
A. ISSUANCE. The Series B Preferred Stock will be issued to shareholders
of Cybernet Internet-Dienstleistungen AG, a German stock corporation, as
partial consideration for the purchase of all of the shares thereof.
B. DIVIDENDS. The holders of the Series B Preferred Stock will be entitled
to receive out of the surplus or net profits of the Corporation legally
available for dividends whether or not declared, dividends at a rate equal to
U.S. $0.01 per share per annum, and no more, before any dividends are paid or
set apart for payment upon any other series of preferred stock of the
Corporation, other than the Series C Preferred Stock of the Corporation, or on
the common stock of the Corporation. Commencing for the fiscal year beginning on
January 1, 1998, the dividend on the Series B Preferred Stock will be paid for
each fiscal year within five months of the end of each fiscal year, subject to
the availability of surplus or net profits therefor. Any dividends paid on the
Series B Preferred Stock in an amount less than the total amount of dividends at
the time payable on the shares will be allocated pro rata in accordance with the
number of shares then outstanding.
The dividends on the Series B Preferred Stock will not be cumulative, so
that if for any period the surplus or net profit of the Corporation are not
sufficient to allow payment of the dividend, only that portion as to which
surplus or net profits are sufficient, if any, shall be paid and any dividend
not so payable shall not accrue. Following payment of the dividends on the
Series B Preferred Stock, the holders of the Series B Preferred Stock shall
share pari passu on a per share basis in the distribution of any dividends by
the Corporation with the holders of shares of the common stock of the
Corporation and shares of any other class of stock of the Corporation entitled
to share therein.
C. VOTING RIGHTS. The holders of the Series B Preferred Stock are entitled
to receive notice of and vote on any matter that is the subject of a vote of
the stockholders of the Corporation in the same manner and with the holders of
the common stock of the Corporation, except as is otherwise required by the
laws of the State of Delaware.
D. REDEMPTION. The shares of Series B Preferred Stock may be redeemed by
the Corporation at any time after January 1, 2000, upon ten (10) days prior
written notice (the "Redemption Notice") to the holder thereof of the
Corporation's intention to redeem the Series B Preferred Stock at a redemption
price of one share of the common stock of the Corporation for each share of
Series B Preferred Stock plus any unpaid dividends earned thereon through the
date of redemption; provided that all and not less than all of the shares of
Series B Preferred Stock are so redeemed.
<PAGE> 32
E. CONVERSION. A holder of Series B Preferred Stock may convert each
share held by him into one share of the common stock of the Corporation upon ten
(10) days written notice to the Corporation; provided, however, that (1) no
conversion may occur prior to January 1, 1999; (2) no more than 25% of the
Series B Preferred Shares held by the holder may be converted prior to January
1, 2000; (3) no more than an additional 25% of the Series B Preferred Shares
held by the holder may be converted prior to January 1, 2001; (4) the remainder
of the Series B Preferred Shares held by the holder may be converted commencing
January 1 2001; and (5) any conversion may not be for less than all of the
Series B Preferred Shares held by the converting shareholder eligible for
conversion at the time of the notice.
F. LIQUIDATION, DISSOLUTION OR WINDING UP. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
Corporation, the holders of the Series B Preferred Stock will be entitled to be
paid the sum of U.S.$3.00 per share plus an amount equal to any unpaid earned
dividends before any amount is paid to the holder of any other series of
preferred stock other than the Series B Preferred Stock of the Corporation or
the common stock of the Corporation. After payment of these amounts to the
holders of the Series B Preferred Stock, the remaining assets of the
Corporation will be distributed to the holders of the common stock, subject to
any other preferences granted to the holders of any other series of preferred
stock as created by the Board of Directors of the Corporation prior to such
time.
G. PREEMPTIVE RIGHTS. The holders of the Series B Preferred Stock will
not have any preemptive right to subscribe for or purchase any shares of stock
or any other securities that may be issued by the Corporation by virtue of
their holding the Series B Preferred Stock.
H. TRANSFERABILITY. The Series B Preferred Stock may not be transferred
by the holder except in compliance with applicable securities laws.
I. VARIATION OF RIGHTS. Any amendment to the Articles of Incorporation
of the Corporation (including any certificates of designation pursuant to a
resolution of the Board of Directors) to delete or vary the rights, powers,
privileges, preferences, designations, qualifications, limitations,
restrictions or conditions attaching to the Series B Preferred Stock must be
approved by the affirmative vote of the holders of a majority of the shares of
Series B Preferred Stock then outstanding, given in person or by proxy whether
in writing or at a meeting at which the holders of the shares of Series B
Preferred Stock will be entitled to vote separately as a class.
J. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series B Preferred Stock, the Series B Preferred Stock will
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth above in this Certificate of Designation, as the same
may be amended and/or restated from time to time.
<PAGE> 33
EXHIBIT C TO STOCK PURCHASE AGREEMENT
FORM OF PREFERRED SHARE RESOLUTION, SERIES C
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE
SERIES C PREFERRED STOCK
Cybernet Internet Services International, Inc., a Delaware corporation
(the "Corporation"), submits the following Certificate of Designation in
accordance with Section 151 of the Delaware General Corporation Law.
The undersigned certifies that pursuant to the authority conferred upon
the Board of Directors by the Corporation's Articles of Incorporation, the
Board of Directors has duly adopted resolutions providing for the establishment
of a series of preferred stock consisting of shares, with a par value of
$0.001 and designated as the "Series C Preferred Stock" (the "Series C
Preferred Stock"), which resolutions are set forth below in their entirety:
NOW, THEREFORE, IT IS RESOLVED, that the Corporation's Board of Directors
approves the designation of a series of preferred shares of the Corporation
consisting of shares, with a par value of $0.001, to be designated as the
"Series C Preferred Stock." The rights, powers privileges, preferences,
designations, qualifications, limitations, restrictions and conditions attaching
to the Series C Preferred Stock will be as set forth in the attached Schedule A
which is incorporated herein and made a part hereof by this reference.
FURTHER, RESOLVED, that the President and the Secretary of the
Corporation, are each authorized and directed, in the name and on behalf of the
Corporation, to execute, acknowledge, file and record with the appropriate
officials at the office of the Secretary of State of the State of Delaware, a
certificate of designation setting forth a copy of these resolutions and such
additional information as required by Section 151 of the Delaware General
Corporation Law.
FURTHER, RESOLVED, that the proper officers of the Corporation are
authorized and directed to take all such other actions and to execute, deliver
and file all such further documents, certificates, notices or instruments as
may be required or as such officers may deem necessary or appropriate in
furtherance of or in connection with the foregoing resolutions and to
effectuate fully the purposes and intents thereof.
[Signatures on following page]
<PAGE> 34
IN WITNESS WHEREOF, the undersigned has caused the execution of this
Certificate of Designation on ________________, 1997.
XXXXXXXXXXXXXXXXXXXXX
President
ATTEST:
XXXXXXXXXXXXXXXXXXXXXX
Secretary
<PAGE> 35
SCHEDULE A
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
RIGHTS, POWERS, PRIVILEGES, RESTRICTIONS AND CONDITIONS OF THE
SERIES C PREFERRED STOCK
The rights, powers, privileges, preferences, designations, qualifications,
limitations, restrictions and conditions attaching to the Series C Preferred
Stock (the "Series C Preferred Stock") of Cybernet Internet International
Services, Inc., a Delaware corporation (the "Corporation"), are as follows:
A. ISSUANCE. The Series C Preferred Stock will be issued to subscribers of
the Series C Preferred Stock upon receipt of a fully executed and delivered
subscription agreement ("Subscription Agreement") and receipt of the monies
under the terms of the Subscription Agreement. One share of Series C Preferred
Stock will be issued for each U.S.$5.50 received from the subscriber.
B. DIVIDENDS. The holders of the Series C Preferred Stock will be entitled
to receive out of the surplus or net profits of the Corporation, dividends at a
rate equal to 8% per annum, and no more, before any dividends are paid or set
apart for payment upon any other series of preferred stock or on the common
stock of the Corporation. Dividends will begin to accrue on January 1, 1998.
Commencing for the fiscal year beginning on January 1, 1998, the dividend on the
Series C Preferred Stock will be paid for each fiscal year within five months of
the end of each fiscal year, subject to the availability of surplus or net
profits therefor. Any dividends paid on the Series C Preferred Stock in an
amount less than the total amount of dividends at the time accrued and payable
on the shares will be allocated pro rata in accordance with the number of shares
then outstanding.
The dividends on the Series C Preferred Stock will be cumulative, so that
if for any period the dividend is not paid, the right to such dividend will
accumulate, and all arrears so accumulated will be paid before any dividends are
paid to any other series of preferred stock or the common stock of the
Corporation.
C. VOTING RIGHTS. The holders of the Series C Preferred Stock are not
entitled to receive notice of or to vote on any matter that is the subject of a
vote of the stockholders of the Corporation, except as otherwise required by the
laws of the State of Delaware.
D. REDEMPTION AND EXCHANGE. The Shares of Series C Preferred Stock may be
redeemed by the Corporation at any time upon ten (10) days prior written notice
(the "Redemption Notice") to the holder thereof of the Corporation's intention
to redeem the Series C Preferred Stock at a redemption price of 100% of the
purchase price paid to the Corporation for such shares plus any unpaid accrued
dividends thereon through the date of redemption so long as prior to the date of
redemption the following has occurred:
1. The Corporation must have offered to exchange on the terms set
forth below (the "Exchange Offer") each share of Series C Preferred Stock
for (a) one share of the Corporation's voting common stock par value U.S.
$0.001 per share (the "Common Stock"), plus (b) one warrant ("Warrant") to
purchase the number of shares of Common Stock equal in the aggregate to
one-half the number of shares of Common Stock received in the Exchange
Offer, which Warrant will be exercisable at any time through the first
anniversary of the date of issuance of the Warrant at a
<PAGE> 36
purchase price equal to U.S.$7.50 per share. The Exchange Offer will remain
open for at least twenty (20) days; and
2. A registration statement under the Securities Act of 1933, as
amended, must be in effect registering the issuance of the Common Stock and
Warrants pursuant to the Exchange Offer.
E. Liquidation, Dissolution or Winding Up. Upon the liquidation,
dissolution or winding up, whether voluntary or involuntary, of the
Corporation, the holders of the Series C Preferred Stock will be entitled to be
paid the sum of U.S.$5.50 per share plus an amount equal to any unpaid accrued
dividends before any amount is paid to the holder of any other series of
preferred stock or the common stock of the Corporation. After payment of these
amounts to the holders of the Series C Preferred Stock, the remaining assets of
the Corporation will be distributed to the holders of the common stock, subject
to any other preferences granted to the holders of any other series of
preferred stock as created by the Board of Directors of the Corporation prior
to such time.
F. Preemptive Rights. The holders of the Series C Preferred Stock will not
have any preemptive right to subscribe for or purchase any shares of stock or
any other securities that may be issued by the Corporation by virtue of their
holding the Series C Preferred Stock.
G. Transferability. The Series C Preferred Stock may not be transferred by
the holder and any attempted transfers will not be recognized by the
Corporation or its stock transfer agent.
H. Variation of Rights. Any amendment to the Articles of Incorporation of
the Corporation (including any certificates of designation pursuant to a
resolution of the Board of Directors) to delete or vary the rights, powers,
privileges, preferences, designations, qualifications, limitations,
restrictions or conditions attaching to the Series C Preferred Stock must be
approved by the affirmative vote of the holders of a majority of the shares of
Series C Preferred Stock then outstanding, given in person or by proxy whether
in writing or at a meeting at which the holders of the shares of Series C
Preferred Stock will be entitled to vote separately as a class.
I. Exclusion of Other Rights. Except as may otherwise be required by law
and for the equitable rights and remedies that may otherwise be available to
the holders of the Series C Preferred Stock, the Series C Preferred Stock will
not have any rights, powers, privileges, preferences, designations,
qualifications, limitations, restrictions or conditions other than as
specifically set forth above in this Certificate of Designation, as the same
may be amended and/or restated from time to time.
<PAGE> 37
DISCLOSURE SCHEDULES FOR SECTION 3
THE STOCK PURCHASE AGREEMENT
Disclosure Schedule 3.5
[previously provided]
Disclosure Schedule 3.6
None
Disclosure Schedule 3.7
Agreement with AimQuest Corp., dated March 19, 1997,
which consent is being obtained
Disclosure Schedule 3.8
None except as disclosed in Disclosure Schedule 3.7
Disclosure Schedule 3.17
Disclosure Schedule 3.10
1. Agreement with Info AG dated 11 July 1996
2. Agreement with European Computer Industry Research Center dated 5/11
Feb. 1997
3. Agreement with Microsoft Corp. dated 6 Sept./11 Oct. 1996
4. Agreement with Spider Technologies Inc. dated 29 Aug. 1996
5. Agreement with AimQuest Corp. dated 19 March 1997
6. Agreement with Merisel GmbH dated 8 Oct. 1996
7. Agreement with Sun Microsystems GmbH dated 1 Dec. 1996
No other material agreements.
Consent is required under the agreement with AimQuest Corp., which consent is
being obtained.
<PAGE> 38
Disclosure Schedule 3.11
None except as disclosed in Disclosure Schedule 3.10.
Disclosure Schedule 3.12
Lease Agreement Between Cybernet and
KG Bayerische Hausbau GmbH und Co.
dated February 29, 1996 and
Addendum No. 1 and Addendum No. 2 thereto.
Disclosure Schedule 3.13
None
Disclosure Schedule 3.15
None
Disclosure Schedule 3.16
None
Disclosure Schedule 3.18
See Attached.
Disclosure Schedule 3.19
See Attached.
Disclosure Schedule 3.20
None
2
<PAGE> 39
DISCLOSURE SCHEDULE 3.5
Financial Statements of
Cybernet Internet-Dienstleistungen AG
<PAGE> 40
Cybernet
Internet-Dienstleistungen AG
Berlin
Financial Statements
For the years ended December 31, 1996 and 1995
<PAGE> 41
[COOPERS & LYBRAND LETTERHEAD]
NMM - 9584
To the Shareholders of Cybernet Internet-Dienstleistungen AG
Report of Independent Accountants
1. We have audited the accompanying balance sheets of Cybernet
Internet-Dienstleistungen AG as of December 31, 1996 and December 31, 1995
and the related statements of income, retained earnings and cash flows for
the years then ended, which have been prepared on the basis of accounting
principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
2. We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
3. In our opinion, the financial statements described in the first paragraph
present fairly, in all material respects, the financial position of
Cybernet Internet-Dienstleistungen AG as of December 31, 1996 and December
31, 1995, and the results of its operations and its cash flows for the
years then ended in accordance with accounting principles generally
accepted in the United States of America.
April 28, 1997
Coopers & Lybrand
Wirtschaftsprufungsgesellschaft GmbH
(Illegible signature)
<PAGE> 42
CYBERNET Internet-Dienstleistungen AG
Berlin
Statement of Income and Retained Earnings
for the two years ended December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
DM DM
------------- ---------
<S> <C> <C>
REVENUES:
Hardware and software 223.913,49
Services 243.893,49
------------- ---------
Total sales and revenues 467.806,98 0,00
COSTS AND EXPENSES:
Cost of sales and revenues 552.112,75
Marketing 261.838,31
General and administrative 402.205,09 5.285,86
Interest expense, net 3.161,83 13,07
Other expenses 290.964,65
------------- ---------
Total costs and expenses 1.510.282,63 5.298,93
LOSS BEFORE TAXES -1.042.475,65 -5.298,93
Income tax credit 611.000,00
------------- ---------
NET LOSS -431.475,65 -5.298,93
Retained deficit at beginning of year -5.298,93 0,00
------------- ---------
RETAINED DEFICIT AT END of YEAR -436.774,58 -5.298,93
============= =========
NET LOSS PER COMMON SHARE -1,47 -0,26
============= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 43
CYBERNET Internet-Dienstleistungen AG
Berlin
Balance Sheets as of December 31
<TABLE>
ASSETS LIABILITIES AND STOCKHOLDERS' EQUITY
__________________________________________________________________________________________________________________________________
<CAPTION>
1996 1995 1996 1995
DM DM DM DM
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Current assets: Current liabilities:
Cash and cash equivalents 43.362,14 70.446,82 Short term borrowings 111.762,07
Short-term investments 705.409,00 Trade accounts payable 351.973,43
Trade accounts receivable
(net of allowances
DM 23,500.00) 285.325,27 Other accrued liabilities 54.075,84 1.600,00
Other receivables 131.653,49 25.854,25 Deferred revenue 9.598,00
Prepaid expenses and other
current assets 16.492,37 Accrued personnel costs 127.207,51
------------ ---------- ----------- ----------
Total current assets 1.182.242,27 96.301,07 Total current liabilities 654.616,85 1.600,00
Property and equipment, net 782.874,00 0,00 Long-term liabilities
Deferred income taxes 466.000,00 0,00
Other assets: Stockholders' equity:
Product development costs, net 663.894,00
Software licenses 197.832,00 Common stock 100.000,00 100.000,00
Deferred income taxes 1.077.000,00 Other Stocks issued and fully paid in 3.100.000,00
------------ --------- Additional paid-in capital 20.000,00
Total other assets 1.938.726,00 0,00
Accumulated deficit -436.774,58 -5.298,93
------------ ----------
Total stockholders' equity 2.783.225,42 94.701,07
------------ --------- ------------ ----------
3.903.842,27 96.301,07 3.903.842,27 96.301,07
============ ========= ============ ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 44
CYBERNET Internet-Dienstleistungen AG
Berlin
Statements of Cash Flows
<TABLE>
<CAPTION>
1996 1995
for the two Years Ended December 31, DM DM
- ------------------------------------ ---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss -431.475,65 -5.298,93
Adjustments to reconcile net income to net
cash provided by operating activities:
Deferred tax credit -611.000,00
Depreciation and amortization 56.583,21
Amortization of purchased and capitalized
software 14.926,66
Provision for losses on accounts receivable 23.500,00
Changes in operating assets and liabilities
Trade accounts receivable -308.825,27
Other receivables -105.799,24 -25.854,25
Prepaid expenses and other current assets -16.492,37
Trade accounts payable 351.973,43
Other accrued expenses and liabilities 52.475,84 1.600,00
Deferred revenue 9.598,00
Accrued personnel costs 127.207,51
----------
Total adjustments -405.852,23 -24.254,25
---------- ----------
Net Cash used in operating activities -837.327,88 -29.553,18
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of short-term investments -705.409,00
Purchase of property and equipment -839.457,21
Product development costs -663.894,00
Purchase of capitalized software -212.758,66
---------- ----------
Net Cash used in investing activities -2.421.518,87 0,00
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of common stock, net 3.120.000,00 100.000,00
Proceeds from short term borrowings 111.762,07
------------ ----------
Net Cash provided by financing activities 3.231.762,07 100.000,00
-------------- ----------
NET DECREASE/INCREASE IN CASH AND CASH
EQUIVALENTS -27.084,68 70.446,82
Cash and Cash Equivalents at Beginning of Year 70.446,82 0,00
--------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR 43.362,14 70.446,82
--------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 45
CYBERNET Internet-Dienstleistungen AG
Berlin
Statement of Income and Retained Earnings
for the two years ended December 31
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
US $ US $
---- ----
<S> <C> <C>
REVENUES:
Sales and service revenues 144.460,32
Other revenues 157.350,64
---------- ----------
Total sales and revenues 301.810,96 0,00
COST AND EXPENSES:
Cost of sales and revenues 356.201,77
Marketing 168.927,94
General and administrative 259.487,16 3.410,23
Interest expense, net 2.039,90 8,43
Other expenses 187.719,13
---------- ---------
Total costs and expenses 974.375,90 3.418,66
LOSS BEFORE TAXES -672.564,94 -3.418,66
Income tax benefit 394.193,55
---------- ---------
NET LOSS -278.371,39 -3.418,66
Retained deficit at beginning of year -3.418,66 0,00
---------- ---------
RETAINED DEFICIT AT END OF YEAR -281.790,05 -3.418,66
========== =========
NET LOSS PER COMMON SHARE -0.95 -0,17
========== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 46
CYBERNET Internet-Dienstleistungen AG
Berlin
Balance Sheets as of December 31
<TABLE>
<CAPTION>
ASSETS
- -------------------------------------------------------------
1996 1995
US $ US $
------------ ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents 27.975,57 45.449,56
Short-term investments 455.102,58
Trade accounts receivable
(net of allowances US $15.161,29) 184.080,82
Other receivables 84.937,74 16.680,16
Prepaid expenses and other
current assets 10.640,24
------------ ---------
Total current assets 762.736,95 62.129,72
Property and equipment, net 505.080,00 0,00
Other assets:
Product development costs, net 428.318,71
Software licenses 127.633,55
Deferred income taxes 694.838,71
------------ ---------
Total other assets 1.250.790,97 0,00
------------ ---------
2.518.607,92 62.129,72
============ =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- -------------------------------------------------------------
1996 1995
US $ US $
------------ ---------
<S> <C> <C>
Current liabilities:
Short term borrowings 72.104,56 0,00
Trade accounts payable 277.079,63 0,00
Other accrued liabilities 34.887,64 1.032,26
Deferred revenue 6.192,26 0,00
Accrued personnel costs 82.069,36 0,00
------------ ---------
Total current liabilities 422.333,45 1.032,26
Long-term liabilities
Deferred income taxes 300.645,16 0,00
Stockholders' equity:
Common stock 64.516,13 64.516,12
Other Stocks issued and fully
paid in 2.000.000,00 0,00
Additional paid-in capital 12.903,23 0,00
0,00
Accumulated deficit -281.790,05 -3.418,66
------------ ---------
1.795.629,31 61.097,46
------------ ---------
Total stockholders' equity 2.518.607,92 62.129,72
============ =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 47
CYBERNET Internet-Dienstleistungen AG
Berlin
Statements of Cash Flows
<TABLE>
<CAPTION>
1996 1995
for the two Years Ended December 31, US $ US $
- ----------------------------------------------------------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss -278.371,39 -3.418,66
Adjustments to reconcile net income to
net cash provided by operating
activities:
Deferred tax credit -394.193,55
Depreciation and amortization 36.505,30
Amortization of purchased and
capitalized software 9.630,10
Provision for losses on accounts
receivable 23.500,00
Changes in operating assets and
liabilities
Trade accounts receivable -207.580,82
Other receivables -68.257,58 -16.680,16
Prepaid expenses and other current
assets -10.640,24
Trade accounts payable 227.079,63
Other accrued expenses and liabilities 33.855,38 1.032,26
Deferred revenue 6.192,26
Accrued personnel costs 82.069,36
- ----------------------------------------------------------------------
Total adjustments -261.840,16 -15.647,90
- ----------------------------------------------------------------------
Net Cash used in operating activities -540.211,55 -19.066,56
- ----------------------------------------------------------------------
Cash Flows from Investing Activities:
Purchase of short-term investments -455.102,58
Purchase of property and equipment -541.585,30
Product development costs -428.318,71
Purchase of capitalized software -137.263,65
- ----------------------------------------------------------------------
Net Cash used in investing activities -1.562.270,24 0,00
Cash Flows from Financing Activities:
Proceeds from issue of common stock, net 2.012.903,24 64.516,12
Proceeds from short term borrowings 72.104,56
- ----------------------------------------------------------------------
Net Cash provided by financing
activities 2.085.007,80 64.516,12
- ----------------------------------------------------------------------
Net Decrease/Increase in Cash and
Cash Equivalents -17.473,99 45.449,56
Cash and Cash Equivalents at Beginning
of Year 45.449,56 0,00
- ----------------------------------------------------------------------
Cash and Cash Equivalents at End of Year 27.975,57 45.449,56
- ----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 48
NOTES TO FINANCIAL STATEMENTS
1. ORGANISATION
Cybernet AG, founded 1995 by three experienced industry experts, has
established its headquarters in Munich, Germany, and today is offering a
full spectrum of Internet- and Intranet-related telecommunication and
systems integration services to corporate customers.
Today, corporations interested in reducing costs or increasing revenues
through the use of Internet or Intranet technology have to use the services
of an array of vendors: telecommunication carriers, Internet access
providers, multimedia agencies, system integrators, firewall vendors,
database designers and specialists for encryption and electronic mail
(email). Cybernet AG is uniquely positioned as a full-service provider of
all the services related to the utilization of related business
applications around the Internet and Intranet. Cybernet AG's portfolio
includes:
system integration, building customer-specific applications and
networks
access to state-of-the-art network with 120 access locations for leased
lines and 35 access locations (end-of-the-year:80) for fast modems, and
ISDN
fast Internet access to the German Internet exchange, other
European cities, and MAE-East (U.S.)
virtual private networks for corporations and "virtual Internet
providers"
value-added services (international roaming, Internet fax services, and
in the future, telephony and videoconferencing)
security-related products and services (firewalls, secure virtual private
networks, encrypted email)
electronic commerce (catalogs, secure electronic payment)
software development tools for Java (host-integration)
training
Whereas most competitors address only part of the customer requirements,
Cybernet AG is able to build a lasting customer relationship by providing a
larger variety of higher-value services. Other competitors focus on the
consumer Internet access market, whereas Cybernet AG is focused serving the
corporate market. The company believes that in the medium to long term
professional use of the Internet and Intranets is a much more valuable
segment of the market than others, e.g. running consumer online services.
The U.S. market for Internet services provides clear evidence for this
assumption.
In the first year Cybernet AG not only succeeded in attracting a lot of
talent to build up an operational organization and technical
infrastructure, but also started to serve strategically important corporate
customers: e.g. GZS (Gesellschaft fur Zahlungssysteme) Germany's only
MasterCard credit card processor; Commerzbank, Germany's third largest
bank; START, the largest nationwide network for the travel industry, and
others. The company focuses on projects that utilize both its system
integration and nationwide networking capabilities. Also, Cybernet AG
positions itself as a main provider for electronic commerce solutions by
working with credit card companies. VeriFone, and providers of so-called
Merchant Server software (e.g. Microsoft). At the industry's largest trade
show, CeBIT'97 in Hannover, Cybernet AG demonstrated the first fully
operational online shop based on Microsoft Merchant Server.
<PAGE> 49
2. BASIS OF PRESENTING FINANCIAL STATEMENTS
The Company maintains its accounts and records in Deutsche Mark in
accordance with accounting principles and practices generally accepted in
Germany. The accompanying financial statements have been prepared from the
Jahresabschlubss (financial statements) as required by German
Handelsgesetzbuch. Certain modifications have been made in the accompanying
financial statements in order to present them in a form which is in
accordance to US GAAP.
The accompanying statements are expressed in Deutsche Mark and solely for
the convenience of the reader, have been translated into US $ at 1,55 DM =
1.00 US $, the approximate rate of exchange on December 31, 1996. The
translation should not be construed as a representation that Deutsche Mark
have been, could have been or could in the future be, converted into US $
at the above or any other rate.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION Revenues from network services are recognized over the
period services are provided. Other revenues, consisting principally of the
sale of merchandise (mainly EDP-hardware), data network services,
production services, and development and licensing fees are recognized as
services are rendered or the product is shipped. Deferred revenue consists
primarily of monthly subscription fees billed in advance.
PROPERTY AND EQUIPMENT Property and equipment are recorded at cost and
depreciated or amortized using the straight-line methode over the estimated
useful life of the asset, which ranges from 4 years (EDP-hardware) to 10
years (furniture). Software license fees with net unamortized values of DM
197,832.00 (US $ 127,633.55) are included in other assets. Amortization
expense for the year ended December 31, 1996 was DM 14,926.66 (US
$9,630.00).
PRODUCT DEVELOPMENT COSTS The Company capitalizes costs incurred for the
production of computer software used in the sale of its services. Costs
capitalized include direct labor and related overhead for software produced
by the Company and the costs of software purchased from third parties. All
costs in the software development process that are classified as research
and development are expensed as incurred until technological feasibility
has been established. Once technological feasibility has been established,
such costs are capitalized until the software is commercially available.
Amortization is provided on a product-to-product basis, using the greater
of the straight-line method or current year revenue as a percentage of
total revenue estimates for the related software product, not to exceed
four years, commencing the month after the date of product release.
CASH AND CASH EQUIVALENTS The Company considers all highly liquid
investments with an original maturity of three months or less to be cash
equivalents.
SHORT TERM INVESTMENTS In accordance to Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" available-for-sale securities are carried at fair value,
with unrealized gains and losses reported as a separate component of
stockholder's equity.
<PAGE> 50
Realized gains losses and declines in value judged to be other than
temporary on available-for-sale securities are included in other income.
The company has classified all debt and equity securities as
available-for-sale. At December 31, 1996 the estimated fair value of
available-for-sale securities approximated cost.
NET LOSS PER COMMON SHARE Net loss per share is calculated by dividing net
loss by the weighted average number of common shares outstanding during the
period.
USE OF ESTIMATES The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31, 1996
US $ DM
<S> <C> <C>
Computer equipment 308.808,00 478.652,84
Leasehold improvements 30.546,00 47.346,65
Furniture and fixtures 202.231,00 313.457,72
-------------------------
541.585,00 839.457,21
Less accumulated depreciation and
amortization 36.505,00 56.583,21
-------------------------
Net Property and equipment 505.080,00 782.874,00
-------------------------
</TABLE>
5. LEASES
The company leases facilities and equipment under long-term operating
leases. Future minimum payments under noncancelable operating leasing with
initial terms of one year or more are as follows:
<TABLE>
<CAPTION>
US $ DM
<S> <C> <C>
Year ending December 31
1997 106.015,00 164.324,00
1998 114.890,00 178.080,00
1999 120.272,00 186.421,00
2000 112.742,00 174.750,00
2001 115.974,00 179.760,00
Thereafter 0,00 0,00
-------------------------
569.893,00 883.335,00
=========================
</TABLE>
The company's rental expense under operating leases in the year ended
December 31, 1996 totaled approximately DM 87.588,00 (US $56.508,39).
<PAGE> 51
6. COMMITMENTS COMMUNICATION NETWORKS
The Company has guaranteed monthly usage levels of data and voice
communications with one of its vendors. The remaining commitments are as
follows:
<TABLE>
<CAPTION>
US $ DM
<S> <C> <C>
Year ending December 31
1997 277.463,00 430.068,00
1998 277.463,00 430.068,00
1999 208.097,00 322.551,00
</TABLE>
The related expense for the year ended December 31, 1996 was DM 79.658,00
(US $51.392,00)
7. CAPITAL ACCOUNTS
COMMON STOCK At December 31, 1996, the Company's authorised share capital
was 20.000 common shares of DM 5,00 (US $3,23) par value. 20.000 shares
were issued and outstanding.
INCREASE OF CAPITAL At extraordinary meetings held on February 15, 1996
and on September 13, 1996 the Company's shareholders approved amendments
and restatements of the certificate of incorporation that authorized the
future issuance of 180.000 shares and 440.000 shares of common stock DM
5,00 (US $3,23) par value. According to German Law the increase of capital
becomes valid, when it is registered in the Handelsregister (German
Register of Companies). This registration is still outstanding. Although
the shares still are unissued the subscribers paid in fully during 1996.
8. INCOME TAXES
Tax Rate
The following is reconciliation of the statutory German income tax rate to
the financial statement effective tax rate:
<TABLE>
<CAPTION>
1996
<S> <C>
German federal income tax rate
Korperschaftsteuer 45.0%
Solidartratszuschlag 3.4%
German trade tax, net of federal income tax benefit 10.2%
-----
Effective tax rate 58.6%
-----
</TABLE>
<PAGE> 52
Tax Expense/Credit
------------------
The tax credit for the year can be analysed as follows:
<TABLE>
<CAPTION>
US $ DM
<S> <C> <C>
Tax currently payable 0,00 0,00
Deferred tax credit 394.193,53 611.000,00
---------- ----------
394.193,53 611.000,00
---------- ----------
</TABLE>
Deferred income taxes are provided in accordance with SFAS 109 on
differences in the treatment of income and expense item for financial
reporting and income tax purposes, primarily relating to depreciation of
Property and Equipment and to product development costs.
As of December 31, 1996 the company has net tax loss carryforwards of
approximately DM 1.835.000,00. For tax purposes these losses will be
available to offset future taxable income.
Deferred income tax reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
Year ending December 31 US $ DM
<S> <C> <C>
Deferred tax liabilities
-------------------------
Product development costs 428.387,00 664.000,00
Depreciation and amortization 75.484,00 117.000,00
Other 9.032,00 14.000,00
------------ ------------
Total temporary differences 512.903,00 795.000,00
Net deferred tax liabilities 300.645,00 466.000,00
============ ============
Deferred tax Assets
-------------------
net operating loss carryforwards 1.186.452,00 1.839.000,00
Total deferred tax assets 694.839,00 1.077.000,00
============ ============
</TABLE>
9. SOFTWARE DEVELOPMENT COSTS
Costs of DM 284.525,44 (US $ 183.564,80) incurred in developing software to
a stage where its technological feasibility was established have been
expensed as incurred.
<PAGE> 53
DISCLOSURE SCHEDULES 3.7 AND 3.10
Filings, Consents and Approvals
Material Contracts and Transactions
<PAGE> 54
[BESNER - KREIFELS - WEBER LETTERHEAD]
Michael H. Chanin, Esq.
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue, N. W.
Washington, D.C. 20004-2505
via Telefax Munchen,
001 - 202 624 7222 13.06.1997
2 pages 06-97/96003-06
HB/AB
Stock Purchase Agreement
Cybernet Internet-Dienstleistungen AG
Supplement to Disclosure Schedules 3.7 and 3.10
Dear Michael,
I make reference to our telephone conversation of earlier today. As already
discussed with Patrick Biagosch on Wednesday Disclosure Schedules 3.7 and 3.10
of the Stock Purchase Agreement have to be supplemented as follows:
Disclosure Schedule 3.7:
"Notice and public announcement in accordance with Section 20 German Stock
Corporation Act"
<PAGE> 55
- 2 -
Disclosure Schedule 3.10:
"8. Employment Agreement with a new member of the Vorstand"
9. Agreement with Holger Timm providing a loan to Cybernet in the amount of
DM 1.2 Mio."
To confirm the above mentioned supplements please have this letter
countersigned on behalf of Cyber U.S. and return the signed letter by fax.
With kind regards
BESNER KREIFELS WEBER
/s/ Hubert Besner
Dr. Hubert Besner
Rechtsanwalt
We agree to the foregoing:
__________
Cyber U.S.
<PAGE> 56
-2-
Disclosure Schedule 3.10:
"8. Employment Agreement with a new member of the Vorstand"
9. Agreement with Holger Timm providing a loan to Cybernet in the amount of
DM 1.2 Mio."
To confirm the above mentioned supplements please have this letter
countersigned on behalf of Cyber U.S. and return the signed letter by fax.
With kind regards
BESNER KREIFELS WEBER
/s/ Dr. Hubert Besner
- --------------------------------
Dr. Hubert Besner
Rechtsanwalt
We agree to the foregoing
/s/ XXXXXXXXXXXXXXXX
-----------------------------
Cyber U.S.
<PAGE> 57
[PUNDER, VOLHARD, WEBER & AXSTER LETTERHEAD]
By fax
Mr. Michael H. Chanin
Powell, Goldstein, Frazer & Murphy LLP
1001 Pennsylvania Avenue
N.W. 6th Floor
Washington DC 2004 June 19, 1997
USA 934.51-0.12 88.a-fer/uk
STOCK PURCHASE AGREEMENT
CYBERNET INTERNET DIENSTLEISTUNGEN AG
SUPPLEMENT TO DISCLOSURE SCHEDULES 3.7 AND 3.10
Dear Mike,
I refer to a telefax of Hubert Besner dated June 18, 1997, we received together
with several enclosures.
With regard to the content of Dr. Besner's fax of June 18, 1997, we have the
following comments:
1. LOAN AGREEMENT
We were provided with a copy of a handwritten loan agreement
(Darlehensvertrag) between Cybernet Internet Dienstleistungen AG ("Cybernet")
and Holger Timm, dated May 30, 1997 (hereinafter the "Loan Agreement).
[PUNDER GROUP LOGO]
<PAGE> 58
-2-
1.1 Content of the Loan Agreement
-----------------------------
The Loan Agreement roughly has the following content: Holger Timm has
provided a short-term interest-free loan of an amount of 1,200,000 DM to
Cybernet AG on May 30, 1997. The loan has been received by Cybernet in
full. The loan amount shall be repaid on July 31, 1997, the latest. If
repayment has not been made until the aforementioned date, the conditions
of the Loan Agreement shall be renegotiated. Part of the loan amount shall
be repaid before July 1, 1997 by loans of other shareholders.
The signatures to the contract are only partly legible: The legible ones
read "Holger Timm", "A. Eder" (signed twice).
1.2 Remarks
-------
Due to the Loan Agreement being handwritten and the signatures applied only
partly legible, we are not in a position to assess whether the Loan
Agreement is binding for Cybernet. This may be the case e.g. if Mr. A.
Eder, presently member of Cybernet's management board, who has signed the
Loan Agreement twice, has acted with power of attorney granted by another
member of the management board. According to the commercial register
extract, each of the members of the Board of Management is entitled to
represent the company jointly with another member of the Board or jointly
with a holder of a registered power of procuration (Prokura).
As the Loan Agreement is concluded for a limited period of time, a
termination with notice (ordentliche Kundigung) is not permitted. Both
parties remain, however, entitled to terminate the agreement for good
cause.
The agreement is in accordance with Art. 57 para 2 Stock Corporation Act
(Aktiengesetz, in the following "AktG"), prohibiting any promise of
interest or payment of interest to shareholders, in order to prevent a
hidden repayment of their capital contributions. As Mr. Timm has only
granted an interest-free loan, Art. 57 para 2 AktG is not violated by the
Loan Agreement. It should be noted that in case of non-repayment of
Cybernet in due time, the renegotiation of the conditions of the Loan
Agreement may also not provide for interest payment.
<PAGE> 59
-3-
Please note that Art 57 para 1 sentence 1 AktG generally prohibits the
return of their capital contributions to the shareholders. German
jurisdiction considers the repayment of shareholders' loans replacing
registered capital under certain conditions as a hidden return of
shareholders' contributions. If an "entrepreneurially engaged"
(unternehmerisch Beteiligter) shareholder grants such a capital
replacement loan, the repayment of the loan in a period of financial crisis
for the company is considered a violation of Art. 57 para 1 sentence 1
AktG.
An "entrepreneurial engagement" of a shareholder is generally assumed if
the respective shareholder holds more than 25% of the voting shares of the
company. Now Mr. Timm estimatedly only holds about 6.4% of the company's
shares. German jurisdiction does, however, not exclude that an
entrepreneurial engagement of a shareholder can be given also in case
additional circumstances lead to the conclusion that the respective
shareholder exerts entrepreneurial influence despite his relatively low
share. Whether such circumstances are given in this case, we are not in a
position to assess.
Neither are we in a position to assess whether Cybernet is presently or
might in the near future find itself in a financial crisis which would
prohibit the repayment of the loan given by Mr. Timm.
2. EMPLOYMENT AGREEMENT
We were provided with a copy of an employment agreement between Cybernet
and Dr. Alessandro Giacalone dated April 28 and May 15, 1997 (hereinafter
the "Employment Agreement").
2.1 Content
-------
Art. 1 stipulates that Mr. Giacalone has been appointed as a member of the
management board (Mitglied des Vorstandes) of Cybernet upon decision of
Cybernet's supervisory board (Aufsichtsrat). The appointment is valid for
the duration of three years dating from the date of acceptance of this
appointment by Mr. Giacalone. Mr. Giacalone is entitled to represent
Cybernet together with another member of the management board or a holder
of a registered power of procuration (Prokura).
<PAGE> 60
-4-
Mr. Giacalone shall be responsible for the business areas research and
development as well as communication services. The following items require the
prior approval of the company's supervisory board:
- - Acquisition, establishment or sale of other enterprises as well as
participation in other enterprises.
- - Acquisition, sale or encumbrance of real property, of rights similar to
real property (grundstucksahnlichen Rechten) or rights to real property.
- - Contracts of Cybernet AG with its shareholders or persons close to the
shareholders and conclusion, amendment or termination of enterprise
agreements (Untemehmensvertragen).
Art. 1(3) contains a prohibition of any additional occupation for Mr. Giacalone
without prior approval of the supervisory board of Cybernet.
The duration of the Employment Agreement shall be three years, beginning with
the date of acceptance of the appointment as member of the management board.
The Agreement shall be prolongated automatically for another two years, if not
expressly excluded before by written declaration of the supervisory board.
Mr. Giacalone shall be entitled to terminate the Agreement upon notice six
months in advance (Art. 2(2)).
If Mr. Giacalone shall, during the duration of the Agreement, become perpetually
unable to work (dauernd arbeitsunfahig), the Agreement shall be terminated by
the end of the month in which the perpetual unability to work is acknowledged.
This perpetual unability to work shall be assumed if Mr. Giacalone has been, for
reasons of health, unable to resume his activities for more than six months and
the recuperation of his working ability cannot be expected within further six
months.
As remuneration, Mr. Giacalone shall receive a yearly salary of 225,000 DM.
Cybernet shall additionally pay half of the health insurance fees of Mr.
Giacalone (Art. 3).
According to Art. 4, Mr. Giacalone shall enjoy a yearly vacation of 30 working
days.
<PAGE> 61
-5-
Mr. Giacalone shall keep confidential all business related affairs of
Cybernet also for the time after the termination of the Employment
Agreement. Furthermore, he may not use business secrets or other affairs
of Cybernet for his own purposes (Art. 5).
According to Art. 6 ?? documentation and other results of the activity of
Mr. Giacalone related to the employment activities of Mr. Giacalone for
Cybernet, shall be the sole property (alleiniges Eigentum) of Cybernet.
Cybernet shall be solely entitled to all intellectual property rights
thereto. The provisions of the Act on Employee Inventions
(arbeitnehmererfindungsgesetz, hereinafter "ArbEG") are applicable.
Art. 6(2) stipulates that, upon termination of the Employment Agreement,
Mr. Giacalone shall return all documentation and other work results
including copies and other data carriers related to Cybernet in his
position. Mr. Giacalone shall not have any right of retention
(Zuruckbehaltungsrecht) with regard to this documentation etc.
2.2 Remarks
2.2.1 Rights and Obligations, Power of Attorney
The limitations of Mr. Giacalone's power of attorney are fairly common.
Missing is an amount limitation for the acceptance of loans or the
granting of security.
2.2.2 Non-Competition
The prohibition of any additional occupation contained in Art.1(3) does
include a prohibition of competition for the duration of the Employment
Agreement. Please note that ????? prohibition of competing activities
????? ????? agreed ????? ????? certain period of time after the
termination of an Employment Agreement, subject, however, to the
special circumstances of the employment relationship. Furthermore ???
prohibition to participate in or hold shares of enterprises competing
with Cybernet is missing.
<PAGE> 62
-6-
2.2.3 Termination
The notice period for Mr. Giacalone's termination declaration in Art.
2 (2) is not overly long. Apart from this termination with notice,
both parties remain entitled to a termination without notice for good
cause.
2.2.4 Remuneration
The remuneration amount in Art. 3 (1) refers to remuneration before
tax and social security payments (Bruttogehalt).
2.2.5 Working Results
With regard to the working results of Mr. Giacalone, Art. 6 (1)
provides for a far reaching ownership by Cybernet of intellectual
property rights. Art. 6 (1) does, however, stipulate the applicability
of the ArbEG. The ArbEG contains provisions on the procedure of
acquisition of employee inventions by the employer as well as certain
rules for dispute resolution in cases of conflict.
2.2.6 Documentation
The obligation of Mr. Giacalone to return to Cybernet all
documentation, working results and other data carriers related to
Cybernet upon termination of the Employment Agreement is fairly
common.
I hope the above is helpful to you. Please do not hesitate to contact me if you
have any further questions.
Yours sincerely,
/s/ Patrick Biagosch
- --------------------
(Patrick Biagosch)
<PAGE> 63
DISCLOSURE SCHEDULE 3.18
OTHER INTELLECTUAL PROPERTY
<PAGE> 64
Disclosure Schedule 3.18
Anmeldungen:
1. Deutsche Wortmarke "CYBER NET"
Akt.-Z.: 395 28 921.1
2. Schweizer Wortmarke "CYBERNET"
Akt.-Z.: 08270/1996 von 08.11.1996
3. Euro-Wortmarke "CYBERNET"
Akt.-Z.: 314 427
4. Schweizer Bildmarke "Cybernet - Der Business Provider"
Akt.-Z.: 08275/1996
5. Euro Bildmarke "Cybernet - Der Business Provider"
Akt.-Z.: 433 094
<PAGE> 65
DISCLOSURE SCHEDULE 3.19
Insurance
<PAGE> 66
DISCLOSURE SCHEDULE 3.19
[TO COME]
<PAGE> 67
DISCLOSURE SCHEDULE 4.1, 4.3, and 4.6
RESTATED NOTICE AND PROXY
SEE TAB 10
<PAGE> 68
DISCLOSURE SCHEDULE 4.2
-----------------------
Financial Statements of
Cybernet Internet Services International, Inc.
(formerly known as New Century Technologies Corporation)
<PAGE> 69
DISCLOSURE SCHEDULE 4.2
CAPITALIZATION OF CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
(based on common shares)
New Century Cybernet Internet Services
Technologies Corporation International, Inc.
(NCTC) (CISI)
Original Shareholders
166,891 shares (1)
Reg D Offering
9,380,000
---------
9,546,891 shares
Merger of NCTC and CISI 9,546,891 shares
----------------
Acquisition of all shares of 11,520,000
Cybernet 5,160,000 common shares
1,200,000 Series A
Preferred Shares
5,160,000 Series B
Preferred Shares
Issuance of Series C Preferred Shares and 1,500,000 (2)
subsequent exchange ------------
Total 22,566,891 shares
- --------------------
(1) Includes 5,000 shares issued to Dr. Robert Moore under a settlement
agreement. Also, includes 20,000 shares claimed by Dr. S.E. Beladi under an
agreement with Cyber Utah which have not been issued and are in dispute.
(2) Assumes that 1,500,000 Series C Preferred Shares are issued and
subsequently exchanged for 1,500,000 common shares. Does not include
possible subsequent exercise of warrants to purchase 750,000 common shares
which warrants are intended to be included in the exchange offer for the
Series C Preferred S Shares.
<PAGE> 70
NEW CENTURY TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
FOR THE PERIOD ENDED FEBRUARY 28, 1997 AND
FOR THE YEARS ENDED AUGUST 31, 1996, 1995 AND 1994
<PAGE> 71
CONTENTS
Independent Auditors' Report.................................................. 3
Balance Sheets................................................................ 4
Statements of Operations...................................................... 5
Statements of Stockholders' Equity............................................ 6
Statements of Cash Flows...................................................... 9
Notes to the Financial Statements.............................................11
<PAGE> 72
[JONES, JENSEN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
New Century Technologies Corporation
(A Development Stage Company)
Salt Lake City, Utah
We have audited the accompanying balance sheets of New Century Technologies
Corporation (a development stage company) as of February 28, 1997 and August
31, 1996 and 1995, and the related statements of operations, stockholders'
equity, and cash flows for the periods then ended February 28, 1997, August 31,
1996, 1995 and 1994 and from inception on September 27, 1983 through February
28, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of New Century Technologies
Corporation (a development stage company) as of February 28, 1997 and August
31, 1996 and 1995, and the results of its operations and its cash flows for the
periods ended February 28, 1997, August 31, 1996, 1995 and 1994 and from
inception on September 27, 1983 through February 28, 1997, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has no operating capital and has had no
operations that together raise substantial doubt about its ability to continue
as a going concern. Management's plans in regard to these matters are also
described in Note 4. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
March 29, 1997
<PAGE> 73
NEW CENTURY TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
AUGUST 31,
FEBRUARY 28, --------------------------
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 59,785 $ -- $ --
----------- ----------- -----------
Total Current Assets 59,785 $ -- $ --
----------- ----------- -----------
TOTAL ASSETS $ 59,785 $ -- $ --
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 3,901 $ 3,716 $ 3,716
Accrued expense 18,060 15,560 10,560
Taxes payable 1,015 400 300
Notes payable -- shareholder
(Notes 3 and 6) 50,000 50,000 50,000
----------- ----------- -----------
Total Current Liabilities 72,976 69,676 64,576
----------- ----------- -----------
COMMITMENT AND CONTINGENCY (Note 5) -- -- --
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common Stock $.001 par value,
50,000,000 shares authorized,
141,891 shares outstanding at
February 28, 1997; 106,867 shares
outstanding at August 31, 1996 and 1995 142 107 107
Additional paid-in capital 1,812,089 1,745,310 1,745,310
Loss accumulated during the
development stage (1,825,422) (1,815,093) (1,809,993)
----------- ----------- -----------
Total Stockholders' Equity (13,191) (69,626) (64,576)
----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 59,785 $ -- $ --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 74
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
From
For The Inception on
Six Months September 27,
Ended For the Years Ended August 31, 1983 Through
February 28, ------------------------------------ February 28,
1997 1996 1995 1994 1997
------------ ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
LOSS FROM DISCONTINUED
OPERATIONS $(10,329) $(5,100) $(45,100) $(1,512,294) $(1,825,422)
======== ======= ======== =========== ===========
WEIGHTED AVERAGE
LOSS PER SHARE (Note 1) $ (0.07) $ (0.05) $ (0.42) $ (15.07)
======== ======= ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE> 75
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From inception on September 27, 1983 through February 28, 1997
<TABLE>
<CAPTION>
Loss
Accumulated Total
Common Stock Additional During the Stock-
----------------- Paid-in Development holders'
Shares Amount Capital Stage Equity
------ ------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Issuance of 883 shares for $3.40 per share
in October 1983 834 $1 $ 2,999 $ - $ 3,000
Issuance of 8,333 shares for $3.60 per share
in October 1985 from public offering 8,333 8 29,992 - 30,000
Costs of public offering - - (6,324) - (6,324)
Net loss from inception through August 31,
1987 - - - (23,599) (23,599)
----- -- ------- -------- --------
Balance, August 31, 1987 9,167 9 26,667 (23,599) 3,077
Net loss for the year ended August 31,
1988 - - - (4,256) (4,256)
----- -- ------- -------- --------
Balance, August 31, 1988 9,167 9 26,667 (27,855) (1,179)
Net loss for the year ended August 31,
1989 - - - (100) (100)
----- -- ------- -------- --------
Balance, August 31, 1989 9,167 9 26,667 (27,955) (1,279)
Payments of accounts payable by
shareholder - - 1,179 - 1,179
Net loss for the year ended August 31,
1990 - - - (100) (100)
----- -- ------- -------- --------
Balance, August 31, 1990 9,167 9 27,846 (28,055) (200)
Net loss for the year ended August 31,
1991 - - - (100) (100)
----- -- ------- -------- --------
Balance, August 31, 1991 9,167 $9 $27,846 $(28,155) $ (300)
----- -- ------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements
6
<PAGE> 76
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From inception on September 27, 1983 through February 28, 1997
<TABLE>
<CAPTION>
LOSS
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DURING THE STOCK-
------------------------ PAID-IN DEVELOPMENT HOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY
--------- --------- ----------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance forward 9,167 $ 9 $ 27,846 $ (28,155) $ (300)
Net loss for the year
ended August 31, 1992 -- -- -- (3,205) (3,205)
--------- --------- ----------- --------------- --------------
Balance, August 31, 1992 9,167 9 27,846 (31,360) (3,505)
Issuance of shares to
former directors for
consulting services 833 1 165 -- 166
Issuance of shares for
cash in August 1993 1,630 2 165,998 -- 166,000
Issuance of shares for
services rendered and
inventory 48,420 48 394,623 -- 394,671
Issuance of shares for
cash in August 1993 550 1 12,499 -- 12,500
Net loss for the year
ended August 31, 1993 -- -- -- (221,239) (221,239)
--------- --------- ----------- -------------- ----------------
Balance, August 31, 1993 60,600 61 601,131 (252,599) 348,593
Issuance of shares for cash 41,017 41 1,042,184 -- 1,042,225
Issuance of shares for
services 1,250 1 62,499 -- 62,500
Returned to authorized (2,500) (3) (497) -- (500)
Net loss for the year
ended August 31, 1994 -- -- -- (1,512,294) (1,512,294)
--------- --------- ------------ -------------- ----------------
Balance, August 31, 1994 100,367 $ 100 $1,705,317 $(1,764,893) $ (59,476)
--------- --------- ------------ -------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
7
<PAGE> 77
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Stockholders' Equity
From inception on September 27, 1983 through February 28, 1997
<TABLE>
<CAPTION>
LOSS
ACCUMULATED TOTAL
COMMON STOCK ADDITIONAL DURING THE STOCK-
------------------------ PAID-IN DEVELOPMENT HOLDERS'
SHARES AMOUNT CAPITAL STAGE EQUITY
--------- --------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, August 31, 1994 100,367 $100 $1,705,317 $(1,764,893) $(59,476)
Issuance of shares
for cash at $5.00 per share 5,000 5 24,995 -- 25,000
Issuance of shares for
services at $10.00 per share 1,500 2 14,998 -- 15,000
Net loss for the year
ended August 31, 1995 -- -- -- (45,100) (45,100)
------- ---- ---------- ----------- --------
Balance, August 31, 1995 106,867 107 1,745,310 (1,809,993) (64,576)
Net loss for the year
ended August 31, 1996 -- -- -- (5,100) (5,100)
------- ---- ---------- ----------- --------
Balance, August 31, 1996 106,867 107 1,745,310 (1,815,093) (69,676)
Payments of accounts
payable by shareholder -- -- 1,814 -- 1,814
Issuance of shares for cash
at $1.86 per share 35,000 35 64,965 -- 65,000
Fractional shares resulting
from 1 for 20 reverse split 24 -- -- -- --
Net loss for the period
ended February 28, 1997 -- -- -- (10,329) (10,329)
------- ---- ---------- ----------- --------
Balance, February 28, 1997 141,891 $142 $1,812,089 $(1,825,422) $(13,191)
======= ==== ========== =========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
8
<PAGE> 78
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
From
For the Inception on
Six Months September 27,
Ended For the Years Ended August 31, 1983 Through
February 28, ------------------------------- February 28,
1997 1996 1995 1994 1997
-------- ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Cash Flows From Operations
Net loss $(10,329) $(5,100) $(45,100) $(1,512,294) $(1,825,382)
Amortization - - - - 1,877
Decrease in inventory - - - 400,000 400,000
Decrease in other assets - - - 4,000 -
Increase in accounts payable 185 - - 1,571 -
Increase in accrued expenses 2,500 5,000 5,000 5,000 18,060
Increase in taxes payable 615 100 100 100 1,015
Shares issued for services - - 15,000 62,500 77,500
Expenses paid by shareholder 1,814 - - - 5,595
Bad debt - note receivable - - - - 21,099
Loss from partnership
interest - - - - 2,500
-------- ------- -------- ----------- -----------
Net Cash Flows Used
From Operations (5,215) - (25,000) (1,039,123) (1,297,736)
-------- ------- -------- ----------- -----------
Cash Flows From Investing
Activities
Organization costs - - - - (1,877)
Note receivable - - - - (21,099)
Investment in partnership - - - - (2,500)
-------- ------- -------- ----------- -----------
Net Cash Flows Used From
Investing Activities - - - - (25,476)
-------- ------- -------- ----------- -----------
Cash Flows From Financing
Activities
Issuance (repayment) of
notes payable - - - (2,602) 47,398
Issuance of common shares,
net of stock offering
costs 65,000 - 25,000 1,042,225 1,332,238
Stock returned to authorized - - - (500) (500)
-------- ------- -------- ----------- -----------
Net Cash Flows Provided
by Financing Activities $ 65,000 $ - $ 25,000 $1,039,123 $1,379,136
-------- ------- -------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 79
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From
For the Inception on
Six Months September 27,
Ended For the Years Ended August 31, 1983 Through
February 28, ------------------------------ February 28,
1997 1996 1995 1994 1997
------- ------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Net Change in Cash $59,785 $ - $ - $ - $ 55,924
Cash at Beginning of Period - - - - -
------- ------- -------- ----------- ---------
Cash at End of Period $59,785 $ - $ - $ - $ 55,924
------- ------- -------- ----------- ---------
Cash paid for:
Interest $ - $ - $ - $ - $ -
Income taxes $ 400 $ - $ - $ - $ 700
Non-Cash Financing Activities:
Issuance of shares for
services $ - $ - $15,000 $62,500 $ 77,500
Issuance of shares for
inventory $ - $ - $ - $ - $400,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 80
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was incorporated under the laws of the State of Utah on
September 27, 1983. The Company has not begun significant operations
and is classified as a development stage company per Statement of
Financial Accounting Standards Number 7. At a Special Meeting of the
shareholders of All Time High, Inc. on July 26, 1993 the Company's
name was changed to New Century Technologies Corporation.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting.
c. Income Taxes
There has been no provision for income taxes due to net operating
losses since inception. The Company has available unused net operating
loss carryforwards of approximately $1,800,000 which may be applied
against future taxable income. The minimum state franchise tax has
been accrued in operating expenses for each reporting period. The
potential tax benefits of the net operating loss carryovers have been
offset by a valuation allowance of the same amount.
d. Loss Per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the period.
e. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
f. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
-11-
<PAGE> 81
NEW CENTURY TECHNOLOGIES CORPORATION
(A Development Stage Company)
Notes to the Financial Statements
NOTE 2 -- COMMON SHARES REVERSE SPLIT
At a Special Meeting of Shareholders on October 14, 1994 the Company
effected a reverse stock split of its issued and outstanding shares on
a one for ten (1:10) basis.
At a Special Meeting of Shareholders on February 28, 1997 the Company
effected a reverse stock split of its issued and outstanding shares on
a one for twenty (1:20) basis.
All references to shares issued and outstanding have been restated to
conform to the reverse splits.
NOTE 3 -- NOTES PAYABLE SHAREHOLDER
The Company entered into a Purchase Agreement on July 26, 1993 with
Robert Moore, Jr., M.D. (Dr. Moore), a shareholder of the Company, for
the purchase of parts inventories, valued at $400,000 and all assets
of the Seller relating to, or used, or employed in connection with, or
related to development of the RM 2000 engine. In partial payment of
the purchase price the Company assumed a monthly rental on a storage
facility in which the RM 2000 engine parts and components are stored,
and the Company assumed phone service utilized at the storage
facility. The Company also issued one hundred thousand (100,000)
unregistered common shares, and a promissory note in the principle sum
of fifty thousand dollars ($50,000) bearing interest at ten percent
(10%) per annum and payable in full on or before December 31, 1993. An
additional one hundred thousand dollars ($100,000) was due and payable
upon the completion of the offer and sale of common shares to the
public pursuant to Regulation D, rule 504, promulgated under the
securities act of 1933, as amended. Also a royalty payable to Dr.
Moore of ten cents ($0.10) per RM 2000 engine manufactured and sold
would be paid. No engines were manufactured and no payments were made
to Dr. Moore under the terms of the purchase agreement. During 1994
all development activities related to the engine were discontinued.
The remaining inventory of parts having no value, was written off. On
March 14, 1997 the Company settled all outstanding claims with Dr.
Moore. (See Note 6)
NOTE 4 -- GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has no
operations at this time and no operating expenses. The Company is
presently seeking a merger and, or acquisition candidate with ongoing
operations. In the interim shareholders of the Company have committed
to meeting its minimal operating costs.
NOTE 5 -- ROYALTY AGREEMENT/COMMITMENTS AND CONTINGENCIES
The Company entered into a royalty agreement with Dr. Moore to pay ten
cents ($0.10) per RM 2000 engine manufactured and sold. When the
Company completed its public offering of common shares, an additional
one hundred thousand dollars ($100,000) was due and payable in
connection with the purchase of the RM 2000 engine parts and
components from Dr. Moore. No engines were manufactured and no
payments were made to Dr. Moore under the terms of the agreement. The
agreement with Dr. Moore was cancelled on March 14, 1997. (See Note 6)
-12-
<PAGE> 82
NEW CENTURY TECHNOLOGIES CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
NOTE 6 - SUBSEQUENT EVENTS
On March 14, 1997, Dr. Moore signed a settlement agreement with the
Company accepting 5,000 shares of the Company's unregistered common
stock in full satisfaction of all amounts owed Dr. Moore by the Company
under the terms of the purchase agreement. A trustee for Dr. Moore will
hold the shares until they can be sold through the market. The
President of the Company has personally guaranteed to pay Dr. Moore the
difference if any, between the proceeds of the sale of the stock and
$50,000.
On March 3, 1997 the Company wired $45,000 to Dr. S.E. Beladi (Dr.
Beladi), former President of the Company, under the terms of a
settlement agreement signed by Dr. Beladi and dated February 28, 1997.
In addition to the cash payment, the Company will deliver 20,000 shares
of the Company's common stock to Dr. Beladi within 60 days of the
signed agreement. A delay in the delivery of the stock will initiate a
5% penalty, compounded daily, until the shares are delivered. Dr.
Beladi has agreed to accept the cash and stock in full satisfaction of
all amounts which may be owing to him pursuant to his employment with
the Company. Additionally, the President of the Company has personally
guaranteed the Company's obligation to Dr. Beladi under the terms of
the agreement.
13
<PAGE> 83
CYBERNET INTERNET SERVICES INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
July 28, 1997
The Shareholders of Cybernet Internet-Dienstleistungen AG:
Cybermind Interactive Europe AG,
a German Corporation; and Messrs.
Andreas Eder, Roland Manger, Thomas
Schulz, Rudolf Strobl and Holger Timm
Re: Assignment of Stock Purchase Agreement and Related Agreements;
Closing Date for Stock Purchase Agreement and Financing
Gentlemen:
By this letter, Cybernet Internet Services International, Inc., a Delaware
corporation ("Cybernet Delaware"), assigns all of its interest in the Stock
Purchase Agreement, dated June 11, 1997, to its parent corporation, Cybernet
Internet Services International, Inc., a Utah corporation ("Cybernet Utah"),
and Cybernet Utah assumes Cybernet Delaware's rights and obligations under the
Stock Purchase Agreement. The terms of the Stock Purchase Agreement will remain
unchanged except for the substitution of Cybernet Utah for Cybernet Delaware
throughout and the substitution of Utah law for Delaware law.
Cybernet Delaware and Cybernet Utah hereby further agree and undertake to
obtain any additional consents and take any further necessary actions for
Cybernet Delaware to assign and Cybernet Utah to assume all related agreements,
including without limitation: (i) the Escrow Agreement, dated June 24, 1997,
between Rinderknecht, Glaus & Stadelhofer and Cybernet Delaware; (ii) all
Subscription Agreements executed for the purchase of Cybernet Delaware stock;
(iii) the Placement Agreement, dated June 23, 1997, between Union Capital
Markets (UK) Ltd. and Cybernet Delaware. Further, Cybernet Delaware and
Cybernet Utah agree to make any necessary clarifying amendments to the Private
Placement Memorandum dated June 23, 1997.
With respect to the Closing Date for the Stock Purchase Agreement,
reference is made to Paragraphs 2.1 (Closing Date) and 1.5 (Financing) of the
Stock Purchase Agreement. As provided therein, we propose on behalf of Cybernet
Utah that the Closing Date for the Stock Purchase Agreement and related
transactions and the date on which the Financing is provided by August 18,
1997, assuming shareholder approval by Cybernet Utah or on the business day
after such approval if later. In addition, the date of "August 15, 1997" in
Paragraph 6.3(d) of the Stock Purchase Agreement is proposed to be changed to
"August 31, 1997."
<PAGE> 84
Shareholders of
Cybernet Internet-Dienstleistungen AG
July 28, 1997
Page 2
The signatures below evidence approval of the parties to the assignments
by Cybernet Delaware and assumptions by Cybernet Utah described above and to
adjusted dates for the Stock Purchase Agreement and the Financing as stated
above.
Sincerely,
/s/ David Lehmberg
--------------------------
David Lehmberg
President
Cybernet Internet Services
International, Inc., a Delaware corporation
ACKNOWLEDGED AND AGREED:
1. CYBERNET INTERNET SERVICES INTERNATIONAL, INC.,
A UTAH CORPORATION
By: /s/ David Lehmberg
-------------------------------
David Lehmber, President
Date:
2. SHAREHOLDERS OF CYBERNET INTERNET-DIENSTLEISTUNGEN AG:
Cybermind Interactive Europe AG
By: /s/ Holger Timm /s/ Thomas Schulz
------------------------------- -----------------------------
Holger Timm, President Thomas Schulz
Date: 28 July 1997 Date: 28 July 1997
/s/ Andreas Eder /s/ Rudolf Strobl
------------------------------- ----------------------------
Andreas Eder Rudolf Strobl
Date: Date: 28-7-97
/s/ Roland Manger /s/ Holger Timm
------------------------------- ----------------------------
Roland Manger Holger Timm
Date: Date: 28 July 1997
<PAGE> 85
[CYBERNET INTERNET SERVICES INTERNATIONAL, INC. LETTERHEAD]
August 26, 1997
The Shareholders of Cybernet Internet-Dienstleistungen AG:
Cybermind Interactive Europe AG, a German stock corporation;
and Messrs. Andreas Eder, Roland Manger, Thomas Schulz,
Rudolf Strobl and Holger Timm
Re: Second Modification to Stock Purchase Agreement
Gentlemen:
This letter is to set forth our agreement on minor modifications of the
Stock Purchase Agreement.
1. Compliance With Utah Law. The assignment of the Stock Purchase
Agreement from Cybernet Delaware to Cybernet Utah necessitates a minor
modification of the description of the Series C shares involved in the private
placement to comply with Utah law. With respect to the ability to transfer the
shares, the original description of the Series C shares status:
G. Transferability. The Series C Preferred Stock may not be transferred by
the holder and any attempted transfers will not be recognized by the
Corporation or its stock transfer agent.
Utah law will not permit such a broad restriction on the transfer of
shares. Therefore, by this letter, we amend Exhibit C of the Stock Purchase
Agreement to permit greater transferability of the Series C shares.
Specifically, the transferability provision of the description of the Series C
shares is hereby modified to state the following:
G. Transferability. Subject to compliance with applicable securities laws,
a holder of Series C Preferred Stock may sell such stock or otherwise
transfer it for valuable consideration; provided, that the Company has a
right of first refusal. A holder of Series C Preferred Stock who receives
a Qualified Offer to buy such stock and who wishes to sell such stock
("Offered Stock"), must promptly send a written notice to the Company
("Sale Notice"), and offer (or be deemed to have offered), to sell the
Offered Stock to the Company at the same price and on the same terms as
the Qualified Offer.
<PAGE> 86
Shareholders of Cybernet Internet-
Dienstleistungen AG
August 26, 1997
Page 2
(For these purposes, a Qualified Offer is a legally enforceable written
offer that is made at arm's length by a party that is not an affiliate of
the holder and that is financially capable of carrying out the terms of the
written offer.) The Sale Notice must include the identity of the proposed
transferee, the terms of the transfer, and the price offered by the
proposed transferee for the Offered Stock. The holder must be bound to the
terms of the Qualified Offer as stated in the Sale Notice and must keep the
Company informed of any material changes in the proposed transfer. The
holder must also provide the Company with any other information regarding
the Qualified Offer and the proposed transfer as the Company may reasonably
request.
The Company will have an option for thirty (30) days from the receipt of
the Sale Notice to elect to purchase all, but not less than all, of the
Offered Stock. The Company may exercise its option by sending a written
notice to the holder containing a statement that it is exercising its
option. The purchase price of the Offered Stock will be the price contained
in the Qualified Offer. The purchase price of the Offered Stock will be
paid on the same terms as the terms contained in the Qualified Offer.
If the Company does not exercise its option to purchase the Offered Stock,
the holder may sell the Offered Stock to the proposed transferee at a price
and on terms and conditions no less favorable than those set forth in the
Sale Notice. The Company, on the request of the holder, will provide
written evidence to the holder that it has waived its option, so as to
permit the transfer of the Offered Stock. If the holder fails to make the
sale to the proposed transferee within thirty (30) days following the
Company's waiver of its option to purchase the Offered Stock, the waiver
for such sale will lapse and any subsequent proposed transfer to the
proposed transferee or another transferee will be subject to the Company's
right of first refusal. A transfer is consummated when the Company has been
given notice that legal title to the shares of the Offered Stock has been
transferred, subject to recordation on the books of the Company. Any person
or entity acquiring Series C Preferred Stock will take the Offered Stock
subject to any applicable securities laws.
2. Typographical Error in Description of Series A Shares. Exhibit A to the
Stock Purchase Agreement contains the descriptions of the three series of
preferred shares that Cybernet Utah will issue in connection with the Stock
Purchase Agreement and related private financing. Schedule A of Exhibit A,
which describes the Series A shares has a typographical error in Paragraph D
which should be corrected to maintain the clarity of the share description. The
date "December 31, 2002" as used in Paragraph D is inserted to read "December
31, 2001."
<PAGE> 87
Shareholders of Cybernet Internet-
Dienstleistungen AG
August 26, 1997
Page 3
3. Disclosures Pursuant to Paragraphs 4.1, 4.5 and 4.6: In preparing to
consummate the Stock Purchase Agreement and related transactions, Cybernet Utah
determined that certain recent corporate actions reflected in its corporate
records may have been taken without following appropriate corporate governance
procedures. Therefore, the shareholders meeting originally called for August 16,
1997 has been delayed until September 6, 1997 (assuming a quorum is then
obtained) to permit the preparation of additional disclosures in a Restated
Proxy Statement. In addition to seeking the approval from its shareholders for
the transactions contemplated by the Stock Purchase Agreement, Cybernet Utah
will submit additional proposals to its shareholders requesting ratification of
certain actions of the Cybernet Utah directors and/or shareholders from January,
1997 to the present. These actions are detailed in the Restated Proxy Statement
attached hereto and made a part hereof as Disclosure Schedule 4.1/4.3/4.6.
4. Closing Date. With reference to Paragraphs 2.1 (Closing Date) and 1.5
(Financing) of the Stock Purchase Agreement, we propose on behalf of Cybernet
Utah that, to accommodate the new date for the meeting of Cybernet Utah
shareholders, the Closing Date for the Stock Purchase Agreement and related
transactions and the date on which the Financing is provided be latest September
30, 1997.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
<PAGE> 88
SHAREHOLDERS OF CYBERNET INTERNET-
DIENSTIELSTUNGEN AG
AUGUST 26, 1997
PAGE 4
The signatures below evidence approval of the parties to the Second
Modification to the Stock Purchase Agreement.
Sincerely,
David Lehmberg
President
Cybernet Internet Services
International, Inc., a Utah corporation
ACKNOWLEDGED AND AGREED:
CYBERMIND INTERACTIVE EUROPE AG
By:
---------------------------------- -------------------------------------
Holger Timm, President Thomas Schulz
Date: Date:
- ------------------------------------- -------------------------------------
Andreas Eder Rudolf Strobl
Date: Date:
- ------------------------------------- -------------------------------------
Roland Manger Holger Timm
Date: Date:
<PAGE> 89
VOLLMACHT
Ich, der unterzeichmende Thomas Schulz, wohnhaft in Zweibruckenstrasse 8, 80331
Munchen, bevollmachtige hiermit Herrn Andreas Eder, mich im Zusammenhang mit dem
Closing des Stock Purchase Agreements vom 11.06.1997 mit der CYBERNET Internet
Services International, Inc., umfassend zu vertreten, insbesondere auch das
Pooling Trust Agreement im meinem Namen abzuschliessen und meine Aktien der
CYBERNET Internet-Dienstleistungen AG zu ubertragen. Herr Andreas Eder ist
ermachtigz, alle in diesem Zusammenhang erforderlichen oder zweckmassigen
Erklarungen abzugehen. Herr Andreas Eder ist von den Beschrankungen des Section
181 BGB befreit und ermachtigt. Untervollmacht zu erteilen.
[Illegible] den 14.8.97
- ----------- -------
/s/ Thomas Schulz
- -----------------------
(Thomas Schulz)
<PAGE> 90
VOLLMACHT
Ich, der unterzeichmende Rudolf Strobl, wohnhaft in Friedenspromenade 49a, 81827
Munchen bevollmachtige hiermit Herrn Andreas Eder, mich im Zusammenhang mit dem
Closing des Stock Purchase Agreements vom 11.06.1997 mit der CYBERNET Internet
Services International, Inc., umfassend zu vertreten, insbesondere auch das
Pooling Trust Agreement im meinem Namen abzuschliessen und meine Aktien der
CYBERNET Internet-Dienstleistungen AG zu ubertragen. Herr Andreas Eder ist
ermachtigz, alle in diesem Zusammenhang erforderlichen oder zweckmassigen
Erklarungen abrugeben. Herr Andreas Eder ist von den Beschrankungen des Section
181 BGB befreit und ermachtigt. Untervollmacht zu arteilen.
[Illegible] den 14.8.97
- ----------- -------
/s/ Rudolf Strobl
- -----------------------
(Rudolf Strobl)
<PAGE> 1
Translation from German
POOLING AND TRUST AGREEMENT
1. Cybermind Interactive Europe AG,
represented by its managing director, Holger Timm
2. Andreas Eder,
Frohlichstr. 6,81479 Munich
3. Roland Manger,
Kellestr. 14,81667 Munich
4. Thomas Schulz,
Zweibruckenstr. 8,80331 Munich
5. Rudolf Strobl,
Friedenspromenade 49a, 81827 Munich
6. Holger Timm,
Trabener Str. 12,14193 Berlin
hereinafter individually or together referred to as the
"shareholders"
and
7. Dr. Hubert Besner,
Widenmayerstr. 41,80538 Munich
hereinafter referred to as the "trustee"
are hereby concluding the following agreement:
<PAGE> 2
I
Subject
The shareholders sold their 640,000 pieces of bearer shares of CYBERNET
Internet-Dienstleistungen AG (hereinafter referred to as "CYBERNET AG") to
Cybernet Internet Services International, Inc. (hereinafter referred to as
"CYBER U.S.") to the par value of DM 5.--respectively with the Stock Purchase
Agreement of 11.06.1997 (hereinafter referred to as the "Stock Purchase
Agreement"). As compensation, the shareholders will receive shares of CYBER U.S.
as listed hereunder:
1. Cybermind AG 5,160,000 preferred shares series B
600,000 preferred shares series A
2. Andreas Eder 2,257,500 common stock
262,500 preferred shares series A
3. Roland Manger 161,250 common stock
18,750 preferred shares series A
4. Thomas Schulz 645,000 common stock
75,000 preferred shares series A
5. Rudolf Strobl 483,750 common stock
56,250 preferred shares series A
6. Holger Timm 1,612,500 common stock
187,500 preferred shares series A
II
Trusteeship
1. The shareholders hereby order and authorize the trustee to accept the
shares of CYBER U.S. (hereinafter referred to as the "shares") mentioned in
number I. above within the closing of the Stock Purchase Agreement, and to
keep them in custody subsequently in a trust account with BHF-Bank Berlin
(no. 170080577) registered for the trustee and for the account of the
respective shareholder. The transferability of the shares is restricted in
accordance with U.S. and other applicable negotiable instruments law. The
share certificates contain the following note: These shares are subject to
the restrictions pursuant to the Pooling and Trust Agreement of 18 August
1997. A copy of this agreement can be obtained with the company.
<PAGE> 3
2. The trustee is ordered and authorized by the parties to keep in custody and
issue the shares pursuant to this agreement. With view to the obligations
of the shareholders towards Cyber U.S., the trustee keeps the shares in
custody pursuant to the Stock Purchase Agreement.
III.
Pooling Commitment, Right of Preemption
1. The individual shareholders cannot demand transfer and issuance of the
shares from the trustee until 31.12.1998. Starting from 01.01.1999, the
individual shareholders can demand transfer and issuance of 25% of the
shares kept for them respectively, starting from 01.01.2000 the transfer
and issuance of another 25% of the shares kept for them and starting from
01.01.2001 the transfer and issuance of another 50% of the shares kept for
them.
2. As far as the shares are kept in custody by the trustee pursuant to this
agreement, the shareholders can sell their shares to shareholders only, not
to third parties. In the case of sale of shares to one or several
shareholders, the other shareholders (including the buyers, if they are
shareholders) have the right of preemption. The persons entitled to
preemption have the right of preemption in the ratio of their number of
shares. As far as a person entitled to preemption does not exert his right
of preemption at all or not in time, it accrues to the other persons
entitled to preemption in the ratio of their number of shares.
<PAGE> 4
IV.
Obligations of the Trustee
1. With the exception of above number III.1., the trustee will only dispose of
the shares after joint written instruction of all shareholders and of
CYBER U.S.
2. Before exerting the rights he has as a shareholder towards CYBER U.S.,
towards other shareholders or towards third parties, the trustee shall
request the instructions of the individual shareholders and will comply
with the instructions of the individual shareholders. In case delay causes
danger, the trustee is entitled to act at his best discretion, taking the
interests of the respective shareholder into consideration, if the prior
getting of instructions is not possible.
3. The trustee has to pass all documents and information he receives as a
shareholder on to the shareholders immediately. Exceeding obligations to
inform or make reports, in particular regarding the situation of CYBER U.S.
or the shares, do not exist and are expressly contracted out.
4. The trustee has to make a statement of all payments and other benefits that
are made upon him in his capacity as a shareholder, in particular
dividends, and has to pay them to the shareholders.
V.
Proxies
The trustee hereby irrevocably authorizes the individual shareholders to
exercise their voting right and all other rights in connection with the shares,
provided that the respective shareholders are also entitled to delegate their
authority to other persons. Any shareholder is entitled to exercise his voting
right independently of the other shareholders.
VI.
Liability of the Trustee
Liability of the trustee for the due performance of this agreement shall be
limited to intention and gross negligence. Any liability with respect to the
development of the enterprise of CYBER U.S. or of CYBERNET AG or to the
development of value of the shares is expressly excluded.
<PAGE> 5
VII.
Reimbursement of Expenses, Release
1. The trustee is entitled to reimbursement of expenses and expenditure he may
be incurred within the performance of this agreement, plus eventual
statutory turnover tax.
2. Upon the request of the trustee, the shareholders shall release the trustee
from all obligations that may arise for him from the performance of this
agreement.
VIII.
Termination of the Trust Agreement
1. The shareholders and CYBER U.S. can terminate this agreement by joint
written declaration without giving reasons any time. As for the rest, this
agreement expires upon complete transfer and issuance of the shares to the
shareholders pursuant to above number III.1.
2. In the case of death or non-temporary prevention of the trustee, the rights
and obligations under this agreement will pass on to a trustee jointly
determined by the shareholders and CYBER U.S. If the shareholders and CYBER
U.S. cannot agree upon a joint trustee, chairmen of the supervisory board
of CYBERNET AG have to determine a trustee. The trustee hereby irrevocably
offers the successor thus determined as trustee the transfer of the shares
and the assignment of the rights to issuance of the shares against
BHF-Bank.
IX.
Other Provisions
1. Modifications and supplements of this agreement must be in writing in
order to be effective. Oral arrangements shall be ineffective.
<PAGE> 6
2. To this agreement, exclusively German law shall apply.
3. If individual provisions of this agreement or parts thereof should be or
become ineffective or void or unenforceable, or if this agreement should
contain a gap, the effectiveness of the other provisions shall not be
affected thereby. Instead of the ineffective or void or unenforceable
provision or in order to fill the gap, an appropriate regulation shall be
considered agreed upon, which -- within what is legally permissible --
comes closest to the economic result the parties intended with the
in effective or unenforceable provision and to what they would have
intended if they had taken the unregulated point into consideration
pursuant to the sense and purpose of the agreement prior to using the legal
provisions; alternatively, this regulation has to be agreed upon and has to
be put down in writing.
Munich, 18.08.1997
sgd.: p.p. A. Eder sgd.: p.p. A. Eder
Cybermind Interactive Europe AG Rudolf Strobl
sgd.: A. Eder sgd.: p.p. A. Eder
Andreas Eder Holger Timm
sgd.: p.p. A. Eder sgd.: Hubert Besner
Roland Manger Trustee
sgd.: p.p. A. Eder
Thomas Schultz
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
[SIG]
Elisabeth Groner
<PAGE> 1
Translation from German
POOLING AND TRUST AGREEMENT
1. Stefan Heiligensetzer,
resident in Ottacker 17,87477 Sulzberg
hereinafter referred to as the "beneficiary"
and
2. Dr. Hubert Besner,
Widenmayerstr. 41, 80538 Munich
hereinafter referred to as the "trustee"
are hereby concluding the following agreement:
I.
Subject
The beneficiary sold his share in the company Artwise GmbH Software Losungen to
Cybernet Internet-Dienstleistungen AG (hereinafter referred to as "Cybernet
AG") and to Cybernet Internet-Beteiligungs GmbH (hereinafter referred to as
"Cybernet GmbH") with the Contract of Sale and Assignment of 18.09.1997
(document no. 1218/1997 of the notary public Dr. Siegmar Mossner in Ulm,
hereinafter referred to as the "Contract of Sale and Assignment"). One part of
the purchase price pursuant to the Contract of Sale and Assignment can be
performed with 19,861 pieces of common stock of Cybernet Internet Services
International, Inc. (hereinafter referred to as "Cybernet U.S.").
<PAGE> 2
II.
Trusteeship
1. The beneficiary hereby orders and authorizes the trustee to accept the
19,861 pieces of common stock of Cybernet U.S. (hereinafter referred to as
the "shares") mentioned in number I. above within the performance of the
part of the purchase price pursuant to the Contract of Sale and Assignment,
and to keep them in custody subsequently in a trust account with BHF-Bank
Berlin (no. 170080577), registered for the trustee and for the account of
the beneficiary. The transferability of the shares is restricted in
accordance with U.S. and other applicable negotiable instruments law. The
share certificates contain the following note: These shares are subject to
the restrictions pursuant to the Pooling and Trust Agreement of 08.01.1998.
A copy of this agreement can be obtained with the company.
2. The trustee is ordered and authorized by the beneficiary to keep in custody
and issue the shares pursuant to this agreement. With view to the
obligations of the beneficiary towards Cybernet AG and Cybernet GmbH, the
trustee keeps the shares in custody pursuant to the Contract of Sale and
Assignment.
III.
Pooling Commitment
The beneficiary cannot demand transfer and issuance of the shares from the
trustee until 31.12.1998. Starting from 01.01.1999, the beneficiary can demand
transfer and issuance of 25% of the shares kept for him, starting from
01.01.2000 the transfer and issuance of another 25% of the shares kept for him
and starting from 01.01.2001 the transfer and issuance of another 50% of the
shares kept for him.
IV.
Obligations of the Trustee
1. With the exception of number III. above, the trustee will only dispose of
the shares after joint written instruction of the beneficiary and of
Cybernet AG.
<PAGE> 3
2. Before exerting the rights he has as a shareholder towards Cybernet U.S.,
towards other shareholders or towards third parties, the trustee shall
request the instructions of the beneficiary and will comply with the
instructions of the beneficiary. In case delay causes danger, the trustee
is entitled to act at his best discretion, taking the interests of the
beneficiary into consideration, if the prior getting of instructions is not
possible.
3. The trustee has to pass all documents and information he receives as a
shareholder on to the beneficiary immediately. Exceeding obligations to
inform or make reports, in particular regarding the situation of Cybernet
U.S. or the shares, do not exist and are expressly contracted out.
4. The trustee has to make a statement of all payments and other benefits that
are made upon him in his capacity as a shareholder, in particular
dividends, and has to pay them to the beneficiary.
V.
PROXIES
The trustee hereby irrevocably authorizes the beneficiary to exercise his
voting right and all other rights in connection with the shares, provided that
the beneficiary is also entitled to delegate his authority to other persons.
VI.
LIABILITY OF THE TRUSTEE
Liability of the trustee for the due performance of this agreement shall be
limited to intention and gross negligence. Any liability with respect to the
development of the enterprise of Cybernet U.S. or of Cybernet AG or to the
development of value of the shares is expressly excluded.
<PAGE> 4
VII.
REIMBURSEMENT OF EXPENSES, RELEASE
1. The trustee is entitled to reimbursement of expenses and expenditure he
may be incurred within the performance of this agreement, plus eventual
statutory turnover tax.
2. Upon the request of the trustee, the beneficiary shall release the trustee
from all obligations that may arise for him from the performance of this
agreement.
VIII.
TERMINATION OF THE TRUST AGREEMENT
1. The beneficiary and Cybernet AG can terminate this agreement by joint
written declaration without giving reasons any time. As for the rest, this
Trust Agreement expires upon complete transfer and issuance of the shares
to the beneficiary pursuant to number III, above.
2. In the case of death or non-temporary prevention of the trustee, the rights
and obligations under this Trust Agreement will pass on to a trustee
jointly determined by the beneficiary and Cybernet AG. If the beneficiary
and Cybernet AG cannot agree upon a joint trustee, chairmen of the
supervisory board of Cybernet AG have to determine a trustee. The trustee
hereby irrevocably offers the successor thus determined as trustee the
transfer of the shares and the assignment of the rights to issuance of the
shares against BHF-Bank.
IX.
OTHER PROVISIONS
1. Modifications and supplements of this agreement must be in writing in order
to be effective. Oral arrangements shall be ineffective.
2. To this agreement, exclusively German law shall apply.
<PAGE> 5
3. If individual provisions of this agreement or parts thereof should be or
become ineffective or void or unenforceable, of if this agreement should
contain a gap, the effectiveness of the other provisions shall not be
affected thereby. Instead of the ineffective or void or unenforceable
provision or in order to fill the gap, an appropriate regulation shall be
considered agreed upon, which - within what is legally permissible - comes
closest to the economic result the parties intended with the ineffective or
unenforceable provision and to what they would have intended if they had
taken the unregulated point into consideration pursuant to the sense and
purpose of the agreement prior to using the legal provisions;
alternatively, this regulation has to be agreed upon and has to be put down
in writing.
Munich, 08.01.1998
sgd.: S. Heiligensetzer sgd.: Hubert Besner
Beneficiary Trustee
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
/s/ Elisabeth Groner
<PAGE> 1
EXHIBIT 10.7.1
Pooling agreements between the Company and the following former
shareholders of Artwise also exist; they are identical to the pooling agreement
in Exhibit 10.7 except for the name and number of shares, as follows: Mr.
Marchewicz, relating to 19,861 shares of Common Stock; Mr. Strehle, relating to
19,861 shares of Common Stock; Mr. Schonenberger, relating to 2,841 shares of
Common Stock; and Mr. Bernecker, relating to 3,724 shares of Common Stock.
<PAGE> 1
CONSULTING AGREEMENT
This CONSULTING AGREEMENT ("Agreement") is entered into as of December 15,
1997, between Cybernet Internet-Dienstleistungen AG, a German corporation
("Cybernet"), and Eiderdown Trading Ltd., a Bahamas company ("Eiderdown").
Whereas Cybernet intends to acquire 66% of the total share capital of Eclipse
s.r.l. with its registered seat in Rovereto, Italy ("Eclipse");
whereas Eiderdown rendered to Cybernet certain consulting services in
connection with the Italian internet provider market and the acquisition of an
Italian internet provider;
whereas Cybernet will be entitled to transfer 27,000 of the common stock, par
value $0.001 of Cybernet Internet Services International Inc. (Cyber U.S.), a
Utah corporation, listed at the OTC Bulletin Board of the NASDAQ;
the parties agree as follows:
1. Cybernet will transfer 27,000 shares of common stock, par value $0.001
of Cyber U.S. as a consideration for certain consulting services
rendered by Eiderdown to Cybernet in connection with the Italian
internet provider market and the acquisition of an Italian internet
provider.
2. The 27,000 shares of Cyber U.S. will be transferred by Cybernet on or
before June 30, 1998 at the expense of Cybernet to Banco Del Gottardo,
Lugano, Switzerland, as Pooling Trustee (the "Pooling Trustee")
provided that Eiderdown will have executed a pooling trust agreement
(the "Pooling Trust Agreement"), substantially accepted by Cybernet,
with the Pooling Trustee providing that the 27,000 shares of Cyber
U.S. shall be held by the Pooling Trustee and not sold until released
by the Pooling Trustee, that 6,750 of such shares shall be released
one year after the Pooling Trustee has received the 27,000 shares of
Cyber U.S., that an additional 6,750 of such shares shall be re-
<PAGE> 2
-2-
leased on January 1, 2000, and that the remaining 13,500 of such
shares shall be released on January 1, 2001.
3. Cybernet represents to Eiderdown, that Eiderdown will receive after
the time by time release of the 27,000 shares of Cyber U.S. as
provided herein free trading stock with respect to applicable U.S.
securities law, either by filing a registration statement to the
Securities Exchange Commission or by an applicable exemption of such
registration requirements. As soon as a registration statement has
been done Cybernet shall forward a copy to Eiderdown.
4. Cybernet agrees to indemnify Eiderdown in respect of any and all
damages, losses and expenses suffered, incurred or sustained by
Eiderdown resulting from any misrepresentation or nonfulfillment of
or failure to perform any covenant contained in this Agreement.
5. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties. This Agreement contains the
entire agreement between the parties with respect to the subject
matter hereof and supersedes all prior arrangements and
understandings, both written and oral, expressed or implied, with
respect thereto.
6. All notices and other communications required or permitted to under
this Agreement must be in writing and will be deemed given if sent by
personal delivery, fax with electronic confirmation of delivery,
nationally-recognized overnight courier company that is able to
provide proof or receipt of delivery, or registered or certified mail
(return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as may be
specified by like notice):
If to Cybernet or Cyber U.S.: Andreas Eder
Cybernet Internet -- Dienstleistungen AG
Stefan-George-Ring 19
D-81929 Munich, Germany
Tel: 49-89-993-150
Fax: 49-89-993-15-199
<PAGE> 3
-3-
With a copy to: Dr. Hubert Besner
Besner, Kreifels, Weber
Widenmayerstr 41
80538 Munich, Germany
Tel: 49-89-21-99-920
Fax: 49-89-21-99-9233
If to Eiderdown Trading Ltd.: Eiderdown Trading Ltd.
IBM House
P.O. Box 6312
Nassau, Bahamas
If to Pooling Trustee.: Banca del Gottardo
Via S. Franscini
6900 Lugano, Switzerland
Fax: 41-91-8082451
7. This Agreement will be governed by and construed in accordance with
the laws of the Federal Republic of Germany applicable to contracts
made and to be performed therein, without regard to conflicts of laws
principles.
8. This Agreement may be executed by delivery of executed signature
pages by fax and such fax execution will be effective for all
purposes.
Executed on December 15, 1997
Cybernet Internet-Dienstleistungen AG Eiderdown Trading Ltd.
By: By:
Name: Name:
Title: Title:
<PAGE> 1
Translation from German
EMPLOYMENT CONTRACT
CYBERNET Internet-Dienstleistungen Aktiengesellschaft, Berlin
(hereinafter referred to as "CYBERNET AG") represented by the chairman
of the supervisory board, Holger Timm
and
Andreas Eder, business graduate
resident in Frohlichstr. 6, 81479 Munich
are hereby concluding the following employment contract due to the resolution
of the supervisory board of 23.2.1998 and to replace the employment contract of
15.02.1996:
Section 1
Tasks
1. With the resolution of the supervisory board of 23.2.1998, Andreas Eder was
appointed as managing director of CYBERNET AG again for a period of three
years. The appointment took effect on 16.02.1998. Andreas Eder represents
CYBERNET AG together with another member of the managing board or a holder
of a Prokura.
2. He shall manage the business pursuant to the laws, to the shareholders'
agreement of CYBERNET AG, to the rules of procedure for the managing board
and to the resolutions of the general meeting of shareholders and of the
supervisory board. Moreover, he requires prior consent of the supervisory
board for the following management measures:
<PAGE> 2
a) acquisition, establishment or sale of other enterprises and of
participations in other enterprises;
b) acquisition, sale and encumbrance of real property and equivalent
rights or rights of real property;
c) agreements of CYBERNET AG with shareholders or related persons;
d) conclusion, modification and cancellation of agreements between
business enterprises.
3. Andreas Eder shall dedicate his know-how and his workforce to CYBERNET AG
only. Taking over other activities within the professional field--no matter
if they are taken over against payment or in a honorary capacity--requires
prior consent of the supervisory board.
Section 2
Term of the Contract
1. This contract is concluded for a period of three years, and took effect on
16.02.1998. It will be extended for two years if no written declaration of
the supervisory board has been presented by the end of the second year of
the term of the contract at the latest, which declaration states that this
contract will not be extended after the end of the third year.
2. Andreas Eder is entitled to terminate the contract subject to a period of
notice of six months any time.
3. If Andreas Eder should become permanently disabled during the term of this
contract, the contract shall expire at the end of the month in which the
permanent disability was stated. As defined by this contract, permanent
disability involves that Andreas Eder will not be able to perform his
duties for health reasons for more than six months and that it cannot be
expected that he will be fit for duty within another six months. In the
case of doubt, the permanent disability will be stated by the expert
opinion of a physician chosen by the supervisory board of CYBERNET AG.
<PAGE> 3
Section 3
Remuneration
1. As remuneration for his activity, Andreas Eder will get a basic annual
salary of DM 180,000.-. This basic salary will be paid in twelve equal
installments, withholding the statutory deductions, at the end of the
calendar month respectively, the last time for the full month in which this
contract expires. For an increase of earnings, a resolution of the
supervisory board of CYBERNET AG is required.
2. If certain annual targets are attained, Andreas Eder gets a bonus. The
amount of bonus and the annual targets are jointly determined by the
managing board and the supervisory board at the beginning of every
financial year. The targets for 1998 and the corresponding bonus have been
incorporated into this Employment Contract as Enclosure 1. The bonus is
paid, withholding the statutory deductions, within the first quarter
respectively for the past financial year.
Moreover, CYBERNET AG will pay half of the contributions for health
insurance of Andreas Eder.
3. In the case of sickness or other not culpable prevention from duty,
payment of the salary pursuant to number 1. above will be continued for
six months. Benefits of the statutory or private health insurance scheme
will be credited for.
4. In the case of death of Andreas Eder, payment of the salary pursuant to
number 1. above will be continued to the spouse and to the children who
are still doing a professional training together for six months.
5. Andreas Eder will receive compensation for the expenditure required in the
interest of CYBERNET AG, which compensation shall be adequate
corresponding to the regulations for the managing board of CYBERNET AG.
<PAGE> 4
6. A company car will be placed at Andreas Eder's disposal--for private use,
too--pursuant to the company car regulation of CYBERNET AG enclosed in
Enclosure 2.
Section 4
Holiday
Andreas Eder is entitled to an annual holiday of 30 working days, which he is
supposed to take in fractions and in coordination with the other members of the
managing board.
Section 5
Secrecy
Andreas Eder is engaged to observe strict secrecy towards unauthorized third
parties regarding all internal and business matters of CYBERNET AG, even after
his employment contract expired. Andreas Eder is in particular prohibited from
using or having used or disclosing for his own profit matters of CYBERNET AG
such as business secrets or other knowledge.
Section 6
Copyrights, Returns of Documents
1. All documents, documentations and other work results Andreas Eder prepares
himself or acquires for CYBERNET AG in the performance of his duties are
the sole property of CYBERNET AG. All industrial property rights thereof
are due to CYBERNET AG to the largest possible extent. The provisions of
the employee invention law shall apply accordingly.
2. Upon termination of the Employment Contract, Andreas Eder immediately has
to return all documents and other work results including all photocopies
and copies and other data media concerning CYBERNET AG which are in his
possession. On no legal grounds does Andreas Eder have a right of retention
of said objects and documents towards CYBERNET AG.
<PAGE> 5
Section 7
Final Provisions
1. If individual provisions of this contract should be ineffective, the
effectiveness of the other provisions shall not be affected thereby. The
parties are engaged to replace the ineffective provision with an effective
provision which attains the economic success intended with the ineffective
provision as far as possible.
2. Modifications or supplements of this contract must be writing in order to
be effective. This shall apply to the modification of the foregoing
requirement of writing.
Munich, 23.2.1998
sgd.: Holger Timm
CYBERNET Internet-Dienstleistungen Aktiengesellschaft, Berlin
represented by the chairman of the supervisory board, Holger Timm
sgd.: A. Eder
Andreas Eder
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
/s/ Elisabeth Groner
<PAGE> 1
Translation from German
EMPLOYMENT CONTRACT
CYBERNET Internet-Dienstleistungen Aktiengesellschaft, Berlin
(hereinafter referred to as "CYBERNET AG")
represented by the member of the supervisory board Dr. Hubert Besner
and
Dr. Alessandro Giacalone
resident in Hubertusstr. 19 in 85614 Eglharting
are hereby concluding the following employment contract due to the resolution
of the supervisory board:
Section 1
Tasks
1. Upon resolution of the supervisory board, Dr. Alessandro Giacalone was
appointed as member of the managing board of CYBERNET AG. The appointment
shall be effective for the duration of three years, starting upon the
acceptance of the appointment to join the managing board. Dr. Alessandro
Giacalone represents CYBERNET AG together with another member of the
managing board or a holder of a Prokura.
2. Dr. Alessandro Giacalone shall be responsible for the spheres of business
Research and Development and Communication Services. He shall carry out
the business pursuant to the laws, to the shareholders' agreement CYBERNET
AG, to eventual rules of procedure for the managing board and to the
resolutions of the general meeting of shareholders and of the supervisory
board. Moreover, he requires prior consent of the supervisory board for
the following management measures:
<PAGE> 2
a) acquisition, establishment or sale of other enterprises and of
participations in other enterprises;
b) acquisition, sale and encumbrance of real property and equivalent
rights or rights of real property;
c) agreements of CYBERNET AG with shareholders or related persons; and
d) conclusion, modification and cancellation of agreements between
business enterprises.
3. Dr. Alessandro Giacalone shall dedicate his know-how and his workforce to
CYBERNET AG only. Taking over other activities within the professional
field--no matter if they are taken over against payment or in a honorary
capacity--requires prior consent of the supervisory board.
Section 2
Term of the Contract
1. This contract is concluded for a period of three years, and takes effect
upon the acceptance of his appointment as member of the managing board. It
will be extended for two years if no written declaration of the supervisory
board has been presented by the end of the second year of the term of the
contract at the latest, which declaration states that this contract will
not be extended after the ended of the third year.
2. Dr. Alessandro Giacalone is entitled to terminate the contract subject to a
period of notice of six months any time.
3. If Dr. Alessandro Giacalone should become permanently disabled during the
term of this contract, the contract shall expire at the end of the month in
which the permanent disability was stated. As defined by this contract,
permanent disability involves that Dr. Alessandro Giacalone will not be
able to perform his duties for health reasons for more than six months and
that it cannot be expected that he will be fit for duty within another six
months. In the case of doubt, the permanent disability will be stated by
the expert opinion of a physician chosen by the supervisory board of
CYBERNET AG.
<PAGE> 3
Section 3
Remuneration
1. As remuneration for his activity, Dr. Alessandro Giacalone will get an
annual salary of DM 225,000.-. This annual salary will be paid in twelve
equal installments, withholding the statutory deductions, at the end of the
calendar month respectively, the last time for the full month in which this
contract expires. For an increase of earnings, a resolution of the
supervisory board of CYBERNET AG is required.
2. Moreover, CYBERNET AG will pay half of the contributions for health
insurance of Dr. Alessandro Giacalone.
3. In the case of sickness or other not culpable prevention from duty, payment
of the salary pursuant to number 1. above will be continued for six months.
Benefits of the statutory or private health insurance scheme will be
credited for.
4. In the case of death of Dr. Alessandro Giacalone, payment of the salary
pursuant to number 1, above will be continued to the spouse and to the
children who are still doing a professional training together for six
months.
5. Dr. Alessandro Giacalone will receive compensation for the expenditure
required in the interest of CYBERNET AG, which compensation shall be
adequate corresponding to the regulations for the managing board of
CYBERNET AG.
Section 4
Holiday
Dr. Alessandro Giacalone is entitled to an annual holiday of 30 working days,
which he is supposed to take in fractions and in coordination with the other
members of the managing board.
<PAGE> 4
Section 5
Secrecy
Dr. Alessandro Giacalone is engaged to observe strict secrecy towards
unauthorized third parties regarding all internal and business matters of
CYBERNET AG, even after this employment contract expired. Dr. Alessandro
Giacalone is in particular prohibited from using or having used or disclosing
for his own profit matters of CYBERNET AG such as business secrets or other
knowledge.
Section 6
Copyrights, Return of Documents
1. All documents, documentations and other work results Dr. Alessandro
Giacalone prepares himself or acquires for CYBERNET AG in the performance
of his duties are the sole property of CYBERNET AG. All industrial property
rights thereof are due to CYBERNET AG to the largest possible extent. The
provisions of the employee invention law shall apply accordingly.
2. Upon termination of the Employment Contract, Dr. Alessandro Giacalone
immediately has to return all documents and other work results including
all photocopies and copies and other data media concerning CYBERNET AG
which are in his possession. On no legal grounds does Dr. Alessandro
Giacalone have a right of retention of said objects and documents towards
CYBERNET AG.
Section 7
Final Provisions
1. If individual provisions of this contract should be ineffective, the
effectiveness of the other provisions shall not be affected thereby. The
parties are engaged to replace the ineffective provision with an effective
provision which attains the economic success intended with the ineffective
provision as far as possible.
<PAGE> 5
2. Modifications or supplements of this contract must be in writing in order
to be effective. This shall also apply to the modification of the foregoing
requirement of writing.
Munich, 28.04.1997
sgd.: p.p. Besner
CYBERNET Internet-Dienstleistungen Aktiengesellschaft, Berlin
represented by the member of the supervisory board Dr. Hubert Besner
Munich, 15.05.1997
sgd.: Alessandro Giacalone
Dr. Alessandro Giacalone
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
/s/ Elizabeth Groner
<PAGE> 1
Translation from German
CONTRACT OF EMPLOYMENT
Cybernet Internet-Dienstleistungen AG
Stefan-George-Ring 19
81929 Munich
- hereinafter referred to as the "employer" -
and
Christina Moosmann
Schubertstr. 12, Vaterstetten
- hereinafter referred to as the "employee" -
are hereby concluding the following contract:
Section 1 Range of Responsibilities
(1) You are employed as the responsible manager of the Financial, Accounting
and Controlling Departments. You will report to the managing board
directly, and you will be consulted for all major economic decisions of
the managing board. Major decisions within your range can, if they are
contrary to your opinion, only be made with a majority decision of the
managing board. You receive commercial procuration.
(2) If required and as far as can be expected of you, you shall temporarily
also take over tasks which are beyond your actual range of
responsibilities.
(3) Your employer can also employ you in another, equivalent position for a
limited period. You engage yourself to carry out all tasks you are
entrusted with thoroughly and to your best effort, using all your
knowledge, abilities and experiences. This implies that you will also work
beyond usual working hours and on week-ends, if required.
Section 2 Working Hours
(1) The regular weekly working hours shall be 40 hours.
(2) The working hours are flexibly determined by the employer respectively in
consent with the employee.
<PAGE> 2
Section 3 Duration/Termination
(1) The employment starts on 01.10.1997 and shall be of unlimited duration.
Each of the two contracting parties can terminate the employment subject
to a period of notice of six months, to take effect at the end of a month.
(2) The employment expires at the end of the quarter in which you reach the
age of 65 without the requirement of termination. As for the rest, the
statutory provisions of termination shall apply.
(3) Even after termination was pronounced, you are engaged to carry out your
tasks thoroughly until the end of the employment. The employer is free to
release you from further service after termination. That time will be
credited for eventual right to holiday. In this case the employer is
engaged, however, to pay you your earnings until the expiry of the
contract unless you yourself wish to be released from further service.
Section 4 Remuneration
(1) You will receive an annual salary of DM 140,000 gross which will be paid,
withholding the statutory deductions, in twelve equal instalments.
(2) Increases in salary will become effective upon written notice of the
employer.
(3) As far as you work excess hours (more than 40 hours a week), they are
covered by your salary.
(4) The earnings are, at the end of the respective month of payment,
subsequently transferred to an account to be indicated by you.
Section 5 Holiday
(1) You have a right to a holiday of 30 working days a year. In the calendar
year of the start and the expiry of the employment, 1/12 of the annual
holiday will be granted for every complete month in which the employment
existed unless the complete right to holiday arised and was granted.
(2) You can assert your right to a holiday after 6 months of service with the
firm for the first time.
(3) The timing of the holiday shall depend on the internal requirements. As
far as possible, your wishes will be taken into consideration.
(4) The holiday has to be granted and taken during the current calendar year.
If urgent business-related or personal reasons of the employee justify it,
which has to be proven,
<PAGE> 3
holiday which has not been taken can be transferred to the subsequent
calendar year after prior written consent of the employer. In case holiday
has been transferred, it has to be requested and taken by 31.3. of the
subsequent calendar year. After this date, holiday which has not been taken
lapses; holiday compensation will not be made.
Section 6 Work Results which are protectable by Copyright
(Computer Programmes a.o.)
(1) You assign the employer an exclusive, unrestricted licence unlimited in
duration and territory for all known types of utilization as well as
property rights of the work results prepared by you as far as they result
from your activity pursuant to the contract of employment or are decisively
based on experiences, works or documents of the employer.
(2) You approve of the employer as sole proprietor of these licences
processing, redesigning, translating or further developing these work
results without your express consent. Furthermore, the employer may
duplicate, transfer to vision or sound carriers and data media or otherwise
utilize these work results in their original or in processed, redesigned,
translated or further developed form without your express consent.
(3) Furthermore the employer is entitled in every particular case to transfer
above licences or parts thereof to third parties or to grant third parties
these licences without further consent.
(4) The granting of above rights shall remain effective even after the
employment has been terminated.
(5) The right to make an author's copy as well as the right of access to the
work results shall be excluded. You engage yourself to document the work
results you prepared within the employment pursuant to the instructions and
the respectively effective guidelines of the employer, and to return work
results and documents to the employer or grant him unrestricted access upon
your withdrawal so that he can exert his licences.
(6) All claims for the transfer of the licences and rights of utilization to
the employer as well as all other eventual claims for remuneration
resulting from the copyrights of the work results now or in future are
covered by your salary.
(7) Above regulation shall apply accordingly as far as the result of your work
is not protectable or protected by copyrights but by related property
rights, patent rights or the general law of unfair competition.
Section 7 Secrecy and Data Protection
(1) With your signature under this contract, you also engage yourself to
observe the data secret pursuant to the provisions of the Federal Data
Protection Act. Pursuant to the latter, you are prohibited from processing
or using person-related data without authorization.
<PAGE> 4
(2) You shall observe secrecy regarding all internal or business secrets of the
employer as well as all other matters and affairs you get notice of within
your activity. You shall provide for no third parties getting notice of the
aforementioned without authorization. The obligation to observe secrecy
shall in particular apply to matters and affairs which concern the business
partners of the employer.
(3) The obligation to keep all internal and business secrets secret shall
continue after the employment has been terminated.
(4) Any violation of the obligation to observe secrecy shall be considered good
cause in any case, which entitles the employer to extraordinary termination
of this contract.
Section 8 Side-line Employment/Prohibition to Entice Customers Away
(1) Starting side-line employments requires prior written consent of the
employer. In the case of contravention, the employer reserves the right to
assert claims for damages. The right of extraordinary termination for good
cause shall remain unaffected thereby.
(2) In the case of termination of this contract, the employee shall not try to
get customers of the employer or court them.
Section 9 Voluntary Contributions
Voluntary contributions (benefits) granted by the employer represent a
non-recurring remuneration for the fidelity and services rendered by the
employee so far. Even recurring benefits are only granted voluntarily and do
not give cause for a claim for repetition. In particular they do not represent
a business exercise either.
Section 10 Preclusive Period
(1) All mutual claims resulting from the contractual relationship and all
claims which are related to the contractual relationship are excluded
unless they are made towards the other party in writing within 3 (three)
months. The three-month period starts on the date of the claim.
(2) If the other party rejects the claim, it shall be excluded unless it is
enforced by order of the court within three months after the rejection. If
the other party does not make a statement within three months after the
assertion of the claim, the latter shall be excluded unless it is
subsequently enforced by order of the court within a time limit of another
three months.
<PAGE> 5
Section 11 Final Provisions
(1) Modifications and supplements of this contract must be in writing. This
shall also apply to cancelling this requirement of written form.
(2) Oral subsidiary agreements have not been made.
(3) If individual provisions of this contract or parts thereof should be or
become ineffective, the effectiveness of the other provisions shall not be
affected thereby. Gaps or ineffective regulations have to be supplemented
in such manner that a different regulation is found that comes, in its
economical purpose, closest to what the parties would have intended under
consideration of the purpose intended with the contract if they had taken
the gap or ineffectiveness into consideration.
Munich, 28.4.97 Munich, 12.05.97
sgd.: A. Eder sgd.: Moosmann
(Employer) (Employee)
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
/s/ Elisabeth Groner
<PAGE> 1
Translation from German
EMPLOYMENT CONTRACT
CYBERNET Internet-Dienstleistungen Aktiengesellschaft, Berlin (hereinafter
referred to as "CYBERNET AG")
represented by the chairman of the supervisory board, Holger Timm
and
Rudolf Strobl, qualified engineer
resident in Friedenspromenade 49a,81827 Munich
are hereby concluding the following employment contract due to the resolution
of the supervisory board of 23.2.1998 and to replace the employment contract of
15.02.1996:
Section 1
Tasks
1. With the resolution of the supervisory board of 23.2.1998, Rudolf Strobl
was appointed as member of the managing board of CYBERNET AG again for a
period of three years. The appointment took effect on 16.02.1998. Rudolf
Strobl represents CYBERNET AG together with another member of the managing
board or a holder of a Prokura.
2. He shall manage the business pursuant to the laws, to the shareholders'
agreement of CYBERNET AG, to the rules of procedure for the managing board
and to the resolutions of the general meeting of shareholders and of the
supervisory board. Moreover, he requires prior consent of the supervisory
board for the following management measures:
<PAGE> 2
a) acquisition, establishment or sale of other enterprises and of
participations in other enterprises;
b) acquisition, sale and encumbrance of real property and equivalent rights
or rights of real property;
c) agreements of CYBERNET AG with shareholders or related persons;
and
d) conclusion, modification and cancellation of agreements between business
enterprises.
3. Rudolf Strobl shall dedicate his know-how and his workforce to CYBERNET AG
only. Taking over other activities within the professional field--no matter
if they are taken over against payment or in a honorary capacity--requires
prior consent of the supervisory board.
Section 2
Terms of the Contract
1. This contract is concluded for a period of three years, and took effect on
16.02.1998. It will be extended for two years if no written declaration of
the supervisory board has been presented by the end of the second year of
the term of the contract at the latest, which declaration states that this
contract will not be extended after the end of the third year.
2. Rudolf Strobl is entitled to terminate the contract subject to a period of
notice of six months any time.
3. If Rudolf Strobl should become permanently disabled during the term of this
contract, the contract shall expire at the end of the month in which the
permanent disability was stated. As defined by this contract, permanent
disability involves that Rudolf Strobl will not be able to perform his
duties for health reasons for more than six months and that it cannot be
expected that he will be fit for duty within another six months. In the
case of doubt, the permanent disability will be stated by the expert
opinion of a physician chosen by the supervisory board of CYBERNET AG.
<PAGE> 3
Section 3
Remuneration
1. As remuneration for his activity, Rudolf Strobl will get a basic annual
salary of DM 180,000.--. This basic salary will be paid in twelve equal
instalments, withholding the statutory deductions, at the end of the
calendar month respectively, the last time for the full month in which
this contract expires. For an increase of earnings, a resolution of the
supervisory board of CYBERNET AG is required.
2. If certain annual targets are attained, Rudolf Strobl gets a bonus. The
amount of bonus and the annual targets are jointly determined by the
managing board and the supervisory board at the beginning of every
financial year. The targets for 1998 and the corresponding bonus have been
incorporated into this Employment Contract as Enclosure 1. The bonus is
paid, withholding the statutory deductions, within the first quarter
respectively for the past financial year.
Moreover, CYBERNET AG will pay half of the contributions for health
insurance of Rudolf Strobl.
3. In the case of sickness or other not culpable prevention from duty,
payment of the salary pursuant to number 1. above will be continued for
six months. Benefits of the statutory or private health insurance scheme
will be credited for.
4. In the case of death of Rudolf Strobl, payment of the salary pursuant to
number 1. above will be continued to the spouse and to the children who
are still doing a professional training together for six months.
5. Rudolf Strobl will receive compensation for the expenditure required in
the interest of CYBERNET AG, which compensation shall be adequate
corresponding to the regulations for the managing board of CYNERNET AG.
<PAGE> 4
6. A company car will be placed at Rudolf Strobl's disposal -- for private
use, too -- pursuant to the company car regulation of CYBERNET AG enclosed
in Enclosure 2.
Section 4
Holiday
Rudolf Strobl is entitled to an annual holiday of 30 working days, which he is
supposed to take in fractions and in coordination with the other members of
the managing board.
Section 5
Secrecy
Rudolf Strobl is engaged to observe strict secrecy towards unauthorized third
parties regarding all internal and business matters of CYBERNET AG, even after
his employment contract expired. Rudolf Strobl is in particular prohibited from
using or having used or disclosing for his own profit matters of CYBERNET AG
such as business secrets or other knowledge.
Section 6
Copyrights, Return of Documents
1. All documents, documentations and other work results Rudolf Strobl
prepares himself or acquires for CYBERNET AG in the performance of his
duties are the sole property of CYBERNET AG. All industrial property
rights thereof are due to CYBERNET AG to the largest possible extent. The
provisions of the employee invention law shall apply accordingly.
2. Upon termination of the Employment Contract, Rudolf Strobl immediately has
to return all documents and other work results including all photocopies
and copies and other data media concerning CYBERNET AG which are in his
possession. On no legal grounds does Rudolf Strobl have a right of
retention of said objects and documents towards CYBERNET AG.
<PAGE> 5
Section 7
Final Provisions
1. If individual provisions of this contract should be ineffective, the
effectiveness of the other provisions shall not be affected thereby. The
parties are engaged to replace the ineffective provision with an
effective provision which attains the economic success intended with the
ineffective provision as far as possible.
2. Modifications or supplements of this contract must be in writing in order
to be effective. This shall also apply to the modification of the
foregoing requirement of writing.
Munich, 23.2.1998
sgd.:Holger Timm
CYBERNET Internet--Dienstleistungen Aktiengesellschaft, Berlin
represented by the chairman of the supervisory board, Holger Timm
sgd.:R. Strobl
Rudolf Strobl
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
/s/ ELISABETH GRONER
<PAGE> 1
Translation from German
-----------------------
SUBLEASE
for business premises
Office
between KG Bayerische Hausbau GmbH und Co.
Landlord
represented by BIV
BAYERISCHE IMMOBILIENVERWALTUNG GMBH
Denninger Strasse 165, 81925 Munich
and Cybernet AG.i.G
Trabenerstrasse 12, 14193 Berlin
Tenant
Section 1
Subject of Lease/Leased Property
1. On the property Zamilapark MK 2, Stefan-George-Ring 19, the space marked
with green colour in the leasing plan enclosed as a part of this lease/to
be handed in later is leased, to wit the commercial space
office on the 3rd floor/space no. A + B = 491.27 m(2)
cellar no. 1 D on the 1st basement 53.50 m(2)
for the exclusive use as an office pursuant to Section 2 of this contract.
2. The indications of square metres are based on a space calculation of the
Landlord pursuant to GSI 277, part 1, section 2.3, whereby partition walls
in lightweight construction were passed over.
3. Pursuant to Section 536 of the Civil Code, the Landlord has to deliver the
leased property only in such converted state as specified in the leasing
plan of the Landlord and in the constructional description enclosed in this
lease. As far as the leased property requires that constructional measures
be taken with the property or with the leased premises and the internal
works for the purpose of the lease (Section 2) agreed upon and/or for
special requests of the Tenant, which measures exceed the present state of
conversion, they shall be borne by the Tenant alone and are, as far as that
goes, not subject to the obligation of advance performance of the Landlord.
<PAGE> 2
Section 2
Use of Leased Premises
1. The premises are leased for maintaining an office (branch of trade; computer
and network services).
2. The Tenant may use the leased property for the purpose pursuant to the
contract for the term of lease only. Any change of the branch of trade
requires prior written consent of the Landlord.
3. The Landlord does not grant the Tenant competition protection for the
purpose of lease and the branch of trade of the Tenant.
4. The Tenant has to comply with any obligations and obtain any authorizations
is connection with his trade.
5. The effectiveness of this lease shall be independent of any official trade
or business license that may be required.
6. The Tenant is obliged to manage his business carefully and thoroughly, in
particular to comply with the related instructions of the Landlord.
Section 3
Term of Lease
1. The contracting parties agree upon the following term of this lease:
start of the lease: expectedly 01.05.1996
duration of the lease: 5 years
end of the lease: 30.04.2001
2. The obligation to pay
a) the rent starts on 01.06.1996
b) the operating costs and other incidental expenses starts, however, on
the day the leased property is handed over to the Tenant.
3. The leased property is expected to be handed over on 01.05.1996; the date
of the delivery record shall be decisive.
4. The Landlord will give notice of the date the leased property will be
handed over. The Landlord will not assume any liability for a specific date
of handing over or for the previous tenant vacating the premises in time.
5. The Tenant has a non-recurring right of termination of this contract at the
end of the 5th year and after the end of the 8th year. Termination has to
be made in writing by registered letter/advice of delivery with a time
limit of 9 months. In case no due notice of termination is given, the
contract will expire according to Section 3, number 1 or Section 4
respectively.
<PAGE> 3
Section 4
Option of Lease
A fixed term of lease (according to Section 3) shall be considered agreed upon
between the contracting parties. After the end of the fixed term of lease
(30.04.2001), the lease will extend for another 3 years, and for another 2
years again unless terminated by the Tenant with a time limit of 12 months
before the expiry of the fixed term of lease. Termination has to be made in
writing (registered letter/advice of delivery).
Section 5
Rent
<TABLE>
<CAPTION>
<S> <C> <C>
1. The basic rent per month is DM 10,744.67
(in words: one-nought-seven-four-four)
office 491.27 m(2) at DM 21.00
cellar no. 1 D 53.50 m(2) at DM 8.00
Plus respectively valid VAT,
presently 15% DM 1,611.70 DM 12,356.37
------------
2. The Tenant shall, in addition to the basic rent, also
bear all operating costs as regulated in Enclosure 3
of Section 27, par. 1 of the 2nd Calculation Regulations
and enclosed in this contract as enclosure.
Advance payment of operating costs
per month is DM 1,817.70
office 491.27 m(2) at DM 3.70
plus respectively valid VAT,
presently 15% DM 272.66 DM 2,090.36
----------- ------------
Basic rent and advance payment of operating
costs per month DM 14,446.73
============
Graduated rent
as of 01.05.1997, DM 22.00/m(2) net
as of 01.05.1998, DM 25.00/m(2) net
as of 01.05.1999, DM 26.00/m(2) net
3. Payment of the first rent has to be made on 01.06.1996.
4. In the case of delayed payment, the Landlord is entitled to charge
statutory default interest of 2% above the respective discount
rate of the Deutsche Bundesbank as of the due date until the day of
receipt of payment as well as eventual costs incurred in making request
for payment.
</TABLE>
<PAGE> 4
Section 6
Operating Costs and Other Incidental Expenses
1. Statement of account of the operating costs is made annually. Both
contracting parties are obliged to settle the operating costs account
within 30 calendar days after is was presented.
If the lease is terminated during the accounting period, the operating
costs will be apportioned in the ratio of the time of lease to the
accounting year in the following account.
2. The Tenant is authorized to inspect the documents of operating costs
accounting at the Landlord's during usual business hours after prior
announcement.
3. The operating costs account shall be considered acknowledged by the Tenant
if he did not object in writing within four weeks after the receipt
thereof.
This effect has to be pointed out in the operating costs account.
4. The monthly advance payments of operating costs shall be 1/12 of the last
annual account respectively.
5. In the case of considerable increase of costs (for example due to
increased consumption, changed price and wage situation), the Landlord is
entitled to adjust the monthly advance payments to the changed conditions
by unilateral declaration with immediate effect even during the current
accounting period.
6. In any charges, duties or other costs which are in economic connection with
the property are newly introduced or increased, or if any operating costs
are newly incurred, the Landlord may apportion them and may determine
appropriate monthly advance payments for them.
7. From the costs of heat and hot water supply, a part is - within the legal
provisions - apportioned depending on the established consumption (60%),
the other costs depending on the respective usable floor space (40%) of the
individual tenants. The Landlord reserves the right to change this
apportionment within the legal provisions.
For the apportionment of the other operating costs, the Landlord shall
determine a distribution system in his fair judgment.
The Landlord shall also determine the type of accounting and of the
establishment of consumption in his fair judgment within the legal
provisions.
8. In deviation of Enclosure 3 Section of Section 27, par. 1 of the 2nd
Calculation Regulations, the Landlord shall also be entitled to make a pro
rata apportionment to the tenants of any guarding costs that may be
incurred. For the apportionment of these costs, above regulations shall
apply correspondingly.
9. In the case of failure of operational and supply installations for which
the Landlord is not responsible, the Tenant shall only be entitled to
reduction to the amount of the operating costs to be paid for these
installations, and this only in a ratio that corresponds to the failure.
Exceeding claims of the Tenant shall be excluded.
<PAGE> 5
Section 7
Payment of Rent
1. The basic rent, the operating costs and other incidental expenses are due
for payment in advance, on the 3rd working day of the current month at the
latest. The place and type of payment shall be determined by the Landlord.
Whether payment is in time shall depend on the day of receipt of payment.
2. Payments of the Tenant have to be made to the following account:
owner: KG Bayerische Hausbau GmbH und Co.
bank: Bayerische Landesbank Munchen
bank code number: 700 500 00
account number: 190 341 53
purpose of use: 1.0059.1301.1
3. The rent shall be transferred by standing order.
4. If the Tenant is in default with his payments, payments are to be
appropriated to eventual costs, charges for the request for payment,
interest etc. first, then to the operating costs and other incidental
expenses, and last to the oldest basic rent. The Tenant has to pay a lump
sum for expenses of DM 10.00 for every reminder. This shall also apply to
reminders which are caused by incorrect or incomplete information on
paying-in slips of the Tenant. In the case of non-controversial default in
payment of more than one monthly rent, the Landlord is also authorized to
discontinue supply services such as heating with immediate effect until
the arrears--including eventual costs incurred in making request for
payment or costs of proceedings--have been completely settled.
5. Any rights of retention which are not based on this contractual
relationship, rights of set-off except against a claim of the Landlord
which has not been contested or has become res judicata against the basic
rent, operating costs or other incidental expenses shall be excluded.
Section 8
Handing Over of Leased Property
1. The date the leased property will be handed over shall be determined by
the Landlord. The Landlord will not assume any liability for a specific
date of handing over or for the previous tenant vacating the premises in
time unless the damage the Tenant provably suffered was caused by an
intentional or grossly negligent violation of obligation on the part of
the Landlord or his vicarious agents.
2. Before or when the leased property is handed over, a delivery record is
made, which has to be signed by the Landlord and the Tenant. The Tenant
takes over the leased property pursuant to this delivery record.
<PAGE> 6
If the Tenant is absent on the date of handing over despite timely prior
notification without sufficient excuse, the leased property shall be
considered handed over after the Landlord prepared a delivery record and
sent it to the Tenant, and this with the consequence that default of the
debtor for the first basic rent including operating costs and other
incidental expenses starts as of this date.
As an alternative, the Landlord is entitled to withdraw from the contract
with immediate effect and to demand damages due to non-performance.
If the leased property can only be leased on after the complete or partly
removal of special requests ordered by the Tenant and already performed
and if the Landlord is thus incurred additional costs and expenses, the
Tenant has to reimburse them to the full extent.
3. The operating costs and other incidental expenses have to be paid
completely starting from the date the leased property is handed over. The
leased property can only be handed over if the Landlord has received the
required surety.
If the leased property is, in exceptional cases, handed over though, the
Landlord is entitled to withdraw from the lease again with immediate
effect if the Tenant does not make the due payments within 10 calendar
days after the leased property was handed over. The same shall apply if
the Tenant does not reimburse the additional costs of conversion according
to Section 9, number 2 within one month after the final accounts were
rendered. The Tenant shall be liable for full compensation for any damage
the Landlord suffers until he can lease the property on. Number 2, par. 3
shall apply accordingly.
4. The Landlord has to be advised of any defects of the leased property two
weeks after it was handed over at the latest, for which the date of the
delivery record is decisive. If defects are not advised of within this
time limit, the Tenant acknowledges that he took over the leased property
in due condition and as agreed upon in this contract.
5. Claims for damages and reduction of the rent due to defects of the leased
property as well as reductions or claims for damages due to construction
noise or the maintenance of construction sites, even if arranged for by
the Landlord, shall be excluded as far as they only represent minor
impairment regarding the usability of the leased property.
Section 9
Changements and Improvements
1. If the Tenant, after the leased premises were handed over, wishes for a
design and/or furnishing of the leased premises which deviate from the
standard plans and the constructional description according to the
contract (special requests), he has to request prior written consent of
the Landlord in time.
Consent can only be denied for good cause, in particular if the special
requests intervene in the constructional design.
2. Unless otherwise agreed upon in writing, the planning and performance of
the work connected with the special requests is made by the Landlord as
general contractor by the order of and for the account of the Tenant; this
shall only apply to any work which is subject to warranty obligation.
<PAGE> 7
The Tenant has to reimburse the Landlord any planning and performance costs
which are incurred in connection with the placement and the performance of
the order as well as a general contractor supplement of 15% of the net
amount of the invoice plus respectively valid VAT within one month after
the final accounts were rendered. The Landlord is also entitled to demand
partial payment of the Tenant of 90% of the gross amount of the invoice of
the respectively proven performance, depending on the progress of the
construction work. The partial payments are respectively due for payment
three weeks after the invoice was made out, and interest of 2% above the
respective discount rate of Deutsche Bundesbank has to be paid on them in
the case of default.
Unless otherwise agreed upon in writing, the Tenant has to make an
irrevocable, unlimited absolute surety of a German big bank, for which a
deposit shall be excluded, to the amount of the expected costs advised by
the Landlord upon placement of the order and before the work starts. In
case this surety is not made in time, Section 8, number 2, par. 3 shall
apply accordingly.
3. The Landlord may also demand that the Tenant order such architect, engineer
engaged in statical calculations or crafts firm which the Landlord
bindingly assigned the Tenant or to the consultation of which the Landlord
agreed to further plan and perform the deviations to be authorized by the
Landlord on behalf of and for the account of the Tenant.
In this case, the Tenant shall be subject to the instructions and orders of
the Landlord and the specialists ordered by him in the performance of any
work. The Tenant shall also be liable to the Landlord that no damage be
done to the leased property in the performance of services of that kind.
The Tenant has to release the Landlord from any costs of these special
requests and of eventual other related claims of the contractors,
architect(s) and specialist engineers instructed by him. Any claims of the
Tenant for compensation of related increased costs or improvements of value
of the leased property as well as claims for reduction and damages due to
eventual defects of the deviating design and/or furnishing of the leased
property to the Landlord shall be excluded.
The Tenant shall bear any dangers in connection with the performance of
special requests and other measures arranged by the Tenant on his own
behalf and for his own account. He hereby releases the Landlord from any
claims which--on which legal grounds whatsoever--may be raised against the
Landlord in this connection.
4. If the completion of constructional measures regarding the design and/or
the furnishing of the leased property arranged by the Tenant is delayed, no
matter if the Landlord or third parties were instructed with the measures,
the Landlord's determination of the date of handing over the leased
premises and the start of the payments agreed upon in this contract shall
not be affected thereby. If the Landlord was instructed with the special
requests, another regulation shall only apply if the delay was caused
intentionally or grossly negligently by the Landlord or his vicarious
agents.
5. The Landlord may, after prior announcement, carry out any maintenance
measures, repairs and changements of the property and of the leased
premises even without the consent of the Tenant as far as is necessary or
useful. Business operation may not be considerably impaired.
<PAGE> 8
The Tenant may not obstruct this work, and in particular has to keep the
leased premises accessible for the performance thereof. As far as he does
not comply with these obligations, he has to reimburse the Landlord the
resulting damage.
In the case of claims for damages or reduction of rent the Tenant may raise
against the Landlord in the case of repair or changement work or in the
case of the remedy of constructional defects relating to the usability of
the leased property, the regulations of the Civil Code shall apply.
6. The Tenant may not make any constructional or other changes inside (changes
of the room division, for example) and at the front of the leased property,
even during the term of lease, without prior written consent of the
Landlord. This shall also apply to writings of any type (name and company
signs, illuminated letters etc.)
7. If the Tenant wishes to remove or change again changements of the leased
property arranged by him during the term of lease, written consent of the
Landlord and a corresponding placement of an order to the Landlord is
required again.
Section 10
Maintenance Repairs and Improvement Repairs
1. The Tenant has to take good care of the leased property, its furnishings,
the property including any joint installations and outdoor grounds. The
Tenant shall be liable for damages for any arising damage and expenditure
the Landlord is incurred.
2. The Tenant shall provide for due cleaning, airing and heating of the
leased property and shall take over the maintenance and repair of the
leased property and its furnishings if caused by the Tenant (electrical,
sanitary installations, locks, glass panes, panel ceilings, sun protection
installations etc., for example) and improvement repairs (painting the
walls and ceilings with latex paint, the radiators, and cleaning or
renewing the floor coverings and cleaning the panel ceilings as well as
polishing the veneered precious wood doors, etc., for example).
Further regulations are established in Enclosure b (Distribution of repair
and renovation charges).
3. If, in the case of damage or clogging up of pipes, it cannot be
established which tenant caused them, all tenants which are located above
the concerned spot shall be liable jointly.
4. If the Tenant does not meet his obligations pursuant to number 1-3 above
despite written request within one month, the Landlord can arrange
required work at the expenses of the Tenant without grace period.
5. The loss of keys has to be reported to the Landlord immediately. In the
case of loss of keys, the Tenant shall bear the expenses for the new
acquisition as well as for an eventual exchange of the locks.
<PAGE> 9
6. The Tenant shall report any occurring damages or defects of the leased
premises themselves and of the joint installations located within the
leased property to the Landlord immediately and in writing. If the Tenant
fails to make this report, he shall be liable to reimburse the resulting
damage. The Tenant shall bear the burden of proof that he made the report
in time.
Section 11
Subleasing/Subletting of Premises to a Third Party
1. Any complete or partial subletting of the premises to third parties, in
particular subleasing the leased property, requires prior written consent
of the Landlord. Subleasing is permitted for company-related enterprises
such as subsidiaries or any firms which are economically connected to the
principal Tenant otherwise after prior announcement.
2. The Landlord can revoke the consent to subletting of the premises to a
third party for good cause any time.
3. If any official requirements have to be met for other use, even within
subletting or subleasing, they shall be exclusively provided for by the
Tenant.
Section 12
Lien of Landlord
1. The Landlord has a lien of the contributed objects of the Tenant
(furniture, machines and other fixtures and facilities) for any claims,
including future claims, resulting from this contract and the enclosures
thereof.
2. In the case of seizure of contributed objects by third parties, the Tenant
engages himself to advise the Landlord of the extent of seizure
immediately.
3. The Tenant irrevocably assigns all existing and future claims to which he
is entitled from third parties from the subletting of leased premises, in
particular from subleasing, to the Landlord. The Landlord is hereby
authorized by the Tenant to inform the third party of the assignment in the
case of default in payment in the place of and on behalf of the Tenant, and
to collect the sums the third party owes the Tenant.
Section 13
Accessability of Leased Property
1. The Landlord or any person authorized by him is entitled to access the
leased premises during the day after prior announcement. In case of
imminent danger, he has this right any time; if required, he can have the
leased premises opened at the expenses of the Tenant.
2. The Tenant has to provide for the leased premises being accessible even if
he is absent, if required.
<PAGE> 10
3. If the Tenant does not keep the leased property accessible for the
Landlord, he shall be liable for any damage for the Landlord or a third
party which results therefrom.
4. If the Landlord wants to sell the property or if the lease has been
terminated, he may access the leased property together with an interested
party on working days from Monday to Friday after timely prior
announcement. After termination has been made, the Landlord may also put up
to-let-signs at the leased property anywhere he wants.
5. In order to provide for accessability in case of imminent danger, the
Tenant expressly agrees to one key for each leased premise remaining with
the Landlord respectively.
Section 14
Termination in Extraordinary Cases
1. The Tenant has a right of termination pursuant to Section 9, number 5,
par. 4.
2. The Landlord can terminate the lease without notice if
a) the Tenant is in default with more than two monthly rents or did not
make the agreed surety at the time, to the amount or of the type
established in this contract;
b) the Tenant discontinues his payments or if legal composition
proceedings or bankruptcy proceedings are instituted on his assets;
c) the Tenant, despite two written warnings which pointed out the
consequences, does not comply with the terms and conditions of the
contract.
3. If the lease is terminated due to termination of the Landlord without
notice, the Tenant shall be liable to the Landlord for the loss of rent
including all operational costs and other incidental expenses until the
leased property is leased again. Eventual claims of the Tenant against the
Landlord will only be due for repayment after this date. The Landlord will
under no circumstances have to pay interest on these claims. The Landlord
reserves the right to assert further claims.
Section 15
Surety
1. The Tenant will lodge a surety of 3 gross monthly rents to the amount of
DM 43,340.00
(in words: four-three-three-four-nought)
The Tenant is permitted to make the surety by means of a surety of a bank
if it corresponds with the model of the Landlord.
The model may in particular provide that payments have to be made upon
first request.
2. The surety is due upon the handing over of the leased unit unless otherwise
provided by this contract. The surety will be returned two months after the
lease expired and the leased unit was returned pursuant to the contract
and eventual counterclaims of the Landlord were set off at the earliest.
The Landlord reserves the right to withhold the portion of the operating
costs.
<PAGE> 11
3. If the rent is changed by at least 10% during the term of lease, the Tenant
is, upon the request of the Landlord, obliged to make a corresponding
adjustment of the surety. The Landlord is entitled to make use of the
surety even during the time of lease in order to cover non-controversial
claims he may be entitled to. As far as the Landlord made said use, the
Tenant is obliged to replenish the surety to the amount and type agreed
upon.
4. If the Tenant does not lodge the agreed surety at the date due at the
latest or if he does not replenish is pursuant to number 3, the Landlord is
entitled to withdraw from the contract with immediate effect or to
pronounce extraordinary termination of the lease without notice.
Section 16
Expiry of Lease
1. Upon expiry of the lease, the Tenant has to
a) carry out the improvement repairs to which he is obliged pursuant to
Section 10, number 2 and to return the leased property in the state
pursuant to the contract. The time required for carrying out the
improvement repairs shall be during the term of lease and shall thus
be for the Tenant's account.
b) hand out any keys of the leased property to the Landlord. As for the
rest, Section 10, number 5 shall apply.
2. Unless otherwise provided in writing, the Tenant has to remove -- at his
own expenses and before moving out -- any changements of the leased
property, installations and alterations as well as changements of the
design or the furnishings of the leased property (special requests) made or
arranged by him, and has to create the state pursuant to the original
leasing plan and the constructional description in the contract of the
Landlord. Unless otherwise provided in writing, this work is carried out by
the Landlord as general contractor by order of and for the account of the
Tenant.
Unless otherwise provided in writing, any claims for redemption or
compensation for objects or services that are not removed shall be excluded
for the Landlord.
3. As far as another conversion of the leased premises for a different purpose
is intended after the lease expired, the Landlord is, as an alternative,
entitled to demand of the Tenant to make an appropriate contribution to the
conversion expenses instead of creating the original state or making
improvement repairs. The Landlord shall present an estimate of expenses.
Unless otherwise provided in writing, said estimate is calculated from the
expected amount of costs of creating the original state.
<PAGE> 12
Section 17
Changes of Rent
If the cost-of-living index for the living standard of a four-person employee
household with average income as published by the Federal Statistical Office
changes by more than 10 points (base 1991 = 100) compared to the time the lease
started (01.05.1998), the rent will increase or decrease in the same ratio
automatically starting from the 1st day of the following month as soon as the
index figure reached 10 points upwards or downwards. An increase or decrease
can be made starting from 01.05.2001 for the first time.
This shall also apply as far as graduated rents were established in the
contract for specific periods. The latter shall only be considered agreed upon
as minimum rents, the new establishment of which can also be demanded if the
10-point limit is passed.
The notice on the part of the Landlord shall only have a declaratory function.
In the case of increase of the rent, the Tenant cannot plead that he got the
notice after the official publication of the increase of the index figures only.
For the subsequent time of the contract, the rent can, pursuant to par. 1, be
adjusted as at the time of the state of the index last taken into consideration
after the required points (10) were reached respectively. The claim on the part
of the Landlord for adjustment of the rent does not lapse, even if the
Landlord does not make an adjustment of rent immediately when the points are
reached.
This regulation requires the authorization of the State Central Bank, which
authorization the Landlord will request.
Section 18
Other Provisions
1. The Tenant is not permitted to assign any rights under this contract to
third parties without the consent of the Landlord.
2. Claims for liability of the Tenant against the Landlord and his vicarious
agents shall be subject to the regulations of the Civil Code.
3. Should any parts of this contract including the enclosures thereof be or
become legally ineffective, the effectiveness of the other provisions
shall remain completely unaffected thereby. The contracting parties engage
themselves, upon request of one of them, to make up for the invalid
provisions in legally effective manner and, as far as possible, without
changing the factual contents of the contract.
4. The Landlord is authorized to make an affiliated company enter this
contract in his place completely or in part by unilateral written
declaration.
5. The place of performance and place of jurisdiction shall be Munich.
6. Any rights of retention which are not based on this lease and rights of
set-off, except against a claim of the Landlord for rent, operating costs
and other incidental expenses which claim has not been contested and has
become res judicata, shall be excluded.
<PAGE> 13
7. Supplementary arrangements must be in writing in order to be effective and
are to be incorporated into this contract as enclosures. There have not
been made any subsidiary agreements of this contract.
8. The Tenant will be granted a guarantee of first offer of neighbouring
office spaces, whereby a time limit for decision of two weeks shall be
considered agreed upon.
9. The Tenant knows that the Landlord himself is not the owner of the real
property. If the principal lease expires, the Subtenant is, upon request
of the Landlord, obliged to consent to the real property owner or another
authorized third person entering the existing lease as landlord, whereby
the provisions provided therein shall continue.
Section 19
Parts of Lease
The parts of the lease include:
- - Enclosure a) Rules of the house for business enterprises
- - Enclosure b) Distribution of repairs and renovation charges
- - Enclosure c) List of operating expenses pursuant to enclosure 3 of Section
27, par. 1 of the 2nd Calculation Regulations
- - Enclosure d) Constructional description
The Tenant declares to have read all arrangements and Enclosures of this
contract. He acknowledges the contents thereof to be legally binding for him.
Munich, 29.02.1996
sgd.: illegible sgd.: A. Eder
stamp and signature stamp and signature
BIV in representation of the Landlord of the Tenant
W. Saar, K. Stindt Andreas Eder
names of the undersigned name(s) of the undersigned
Managing Director of CYBERNET AG
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ ELISABETH GRONER
<PAGE> 14
Translation from German
Enclosure a of the Lease
RULES OF THE HOUSE FOR BUSINESS ENTERPRISES
Section 1
Special Obligations of Tenant
1. The Tenant engages himself to treat the leased premises and the entire
property including all installations with due care and to keep them clean.
2. Putting up and storing objects of any kind outside the leased premises is
not permitted. Bicycles and mopeds must not be parked inside the leased
property.
3. Parking as well as loading and unloading is only permitted on the spaces
provided for this purpose.
4. Fuels and easily inflammable materials must not be stored inside the
leased premises. In particular the official provisions for fire prevention
have to be observed.
5. Animals, in particular pets, may only be kept in the leased premises with
written consent of the Landlord.
Section 2
Safety Regulations
1. Storing easily inflammable materials and objects as well as smoking and
open fire are not permitted in the cellars, attics, stores and garages.
2. The doors leading to the leased premises have to be kept shut after office
hours.
3. The Tenant has to prevent the unauthorized use of property installations on
the part of persons which are not related to him.
4. Information as well as obligatory and prohibitory signs have to be
observed.
Section 3
Emergencies
1. If a fire is discovered, the following institutions have to be notified
immediately.
a) fire brigade
b) police
c) property management/caretaker
<PAGE> 15
If the property management cannot be reached, the same shall apply
correspondingly if damage caused by water, by oil, by gas and by smoke is
discovered as well as in other events of emergency. The duty of notification
does not only apply to the leased premises but to the entire property. The
relevant provisions of the fire direction, of the emergency relief organization
for damage caused by gas and water, of the technical relief organization, of the
civil population protection and of other applicable authorities have to be
observed.
2. If capital crimes are discovered, the respectively competent authorities
have to be informed.
Section 4
Nuisance of Co-Tenants and Neighbours
1. The Tenant engages himself to show utmost consideration for the other
co-tenants and to refrain from any disturbance and nuisance within the
silence periods provided by law.
2. Making and taking delivery of goods of any kind is not permitted between
22:00 and 6:00. Exceptions require the written consent of the Landlord.
3. Starting the operation of machines which cause noise and vibrations as well
as operating phono systems of any kind which exceed the statutory or
official limits is not admissible. Exceptions are only permissible with the
written consent of the Landlord.
4. Nuisance of the other co-tenants by dust or smell, which applies in
particular to restoration enterprises, has to be avoided. The Tenant has to
take appropriate measures for necessary disintegration of the smell or
airing at his own expenses.
Necessity shall be determined by the Landlord.
Section 5
Refuse
1. Rubbish and waste products of any kind may only be filled into the
containers designated for this purpose.
2. It is not permitted to throw any liquid, mushy, splintering or bulky
objects into the waste disposal unit. In the case of contravention, the
responsible Tenant has to pay a charge of DM 20.00; besides, he shall be
liable for any corresponding costs and damages.
3. Washbasins and sink units as well as toilets are to serve the purpose for
which they are designated only; emptening other rubbish and liquids, in
particular acids and lyes, is to be forborne. The Tenant shall be liable
for any damage of the toilets and washing units.
4. The Tenant has to bear the costs of removal and disposal of his industrial
waste. In the case of short-term storage of the industrial waste within his
leased premises, he has to provide for hygenic and appropriate storage.
<PAGE> 16
5. The leased property has to be kept free of any parasites. If there is
suspicion of parasites, the Landlord can have the leased property examined
and, if required, have the leased property disinfected at the expenses of
the Tenant. In case parasites are discovered, claims for damages and
reduction of rent against the Landlord shall be excluded in any case.
Section 6
Front and Shop Windows
1. Vending machines may only be put up outside the leased premises (front,
hallways, corridors) with the consent of the Landlord.
2. Painting the shop and office windows with letterings or symbols can also be
prohibited by the Landlord if the overall picture of the building or
property is disturbed thereby.
3. Any company advertising or advertisement must not give an indecent
impression and has to correspond to the traditional, public opinion of good
morals.
4. Putting up sales stands, offering goods or otherwise using free spaces in
front of the leased premises is not permitted. Exceptions require the
written consent of the Landlord.
Section 7
Particular Installations
1. Passenger lifts may only be used for the purpose for which they are
designated. Transporting goods or bulky objects is not permitted.
2. Goods lifts may not be used for storing objects. Transporting persons may
only be permitted in exceptional cases. The relevant provisions of the
trade association, of the safety standards authority and of other competent
authorities have to be observed when operating the goods lifts.
3. The unauthorized utilization of particular operational or safety
installations (alarm systems, fire extinguishers etc.) result in
prosecution.
Section 8
Heating
The claim for heating covers the time between 7:00 and 20:00, except for
Saturdays, Sundays and public holidays.
This claim shall be excluded if the Tenant changes the premises with
installations or alterations in such manner that the room temperature cannot be
maintained.
The heating periods is from 01.10 to 30.04. of every year.
<PAGE> 17
Section 9
Authorities of Caretaker
1. The caretaker is the vicarious agent of the property management.
2. The caretaker is authorized to pass instructions of the property management
within the rules of the house on to the Tenant.
3. The caretaker is obliged to notify the property management of any
violations of the rules of the house.
4. In case of imminent danger or in order to avoid damage for the Tenant and
the Landlord, the caretaker is authorized to access the leased premises by
force, if necessary. The costs of access by force shall be borne by the
Tenant.
Section 10
Other Provisions
The Landlord can extend or modify the rules of the house by additional
provisions. Provisions become a binding part of the rules of the house if they
are given notice of in writing by registered letter to the Tenant.
Section 11
Liability
"The Tenant has to effect a third party liability insurance and glass insurance
which provides cover at the date the Tenant moves in at the latest. This
obligation fails if the Landlord tells the Tenant upon the request of the
Tenant that object-related insurance contracts of this kind have already been
concluded. In this case, the Tenant has to bear the pro rata costs as
incidental expenses. This obligation applies for the Tenant even if he effects
his own insurances without having asked the Landlord regarding the existence
of object-related insurance contracts beforehand."
Munich, 29.02.1996
sgd.: illegible sgd.: A. Eder
stamp and signature stamp and signature
BIV in representation of the Landlord of the Tenant
W. Saar, K. Stindt Andreas Eder
names of the undersigned name(s) of the undersigned
Managing Director of CYBERNET AG
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ ELISABETH GRONER
<PAGE> 18
Translation from German
7th SUPPLEMENT
of the principal lease of 29.02.1996
between: KG Bayerische Hausbau GmbH & Co.
- Landlord -
represented by: BIV BAYERISCHE IMMOBILIENVERWALTUNG GMBH
Suskindstrasse 4, 81929 Munich
and: Cybernet AG
Internet-Dienstleistungen
Stefan-George-Ring 19, 81929 Munich
- Tenant -
Section 1
Leased Property
On the property Zamilapark MK2, Stefan-George-Ring 19, 81929 Munich, the spaces
indicated hereunder are leased:
office A + B on the 3rd floor of 491.27 m2
office E on the 3rd floor of 281.61 m2
office C on the 3rd floor of 305.76 m2
office D on the 3rd floor of 238.61 m2
cellar 1 D on the 1st basement of 53.50 m2
cellar 22/23 on the 1st basement of c. 40.00 m2
36 parking spaces for cars
Section 2
Additional Lease
As of 01.07.1998, the cellar no. 26/27 on the 1st basement of c. 70.07 m2 will
be additionally leased for DM 8.00/m2 net per month.
Section 3
Rent
The rent will be established as follows starting from 01.07.1998:
<PAGE> 19
office A + B 3rd floor of 491.27 m2 at DM 25.00 DM 12,281.75
office C 3rd floor of 305.76 m2 at DM 25.00 DM 7,644.00
office D 3rd floor of 238.61 m2 at DM 25.00 DM 5,965.25
office B 3rd floor of 281.61 m2 at DM 25.00 DM 7,040.25
cellar 1 D 1st basement of 53.50 m2 at DM 8.00 DM 428.00
cellar 22/23 1st basement of c. 40.00 m2 at DM 8.00 DM 320.00
cellar 26/27 1st basement of 70.06 m2 at DM 8.00 DM 560.48
plus statutory VAT, at present 16% DM 5,478.36
------------
DM 39,718.09
Advance payment of incidental expenses pursuant to the
2nd Operating Costs Regulations:
unchanged: DM 5,653.64
Parking spaces for cars:
unchanged: DM 2,505.60
Total monthly rent starting from 01.07.1998 DM 47,877.33
Section 4
Other Provisions
As for the rest, the terms and conditions of the principal lease of 29.02.1996
including the enclosures and additions thereof shall continue to be valid to
their full extent unless modified by this or previous supplements.
Munich, 09.06.1998
sgd.: illegible sgd.: R. Strobl
BIV in representation of the Tenant
Landlord sgd.: A. Eder
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ ELIZABETH GRONER
<PAGE> 20
Translation from German
6th SUPPLEMENT
of the principal lease of 29.02.1996
between: KG Bayerische Hausbau GmbH & Co.
-Landlord-
represented by: BIV BAYERISCHE IMMOBILIENVERWALTUNG GMBH
Denninger Strasse, 169, 81925 Munich
and: Cybernet AG
Internet-Dienstleistungen
Stefan-George-Ring 19, 81929 Munich
-Tenant-
Section 1
Change of Rent
1. In Section 17 of above principal lease, a rent adjustment clause has been
agreed upon. The parties agree that this clause ceases to be a part of the
lease and that rent adjustment is agreed upon as follows:
2. If the cost-of-living index for the living standard of a four-person
employee household with average income as published by the Federal
Statistical Office changes by more than 10 points (basis 1991 = 100)
compared to 01.05.1998, the rent will increase or decrease in the same
ratio automatically starting from the 1st day of the following month as
soon as the index figure reached 10 points upwards or downwards.
3. An increase or decrease can be made starting from 01.05.2001 for the first
time.
4. The notice on the part of the Landlord shall only have a declaratory
function. In the case of increase of the rent, the Tenant cannot plead
that he got the notice after the official publication of the increase of
the index figures only.
5. For the subsequent time of lease, the rent can, pursuant to par. 1, be
adjusted as at the time of the state of the index last taken into
consideration after the required points (10) were reached respectively.
The claim on the part of the Landlord for adjustment of the rent does not
lapse, even if the Landlord does not make an adjustment of rent
immediately when the points are reached.
6. This regulation requires the authorization of the State Central Bank,
which authorization the Landlord will request.
<PAGE> 21
Section 2
Other Provisions
As for the rest, the terms and conditions of the principal lease of 29.02.1996
including the enclosures and additions thereof shall continue to be valid to
their full extent unless modified by this or previous supplements.
Munich, 13.01.1998
sgd.: illegible sgd.: A. Eder
BIV in representation of the Landlord Tenant
Cybernet Internet-Dienstleistungen AG
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ Elisabeth Groner
<PAGE> 22
Translation from German
5th SUPPLEMENT
of the principal lease of 29.02.1996
<TABLE>
<S> <C>
between: KG Bayerische Hausbau GmbH & Co.
- Landlord -
represented by: BIV BAYERISCHE IMMOBILIENVERWALTUNG GMBH
Denninger Strasse 169, 81925 Munich
and: Cybernet AG
Internet-Dienstleistungen
Stefan-George-Ring 19,81929 Munich
- Tenant -
</TABLE>
Section 1
Leased Property
On the property Zamilapark MK2, Stefan-George-Ring 19, 81929 Munich, the spaces
indicated hereunder are leased:
<TABLE>
<CAPTION>
<S> <C> <C>
office A + B on the 3rd floor of 491.27 m(2)
office C on the 3rd floor of 305.76 m(2)
office D on the 3rd floor of 238.61 m(2)
cellar 1 D on the 1st basement of 53.50 m(2)
cellar 22/23 on the 1st basement of c. 40.00 m(2)
36 parking spaces for cars
</TABLE>
Section 2
Additional Lease
As of 01.01.1998, the space B on the 3rd floor of about 281.61 m(2) will be
additionally leased for DM 24.00/m(2) net per month.
The Tenant knows that sound insulation cannot be guaranteed between space A and
space B due to the properties of the partition wall.
As of 01.08.1998, the space A on the 3rd floor of about 258.08 m(2) will be
additionally leased for DM 25.00/m(2) net per month.
For the additionally leased spaces, the same terms and conditions analogously
to the principal lease of 29.02.1996 shall be considered agreed upon.
<PAGE> 23
Section 3
Rent
The rent will be established as follows starting from 01.01.1998:
office A + B 3rd floor of 491.27 m(2) at DM 22.00 DM 10,807.94
office C 3rd floor of 305.76 m(2) at DM 22.00 DM 6,726.72
office D 3rd floor of 238.61 m(2) at DM 24.00 DM 5,726.64
office B 3rd floor of c. 281.61 m(2) at DM 24.00 DM 6,758.64
cellar 1D 1st basement of 53.50 m(2) at DM 8.00 DM 428.00
cellar 22/23 1st basement of c. 40.00 m(2) at DM 8.00 DM 320.00
plus statutory VAT, at present 15% DM 4,615.19
------------
DM 35,383.13
Advance payment of incidental expenses pursuant to the
2nd Operating Costs Regulations:
office 1,317.25 m(2) at DM 3,70 DM 4,873.83
plus VAT 15% DM 731.07 DM 5,604.90
-----------
Parking spaces for cars:
unchanged: DM 2,484.00
Total monthly rent starting from 01.01.1998 DM 43,472.03
Pursuant to Section 5, number 2 of the lease, the rent will be established as
follows starting from 01.05.1998:
office A + B 3rd floor of 491.27 m(2) at DM 25.00 DM 12,281.75
office C 3rd floor of 305.76 m(2) at DM 25.00 DM 7,644.00
office D 3rd floor of 238.61 m(2) at DM 25.00 DM 5,965.25
office B 3rd floor of c. 281.61 m(2) at DM 25.00 DM 7,040.25
cellar 1D 1st basement of 53.50 m(2) at DM 8.00 DM 428.00
cellar 22/23 1st basement of c. 40.00 m(2) at DM 8.00 DM 320.00
plus statutory VAT, at present 15% DM 5,051.89
------------
DM 38,731.14
Advance payment of incidental expenses pursuant to the
2nd Operating Costs Regulations:
unchanged: DM 5,604.90
Parking spaces for cars:
unchanged: DM 2,484.00
Total monthly rent starting from 01.05.1998 DM 46,820.04
<PAGE> 24
The rent will be established as follows starting for 01.08.1998:
office A + B 3rd floor of 491.27 m(2) at DM 25.00 DM 12,281.75
office C 3rd floor of 305.76 m(2) at DM 25.00 DM 7,644.00
office D 3rd floor of 238.61 m(2) at DM 25.00 DM 5,965.25
office B new 3rd floor of c. 281.61 m(2) at DM 25.00 DM 7,040.25
office A new 3rd floor of c. 258.08 m(2) at DM 25.00 DM 6,452.00
cellar 1D 1st basement of 53.50 m(2) at DM 8.00 DM 428.00
cellar 22/23 1st basement of c. 40.00 m(2) at DM 8.00 DM 320.00
plus statutory VAT, at present 15% DM 6,019.69
------------
DM 46,150.94
Advance payment of incidental expenses pursuant to the
2nd Operating Costs Regulations:
office 1,575.33 m(2) at DM 3,70 DM 5,828.72
plus VAT 15% DM 874.31 DM 6,703.03
-----------
Parking spaces for cars:
unchanged: DM 2,484.00
Total monthly rent starting from 01.08.1998 DM 55,337.97
Section 4
Surety
Pursuant to Section 15 of the principal lease of 29.02.1996, the existing
surety of DM 92,000.00 has to be increased as follows:
01.01.1998 DM 123,000.00
01.08.1998 DM 159,000.00
Section 5
Other Provisions
As for the rest, the terms and conditions of the principal lease of 29.02.1996
including the enclosures and additions thereof shall continue to be valid to
their full extent unless modified by this or previous supplements.
Munich, 22.09.1997
sgd.: illegible sgd.: A. Eder
BIV in representation of the Tenant
Landlord Cybernet Internet-Dienstleistungen AG
<PAGE> 25
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
[SIG]
<PAGE> 26
Translation from German
4th SUPPLEMENT
of the principal lease of 29.02.1996
between: KG Bayerische Hausbau GmbH & Co.
-- Landlord --
represented by: BIV BAYERISCHE IMMOBILIENVERWALTUNG GMBH
Denninger Strasse 169, 81925 Munich
and: Cybernet AG
Internet-Dienstleistungen
Stefan-George-Ring 19, 81929 Munich
- Tenant -
Section 1
Leased Property
On the property Zamilapark MK2, Stefan-George-Ring 19, 81929 Munich, the spaces
indicated hereunder are leased:
<TABLE>
<S> <C> <C> <C>
office A + B on the 3rd floor of 491.27 m(2)
office C on the 3rd floor of 305.76 m(2)
office D on the 3rd floor of c. 237.00 m(2)
cellar 1 D on the 1st basement of 53.50 m(2)
cellar 22/23 on the 1st basement of c. 40.00 m(2)
</TABLE>
36 parking spaces for cars
Section 2
Subsequent Calculation of Space
For space D on the 3rd floor additionally leased as of 16.07.1997, the Landlord
made a subsequent calculation of the leased space.
The result of the subsequent calculation of space D is 238.61 m(2) according to
the enclosed leasing plans.
<PAGE> 27
Section 3
Rent
The rent is established as follows as of 16.07.1997 retrospectively:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
office A + B 3rd floor of 491.27 m(2) at DM 22.00 DM 10,807.94
office C 3rd floor of 305.76 m(2) at DM 22.00 DM 6,726.72
office D 3rd floor of 238.61 m(2) at DM 24.00 DM 5,726.64
cellar 1 D 1st basement of 53.50 m(2) at DM 8.00 DM 428.00
cellar 22-23 1st basement of c. 40.00 m(2) at DM 8.00 DM 320.00
plus statutory VAT, at present 15% DM 3,601.40
------------
DM 27,610.70
</TABLE>
Advance payment of incidental expenses pursuant to the
2nd Operating Costs Regulations:
<TABLE>
<CAPTION>
<S> <C> <C>
office 1,035.64 m(2) at DM 3,70 DM 3,831.87
plus VAT 15% DM 574.78 DM 4,406.65
-----------
Parking spaces for cars:
unchanged: DM 2,484.00
Total monthly rent as of 16.07.1997 DM 34,501.35
</TABLE>
Section 4
Other Provisions
As for the rest, the terms and conditions of the principal lease of 29.02.1996
including the enclosures and additions thereof shall continue to be valid to
their full extent unless modified by this or previous supplements.
Munich, 06.08.1997
sgd.: illegible sgd.: A. Eder
BIV in representation of the Tenant
Landlord
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ Elisabeth Groner
<PAGE> 28
Translation from German
3rd SUPPLEMENT
of the principal lease of 29.02.1996
between: KG Bayerische Hausbau GmbH & Co.
- Landlord -
represented by: BIV BAYERISCHE IMMOBILIENVERWALTUNG GMBH
Denninger Strasse 169, 81925 Munich
and: Cybernet AG
Internet-Dienstleistungen
Stefan-George-Ring 19, 81929 Munich
- Tenant -
Section 1
Leased Property
On the property Zamilapark MK2, Stefan-George-Ring 19, 81929 Munich, the spaces
indicated hereunder are leased:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
office A + B on the 3rd floor of 491.27 m(2)
office C on the 3rd floor of 305.76 m(2)
office D on the 3rd floor of c. 237.00 m(2)
cellar 1 D on the 1st basement of 53.50 m(2)
</TABLE>
36 parking spaces for cars
Section 2
Additional Lease
As of 01.07.1997, the cellar no. 22-23 on the 1st basement of c. 40.00 m(2) will
be additionally leased for DM 8.00/m(2) net per month.
Section 3
Rent
The rent will be established as follows starting from 01.07.1997:
<PAGE> 29
office A + B 3rd floor of 491.27 m(2) at DM 22.00 DM 10,807.94
office C 3rd floor of 305.76 m(2) at DM 22.00 DM 6,726.72
office D 3rd floor of c. 237.00 m(2) at DM 24.00 DM 5,688.00
cellar 1 D 1st basement of 53.50 m(2) at DM 8.00 DM 428.00
cellar 22-23 1st basement of c. 40.00 m(2) at DM 8.00 DM 320.00
plus statutory VAT, at present 15% DM 3,595.60
------------
DM 27,566.26
Advance payment of incidental expenses pursuant to the
2nd Operating Costs Regulations:
unchanged: DM 4,399.80
Parking spaces for cars:
25 underground parking spaces for cars at DM 80.00 DM 2,000.00
10 underground parking spaces for cars at DM 10.00 DM 100.00
01 parking space for a car above ground at DM 60.00 DM 60.00
plus statutory VAT, 15% DM 324.00
-----------
DM 2,484.00
Total monthly rent as of 16.07.1997 DM 34,450.06
============
Section 4
Other Provisions
As for the rest, the terms and conditions of the principal lease of 29.02.1996
including the enclosures and additions thereof shall continue to be valid to
their full extent unless modified by this or previous supplements.
Munich, 16.06.1997
sgd.: illegible sgd.: A. Eder
BIV in representation of the Tenant
Landlord
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ Elizabeth Groner
<PAGE> 30
Translation from German
2nd SUPPLEMENT
of the principal lease of 29.02.1996
between: KG Bayerische Hausbau GmbH & Co.
- Landlord -
represented by: BIV BAYERISCHE IMMOBILIENVERWALTUNG GMBH
Denninger Strasse 169, 81929 Munich
and: Cybernet AG
Internet-Dienstleistungen
Stefan-George-Ring 19, 81929 Munich
- Tenant -
Section 1
Leased Property
On the property Zamilapark MK2, Stefan-George-Ring 19, 81929 Munich, the spaces
indicated hereunder are leased:
office A + B on the 3rd floor of 491.27 m(2)
office C on the 3rd floor of 305.76 m(2)
cellar 1 D on the 1st basement of 53.50 m(2)
30 underground parking spaces for cars
01 parking space for a car above ground
Section 2
Additional Lease
As of 01.07.1997, the office D on the 3rd floor of c. 237.00 m(2) will be
additionally leased for DM 24.00/m(2) net per month.
Section 3
Rent
The rent will be established as follows starting from 01.07.1997:
<PAGE> 31
office A+B 3rd floor of 491.27 m(2) at DM 22.00 DM 10,807.94
office C 3rd floor of 305.76 m(2) at DM 22.00 DM 6,726.72
office D 3rd floor of c. 237.00 m(2) at DM 24.00 DM 5,688.00
cellar 1 D 1st basement of 53.50 m(2) at DM 8.00 DM 428.00
plus statutory VAT, at present 15% DM 3,547.60
------------
DM 27,198.26
Advance payment of incidental expenses pursuant to the
2nd Operating Costs Regulations:
office 1,034.03 m(2) at DM 3.70 DM 3,825.91
plus statutory VAT, 15% DM 573.89 DM 4,399.80
Parking spaces for cars:
20 underground parking spaces for cars at DM 80.00 DM 1,600.00
10 underground parking spaces for cars at DM 10.00 DM 100.00
01 parking space for a car above ground at DM 60.00 DM 60.00
plus statutory VAT, 15% DM 264.00
-----------
DM 2,024.00
Total monthly rent as of 01.07.1997 DM 33,622.06
============
Section 4
Surety
Pursuant to Section 15 of the principal lease of 29.02.1996, the bank guarantee
has to be increased to a total amount of DM 92,000.00 by 01.07.1997.
Section 5
Other Provisions
As for the rest, the terms and conditions of the principal lease of 29.02.1996
including the enclosures and additions thereof shall continue to be valid to
their full extent unless modified by this or previous supplements.
Munich, 02.04.1997
sgd.: illegible sgd.: A. Eder
BIV in representation of the Tenant
Landlord Cybernet AG
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ ELISABETH GRONER
<PAGE> 32
Translation from German
1st SUPPLEMENT
of the principal lease of 19.03.1998
between: Bayerische Grundbesitz GmbH & Co. Verwaltungs-KG
represented by: Bayerische Immobilienverwaltung GmbH
Denninger Strasse 169, 81925 Munich
-Landlord-
and: Cybernet
Internet-Dienstleistungen AG
Stefan-George-Ring 19, 81929 Munich
-Tenant-
Section 1
Leased Property
On the property "Weisser Riese", Rosenkavalierplatz 5, 81925 Munich, the
following commercial units are leased:
office on the 1st floor c. 316.00 m(2)
cellar 1014 on the 2nd basement c. 82.75 m(2)
Section 2
Calculation of Space
For the office and cellar spaces indicated under Section 1, the Landlord made a
calculation of space (pursuant to the principal lease, Section 1, number 3) and
recorded it in the leasing plans which are incorporated into the supplement.
As of the start of lease (01.05.1998), the definite office space of 315.42 m(2)
as well as the definite cellar space of 86.22 m(2) will be used as a basis.
Section 3
Term
Due to the delay of performance on the part of the Landlord, the following new
term is agreed upon, modifying the lease of 19.03.1998, Section 4:
The lease starts on 01.05.1998
Term of lease: 5 years
End of lease: 30.04.2003
The obligation to pay rent starts on 01.06.1998. The operating costs and other
incidental expenses have to be paid starting from the start of lease
(01.05.1998).
<PAGE> 33
Section 4
Change of Rent
The contracting parties agreed upon grading of the rent to start at the
beginning of the 2nd year of the contract. Due to the new start of lease
(01.05.1998), the start of grading is changed as follows:
01.05.1999 until 30.04.2000 increase of the rent basic rent to DM 34.00/m(2)
01.05.2000 increase of the net basic rent to DM 35.00 m(2)
Modifying the principal lease of 19.03.1998, Section 7, the start of the index
is set on 01.05.2000 (basis 1991 = 100).
Section 5
Rent
Due to the calculation of space, the new rent of the basic rent will be as
follows starting from the start of lease (01.05.1998):
<TABLE>
<S> <C>
basic rent:
office of 315.42 m(2) at DM 0.00/m(2) DM 0.00
cellar of 86.22 m(2) at DM 0.00/m(2) DM 0.00
plus statutory VAT, at present 16% DM 0.00
-----------
DM 0.00
incidental expenses pursuant to the 2nd Operating Costs Regulations
office of 315.42m(2) at DM 3.70/m(2) DM 1,167.05
flat energy charge for cellar lump sum DM 20.00
plus statutory VAT, at present 16% DM 189.93
-----------
DM 1,376.98
total rent DM 1,376.98
===========
</TABLE>
<PAGE> 34
Due to the calculation of space, the new rent of the basic rent will be as
follows starting from the start of payment (01.06.1998):
<TABLE>
<S> <C>
basic rent:
office of 315.42 m(2) at DM 33.00/m(2) DM 10,408.86
cellar of 86.22 m(2) at DM 9.00/m(2) DM 775.98
plus statutory VAT, at present 16% DM 1,789.58
------------
DM 12,974.42
incidental expenses pursuant to the 2nd Operating Costs Regulations
office of 315.42m(2) at DM 3.70/m(2) DM 1,167.05
flat energy charge for cellar lump sum DM 20.00
plus statutory VAT, at present 16% DM 189.93
------------
DM 1,376.98
total rent DM 14,351.40
============
</TABLE>
Section 2
Other Provisions
As for the rest, the regulations and conditions of the principal lease of
19.03.1998 including the enclosures and additions thereof shall continue to be
valid to their full extent unless modified by this supplement.
Munich, 17.06.1998
sgd.: A. Eder
BIV in representation of the Landlord Tenant
Cybernet Internet-Dienstleistungen AG
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
26 August 1998
/s/ ELISABETH GRONER
<PAGE> 1
MILLER LEASING MIETE
GMBH
Louisenstrasse 145 - 61348 Bad Homburg - Tel.: (++49) 6172-4860-0
Fax (++49) 6172-4863-48
- --------------------------------------------------------------------------------
FULL AMORTIZATION LEASING AGREEMENT NO. 13 00 00
FOR HARD- AND SOFTWARE
with purchase, extension and return options
between and
CYBERNET INTERNET-DIENSTLEISTUNGEN MILLER LEASING MIETE GMbH
AG LOUISENSTRASSE 145
STEFAN-GEORGE-RING 19 61348 BAD HOMBURG
81929 MUNICH
- - hereinafter referred to as - hereinafter referred to as
the "lessee" - the "lessor" -
Tel. (++49)-89-993 15-0 Fax: (++49)-89-993-15-199
Bank: Sort code:
Account no.: Company registration no.:
The lessee hereby makes the lessor an offer to conclude a leasing agreement with
the latter in accordance with the provisions BELOW AND OVERLEAF. The specific
details of the individual leasing agreement are contained in a leasing system
confirmation. The lessee grants the lessor a period of one month from the date
of signature of the leasing agreement by the former to accept the contract
offered.
Should the lessor accept this contract offered, the lessee simultaneously
commissions the lessor to purchase the leased items selected by said lessee,
under the manufacturer/supplier's contractual conditions. The hard- and/or
software selected by the lessee itself will constitute the leased item.
This agreement constitutes a full amortization agreement with
purchaser/extension/ return options.
Insofar as a software license agreement exists between the lessee and the
manufacturer/supplier, the parties hereby agree that the lessor will take over
this contract in accordance with a separate agreement to do so, which will form
a constituent part of this leasing agreement.
The leasing agreement continues with Section 1-Section 13.
Munich, January 12, 1998 Bad Homburg, January 22, 1998
[stamped]
Internet-Dienstleistungen AG
Stefan-George-Ring 19
D-81929 Munich
Tel.: (++49)-89-9 93 15-0
Fax: (++49)-89-9 93 15-199
[illegible signature] [illegible signature]
(Lessee, legally-binding signature (Lessor)
and company stamp)
1
<PAGE> 2
MILLER LEASING MIETE
GMBH
Louisenstrasse 145 - 61348 Bad Homburg - Tel.: (++49) 6172-4860-0
Fax (++49) 6172-4863-48
- --------------------------------------------------------------------------------
SECTION 1
SUBJECT TO THE CONTRACT
(1) The lessor grants the lessee the right to use the leased item at the
specified location for the purposes intended by the manufacturer/supplier,
throughout the term of the leasing agreement, against payment. The leased
item is described in the leasing system confirmation submitted by the
lessor and appended to these general terms and conditions of leasing as a
constituent part thereof. It represents the leasing agreement, in
conjunction with these general terms and conditions of leasing and the
cover sheet. A new leasing system confirmation must be signed by the
parties for any exchange or expansion of or addition to the leased item
or parts thereof. The conditions of the leasing agreement also apply to
any exchange or expansion of or addition to the leased items.
(2) Use of the software will correspond to the conditions of the
manufacturer/supplier's software license agreement. Should the lessee
receive the software from the lessor direct, the former will consent to
these conditions.
(3) The lessee will take care of the lessor's property and observe the
relevant recommendations of the manufacturer/supplier when using the
leased item. The lessee will be obliged to maintain the leased item in
working order, at its own expense and risk.
(4) The lessee may not modify the leased item without the prior written
consent of the lessor. The lessee will be entitled, and, upon demand by
the lessor, obliged to restore the leased item to its original condition
upon termination of the leasing agreement, at its own expense and risk.
(5) The lessee will be obliged to conclude a maintenance agreement for the
hardware with the manufacturer/supplier or another specialist company, and
a support agreement for the software throughout the term of the leasing
agreement, at its own expense, and meet its resultant obligations. Any
repairs or spare parts required will be for the account of the former.
(6) The manufacturer/supplier will invoice the lessee separately for
subsidiary costs such as packaging, carriage and installation.
SECTION 2
SEPARATION AGREEMENT
(1) The lessee agrees that the content of the leasing agreement will be
legally and commercially separate from the consultancy agreement concluded
with the manufacturer/supplier or a third party, and will thus be
independent. The lessee will therefore be unable to assert any
counter-claims, objections or protests against the lessor under the
leasing agreement arising from poor fulfillment of the consultancy
agreement.
2
<PAGE> 3
MILLER LEASING MIETE
GMBH
Louisenstrasse 145 - 61348 Bad Homburg -
Tel.: (++49) 6172-4863-0 - Fax (++49) 6172-4863-48
- --------------------------------------------------------------------------------
(2) The same will apply insofar as the lessee concludes a software license
agreement directly with the manufacturer/supplier or a third party.
SECTION 3
TRANSFER OF THE LEASED ITEM
(2) The lessee will be obliged to provide the lessor with an immediate written
confirmation of transfer of the entire leased item or of a commercially
viable partial delivery, in perfect working order, by correct completion
of the transfer confirmation form provided by the lessor, including a
legally-binding signature, stating the date of transfer. The lessee agrees
that submission of such a transfer confirmation will constitute grounds
for payment of the purchase price by the lessor to the
manufacturer/supplier. As a result, incomplete or incorrect declarations
in the transfer confirmation will be the responsibility of the lessee,,
insofar as the lessor consequently suffers a loss or disadvantage. The
lessee will be at liberty to prove that it is not negligent, or negligent
only to a lesser degree compared to the software supplier, for the
incomplete or incorrect declaration.
(2) After acceptance, which is the lessee's obligation, the lessee must
inspect the leased item immediately and notify the manufacturer/supplier
and the lessor at the same time of any defects under Section 377, Section
378 or Section 381, sub-paragraph 2 of the HGB [German Commercial Code].
(3) When the transfer confirmation has been signed, the term of the lease of
the leased item will begin from the date of transfer. The lessee will be
obliged to sign the transfer confirmation when the leased item is put into
use at the latest, adding the date of transfer.
(4) Should the lessee infringe its obligation to submit the signed transfer
confirmation, the lessor will be obliged to set a reasonable extension to
the deadline, under penalty of refusal. Should the lessee not meet this
demand, the lessor will be entitled to terminate the contract.
SECTION 4
PAYMENTS
(1) The leasing installment must be paid monthly in advance by the first day of
every month to the lessor's account, charges paid. The date of the credit
will determine whether payment has been made on time. Should the beginning
of the term of the lease agreement under Section 3 (3) not fall on the
first of the month, an installment of 1/30 of the monthly leasing
installment will be payable for each day of potential use within the first
month. This will apply analogously to the last month of use.
(2) Should there be a change in the capital market interest rates on which the
leasing installment is based on the date of calculation, between
conclusion of
3
<PAGE> 4
MILLER LEASING MIETE
GMBH
Louisenstrasse 145 - 61348 Bad Homburg -
Tel.: (++49) 6172-4863-0 - Fax (++49) 6172-4863-48
- --------------------------------------------------------------------------------
the leasing agreement and commencement of the term of the lease under
Section 3 (3), the lessor will be entitled and obliged to increase or
reduce the leasing installment by the same proportion by which the capital
market interest rates rise or fall from the date of calculation to the
beginning of the term of the lease under Section 3 (3). This will apply
analogously in the event of a change in the purchase price as the basis of
calculation of the leasing installments, etc., insofar as the purchase
price changes between conclusion of the leasing agreement and delivery.
(3) The leasing installment, the VAT and all other amounts due will be
collected by direct debit. The lessee hereby grants the lessor the
necessary authorization to do so until further notice.
(4) The lessee will only be entitled to offset amounts if its counter-claims
are legally binding, accepted or undisputed.
(5) The lessee will be responsible for all fees, contributions, taxes and
other charges relating to the use or keeping of the leased item. The
leasing installment will only take account of the taxes applicable at the
time of conclusion of the leasing agreement. Should these change, the
lessee will have to pay the additional amount. The lessor will be entitled
and obliged to adjust the leasing installment accordingly.
SECTION 5
RISK -- INSURANCE -- PROPRIETARY RIGHTS
(1) Delivery, set-up, installation and de-installation of the leased item will
take place at the lessee's expense and risk.
(2) The lessee will be responsible for the substantive and price risk. Should
the leased item be destroyed or damaged, the lessee will not be discharged
from further payment of the leasing installments. It will be obliged to
restore the leased item at its own expense. In the event of destruction or
major damage, both contracting parties will be entitled to terminate the
agreement without notice. In such a case, however, the lessee will remain
obliged to meet the lessor's claim for full amortization in accordance
with the stipulation under Section 7 (5).
(3) The lessor will take out electronic equipment insurance for the leased
item in accordance with the conditions of AVFE 76, at the lessee's
expense, from the commencement of the term of the lease in accordance with
Section 3 (3), at the site stipulated in the leasing system confirmation,
until the end of the term of the lease agreement. The conditions thereof
will be submitted to the lessee on request. The excess to be paid by the
lessee will be DM 1,000 each and every claim.
(4) The lessee itself will be responsible for appropriate insurance cover for
the preceding period. The lessee hereby assigns any claims arising from
said insurance to the lessor, who accepts such assignment.
4
<PAGE> 5
MILLER LEASING MIETE
GMBH
Louisenstrasse 145 - 61348 Bad Homburg -
Tel.: (++49) 6172-4863-0 - Fax (++49) 6172-4863-48
- --------------------------------------------------------------------------------
(5) The lessor must be informed immediately of any loss. Repair of the leased
item must be agreed with the lessor, insofar as the repair costs exceed DM
1,000. It will be the lessee's responsibility to ensure that insurance is
taken out to cover any loss in excess of this amount.
(6) The lessor will conclude data media insurance for the software from the
commencement of the term of the lease in accordance with Section 3 (3) to
the end thereof, at the expense of the lessee. The conditions will be
submitted to the lessee upon request.
(7) Removal of the leased item from the site specified on the leasing system
confirmation is not permitted without the lessor's prior written approval.
The lessor or its representatives will be entitled to satisfy themselves
of the condition of the leased item during normal business hours and check
that it is being used for its intended purpose. The lessor may demand that
the leased item be marked as its property.
(8) The lessee must inform the lessor immediately if its proprietary rights
are endangered, by seizure of the leased item by third parties, for
example. The lessee must inform the lessor in writing immediately of any
imminent or effective distraint upon the leased item. The same will apply
in the event of imminent forced sale or sequestration of the property on
which the leased item is located. The lessee will be responsible for all
intervention costs incurred for protection of the lessor's property.
(9) Should the leased item constitute a firm fixture of a property or
building, this will only be the case for a temporary purpose, with removal
of the leased item from the property or building at the end of the lease
agreement intended. Should the lessee not be the owner of the property or
building, the former must make it clear to the owner that the leased item
is only affixed for a temporary purpose. The lessor will also be entitled
to do this.
SECTION 6
LIABILITY -- GUARANTEE -- ASSIGNMENT
(1) In view of the fact that the lessor's personal liability towards the
lessee under the lease agreement is contracted out for the term of said
agreement, the lessor hereby assigns all claims to which it is entitled
from the purchase of the leased item from the manufacturer/supplier, with
the exception of the claim for performance, to the lessee. This will apply
in particular to claims arising from delay, poor performance, guarantee,
liability for sound title and other contractual or statutory claims. The
lessee will assert such claims against the manufacturer/supplier in good
time, at its own expense and at its own risk. This will apply in
particular to any guarantee claims which the lessee must assert
exclusively against the manufacturer/supplier.
(2) The lessee will indemnify the lessor against any third party claims
pertaining to the ownership and use of the leased item, particularly from
the breach of industrial proprietary rights.
5
<PAGE> 6
MILLER LEASING MIETE
GMBH
Louisenstrasse 145 - 61348 Bad Homburg - Tel: (++49)6172-4863-0
Fax (++49)6172-4863-48
- --------------------------------------------------------------------------------
(3) Insofar as the lessee institutes legal proceedings against the
manufacturer/supplier, particularly to cancel the contract or reduce the
purchase price, it will be obliged to ensure in the petition that
repayment will be made to the lessor direct. The same will apply if the
lessee reaches an out-of-court settlement with the manufacturer/supplier.
The lessee will also be obliged to inform the lessor in writing
immediately of any warranty claim or other defects which occur in the use
of the leased item. This will apply specifically in the case of
institution of legal proceedings, in which case the lessor must be given
the opportunity to participate therein.
(4) In the event of cancellation of the contract between the lessee and the
manufacturer/supplier, irrespective of whether this takes place on the
basis of contractual agreements or a court judgment, the commercial basis
of the leasing agreement will cease to exist, with retrospective effect.
In this case, the lessor will be obliged to repay the leasing installments
received to the lessee, as if the lessee had not, or could not have,
obtained any benefit from the use of the leased item. Should the lessee
successfully assert a claim against the manufacturer/supplier for a
reduction, the leasing installments will be reduced accordingly.
(5) Should the lessee successfully assert a claim against the
manufacturer/supplier for a replacement delivery of the leased item,
title to the replacement leased item delivered will be transferred
directly to the lessor. The lessee will inform the lessor of the serial
number or other distinguishing marks of the replacement leased item after
it has been exchanged and confirm receipt and the efficiency of the
replacement leased item to the lessor.
SECTION 7
ARREARS OF PAYMENT BY THE LESSEE -- MATURITY -- NOTICE OF TERMINATION
(1) Should the lessee fall into arrears of payment in whole or in part, the
lessor will be entitled to charge interest on arrears at 5% above the
respective discount rate of the Deutsche Bundesbank [Central Bank of
Germany]. Should the lessor incur a further loss as a result of late
payment, this must be refunded by the lessee. However, should the lessee
prove that the late payment has entailed no, or a far smaller, loss, only
this lower amount must be refunded to the lessor.
(2) Should the lessee fall into arrears of two consecutive leasing
installments or a substantial proportion thereof, the lessor will be
entitled to serve notice of immediate termination. The same will also
apply if there is a substantial deterioration in the lessee's financial
circumstances, as a result of enforcement measures, refusal of payment of
bills of exchange or cheques, for example, or if composition or bankruptcy
proceedings are opened on the assets of the lessee or one of its
personally liable shareholders.
6
<PAGE> 7
MILLER LEASING MIETE
GMBH
Louisenstrasse 145 - 61348 Bad Homburg - Tel: (++49)6172-4863-0
Fax (++49)6172-4863-48
- --------------------------------------------------------------------------------
(3) Moreover, the lessor will be entitled to terminate the leasing agreement
without notice insofar as the lessee culpably breaches its essential
duties under the leasing agreement, despite a prior written warning.
(4) In all cases in which the lessor is entitled to serve notice of immediate
termination, the lessor will be entitled to demand compensation for
non-performance.
(5) Insofar as the lessor may be entitled to the right to serve notice of
immediate termination, the lessor's claim for compensation will be
calculated in such a way that all leasing installments due on the basis of
the claim for full amortization to which the lessor is entitled, plus
appropriate interest, will be due immediately. Insofar as the lessor
incurs additional expenses as a consequence of notice of termination
(valuation costs, compensation for prepayment, etc.), it will be entitled
to invoice these too, within the scope of a claim for compensation.
Insofar as the lessor saves expenses as a consequence of said notice of
termination, these must be deducted. The lessor will also be obliged to
dispose of the leased item as favorably as possible. Proceeds of disposal
must be credited to the lessee in the lessor's claim for compensation,
after deduction of the cost of disposal and/or seizure. The lessor will be
entitled to any excess proceeds. The lessee will bear the risk for the
lessor's ability to dispose of the leased item.
(6) Section 569 of the BGB [German Civil Code] will not apply.
SECTION 8
RIGHTS OF THE LESSEE AFTER EXPIRY OF THE BASIC TERM OF THE LEASE
(1) The lessee will decide no later than three months prior to expiry of the
basic term of the lease whether it will then exercise its extension option
hereby granted, return the leased item to the lessor, or exercise its
purchase option also hereby granted, at its discretion.
(2) In respect of the purchase option, the purchase price will depend on the
book value of the leased item determined at the end of the basic term of
the lease, allowing for depreciation for wear and tear (table)
[AfA-Tabelle], or its fair market value at that time, whichever is lower.
Proof that the fair market value is lower will be incumbent on the lessee.
Written confirmation of exercise of the purchase option will be required.
The purchase price will be due at the end of the term of the lease. Any
warranty claims will be precluded.
(3) Should the lessee decide to exercise its option to extend the leasing
agreement, the extension leasing installment will depend on the wear and
tear on the leased item, calculated on the basis of the book value at the
end of the basic term of the lease, taking account of depreciation for
wear and tear (table), or its fair market value at that time, if lower.
Proof that the fair market value is lower will be incumbent on the lessee.
Written confirmation
7
<PAGE> 8
MILLER LEASING MIETE
GMBH
Louisenstrasse 145-61348 Bad Hornburg Tel.: (++49) 6172-4863-0
Fax (++49)6172-4863-48
- --------------------------------------------------------------------------------
of exercise of the extension option will be required. Claims under Section
537 and Section 538 of the BGB [German Civil Code] will be precluded.
(4) The lessee will be obliged to meet its obligations under the software
license agreement throughout the extension of the contract or after
exercising the purchase option.
Section 9
Return of the leased item
(1) The leased item, including the software, data media, full documentation and
accessories, will be returned to the lessor at the lessee's expense and
risk. The lessee must delete any other copies of the software it has and
the version installed on the hardware after expiry of the contract, and
confirm deletion to the lessor in writing. The lessor may specify any
location in Germany as the place of transfer. The lessor may instruct the
lessee to scrap the leased item, at the latter's expense, instead of
returning it.
(2) If the leased item is returned, it must be in a condition appropriate for
contractual use. The lessee will be liable for any defects and
shortcomings.
(3) Should the lessee fail to return the leased item after expiry of the basic
term of the lease, despite a request from the lessor to do so, the lessor
may demand the agreed leasing installment for the duration of retention as
compensation. The right to assert any further claim is reserved.
(4) Section 4(4) will apply analogously to any right of retention of the leased
item.
Section 10
Agreement on termination
(1) The agreement may be terminated prematurely prior to expiry of its basic
term, by agreement between the parties. However, this will not be
admissible until 40% of the ordinary useful life has expired, in accordance
with the official table for wear and tear of the leased item.
(2) Agreement on premature termination will be conditional on an offer by the
lessee to pay the lessor an amount for the remaining outstanding leasing
installments within the scope of the full amortization obligation of the
lessee, appropriately discounted, plus all individual costs associated with
premature termination of the agreement which the lessor has renounced,
particularly any compensation for prepayment, plus VAT at the statutory
rate.
(3) The lessor will be obliged to dispose of the leased item as favorably as
possible. 90% of the proceeds of disposal (net of VAT, but after deduction
of the cost of disposal) will be credit to the lessee up to the amount of
the claim for full amortization by the lessor.
8
<PAGE> 9
MILLER LEASING MIETE
GMBH
Louisenstrasse 145-61348 Bad Hornburg Tel.: (++49) 6172-4863-0
Fax (++49)6172-4863-48
- --------------------------------------------------------------------------------
Section 11
Assignment of the lessee's rights - Sub-leasing
(1) Assignment or transfer of any nature or pledging of the rights and claims
to which the lessee is entitled under this contract will not be permitted.
(2) Sub-leasing or cession of the leased item to third parties in any other way
will require the prior written consent of the lessor.
Section 12
Transfer of the lessor's rights and obligations - Refinancing
(1) The lessee consents to transfer of the rights and obligations arising from
this leasing agreement to third parties by the lessor in whole or in part.
This is admissible specifically within the scope of refinancing. The lessee
hereby consents to assignment of the leasing receivables.
(2) The lessee is obligated to make payments only to the specified account, in
accordance with a memorandum on this subject from the lessor or the
refinancing agency.
(3) The lessee will also be obliged to submit all declarations to the
refinancing agency which are normally demanded by the latter for the
purpose of refinancing, taking appropriate account of the lessee's
interests.
Section 13
Miscellaneous - Court of jurisdiction - Place of performance
(1) The lessee will provide the lessor with information and evidence of its
financial position annually, on its own initiative, after audited annual
accounts have been drawn up, and upon request. The lessor will be entitled
to submit the documents received from the lessee prior to conclusion of the
agreement and in subsequent years for the purpose of checking its
creditworthiness, to the respective refinancing agency for inspection.
(2) The lessee must inform the lessor in writing immediately of any transfer of
domicile or registered office and changes in the legal form and liability
of its company.
(3) Amendments or additions to this contract will only be valid if made in
writing.
(4) THE LESSEE CONSENTS TO STORAGE, AMENDMENT OR DELETION OF PERSONAL DATA
PERTAINING TO THE FORMER BY THE LESSOR, TAKING ACCOUNT OF THE PROVISIONS OF
CURRENT DATA PROTECTION LEGISLATION, AND COMMUNICATION THEREOF TO THIRD
PARTIES FOR THE PURPOSE OF REFINANCING.
(5) Insofar as the lessee is a businessman or a statutory body, or constitutes
a special public fund, the court of jurisdiction and place of performance
will be the court with jurisdiction at the registered office of the lessor.
9
<PAGE> 10
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court of Landshut
(Landgericht Landshut) I hereby certify that the foregoing is a true and
complete English translation of a photocopy of the document in the German
language submitted to me.
(Als vom Prasidenten des Landgerichts Landshut Offentlich bestellte und
allgemein beeidigte Ubersetzerin fur die englische Sprache bestatige ich:
Vorstehende englische Ubersetzung der mir in Photokopie vorgelegten, in
deutscher Sprache abgefassten Urkunde ist richtig und vollstandig.)
Landshut, Federal Republic of German,
September 3, 1998
/s/ BIRGIT PLEIER
Birgit Pleier
Sworn translator
<PAGE> 11
MILLER LEASING MIETE
GMBH
Louisenstr. 145 - 61348 Bad Homburg - Tel.: (++49) 6172-4863-0 Fax (++49)
6172-4863-48
- -------------------------------------------------------------------------------
LEASING SYSTEM CONFIRMATION NO. 13 00 00
pertaining to leasing agreement no. 130000 of January 1998
- -------------------------------------------------------------------------------
between and
CYBERNET INTERNET- MILLER LEASING MIETE GMBH
DIENSLEISTUNGEN AG LOUISENSTRASSE 145
STEFAN-GEORGE-RING 19 61348 BAD HOMBURG
81929 MUNICH
as lessee as lessor
- --------------------------------------------------------------------------------
For the leased item described below in
more detail from the manufacturer/ TELEMATION
supplier: NETZWERK AG
Site/delivery address: TO BE ADVISED
Fixed agreed basic term of the lease: 36 MONTHS New system o
Non-binding delivery date: ASAP Second hand
Offer price in DM Section 8(1): -- system o
Order no. Date of initial
Date of calculation: DECEMBER 29, 1997 acquisition
- --------------------------------------------------------------------------------
Model no. Qty. Description Monthly leasing Purchase price as
installment excl. a basis for
maintenance (in calculation of the
DM, net of VAT) leasing installment
(in DM, net of VAT)
- -------------------------------------------------------------------------------
SEE APPENDIX
FOR
CONFIGURATION
- -------------------------------------------------------------------------------
Net amount: 32,269.00 --
- --------------------------------------------------------------------------------
Total for insurance for electronic 211.60 --
equipment (incl. insurance tax):
- --------------------------------------------------------------------------------
Net total: 32,480.60 1,058,002.50
- --------------------------------------------------------------------------------
plus VAT at the statutory rate 4,872.09 158,700.38
(currently 15%):
- --------------------------------------------------------------------------------
Gross total (subject to the 37,352.69 1,216,702.88
stipulation of Section 4 of
the leasing agreement):
- -------------------------------------------------------------------------------
Munich, January 12, 1998 Bad Homburg, January 22, 1998
<<Stamped:>>
Cybernet
Internet-Dienstleistungen AG
Stefan-George-Ring 19
D-81929 Munich
Tel.: (++49)-89-9 93 15-0
Fax : (++49)-89-9 93 15-199
<<illegible signature>> <<illegible signature>>
(Lessee, legally-binding signature (Lessor)
and company stamp)
Version of April 16, 1996
<PAGE> 12
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court of Landshut
(Landgericht Landshut) I hereby certify that the foregoing is a true and
complete English translation of a photocopy of the document in the German
language submitted to me."
(Als vom Prasidenten des Landgerichts Landshut offentlich bestellte und
allegemein beeidigte Ubersetzerin fur die englische Sprache bestatige ich:
Vorstehende englische Ubersetzung der mir in Photokopie vorgelegten, in
deutscher Sprache abgefassten Urkunde ist richtig and vollstandig.)
Landshut, Federal Republic of Germany,
September 3, 1998
/s/ BIRGIT PLEIER
- ---------------------------
Birgit Pleier
Sworn translator
<PAGE> 1
Translation from German
INFO AG
AGREEMENT ON THE USE OF
DATA COMMUNICATION INSTALLATIONS OF INFO AG
Agreement number: 96922
Parts of the Agreement: Individual orders
General terms and conditions of business
Pricing and service agreement
INFO AG
Grasweg 62-66
22303 Hamburg
hereinafter referred to as the operator
and
CYBERNET
Internet-Dienstleistungen AG
Stefan-George-Ring 19
81929 Munich
hereinafter referred to as the
contracting party
are hereby concluding the following Agreement:
<PAGE> 2
Section 1 Purpose of the Agreement
1. The contracting party will be provided the service of data transportation
and related services in a service network at locations with network nodes
of the operator and its cooperation partners.
2. In order to render the service, the operator will be entitled to
temporarily store data of the contracting party in network nodes or at
locations of the contracting party, to transmit or receive them via lines
or by radio there and to analyse them for maintenance purposes. The
quantity of data traffic will be measured, and the results will be stored.
The inventory data regarding the locations connected with the network
provided by the contracting party will be processed and used for the
purpose of rendering the service agreed upon. Data traffic and locations
will be put in relation to each other and will be evaluated.
3. The network of the operator will be operated in rented lines of Deutsche
Telekom AG. Unless contrary regulations have been established in this
agreement and in the enclosed General terms and conditions of business,
the respective general terms and conditions of business and other
provisions of Deutsche Telekom AG shall apply.
4. The extent of the data transportation service depends on the arrangements
made in the Pricing and service agreement.
5. The use of the services by third parties is only permitted after prior
written consent of the operator, except for firms in which the contracting
party holds majority participation.
6. This agreement is an agreement of data processing by order pursuant to
Section 11 of the Federal Data Protection Act. The statutory provisions of
Communications Law in their respectively valid version, in particular the
law on telecommunications systems shall apply as well as the
correspondingly made regulations regarding data protection for enterprises
which render telecommunication services (Enterprises Data Protection
Regulations).
Section 2 Parts of the Agreement
Apart from this agreement itself, all individual orders, the enclosed General
terms and conditions of business and the Pricing and service agreement shall be
parts of this agreement.
Section 3 Term of the Agreement
1. This agreement starts with the provision of the first data connection on
the part of the operator for the contracting party. The duration and the
corresponding period of termination for the operator and for the
contracting party shall be:
duration period of termination
unlimited 1 month before the end of a month
12 months 3 months before the expiry of the agreement
X 36 months 12 months before the expiry of the agreement
60 months 12 months before the expiry of the agreement
2. If no due notice of termination of an agreement with definitely agreed
duration is given, the agreement will be renewed implicitly for another 12
months respectively after the expiry of the agreement.
<PAGE> 3
3. The duration of the agreement shall apply for all connections to the
network independently of the date of provision of the individual connection
to the network. The minimum duration for individual connections to the
network shall be, however, three months, in the case of equipment
especially installed for the customer (such as concentrators) six months.
4. If a definite duration of the agreement has been agreed upon, the
conditions described in the Pricing and service agreement have been
determined for the duration of the agreement.
5. Dates and time limits of service shall only be binding if the operator
expressly confirms so in writing. Time limits of service start on the third
day after the operator received the order.
6. In the case of termination, the agreement shall only expire when the
operation of the last connection to the network has been discontinued.
7. Unless regulated otherwise, the raising of charges starts on the date a
connection is provided.
8. The contracting party is engaged to make the installation of connections
and equipment in its business premises possible. If the provision of a data
connection is delayed due to reasons which are caused by the contracting
party, the operator has the right to unilaterally define the connection as
provided.
Section 4 Termination
1. The termination of individual connections to the network during the
duration of the agreement is not possible. Excluded therefrom are:
a) changes in the location of the contracting party as long as the number of
all connections to the network is not less than the number of connections
indicated in the pricing and service agreement.
b) the discontinuation of locations. In this case, 50% of the basic charges and
50% of the minimum communication charges will be deducted from the
contracting party after termination, and Deutsche Telekom AG will be
charged the cancelled costs of supply lines for the remaining duration.
The charge of the contractual penalty is cancelled if the abandoned
location is replaced by a different, additional location.
c) the operator's change to permanent connections with higher speeds.
Terminations resulting therefrom are even permissible if they result in a
change of the total number of connections indicated in the Pricing and
service agreement.
For the exceptions defined under a) to c), a period of termination of one
month before the end of a month shall be considered agreed upon.
2. The notice of termination has to be served upon the other party by
registered letter.
Section 5 Extraordinary Termination
1. The contracting party has the right of extraordinary termination if the
operator does not or cannot meet its service requirements specified in the
agreement despite an appropriate grace period. In this case, no costs are
incurred for the remaining duration.
2. The operator has the right of extraordinary termination if the contracting
party acts grossly contrarily to the terms of the agreement, in particular
if it is in default with the payment of the charges more than two months.
3. In the case of institution of composition proceedings or bankruptcy
proceedings, the other party respectively has the right of extraordinary
termination.
<PAGE> 4
Section 6 Guarantee
1. The operator guarantees that the data transportation service specified in
the individual orders as well as in the enclosed General terms and
conditions of business has the indicated properties.
The operator engages itself to take any actions required in order to
maintain the use pursuant to the agreement during the duration of the
agreement.
2. The contracting party engages itself to report any troubles with the
installations to the trouble department of the operator immediately in
writing, by telephone or by telex.
The operator does not take over any guarantee for damage that results from
delayed report. Costs which are incurred due to delayed report of the
troubles shall be borne by the contracting party.
3. The operator shall remedy any troubles with the provided installations as
well as problems with the use of the services immediately as far as is
possible under technical and business aspects.
The operator does not take over any guarantee for problems which exceed the
range of responsibilities of the operator (in particular the provision of
lines by Deutsche Telekom AG).
Unforeseeable events such as force majeure, industrial disputes,
authority actions, loss of transfer means or energy, unforeseeable
non-delivery on the part of the previous supplier as well as other
troubles on which the operator does not have any influence shall release
the operator from its obligation to render service in time as long as they
continue. Time limits of service shall be extended by the duration of the
trouble. If the trouble continues for more than four weeks, both parties
may withdraw from the agreement. As far as that goes, the contracting
party does not have any claim for damages.
If the operator fails to fulfill its obligation pursuant to paragraph 1,
1/30 of the fixed monthly charges payable by the contracting party for the
respective month for services which have a defect shall be cancelled for
every calender day on which the due service has not been rendered, to start
after a period of 24 hours after the report of the troubles in which the
defect has continuously existed. Exceeding warranty claims shall be
excluded.
4. The contracting party is engaged to reimburse the operator all
expenditures after it reported troubles unless the trouble provably comes
from the range of responsibilities of the operator. In particular
expenditures for the remedy of troubles from the field of the terminal
equipment of the contracting party or troubles which were caused due to
negligent handling on the part of its employees or third parties ordered
by it have to be reimbursed.
Section 7 Leasing of Equipment
1. The operator will, if applicable, lease one or several pieces of equipment
(modems, concentrators etc.) to the contracting party for the use of the
services of the operator. Said equipment remains the property of the
operator. The contracting party is liable for its due handling during the
time of the lease.
2. The contracting party will, at its own expenses, provide the required
premises and electric energy for the installation, operation and
maintenance of the equipment installed at the contracting party's place.
<PAGE> 5
3. If special environment requirements (climate etc.) are made for equipment,
they shall be established as enclosure of this agreement.
4. The contracting party shall ensure that the leased equipment is only used
according to its purpose and not by unauthorized persons. It shall advise
the operator of eventual theft, loss or access by third parties
immediately so that the operator can arrange for any actions required to
protect its rights as well as for blocking the services, if applicable.
The contracting party shall bear all service charges incurred up to the
discontinuation of the services.
The contracting party shall ensure that, in the case of bankruptcy of the
contracting party, the leased equipment is not included in the bankrupt's
estate.
5. The contracting party engages itself to return any equipment leased to it
to the operator after the services were discontinued.
Section 8 Reservation of Right of Modification
The operator is entitled to unilateral service modifications, for example
in order to realize technical innovations. The operator shall inform the
contracting party of modifications of that kind in time and avoid
disadvantages for the contracting party as far as is technically
possible. The contracting party shall accept necessary installation work
on the premises of the contracting party and shall not consider them a
disadvantage. The contracting party will not be charged any costs of
unilateral service modifications.
Section 9 Liability
1. The operator shall only be liable for damage of the contracting party
which the operator caused grossly negligently or intentionally, with
limitation to the higher of the following two amounts:
DM 50,000.00
or
the value of the last three invoices (not including turnover tax); if less
than three invoices have been made out, this sum shall apply.
2. As far as damage arose for the contracting party due to gross negligence
or intention, the operator shall only be liable for the direct damage.
Liability for indirect damage such as lost profits, missed savings or
damage from third party's claims is expressly excluded. The operator shall
not be liable for any damage which results from the breakdown of the
public telecommunications systems.
Section 10 Freedom from Third Party's Rights
1. The operator guarantees for the area of the Federal Republic of Germany
that the provided service network is free from third party's rights which
may affect the contracting party's use as agreed upon.
2. The contracting party shall inform the operator immediately in writing if
any claims due to the violation of property rights are put forth against
it. The operator will indemnify the contracting party against claims made
by the property right owners to the established liability limit (Section 9
Liability) and will, after prior written consent, reimburse the
contracting party eventual costs of defence. Choosing the respective
defence action is the privilege of the operator.
<PAGE> 6
3. If the use agreed upon is affected by property rights of third parties, the
operator is, to an extent which is tolerable for the contracting party,
entitled to acquire licences according to its choice and at its own
expenses or to change or exchange the service network and/or the data
transportation service.
4. The contracting party may terminate the agreement without notice if the
operator does not succeed in removing impairments, i.e. third party's
rights pursuant to the rules of paragraph 2 and 3 within four weeks after
getting informed.
Exceeding claims due to impossibility or impairment of the agreed use by
property rights of third parties shall be excluded.
Section 11 Data Protection
1. The operator engages itself to observe strict secrecy towards third parties
including other contracting parties regarding all knowledge, documents or
data which resulted from the mutual contractual relationship or may result
therefrom in future and regarding the procedure and results thereof. This
obligation will continue even after the agreement expired.
2. The operator engages itself to observe data secrecy corresponding to
Section 5 of the Federal Data Protection Act and to bind employees of the
operator to data secrecy by contract. Person-related data of the
contracting party will only be used and stored by the operator in order to
carry out the tasks established in this agreement.
3. The operator engages itself to observe the principles of due data
processing and to supervise the compliance therewith. It prepared a
security concept with the required and suitable data protection measures in
order to guarantee the provisions of data protection. In particular it took
the measures required in order to meet the requirements pursuant to the
enclosure of Section 9 of the Federal Data Protection Act. The operator
provides for the compliance with the obligation to register pursuant to
Section 32 of the Federal Data Protection Act and for the appointment of an
expert and reliable Commissioner for Data Protection pursuant to Section 36
of the Federal Data Protection Act.
4. The operator engages itself to process and use the data of the contracting
party only within this agreement and pursuant to the instructions of the
contracting party corresponding to Section 11 of the Federal Data
Protection Act. Any use for other purposes - including the operator's own
purposes - is not permitted. Instructions exceeding this agreement must be
in writing. Instructions made orally by authorized persons of the
contracting party have to be confirmed in writing immediately. If the
operator believes that an instruction of the contracting party violates the
data protection provisions, it shall point this out to the contracting
party. This obligation to point out shall not involve comprehensive legal
examination.
5. The contracting party shall remain responsible for the compliance with the
applicable data protection provisions regarding the processing of its data
transferred in the network.
6. The operator engages itself to tolerate the examination of the compliance
with data protection provisions regarding the data of the contracting party
on its premises by the Commissioner for Data Protection of the contracting
party.
<PAGE> 7
Section 12 Subcontractual Relationships
The contracting party consents to the following:
1. that the data of the contracting party may be transferred beyond Germany
via the European network of the group of the operator in particular cases.
As far as the contracting party expressly wishes for connections with
authorities beyond this network, its data are also transferred via other
networks.
2. that the operator may order the other companies within its group to carry
out network administration for the network of the operator as well as to
establish the quantities of data traffic and process them.
3. that the operator uses other subcontractors for performing its obligations
pursuant to the agreement (installation, maintenance and service), which
subcontractors shall access the data of the contracting party for above
purposes only.
4. that the operator will make data for said subcontractual relationships
accessible pursuant to Section 14 a, par. 1 of the Telecommunications
Systems Law. The operator engages other companies of the group and all
other subcontractors involved to observe the secrecy of telecommunications
pursuant to Section 10, par. 1 of the Telecommunications Systems Law as
well as to comply with the provisions of the Enterprises Data Protection
Regulations.
Section 13 Final Provisions
1. Any modifications and supplements must be in writing and signed by both
parties.
2. If any provisions of this agreement should be or become ineffective, the
effectiveness of the other provisions of the agreement shall not be
affected thereby. An appropriate regulation shall take the place of the
ineffective or unenforceable provision, which regulation comes, as far as
legally permissible, closest to what the parties to the agreement intended.
3. The law of the Federal Republic of Germany shall apply. The place of
jurisdiction shall be Hamburg.
4. The place of performance shall be the location of the network node used by
the respective contracting party.
Hamburg, 29.7.96 Munich, 11.7.96
place, date place, date
sgd.: illegible sgd.: A. Eder
INFO AG CYBERNET Internet-Dienstleistungen AG
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
/s/ Elisabeth Groner
<PAGE> 8
Translation from German
16 July 1998
INFO AG
to the managing board
to the attention of Klaus Olaf Zehle
Grasweg 62-66
22303 Hamburg
Agreement number: 96922, Termination of the Agreement
Dear Mr. Zehle,
Pursuant to the agreement concluded between INFO AG and Cybernet
Internet-Dienstleistungen AG on 29.07.96, Agreement number 96922 (INFO AG),
Cybernet AG hereby gives due notice of termination of above agreement.
In order to be able to carry out the withdrawal from the agreement by common
consent of both parties under technical and business aspects and without
impairments for the respective customers, we are going to ask you for
corresponding meetings the next couple of days.
The Agreement of Use concluded between Cybernet Internet-Dienstleistungen AG
and INFO AG on 19.12.97 shall remain unaffected thereby. The next couple of
weeks, we are going to present you the new technical solution for the services
offered.
Yours faithfully
Cybernet
Internet-Dienstleistungen AG
the Managing Board
sgd.: A. Eder sgd.: A. Giacalone
Andreas Eder Alessandro Giacalone
- --------------------------------------------------------------------------------
In my capacity as a public translator for the English language, duly
commissioned and sworn by the President of the Regional Court I of Munich, I
hereby certify that the foregoing is a true and complete English translation of
the German document submitted to me.
Munich, Federal Republic of Germany
21 August 1998
/s/ ELISABETH GRONER
<PAGE> 1
EXHIBIT 10.16
Dave Morton
To: Dave Morton
Subject: FW: upgrade to 1024
Ebone/contract/008
EBONE Internet access contract
The undersigned, ANDREAS EDER/ALESSANDRO GIACALONE
acting on behalf of CYBERNET AG (the Customer)
address: STEFAN-GEORGE-RING 19-23
81929 MUNCHEN, GERMANY
VAT number: DE 177968676 (for customers within the EU)
phone: +49-89-993-15-164
fax: --199
Administrative contact (name and e-mail):
Technical contact (name and e-mail):
requests a connection to Ebone, with the following specifications:
access capacity: 1.536 mbits
starting date: 27.2.98
preferred EBS for connection: Munich EBS
extra routes required (routes to Ebone customers are always included):
no extra routes
---
Ebone European peers
---
(check one or more) backup to Ebone European peers
---
X US and global routing
---
backup for US and global routing
---
any special requirements: This contract replaces the existing contract for
Ebone access from the date the new service specified above has started.
and agrees to pay the annual sum below to Ebone Inc. for Internet access as
specified above based on the most recent Ebone access cost list:
Access cost: 297K Ecu per year. - 6% = 279.180 KECU.
The Customer is operationally and financially responsible for providing a
connection from the Customer network to the EBS at the required access speed.
Please bill quarterly.
Ebone Inc. will bill the Customer annually, semi-annually or quarterly in
advance, whichever is preferred by the Customer. Ebone reserves the right to
charge interest of 1% per month on any late payments from the due date until
they are actually received by Ebone.
All costs specified are exclusive of VAT and other taxes.
The present agreement is not limited in time. However, the Customer may
1
<PAGE> 2
change the access purchased or withdraw from Ebone by the end of a quarter
provided a six months notice has been given to Ebone. In case the Customer
disconnects from Ebone before the contract is terminated with due notice, then
the Customer shall pay to Ebone on the date of disconnection a sum equivalent to
the access charge for the period until the date where the contract can be
terminated by the Customer with the notice specified above.
Ebone Inc. may terminate the agreement or change the access fee above by three
months notice. In case of a fee increase the Customer has the right to
terminate the agreement in writing up until the date of the price increase, but
if the Customer does not do so, then the agreement continues on unchanged terms
except that the new access fee applies.
The Ebone network is designed to constitute a high quality part of the Internet
with most of the backbone being resilient to allow operations to continue in
the case of single line failure. However, Ebone Inc. has no responsibility
whatsoever as to the Customer's or third parties' use of the Internet. Ebone
Inc. will under no circumstances become liable to pay damages to the Customer
or third parties in regard to direct or indirect losses suffered by the
Customer or third parties due to Ebone Inc.'s non-fulfilment of this contract.
Any dispute or claim arising out of or in connection with this contract, or the
breach, termination or invalidity thereof, shall be settled by arbitration in
accordance with the rules of procedure of the Danish Institute of Arbitration
(Copenhagen Arbitration). The place of the arbitration shall be in Copenhagen.
The language of the arbitration shall be English. The contract shall be
governed by the law of Denmark.
Each party shall appoint one arbitrator and the institute shall appoint a third
arbitrator as chairman of the arbitration tribunal. If a party fails to appoint
an arbitrator within four weeks after having requested or having received
notice of the arbitration, this arbitrator shall be appointed by the Institute.
signed
date 26.2.97
on behalf of the Customer: /s/ ALESSANDRO GIACALONE
------------------------
on behalf of Ebone Inc.: /s/ ANDREAS EDER
------------------------
- -----------------------------------------
- -----------------------------------------
Ebone Inc. access costs for 1998 prices/3.11.1997
- ------------------
The 1998 standard Ebone access costs are calculated in kEcu per year as
12 + 190 bandwidth/1024kbps, including the EBS port charge. The costs for the
most common bandwidths are tabled below.
Customers are responsible for the cost of the access line and whatever local
loops and null-modems that are necessary to reach the EBS at the contracted
access speed. At present, EBSs are located in Amsterdam, Bratislava, Frankfurt,
Geneva, London, Munich, Paris, Stockholm, Vienna and Zurich.
<TABLE>
<CAPTION>
Access 1998 cost
bandwidth/kbps Ecu/year
- -------------- ---------
<S> <C>
64 23875
128 35750
256 59500
</TABLE>
2
<PAGE> 1
Certified translation from the German language
page 1 of 4
AGREEMENT
between
feratel International GmbH A-5452 Pfarrwerfen
- - hereinafter referred to as FERATEL -
and
Cybernet Internet-Dienstleistungen AG, Stefan Georg Ring 19, D-81929 Munich
- - hereinafter referred to as CYBERNET -
1. SERVICES:
1.1. feratel shall install a bi-directional digital radio-relay link from the
Brenner Pass to Munich (town) and place it at the disposal of Cybernet.
The transmission capability shall be 34,368 Kbit/s bi-directionally PDH.
Interface: F 703 HDB3
1.1.1. The line will not be installed redundantly for the time being. The
entire line shall be equipped with emergency power and dispose of a remote
control installation. In case of a possible failure, feratel shall guarantee
the removal of the defect within 36 hours. This shall not apply if a failure is
caused by conditions that cannot be influenced by feratel, such as force
majeure.
In case the line is not installed redundantly, a network availability of 99.40%
shall be guaranteed.
The network availability being based on a network operation of 24 hours on 365
days a year, the downtime that is tolerated will be 54 hours per year.
1.1.2. Cybernet can require a respective upgrading of the line to a redundant
function and feratel shall comply with such request within a reasonable period
of time. In case of a redundant construction of the line, the entire line shall
be double equipped.
In case of a redundant installation of the line, a network availability of
99.95% shall be guaranteed.
The network availability being based on a network operation of 24 hours on 365
days a year, the downtime that is tolerated will be 4.5 hours per year.
1.1.3. feratel shall not be responsible in any case for any failure caused in
Cybernet's sphere of influence, such as failure due to insufficient power
supply on the Munich site.
<PAGE> 2
Certified translation from the German language
page 2 of 4
- --------------------------------------------------------------------------------
1.2 feratel shall place a second 34 Mbit channel between the Ranggerkopfl and
Munich at the disposal of Cybernet for one year.
The transmission capability shall be 34,368 Kbit/s bi-directionally PDH.
Interface: G 703 HDB3
1.2.1. The line will not be installed redundantly. The entire line shall be
equipped with emergency power and dispose of a remote control installation. In
case of a possible failure, feratel shall guarantee the removal of the defect
within 36 hours. This shall not apply if a failure is caused by conditions that
cannot be influenced by feratel, such as force majeure.
A network availability of 99.40% shall be guaranteed.
The network availability being based on a network operation of 24 hours on 365
days a year, the downtime that is tolerated will be 54 hours per year.
1.2.2. feratel shall not be responsible in any case for any failure caused in
Cybernet's sphere of influence, such as failure due to insufficient power
supply on the Munich site.
1.3. feratel shall install a bi-directional digital radio-relay link from
Ranggerkopfl to Innsbruck/Rum and place it at the disposal of Cybernet.
The transmission capability shall be 34,368 Kbit/s bi-directionally PDH.
Interface: G 703 HDB3
1.3.1 As for the rest, the provisions under Items 1.2.1. and 1.2.2. shall be
applicable.
2. MAINTENANCE AND REPAIR:
The maintenance and repair of the system shall be incumbent on feratel.
Cybernet shall permit the personnel of feratel to carry out any maintenance and
repair work that may be necessary on site in Munich.feratel shall grant the
personnel of Cybernet access to the individual radio-relay stations.
3. COSTS:
3.1 For the radio-relay link from the Brenner Pass to Munich described under
Item 1.1., Cybernet shall pay monthly utilization charges to the net amount of
S295,000.00.
3.2 feratel shall place the radio-relay link described under Item 1.2. to
Cybernet's disposal free of charge for the period of one year. After the end of
that one-year period, Cybernet shall pay monthly utilization charges to the net
amount of S147,500.00.
3.3 For the radio-relay link described under Item 1.3., Cybernet shall pay
monthly utilization charges to the net amount of S33,000.00.
<PAGE> 3
Certified translation from the German language
page 3 of 4
3.4 Cybernet shall grant feratel the installation and maintenance of the
necessary appliances on the Munich site free of charge.
3.5 The payments shall be made monthly in advance on the first day of the
respective month free of charges and deductions to an account to be specified by
feratel. The payments shall only commence as from the time the system becomes
operational. There is expressly not agreed a stable value of the demand. 8 month
before the end of the initial three years of the Contract, the contracting
parties shall enter into negotiations on the utilization charges to be paid
after the end of three years.
4. DATE OF THE LINE CONSTRUCTION:
feratel shall commence the construction of the line immediately after the
conclusion of the Contract and shall make every endeavor to ensure that it will
be possible to put the system into operation 6 months after the conclusion of
the Contract at the latest and that all official permits will be present at that
time.
5. CONTRACT PERIOD:
The Agreement is concluded for an indefinite period of time and can be
terminated by either party observing a notice period of six months with effect
from the end of a year. A notice of termination must be sent by registered
letter, the date as postmarked being applicable. In consideration of the high
investment sum that is necessary for the initial line construction, Cybernet
expressly waives its right of termination for a period of three years.
6. OFFICE ROOMS:
In order to perform the purpose of this Contract, feratel shall temporarily let
to Cybernet 50 m(2) of office room in the Bundesstrasse 4, A-6063 Rum/Innsbruck.
The monthly rent is S 150.00 per m(2). If it should be necessary, the
contracting parties will conclude a separate lease contract in that regard.
7. GENERAL PROVISIONS:
Cybernet is not entitled to any claims for damages for whatever reason under
this Agreement - except for cases of gross negligence or intent on the part of
feratel. This, however, does not apply to failures of the systems described
under Item 1. beyond the respectively specified range of network availability.
The amount of a claim for damages shall be limited to the amount of two monthly
charges, unless otherwise provided by imperative provisions of the law.
A claim for reduction shall only be possible to an amount in an exact proportion
of the time of the service not rendered to the monthly charge.
Claims of Cybernet are subject to a one-year limitation period.
Cybernet is entitled to leave the contractual lines also to third parties for
utilization.
<PAGE> 4
Certified translation from the German language
page 4 of 4
All objects deposited by feratel on whatever site, whether movable or immovable
or fixed, shall not pass into the ownership of Cybernet, but shall remain the
exclusive property of feratel.
Any multiplexers that may be installed are not part of this offer and shall be
provided by the customers as required.
The validity of this Contract shall not be affected by a possible invalidity of
individual provisions. An invalid provision shall be replaced by another
permissible provisions that corresponds to the purpose of the cancelled
provision.
Any alterations and additions must be made in writing to become effective; this
shall in particular also apply to the requirement of writing.
This Contract and the related legal relationship are exclusively subject to
Austrian law, subject to the provision that the application of any regulations
referring to other legal systems and the United Nations Convention on Contracts
for the International Sale of Goods of April 11, 1980, are excluded.
Any disputes under this Contract fall within the exclusive jurisdiction of the
materially competent court in Innsbruck.
/signature/ /stamp/:
feratel International GmbH feratel
INTERNATIONAL GMBH
A-5452 Pfarrwerfen
(illegible)
/signature/ /stamp/:
Cybernet Internet-Dienstleistungen AG Internet-Dienstleistungen AG
Stefan-Georg-Ring 19
D-81929 Munich
(illegible)
Fax: + 49 89/9 93 15 - 199
<PAGE> 1
EXHIBIT 21.1 SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary Direct or Indirect Percentage Owned
---------- ------------------ ----------------
<S> <C> <C>
Cybernet Internet
Dienstleistungen AG
Germany Direct 100%
Vianet EDV Dienstleistungs
GmbH
Austria Direct 100%
Eclipse s.p.a.
Italy Indirect 66%
Cybernet Internet
Beteiligungs GmbH
Germany Indirect 100%
Open:Net Internet Solutions
GmbH
Germany Indirect 100%
Artwise GmbH
Germany Indirect 100%
</TABLE>
<PAGE> 1
EXHIBIT 23.2
We consent to the reference to our firm under the caption "Experts" and
to the use of our reports dated May 6, 1998, in the Registration Statement (Form
S-1) and related Prospectus of Cybernet Internet Services International, Inc.
for the registration of 3,500,000 shares of its common stock.
/s/ SCHITAG ERNST & YOUNG AG
----------------------------
Schitag Ernst & Young AG
Munich, Germany
September 16, 1998
<PAGE> 1
EXHIBIT 23.3
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated July 31, 1998, in the Registration Statement (Form
S-1) and related Prospectus of Cybernet Internet Services International, Inc.
for the registration of 3,500,000 shares of its common stock.
ERNST & YOUNG
WIRTSCHAFTSPRUFUNGS-UND
STEUERBERATUNGSGESELLSCHAFT MBH
Vienna, Austria
September 16, 1998
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Andreas Eder, Hubert
Besner, and Robert Fratarcangelo, and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and all documents relating thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing necessary or advisable to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or his substituter substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Power of Attorney has been signed by the following persons in the capacities and
on the dates indicated.
<TABLE>
<S> <C> <C>
September ________, 1998 /s/
---------------------------------------------- Chairman of the
Andreas Eder Board of
Directors, Chief
Executive Officer
September ________, 1998 /s/ Director
----------------------------------------------
Tristan Libischer
September ________, 1998 /s/ Director
----------------------------------------------
Holger Timm
September ________, 1998 /s/ Director
----------------------------------------------
Hubert Besner
September ________, 1998 /s/ Director
----------------------------------------------
G.W. Norman Wareham
September ________, 1998 /s/ Director
----------------------------------------------
Robert Fratarcangelo
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
September ________, 1998 /s/
---------------------------------------------- Principal
Christian Moosmann Accounting and
Financial Officer
</TABLE>
