<PAGE>
As filed with the Securities and Exchange Commission on May 25, 2000
Registration No. 333- .
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
BROKAT Infosystems Aktiengesellschaft
(Exact Name of Registrant as Specified in its Charter)
---------------
Not Applicable
(Translation of Registrant's Name into English)
<TABLE>
<S> <C> <C>
Federal Republic of Germany 7379 Not Applicable
(State or other jurisdiction
of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
<TABLE>
<S> <C>
BROKAT Infosystems AG CT Corporation System
Industriestrabe 3 111 Eighth Avenue
D-70565 Stuttgart New York, N.Y. 10011
Federal Republic of Germany (212) 894-8940
+ 49 711 788-44-0
(Address and telephone number of registrant's (Name, address and telephone number of agent
principal executive offices) for service)
</TABLE>
---------------
Copies to:
<TABLE>
<S> <C>
Lars Bang-Jensen, Esq. Dr. Andreas Wolfle
LeBoeuf, Lamb, Greene & MacRae, L.L.P. Haver & Mailander
125 West 55th Street Lenzhalde 83-85
New York, N.Y. 10019 D70192 Stuttgart
(212) 424-8000 Federal Republic of Germany
+ 49 711 227-44-0
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
---------------
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement of the same
offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<CAPTION>
Proposed
Maximum Proposed Maximum Amount of
Title of Each Class of Amount to Offering Price Aggregate Registration
Securities to be Registered be Registered(1) Per Unit Offering Price(1) Fee
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11 1/2% Senior Notes Due
2010....................... (Euro)125,000,000 100% (Euro)125,000,000 $29,819
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933. The
(Euro)125,000,000 face amount of the Senior Notes has been converted into
U.S. dollars at the rate of (Euro)1.00=$0.9036, the noon buying rate in New
York for cable transfers as certified for customs purposes by the Federal
Reserve Bank of New York on May 22, 2000.
---------------
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 the Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this Prospectus. This +
+Prospectus is not an offer to sell these securities or our solicitation of +
+your offer to buy these securities, nor will we sell them or accept your +
+offer to buy them, in any jurisdiction where that would not be permitted or +
+legal prior to registration or qualification in that jurisdiction. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY 25, 2000
PROSPECTUS
[BROKAT LOGO]
BROKAT Infosystems AG
Offer to Exchange
(Euro)125,000,000
11 1/2% Senior Notes Due 2010
Terms of the Exchange Offer
. We are offering to . We will exchange all
exchange all of your outstanding original
original 11 1/2% notes that are validly
Senior Notes Due 2010 tendered and not
for registered 11 withdrawn prior to the
1/2% Senior Notes Due expiration of the
2010. exchange offer.
. If you decide to . You may withdraw
participate in the tenders of original
exchange offer, the notes at any time
exchange notes will be prior to the
issued to you in the expiration of the
same principal amount exchange offer.
as the original notes.
. We believe that the
. The terms of the exchange of original
exchange notes are notes for exchange
substantially notes will not be a
identical to the taxable exchange for
outstanding original U.S. federal income
notes, except that the tax purposes, but you
exchange notes have should consult your
been registered under tax advisor.
the Securities Act and
transfer restrictions
and registration
rights relating to the
original notes do not
apply to the exchange
notes.
. We will not receive
any proceeds from the
exchange offer.
. We currently intend to
list the exchange
notes on the
Luxembourg Stock
Exchange.
. Any original notes not
exchanged will
continue to have
restrictions on their
transfers.
The exchange offer will expire at 5:00 p.m., London time, on . , 2000,
unless extended.
You should read the "Risk Factors" section beginning on page 13 for a
discussion of risks that you should consider before tendering your original
notes.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
. , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Selected Historical Consolidated
Financial Data....................... 42
Selected Financial Data............... 43
Management's Discussion And Analysis
of Financial Condition And Results of
Operations........................... 46
Business.............................. 56
Management............................ 69
Certain Transactions and
Relationships........................ 74
Principal Shareholders................ 75
Description of the Notes.............. 76
Form of the Notes, Clearance and
Settlement........................... 118
Taxation.............................. 122
Plan of Distribution.................. 126
Legal Matters......................... 127
Experts............................... 127
General Information................... 127
Index to Financial Statements......... F-1
</TABLE>
<TABLE>
<S> <C>
Important Information About This
Prospectus........................... i
Trademarks and Service Marks.......... i
Where You Can Find More Information... ii
Enforceability of Civil Liabilities... ii
Currency And Financial Statement
Presentation......................... iii
Exchange Rate Information............. iv
Prospectus Summary.................... 1
Summary Financial Data................ 11
Risk Factors.......................... 13
Disclosure Regarding Forward Looking
Statements........................... 23
The Exchange Offer.................... 24
The Company........................... 31
Recent Acquisitions And Other
Strategic Initiatives................ 31
Use of Proceeds....................... 33
Capitalization........................ 34
Unaudited Pro Forma Financial Data.... 35
</TABLE>
<PAGE>
IMPORTANT INFORMATION ABOUT THIS PROSPECTUS
General
You should rely only on the information contained in this prospectus. We
have not authorized any other person to provide you with different information.
The information contained in this prospectus is set forth as of the date hereof
and is subject to change, completion or amendment without notice. You should
not assume that the information contained in this prospectus is accurate as of
any date other than the date on the cover page of this prospectus.
The distribution of this prospectus and the offer and sale of the notes may
be restricted by law in certain jurisdictions. Persons into whose possession
this prospectus or any of the notes come must inform themselves about, and
observe, such restrictions. In particular, except for (i) our filing of
registration statement with the SEC on Form F-4 (No. 333- ) under the
Securities Act of 1933 with respect to the exchange notes; (ii) listing of the
original notes on the Luxembourg Stock Exchange; and (iii) our application to
list the exchange notes on the Luxembourg Stock Exchange, we have taken no
action which would permit a public offering of the notes or distribution of
this prospectus or any other offering material in any jurisdiction where action
for that purpose is required. Accordingly, the notes may not be offered or
sold, directly or indirectly, and neither this prospectus nor any other
offering material may be distributed or published in any jurisdiction, except
under circumstances that will result in compliance with any applicable laws and
regulations. Each prospective purchaser of the notes must comply with all
applicable laws and regulations in force in any jurisdiction in which it
purchases, offers or sells the notes or possesses or distributes this
prospectus and must obtain any consent, approval or permission required of it
for the purchase, offer or sale by it of the notes under the laws and
regulations in force in any jurisdiction to which it is subject or in which it
makes such purchases, offers or sales and we shall have no responsibility
therefor.
To the extent that we provide market share estimates in this prospectus,
unless otherwise noted, these estimates have been prepared by our management
based on consultations with our customers and suppliers, as well as on publicly
available information about market size and our competitors. Certain
information with respect to us, our products and our industry is derived from
publicly available reports and other publications of eStats, IDC Corporation,
Datamonitor, Gartner Group, Durlacher Research, Booz Allen & Hamilton,
Forrester Research and Killen & Associates. Although we believe that all of
such sources are reliable, the accuracy and completeness of such information is
not guaranteed and has not been independently verified. We accept
responsibility for having correctly reproduced such information from the above
mentioned sources.
For New Hampshire Residents:
Neither the fact that a registration statement or an application for a
license has been filed under Chapter 421-b of the New Hampshire Uniform
Securities Act with the State of New Hampshire nor the fact that a security is
effectively registered or a person is licensed in the State of New Hampshire
constitutes a finding by the Secretary of State that any document filed under
RSA 421-B is true, complete and not misleading. Neither any such fact nor the
fact that an exemption or exception is available for a security or a
transaction means that the Secretary of State has passed in any way upon the
merits or qualifications of, or recommended or given approval to, any person,
security, or transaction. It is unlawful to make, or cause to be made, to any
prospective purchaser, customer, or client any representation inconsistent with
the provisions of this paragraph.
TRADEMARKS AND SERVICE MARKS
We have registered or applied for registration of Twister, BROKAT, X.PRESSO
Security Package, X.PRESSO (without addendum), X.Agent, X.PAY, X PAY and XPAY
as our word trademarks and the BROKAT logo and esign as our word/device
trademarks in various jurisdictions. All other trademarks, registered
trademarks, service marks and registered service marks used in this prospectus
are the property of their respective owners.
i
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement we filed with the SEC on
Form F-4 (No. 333- ) under the Securities Act with respect to the exchange
notes. As permitted by the rules and regulations of the SEC, this prospectus
omits some of the information, exhibits and undertakings contained in the
registration statement. For further information with respect to us and the
exchange notes, see the registration statement, including its exhibits.
You may read and copy any document we file at the following SEC public
reference rooms:
<TABLE>
<S> <C> <C>
Judiciary Plaza 500 West Madison Street 7 World Trade Center
450 Fifth Street, N.W. 14th Floor Suite 1300
Room 1024 Chicago, Illinois 60661 New York, New York 10048
Washington, D.C. 20549
</TABLE>
Statements contained in this prospectus relating to the contents of any
contract or other document are for informational purposes and should not
substitute for your review of the copy of the contract or document filed as an
exhibit to the registration statement. Any such statements in the prospectus
are qualified in all respects by reference to the corresponding exhibit.
We are not currently required to satisfy the information requirements of the
Exchange Act. Upon the effectiveness of the registration statement, we will
have to satisfy these requirements as they apply to foreign private issuers
and, accordingly, will file all reports and other information required by the
SEC. We also have agreed pursuant to the indenture to file with the SEC and to
provide to the trustee and the holders of the notes quarterly and annual
financial information and related disclosure for as long as the notes are
outstanding. See "Description of the Notes--Reports."
For a period of one year after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to it to
any broker-dealer that requests such documents.
You can obtain, free of charge, copies of this prospectus (and copies of the
documents referred to in this prospectus) from us at Industriestrasse 3, D-70565
Stuttgart, Germany and, as long as the notes are listed on the Luxembourg Stock
Exchange, from Kredietbank S.A. Luxembourgeoise, our listing, paying and
transfer agent in Luxembourg at 43 Boulevard Royal, L-2955 Luxembourg.
ENFORCEABILITY OF CIVIL LIABILITIES
We are a stock corporation organized under the laws of Germany. Most of our
management board and supervisory board members and executive officers reside
outside the United States. All or a substantial portion of our assets and most
of our management board and supervisory board members also are located outside
the United States. As a result, it may not be possible for investors to effect
service of process within the United States upon BROKAT or such persons with
respect to matters arising under the United States federal securities laws or
to enforce against BROKAT or such persons located outside the United States
judgments of United States courts predicated upon the civil liability
provisions of the United States federal securities laws.
We have been advised by our special counsel as to German law, Haver &
Mailander, that there is doubt as to the enforceability in Germany, in original
actions or in actions for enforcement of judgments of United States courts, of
civil liabilities predicated solely upon the federal securities laws of the
United States. In addition, awards of punitive damages in actions brought in
the United States or elsewhere may be unenforceable in Germany.
We have appointed CT Corporation Systems, 111 Eighth Avenue, New York, New
York 10011 as our agent to receive service of process in any action against us
in any state or federal court in the State of New York arising out of this
offering or any purchase or sale of the notes in connection with this offering.
ii
<PAGE>
CURRENCY AND FINANCIAL STATEMENT PRESENTATION
We prepare our consolidated financial statements in Deutsche Marks. In this
prospectus, unless otherwise specified or unless the context otherwise
requires, all references to "Deutsche Marks," "DM" and "Pfennigs" are to the
denominative currency of the Euro used in the Federal Republic of Germany, all
references to "Euro" and "(Euro)" are to the single lawful currency of the
countries participating in the European Economic and Monetary Union (EMU), and
all references to "U.S. dollars," "dollars" and "$" are to the lawful currency
of the United States.
The Federal Reserve Bank of New York provides conversion rates for the Euro
in place of the individual Euro zone currencies, such as the Deutsche Mark.
Deutsche Mark rates can be derived from the Euro rate by using the fixed
conversion rate of DM 1.95583 = (Euro) 1.00, the exchange rate fixed by the
Council of the European Economic and Monetary Union ("EMU Council"). Solely for
your convenience (except where otherwise indicated), we have translated:
. Euro into U.S. dollars at the rate of (Euro) 0.9930 = $1.00, based on
the noon buying rate in The City of New York for cable transfers in
foreign currencies certified by the Federal Reserve Bank of New York for
customs purposes of (Euro) 1 = $1.0070 on December 31, 1999, and
. Deutsche Mark into U.S. dollars at the rate of DM 1.9422 = $1.00, based
on the noon buying rate for Euros on December 31, 1999 and the
conversion rate of DM 1.95583 = (Euro) 1.00 fixed by the EMU Council.
You should not construe these translations as a representation that such
translated amounts actually represent such Deutsche Mark, Euro or U.S. dollar
amounts from which they were translated or that they could be converted into
such Deutsche Mark, Euro or U.S. dollar amounts at the rates indicated or any
other rates. On May 22, 2000, the exchange rate was (Euro) 1.1067 = $1.00,
based on the noon buying rate. You should read "Exchange Rate Information" for
information regarding recent rates of exchange between the U.S. dollar and the
Deutsche Mark and between the U.S. dollar and the Euro.
Financial information in this prospectus has been prepared in accordance
with generally accepted accounting principles in the United States ("U.S.
GAAP"), except for financial information for the fiscal year ended June 30,
1995, which was prepared in accordance with generally accepted accounting
principles in Germany ("German GAAP"), and except for financial information of
ESD Vermogensverwaltungsgesellschaft mbH and MeTechnology AG for the fiscal
years ended December 31, 1997 and 1998, which was prepared in accordance with
German GAAP with reconciliation to U.S. GAAP in accordance with Item 17 of SEC
Form 20-F.
iii
<PAGE>
EXCHANGE RATE INFORMATION
The following tables set forth, for the periods indicated, certain
information concerning the exchange rates based on the noon buying rates for
Deutsche Marks and Euro, expressed in Deutsche Marks and Euro, respectively,
per dollar. We have provided such rates solely for your convenience and you
should not construe these translations as a representation that Deutsche Marks
or Euro amounts actually represent such dollar amounts or that such Deutsche
Marks or Euro amounts could have been, or could be, converted into dollars at
that rate or at any other rate. We did not use such rates in the preparation of
our combined financial statements included elsewhere in this prospectus. The
columns entitled "Average Rate" represent the exchange rates based on the
average noon buying rates for Deutsche Marks and Euro, in each case on the last
business day of each month during the relevant period. As of January 1, 1999,
the exchange rate between the Deutsche Mark and the Euro was fixed at
(Euro) 1.00 = DM 1.95583.
<TABLE>
<CAPTION>
Average Period
Deutsche Mark-Dollar Exchange Rate Rate High Low End Rate
- ---------------------------------- ------- ------ ------ --------
<S> <C> <C> <C> <C>
Year Ended December 31,
1995........................................... 1.4261 1.5612 1.3565 1.4345
1996........................................... 1.5070 1.5655 1.4354 1.5387
1997........................................... 1.7394 1.8810 1.5413 1.7991
1998........................................... 1.7588 1.8542 1.6060 1.6670
<CAPTION>
Average Period
Euro-Dollar Exchange Rate Rate High Low End Rate
- ------------------------- ------- ------ ------ --------
<S> <C> <C> <C> <C>
Year Ended December 31,
1999........................................... 0.9445 0.9930 0.8466 0.9930
Month Ended 2000
January 31..................................... 1.0249 0.9676 1.0249
February 29.................................... 1.0370 0.9940 1.0370
March 31....................................... 1.0499 1.0284 1.0444
April 30....................................... 1.1009 1.0366 1.1002
</TABLE>
iv
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary is not complete and we strongly encourage you to carefully review
this prospectus, including our consolidated financial statements included in
this prospectus and the information set forth in the sections of this
prospectus entitled "Disclosure Regarding Forward Looking Statements" and "Risk
Factors." Unless otherwise noted or the context otherwise requires, the terms
"we", "our", "the Company", "BROKAT", or "our company" refer to BROKAT
Infosystems AG and its subsidiaries. Unless otherwise noted, references to our
business and to pro forma information give effect to our acquisitions in May
1999 of MeTechnology AG and Transaction Software Technologies, Inc.
BROKAT Infosystems AG
We are a leading provider of software for the rapidly expanding e-banking
market and the leading provider of such software to European banks. We design,
develop, market and support e-business software. To date, we have concentrated
on providing e-banking solutions, particularly to banks in Germany and Austria,
and to a lesser extent, other geographic areas such as the United Kingdom, the
United States, the Asia-Pacific region, Switzerland and the Benelux countries.
We intend to further leverage our leading position in the European
e-banking sector to expand our presence in other geographic areas and in other
e-business sectors, with the long-term objective of establishing our core
product as the industry standard platform for the delivery of
e-business services.
Our core product, Twister, is an open architecture software platform that
integrates the information technology systems of a business with a variety of
electronic communications channels. This software enables consumers to interact
with the business over the Internet through a range of secure electronic
communication channels, such as personal computers, mobile telephones, call
centers, personal digital assistants and WebTV, while permitting the business
to offer its products and services regardless of the types of computer systems
in use and regardless of the language in which its software applications are
written.
We also offer industry-specific software application packages, allowing a
business to establish e-front offices through which consumers can access its
products or services. These software packages, in combination with our Twister
platform, provide a business with both customer relationship management and
back office integration functions. In addition, we provide a range of
professional services such as consulting, customization, installation,
training, and maintenance and support in connection with the sales of our
products.
We distribute, implement and support our products worldwide through our
subsidiaries and sales offices as well as through distribution partners, such
as consulting firms and value added resellers, and through joint ventures. We
estimate that, at December 31, 1999, more than 2,000 financial institutions and
more than 2 million end-users worldwide--principally in Germany and Austria--
conducted e-business activities using our products. Our market share of the e-
banking sector is approximately 80-90% in Germany and Austria, and
approximately 40% in the rest of Europe. We believe that the majority of all
banks in Germany offering
e-banking services use our software.
1
<PAGE>
Corporate Structure
- --------
(1) Includes the former operations of Transaction Software Technologies, Inc.
(2) In the process of being merged into its parent company.
(3) Acquisition of 100% is subject to completion of formalities under
applicable law.
(4) Subject to completion of organizational formalities.
Recent Developments
In the last twelve months, we made three strategic acquisitions. We acquired
100% of:
. Transaction Software Technologies, Inc., a software company located in
the United States which specializes in the development and
implementation of cash management systems for banking institutions;
. MeTechnology AG, a German company involved in the development and
implementation of online banking software; and
. Fernbach Financial Software S.A., a Luxembourg company which develops
and markets software products for the processing of transactions of
banks.
We have also formed alliances with strategic partners involved in various
aspects of e-business. We are one of the original ten software companies
selected by a subsidiary of Intel Corporation to optimize our software for use
with their newly-developed 64-bit Intel processor. We were also the first
provider of e-front office software certified by SAP to be compatible with SAP
software, allowing financial institutions using the SAP back office software to
offer e-finance services using our platform.
Market Overview
In recent years, businesses and consumers have been transforming the
Internet into a commercial medium. Businesses are using electronic
communication channels to provide the same products and services as they have
traditionally, but, in many cases, faster, more effectively and less
expensively than using traditional distribution channels, such as branches and
retail stores. In particular, businesses increasingly are using electronic
communication media to offer their products and services by establishing e-
front offices, through which they can make contact with their customers,
identify their needs and offer individualized services.
In spite of the tremendous opportunities that e-business can offer,
businesses nonetheless face challenges in establishing and conducting e-
business operations because such businesses may be using different generations
and types of information technology systems, and their e-business software
applications may be written in different programming languages. The growth of
e-business is stimulating the market for software
2
<PAGE>
that has the capacity to integrate different computer systems into coherent
infrastructures for the electronic delivery of information.
Strategy
Our principal objective is to establish our core product, Twister, as the
standard worldwide software platform for the delivery of e-finance, e-commerce
and other e-services over the Internet through all significant electronic
distribution channels, including personal computers, mobile telephones, call
centers, personal digital assistants and WebTV. To achieve this objective, we
intend to:
. Continue to enhance the functionality of the Twister platform;
. Expand our range of standardized software applications and enhance our
existing software applications based on our Twister platform;
. Expand our presence throughout Europe, North America and the Asia-
Pacific region, through internal growth, joint ventures and strategic
acquisitions;
. Continue to emphasize indirect sales through joint ventures and through
the strengthening and expansion of our network of business partners,
including value added resellers, consultants, system integrators and
solution providers; and
. Leverage our leading market position in the European e-banking services
sector and our technological leadership, in order to position ourselves
to take advantage of the development of other e-business segments and
other aspects of e-business.
3
<PAGE>
The Exchange Offer
<TABLE>
<C> <S>
Notes Offered.................. We are offering (Euro)125,000,000 principal amount of
our 11 1/2% Senior Notes due 2010 in exchange for an
equal aggregate principal amount of our original 11
1/2% Senior Notes due 2010 on a one for one basis. In
this document, we will refer to the notes originally
offered in March 2000 as the "original notes" and to
the notes which we are offering through this prospectus
in exchange for original notes as "exchange notes." All
references in this prospectus to the "notes" will
include the original notes and the exchange notes
unless the context otherwise requires. The exchange
notes have substantially the same terms as the original
notes you hold, except that these exchange notes have
been registered under the Securities Act and will be
freely tradeable.
Registration Rights Agreement.. At the time we sold investors the original notes, we
entered into a registration rights agreement requiring
us to make this exchange offer.
After the exchange offer is complete, you will no
longer be entitled to exchange your original notes for
registered exchange notes. We may in limited
circumstances, be required to file a shelf registration
statement under the Securities Act with respect to your
original notes. We do not currently expect to have to
file a shelf registration statement.
The Exchange Offer............. We are offering to exchange (Euro)1,000 principal
amount of exchange notes for each (Euro)1,000 principal
amount of our outstanding original notes.
In order to be exchanged, your original notes must be
properly tendered and accepted. All original notes that
are validly tendered and not withdrawn will be
exchanged.
Ability to Resell Exchange We believe that the exchange notes issued in this
Notes......................... exchange offer may be offered for resale, resold and
otherwise transferred by you without compliance with
the registration and prospectus delivery provisions of
the Securities Act if:
. the exchange notes issued in the exchange offer are
being acquired in the ordinary course of your
business;
. you are not participating, do not intend to
participate and have no arrangement or understanding
with any person to participate in the distribution
of the exchange notes issued to you in the exchange
offer; and
. you are not an affiliate (as defined under the
Exchange Act)
of ours.
</TABLE>
4
<PAGE>
<TABLE>
<C> <S>
If this belief is inaccurate and you transfer any
exchange notes issued to you in the exchange offer
without delivering a prospectus which meets the
requirements of the Securities Act or without an
exemption from these requirements, you may incur
liability under the Securities Act. We do not assume
any liability if you do and will not indemnify you.
If you are a broker-dealer and wish to exchange the
original notes that you received as a result of market-
making or other trading activities, you must agree to
deliver this prospectus in connection with the sale of
the exchange notes that you receive in this exchange
offer.
Persons Excluded from the
Exchange Offer................ You may not participate in the exchange offer if you
are:
. a holder of the original notes in any jurisdiction
in which the exchange offer or your acceptance is
not legal under the applicable securities or blue
sky laws of that jurisdiction; or
. a holder of the original notes who is an affiliate
(as defined under the Exchange Act) of ours.
Consequence of Failure to
Exchange Your Original Notes.. If you do not exchange your original notes for exchange
notes in the exchange offer, your original notes will
continue to have restrictions on transfer contained on
the legend. In general, you may not offer or sale your
original notes unless there is an exemption from, or
the transaction is not governed by, the Securities Act
and applicable state securities laws. We have no
current plans to register your original notes under the
Securities Act unless we are required to file a shelf
registration statement.
Expiration Date................ The exchange offer expires at 5:00 p.m., London time,
on . 2000, the expiration date, unless we extend the
exchange offer.
Accrued Interest on the
Exchange Notes................ The exchange notes will bear interest from March 28,
2000. Holders of original notes whose original notes
are accepted for exchange will be deemed to have waived
the right to receive any payment of interest on such
original notes that has accrued from March 28, 2000 to
the date of the issuance of the exchange notes.
Consequently, holders who exchange their original notes
for exchange notes will receive the same interest
payment on September 30, 2000 that they would have
received had they not accepted the exchange offer. This
is the first interest payment date for either the
original notes or the exchange notes.
Conditions to the Exchange The exchange offer has customary conditions that may be
Offer......................... waived by us. There is no minimum amount of original
notes that must be tendered to complete the exchange
offer.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
Procedures for Tendering Your
Original Notes................ If you wish to tender your original notes for exchange
in the exchange offer you must send to The Bank of New
York, London Branch, the exchange agent, on or before
5:00 p.m., London time,
on the expiration date of the exchange offer, a
computer generated message transmitted by means of the
Euroclear and Clearstream system as part of a
confirmation of book entry transfer in which you
acknowledge and agree to be bound by the terms of the
letter of transmittal.
If you accept our offer through Euroclear and
Clearstream, you will make the representations
described under "The Exchange Offer--Purpose and
Effect--Representations We Need From You Before You
Participate in the Exchange Offer."
Termination of the Exchange We may terminate the exchange offer under certain
Offer......................... circumstances. Should we fail to consummate the
exchange offer, holders of the original notes will have
rights against us under the registration rights
agreement executed as part of the offering of the
original notes.
Withdrawal Rights.............. You may withdraw the tender of your original notes at
any time prior to 5:00 p.m., London time, on the
expiration date.
U.S. Tax Considerations........ The exchange of your original notes for exchange notes
generally will not result in any income, gain or loss
to you for U.S. federal income tax purposes.
Use of Proceeds................ We will not receive any proceeds from the issuance of
the exchange notes in the exchange offer. We will pay
all expenses incident to the exchange offer.
Exchange Agent................. The Bank of New York, London Branch, is serving as the
exchange agent. Its address, telephone number and
facsimile number are:
</TABLE>
The Bank of New York, London Branch
30 Cannon Street
London EC4M 6XH
United Kingdom
Attention: Emma Wilkes
Reorganization Department
Fax: 44 20 7964 6399
Telephone: 44 20 7893 7235
Please review the information contained under the caption "The Exchange
Offer" for more detailed information concerning the exchange offer.
6
<PAGE>
The Notes
The summary below describes the principal terms of the notes. Many of the
terms and conditions described below are subject to important limitations and
exceptions. The "Description of the Notes" section of this prospectus contains
a more detailed description of the terms and conditions of the notes.
<TABLE>
<S> <C>
Issuer.................. BROKAT Infosystems AG
Notes Offered........... (Euro) 125,000,000 aggregate principal amount of 11
1/2% Senior Notes due 2010.
Maturity................ March 31, 2010.
Interest................ Interest on the notes will accrue from March 28, 2000
and be payable in cash at a rate of 11 1/2% per year
semiannually in arrears on March 31 and September 30 of
each year, commencing September 30, 2000, to holders of
record on the immediately preceding March 15 and
September 15.
Sinking Fund............ None.
Optional Redemption..... We may, at our option, redeem some or all of the notes
at any time on or after March 31, 2005 at the
redemption prices listed under the heading "Description
of the Notes--Optional Redemption," plus accrued and
unpaid interest, if any, to the redemption date.
Optional Redemption
After Public Equity On any one or more occasions prior to March 31, 2003,
Offerings.............. we may, on not less than 30 nor more than 60 days'
notice, at our option use the net cash proceeds of one
or more qualified equity offerings to redeem up to 35%
of the aggregate principal amount of the notes
originally issued at a redemption price in cash of
111.50% of the principal amount of such notes, plus
accrued and unpaid interest and liquidated damages and
additional amounts, if any, on such notes to the
redemption date, as long as:
. we redeem the notes within 60 days of completing the
public equity offering; and
. at least 65% of the aggregate principal amount of
the notes originally issued, excluding notes held by
us or our affiliates and subsidiaries, remains
outstanding immediately after the redemption.
Optional Redemption for
Taxation Reasons....... If deduction or withholding for or on account of taxes
in the Federal Republic of Germany or any jurisdiction
in which we are organized or otherwise resident for tax
purposes or any jurisdiction from or through which
payment is made shall be required on any payments made
by us with respect to the notes, the notes may be
redeemed, at our option, in whole but not in part, at
any time upon not less than 30 nor more than 60 days'
notice at a redemption price equal to the principal
amount of the notes, together with accrued and unpaid
interest and liquidated damages and additional amounts,
if any, to the redemption date.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Ranking... The notes will be our senior unsecured obligations. The
notes will:
. rank equally with all of our existing and future
senior indebtedness; and
. rank senior to all of our existing and future
subordinated indebtedness.
As of December 31, 1999, on a pro forma basis after
giving effect to this offering and the application of
the proceeds of this offering, there would have been:
. no secured indebtedness to which the notes would
have been effectively subordinated;
. no amounts available for additional borrowing under
secured credit facilities to which the notes would
have been effectively subordinated;
. approximately (Euro) 1.8 million of additional
indebtedness ranking equally with the notes; and
. no additional indebtedness ranking junior to the
notes.
Because the notes are unsecured, they will be
effectively subordinated in right of payment to any of
our or our subsidiaries' secured indebtedness to the
extent of the assets serving as security for this
secured indebtedness.
The notes will also be effectively subordinated to all
liabilities of our subsidiaries, including trade
payables of such subsidiaries.
The indenture governing the notes will permit us and
our subsidiaries to incur substantial additional
indebtedness, subject to certain limitations.
Change of If a change of control occurs, we must give holders of
Control.. the notes the opportunity to sell us their notes at a
price of 101% of the principal amount of such notes,
plus accrued and unpaid interest and liquidated damages
and additional amounts, if any, on such notes to the
date of such repurchase.
We might not be able to pay you the required price for
the notes you present to us at the time of a change of
control offer because:
. we might not have enough funds at that time; or
. the terms of our debt or other agreements may
prevent us from making a change of control offer or
payment.
Asset Sale If we engage in asset sales, we generally must either
Proceeds.. invest the net proceeds from such sales in our business
or repay our indebtedness within a period of time, or
make an offer to purchase notes at a price of 100% of
their principal amount, plus accrued and unpaid
interest and liquidated damages and additional amounts,
if any.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Certain Covenants........ The indenture governing the notes contains covenants,
among other things, limiting our ability and the
ability of our subsidiaries to:
. incur or refinance debt;
. pay dividends or make distributions on, or
repurchase, our capital stock;
. make investments, loans or advances;
. create liens on our or our subsidiaries' assets;
. merge, consolidate or sell substantially all of our
assets;
. issue or sell stock of our subsidiaries;
. enter into sale-leaseback transactions; and
. enter into transactions with our affiliates.
These covenants are subject to a number of important
limitations and exceptions.
</TABLE>
<TABLE>
<S> <C>
Trustee, Registrar,
Principal Paying and
Transfer Agent......... The Bank of New York.
Luxembourg Listing,
Paying and Transfer Kredietbank S.A. Luxembourgeoise (so long as the notes
Agent.................. are listed on the Luxembourg Stock Exchange).
Listing................. We listed the original notes and we expect to make an
application to list the exchange notes on the
Luxembourg Stock Exchange.
Security Numbers for the
Original Notes......... ISIN:Regulation S Note XS0109534643
144A Note XS0109534999
Common Code:Regulation S Note 010953464
144A 010953499
Security Numbers for the
Exchange Notes......... ISIN: .
Common Code: .
CUSIP: .
Governing Law........... The notes and the indenture governing the notes will be
governed by the laws of the State of New York. See
"Description of the Notes--Governing Law."
</TABLE>
Investing in the notes involves certain risks. See "Risk Factors" for a
description of some of the risks you should consider before investing in the
notes.
----------------
We are a stock corporation organized under the laws of Germany. Our
headquarters are located at Industriestrasse 3, D-70565 Stuttgart, Germany.
Our telephone number is +49 711 788 44-0. Our Internet address is
www.brokat.com.
9
<PAGE>
Summary Historical and Pro Forma Financial Data
The following table sets forth some of our historical and pro forma
financial data for the periods indicated. The summary historical financial data
set forth below have been derived from our consolidated financial statements.
Our consolidated financial statements for the years ended June 30, 1997, 1998
and 1999 and for the six months ended December 31, 1999 have been audited by
Arthur Andersen Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft
mbH, independent auditors and are included elsewhere in this prospectus.
Through the fiscal year ended June 30, 1999, our fiscal year ended on June 30.
We have since changed our fiscal year to end on December 31. Our results of
operations for the six months ended December 31, 1999 are not necessarily
indicative of results that may be expected for the full year.
The summary unaudited pro forma statements of operations data for the fiscal
year ended June 30, 1999 and for the six months ended December 31, 1999 give
pro forma effect to the acquisitions of MeTechnology AG and Transaction
Software Technologies, Inc. and to the offering of the notes and the
application of the net proceeds of the offering as if they had occurred on July
1, 1998. The summary unaudited pro forma balance sheet data as of December 31,
1999 give pro forma effect to the offering of the notes and the application of
the net proceeds of the offering as if they had occurred on December 31, 1999.
The pro forma adjustments are based on available information and certain
assumptions that we believe are reasonable. The unaudited pro forma data are
not necessarily indicative of our financial position or results of operations
had the transactions occurred on the indicated dates, nor do the unaudited pro
forma data purport to represent our financial position or results of operations
for any future date or period. You should carefully review our consolidated
financial statements included elsewhere in this prospectus and the information
set forth under the captions "Capitalization," "Unaudited Pro Forma Financial
Data," "Selected Historical Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
10
<PAGE>
SUMMARY FINANCIAL DATA
(Deutsche Marks and Dollars in thousands)
<TABLE>
<CAPTION>
Pro Forma for the
Acquisitions and the
Offering
------------------------
Fiscal Year Six
Fiscal Years Ended June 30 Six Months Ended December 31 Ended Months Ended
----------------------------------------- --------------------------------- June 30, December 31,
1997(1) 1998 1999 1999 1998 1999 1999 1999 1999
--------- --------- --------- ----------- ----------- --------- ----------- ----------- ------------
DM DM DM $ DM DM $ DM DM
(audited) (audited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data
Revenue......... 12,101 29,571 62,487 32,173 19,671 51,287 26,407 71,653 51,287
Cost of Sales... (7,971) (15,493) (31,325) (16,129) (10,371) (22,937) (11,810) (36,933) (22,937)
------ ------- ------- ------- ------- ------- ------- -------- -------
Gross profit.... 4,130 14,078 31,162 16,044 9,300 28,350 14,597 34,720 28,350
------ ------- ------- ------- ------- ------- ------- -------- -------
Selling
expenses....... (3,118) (16,636) (38,848) (20,002) (15,535) (27,714) (14,269) (44,670) (27,714)
General and
administrative
expenses....... (1,332) (4,305) (10,639) (5,478) (4,092) (12,643) (6,510) (17,922) (12,643)
Research and
development
expenses....... (1,450) (4,917) (8,733) (4,496) (3,896) (12,769) (6,575) (15,119) (12,769)
Amortization
costs on
goodwill and on
intangible
assets from
acquisitions... -- -- (3,686) (1,898) -- (15,797) (8,134) (31,488) (15,797)
Non-cash charges
associated with
stock option
grants......... -- -- (16,340) (8,413) -- (12,240) (6,302) (16,340) (12,240)
------ ------- ------- ------- ------- ------- ------- -------- -------
Total operating
expenses....... (5,900) (25,858) (78,246) (40,287) (23,523) (81,163) (41,790) (125,539) (81,163)
------ ------- ------- ------- ------- ------- ------- -------- -------
Operating loss.. (1,770) (11,780) (47,084) (24,243) (14,223) (52,813) (27,193) (90,819) (52,813)
------ ------- ------- ------- ------- ------- ------- -------- -------
Interest
income......... 5 150 1,528 787 726 35 18 1,575 35
Interest
expense........ (157) (454) (960) (494) (209) (867) (446) (30,062) (14,644)
Other income,
net............ 198 239 2,565 1,321 1,261 2,298 1,183 2,565 2,298
Loss absorption
of convertible
debt of silent
partners....... -- 3,252 926 476 926 -- -- 926 --
------ ------- ------- ------- ------- ------- ------- -------- -------
Loss before
income taxes
and
extraordinary
items.......... (1,724) (8,593) (43,025) (22,153) (11,519) (51,347) (26,438) (115,815) (65,124)
Income tax
benefit
(expense)...... 10 -- (113) (58) -- (104) (54) (210) (104)
Minority
interest....... -- -- 90 46 -- (26) (13) 90 (26)
------ ------- ------- ------- ------- ------- ------- -------- -------
Loss before
extraordinary
item........... (1,714) (8,593) (43,048) (22,165) (11,519) (51,477) (26,505) (115,935) (65,254)
Extraordinary
loss on early
extinguishment
of debt, net of
taxes.......... -- -- (4,242) (2,184) (4,242) -- -- (4,242) --
------ ------- ------- ------- ------- ------- ------- -------- -------
Net loss........ (1,714) (8,593) (47,290) (24,349) (15,761) (51,477) (26,505) (120,177) (65,254)
====== ======= ======= ======= ======= ======= ======= ======== =======
Other Financial
Data:
EBITDA(2)....... (838) (6,915) (36,799) (18,947) (11,051) (31,649) (16,295)
Adjusted
EBITDA(2)...... (838) (10,167) (21,385) (11,011) (11,977) (19,409) (9,993)
Amortization
costs on
goodwill and on
intangible
assets from
acquisitions
and
depreciation... 734 1,374 6,705 3,452 985 18,892 9,727
Capital
expenditures... 1,748 3,869 10,835 5,579 3,396 4,334 2,231
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Pro
Forma
for
the
Offering
As
of
As of June 30, As of December 31, December
----------------------------------------- --------------------------------- 31,
1997 1998 1999 1999 1998 1999 1999 1999
--------- --------- --------- ----------- ----------- --------- ----------- --------------
DM DM DM $ DM DM $ DM
(audited) (audited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets............ 7,222 19,680 275,070 141,628 94,246 248,685 128,043 444,893
Total long-term debt.... 2,730 10,308 24,356 12,540 6,000 3,850 1,982 246,329
Total liabilities....... 8,208 19,219 56,731 29,210 18,354 78,313 40,322 274,521
Total shareholders'
equity................. (986) 461 217,939 112,212 75,892 169,946 87,502 169,946
</TABLE>
- -------
(1) Our financial statements contained in this prospectus have been prepared to
comply with SEC requirements, as well as U.S. GAAP requirements. To
maintain a consistent presentation, the balance sheet data at June 30, 1997
differ in certain respects from the balance sheet data at such date
included in our published accounts.
(2) We have presented EBITDA and Adjusted EBITDA in order to allow for greater
comparability between periods as well as an indication of our results on an
ongoing basis. We define EBITDA as net loss plus extraordinary losses,
income tax expense, interest expense, and depreciation and amortization,
less interest income and income tax benefit. We define Adjusted EBITDA as
EBITDA plus non-cash charges associated with stock option grants less loss
absorption of convertible debt of silent partners. Because all companies do
not calculate EBITDA or similarly titled financial measures in the same
manner, other companies' disclosures of EBITDA may not be comparable with
EBITDA as used here. EBITDA and Adjusted EBITDA as used here should not be
considered as an alternative to net income or loss (as an indicator of
operating performance) or as an alternative to cash flow (as a measure of
liquidity or ability to service debt obligations) and is not a measure of
performance or financial condition under U.S. GAAP. EBITDA and Adjusted
EBITDA are intended to provide additional information for evaluating the
ability of an entity to meet its obligations. Cash flows in accordance with
U.S. GAAP consist of cash flows from (i) operating, (ii) investing and
(iii) financing activities. Cash flows from operating activities reflect
net income or loss (including charges for interest and income taxes not
reflected in EBITDA as used here), adjusted for (i) all non-cash charges or
credits (including, but not limited to, depreciation and amortization) and
(ii) changes in operating assets and liabilities (not reflected in EBITDA).
EBITDA as used here differs from Consolidated Cash Flow as defined in the
indenture governing the notes. See "Description of the Notes--Definitions."
12
<PAGE>
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to buy our notes.
Risks Related to Our Business
We have experienced net losses and negative cash flows in the last three
fiscal years and may continue to experience net losses and negative cash
flows in the future
We experienced net losses of approximately DM 51.5 million for the six
months ended December 31, 1999 and net losses of approximately DM 47.3
million, approximately DM 8.6 million and approximately DM 1.7 million for the
fiscal years ended June 30, 1999, 1998 and 1997, respectively. Our accumulated
deficit through December 31, 1999 was approximately DM 109.1 million. We have
also experienced negative earnings before interest expense and interest
income, taxes, depreciation and amortization during each of such periods. The
development of new versions and adaptations of our Twister platform, the entry
into new e-business sectors, the increased penetration of the e-finance sector
and the geographic expansion of our business through internal growth or
acquisitions will require a significant amount of cash resources. We expect to
continue to operate at a net loss and experience negative cash flow in the
near term as we continue our development program and expand our business.
Continuing net losses and future cash shortfalls will require additional debt
or equity financing, which may not be available to us on a timely basis, at
acceptable terms, or at all. If we cannot obtain such financing on acceptable
terms, we may not be able to continue our development programs or expand our
business.
The market for our products and services is in its early stage of development
We develop and market software which serves as an interface between
businesses' traditional information processing systems and electronic
distribution channels for the sale of products and services. The market for
our products and services is in its early stages of development and is rapidly
evolving. As is typical for new and rapidly evolving industries, demand and
market acceptance for recently introduced products and services are subject to
a high level of uncertainty, especially where, as is true of us, acquisition
of the product often requires a large capital commitment or other significant
commitment of resources. This uncertainty is compounded by the risks that
consumers and businesses will not adopt e-business commerce and that an
appropriate infrastructure necessary to support increased e-commerce and
communication will fail to develop, in each case, to a sufficient extent and
within an adequate time frame to permit us to succeed.
Adoption of e-business and knowledge management, particularly by those
individuals and businesses that have historically relied upon traditional
means of commerce and communication, will require a broad acceptance of new
and substantially different methods of conducting business and exchanging
information. Moreover, our products and services involve a new approach to the
conduct of e-business and, as a result, intensive marketing and sales efforts
may be necessary to educate prospective customers regarding the uses and
benefits of our products and services. For example, businesses that have
already invested substantial resources in other methods of conducting e-
business may be reluctant or slow to adopt a new approach that may replace,
limit, or compete with their existing systems. Moreover, the security concerns
of existing and potential users of our products and services may inhibit the
growth of e-business generally and the market's acceptance of our products and
services in particular. Accordingly, there can be no assurance that a viable
market for our products and services will emerge or be sustainable.
The success of our products is tied to the success of the Internet
Sales of most of our products and services will depend upon the adoption of
the Internet and the related electronic communication channels as widely used
media for commerce and communication. The Internet and the related electronic
communication channels have experienced, and are expected to continue to
experience,
13
<PAGE>
significant growth in the number of users and amount of traffic. There can be
no assurance that the electronic communication infrastructure will continue to
be able to support the demands placed on it by this continued growth. In
addition, electronic communication channels could lose their viability due to
delays in the development or adoption of new standards and protocols to handle
increased levels of e-business activity or due to increased governmental
regulation. Moreover, because global commerce and online exchange of
information over the Internet through various electronic communication channels
are relatively new and evolving, there can be no assurance that they will prove
to be viable for commercial transactions. Certain issues concerning the
commercial use of the Internet and the related electronic communication
channels (such as, security, reliability, cost, ease of use, accessibility, and
quality of service) and the subsequent outcomes of such issues may negatively
affect their growth or the attractiveness of e-business. If critical issues
concerning the commercial use of the Internet and the related electronic
communication channels are not favorably resolved, if the necessary
infrastructure and complementary products are not developed, or if they do not
become viable for commercial transactions, our business, financial condition
and results of operations will be materially and adversely affected.
We increasingly rely on third party consultants, distributors and customizers
for sales of our products
Historically, we engaged primarily in the direct sales of our products to
banks and other business customers and provided services to these customers to
adapt and customize our products to their existing informational systems and
their specific requirements. We are increasingly emphasizing indirect sales
through third parties, including joint ventures to which we may license our
software, as part of our business strategy to increase sales and market
penetration of our products and to enter into new e-commerce sectors and
geographic regions. For these indirect sales, we rely on system integrators,
value added resellers, consultants and joint ventures that perform or contract
with others for the installation and customization services that a particular
business customer may require. As a result, the proportion of our revenues
derived from license fees has increased and the proportion of our revenue
derived from the provision of services has decreased. To date, we have
relationships with only a limited number of third party distribution partners,
and we intend to further increase our reliance on these partners in the future.
The continued success of this strategy will depend on our ability to enter into
and expand profitable relationships with third parties, including joint
ventures to which we may license our software, who are willing and able to
distribute our products under license and perform or contract for the necessary
services to install and customize our products. Our agreements with these third
parties may not restrict them from distributing products that compete with our
products. If these relationships fail, we will have to devote substantially
more resources to the distribution, sales and marketing, implementation and
support of our products than we would otherwise, and our efforts may not be as
effective as those of our partners.
The markets for our products are highly competitive
The e-business software industry and the markets for our products are
generally highly competitive. We expect that competition in the market for e-
business software will increase from both existing suppliers and new suppliers
entering the market, especially in light of the expansion of e-business
opportunities and the current receptivity of the capital markets to companies
in this industry. When marketing our products, we compete in particular with
providers of software platforms for e-business and providers of software
applications for e-business. Furthermore, potential customers could develop
their own solutions for accessing electronic distribution channels.
Some of our competitors have longer operating histories, and significantly
greater financial, technical, marketing, and other resources than we do and
thus may be able to respond more quickly to new or changing opportunities,
technologies and customer requirements. Also, current and potential competitors
may have greater name recognition and more extensive customer bases that could
be leveraged, thereby gaining market share to our detriment. Such competitors
may be able to undertake more extensive promotional activities, adopt more
aggressive pricing policies, and offer more attractive terms to purchasers than
we can. Moreover, certain of our current and potential competitors may bundle
their products in a manner that may discourage users from purchasing products
offered by us. In addition, current and potential competitors have established
or may
14
<PAGE>
establish cooperative relationships among themselves or with third parties to
enhance their products. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share.
The principal competitive factors affecting the market for our products are
depth and breadth of functionality offered, ease of application development,
time required for application development, reliance on industry standards,
reliability, scalability, maintainability, personalization and other features,
product quality, price, and customer support. We believe that we presently
compete favorably with respect to each of these factors. However, our market
is still evolving, and we cannot assure you that we will be able to compete
successfully with current or future competitors, or that competitive pressures
faced by us will not have a material adverse effect on our business, financial
condition and results of operations.
We may be unable to timely respond to rapid technological advances and
emerging industry standards and practices
The information services, software and communications industries are
characterized by rapid technological change, changes in customer requirements,
frequent new product and service introductions and enhancements, and emerging
industry standards. The introduction of products and services embodying new
technologies and the emergence of new industry standards and practices can
render existing products and services obsolete and unmarketable. Our future
success will depend, in part, on our ability to develop leading technologies,
enhance our existing products and services, develop new products and services
that address the increasingly sophisticated and varied needs of our
prospective customers, and respond to technological advances and emerging
industry standards and practices on a timely and cost-effective basis.
We cannot assure you that we will be successful in effectively using new
technologies, adapting our products to emerging industry standards,
developing, introducing, and marketing product and service enhancements, or
new products and services, or that we will not experience difficulties that
could delay or prevent the successful development, introduction, or marketing
of these products and services, or that our new product and service
enhancements will adequately meet the requirements of the marketplace and
achieve market acceptance. If we are unable, for technical or other reasons,
to develop and introduce new products and services or enhancements of existing
products and services in a timely manner in response to changing market
conditions or customer requirements, or if new products and services do not
achieve market acceptance, our business, financial condition and results of
operations will be materially and adversely affected.
We may be unable to successfully manage any future growth
The rapid growth of our business and sales has created significant demands
on our personnel and on our administrative and financial resources. Our
ability to manage growth will depend in part on our administrative, financial
and operational controls and our continued ability to create the
infrastructure necessary to exploit market opportunities for our products and
services. Our senior management has generally had limited experience in
managing large and rapidly growing business organizations. Our ability to
compete effectively and to profitably grow our business will require us to
continually improve our financial and management controls, reporting systems
and procedures on a timely basis, implement new systems as necessary, and
expand, train and manage our workforce. The failure of our management to
respond effectively to these challenges and to changes in business conditions
could significantly affect our business, results of operations and financial
condition.
During 1999, we implemented a new integrated operational system for
accounting and control functions related to our German operations. We
currently have no such integrated system for operations outside of Germany. If
we are unable to implement such an integrated system for our worldwide
operations on a timely basis, our business, financial condition and results of
operations could be materially and adversely affected.
15
<PAGE>
We may need additional capital in the future
As we continue to develop and expand our business, we may require
significant additional capital to fund our capital expenditures, research and
development and working capital needs, as well as our debt service requirements
and anticipated cash flow deficits. The actual amounts and timing of our future
capital requirements may vary significantly from our estimates. In addition, we
continually reevaluate our business plan in our rapidly changing industry. Our
business plan may change in material respects in the intermediate term. Any
such change could result in unforeseen needs for additional financing. Our
revenues and costs are dependent on factors that are largely beyond our
control, such as changes in technology, increased competition, regulatory
developments, fluctuation in interest or currency exchange rates and various
other factors. Due to the uncertainty of these factors, our actual revenues and
costs may vary significantly from our forecasts. Any such significant variation
will affect our future capital requirements.
Our acquisition strategy involves significant risks
We will continue to explore acquisitions of related businesses as an
important element of our growth strategy as a means of enhancing our existing
products and expanding the geographic and industry scope of our business. In
the last twelve months, we made several strategic acquisitions, including the
acquisition of MeTechnology AG, a German software development company,
Transaction Software Technologies, Inc., or TST, a U.S. provider of electronic
cash management software for banks and their customers, and Fernbach Financial
Software S.A., a Luxembourg company involved in the development and marketing
of software products for the processing of transactions of banks.
Our ability to implement this strategy will depend on our ability to
identify appropriate acquisition targets, to consummate acquisitions and to
integrate the operations, technologies, products and personnel of acquired
businesses (including our recent acquisitions). Our ability to consummate
acquisitions will be limited by our financial resources, including available
cash and borrowing capacity and the market value and liquidity of our shares.
Acquisitions could also divert management attention from our other operations.
We could also lose key employees of acquired businesses. In addition, to the
extent we use available cash resources or borrow money to finance an
acquisition, our ability to make payments on the notes may be reduced.
Furthermore, we could incur substantial expenses following an acquisition,
including expenses of integrating an acquired business.
We expect that competition for appropriate acquisition targets may be
significant. We may compete with other software companies with similar
acquisition strategies, many of which may be larger and have greater financial
and other resources than we have. Competition for acquisition targets in our
industry is based on a number of factors, including price, terms, size and
access to capital, ability to offer cash, stock or other forms of consideration
and other matters. We cannot assure you that we will be able to identify and
acquire suitable companies on acceptable terms.
Our success depends on continued market acceptance of Twister and our ability
to adapt Twister and related products to meet changes in technology and
customer needs
All of our revenue is derived from the sale of products and services derived
from our core product platform, Twister. Our success, therefore, depends on the
continued and growing acceptance of products based on Twister and our
continuing ability to introduce new versions of Twister and to adapt the
Twister platform for changes in computer and communications hardware,
informational system software, channels for electronic access, communication
and distribution, and evolving customer needs. If demand for products based on
Twister does not continue to grow, or pricing or demand is otherwise adversely
affected by competition or technological change, our business, financial
condition and operating results could be materially and adversely affected.
We need to retain the services of certain key employees and other qualified
personnel
Our success depends to a large extent on the efforts and ability of our
management and other key employees. Our ability to retain and attract qualified
management, technical and sales personnel is critical to
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the success of our business. The loss of management or key employees, in
particular in the area of research and development, or our inability to hire
additional qualified personnel as required, could have a detrimental effect on
our business, financial condition and results of operations. There is intense
employment competition among companies in our industry because of a shortage of
qualified personnel. As a result, we could suffer losses of key personnel whom
we may not be able to replace.
We bear the risk of product defects and product liability
Our software products could contain latent defects. Any latent defects could
adversely affect the performance of our software and significantly reduce the
demand for our products, generate negative publicity, result in the loss of
existing orders or a delay in the receipt of new orders, divert development
resources and result in additional warranty and service costs and product
liability claims. Since our products are critical to the functioning of
electronic distribution and sales channels, any failure of our products could
result in substantial financial losses for businesses using our products. In
addition, the introduction of new products or new versions of our existing
products could be delayed upon discovery of defects.
It is possible that contractual conditions limiting our liability will not
be valid in all cases and under all legal systems, and that sufficient
insurance coverage will not be available to us on reasonable terms. Although we
have not been involved in any significant product liability cases, we are
subject to the risk that such claims may be made against us in the future.
Since the commencement of our business, we have taken the year 2000 date
recognition problem of certain computer software and hardware into account with
respect to our software products. We warrant the year 2000 compatibility of our
software to our customers. While we have successfully resolved all Year 2000
software problems to date, we cannot exclude the possibility that claims for
Year 2000 non-compliance may arise in the future.
We need to protect our intellectual property and to invest in research and
development, which requires cash resources
In order to maintain the benefits of our technology, we need to protect our
intellectual property rights, and we also need to invest in research and
development. Our success as an enterprise depends to a large extent on the
protection of intellectual property rights for the software we develop. We
generally do not rely on patents to protect our intellectual property
interests. We seek to protect our intellectual property rights by virtue of
confidentiality covenants with management, employees and third parties as well
as through copyright and trademark protection. However, we cannot guarantee
that we will be able to protect, or to continue to develop, proprietary
information. No assurance can be made that existing measures or intellectual
property laws will be sufficient to prevent the independent development of
similar technologies by competitors. We also cannot assure you that we can
sustain the level of capital expenditure necessary to protect our technological
position.
Others may claim that we infringe their intellectual property
We are subject to the risks of claims alleging infringement of third party
intellectual property rights. These claims could require us to spend
significant sums in litigation, pay damages, divert significant management
resources, cause delays in the marketing and sale of our products, require us
to enter into royalty or licensing arrangements, cause us to discontinue the
use of challenged technology or trademarks or to develop non-infringing
intellectual property.
The risks of such infringement claims may increase in the future in light of
increasing competition and the fact that functions of various products being
offered in the market can overlap. Claims based on alleged or actual
infringement of intellectual property rights could have a significantly
detrimental effect on our business, financial condition and results of
operations. See "Business--Intellectual Property."
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Certain of our operations are, or may become, regulated by different
governmental agencies, which require our products and activities to comply
with their rules and procedures
Currently, access to and commercial transactions on the Internet are subject
to few specific legal regulations. However, as the market matures, regulation
of the access to and the transaction of business on the Internet will likely
increase as a result of rising usage or abuse. The adoption of such regulations
could deter the growth of electronic distribution and sales of products which,
in turn, would have a detrimental effect upon our business.
The Twister application, X.PRESSO security package, is equipped with a 128-
bit encryption technology, to provide secure data transfer in the case of
electronic settlement of financial services via electronic distribution
channels. This encryption technology is important for marketing our products to
businesses offering e-finance and e-commerce services. The export of encryption
technology has been subject to strict export controls, which have been
liberalized in recent years. The export and use of this encryption technology
is not currently subject to either German or European Union prohibitions or
limitations with respect to the geographic markets that are relevant to us.
Under U.S. laws, the export of 128-bit encryption technology from the United
States is prohibited without an export license. Export licenses can be
obtained, however, for software used by financial service companies as end
users to secure their electronic distribution channels. We have received such a
license from the U.S. Department of Commerce, Bureau of Export Administration.
The license expires July 31, 2001. This enables U.S. banks to use the X.PRESSO
Security Package for electronic distribution outside the United States as well.
In addition, on December 2, 1998, the French governmental body SCSSI (Service
Central de la Securite des Systemes d'Information) authorized the so-called
"collective" use of the X.PRESSO security package 1.3 by French financial
institutions. This authorization will expire on November 27, 2003 unless
renewed or extended.
There can be no assurance that Germany, the European Union, the United
States or other jurisdictions will not further restrict distribution of 128-bit
encryption technology. In addition, the U.S. Department of Commerce could
cancel the license issued to us, refuse to extend such license beyond July 31,
2001 or delay granting such an extension. Such actions could have detrimental
effect on the marketing of the X.PRESSO Security Package application and on our
business as a whole. Furthermore, if existing export license requirements in
the United States were rescinded, we could be exposed to additional
competition.
New developments may compromise or breach encryption technology used by us to
protect customer transaction data
A significant barrier to online commerce and communication is the secure
exchange of value and confidential information over public networks. We rely on
encryption and authentication technology, including licensed public key
cryptography technology, to provide the security and authentication necessary
to effect the secure exchange of value and confidential information. We cannot
assure you 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 licensors' or other algorithms used by us to protect customer
transaction data. If any such compromise of our security were to occur, it
could have a material adverse effect on our business, financial condition and
results of operations.
Our results of operations are subject to strong volatility
Our results are and will continue to be subject to strong volatility which
could affect our ability to make payments on the notes as due. A wide range of
factors may precipitate such variations in results. Such factors include the
introduction by us, or our competitors, of new or improved products, the market
acceptance of our products, the timing of revenue recognition related to large
orders, accounting rules applicable to the recognition of license revenues,
changes in operational costs, pricing, third party distributor relationships,
and the introduction or rescission of governmental regulation.
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Our geographic market expansion may not be successful
In recent years, we have sought to expand the geographic scope of our
markets outside Germany and Europe, particularly in Asia and the United States.
We have made, and expect to continue to make, significant expenditures to
expand our geographic presence, including the acquisition of related businesses
in other geographic regions. Our ability to be successful in this strategy has
been, and will continue to be, affected by differences in the technological and
competitive environment in these markets and in the market acceptance of our
products. For example, we do not expect that electronic retail banking
applications on which we have based our growth in parts of Europe will play a
significant role in our expansion efforts in the United States. Thus, our
success in the United States and certain markets outside Europe will depend on
the development and marketing of new applications for our software. In
addition, geographic expansion generally increases the risks of doing business
on an international basis. These risks can include variance in protection of
intellectual property, trade barriers, differing payment cycles, differing tax
consequences, variance in local laws and regulations, compliance with a range
of laws, regulations and treaties and the need to staff and manage foreign
operations.
Changes in foreign exchange rates or interest rates could have adverse effects
on our operations
During the six months ended December 31, 1999, approximately 38% of our
revenues came from sources outside the Euro currency zone, and we expect that
the percentage of our revenues derived from these countries may increase in the
future. Changes in foreign currency exchange rates can affect our ability to
sell our products at satisfactory prices and can reduce the value of our assets
and revenues and increase our liabilities and costs. Even if foreign currency
expenses substantially offset revenues in the same currency, our profits may be
diminished when reported in Deutsche Marks or Euro. To date, we have not sought
to reduce our exposure to exchange rate risks through hedging transactions. We
may therefore suffer losses solely as a result of exchange rate fluctuations.
Our Management Board owns a substantial portion of our outstanding shares and
is likely to have a controlling influence over all business decisions
As of May 22, 2000, the members of our Management Board as a group
beneficially owned approximately 32.7% of our outstanding common shares, and
are likely to continue to have a controlling influence over all material
decisions concerning our business as well as over the future composition of the
Supervisory Board, and, hence, indirectly the Management Board as well. They
may be in a position to prevent any change to the composition of our Management
Board and may take actions or enter into transactions that involve risks to
holders of the notes.
We rely on the financial services sector for a significant proportion of our
revenues
Historically, we have relied on the sale of our products and services to
European banks for most of our revenue. During the six months ended December
31, 1999 and fiscal year ended June 30, 1999, revenues related to our European
e-banking products and services accounted for 80% of our revenues. Although we
are seeking to expand into other e-business sectors, there can be no assurance
that we will be able to duplicate our success with e-banking products in these
other sectors. Moreover, if we were unable successfully to expand into other
sectors, we would be adversely affected by a decline in demand for our e-
banking products and services or greater competition in providing such products
and services.
Our results depend on a small number of large orders
We derive a significant portion of our revenues from a small number of
relatively large orders. In the six months ended December 31, 1999,
approximately 11.3% of total revenue was derived from one customer. In the year
ended June 30, 1999, approximately 20.3% of total revenue was derived from one
customer and
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approximately 18.5% from another customer. Our operating results for a
particular period could be materially and adversely affected if we are unable
to complete one or more substantial license sales or implementations planned
for that period.
Risks Related to the Notes
We may not be able to meet our payment obligations on the notes
Our ability to meet our obligations under the notes will depend on the
future performance of our business and whether we can successfully implement
our business strategy. Our future performance will be subject to the further
development of the market for our products and services, competition, general
economic conditions and legal, regulatory and technological factors. As a
result of these or other conditions within or beyond our control, we may not
generate sufficient cash flow to enable us to meet our payment obligations
under the notes or other indebtedness or be able to fund our other cash
requirements. If we are unable to generate sufficient cash flow to meet these
requirements, we will have to explore other alternatives such as delaying or
reducing capital expenditures, including research and development, refinancing
our debt, or the sale of additional equity. Our ability to obtain additional
financing or equity capital will depend on our financial condition, our
prospects and market conditions at such future time. We cannot predict whether
any debt financing or equity issuance could be accomplished on a timely basis,
on satisfactory terms, or at all, or whether such actions would enable us to
continue to satisfy our obligations under the notes.
Our substantial amount of debt could impair our financial health and prevent
us from fulfilling our obligations under the notes
Following the completion of the offering, the notes will constitute
substantially all of our indebtedness. However, the indenture governing the
notes permits us to incur additional indebtedness. Thus, particularly as we
pursue our expansion strategy, the total amount of our indebtedness may
increase substantially.
Our large amount of debt and our obligations to make principal and interest
payments on the notes, and any additional indebtedness, could have important
consequences for you as a holder of the notes, including the following:
. we will need to use a large portion of the proceeds from the sale of the
notes, in addition to our cash flows, to meet our payment obligations on
the notes and other indebtedness;
. we may have more debt than our competitors, which could put us at a
competitive disadvantage;
. it may reduce our flexibility in responding to changing economic and
industry conditions;
. it may make us more vulnerable to general economic and industry specific
downturns; and
. it may limit our ability to pursue business opportunities, to borrow
more money for operations, research and development, or capital
expenditures in the future, to compete effectively in our industry and
to implement our business strategy.
Our operations and those of our subsidiaries will be restricted by the terms
of the notes
The indenture and existing credit agreements to which we are, or may in the
future become, a party limit our flexibility in operating our businesses. In
particular, these agreements limit our ability and the ability of our
subsidiaries in certain circumstances to:
. borrow more money or incur further debt;
. pay dividends;
. make certain investments or buy assets;
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. use our assets as security for borrowing money or in other transactions;
. enter into certain transactions with our affiliates;
. sell our assets;
. merge or consolidate with other companies; and
. engage in joint ventures.
Furthermore, one of our strategies is to consider and take advantage of
selected opportunities to grow by acquiring other businesses whose operations
or product lines fit well with our existing business or whose geographic
location or market position enables us to expand into new markets. Our ability
to implement this expansion strategy may depend on our ability to finance such
expansion within the constraints of our various debt covenants, as well as on
the availability of suitable businesses at suitable valuations.
We depend in part on our subsidiaries to repay our debts
A portion of our cash flow and consequently our ability to service our debt
obligations is partially dependent upon our ability to receive cash from our
subsidiaries. Our subsidiaries are separate legal entities. They have no legal
obligation to pay amounts due under the notes or to make funds available for
such payments. Applicable law of the jurisdictions in which our subsidiaries
are organized or contractual or other obligations to which they are subject may
limit their ability to pay dividends to us or make payments to us on inter-
company loans. In general, our subsidiaries are restricted from paying
dividends unless they meet the statutory financial requirements in their
respective jurisdictions of organization. Although the indenture governing the
notes limits the ability of our subsidiaries to enter into consensual
restrictions on their ability to pay dividends and make other payments, such
limitations are subject to a number of significant qualifications and
exceptions. Our subsidiaries may agree to such restrictions in certain
circumstances. Furthermore, the payment of interest and principal on inter-
company loans and advances as well as the payment of dividends by our
subsidiaries may be subject to taxes.
Creditors of our subsidiaries will have a prior claim to the assets of such
subsidiaries before claims of holders of our indebtedness, including the notes.
As such, the notes will effectively be subordinated to the existing and future
indebtedness and other liabilities, including trade payables, of our
subsidiaries, except to the extent that we are recognized as a creditor as a
result of loans we may have made to a subsidiary. If we are recognized as a
creditor, our claim may still be subordinated with respect to any assets of our
subsidiary pledged to secure other indebtedness and any indebtedness of such
subsidiary senior to that held by us. In the event of a bankruptcy of any of
our subsidiaries, inter-company loans from us to our subsidiary may not be
respected under applicable bankruptcy law. The indenture governing the notes
limits the ability of our subsidiaries to incur indebtedness and to issue
preferred stock, but there are certain significant qualifications and
exceptions to this limitation. Accordingly, our subsidiaries may continue to
incur a substantial amount of indebtedness and issue preferred stock under
certain circumstances.
Our secured debt will have priority over the notes
The notes will be unsecured. The indenture governing the notes permits us to
incur additional indebtedness. We and our subsidiaries will in some cases be
permitted to secure this indebtedness. Our subsidiaries' obligations under any
senior secured credit facility may be secured by pledges or charges over the
stock of our subsidiaries and by security interests over all or substantially
all of the assets and undertakings of our subsidiaries. Certain of our
subsidiaries may guarantee our obligations under a senior secured credit
facility. If we default on the notes or enter bankruptcy, liquidation or
reorganization, then all of our assets that secure our debts will be used to
satisfy the obligations under senior secured debt before we could make any
payment on the notes. Therefore, there may only be limited assets available to
make payments on the notes in the event of an acceleration of the notes. If
there is not enough collateral to satisfy the obligations of the senior secured
debt, the remaining amounts of senior secured debt would share equally with
unsecured senior debtholders, such as the notes.
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A liquid active trading market for the notes may not develop
No liquid active trading market currently exists for the notes and none may
develop following this offering. We listed the original notes and expect to
make an application to list the exchange notes on the Luxembourg Stock
Exchange, but we do not intend to apply to list the notes on any U.S.
securities exchange or market. The Initial Purchaser has informed us that it
intends to make a market in the notes. However, it is not obligated to do so,
and may discontinue such market making at any time without notice. We cannot
assure you that an active trading market for the notes will develop, or if one
does develop, that it will be sustained.
Historically, the market for non-investment grade debt has been highly
volatile in terms of price. It is possible that the market for the notes will
also be volatile. This volatility in price may affect your ability to resell
your notes or the timing of their sale.
We may not be able to obtain enough funds to repurchase your notes if a change
of control takes place
A "change of control" is an event (defined in the indenture) which includes
certain changes in ownership of or voting rights with respect to us. If a
change of control occurs, you may require us to purchase any or all of your
notes at 101% of their principal amount together with accrued and unpaid
interest. We may not have enough money, however, to purchase your notes upon a
change of control and also may not be able to raise the money to do so.
Restrictions on a change of control contained in the indenture may make it more
difficult for others to obtain control of our company.
The change of control provisions may not protect you in a transaction in
which we incur a large amount of debt, including a reorganization,
restructuring, merger or other similar transaction, because that kind of
transaction may not involve any shift in voting power or beneficial ownership,
or may not involve a shift large enough to trigger a change of control.
If you do not exchange your original notes for exchange notes, your ability to
transfer old notes will be restricted
We will only issue exchange notes in exchange for original notes that are
timely and properly tendered. Therefore, you should allow sufficient time to
ensure timely delivery of the original notes and you should carefully follow
the instructions on how to tender your original notes. Neither we nor the
exchange agent are required to tell you of any defects or irregularities with
respect to your tender of the original notes. We relied on exemptions from the
registration requirements of the Securities Act and applicable state securities
laws when we sold the original notes. We do not currently intend to register
the original notes under the Securities Act. If you do not exchange your
original notes in the exchange offer, you may only sell your original notes if:
.they are registered under the Securities Act and applicable state
securities laws,
. they are offered or sold under an exemption from the Securities Act and
applicable state securities laws, or
. they are offered or sold in a transaction not subject to the Securities
Act and applicable state securities laws.
In addition, after the exchange offer is consummated, if you continue to
hold any original notes, you may have trouble selling them because there will
be fewer original notes outstanding. If a large number of original notes are
not tendered or are tendered improperly, the limited amount of exchange notes
that would be issued and outstanding after we complete the exchange offer could
lower the market price of such exchange notes.
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DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This prospectus contains statements that constitute forward looking
statements within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. Forward looking statements are statements other than historical
information or statements of current condition. These statements appear in a
number of places in this prospectus and include statements concerning our
intent, belief or current expectations regarding future events, for example,
the following:
. increased competition from other companies in the industry;
. changing technology and future demand for our products;
. changes in our business strategy or development plans;
. our ability to attract and retain qualified personnel;
. worldwide economic and business conditions;
. regulatory, legislative and judicial developments;
. our financing plans; and
. trends affecting our financial condition or results of operations.
Forward looking statements are not guarantees of future performance and
involve risks and uncertainties, and actual results may differ materially from
those in the forward looking statements as a result of various factors. The
information in the "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business" sections identifies some of the important factors that could cause
results to differ from those in the forward looking statements. Although our
management believes that the expectations as reflected by the forward looking
statements are reasonable based on information currently available to them, we
cannot assure you that the expectations will prove to have been correct.
Accordingly, you should not place undue reliance on these forward looking
statements. In any event, these statements speak only as of the date of this
prospectus, and we undertake no obligation to revise or update any of them to
reflect events or circumstances after the date of this prospectus, including,
without limitation, changes in our business strategy or planned capital
expenditures, or to reflect new information or the occurrence of unanticipated
events.
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THE EXCHANGE OFFER
General
On March 28, 2000 we sold the original notes to WestLB Pammure Limited. In
connection with the sale of the original notes, we entered into a registration
rights agreement. This agreement requires us to file a registration statement
under the Securities Act offering to exchange the exchange notes for your
original notes. Accordingly, we are offering you the opportunity to exchange
your original notes for exchange notes. The exchange notes will be registered
and issued without a restrictive legend. This means that, unlike your original
notes which contain restrictions on their transfer, the exchange notes may be
reoffered and resold freely by you to any potential buyer without further
registration under the Securities Act. This is beneficial to you since in order
to sell your original notes you must find an available exemption from the
registration requirements of the Securities Act.
The registration rights agreement further provides that we must cause the
registration statement to be declared effective on or before August 25, 2000,
or we will owe liquidated damages to the holders of original notes. Except as
discussed below, upon the completion of the exchange offer we will have no
further obligations to register your original notes.
We want to advise you that a copy of the registration rights agreement has
been filed as an exhibit to the registration statement and you are encouraged
to read the entire text of the agreement. We expressly qualify all of our
discussions of the registration rights agreement by the terms of the agreement
itself.
Before you can participate in the exchange offer, you need to represent to
us that:
. the exchange notes you acquire in an exchange offer are being obtained
in the ordinary course of business;
. neither you nor any person you are acting for is engaging in or intends
to engage in a distribution of the exchange notes;
. neither you nor any person you are acting for has an arrangement or
understanding with any person to participate in the distribution of the
exchange notes;
. neither you nor any person you are acting for is our "affiliate," as
defined under Rule 405 of the Securities Act; and
. if you or any other person you are acting for is a broker-dealer, and
you receive exchange notes for your own account in exchange for your
original notes which were acquired as a result of market-making
activities or other trading activities, you will deliver a prospectus in
connection with any resale of such exchange notes.
In accordance with the registration rights agreement, we are also required
to file a registration statement for a continuous offering in accordance with
Rule 415 of the Securities Act to register your original notes if:
. the exchange offer is not permitted under applicable law;
. the exchange offer is not completed by October 24, 2000;
. you notify us timely that any of the reasons included in the
registration rights agreements exist for us to do so following the
exchange offer; or
. in the event that we are obligated to file a "shelf" registration
statement, we will be required to keep such shelf registration statement
effective for up to two years from the date of effectiveness. Other than
as described above, you will not have the right to participate in the
shelf registration or require that we register your original notes under
the Securities Act.
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If you participate in any exchange offer, you will be able to freely sell
or transfer your exchange notes if:
. the exchange notes issued in the exchange offer are being acquired in
the ordinary course of business;
. you are not participating, do not intend to participate and have no
arrangement or understanding with any person to participate in the
distribution of the exchange notes issued to you in the exchange offer;
and
. you are not an affiliate of ours.
We believe that the exchange notes issued to you in this exchange offer may
be offered for resale, sold and otherwise transferred by you, without
compliance with the registration and prospectus delivery provisions of the
Securities Act, only if you make the representations that we discuss above.
Our belief is based upon existing interpretations by the SEC staff
contained in several "no-action" letters to third-parties unrelated to us. If
you tender your original notes in the exchange offer for the purpose of
participating in a distribution of exchange notes you cannot rely on these
interpretations by the SEC staff and you must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction. Each broker-dealer that receives exchange notes
for its own account in exchange for its original notes, whether the original
notes were acquired by that broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such exchange notes.
You may suffer adverse consequences if you fail to exchange your original
notes. Following the completion of the exchange offer, except as set forth
above and in the registration rights agreement, you will not have any further
registration rights and your original notes will continue to be subject to
certain restrictions on transfer. Accordingly, if you do not participate in
the exchange offer, your ability to sell your original notes could be
adversely affected.
Terms of the Exchange Offer
We will accept any validly tendered original notes which are not withdrawn
prior to 5:00 p.m., London time, on the expiration date. We will issue
(Euro)1,000 principal amount of exchange notes in exchange for each
(Euro)1,000 principal amount of your original notes tendered. You may tender
some or all of your original notes in the exchange offer.
The form and terms of the exchange notes will be substantially the same as
the form and terms of your original notes except that the exchange notes have
been registered under the Securities Act and will not bear a legend
restricting their transfer. The exchange notes will be issued under, and
entitled to the benefits of the same indenture governing your original notes.
This prospectus, together with the letter of transmittal you received with
this prospectus, is being sent to you and to others who have beneficial
interests in the original notes. There is no fixed record date for determining
the registered holders of original notes entitled to participate in the
exchange offer. We intend to conduct the exchange offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of
the SEC. The exchange offer is not conditioned upon any minimum amount of
original notes. As a holder of the original notes you do not have any
appraisal or dissenters' rights in connection with the exchange offer.
We shall be deemed to have accepted for exchange properly tendered original
notes when we have given oral or written notice thereof to the exchange agent
and complied with the applicable provisions of the registration rights
agreement. We expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any original notes upon the occurrence
of any of the conditions specified below under "Conditions to the Exchange
Offer."
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You will not be required to pay brokerage commissions, fees, or transfer
taxes in the exchange of your original notes. We will pay all charges and
expenses in connection with the exchange offer.
Expiration Date; Extensions; Amendments
The exchange offer will expire at 5:00 p.m., London time, on ., 2000 unless
we extend the exchange offer, in which case the exchange offer shall terminate
at 5:00 p.m., London time, on the last day of the extension. In any event, the
exchange offer will be held open for at least 30 days. In order to extend the
exchange offer, we will inform the exchange agent by oral or written notice and
will mail to the registered holders of the original notes an announcement
thereof, in each case before 9:00 a.m. London time on the next business day
after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
. to delay accepting your original notes;
. to extend the exchange offer;
. to terminate the exchange offer, if any of the conditions shall not have
been satisfied; or
. to amend the terms of the exchange offer in any manner.
If we delay, extend, terminate or amend the exchange offer, we will give an
oral or written notice to the exchange agent. We will also promptly notify the
registered holders of the original notes. If we determine changes to the
exchange offer to be material, then we will promptly disclose such changes by
means of a prospectus supplement to be distributed to registered holders of the
original notes. If such a situation should occur, we would also extend the
exchange offer.
Interest on the Exchange Notes
Interest on the exchange notes will be payable semiannually in arrears on
March 31 and September 30 of each year, commencing on September 30, 2000.
Procedures for Tendering Your Original Notes
Tenders of original notes may be made only in book-entry form. Before
tendering your original notes in the exchange offer, you should read this
prospectus and the relevant accompanying letter of transmittal and you must
comply with the procedures established by Euroclear and/or Clearstream, as the
case may be, prior to 5:00 p.m., London time, on the expiration date. In
addition, the exchange agent must receive a timely confirmation of any book-
entry transfer of original notes into the exchange agent's account at Euroclear
and/or Clearstream prior to 5:00 p.m., London time, on the expiration date.
Any tender that you do not withdraw before 5:00 p.m., London time, on the
expiration date will constitute an agreement between you and us, in accordance
with the terms and conditions set forth in this prospectus and in the letter of
transmittal, including the representations and warranties set forth in the
letter of transmittal.
If you are a beneficial owner whose original notes are held on your behalf
in the name of a broker, dealer, commercial bank, trust company, or other
nominee, and you wish to tender, you should contact that holder promptly,
instructing it to tender on your behalf.
In all cases, we will issue exchange notes only after the exchange agent
receives, prior to 5:00 p.m., London time, on the expiration date, confirmation
from Euroclear and/or Clearstream that original notes have been tendered in
accordance with the procedures established by Euroclear and/or Clearstream. In
order to make this book-entry confirmation, you must acknowledge your receipt
of the letter of transmittal and agree to be bound by its terms. If we do not
accept any tendered original notes for any reason or if you submit original
26
<PAGE>
notes for a greater principal amount than you desire to exchange, the
unaccepted or non-exchanged original notes will be returned without expense to
you, pursuant to the book-entry transfer procedures, and will be credited to
the appropriate account with Euroclear and/or Clearstream as promptly as
practicable.
Participants in Euroclear and/or Cedelbank must send an electronic
instruction to Euroclear and/or Clearstream, as applicable, in accordance with
their procedures established to tender original notes, in place of sending a
signed, hard copy of the letter of transmittal. The electronic instruction
transmitted by Euroclear and/or Clearstream to the exchange agent must contain
a computer generated message, by which you acknowledge your receipt of the
letter of transmittal and agree to be bound by it.
Conditions to the Exchange Offer
All questions as to the validity, form, eligibility (including time of
receipt), acceptance, and withdrawal of tendered original notes will be
determined by us in our sole discretion, and our determination will be final
and binding. We reserve the absolute right to reject any and all original notes
not properly tendered or any original notes the acceptance of which would be
unlawful in the opinion of our counsel. We also reserve the right to waive any
defects, irregularities, or conditions of tender as to particular original
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in a letter of transmittal, will be final and
binding on all parties. Any defects or irregularities in connection with
tenders of original notes must be cured within such time as we shall determine,
unless waived by us. Although we intend to notify you of defects or
irregularities with respect to tenders of original notes we, or the exchange
agent or any other person shall not incur any liability for failure to give
such notification. Tenders of original notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any
original notes received by the exchange agent that are not properly tendered
and as to which the defects or irregularities have not been cured or waived
will be returned by the exchange agent, as soon as practicable following the
expiration date to you.
We reserve the right in our sole discretion to purchase or make offers for
any original notes that remain outstanding after the expiration date or to
terminate the exchange offer and to the extent permitted by applicable law,
purchase original notes in the open market in privately negotiated
transactions, or otherwise. The terms of any such purchases or offers could
differ from the terms of this exchange offer.
These conditions are for our sole benefit and may be asserted by us at any
time or for any reason or may be waived by us in whole or in part at any time
in our sole discretion. The failure by us to exercise any of our rights shall
not be a waiver of our rights.
We will not accept for exchange any original notes tendered, and we will not
issue any exchange notes in exchange for any original notes, if at such time
any stop order shall be threatened or in effect with respect to the
registration statement or the qualification of the indenture relating to the
exchange notes under the Trust Indenture Act. We are required to use best
efforts to obtain the withdrawal of any stop order at the earliest possible
time.
If we do not accept your tendered original notes or if you submit original
notes for a greater aggregate principal amount than you desire to exchange,
then the unaccepted or unexchanged original notes will be returned without
expense to you.
Withdrawal Rights
You may withdraw your tender of original notes at any time prior to 5:00
p.m., London time, on the expiration date.
For a withdrawal of tendered original notes to be effective, an electronic
transmission containing notice of withdrawal must be received by the exchange
agent prior to 5:00 p.m., London time, on the expiration date.
27
<PAGE>
Any such notice of withdrawal must:
. specify your name; and
. identify the original notes to be withdrawn and principal amount of such
original notes.
All questions as to the validity, form, and eligibility (including time of
receipt) of such notices will be determined by us and our determination shall
be final and binding on all parties. Any original notes withdrawn will be
considered not to have been validly tendered for the purposes of the exchange
offer. Any original notes which have been tendered for exchange but which are
not exchanged for any reason will be returned to you as soon as practicable
after withdrawal, rejection of tender, or termination of the exchange offer
relating to such original notes. Properly withdrawn original notes may be
retendered by following one of the procedures described in "Procedures for
Tendering Your Original Notes" at any time prior to 5:00 p.m., London time, on
the expiration date.
Exchange Agent
We have appointed The Bank of New York as the exchange agent for the
exchange offer. Questions, requests for assistance and requests for additional
copies of the prospectus or a letter of transmittal should be directed to the
exchange agent addressed as follows:
The Bank of New York, London Branch
30 Cannon Street
London EC4M 6XH
United Kingdom
Attn: Emma Wilkes
Reorganization Department
Fax: 44 20 7964 6399
Telephone: 44 20 7893 7235
Luxembourg Paying Agent and Notices Required by the Luxembourg Stock Exchange
The exchange of original notes for exchange notes pursuant to the exchange
offer, and any related transactions, may be effected through the paying agent
in Luxembourg. All documentation with respect to the exchange offer will be
available at the office of the paying agent in Luxembourg. So long as the notes
are listed on the Luxembourg Stock Exchange and the rules of such stock
exchange shall require, prior to the commencement of the exchange offer, notice
of the exchange offer will be given to the Luxembourg Stock Exchange and will
be published in a newspaper having a general circulation in Luxembourg (which
is expected to be the Luxembourg Wort). Such notice will, among other things,
provide details of the conditions to, and the commencement and expected
completion dates of, the exchange offer. So long as the notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall require,
notice of the results of the exchange offer will be given to the Luxembourg
Stock Exchange and will be published in a newspaper having a general
circulation in Luxembourg (which is expected to be the Luxembourg Wort), in
each case, as promptly as practicable following the completion of the exchange
offer.
Fees and Expenses
We will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. The principal solicitation is being made by
mail. However, additional solicitations may be made in person or by telephone
by our officers and employees
We will pay the expenses incurred in connection with the exchange offer,
including the fees and expenses incurred by the exchange agent.
28
<PAGE>
Transfer Taxes
Noteholders who tender their original notes for exchange will not be
obligated to pay any transfer taxes. If, however,
. a tendering noteholder instructs us to register exchange notes in the
name of any person other than the registered holder of the original
notes tendered, or
. a tendering noteholder requests that original notes to tendered or not
accepted in this exchange offer be returned to a person other than the
registered holder of the original notes, or
. a transfer tax is imposed for any reason other than the exchange of
original notes in connection with this exchange offer,
then the amount of any such transfer taxes, whether imposed on the registered
noteholder or any other persons, will be payable by the tendering noteholder.
Failure to Exchange Your Original Notes
Your participation in the exchange offer is voluntary. You are urged to
consult your financial and tax advisors in making your own decisions on what
actions to take and should read the "Taxation" section of this prospectus.
. If you do not exchange your original notes, you may resell them only to
a person whom you reasonably believe is a qualified institutional buyer
(as defined in Rule 144A under the Securities Act) in a transaction
meeting the requirements of Rule 144A;
. in a transaction meeting the requirements of Rule 144 under the
Securities Act;
. in accordance with another exemption from the registration requirements
of the Securities Act (and base upon an opinion of your counsel if we so
request);
. to us; or
. under an effective registration statement.
In each case, you must comply with any applicable securities laws of any
state of the U.S. or any other applicable jurisdiction. Under certain
circumstances, we are required to file a shelf registration statement. We do
not currently expect to have to file a shelf registration statement.
Payment of Liquidated Damages upon Registration Default
We will be required to pay liquidated damages on the original notes if:
. the exchange offer registration statement is not filed with the SEC on
or before May 28, 2000;
. the exchange offer registration statement is not declared effective on
or before August 25, 2000;
. the shelf registration statement, if any, is not filed with the SEC on
or before December 22, 2000;
. the shelf registration statement, if any, is not declared effective on
or before March 23, 2001;
. the exchange offer is not completed within 30 days after the exchange
offer registration statement is declared effective; or
. the exchange offer registration statement or the shelf registration
statement is declared effective but then ceases to be effective or fail
to be usable for its intended purpose without being succeeded
immediately by a post-effective amendment to such registration statement
that cures such failure and that is itself declared effective
immediately.
29
<PAGE>
Each of these events is a registration default. In the case of a
registration default, we will be required to pay liquidated damages at a rate
of 0.25% per annum for the first 90-day period immediately following the
occurrence of such registration default. The amount of liquidated damages shall
increase by an additional 0.25% per annum with respect to each subsequent 90-
day period until all registration defaults have been cured, up to a maximum
amount of liquidated damages of 2.0% per annum. Once the registration default
is cured, the liquidated damages will cease to accrue.
30
<PAGE>
THE COMPANY
Our company, BROKAT Infosystems AG, was originally established as BROKAT
Informationssysteme GmbH on September 17, 1994. We have become a leading
provider of software for the rapidly expanding e-banking market and the leading
provider of such software to European banks. We design, develop, market and
support e-business software. To date, we have concentrated on providing e-
banking solutions, particularly to banks in Germany and Austria, and to a
lesser extent, other geographic areas such as the United Kingdom, the United
States, the Asia-Pacific region, Switzerland and the Benelux countries. Our
core product, Twister, is an open architecture software platform that
integrates the information technology systems of a business with a variety of
electronic communications channels. We also offer industry-specific software
application packages, allowing a business to establish e-front offices through
which consumers can access its products or services. In addition, we provide a
range of professional services such as consulting, customization, installation,
training, and maintenance and support in connection with the sales of our
products.
Pursuant to a shareholder resolution of April 1, 1998, we changed our name
to BROKAT Infosystems and converted our corporate form from a limited liability
company (Gesellschaft mit beschrankter Haftung, or "GmbH") to a stock
corporation (Aktiengesellschaft, or "AG"). The change was filed with the
commercial register in Stuttgart on July 3, 1998.
On September 17, 1998, we completed an initial public offering of our common
shares in Germany and listed our shares on the Neuer Markt segment of the
Frankfurt stock exchange under the symbol "BRJ." We raised net proceeds of
approximately DM 83.0 million in our initial public offering.
Our principal executive office is located at Industriestrasse 3, D-70565
Stuttgart, Germany, and our telephone number is +49-711-78844-0.
RECENT ACQUISITIONS AND OTHER STRATEGIC INITIATIVES
On May 9, 1999, we acquired Transaction Software Technologies, Inc., for DM
34.9 million in cash. TST has been active in the development and implementation
of cash management systems for banking institutions in the United States. The
TST acquisition provides us with a corporate cash management software
application marketable in the United States and thus enhanced our presence in
the U.S. market.
On May 21, 1999, we acquired MeTechnology AG, a German company involved in
the development and implementation of online banking software. Consideration
for this acquisition consisted of 2,332,374 post-split shares of our common
stock having a value of DM 159.7 million on the date of acquisition. Through
the acquisition of MeTechnology, we acquired technology and research personnel
complementary to our existing business, which will allow us to widen the range
of our products and enhance our existing products.
On December 20, 1999, we acquired 25.1% of the outstanding capital stock of
Fernbach Financial Software S.A., a Luxembourg company, for a capital
contribution of DM 4.0 million in cash. In February 2000, we acquired (subject
to the completion of formalities under applicable law) the remaining 74.9% of
Fernbach's outstanding capital stock, effective as of January 1, 2000, for
182,838 post-split shares of our common stock to be issued out of a capital
increase against the contribution in kind of the Fernbach shares. Fernbach
companies develop and market software products for the processing of
transactions of banks. Through this acquisition, we gained the expertise and
specialized e-finance software that will allow us to enhance our standardized
software packages offered to brokerage firms and banks.
31
<PAGE>
As part of our marketing strategy, we have also acquired minority interests
in Bremen Online Services Entwicklungs-und Betriebsgesellschaft mbH & Co. KG
and LexLinkLine AG, German companies providing e-services.
We work closely with several strategic partners that are involved in various
aspects of e-business. We are one of the original ten software companies
worldwide selected by a subsidiary of Intel Corporation as a preferred business
partner to optimize our software for use with the newly developed generation of
64-bit Intel processors. In addition, we founded a consortium to develop a
uniform application interface as a mobile digital signature standard to
facilitate confirmations of e-business transactions via mobile telephones. The
consortium includes mobile telephone manufacturers and network operators,
software vendors and smart card manufacturers. We were the first provider of e-
front office software certified by SAP for compatibility with SAP software,
allowing financial institutions using the SAP back office software to offer e-
finance services using our platform.
32
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the offering of the exchange
notes. In consideration for issuing the exchange notes as described in this
prospectus, we will receive in exchange original notes in like principal
amount, the terms of which are identical in all material respects to those of
the exchange notes. The original notes surrendered in exchange for the exchange
notes will be retired and cancelled and cannot be reissued.
We applied the net proceeds from the sale of the original notes of
approximately (Euro) 120.5 million (DM 235.7 million) in part to repay
substantially all of our outstanding debt. We repaid the following debt
obligations with the proceeds of the offering of the original notes:
. DM 38.4 million under a DM 60.0 million overdraft bank credit facility,
which accrues interest at 6.0% per annum;
. DM 3.8 million under a DM 5.0 million bank credit facility, which
accrues interest at 4.0% per annum;
. DM 2,000 under a DM 5.0 million bank credit facility, which accrues
interest at 6.0% per annum;
. DM 2.0 million under a DM 2.0 million bank line of credit, which accrues
interest at 7.0% per annum and entitles the lender to participate in a
portion of our net profits up to 3.0% of the stated value of the
facility, subject to the consent of the lender and a prepayment premium
of 1.0% of the prepayment amount;
. three loans aggregating DM 4.0 million from Technologie-Beteiligungs-
Gesellschaft mbH, which accrue interest at 6.0% per annum and entitle
the lender to participate in a portion of our net profits equal to 8.0%
per annum, as well as to receive an aggregate payment of up to 32.5% of
the value of the loans on the repayment date less any net profits paid
to such lender during the term of the loans, if justified in the
lender's judgment based on the overall financial situation of our
company; and
. approximately (Euro) 370,000 of secured indebtedness owed to a bank by
Fernbach Financial Software S.A. under a credit facility.
We plan to use the balance of the proceeds from the offering of the notes
for working capital requirements and other general corporate purposes, which
may include acquisitions of related businesses. Pending utilization of the
balance of the proceeds, we have invested such proceeds in short-term
investment grade securities and money market instruments.
33
<PAGE>
CAPITALIZATION
Our authorized share capital consists of 42,658,412 shares of common stock,
of which 26,848,773 shares were issued and outstanding as of December 31, 1999.
Shares issued and outstanding have an equivalent par value of DM 1.96 ((Euro)
1.00).
The following table sets forth as of December 31, 1999 our actual
capitalization and such capitalization as adjusted for the sale of the notes
and the application of the net proceeds from this offering. [There has been no
material change in our capitalization or short-term debt since December 31,
1999 except that our short-term debt increased to approximately DM 57.0 million
as of March 20, 2000. In connection with the acquisition of Fernbach Financial
Software S.A., following December 31, 1999 we acquired approximately
(Euro) 740,000 of secured indebtedness, half of which will be repaid at the end
of March 2000, and the balance will be repaid in June 2000.] This table should
be read together with the "Unaudited Pro Forma Financial Data," "Selected
Financial Data," Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements included
elsewhere in this prospectus.
<TABLE>
<CAPTION>
At December 31, 1999
----------------------------------------------------------
Actual As Adjusted for Offering
--------------------------- -----------------------------
DM (Euro) U.S.$(1) DM (Euro) U.S.$(1)
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents............ 6,963 3,560 3,585 194,371 99,380 100,078
======== ======= ======= ======== ======= =======
Short-term debt(2)...... 47,936 24,509 24,681 1,665(3) 851 857
-------- ------- ------- -------- ------- -------
Long-term debt:
Long-term
indebtedness......... 3,850 1,968 1,982 1,850(4) 946 953
Notes hereby offered.. -- -- -- 244,479 125,000 125,877
-------- ------- ------- -------- ------- -------
3,850 1,968 1,982 246,329 125,946 126,830
-------- ------- ------- -------- ------- -------
Shareholders' equity:
Common Stock.......... 52,512 26,849 27,037 52,512 26,849 27,037
Additional paid-in
capital(5)........... 343,260 175,506 176,738 343,260 175,506 176,738
Accumulated deficit... (109,064) (55,764) (56,155) (109,064) (55,764) (56,155)
Deferred
compensation(5)...... (113,376) (57,968) (58,375) (113,376) (57,968) (58,375)
Accumulated other
comprehensive loss... (3,386) (1,731) (1,743) (3,386) (1,731) (1,743)
-------- ------- ------- -------- ------- -------
Total shareholders'
equity................. 169,946 86,892 87,502 169,946 86,892 87,502
-------- ------- ------- -------- ------- -------
Total capitalization
and short-term debt.. 221,732 113,369 114,165 417,940 213,689 215,189
======== ======= ======= ======== ======= =======
</TABLE>
- --------
Notes:
(1) Solely for your convenience, we have translated Deutsche Marks into U.S.
dollars at the rate of DM 1.9422 = $1.00 based on the noon buying rate for
Euros on December 31, 1999 and the conversion rate of DM 1.95583 =
(Euro) 1.00 fixed by the EMU Council.
(2) Includes current portion of long-term debt.
(3) Represents amounts due in May 2000 to the former shareholders of TST for a
portion of the purchase price of TST.
(4) Of this amount, DM 1,529,000 represents the discounted present value of
amounts potentially due in May 2001 to the former shareholders of TST as
contingent payments relating to the acquisition of TST. The balance of
DM 321,000 represents the final installment of the purchase price for the
investment in Bremen Online Services.
(5) In connection with the grant of stock options to certain of our employees
we were required by accounting principles to record deferred compensation
representing the difference between the intrinsic value of the options
based on the current value of our stock at the period-end and the exercise
price of the options. Such amount is reserved in the deferred compensation
account and additional paid-in capital is credited with a corresponding
amount. It is amortized ratably over the vesting period of the applicable
options.
34
<PAGE>
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated statement of operations for
the fiscal year ended June 30, 1999 gives pro forma effect to the acquisitions
of MeTechnology AG and Transaction Software Technologies, Inc. and the offering
of the notes and the application of the net proceeds of the offering as if they
had occurred on July 1, 1998. The following unaudited pro forma consolidated
statement of operations for the six months ended December 31, 1999 gives pro
forma effect to the offering of the notes and the application of the net
proceeds of the offering as if they had occurred on July 1, 1998. Significant
intercompany accounts and transactions that were reflected previously in the
historical financial statements prior to the acquisitions have been eliminated.
The unaudited pro forma consolidated balance sheet as of December 31, 1999
gives pro forma effect to the offering of the notes and the application of the
net proceeds of the offering as if they had occurred on December 31, 1999.
The unaudited pro forma consolidated financial data are derived from our
historical consolidated financial statements and the historical consolidated
financial statements of MeTechnology and TST, which are included elsewhere in
this prospectus. Because our fiscal year historically differed from those of
both MeTechnology and TST, financial data presented for MeTechnology and TST
reflect adjustments to present financial information for periods comparable to
ours. These adjustments are quantified in the tables following the pro forma
consolidated statements of operations. Amounts are given in thousands of
Deutsche Marks unless otherwise specified.
The pro forma adjustments are described in the accompanying notes to the
consolidated financial statements and are based upon available information and
upon assumptions that we deemed reasonable. You should read the unaudited pro
forma financial data in conjunction with the financial statements (including
the notes to the consolidated financial statements) appearing elsewhere in this
prospectus.
We have provided the unaudited pro forma financial data for informational
purposes only and you should not consider such data indicative of actual
results that we would have achieved had such transactions been consummated on
the date or for the periods indicated. We do not purport to indicate the
balance sheet data or results of operations as of any future date or for any
future period.
35
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro Forma
Brokat Adjustments Notes Pro Forma
-------- ----------- ----- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............... 6,963 187,408 (1) 194,371
Accounts receivable (less allowance for
doubtful accounts of DM 1,575 at
December 31, 1999)..................... 36,187 0 36,187
Cost and estimated earnings in excess of
billings on uncompleted contracts...... 1,965 0 1,965
Advances on purchase commitments........ 3,000 0 3,000
Prepaid expenses and other current
assets................................. 6,795 0 6,795
-------- ------- --------
Total current assets.................... 54,910 187,408 242,318
-------- ------- --------
Computer equipment...................... 12,813 0 12,813
Furniture and fixtures.................. 5,296 0 5,296
Less: accumulated amortization.......... (8,607) 0 (8,607)
-------- ------- --------
9,502 0 9,502
-------- ------- --------
Goodwill................................ 188,887 0 188,887
Other intangible assets................. 8,448 0 8,448
Less: accumulated amortization.......... (20,547) 0 (20,547)
-------- ------- --------
176,788 0 176,788
-------- ------- --------
Investments in associated companies..... 4,139 0 4,139
Other long-term investments............. 1,013 0 1,013
Deferred note issuance costs............ 0 8,800 (1) 8,800
Deferred income taxes................... 2,333 0 2,333
-------- ------- --------
Total assets............................ 248,685 196,208 444,893
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt to banks................ 42,271 (42,271) (1) 0
Other short-term debt................... 5,665 (4,000) (1) 1,665
Accounts payable, trade................. 5,043 0 5,043
Payroll-related accruals................ 5,296 0 5,296
Tax-related accruals.................... 2,150 0 2,150
Billings in excess of cost and estimated
earnings on uncompleted contracts...... 1,818 0 1,818
Other accrued expenses and current
liabilities............................ 6,264 0 6,264
Deferred income......................... 3,579 0 3,579
Deferred income taxes................... 2,377 0 2,377
-------- ------- --------
Total current liabilities............... 74,463 (46,271) 28,192
-------- ------- --------
Long-term debt to banks................. 2,000 (2,000) (1) 0
Senior Notes............................ 0 244,479 (1) 244,479
Other long-term debt.................... 1,850 0 1,850
-------- ------- --------
Total liabilities....................... 78,313 196,208 274,521
-------- ------- --------
Minority interest....................... 426 0 426
-------- ------- --------
Shareholder' equity:
Common Stock............................ 52,512 0 52,512
Additional paid-in capital.............. 343,260 0 343,260
Accumulated deficit..................... (109,064) 0 (109,064)
Deferred compensation................... (113,376) 0 (113,376)
Accumulated other comprehensive loss.... (3,386) 0 (3,386)
-------- ------- --------
Total shareholders' equity.............. 169,946 0 169,946
-------- ------- --------
Total liabilities and shareholders'
equity................................. 248,685 196,208 444,893
======== ======= ========
</TABLE>
The Notes to Unaudited Pro Forma Financial Data are an integral part of this
consolidated pro forma balance sheet.
36
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
JUNE 30, 1999
<TABLE>
<CAPTION>
Brokat MeTechnology TST
---------- ------------ ------------
Year ended July 1, 1998 July 1, 1998
June 30, thru May 21, thru May 9, Pro Forma Pro Forma
1999 1999 1999 Adjustments Notes Combined
---------- ------------ ------------ ----------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenue................. 62,487 4,544 8,375 (3,753) (2) 71,653
Cost of Sales (exclusive
of DM 6,794 of non-cash
charges from stock
option grants by Brokat
in the year ended June
30, 1999).............. (31,325) (2,619) (2,989) 0 (36,933)
---------- ------- ------ ------- ----------
Gross profit............ 31,162 1,925 5,386 (3,753) 34,720
---------- ------- ------ ------- ----------
Selling expenses
(exclusive of DM 6,070
of non-cash charges
from stock option
grants by Brokat in the
year ended June 30,
1999).................. (38,848) (4,960) (862) 0 (44,670)
General and
administrative expenses
(exclusive of DM 1,580
of non-cash charges
from stock option
grants by Brokat in the
year ended June 30,
1999).................. (10,639) (5,833) (1,450) 0 (17,922)
Research and development
expenses (exclusive of
DM 1,896 of non-cash
charges from stock
option grants by Brokat
in the year ended June
30, 1999).............. (8,733) (3,180) (3,206) 0 (15,119)
Amortization of goodwill
and other intangible
assets from
acquisitions (3,686) 0 0 (27,802) (3) (31,488)
Non-cash charges
associated with stock
option grants.......... (16,340) 0 0 0 (16,340)
---------- ------- ------ ------- ----------
Total operating
expenses............... (78,246) (13,973) (5,518) (27,802) (125,539)
---------- ------- ------ ------- ----------
Operating loss.......... (47,084) (12,048) (132) (31,555) (90,819)
---------- ------- ------ ------- ----------
Interest income......... 1,528 0 47 0 1,575
Interest expense........ (960) (390) (133) (28,579) (4) (30,062)
Other income, net....... 2,565 0 0 0 2,565
Loss absorption of
convertible debt of
silent partners........ 926 0 0 0 926
---------- ------- ------ ------- ----------
Loss before income taxes
and minority
interests.............. (43,025) (12,438) (218) (60,134) (115,815)
---------- ------- ------ ------- ----------
Income tax expense...... (113) (17) (80) 0 (210)
Minority interest....... 90 0 0 0 90
---------- ------- ------ ------- ----------
Net loss before
extraordinary item..... (43,048) (12,455) (298) (60,134) (115,935)
Extraordinary loss on
early extinguishment of
debt................... (4,242) 0 0 0 (4,242)
---------- ------- ------ ------- ----------
Net loss................ (47,290) (12,455) (298) (60,134) (120,177)
========== ======= ====== ======= ==========
Basic and diluted loss
per share:
Loss before
extraordinary items.... (2.18) (5.31)
Extraordinary loss...... (0.22) (0.19)
---------- ----------
Net loss................ (2.40) (5.50)
========== ==========
Weighted average number
of common shares
outstanding............ 19,694,650 21,847,409
</TABLE>
The Notes to Unaudited Pro Forma Data are an integral part of this consolidated
pro forma statement of operations.
37
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Pro Forma Pro Forma
The Company Adjustments Notes Combined
----------- ----------- ----- ----------
DM DM DM
<S> <C> <C> <C> <C>
Revenue............................ 51,287 0 51,287
Cost of Sales (exclusive of DM
4,298 of non-cash charges from
stock option grants in the figures
of Brokat in the six months ended
December 31, 1999.)............... (22,937) 0 (22,937)
---------- ------- ----------
Gross profit....................... 28,350 0 28,350
---------- ------- ----------
Selling expenses (exclusive of DM
3,524 of non-cash charges from
stock option grants in the figures
of Brokat in the six months ended
December 31, 1999.)............... (27,714) 0 (27,714)
General and administrative expenses
(exclusive of DM 1,552 of non-cash
charges from stock option grants
in the figures of Brokat in the
six months ended December 31,
1999.)............................ (12,643) 0 (12,643)
Research and development expenses
(exclusive of DM 2,866 of non-cash
charges from stock option grants
in the figures of Brokat in the
six months ended December 31,
1999.)............................ (12,769) 0 (12,769)
Non-cash charges associated with
stock option grants............... (12,240) 0 (12,240)
---------- ------- ----------
Total operating expenses........... (81,163) 0 (81,163)
---------- ----------
Operating loss..................... (52,813) 0 (52,813)
---------- ------- ----------
Interest income.................... 35 0 35
Interest expense................... (867) (13,777) (5) (14,644)
Other income, net.................. 2,298 0 2,298
---------- ------- ----------
Loss before income taxes and
minority interests................ (51,347) (13,777) (65,124)
---------- ------- ----------
Income tax expense................. (104) 0 (104)
Minority interest.................. (26) 0 (26)
---------- ------- ----------
Net loss........................... (51,477) (13,777) (65,254)
========== ======= ==========
Basic and diluted loss per share... (1.92) (2.43)
========== ==========
Weighted average number of common
shares outstanding................ 26,848,773 26,848,773
</TABLE>
Amortization of goodwill and other
intangible assets from
acquisitions...................... (15,797) 0 (15,797)
The Notes to Unaudited Pro Forma Data are an integral part of this consolidated
pro forma statement of operations.
38
<PAGE>
The unaudited statement of operations of MeTechnology for the period July 1,
1998 to May 21, 1999 is as follows:
<TABLE>
<CAPTION>
MeTechnology
---------------------------------------------------------------
January 1, 1998 (Less) (Add)
thru January 1, 1998 January 1, 1999 July 1, 1998 July 1, 1998
December 31, thru thru thru Reconciliation thru
1998 June 30, 1998 May 21,1999 May 21, 1999 German GAAP May 21, 1999
German GAAP German GAAP German GAAP German GAAP to US GAAP US GAAP
--------------- --------------- --------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue................. 4,870 2,922 1,400 3,348 1,196 4,544
Cost of sales........... (1,874) (625) (1,223) (2,472) (147) (2,619)
------ ------ ------ ------- ----- -------
Gross profit (loss)..... 2,996 2,297 177 876 1,049 1,925
------ ------ ------ ------- ----- -------
Selling expenses........ (3,514) (1,171) (2,617) (4,960) 0 (4,960)
General and
administrative
expenses............... (4,100) (1,367) (3,100) (5,833) 0 (5,833)
Research and development
expenses............... (2,226) (742) (1,696) (3,180) 0 (3,180)
------ ------ ------ ------- ----- -------
Total operating
expenses............... (9,840) (3,280) (7,413) (13,973) 0 (13,973)
------ ------ ------ ------- ----- -------
Operating loss.......... (6,844) (983) (7,236) (13,097) 1,049 (12,048)
------ ------ ------ ------- ----- -------
Interest expense........ (267) (75) (198) (390) 0 (390)
------ ------ ------ ------- ----- -------
Loss before income
taxes.................. (7,111) (1,058) (7,434) (13,487) 1,049 (12,438)
------ ------ ------ ------- ----- -------
Income taxes............ (27) (13) (3) (17) 0 (17)
------ ------ ------ ------- ----- -------
Net loss................ (7,138) (1,071) (7,437) (13,504) 1,049 (12,455)
====== ====== ====== ======= ===== =======
</TABLE>
In accordance with German GAAP, the audited statement of operations for the
year ended December 31, 1998 has been prepared presenting costs by their
nature. In order to comply with the functional cost format commonly used under
U.S. GAAP, the costs incurred have been reclassified to cost of sales, selling,
general and administrative as well as research and development expenses based
on the character of the underlying costs.
A reconciliation from German GAAP to U.S. GAAP has been performed to account
for differences in revenue recognition on long-term software customization
projects. Under German GAAP, license revenue is realized upon delivery of the
software, while the customization work is accounted for separately under the
completed-contract-method. Under U.S. GAAP, these license and customization
revenues would be recognized using the percentage-of-completion-method.
39
<PAGE>
The statement of operations of TST for the period July 1, 1998 to May 9,
1999 is as follows:
<TABLE>
<CAPTION>
TST
------------------------------------------------------------------
(Less) (Add)
October 1, 1997 October 1, 1998 July 1, 1998
Year ended to to to
September 30, 1998 June 30, 1998 May 9, 1999 May 9, 1999
------------------ --------------- --------------- ------------
<S> <C> <C> <C> <C>
Revenue................. 7,896 5,219 5,698 8,375
Cost of sales........... (2,633) (2,168) (2,524) (2,989)
------ ------ ------ ------
Gross profit............ 5,263 3,051 3,174 5,386
------ ------ ------ ------
Selling expenses........ (1,109) (802) (555) (862)
General and
administrative
expenses............... (735) (470) (1,185) (1,450)
Research and development
expenses............... (3,232) (1,917) (1,891) (3,206)
------ ------ ------ ------
Total operating
expenses............... (5,076) (3,189) (3,631) (5,518)
------ ------ ------ ------
Operating income
(loss)................. 187 (138) (457) (132)
------ ------ ------ ------
Interest income......... 43 33 37 47
Interest expense........ (23) (15) (125) (133)
------ ------ ------ ------
Income before taxes..... 207 (120) (545) (218)
------ ------ ------ ------
Income taxes............ (83) (1) 2 (80)
------ ------ ------ ------
Net income (loss)....... 124 (121) (543) (298)
====== ====== ====== ======
</TABLE>
The statement of operations of TST was translated to Deutsche Marks using
the average translation rate for the respective periods.
NOTES TO UNAUDITED PRO FORMA DATA
(1) To reflect the issuance of notes at an assumed rate of 11.5%, with a
face value of DM 244,479 and estimated deferred note issuance costs of DM
8,800. Additionally, this pro forma adjustment reflects management's intention
to use part of the proceeds from the offering to repay indebtedness. The
assumption related to the interest rate and face value of the notes are
indicative only and are subject to change.
(2) To eliminate license sales of DM 3,000 from us to MeTechnology and DM
753 from us to TST. No material direct costs were related to these licenses.
(3) To record additional amortization expense resulting from the increase in
goodwill and intangible assets from acquisitions. Such amounts are expected to
be amortized over the following useful lives:
<TABLE>
<CAPTION>
Portion not
Amortization included in
already June 30,
Annual included in 1999 report Estimated
amortization June 30, pro forma Useful
Intangible Asset total 1999 figures Adjustments Life
- ---------------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C>
MeTechnology
Customer list................... 261 29 232 5 years
Goodwill........................ 25,854 2,905 22,949 7 years
------ ----- ------
26,115 2,934 23,181
------ ----- ------
TST
Customer list................... 803 112 691 5 years
Goodwill........................ 4,567 637 3,930 7 years
------ ----- ------
5,370 749 4,621
------ ----- ------
TOTAL........................... 31,485 3,683 27,802
====== ===== ======
</TABLE>
40
<PAGE>
The allocations of purchase price related to the acquisitions of
MeTechnology and TST are as follows:
<TABLE>
<CAPTION>
MeTechnology TST
------------ ------
<S> <C> <C>
Current assets and other tangible assets................... 8,876 5,345
Liabilities assumed........................................ (30,324) (6,703)
Customer list.............................................. 1,307 4,015
Goodwill................................................... 180,980 31,969
------- ------
Purchase Price.......................................... 160,839 34,626
======= ======
</TABLE>
(4) To account for the following:
. DM 52 related to financing the acquisition of TST,
. DM 28,115 related to interest expense on the notes,
. DM 880 related to the amortization of deferred note issuance costs,
and
. DM 468 related to a decrease in interest expense through the
repayment of indebtedness with the proceeds from the offering
As described in the notes to the consolidated financial statements, interest
on the financing related to the TST acquisition has been calculated by
discounting the non-interest bearing notes of DM 1,665 using an imputed rate of
interest of 5%. The DM 52 shown above does not include interest expense of DM
20 which already was reflected in our historical financial statements of BROKAT
from the date of acquisition to June 30, 1999.
Interest expense on the notes has been calculated by applying the rate of
interest (11.5%) to their face value. Deferred note issuance costs are being
recognized over the 10-year term of the notes.
Management used part of the proceeds from the note offering to repay
indebtedness of the Company. The annual interest rate on this debt outstanding
at the year ended June 30, 1999 was between 4.08% and 7%. No extraordinary gain
or loss will be recognized in relation to the repayment of the above mentioned
debt.
(5) To account for the following:
. DM 14,058 related to current bond interest expense,
. DM 440 related to the recognition of deferred note issuance costs and
. DM 721 related to a decrease of interest expenses from the repayment
of indebtedness with the proceeds from the sale of the notes.
Interest expense on the notes has been calculated by applying the rate of
interest (11.5%) to their face value. Deferred note issuance costs are being
recognized over the 10-year term of the notes.
Management used part of the proceeds from the note offering to repay
indebtedness of the company. The annual interest rate on this debt outstanding
at the year ended June 30, 1999 was between 4.08% and 7%. No extraordinary gain
or loss will be recognized in relation to the repayment of the above mentioned
short-term debt.
41
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected historical consolidated
financial data as of and for the five years ended June 30, 1999 and as of and
for the six months ended December 31, 1998 and 1999. The selected historical
consolidated financial data as of and for the three years ended June 30, 1999
and for the six months ended December 31, 1999 have been extracted or derived
from our audited consolidated financial statements which are included elsewhere
in this prospectus, together with the report thereon of Arthur Andersen,
Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft mbH, independent
auditors. The selected historical financial data as of and for the year ended
June 30, 1996 were derived from audited consolidated financial statements for
such period not included in this prospectus, and the selected historical
financial data as of and for the year ended June 30, 1995 were derived from our
unaudited consolidated financial statements for such period, which were
prepared under German GAAP. The selected historical interim financial data as
of and for the six months ended December 31, 1998 were derived from management
records and in our opinion, reflect all adjustments necessary to present fairly
the financial position and results of operations for the periods presented. You
should read the following table in conjunction with "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
historical consolidated financial statements and the notes to the consolidated
financial statements included elsewhere in this prospectus.
42
<PAGE>
SELECTED FINANCIAL DATA
(Deutsche Marks and Dollars in thousands)
<TABLE>
<CAPTION>
Six Months
Fiscal Years Ended
Ended June 30 December 31
--------------------------------------------------------------- ---------------------------------
1995(1) 1996 1997 1998 1999 1999 1998 1999 1999
----------- --------- --------- --------- --------- ----------- ----------- --------- -----------
DM DM DM DM DM $ DM DM $
(unaudited) (audited) (audited) (audited) (audited) (unaudited) (unaudited) (audited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenue(2)
Software licensing
fees............... 7,231 21,056 10,841 5,458 19,141 9,855
Professional service
fees............... 16,529 21,913 11,283 9,638 22,630 11,652
Customer support
fees............... 1,397 5,970 3,073 2,530 5,709 2,940
Product sales....... 4,414 13,492 6,947 2,045 3,558 1,832
Other revenue....... -- 56 29 -- 249 128
---- ------ ------ ------- ------- ------- ------- ------- -------
Total revenue........ 768 2,684 12,101 29,571 62,487 32,173 19,671 51,287 26,407
Cost of sales........ (531) (1,272) (7,971) (15,493) (31,325) (16,129) (10,371) (22,937) (11,810)
---- ------ ------ ------- ------- ------- ------- ------- -------
Gross profit......... 237 1,412 4,130 14,078 31,162 16,044 9,300 28,350 14,597
---- ------ ------ ------- ------- ------- ------- ------- -------
Selling expenses..... (149) (524) (3,118) (16,636) (38,848) (20,002) (15,535) (27,714) (14,269)
General and
administrative
expenses............ (46) (197) (1,332) (4,305) (10,639) (5,478) (4,092) (12,643) (6,510)
Research and
development
expenses............ (20) (546) (1,450) (4,917) (8,733) (4,496) (3,896) (12,769) (6,575)
Amortization costs on
goodwill and on
intangible assets
from acquisitions... -- -- -- -- (3,686) (1,898) -- (15,797) (8,134)
Non-cash charges
associated with
stock option
grants.............. -- -- -- -- (16,340) (8,413) -- (12,240) (6,302)
---- ------ ------ ------- ------- ------- ------- ------- -------
Total operating
expenses............ (215) (1,267) (5,900) (25,858) (78,246) (40,287) (23,523) (81,163) (41,790)
---- ------ ------ ------- ------- ------- ------- ------- -------
Operating income
(loss).............. 22 145 (1,770) (11,780) (47,084) (24,243) (14,223) (52,813) (27,193)
---- ------ ------ ------- ------- ------- ------- ------- -------
Interest income...... 1 -- 5 150 1,528 787 726 35 18
Interest expense..... 0 (7) (157) (454) (960) (494) (209) (867) (446)
Other income, net.... -- 32 198 239 2,565 1,321 1,261 2,298 1,183
Loss absorption of
convertible debt of
silent partners..... -- -- -- 3,252 926 476 926 -- --
---- ------ ------ ------- ------- ------- ------- ------- -------
Income (loss) before
income taxes and
extraordinary
items............... 23 170 (1,724) (8,593) (43,025) (22,153) (11,519) (51,347) (26,438)
Income tax benefit... (13) (73) 10 -- (113) (58) -- (104) (54)
Minority interest.... -- -- -- -- 90 46 -- (26) (13)
---- ------ ------ ------- ------- ------- ------- ------- -------
Income (loss) before
extraordinary
items............... 10 97 (1,714) (8,593) (43,048) (22,165) (11,519) (51,477) (26,505)
Extraordinary loss on
early extinguishment
of debt net of
taxes............... -- -- -- -- (4,242) (2,184) (4,242) -- --
---- ------ ------ ------- ------- ------- ------- ------- -------
Net income (loss).... 10 97 (1,714) (8,593) (47,290) (24,349) (15,761) (51,477) (26,505)
==== ====== ====== ======= ======= ======= ======= ======= =======
Basic and diluted
loss per common
share(3)............ -- -- -- -- (2.40) (1.24) -- (1.92) (0.99)
Cash Flow
Information:
Net cash (used in)
provided by operating
activities(4)........ -- 235 (3,214) (13,449) (35,686) (18,374) (11,996) (27,480) (14,149)
Net cash used in
investing
activities(4)....... -- (370) (1,744) (3,763) (39,973) (20,581) (3,396) (8,890) (4,577)
Net cash provided by
financing
activities(4)....... -- 76 4,965 19,008 83,025 42,748 82,806 37,746 19,435
Other Financial Data:
EBITDA(5)............ 71 332 (838) (6,915) (36,799) (18,947) (11,051) (31,649) (16,295)
Adjusted EBITDA(5)... 71 332 (838) (10,167) (21,385) (11,011) (11,977) (19,409) (9,993)
Amortization costs on
goodwill and on
intangible assets
from acquisitions
and depreciation.... 49 155 734 1,374 6,705 3,452 985 18,892 9,727
Capital
expenditures........ 155 384 1,748 3,869 10,835 5,579 3,396 4,334 2,231
Ratio of earnings to
fixed charges(6).... 4.83x 7.3x -- -- -- -- -- -- --
Pro forma ratio of
earnings to fixed
charges(7).......... -- -- -- -- -- -- -- -- --
<CAPTION>
As of June 30 As of December 31
--------------------------------------------------------------- ---------------------------------
1995 1996 1997(8) 1998 1999 1999 1998 1999 1999
----------- --------- --------- --------- --------- ----------- ----------- --------- -----------
DM DM DM DM DM $ DM DM $
(unaudited) (audited) (audited) (audited) (audited) (unaudited) (unaudited) (audited) (unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Total assets......... 531 1,008 7,222 19,680 275,070 141,628 94,246 248,685 128,043
Total long-term
debt................ -- 23 2,730 10,308 24,356 12,540 6,000 3,850 1,982
Total liabilities.... 471 839 8,208 19,219 56,731 29,210 18,354 78,313 40,322
Total shareholders'
equity.............. 60 169 (986) 461 217,939 112,212 75,892 169,946 87,502
</TABLE>
43
<PAGE>
- --------
(1) For the fiscal year ended June 30, 1995, our consolidated financial
statements were prepared in accordance with German GAAP.
(2) We did not categorize our sources of revenue prior to July 1, 1997.
(3) Per share data were unavailable prior to our conversion from a limited
liability company to a stock corporation in July 1998.
(4) Financial statements for the fiscal year ended June 30, 1995 were prepared
under German GAAP, which does not require cash flow information.
(5) We have presented EBITDA and Adjusted EBITDA in order to allow for greater
comparability between periods as well as an indication of our results on an
ongoing basis. We define EBITDA as net loss plus extraordinary losses,
income tax expense, interest expense, and depreciation and amortization,
less interest income and income tax benefit. We define Adjusted EBITDA as
EBITDA plus non-cash charges associated with stock option grants less loss
absorption of convertible debt of silent partners. Because all companies do
not calculate EBITDA or similarly titled financial measures in the same
manner, other companies' disclosures of EBITDA may not be comparable with
EBITDA as used here. EBITDA and Adjusted EBITDA as used here should not be
considered as an alternative to net income or loss (as an indicator of
operating performance) or as an alternative to cash flow (as a measure of
liquidity or ability to service debt obligations) and is not a measure of
performance or financial condition under U.S. GAAP. EBITDA and Adjusted
EBITDA all intended to provide additional information for evaluating the
ability of an entity to meet its obligations. Cash flows in accordance with
U.S. GAAP consist of cash flows from (i) operating, (ii) investing and
(iii) financing activities. Cash flows from operating activities reflect
net income or loss (including charges for interest and income taxes not
reflected in EBITDA as used here, adjusted for (i) all non-cash charges or
credits (including, but not limited to, depreciation and amortization) and
(ii) changes in operating assets and liabilities (not reflected in EBITDA).
EBITDA as used here differs from Consolidated Cash Flow as defined in the
indenture governing the notes. See "Description of the Notes--Definitions."
(6) Ratio of earnings to fixed charges is computed by dividing our earnings
from continuing operations before income taxes, minority interest and fixed
charges by our fixed charges. Our fixed charges consist of interest expense
plus one-third of rental expense (the portion that has been deemed by
management to be representative of the interest factor). Earnings were
insufficient to cover fixed charges by DM (1,724), DM (8,593), DM (43,025),
DM (11,519) and DM (51,347) for the years ended June 30, 1997, 1998 and
1999, and six months ended December 31, 1998 and 1999.
(7) Pro forma ratio of earnings to fixed charges gives pro forma effect to the
offering of the notes and the application of the proceeds of the offering
as if they had occurred at the beginning of the respective periods.
Earnings plus pro forma fixed charges would have been insufficient to cover
pro forma fixed charges by DM (71,552) for the year ended June 30, 1999 and
DM (65,124) for the six months ended December 31, 1999.
(8) Our financial statements contained in this prospectus have been prepared to
comply with SEC requirements, as well as U.S. GAAP requirements. To
maintain a consistent presentation, the balance sheet data at June 30, 1997
differ in certain respects from the balance sheet data at such date
included in our published accounts.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this prospectus. Our
financial statements and, except as otherwise indicated, all financial
information about our company in this prospectus were prepared in accordance
with U.S. GAAP. This discussion contains forward looking statements that
involve risks and uncertainties as set forth above under "Disclosure Regarding
Forward Looking Statements."
Overview
We are a leading provider of software for the rapidly expanding e-banking
market and the leading provider of such software to European banks. We design,
develop, market and support e-business software. To date, we have concentrated
on providing e-banking solutions, particularly to banks in Germany and Austria,
and to a lesser extent, other geographic areas such as the United Kingdom, the
United States, the Asia-Pacific region, Switzerland and the Benelux countries.
We intend to further leverage our leading position in the European e-banking
sector to expand our presence in other geographic areas and in other e-business
sectors, with the long-term objective of establishing our core product as the
industry standard platform for the delivery of e-business services.
In May 1999, we acquired MeTechnology AG and Transaction Software
Technologies, Inc. and the results of operations for periods subsequent to such
acquisitions include the results of these subsidiaries. These and other
acquisitions we made in the last twelve months are described above under
"Recent Acquisitions and Other Strategic Initiatives." These acquisitions were
accounted for under purchase accounting principles, resulting in acquired
goodwill of DM 212.9 million. This goodwill is being amortized over seven
years. The results of operations for the year ended June 30, 1999 and the six
months ended December 31, 1999 included amortization of goodwill and other
intangible assets from acquisitions of DM 3.7 million and 15.8 million,
respectively.
Our revenue is derived primarily from four sources:
. Software licensing fees. We derive licensing fees from the licensing of
the software we develop. Fees from the sale of licenses are recognized
upon delivery of the software to our customer if collection of the
resulting receivable is probable, an agreement has been signed, the fee
is fixed or determinable and we have no significant obligations
remaining. Revenue is recognized over the duration of the project when
we are obligated to provide a significant amount of professional
services to customize the software to meet our customer's requirements.
. Professional service fees. We derive fees from providing consulting,
customization and installation services, which are recognized relative
to the portion of the project completed on fixed fee contracts and as
such services are performed on variable fee (actual time and materials)
contracts.
. Customer service revenue. We derive fees from providing ongoing customer
support services, which are provided pursuant to maintenance agreements.
These agreements typically have a term of one year, and revenue is
recognized ratably over the period of the agreement.
. Product sales. We derive revenue from the resale of hardware and, to a
lesser extent, software obtained from third parties as part of the
provision to our customers of comprehensive e-business solutions. This
revenue is recognized at the time of delivery.
As is the case with many other software companies, there is a seasonal
variability to our business with respect to the receipt of orders.
Historically, orders generally increase in the fourth quarter of each calendar
year, as business customers attempt to make full use of their software budgets
prior to year end. The CeBIT information technology fair, which takes place
annually in late February or early March, also leads to an increase in orders
in the second quarter of each calendar year, while the first and third quarters
of the calendar year tend to be less active quarters for the receipt of new
orders. However, because of the continuing growth in overall sales and the
impact of our revenue recognition policies, this seasonal variability in orders
has not resulted in any significant seasonal variability in revenue to date.
45
<PAGE>
Under our 1998 and 1999 stock option plans for employees, we have issued
options to acquire up to an aggregate of approximately 2.6 million shares. In
order for optionees to exercise these options, the increase in the market value
of BROKAT shares above the exercise price must at least equal the overall
increase in the value of the Frankfurt Stock Exchange Neuer Markt Index. Based
on the intrinsic value method required by Accounting Principles Board ("APB")
Opinion No. 25 "Accounting for Stock Issued to Employees", we recognized in our
statement of operations non-cash charges associated with stock option grants of
DM 12.2 million for the six months ended December 31, 1999 and DM 16.3 million
for the year ended June 30, 1999. The amount of these non-cash charges under
this accounting treatment generally increases as the market price of our shares
increases during an accounting period and decreases as such market price
declines. Our consolidated balance sheets also reflect a reserve in our
deferred compensation account and a credit to additional paid-in capital in
respect of these options.
In September 1997, Technologie-Beteiligungs-Gesellschaft mbH, also known as
tbg, invested DM 7.0 million in us under a "silent partnership" contract under
which tbg would participate in our losses through a proportionate reduction in
its investment. For the years ended June 30, 1998 and June 30, 1999, this loss
participation resulted in "loss absorption of convertible debt of silent
partners" of DM 3.3 million and DM 0.9 million. Prior to our initial public
offering, we issued shares to tbg valued at DM 7.0 million in exchange for its
silent participation investment. The excess of the value of these shares over
the carrying value of this investment of DM 4.2 million was recognized as an
"extraordinary loss on early extinguishment of debt" during the year ended June
30, 1999 in accordance with APB Opinion No. 26 "Early Extinguishment of Debt."
In November 1999, our shareholders approved a change in our fiscal year from
a fiscal year ended June 30 to a calendar fiscal year ended December 31, 1999.
For the transition period in 1999, our fiscal year commenced on July 1, 1999
and ended on December 31, 1999.
Results of Operations
The following table sets forth for the periods indicated certain income and
expense items as a percentage of total revenue:
<TABLE>
<CAPTION>
Six Months
Ended Fiscal Years Ended
December 31, June 30,
--------------- --------------------------
1998 1999 1997 1998 1999
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenue
Software licensing fees...... 28% 38% --* 24% 34%
Professional service fees.... 49 44 --* 56 35
Customer support fees........ 13 11 --* 5 10
Product sales................ 10 7 --* 15 21
----- ------ ------ ------ ------
Total revenue.............. 100 100 100% 100 100
----- ------ ------ ------ ------
Cost of sales.................. 53 45 66 52 50
----- ------ ------ ------ ------
Gross margin................... 47 55 34 48 50
Selling expenses............... (79) (54) (26) (56) (62)
General and administrative
expenses...................... (21) (25) (11) (15) (17)
Research and development
expenses...................... (20) (25) (12) (17) (14)
Amortization costs on goodwill
and on intangible assets from
acquisitions.................. -- (30) -- -- (6)
Non-cash charges -- stock
option grants................. -- (24) -- -- (26)
Interest income, net........... 3 (1) (1) (1) 1
Other income, net.............. 6 4 2 1 4
Loss absorption -- convertible
debt.......................... 5 -- -- 11 1
Early extinguishment of debt... (21) -- -- -- (7)
----- ------ ------ ------ ------
Net loss....................... (80)% (100)% (14)% (29)% (76)%
===== ====== ====== ====== ======
</TABLE>
- --------
* We did not categorize our revenue prior to July 1, 1997.
46
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Six months ended December 31, 1999 compared with six months ended December 31,
1998
Revenue
Total revenue increased DM 31.6 million, or 160%, from DM 19.7 million in
the six months ended December 31, 1998 to DM 51.3 million in the six months
ended December 31, 1999. This growth in revenue was largely attributable to:
(i) new orders received during the period, including an increase in
international sales and in indirect sales through resellers; (ii) an increase
in the revenue recognized from orders received in prior periods; (iii) license
upgrades; and (iv) sales revenue related to the businesses acquired in the TST
and MeTechnology acquisitions in May 1999. The Co-operative Bank plc,
Manchester, accounted for 11.3% of our total revenue for the six months ended
December 31, 1999.
Revenue from licensing software increased DM 13.6 million, or 247%, from DM
5.5 million in the six months ended December 31, 1998 to DM 19.1 million in the
six months ended December 31, 1999. Software licensing revenue represented 38%
of total revenue in the six months ended December 31, 1999, compared to 28% for
the six months ended December 31, 1998 due primarily to increasing indirect
sales of our software to resellers resulting from greater standardization of
our products. Such indirect sales included two sales to resellers outside of
Germany totaling DM 5.7 million in aggregate.
Professional services revenue increased DM 13.0 million, or 135%, from DM
9.6 million in the six months ended December 31, 1998 to DM 22.6 million in the
six months ended December 31, 1999 reflecting increases in sales of
professional services both to new and existing customers. Professional service
revenue represented 44% of total revenue in the six months ended December 31,
1999, compared to 49% for the six months ended December 31, 1998, reflecting
the relative increase in indirect sales to resellers described above as to
which we are not obligated to perform significant professional services.
Revenue from the sale of third party products increased DM 1.6 million, or
80%, from DM 2.0 million in the six months ended December 31, 1998 to DM 3.6
million in the six months ended December 31, 1999 because of an increase in the
number of third party product sales. Third party product revenue represented 7%
of total revenue in the six months ended December 31, 1999, compared to 10% for
the six months ended December 31, 1998. Revenue from the sales of third party
products is not regarded as a core part of business revenues. Such sales are
made largely as an accommodation to strategic customers. We anticipate that
there will be substantial variability in this revenue from period to period.
Customer service revenue increased DM 3.2 million, or 128%, from DM 2.5
million in the six months ended December 31, 1998 to DM 5.7 million in the six
months ended December 31, 1999 reflecting an increase in the number of
maintenance agreements entered into with our customers as direct sales of our
software licenses have increased. Customer service revenue represented 11% of
total revenue in the six months ended December 31, 1999, compared to 13% for
the six months ended December 31, 1998. The decline in the percentage of our
revenue derived from customer service fees was due to the disproportionate
increase in indirect sales of our products for which we did not enter into
maintenance agreements with the ultimate end-user. Approximately 85% of our
customers enter into maintenance agreements with us.
Revenue from sources outside of Germany increased DM 18.2 million, or 190%,
from DM 9.6 million in the six months ended December 31, 1998 to DM 27.8
million in the six months ended December 31, 1999 due to the DM 5.7 million of
sales to two resellers described above, revenues from the sale of corporate
cash management software in the United States following the TST acquisition in
May 1999 and a general increase in international sales believed to be
attributable to the increased international presence of BROKAT. Revenue from
outside of Germany represented 54% of total revenue in the six months ended
December 31, 1999, compared to 49% for the six months ended December 31, 1998.
For the six months ended December 31, 1999, sales of our products and services
in Great Britain and Scandinavia accounted for 24% of our total revenue, the
United States accounted for 11%, Asia accounted for 9% and Luxembourg accounted
for 6%.
47
<PAGE>
Cost of Sales
Cost of sales includes all costs associated with the production of our
products, including salaries and related indirect costs of personnel in our
Professional Services and Customer Support departments, the costs associated
with the use of outside programmers and costs of purchasing third party
products that we resell to customers. Cost of sales increased DM 12.5 million,
or 120%, from DM 10.4 million in the six months ended December 31, 1998 to DM
22.9 million in the six months ended December 31, 1999 due to the increase in
sales. Gross margins increased from DM 9.3 million, or 47% of revenue in the
six months ended December 31, 1998, to DM 28.4 million, or 55% of revenue in
the six months ended December 31, 1999 due to the relative growth in indirect
sales. Although we expect continued growth in indirect sales, we anticipate
that cost of sales will remain a significant expense for the foreseeable future
as we enter new markets which will require us to use the professional skills of
BROKAT employees to implement projects in these new markets.
Operating Expenses
Selling expenses. Selling expenses primarily consist of direct and indirect
costs associated with personnel in our Sales and Marketing Department, costs of
travel and trade shows, and promotional and advertising costs, as well as the
costs of expanding our sales offices. Selling expenses increased DM 12.2
million, or 79%, from DM 15.5 million in the six months ended December 31, 1998
to DM 27.7 million in the six months ended December 31, 1999. The increase
resulted from our continuing efforts to expand our sales and marketing
capabilities and activities. The smaller increase in selling expenses relative
to the increase in our sales revenue reflected the efforts expended in prior
periods to hire staff and purchase equipment to provide a sufficient
infrastructure for the international activities of our Sales and Marketing
Department. Selling expenses, particularly advertising and promotional costs,
are expected to continue to increase in line with our strategy to establish our
brand name on a global basis.
Research and development expenses. Research and development expenses
primarily consist of personnel costs in our research and development department
and the cost of equipment and supplies used to enhance existing products and
develop new products. Research and development expenses increased DM 8.9
million, or 228%, from DM 3.9 million in the six months ended December 31, 1998
to DM 12.8 million in the six months ended December 31, 1999. Research and
development expenses represented 25% of total revenue in the six months ended
December 31, 1999, compared to 20% for the six months ended December 31, 1998.
The increase in research and development expense resulted primarily from the
acquisition of MeTechnology and TST and, in particular, the addition of 132
research and development employees.
General and administrative expenses. General and administrative expenses
primarily consist of personnel costs for administrative and support staff and
legal, consulting and accounting fees and facility costs. General and
administrative expenses increased DM 8.5 million, or 207%, from DM 4.1 million
in the six months ended December 31, 1998 to DM 12.6 million in the six months
ended December 31, 1999. General and administrative expenses represented 25% of
sales revenue in the six months ended December 31, 1999, compared to 21% for
the six months ended December 31, 1998. The increase in expense primarily
reflected the acquisition of MeTechnology and TST in May 1999 and in particular
the addition of their administrative staffs. As we continue to reduce
duplicative administrative functions through the consolidation of MeTechnology
and TST into the existing Brokat organization, we anticipate a favorable impact
on general and administrative expenses in future periods. The increase also
reflected additional accounting expenses in preparation for a possible listing
in the United States later this year.
Interest expense, net. Net interest expense increased DM 1.3 million, or
260% from net interest income of DM 0.5 million in the six months ended
December 31, 1998 to net interest expense of DM 0.8 million for the six months
ended December 31, 1999, primarily due to the change in our sources of funding
from the proceeds of our initial public offering to credit facilities.
Other income, net. Other income, net increased DM 1.0 million, or 77%, from
DM 1.3 million in the six months ended December 31, 1998 to DM 2.3 million in
the six months ended December 31, 1999. Other
48
<PAGE>
income, net represented 4% of total revenue in the six months ended December
31, 1999, compared to 6% for the six months ended December 31, 1998. This
increase resulted primarily from the higher income derived as a result of
changes in exchange rates.
Net Loss
As a result of the foregoing, our net loss for the six months ended December
31, 1999 increased by DM 35.7 million, or 226%, to DM 51.5 million from DM 15.8
million for the six months ended December 31, 1998. Our earnings before
interest, tax, depreciation, amortization and non-cash charges related to our
stock option program resulted in a loss of DM 19.4 million for the six months
ended December 31, 1999 compared to a loss of DM 11.1 million for the six
months ended December 31, 1998.
Year ended June 30, 1999 compared to year ended June 30, 1998
Revenue
Total revenue increased DM 32.9 million, or 111%, from DM 29.6 million for
the year ended June 30, 1998 to DM 62.5 million for the year ended June 30,
1999. This growth in revenue was largely attributable to: (i) new orders
received during the year, including an indirect sale of DM 9.0 million to
German reseller and an increase in international sales; (ii) an increase in the
revenue recognized from orders received in prior periods; and (iii) the sale of
third party products to a strategically important German customer for DM 9.6
million. ConSors Discount Brokers AG accounted for approximately 20.3% and
Media Support Group GmbH and its affiliates accounted for approximately 18.5%
of our total revenue in the year ended June 30, 1999.
Revenue from licensing software increased DM 13.9 million, or 193%, from DM
7.2 million for the year ended June 30, 1998 to DM 21.1 million for the year
ended June 30, 1999. Software licensing revenue represented 34% of sales
revenue for the year ended June 30, 1999 as compared to 24% for the year ended
June 30, 1998 due primarily to increasing indirect sales of our software to
resellers reflecting the greater standardization of our products. Indirect
sales included a sale to a German reseller totaling DM 9.0 million.
Professional services revenue increased DM 5.4 million, or 33%, from DM 16.5
million for the year ended June 30, 1998 to DM 21.9 million in the year ended
June 30, 1999 reflecting an increase in sales of our professional services both
to new and existing customers. Professional service revenue represented 35% of
total sales revenue for the year ended June 30, 1999, compared to 56% for the
year ended June 30, 1998, reflecting the relative increase in indirect sales to
resellers described above.
Revenue from the sale of third party products increased DM 9.1 million, or
207%, from DM 4.4 million for the year ended June 30, 1998 to DM 13.5 million
for the year ended June 30, 1999. Third party product revenue represented 21%
of total sales revenue for the year ended June 30, 1999, compared to 15% for
the year ended June 30, 1998. This increase is largely attributable to a DM 9.6
million sale of third party products to a strategically important customer in
Germany.
Customer service revenue increased DM 4.6 million, or 329%, from DM 1.4
million for the year ended June 30, 1998 to DM 6.0 million for the year ended
June 30, 1999. Customer service revenue represented 10% of total sales revenue
for the year ended June 30, 1999, compared to 5.0% for the year ended June 30,
1998. The increase in customer service revenue is due to the increase both in
the proportion of our customers entering into maintenance agreements with us
and in the absolute number of our customers related to the growth in product
sales.
Revenue from sources outside of Germany increased DM 6.8 million, or 65%,
from DM 10.4 million for the year ended June 30, 1998 to DM 17.2 million for
the year ended June 30, 1999. Revenue from outside of Germany represented 28%
of total sales revenue for the year ended June 30, 1999, compared to 35% for
the year ended June 30, 1998. The significant sales of our software to a German
reseller for DM 9.0 million and of third party products to a significant German
customer for DM 9.6 million were responsible for the decrease in international
sales as a percentage of total sales revenue.
49
<PAGE>
Cost of Sales
Cost of sales increased DM 15.8 million, or 102%, from DM 15.5 million for
the year ended June 30, 1998 to DM 31.3 million for the year ended June 30,
1999, which was generally consistent with the increase in sales revenue. Gross
margins increased from DM 14.1 million, or 48% of revenue for the year ended
June 30, 1998, to DM 31.2 million, or 50% of revenue for the year ended June
30, 1999 due to an increase in the proportion of revenue derived from higher
margin license fees, which was offset in part by the effect of the DM 9.6
million sale of third party products, which had a lower margin.
Operating Expenses
Selling expenses. Selling expenses increased DM 22.2 million, or 134%, from
DM 16.6 million for the year ended June 30, 1998 to DM 38.8 million for the
year ended June 30, 1999. The increase resulted from our efforts to expand our
sales and marketing capabilities and activities internationally as well as in
Germany.
Research and development expenses. Research and development expenses
increased DM 3.8 million, or 78%, from DM 4.9 million from the year ended June
30, 1998 to DM 8.7 million for the year ended June 30, 1999. Research and
development expenses represented 14% of total sales revenue for the year ended
June 30, 1999, compared to 17% for the year ended June 30, 1998. This increase
was the result of the addition of personnel, including six weeks of costs
related to the research and development personnel of MeTechnology and TST,
which were acquired in May 1999.
General and administrative expenses. General and administrative expenses
increased DM 6.3 million, or 147%, from DM 4.3 million for the year ended June
30, 1998 to DM 10.6 million for the year ended June 30, 1999. General and
administrative expenses represented 17% of sales revenue for the year ended
June 30, 1999, compared to 15% for the year ended June 30, 1998. These
increases were due primarily to (i) the continued development of an
administrative infrastructure for the conduct of our business internationally,
including the hiring of administrative staff, primarily in finance and human
resources, and the implementation of new software for our information systems,
and (ii) expenses related to the integration of the operations of MeTechnology
and TST.
Interest expense, net. In the year ended June 30, 1999, we incurred net
interest income of DM 0.6 million, which represented a decrease in our net
interest expense of 0.9 million, or 300%, when compared to the net interest
expense of DM 0.3 million for the year ended June 30, 1998. This decrease
resulted primarily from the change in our sources of funding from interest-
bearing debt of silent partners to the proceeds of our initial public offering.
Other income, net. Other income, net increased DM 2.33 million, or 971%,
from DM 0.24 million in the year ended June 30, 1998 to DM 2.57 million in the
year ended June 30, 1999. Other income, net represented 4% of total revenue in
the year ended June 30, 1999, compared to 0.8% for the year ended June 30,
1998. This increase resulted primarily from (i) income derived from a customer
who paid us the full contract value following its decision to halt
implementation of a project due to internal considerations and (ii) income
derived as a result of changes in exchange rates.
Net Loss
As a result of the foregoing, our net loss for year ended June 30, 1999
increased by DM 38.7 million, or 450% to DM 47.3 million from DM 8.6 million
for the year ended June 30, 1998. Excluding the effect of extraordinary items,
amortization of goodwill, non-cash charges associated with stock option grants
and the tbg loss participation, net losses would be DM 23.9 million for the
year ended June 30, 1999 as compared with DM 11.8 million of the year ended
June 30, 1998.
50
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Year ended June 30, 1998 compared to year ended June 30, 1997
Revenue
Total revenue increased DM 17.5 million, or 145%, from DM 12.1 million for
the year ended June 30, 1997 to DM 29.6 million for the year ended June 30,
1998. This growth in revenue was largely attributable to (i) new orders from
German and other European banks for our software products and services for e-
banking as well as our first orders from companies in the insurance and
telecommunications sector; (ii) an increase in the revenue recognized from
orders received in prior periods, and (iii) an increase in international sales.
This increase was primarily attributable to the developing demand by German and
European credit institutions for complete software solutions to provide secure
Internet banking. In addition during the year ended June 30, 1998, we
implemented software solutions for insurance and telecommunications companies
for the first time.
For periods prior to the year ended June 30, 1998, we did not classify
revenues by source among the categories of license fee, professional service,
third party product and customer service revenue. However, the preponderance of
our revenue during the year ended June 30, 1997 and prior periods was derived
from the provision of professional services as we had relatively little
standardized software available for sale. Revenue from licensing software was
DM 7.2 million for the year ended June 30, 1998, which represented 24.0% of
sales revenue for the year. Professional services revenue was DM 16.5 million
for the year ended June 30, 1998, which represented 56% of total sales revenue
for the year ended June 30, 1998. Revenue from the sale of third party products
was DM 4.4 million for the year ended June 30,1998, which represented 15% of
total sales revenue for the year ended June 30,1998. Customer service revenue
was DM 1.4 million for the year ended June 30, 1998, which represented 5.0% of
total sales revenue for the year ended June 30, 1998.
Revenue from sources outside of Germany increased DM 8.2 million, or 373%,
from DM 2.2 million for the year ended June 30, 1997 to DM 10.4 million for the
year ended June 30, 1998. Revenue from outside of Germany represented 35% of
total sales revenue for the year ended June 30, 1998, compared to 18% for the
year ended June 30, 1997. The increase in sales revenue outside of Germany was
primarily due to our increased international marketing and sales efforts,
including the opening of regional offices, that increased our international
presence.
Cost of Sales
Cost of sales increased DM 7.5 million, or 94%, from DM 8.0 million for the
year ended June 30, 1997 to DM 15.5 million for the year ended June 30, 1998.
Gross profits increased from DM 4.1 million, or 34% of sales revenue, for the
year ended June 30, 1997 to DM 14.1 million, or 48% of sales revenue, for the
year ended June 30, 1998. The 94% increase in the cost of sales was relatively
lower than the 145% increase in sales revenue primarily due to the fact that
during the year ended June 30, 1998 we developed a range of more standardized
software products which we then were able to sell to our customers. Although
most of these products still required customization to meet the customer's
needs, the higher degree of standardization led to a lower costs of sales and
an increase in gross margins.
Operating Expenses
Selling expenses. Selling expenses increased DM 13.5 million, or 435%, from
DM 3.1 million for the year ended June 30, 1997 to DM 16.6 million for the year
ended June 30, 1998. The increase resulted from our efforts to achieve higher
market penetration by expanding our sales and marketing capabilities and
activities internationally and in Germany.
Research and development expenses. Research and development expenses
increased DM 3.4 million, or 227%, from DM 1.5 million from the year ended June
30, 1997 to DM 4.9 million for the year ended June 30, 1998. Research and
development expenses represented 17% of total sales revenue for the year ended
June 30, 1998, compared to 12% for the year ended June 30, 1997. This increase
was due primarily to higher R&D costs during the year ended June 30, 1998 to
enhance and standardize our products.
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General and administrative expenses. General and administrative expenses
increased DM 3.0 million, or 231%, from DM 1.3 million for the year ended June
30, 1997 to DM 4.3 million for the year ended June 30, 1998. General and
administrative expenses represented 15% of sales revenue for the year ended
June 30, 1998, compared to 11% for the year ended June 30, 1997. These
increases were due primarily to the development of an administrative
infrastructure to manage the future growth of our business on a global basis,
including the purchase of new software tools and the hiring of administrative
staff.
Interest expense, net. Net interest expenses increased DM 0.15 million, or
100%, from DM 0.15 million in the year ended June 30, 1997 to DM 0.3 million in
the year ended June 30, 1998. This increase reflected primarily the increase in
the volume of our business activities and the corresponding higher funding
needs. In both periods our funding source principally consisted of loans from
silent partners.
Other income, net. Other income, net increased DM 0.04 million, or 20%, from
DM 0.2 million in the year ended June 30, 1997 to DM 0.24 million in the year
ended June 30, 1998. Other income, net represented 0.8% of total revenue in the
year ended June 30, 1998, compared to 1.6% for the year ended June 30, 1997.
Net Loss
As a result of the foregoing, our net loss increased by DM 6.9 million, or
406%, for the year ended June 30, 1998 from DM 1.7 million for the year ended
June 30, 1997 to DM 8.6 million for the year ended June 30, 1999. Adjusted for
the loss participation by tbg of DM 3.3 million, the net loss for the year
ended June 30, 1998 would have been approximately DM 11.8 million.
Liquidity and Capital Resources
Since our inception, we have met our cash requirements through issuances of
our equity shares, bank borrowings and other indebtedness (including loans from
silent partners), cash flow from operations and interest income on short-term
investments. We have not been profitable since the fiscal year ended June 30,
1996 and have an accumulated deficit of DM 109.1 million as of December 31,
1999, which included DM 19.5 million in amortization of goodwill and DM 28.6
million of non-cash charges associated with stock option grants. We expect to
continue to generate losses for the foreseeable future as we continue to pursue
our strategy to establish our Twister platform as the industry standard for the
delivery of e-business services. We anticipate that our current cash and cash
equivalents, together with the net proceeds from the sale of the notes, will be
sufficient to meet our cash requirements for at least the next twelve months.
However, our cash requirements may vary significantly from current projections.
As of December 31, 1999, we had current assets of DM 54.9 million and
current liabilities of DM 74.5 million. Current assets included cash and cash
equivalents of DM 7.0 million and accounts receivable of DM 36.2 million.
Current liabilities included DM 42.3 million of short-term borrowings under
four credit facilities with banks with aggregate commitments of DM 75.5
million. We used a portion of the proceeds from the sale of the original notes
to repay in full outstanding borrowings under these facilities. These
facilities, each of which contains customary financial and operating covenants,
consist of the following:
. an unsecured revolving credit facility with a bank under which we can
borrow up to DM 60.0 million for working capital and other general
corporate purposes. We are in discussions with the lender to extend this
facility, which is scheduled to expire on June 30, 2000. As of December
31, 1999, interest on borrowings was payable at the rate of 6% per year
subject to modification based on market conditions prevailing at any
given time. We may prepay loans under the facility at any time without
premium or penalty. As of December 31, 1999, approximately DM 38.4
million was outstanding under the credit facility;
. an unsecured revolving bank credit facility under which we can borrow up
to an aggregate of DM 5.0 million for working capital and other general
corporate purposes. The revolving credit facility is scheduled to expire
on December 31, 2000;
52
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. an unsecured revolving credit facility with a bank under which we can
borrow up to DM 5.0 million for working capital and other general
corporate purposes. This facility is extended by the lender on
a month-to-month basis. Amounts outstanding under this facility bear
interest at 6%, subject to change based on market conditions. The
facility contains customary financial and operational covenants. We may
prepay loans at month-end; and
. an unsecured revolving bank credit facility under which we can borrow up
to an aggregate of DM 5.5 million for working capital and other general
corporate purposes. The revolving credit facility is scheduled to expire
on June 30, 2001.
We also have outstanding certain obligations owed to the former shareholders
of TST that were incurred in connection with our acquisition of TST, including
DM 1.7 million that will be due in May 2000 and DM 1.5 million (at present
value) potentially due in May 2001.
Net cash used in operating activities totaled DM 27.5 million, DM 35.7
million, DM 13.4 million and DM 3.2 million for the six months ended December
31, 1999 and the years ended June 30, 1999, 1998 and 1997, respectively. The
increase in net cash used in operations reflects the net losses experienced in
these periods.
Net cash used in investing activities totaled DM 8.9 million, DM 40.0
million, DM 3.8 million and DM 1.7 million for the six months ended December
31, 1999 and the years ended June 30, 1999, 1998 and 1997, respectively. A net
total of DM 35.2 million of cash was used for acquisitions during the year
ended June 30, 1999, including the acquisition in May 1999 of TST for net cash
of DM 34.9 million. Cash used in investing activities for the six months ended
December 31, 1999 includes DM 4.5 million for the purchase of investments
including our investments in Fernbach Financial Software S.A. and Bremen Online
Services described in Note 4 of the Notes to our consolidated financial
statements. Cash used for the purchase of property and equipment was DM 3.9
million, DM 5.2 million, DM 3.7 million and DM 1.5 million for the six months
ended December 31, 1999 and the years ended June 30, 1999, 1998 and 1997,
respectively. The largest component of capital expenditures for property and
equipment during all periods was for software, hardware, information technology
infrastructure and office equipment for new employees.
Net cash provided by financing activities was DM 37.7 million, DM 83.0
million, DM 19.0 million and DM 5.0 million for the six months ended December
31, 1999 and the years ended June 30, 1999, 1998 and 1997, respectively. In
September and October 1998, we realized net cash proceeds of DM 83.0 million in
connection with an initial public offering of our shares. In the year ended
June 30, 1998, we raised DM 10.0 million through the issuance of equity and DM
11.0 million through the investment of tbg.
In May 2000, we received cash proceeds of DM 19.6 million from an investment
in our equity shares by a subsidiary of Intel Corporation.
Quantitative and Qualitative Disclosures About Market Risk
We do not use market-sensitive instruments, such as derivative financial
instruments. Our primary market risk is in the area of exchange rate
fluctuations.
We maintain our cash balances in deposits at banks and in highly liquid
short-term investments, such as money market mutual funds, which lowers our
exposure to interest income risks. We do not consider our exposure to interest
rate and exchange rate fluctuation risks to be material in respect of our
deposits and investments.
We have financial instruments that are subject to interest rate risk,
principally short-term investments and debt obligations. Historically, we have
not experienced material gains or losses due to interest rate changes. We do
not consider our interest rate risk to be material in respect of our short-term
investments and debt obligations.
53
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A significant portion of our revenues and expenses are denominated in
currencies other than the Deutsche Mark and Euro. Approximately 20% of our
revenues for the fiscal year ended June 30, 1999 and 38% of our revenues for
the six months ended December 31, 1999 were denominated in currencies other
than the Deutsche Mark and Euro. For the six months ended December 31, 1999,
sales of our products and services in the United Kingdom accounted for 16% of
our revenue, the United States accounted for 11%, Asia-Pacific region accounted
for 9%, and Switzerland accounted for 2% of our revenue. Accordingly, the
majority of our exposure related to the fluctuations in the exchange rates
between the Deutsche Mark and the British pound, the U.S. dollar, the Singapore
dollar, the Hong Kong dollar, the Swiss Franc and the Australian dollar.
We prepared a sensitivity analysis to assess the impact of exchange rate
fluctuations on our operating results for the year ended June 30, 1999 and for
the six months ended December 31, 1999. Based on this analysis, we estimate
that a 10% adverse change in the rates of exchange of Deutsche Marks against
the basket of currencies comprising our revenues from sources outside of the
Euro zone would have increased our reported net loss for the year ended June
30, 1999 and for the six months ended December 31, 1999 by approximately DM 0.5
million. Our analysis also indicated that a 10% decrease in the rates of
exchange of Deutsche Marks against such basket of currencies would have
resulted in a decrease of the value of our net assets by approximately DM 1.0
million as of December 31, 1999.
To date, we have not entered into any derivative hedging instruments to
reduce the risk of exchange rate fluctuations.
Accounting for Income Taxes
We utilize the liability method of accounting for income taxes in accordance
with SFAS No. 109, "Accounting for Income Taxes." Under the liability method,
deferred taxes are determined based on the differences between the financial
statements and tax basis of assets and liabilities using enacted tax rates in
effect in the years in which the differences are expected to reverse. Valuation
allowances are recorded to reduce deferred tax assets when it is more likely
than not that a tax benefit will not be realized.
For the year ended June 30, 1999 and the six months ended December 31, 1999
we had deferred tax assets in the amount of DM 1.4 million and DM 2.3 million,
respectively, and deferred tax liabilities in the amount of DM 1.4 million and
DM 2.4 million, respectively. Due to our history of operating losses, the
probability that we can make use of our loss-carryforwards in the future must
be regarded as less than 50%, so we booked valuation allowances on the deferred
tax asset to the extent that the deferred tax assets equal the deferred tax
liabilities.
Recent Accounting Pronouncements
Effective July 1, 1998, we adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 requires companies to report comprehensive income, which
is defined as all changes in equity during a period, except those resulting
from investment by owners and distribution to owners, in financial statements
for the period in which they are recognized. Net income and other comprehensive
income, including foreign currency translation, minimum pension liability and
unrealized gains and losses on investments are to be reported, net of their
relaxed tax effect, to arrive at comprehensive income. SFAS No. 130 requires
only additional disclosure in the financial statements and does not effect our
financial condition or results of operation. Our prior year financial
statements have been restated to conform to the requirements of SFAS No. 130.
Effective July 1, 1998, we adopted SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information." We operate in one business segment,
the licensing of software products. Therefore the adoption of SFAS No. 131 had
no impact on our financial condition or results of operations.
In March 1998, the Accounting Standards Executive Committee of the AICPA
approved Statement of Position (SOP) 98-1. This SOP governs the accounting for
internally used, acquired or internally developed software and requires the
capitalization of certain associated costs. SOP 98-1 is applicable for
financial years
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beginning after December 15, 1998. Effective July 1, 1998, we adopted SOP 98-1.
In accordance with the capitalization criteria of SOP 98-1 we capitalized the
costs associated with internally developed, and used software in the amount of
DM 437.0 thousand during the year ended June 30, 1999. During the six months
ended December 31, 1999, we did not capitalize any such costs.
The Financial Accounting Standards Board (FASB) recently issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires that companies recognize all derivatives as either assets or
liabilities in the balance sheet at fair value. Under this statement,
accounting for changes in the fair value of a derivative depends on its
intended use and designation. In June 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities-Deferral of the
Effective Date of SFAS No. 133." SFAS No. 137 amends the effective date of SFAS
No. 133. SFAS No. 133 will now be effective for all fiscal quarters and all
fiscal years beginning after June 15, 2000. We are currently assessing the
potential effects of this new standard. Based on our current and expected
levels of use of derivative instruments, the adoption of this new standard is
not expected to have a material effect on our financial condition or results of
operations.
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BUSINESS
General
We are a leading provider of software for the rapidly expanding e-banking
market and the leading provider of such software to European banks. We design,
develop, market and support e-business software. To date, we have concentrated
on providing e-banking solutions, particularly to banks in Germany and Austria,
and to a lesser extent, other geographic areas such as the United Kingdom, the
United States, the Asia-Pacific region, Switzerland and the Benelux countries.
We intend to further leverage our leading position in the European e-banking
sector to expand our presence in other geographic areas and in other e-business
sectors, with the long-term objective of establishing our core product as the
industry standard platform for the delivery of e-business services.
Our core product, Twister, is an open architecture software platform that
integrates the information technology systems of a business with a variety of
electronic communications channels. This software enables consumers to interact
with the business over the Internet through a range of secure electronic
communication channels, such as personal computers, mobile telephones, call
centers, personal digital assistants and WebTV while permitting the business to
offer its products and services regardless of the types of computer systems in
use and regardless of the language in which its software applications are
written.
We also offer industry-specific software application packages, allowing a
business to establish e-front offices through which consumers can access its
products or services. These software packages, in combination with our Twister
platform, provide a business with both customer relationship management and
back office integration functions. In addition, we provide a range of
professional services such as consulting, customization, installation,
training, and maintenance and support in connection with the sales of our
products.
We distribute, implement and support our products worldwide through our
subsidiaries and sales offices as well as through distribution partners, such
as consulting firms and value added resellers, and through joint ventures. We
estimate that, as of December 31, 1999, more than 2,000 financial institutions
and more than 2 million end-users worldwide--principally in Germany and
Austria--conducted e-business activities using our products. Our market share
of the e-banking sector is approximately 80-90% in Germany and Austria, and
approximately 40% in the rest of Europe. We believe that the majority of all
banks in Germany offering the
e-banking services use our software.
We derive our revenues from four principal sources:
. software license fees, including fees associated with initial
installations, and version and capacity upgrades;
. professional service fees, including fees paid for customization of
software for particular end use applications;
. customer support fees, covering minor software upgrades and technical
support; and
. sale of hardware and certain software sourced from third parties used as
part of our software solutions.
Market Overview
In recent years, businesses and consumers have been transforming the
Internet into a commercial medium. In 1999, the number of Internet users was
estimated at 130 million worldwide. The number of Internet users is forecasted
to reach 540 million in 2005. In addition, newly developed electronic
communication channels are expected to increase the importance and potential of
e-business. For example, by 2004, the total number of interactive mobile
telephone banking customers is projected to reach almost 13.9 million, and at
least 40% of business to consumer e-commerce transactions outside North America
are expected to be initiated from mobile, cellular-enabled devices. The
European mobile commerce market alone is projected to grow from (Euro) 323.0
million in 1998 to (Euro) 23.0 billion in 2003.
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Businesses are using electronic communication channels to provide the same
products and services as they have traditionally, but, in many cases, faster,
more effectively and less expensively than using traditional distribution
channels, such as branches and retail stores. In particular, businesses are
increasingly using electronic communication media to offer their products and
services by establishing e-front offices, through which they can make contact
with their customers, identify their needs and offer individualized services.
For their part, customers can contact businesses 24 hours a day, through a
variety of channels, including channels such as mobile telephones that can
access, and be accessed following a customer-initiated transaction, wherever
the customer may be. Businesses are expected to accelerate the adaptation of
their web sites to handle online transactions. Though estimates of the future
growth of e-business vary widely, they nevertheless all foresee growth in the
coming years.
In spite of the tremendous opportunities that e-business can offer,
businesses nonetheless face challenges in establishing and conducting e-
business operations. Such businesses may be using different generations and
different types of information technology systems. In addition, their e-
business software applications may be written in different programming
languages. Finally, a variety of electronic communication channels are
available for consumers to access products and services of e-business
providers. To take full advantage of the potential offered by e-business, a
company must have the capacity to connect each of its computer systems and
software applications with every possible electronic communication channel used
by its customers.
The growth of e-business is stimulating the market for software that has the
capacity to integrate different computer systems into coherent infrastructures
for the electronic delivery of information. Most software currently used for
this integration task addresses only a portion of the required functions. Due
to the low level of standardization, such software usually requires significant
effort and expense to achieve even a modest level of system integration.
Tailor-made solutions, often developed at great technical effort and expense,
may subsequently prove to be inflexible and expensive to maintain.
Our Strengths
We rely on the following key strengths to respond to the needs of the e-
business market:
Our Products
Our Twister platform and related applications allow businesses engaged in e-
business operations to integrate their existing information technology systems
with a variety of electronic communications channels. Users of our platform are
generally not constrained by the source and format of their data. The platform
extracts the data from different systems and applications of a business,
reformats the data as necessary and communicates the data to the business'
consumers securely through a variety of electronic communication media the
consumers may be using. The platform allows communications over multichannels
simultaneously. Our software offers:
. simplicity--our products are designed to be easy to maintain and enhance
and allow for integration of an existing information system environment
with electronic communications channels and functions. Furthermore, new
distribution channels, services and systems may be added easily and
relatively inexpensively, without major modifications to the back-end
systems, due to Twister's modular architecture;
. security--our products use 128-bit encryption technology and thus
provide the highest economically feasible standard generally available
today for secrecy, data protection, user authentication and non-
repudiation of electronically initiated transactions;
. reliability--our products are generally stable and fault-tolerant;
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. scalability--our products are capable of meeting the high volume
requirements of large businesses as well as those of smaller businesses;
and
. openness--our products are compatible with a wide range of major
operating systems and industry standards for application development.
Strategic Alliances
We cooperate with several strategic partners that are engaged in various
aspects of e-business. We are one of the original ten software companies
worldwide selected by Intel as a preferred business partner to optimize our
software for use with the newly developed generation of 64-bit Intel
processors. We founded a consortium to develop a uniform application interface
as a mobile digital signature standard to facilitate confirmations of
e-business transactions via mobile telephones. The consortium includes mobile
telephone manufacturers and network operators, software vendors and smart card
manufacturers. We were also the first provider of e-front office software
certified by SAP for compatibility with SAP software, which allows financial
institutions using the SAP back office software to offer e-finance services
using our platform.
Continuity of Senior Management
We benefit from the continuity of our senior management team. Messrs. Rover,
Anderer, Schlumpberger, Janssen and Schumacher have been with us since the
establishment of our company in 1994. Our senior management has been
strengthened by the addition of Mr. Maestrini in 1999. As a group, our senior
management has a significant economic stake in our company, beneficially owning
approximately 40% of outstanding shares.
Technical Expertise of Our Personnel
We benefit from a talented and motivated technical staff, with a broad range
of skills and expertise in the technologies relevant to our business. Our
employees share in our financial success through participation in our firm-wide
employee stock option plans and our annual bonus scheme. See "Management--
Management and Employee Incentive Arrangements."
Market Position
We have successfully established BROKAT as a recognized brand name in the
European e-banking market. We intend to use our brand name recognition, our
leading market position and our growing global distribution and sales network
to expand into other fast growing segments of the e-finance market as well as
other sectors of e-business.
Strategy
Our principal objective is to establish Twister as the standard worldwide
software platform for the delivery of e-finance, e-commerce and other e-
services through all significant electronic distribution channels, including
personal computers, mobile telephones, call centers, personal digital
assistants and WebTV. The principal elements of our business strategy to
achieve this objective are as follows:
Continue to enhance the functionality of the Twister platform
No software platform is currently accepted as the e-business industry
standard. The platform ultimately accepted as the industry standard will have
to have broad compatibility and be reliable, simple, scalable, open and secure.
In future versions of our Twister platform, we will seek to maintain our
technological leadership by refining elements of the platform. We are currently
developing Twister Version 4.0 for launch later this year. In this version, we
will offer a wireless application protocol feature, as well as application
development support that will enable our customers to develop their own
applications compatible with multi-industry standards.
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Expand our range of standardized software applications and enhance our
existing software applications based on our Twister platform
Through our own research and development activities and through joint
ventures and the efforts of our business partners, we will seek both to expand
the range of affordable, quick and reliable applications targeted to specific
industry sectors and to enhance our existing software applications. These
applications will allow our customers and other third parties to minimize the
customization and implementation processes of Twister-based solutions. These
products are expected to increase the appeal of Twister to e-business
participants and the probability that Twister will become the industry standard
e-services software platform. Our emphasis on both platform technology and
application technology gives us a competitive advantage over providers that
offer one or the other, but not both, technologies.
Expand our presence throughout Europe, North America and the Asia-Pacific
region, through internal growth, joint ventures and strategic acquisitions
We intend to establish a global presence through internal growth, joint
ventures and strategic acquisitions. We have established subsidiaries and sales
offices in 13 countries around the world outside of Germany. Our geographic
expansion efforts will be affected by differences in the e-business
environment, technology and the relative maturity of each targeted market. We
seek to adapt to the unique conditions to each of these geographic markets by
focusing on a market segment where we can quickly establish a leading position
through internal efforts, joint ventures or acquisitions. In the United States,
for example, we are focused, as our initial e-finance beachhead, on expanding
the opportunities for the sale of corporate cash management software products
based on the Twister platform. We market these products to banks which, in
turn, can offer the cash management capabilities to their corporate clients. In
Singapore, we now provide e-finance services to three of the leading banks.
Continue to emphasize indirect sales through the strengthening and expansion
of our network of business partners, including through joint ventures and
value added resellers, consultants, system integrators and solution providers
In recent years, we have shifted the emphasis of our marketing and sales
activities away from direct sales, which include the provision of customized
software products and services that yielded revenues from the provision of
professional services, to indirect sales, involving the provision of
standardized software packages to value added resellers and other distributors
who perform professional services, or contract with or license software to
others who will perform the customization or other services necessary to meet
the end-user's needs. We believe that indirect sales and licensing through
third parties will give us the opportunity to increase revenues at a faster
rate and at higher margins than we could through direct sales.
Leverage our leading market position in the European e-banking services sector
and technological leadership, in order to position ourselves to take advantage
of the development of other e-business segments and other aspects of e-
business
We believe that the participants in the e-banking sector are at the
forefront of the development of e-business. We will seek to use our resources
to strengthen our position as a leading developer and seller of e-banking
software and solutions to European banks, insurance companies and other
financial institutions, and to capitalize on our leading position as an
established brand in e-banking to capture opportunities in other rapidly
growing e-business sectors. We will seek to diversify into other e-business
sectors as opportunities arise for collaboration with our distribution and
joint venture partners in the countries in which we do business.
Products
Twister
We design, develop, market and support Twister--an electronic services
software platform--and related software applications which enable businesses to
build e-front offices. E-front offices form the basis for all
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customer-focused business models that include the offering of products and
services through both electronic and traditional distribution channels. E-front
offices present an entirely new organizational approach to the convergence of
traditional business and new electronic communication media.
Twister integrates the benefits of various platform concepts into one model.
In effect, the Twister platform and its standard components create a
comprehensive infrastructure for e-front offices through which a variety of
electronic and traditional distribution channels can be integrated.
[CHART]
Twister gateways provide a secure, application-specific interface between
the Twister platform and the various electronic communication channels, such as
personal computers, mobile telephones, call centers, personal digital
assistants and WebTV. Client requests are interpreted and transferred in the
acceptable format to the appropriate Twister application components. Currently,
the standard Twister gateways include:
. X.Presso 3.5, which provides a secure 128-bit encrypted Internet
connection;
. SMS and WAP gateways, which integrate Twister with the mobile telephone
industry Short Message Service standard and with the wireless
application protocol that enables mobile telephones to provide services
similar to the World Wide Web;
. OFX, HBCI and Star Money gateways, which integrate Twister with the U.S.
banking industry Open Financial Exchange or OFX standard, the German
banking industry alternative Home Banking Computer Interface or HBCI
standard and the Star Money Personal Finance Management;
. COM, which integrates Twister with the Microsoft Component Object Model-
based software applications;
. SAP R/3, which integrates Twister with the SAP R/3 enterprise resource
planning system;
. SET, which allows Twister to be used for the reception of Secure
Electronic Transaction messages for payment transactions; and
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. Interactive Voice Response, which allows Twister to be connected to
interactive voice systems, which are an integral part of call centers.
Twister accessors are preconfigured software modules that provide access to
the various elements of a business' computer systems. Using accessors, business
functions or objects existing in such elements can be extracted and then
recombined as required. These extracted functional modules can be used in the
business' specific applications and thus, simultaneously, on various electronic
communication channels. Currently, our standard Twister accessors include
Oracle 7, Oracle 8, Informix, Sybase, MS SQL Server, DB/2, SAP R/3, BTX, MQ
Series, Mail LDAP, S.W.I.F.T., Kordoba, Reuters, and Micrologica Call Center
Connector. These accessors form the basis for other application-specific
accessors.
Twister application services. We currently provide, as part of our Twister
platform, two software utility applications. These enhance functionalities of
all software applications using Twister to interact with consumers, by allowing
them to provide additional services. Twister application developers can build
on these components when developing further e-business software applications.
Currently, our application services include:
X.Agent provides a combination of telephone counseling and visual support as
a new form of communication. It enables call center and web site functions to
be merged, resulting in a web-based, one-on-one connection between a business
and its customers; and
Vignette Story Server Plugin integrates the Vignette Story Server into our
Twister platform. Vignette Story Server allows businesses to personalize
information provided to targeted customers. Because the integration of Twister
and Vignette solutions involves a standard Twister component, our customers can
quickly offer these personalized services over the Internet. For example, banks
could provide a customer with personalized news, quotes and market events.
Twister Development Tools
In order to enable our customers and distribution partners to more easily
develop their customized software applications, we have developed:
Twister Development Toolkit, which enables our business partners and our
customers to easily develop additional Twister components--either gateways or
accessors--to connect to application- or industry-specific communication
channels or back-end systems; and
Twister Component Builder for SAP R/3, which enables automatic generation of
software applications for SAP R/3, a widely used enterprise resource planning
system, to achieve a seamless integration of SAP R/3 modules into existing
information technology environments on a technical and business level.
Twister Applications and Packages
We plan to offer our Twister platform with a variety of standardized
software applications. Because of Twister's modular architecture, these
applications will be capable of being freely combined to facilitate access to
additional electronic communication channels.
Brokerage and Banking. As part of the standardized application packages for
e-brokerage services, we will offer integrated components for brokerage service
providers on the basis of the Twister platform. These components will
complement the financial institution solutions that we have marketed to banks.
The brokerage modules will include functions such as portfolio management and
analysis, securities trading and reporting services. These functions will,
among other things, enable clients to be informed automatically by the software
that a transaction is ready to be effected, subject to the client's
authorization. For example, a brokerage firm client can be notified by this
application when a previously designated price for a security has been reached.
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We are developing these application packages on the basis of our experience in
the e-banking sector, together with the expertise and specialized banking
products that we gained through the acquisition of Fernbach Financial Software
S.A.
Cash Management. Through our acquisition of TST, we have acquired cost-
effective applications that allow banks to provide cash management services to
their middle market and small business customers. We are in the process of
securing full compatibility of these stand-alone applications with our Twister
platform. Our Internet-based cash management products currently offered
include: balance reporting, stop payments, money market investment services and
account transfers. Our customers using this application include six of the
largest twenty U.S. banks: Bank of America, The Chase Manhattan Bank, SunTrust,
Wells Fargo, U.S. Bank and First Union Bank.
Payment. X.PAY provides a modular-built payment system based on Twister. It
supports the current standard for electronic payments, provides convenient user
guidance, permits the use of all methods of electronic payments and is
certified for use with the Secure Electronic Transmission messages standard.
X.PAY supports the processing of direct debit payments as well as payments by
credit or debit cards. Our customers using this application include Pago
International and TeleCash, German electronic payment system providers; DBS, a
Singapore bank; and the Swiss Postfinance.
To simplify the marketing of Twister, we have preconfigured several gateways
and accessors. These provide specific, standardized solutions for banks,
brokerage firms and insurance companies.
X.PRESSO security package 3.5 is a secure online gateway for Twister that
allows for highly secure data exchange over the Internet between businesses
using Java based applications and their clients. This gateway is compatible
with widely accepted web servers such as Netscape Enterprise Server, Microsoft
Internet Information Server and Stronghold. The X.PRESSO security package can
optionally provide 128-bit encryption for the communication with the X.PRESSO
Java classes. The security protocol SSL 3.0 (Secure Sockets Layer) allows
secure communication. The security features of this gateway support encryption,
message integrity, and client and server authentication. In 1998, the German
Federal Authority for Security of Information Technology certified the security
features of the X.PRESSO security package 1.3. In addition, on July 15, 1997,
the U.S. Department of Commerce, Bureau of Export Administration, granted to us
an export license for the X.PRESSO security package, pursuant to which we may
distribute this product worldwide from the United States. This export permit
will expire on July 31, 2001 unless renewed or extended. Furthermore, we were
granted a license exception for the X.PRESSO Transaction Applets, one of the
components of this gateway. Finally, on December 2, 1998, the French
governmental body SCSSI (Service Central de la Securite des Systemes
d'Information) authorized the so-called "collective" use of the X.PRESSO
security package 1.3 by French financial institutions. This authorization will
expire on November 27, 2003 unless renewed or extended. (See "Risk Factors--
Certain of our operations are, or may become, regulated by different
governmental agencies, which require our products and activities to comply with
their rules and procedures").
X.HBCI Banking is a gateway that supports the Home-Banking Computer
Interface or HBCI-standard, standard protocol for home-banking recently adopted
by the German banking industry as an alternative to OFX, a U.S. banking
standard for the electronic exchange of financial information developed by
Checkfree, Intuit and Microsoft. X.HBCI Banking allows customers to make
transfers, balance inquiries, standing orders and fixed-term deposits; to
obtain security account balance information; to transfer orders abroad; to
schedule appointments and to order bank forms. Additional services may easily
be added due to its modular architecture. In addition, X.HBCI Banking supports
current industry standards for authentication, safeguarding of integrity of
transactions and encryption.
X.OFX Banking is a platform-independent software application that supports
the Open Financial Exchange or OFX-standard Version 1, the U.S. home e-banking
standard jointly developed by Checkfree, Intuit and Microsoft in cooperation
with several U.S. banks. OFX provided a uniform interface for bank customers as
well as developers of home-banking software for communication with financial
services providers.
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Services
We provide two types of services: professional services and customer
support.
Professional Services
Our professional services include: project-oriented consulting, design and
programming services in connection with the integration of a company's
information technology systems with various electronic communication channels.
In the initial phase, we advise companies with respect to the feasibility and
range of potential projects. Thereafter, we adapt our products to our
customers' individualized needs. During the installation phase, we adapt the
customers' information technology systems to enable the connection to
electronic communication channels and, to the extent necessary, we further
improve such systems. Our professional services staff works closely with our
various product divisions.
Customer Support
We offer various types of customer support services. Under our standard
service contracts, we offer world- wide support for the users of our standard
software, our customized software products, and software products provided by
third parties that are based on our products. We provide companies with
software updates. Software problems are diagnosed online and maintenance work
is performed at the company's premises. Our training center supports companies
and our distribution partners in the training of their help desk employees,
system administrators and system integrators, all of whom must have an
understanding of our products. Following the installation of our software, we
provide a framework for defining operating procedures, developing surveillance
systems for systems operators and implementing fault information systems.
Marketing
Our marketing efforts are directed at rapid global market penetration in
order to establish Twister as the worldwide standard for conducting e-business
operations. We intend to use our position as a recognized brand name in the e-
banking market to establish a presence in other markets for e-finance services
as well as other e-business sectors.
We rely on a strategy of reference marketing to develop new clients. When
entering into a market, our sales staff concentrates on the acquisition of key
customers and projects. Since businesses intending to offer products and
services through electronic communication channels typically are looking for
quick and easy-to-install applications, in the initial marketing phase we
concentrate on presenting industry specific applications to key participants in
the relevant industry sector. We emphasize flexible access to the entire range
of electronic communication channels at a reasonable cost. Once key
participants and projects are acquired, we use a more comprehensive marketing
campaign to attract other customers using our existing clients as reference.
In our broader marketing campaigns, we focus on two levels. First, we
emphasize the immediate (mostly technological) benefits of using our platform
and applications for the speedy deployment of mission-critical e-business
solutions. Second, we focus, based on our in-depth understanding of the end-
user's (i.e., consumer's) ultimate needs, on the business opportunity and cost
savings that our products have the potential to offer.
To broaden our brand name recognition, we use a variety of channels,
including advertising in print media, participation in key industry trade shows
and our web site. We currently target all market segments of e-finance, such as
retail banking, brokerage, corporate banking, payment, and insurance industry.
Banking sector (corporate banking and retail banking). The last decade has
been characterized by a fundamental change in the financial services industry.
The widespread use of fixed line and mobile telephones, personal digital
assistants and personal computers, as well as the emergence of the so-called
executable-content-technologies such as Java and ActiveX, enable banks to make
greater use of electronic communication
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channels. These channels allow banks with the opportunity to provide more
efficient and convenient banking services, at reduced costs. While the cost per
banking transaction processed by a branch of a bank was estimated at around
$1.07, transactions settled through telephone are estimated at 54 cents and
transactions completed via the Internet are estimated at 1 cent. As new
competitors, relying on electronic channels--such as Interactive Voice Response
and Internet Banking--offer cost-efficient products, and are thus in a position
to compete with established financial institutions, the pressure to use new
channels is expected to increase.
We have benefitted from this trend in Germany and intend to establish a
strong market position in other regional markets, such as other areas of Europe
and in Asia.
Brokerage services. The market for e-brokerage services in Europe is still
developing. To take advantage of the future opportunities in this market, we
are developing a comprehensive brokerage services application package that will
provide individual investors to enjoy the same trading and analysis
capabilities that are now generally available in Europe only to institutional
investors.
Cash Management. We expect to see a fundamental change in how businesses
will conduct cash management activities. In 2004, the business market for cash
management systems is expected to reach $80 billion. In offering cash
management products, we have focused to date primarily on the United States,
where we used the acquisition of a cash management software developer as the
vehicle for our entrance into the U.S. e-services market. We intend to
capitalize on the experience and knowledge acquired in the U.S. market and
penetrate other regional markets for cash management software.
Payment services. With the increasing adoption of electronic payment, we
expect a growing demand for further improvement of the payment infrastructure.
Consequently, we expect that the number of businesses using our X.PAY product
will also increase.
Insurance industry. We believe that competitive pressures in the insurance
sector will stimulate the online distribution of insurance services. The costs
to insurance companies in advising clients and entering into insurance
contracts have been estimated at being 20% lower when effected via the Internet
than when effected via traditional channels. Accordingly, we expect that the
demand for our products in this industry sector will increase.
Distribution and Sales
We distribute our products in three regions: Europe, Middle East and Africa
(EMEA); the Asia-Pacific region; and North America. Within each region, we have
established sales offices or subsidiaries. On February 1, 2000, our sales
organization included 59 sales representatives, managers and pre-sale support
staff. Our sales personnel is located in Germany, the United States,
Luxembourg, the United Kingdom, Austria, the Netherlands, France, Sweden,
Switzerland, Singapore, Hong Kong, Australia and Japan.
In addition to direct sales and joint ventures, we also use distribution
partners to market and sell our products. Our distribution partner programs are
managed from our headquarters in Stuttgart as well as through our local sales
operations. Our distribution partners include:
. Twister System Integrators and Solution Providers, who offer to our
customers additional services as well as complementary software and
hardware. These providers act as the principal interface with the
business customers up to the delivery of the solution. These providers
also sell Twister licenses and benefits as well as professional services
associated with the Twister implementation;
. Twister Consulting Partners, who offer consulting services in specific
industry sectors. In contrast to Twister solution providers, consulting
partners do not resell Twister products; and
. Twister Application Providers, who are value added resellers and who
integrate their own applications with the Twister platform and develop
new gateways and accessors. Twister application providers
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enhance the Twister platform by adding additional functionalities such
as new processes, functions and industry knowledge. Twister application
providers are able to offer complete e-business solutions by integrating
their applications with Twister using the Twister development tools.
Twister offers them access to a range of electronic communication
channels and back-end connectivity by focusing on their core competence
in developing their applications. They also benefit from Twister's
openness and scalability. The application providers also act as
resellers of Twister products.
We are attempting to develop additional partner programs that will attract
opinion leaders such as consulting or technology companies to broaden the
industry support for our platform.
We will seek to create a network of component suppliers to develop
industry- and region-specific software applications for Twister. Our
distribution partner programs are also directed at establishing lasting
business relationships with suppliers of products complementary to Twister. We
also act as a reseller for the products of our distribution partners. We
receive a selling commission for our reselling activities, the amount of which
is based on the sales volume generated by us.
Our business partners include Sun Microsystems Inc., Hewlett-Packard, IBM
Deutschland Informationssysteme, debis Systemhaus, KPMG, Intershop,
Micrologica, Faktum, Telecash, IDS Scheer, PAGO id2, Siemens Business
Services, Bull Information Systems, Bosch Telecom, Intel, Periphonics, SAP,
Roccade Finance, SOPRA, PricewaterhouseCoopers, Information Mosaic, CMA
Comedia and Deloitte Touche Tomatsu Australia.
Research and Development
Our research and development department consists of the Twister division--
which focuses on the further development of Twister; and the commerce systems
and financial systems divisions--which both focus on the development of
software applications for specific targeted industry sectors. These three
development divisions are responsible for the complete lifecycle of their
product components. These divisions also are responsible for quality
assurance, program management, technical documentation and product management.
The research and development department facilities are located in Germany,
Hungary and the United States. Our expenses for research and development
amounted to approximately DM 8.7 million for the fiscal year ended June 30,
1999; approximately DM 17.6 million for the twelve months ended December 31,
1999; and approximately DM 6.9 million for the twelve months ended December
31, 1998. As of December 31, 1999, our research and development department
employed 189 staff members. In order to ensure the compliance of our products
with market requirements, the department closely cooperates with our
professional services staff as well as with the product marketing unit of our
Marketing department. We generally seek to integrate innovations developed
within the framework of client projects into our standard software products
and thus, attempt to retain intellectual property rights to the broadest
extent possible, and attempt to avoid exclusive licenses to clients for which
specific applications have been developed.
Intellectual Property
Our success and ability to compete depend to a significant degree on our
proprietary technology. We rely primarily on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual
provisions to protect our proprietary rights and information, all of which
afford only limited protection. It is our policy to not allow a third party
access to our confidential intellectual property. Despite our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy
different aspects of our products or obtain and use information that we regard
as proprietary.
Policing unauthorized use of our products is difficult, and while we are
unable to determine the extent to which piracy of our products exists,
software piracy can be expected to be a persistent problem. In addition, the
laws of some foreign countries do not protect our proprietary rights to the
same extent as the laws of the
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United States or the laws of the Federal Republic of Germany. Accordingly, we
cannot assure you that our means of protecting our proprietary rights will be
adequate or that our competitors will not independently develop similar
technology.
Generally, it is our policy to enter into non-disclosure agreements with our
employees, distributors and other business partners and to control and to limit
access to and distribution of our software, documentation and other proprietary
information. However, we cannot assure you that the non-disclosure agreements
would survive a legal challenge to their validity or provide significant
protection. We have not generally executed post-contractual non-competition
agreements with employees, since we believe that such a contractual restraint
would hinder our recruiting efforts.
Patents
We received a patent covering our core Twister technology from the German
Patent Office (Deutsches Patentamt) on May 31, 1999. We filed a subsequent
patent application for this technology with the United States Patent Office on
February 2, 1999, which is pending.
On October 28, 1997, we filed a patent application in Germany regarding our
methodology for digital authentication of messages sent via telephone networks
(SMS banking). On December 28, 1999, we applied for registration of a utility
model (Gebrauchsmuster) under German law to protect our technology for the
process of validating e-business transactions. Both applications are currently
pending.
We cannot assure you that our patent would survive a legal challenge to its
validity or provide significant protection. Also, we cannot assure you that we
will be issued patents pursuant to any of our currently pending applications.
Trademarks
In Germany, we have registered or applied for registration of the following
trademarks: Twister, BROKAT, X.PRESSO Security Package, X.PRESSO (without
addendum), X.Agent, X.PAY, X PAY and XPAY (in each case a word-trademark) and
the BROKAT logo (a word/device-trademark). Most of these trademarks have also
been registered or filed in central and western Europe as well as the United
States, Canada, Singapore, Australia, Japan, Malaysia and Thailand. In
addition, we have filed an application for a community mark for the esign
word/device trademark with the EU Office for Harmonization in the Internal
Market.
Licenses
For the development and production of our products, we currently use two
licenses in respect of RSA and IDEA, encryption algorithms commonly used in the
industry. Pursuant to the licensing agreements, the licensors are not entitled
to terminate the agreements as long as we pay the agreed licensing fees and are
not in breach of any other contractual arrangements. In addition, encryption
algorithms may also be drawn from other sources.
We generally do not provide exclusive licenses to use our products. We issue
exclusive licenses for client- specific adaptation programming only if the
relevant adaptations are in fact so client-specific that they could not be put
to use in relation to other clients.
Coexistence Agreements and Other Intellectual Property Matters
We have entered into a coexistence agreement with RSL COM, a parent company
of Twister Communications Network, a company located in the United States which
is active in the call-back business. The agreement allows us to use the Twister
trademark in our software business and in the field of mobile digital
signatures.
The Twister trademark is in conflict with the "Type Twister" trademark
registered by Adobe Systems for desktop publishing purposes. We have negotiated
a coexistence agreement, but it has not yet been signed by Adobe.
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<PAGE>
Following objections from France Telecom and co-ex GemPlus, our X.PRESSO
trademark application with the competent European Union authority has been
temporarily suspended. We are currently in the process of negotiating a
coexistence agreement.
Following objections from ESIGN AG, a German company active in the
development of video screen three-dimensional solutions, our esign trademark
application in the EU Office for Harmonization in the Internal Market has been
temporarily suspended. We are attempting to negotiate a coexistence agreement.
Except as discussed above, we are not aware that any of our products
infringe upon the proprietary rights of third parties. We cannot assure you,
however, that third parties will not claim infringement by us with respect to
current or future products. We expect that software product developers will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. Any such claims with or without merit,
could result in costly litigation that could absorb significant management time
or cause product shipment delays, as well as delays in the marketing and sales
of our products which could have a material adverse effect upon our business,
financial condition and results of operations. Such claims might require us to
enter into royalty or licensing agreements which may not be available on terms
acceptable to us or at all, which could have a material adverse effect upon our
business, financial condition and results of operations. (See "Risk Factors--
Others may claim that we infringe their intellectual property").
Competition
The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Our products are targeted at the emerging
market for e-business software and our competitors are diverse and offer a
variety of solutions directed at various segments of the e-business market. We
distinguish ourselves from the majority of our competitors by a combination of
factors, which include the simplicity, security, reliability, scalability and
openness of our products. However, we expect the competition in the market for
e-business software from existing and new software developers to grow further.
We compete with suppliers of e-business software platforms and software
applications. In addition, our potential clients may develop their own e-
business solutions.
Our main competitors include:
. Platform developers such as BEA Systems Inc., New Era of Networks Inc.,
IBM and Tibco Finance Technology Inc.; and
. Application developers such as BroadVision, Inc., Open Market, Inc. and
S-1 Corporation.
Several competitors have longer operating histories, greater financial,
technical, marketing and other resources, greater name recognition and a larger
installed base of customers than we do. Our competitors have, and other
potential competitors may have, well-established relationships with current and
potential customers and strategic partners of ours, extensive knowledge of the
e-business software industry and the resources to enable them more easily to
offer a single solution. As a result, these competitors may be able to respond
more quickly to new or emerging technologies and changes in customer
requirements, or to devote greater resources to the development, promotion and
sale of their products, than can we.
We also expect that competition will increase as a result of software
industry consolidation. In addition, current and potential competitors have
established or may establish cooperative relationships among themselves or with
third parties to increase the ability of their products to address the needs of
our prospective customers. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could have a material adverse
effect on our business, financial condition
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<PAGE>
and operating results. We cannot assure you that we will be able to compete
successfully against current and future competitors or that competitive
pressures faced by us will not materially and adversely affect our business,
financial condition and results of operations. See "Risk Factors--The markets
for our products are highly competitive".
Employees
We employed the following number of employees as of June 30, 1997, 1998 and
1999 and December 31, 1999:
<TABLE>
<CAPTION>
As of June 30, As of
-------------- December 31,
Category 1997 1998 1999 1999
-------- ---- ---- ---- ------------
<S> <C> <C> <C> <C>
Professional Services............................... 50 97 186 217
Sales and Marketing................................. 19 39 98 120
Research and Development............................ 11 72 178 189
Finance and Administration.......................... 13 25 50 62
--- --- --- ---
Total............................................. 93 233 512 588
=== === === ===
</TABLE>
Of the total number of our employees, as of December 31, 1999, 401 are
located in Germany, 53 are located in Europe (outside Germany), 99 are located
in North America and 35 are located in the Asia/Pacific region.
Real Property
We do not own any real estate, but lease all of our facilities. Our
principal administrative, research and development, marketing and sales
facilities total approximately 8,245 square meters and are located in one
building in Stuttgart, Germany. In addition, we have research and development
facilities near Atlanta in the United States, and administrative, sales,
marketing and customer service facilities near Atlanta in the United States;
Dolzig, Paderborn, Munich, Cologne and Wilhelmshaven, Germany; Singapore;
Luxembourg; London, United Kingdom; Zurich, Switzerland; Vienna, Austria;
Budapest, Hungary; Sydney, Australia; Hong Kong, China; Tokyo, Japan; Paris,
France; Stockholm, Sweden; and Tel Aviv, Israel.
Legal Proceedings
We are not a party to any legal proceedings, the adverse outcome of which,
individually or in the aggregate, would have a material adverse effect on our
business, operating results and financial condition.
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MANAGEMENT
In accordance with German law governing a stock corporation
(Aktiengesellschaft or AG), we have a Management Board (Vorstand) and a
Supervisory Board (Aufsichtsrat). The two boards are separate and no individual
may simultaneously be a member of both boards.
In carrying out their duties, members of both the Management Board and the
Supervisory Board must exercise the standard of care of a diligent and prudent
businessperson. In complying with such standard of care, board members must
take into account a broad range of considerations, including our interests and
those of our shareholders, employees and creditors. In addition, the members of
the Management Board are personally liable for certain violations by our
company under the Stock Corporation Act (Aktiengesetz, the "Stock Corporation
Act").
Management Board
The present members of our Management Board, their ages, current positions
and terms of appointment are as follows:
<TABLE>
<CAPTION>
Member
Name since Term expires Age Current Position
---- ------ ----------------- --- ----------------------------
<S> <C> <C> <C> <C>
Mr. Stefan Rover........ 1994 February 28, 2003 34 Chief Executive Officer and
Management Board
Spokesperson
(Vorstandssprecher)
Dr. Boris Anderer....... 1994 February 28, 2003 41 Management Board Co-
Spokesperson
(Co-Vorstandssprecher)
Mr. Michael Janssen...... 1996 February 28, 2003 33 Management Board Member
(Vorstandsmitglied) and
Chief Financial Officer
Mr. Achim 1994 February 28, 2003 34 Management Board Member
Schlumpberger.......... (Vorstandsmitglied) and Head
of Twister Development
Division
Mr. Michael Schumacher.. 1994 February 28, 2003 38 Management Board Member
(Vorstandsmitglied) and Head
of Financial Systems
Division
Mr. Angelo Maestrini.... 1999 October 1, 2003 39 Management Board Member
(Vorstandsmitglied) and
Chief Operating Officer
</TABLE>
Stefan Rover is our Chief Executive Officer and Spokesperson
(Vorstandssprecher) of the Management Board. Mr. Rover is in charge of the
implementation of our strategic goals and corporate communications. He studied
business administration and law. As a student, he worked as an independent
systems developer. In 1992, he founded Rover Software GmbH where he was
responsible for software consulting and project management until 1995. Mr.
Rover has been one of the managing directors of our company since 1994.
Dr. Boris Anderer is the Co-Spokesperson (Co-Vorstandssprecher) of the
Management Board. He is responsible for the strategic development of our
company and for implementing special projects, such as our current contemplated
expansion of the United States operations. Dr. Anderer is a graduated
physicist. On a scholarship from the Kernforschungszentrum Karlsruhe he
received a doctorate in physics in 1989. Dr. Anderer was employed between 1990
and 1994 as a management consultant at McKinsey & Company. He has been one of
our managing directors since 1994.
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Michael Janssen is a member of the Management Board (Vorstandsmitglied) and
has served as our Chief Financial Officer since 1996. Mr. Janssen has a masters
degree in business. Both before and during his formal studies in Tubingen and
the United States, he was trained as a bank apprentice and was employed as the
assistant to the managing director at the Direkt Anlage Bank GmbH and the Hypo
EDV Dienstleistungen fur Banken GmbH.
Achim Schlumberger is a member of the Management Board (Vorstandsmitglied)
and the head of the Twister development division. Mr. Schlumpberger is a state
certified computer scientist and first worked as a computer consultant. In
1989, he became an independent systems analyst through the sole proprietorship
"AS Systemanalysen." He has been one of our managing directors since 1994.
Michael Schumacher is a member of the Management Board (Vorstandsmitglied)
and the head of the financial systems division. He is a graduated medical
computer scientist. After completing his university degree, he became an
independent computer consultant and systems analyst in 1990. He has been one of
the managing directors of our company since 1994.
Angelo Maestrini is a member of the Management Board (Vorstandsmitglied) and
has served as our Chief Operating Officer since October 1999. He is responsible
for all customer-related business activities, comprised of sales, marketing,
professional services and customer support, and, in particular, for the
establishment and management of our international business. Prior to joining
our company, Mr. Maestrini was Senior Vice President (International) at Optika
Inc., a leading United States provider of e-commerce solutions.
The Management Board is responsible for managing our day-to-day business in
accordance with the Stock Corporation Act, our articles of association
(Satzung, the "Articles of Association") and the rules of procedure for the
conduct of the affairs of the Management Board (the "Rules of Procedure")
adopted by the Supervisory Board. In the Rules of Procedure, the Supervisory
Board set forth the allocation of responsibilities of the members of the
Management Board and provided a list of important issues and important matters
which require the Supervisory Board's prior consent, such as borrowing or
lending of material amounts, participation in joint ventures, making
investments in other enterprises, the establishment of subsidiaries and
transactions involving a change in control of our company.
The Supervisory Board has the power to determine, appoint and remove members
of the Management Board in accordance with the Stock Corporation Act. The
members of the Management Board are appointed by the Supervisory Board for a
maximum term of five years. They may be re-appointed or have their term
extended for additional five-year terms. The Supervisory Board may remove a
member of the Management Board prior to expiration of his term if he commits a
serious breach of duty or is incapable of carrying out his duties or if there
is a bona fide vote of no confidence at the shareholders' meeting.
If only one member of the Management Board is appointed, then he or she
alone will represent us. If more than one Management Board member is appointed,
then we shall be represented jointly by two Management Board members or by one
Management Board member acting together with the holder or holders of a special
power of attorney (Prokura). Recently, our Management Board has designated
several employees of our company to be granted such a special power of
attorney. Pursuant to the Articles of Association, the Supervisory Board may
grant sole power of attorney to one, to several, or to all members of the
Management Board.
The Management Board must report regularly, and in no event, less than once
every quarter, to the Supervisory Board. However, certain information on the
status of our business must be reported on a monthly basis. Under the Articles
of Association, the Management Board is generally required to report on the
current status of our business and business prospects, as well as on any issues
of fundamental or unusual concern. The Supervisory Board is also entitled to
request special reports at any time.
Our Management Board consists of six members. The members of the Management
Board can be contacted at our offices in Stuttgart.
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Supervisory Board
The current members of the Supervisory Board, their ages, the expiration of
their terms and principal occupations are as follows:
<TABLE>
<CAPTION>
Name Member since Term expires Age Function Principal Occupation
---- ----------------- ------------- --- -------- ---------------------
<S> <C> <C> <C> <C> <C>
Mr. Falk F. Strascheg... April 1, 1998 May 2002 59 Chairman Managing director
Technologieholding VC
GmbH Munich
Dr. Hermann Wundt....... April 1, 1998 May 2002 56 Deputy Attorney at law, Tax
Chairman advisor, Accountant
Mr. Ernst G. Mayer...... April 1, 1998 May 2002 46 Member Managing director,
Technologie
Beteiligungs-
Gesellschaft mbH
Prof. Dr. Wolfgang May 5, 1998 May 2002 48 Member Professor of business
Konig.................. administration,
Universitat Frankfurt
am Main
Ms. Angelika Pohlenz.... April 1, 1998 May 2002 51 Member Secretary General,
International Chamber
of Commerce
Dr. Peter Page.......... November 18, 1999 November 2003 60 Member Consultant, Former
Management Board
member of Software AG
and Siemens AG
</TABLE>
The principal function of our Supervisory Board is to advise and supervise
the Management Board without being involved in the conduct of day-to-day
transactions. The Supervisory Board has comprehensive monitoring functions. In
addition, it is also responsible for appointing and removing the members of the
Management Board. Although the Supervisory Board may not make management
decisions, it may determine that certain types of transactions require its
prior consent, and the Rules of Procedure provide that certain affairs,
operations and major transactions, such as large capital expenditure items,
require the prior consent of the Supervisory Board. To ensure that the
functions of the Supervisory Board are carried out properly, the Management
Board must, among other things, regularly report to the Supervisory Board with
regard to current business operations and future business planning.
According to the Articles of Association, the Supervisory Board consists of
six members elected by a majority of our shareholders at a shareholders'
meeting in accordance with the provisions of the Stock Corporation Act. The
members of the Supervisory Board are each elected for a fixed term of
approximately five years, unless the shareholders' meeting determines a shorter
tenure for particular members or for all members elected. Such term expires at
the shareholders' meeting to approve the actions taken by the Supervisory Board
during the fourth fiscal year following its members' election. However, the
fiscal year in which the term commences is not counted for such purposes.
Supervisory Board members may be re-elected by a majority of the shareholders.
Except for Dr. Page, whose term expires in 2003, the current members of the
Supervisory Board are subject to re-election in fiscal 2002.
A member of the Supervisory Board may be removed by the shareholders by a
majority of at least three quarters of the votes cast at a duly held
shareholders' meeting. The Supervisory Board appoints a chairperson and one or
more deputy chairpersons from among its members for the current term of office
following the shareholders' meeting at which the Supervisory Board members were
elected. The election of the chairperson and deputy chairpersons is held at a
non-specially convened meeting in accordance with the provisions of the Stock
Corporation Act. The election of the chairperson and the first deputy
chairpersons requires a majority
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<PAGE>
vote. Should the chairperson or the deputy chairpersons resign from their
position before the end of their tenure, the Supervisory Board shall hold a new
election for the statutory term of office remaining after the resignation.
Unless otherwise provided for by applicable law, resolutions of the
Supervisory Board are passed by a simple majority of the votes cast. A majority
of the Supervisory Board members must be present at such Supervisory Board
meeting in order to constitute a quorum. If a Supervisory Board vote results in
a tie, then the vote of the Supervisory Board's chairman shall be decisive.
The members of our Supervisory Board can be contacted through our offices in
Stuttgart.
Management and employee incentive arrangements
Compensation
The aggregate amount of compensation paid by us to the members of our
Management Board in the six months ended December 31, 1999 amounted to
approximately DM 770.0 thousand. Between 20% and 25% of the total remuneration
paid to the members of the Management Board depends on their achievement of
performance targets, which are defined by certain qualitative criteria, as well
as our sales and profit. These targets are set by the Supervisory Board, in
accordance with German law, on an annual basis.
The Supervisory Board is also compensated for its activities. The Articles
of Association provide that, at the end of each year, each member of the
Supervisory Board receives an adequate remuneration in addition to
reimbursement of expenses. The May 7, 1998 shareholders' meeting passed a
resolution to fix the aggregate remuneration of the Supervisory Board at DM
70.0 thousand. Value added tax shown in an invoice by, or a credit to, a
Supervisory Board member is credited or reimbursed by our company at the
statutory rate applicable from time to time. The total compensation for our
current Supervisory Board for the six months ended December 31, 1999 amounted
to DM 35.0 thousand.
Annual bonus scheme
All of the members of the Management Board and all of our employees receive
part of their salary in bonuses tied to revenue or other achievement targets.
Employee stock option plans
Presently we have two employee stock option plans. The members of the
Management Board and the Supervisory Board are not entitled to participate in
these programs. The stock option plans were introduced as an additional
incentive tool. They are also means of attracting and retaining experienced
personnel and promoting our success by providing employees the opportunity to
acquire common stock.
On September 16, 1998, under our 1998 stock option plan, we have issued to
our employees options to acquire approximately 1.2 million shares of our common
stock. The option rights entitle the bearer to purchase our shares at a price
of DM 21.33 per share, and vest in three installments approximately after two,
three and four years.
On December 15, 1999, under our 1999 stock option plan, we have issued to
our employees options to acquire approximately 1.2 million shares of our common
stock. The option rights entitle the bearer to purchase shares in the company
at a price of DM 65.85 per share, and vest in three installments approximately
after two, three and four years.
Under both plans the options can only be exercised, if at certain specified
dates, the increase in the value of our stock--based on a comparison of the
average price of the shares during the last five trading days before
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the first exercise period against the strike price of the options--at least
equals the performance of the Neuer Markt index.
Moreover, our principal investors have issued 200,460 option rights for the
purchase of our shares from their private holdings to several senior employees
of our company. These rights entitle the bearer to purchase shares at DM 4.15
per share. The options have been negotiated in February 1998, granted in August
1998, and vest ratably at the end of each of the next four years following the
date of grant. There is no performance criteria for these options.
In the course of the fiscal year ended June 30, 1999, the employees of one
of our subsidiaries were given options to acquire our shares. These options
were not granted by us, but pro rata by our shareholders using their own
shares.
Former management shareholders of an affiliated company have issued options
for a portion of the BROKAT shares received in consideration of all of their
shares of the affiliated company ("ME Plan"). These options were issued to the
present employees of the affiliated company on July 26, 1999 per share, and
entitle the holders to purchase up to 135,150 of our shares from the
shareholders at a purchase price of DM 21.33 per share. The options vest
ratably after approximately 1.5, 2.5 and 3.5 years and can only be exercised if
similar performance criteria to the 1998 and 1999 options are met.
All options from all programs not exercised after the last vesting period
will expire.
As of December 31, 1999, none of the outstanding options was exercisable.
The options are scheduled to become exercisable between March 2000 and June
2004.
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CERTAIN TRANSACTIONS AND RELATIONSHIPS
License agreement with Fernbach Software S. A.
Effective December 30, 1999, we entered into a license agreement with
Fernbach Software S.A. The purpose of the license agreement is to give us the
right to market the computer programs offered by Fernbach. The license is
restricted to specific programs up to a value of DM 3.0 million; for each item
ordered, we will be given a discount of 50% on the list price. In return, we
paid a license fee of DM 3.0 million.
The pre-paid purchase commitment of DM 3.0 million has been shown as a
current asset even though all purchases under this agreement may not be made
during the next twelve months. This pre-paid license fee will then be recorded
as an expense in the respective fiscal year in which the license programs were
acquired.
Transaction Software Technologies, Inc.
Before the date of our acquisition of TST, our company recognized sales with
TST for software license of DM 753.0 thousand in the year ended June 30, 1999.
No such sales were recognized in the year ended June 30, 1998.
MeTechnology Europe GmbH
MeTechnology Europe GmbH is a 100% subsidiary of MeTechnology AG, Leipzig.
Before the acquisition date of MeTechnology AG, we recognized sales with
MeTechnology Europe GmbH for software license of DM 3.0 million in the year
ended June 30, 1999. No such sales were recognized in the year ended June 30,
1998.
Haver & Mailander
The Stuttgart law firm Haver & Mailander regularly performs services for our
company. The wife of our Chief Executive Officer works there as a partner. In
her capacity as partner of the firm, Dr. Rover is not, however, involved in the
matters relating to our company. Charges for services performed by Haver &
Mailander for the six months ended December 31, 1999 amounted to DM 251.0
thousand; for the year ended June 30, 1999 DM 301.0 thousand; and for the year
ended June 30, 1998 DM 2.0 thousand; while for the year ended June 30, 1997
there were no charges for services performed.
Tax advisory firm RWT Reutlinger Wirtschaftstreuhand GmbH and the related law
firm Rechtsanwaltsgesellschaft RWT Anwaltskanzlei GmbH (RWT)
RWT regularly provides tax advice to us. The managing partner of RWT is the
deputy chairman of our Supervisory Board, Dr. Hermann Wundt. Charges for
services by RWT to us for the six months ended December 31, 1999 amounted to DM
53.0 thousand; for the year ended June 30, 1999 DM 351.0 thousand; for the year
ended June 30, 1998 DM 62.0 thousand; and for the year ended June 30, 1997 DM
88.0 thousand.
Our management believes that these related party transactions were under
terms no less favorable to us than those arranged with other third parties.
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PRINCIPAL SHAREHOLDERS
Our authorized share capital consists of 42,658,412 shares of common stock,
of which 27,311,184 shares were issued and outstanding as of May 22, 2000.
Shares issued and outstanding have an equivalent par value of DM 1.96
((Euro) 1.00).
Our common stock trades on the Neuer Markt segment of the Frankfurt Stock
Exchange under the symbol "BRJ."
The table below sets forth contain information regarding the beneficial
ownership of the issued and outstanding shares of our common stock for: each
person who owns more than 10% of our common stock; and for members of our
Management Board as a group.
<TABLE>
<CAPTION>
Amount Percent of
Identity of Person or group Owned Class
--------------------------- --------- ----------
<S> <C> <C>
Members of the Management Board as a group........... 8,946,097 32.7%
</TABLE>
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DESCRIPTION OF THE NOTES
General
For purposes of this section, references to the "Company" include only
BROKAT Infosystems AG and not its Subsidiaries. All references in this section
to "Notes" shall be deemed to refer collectively to the original notes and the
exchange notes, unless the context otherwise requires. You can find the
definitions of certain capitalized terms used in this section under the
subheading "Certain Definitions."
The Company issued the original notes and will issue the exchange notes
under an Indenture between itself and The Bank of New York, as Trustee. The
terms of the notes include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act. Copies of the Indenture
are available as set forth under the caption "Where You Can Find More
Information."
The following description is a summary of the material provisions of the
Indenture. It does not restate the Indenture in its entirety. We urge you to
read the Indenture because the Indenture, and not this description, defines
your rights as an owner of an interest in notes.
The original Notes were and the exchange notes will be issued in fully
registered global form only, without coupons, in denominations of Euro 1,000
and any integral multiple of Euro 1,000, except that Notes in definitive form
may be issued in certain limited circumstances, as described under the caption
"Form of the Notes, Clearance and Settlement." Any original notes that remain
outstanding after the completion of the Exchange Offer Rights Agreement,
together with the exchange notes issued in connection with the Exchange Offer,
will be treated as a single class of securities for all purposes under the
Indenture, including, without limitation, waivers, amendments, redemptions,
Change of Control Offers and Asset Sale Offers. The registered Holder of a note
will be treated as its owner for all purposes.
The Notes
The notes are general unsecured senior Indebtedness of the Company.
The notes are limited in aggregate principal amount to Euro 125 million, all
of which is being issued in this offering. The notes will mature on March 31,
2010 and will be repaid at maturity at their principal amount unless previously
redeemed. Interest on the notes will accrue and be payable in cash at a rate of
11 1/2% per annum semiannually in arrears on March 31 and September 30 of each
year, commencing September 30, 2000 to Holders of record on the immediately
preceding March 15 and September 15.
Payments
Interest will accrue from the most recent date to which interest has been
paid on such notes or, if no interest has been paid, from the date of original
issuance of such notes. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months. Principal, interest and premium, if
any, on the notes will be paid at each office or agency of the Company
maintained for such purpose or, at the option of the Company, payment of
interest and premium, if any, may be made by check mailed to the Holders of the
notes at their respective addresses set forth in the register of Holders of
notes and, as long as notes are listed on the Luxembourg Stock Exchange,
payments of principal of the notes will be made upon presentation and surrender
of the notes at the office of the paying agent in Luxembourg; provided that all
payments of principal, interest and premium, if any, with respect to notes the
Holders of which have given wire transfer instructions to the Company will be
required to be made by wire transfer of immediately available funds to the
accounts specified by such Holders. Until otherwise designated by the Company,
the Company's office and agency, registrar, paying agents and transfer agents
under the Indenture will be as set forth on the back cover page of this
prospectus.
All references in this prospectus or the Indenture to payments on or in
respect of principal of, premium, if any, and interest on the notes, shall be
deemed to include applicable Additional Amounts and Liquidated Damages, if any.
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Ranking and Security
The notes will be senior Indebtedness of the Company. The notes will rank
equally in right of payment with all existing and future senior Indebtedness of
the Company and will rank equally among themselves. The notes will rank senior
in right of payment to any existing and future subordinated Indebtedness of the
Company.
The notes are unsecured. As such, they will be effectively subordinated in
right of payment to any of the Company's secured Indebtedness to the extent of
the assets serving as security for such secured Indebtedness. See "Risk
Factors--Our secured debt will have priority over the notes."
A significant portion of the operations of the Company is conducted through
its Subsidiaries. As such, the Company depends in part on the cash flow of its
Subsidiaries to meet its obligations, including its obligations under the
notes. The notes will also be effectively subordinated to all liabilities of
our Subsidiaries, including trade payables of such Subsidiaries. As of December
31, 1999, on a pro forma basis after giving effect to the offering, our
Subsidiaries had no material outstanding Indebtedness other than intercompany
Indebtedness and trade payables. See "Risk Factors--We depend in part on our
subsidiaries to repay our debts."
The Indenture permits us, subject to certain limitations, to incur
substantial additional Indebtedness, including secured Indebtedness to which
the notes would be effectively subordinated. See "Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Equity."
As of December 31, 1999, on a pro forma basis after giving effect to the
offering and the application of the proceeds of this offering, there would have
been:
. no secured Indebtedness of the Company to which the notes would have
been effectively subordinated;
. no amounts available for additional borrowing on a secured basis under
the Senior Credit Facilities, to which the notes would have been
effectively subordinated;
. approximately (Euro) 1.8 million of additional Indebtedness of the
Company ranking equally with the notes; and
. no additional Indebtedness of the Company ranking junior to the notes.
Additional Amounts
All payments made by the Company on the notes will be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of any Relevant Taxing Jurisdiction
unless the withholding or deduction of such Taxes is then required by law. If
any deduction or withholding for, or on account of, any Taxes of any Relevant
Taxing Jurisdiction, shall at any time be required on any payments made by the
Company with respect to the notes, including payments of principal, redemption
price, interest or premium, the Company will pay such Additional Amounts as may
be necessary in order that the net amounts received in respect of such payments
by the holders of the notes or the Trustee, as the case may be, after such
withholding or deduction, equal the respective amounts which would have been
received in respect of such payments in the absence of such withholding or
deduction; except that no such Additional Amounts will be payable with respect
to:
(i) any payments on a note held by or on behalf of a holder or
beneficial owner who is liable for such Taxes in respect of such note by
reason of the holder or beneficial owner having some connection with the
Relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, the Relevant Taxing
Jurisdiction) other than by the mere holding of such note or enforcement of
rights thereunder or the receipt of payments in respect thereof;
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(ii) any Taxes that are imposed or withheld as a result of a change in
law after the Issue Date where such withholding or imposition is by reason
of the failure of the holder or beneficial owner of the note to comply with
any request by the Company to provide information concerning the
nationality, residence or identity of such holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or
reporting requirement, which is required or imposed by a statute, treaty,
regulation or administrative practice of the Relevant Taxing Jurisdiction
as a precondition to exemption from all or part of such Taxes;
(iii) except in the case of the winding up of the Company, any note
presented for payment (where presentation is required) in the Relevant
Taxing Jurisdiction; or
(iv) any note presented for payment (where presentation is required)
more than 30 days after the relevant payment is first made available for
payment to the holder.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the note been the holder of the Note, such beneficial owner would not
have been entitled to payment of Additional Amounts by reason of clauses (i) to
(iv) inclusive above.
Upon request, the Company will provide the Trustee with documentation
reasonably satisfactory to the Trustee evidencing the payment of Additional
Amounts. Holders may obtain, free of charge, copies of such documentation from
the Company and, as long as notes are listed on the Luxembourg Stock Exchange,
from the paying agent in Luxembourg.
The Company will pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
notes or any other document or instrument referred to therein, or the receipt
of any payments with respect to the notes, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside of the Federal Republic of
Germany, the United States of America or any jurisdiction in which a paying
agent is located, other than those resulting from, or required to be paid in
connection with, the enforcement of the notes or any other such document or
instrument following the occurrence of any Event of Default with respect to the
notes.
Redemption
Optional Redemption
The notes will not be redeemable prior to March 31, 2005, except as
described in the following two paragraphs. The notes will be redeemable at any
time at the option of the Company, in whole or in part, upon not less than 30
nor more than 60 days' notice, in cash at the redemption prices, expressed as
percentages of principal amount, set forth below, plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on March 31 of the years indicated below:
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
2005............................................................ 105.750%
2006............................................................ 103.833%
2007............................................................ 101.917%
2008 and thereafter............................................. 100.000%
</TABLE>
Optional Redemption After Qualified Equity Offerings
On any one or more occasions prior to March 31, 2003, the Company may, upon
not less than 30 nor more than 60 days' notice, at its option use the net cash
proceeds of one or more Qualified Equity Offerings to redeem up to 35% of the
aggregate principal amount of the notes originally issued at a redemption price
in cash of 111.50% of the principal amount of such notes, plus accrued and
unpaid interest on such notes to the redemption date; provided that:
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. at least 65% of the aggregate principal amount of the notes originally
issued, excluding notes held by the Company, its Affiliates and its
Subsidiaries, remains outstanding immediately after the occurrence of
such redemption; and
. such redemption shall occur within 60 days of the date of the closing of
such Qualified Equity Offering.
Optional Redemption for Taxation Reasons
The notes may be redeemed, at the option of the Company, in whole but not in
part, at any time upon not less than 30 nor more than 60 days' notice, which
notice shall be irrevocable, at a redemption price equal to the principal
amount of the notes, together with accrued and unpaid interest to the date
fixed by the Company for redemption (a "Tax Redemption Date") and all
Additional Amounts, if any, then due and which will become due on the Tax
Redemption Date as a result of the redemption or otherwise, if the Company
determines that, as a result of (i) any change in, or amendment to, the laws or
treaties or any regulations or rulings promulgated under the laws or treaties
of any Relevant Taxing Jurisdiction affecting taxation, which change in, or
amendment to, such laws, treaties, regulations or rulings becomes effective on
or after the Issue Date, or (ii) any change in or new or different position
regarding the application, administration or interpretation of such laws,
treaties, regulations or rulings, including a holding, judgment or order by a
court of competent jurisdiction, which change, amendment, application or
interpretation becomes effective on or after the Issue Date, the Company is, or
on the next Interest Payment Date would be, required to pay Additional Amounts,
and the Company determines that such payment obligation cannot be avoided by
the Company taking reasonable measures.
Notwithstanding the foregoing, no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Company would be
obligated to make such payment or withholding if a payment in respect of the
notes were then due. Prior to the giving of any notice of redemption of the
notes pursuant to the foregoing, the Company will deliver to the Trustee an
opinion of an independent tax counsel of recognized international standing to
the effect that the circumstances referred to above exist. The Trustee shall
accept such opinion as sufficient evidence of the satisfaction of the
conditions precedent described above, in which event it shall be conclusive and
binding on the holders.
Selection and Notice
If less than all of the notes are to be redeemed at any time, selection of
notes for redemption will be made by the Trustee in compliance with the
requirements of the principal securities exchange, if any, on which such notes
are listed, or, if such notes are not so listed, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate, subject to the
applicable procedures of any clearing organization; provided that no notes of
Euro 1,000 or less shall be redeemed in part. Notices of redemption shall be
given as set forth under "Notices" at least 30 but not more than 60 days before
the redemption date. Notices of redemption may not be conditional. If any note
is to be redeemed in part only, the notice of redemption that relates to such
note shall state the portion of the principal amount thereof to be redeemed. A
new note in principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of the original
note. Notes called for redemption become due on the date fixed for redemption.
On and after the redemption date, interest will cease to accrue on notes or
portions of them called for redemption; provided, that the Company has
deposited with the paying agent for the notes funds necessary to pay the
applicable redemption price under the Indenture.
Mandatory Redemption
There are no mandatory redemption or sinking fund payments with respect to
the notes.
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Change of Control
Upon the occurrence of a Change of Control, each Holder will have the right
to require the Company to repurchase all or any part (equal to Euro 1,000 in
principal amount and integral multiples of such amount) of such Holder's notes
in a Change of Control Offer on the terms set forth below. As long as the notes
are listed on the Luxembourg Stock Exchange, all services linked to any such
repurchase will be available through the office of the paying agent in
Luxembourg.
Within 30 days following any Change of Control, the Company shall give
notice as set forth under "Notices" describing the transaction or transactions
that constitute the Change of Control and offering to repurchase the notes,
under the procedures prescribed by the Indenture and described in such notice,
on the date specified in such notice. The Change of Control Payment Date shall
be no earlier than 30 days nor later than 60 days from the date such notice is
given.
The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations, including the laws
and regulations of any non-U.S. jurisdiction in which a Change of Control Offer
is made, and with the requirements of any securities exchange on which the
notes are then listed, in each case to the extent such laws, regulations and
requirements are applicable in connection with a Change of Control Offer and a
repurchase of the notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached obligations under the "Change of Control" provisions of the Indenture
by virtue of so acting.
On the Change of Control Payment Date, the Company will, to the extent
lawful:
. accept for payment all notes or portions of notes properly tendered
under the Change of Control Offer;
. deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all notes or portions of notes so tendered; and
. deliver or cause to be delivered to the Trustee the notes so accepted,
together with an Officers' Certificate stating the aggregate principal
amount of notes so repurchased.
The paying agent will promptly mail to each Holder of notes so tendered the
Change of Control Payment for such notes. The Trustee will promptly
authenticate and deliver new notes in principal amounts of Euro 1,000 or
integral multiples of Euro 1,000 equal in principal amount to the unpurchased
portion, if any, of the notes so surrendered. The Company will publicly
announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party:
. makes a Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements applicable to such Change
of Control Offer otherwise required to be made by the Company, and
. purchases all notes validly tendered and not withdrawn in such Change of
Control Offer by making the applicable Change of Control Payment.
In the event of any takeover, recapitalization or similar transaction that
does not involve a Change of Control as described above, the Company will not
be required to offer to repurchase or to redeem the notes. The Senior Credit
Facilities or New Credit Facilities are expected to prohibit the Company from
purchasing any notes prior to the final maturity of Indebtedness under such
facilities. Any Senior Credit Facilities or New Credit Facilities may also
provide that some change of control events with respect to the Company would
constitute a default under such facilities. Other future credit or financing
agreements or other agreements to
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which the Company may become party may contain similar restrictions and
provisions. In the event a Change of Control occurs at a time when the Company
is prohibited from purchasing notes, the Company could seek the consent of
necessary parties to the purchase of notes or could attempt to renegotiate,
refinance or extinguish the agreements that contain any such prohibition. If
the Company does not obtain such a consent or repay such borrowings, the
Company will remain prohibited from purchasing notes. Any failure by the
Company to repurchase tendered notes, as a result of any such conflict with
other agreements or otherwise, would constitute an Event of Default under the
Indenture which may, in turn, constitute a default under the Senior Credit
Facilities or any New Credit Facility.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Restricted Subsidiaries taken as a whole.
Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of notes to require
the Company to repurchase such notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
The existence of this right to require the Company to repurchase notes upon
a Change of Control may deter a third party from acquiring the Company in a
transaction which constitutes a Change of Control.
Certain Covenants
Asset Sales
The Company will not, and will not permit any of its Restricted Subsidiaries
to, consummate an Asset Sale unless:
. the Company or such Restricted Subsidiary receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the
assets or Equity Interests issued, sold or otherwise disposed of, as
evidenced by a resolution of the Board set forth in an Officers'
Certificate delivered to the Trustee; and
. at least 85% of the consideration received by the Company or such
Restricted Subsidiary in such Asset Sale is in the form of cash or Cash
Equivalents.
For purposes of this covenant the amount of:
. any liabilities shown on the Company's or such Restricted Subsidiary's
most recent balance sheet, other than contingent liabilities and
liabilities that are expressly subordinated in right of payment to the
notes, that are assumed by an unaffiliated third party in connection
with such Asset Sale under assumption, novation or other similar
agreements that release the Company or such Restricted Subsidiary from
any and all further liability on such liabilities; and
. any securities, notes or other obligations received by the Company or
such Restricted Subsidiary from an unaffiliated third party in
connection with such Asset Sale that are contemporaneously, subject only
to ordinary settlement periods not exceeding 10 business days, converted
by the Company or such Restricted Subsidiary into cash or Cash
Equivalents;
shall, to the extent of such liabilities so assumed or such cash or Cash
Equivalents so received, be deemed to be cash or Cash Equivalents for
purposes of this covenant.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Company shall, at its option, apply such Net Proceeds to:
. repay Senior Debt;
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. repay any Indebtedness, other than Indebtedness that is by its terms
subordinated to the notes and, in the case of any revolving
Indebtedness, correspondingly permanently reduce revolving borrowing
commitments with respect thereto;
. the acquisition of a majority of the assets or Voting Stock of a
Permitted Business;
. the making of capital expenditures; or
. the acquisition of other assets that are used or useful in a Permitted
Business.
Pending the final application of any such Net Proceeds, the Company may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner not prohibited by the Indenture. Any Net Proceeds from
Asset Sales that are not so applied or invested will be deemed to constitute
"Excess Proceeds."
On the earlier to occur of:
. the 271st day following an Asset Sale; or
. such earlier date, if any, that the Board determines not to apply the
Net Proceeds relating to such Asset Sale as set forth in the preceding
paragraph,
such aggregate Excess Proceeds which have not been so applied on or before
such date shall be applied to make an Asset Sale Offer on a pro rata basis
to:
. all Holders of the notes, and
. all holders of other Indebtedness of the Company or any Restricted
Subsidiary that is not by its terms expressly subordinated in right of
payment to the notes to whom an Asset Sale Offer or similar offer is
required to be made under the terms of the instruments governing such
other Indebtedness.
Notwithstanding the foregoing, the Company may defer the Asset Sale Offer
until aggregate Excess Proceeds exceed Euro 5.0 million. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Company
may use such Excess Proceeds for any purpose not otherwise prohibited by the
Indenture. If the aggregate principal amount of Indebtedness tendered into such
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall
select the notes and other Indebtedness to be purchased in compliance with the
requirements of the principal securities exchange, if any, on which such notes
are listed, or, if such notes are not so listed, on a pro rata basis, subject
to the applicable procedures of any clearing organization, among the Holders of
notes and, if applicable, such other Indebtedness based upon the aggregate
outstanding principal amount or accreted value of the notes and such other
Indebtedness. Upon completion of an Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
Restricted Payments
The Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, make or pay any Restricted Payment, unless at the
time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence of such Restricted Payment; and
(2) the Company would, at the time of such Restricted Payment and after
giving pro forma effect to such Restricted Payment as if such Restricted
Payment had been made at the beginning of the applicable four quarter
period, have been permitted to incur at least Euro 1.00 of additional
Indebtedness, other than Permitted Indebtedness, under the Fixed Charge
Coverage Ratio test set forth in the first paragraph of the covenant
described under the caption "Certain Covenants--Incurrence of Indebtedness
and Issuance of Preferred Equity"; and
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(3) the aggregate amount of all such Restricted Payments made after the
Issue Date, including such proposed Restricted Payment but excluding
Restricted Payments permitted by clauses (2), (3), (5), (7) and (8) of the
second paragraph of this covenant, is less than the sum, without
duplication, of:
(A) 50% of the aggregate amount of the Adjusted Consolidated Net
Income (or, if the Adjusted Consolidated Net Income is a loss, minus
100% of the amount of such loss) of the Company accrued on a cumulative
basis during the period (taken as one accounting period) beginning on
the first day of the first fiscal quarter commencing after the Issue
Date and ending on the last day of the most recently ended fiscal
quarter for which internal financial statements are available at the
time of such Restricted Payment, plus
(B) 100% of the aggregate Capital Stock Sale Proceeds or other net
cash proceeds:
(1) received since the Issue Date from the issue or sale of
Capital Stock, other than Disqualified Stock, of the Company other
than to:
(X) a Subsidiary of the Company,
(Y) an employee stock ownership plan or similar trust of the
Company, or
(Z) management employees of the Company or any Subsidiary of
the Company, other than under bona fide employee stock option
plans of the Company; or
(2) received from the issue or sale of Disqualified Stock or debt
securities of the Company other than to:
(X) a Subsidiary of the Company,
(Y) an employee stock ownership plan or similar trust of the
Company, or
(Z) employees of the Company or any Subsidiary of the Company,
other than under bona fide employee stock option plans of the
Company;
provided, that such Disqualified Stock or debt securities have been
converted after the Issue Date into Capital Stock, other than
Disqualified Stock, of the Company;
in each such case, excluding:
. any net cash proceeds from a Qualified Equity Offering to the extent
used to redeem the notes under the covenant described under the caption
"Redemption--Optional Redemption After Qualified Equity Offerings" and
. any amounts utilized for any redemption, repurchase, retirement,
defeasance or other acquisition referred to in clause (2) of the second
paragraph of this covenant; plus
(C) to the extent that any Restricted Investment that was made after
the Issue Date is disposed of or otherwise liquidated or repaid for
cash, 100% of the lesser of:
(1) the net after-tax cash return of capital with respect to such
Restricted Investment; and
(2) the initial book value of such Restricted Investment, plus
(D) to the extent that any Unrestricted Subsidiary is redesignated as
a Restricted Subsidiary after the Issue Date, 100% of the lesser of:
(1) the Fair Market Value of the Company's Investment in such
Subsidiary as of the date of such redesignation; or
(2) the Fair Market Value of the Company's Investment in such
Subsidiary as of the date on which such Subsidiary was originally
designated as an Unrestricted Subsidiary.
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The foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of its
declaration, if at such date of declaration such payment would have
complied with the provisions of the Indenture;
(2) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, the redemption, repurchase,
retirement, defeasance or other acquisition of:
(A) any Indebtedness that is by its terms subordinated to the notes;
or
(B) any Equity Interests of the Company,
in each case from the Capital Stock Sale Proceeds from the substantially
concurrent sale of Capital Stock, other than Disqualified Stock, of the
Company other than to:
(I) a Subsidiary of the Company,
(II) an employee stock ownership plan or similar trust of the
Company, or
(III) management employees of the Company or any Subsidiary of
the Company, other than under bona fide employee stock option plans
of the Company;
provided, that the amount of any such Capital Stock Sale Proceeds so
utilized shall be excluded from clause (3)(B) of the preceding paragraph;
(3) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, the redemption, repurchase,
retirement, defeasance or other acquisition of Indebtedness that is by its
terms subordinated to the notes with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness that is by its terms
subordinated to the notes;
(4) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, the redemption, repurchase,
retirement or other acquisition of any Indebtedness or Preferred Stock
following a Change of Control under:
(A) provisions of such Indebtedness or Preferred Stock substantially
similar to those in the covenant described under the caption "Change of
Control" relating to the notes; provided, that the Company shall
previously have complied with the provisions of such covenant with
respect to the notes, including making any applicable Change of Control
Payment, or
(B) the covenant described under the caption "Change of Control";
(5) the payment of any dividend by a Subsidiary of the Company to the
holders of such Subsidiary's common equity Capital Stock in their capacity
as such on a pro rata basis;
(6) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction,
(A) the repurchase, redemption or other acquisition or retirement for
value by the Company, or the distribution by the Company to any third
party of funding to permit the repurchase, redemption or other
acquisition or retirement for value, of any Equity Interests of the
Company or any Subsidiary of the Company held by any employee or former
employee of the Company or any of the Company's Subsidiaries under any
equity subscription agreement, stock option agreement or other similar
agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed the sum of:
(W) Euro 500,000 in any twelve-month period or Euro 2.5 million
in the aggregate, plus
(X) the net cash proceeds of any "key man" life insurance policy
received by the Company with respect to the owner of any such
employee Equity Interests so acquired, plus
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(Y) the net cash proceeds paid to the Company in connection with
the issuance or exercise of any such employee Equity Interests so
acquired, minus
(Z) repurchases of Equity Interests deemed to occur upon exercise
of stock options if such Equity Interests represent a portion of the
exercise price of such options; and
(B) the making of loans or advances to employees of the Company or
any of the Company's Subsidiaries in the ordinary course of business,
but in any event not to exceed Euro 1.0 million in the aggregate
outstanding at any one time;
(7) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, Investments in joint
ventures or other arrangements, including without limitation Investments in
partnerships, limited liability companies, corporations or other entities,
in each case engaged in a Permitted Business, in an aggregate amount,
measured as of the initial date such Investments are made, at any time not
to exceed fifty percent (50%) of the aggregate Capital Stock Sale Proceeds
received since the Issue Date; provided, that the amount of any such
Capital Stock Sale Proceeds so utilized shall be excluded from any
calculation pursuant to clause (3)(B) of the preceding paragraph or clause
(p) of the definition of "Permitted Indebtedness"; and
(8) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, any Permitted Investment.
The amount of any non-cash Restricted Payment shall be the Fair Market Value
on the date of the Restricted Payment of any asset or property proposed to be
transferred or issued by the Company or such Subsidiary, as the case may be, in
connection with the Restricted Payment, as set forth in an Officers'
Certificate delivered to the Trustee as provided below.
Immediately following the date of making any determination of Fair Market
Value required under this covenant, and prior to the date of making any
Restricted Payment on the basis of such determination, the Company shall
deliver to the Trustee an Officers' Certificate:
. stating that such Restricted Payment, if any, is permitted under the
Indenture,
. setting forth the basis upon which any calculations or determinations
required by the covenant described under the caption "Certain
Covenants--Restricted Payments" were made, and
. including a copy of any required resolution of the Board and/or any
opinion or appraisal issued by an accounting, appraisal or investment
banking firm.
Incurrence of Indebtedness and Issuance of Preferred Equity
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise (collectively,
"incur"), with respect to, any Indebtedness, including Acquired Debt, other
than Permitted Indebtedness; and will not issue any Disqualified Stock and will
not permit any of its Subsidiaries to issue any shares of Preferred Stock;
provided that, to the extent otherwise permitted by the Indenture, the Company
may incur Indebtedness, including Acquired Debt, other than Permitted
Indebtedness, or issue shares of Disqualified Stock, if:
(A) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence of such action, and
(B) the Fixed Charge Coverage Ratio for the Company's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such action is taken
would have been at least 2.00 to 1, determined on a pro forma basis,
including a pro forma application of the net proceeds of such action, as if
such action had been taken at the beginning of such four-quarter period.
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Notwithstanding the preceding paragraph, the Company shall not incur:
(1) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any other Indebtedness, unless such Indebtedness
is expressly subordinated in right of payment to the notes, or
(2) any secured Indebtedness, other than Permitted Secured Indebtedness,
unless contemporaneously with any such incurrence effective provision is
made to secure the notes equally and ratably with such secured Indebtedness
for so long as such secured Indebtedness is secured by a Lien.
Neither the Company nor any Restricted Subsidiary will incur any
Indebtedness if the proceeds of any such Indebtedness are used, directly or
indirectly, to refinance any Indebtedness of the Company that is by its terms
subordinated in right of payment to the notes unless such Indebtedness is
subordinated to the notes to at least the same extent as such Indebtedness so
refinanced.
Accrual of interest, accretion or amortization of original issue discount,
the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
shall be included in the Fixed Charges of the Company as accrued, but will not
be deemed to be an incurrence of Indebtedness or an issuance of Disqualified
Stock for purposes of the covenant described under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Equity".
In the event that an item of Indebtedness is permitted to be included under
more than one of the categories described in the definition of "Permitted
Indebtedness" or is permitted to be incurred other than as Permitted
Indebtedness under this covenant, the Company shall, in its discretion,
classify and reclassify such item of Indebtedness in any manner that complies
with the requirements of such definition or this covenant.
Liens
The Company will not, and will not permit any Subsidiary of the Company to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness or trade payables on any asset, whether owned on the
Issue Date or acquired after such date, or any income or profits from any such
asset, or assign or convey any right to receive income from any such asset,
except Permitted Liens.
Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries
The Company will not, and will not suffer or permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to:
(1) pay dividends or make any other distributions to the Company or any
Restricted Subsidiary of the Company on its Capital Stock or with respect
to any other interest or participation in, or measured by, its profits;
(2) pay any Indebtedness owed to the Company or any Restricted
Subsidiary of the Company;
(3) make loans or advances to the Company or any Restricted Subsidiary
of the Company; or
(4) transfer any of its properties or assets to the Company or any
Restricted Subsidiary of the Company.
The restrictions set forth in the preceding paragraph will not apply to
encumbrances or restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the Issue Date and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of Existing
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Indebtedness; provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
are no more restrictive, taken as a whole, with respect to such dividend
and other payment restrictions than those contained in the Existing
Indebtedness as in effect on the Issue Date;
(2) the Senior Credit Facilities or any New Credit Facility permitted
under the Indenture, if
(A) either (x) the encumbrance or restriction applies only in the
event of and during the continuance of any event of default, payment
default or default with respect to a financial covenant contained in
such Indebtedness or agreement, or (y) the Company determines at the
time any such Indebtedness is incurred, and, if applicable, at the time
of any modification of the terms of any such encumbrance or
restriction, that any such encumbrance or restriction will not
materially affect the Company's ability to make principal or interest
payments on the notes, and
(B) the encumbrance or restriction is not materially more
disadvantageous to the Holders of the notes than is customary in
comparable financings or agreements as determined by the Company in
good faith;
(3) the Indenture and the notes;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect
at the time of such acquisition, except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition, which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture
to be incurred;
(6) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) Purchase Money Indebtedness that imposes restrictions of the nature
described in clause (5) above on the property so acquired;
(8) any agreement for the sale of a Restricted Subsidiary that restricts
distributions by that Restricted Subsidiary pending its sale;
(9) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
(10) secured Indebtedness otherwise permitted to be incurred under the
provisions of the Indenture that limits the right of the debtor to dispose
of the assets securing such Indebtedness;
(11) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(12) protective Liens filed in connection with sale and leaseback
transactions under the provisions of the covenant described under the
caption "Certain Covenants--Sale and Leaseback Transactions;"
(13) Purchase Money Indebtedness or other Indebtedness or contractual
obligations incurred in transactions permitted under the provisions of the
covenant described under the caption "Certain Covenants--Sales of Accounts
Receivable;" and
(14) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
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Designations of Unrestricted Subsidiaries.
The Company may designate any Subsidiary of the Company as an "Unrestricted
Subsidiary" under the Indenture only if:
(1) no Default or Event of Default shall have occurred and be continuing
at the time of or after giving effect to such designation; and
(2) the Subsidiary of the Company so designated has property or assets
with a Fair Market Value in an amount not exceeding Euro 1,000 or the
Company would be permitted under the Indenture to make an Investment at the
time of and assuming the effectiveness of such designation in an amount
equal to the sum of:
(A) the aggregate Fair Market Value of Investments represented by
Capital Stock and other Equity Interests of such Subsidiary owned by
the Company and its Restricted Subsidiaries of the Company on such
date, and
(B) the aggregate Fair Market Value of other Investments of the
Company and its Restricted Subsidiaries of the Company in such
Subsidiary on such date; and
(3) the Company would be permitted to incur Euro 1.00 of additional
Indebtedness, other than Permitted Indebtedness, under the Fixed Charge
Coverage Ratio test in the first paragraph of the covenant described under
the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Equity" at the time of and assuming the effectiveness of such
designation; and
(4) the Subsidiary of the Company so designated as an Unrestricted
Subsidiary:
(A) does not own any Equity Interests of the Company or a Restricted
Subsidiary of the Company;
(B) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the
Company unless the terms of any such agreement, contract, arrangement
or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time
from Persons who are not Affiliates of the Company;
(C) has at least one member of its management board or analogous
body that is neither a member of the Board or the supervisory board of
the Company nor an executive officer of the Company or any Restricted
Subsidiary of the Company and has at least one executive officer that
is neither a member of the Board or the supervisory board of the
Company nor an executive officer of the Company or any Restricted
Subsidiary of the Company; and
(D) is not directly or indirectly liable for any Indebtedness in
aggregate principal amount exceeding Euro 1.0 million, unless the
creditors with respect to such Indebtedness have agreed in writing that
they have no recourse, direct or indirect, against the Company or any
Restricted Subsidiary of the Company in respect of any Obligations
relating to such Indebtedness.
The Company shall not, and shall not suffer or permit any Restricted
Subsidiary to, at any time:
(1) provide direct or indirect credit support for or a Guarantee of any
Indebtedness of any Unrestricted Subsidiary, including of any undertaking,
agreement or instrument evidencing any Indebtedness;
(2) be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary;
(3) have any direct or indirect obligation:
(A) to subscribe for additional Equity Interests, or otherwise
contribute to the capital, of any Unrestricted Subsidiary, or
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(B) to maintain or preserve in any manner any Unrestricted
Subsidiary's financial condition, solvency or financial position, or
(C) to cause any Unrestricted Subsidiary to achieve any specified
levels of operating results or capital; or
(4) be directly or indirectly liable for any Indebtedness which permits
the holder, upon notice, lapse of time or both, to declare a default on
such Indebtedness, or cause the payment of such Indebtedness to be
accelerated or payable prior to its final Stated Maturity upon the
occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary, including any right to take enforcement action
against such Unrestricted Subsidiary.
On the date of any such designation, the Company shall be deemed to have
made an Investment constituting a Restricted Payment under the covenant
described under the caption "Restricted Payments" in an amount equal to the
greater of Euro 1,000 or the sum referred to in clause (2) of the first
paragraph of this covenant for all purposes. The Fair Market Value of any such
Investment shall be determined and documented as provided for in respect of
valuation of non-cash Restricted Payments under the covenant described under
the caption "Certain Covenants--Restricted Payments."
The Company may revoke any designation of a Subsidiary as an Unrestricted
Subsidiary if:
(1) no Default or Event of Default shall have occurred and be continuing
at the time of and after giving effect to such revocation; and
(2) all Liens, Indebtedness and other Obligations of such Unrestricted
Subsidiary outstanding immediately following such revocation would, if
incurred at such time, be permitted to be incurred by a Restricted
Subsidiary of the Company for all purposes under the Indenture.
Upon any such revocation such Subsidiary shall constitute a Restricted
Subsidiary for all purposes under the Indenture.
Any designation or revocation by the Board shall be evidenced to the Trustee
by filing with the Trustee a certified copy of the resolution of the Board
giving effect to such designation or revocation and an Officers' Certificate
certifying that such designation or revocation:
(1) complied with the foregoing conditions,
(2) was permitted by the covenant described under the caption "Certain
Covenants--Restricted Payments" and
(3) was permitted by the other terms and provisions of the Indenture.
If, at any time, any Unrestricted Subsidiary would fail to meet the
requirements as an Unrestricted Subsidiary set forth in clause (4) of the first
paragraph and in the second paragraph of this covenant, it shall thereafter
cease to be an Unrestricted Subsidiary for purposes of the Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date, and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Equity," the Company shall be in default of such covenant.
Merger, Consolidation, or Sale of Assets
The Company may not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person or
group of Persons, unless:
(1) the Company is the surviving Person or the Person formed by or
surviving any such consolidation or merger, if other than the Company, or
to which such sale, assignment, transfer, lease,
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conveyance or other disposition shall have been made is a stock corporation
or limited liability company organized or existing under the laws of the
Federal Republic of Germany, the United Kingdom, the Kingdoms of Denmark,
Norway or Sweden, the Republic of Finland or the United States of America
or any State thereof or the District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation
or merger, if other than the Company, or the entity or Person to which such
sale, assignment, transfer, lease, conveyance or other disposition shall
have been made assumes all the obligations of the Company under the
Registration Rights Agreement, the notes and the Indenture under
supplemental agreements in a form reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of Default
exists;
(4) except in the case of a merger or consolidation of the Company with
or into a Wholly Owned Restricted Subsidiary of the Company, the Company or
the entity or Person formed by or surviving any such consolidation or
merger, if other than the Company, or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made, at
the time of such transaction and after giving pro forma effect to such
transaction as if such transaction had occurred at the beginning of the
applicable four-quarter period,
(A) will be permitted to incur at least Euro 1.00 of additional
Indebtedness, other than Permitted Indebtedness, under the Fixed Charge
Coverage Ratio test of the covenant described under the caption
"Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Equity;" or
(B) will have a Fixed Charge Coverage Ratio equal to or greater than
the Fixed Charge Coverage Ratio immediately prior to such transaction;
(5) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture, if any,
comply with the Indenture; and
(6) the Company shall have delivered to the Trustee an opinion of tax
counsel reasonably acceptable to the Trustee stating that:
(A) note holders will not recognize income, gain or loss for United
States Federal or German income tax purposes as a result of such
transaction;
(B) any payment of principal, redemption price or purchase price of,
premium, if any, and interest on the notes by the Company to a holder
after the consolidation, merger, conveyance, transfer or lease of
assets will not be subject to the Taxes described under "Additional
Amounts" and
(C) no other taxes on income, including taxable capital gains, will
be payable under the tax laws of any Relevant Taxing Jurisdiction by a
holder who is or who is deemed to be a non-resident of the Relevant
Taxing Jurisdiction in respect of the acquisition, ownership or
disposition of the notes, including the receipt of principal of,
premium, if any, and interest paid pursuant to such notes.
Notwithstanding clause (4) of the first paragraph of this covenant, the
Company will be permitted to reorganize as a corporation in the United States
of America or any State thereof or the District of Columbia; provided that the
Company shall have delivered to the Trustee an Opinion of Counsel confirming
that the holders of the Notes will not recognize income, gain or loss for
Federal Republic of Germany or United States Federal income tax purposes as a
result of such reorganization and will be subject to Federal Republic of
Germany or United States Federal income tax in the same manner and at the same
times as would have been the case if such reorganization had not occurred.
Transactions with Affiliates
The Company will not, and will not permit any of its Restricted Subsidiaries
to, make any payment to, or sell, lease, transfer or otherwise dispose of any
of its properties or assets to, or purchase any property or assets
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from, or enter into or make or amend any transaction, contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person; and
(2) the Company delivers to the Trustee:
(A) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
Euro 1.0 million, a resolution of the Board set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with
clause (1) above and that such Affiliate Transaction has been approved
by a majority of the disinterested members of the Board; and
(B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
Euro 2.5 million, an opinion as to the fairness to the Holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of international
standing.
Notwithstanding the first paragraph of this covenant, the following items
shall not be deemed to be Affiliate Transactions:
(1) any employment agreement entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries;
(3) payment of reasonable Board or supervisory board member fees to
Persons who are not otherwise Affiliates of the Company and payments in
respect of indemnification obligations owing to members of the Board or the
supervisory board, officers or other individuals under the organic
documents of the Company or under written agreements with any such Person;
(4) Restricted Payments that are expressly permitted under the covenant
described under the caption "Certain Covenants--Restricted Payments;"
(5) transactions pursuant to agreements entered into or in effect prior
to the Issue Date and disclosed under the captions "Certain Transactions
and Relationships," including modifications or amendments to such
agreements entered into after the Issue Date; provided, that the terms of
any such agreement as so modified or amended are not, in the aggregate,
less favorable to the Company or such Restricted Subsidiary than the terms
of such agreement prior to such modification or amendment; and
(6) transactions effected in compliance with the terms of the covenant
described under the caption "Sales of Accounts Receivable."
Sale and Leaseback Transactions
The Company will not, and will not permit any of its Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that the Company or
a Restricted Subsidiary of the Company may enter into a sale and leaseback
transaction if:
(1) the Company or such Restricted Subsidiary could have:
(A) incurred Indebtedness, other than Permitted Indebtedness, in an
amount equal to the Attributable Debt relating to such sale and
leaseback transaction under the Fixed Charge Coverage
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Ratio test set forth in the first paragraph of the covenant described
under the caption "Certain Covenants--Incurrence of Additional
Indebtedness and Issuance of Preferred Equity;" and
(B) incurred a Lien to secure such Indebtedness under the covenant
described under the caption "Certain Covenants--Liens;"
(2) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the Fair Market Value, as set forth in an Officers'
Certificate delivered to the Trustee, of the property that is the subject
of such sale and leaseback transaction; and
(3) the transfer of assets in such sale and leaseback transaction is
permitted by, and the Company or such Restricted Subsidiary applies the
proceeds of such transaction in compliance with, the covenant described
under the caption "Certain Covenants--Asset Sales."
Notwithstanding the first paragraph of this covenant, sale and leaseback
transactions that are not otherwise permitted under the Indenture will be
permitted at any time between:
. the Company and a Wholly Owned Restricted Subsidiary of the Company, or
. Wholly Owned Restricted Subsidiaries of the Company.
Restrictions on Preferred Stock of Subsidiaries
The Company will not permit any of its Restricted Subsidiaries to issue any
Preferred Stock, or permit any Person to own or hold an interest in any
Preferred Stock of any such Restricted Subsidiary, except for Preferred Stock
issued to and held by the Company or a Wholly Owned Restricted Subsidiary of
the Company.
Limitation on Equity Interests in Restricted Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary of the
Company to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock in any Restricted Subsidiary of the Company to any Person, other than the
Company or a Wholly Owned Restricted Subsidiary of the Company, unless:
(1) such transfer, conveyance, sale, lease or other disposition is of
all the Capital Stock in such Restricted Subsidiary of the Company; and
(2) the net cash proceeds from such transfer, conveyance, sale, lease or
other disposition are applied to finance an Asset Sale Offer in accordance
with the covenant described under the caption "Certain Covenants--Asset
Sales."
The Company will not permit any Restricted Subsidiary of the Company to
issue any of its Equity Interests, other than shares of its Capital Stock
constituting directors' qualifying shares or owned by officers or agents of
such Person solely in their capacity as such, to any Person other than to the
Company or a Wholly Owned Restricted Subsidiary of the Company.
The foregoing restrictions will not apply to any issuance or disposition of
shares of GO Solutions GmbH to certain individuals currently serving as
officers of such entity as required pursuant to the agreement between the
Company and such entity as in effect on the Issue Date.
Business Activities
Except to such extent as would not be material to the Company and its
Restricted Subsidiaries taken as a whole, the Company will not, and will not
permit any Restricted Subsidiary to, engage in any business other than:
. a Permitted Business; and
. the making of Permitted Investments and engaging in a business in
connection with any such Permitted Investment.
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Payments for Consent
The Company will not, and will not permit or suffer any of its Subsidiaries
or Affiliates to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any Holder of
any notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the notes, unless such
consideration is offered to all Holders of the notes and is paid to all Holders
of the notes that consent, waive or agree to amend in the time period set forth
in the solicitation documents relating to such consent, waiver or agreement.
Limitations on Issuances of Guarantees of Indebtedness
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any
other Indebtedness of the Company unless such Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for
the Guarantee of the payment of the notes by such Subsidiary, which Guarantee
shall be senior to such Subsidiary's Guarantee of or pledge to secure such
other Indebtedness, unless such other Indebtedness is Senior Debt, in which
case the Guarantee of the notes may be equal with the Guarantee of such Senior
Debt. Notwithstanding the foregoing, any such Guarantee by a Subsidiary of the
notes may provide by its terms that it shall be automatically and
unconditionally released and discharged upon any sale, exchange or transfer, to
any Person not an Affiliate of the Company, of all of the Company's Equity
Interests in, or all or substantially all the assets of, such Restricted
Subsidiary, which sale, exchange or transfer is made in compliance with the
applicable provisions of the Indenture.
Reports
Whether or not required by the rules and regulations of the SEC, and whether
or not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, or
any successor provision, the Company will prepare:
(1) quarterly reports on Form 6-K, or any other applicable form, and
annual reports on Form 20-F, or any other applicable form, that include:
(A) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 20-
F, respectively, if the Company were required to file such Forms;
(B) a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and
results of operations of the Company and its consolidated Subsidiaries,
showing in reasonable detail, either on the face of the financial
statements or in the footnotes thereto and in Management's Discussion
and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its
Restricted Subsidiaries separate from the financial condition and
results of operations of any Unrestricted Subsidiaries of the Company;
and
(C) with respect to the annual information only, a report thereon by
the Company's certified independent accountants; and
(2) current reports on Form 6-K, or any other applicable form,
containing all of the information that would be required to be filed with
the SEC on Form 8-K if the Company were required to file such reports.
Whether or not required by the rules and regulations of the SEC, and whether
or not the Company is subject to Section 13(a) or 15(d) of the Exchange Act, or
any successor provision, the Company will:
(1) upon effectiveness of the exchange offer file with the SEC (if
permitted by SEC practice and applicable law and regulations) such annual,
quarterly and current reports on or prior to the respective dates (the
"Required Filing Dates") by which the Company would have been required so
to file such documents if the Company were so required; and
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(2) within 15 days of each Required Filing Date (whether or not
permitted or required to be filed with the SEC) transmit or cause to be
transmitted by mail to all Holders, as their names and addresses appear in
the note register, without cost to such Holders, and file with the Trustee,
copies of such annual, quarterly and current reports and other documents.
At all times that the Company does not file such annual, quarterly and
current reports and other documents with the SEC, or if such annual, quarterly
and current reports and other documents do not contain all of the information
required to be delivered under Rule 144A(d)(4), the Company will make available
to any Holder of Notes, to securities analysts and to prospective purchasers of
the notes, the information required by Rule 144A(d)(4) under the Securities
Act.
For so long as the notes are listed on the Luxembourg Stock Exchange and the
rules of the Luxembourg Stock Exchange so require, reports filed with the SEC
or required to be provided to the Holders of the Notes pursuant to the
Indenture may be obtained at the office of the paying agent in Luxembourg.
Notices
Notices regarding the Global Notes will be sent to Euroclear and
Clearstream, with a copy to the Trustee, and will be published in a leading
newspaper having a general circulation in London, which is expected to be the
Financial Times, in Frankfurt, which is expected to be the Frankfurter
Allgemeine Zeitung and, if and so long as the notes are listed on the
Luxembourg Stock Exchange and the rules of such stock exchange shall so
require, a leading daily newspaper having a general circulation in Luxembourg,
which is expected to be the Luxemburger Wort. Notices regarding definitive
notes will be published in a leading newspaper having a general circulation in
London, which is expected to be the Financial Times, in Frankfurt, which is
expected to be the Frankfurter Allgemeine Zeitung and, if and so long as the
notes are listed on the Luxembourg Stock Exchange and the rules of such stock
exchange shall so require, a leading daily newspaper having a general
circulation in Luxembourg, which is expected to be the Luxemburger Wort, and
mailed to Holders, with a copy to the Trustee, by first-class mail at their
respective addresses as they appear on the registration books of the Registrar.
Notices will be deemed given on the first date on which publication is made.
Corporate Existence
The Company will do or cause to be done all things necessary to preserve and
keep in full force and effect:
. its corporate existence and the corporate or other existence of each of
its Subsidiaries, in accordance with the respective organizational
documents of the Company or such Subsidiary; and
. the organizational documents and statutory rights, licenses and
franchises of the Company or such Subsidiary.
Notwithstanding the preceding paragraph, the Company will not be required to
preserve any such right, license or franchise, or the corporate existence of
any of such Subsidiaries, if the Board shall determine that:
. such preservation is no longer desirable for the conduct of the
Permitted Business of the Company and its Subsidiaries, taken as a
whole, and
. the loss of any such right, license, franchise or corporate existence is
not adverse in any material respect to the holders of the notes.
Taxes
The Company will, and will cause its Restricted Subsidiaries to, pay and
discharge when due and payable all taxes, levies, imposts, duties or other
governmental charges imposed on it or on its income or profits or on any of its
properties except such taxes, levies, imposts, duties or other governmental
charges which are being
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contested in good faith in appropriate proceedings and for which adequate
reserves have been established in accordance with U.S. GAAP.
Limitation on Repayment upon a Change of Control
The Company will not make an offer to repurchase any Indebtedness of the
Company or any Restricted Subsidiary that is by its terms subordinated to the
notes or any Preferred Stock of the Company if the Company is required to do so
in connection with a change of control under such Indebtedness or Preferred
Stock until at least 91 days after the occurrence of such change of control. If
such change of control constitutes a Change of Control under the Indenture, the
Company shall not make any payment or deposit in respect of any repurchase of
any such Indebtedness or Preferred Stock for 30 days following the Change of
Control Payment Date relating to the notes following such Change of Control.
Sales of Accounts Receivable
The Company or any of its Restricted Subsidiaries may sell from time to time
accounts and notes receivable and related assets to an Accounts Receivable
Subsidiary; provided that:
(1) the aggregate consideration received in each such sale is at least
equal to the aggregate Fair Market Value of the receivables sold;
(2) no less than 85% of the consideration received in each such sale
consists of:
(A) cash or a promissory note (a "Promissory Note") which is not
subordinated to any Indebtedness or obligation other than any
Indebtedness or obligation owing to a financing entity (the
"Financier") providing the financing for the Accounts Receivable
Subsidiary with respect to such receivables and related assets; or
(B) an Equity Interest in such Accounts Receivable Subsidiary;
(3) the initial sale of receivables and related assets includes all of
the receivables and related assets of the Company and its Restricted
Subsidiaries that are party to such arrangements that constitute eligible
assets under such arrangements;
(4) the cash proceeds received from the initial sale less reasonable and
customary transaction costs will be deemed to be Net Proceeds and will be
applied to finance an Asset Sale Offer in accordance with the covenant
described under the caption "Certain Covenants--Asset Sales;" and
(5) the Company and its Restricted Subsidiaries will sell all
receivables and related assets that constitute eligible assets under such
arrangements to the Accounts Receivable Subsidiary no less frequently than
on a weekly basis.
The Company:
(1) will not permit any Accounts Receivable Subsidiary to sell any
receivables and related assets purchased from the Company or any of its
Restricted Subsidiaries to any other Person, except:
(A) on an arm's-length basis; and
(B) solely for consideration in the form of cash or Cash
Equivalents;
(2) will not permit the Accounts Receivable Subsidiary to engage in any
business or transaction other than the purchase, financing and sale of
receivables and related assets of the Company and its Restricted
Subsidiaries and activities directly incidental thereto;
(3) will not permit any Accounts Receivable Subsidiary to incur
Indebtedness in an amount in excess of the book value of such Accounts
Receivable Subsidiary's total assets, as determined in accordance with U.S.
GAAP;
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(4) will, at least as frequently as monthly, cause the Accounts
Receivable Subsidiary to remit to the Company as payment on the outstanding
balance of the Promissory Notes, all available cash or Cash Equivalents not
held in a collection account pledged to a Financier, to the extent not
applied to pay or maintain reserves for reasonable operating expenses of
the Accounts Receivable Subsidiary or to satisfy reasonable minimum
operating capital requirements; and
(5) will not, and will not permit any of its Subsidiaries to, sell
accounts receivable to any Accounts Receivable Subsidiary upon the
occurrence of certain events of bankruptcy or insolvency with respect to
such Accounts Receivable Subsidiary.
Events of Default and Remedies
Each of the following constitutes an Event of Default:
(1) default for 30 days in the payment when due of interest on, or
Additional Amounts or Liquidated Damages with respect to, the notes;
(2) default in payment when due of the principal of or premium, if any,
on the notes;
(3) failure by the Company or any of its Subsidiaries to comply with the
provisions described under the captions "Change of Control," "Certain
Covenants--Asset Sales," "Certain Covenants--Restricted Payments" or
"Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Equity;"
(4) failure by the Company or any of its Subsidiaries for 60 days after
notice to comply with any of its other agreements in the Indenture or the
notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries, or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries, whether such Indebtedness or guarantee now
exists, or is created after the Issue Date, which default:
(A) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a
"Payment Default"); or
(B) results in the acceleration of such Indebtedness prior to its
express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates Euro 5.0 million or more;
(6) failure by the Company or any of its Restricted Subsidiaries to pay
final judgments, other than those as to which insurance coverage or
indemnity from an insurance company with assets in excess of Euro 100
million has been acknowledged in writing, aggregating in excess of Euro 5.0
million, which judgments are not paid, discharged or stayed for a period of
30 days; and
(7) certain events of bankruptcy or insolvency with respect to the
Company, any of its Significant Subsidiaries or any group of Restricted
Subsidiaries of the Company that, taken together, would constitute a
Significant Subsidiary of the Company.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding notes may declare
all the notes to be due and payable immediately. Upon such declaration, the
principal of, premium, if any, and accrued and unpaid interest on, such notes
shall be due and payable immediately. Notwithstanding the foregoing, in the
case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any of its Significant Subsidiaries or
any group of Restricted Subsidiaries of the Company that, taken together, would
constitute a Significant Subsidiary of the Company, all outstanding notes will
become due and payable without further action or notice. Holders
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of the notes may not enforce the Indenture or the notes except as provided in
the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
notes notice of any continuing Default or Event of Default, except a Default or
Event of Default relating to the payment of principal or interest, if it
determines that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Company with the
intention of avoiding payment of the premium that the Company would have had to
pay if the Company then had elected to redeem the notes under the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the notes. If an Event of Default occurs prior to March 31,
2005, by reason of any willful action or inaction taken or not taken by or on
behalf of the Company with the intention of avoiding the prohibition on
redemption of the notes prior to such date, then the premium specified in the
Indenture with respect to redemption upon the occurrence of a Change of Control
prior to such date shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the notes.
The Holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the Indenture except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the notes.
The Company will deliver to the Trustee annually a statement regarding
compliance with the Indenture, and upon becoming aware of any Default or Event
of Default, deliver to the Trustee a statement specifying such Default or Event
of Default.
Personal Liability of Directors, Officers, Employees, Members and Stockholders
No member of the Board or the supervisory board, officer, employee,
incorporator, member or stockholder of the Company, as such, shall have any
liability for any obligations of the Company under the notes, the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of notes by accepting a note waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the notes. Such waiver may not be effective to waive liabilities
under the United States securities laws. The SEC has taken the view that such a
waiver is against public policy.
Legal Defeasance and Covenant Defeasance
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes ("Legal
Defeasance"), except for:
(1) the rights of Holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on such notes
when such payments are due from the trust referred to below,
(2) the Company's obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust,
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and the Company's obligations in connection with such rights, powers,
trusts, duties and immunities, and
(4) the Legal Defeasance provisions of the Indenture.
The Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events, not including non-payment, bankruptcy,
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receivership, rehabilitation and insolvency events, described under the caption
"Events of Default and Remedies" will no longer constitute an Event of Default
with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders of the notes, cash in Euros or Government
Obligations, or a combination thereof, in such amounts as will be
sufficient, in the opinion of an internationally recognized firm of
independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding notes on the Stated Maturity or on the
applicable redemption date, as the case may be, and the Company must
specify whether the notes are being defeased to final Stated Maturity or to
a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have delivered to
the Trustee an Opinion of Counsel in the United States and the Federal
Republic of Germany, as the case may be, reasonably acceptable to the
Trustee confirming that, subject to customary assumptions and exclusions:
(A) the Company has received from, or there has been published by,
the United States Internal Revenue Service a ruling, or
(B) since the Issue Date, there has been a change in applicable
United States Federal income tax law,
in either case to the effect that, and based thereon such Opinion of
Counsel shall confirm that, the Holders of the outstanding notes will not
recognize income, gain or loss for Federal Republic of Germany or United
States Federal income tax purposes as a result of such Legal Defeasance and
will be subject to Federal Republic of Germany or United States Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, the Company shall have delivered
to the Trustee an Opinion of Counsel in the United States and the Federal
Republic of Germany, as the case may be, reasonably acceptable to the
Trustee confirming that the Holders of the outstanding notes will not
recognize income, gain or loss for Federal Republic of Germany or United
States Federal income tax purposes as a result of such Covenant Defeasance
and will be subject to Federal Republic of Germany or United States Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit, other than a Default or Event of Default
resulting from the borrowing of funds to be applied to such deposit, or
insofar as Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day after the date
of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument, other than the Indenture, to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound;
(6) the Company must have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
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Amendment, Supplement and Waiver
Except as provided in the following paragraphs:
(1) the Indenture or the notes may be amended or supplemented with the
consent of the Holders of a majority in principal amount of the notes then
outstanding, including consents obtained in connection with a purchase of,
or tender offer or exchange offer for, notes, and
(2) any existing default or compliance with any provision of the
Indenture or the notes may be waived with the consent of the Holders of a
majority in principal amount of the notes then outstanding, including
consents obtained in connection with a purchase of, or tender offer or
exchange offer for, notes.
Notwithstanding the foregoing, without the consent of each Holder affected,
an amendment or waiver may not, with respect to any notes held by a non-
consenting Holder:
(1) reduce the principal amount of notes the Holders of which must
consent to an amendment, supplement or waiver,
(2) reduce the principal of or change the fixed maturity of any note or
alter the provisions with respect to the redemption of the notes,
(3) reduce the rate of or change the time for payment of interest on any
note,
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes, except a rescission of
acceleration of the notes by the Holders of at least a majority in
aggregate principal amount of the notes or a waiver of the payment default
that resulted from such acceleration,
(5) make any note payable in the currency other than the Euro,
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of Holders of notes to receive
payments of principal of or premium, if any, or interest on the notes,
other than payments under the covenants described under the captions
"Change of Control" or "Certain Covenants--Asset Sales,"
(7) waive a redemption payment with respect to any note, other than
payments under the covenants described under the captions "Change of
Control" or "Certain Covenants--Asset Sales,"
(8) make any change in the provisions of the Indenture relating to the
obligations of the Company or the rights of Holders of notes to receive
payments under the covenants described under the captions "Change of
Control" or "Certain Covenants--Asset Sales" or "Additional Amounts,"
(9) amend the terms of the notes or the Indenture in a way that would
result in the loss of an exemption from any of the Taxes described
thereunder or an exemption from any obligation to withhold or deduct Taxes
as described thereunder unless the Company agrees to pay Additional
Amounts, if any, in respect thereof, or
(10) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing two paragraphs, without the consent of any
Holder of notes, the Company and the Trustee may amend or supplement the
Indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency,
(2) to provide for uncertificated notes in addition to or in place of
certificated notes,
(3) to provide for the assumption of the Company's obligations to
Holders of notes in the case of a merger or consolidation or sale of all or
substantially all of the Company's assets,
(4) to make any change that would provide any additional rights or
benefits to the Holders of notes or that does not adversely affect the
rights or benefits under the Indenture of any such holder, or
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(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the Trust Indenture Act.
(6) to provide for the issuance of the exchange notes in accordance with
the Registration Rights Agreement.
Enforceability of Judgments; Consent to Jurisdiction and Service
Service of process upon the Company, in an action to enforce the Indenture
or the notes may be obtained within the United States by service upon CT
Corporation System, the Company's designated agent. Since substantial amounts
of the Company's assets are outside the United States, any judgment obtained in
the United States against the Company, including judgments with respect to the
payment of principal, premium, if any, and interest on the notes, may not be
collectible within the United States.
Although the Company will agree under the terms of the Indenture to accept
service of process in the United States by an agent designated for such
purpose, it may not be possible for investors to (i) effect service of process
within the United States upon the Company's officers and directors and (ii)
realize in the United States upon judgments against such persons obtained in
such courts predicated upon civil liabilities of such persons, including any
judgments predicated upon United States federal securities laws, to the extent
such judgments exceed such person's United States assets. See "Enforceability
of Civil Liabilities."
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
such claim as security or otherwise. The Trustee will be permitted to engage in
other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the SEC for permission to
continue or resign.
The Holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur which shall not be cured, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Indenture
at the request of any Holder of notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
Governing Law
The Indenture and the Notes will be governed by, and construed in accordance
with, the laws of the State of New York.
Where You Can Find More Information
Anyone who receives this prospectus may obtain a copy of the Indenture and
the Registration Rights Agreement without charge by writing to the Company at
BROKAT Infosystems AG, Industriestrasse 3, D-70565, Stuttgart, Germany,
Attention: General Counsel or, as long as the notes are listed on the
Luxembourg Stock Exchange at the office of the paying agent in Luxembourg.
Certain Definitions
Set forth below are various defined terms used in the "Description of the
Notes" section of this prospectus. Reference is made to the Indenture for a
full disclosure of all such terms, as well as any other capitalized terms used
in the "Description of the Notes" section of this prospectus for which no
definition is provided.
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"Accounts Receivable Subsidiary" means a Wholly Owned Restricted Subsidiary
of the Company:
(a) which is formed solely for the purpose of, and which engages in no
activities other than activities in connection with, financing accounts
receivable and/or notes receivable and related assets of the Company and/or
its Restricted Subsidiaries,
(b) which is designated by the Board as an Accounts Receivable
Subsidiary under a resolution set forth in an Officers' Certificate and
delivered to the Trustee,
(c) which has total assets at the time of such designation with a book
value not exceeding Euro 100,000 plus the reasonable fees and expenses
required to establish such Accounts Receivable Subsidiary and any accounts
receivable financing,
(d) no portion of the Indebtedness or any other obligation, contingent
or otherwise, of which:
(i) is at any time recourse to or obligates the Company or any
Restricted Subsidiary of the Company in any way, other than under:
(A) representations, warranties, covenants and indemnities
entered into in the ordinary course of business in connection with
the sale of accounts receivable and/or notes receivable to such
Accounts Receivable Subsidiary or
(B) any guarantee of any such accounts receivable financing by
the Company that is permitted to be incurred under the covenant
described under the caption entitled "Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Equity," or
(ii) subjects any property or asset of the Company or any Restricted
Subsidiary of the Company, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than under:
(A) representations, warranties, covenants and indemnities
entered into in the ordinary course of business in connection with
sales of accounts receivable and/or notes receivable or
(B) any guarantee of any such accounts receivable financing by
the Company that is permitted to be incurred under the covenant
described under the caption "Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Equity,"
(e) with which neither the Company nor any Restricted Subsidiary of the
Company has any contract, agreement, arrangement or understanding other
than contracts, agreements, arrangements or understandings entered into in
the ordinary course of business in connection with sales of accounts
receivable and/or notes receivable in accordance with the description under
the caption "Sales of Accounts Receivable" and fees payable in the ordinary
course of business in connection with servicing accounts receivable and/or
notes receivable, and
(f) with respect to which neither the Company nor any Restricted
Subsidiary of the Company has any obligation:
(i) to subscribe for additional shares of Capital Stock or other
Equity Interests or to make any additional capital contribution or
similar payment or transfer other than in connection with the sale of
accounts receivable and/or notes receivable to such Accounts Receivable
Subsidiary in accordance with the description under the caption "Sales
of Accounts Receivable"; or
(ii) to maintain or preserve solvency or any balance sheet item,
financial condition, level of income or results of operations.
"Acquired Debt" means, with respect to any specified Person:
(a) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of such specified Person, and
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(b) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Additional Amounts" means the amount of any deduction or withholding for,
or on account of, any Taxes of any Relevant Taxing Jurisdiction which shall at
any time be required on any payments made by the Company with respect to the
notes, including payments of principal, redemption price, interest or premium.
"Adjusted Consolidated Net Income" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period minus
any amounts paid or accrued as dividends on Preferred Stock for such period,
plus the amount of non-cash stock option expense (excluding any such non-cash
stock option expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Subsidiaries
for such period to the extent that the amount of such non-cash stock option
expense was deducted in computing such Consolidated Net Income for such
period.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"control", including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with", as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Asset Sale" means:
(a) the sale, lease, conveyance or other disposition of any assets or
rights, including by way of a sale and leaseback, other than:
(i) in the ordinary course of business consistent with past
practices, or
(ii) sales or other dispositions of accounts receivable and/or notes
receivable and related assets to the Accounts Receivable Subsidiary in
accordance with the covenant described under the caption "Sales of
Accounts Receivable";
(b) the issue or sale by the Company or any of its Subsidiaries of
Equity Interests of any of the Company's Restricted Subsidiaries:
(i) that have a Fair Market Value in excess of Euro 1.0 million or
(ii) for net proceeds in excess of Euro 1.0 million;
in the case of either clause (a) or (b), whether in a single transaction or
a series of related transactions.
Notwithstanding the foregoing,
(a) the sale, lease, conveyance or other disposition of all or
substantially all of the assets of the Company and its Subsidiaries taken
as a whole will be governed by the provisions of the Indenture described
under the caption "Change of Control" and/or the provisions described under
the caption "Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant; and
(b) the following items shall not be deemed to be Asset Sales:
(i) a transfer of assets by the Company to a Wholly Owned Restricted
Subsidiary of the Company or by a Wholly Owned Restricted Subsidiary of
the Company to the Company or to another Wholly Owned Restricted
Subsidiary of the Company;
(ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company;
(iii) a Restricted Payment that is permitted by the covenant
described under the caption "Certain Covenants--Restricted Payments";
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(iv) any disposition of damaged, worn out or otherwise obsolete
property in the ordinary course of business, so long as such property
is no longer necessary for the proper conduct of a Permitted Business;
(v) any disposition in one or more transactions of business
operations no longer necessary for the proper conduct of a Permitted
Business; provided, that the aggregate Fair Market Value of such
dispositions since the Issue Date does not exceed Euro 5.0 million in
the aggregate;
(vi) any sale or discount without recourse, other than recourse for
a breach of a representation or warranty, of accounts receivable
arising in the ordinary course of business, but only in connection with
the collection or compromise of such accounts; and
(vii) the incurrence of any Permitted Lien and the disposition of
assets pursuant to any such Permitted Lien by any secured party under
such Permitted Lien.
"Asset Sale Offer" means an offer to purchase notes and other Indebtedness
with Excess Proceeds, at an offer price in cash equal to 100% of the principal
amount or accreted value of such notes and such other Indebtedness, plus
accrued and unpaid interest on such notes and such other Indebtedness to the
date of repurchase, in accordance with the procedures set forth in the
Indenture.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value, discounted at the rate of
interest implicit in such transaction, determined in accordance with U.S. GAAP,
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction, including
any period for which such lease has been extended or may, at the option of the
lessor, be extended.
"Board" means:
(a) if the Company is a stock corporation at the relevant time, the
board of directors, management board or analogous body of the Company,
(b) if the Company is a limited liability company at the relevant time,
the management board or analogous body of the Company, if it has such a
body, and if it does not, the management board or analogous body of the
manager of the Company,
(c) if the Company is neither a corporation or a limited liability
company at the relevant time, the management board or analogous body of the
Company.
"Borrowing Base" means, as of the date of determination, an amount equal to
the sum, without duplication, of 50% of the net book value of the Company's and
its Restricted Subsidiaries' accounts receivable which are not more than 60
days past due. The net book value of such items shall be determined on a
consolidated basis in accordance with U.S. GAAP and shall be that reflected on
the Company's consolidated balance sheet for the most recent fiscal quarter
ending prior to the date of determination as to which financial results are
available, but in no event ending more than 135 days prior to the date of
determination, it being understood that the accounts receivable of an acquired
business may be included if such acquisition has been completed on or prior to
the date of determination.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with U.S. GAAP. The amount of Indebtedness represented
by a Capital Lease Obligation shall be the capitalized amount of the liability
in respect of such obligation determined in accordance with U.S. GAAP, and the
maturity thereof shall be the date of the last scheduled payment of rent or any
other amount due under the relevant lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" means:
(a) in the case of a corporation, corporate stock,
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(b) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents, however
designated, of corporate stock,
(c) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited, and
(d) in the case of any Person, any other interest or participation that
confers the right to receive a share of the profits or losses of, or
distributions of assets of, the issuing Person;
excluding in each case any debt security that is convertible into, or
exchangeable for, Capital Stock.
"Capital Stock Sale Proceeds" means the aggregate net cash proceeds received
by the Company from any common equity capital contribution or any issuance or
sale of any class of Capital Stock of the Company after the Issue Date.
"Cash Equivalents" means:
(a) securities having maturities of one year or less from the date of
acquisition issued or directly and fully guaranteed or insured by the
Federal government of the Federal Republic of Germany or by the Federal
government of the United States of America or any agency or instrumentality
thereof, provided that the full faith and credit of the Federal Republic of
Germany or the United States of America is pledged in support of such
securities,
(b) certificates of deposit and eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities of one year or less from the date of acquisition and overnight
bank deposits, in each case with any commercial bank established under the
laws of the Federal Republic of Germany or the United States of America or
any subdivision thereof having combined capital and surplus in excess of
Euro 500.0 million and a Thompson Bank Watch Rating or comparable rating of
"B" or better,
(c) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (a) or (b) above
entered into with any financial institution meeting the qualifications
specified in clause (b) above,
(d) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
with maturities of one year or less from the date of acquisition, and
(e) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (a) through (d) of this
definition.
"Change of Control Offer" means the offer to repurchase the notes required
under the covenant described under the caption "Change of Control."
"Change of Control Payment" means a cash payment of a purchase price equal
to 101% of the principal amount of all notes purchased in connection with a
Change of Control Offer, plus accrued and unpaid interest, if any, on such
notes to the date of such repurchase.
"Change of Control Payment Date" means the date specified for payment in the
notice of a Change of Control required to be given under the covenant described
under the caption "Change of Control."
"Change of Control" means the occurrence of any of the following:
(a) the sale, lease, transfer, conveyance or other disposition other
than by way of merger or consolidation, in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to any "person" as such term
is used in Section 13(d)(3) of the Exchange Act, other than any Principal
or Principals;
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(b) the adoption of a plan relating to the liquidation or dissolution of
the Company;
(c) the consummation of any transaction, including, without limitation,
any merger or consolidation, the result of which is that any "person" as
such term is used in Section 13(d)(3) of the Exchange Act other than any
Principal or Principals becomes directly or indirectly the "beneficial
owner" of more than 50% of the Voting Stock of the Company, measured by
voting power rather than number of shares;
(d) the first day on which a majority of the members of the Board are
not Continuing Board Members; or
(e) the consummation of the amalgamation, merger or consolidation of the
Company with another Person in which the holders of the Capital Stock
representing the common equity capital of the Company immediately prior to
the amalgamation, merger or consolidation, would not beneficially own,
immediately after the amalgamation, merger or consolidation, Capital Stock
entitling such holders to 50% or more of all votes, without consideration
of the rights of any class of Capital Stock to elect members of the
management board or other analogous body by a separate class vote, to which
all holders of the Capital Stock of the Person issuing cash or securities
in the amalgamation, merger or consolidation would be entitled in the
election of members of the management board or other analogous body or in
which members of the Board, immediately prior to such amalgamation, merger
or consolidation, would not, immediately after such amalgamation, merger or
consolidation constitute a majority of the management board or other
analogous body of the Person issuing cash or securities in such
amalgamation, merger or consolidation.
For purposes of this definition, "beneficial owner" shall mean as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Depositary" means, with respect to the notes issued in the form of
one or more global securities, the Person designated as the common depositary
by Euroclear or Clearstream, which shall initially be The Bank of New York,
London Branch.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period minus non-cash items
increasing such Consolidated Net Income for such period, plus, without
duplication:
(a) an amount equal to any extraordinary loss plus any net loss realized
in connection with an Asset Sale, to the extent such losses were deducted
in computing such Consolidated Net Income,
(b) provision for taxes based on income or profits of such Person and
its Subsidiaries for such period, to the extent that such provision for
taxes was included in computing such Consolidated Net Income,
(c) Fixed Charges of such Person and its Restricted Subsidiaries for
such period,
(d) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash expenses (excluding any
such non-cash expense to the extent that it represents an accrual of or
reserve for cash expenses in any future period or amortization of a prepaid
cash expense that was paid in a prior period) of such Person and its
Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income,
in each case, on a consolidated basis and determined in accordance with U.S.
GAAP.
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Notwithstanding the foregoing, the provision for taxes based on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Subsidiary of a Person shall be added to Consolidated Net Income to
compute Consolidated Cash Flow only to the extent and in the same proportion
that the Net Income of such Subsidiary was included in calculating the
Consolidated Net Income of such Person and only if a corresponding amount would
be permitted at the date of determination to be distributed in the form of a
dividend to the Company by such Subsidiary without prior approval that has not
been obtained, under the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with U.S. GAAP;
provided that:
(a) the Net Income, but not loss, of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of accounting
shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted
Subsidiary of the referent Person,
(b) the Net Income of any Subsidiary shall be excluded to the extent
that the declaration or payment of dividends or similar distributions by
that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval that has not been
obtained or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Subsidiary or its
stockholders,
(c) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, and
(d) the cumulative effect of a change in accounting principles shall be
excluded.
"Continuing Board Member" means, as of any date of determination, any member
of the Board who:
(a) was a member of the Board on the Issue Date; or
(b) was nominated for election or elected to the Board with the approval
of a majority of the Continuing Board Members who were members of such
Board at the time of such nomination or election.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof, or upon the happening of any
event, matures or is mandatorily redeemable, under a sinking fund obligation or
otherwise, or is redeemable at the option of the Holder thereof, in whole or in
part, on or prior to the date that is 91 days after the date on which the notes
mature; provided however, that any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
the issuers thereof to repurchase such Capital Stock upon the occurrence of an
event substantially similar to those described in the definitions of "Change of
Control" or "Asset Sale" shall not constitute Disqualified Stock if the terms
of such Capital Stock provide that such issuers may not repurchase or redeem
any such Capital Stock under such provisions unless such repurchase or
redemption complies, to the extent applicable, with the covenant described
under the caption "Certain Covenants--Restricted Payments."
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Existing Indebtedness" means Indebtedness of the Company and its
Subsidiaries in existence on the Issue Date after giving effect to the use of
proceeds contemplated by this prospectus, until such amounts are repaid.
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"Fair Market Value" means, with respect to any asset or property, the price
(after taking into account any liabilities relating to such assets or property)
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of which is
under any compulsion to complete the transaction; provided, that the Fair
Market Value of any such asset or property shall be determined conclusively by
the Board acting in good faith, which determination shall be evidenced by a
resolution of the Board delivered to the Trustee; and further provided, that
any determination of Fair Market Value by the Board required under the
Indenture shall be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of international standing if the Fair
Market Value exceeds Euro 5.0 million.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of:
(a) the consolidated interest expense of such Person and its Restricted
Subsidiaries for such period, whether paid or accrued and whether or not
capitalized, including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of
all payments associated with Capital Lease Obligations, the imputed
interest with respect to Attributable Debt, commissions, discounts and
other fees and charges incurred in respect of letter of credit, bankers'
acceptance or similar financings, and net payments, if any, under Hedging
Obligations,
(b) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon, and
(c) all cash dividend payments or other distributions, and non-cash
dividend payments in the case of a Person that is a Subsidiary, on any
class or series of Preferred Stock of such Person, on a consolidated basis,
in each case in accordance with U.S. GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness, other than revolving credit borrowings,
or issues or redeems Preferred Stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of Preferred Stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above:
(a) any acquisition made by the Company or any of its Restricted
Subsidiaries, including through mergers or consolidations and including any
related financing transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the Calculation
Date, shall be deemed to have occurred on, and given pro forma effect from,
the first day of the four-quarter reference period;
(b) Consolidated Cash Flow for such reference period shall be calculated
without giving effect to clause (c) of the proviso set forth in the
definition of Consolidated Net Income;
(c) Consolidated Cash Flow for such reference period shall be calculated
giving pro forma effect to cost savings resulting from any such acquisition
if:
(i) such cost savings could then be reflected in pro forma financial
statements included in a registration statement complying with the
Securities Act, Regulation S-X and any interpretations of Regulation S-
X by the SEC;
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(ii) the Company reasonably determines such cost savings are
probable based upon specifically identified actions that it has
determined to take; and
(iii) the Company delivers to the Trustee:
(A) a certified copy of a resolution of the Board approving such
determination, the specific actions to be taken and the delivery to
the Trustee of such certification; and
(B) an Officers' Certificate signed by the Company's chief
financial officer certifying that such savings have reasonably been
determined to be probable and setting forth in reasonable detail the
specific actions to be taken, the cost savings to be achieved from
each such action, and the amount, if any, of any related reduction
in Consolidated Cash Flow resulting from such actions reasonably
determined to be probable;
(d) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with U.S. GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded; and
(e) the Fixed Charges attributable to discontinued operations, as
determined in accordance with U.S. GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to
the extent that the obligations giving rise to such Fixed Charges will not
be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"Government Obligation" means direct non-callable obligations of, or non-
callable obligations guaranteed by (a) any member nation of the European Union
for the payment of which obligation or guarantee the full faith and credit of
the respective nation is pledged; provided, that such nation has a credit
rating at least equal to that of the highest rated member nation of the
European Economic Area, pursuant to the Oporto Agreement on the European
Economic Area dated May 2, 1992 as amended, or (b) the United States of America
for the payment of which obligation or guarantee the full faith and credit of
the United States of America is pledged.
"Guarantee" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect of
letters of credit, of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements or other agreements or arrangements
designed to protect such Person against fluctuations in interest rates, and
(2) currency exchange contracts, currency swap agreements or other
similar agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates,
in each case, provided that such obligations are entered into solely to protect
such Person against fluctuations in interest rates or currency exchange rates
and not for purposes of speculation.
"Holders" means the holders of the Notes.
"Indebtedness" means, with respect to any Person, without duplication:
(a) all indebtedness of such Person for borrowed money,
(b) all indebtedness of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(c) all Capital Lease Obligations and Attributable Debt of such Person,
(d) all obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement,
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(e) all obligations for the reimbursement of any obligor on any letter
of credit, banker's acceptance or similar instrument,
(f) guarantees and other contingent obligations in respect of
Indebtedness referred to in clauses (a) through (e) above and clauses (g)
through (h) below,
(g) all obligations of any other Person of the type referred to in
clauses (a) through (f) which are secured by any Lien on any property or
asset of such Person, the amount of such obligation being deemed to be the
lesser of (i) the Fair Market Value of such property or asset or (ii) the
amount of the obligation so secured,
(h) all obligations under Hedging Obligations or other currency
agreements and interest swap agreements of such Person, and
(i) all Disqualified Stock issued by such Person with the amount of
Indebtedness represented by such Disqualified Stock being equal to the
greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, but excluding accrued dividends, if any.
For purposes of this definition, the "maximum fixed repurchase price" of
any Disqualified Stock which does not have a fixed repurchase price shall
be calculated in accordance with the terms of such Disqualified Stock as if
such Disqualified Stock were purchased on any date on which Indebtedness
shall be required to be determined under the Indenture, and if such price
is based upon, or measured by, the Fair Market Value of such Disqualified
Stock;
except, in each case, any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing, other than letters of
credit, Attributable Debt and Hedging Obligations, would appear as a liability
upon a balance sheet of such Person prepared in accordance with U.S. GAAP.
The amount of any Indebtedness outstanding as of any date shall be:
(a) the accreted value of such Indebtedness, in the case of any
Indebtedness issued with original issue discount, and
(b) the principal amount of such Indebtedness, together with any
interest thereon that is more than 30 days past due, in the case of any
other Indebtedness.
"Indenture" means the indenture governing the notes.
"Initial Purchaser" means WestLB Panmure Limited.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons, including Affiliates of such Person, in the forms of
direct or indirect loans, including guarantees of Indebtedness or other
obligations, advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
U.S. GAAP. If the Company or any Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to
the Fair Market Value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined and documented as provided for valuation of
non-cash Restricted Payments under the covenant described under the caption
"Certain Covenants--Restricted Payments."
"Issue Date" means March 28, 2000.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law, including
any conditional sale or other title retention agreement, any lease in the
nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement
under the Uniform Commercial Code or equivalent statutes of any jurisdiction.
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"Liquidated Damages" means all liquidated damages then owing to Holders
pursuant to the Registration Rights Agreement.
"Management Investors" means the members of the Board and officers and
employees of the Company or a Subsidiary of the Company who owned Capital
Stock of the Company on the Issue Date.
"Net Income" means, with respect to any Person for any period, the net
income or loss of such Person, determined in accordance with U.S. GAAP and
before any reduction in respect of dividends on Preferred Stock, but excluding
any gain, but not loss, together with any related provision for taxes on such
gain, but not loss, realized in connection with:
(i) any Asset Sale, including, without limitation, dispositions in
connection with sale and leaseback transactions,
(ii) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries, and
(iii) any extraordinary or nonrecurring gain, but not loss, together
with any related provision for taxes on such extraordinary or nonrecurring
gain, but not loss, of such Person for such period.
"Net Proceeds" means the aggregate proceeds received by the Company or any
of its Restricted Subsidiaries in respect of any Asset Sale, including any
cash received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale, net of the direct costs relating to such Asset
Sale, including legal, accounting and investment banking fees, and sales
commissions, and any relocation expenses incurred as a result of such Asset
Sale, any taxes paid or payable as a result of such Asset Sale, after taking
into account any available tax credits or deductions and any tax sharing
arrangements, and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with U.S. GAAP.
"New Credit Facility" means, with respect to the Company, at any time, any
credit facility or commercial paper facility between the Company and any
lender, whether in place of or in addition to the Senior Credit Facilities or
any New Credit Facility and providing for Indebtedness:
(a) incurred in compliance with clause (a) of the definition of
"Permitted Indebtedness" and
(b) providing for revolving credit loans, term loans, receivables
financing, including through the sale of receivables to such lenders or to
special purpose entities formed to borrow from such lenders against such
receivables, or letters of credit.
"Non-Recourse Debt" means, with respect to any Person, Indebtedness or that
portion of Indebtedness:
(a) as to which the specified Person:
(i) provides no credit support of any kind, including any
undertaking, agreement or instrument that would constitute Indebtedness,
(ii) is not directly or indirectly liable as a guarantor or
otherwise, or
(iii) does not constitute the lender; and
(b) no default with respect to which, including any rights that the
holders of such Indebtedness may have to take enforcement action against an
Unrestricted Subsidiary, would permit, upon notice, lapse of time or both,
any holder of any other Indebtedness, other than the notes, of the
specified Person to declare a default on such other Indebtedness or cause
the payment of such other Indebtedness to be accelerated or payable prior
to its Stated Maturity; and
(c) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the specified Person.
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by any two members of the
Board.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee and who may be an employee of or counsel to the
Company or the Trustee.
"Permitted Business" means any of the businesses and any other businesses
ancillary or complementary to the businesses engaged in by the Company and its
respective Restricted Subsidiaries on the Issue Date.
"Permitted Indebtedness" means:
(a) the incurrence by the Company or any Restricted Subsidiary of
Indebtedness under a term or revolving credit facility or letters of credit
(with letters of credit being deemed to have a principal amount equal to
the maximum potential liability of the Company and its Subsidiaries under
such letters of credit), pursuant to the Senior Credit Facilities or a New
Credit Facility; provided, that the aggregate principal amount of all
Indebtedness outstanding under all such facilities after giving effect to
such incurrence does not exceed the greater of Euro 25.0 million or the
Borrowing Base;
(b) the incurrence by the Company and its Subsidiaries of Existing
Indebtedness;
(c) the incurrence by the Company of Indebtedness represented by the
notes;
(d) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations or Purchase Money
Indebtedness, at any time outstanding in an aggregate principal amount,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred under this clause (d), not
to exceed Euro 3.0 million;
(e) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Indebtedness, other than
intercompany Indebtedness, that was permitted by the Indenture to be
incurred under the covenant described under the caption "Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Equity" or
clauses (b), (c), (d), (e), (h) or (p) of this paragraph;
(f) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness owing to and held by any Wholly Owned Restricted Subsidiary
of the Company or owing to and held by the Company; provided that
(i) if the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in full in
cash of all Obligations with respect to the notes; and
(ii) (A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
the Company or a Wholly Owned Restricted Subsidiary of the Company
shall be deemed to constitute an incurrence of such Indebtedness by the
Company or such Restricted Subsidiary that was not permitted by this
clause (f); and
(B) any transfer of any interest in such Indebtedness to a Person
other than the Company or a Wholly Owned Restricted Subsidiary of
the Company shall be deemed to constitute an incurrence of such
Indebtedness by the Company or such Restricted Subsidiary that was
not permitted by this clause (f);
(g) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations incurred with respect to any Indebtedness or
Obligation that is permitted by the terms of the Indenture to be
outstanding;
(h) the incurrence by the Company or any Restricted Subsidiary of
additional Indebtedness in an aggregate principal amount or accreted value,
as applicable, at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness
incurred under this clause (h), not to exceed Euro 5.0 million;
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(i) the incurrence by the Company's Unrestricted Subsidiaries of
Indebtedness that is Non-Recourse Debt to the Company and its Restricted
Subsidiaries; provided, that upon the occurrence of any event that causes
any such Indebtedness to cease to be Non-Recourse Debt to the Company and
its Restricted Subsidiaries, such event shall be deemed to constitute an
incurrence of such Indebtedness by a Restricted Subsidiary of the Company
that was not permitted by this clause (i);
(j) the incurrence of Indebtedness of the Company and its Restricted
Subsidiaries, including letters of credit, in respect of performance bonds,
bankers' acceptances, letters of credit, performance, bid, surety or appeal
bonds or similar bonds and completion guarantees provided by the Company
and its Restricted Subsidiaries in the ordinary course of their business
and consistent with past practices and which do not secure other
Indebtedness;
(k) Indebtedness of the Company and its Restricted Subsidiaries arising
from agreements providing for indemnification, adjustment of purchase price
or similar obligations, in any case incurred in connection with the
disposition of any business, assets or Subsidiary of the Company, other
than Guarantees of Indebtedness incurred by any Person acquiring all or any
portion of such business, assets or Subsidiary for the purpose of financing
such acquisition, in an aggregate principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary of
the Company in connection with such disposition;
(l) Indebtedness of the Company or a Restricted Subsidiary owed to any
Person, including obligations in respect of letters of credit for the
benefit of such Person, in connection with workers' compensation, health,
disability or other employee benefits or property, casualty or liability
insurance provided by such Person to the Company or such Restricted
Subsidiary, under reimbursement or indemnification obligations to such
Person, in each case incurred in the ordinary course of business and
consistent with past practices;
(m) the Guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or a Subsidiary of the Company that was
permitted to be incurred by another provision of the covenant described
under the caption "Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Equity;"
(n) Indebtedness incurred in connection with a transaction permitted
under the covenant described under the caption "Sales of Accounts
Receivable;"
(o) Indebtedness of the Company or any Restricted Subsidiary of the
Company convertible into Capital Stock of the Company issued to employees
of the Company or such Restricted Subsidiary in an amount not to exceed
Euro 500,000 in the aggregate; and
(p) Indebtedness of the Company in an aggregate amount, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred under this clause (p), not to exceed the amount
of Capital Stock Sale Proceeds received since the Issue Date from the
issuance and sale of Capital Stock, other than Disqualified Stock, of the
Company; provided, that the amount of any such Capital Stock Sale Proceeds
utilized to support the incurrence of Indebtedness pursuant to this clause
(p) shall be excluded from any calculation pursuant to clause (3)(B) of the
first paragraph or clause (7) of the second paragraph of the covenant
described under the caption "Certain Covenants--Restricted Payments."
"Permitted Investments" means:
(a) any Investment in the Company or in a Restricted Subsidiary of the
Company that is engaged in a Permitted Business;
(b) any Investment in cash or Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the
Company in a Person, if as a result of or in connection with such
Investment:
(i) such Person becomes a Restricted Subsidiary of the Company and
is engaged in a Permitted Business; or
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(ii) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the Company
and is engaged in a Permitted Business;
(d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made in compliance with the
covenant described above under the caption "Certain Covenants--Asset Sales"
or from a sale that was made in compliance with the requirements described
under the caption "Sales of Accounts Receivable";
(e) any acquisition or any portion of any acquisition of assets or
property made solely in exchange for the issuance of Equity Interests,
other than Disqualified Stock, of the Company;
(f) any Investment by the Company or any Wholly Owned Restricted
Subsidiary of the Company involving the contribution of assets to a Wholly
Owned Restricted Subsidiary of the Company in exchange for the incurrence
by such Wholly Owned Restricted Subsidiary of the Company of Indebtedness
owed to the Company or any Wholly Owned Restricted Subsidiary of the
Company;
(g) Investments in an Accounts Receivable Subsidiary made in connection
with the formation of such Accounts Receivable Subsidiary;
(h) Investments in the form of intercompany Indebtedness permitted under
clause (f) of the definition of "Permitted Indebtedness;"
(i) Investments in existence on the Issue Date; and
(j) other Investments having an aggregate Fair Market Value, measured on
the date each such Investment was made and without giving effect to
subsequent changes in value, when taken together with all other Investments
made under this clause (j) that are at the time outstanding, not to exceed
Euro 15.0 million.
"Permitted Liens" means:
(a) Liens on assets or property of the Company or any Restricted
Subsidiary of the Company to secure Senior Debt of the Company or such
Restricted Subsidiary of the Company incurred under clauses (a), (g) and
(j) of the definition of Permitted Indebtedness;
(b) Liens in favor of the Company or any Restricted Subsidiary of the
Company;
(c) Liens on assets or property of a Person existing at the time such
Person is merged into or consolidated with one of the Company or any
Subsidiary of the Company; provided, that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not
extend to any assets or property other than those of the Person merged into
or consolidated with the Company or any Subsidiary of the Company;
(d) Liens on assets or property existing at the time of acquisition
thereof by the Company or any Subsidiary of the Company; provided, that
such Liens were in existence prior to the contemplation of such
acquisition;
(e) Liens to secure the performance of statutory obligations, surety or
appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(f) Liens to secure Indebtedness represented by Capital Lease
Obligations or Purchase Money Indebtedness permitted by clause (d) of the
definition of Permitted Indebtedness; provided, that such Liens cover only
assets or property acquired with such Indebtedness;
(g) Liens existing on the Issue Date;
(h) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided, that any reserve or other appropriate provision as shall be
required in conformity with U.S. GAAP shall have been made therefor;
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(i) Liens on assets or property of Unrestricted Subsidiaries that secure
Indebtedness of Unrestricted Subsidiaries that is Non-Recourse Debt to the
Company and its Restricted Subsidiaries;
(j) Liens incurred by the Company or any Restricted Subsidiary of the
Company in the ordinary course of business of the Company or such
Restricted Subsidiary of the Company with respect to obligations that do
not exceed Euro 2.5 million at any one time outstanding that:
(i) are not incurred in connection with the borrowing of money or
the obtaining of advances or credit, other than trade credit in the
ordinary course of business, and
(ii) do not in the aggregate materially detract from the value of
the assets or property or materially impair the use of the assets or
property in the operation of business by the Company or such
Subsidiary;
(k) Liens in connection with workers' compensation obligations and
general liability exposure of the Company or any Restricted Subsidiary of
the Company;
(l) Liens arising by reason of any judgment, decree or court order, to
the extent not otherwise resulting in an Event of Default;
(m) Liens arising by reason of easements, rights of way, zoning
restrictions, leases or subleases to a third party and other similar
charges or encumbrances in respect of real property, in each case not
interfering in any material respect with the ordinary conduct the business
of the Company or any of its Restricted Subsidiaries;
(n) Liens imposed by law, including carriers', warehousemen's,
materialmen's and mechanics' Liens, in each case for sums not yet due or
being contested in good faith by appropriate proceedings if a reserve or
any other provision required under U.S. GAAP shall have been made; and
(o) Liens arising by operation of law in favor of depositary banks and
collecting banks, incurred in the ordinary course of business.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness, other than intercompany Indebtedness, of the Company
or any of its Restricted Subsidiaries that was permitted by the Indenture to be
incurred; provided, that:
(a) the principal amount or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal amount or
accreted value, if applicable, of, plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded plus the amount of reasonable expenses incurred in connection with
the incurrence of such Permitted Refinancing Indebtedness;
(b) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(c) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, such
Permitted Refinancing Indebtedness is subordinated in right of payment to
the notes on terms at least as favorable to the Holders of the notes as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and
(d) such Indebtedness is incurred only by Persons who are the obligors
on the Indebtedness being extended, refinanced, renewed, replaced, defeased
or refunded.
"Permitted Secured Indebtedness" means any Indebtedness of the Company or
any Restricted Subsidiary of the Company permitted to be incurred or
outstanding under the Indenture which is secured by a Permitted Lien.
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"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes, however designated, which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Principals" means:
(a) Messrs. Stefan Rover, Boris Anderer, Michael Janben, Achim
Schlumpberger, Angelo Maestrini and Michael Schumacher, and the Management
Investors;
(b) any Related Party of a Person referred to in clause (a); and
(c) any Person or group of Persons which holds, directly or indirectly,
Equity Interests in any Person so long as a majority of the Voting Stock in
such Person is beneficially owned by the Persons referred to in clauses (a)
and (b).
"Purchase Money Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries incurred in the normal course of business for the
purpose of financing all or any part of the purchase price, or the cost of
installation, construction or improvement, of property or equipment.
"Qualified Equity Offering" means any private or public offering of Equity
Interests, other than Disqualified Stock, of the Company; provided, that the
net cash proceeds of such offering:
. are included as, or contributed to the Company as, common equity capital
of the Company; and
. exceed Euro 75.0 million, in the case of a public offering, or Euro 50.0
million in the case of a private offering.
"Registration Rights Agreement" means the Registration Rights Agreement
relating to the notes between the Company and the Initial Purchaser for the
benefit of the Initial Purchaser and the holders of notes, as amended or
modified from time to time in accordance with the terms of such Registration
Rights Agreement.
"Related Party" means with respect to any Principal:
(a) such Principal, any direct or indirect wholly owned Subsidiary of
such Principal, and any officer, director or employee of such Principal or
any wholly owned Subsidiary of such Principal; or
(b) any member of the "immediate family" as such term is used in Rule
16a-1(e) under the Exchange Act of such Principal or the officers,
directors and employees referred to in clause (i) above; or
(c) any trust, corporation or partnership 100%-in-interest of the
beneficiaries, stockholders or partners of which consists of one or more of
the persons described in clause (i) or (ii) above.
"Relevant Taxing Jurisdiction" means the Federal Republic of Germany or any
jurisdiction in which the Company or any successor thereto is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made.
"Restricted Investment" means an Investment other than a Permitted
Investment permitted pursuant to clause (8) of the second paragraph of the
covenant described under the caption "Certain Covenants--Restricted Payments."
"Restricted Payment" means to:
(a) declare or pay any dividend or make any other payment or
distribution on account of Equity Interests of the Company or a Subsidiary
of the Company, including, without limitation, any such payment in
connection with any merger or consolidation or to the direct or indirect
holders of Equity Interests in their capacity as such, other than
dividends, payments or distributions payable:
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(i) in Equity Interests, other than Disqualified Stock, of the
Company, or
(ii) to the Company, or
(iii) to a Restricted Subsidiary of the Company;
(b) purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation, any Equity Interests of the Company or of any direct or
indirect parent of the Company;
(c) make any payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is by its
terms subordinated to the notes (other than the purchase, repurchase or
other acquisition of such indebtedness in anticipation of satisfying a
sinking fund obligation, principal installment or final maturity, in each
case due within one year of the date of such purchase, repurchase or
acquisition), except a payment of interest or principal at Stated Maturity;
or
(d) make any Restricted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person that
is not an Unrestricted Subsidiary.
"Senior Credit Facilities" means:
(a) the credit agreement dated as of July 27, 1999 between the Company
and Deutsche Bank AG providing for up to DM 60.0 million revolving credit
borrowings, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith,
(b) the credit agreement in effect on the Issue Date, by and between the
Company, and Kreissparkasse Boblingen, providing for up to DM 5.5 million
revolving credit borrowings and other loans, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith,
(c) the credit agreement dated as of December 20, 1999, by and between
the Company and Volksbank AG im Kreis Boblingen, providing for up to DM 5.0
million revolving credit borrowings and other loans, including any related
notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and
(d) the credit agreement in effect on the Issue Date between the Company
and Dresdner Bank AG, providing for up to DM 5.0 million revolving credit
borrowings and other loans including any related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith.
in each case as amended, modified, renewed, refunded, replaced or refinanced
from time to time.
"Senior Debt" means:
(a) all Indebtedness outstanding under the Senior Credit Facilities or
any New Credit Facility and all Hedging Obligations with respect to such
Indebtedness,
(b) any other Indebtedness permitted to be incurred under the terms of
the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is not superior, or is subordinated, in
right of payment to the notes, and
(c) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary, Senior Debt will not include:
(a) any Indebtedness or Obligation which is subordinate or junior in any
respect, other than as a result of the Indebtedness being unsecured, to any
other Indebtedness or obligation,
(b) any liability for taxes owed or owing,
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(c) any Indebtedness of the Company to any of its Subsidiaries or other
Affiliates or any Indebtedness of any of the Subsidiaries or other
Affiliates of the Company to the Company,
(d) any account payable or other liability to trade creditors arising in
the ordinary course of business,
(e) any Indebtedness that is incurred in violation of the Indenture, or
(f) any Capital Stock.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, as such
Regulation is in effect on the Issue Date.
"Stated Maturity" means, with respect to any payment of interest or
principal on any Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing
such Indebtedness, excluding any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally
scheduled for the making of such payment.
"Subsidiary" means, with respect to any Person:
(a) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled,
without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees of such Person is at the time
owned or controlled, directly or indirectly, by such Person and/or one or
more of the other Subsidiaries of that Person, and
(b) any partnership:
(i) the sole general partner or the managing general partner of which
is such Person or a Subsidiary of such Person, or
(ii) the only general partners of which are such Person and/or of one
or more Subsidiaries of such Person.
"Unrestricted Subsidiary" means any direct or indirect Subsidiary of the
Company that is designated as an Unrestricted Subsidiary of the Company in
compliance with the covenant described under the caption "Certain Covenants--
Designations of Unrestricted Subsidiaries."
"U.S. GAAP" means, at any date of determination, generally accepted
accounting principles as in effect in the United States of America on such
date of determination, consistently applied for all periods.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the management
board or analogous body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(a) the sum of the products obtained by multiplying:
(i) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including
payment at final maturity, by:
(ii) the number of years, calculated to the nearest one-twelfth, that
will elapse between such date and the making of such payment; by:
(b) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares and
Capital Stock or other ownership interests owned by officers or agents of such
Person solely in their capacity as such, shall at the time be owned by such
Person or by such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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FORM OF THE NOTES, CLEARANCE AND SETTLEMENT
The exchange notes will be represented by one or more notes in registered,
global form (the "Global Notes") deposited with The Bank of New York, London
Branch, as common depositary (the "Common Depositary") for Morgan Guaranty
Trust Company of New York, Brussels office, as operator (the "Euroclear
Operator") of the Euroclear System ("Euroclear") and Clearstream International
("Clearstream"), and registered in the name of a nominee of the Common
Depositary. The notes will not be eligible for clearance through The Depository
Trust Company. Except in the limited circumstances set forth below, notes in
certificated form will not be issued.
Depositary Procedures
We understand as follows with respect to Euroclear and Clearstream:
Euroclear and Clearstream each hold securities for their account holders and
facilitate the clearance and settlement of securities transactions by
electronic book-entry transfer between their respective account holders,
thereby eliminating the need for physical movements of certificates and any
risk from lack of simultaneous transfers of securities. Euroclear and
Clearstream each provide various services including safekeeping,
administration, clearance and settlement of internationally traded securities
and securities lending and borrowing. Each of Euroclear and Clearstream can
settle securities transactions in more than 30 currencies, including the Euro.
Euroclear and Clearstream each also deal with domestic securities markets in
several countries through an established electronic bridge between their two
systems across which their respective account holders may settle trades with
each other. Account holders in both Euroclear and Clearstream are world-wide
financial institutions including underwriters, securities brokers and dealers,
banks, trust companies and clearing corporations. Indirect access to both
Euroclear and Clearstream is available to other institutions that clear through
or maintain a custodial relationship with an account holder of either system.
An account holder's overall contractual relations with either Euroclear or
Clearstream are governed by the respective rules and operating procedures of
Euroclear or Clearstream and any applicable laws. Both Euroclear and
Clearstream act under such rules and operating procedures only on behalf of
their respective account holders, and have no record of or relationship with
any persons who are not direct account holders.
Investors who hold accounts with the Euroclear Operator or Clearstream may
acquire, hold and transfer security entitlements with respect to each such
Global Note against the Euroclear Operator or Clearstream and its respective
property by book-entry to accounts with the Euroclear Operator or Clearstream,
each of which has an account with the Common Depositary and subject at all
times to the procedures and requirements of Euroclear or Clearstream, as the
case may be. "Security entitlement" means the rights and property interests of
an account holder against its securities intermediary under the applicable law
in or with respect to a security, including any ownership, co-ownership,
contractual or other rights. Investors who do not have accounts with the
Euroclear Operator or Clearstream may acquire, hold and transfer security
entitlements with respect to a Global Note against the securities intermediary
and its property with which such investors hold accounts by book-entry to
accounts with such securities intermediary, which in turn, may hold a security
entitlement with respect to such Global Note through the Euroclear Operator or
Clearstream. Investors electing to acquire security entitlements with respect
to a Global Note through an account with the Euroclear Operator or Clearstream
or some other securities intermediary must follow the settlement procedures of
their securities intermediary with respect to the settlement of new issues of
securities. Security entitlement with respect to a Global Note to be acquired
through an account with the Euroclear Operator or Clearstream will be credited
to such account as of the settlement date against payment in Euro for value as
of the settlement date. Investors electing to acquire, hold or transfer
security entitlements with respect to a Global Note through an account with the
Euroclear Operator, Clearstream or some other securities intermediary other
than in connection with the initial distribution of the notes must follow the
settlement procedures of their securities intermediary with respect to the
settlement of secondary market transaction in securities.
Except as described below, owners of interests in the Global Notes will not
have notes registered in their names, will not receive physical delivery of
notes in certificated form and will not be considered the
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registered owners of holders of notes. So long as the Common Depositary is the
registered owner or holder of a Global Note, such party will be considered the
sole owner or holder of the notes represented by such Global Note for all
purposes under the indenture and the notes. Accordingly, each person owning a
beneficial interest in a Global Note must rely on the procedures of Euroclear
and Clearstream, as the case may be, and their account holders to exercise any
rights and remedies of a holder of notes under the indenture governing the
notes. Payments of principal and interest on the Global Notes will be made to
the Common Depositary on behalf of Euroclear and Clearstream as the registered
owners thereof.
The laws of some countries and some states in the United States require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to transfer beneficial interests in a
Global Note to such persons may be limited to that extent. Because Euroclear
and Clearstream can act only on behalf of their respective account holders, the
ability of a person having beneficial interests in a Global Note to pledge such
interests to persons or entities that do not participate in the relevant
clearing system, or otherwise take actions in respect to such interests, may be
affected by the lack of a physical certificate evidencing such interests.
Payments on the Global Notes
Payments in respect of the principal of, premium, if any, and interest
(including Additional Amounts, if any) on a Global Note will be made through a
paying agent appointed pursuant to the indenture governing the notes and will
be payable to the Common Depositary on behalf of Euroclear and Clearstream,
each in its capacity as the registered holder of the notes under such
indenture. Under the terms of the indenture governing the notes, our company
and the Trustee will treat the persons in whose names the notes, including the
Global Notes, are registered as the owners thereof for the purpose of receiving
such payments and for any and all other purposes whatsoever. Consequently, none
of our company, the Initial Purchaser, the Trustee, or any agent of our
company, the Initial Purchaser or the Trustee has or will have any
responsibility or liability for
. any aspect or accuracy of the records of the relevant clearing system or
the account holders thereof relating to payments made on account of
beneficial ownership interests in the Global Notes, or for maintaining,
supervising or reviewing any records of such clearing system or account
holder relating to beneficial ownership interests in the Global Notes,
or
. any other manner relating to the actions and practices of the relevant
clearing system or the account holders thereof.
Euroclear or Clearstream, as the case may be, upon receipt of any such
payment, will immediately credit the accounts of their respective relevant
account holders, with payments in amounts proportionate to their respective
holdings in principal amount of beneficial interest in the relevant Global
Note, as shown on the records of Euroclear or Clearstream, as the case may be.
Our company expects that payments by such account holders to the beneficial
owners of Global Notes will be governed by standing instructions and customary
practices and will be the responsibility of such account holders. Neither our
company nor the Trustee will have responsibility or liability for the payment
of amounts owing in respect of beneficial interests in the Global Notes held by
the Common Depositary on behalf of Euroclear and Clearstream.
Transfers of Global Securities and Interests Therein
Unless definitive securities are issued, the Global Notes may be
transferred, in whole and not in part, only by Euroclear and Clearstream to the
Common Depositary or by the Common Depositary to Euroclear and Clearstream,
respectively, or to another nominee or successor thereof or a nominee of such
successor.
Transfers of beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of Euroclear and Clearstream and their
respective account holders and intermediaries. Any secondary market-trading
activity in beneficial interests in the Global Notes is expected to occur
through the account holders and
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intermediaries or Euroclear and Clearstream, and the securities custody
accounts of investors will be credited with the holdings against payment in
same-day funds on the settlement date.
No service charge will be made for any registration of transfer or exchange
of notes, but the Trustee may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Although Euroclear and Clearstream have agreed to follow certain procedures
to facilitate transfers of interests in the Global Notes among account holders
in Euroclear and Clearstream, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued at
any time. None of our company, the Initial Purchaser, the Trustee, nor any
agent of our company, the Initial Purchaser or the Trustee has or will have any
responsibility for the nonperformance or misperformance (as a result of
insolvency, mistake, misconduct or otherwise) by Euroclear or Clearstream or
their respective account holders or intermediaries of their respective
obligations under the rules and procedures governing their operations.
Our company understands that under existing industry practices, if either
our company or the Trustee requests any action of holders of notes, or if an
owner of a beneficial interest in a Global Note desires to give instructions or
take an action that a holder is entitled to give or take under the indenture
governing the notes, Euroclear or Clearstream would authorize their respective
account holders owning the relevant beneficial interest to give instructions or
take such action, and such account holders would authorize intermediaries to
give instructions or take such action, or would otherwise act upon the
instructions of such intermediaries.
Our company understands that, under the existing practices of Euroclear or
Clearstream, if less than all of the respective class of notes are to redeemed
at any time, Euroclear or Clearstream will credit their respective account
holders' accounts on a proportionate basis (with adjustments to prevent
fractions) or on such other basis as Euroclear or Clearstream deems fair and
appropriate, provided that no beneficial interests of less than (Euro) 1,000
may be redeemed in part.
Certificated Notes
Beneficial interests in a Global Note are exchangeable for definitive notes
in registered certificated form only if:
. Euroclear and Clearstream are unwilling or unable to continue as
depositary for such Global Note and our company thereupon fails to
appoint a successor depositary within 90 days; or
. there shall have occurred and be continuing a default or an Event of
Default with respect to the notes. In all cases, certificated notes
delivered in exchange for any Global Note or beneficial interest therein
will be registered in the names, and issued in any approved
denominations, requested by or on behalf of Euroclear or Clearstream in
accordance with their customary procedures. The notes may not be issued
in bearer form.
In the case of the issuance of certificated notes in the limited
circumstances set forth above, the holder of any such certificated note may
transfer such note by surrendering it at the offices or agencies of our company
maintained for such purpose within the City and State of New York and London,
England, and at the offices of the transfer agents in Luxembourg. Until
otherwise designated by our company, an office or agency of our company in the
City and State of New York and London, England, respectively, will be the
offices of the Trustee and London Paying Agent maintained for such purpose. In
the event of a partial transfer of a holding of notes, represented by one
certificate, or partial redemption of such a holding represented by one
certificate, a new certificate shall be issued to the transferee in respect of
the part transferred or redeemed and a further new certificate in respect of
the balance of the holding not transferred or redeemed shall be issued to the
transferor, provided that no certificate in denominations less than (Euro)1,000
shall be issued. Each new certificate to be issued shall be available for
delivery within ten business days at the office of the Trustee or the transfer
agent in Luxembourg. The cost of preparing, printing, packaging and delivering
the certificated notes shall be borne by our company.
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Our company shall not be required to register the transfer or exchange of
certificated notes for a period of 15 days preceding
. the due date of any payment of principal of or interest on the notes or
. a selection of notes to be redeemed.
Also, our company is not required to register the transfer or exchange of
any notes selected for redemption. In the event of the transfer of any
certificated note, the Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and our company may
require a holder to pay any taxes and fees required by law and permitted by the
indenture and the notes.
If certificated notes are issued, and a holder of a certificated note claims
that the note has been lost, destroyed or wrongfully taken or if such note is
mutilated and surrendered to the Trustee (or, for so long as the notes are
listed on the Luxembourg Stock Exchange, at the specified offices of the
transfer agents in Luxembourg), our company shall issue and the Trustee shall
authenticate a replacement note if the Trustee's and our company's requirements
are met. If required by the Trustee or our company, an indemnity bond must be
sufficient in the judgment of both to protect our company, the Trustee or any
paying agent or authenticating agent appointed pursuant to the indenture from
any loss which any of them may suffer if a note is replaced. Our company may
charge for its expenses in replacing a note.
In case any such mutilated, destroyed, lost or stolen note has become or is
about to become due and payable, or is about to be redeemed or purchased by our
company pursuant to the provisions of the indenture governing the notes, our
company in its discretion may, instead of issuing a new note, pay, redeem or
purchase such note.
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<PAGE>
TAXATION
United States Federal Income Taxation
The following describes certain United States federal income tax
consequences relating to the purchase, ownership and disposition of notes by a
holder. The summary does not purport to be a comprehensive description of all
of the tax considerations that may be relevant to a decision to purchase the
notes. In particular, the following discussion deals only with U.S. holders who
purchase the notes at the issue price as part of the initial distribution and
will hold the notes as capital assets, and does not address the tax treatment
of holders that are subject to special tax rules, such as banks, tax-exempt
entities, insurance companies, dealers in securities or currencies, traders in
securities electing to mark the securities to market, persons that hold notes
as part of an integrated investment (including a "straddle") comprised of notes
and one or more other positions, and persons that have a "functional currency"
other than the U.S. dollar. Moreover, the discussion applies only to a holder
who is a citizen or resident of the United States or a United States
corporation or that otherwise is subject to United States taxation on a net
income basis in respect of the notes (a "U.S. holder"). The summary is based on
laws, regulations, rulings and decisions in effect on the date hereof, all of
which are subject to change. Prospective purchasers should consult their own
advisers regarding the tax consequences of an investment in the notes in light
of their particular circumstances, including the effect of any other federal,
state, local or other non-U.S. law that might apply.
Interest
Interest on the notes will be includable in a U.S. holder's income at the
time the interest is accrued or received, in accordance with the holder's
method of tax accounting.
A U.S. holder that uses the cash method of accounting for tax purposes will
realize interest income equal to the U.S. dollar value of the interest payment,
based on the spot rate of exchange on the date of receipt, regardless of
whether the payment in fact is converted into U.S. dollars. The U.S. holder
will not have exchange gain or loss on the interest payment but may have
exchange gain or loss when it disposes of any foreign currency received.
A U.S. holder that uses the accrual method of accounting for tax purposes
will determine the amount of interest income allocable to an accrual period in
the relevant foreign currency and then will translate that amount into U.S.
dollars at the average exchange rate in effect during the interest accrual
period (or portion thereof within the U.S. holder's taxable year), unless the
holder has made the election described below. An accrual basis holder may make
an election (which must be applied consistently to all debt instruments from
year to year and may not be revoked without the consent of the Internal Revenue
Service) to translate accrued interest income at the spot rate of exchange on
the last day of the accrual period (or the last day of the taxable year within
that accrual period if the accrual period includes more than one taxable year),
or at the spot rate on the date of receipt if that date is within five business
days of the last day of the accrual period. A U.S. holder who uses the accrual
method of accounting for tax purposes will recognize foreign currency gain or
loss on the receipt of an interest payment if the spot rate in effect on the
date the payment is received differs from the rate applicable to an accrual of
that interest. This foreign currency gain or loss will be treated as ordinary
income or loss, and generally will not be treated as an adjustment to interest
income.
Sale and Other Dispositions of the Notes
Upon the sale, exchange, retirement or other taxable disposition of a note,
a U.S. holder generally will recognize gain or loss equal to the difference
between the amount realized (less any accrued interest, which will be taxable
as interest income) and the holder's tax basis in such note. If a U.S. holder
receives foreign currency in respect of the sale, exchange or retirement of a
note, the amount realized will be the U.S. dollar equivalent of the amount
received, calculated at the spot rate in effect at the time of the sale,
exchange or retirement. If notes are traded on an established securities
market, a cash basis taxpayer (and if it elects, an accrual basis
122
<PAGE>
taxpayer) will determine the U.S. dollar equivalent of the amount realized by
translating that amount at the spot rate on the settlement date of the sale,
exchange or retirement. If an accrual method taxpayer makes such an election,
the election must be applied consistently to all debt instruments from year to
year and may not be changed without the consent of the IRS.
Except as discussed below with respect to foreign currency gain or loss,
gain or loss recognized by a U.S. holder on the sale, exchange or retirement of
a note generally will be long-term capital gain or loss if the U.S. holder has
held the note for more than one year at the time of disposition. A U.S.
holder's ability to offset capital losses against ordinary income is limited.
Long-term capital gain recognized by an individual holder generally is subject
to taxation at a maximum rate of 20%.
Gain or loss that is attributable to changes in the exchange rate for a
foreign currency will be treated as ordinary income or loss, and generally will
not be treated as an adjustment to interest income. Such foreign currency gain
or loss will be taken into account only to the extent of total gain or loss
realized on the sale, exchange or retirement of the note.
Foreign Tax Credit
For U.S. foreign tax credit purposes, interest on the notes will be treated
as foreign-source income and generally will be subject to the separate foreign
tax credit limitation for passive income. However, if such interest were to
become subject to a withholding tax at a rate of five percent or more, it would
be segregated in the separate foreign tax credit basket for high withholding
tax interest. If such interest were received by a U.S. holder engaged in the
active conduct of a banking, insurance, financing or similar business, such
income may be segregated in the separate foreign tax credit basket for
financial services income. If we pay additional amounts due to the imposition
of German withholding taxes, you will be treated as if you actually received
the amount of German taxes withheld by us and then paid over the withheld taxes
to the German taxing authorities. As a result, with respect to a particular
interest payment you may be required to include more interest in gross income
than the amount of cash you actually receive.
Gain or loss realized on the sale, exchange, retirement or other disposition
of a note (including foreign currency gain or loss) generally will be treated
as U.S.-source income or loss for foreign tax credit purposes.
Exchange Offer
An exchange of the original notes for the exchange notes pursuant to the
exchange offer will not be a taxable event for U.S. federal income tax
purposes. Consequently, a U.S. holder will not recognize taxable gain or loss
as a result of exchanging the original notes for the exchange notes. If our
company fails to comply with certain of its obligations under the registration
rights agreement, additional interest may become payable on the notes. A U.S.
holder will not be required to take account of such additional interest in
determining its income for U.S. federal income tax purposes unless the events
giving rise to the obligation to pay such interest have occurred.
Non-U.S. Holders
If you are not a U.S. holder, payments of interest to you on a note
generally will not be subject to U.S. withholding tax. If payments of interest
are effectively connected with your conduct of a trade or business in the
United States, the interest will be subject to the U.S. federal income tax that
applies to U.S. persons generally (and with respect to corporate holders under
certain circumstances, the branch profits tax).
Subject to the discussion below of information reporting and backup
withholding, if you are not a U.S. holder, any gain you realize on a sale or
exchange of a note will not be subject to U.S. federal income tax, including
withholding tax, unless (i) such gain is effectively connected with your
conduct of a trade or business in the United States or (ii) if you are an
individual, you are present in the United States for 183 days or more in the
taxable year of sale, and you meet certain other conditions.
123
<PAGE>
Information Reporting and Backup Withholding
Interest on the notes, and payments of the proceeds of a sale of notes, that
are paid within the United States or through certain United States-related
financial intermediaries are subject to information reporting and may be
subject to backup withholding at a 31% rate unless the holder (i) is a
corporation or other exempt recipient or (ii) provides a taxpayer
identification number and certifies that no loss of exemption from backup
withholding has occurred. Holders that are not United States persons generally
are not subject to information reporting or backup withholding. However, such a
holder may be required to provide a certification to establish its non-U.S.
status in connection with payments received within the United States or from
certain U.S.-related payors.
German Taxation
General
The following describes German income tax consequences relating to holders
as regards the purchase, ownership and disposition of the notes. This summary
does not purport to be a comprehensive description of all of the tax
considerations that may be relevant to a decision to purchase the notes. In
particular, it does not cover foreign tax consequences for foreign holders.
This summary is based on the laws currently in force and as applied in
practice on the date hereof, all of which are subject to change, possibly with
retroactive effect. Prospective purchasers of the notes are advised to consult
their own tax advisors as to the German or other tax consequences of the
purchase, ownership and disposition of the notes in light of their particular
circumstances, including the effect of any state, local or other national laws.
The taxable treatment of over-the-counter transactions (Tafelgeschafte)
diverges from noncertificated notes. Over-the-counter transactions means that
interest payments are made anonymously upon presentation of coupons or of a
note in certificated form.
Interest Income derived from the Notes--Resident Holders
In general, for "resident holders" the income earned from the notes is
taxable according to sec. 20 (1) no. 7 Income Tax Act (EStG) as income from
investments. If the notes are business properties then the income is taxable as
business income.
Interest payments under the notes are subject to tax in Germany at regular
German tax rates if the payments are made to a holder of a note who, for tax
purposes, is an individual resident in Germany (that is, persons whose
residence or customary place of abode is located in Germany), a corporation
that maintains its statutory seat or principal place of management in Germany,
or if the payments are attributable to a permanent establishment maintained by,
or a fixed place of business available to, a holder of a note who is an
individual not resident in Germany for tax purposes or a corporation that does
not maintain its statutory seat or principal place of management in Germany.
In addition to taxation of interest based on the notes, according to sec. 43
(1) no. 7 lit. b EStG, a withholding tax (Zinsabschlagsteuer, "German Interest
Withholding Tax") is levied on the interest payments. This tax is fully
credited against individual and corporate income taxes. Generally, the
withholding tax rate on interest income is 30% of the interest income. Interest
payments from over-the-counter transactions (Tafelgeschafte) are taxed at a
rate of 35%. Additionally a 5.5% solidarity surcharge on withholding tax is
levied (tax rate 31.65% instead of 30% and 36.925% instead of 35%). The tax is
levied by the domestic (German) paying agent.
According to sec. 20 (4) EStG, a tax free allowance for investment income
exists for private individuals. The amount of interest received that can be
excluded from taxable income is DM 3.0 thousand (DM 6.0 thousand for married
couples) for all investment income (interest on bonds, interest on bank
deposits, dividends
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<PAGE>
etc.). In combination with the lump-sum deduction for investment expenses
(sec. 9 a no. 2 EStG), the amount excludible from taxable income amounts to DM
3.1 thousand (DM 6.2 thousand). However, these tax free allowances only apply
to private investors. For corporate investors the income from the interest on
the notes does not qualify as investment income but as business income; thus
the allowance for investment income can not be considered.
In addition, if the income earned from the notes are trade or business
income, the interest may be subject to a municipal trade tax. Trade tax rates
are determined according to the locality in which the business is conducted
and typically range between 15 and 20%, whereby the trade tax is deductible as
a business expense in computing the income which is subject to income or
corporation tax.
Interest Income derived from the Notes--Non-Resident Holders
In general, for "non-resident holders" the income earned from the notes is
not subject to German taxation.
"Non-residents" are natural or juridical persons who have neither a
residence, habitual abode, nor place of management or headquarters in Germany.
Non-residents are exempt from German withholding taxes. In other words, any
foreigner, who for tax purposes, is a non-resident of Germany, receiving
interest payments from a German bank (excluding over-the-counter
transactions--see below) is exempt from the German withholding tax on interest
payments, irrespective of the nationality of the non-resident.
However, the tax exemption on interest payments for non-residents does not
apply to over-the-counter transactions. In such cases, a withholding tax is
levied and a refund of the German withholding tax may be available according
to tax treaties.
Sale of Notes
In case of the sale of a note, a gain or loss equal to the difference
between the amount realized (less any accrued interest (Stuckzinsen), which
are taxable as interest income including the German withholding taxes) and the
original purchase price will be recognized.
Generally, gains or losses realized from the sale of the note by resident
holders are subject to tax at the standard German tax rate. A German
withholding tax does not exist for gains on sale. However, if the notes are
held in private property, the gain on sale is not subject to German tax,
provided the note is held for at least one year. Gains or losses realized from
the sale of the note by non-resident holders are not subject to taxation in
Germany.
Proposed European Union Withholding Tax Directive
A proposal currently under consideration by the European Union would oblige
each EU member state either (1) to require a "paying agent" established in the
EU member state to withhold tax on payments of interest, discount to premium
to an individual beneficial owner who is a tax resident in another EU member
state, unless the recipient establishes that it has reported the payment in
its state of residence or (2) to require a paying agent established in the EU
member state to supply information concerning the payment to the EU member
state where such recipient is a tax resident. If adopted, this proposal would
be expected to come into effect on January 1, 2001. It is impossible to
predict whether, or in what form, the proposal will be adopted.
Prospective purchasers of the notes should seek independent tax advice.
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<PAGE>
PLAN OF DISTRIBUTION
Based on positions taken by the staff of the SEC set forth in no-action
letters issued to Exxon Capital Holdings Corp. and Morgan Stanley & Co. Inc.,
among others, we believe that the exchange notes issued in the exchange offer
in exchange for the original notes may be offered for resale, resold and
otherwise transferred by holders of such notes, other than any holder which is:
. an "affiliate" of our company within the meaning of Rule 405 under the
Securities Act,
. a broker-dealer who acquired notes directly from our company, or
. broker-dealers who acquired notes as a result of market-making or other
trading activities,
without compliance with the registration and prospectus delivery provisions for
the Securities Act, as long as:
. the exchange notes are acquired in the ordinary course of such holders'
business and
. such holders are not engaged in, and do not intend to engage in, and
have no arrangement or understanding with any person to participate in,
a distribution of such exchange notes, provided that broker-dealers
receiving exchange notes in the exchange offer will be subject to a
prospectus delivery requirement with respect to resales of such exchange
notes.
To date, the staff of the SEC has taken the position that participating
broker-dealers may fulfill their prospectus delivery requirements for
transactions involving an exchange of securities such as the exchange in the
exchange offer, other than a resale of an unsold allotment from the sale of the
original notes to the initial purchasers, with this prospectus. Under the
registration rights agreement, we have agreed to permit participating broker-
dealers and other persons, if any, subject to similar prospectus delivery
requirements to use this prospectus in connection with the resale of such
exchange notes. We have agreed that, for a period of one year after the
exchange offer has been consummated, we will make this prospectus, and any
amendment or supplement, available to any broker-dealer that requests such
documents.
Each holder of original notes who wishes to exchange its original notes for
exchange notes in the exchange offer will be required to make certain
representations to us as set forth in "Exchange Offer." In addition, each
holder who is a broker-dealer and who receives exchange notes for its own
account in exchange for original notes that were acquired by it as a result of
market-making activities or other trading activities, will be required to
acknowledge that it will deliver a prospectus in connection with any resale by
it of such exchange notes.
Holders who tender original notes in the exchange offer with the intention
to participate in a distribution of the exchange notes may not rely upon the
Exxon Capital Holdings Corp., the Morgan Stanley & Co. Inc. or similar no-
action letters.
We will not receive any proceeds from any sale of exchange notes by broker-
dealers. Exchange notes received by broker-dealers for their own account in the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the exchange notes or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or at negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such broker-
dealer and/or the purchasers of any such exchange notes. The letter of
transmittal states that by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We have agreed to pay all expenses incidental to the exchange offer other
than commissions and concessions of any brokers or dealers and will indemnify
holders of the original notes, including any broker-dealers, against certain
liabilities, including liabilities under the Securities Act, as set forth in
the registration rights agreement.
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<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the issuance of the
exchange notes will be passed upon for BROKAT by LeBoeuf, Lamb, Greene &
MacRae, L.L.P., a limited liability partnership including professional
corporations, New York, New York, with respect to matters of United States
federal and New York law. Certain legal matters with respect to the exchange
notes will be passed upon for BROKAT by Haver & Mailander, Stuttgart, Germany,
with respect to matters of German law.
EXPERTS
The consolidated financial statements of:
. Brokat Infosystems AG as of December 31, 1999 and June 30, 1999 and 1998
and for the six months ended December 31, 1999 and for each of the three
years in the period ended June 30, 1999; and
. MeTechnology AG and its predecessor, ESD Vermogensverwaltungsgesellschaft
mbH as of December 31, 1998 and 1997 and for the years then ended;
included in this prospectus and elsewhere in the registration statement to the
extent and for the periods indicated in their reports have been audited by
Arthur Andersen Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft
mbH, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
The consolidated financial statements of Transaction Software Technologies,
Inc. as of September 30, 1998 and 1997 and for the years then ended, included
in this prospectus, have been audited by Arthur Andersen LLP, independent
public accountants, and are included herein in reliance upon the authority of
said firm as experts in giving said reports.
GENERAL INFORMATION
Listing
We listed the original notes and expect to make an application to list the
exchange notes on the Luxembourg Stock Exchange. The Articles of Association of
our company and the legal notice relating to the issue of the notes have been
deposited with the Registrar of the District Court in Luxembourg (Greffier en
Chef du Tribunal d'Arrondissement a Luxembourg), where such documents are
available for inspection and where copies of such documents can be obtained
upon request. As long as the notes are listed on the Luxembourg Stock Exchange,
we will maintain a listing, paying and transfer agent in Luxembourg. According
to Chapter VI, Article 3, point A/11/2 of the Rules and Regulations of the
Luxembourg Stock Exchange, the notes shall be freely transferable and therefore
no transaction made on the Luxembourg Stock Exchange shall be cancelled.
Authorizations
We have obtained all necessary consents, approvals and authorizations in
connection with the issue of the notes. The issue of the notes was authorized
by resolutions of our Management Board passed on February 7, 2000 and by
resolutions of our Supervisory Board passed on February 21, 2000.
No Material Change
Except as disclosed in this prospectus, there has been no material change in
the financial position of our company and our subsidiaries since December 31,
1999.
Litigation
Neither our company nor any of our subsidiaries or affiliates is involved in
any litigation or arbitration proceedings which relate to claims or amounts
which are material in the context of the issue of the notes or that may have,
or have had during the 12 months preceding the date of this prospectus, a
material adverse effect on the financial position of our company, nor, so far
as any of them is aware, is any such proceeding pending or threatened.
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<PAGE>
Documents
Copies of the following documents may be inspected at the specified offices
of our Listing, Paying and Transfer Agent in Luxembourg:
. Articles of Association of our company;
. the Purchase Agreement and Registration Rights Agreement relating to the
notes; and
. the indenture to be dated as of March 28, 2000 relating to the notes,
which includes the forms of the note certificates.
In addition, copies of the most recent consolidated financial statements of
our company for the preceding financial year, and any interim quarterly
financial statements published by our company, will be available at the
specified offices of the Paying and Transfer Agents in Luxembourg for so long
as the notes are listed on the Luxembourg Stock Exchange. Our company publishes
only consolidated financial statements.
Clearing Systems
The notes have been accepted for clearance through the facilities of
Euroclear and Clearstream. Relevant trading information is set forth below.
<TABLE>
<CAPTION>
ISIN Common Code
---- -----------
<S> <C> <C>
Original Notes
Rule 144A............................................ XS0109534999 010953499
Regulation S......................................... XS0109534643 010953464
Exchange Notes......................................... . .
</TABLE>
Exchange Offer
In connection with the exchange offer referred to under the caption
"Exchange Offer; Registration Rights," application will be made to list the New
Notes on the Luxembourg Stock Exchange. The New Notes will be accepted for
clearance through the accounts of Euroclear and Clearstream and they will have
a new Common Code and a new ISIN number, which will be transmitted to the
Luxembourg Stock Exchange. All documents prepared in connection with the
exchange offer will be available at the office of the listing agent in
Luxembourg and all necessary actions and services in respect of the exchange
offer may be done at the office of the listing agent in Luxembourg.
All notices relating to the exchange offer will be published in accordance
with the notice provisions of the applicable indenture. See "Description of the
Notes--Notices." So long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall require, prior to the
commencement of the exchange offer, notice of the exchange offer will be given
to the Luxembourg Stock Exchange and will be published in a newspaper having a
general circulation in Luxembourg (which is expected to be the Luxembourg
Wort). Such notice will, among other things, provide details of the conditions
to, and the commencement and expected completion dates of, the exchange offer.
So long as the notes are listed on the Luxembourg Stock Exchange and the rules
of such stock exchange shall require, notice of the results of the exchange
offer will be given to the Luxembourg Stock Exchange and will be published in a
newspaper having a general circulation in Luxembourg (which is expected to be
the Luxembourg Wort), in each case, as promptly as practicable following the
completion of the exchange offer.
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<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
BROKAT Infosystems AG
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets as of December 31, 1999, June 30, 1999, and
June 30, 1998............................................................ F-3
Consolidated Statements of Operations for the six months ended
December 31, 1999 and for the years ended June 30, 1999, June 30, 1998,
and June 30, 1997........................................................ F-4
Consolidated Statements of Changes in Shareholders' Equity for the six
months ended December 31, 1999 and for the three years ended June 30,
1999..................................................................... F-5
</TABLE>
<TABLE>
<S> <C>
Consolidated Statements of Cash Flows for the six months ended
December 31, 1999 and for the years ended June 30, 1999, June 30, 1998,
and June 30, 1997........................................................ F-6
Notes to the Consolidated Financial Statements............................ F-7
Transaction Software Technologies, Inc.
Report of Independent Public Accountants.................................. F-35
Consolidated Balance Sheets as of September 30, 1998 and 1997............. F-36
Consolidated Statements of Operations for the years ended September 30,
1998 and 1997............................................................ F-37
Consolidated Statements of Changes in Shareholders' Equity for the years
ended September 30, 1998 and 1997........................................ F-38
Consolidated Statements of Cash Flows for the years ended September 30,
1998 and 1997............................................................ F-39
Notes to the Consolidated Financial Statements............................ F-40
</TABLE>
<TABLE>
<S> <C>
MeTechnology AG
Reports of Independent Public Accountants.................................. F-46
Consolidated Balance Sheets as of December 31, 1998 and 1997............... F-48
</TABLE>
<TABLE>
<S> <C>
Consolidated Statements of Operations for the years ended December 31,
1998 and 1997........................................................... F-49
</TABLE>
<TABLE>
<S> <C>
Consolidated Statements of Changes in Shareholders' Equity for the years
ended December 31, 1998 and 1997........................................ F-50
</TABLE>
<TABLE>
<S> <C>
Consolidated Statements of Cash Flows for the years ended December 31,
1998 and 1997........................................................... F-51
</TABLE>
<TABLE>
<S> <C>
Notes to Consolidated Financial Statements................................. F-52
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Brokat Infosystems Aktiengesellschaft:
We have audited the accompanying consolidated balance sheets of Brokat
Infosystems Aktiengesellschaft and subsidiaries (the "Company") as of December
31, 1999, June 30, 1999, and June 30, 1998 and the related consolidated
statements of operations, cash flows and shareholders' equity for the six month
period ended December 31, 1999 and for each of the three years in the period
ended June 30, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards in Germany and the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Brokat Infosystems Aktiengesellschaft and subsidiaries as of December 31,
1999, June 30, 1999, and June 30, 1998 and the results of their operations and
their cash flows for the six month period ended December 31, 1999 and for each
of the three years in the period ended June 30, 1999 in conformity with
generally accepted accounting principles in the United States.
Arthur Andersen
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
Dr. Schmidt Schupeck
Wirtschaftsprufer Wirtschaftsprufer
Stuttgart, Germany
February 14, 2000
F-2
<PAGE>
BROKAT INFOSYSTEMS AG
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
---------------- December 31,
Note 1998 1999 1999
---- ------- ------- ------------
(DM in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. 1,832 7,141 6,963
Accounts receivable (less allowance for
doubtful accounts of DM 1,575,000,
DM 2,270,000 and DM 283,000 at December
31, 1999, June 30, 1999, and June 30,
1998, respectively)...................... 10,716 35,076 36,187
Cost and estimated earnings in excess of
billings on uncompleted contracts........ (4) 1,806 2,499 1,965
Advances on purchase commitments.......... (19) 0 0 3,000
Prepaid expenses and other current
assets................................... (5) 1,015 3,923 6,795
------- ------- --------
Total current assets...................... 15,369 48,639 54,910
------- ------- --------
Property and equipment, at cost............
Computer equipment......................... 3,941 9,696 12,813
Furniture and fixtures..................... 1,022 4,891 5,296
Less: accumulated amortization............. (1,502) (6,264) (8,607)
------- ------- --------
3,461 8,323 9,502
------- ------- --------
Goodwill................................... (6) 0 212,948 188,887
Other intangible assets.................... (6) 496 8,033 8,448
Less: accumulated amortization............. (6) (223) (4,320) (20,547)
------- ------- --------
273 216,661 176,788
------- ------- --------
Investments in associated companies........ (3) 0 0 4,139
Other long-term investments................ (3) 0 0 1,013
Deferred income taxes...................... (14) 577 1,447 2,333
------- ------- --------
Total assets.............................. 19,680 275,070 248,685
======= ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt to banks.................. (7) 0 3,226 42,271
Other short-term debt..................... (8) 0 3,438 5,665
Accounts payable, trade................... 2,322 8,939 5,043
Payroll-related accruals.................. 1,935 4,229 5,296
Tax-related accruals...................... 501 847 2,150
Billings in excess of cost and estimated
earnings on uncompleted contracts........ (4) 970 857 1,818
Other accrued expenses and current
liabilities.............................. (9) 1,499 5,962 6,264
Deferred income........................... 1,107 3,430 3,579
Deferred income taxes..................... (14) 577 1,447 2,377
------- ------- --------
Total current liabilities................. 8,911 32,375 74,463
======= ======= ========
Long-term debt to banks.................... (10) 2,000 2,000 2,000
Long-term debt to shareholders............. (11) 4,555 4,000 0
Other long-term debt....................... (12) 3,753 18,356 1,850
------- ------- --------
Total liabilities......................... 19,219 56,731 78,313
------- ------- --------
Minority interest.......................... 0 400 426
------- ------- --------
Shareholders' equity: (15)
Common Stock.............................. 0 44,748 52,512
GmbH Capital.............................. 158 0 0
Additional paid-in capital................ 10,567 271,751 343,260
Accumulated deficit....................... (10,297) (57,587) (109,064)
Deferred compensation..................... (16) 0 (39,261) (113,376)
Accumulated other comprehensive income
(loss)................................... 33 (1,712) (3,386)
------- ------- --------
Total shareholders' equity................ 461 217,939 169,946
------- ------- --------
Total liabilities and shareholders'
equity................................... 19,680 275,070 248,685
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
BROKAT INFOSYSTEMS AG
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
June 30, December 31,
Note 1997 1998 1999 1999
-------- --------- --------------------------- ----------------
(DM in thousands, except share data and per share data)
<S> <C> <C> <C> <C> <C>
Revenue................. (18) 12,101 29,571 62,487 51,287
Cost of Sales (exclusive
of DM 4,298.0 thousand
and DM 6,794.0 thousand
of non-cash charges
from stock option
grants in the six
months ended December
31, 1999 and the year
ended June 30, 1999)... (7,971) (15,493) (31,325) (22,937)
--------- ---------- ------------- -------------
Gross profit............ 4,130 14,078 31,162 28,350
--------- ---------- ------------- -------------
Selling expenses
(exclusive of DM
3,524.0 thousand and DM
6,070.0 thousand of
non-cash charges from
stock option grants in
the six months ended
December 31, 1999 and
the year ended June 30,
1999).................. (3,118) (16,636) (38,848) (27,714)
General and
administrative expenses
(exclusive of DM
1,552.0 thousand and DM
1,580.0 thousand of
non-cash charges from
stock option grants in
the six months ended
December 31, 1999, and
the year ended June 30,
1999).................. (1,332) (4,305) (10,639) (12,643)
Research and development
expenses (exclusive of
DM 2,866.0 thousand and
DM 1,896.0 thousand of
non-cash charges from
stock option grants in
the six months ended
December 31, 1999, and
the year ended June 30,
1999).................. (1,450) (4,917) (8,733) (12,769)
Amortization of goodwill
and other intangible
assets from
acquisitions........... 0 0 (3,686) (15,797)
Non-cash charges
associated with stock
option grants.......... (16) 0 0 (16,340) (12,240)
--------- ---------- ------------- -------------
Total operating
expenses............... (5,900) (25,858) (78,246) (81,163)
--------- ---------- ------------- -------------
Operating loss.......... (1,770) (11,780) (47,084) (52,813)
--------- ---------- ------------- -------------
Interest income......... 5 150 1,528 35
Interest expense........ (157) (454) (960) (867)
Other, net.............. 198 239 2,565 2,298
Loss absorption of
convertible debt of
silent partners........ 0 3,252 926 0
--------- ---------- ------------- -------------
Loss before income taxes
and extraordinary
items.................. (1,724) (8,593) (43,025) (51,347)
--------- ---------- ------------- -------------
Income tax benefit
(expense).............. (14) 10 0 (113) (104)
Minority interest....... 0 0 90 (26)
--------- ---------- ------------- -------------
Loss before
extraordinary items.... (1,714) (8,593) (43,048) (51,477)
Extraordinary loss on
early extinguishment of
debt................... 0 0 (4,242) 0
--------- ---------- ------------- -------------
Net loss................ (1,714) (8,593) (47,290) (51,477)
========= ========== ============= =============
Basic and diluted loss
per share:
Loss before
extraordinary items.... (2.18) (1.92)
Extraordinary loss...... (0.22) 0.00
Net loss................ (2.40) (1.92)
============= =============
Weighted average number
of common shares
outstanding............ 19,694,650 26,848,773
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
BROKAT INFOSYSTEMS AG
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Other
Compre- Total Compre-
Preferred Stock Common Stock Additional Accumulated hensive Stock- hensive
------------------ ----------------- GMBH Paid-in Earnings Deferred Income holders Income
Shares Amount Shares Amount Capital Capital (Deficit) Compensation (Loss) Equity (Loss)
--------- ------- ---------- ------ ------- ---------- ----------- ------------ ------- ------- -------
(DM in thousands, except share data)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June
30, 1996........ 0 0 0 0 62 0 107 0 0 169
Dividends....... 0 0 0 0 0 0 (97) 0 0 (97)
Capital
increases....... 0 0 0 0 65 591 0 0 0 656
Net income...... 0 0 0 0 0 0 (1,714) 0 0 (1,714) (1,714)
-------
Comprehensive
loss............ (1,714)
--------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- -------
Balance, June
30, 1997........ 0 0 0 0 127 591 (1,704) 0 0 (986)
--------- ----- ---------- ------ ---- ------- -------- -------- ------ -------
Capital
increases....... 0 0 0 0 31 9,976 0 0 0 10,007
Net loss........ 0 0 0 0 0 0 (8,593) 0 0 (8,593) (8,593)
Foreign currency
translation
adjustment...... 0 0 0 0 0 0 0 0 33 33 33
-------
Comprehensive
loss............ (8,560)
--------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- -------
Balance, June
30, 1998........ 0 0 0 0 158 10,567 (10,297) 0 33 461
--------- ----- ---------- ------ ---- ------- -------- -------- ------ -------
Shares issued in
connection with
the conversion
from GmbH to
AG.............. 30,780 51 64,200 107 (158) 0 0 0 0 0
Conversion of
preferred stock
to common
stock........... (30,780) (51) 30,780 51 0 0 0 0 0 0
Shares issued
upon conversion
of debt......... 0 0 1,419 2 0 7,484 0 0 0 7,486
Shares issued in
IPO, net of
issuance cost... 0 0 24,000,000 40,000 0 34,066 0 0 0 74,066
Shares issued
after IPO....... 0 0 420,000 700 0 8,260 0 0 0 8,960
Shares issued
for acquisition
of
MeTechnology.... 0 0 2,332,374 3,888 0 155,773 0 0 0 159,661
Non-cash
compensation
from issuance of
stock options to
employees....... 0 0 0 0 0 55,601 0 (55,601) 0 0
Amortization of
deferred stock
option
compensation.... 0 0 0 0 0 0 0 16,340 0 16,340
Net loss........ 0 0 0 0 0 0 (47,290) 0 0 (47,290) (47,290)
Foreign currency
translation
adjustment...... 0 0 0 0 0 0 0 0 (1,745) (1,745) (1,745)
-------
Comprehensive
loss............ (49,035)
--------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- -------
Balance, June
30, 1999........ 0 0 26,848,773 44,748 0 271,751 (57,587) (39,261) (1,712) 217,939
--------- ----- ---------- ------ ---- ------- -------- -------- ------ -------
Adjustment to
reflect change
in par value.... 0 0 0 7,764 0 (7,764) 0 0 0 0
Change in
deferred
compensation for
variable stock
options to
employees on
previous stock
option grants... 0 0 0 0 0 35,431 0 (35,431) 0 0
Non-cash
compensation on
stock options
granted to
employees under
ME-Plan......... 0 0 0 0 0 0 0 (7,082) 0 (7,082)
Non-cash
compensation
from issuance of
stock options to
employees under
1999 Plan....... 0 0 0 0 0 43,842 0 (43,842) 0 0
Amortization of
deferred stock
option
compensation.... 0 0 0 0 0 0 0 12,240 0 12,240
Net loss........ 0 0 0 0 0 0 (51,477) 0 0 (51,477) (51,477)
Foreign currency
translation
adjustment...... 0 0 0 0 0 0 0 0 (1,674) (1,674) (1,674)
-------
Comprehensive
loss............ (53,151)
--------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- -------
Balance,
December 31,
1999............ 0 0 26,848,773 52,512 0 343,260 (109,064) (113,376) (3,386) 169,946
========= ===== ========== ====== ==== ======= ======== ======== ====== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
BROKAT INFOSYSTEMS AG
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months
Year Ended June 30, Ended
------------------------ December 31,
1997 1998 1999 1999
------ ------- ------- ----------------
(DM in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash flow from Operating
Activities:
Net loss......................... (1,714) (8,593) (47,290) (51,477)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Extraordinary loss............... 0 0 4,242 0
Minority interest................ 0 0 (90) 26
Depreciation and amortization.... 734 1,374 6,705 18,892
Gain on disposal of property and
equipment....................... 29 (1) (2) 0
Loss participation from holders
of convertible debt............. 0 (3,252) (926) 0
Deferred income taxes............ (10) 0 0 44
Non-cash charges associated with
stock option grants............. 0 0 16,340 12,240
Changes in operating assets and
liabilities:
Accounts receivable............. (3,113) (6,960) (23,377) (1,111)
Net changes in cost and
estimated earnings in excess of
billings....................... (1,576) 740 3,718 1,495
Prepaid expenses and other
current assets................. (148) (833) (1,442) (5,872)
Accounts payable, trade......... 1,504 613 4,750 (3,896)
Payroll and tax related
accruals....................... 572 1,153 2,050 2,370
Other accrued expenses and
liabilities.................... 348 1,363 (564) (340)
Deferred income................. 160 947 200 149
------ ------- ------- -------
Net cash used in operating
activities...................... (3,214) (13,449) (35,686) (27,480)
------ ------- ------- -------
Cash flow from Investing
Activities:
Acquisitions of intangible
assets.......................... (282) (159) (5,628) (443)
Purchases of property and
equipment....................... (1,466) (3,710) (5,207) (3,891)
Purchases of investments......... 0 0 0 (4,526)
Acquisitions, net of cash
acquired........................ 0 0 (29,431) (30)
Proceeds from sale of property
and equipment................... 4 106 293 0
------ ------- ------- -------
Net cash used in investing
activities..................... (1,744) (3,763) (39,973) (8,890)
------ ------- ------- -------
Cash flow from Financing
Activities:
Net change in short-term debt.... 2,995 (1,129) 0 37,746
Proceeds from debt issuances..... 1,516 10,130 0 0
Issuances of share capital....... 551 10,007 83,025 0
Dividends paid................... (97) 0 0 0
------ ------- ------- -------
Net cash provided by financing
activities..................... 4,965 19,008 83,025 37,746
------ ------- ------- -------
Effect of Exchange Rate
Differences on Cash.............. 0 20 (2,057) (1,554)
Increase (decrease) in Cash and
Cash Equivalents................. 7 1,816 5,309 (178)
Cash and Cash Equivalents:
At the beginning of the period... 9 16 1,832 7,141
------ ------- ------- -------
At the end of the period......... 16 1,832 7,141 6,963
====== ======= ======= =======
Supplemental Disclosure of Cash
flow Information:
Cash paid for:
Interest......................... 105 330 930 636
Income taxes..................... 9 0 0 240
</TABLE>
Supplemental Disclosures of Non-Cash Transactions:
In the year ended June 30, 1999, the Company acquired MeTechnology AG,
Leipzig, in exchange for common shares of the Company with a fair value of DM
159,661.0 thousand. Also during that year, approximately DM 7,486.0 thousand of
debt was converted into equity.
In the six months period ended December 31, 1999, the change in deferred
compensation related to stock options of DM 86,355.0 thousand was credited to
additional paid-in capital in the amount of DM 79,273.0 thousand and goodwill
in the amount of DM 7,082.0 thousand. In the same period long-term debt
recorded in connection with the acquisition of MeTechnology of DM 16,980.0
thousand was forgiven and charged to goodwill (see Note 12).
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The Company
Brokat Infosystems AG (formerly: Brokat Informationssysteme GmbH),
Stuttgart, Germany, was founded on September 17, 1994. The Company and its
subsidiaries develop and market cross-channel software for the integration of
existing IT systems and applications into various electronic channels such as
Internet, mobile radio or call centers. The Company's main customers are banks
and other institutions which offer and process services through electronic
channels.
By a shareholders' resolution of April 1, 1998, the parent company was
converted from a limited liability company (Gesellschaft mit beschrankter
Haftung, "GmbH") to a stock corporation (Aktiengesellschaft, "AG"). Under a
GmbH the equity interests of the shareholders in the company are not
represented by a specific number of shares. Under the stock corporation
structure, shares are issued to the shareholders and the number of shares
issued corresponds to the share capital of the company. The change in capital
structure was registered with the commercial register in Stuttgart on July 3,
1998.
On September 17, 1998, the Company completed an initial public offering
("IPO") of its share capital in Germany and listed its shares on the Neuer
Markt, a German stock exchange. The listing of these shares and the IPO,
itself, involved a series of transactions that immediately preceded the initial
public offering. These transactions are discussed in the following paragraphs.
The purpose of these transactions was to increase the number of shares
outstanding immediately prior to the IPO, without effecting a stock split, as
well as comply with German law that requires existing shareholders to have a
pre-emptive right to purchase newly issued shares before outside shareholders
may purchase these shares.
On September 15, 1998, existing shareholders of the Company (the "Existing
Shareholders") participated in a rights offering, whereby existing shareholders
were issued 248.97 rights for each share of stock owned. Each right allowed
shareholders to purchase one share of the Company's common stock for a price of
DM 3.33 per share. In aggregate, 24,000,000 rights were issued to shareholders.
Immediately upon issuance, the shareholders sold 3,750,000 of their rights
to Banque Paribas, Frankfurt am Main ("Paribas"), an entity which acted as an
investment banker for the Company. Paribas acquired these rights for a cash
consideration of DM 18.00 per right. This value was determined based upon the
difference between the Company's initial public offering price of DM 21.33 per
share (see below) and the exercise price of the right of DM 3.33 per share.
Upon acquisition, Paribas then immediately exercised all of the rights and
purchased 3,750,000 shares of the Company's common stock for cash proceeds
totaling DM 12,500,000, excluding underwriter discounts and commissions.
Using the consideration received from the sale of the 3,750,000 conversion
rights, the Existing Shareholders then exercised their rights and purchased
20,250,000 shares of the Company's common stock for cash proceeds totaling DM
67,500,000. In total, the Company received DM 80,000,000 from the sale of the
stock rights.
The remaining 3,750,000 shares then held by the bank were issued to the
public at an offering price of DM 21.33 per share. All proceeds from the
issuance of these shares were retained by Paribas to offset initial funding
requirements to obtain and exercise the 3,750,000 rights.
F-7
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table summarizes cash proceeds and expenditures by the
parties to all of the transactions:
<TABLE>
<CAPTION>
Cash received/(expended)
---------------------------------------------------
Existing New
Bank Shareholders Shareholders Company
----------- ------------ ------------ ----------
<S> <C> <C> <C> <C>
Sale of rights to
Paribas................ (67,500,000) 67,500,000 -- --
Exercise of rights by
Paribas................ (12,500,000) -- -- 12,500,000
Exercise of rights by
Existing Shareholders.. -- (67,500,000) -- 67,500,000
Sale of shares to new
shareholders........... 80,000,0000 -- (80,000,000) --
----------- ----------- ----------- ----------
-- -- (80,000,000) 80,000,000
=========== =========== =========== ==========
</TABLE>
In connection with the rights offering, the Existing Shareholders of the
Company remained in the same economic position both immediately before and
after the offering. Net proceeds to the Company as a result of the
transactions described above was DM 74,066,000, consisting of gross proceeds
of DM 80,000,000 less underwriters' discounts, commissions and other offering
expenses of DM 5,934,000. Additionally, the Company raised DM 8,960,000 from
the exercise of the over-allotment option in October 1998, resulting in total
net proceeds from the offering of approximately DM 83,000,000.
Note 2. Summary of Significant Accounting Policies
Basis of consolidation
The accompanying consolidated financial statements of the Company have been
prepared in accordance with United States generally accepted accounting
principles ("US-GAAP"). The assets, liabilities and results of operations of
entities in which the Company has a controlling interest have been
consolidated. Investments in which the Company exercises significant
influence, but which it does not control (generally 20-50% ownership interest)
are accounted for under the equity method of accounting. Investments in which
the Company has less than a 20% ownership interest are accounted for under
cost method of accounting. All significant intercompany accounts and
transactions have been eliminated. Minority interest represents the 49%
separate ownership of the German subsidiary Go-Solutions GmbH.
Basis of presentation
The accompanying consolidated financial statements are stated in thousands
of Deutsche Marks.
The Company's fiscal year previously ended on June 30. In November, 1999,
the Shareholders Meeting approved management's plan to change the Company's
fiscal year to a calendar year ending on December 31. In 1999, the transition
year, the Company's fiscal year begins July 1, 1999, and ends December 31,
1999. Beginning July 1, 1999, international operating subsidiaries, which had
generally been included in the consolidated financial statements based on
interim financial statements for fiscal years ending June 30, are now included
in the consolidated financial statements based on fiscal years ending December
31.
The consolidated statements of operations, shareholders' equity, and cash
flows are presented for the six months ended December 31, 1999, and for each
of the three years ended June 30, 1999, June 30, 1998, and June 30, 1997.
F-8
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
For comparative purposes only, the following table presents the condensed
results of operations for the six months ended December 31, 1999 and 1998.
Condensed Consolidated Statement of Operations
<TABLE>
<CAPTION>
Six Months Ended
December 31,
--------------------------------
1998 1999
--------------- --------------
(Unaudited) (Audited)
(DM in thousands, except per
share data)
<S> <C> <C>
Revenue................................. 19,671 51,287
Cost of Sales........................... (10,371) (22,937)
-------------- --------------
Gross Profit............................ 9,300 28,350
-------------- --------------
Other costs and expenses................ (20,819) (79,697)
-------------- --------------
Loss before income taxes................ (11,519) (51,347)
-------------- --------------
Income taxes............................ 0 (104)
Minority Interest....................... 0 (26)
Extraordinary loss on early
extinguishment of debt................. (4,242) 0
-------------- --------------
Net loss................................ (15,761) (51,477)
============== ==============
Basic and diluted loss per share before
extraordinary items.................... (0.80) (1.92)
============== ==============
Basic and diluted loss per share........ (1.09) (1.92)
============== ==============
</TABLE>
Use of estimates
The preparation of financial statements in conformity with US-GAAP requires
management of the Company to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Foreign currency translation
The Company's financial statements are prepared in Deutsche Mark. The
functional currency of each of the Company's subsidiaries is the local currency
in which each subsidiary is located. Assets and liabilities denominated in
foreign currencies are translated at rates of exchange in effect at the balance
sheet date. Revenues and expenses are translated at average rates of exchange
in effect during the year. Differences arising from the translation are
recorded to accumulated other comprehensive income. Transactions in foreign
currencies are translated at the exchange rate in effect at the date of each
transaction. Differences in exchange rates during the period between the date a
transaction denominated in a foreign currency is consummated and the date on
which it is either settled or translated for inclusion in a consolidated
balance sheet are recognized in the statement of operations and are included in
"Other, net" for that period. The foreign currency exchange gain (loss)
recognized in the statement of operations for the six months period ended
December 31, 1999, and the years ended June 30, 1999, June 30, 1998, and June
30, 1997 was DM 2,250.0 thousand, DM 2,177.0 thousand, DM (215.0) thousand and
DM 0 thousand, respectively.
Cash and cash equivalents
All highly liquid investments with original maturities of three months or
less are considered to be cash equivalents. The carrying amounts of cash and
cash equivalents approximates fair value due to the short maturity of these
investments.
F-9
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Trade accounts receivable
Receivables with recognizable risks are provided for by adequate allowances,
while uncollectible receivables are written off. Trade accounts receivable are
expected to be settled within one year of the origination of the receivable.
Advances on purchase commitments
Advances on purchase commitments represent prepayments on software licenses
purchased from a related party (see Note 19).
Accounting for long-lived assets
The Company, at each balance date, evaluates the recoverability of the
carrying amount of its long-lived assets in accordance with Statement of
Financial Accounting Standard (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be disposed of". Whenever events
or changes in circumstances indicate that the carrying amounts of those assets
may not be recoverable over the remaining amortization period, the Company will
compare undiscounted net cash flows estimated to be generated by those assets
to the carrying amount of those assets. To the extent that these cash flows are
less than the carrying amounts of the assets, the Company will record
impairment losses to write the asset down to fair value. As of December 31,
1999, management believes that no such impairment exists.
Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful life of the assets, ranging from
3 years for computer hardware and 5 to 10 years for furniture and fixtures.
Cost includes major expenditures and replacements which extend useful lives
or increase capacity and interest cost associated with significant capital
additions. For all periods presented, interest costs allocable to these
projects have been insignificant and have not been capitalized. When assets are
sold or retired, their cost and related accumulated depreciation are removed
from the appropriate accounts. Any gains or losses on disposition of such
assets are recorded as other income or expense. Maintenance and minor repairs
are charged to operations as incurred.
Purchased software is stated at cost and depreciated using the straight-line
method over the estimated useful life of the software.
Goodwill and purchased intangible assets are capitalized and amortized on a
straight line basis over their estimated periods to be benefited. This
amortization period is determined individually for each asset and ranges from 3
to 7 years.
Income taxes
The Company utilizes the liability method of accounting for income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes". Under the
liability method, deferred taxes are determined based on the differences
between the financial statements and tax basis of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse. Valuation allowances are recorded to reduce deferred tax assets
when it is more likely than not that a tax benefit will not be realized.
Earnings (loss) per share information
In accordance with SFAS No. 128, "Earnings per Share" basic earnings per
share are calculated using income available to common shareholders divided by
the weighted average of common shares outstanding
F-10
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
during the year. Diluted earnings per share are similar to basic earnings per
share except that the weighted average of common shares outstanding is
increased to include the number of additional common shares that would have
been outstanding if the dilutive potential common shares, such as options, had
been issued. For all periods presented, no potentially dilutive securities have
been included in the calculation of diluted loss per share as such amounts
would be antidilutive in periods in which a loss has been reported. The
aggregate number of potential common share equivalents that have been excluded
from the diluted loss per share calculation was 2,409,639 and 1,204,818 as of
December 31, 1999, and June 30, 1999, respectively, and related entirely to
stock options.
As described in Note 1, the Company changed its corporate structure from a
"GmbH" to "AG". Under a GmbH the equity interest of the shareholders in the
company are not represented by a specific number of shares. Accordingly there
is no per share amount assignable to the Company before fiscal year June 1999.
Stock splits
In July 1998 and December 1999, the Company effected a ten-for-one and a
three-for-one stock split, respectively. All share and per-share amounts in the
accompanying consolidated financial statements have been restated to give
effect to both splits.
Software development costs
The Company accounts for its software development costs in accordance with
SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased
or Otherwise Marketed". Capitalization of software development costs begins
upon establishment of technological feasibility and ends upon general release
of the software to the public. In accordance with SFAS No. 86, the Company has
defined technological feasibility as the completion of the working model.
Research and development costs are incurred during the completion of the
preliminary design and conception phase and prior to the technical and economic
feasibility of the product being established. These costs are immediately
expensed as research and development costs when incurred.
Advertising costs
Advertising costs are expensed as incurred. Advertising costs were DM
2,595.0 thousand, DM 3,367.0 thousand, DM 2,011.0 thousand and DM 420.0
thousand for the six months ended December 31, 1999, and for the years ended
June 30, 1999, June 30, 1998, and June 30, 1997, respectively.
Revenue recognition
The Company generates revenues from the installation and licensing of the
rights to use its software products to end users. The Company also generates
revenues from sales of professional services, including consulting, training,
and maintenance.
Revenues from software license agreements are recognized upon delivery of
the software if among other things (1) collection is probable, (2) all license
payments are due within one year, (3) the license fee is otherwise fixed and
determinable and (4) vendor specific evidence exists to allocate the total fee
to all elements of the arrangement.
Service revenue is primarily related to implementation and installation
services performed under separate service arrangements. Revenues from
consulting, training and maintenance services are recognized as the services
are performed.
F-11
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
If a license arrangement includes both software and service elements, the
license fee is allocated to services and other elements of the arrangement
based on their fair value as established by independent sales of the respective
element to customers. Generally, revenues from the licensing and installation
of software, including software customization or modification, are deferred and
recognized under the percentage of completion method of accounting as services
are performed. Due to the long-term nature of these projects, percentage of
completion is measured by the labor cost incurred to total estimated labor cost
method. Billings issued to, and cash payments received from customers are not
shown as sales revenue but deducted without effect on income from cost in
excess of billings on uncompleted contracts or added to billings in excess of
costs on uncompleted contracts.
Sales revenues from maintenance agreements are recorded as revenue ratably
over the term of the contract. Revenues from maintenance agreements, which are
embedded into sale and installation agreements are estimated based on similar
stand-alone agreements and recognized over the term of the agreement. Any
unrecognized revenues are recorded on the accompanying balance sheets as
deferred income.
Provisions for estimated losses on uncompleted contracts are made in the
period in which such losses are determined. In forecasting ultimate
profitability on certain contracts, estimated recoveries are included for work
performed under customer change orders to contracts for which firm prices have
not yet been negotiated. Due to uncertainties inherent in the estimation
process, it is reasonably possible that completion costs, including those
arising from contract penalty provisions and final contract settlements, will
be revised in the near-term. Such revisions to costs and income are recognized
in the period in which the revisions are determined.
New accounting standards
Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". SFAS No. 130 requires companies to report comprehensive
income, which is defined as all changes in equity during a period, except those
resulting from investment by owners and distribution to owners, in a financial
statement for the period in which they are recognized. Net income and other
comprehensive income, including foreign currency translation adjustment,
minimum pension liability and unrealized gains and losses on investments are to
be reported, net of their related tax effect, to arrive at comprehensive
income. The Standard requires only additional disclosure in the financial
statements and does not affect the Company's financial position or results of
operations. Prior years financial statements have been restated to conform to
the requirements of SFAS No. 130.
Effective July 1, 1998, the Company adopted SFAS No. 131, "Disclosure about
Segments of an enterprise and related Information". The Company operates in one
business segment, the licensing of software products. Therefore the adoption of
SFAS No. 131 had no impact on the Company's financial position or results of
operations.
In March 1998 the Accounting Standards Executive Committee of the AICPA
approved Statement of Position (SOP) 98-1. This SOP governs the accounting of
internally used, acquired or internally developed software and requires the
capitalization of certain associated costs. SOP 98-1 is applicable for
financial years beginning after December 15, 1998. Effective July 1, 1998, the
Company adopted SOP 98-1. In accordance with the capitalization criteria of SOP
98-1 the Company capitalized internally developed, self-used software of DM 0
thousand and DM 437.0 thousand during the six months ended December 31, 1999,
and the year ended June 30, 1999.
The Financial Accounting Standards Board (FASB) recently issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities", which
requires that companies recognize all derivatives as either assets or
liabilities in the balance sheet at fair value. Under this statement,
accounting for changes in fair
F-12
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
value of a derivative depends on its intended use and designation. In June
1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities--Deferral of the Effective Date of SFAS No. 133". SFAS No.
137 amends the effective date of SFAS No. 133. SFAS No. 133 will now be
effective for all fiscal quarters of all fiscal years beginning after June 15,
2000. The Company is currently assessing the potential effects of this new
standard. Based on the current and expected levels of derivative instruments
used by the Company, the adoption of this new standard is not expected to have
a material effect on the Company's results of operations or financial position.
Note 3. Acquisitions
Transaction Software Technologies, Inc., Atlanta, USA
On May 9, 1999, the Company acquired Transaction Software Technologies,
Inc., Atlanta, USA, (TST), for DM 34.9 million in cash (including direct
acquisition costs), of which DM 1,665.0 thousand was to be paid twelve months
after closing and another DM 1,665.0 thousand was to be paid 24 months after
closing, with no interest due. Complementing the Company's existing software
business, TST has been a leader in the development and implementation of cash
management systems in U.S. banking institutions. The acquisition was accounted
for using the purchase method. Accordingly, the purchase price was allocated to
the assets acquired and the liabilities assumed, based on the completion of the
evaluation of the fair values of TST's assets and liabilities at the date of
acquisition. The following is a summary of the purchase price allocation:
<TABLE>
<CAPTION>
DM
(in thousands)
--------------
<S> <C>
Current assets and other tangible assets...................... 5,345
Liabilities assumed........................................... (6,703)
Customer list................................................. 4,015
Goodwill...................................................... 31,969
------
34,626
======
</TABLE>
The acquired customer list is being depreciated over a period of 5 years.
Acquired goodwill is being amortized over a period of 7 years. The operating
results of TST have been included in the consolidated income statements from
the date of acquisition. The allocation of purchase price is based on
preliminary estimates of fair value and is subject to revision based upon the
finalization of management's assessment of the fair value of net assets
acquired. Changes in the allocation of the purchase price would likely be
limited to the recording of other identified intangible assets, resulting in a
reduction of goodwill, if such assets and their respective values can be
identified.
F-13
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
MeTechnology AG, Leipzig
On May 21, 1999, the Company acquired MeTechnology AG, Leipzig, for the
issuance of 2,332,374 shares of Brokat common stock having a value of DM 159.7
million on the date of acquisition. Additionally, DM 1.2 million direct
acquisition cost were paid in cash. Complementing the Company's existing
software business, MeTechnology AG has been a leader in the development and
implementation of online banking software in Germany. The acquisition was
accounted for using the purchase method. Accordingly, the purchase price was
allocated to the assets acquired and the liabilities assumed, based on the
evaluation of the fair values of MeTechnology AG's assets and liabilities at
the date of acquisition. The following is a summary of the purchase price
allocation:
<TABLE>
<CAPTION>
DM
(in thousands)
--------------
<S> <C>
Current assets and other tangible assets...................... 8,876
Liabilities assumed........................................... (30,324)
Customer list................................................. 1,307
Goodwill...................................................... 180,980
-------
160,839
=======
</TABLE>
The acquired customer list is being depreciated over a period of 5 years.
Acquired goodwill is being amortized over a period of 7 years. The operating
results of MeTechnology AG have been included in the consolidated income
statements from the date of acquisition. The allocation of the purchase price
is based on preliminary estimates of fair value and is subject to revision
based upon the finalization of management's assessment of the fair value of net
assets acquired. Changes in the allocation of purchase price would likely be
limited to the recording of other identified intangible assets, resulting in a
reduction of goodwill, if such assets and their respective values can be
identified.
In July 1999, the sellers of MeTechnology AG agreed to grant 135,150 of the
total shares of 2,332,374 that they received in consideration for MeTechnology
AG in the form of options to employees of MeTechnology AG. The strike price of
these options was DM 21.33 and such options had the same terms as the general
stock option plan for the employees of Brokat. The assignment of the employee
shares was performed in the six months ended December 31, 1999, as described in
Note 16.
In the six months ended December 31, 1999, goodwill was decreased by DM
7,082.0 thousand due to the grant of the option rights as well as in the amount
of DM 16,980.0 thousand due to the revision of management's estimates in
relation to the fair value of liabilities assumed. Specifically, convertible
debt and other long-term liabilities previously thought to be assumed by Brokat
were actually repaid by the former shareholders of MeTechnology AG as described
in Note 12.
F-14
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following unaudited pro forma financial information presents results as
if the acquisition of TST and MeTechnology AG had occurred at the beginning of
the respective periods:
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1999
------------- -------------
(unaudited) (unaudited)
(DM in thousands, except
per share data)
<S> <C> <C>
Pro forma revenue.............................. 39,731 71,653
Pro forma net loss............................. (47,469) (91,667)
Pro forma loss per share before extraordinary
items......................................... -- (4.01)
Pro forma loss per share....................... -- (4.20)
</TABLE>
These pro forma results have been prepared for comparative purposes only and
include certain adjustments such as additional amortization expense as a result
of goodwill arising from the purchase and interest expense on acquisition debt.
The pro forma results are not necessarily indicative of the results of
operations which actually would have resulted had the purchase been in effect
at the beginning of the respective periods or of future results.
Bremen Online Services Entwicklungs- und Betriebsgesellschaft mbH & Co. KG,
Bremen
Bremen Online Services Entwicklungs- und Betriebsgesellschaft mbH & Co. KG,
Bremen, was founded by the articles of association dated July 16, 1999. Brokat
has a 5% interest in the capital of the company at a cost of DM 1,000.0
thousand, of which DM 334.0 thousand had to be paid immediately and DM 666.0
thousand is to be paid in two equal installments by March 31, 2000, and March
31, 2001, with no interest due. This investment is being accounted for
utilizing the cost method of accounting. The purpose of the company is the
development, operating and marketing of the Bremen Online Services
infrastructure including the online applications from public administration and
business who wish to use this safe infrastructure and the initiation and
performance of other projects in this area.
GEKA Beteiligungs AG, Frankfurt
On September 6, 1999, the Company acquired 100% of the outstanding common
stock of GEKA-Beteiligungs AG, Frankfurt, for DM 130.0 thousand GEKA
Beteiligungs AG does not yet have an operating business. The organization cost
of DM 30.0 thousand was expensed in the current period.
LexLinkLine AG, Dusseldorf
On October 18, 1999, the Company acquired 12.5% of the outstanding common
stock of LexLinkLine AG, Dusseldorf, for DM 39.0 thousand. This investment is
being accounted for using the cost method of accounting. LexLinkLine AG will
develop and market "Web&Voice" technologies. As part of its product range
LexLinkLine will market the "Internet Communication Center" for Brokat which
connects the Internet and the Call-Center.
Fernbach Financial Software S.A., Luxembourg
On December 20, 1999, the Company acquired 25.1% of the outstanding common
stock of Fernbach Financial Software S.A., Luxembourg, for DM 4.0 million in
cash (and additional direct acquisition costs of DM 154.0 thousand). The excess
of the purchase price over the company's proportionate share of the fair value
of net assets acquired of DM 4,075.0 thousand is being amortized on a straight-
line basis over a period of 7 years. This investment is being accounted for
using the equity method of accounting.
Fernbach Financial Software S.A., Luxembourg, holds 100% interests in
Fernbach Software S.A, Luxembourg, in Fernbach Software AG, Deutschland, and in
Fernbach-Software AG, Switzerland. Fernbach companies develop and market
software and hardware solutions for the handling of transactions, particularly
in the area of bank software.
F-15
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The purchase agreement gave Brokat an option to acquire the remaining shares
of Fernbach Financial Software S.A. until June 30, 2000. Brokat can exercise
the options as of December 31, 1999, March 31, or June 30, 2000. The option
purchase price is variable and depends on weighted sales, profit and order
backlog values that have been achieved as proxies for the fair value of
Fernbach on each date the option can be exercised. Brokat is also obligated to
exercise the option as of June 30, 2000, provided the consolidated financial
statements of the Fernbach companies show a positive pre-tax result as of the
option date June 30, 2000, for the period from January 1 to June 30, 2000,
after the elimination of any special charges. No value was assigned to this
option at the time of the acquisition of Fernbach Financial Software S.A., as
the option allows for the purchase of the remaining interest in Fernbach at
fair value and is based on Fernbach's past and expected future near-term
operating losses (see also Note 20).
Note 4. Cost and Estimated Earnings in Excess of Billings on Uncompleted
Contracts
Cost and estimated earnings on uncompleted contracts
Costs and estimated earnings in excess of billings on uncompleted contracts
arise when revenues have been recorded but the amounts cannot be billed under
the terms of the contracts. Such amounts are recoverable from customers upon
various measures of performance, including achievement of certain milestones,
completion of specified units or completion of the contract. Cost and estimated
earnings contains directly allocable costs (labor cost and cost of services
provided by third parties) as well as the appropriate portion of overheads
including pro rata administrative expenses.
Also included in costs and estimated earnings on uncompleted contracts are
amounts the Company seeks or will seek to collect from customers or others for
errors or changes in contract specifications or design, contract change orders
in dispute or unapproved as to both scope and price, or other customer-related
causes of unanticipated additional contract costs claims and pending change
orders. These amounts are recorded at their estimated net realizable value when
realization is probable and can be reasonably estimated. No profit is
recognized on the costs incurred in connection with these amounts. Pending
change orders involve the use of estimates and it is reasonably possible that
revisions to the estimated recoverable amounts of recorded pending change
orders may be made in the near-term.
Costs and estimated earnings on uncompleted contracts and related amounts
billed are as follows:
<TABLE>
<CAPTION>
Year Ended Six Months
June 30, Ended
--------------- December 31,
1998 1999 1999
------ ------- ------------
(DM in thousands)
<S> <C> <C> <C>
Costs incurred on uncompleted contracts........ 1,930 6,613 5,379
Estimated earnings............................. 3,147 8,082 6,161
------ ------- -------
5,077 14,695 11,540
------ ------- -------
Less billings to date.......................... (4,241) (13,053) (11,393)
------ ------- -------
836 1,642 147
====== ======= =======
</TABLE>
F-16
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Such amounts are included in the accompanying Consolidated Balance Sheets
under the following captions:
<TABLE>
<CAPTION>
Year Ended Six Months
June 30, Ended
------------ December 31,
1998 1999 1999
----- ----- ------------
(DM in thousands)
<S> <C> <C> <C>
Costs and estimated earnings in excess of
billings on uncompleted contracts............. 1,806 2,499 1,965
Billings in excess of cost and estimated
earnings on uncompleted contracts............. (970) (857) (1,818)
----- ----- ------
836 1,642 147
===== ===== ======
</TABLE>
Note 5. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets are generally accounted for at
nominal value and have a residual term of up to one year.
Prepaid expenses and other current assets consist of the following:
<TABLE>
<CAPTION>
Year Ended Six Months
June 30, Ended
----------- December 31,
1998 1999 1999
----- ----- ------------
(DM in thousands)
<S> <C> <C> <C>
Prepaid taxes....................................... 204 704 2,130
Deferred charges.................................... 413 478 917
Other............................................... 398 2,741 3,748
----- ----- -----
1,015 3,923 6,795
===== ===== =====
</TABLE>
The other prepaid expenses and current assets mainly contain rent deposits,
receivables from employees and other prepayments.
Note 6. Goodwill and Other Intangible Assets
Intangible assets consist of the following:
<TABLE>
<CAPTION>
Year Ended Six Months
June 30, Ended
------------ December 31,
1998 1999 1999
---- ------- ------------
(DM in thousands)
<S> <C> <C> <C>
Goodwill........................................... 0 209,406 170,095
Customer list...................................... 0 5,181 4,649
Software........................................... 273 2,074 2,044
--- ------- -------
273 216,661 176,788
=== ======= =======
</TABLE>
F-17
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Intangible assets are amortized over the following periods:
<TABLE>
<CAPTION>
Useful
life
---------
<S> <C>
Goodwill........................................................... 7 years
Customer list...................................................... 5 years
Software........................................................... 3-5 years
</TABLE>
All intangible assets are amortized using the straight-line method.
Note 7. Short-Term Debt to Banks
At December 31, 1999, the Company had DM 75,500.0 thousand (June 30, 1999:
DM 16,300.0 thousand; June 30, 1998: DM 1,500.0 thousand) general purpose lines
of credit with several banks. Under the Credit Arrangements, the Company has
the option to borrow amounts at various interest rates, payable in Deutsche
Mark. Use of the borrowing is unrestricted, with the exception of the
borrowings under the line of credit with Deutsche Bank AG, Stuttgart, and the
borrowings are unsecured.
At December 31, 1999, the Company had outstanding debt borrowings under the
Credit Arrangements amounting to DM 42,271.0 thousand (June 30, 1999: DM
3,226.0 thousand, June 30, 1998: DM 0 thousand).
Included in the lines of credit is an overdraft credit of DM 60 million
granted initially by Deutsche Bank AG, Stuttgart, to Brokat until December 31,
1999. The funds are to be used exclusively for operating purposes. The current
interest rate is computed at 6% per annum. An extension of the line of credit
has been agreed under certain fulfilled conditions until June 30, 2000.
The interest rate on short-term borrowings outstanding at December 31, 1999,
was between 4.08% and 6.0% (June 30, 1999: between 5.5%-8.25%, June 30, 1998:
no outstanding balances).
Note 8. Other Short-Term Debt
Other short-term debt are as follows:
<TABLE>
<CAPTION>
Year Ended Six Months
June 30, Ended
---------- December 31,
1998 1999 1999
---- ----- ------------
(DM in thousands)
<S> <C> <C> <C>
tbg.................................................. 0 0 4,000
Short-term loan...................................... 0 1,773 0
Debt from purchase price commitments................. 0 1,665 1,665
---- ----- -----
0 3,438 5,665
==== ===== =====
</TABLE>
Regarding the short-term debt against Technologie-Beteiligungs-Gesellschaft
mbH of the Deutsche Ausgleichsbank, Bonn (also referred to as "tbg") (see Note
11).
The short-term loans were granted by a former shareholder of MeTechnology
AG, Leipzig, and were repaid during the six months ended December 31, 1999.
The debt from the purchase price obligation resulted from the purchase of
Transaction Software Technologies, Inc., Atlanta, USA, and is due in May 2000.
F-18
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 9. Other Accrued Expenses and Current Liabilities
Other accrued expenses and current liabilities mainly contain provisions for
interest payments, outstanding invoices, as well as potential losses from
customer projects.
Note 10. Long-Term Debt to Banks
By contract dated May 23, 1997, Kreissparkasse Boblingen provided Brokat
with a line of credit of DM 2,000.0 thousand. The loan has a term of ten years.
Interest is to be paid on the loan at 7% per annum. Furthermore, the creditor
receives profit-based remuneration of 20% per annum of the net profit for the
year, but not exceeding 3% of the stated value of the loan. Repayment shall be
made in one sum at the end of the term. As of December 31, 1999, all of the
loan had been utilized.
The credit agreement contains conditions and events of default, the failure
to comply with, or occurrence of, would generally give the lender the right to
terminate the credit agreement and require the repayment of the outstanding
borrowings under the credit agreement. The most restrictive of such conditions
include the approval of the bank to certain legal transactions. Those
transactions are among others: (1) an amendment or a change of the Company's
statutes, (2) sale of the Company or a part of the Company as well as the
acquisition or the sale of other companies or the shares in other companies as
well as the foundation of subsidiaries, (3) the signing/changing/termination of
contracts with shareholders, relatives of shareholders except for the case when
the modified contracts will meet arm's-length-principle. The Company is not in
compliance with certain of these covenants but such non-compliance has been
waived by the bank.
Note 11. Long-Term Debt to Shareholders
Long-term debt to shareholders are as follows:
<TABLE>
<CAPTION>
Year Ended Six Months
June 30, Ended
----------- December 31,
1998 1999 1999
----- ----- ------------
(DM in thousands)
<S> <C> <C> <C>
tbg................................................ 4,000 4,000 0
AET (at present value, imputed interest rate 5%)... 420 0 0
Other.............................................. 135 0 0
----- ----- ----
4,555 4,000 0
===== ===== ====
</TABLE>
As of June 30, 1999, and 1998, tbg has three "silent participations" in the
parent company totaling DM 4,000.0 thousand. With its first silent
participation on December 2, 1996, tbg invested DM 1,000.0 thousand in the
Company. The investment had an initial term until June 30, 2006. By contract
dated September 19, 1997, a second silent participation of DM 1,000.0 thousand
was consummated; this loan expires on December 31, 2007. By supplementary
agreements of August 1, 1998, both participations were converted into loans
with an annual interest rate of 10.5% and the condition, that the loans can be
terminated no earlier than September 30, 1999. By contract dated September 19,
1997, a third silent participation of DM 2,000.0 thousand was concluded; this
expires on December 31, 2007. By side agreement of August 1, 1998, the annual
interest amounts to 11.5% and the loans can be terminated no earlier than
September 30, 1999.
The tbg agreements contain conditions and events of default, the failure to
comply with, or occurrence of, would generally give the lender the right to
terminate the credit agreement and require the repayment of the outstanding
borrowings under the credit agreement. The most restrictive of such conditions
include the approval of the silent partner to certain legal transactions. Those
transactions are among others: the ratification of amendments or changes of the
Company's statutes.
F-19
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
By side agreements dated August 27, 1999, all three loans in the amount of
DM 4,000.0 thousand have been converted into short-term debt, due June 30,
2000. The annual interest amounts have been changed to 6.0% beginning of
October 1, 1999.
As of July 1, 1998, a loan payable of DM 486.0 thousand was due to the
shareholder Advanced European Technologies N.V., ED Heiloo, Netherlands (also
referred to here as "AET"). The loan was originally callable on October 31,
2001, and was subject to interest at a rate of 5% per annum, with the first
five years being free of interest. Accordingly, the note was recorded at a
discounted amount and interest was imputed at a rate of 5% equivalent to
Company's estimated cost of borrowing for loans with similar characteristics.
In case of an Initial Public Offering ("IPO") of the Company or if all shares
in the Company are sold to a third party the loan is callable at once.
In connection with the Company's IPO the entire loan was contributed on
August 4, 1998, by AET as a contribution in kind in return for 90 shares of
common stock in Brokat. The excess of the value of the common stock issued of
DM 486.0 thousand over the carrying value of the debt was recorded as an
extraordinary loss. By resolution the amount exceeding the calculated share in
the common stock was transferred to the additional paid-in capital.
Note 12. Other Long-Term Debt
Other long-term debt are as follows:
<TABLE>
<CAPTION>
Year Ended Six Months
June 30, Ended
------------ December 31,
1998 1999 1999
----- ------ ------------
(DM in thousands)
<S> <C> <C> <C>
Debt from purchase price commitment.............. 0 1,451 1,529
Silent participations............................ 0 9,950 0
Junior loan...................................... 0 3,530 0
Convertible debt................................. 3,748 3,425 0
Other (at present value, due March 2001, imputed
interest rate 5%)............................... 5 0 321
----- ------ -----
3,753 18,356 1,850
===== ====== =====
</TABLE>
Debt from purchase price commitment
The liability from the purchase price commitment resulted from the purchase
of Transaction Software Technologies, Inc., Atlanta, USA, and is due in May
2001. The liability is free of interest. The recognized imputed interest rate
was 5% per annum, and was determined based on debt with similar
characteristics.
Silent participation and junior loan
A silent participation is a form of loan whereby the note holder receives
interest based on a stated rate in the loan agreement and/or based on the level
of profits (and losses) of the company. Despite receiving interest based on the
earnings of the company, the silent partners do not hold voting rights in the
company and cannot influence operating decisions.
By contract dated December 6, 1996, and amendment agreement of May 29, 1998,
SBF Sachsische Beteiligungsfonds GmbH, Leipzig (also referred to as "SBF"),
invested a total of DM 9,950.0 thousand as silent shareholder in ESD
Information Technology Entwicklungs GmbH, Leipzig, the predecessor of
F-20
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
MeTechnology GmbH. The silent participation expires on December 31, 2001. The
shareholder has a 20% share in the profit, but does not share in the loss of
the Company. SBF also receives annual servicing compensation of 2% of the
investment amount.
By contract dated February 13, 1996, GSM Industriebeteiligungen GmbH, Munich
(also referred to as "GSM"), granted ESD a junior loan of DM 3,530.0 thousand.
The loan arrangement will mature on December 31, 2005, and bears interest at an
annual rate of 8%.
Due to uncertainties as to whether the Company assumed these liabilities in
connection with its purchase of MeTechnology AG, the fair value of this debt
was recorded as part of the purchase price allocation and reflected in the
consolidated balance sheet as of June 30, 1999. During the six months ended
December 31, 1999, SBF and GSM received full repayment of the described debts
from the former shareholders of MeTechnology AG and consequently waived all
rights under the debt instrument. Accordingly, during the six months ended
December 31, 1999, the Company eliminated the estimated liability associated
with these debt instruments and reduced goodwill by DM 13,480.0 thousand, as
prescribed by APB 16 of the Accounting Principles Board and related
interpretations.
Convertible debt
By contract dated September 19, 1997, tbg invested DM 7,000.0 thousand in a
silent participation in the Company. Payment was made on December 2, 1997. The
investment was originally scheduled to mature on December 31, 2007. Under the
silent participation agreement tbg participated proportionately in the losses
of the Company. In the year ended June 30, 1998, this resulted in a loss
absorption of DM 3,252.0 thousand.
For the period July to August 1998 the loss allocable to the silent partner
totaled DM 926.0 thousand. As a result the carrying value of tbg's silent
participation had been reduced to DM 2,822.0 thousand as of August 4, 1998.
On August 4, 1998, tbg was issued common shares valued at DM 7,000.0
thousand in exchange for its silent participation. The excess of the value of
the stock received over the carrying value of this debt of DM 4,178.0 thousand
was recorded as an extraordinary expense from the early retirement of debt, net
of taxes of nil.
By contract dated November 12, 1998, and prior to the acquisition by the
Company of MeTechnology AG, Private Equity Investment Ltd., Grand Cayman (also
referred to as "PEB") invested DM 3,500.0 thousand in MeTechnology AG, Leipzig,
in the form of a convertible bond. The participation entitles PEB until October
31, 2000, to convert at any time a nominal amount of the convertible bond of DM
500 into one share of MeTechnology AG. The convertible bond is interest free
until January 31, 2000. That part of the convertible bond which has not yet
been converted is repayable on October 31, 2000.
Due to uncertainties as to whether Brokat assumed this liability in
connection with its purchase of MeTechnology AG, the fair value of such debt
was recorded as part of the purchase price allocation and is reflected in the
consolidated balance sheet at June 30, 1999.
During the six months ended December 31, 1999, PEB received repayment of the
bond from the former shareholders of MeTechnology AG and consequently waived
all its rights under the convertible bond.
Accordingly, during the six months ended December 31, 1999, the Company
eliminated the estimated liability associated with this debt instrument and
reduced goodwill by DM 3,500.0 thousand, as prescribed by APB 16 and related
interpretations.
F-21
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 13. Fair Value of Financial Instruments
Financial assets and liabilities with carrying values approximating fair
value include cash and cash equivalents, short-term investments, accounts
receivable, accounts payable and short-term debt. The fair value of financial
instruments for which quoted market prices are available are based on such
market prices. Long-term financial investments are reflected at carrying value
because it is not practical to estimate fair value as quoted market prices do
not exist. Fair value of long-term debt is based on discounted cash flow
analyses using interest rates at which similar loans would be made to borrowers
with similar credit ratings.
The following table presents the carrying amounts and the estimated fair
values of financial instruments at December 31, 1999, June 30, 1999, and June
30, 1998, respectively.
<TABLE>
<CAPTION>
Year Ended June 30, Six Months Ended
------------------------------- December 31,
1998 1999 1999
--------------- --------------- -------------------
Carrying Fair Carrying Fair Carrying Fair
Amount Value Amount Value Amount Value
-------- ------ -------- ------ --------- --------
(DM in thousands)
<S> <C> <C> <C> <C> <C> <C>
Financial Instruments
Assets
Long-term investments... 0 0 0 0 1,013 1,013
Liabilities
Long-term debt.......... 10,308 14,110 24,356 28,271 3,850 3,850
</TABLE>
Note 14. Income Tax Benefit (Expense)
The benefit (provision) for income taxes consists of the following:
<TABLE>
<CAPTION>
Year Ended June 30, Six Months Ended
----------------------- December 31,
1997 1998 1999 1999
------ ------ ------- ----------------
(DM in thousands)
<S> <C> <C> <C> <C>
Current taxes
Germany........................... 0 0 0 0
Foreign........................... 0 0 (113) (60)
------ ------ ------- ----
0 0 (113) (60)
------ ------ ------- ----
Deferred taxes
Germany........................... 0 0 0 0
Foreign........................... 10 0 0 (44)
------ ------ ------- ----
10 0 0 (44)
------ ------ ------- ----
10 0 (113) (104)
====== ====== ======= ====
</TABLE>
German corporate tax law applies a split-rate with regard to the taxation of
the income of a corporation. In accordance with the tax law in effect for the
six months ended December 31, 1999 income is initially subject to a federal
corporate tax rate of 40% (1998: 45%, 1997: 45%) plus surcharge of 5.5% (1998:
5.5%, 1997: 7.5%) on federal taxes payable. Including the impact of the
surcharge the federal corporate income tax rate amounts to 42.2% (1998: 47.5%,
1997: 48.4%).
F-22
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of income taxes determined using the German corporate
income tax rate of 42.2% plus a federal tax rate for trade taxes on income of
10.6% for a combined statutory rate of 52.7% in 1999 (1998: 57.1%, 1997:
57.8%) is as follows:
<TABLE>
<CAPTION>
Six Months
Year Ended June 30, Ended
----------------------- December 31,
1997 1998 1999 1999
------ ------- ------- ------------
(DM in thousands)
<S> <C> <C> <C> <C>
Expected benefit for corporate income
taxes............................... 996 4,906 22,674 27,074
Foreign tax rate differential........ 0 (898) (4,743) (1,520)
Changes in valuation allowance on
deferred tax assets................. (809) (6,098) (9,709) (12,848)
Non-tax-deductible stock option
expenses............................ 0 0 (8,611) (6,450)
Amortization of non-tax-deductible
goodwill............................ 0 0 (1,943) (8,325)
Income not subject to tax............ 0 1,857 488 0
Deferred cost related to capital
issuance............................ 0 0 2,845 691
Other................................ (177) 233 (1,114) 1,274
----- ------- ------- -------
Actual benefit (provision) for income
taxes............................... 10 0 (113) (104)
===== ======= ======= =======
</TABLE>
Deferred income tax assets and liabilities are summarized as follows:
<TABLE>
<CAPTION>
Six Months
Year Ended June 30, Ended
--------------------- December 31,
1998 1999 1999
--------- ---------- ------------
(DM in thousands)
<S> <C> <C> <C>
Tax loss carryforwards................. 7,361 30,325 42,752
Unrecognized losses on foreign currency
transactions.......................... 123 0 0
Inventories............................ 0 0 1,200
Valuation allowance.................... (6,907) (28,616) (41,472)
--------- ---------- -------
Total deferred tax assets.............. 577 1,709 2,480
--------- ---------- -------
Other intangible assets................ 0 262 190
Unrecognized gains on foreign currency
transactions.......................... 0 1,147 2,334
Inventories............................ 577 300 0
--------- ---------- -------
Total deferred tax liabilities......... 577 1,709 2,524
--------- ---------- -------
Net deferred tax assets (liabilities).. 0 0 (44)
========= ========== =======
Deferred tax assets and liabilities are reflected on the Company's
consolidated balance sheets as follows:
<CAPTION>
Six Months
Year Ended June 30, Ended
--------------------- December 31,
1998 1999 1999
--------- ---------- ------------
(DM in thousands)
<S> <C> <C> <C>
Noncurrent deferred tax assets......... 577 1,447 2,333
Current deferred tax liabilities....... (577) (1,447) (2,377)
--------- ---------- -------
Net deferred tax assets (liabilities).. 0 0 (44)
========= ========== =======
</TABLE>
F-23
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
At December 31, 1999, the Group had tax loss carryforwards amounting to DM
97,836.0 thousand (June 30, 1999: DM 68,163.0 thousand, June 30, 1998: DM
14,727.0 thousand). Of the tax loss carryforward as of December 31, 1999, DM
1,895.0 thousand expire within 6 years and DM 22,030.0 thousand expire within
15 years. Tax loss carryforwards in the amount of DM 73,911.0 thousand do not
expire.
The Company has provided valuation allowances on the portion of deferred tax
assets for which it is not more likely than not that such assets will be
realized. As of December 31, 1999, as well as in the prior years' valuation
allowances have been recorded on all deferred tax assets due to the continued
losses sustained by the Company.
Note 15. Shareholders' Equity
Common stock and additional paid-in capital
The Company has been listed at the Frankfurt Stock Exchange in the market
segment Neuer Markt since September 17, 1998.
As of July 1, 1998, the GmbH capital of Brokat Informationssysteme GmbH,
Stuttgart, amounted to DM 158.3 thousand and has developed since then as
follows:
As a result of the conversion of the Company into Brokat Infosystems AG, in
July 1998, the capital of the Company was initially divided, pursuant to sec. 4
of the articles of association, into 6,420 common shares and 1,758 preferred
shares in series A and 1,320 preferred shares in series B of DM 16.66 each
which are made out to the bearer and which were taken over by the former
shareholders.
By a resolution of April 1, 1998, which also changed the articles of
association, the shareholders' meeting of Brokat Informationssysteme GmbH,
decided to reduce the par value of the shares of the future Brokat, Stuttgart,
to DM 1.66 and to divide the common stock into 94,980 shares with a par value
of DM 1.66 each. The amendment of the articles of association was filed with
the Commercial Register on July 3, 1998.
By shareholders' resolution taken on August 17, 1998, the common stock of
the Company was increased by DM 2,365.00 to DM 160,665.00. The capital increase
was made by contribution in kind by the contribution of a loan of DM 486,300.00
of AET and a silent contribution with a nominal value of DM 7.0 million worth
DM 2,822,151.62 after loss absorption, of tbg in return for a total of 1,419
shares with a share in the common stock of DM 1.66 each (see Notes 11 and 12).
In addition, by shareholders' resolution of August 17, 1998, the common
stock was increased by issuing 24,000,000 new shares in the Company's IPO. See
Note 1 for a description of this transaction.
Additionally, by resolution of the board of management taken on October 1,
1998 the capital was increased by issuing 420,000 shares of common stock.
On May 20, 1999, the Company issued 2,332,374 shares of common stock in
exchange of 100% of the share capital of MeTechnology AG (see Note 3).
As of June 30, 1999, the number of shares authorized amounts to 36,823,620
of which 26,848,773 shares were issued and outstanding. Shares issued and
outstanding have an equivalent par value of DM 1.66.
According to the shareholders' meeting on November 18, 1999, the common
stock of the Company was converted to Euros ((Euro)) using the official
translation rate. Additionally the Company increased its common stock by DM
7,763,681 (3,969,507 Euro). The capital increase is effected without issuing
new shares by converting additional paid-in capital to common stock.
F-24
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999, the number of shares authorized amounts to
42,658,412 of which 26,848,773 shares were issued and outstanding. Shares
issued and outstanding have an equivalent par value of DM 1.96 (the equivalent
of 1 Euro).
On November 7, 1999, the Company also passed a resolution to increase
capital by issuing 279,573 new shares with an equivalent value of (Euro) 10
million (DM 19,558.0 thousand) with Intel Atlantic, Inc., Santa Clara, USA. The
Company is entitled to the funds once the capital increase has been entered in
the trade register. This had not been done in the six months ended December 31,
1999.
Note 16. Stock Option Plans
Accounting policy
The Company continues to account for stock-based compensation using the
intrinsic value method prescribed in APB 25, "Accounting for Stock Issued to
Employees". Compensation cost for stock options is measured as the excess of
the quoted market price of the Company's stock on the measurement date over the
amount an employee must pay to acquire the stock and is recognized over the
vesting period. The intrinsic value of the options is measured on the basis of
the current market value of the Company's stock at the end of each period.
SFAS No. 123, "Accounting for Stock-Based Compensation," established
accounting and disclosure requirements using a fair-value-based method of
accounting for stock-based employee compensation plans. The Company has elected
to retain its current method of accounting as described above, and has adopted
the disclosure requirements of SFAS No. 123.
Stock option plans
The Company has issued two stock option plans to employees of the Company.
The objectives of these plans include attracting and retaining personnel and
promoting the success of the Company by providing employees the opportunity to
acquire common stock.
Under the 1998 stock option plan (the "1998 Plan"), the Company is
authorized to issue and has issued 1,204,818 option rights for the subscription
of Brokat shares to employees of Brokat and its affiliated companies on
September 16, 1998. The option rights entitle the bearer to purchase shares in
the Company at a price of DM 21.33 and vest in three installments approximately
after two, three and four years.
The options can only be exercised, if at certain specified dates the
increase in the value of Brokat stock--based on the average price of the share
during the last five trading days before the first exercise period against the
IPO price--at least equals the performance of the Neuer Markt index.
Under the 1999 stock option plan (the "1999 Plan") the Company is authorized
to issue and has issued 1,204,821 option rights for the subscription of Brokat
shares to employees of Brokat and its affiliated companies on December 15,
1999. The option rights entitle the bearer to purchase shares in the Company at
a price of DM 65.85 (the average of the last 5 trading days in October when the
program was initiated) and vest in three installments approximately after two,
three and four years.
The options can only be exercised if at certain specified dates the increase
in the value of Brokat stock--based on the average price of the shares during
the last five trading days before the first exercise period against the strike
price of the options--at least equals the performance of the Neuer Markt index.
F-25
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Moreover, principal investors of the Company have issued 200,460 option
rights for the purchase of Brokat shares from their private holdings to several
senior employees of the Brokat group ("Private Plan"). These rights entitle the
bearer to purchase shares at DM 4.15 per share. The options were negotiated in
February 1998, granted in August 1998 and vest ratably at the end of each of
the next four years following the date of grant. There is no performance
criteria for these options.
Former shareholders of MeTechnology have issued options for a portion of the
Brokat shares received in consideration of all of their shares of the
affiliated company ("Me Plan"). These options have been issued to the present
employees of the affiliated company on July 26, 1999, and entitle the bearer to
purchase up to 135,150 shares of Brokat from these shareholders at a purchase
price of DM 21.33. The options vest ratably after approximately 1.5, 2.5 and
3.5 years and can only be exercised if performance criteria similar to the
"1998 Plan" are met.
The options expire within 3.5 to 4.5 years from date of grant.
The status of the Company's stock option plans is summarized below as of
December 31, 1999:
<TABLE>
<CAPTION>
Private
1998 Plan 1999 Plan Me-Plan Plan
--------- --------- ------- -------
<S> <C> <C> <C> <C>
Outstanding at June 30, 1998........... 0 0 0 0
Granted.............................. 1,204,818 0 0 200,460
Exercised............................ 0 0 0 (50,115)
Forfeited............................ 0 0 0 0
--------- --------- ------- -------
Outstanding at June 30, 1999........... 1,204,818 0 0 150,345
Granted.............................. 0 1,204,821 135,150 0
Exercised............................ 0 0 0 0
Forfeited............................ 0 0 0 (60,138)
--------- --------- ------- -------
Outstanding at December 31, 1999....... 1,204,818 1,204,821 135,150 90,207
========= ========= ======= =======
</TABLE>
None of the outstanding options as of December 31, 1999, are exercisable.
All options vest between March 2000 and June 2004.
Additional stock option awards are anticipated in future years. Moreover, as
the measurement dates for the 1998 plan, the 1999 plan and the ME plan have not
been reached yet, future changes in stock price of the Brokat shares will lead
to future adjustments in the total compensation from these programs (variable
stock option plans).
In prior years, Brokat management has used graded vesting to amortize
compensation from stock option programs. Management has decided in the meantime
for the straight line method, since this method is a more common way to better
match the expenses associated with these options with the service period of
optionholders. The change in estimate has been applied prospectively from July
1, 1999. Had the Company continued to apply the graded vesting method to
amortize compensation, the loss for the six months ended December 31, 1999,
would have been increased by DM 6,557.0 thousand and basic and diluted loss per
share would have been increased by DM 0.24.
The weighted average fair value of options granted during the six months
ended December 31, 1999, and the year ended June 30, 1999, was approximately DM
93.96 and DM 13.55 per share, respectively. The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model
with the following assumptions used for grants in 1999 and 1998: risk-free
interest rates ranging from 5.03% to
F-26
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6.24%; expected lives ranging from 3.5 to 4.5 years; expected forfeiture rate
of 10 to 15%; expected dividend yield of zero percent; and expected volatility
ranging from 79% to 90%.
The following table summarizes information about the Company's stock
options at December 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------- ---------------------
Weighted Weighted
Average Average Weighted
Remaining Exercise Average
Range of Exercise Number Life Price Number Exercise Price
----------------- --------- ---------- -------- ------ --------------
<S> <C> <C> <C> <C> <C>
1998 Plan
DM 21.33.............. 1,204,818 1.92 Years DM 21.33 0 0
1999 Plan
DM 65.85.............. 1,204,821 3.42 Years DM 65.85 0 0
Me Plan
DM 21.33.............. 135,150 1.92 Years DM 21.33 0 0
Private Plan
DM 4.15.............. 90,207 1.17 Years DM 4.15 0 0
</TABLE>
Had compensation cost for these grants been determined consistent with SFAS
No. 123, "Accounting for Stock-Based Compensation," the Company's net loss
would have been decreased by approximately DM 9,152.0 thousand for the six
months ended December 31, 1999, and DM 13,402.0 thousand for the twelve months
ended June 30, 1999, respectively. Loss per share would have been decreased by
DM 0.34 and DM 0.68 for the six months ended December 31, 1999, and the twelve
months ended June 30, 1999, respectively.
Note 17. Commitments and Contingencies
Operating leases
The group companies have entered into lease and rental agreements for
various facilities and vehicles. The annual minimum payments from these
agreements amount to DM 7,556.0 thousand for the financial year 2000, DM
6,704.0 thousand for 2001, DM 5,773.0 thousand for 2002, DM 5,264.0 thousand
for 2003 and DM 4,879.0 thousand for the financial year 2004. Thereafter,
commitments of at least DM 6,086.0 thousand will be incurred.
Total rental expense under operating leases amounted to DM 2,809.0 thousand
for the six months ended December 31, 1999, DM 3,502.0 thousand for the year
ended June 30, 1999, DM 252.0 thousand for the year ended June 30, 1998 and DM
236.0 thousand for the year ended June 30, 1997.
Contingencies
The Company operates in countries where political, economic, social and
legal developments could have an impact on the operational activities. The
effects of such risks on the Company's results of operations, which arise
during the normal course of business, are not reasonably determinable and are
therefore not included in the accompanying financial statements.
The Company may be involved in lawsuits, claims, investigations and
proceedings, including product liability and commercial matters which are
handled and defended in the ordinary course of business. There are no such
matters pending that the Company and its general counsel expect to be material
in relation to the Company's business, financial position or results of
operation.
F-27
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Legal matters
The group companies may be subject to litigation from time to time in the
ordinary course of business. As of December 31, 1999, the Company's management
and its legal advisers are not aware of any claims which could materially
affect the business, net assets, financial position or results of the Group.
Note 18. Geographic, Segment and Significant Customer Information
The Company is managed as one business segment. Under the definition of SFAS
No. 131, "Disclosure about Segments of an enterprise and related Information",
Brokat is currently operating in one segment only. The number of business
segments may expand as the Company introduces new products or services or
expands into different markets.
The following geographical allocation of the sales depends on the seat of
the subsidiary recording the sales. The assets comprise long-lived assets with
the exception of deferred tax assets.
<TABLE>
<CAPTION>
Asia-
Germany UK Pacific USA Other Elimination Consolidated
------- ----- ------- ----- ----- ----------- ------------
(DM in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Six months ended
December 31, 1999
Revenue................ 35,472 8,331 4,808 5,405 5,796 (8,525) 51,287
Long-lived assets...... 398,339 1,090 535 2,614 304 (211,439) 191,443
Year ended June 30, 1999
Revenue................ 55,818 3,407 1,774 2,895 1,646 (3,053) 62,487
Long-lived assets...... 391,444 952 438 1,678 208 (169,736) 224,984
Year ended June 30, 1998
Revenue................ 27,149 3,709 1,566 -- 880 (3,733) 29,571
Long-lived assets...... 5,378 178 237 111 16 (2,186) 3,734
Year ended June 30, 1997
Revenue................ 12,101 -- -- -- -- -- 12,101
Long-lived assets...... 1,301 -- -- -- -- -- 1,301
</TABLE>
The external revenue by product group break down as follows:
<TABLE>
<CAPTION>
Six Months
Year Ended June 30, Ended
------------------- December 31,
1998 1999 1999
--------- --------- ------------
(DM in thousands)
<S> <C> <C> <C>
Professional services...................... 16,529 21,913 22,630
License revenues........................... 7,231 21,056 19,141
Sales of hardware.......................... 4,414 13,492 3,558
Customer support........................... 1,397 5,970 5,709
Other...................................... 0 56 249
--------- --------- ------
29,571 62,487 51,287
========= ========= ======
</TABLE>
In the six months ended December 31, 1999, approximately 11.3% of sales were
recorded with one customer. In the year ended June 30, 1999, approximately
20.3% of sales were recorded with one customer and approximately 18.5% with
another customer. In the year ended June 30, 1998, approximately 16.1% of sales
were recorded with one customer. In the year ended June 30, 1997, approximately
21.8% of sales were recorded with one customer.
F-28
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 19. Related Party Transactions
License agreement with Fernbach Software S.A., Luxembourg
Effective December 30, 1999, Brokat (licensee) entered into a license
agreement with Fernbach Software S.A., Luxembourg (licensor). The purpose of
the license agreement is to give Brokat the right to market the computer
programs offered by Fernbach. The license is restricted to specific programs up
to a value of DM 3.0 million; for each item ordered Brokat will be given a
discount of 50% on the list price. In return Brokat made an advance payment for
the license fees of DM 3.0 million against which all the deliveries of software
by the licensor to Brokat are offset. The agreement has a term of 10 years and
can be extended thereafter for a year provided notice of six months is not
given.
The prepaid amount of DM 3.0 has been shown as a current asset even though
all purchases under this agreement may not be made during the next twelve
months. This prepaid amount will then be recorded as an expense in the
respective fiscal year in which the license programs were acquired.
Transaction Software Technologies, Inc., Atlanta, USA, (TST)
Before the acquisition date of TST, the Company recognized sales with TST
for software licenses of DM 753.0 thousand in the year ended June 30, 1999, and
of DM 0 thousand in the years ended June 30, 1998, and 1997.
MeTechnology Europe GmbH, Dolzig/Leipzig
MeTechnology Europe GmbH is a 100% subsidiary of MeTechnology AG, Leipzig.
Before the acquisition date of MeTechnology AG, the Company recognized sales
with MeTechnology Europe GmbH for software licenses of DM 3,000.0 thousand in
the year ended June 30, 1999, and of DM 0 thousand in the years ended June 30,
1998, and June 30, 1997.
Attorneys' office Haver & Mailander
The attorneys Haver & Mailander resident in Stuttgart regularly work for the
Company. The wife of the Chief Executive Officer of the Company works there as
a partner. In her capacity as partner of the firm Dr. Rover is not, however,
involved in the Brokat engagement. The advisory services charged by the
attorneys' office to the Company in the six months ended December 31, 1999,
amounted to DM 251.0 thousand, in the year ended June 30, 1999, DM 301.0
thousand, in the year ended June 30, 1998, DM 2.0 thousand and in the year
ended June 30, 1997, DM 0 thousand.
Tax advisory firm RWT Reutlinger Wirtschaftstreuhand GmbH and the related
attorneys' office Rechtsanwaltsgesellschaft RWT Anwaltskanzlei GmbH (RWT)
The RWT resident in Reutlingen regularly work for the Company. The managing
partner of RWT is the supervisory board member Dr. Hermann Wundt. The services
charged by RWT to the Company in the six months ended December 31, 1999,
amounted to DM 53.0 thousand, in the year ended June 30, 1999, DM 351.0
thousand, in the year ended June 30, 1998, DM 62.0 thousand and in the year
ended June 30, 1997, DM 88.0 thousand.
In addition, see Note 11 for debts to shareholders and Note 16 for options
granted directly by management shareholders to employees of the Company.
Management believes that these related party transactions were under terms
no less favorable to the Company than those arranged with other parties.
F-29
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Note 20. Subsequent Events
In February 2000, the management of Brokat decided to exercise the option to
acquire the remaining 74.9% of interest in Fernbach Financial Software S.A.,
Luxembourg. The option purchase price amounted to DM 35,760.0 thousand and will
be met by an issue of Companies shares (see also Note 3).
Note 21. Additional Local Disclosure Requirements
Exemption from the duty to prepare consolidated financial statements under
German GAAP in accordance with sec. 292 a HGB
As a listed company the parent company makes use of the option to prepare
exempting consolidated financial statements according to international
accounting standards as set forth in sec. 292 a HGB.
In accordance with the interpretation by the German Accounting Standards
Committee (GASC) in German Accounting Standard DRS 1 the consolidated financial
reporting of the parent company is in line with Directive 83/349/EG.
Variances to the HGB principles of group financial reporting relate to the
capitalization of tax loss carryforwards pursuant to SFAS 109, foreign currency
translation (SFAS 52), the measurement of work in process using the percentage-
of-completion method (Accounting Research Bulletin No. 45 (ARB) in conjunction
with SOP 97-2), the capitalization of costs for internally used software (SOP
98-1), the offsetting of issuing costs against issuing gains without effect on
income (SAB 1), the recording of expenses from employee stock options (APB 25)
and the amount of purchased goodwill (APB 16).
Consolidated companies
The consolidated financial statements of Brokat include all subsidiaries in
which the parent company holds an indirect or direct majority of voting rights.
<TABLE>
<CAPTION>
Equity
December 31, Net result
1999 1999
(in local (in local
Share Local currency, in currency, in
Name/seat of company as % Currency '000) '000)
-------------------- ----- -------- ------------ ------------
<S> <C> <C> <C> <C>
Brokat Asia Pte. Ltd., Singapore................... 100.0 SGD (5,981) (1,339)
Brokat Ltd., Hounslow, United Kingdom ............. 100.0 GBP (2,987) (772)
Brokat Infosystems Inc., Alpharetta, USA........... 100.0 USD (9,164) (3,085)
Brokat Systeme AG, Zurich, Switzerland ............ 100.0 CHF (1,418) (492)
Brokat Infosystems Ges.m.b.H., Wien, Austria ...... 100.0 ATS (8,726) (5,195)
GO-Solutions GmbH, Wilhelmshaven................... 51.0 DM 870 54
McTechnology AG, Leipzig........................... 100.0 DM 169,846 3,831
MeTechnology Europe GmbH, Dolzig................... 100.0 DM (6,689) 3,179
MeTechnology Kft., Budapest, Hungary .............. 100.0 HFT 16,652 7,716
Brokat Financial Systems Inc., Atlanta, USA
(former: Transaction Software Technologies, Inc.).. 100.0 USD (2,571) (1,991)
Brokat Australia Pty Ltd., Sydney, Australia....... 100.0 AUD (434) (434)
Brokat Infosystems S.a.r.l., Luxembourg............ 100.0 LUF 757 257
GEKA Beteiligungs Aktiengesellschaft,
Frankfurt a.M. ................................... 100.0 DM 99 0
</TABLE>
F-30
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Brokat Australia and Brokat Luxembourg were founded in the six months ended
December 31, 1999. GEKA Beteiligungs Aktiengesellschaft was acquired in the
six months ended December 31, 1999. MeTechnology Europe GmbH, Dolzig/Leipzig,
is a subsidiary of MeTechnology AG, Leipzig. MeTechnology Kft., Budapest,
Hungary, and GEKA Beteiligungs Aktiengesellschaft are subsidiaries of
MeTechnology Europe GmbH, Dolzig/Leipzig.
For the 100% subsidiaries of Brokat in Singapore, UK, USA, Switzerland,
Australia, Austria and Luxembourg, as well as for Go-Solutions GmbH and for
MeTechnology Kft. the disclosed net results refer to the six months ended
December 31, 1999. For the other subsidiaries the disclosed net results refer
to the full financial year 1999.
The net results of MeTechnology AG and MeTechnology Europe GmbH are
material affected by redemption of loans by the former shareholders of
MeTechnology AG.
Brokat's material additional investments are:
<TABLE>
<CAPTION>
Equity
December 31,
Share 1999 Net results 1999
Name/seat of company as % (in Euro, in '000) (in Euro, in '000)
-------------------- ----- ------------------ ------------------
<S> <C> <C> <C>
Fernbach Financial Software
S.A., Luxembourg............. 25.1 2,307 (27)
Fernbach Software S.A.,
Luxembourg................... 25.1 (1,250) (1,081)
Fernbach Software AG, Germany
............................. 25.1 106 43
Fernbach Software AG,
Switzerland ................. 25.1 (511) (200)
</TABLE>
All of the investments were acquired in the six months ended December 31,
1999 (see also Note 3).
Management Board and power of representation
Members of the Management Board are:
Stefan Rover Spokesman of the Board of Management
Dr. Boris Anderer Deputy Spokesman of the Board of Management
Michael Janssen Chief Financial Officer
Other directorships
Supervisory Board:
german networker Multimedia AG
Achim Schlumpberger Executive Vice President "New Technologies"
Michael Schumacher Executive Vice President of the "Financial
Angelo Maestrini Systems Division"
Chief Operating Officer Field Operations since
September 17, 1999
Total remuneration paid to members of the Management Board in the six
months ended December 31, 1999, amounted to DM 770.0 thousand.
F-31
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following were members of the Supervisory Board during the six months
ended December 31, 1999:
Mr. Falk F. Strascheg, Munich
Chairman
General manager and partner of Technologie-
holding Venture Capital GmbH
Other directorships
Supervisory Board:
BinTec Communications AG
EOS AG
Ponsit Information Technologies AG
Scanla AG Optical Scanning
Going Public AG
Bank Austria TFV High Tech-Unternehmens Bet.
GmbH
European Technologies Holding N.V.
Advanced European Technologies N.V.
Strategic European Technologies N.V.
Technologieholding Central&Eastern Europe Fund
N.V.
Technologieholding Central&Eastern Europe
Parallel Fund B.V.
Dolphin Associates Informations & Communications
Technology Fund for Central and Eastern Europe
Oy.
Dr. Hermann Wundt, Tubingen
Deputy Chairman
General manager and shareholder of RWT
Anwaltskanzlei GmbH and RWT Reutlinger
Wirtschaftstreuhand GmbH
Chairman of the management of RWT Gruppe
Other directorships
Supervisory Board:
SOMAT AG
Mr. Ernst G. Mayer, Pulheim
General manager of Technologie-Beteiligungs-
Gesellschaft mbH der Deutschen Ausgleichsbank
Other directorships
Supervisory Board:
Artemedia AG
Otogene AG
Wavelight AG
Consultant:
cv cryptovision gmbh
Prof. Dr. Wolfgang Konig, Frankfurt
University professor
Other directorships
Supervisory Board:
Innovative Software AG
Ms. Angelika Pohlenz, Wiesbaden
General secretary ICC Deutschland
F-32
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Ms. Maisy Ng, Singapore until November 18, 1999
Dr. Peter Page, Ottobrunn Independent market analyst since November 18,
1999
Other directorships
Supervisory Board:
AutInform AG
ATAMA AG
WEB.DE
Consultant:
i2 Technologies
Macros Consult
CuraData
Total remuneration paid to members of the Supervisory Board during the six
months ended December 31, 1999, amounted to DM 35.0 thousand.
Employees
Personnel expenses included in the Consolidated Statements of Operations are
as follows:
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
June 30, December 31,
1999 1999
---------- ------------
(DM in thousands)
<S> <C> <C>
(56,611) (51,551)
======= =======
thereof non-cash charges associated with stock
option grants (16,340) (12,240)
======= =======
Number of salaried employees (annual average)
<CAPTION>
Six Months
Year Ended Ended
June 30, December 31,
1999 1999
---------- ------------
<S> <C> <C>
311 538
======= =======
Income relating to other periods
<CAPTION>
Six Months
Year Ended Ended
June 30, December 31,
1999 1999
---------- ------------
(DM in thousands)
<S> <C> <C>
0 1,078
======= =======
</TABLE>
F-33
<PAGE>
BROKAT INFOSYSTEMS AG
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
DEVELOPMENT OF FIXED ASSETS OF THE GROUP FOR THE SIX MONTHS ENDED DECEMBER 31,
1999
<TABLE>
<CAPTION>
Acquisition and Manufacturing Cost Accumulated Depreciation Net Book Values
---------------------------------------- ---------------------------------------- ---------------------
July 1, December 31, July 1, December 31, June 30, December 31,
1999 Additions Reversals 1999 1999 Additions Reversals 1999 1999 1999
------- --------- --------- ------------ ------- --------- --------- ------------ -------- ------------
(DM in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Intangible
assets
Goodwill........ 212,948 0 24,062 188,887 3,542 15,249 0 18,792 209,406 170,095
Customer list... 5,324 0 0 5,324 143 532 0 675 5,181 4,649
Software........ 2,709 443 28 3,124 635 507 62 1,080 2,074 2,044
------- ----- ------ ------- ------ ------ --- ------ ------- -------
220,980 443 24,090 197,335 4,320 16,288 62 20,547 216,661 176,788
Tangible assets
Computer
equipment,
furnitures and
fixtures........ 14,587 3,891 369 18,109 6,264 2,588 245 8,607 8,323 9,502
------- ----- ------ ------- ------ ------ --- ------ ------- -------
235,567 4,334 24,459 215,442 10,584 18,876 307 29,153 224,984 186,290
======= ===== ====== ======= ====== ====== === ====== ======= =======
Financial assets
Investment in
associated
companies....... 0 4,155 0 4,155 0 16 0 16 0 4,139
Other long-term
investments..... 0 1,013 0 1,013 0 0 0 0 0 1,013
------- ----- ------ ------- ------ ------ --- ------ ------- -------
0 5,168 0 5,168 0 16 0 16 0 5,152
======= ===== ====== ======= ====== ====== === ====== ======= =======
</TABLE>
F-34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Transaction Software Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of Transaction
Software Technologies, Inc. (a Georgia corporation) and subsidiary as of
September 30, 1998 and 1997 and the related consolidated statements of
operations, shareholders' equity, 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. 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 Transaction Software
Technologies, Inc. and subsidiary as of September 30, 1998 and 1997 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.
Arthur Andersen LLP
Atlanta, Georgia
January 21, 2000
F-35
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
Assets 1998 1997
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 720,111 $ 617,675
Accounts receivable, net of allowance for doubtful
accounts of $121,349 and $134,188 in 1998 and
1997, respectively................................ 1,092,139 1,232,698
Prepaid expenses................................... 43,839 11,322
---------- ----------
Total current assets.............................. 1,856,089 1,861,695
---------- ----------
Property and equipment:
Computer equipment................................. 978,094 901,004
Office furniture................................... 110,789 100,547
---------- ----------
1,088,883 1,001,551
Less accumulated depreciation...................... (813,830) (674,767)
---------- ----------
Property and equipment, net....................... 275,053 326,784
---------- ----------
Total assets...................................... $2,131,142 $2,188,479
========== ==========
<CAPTION>
Liabilities and shareholders' equity 1998 1997
------------------------------------ ---- ----
<S> <C> <C>
Current liabilities:
Accounts payable................................... $ 62,827 $ 17,725
Accrued expenses................................... 106,666 178,035
Accrued income taxes............................... 19,447 0
Deferred income taxes.............................. 322,700 334,924
Current maturities of notes payable................ 290,518 85,121
Deferred revenue................................... 594,828 642,361
---------- ----------
Total current liabilities......................... 1,396,986 1,258,166
---------- ----------
Long-term liabilities:
Notes payable, less current portion................ 29,816 280,074
Deferred income taxes.............................. 29,100 5,605
---------- ----------
Total long-term liabilities....................... 58,916 285,679
---------- ----------
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock, $1 par value; 10,000 shares
authorized; 600 shares issued and outstanding in
1998 and 1997..................................... 600 600
Additional paid-in capital......................... 18,960 18,960
Retained earnings.................................. 655,680 625,074
---------- ----------
Total shareholders' equity........................ 675,240 644,634
---------- ----------
Total liabilities and shareholders' equity........ $2,131,142 $2,188,479
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-36
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenue:
Contract revenue................................... $3,312,163 $2,843,150
Service revenue.................................... 1,186,715 1,053,792
---------- ----------
Total revenue...................................... 4,498,878 3,896,942
---------- ----------
Operating expenses:
Cost of services................................... 1,500,410 1,427,210
General and administrative......................... 418,740 281,205
Sales and marketing................................ 632,099 625,248
Research and development........................... 1,841,363 1,873,673
---------- ----------
Total operating expenses........................... 4,392,612 4,207,336
---------- ----------
Operating income.................................... 106,266 (310,394)
Other income (expense):
Investment income.................................. 24,346 14,534
Interest expense................................... (12,936) (16,608)
---------- ----------
Income before income taxes.......................... 117,676 (312,468)
Provision (benefit) for income taxes (Note 5)....... 47,070 (124,987)
---------- ----------
Net income (loss)................................... $ 70,606 $ (187,481)
========== ==========
Net income (loss) per share:
Basic.............................................. $ 117.68 $ (312.47)
========== ==========
Diluted............................................ $ 117.68 $ (312.47)
========== ==========
Weighted average shares:
Basic.............................................. 600 600
========== ==========
Diluted............................................ 600 600
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-37
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
Common Stock Additional Total
------------- Paid-in Retained Shareholders'
Shares Amount Capital Earnings Equity
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, September 30,
1996.................... 600 $600 $18,960 $842,555 $862,115
Net loss................ 0 (187,481) (187,481)
Dividends on common
stock.................. 0 (30,000) (30,000)
--- ---- ------- -------- --------
Balance, September 30,
1997.................... 600 600 18,960 625,074 644,634
Net income.............. 0 70,606 70,606
Dividends on common
stock.................. 0 (40,000) (40,000)
--- ---- ------- -------- --------
Balance, September 30,
1998.................... 600 $600 $18,960 $655,680 $675,240
=== ==== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
F-38
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ 70,606 $(187,481)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation............................................ 139,063 142,481
Deferred income taxes................................... 11,271 331,933
Changes in operating assets and liabilities:
Accounts receivable..................................... 140,559 (415,533)
Other current assets.................................... (32,517) 4,145
Accounts payable........................................ 45,102 (37,093)
Accrued expenses........................................ (51,922) 161,350
Deferred revenues....................................... (47,533) 284,171
-------- ---------
Cash provided by operating activities.................... 274,629 283,973
-------- ---------
Cash flows from investing activities:
Purchases of equipment and furniture..................... (87,332) (136,257)
-------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable.................. 22,500 245,000
Principal payments on notes payable...................... (67,361) (79,425)
Dividends paid........................................... (40,000) (30,000)
-------- ---------
Cash provided by (used in) financing activities.......... (84,861) 135,575
-------- ---------
Change in cash and cash equivalents....................... 102,436 283,291
Cash and cash equivalents, beginning of year.............. 617,675 334,384
-------- ---------
Cash and cash equivalents, end of year.................... $720,111 $ 617,675
======== =========
Supplemental disclosure of cash flow information:
Cash paid for interest................................... $ 12,936 $ 16,608
======== =========
Cash paid for taxes...................................... $ 7,315 $ 944
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-39
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
1. Nature of business
Transaction Software Technologies, Inc. (the "Company") creates, markets,
licenses, installs, and services various software products that allow financial
institutions to conduct electronic commerce with their corporate clients
through dial-up services or over the Internet. The Company's wholly owned
subsidiary, Transoft Services, Inc. ("TSI"), provides related consulting
services.
2. Summary of significant accounting policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and TSI. All significant intercompany accounts and transactions have been
eliminated.
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 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.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be the equivalent of cash for the
purpose of balance sheet and statement of cash flows presentation. Cash
equivalents, which consist primarily of money market accounts, are carried at
cost which approximates fair market value.
Property and Equipment
Property and equipment which primarily consists of computer equipment and
furniture and fixtures, are stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the various classes of
property, which are three to five years for all computer equipment, and five to
seven years for all furniture and fixtures. Depreciation expense for the years
ended September 30, 1998 and 1997 was $139,063 and $142,481, respectively.
Expenditures for maintenance and repairs are charged to expense as incurred,
and the costs of renewals and betterments are capitalized. Costs and the
related accumulated depreciation of assets sold or retired are removed from the
respective accounts. Any resulting gain or loss is reflected in the
consolidated statements of operations.
During 1995, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 121 established accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used for long-
lived assets and certain identifiable intangibles to be disposed of. The
Company reviews its long-lived assets consisting of property and equipment for
impairment at each balance sheet date or whenever events or changes in
circumstances indicate that the carrying amount of an asset should be assessed.
An impairment is recognized when the undiscounted future cash flows estimated
to be generated by the assets are not sufficient to recover the unamortized
balance of the assets. In such event, an impairment loss is recorded for the
difference between the fair value of the asset
F-40
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(Continued)
(based on discounted cash flows) and its carrying amount. Management believes
that the long-lived assets in the accompanying balance sheets are appropriately
valued.
Revenue Recognition
Contract Revenue
Revenue from fixed price contracts is recognized using the percentage of
completion method measured by the cost to cost method. Contract costs include
direct labor, combined with allocations of operational overhead, and other
direct costs. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in job conditions
resulting in changes to estimated profitability may result in revisions to
costs and revenue and are recognized in the period in which the revisions are
determined.
Services Revenue
Revenue from consulting services is recognized as the service is performed.
Maintenance revenue is deferred and recognized ratably over the term of the
maintenance agreement, which is typically 12 months.
Product Development Costs
Costs incurred to establish the technological feasibility of computer
software products are included in research and development expense and are
charged to expense as incurred. The Company capitalizes costs incurred between
the point of establishing technological feasibility and general release when
such costs are material. As of September 30, 1998 and 1997, the Company has no
capitalized computer software development costs.
Income Taxes
The company utilizes the liability method of accounting for income taxes, as
set forth in SFAS No. 109, "Accounting for Income Taxes." Under the liability
method, deferred income taxes are determined based on the difference between
the financial and tax bases of assets and liabilities using enacted tax rates
in effect in the years in which the differences are expected to reverse.
Valuation allowances are recorded to reduce deferred tax assets when it is more
likely than not that a tax benefit will not be realized.
Fair Values of Financial Instruments
The Company's financial instruments include cash and cash equivalents,
accounts receivable, accounts payable, notes payable, and other short-term
assets and liabilities. The fair value of the Company's long-term debt is
estimated based on the current rates offered to the Company for debt of similar
terms and maturities. Under this method, the Company's fair value of long-term
debt was not significantly different than the stated value at September 30,
1998 and 1997. Based on the short-term nature or variable interest rates of the
remaining financial instruments, the estimated fair market values of the
Company's financial instruments approximate their carrying values at September
30, 1998 and 1997.
Concentrations of Business and Credit Risk
Financial instruments that potentially subject the Company to concentrations
of credit risk consist primarily of accounts receivable. Accounts receivable
represent trade receivables and are unsecured. The Company performs periodic
credit evaluations of its customers' financial condition and generally does not
require collateral to support customer receivables.
F-41
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(Continued)
The Company's clients operate within the financial services industry, and a
significant portion of the Company's revenues is derived from a limited number
of clients. During the years ended September 30, 1998 and 1997, the following
clients individually accounted for more than 10% of the Company's revenue:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Client A.......................... 21% 27%
Client B.......................... 12% 13%
Client C.......................... 11% *
Client D.......................... 12% *
</TABLE>
- --------
*Accounted for less than 10% of total revenues for the period indicated.
At September 30, 1998, 15% of the Company's accounts receivable related to
Client A and the remaining three clients make up 20%.
Net income (loss) per share
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings per Share" for all periods presented. This statement
replaces previously reported primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share exclude any dilutive effect of options and convertible
securities. Basic net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common stock outstanding during
the period. Diluted net income (loss) per share is computed by dividing net
income (loss) by the weighted average number of common stock and dilutive stock
equivalents outstanding during the period. The following table sets forth the
computation of basic and diluted net income (loss) per share.
<TABLE>
<CAPTION>
1998 1997
------- ---------
<S> <C> <C>
Numerator:
Net income (loss)...................................... $70,606 $(187,481)
======= =========
Denominator:
Weighted average shares outstanding--Basic ............ 600 600
Weighted average shares outstanding--Diluted........... 600 600
</TABLE>
Recent Accounting Pronouncements
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
SFAS No. 130 establishes standards for reporting and disclosing comprehensive
income and its components. Comprehensive income is defined as the change in
equity (net assets) of a business enterprise during a period from transactions
and other events and circumstances from nonowner sources. In addition to net
income, SFAS No. 130 requires the reporting of other comprehensive income,
defined as revenues, expenses, gains, and losses that under generally accepted
accounting principles are not included in net income. As of September 30, 1998,
the Company had no items of other comprehensive income.
The Financial Accounting Standards Board ("FASB") recently issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), which requires that companies
recognize all derivatives as either assets or liabilities in the balance sheet
at fair value. Under this statement, accounting for changes in fair value of a
derivative depends on its intended use and designation. In June 1999, the FASB
issued Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB
F-42
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(Continued)
Statement No. 133" ("SFAS 137"). SFAS 137 amends the effective date of SFAS
133. SFAS 133 will now be effective for all fiscal quarters of all fiscal years
beginning after June 15, 2000. SFAS No. 133 is not to be applied retroactively
to financial statements of prior periods. The Company expects no material
impact on its results of operations, comprehensive income or financial position
as a result of the adoption of SFAS No. 133.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." Under SOP 98-1, computer
software costs incurred in the preliminary project stage are expensed as
incurred. Additional, specified upgrades and enhancements may be capitalized;
however, external costs related to maintenance, unspecified upgrades, and
enhancements should be recognized as expense over the contract period on a
systematic basis. Internal costs incurred for maintenance should be expensed as
incurred. In the opinion of management, the adoption of SOP 98-1 will not have
a material effect on the consolidated financial statements of the Company.
3. Notes Payable
Notes payable consist of the following at September 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Note payable to vendor, noninterest-bearing, principal
balance due in six equal monthly installments beginning
December 22, 1998....................................... $232,500 $210,000
Note payable to bank, interest at 8.7%, principal and
interest payable in monthly installments of $2,895
through December 1999; secured by computer equipment.... 41,137 70,781
Note payable to bank, interest at 7.8%, principal and
interest payable in monthly installments of $1,212
through January 2001; secured by computer equipment..... 30,954 42,494
Note payable to bank, interest at 8.75%, principal and
interest payable in monthly installments of $1,108
through December 1999; secured by computer equipment.... 15,743 27,127
Equipment loan, interest at 6.5%, principal and interest
payable in monthly installments of $2,989 through
February 1998........................................... 0 14,793
-------- --------
320,334 365,195
Less current portion..................................... 290,518 85,121
-------- --------
$ 29,816 $280,074
======== ========
</TABLE>
Following are maturities of notes payable as of September 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
1999................................ $290,518
2000................................ 26,831
2001................................ 2,985
--------
$320,334
========
</TABLE>
4. Shareholders' Equity
During the years ended September 30, 1998 and 1997, the board of directors
declared dividends on common stock. The Company paid dividends in the amount of
$66.67 and $50 per share during the years ended September 30, 1998 and 1997,
respectively.
F-43
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. Income Taxes
Income tax expense for the years ended September 30, 1998 and 1997 consisted
of the following:
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Current income tax provision ........................... $ 42,562 $ 7,786
Deferred income tax provision (benefit)................. 4,508 (132,773)
-------- ---------
$ 47,070 $(124,987)
======== =========
</TABLE>
The following is a summary of the items which resulted in recorded income
tax provision to differ from taxes computed using the statutory federal income
tax rate for the years ended September 30, 1997 and 1998:
<TABLE>
<CAPTION>
1998 1997
----- -----
<S> <C> <C>
Statutory federal income tax rate.............................. 34.0% 34.0%
Effect of:
State income tax............................................ 6.0 6.0
----- -----
Pro forma income taxes......................................... 40.0% 40.0%
===== =====
</TABLE>
All net income (loss) before taxes was derived in the United States.
The components of the deferred tax liabilities as of September 30, 1998 and
1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Current:
Accrual basis financial statement income in excess of
cash basis taxable income.............................. $322,700 $334,924
======== ========
Long-term:
Depreciation............................................ $ 29,100 $ 5,605
======== ========
</TABLE>
6. Commitments and Contingencies
Legal Proceedings
The Company is not currently a party to any material legal proceedings. From
time to time, the Company may be subject to legal proceedings and claims in the
ordinary course of business. Such claims, even if not meritorious, could result
in the expenditure of significant financial and managerial resources. In
addition, the Company, from time to time, may become a party to legal or
administrative proceedings or arbitration that arise in the ordinary course of
business.
Operating Leases
The Company leases its office facilities and other equipment under
noncancelable operating lease agreements which expire on various dates through
November 1999. The Company recorded lease expense of approximately $98,600 and
$101,500 for the years ended September 30, 1998 and 1997, respectively, related
to these leases.
F-44
<PAGE>
TRANSACTION SOFTWARE TECHNOLOGIES, INC.
AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS--(Continued)
Minimum future payments under noncancelable operating leases as of September
30 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1999................................. $79,980
2000................................. 19,995
-------
$99,975
=======
</TABLE>
7.Retirement Plan
Effective May 1, 1993, the Company adopted a 401(k) retirement plan (the
"Plan") covering substantially all employees. The Plan provides for
discretionary employer matching contributions. The Company contributed
approximately $44,500 and $18,500 during the years ended September 30, 1998 and
1997, respectively. These amounts have been recorded as general and
administrative expenses.
8. Subsequent event (unaudited)
Effective May 10, 1999, BROKAT Infosystems AG ("BROKAT"), a German company,
acquired substantially all of the assets of the Company under the terms of a
stock purchase agreement. The purchase price was approximately $18.6 million
and is being accounted for by BROKAT under the purchase method of accounting.
F-45
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of ESD Vermogensverwaltungsgesellschaft mbH:
We have audited the accompanying consolidated balance sheets of ESD
Vermogensverwaltungsgesellschaft mbH and subsidiaries (the "Company") as of
December 31, 1997 and the related consolidated statements of operations, cash
flows and shareholders' equity for the year then ended. These consolidated
financial statements, which have been prepared in compliance with German
commercial law, are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards in Germany which are substantially consistent with those standards in
the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of ESD Vermogensverwaltungsgesellschaft mbH and subsidiaries as of December 31,
1997 and the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles in Germany.
Accounting practices used by ESD Vermogensverwaltungsgesellschaft mbH in
preparing the accompanying consolidated financial statements conform with
generally accepted accounting principles in Germany but do not conform with
accounting principles generally accepted in the United States (US GAAP). A
description of these differences and a complete reconciliation of consolidated
net income and shareholders' equity to US GAAP are set forth in Note V.
Arthur Andersen
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
Stuttgart, Germany Dr. Schmidt Baierl
March 10, 2000 Wirtschaftsprufer Wirtschaftsprufer
F-46
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of MeTechnology Aktiengesellschaft:
We have audited the accompanying consolidated balance sheets of MeTechnology
Aktiengesellschaft and subsidiaries (the "Company") as of December 31, 1998 and
the related consolidated statements of operations, cash flows and shareholders'
equity for the year then ended. These consolidated financial statements, which
have been prepared in compliance with German commercial law, are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards in Germany which are substantially consistent with those standards in
the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of MeTechnology Aktiengesellschaft and subsidiaries as of December 31, 1998 and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles in Germany.
Accounting practices used by MeTechnology Aktiengesellschaft in preparing
the accompanying consolidated financial statements conform with generally
accepted accounting principles in Germany but do not conform with accounting
principles generally accepted in the United States (US GAAP). A description of
these differences and a complete reconciliation of consolidated net income and
shareholders' equity to US GAAP are set forth in Note V.
Arthur Andersen
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
Stuttgart, Germany Dr. Schmidt Baierl
March 10, 2000 Wirtschaftsprufer Wirtschaftsprufer
F-47
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
(DM in thousands)
<S> <C> <C>
ASSETS
FIXED ASSETS
Intangible assets
Software.......................................... 94 28
------ ------
Property, plant and equipment
Buildings on third party land..................... 30 16
Other equipment, factory and office equipment..... 832 428
------ ------
862 444
------ ------
956 472
------ ------
CURRENT ASSETS
Inventories
Raw materials, consumables and supplies........... 47 74
Work in process................................... 719 263
------ ------
766 337
------ ------
Receivables and other assets
Trade receivables................................. 2,275 170
Other assets...................................... 588 117
------ ------
2,863 287
------ ------
Other securities................................... 0 1,869
Cash, bank balances................................ 808 1,454
------ ------
808 3,323
------ ------
4,437 3,947
------ ------
PREPAID ASSETS...................................... 10 73
------ ------
ACCUMULATED DEFICIT FOR THE YEAR NOT COVERED BY
EQUITY............................................. 15,046 8,175
------ ------
20,449 12,667
====== ======
EQUITY AND LIABILITIES
EQUITY
Common Stock....................................... 1,000
GmbH capital....................................... 150
Additional paid-in capital......................... 417 1,000
Accumulated deficit covered by equity.............. (1,417) (1,150)
------ ------
0 0
------ ------
CONTRIBUTIONS FROM SILENT PARTNERS
SUBORDINATED LOANS
Contributions from silent partners................. 9,950 8,000
Subordinated loans................................. 3,530 3,530
------ ------
13,480 11,530
------ ------
ACCRUALS
Other accruals..................................... 939 231
------ ------
LIABILITIES
Convertible bonds.................................. 3,352 0
Liabilities to banks............................... 750 8
Payments received on account of orders............. 513 262
Trade payables..................................... 916 201
Other liabilities.................................. 460 435
------ ------
5,991 906
------ ------
DEFERRED INCOME..................................... 39 0
------ ------
20,449 12,667
====== ======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-48
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------
1998 1997
------------ -----------
(DM in thousands)
<S> <C> <C>
Revenue............................................. 4,870 1,965
Increase (decrease) in inventories.................. 456 (25)
Other operating income.............................. 240 84
Cost of materials
Cost of raw materials, consumables and supplies
and for purchased goods.......................... (238) (88)
Cost of purchased services........................ (407) (210)
Personnel expenses
Wages and salaries................................ (5,481) (2,953)
Social security and other pension payments........ (1,004) (554)
-- thereof for pensions TDM 22 (prior year: TDM
20)
Depreciation on intangible assets, and property,
plant and equipment................................ (486) (177)
Other operating expenses............................ (4,794) (2,579)
Interest and similar income......................... 42 136
Interest and similar expenses....................... (309) (281)
------------ -----------
Loss before taxes................................... (7,111) (4,682)
------------ -----------
Income tax benefit.................................. 0 1
Other taxes......................................... (27) (1)
------------ -----------
Consolidated net loss............................... (7,138) (4,682)
------------ -----------
Accumulated deficit, beginning of year.............. (9,325) (4,643)
------------ -----------
Accumulated deficit, end of year.................... (16,463) (9,325)
============ ===========
<CAPTION>
DM
------------
<S> <C> <C>
Loss per share...................................... (35.69)
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-49
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
--------------
Additional Total
GmbH Paid in Accumulated Shareholders Comprehensive
Shares Amount Capital Capital loss Equity Income (Loss)
------- ------ ------- ---------- ----------- ------------ -------------
(DM in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
As of December 31,
1996................... 0 0 150 1,000 (4,643) (3,493)
Net loss for the year... 0 0 0 0 (4,682) (4,682) (4,682)
------
Comprehensive Loss...... 0 0 0 0 0 0 (4,682)
------- ----- ---- ----- ------- ------- ------
As of December 31,
1997................... 0 0 150 1,000 (9,325) (8,175)
------- ----- ---- ----- ------- -------
Foundation of
MeTechnology AG........ 20,000 100 0 0 0 100
Contribution in kind
GmbH................... 180,000 900 (150) (750) 0 0
Recognition of discount
on convertible bond.... 0 0 0 167 0 167
Net loss for the year... 0 0 0 0 (7,138) (7,138) (7,138)
------
Comprehensive Loss...... 0 0 0 0 0 0 (7,138)
------- ----- ---- ----- ------- ------- ======
As of December 31,
1998................... 200,000 1,000 0 417 (16,463) (15,046)
======= ===== ==== ===== ======= =======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-50
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended
December 31,
--------------
1998 1997
------ ------
(DM in
thousands)
<S> <C> <C>
Cash flow from Operating Activities
Net loss...................................................... (7,138) (4,682)
Adjustments to reconcile net loss to net cash used in operat-
ing activities
Accretion of interest expense on noninterest bearing debt.... 19 0
Depreciation and amortization................................ 486 177
Changes in trade receivables................................. (2,105) 265
Changes in inventories....................................... (429) (44)
Changes in prepaid expenses and other current assets......... (408) (121)
Changes in trade payables.................................... 715 (122)
Changes in other accruals.................................... 708 137
Changes in liabilities....................................... 315 (94)
------ ------
Net cash used in operating activities....................... (7,837) (4,484)
------ ------
Cash flow from Investing Activities
Acquisitions of intangible assets............................ (90) (29)
Purchases of property and equipment.......................... (880) (296)
Proceeds from sale of property and equipment................. 0 36
------ ------
Net cash used in investing activities....................... (970) (289)
------ ------
Cash flow from Financing Activities
Net change in short-term bank debt........................... 742 8
Changes in securities classified as current assets........... 1,869 (1,869)
Long-term borrowings......................................... 5,450 130
Issuances of share capital................................... 100 0
------ ------
Net cash provided (used) by financing activities............ 8,161 (1,731)
------ ------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. (646) (6,504)
CASH AND CASH EQUIVALENTS
At the beginning of the period.............................. 1,454 7,958
------ ------
At the end of the period.................................... 808 1,454
====== ======
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest..................................................... 366 205
Taxes........................................................ 27 1
------ ------
393 206
====== ======
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
F-51
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(I)GENERAL DISCLOSURES
The consolidated financial statements of MeTechnology Aktiengesellschaft,
Leipzig, for the year ended December 31, 1998 and ESD
Vermogensverwaltungsgesellschaft mbH, Munchen, for the year ended December 31,
1997 have been prepared in thousands of Deutsche Mark (TDM) in accordance with
the 3rd book of the German Commercial Code (HGB). The income statement has been
prepared according to the method of total costs.
To improve clarity individual items of the consolidated balance sheet and
consolidated income statement have been combined. These items are disclosed
separately in the notes to the financial statements.
To further improve clarity, the items in the consolidated balance sheet and
consolidated income statement have not been numbered.
(II)CONSOLIDATION GROUP
For the financial year 1997 the consolidated financial statements comprise
the parent company ESD Vermogensverwaltungsgesellschaft mbH, Munchen (ESD-VV),
and ESD Information Technology Entwicklungsgesellschaft mbH, Dolzig (ESD-IT),
as a 100 % subsidiary. The first-time consolidation at the time of acquisition
in 1994 was performed according to the revaluation method in accordance with
sec. 301 (1) no. 2 HGB (German Commercial Code). The purchase price of ESD-IT
and the equity being taken over amounted to TDM 50 so that a goodwill did not
arise at the time of first-time consolidation.
By a merger agreement certified by a notary public and signed July 13, 1998,
ESD-IT was retroactively merged into ESD-VV as of January 1, 1998. At a
shareholders' meeting on the same day, ESD-VV was renamed MeTechnology Europe
GmbH (Me GmbH) and the statutory seat moved from Munchen to Bienitz. At the
time of the merger the accounts of ESD-IT and EDS-VV were combined using their
historical cost bases, as this merger represents a reorganization of entities
under common control.
MeTechnology Aktiengesellschaft with statutory seat in Leipzig (Me AG) was
founded on June 26, 1998, as a holding company with common stock of TDM 100. By
contract certified by a notary public dated October 21, 1998 the common stock
of Me AG was increased by a contribution in kind of all shares in Me GmbH to Me
AG.
As of December 31, 1998, the consolidated financial statements of Me AG thus
contain the parent company and Me GmbH as a wholly owned subsidiary. The
shareholders of the two companies were identical at the time of the
contribution of Me GmbH into Me AG and held the identical percentage interests
in the two companies (common ownership). Accordingly, the contribution of Me
GmbH into Me AG has also been reflected as a reorganization of entities under
common control, and was accounted for using the historical cost bases of the
combining entities. Due to the fact that the two groups are actually identical
for economic purposes and in order to make the consolidated financial
statements for the years 1997 and 1998 comparable, the consolidation was
prepared as if the new structure had been started at January 1, 1998.
In 1997, the shares in Yellowstar Gesellschaft fur Softwarevertrieb und
Marketing mbH, Haar, a 100 % subsidiary of ESD-VV, were sold. This company was
not included in the consolidated financial statements of ESD-VV in 1997 in
accordance with sec. 296 (1) no. 2 and 3 HGB.
On August 19, 1998, Me AG as sole shareholder founded MeTechnology Ltd., UK,
with common stock of GBP 100. During 1998, MeTechnology Ltd., UK, was a non-
operating legal entity. In accordance with sec. 296 (2) HGB, MeTechnology Ltd.,
UK, has not been included in the consolidation group due to immateriality.
The shareholdings of ESD-VV and Me AG are included in Note (VI)(2).
F-52
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(III) PRINCIPLES OF CONSOLIDATION
In 1997, the capital consolidation of ESD-VV and ESD-IT under local (German)
GAAP was performed according to the revaluation method pursuant to sec. 301 (1)
no. 2 HGB by offsetting the acquisition cost against the pro rata equity of the
consolidated subsidiary at the time of acquisition in 1994, retroactively.
Capital consolidation of Me AG and Me GmbH under local (German) GAAP was
performed according to the pooling-of-interests method pursuant to sec. 302 (1)
HGB. Consequently, the difference of TDM 750 between common stock issued by Me
AG of TDM 900 and GmbH capital contributed in return of TDM 150 was offset
against additional paid-in capital in accordance with sec. 302 (2) HGB.
Intercompany results, intercompany sales, expenses and income as well as
intercompany receivables and liabilities between the consolidated companies
have been eliminated. There were no intercompany profits as of the closing
date.
(IV) SIGNIFICANT ACCOUNTING AND VALUATION METHODS, CURRENCY TRANSLATION
The financial statements of the consolidated group companies were prepared
according to uniform accounting and valuation methods.
Intangible assets, where acquired for a consideration, are capitalized at
acquisition cost and subject to scheduled depreciation. Intangible assets are
written off using the straight-line method of depreciation over a period of 3
years.
Buildings on third party land concern to capitalized electrical
installations inside the leased buildings.
Property, plant and equipment are stated at cost less scheduled depreciation
or at net realizable value, if lower, as of the balance sheet date.
The following depreciation methods were applied to property, plant and
equipment:
<TABLE>
<CAPTION>
Method Years
------------- -----
<S> <C> <C>
Buildings on third party land............................... straight-line 3
Other equipment, office and factory equipment............... straight-line 4-5
</TABLE>
Low value assets are fully expensed in the year of acquisition.
Extraordinary depreciation is charged if an item has to be disclosed at the
lower attributable value.
Inventories of raw materials and supplies as well as work in process is
valued at acquisition or manufacturing cost or at net realizable value, if
lower. Manufacturing cost includes direct labor costs including appropriate
overheads.
Receivables and other assets are stated at the nominal amount or the lower
attributable value. The collection risk on receivables has been covered by
creation of a bad debt allowance of 1 % of the net receivables on hand, which
approximates historic bad debt write-offs.
Cash and cash equivalents have been valued at nominal value.
Other accruals are created on the basis of prudent commercial judgement to
cover all potential losses from pending transactions and contingent liabilities
as of the balance sheet date.
Liabilities are stated at the repayment value.
Receivables and liabilities in foreign currency are valued at the rate
prevailing at the date of origin. Exchange rate losses occurring prior to the
balance sheet date or evident are considered with effect on income.
F-53
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(V)US-GAAP RECONCILIATION
The audited consolidated financial statements of Me AG and ESD-VV were
prepared according to German accounting principles. A reconciliation of the net
losses and equity from the German accounting principles to the accounting
principles generally accepted in the United States of America (US-GAAP) for the
financial years 1997 and 1998 is presented in the following tables.
<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
(DM in thousands)
<S> <C> <C>
Net loss per German generally accepted accounting princi-
ples..................................................... (7,138) (4,682)
Long-term projects for software adaptation................ (1,489) (23)
Unrealized losses/gains on marketable securities.......... (20) 20
-------- --------
Net loss according to US generally accepted accounting
principles............................................... (8,647) (4,685)
======== ========
</TABLE>
<TABLE>
<CAPTION>
December 31,
---------------
1998 1997
------- ------
(DM in
thousands)
<S> <C> <C>
Equity per German generally accepted accounting principles... (16,463) (9,325)
Long-term projects for software adaptation................... (1,326) 163
------- ------
Equity according to US generally accepted accounting princi-
ples........................................................ (17,789) (9,162)
======= ======
</TABLE>
Under German GAAP, license revenues can be realized upon delivery of the
software while software adaptations are posted separately according to the
completed contract method. Under US-GAAP license and software adaptation
revenues are realized uniformly according to the percentage of completion
method.
Under US-GAAP, marketable securities that are available for sale are
recorded at fair market value, with the offsetting unrealized gain or loss
recorded as a component of other comprehensive income. Under German GAAP,
marketable securities are recorded at cost, but provisions for losses are
recorded when prudent.
In 1997, the Company, under German GAAP, recorded a provision of TDM 20
related to unrealized losses on marketable securities available for sale. At
that time, the fair market value of the securities was below their carrying
amount by more than TDM 20. However, as discussed in Note (VI)(4), the Company
received a gurantee from Financial Intelligent Transactions
Vermogensverwaltungs GmbH, Munchen, whereby the Company's maximum loss on these
securities would be limited to TDM 20.
Under US-GAAP, the reduction in the fair value of these securities in 1997,
up to the TDM 20 limit, would be recorded as a reduction in other comprehensive
income rather than as a charge to expense, since the decline in market value
was not of a permanent nature. This difference has no effect on reported
shareholders' equity but would reduce other comprehensive income by TDM 20 in
1997.
In 1998, the Company sold the marketable securities at an amount nearly
identical to their original cost basis. Under German GAAP, the Company recorded
a gain of approximately TDM 20, as the carrying value of those securities had
been reduced in 1997 by the provision described above. Under US-GAAP, the
Company would have recorded no gain or loss on the disposal, but would have had
a gain in other comprehensive income of TDM 20 due to the appreciation in the
fair value of the securities prior to their sale. Again, this difference in
accounting would have no effect on reported shareholders' equity.
F-54
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Under German GAAP, provisions for contingencies are established for all
potential losses from pending transactions and contingent liabilities as of the
balance sheet date. Under US-GAAP, such provisions can only be recorded when an
exposure is probable and the amount of the exposure is reasonably estimable. At
December 31, 1998 and 1997, though, there were no accruals recorded under
German GAAP that would not be recorded under US-GAAP.
Under German GAAP, unrealized foreign exchange gains in each group of
currencies are not included in income. Exchange losses in each group of
currencies, though, are charged to the statement of operations immediately.
Under US-GAAP, foreign currency transaction gains and losses are expensed as
incurred. At December 31, 1998 and 1997, no material amounts in foreign
currency were recorded.
Under German GAAP, certain balances are classified differently than under
US-GAAP. For example, changes in inventory accounts which are recorded as
revenues under German GAAP, would be considered part of cost of goods sold
under US-GAAP. In addition, costs and estimated profits in excess of billings
on long-term construction type contracts would be categorized as such under US-
GAAP, but such amounts are classified as inventories for German GAAP. These
differences in classification yield no GAAP differences in reported net loss or
shareholders' equity.
US-GAAP requires that all majority owned and controlled subsidiaries be
consolidated. Under German GAAP, such subsidiaries need not to be consolidated
if they do not have material operations. During the year ended December 31,
1998, the Company had one inactive subsidiary that was not consolidated for
German GAAP purposes. However, the consolidation of this subsidiary under US-
GAAP would yield no material differences in reported net income or
shareholders' equity, or any other balance sheet or statement of operations
account.
F-55
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(VI)EXPLANATORY COMMENTS ON THE CONSOLIDATED FINANCIAL STATEMENTS
(1)Fixed assets
DEVELOPMENT OF FIXED ASSETS OF THE GROUP FOR THE FINANCIAL YEAR 1997
<TABLE>
<CAPTION>
NET BOOK
ACQUISITION AND MANUFACTURING COST ACCUMULATED DEPRECIATION VALUES
-------------------------------------------- -------------------------------------------- ------------
Jan 1, 1997 Additions Reversals Dec 31, 1997 Jan 1, 1997 Additions Reversals Dec 31, 1997 Dec 31, 1997
----------- --------- --------- ------------ ----------- --------- --------- ------------ ------------
(DM in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTANGIBLE AS-
SETS
Software........ 7 29 0 36 1 7 0 8 28
--- --- --- --- --- --- --- --- ---
PROPERTY, PLANT
AND EQUIPMENT
Buildings on
third party
land........... 21 4 0 25 2 7 0 9 16
Other equipment,
factory and
office
equipment...... 539 292 173 658 205 163 138 230 428
--- --- --- --- --- --- --- --- ---
560 296 173 683 207 170 138 239 444
--- --- --- --- --- --- --- --- ---
FINANCIAL ASSETS
Shares in affil-
iated compa-
nies........... 250 0 250 0 250 0 250 0 0
--- --- --- --- --- --- --- --- ---
817 325 423 719 458 177 388 247 472
=== === === === === === === === ===
</TABLE>
DEVELOPMENT OF FIXED ASSETS OF THE GROUP FOR THE FINANCIAL YEAR 1998
<TABLE>
<CAPTION>
ACQUISITION AND MANUFACTURING COST ACCUMULATED DEPRECIATION
-------------------------------------------- --------------------------------------------
Jan 1, 1998 Additions Reversals Dec 31, 1998 Jan 1, 1998 Additions Reversals Dec 31, 1998
----------- --------- --------- ------------ ----------- --------- --------- ------------
(DM in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTANGIBLE AS-
SETS
Software........ 36 90 0 126 8 24 0 32
--- --- --- ----- --- --- --- ---
PROPERTY, PLANT
AND EQUIPMENT
Buildings on
third party
land........... 25 28 0 53 9 14 0 23
Other equipment,
factory and
office equip-
ment........... 658 852 208 1,302 230 448 208 470
--- --- --- ----- --- --- --- ---
683 880 208 1,355 239 462 208 493
--- --- --- ----- --- --- --- ---
719 970 208 1,481 247 486 208 525
=== === === ===== === === === ===
<CAPTION>
NET BOOK
VALUES
-------------------------
Dec 31, 1998 Dec 31, 1997
------------ ------------
<S> <C> <C>
INTANGIBLE AS-
SETS
Software........ 94 28
------------ ------------
PROPERTY, PLANT
AND EQUIPMENT
Buildings on
third party
land........... 30 16
Other equipment,
factory and
office equip-
ment........... 832 428
------------ ------------
862 444
------------ ------------
956 472
============ ============
</TABLE>
F-56
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(2)Shareholdings and consolidation group
<TABLE>
<CAPTION>
Result
Participation Equity of the financial
quota December 31, year
Currency as % 1997 1997
-------- ------------- ------------ ----------------
(DM in thousands)
<S> <C> <C> <C> <C>
ESD Information Technology
Entwicklungsgesellschaft
mbH, Dolzig.............. DEM 100 (8,313) (4,628)
</TABLE>
<TABLE>
<CAPTION>
Result
Participation Equity of the financial
quota December 31, year
Currency as % 1998 1998
-------- ------------- ------------ ----------------
(DM in thousands)
<S> <C> <C> <C> <C>
MeTechnology Europe
GmbH, Bienitz.......... DEM 100 (11,890) (15,728)(/1/)
MeTechnology Ltd., UK... GBP 100 0 0(/2/)
</TABLE>
- --------
Notes:
(1) Single entity financial statements for the financial year 1998 include a
loss from the merger of ESD-VV and ESD-IT of TDM 9,013, which corresponds
to operating losses of ESD-IT before the first-time consolidation as of
January 1, 1998.
(2) MeTechnology Ltd., UK, during 1998 was a non-operating legal entity.
(3)Receivables and other assets
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
-------------------------- --------------------------
thereof thereof
with a residual term with a residual term
of more than of more than
Total 1 year Total 1 year
----- -------------------- ----- --------------------
(DM in thousands)
<S> <C> <C> <C> <C>
Trade receivables......... 2,275 0 170 0
Other assets.............. 588 112 117 50
----- --- --- ---
2,863 112 287 50
===== === === ===
</TABLE>
Other assets in the consolidated financial statements contain receivables
from deposits, receivables from employees and prepaid taxes. Other assets
contain receivables from shareholders in the amount of DM 3.0 thousand.
(4)Other securities
In 1997, other securities relate to marketable securities public traded on
the German Stock Exchange which are held in a custody account at Oberbank,
Munchen. Financial Intelligent Transactions Vermogensverwaltungs GmbH, Munchen,
has agreed to guarantee that the maximum loss to be borne by the Company upon
sale of these securities to be TDM 20. In 1997, the Company recorded a loss of
TDM 20 to
F-57
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
reflect the fact that the fair value of these securities was below their
carrying amount. In 1998 the securities were sold at an amount nearly identical
to their original cost basis.
(5)Additional paid-in capital
The Me AG additional paid-in capital amounts to TDM 167 as of December 31,
1998, resulting from the convertible bond as described in Note (8). The
additional amount of TDM 250 results from the capital consolidation as
described in Note (III).
(6)Contribution of silent partners and subordinated loans
In 1996, the subsidiary ESD-IT entered into a silent partnership agreement
with SBF Sachsischer Beteiligungsfonds GmbH (SBF), Leipzig, until December 31,
2001. As of December 31, 1997 the contribution amounted to TDM 8,000. The
contribution was increased by TDM 1,950 to TDM 9,950 in 1998. SBF has issued a
letter of subordination for its claims from the silent partnership. SBF
receives a 20% share of the company's profits, but does not participate in
losses. SBF also receives annual servicing compensation of 2% of the investment
amount.
In 1996, GSM Industriebeteiligungen GmbH, Munchen, also granted ESD-IT a
subordinated loan. As of December 31, 1998, the loan still amounts to TDM
3,530. The loan has to be repaid by the year 2005 and is subject to interest at
a rate of 8%.
(7)Other accruals
The other accruals mainly contain amounts for warranties, costs yet to be
incurred, personnel expenses, costs relating to the preparation of financial
statements and legal and consulting costs as well as the remuneration of the
supervisory board.
(8)Liabilities
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------- ------------
up to up to
Total 1 year Total 1 year
------ ------ ----- ------
(DM in thousands)
<S> <C> <C> <C> <C>
Convertible bond..................................... 3,352 0 0 0
Liabilities to banks................................. 750 750 8 8
Payments received on account of orders............... 513 513 262 262
Trade payables....................................... 916 916 201 201
Other liabilities.................................... 460 460 435 435
- thereof taxes................................... 0 0 119 119
------ ----- --- ---
5,991 2,639 906 906
====== ===== === ===
</TABLE>
The convertible bond was subscribed by Private Equity Bridge Investment Ltd.
(PEB), Grand Cayman, Cayman Islands, British West Indies, on November 12, 1998.
The bond entitles PEB until October 31, 2000, to convert at any time a nominal
amount of the convertible bond of DM 500 into one share of Me AG. The
convertible bond is interest free until January 31, 2000, after which it is
subject to a 6% interest rate. That part of the convertible bond which has not
yet been converted is repayable on October 31, 2000. Discounted at a rate of
interest for comparable debt of 5%, the face value of the bond at November 12,
1998 was TDM 3,333,
F-58
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
with the difference of TDM 167 to the face value of the bond of TDM 3,500
being credited to additional paid-in capital. Other liabilities include
liabilities to shareholders in the amount of TDM 8.0.
(9)Other financial commitments
In 1997 the other financial liabilities from rent and lease agreements of
ESD-VV relate to:
<TABLE>
<CAPTION>
Year ended December 31, 1997
------------------------------
more than Total
Up to on year one year amount
------------- --------- ------
(DM in thousands)
<S> <C> <C> <C>
Leases for buildings............................. 326 388 714
Car pool leases.................................. 61 35 96
Leases for telecommunications.................... 26 154 180
--- --- ---
413 577 990
=== === ===
</TABLE>
In 1998 the other financial liabilities from rent and lease agreements of
Me AG relate to:
<TABLE>
<CAPTION>
Year ended December 31, 1998
------------------------------
More than Total
Up to on year one year amount
------------- --------- ------
(DM in thousands)
<S> <C> <C> <C>
Leases for buildings............................. 558 558 1,116
Car pool leases.................................. 141 71 212
Leases for telecommunications.................... 29 135 164
--- --- -----
728 764 1,492
=== === =====
</TABLE>
(10)Sales
The sales of the company, which were generated exclusively on the domestic
market, relate to:
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1998 1997
----------- -----------
(DM in thousands)
<S> <C> <C>
Licenses................................................ 2,953 712
Bank applications....................................... 1,221 743
Other................................................... 696 510
----------- -----------
4,870 1,965
=========== ===========
</TABLE>
(11)Other operating income
In 1997, other operating income mainly includes income from the sale of
fixed assets, from the reversal of accruals and the reduction of general
valuation allowance. In a total amount of TDM 48, the other operating income
relates to other periods.
In 1998, other operating income mainly includes the reversal of accruals,
relating to other periods, and gains on the sale of securities of TDM 78.
F-59
<PAGE>
METECHNOLOGY AKTIENGESELLSCHAFT
PRIOR YEAR: ESD VERMOGENSVERWALTUNGSGESELLSCHAFT MBH
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(12)Other operating expenses
In 1997 and 1998, other operating expenses mainly concern selling and
administrative expenses as well as legal and consulting costs. In an total
amount of TDM 42 (1997: TDM 29), the other operating expenses relate to other
periods.
(13)Number of salaried employees (annual average)
<TABLE>
<CAPTION>
Year ended
December 31,
-------------
1998 1997
------ ------
<S> <C> <C>
76 46
====== ======
</TABLE>
(14)Capital stock authorized for issue
The share capital may be increased by TDM 50 through the issuance of
additional authorized capital. This may be issued to satisfy conversion rights
of holders of convertible bonds, which issuance has been agreed by the
shareholders' meeting on November 6, 1998.
(15)Disclosures on company boards
In 1997, the management of ESD-VV comprised:
Dr. Christoph Bulfon General manager
In 1998, the management board of Me AG comprised:
Joszef Bugovics Chairman
In consideration and accordance with the effect of sec. 286 (4) HGB not only
on the single entity financial statements of the parent company, but also on
the consolidated financials, disclosure of total remuneration for the
management board has been omitted.
(16)Supervisory Board
In 1998 the supervisory board of Me AG comprised:
Dr. Peter Page Chairman
Prof. Dr. Wulf von Schimmelmann
Deputy Chairman
Dr. Hans-Joachim Korber
Total remuneration for the supervisory board in 1998 amounted to TDM 27.
(17)Advisory Board
Total remuneration for the advisory board in 1998 amounted to TDM 4 and in
1997 amounted to TDM 70.
Leipzig, February, 2000
ESD Vermogensverwaltungsgesellschaft mbH,
MeTechnology AG
Joszef Bugovics
F-60
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The laws of Germany make no provisions of indemnification of officers and
directors. The Company does not, by charter or by-law provision, provide for
the indemnification of any controlling person, director or officer.
The Company maintains liability insurance for members of its Management
Board, including insurance against liabilities under the Securities Act of
1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
3.1 Articles of Association (Satzung) (English translation)
3.2 Rules of Procedure (Geschaftsordnung) of the Management Board
(English translation)
4.1 Indenture, dated March 28, 2000 between Registrant and The Bank of
New York
4.2 Form of 11 1/2% Senior Notes due 2010 (included as part of Exhibit
4.1)
4.3 Registration Rights Agreement, dated as of March 28, 2000 between
Registrant and WestLB Panmure Limited
5.1* Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
5.2* Opinion of Haver & Mailander
10.1 Agreement Regarding the Sale and Transfer of Shares between Y.A.C.
Finance Holding S.A., Anja Fernbach, Gunther Fernbach and BROKAT
Infosystems AG, dated as of November 2, 1999, as amended and
supplemented as of February 11, 2000 and February 22, 2000
10.2* Stock Purchase Agreement by and among Registrant, Transaction
Software Technologies, Inc., and the shareholders of Transaction
Software Technologies, Inc. dated as of May 7, 1999
10.3 Agreement on Subscription and Contribution of Capital by and between
BROKAT Aktiengesellschaft and ME Shareholders, dated as of May
20/21, 1999
21.1 List of Subsidiaries
23.1 Consent of Arthur Andersen Wirtschaftsprufungsgesellschaft
Steuerberatungsgellschaft mbH
23.2 Consent of Arthur Andersen L.L.P.
23.3* Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in
Exhibit 5.1)
23.4* Consent of Haver & Mailander (included in Exhibit 5.2)
24.1 Power of Attorney (see signature page of registration statement)
25.1 Statement of Eligibility of Trustee on Form T-1
</TABLE>
- --------
*To be filed by amendment.
(b) Financial statement schedules
None
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes that:
1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
II-1
<PAGE>
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering of such securities.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
4. To file a post-effective amendment to the registration statement to
include any financial statements required by Rule 3-19 of Regulation S-X at
the start of any delayed offering or throughout a continuous offering.
Financial statements and information otherwise required by Section 10(a)(3)
of the Securities Act need not be furnished, provided, that the registrant
includes in the prospectus, by means of a post-effective amendment,
financial statements required under this paragraph and other information
necessary to ensure that all other information in the prospectus is at
least as current as the date of those financial statements.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus under
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means, and to arrange or provide for a facility in the
U.S. for responding to such requests. This includes information contained
in documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
"Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the 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 the
successful defense of any action, suit or proceeding) is asserted 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 Act and will be governed by the final
adjudication of such issue."
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Stuttgart, Germany on the 24th day
of May, 2000.
BROKAT Infosystems
Aktiengesellschaft
/s/ Stefan Rover
By: _________________________________
Stefan Rover
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated on the 24th day of May, 2000. Each person whose signature
appears below authorizes each of Stefan Rover and Michael Janssen as attorney-
in-fact, with full power of substitution and resubstitution, to sign and file
on his behalf, individually and in each capacity stated below, all amendments,
including post-effective amendments and supplements, to this registration
statement.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Stefan Rover Management Board Member
___________________________________________ and Chief Executive
Stefan Rover Officer (Principal
Executive Officer)
/s/ Michael Janssen Management Board Member
___________________________________________ and Chief Financial
Michael Janssen Officer (Principal
financial and accounting
officer)
/s/ Dr. Boris Anderer Management Board Member
___________________________________________
Dr. Boris Anderer
/s/ Achim Schlumpberger Management Board Member
___________________________________________
Achim Schlumpberger
/s/ Michael Schumacher Management Board Member
___________________________________________
Michael Schumacher
/s/ Angelo Maestrini Management Board Member
___________________________________________
Angelo Maestrini
/s/ Donald J. Puglisi Authorized United States
___________________________________________ Representative
Donald J. Puglisi
</TABLE>
II-3
<PAGE>
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit
No. Description
- ------- -----------
<S> <C>
3.1 Articles of Association (Satzung) (English translation)
3.2 Rules of Procedure (Geschaftsordnung) of the Management Board (English translation)
4.1 Indenture, dated March 28, 2000 between Registrant and The Bank of New York
4.2 Form of 11 1/2% Senior Notes due 2010 (included as part of Exhibit 4.1)
4.3 Registration Rights Agreement, dated as of March 28, 2000 between Registrant and WestLB Panmure
Limited
5.1* Opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P.
5.2* Opinion of Haver & Mailander
10.1 Agreement Regarding the Sale and Transfer of Shares between Y.A.C. Finance Holding S.A., Anja
Fernbach, Gunther Fernbach and BROKAT Infosystems AG, dated as of November 2, 1999, as
amended and supplemented as of February 11, 2000 and February 22, 2000
10.2* Stock Purchase Agreement by and among Registrant, Transaction Software Technologies, Inc., and the
shareholders of Transaction Software Technologies, Inc. dated as of May 7, 1999
10.3 Agreement on Subscription and Contribution of Capital by and between BROKAT Aktiengesellschaft
and ME Shareholders, dated as of May 20/21, 1999
21.1 List of Subsidiaries
23.1 Consent of Arthur Andersen Wirtschaftsprufungsgesellschaft Steuerberatungsgellschaft mbH
23.2 Consent of Arthur Andersen L.L.P.
23.3* Consent of LeBoeuf, Lamb, Greene & MacRae, L.L.P. (included in Exhibit 5.1)
23.4* Consent of Haver & Mailander (included in Exhibit 5.2)
24.1 Power of Attorney (see signature page of registration statement)
25.1 Statement of Eligibility of Trustee on Form T-1
- ------
</TABLE>
*To be filed by amendment.
(b) Financial statement schedules
None
<PAGE>
EXHIBIT 3.1
Translation
ARTICLES OF ASSOCIATION
of
BROKAT Infosystems Aktiengesellschaft
Stuttgart
<PAGE>
-2-
I.
General Provisions
(S) 1
Corporate Name, Registered Office, Duration
(1) The Company shall bear the corporate name:
BROKAT Infosystems Aktiengesellschaft.
(2) The Company shall have its registered office in Stuttgart.
(3) The Company is hereby established for an indefinite period of time.
(S) 2
Corporate Purpose
(1) The corporate purpose of the Company shall encompass:
a) the development and sale of software and hardware solutions;
b) consulting on the application and use of software and hardware
solutions for secure data transmission in heterogeneous internal
company-wide networks and intra-company networks;
c) the acquisition and sale of software and hardware andsolutions,
whether directly or indirectly, by taking shares in or acquiring
companies whose corporate purpose consists of the activities
mentioned under item a) or b) above.
(2) The Company may conduct all transactions which are suited directly or
indirectly to promote the corporate purpose. The Company may form,
acquire, take shares in and manage the business of companies of the same
or similar type.
(3) The Company may establish branch offices within Germany and abroad. Such
branch offices may bear a corporate name which varies in whole or in part
from the corporate name of the principal office.
(S) 3
Financial Year
The financial year of the Company shall be the calendar year.
<PAGE>
-3-
II.
Capital Stock and Shares
(S) 4
Capital Stock
(1) The Company's capital stock shall amount to Euro 27,311,184 (in words:
twenty seven million three hundred abd eleven thousand one hundred and
eighty-four euros) and shall be divided into 27,311,184 no-par-value
shares.
(2) The Management Board shall be authorized to increase with the approval of
the Supervisory Board the capital stock in the period prior to 30 June
2003 through the issue of new shares in return for cash and non-cash
contributions one or more times by a total of up to Euro 10,337,589 (in
words ten million three hundred and thirty-seven thousand five hundred
and eighty-nine euros) (Authorized Capital I). The Management Board shall
decide on any exclusion of subscription rights with the approval of the
Supervisory Board. The Supervisory Board shall be authorized to modify the
wording of the Bylaws in accordance with the scope of the capital increase
from authorized capital.
(3) The Management Board shall be authorized to increase with the approval of
the Supervisory Board the capital stock in the period prior to 30 June
2003 through the issue of new shares in return for cash and non-cash
contributions one or more times by a total of up to Euro 2,600,000
(Authorized Capital II). The full scope of shareholders' subscription
rights may be excluded provided that the issue price of the new shares on
the date of the final determination of the issue price is not materially
below the market price of shares of the same class which were previously
listed on the stock exchange. The Supervisory Board shall be authorized to
modify the wording of the Bylaws in accordance with the scope of the
capital increase from authorized capital.
(4) The capital stock shall be conditionally increased by up to Euro 2,409,629
through the issue of up to 2,409,629 shares (Conditional Capital I). The
conditional capital increase shall serve to grant options to Management
Board members and employees of BROKAT Infosystems AG as well as to members
of the management and employees of affiliated companies in accordance with
the resolutions of the shareholders adopted at the General Meeting of 03
September 1998 and 18 November 1999. The conditional capital increase
shall be carried out to the extent that the holders of option rights avail
themselves of their rights. The new shares shall entitle their holders to
dividends from the start of the financial year in which the new shares
arise through the exercise of the option rights.
<PAGE>
-4-
(S) 5
Common Provisions for All Shares
(1) In the event of a capital increase, the entitlement to dividends
associated with new shares may be determined at variance with Section 60,
paragraph (2), sentence 3 of the Corporation Act.
(2) The Management Board shall decide with the approval of the Supervisory
Board on provisions regarding the issue, form and content of share
certificates and dividend and renewal certificates.
No claim shall exist to representation of shares by certificates. With the
approval of the Supervisory Board, the Management Board may limit or
exclude the representation of shares by certificates. In the event a
shareholder requests that shares be represented by certificates at
variance therewith, such shareholder must bear the costs of the share
certificates.
(3) Shares shall be bearer shares.
III.
The Management Board
(S) 6
Management Board Members
The Management Board of the Company shall consist of one or more persons.
Without prejudice to any mandatory legal provisions, the Supervisory Board
shall determine the number of members of the Management Board. Alternate
Management Board members may be appointed. The Supervisory Board may appoint a
chairperson and one or more vice chairpersons of the Management Board.
(S) 7
Power of Representation
In the event only one Management Board member has been appointed, such member
shall represent the Company alone. In the event several Management Board
members have been appointed, the Company shall be represented by two
Management Board members jointly or by one Management Board member acting
jointly with a holder of commercial powers of attorney [Prokurist]. The
Supervisory Board may delegate to one, several or all Management Board members
the power to represent the Company alone. The Supervisory Board may empower
Management Board members generally or in any specific case to conclude legal
<PAGE>
-5-
transactions simultaneously on behalf of the Company and as a
representative of a company affiliated with the Company in the terms of
Section 15 of the Corporation Act.
(S) 8
Management
The Management Board shall conduct the business of the Company in accordance
with the provisions of law, these Articles of Association and the rules of
procedure of the Management Board to be issued by the Supervisory Board.
IV.
The Supervisory Board
(S) 9
Supervisory Board Members
(1) The Supervisory Board shall consist of 6 (six) members.
(2) The election shall be made for the longest term permissible in accordance
with Sections 30 and 102 of the Corporation Act, unless the shareholders
in General Meeting determine a shorter term of office during the election.
Supervisory Board members may be re-elected.
(3) In the event any member elected by the shareholders in General Meeting
withdraws from the Supervisory Board prior to the expiration of his or her
term of office, a new election shall be held for such member at the next
General Meeting of shareholders, unless an alternate member has moved up
for the withdrawn member. The term of office of the newly elected member
or of any alternate member who has moved up shall be for the residual term
of office of the withdrawn member.
(4) The shareholders in General Meeting may elect alternate members for the
Supervisory Board members to be elected by the shareholders in the event
Supervisory Board members withdraw prior to the expiration of their term
of office.
(5) After the close of each financial year, the Supervisory Board members
shall receive fair remuneration which shall be determined by resolutions
of the shareholders in General Meeting. Such determination shall apply
until the shareholders resolve otherwise in General Meeting.
The Company shall reimburse the Supervisory Board members for their
outlays. Outlays shall also include any turnover tax incurred on
remuneration, provided the member of the Supervisory Board is entitled to
invoice turnover tax separately and has exercised such right.
<PAGE>
-6-
(S) 10
Resignation
Each member of the Supervisory Board may resign from his or her office upon
giving one month's notice effective from the end of any month by way of a
declaration to be addressed to the chairperson of the Supervisory Board or to
the Management Board.
(S) 11
Chair
(1) The Supervisory Board shall elect a chairperson and one or more vice
chairpersons for the term of office of the person elected as a Supervisory
Board member. The election shall be made at a meeting directly following
the General Meeting at which the members to be newly elected by the
shareholders are elected. No special invitation to such meeting shall be
required. In the event the chairperson or one of the elected vice
chairpersons withdraws from his or her office during the course of his or
her term of office, the Supervisory Board must immediately hold a new
election for the withdrawn member.
(2) Declarations of intent of the Supervisory Board and the committees thereof
shall be issued in the name of the Supervisory Board by the chairperson
thereof. Only the Supervisory Board chairperson shall be authorized to
take delivery of declarations addressed to the Supervisory Board.
(S) 12
Convocation of Supervisory Board Meetings
The meetings of the Supervisory Board shall be convoked in writing or by
telefax by the chairperson observing a notice period of two weeks. The
individual items on the agenda must be specified in the invitation. In case of
urgency, the notice period may be reduced and the convocation may be made by
telephone or e-mail.
(S) 13
Resolutions
(1) Resolutions of the Supervisory Board shall be adopted at meetings.
Resolutions of the Supervisory Board may only be adopted in writing, by
telephone, telefax or e-mail provided that no member of the Supervisory
Board objects to such procedure.
(2) A quorum of the Supervisory Board shall be constituted when half of the
members of which the Supervisory Board consists as a whole participate in
the vote personally or through written ballot. A member shall also
participate in the vote when such member abstains from voting.
<PAGE>
-7-
(3) Unless a larger majority is determined by these Articles of Association,
the resolutions of the Supervisory Board shall require a simple majority
of the votes cast. In the event of a parity of votes, the vote of the
Supervisory Board chairperson shall be decisive; with regard to elections,
ties shall be decided by drawing lots.
The chairperson shall chair the meetings of the Supervisory Board. The
chairperson shall determine the order in which the items on the agenda are
to be discussed as well as the type and order of the voting. These
provisions shall apply accordingly to votes in writing, by telephone,
telefax or e-mail.
(4) Minutes must be kept of the meetings of the Supervisory Board; such
minutes must be signed by the chairperson of the Supervisory Board. The
Supervisory Board chairperson must sign the minutes to be kept on
resolutions adopted in writing or by telephone or e-mail.
(S) 14
Modification of Bylaws
The Supervisory Board shall be authorized to adopt any modifications of these
Articles of Association which only affect the wording hereof.
V.
General Shareholders' Meetings
(S) 15
Place of General Meetings
General Shareholders' Meetings of the Company shall take place at the
Company's registered office or at the location of a German stock exchange.
(S) 16
Convocation
General Shareholders' Meetings shall be convoked by the Management Board. The
convocation must be published in business newspapers, specifying the agenda,
at least one month before the final deposit date ((S) 17(1) hereof), whereby
the convocation date and the deposit date shall not be counted thereby.
<PAGE>
-8-
(S) 17
Deposit of Shares
(1) Only shareholders who deposit their shares prior to the end of normal
business hours by the fifth business day prior to the meeting date at the
latest with the Company, a German notary public or a bank for central
deposit of securities or with the other agents designated in the
convocation to the General Meeting and leave their shares there until the
conclusion of the General Meeting shall be entitled to participate in
General Meetings and exercise voting rights. In the event the final day of
the period falls on a Saturday, Sunday or a state-recognized holiday at
the place of deposit, the respectively preceding business day shall
replace such day.
(2) In the event shares are deposited with a German notary public of with a
bank for central deposit of securities, the confirmation to be issued
thereby must be submitted to the Company cashier on the first business day
after the expiration of the deposit period at the latest.
(3) Deposit with a depositary shall be satisfied by the shares being frozen at
a bank with the consent of the depositary on the latter's behalf until the
conclusion of the General meeting.
(4) Insofar as no share certificates have been issued, the Management Board
shall determine in the invitation to the General Meeting the conditions
under which the shareholders may exercise their voting and motion rights
at the General Meeting.
(5) Saturday shall not be considered a business day under the terms of the
above provisions.
(S) 18
Chair, Voting
(1) The chairperson of the Supervisory Board, a vice chairperson, or any other
member determined by the Supervisory Board shall chair General
Shareholders' Meetings. In the event no member of the Supervisory Board
assumes the chair, the person to chair the meeting shall be elected under
the direction of the oldest shareholder present.
(2) The chairperson of the Meeting may determine an order for the discussion
of the items on the agenda which varies from the announced agenda. Such
person may furthermore determine the type and form of the voting.
(3) Unless a larger majority is mandatory as prescribed by law or these
Articles of Association, the resolutions of shareholders at General
Meetings shall be adopted by a simple majority of the votes cast. Insofar
as the Corporation Act further prescribes a majority of the capital
<PAGE>
-9-
stock represented during the vote in order to adopt resolutions, the
simple majority of the capital represented shall be sufficient, unless a
larger capital majority is mandatory as prescribed by law.
(S) 19
Voting Rights
Each share shall grant the holder one vote. The voting right shall commence
upon the full payment of the contribution.
VI.
Appropriation of Net Income
(S) 20
Transfer to Reserves
In the event the Management and Supervisory Boards approve the annual
financial statements, up to half of the net income may be transferred to other
revenue reserves. The Management and Supervisory Boards shall moreover be
empowered to transfer up to a further one quarter of the net income to other
revenue reserves in accordance with Section 58(2) of the Corporation Act.
VII.
Final Provisions
(S) 21
Formation Expenses
The Company shall bear the formation expenses up to an amount of DM 160,000.
(S) 22
Notices
Notices of the Company shall be made in the Bundesanzeiger [German Federal
Gazette] and, insofar as such is necessary based on the admission of the
Company's shares to any German or foreign stock exchange, also in a national
daily newspaper (official stock exchange bulletin).
***
<PAGE>
EXHIBIT 3.2
Translation
RULES OF PROCEDURE FOR THE
BOARD OF MANAGEMENT OF
BROKAT Infosystems AG
---------------------
(S) 1
Board of Management
The Board of Management conducts the business of BROKAT Infosystems AG
(hereinafter referred to as "the Company") in accordance with the provisions of
the law, the Bylaws of the Company, the respective employment agreements and of
these Rules of Procedure.
The responsibility of the members of the Management Board are broken down as
follows:
Stefan Rover, Spokesman of the Management Board, CEO and responsible for
Sales and Marketing
Marketing and communication
Partner sales
Product management
EMEA sales
Business development
Representative activities
Dr. Boris Anderer, Co-CEO and responsible for Corporate Development
Consolidating BROKAT's strategy
Organization and structuring of BROKAT's M&A strategy
Coordinating M&A projects
Supporting the CEO in representative and sales and marketing activities
Michael Janssen, CFO and responsible for Finance and Organization
Human resources
1
<PAGE>
-2-
Investor relations
Accounting
Controlling
Administration
Achim Schlumpberger, CTO and responsible for Research and Development
Research
Development
Technical documentation
Michael Schumacher, COO and responsible for Customer Service and Management
Systems
Customer support
Quality management
Productizing
Infrastructure (BROKAT internally world-wide)
Information management
(S) 2
Approval by the Supervisory Board
The Board of Management shall require the approval of the Supervisory Board
prior to conducting the following transactions and actions; such consent may
only be given by a majority of two thirds (2/3) of the votes of all of the
Supervisory Board members.
(1) Adopting the budget prepared by the Management Board which is to be
submitted to the Supervisory Board no later than one month prior to
commencement of the coming financial year, including partial budgets such as
sales revenue budget, investment plan, finance budget, human resources
budget, budget income statement and budget balance sheet. The budget for the
Company's subsidiaries is to be included when the budget is prepared for the
Company.
<PAGE>
-3-
(2) The following transactions and actions of the Company require approval
provided that they have not already been included in an annual budget
already adopted pursuant to paragraph (1) above, which the Supervisory Board
has approved without reservation to this extent:
a) Calling for payments to be made to capital stock and premium;
b) Consent to splitting shares;
c) Granting and terminating any participation in profits of the Company, in
particular dormant equity holdings, legal relationships with profit
participation and management bonuses;
d) Entering into and terminating corporate lease, business management and
affiliation agreements and agreements which could result in a
significant restriction in potential corporate activities of the
Company;
e) Selling the entire corporate assets or a significant part thereof;
f) Establishing and terminating companies or enterprises, acquiring and
selling participating interests in other enterprises, entering into,
modifying and terminating articles of incorporation;
g) Establishing, acquiring, closing down and selling operating facilities,
parts of operating facilities or branch operations;
h) Acquiring, selling or charging real estate and equivalent rights;
i) Taking up loans equivalent to (individually or in the aggregate) 10% of
the budget
j) Investments causing the budget to be overrun by over 10% (individually
or in the aggregate);
k) Arranging for development projects with a volume causing the budget to
be overrun by over 10% (individually or in the aggregate);
l) Provision of security, issuing suretyships and guarantees and entering
into obligations on bills of exchange which (individually or in the
aggregate) are in excess of DM 100,000, excluding the customary warranty
for the products of the Company;
m) Giving promises for retirement or pension benefits: the costs of
possible pension promises for managing directors or shareholders will be
treated for the Company like part of the salary;
<PAGE>
-4-
n) Resolutions on items producing a result comparable to that of one of the
foregoing points;
o) All other extraordinary management measures.
(3) Entering into, modifying or terminating affiliation agreements within the
meaning of Section 291 et seq. of the Corporation Act.
(4) Futures transactions in foreign exchange, securities and commodities and
rights traded at stock exchanges, provided and to the extent they have not
been determined to cover specific corporate transactions which have already
been firmly concluded; entering into derivative financial instruments and
factoring transactions.
(5) Entering into, modifying, terminating and renewing agreements with:
a) Shareholders, former shareholders, members of the management and
supervisory boards and relatives of such persons as defined in Section
15 of the German Fiscal Code;
b) Enterprises in which one of the aforementioned persons holds a direct or
indirect participating interest.
(6) Adopting a stock option plan and issuing convertible bonds and jouissance
rights as defined in Section 221 of the Corporation Act.
(7) Application for the direct or indirect (via a further holding corporation)
flotation of the shares in BROKAT Infosystems AG or of its parent
corporation at any stock exchange.
(8) Exploitation of the authorized capital and exclusion of the subscription
right.
(9) All transactions and actions which go beyond the normal course of business.
<PAGE>
-5-
(10) Approval of all transactions and actions by affiliates requiring the
approval of the Company.
(11) (S) 2 shall apply analogously to management measures in subsidiary and
associate companies.
(12) Approval, including approval for individual groups of transactions, may
already be granted in advance. The approval of the general operational plan
containing the measures requiring approval shall be deemed to constitute
approval insofar as no reservation is made in this respect when the plan is
adopted.
(S) 3
Duty to provide Supervisory Board with information
In additional to the information to be provided by law, the Management Board
must provide the Supervisory Board with the following information:
(1) Reports on a monthly basis within thirty days after the end of each month
on:
b) Orders on hand and incoming orders;
c) Report on volume of sales;
d) Liquidity calculation; credit utilization and credit limits, liquid
funds (anticipated incoming and outgoing payments) together with
liquidity plan for the forthcoming six months;
e) Non-audited monthly financial statements;
f) Staff numbers.
(2) Reports on a quarterly basis within thirty days after the end of each
quarter on:
a) Quarterly financial statements plus liquidity calculation
<PAGE>
-6-
for the current quarter (comparison of target/actuals);
cumulative statements for the current financial year;
b) Report on business situation and development.
(3) Audited annual financial statements after submission by the auditor.
(4) Information on significant facts and events immediately after cognizance
thereof.
(5) Reports to be submitted by 15 May of the following financial year:
a) Budget income statement;
b) Budget balance sheet;
c) Human resources budget together with salaries;
d) Investment plan;
e) Sales revenue budget together with materials implemented.
The above duty to provide information relates to the Company and to affiliates.
(S) 4
Amending the Rules of Procedure
The Supervisory Board shall modify or amend the Rules of Procedure of the
Management Board from time to time at its own discretion and according to the
procedure set forth in the Company's Bylaws.
Stuttgart,
Date: 1998
<PAGE>
-7-
BROKAT Infosystems AG
By the Supervisory Board
________________________________________________________
Ernst G. Mayer Maisy Ng
_________________________________________________________
Falk Strascheg Dr. Hermann Wundt
_________________________________________________________
Angelika Pohlenz Prof. Dr. Wolfgang Koenig
<PAGE>
EXHIBIT 4.1
BROKAT INFOSYSTEMS AKTIENGESELLSCHAFT
11 1/2% SENIOR NOTES DUE 2010
INDENTURE
MARCH 28, 2000
THE BANK OF NEW YORK
as Trustee
<PAGE>
TABLE OF CONTENTS
-----------------
Page
ARTICLE I DEFINITIONS AND INCORPORATION
BY REFERENCE.................................... 1
Section 1.1. Definitions..................................... 1
Section 1.2. Other Definitions............................... 24
Section 1.3. Trust Indenture Act............................. 24
Section 1.4. Rules of Construction........................... 25
ARTICLE II THE NOTES....................................... 26
Section 2.1. Form and Dating................................. 26
Section 2.2. Execution and Authentication.................... 27
Section 2.3. Registrar and Paying Agent...................... 27
Section 2.4. Paying Agent To Hold Money in Trust............. 28
Section 2.5. Holder Lists.................................... 28
Section 2.6. Transfer and Exchange........................... 28
Section 2.7 Replacement Notes............................... 44
Section 2.8. Outstanding Notes............................... 44
Section 2.9. Treasury Notes.................................. 45
Section 2.10. Temporary Notes................................. 45
Section 2.11. Cancellation.................................... 46
Section 2.12. Defaulted Interest.............................. 46
Section 2.13. Record Date..................................... 46
Section 2.14. Computation of Interest......................... 46
Section 2.15. CUSIP and ISIN Number........................... 46
ARTICLE III REDEMPTION AND PREPAYMENT....................... 47
Section 3.1. Notices to Trustee.............................. 47
Section 3.2. Selection of Notes To Be Redeemed............... 47
Section 3.3. Notice of Redemption............................ 48
Section 3.4. Effect of Notice of Redemption.................. 49
Section 3.5. Deposit of Redemption Price..................... 49
<PAGE>
Section 3.6. Notes Redeemed in Part.................................49
Section 3.7. Optional Redemption....................................49
Section 3.8. Mandatory Redemption...................................51
Section 3.9. Offer To Purchase By Application
of Excess Proceeds.................................51
ARTICLE IV COVENANTS................................................53
Section 4.1. Payment of Notes.......................................53
Section 4.2. Maintenance of Office or Agency........................54
Section 4.3. Reports................................................54
Section 4.4. Compliance Certificate.................................55
Section 4.5. Taxes..................................................56
Section 4.6. Stay, Extension and Usury Laws.........................57
Section 4.7. Restricted Payments....................................57
Section 4.8. Dividend and Other Payment Restrictions
Affecting Subsidiaries.................................60
Section 4.9. Incurrence of Indebtedness and Issuance of
Preferred Equity...................................61
Section 4.10. Asset Sales...........................................62
Section 4.11. Transactions With Affiliates..........................63
Section 4.12. Liens.................................................64
Section 4.13. Corporate Existence...................................64
Section 4.14. Repurchase Upon Change of Control.....................65
Section 4.15. Designation of Unrestricted Subsidiaries..............66
Section 4.16. Sales of Accounts Receivable..........................68
Section 4.17. Sale And Leaseback Transactions.......................69
Section 4.18. Restriction On Preferred Stock of Subsidiaries........69
Section 4.19. Limitation on Equity Interests in Restricted
Subsidiaries.......................................69
Section 4.20. Payments For Consent..................................70
Section 4.21. Limitations on Issuances of Guarantees of
Indebtedness.......................................70
Section 4.22. Restrictions On Business Activities...................70
Section 4.23. Additional Amounts....................................70
Section 4.24. Limitation on Repayment upon a Change of Control......72
ARTICLE V SUCCESSORS................................................72
Section 5.1. Merger, Consolidation or Sale of Assets................72
<PAGE>
Section 5.2. Successor Corporation Substituted................73
ARTICLE VI DEFAULTS AND REMEDIES............................74
Section 6.1. Events of Default................................74
Section 6.2. Acceleration.....................................75
Section 6.3. Other Remedies...................................76
Section 6.4. Waiver of Past Defaults..........................76
Section 6.5. Control by Majority..............................76
Section 6.6. Limitation on Suits..............................77
Section 6.7. Rights of Holders of Notes to Receive Payment....77
Section 6.8. Collection Suit by Trustee.......................78
Section 6.9. Trustee May File Proofs of Claim.................78
Section 6.10. Priorities.......................................79
Section 6.11. Undertaking for Costs............................79
ARTICLE VII TRUSTEE..........................................80
Section 7.1. Duties of Trustee................................80
Section 7.2. Rights of Trustee................................81
Section 7.3. Individual Rights of Trustee.....................82
Section 7.4. Trustee's Disclaimer.............................82
Section 7.5. Notice of Defaults...............................83
Section 7.6. Reports by Trustee to Holders of the Notes.......83
Section 7.7. Compensation and Indemnity.......................83
Section 7.8. Replacement of Trustee...........................84
Section 7.9. Successor Trustee by Merger, Etc.................85
Section 7.10. Eligibility; Disqualification....................85
Section 7.11. Preferential Collection of Claims Against Issuer.86
ARTICLE VIII LEGAL DEFEASANCE ANDCOVENANT
DEFEASANCE.......................................86
Section 8.1. Option to Effect Legal Defeasance or Covenant
Defeasance.....................................86
Section 8.2. Legal Defeasance and Discharge...................86
Section 8.3. Covenant Defeasance..............................87
Section 8.4. Conditions to Legal or Covenant Defeasance.......87
Section 8.5. Deposited Money and Government Obligations to
Be Held in Trust; Other Miscellaneous
Provisions.....................................89
Section 8.6. Repayment to Issuer..............................89
<PAGE>
Section 8.7. Reinstatement................................... 90
ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER................ 90
Section 9.1. Without Consent of Holders of Notes............. 90
Section 9.2. With Consent of Holders of Notes................ 91
Section 9.3. Compliance with Trust Indenture Act............. 93
Section 9.4. Revocation and Effect of Consents............... 93
Section 9.5. Notation on or Exchange of Notes................ 93
Section 9.6. Trustee to Sign Amendments, Etc................. 93
ARTICLE X MISCELLANEOUS................................... 94
Section 10.1. Trust Indenture Act Controls.................... 94
Section 10.2. Notices......................................... 94
Section 10.3. Communication by Holders of Notes with
Other Holders of Notes........................ 96
Section 10.4. Certificate and Opinion as to Conditions
Precedent..................................... 96
Section 10.5. Statements Required in Certificate or Opinion... 96
Section 10.6. Rules by Trustee and Agents..................... 97
Section 10.7. No Personal Liability of Directors, Officers,
Employees, Members and Stockholders........... 97
Section 10.8. Governing Law................................... 97
Section 10.9. Agent for Service; Submission to Jurisdiction;
Waiver of Immunities.......................... 97
Section 10.10. No Adverse Interpretation of Other Agreements... 98
Section 10.11. Successors...................................... 98
Section 10.12. Severability; Independence of Covenants......... 98
Section 10.13. Duplicate Originals; Counterparts............... 99
Section 10.14. Table of Contents, Headings, Etc................ 99
Section 10.15. Exhibits........................................ 99
Section 10.16. Judgment Currency............................... 99
<PAGE>
INDENTURE, dated as of March 28, 2000 by and among BROKAT Infosystems
Aktiengesellschaft, a stock corporation organized and existing under the laws of
Germany (the "Issuer"), and The Bank of New York, as trustee (the "Trustee").
------ -------
The Issuer and the Trustee agree as follows for the benefit of each other
and for the equal and ratable benefit of the Holders of Euro125,000,000
aggregate principal amount of 11 1/2% Senior Notes due 2010 (the "Senior Notes")
------------
and the 11 1/2% New Senior Notes due 2010 issued in connection with the Exchange
Offer (the "New Senior Notes" and, together with the Senior Notes, the "Notes"):
---------------- -----
I. ARTICLE
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.1. Definitions.
-----------
"144A Global Note" means a Global Note in the form of Exhibit A hereto
---------
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Common Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes issued to QIBs.
"Accounts Receivable Subsidiary" means a Wholly Owned Restricted Subsidiary
of the Issuer (i) which is formed solely for the purpose of, and which engages
in no activities other than activities in connection with, financing accounts
receivable and/or notes receivable and related assets of the Issuer and/or its
Restricted Subsidiaries; (ii) which is designated by the Board as an Accounts
Receivable Subsidiary pursuant to a resolution set forth in an Officers'
Certificate and delivered to the Trustee; (iii) which has total assets at the
time of such designation with a book value not exceeding Euro100,000 plus the
reasonable fees and expenses required to establish such Accounts Receivable
Subsidiary and any accounts receivable financing; (iv) no portion of
Indebtedness or any other obligation (contingent or otherwise) of which (a) is
at any time recourse to or obligates the Issuer or any Restricted Subsidiary of
the Issuer in any way, other than pursuant to (I) representations, warranties,
covenants and indemnities entered into in the ordinary course of business in
connection with the sale of accounts receivable and/or notes receivable to such
Accounts Receivable Subsidiary or (II) any guarantee of any such accounts
receivable financing by the Issuer that is permitted to be incurred pursuant to
Section 4.9, or (b) subjects any property or asset of the Issuer or any
Restricted Subsidiary of the Issuer, directly or indirectly, contingently or
otherwise, to the satisfaction thereof, other than pursuant to (I)
representations,
<PAGE>
2
warranties, covenants and indemnities entered into in the ordinary course of
business in connection with sales of accounts receivable and/or notes receivable
or (II) any guarantee of any such accounts receivable financing by the Issuer
that is permitted to be incurred pursuant to Section 4.9; (v) with which neither
the Issuer nor any Restricted Subsidiary of the Issuer has any contract,
agreement, arrangement or understanding other than contracts, agreements,
arrangements or understandings entered into in the ordinary course of business
in connection with sales of accounts receivable and/or notes receivable in
accordance with Section 4.16 and fees payable in the ordinary course of business
in connection with servicing accounts receivable and/or notes receivable; and
(vi) with respect to which neither the Issuer nor any Restricted Subsidiary of
the Issuer has any obligation (a) to subscribe for additional shares of Capital
Stock or other Equity Interests or to make any additional capital contribution
or similar payment or transfer other than in connection with the sale of
accounts receivable and/or notes receivable to such Accounts Receivable
Subsidiary in accordance with Section 4.16, or (b) to maintain or preserve
solvency or any balance sheet item, financial condition, level of income or
results of operations.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person; and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
<PAGE>
3
"Additional Amounts" means the amount of any deduction or withholding for,
or on account of, any Taxes of any Relevant Taxing Jurisdiction which shall at
any time be required on any payments made by the Issuer with respect to the
Notes, including payments of principal, redemption price, interest, Liquidated
Damages or premium.
"Adjusted Consolidated Net Income" means, with respect to any Person for
any period, the Consolidated Net Income of such Person for such period minus any
-----
amounts paid or accrued as dividends on Preferred Stock for such period, plus
----
the amount of non-cash stock option expense (excluding any such non-cash stock
option expense to the extent that it represents an accrual of or reserve for
cash expenses in any future period or amortization of a prepaid cash expense
that was paid in a prior period) of such Person and its Subsidiaries for such
period to the extent that the amount of such non-cash stock option expense was
deducted in computing such Consolidated Net Income for such period.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided, that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or exchange of
beneficial interests in a Global Note, the rules and procedures of the Common
Depositary, Euroclear or Clearstream that apply to such transfer and exchange.
<PAGE>
4
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including by way of a sale and leaseback) other than (a)
in the ordinary course of business consistent with past practices, or (b) sales
or other dispositions of accounts receivable and/or notes receivable and related
assets to the Accounts Receivable Subsidiary pursuant to Section 4.16; and (ii)
the issue or sale by the Issuer or any of its Subsidiaries of Equity Interests
of any of the Issuer's Restricted Subsidiaries (a) that have a Fair Market Value
in excess of Euro1,000,000, or (b) for net proceeds in excess of Euro1,000,000,
in the case of either clause (i) or (ii), whether in a single transaction or a
series of related transactions. Notwithstanding the foregoing, (i) the sale,
lease, conveyance or other disposition of all or substantially all of the assets
of the Issuer and its Subsidiaries taken as a whole will be governed by Section
4.14 and/or Section 5.1 and not by Section 4.10; and (ii) the following items
shall not be deemed to be Asset Sales: (a) a transfer of assets by the Issuer to
a Wholly Owned Restricted Subsidiary of the Issuer or by a Wholly Owned
Restricted Subsidiary of the Issuer to the Issuer or to another Wholly Owned
Restricted Subsidiary of the Issuer; (b) an issuance of Equity Interests by a
Wholly Owned Restricted Subsidiary of the Issuer to the Issuer or to another
Wholly Owned Restricted Subsidiary of the Issuer; (c) a Restricted Payment that
is permitted by Section 4.7; (d) any disposition of damaged, worn out or
otherwise obsolete property in the ordinary course of business, so long as such
property is no longer necessary for the proper conduct of a Permitted Business;
(e) any disposition in one or more transactions of business operations no longer
necessary for the proper conduct of a Permitted Business; provided, that the
aggregate Fair Market Value of such dispositions since the Issue Date does not
exceed Euro5,000,000 in the aggregate; (f) any sale or discount without recourse
(other than recourse for a breach of a representation or warranty) of accounts
receivable arising in the ordinary course of business, but only in connection
with the collection or compromise of such accounts; and (g) the incurrence of
any Permitted Lien and the disposition of assets pursuant to any such Permitted
Lien by any secured party under such Permitted Lien.
<PAGE>
5
"Asset Sale Offer" means an offer to purchase Notes and other Indebtedness
with Excess Proceeds, at an offer price in cash equal to 100% of the principal
amount or accreted value of such Notes and such other Indebtedness, plus accrued
and unpaid interest and Additional Amounts and Liquidated Damages, if any, on
such Notes and such other Indebtedness to the date of repurchase, in accordance
with the procedures set forth in the Indenture.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with U.S. GAAP)
of the obligation of the lessee for net rental payments during the remaining
term of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Bankruptcy Law" means (i) Insolvenzordnung (German Insolvency Code) or any
other bankruptcy, insolvency or other similar law in the Federal Republic of
Germany or any political subdivision thereof, (ii) Title 11, U.S. Code or any
similar U.S. federal or state law for the relief of debtors, or (iii) any other
applicable foreign bankruptcy, insolvency or similar law.
"Board" means (i) if the Issuer is a stock corporation at the relevant
time, the board of directors, management board or analogous body of the Issuer;
(ii) if the Issuer is a limited liability company at the relevant time, the
management board or analogous body of the Issuer, if it has such a body, and if
it does not, the management board or analogous body of the manager of the
Issuer; or (iii) if the Issuer is neither a corporation or a limited liability
company at the relevant time, the management board or analogous body of the
Issuer.
"Borrowing Base" means, as of the date of determination, an amount equal to
the sum, without duplication, of 50% of the net book value of the Issuer's and
its Restricted Subsidiaries' accounts receivable which are not more than 60 days
past due. The net book value of such items shall be determined on a
<PAGE>
6
consolidated basis in accordance with U.S. GAAP and shall be that reflected on
the Issuer's consolidated balance sheet for the most recent fiscal quarter
ending prior to the date of determination as to which financial results are
available, but in no event ending more than 135 days prior to the date of
determination, it being understood that the accounts receivable of an acquired
business may be included if such acquisition has been completed on or prior to
the date of determination.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with U.S. GAAP. The amount of Indebtedness represented by
a Capital Lease Obligation shall be the capitalized amount of the liability in
respect of such obligation determined in accordance with U.S. GAAP, and the
maturity thereof shall be the date of the last scheduled payment of rent or any
other amount due under the relevant lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty.
"Capital Stock" means (i) in the case of a corporation, corporate stock;
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock; (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited); and
(iv) in the case of any Person, any other interest or participation that confers
the right to receive a share of the profits or losses of, or distributions of
assets of, the issuing Person, excluding, in the case of any of clause (i),
(ii), (iii) or (iv), any debt security that is convertible into, or exchangeable
for, Capital Stock.
"Capital Stock Sale Proceeds" means the aggregate net cash proceeds
received by the Issuer from any common equity capital contribution or any
issuance or sale of any class of Capital Stock of the Issuer after the Issue
Date.
<PAGE>
7
"Cash Equivalents" means (i) securities having maturities of one year or
less from the date of acquisition issued or directly and fully guaranteed or
insured by the federal government of the Federal Republic of Germany or by the
federal government of the United States of America or any agency or
instrumentality thereof, provided that the full faith and credit of the Federal
Republic of Germany or the United States of America is pledged in support of
such securities; (ii) certificates of deposit and Eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities of one year or less from the date of acquisition and
overnight bank deposits, in each case with any commercial bank established under
the laws of the Federal Republic of Germany or the United States of America or
any subdivision thereof having combined capital and surplus in excess of
Euro500,000,000 and a Thompson Bank Watch Rating or comparable rating of "B" or
better; (iii) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (i) or (ii) above
entered into with any financial institution meeting the qualifications specified
in clause (ii) above; (iv) commercial paper having the highest rating obtainable
from Moody's Investors Service, Inc. or Standard & Poor's Corporation and in
each case with maturities of one year or less from the date of acquisition; and
(v) money market funds at least 95% of the assets of which constitute Cash
Equivalents of the kinds described in clauses (i) through (iv) of this
definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Issuer and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than any Principal or Principals; (ii) the adoption of a
plan relating to the liquidation or dissolution of the Issuer; (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation), the result of which is that any "person" (as such term is used
in Section 13(d)(3) of the Exchange Act), other than any Principal or
Principals, becomes directly or indirectly the "beneficial owner" of more than
50% of
<PAGE>
8
the Voting Stock of the Issuer (measured by voting power rather than number of
shares); (iv) the first day on which a majority of the members of the Board are
not Continuing Board Members; or (v) the consummation of the amalgamation,
merger or consolidation of the Issuer with another Person in which the holders
of the Capital Stock representing the common equity capital of the Issuer
immediately prior to the amalgamation, merger or consolidation, would not
beneficially own, immediately after the amalgamation, merger or consolidation,
Capital Stock entitling such holders to 50% or more of all votes, without
consideration of the rights of any class of Capital Stock to elect members of
the management board or other analogous body by a separate class vote, to which
all holders of the Capital Stock of the Person issuing cash or securities in the
amalgamation, merger or consolidation would be entitled in the election of
members of the management board or other analogous body or in which members of
the Board, immediately prior to such amalgamation, merger or consolidation,
would not, immediately after such amalgamation, merger or consolidation
constitute a majority of the management board or other analogous body of the
Person issuing cash or securities in such amalgamation, merger or consolidation.
For purposes of this definition, "beneficial owner" shall mean as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition.
"Change of Control Payment" means a cash payment of a purchase price equal
to 101% of the principal amount of all Notes purchased in connection with a
Change of Control Offer, plus accrued and unpaid interest, Additional Amounts
and Liquidated Damages, if any, on such Notes to the date of such repurchase.
"Clearstream" means Clearstream International.
"Code" means the Internal Revenue Code of 1986, as amended.
<PAGE>
9
"Commission" means the Securities and Exchange Commission.
"Common Depositary" means, with respect to the Notes issued in the form of
one or more global securities, the Person designated as the common depositary by
Euroclear or Clearstream, which shall initially be The Bank of New York, London
branch or a nominee thereof.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period minus non-cash items
increasing such Consolidated Net Income for such period, plus, without
duplication, (i) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale (to the extent such losses were
deducted in computing such Consolidated Net Income), (ii) provision for taxes
based on income or profits of such Person and its Subsidiaries for such period,
to the extent that such provision for taxes was included in computing such
Consolidated Net Income, (iii) Fixed Charges of such Person and its Restricted
Subsidiaries for such period, and (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Subsidiaries for such period to the extent that such depreciation,
amortization and other non-cash expenses were deducted in computing such
Consolidated Net Income, in each case, on a consolidated basis and determined in
accordance with U.S. GAAP. Notwithstanding the foregoing, the provision for
taxes based on the income or profits of, and the depreciation and amortization
and other non-cash charges of, a Subsidiary of a Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
(and in the same proportion) that the Net Income of such Subsidiary was included
in calculating the Consolidated Net Income of such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Issuer
<PAGE>
10
by such Subsidiary without prior approval (that has not been obtained), pursuant
to the terms of its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with U.S. GAAP;
provided, that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary of
the referent Person, (ii) the Net Income of any Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, (iii) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Continuing Board Members" means, as of any date of determination, any
member of the Board who (i) was a member of the Board on the Issue Date; or (ii)
was nominated for election or elected to the Board with the approval of a
majority of the Continuing Board Members who were members of such Board at the
time of such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 10.2 hereof or such other address as to which the
Trustee may give notice to the Issuer.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
<PAGE>
11
"Definitive Note" means each of the Notes that are in the form of Exhibit A
---------
hereto (but without including the Global Note Legend).
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the Holder thereof,
in whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the issuers thereof to repurchase such Capital Stock upon the
occurrence of an event substantially similar to a Change of Control or an Asset
Sale shall not constitute Disqualified Stock if the terms of such Capital Stock
provide that such issuers may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
Section 4.7.
"Distribution Compliance Period" means the 40-day distribution compliance
period as defined in Regulation S.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euro Legal Tender" means Euros as at the time of payment is legal tender
for payment of public and private debts.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
<PAGE>
12
"Existing Indebtedness" means Indebtedness of the Issuer and its
Subsidiaries in existence on the Issue Date after giving effect to the use of
proceeds contemplated by the Offering Memorandum, until such amounts are repaid.
"Fair Market Value" means, with respect to any asset or property, the price
(after taking into account any liabilities relating to such assets or property)
which could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of which is under
any compulsion to complete the transaction; provided, that the Fair Market Value
of any such asset or property shall be determined conclusively by the Board
acting in good faith, which determination shall be evidenced by a resolution of
the Board delivered to the Trustee; and further provided, that any determination
of Fair Market Value by the Board required under the Indenture shall be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of international standing if the Fair Market Value exceeds
Euro5,000,000.
"Fixed Charge Coverage Ratio" means, with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems Preferred Stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
----------------
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of Preferred Stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) any acquisition made by the Issuer
or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent
<PAGE>
13
to such reference period and on or prior to the Calculation Date shall be deemed
to have occurred on, and given pro forma effect from, the first day of the four-
quarter reference period; (ii) Consolidated Cash Flow for such reference period
shall be calculated without giving effect to clause (iii) of the proviso set
forth in the definition of Consolidated Net Income; (iii) Consolidated Cash Flow
for such reference period shall be calculated giving pro forma effect to cost
savings resulting from any such acquisition if (A) such cost savings could then
be reflected in pro forma financial statements included in a registration
statement complying with the Securities Act, Regulation S-X and any
interpretations of Regulation S-X by the Commission, (B) the Issuer reasonably
determines such cost savings are probable based upon specifically identified
actions that it has determined to take, and (C) the Issuer delivers to the
Trustee (I) a certified copy of a resolution of the Board approving such
determination, the specific actions to be taken and the delivery to the Trustee
of such certification, and (II) an Officers' Certificate signed by the Issuer's
chief financial officer certifying that such savings have reasonably been
determined to be probable and setting forth in reasonable detail the specific
actions to be taken, the cost savings to be achieved from each such action, and
the amount, if any, of any related reduction in Consolidated Cash Flow resulting
from such actions reasonably determined to be probable; (iv) the Consolidated
Cash Flow attributable to discontinued operations, as determined in accordance
with U.S. GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded; and (v) the Fixed Charges attributable to
discontinued operations, as determined in accordance with U.S. GAAP, and
operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued and whether
or not capitalized (including, without limitation, amortization of debt issuance
costs
<PAGE>
14
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, the imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges incurred in
respect of letter of credit, bankers' acceptance or similar financings, and net
payments (if any) pursuant to Hedging Obligations); (ii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iii) all cash dividend payments or other distributions (and non-cash
dividend payments in the case of a Person that is a Subsidiary) on any class or
series of Preferred Stock of such Person, on a consolidated basis, in each case
of clauses (i), (ii) and (iii) in accordance with U.S. GAAP.
"Global Note Legend" means the legend set forth in Section 2.6(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means, individually and collectively, each of the Restricted
Global Notes and the Unrestricted Global Notes, in the form of Exhibit A hereto
---------
bearing the Global Notes Legend and deposited with or on behalf of, and
registered in the name of, the Common Depositary or its nominee.
"Government Obligation" means direct non-callable obligations of, or non-
callable obligations guaranteed by (i) any member nation of the European Union
for the payment of which obligation or guarantee the full faith and credit of
the respective nation is pledged; provided, that such nation has a credit rating
at least equal to that of the highest rated member nation of the European
Economic Area, pursuant to the Oporto Agreement on the European Economic Area
dated May 2, 1992 as amended, or (ii) the United States of America for the
payment of which obligation or guarantee the full faith and credit of the United
States of America is pledged.
<PAGE>
15
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect of
letters of credit), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements or other agreements or
arrangements designed to protect such Person against fluctuations in interest
rates, and (ii) currency exchange contracts, currency swap agreements or other
similar agreements or arrangements designed to protect such Person against
fluctuations in currency exchange rates, in each case, provided that such
obligations are entered into solely to protect such Person against fluctuations
in interest rates or currency exchange rates and not for purposes of
speculation.
"Holder" means a Person in whose name a Note is registered.
"IAI Global Note" means a Global Note in the form of Exhibit A hereto
---------
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Common Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes issued to Institutional Accredited Investors.
"Indebtedness" means, with respect to any Person, without duplication, (i)
all indebtedness of such Person for borrowed money, (ii) all indebtedness of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all Capital Lease Obligations and Attributable Debt of such Person, (iv)
all obligations of such Person issued or assumed as the deferred purchase price
of property, all conditional sale obligations and all obligations under any
title retention agreement, (v) all obligations for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar instrument, (vi)
guarantees and other
<PAGE>
16
contingent obligations in respect of Indebtedness referred to in clauses (i)
through (v) above and clauses (vii) through (viii) below, (vii) all obligations
of any other Person of the type referred to in clauses (i) through (vi) which
are secured by any Lien on any property or asset of such Person, the amount of
such obligation being deemed to be the lesser of (A) the Fair Market Value of
such property or asset or (B) the amount of the obligation so secured, (viii)
all obligations under Hedging Obligations or other currency agreements and
interest swap agreements of such Person, and (ix) all Disqualified Stock issued
by such Person with the amount of Indebtedness represented by such Disqualified
Stock being equal to the greater of its voluntary or involuntary liquidation
preference and its maximum fixed repurchase price, but excluding accrued
dividends, if any. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were purchased on any date on
which Indebtedness shall be required to be determined under the Indenture, and
if such price is based upon, or measured by, the Fair Market Value of such
Disqualified Stock, except, in each case, any such balance that constitutes an
accrued expense or trade payable, if and to the extent any of the foregoing,
other than letters of credit, Attributable Debt and Hedging Obligations, would
appear as a liability upon a balance sheet of such Person prepared in accordance
with U.S. GAAP. The amount of any Indebtedness outstanding as of any date shall
be (i) the accreted value of such Indebtedness, in the case of any Indebtedness
issued with original issue discount, and (ii) the principal amount of such
Indebtedness, together with any interest thereon that is more than 30 days past
due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Initial Purchaser" means WestLB Panmure Limited.
"Institutional Accredited Investor" means an "accredited investor" as
defined in Rule 501 (a)(1), (2), (3) or (7) of the Securities Act.
<PAGE>
17
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates of such Person) in the forms of
direct or indirect loans (including guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with U.S.
GAAP. If the Issuer or any Subsidiary of the Issuer sells or otherwise disposes
of any Equity Interests of any direct or indirect Subsidiary of the Issuer such
that, after giving effect to any such sale or disposition, such Person is no
longer a Subsidiary of the Issuer, the Issuer shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the Fair Market
Value of the Equity Interests of such Subsidiary not sold or disposed of in an
amount determined and documented as provided for valuation of non-cash
Restricted Payments in Section 4.7.
"Issue Date" means the closing date for the sale and original issuance of
the Notes under this Indenture.
"Issuer" has the meaning assigned in the preamble of this Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York, the City of London or at a place of
payment are authorized by law, regulation or executive order to remain closed.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Issuer and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in
<PAGE>
18
respect of such asset, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give any
financing statement under the Uniform Commercial Code (or equivalent statutes)
of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing to Holders
pursuant to the Registration Rights Agreement.
"Management Investors" means the members of the Board and officers and
employees of the Issuer or a Subsidiary of the Issuer who own Capital Stock of
the Issuer on the Issue Date.
"Net Income" means, with respect to any Person for any period, (i) the net
income or loss of such Person, determined in accordance with U.S. GAAP and
before any reduction in respect of dividends on Preferred Stock, but excluding
any gain (but not loss), together with any related provision for taxes on such
gain (but not loss), realized in connection with (1) any Asset Sale (including,
without limitation, dispositions in connection with sale and leaseback
transactions) (2) the disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any Indebtedness of such Person
or any of its Restricted Subsidiaries, and (3) any extraordinary or nonrecurring
gain (but not loss), together with any related provision for taxes on such
extraordinary or nonrecurring gain (but not loss) of such Person for such
period.
"Net Proceeds" means the aggregate proceeds received by the Issuer or any
of its Restricted Subsidiaries in respect of any Asset Sale (including any cash
received upon the sale or other disposition of any non-cash consideration
received in any Asset Sale), net of the direct costs relating to such Asset Sale
(including legal, accounting and investment banking fees, and sales commissions)
and any relocation expenses incurred as a result of such Asset Sale, any taxes
paid or payable as a result of such Asset Sale, after taking into account any
available tax credits or
<PAGE>
19
deductions and any tax sharing arrangements, and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
U.S. GAAP.
"New Credit Facility" means, with respect to the Issuer, at any time, any
credit facility or commercial paper facility between the Issuer and any lender,
whether in place of or in addition to the Senior Credit Facilities or any New
Credit Facility and providing for Indebtedness: (i) incurred in compliance with
clause (i) of the definition of "Permitted Indebtedness" and (ii) providing for
revolving credit loans, term loans, receivables financing (including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables) or letters of credit.
"New Senior Notes" has the meaning assigned in the preamble of this
Indenture.
"Non-Recourse Debt" means, with respect to any Person, Indebtedness or that
portion of Indebtedness (i) as to which the specified Person (a) provides no
credit support of any kind (including any undertaking, agreement or instrument
that would constitute Indebtedness), (b) is not directly or indirectly liable
(as a guarantor or otherwise), and (c) does not constitute the lender; and (ii)
no default with respect to which (including any rights that the holders of such
Indebtedness may have to take enforcement action against an Unrestricted
Subsidiary) would permit (upon notice, lapse of time or both) any holder of any
other Indebtedness (other than the Notes) of the specified Person to declare a
default on such other Indebtedness or cause the payment of such other
Indebtedness to be accelerated or payable prior to its Stated Maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the specified Person.
"Non-U.S. Person" means a Person who is not a U.S. Person.
<PAGE>
20
"Notes" has the meaning assigned in the preamble to this Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages, additional amounts and other
liabilities payable under the documentation governing any Indebtedness.
"Obligor" as to the Notes means the Issuer and any successor obligor upon
the Notes.
"Offering" means the offering of the Notes by the Issuer.
"Offering Memorandum" means the offering memorandum, dated March 21, 2000,
issued and used by the Issuer to offer the Notes.
"Officer" means, with respect to any Person, any member of the Board, the
Chief Executive Officer, the President, the Chief Operating Officer, the Chief
Financial Officer, the Treasurer, any Assistant Treasurer, the Controller, the
Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed by any two members of
the Board, that meets the requirements of Section 10.5 hereof.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee and who may be an employee of or counsel to the Issuer
or the Trustee.
"Participant" means, with respect to the Common Depositary, Euroclear or
Clearstream, a Person who has an account with Euroclear or Clearstream.
"Permitted Business" means any of the businesses and any other businesses
ancillary or complementary to the businesses engaged in by the Issuer and its
respective Restricted Subsidiaries on the Issue Date.
<PAGE>
21
"Permitted Indebtedness" means (i) the incurrence by the Issuer or any
Restricted Subsidiary of Indebtedness under a term or revolving credit facility
or letters of credit (with letters of credit being deemed to have a principal
amount equal to the maximum potential liability of the Issuer and its
Subsidiaries under such letters of credit), pursuant to the Senior Credit
Facilities or a New Credit Facility; provided, that the aggregate principal
amount of all Indebtedness outstanding under all such facilities after giving
effect to such incurrence does not exceed the greater of Euro25,000,000 or the
Borrowing Base; (ii) the incurrence by the Issuer and its Subsidiaries of
Existing Indebtedness; (iii) the incurrence by the Issuer of Indebtedness
represented by the Notes issued on the Issue Date or any New Senior Notes issued
in exchange for such Notes; (iv) the incurrence by the Issuer or any of its
Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations
or Purchase Money Indebtedness, at any time outstanding in an aggregate
principal amount, including all Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred under this clause (iv),
not to exceed Euro3,000,000; (v) the incurrence by the Issuer or any of its
Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for,
or the net proceeds of which are used to refund, refinance or replace
Indebtedness, other than intercompany Indebtedness, that was permitted by the
Indenture to be incurred pursuant to Section 4.9 or clauses (ii), (iii), (iv),
(v), (viii) or (xvi); (vi) the incurrence by the Issuer or any of its Restricted
Subsidiaries of Indebtedness owing to and held by any Wholly Owned Restricted
Subsidiary of the Issuer or owing to and held by the Issuer; provided that (a)
if the Issuer is the obligor on such Indebtedness, such Indebtedness is
expressly subordinated to the prior payment in full in cash of all Obligations
with respect to the Notes, and (b) (I) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a Person
other than the Issuer or a Wholly Owned Restricted Subsidiary of the Issuer
shall be
<PAGE>
22
deemed to constitute an incurrence of such Indebtedness by the Issuer or such
Restricted Subsidiary that was not permitted by this clause (vi), and (II) any
transfer of any interest in such Indebtedness to a Person other than the Issuer
or a Wholly Owned Restricted Subsidiary of the Issuer shall be deemed to
constitute an incurrence of such Indebtedness by the Issuer or such Restricted
Subsidiary that was not permitted by this clause (vi); (vii) the incurrence by
the Issuer or any of its Restricted Subsidiaries of Hedging Obligations incurred
with respect to any Indebtedness or Obligation that is permitted by the terms of
the Indenture to be outstanding; (viii) the incurrence by the Issuer or any
Restricted Subsidiary of additional Indebtedness in an aggregate principal
amount or accreted value, as applicable, at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred under this clause (viii), not to exceed Euro5,000,000;
(ix) the incurrence by the Issuer's Unrestricted Subsidiaries of Indebtedness
that is Non-Recourse Debt to the Issuer and its Restricted Subsidiaries;
provided, that upon the occurrence of any event that causes any such
Indebtedness to cease to be Non-Recourse Debt to the Issuer and its Restricted
Subsidiaries, such event shall be deemed to constitute an incurrence of such
Indebtedness by a Restricted Subsidiary of the Issuer that was not permitted by
this clause (ix); (x) the incurrence of Indebtedness of the Issuer and its
Restricted Subsidiaries, including letters of credit, in respect of performance
bonds, bankers' acceptances, letters of credit, performance, bid, surety or
appeal bonds or similar bonds and completion guarantees provided by the Issuer
and its Restricted Subsidiaries in the ordinary course of their business and
consistent with past practices and which do not secure other Indebtedness; (xi)
Indebtedness of the Issuer and its Restricted Subsidiaries arising from
agreements providing for indemnification, adjustment of purchase price or
similar obligations, in any case incurred in connection with the disposition of
any business, assets or Subsidiary of the Issuer, other than Guarantees of
Indebtedness incurred by any Person acquiring all or any portion of such
business, assets or Subsidiary for the purpose of financing such acquisition, in
an aggregate principal amount not to exceed the gross proceeds actually received
by the Issuer or any Restricted Subsidiary of the Issuer in connection with such
disposition; (xii) Indebtedness of the Issuer or a Restricted Subsidiary owed to
any Person, including obligations in respect of letters of credit for the
benefit of such Person, in connection with worker's compensation, health,
disability or other employee benefits or property, casualty or liability
insurance provided by such Person
<PAGE>
23
to the Issuer or such Restricted Subsidiary, under reimbursement or
indemnification obligations to such Person, in each case incurred in the
ordinary course of business and consistent with past practices; (xiii) the
Guarantee by the Issuer or any Restricted Subsidiary of Indebtedness of the
Issuer or a Subsidiary of the Issuer that was permitted to be incurred by
another provision of Section 4.9; (xiv) Indebtedness incurred in connection with
a transaction permitted under Section 4.16; (xv) Indebtedness of the Issuer or
any Restricted Subsidiary of the Issuer convertible into Capital Stock of the
Issuer issued to employees of the Issuer or such Restricted Subsidiary in an
amount not to exceed Euro500,000 in the aggregate; and (xvi) Indebtedness of the
Issuer in an aggregate amount, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness incurred under this
clause (xvi), not to exceed the amount of Capital Stock Sale Proceeds received
since the Issue Date from the issuance and sale of Capital Stock, other than
Disqualified Stock, of the Issuer; provided, that the amount of any such Capital
Stock Sale Proceeds utilized to support the incurrence of Indebtedness pursuant
to this clause (xvi) shall be excluded from any calculation pursuant to clause
(c)(ii) of the first paragraph or clause (g) of the second paragraph of Section
4.7.
<PAGE>
24
"Permitted Investments" means (i) any Investment in the Issuer or in a
Restricted Subsidiary of the Issuer that is engaged in a Permitted Business;
(ii) any Investment in cash or Cash Equivalents; (iii) any Investment by the
Issuer or any Restricted Subsidiary of the Issuer in a Person, if as a result of
or in connection with such Investment (a) such Person becomes a Restricted
Subsidiary of the Issuer and is engaged in a Permitted Business, or (b) such
Person is merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the Issuer or
a Restricted Subsidiary of the Issuer and is engaged in a Permitted Business;
(iv) any Investment made as a result of the receipt of non-cash consideration
from an Asset Sale that was made in compliance with the covenant described above
under Section 4.10 or from a sale that was made in compliance with Section 4.16;
(v) any acquisition or any portion of any acquisition of assets or property made
solely in exchange for the issuance of Equity Interests, other than Disqualified
Stock, of the Issuer; (vi) any Investment by the Issuer or any Wholly Owned
Restricted Subsidiary of the Issuer involving the contribution of assets to a
Wholly Owned Restricted Subsidiary of the Issuer in exchange for the incurrence
by such Wholly Owned Restricted Subsidiary of the Issuer of Indebtedness owed to
the Issuer or any Wholly Owned Restricted Subsidiary of the Issuer; (vii)
Investments in an Accounts Receivable Subsidiary made in connection with the
formation of such Accounts Receivable Subsidiary; (viii) Investments in the form
of intercompany Indebtedness permitted under clause (vi) of the definition of
"Permitted Indebtedness"; (ix) Investments in existence on the Issue Date; and
(x) other Investments having an aggregate Fair Market Value, measured on the
date each such Investment was made and without giving effect to subsequent
changes in value, when taken together with all other Investments made under this
clause (x) that are at the time outstanding, not to exceed Euro15,000,000.
"Permitted Liens" means (i) Liens on assets or property of the Issuer or
any Restricted Subsidiary of the Issuer to secure Senior Debt of the Issuer or
such Restricted Subsidiary of the Issuer incurred under clauses (i), (vii) and
(x) of the definition of
<PAGE>
25
"Permitted Indebtedness"; (ii) Liens in favor of the Issuer or any Restricted
Subsidiary of the Issuer; (iii) Liens on assets or property of a Person existing
at the time such Person is merged into or consolidated with one of the Issuer or
any Subsidiary of the Issuer; provided, that such Liens were in existence prior
to the contemplation of such merger or consolidation and do not extend to any
assets or property other than those of the Person merged into or consolidated
with the Issuer or any Subsidiary of the Issuer; (iv) Liens on assets or
property existing at the time of acquisition thereof by the Issuer or any
Subsidiary of the Issuer; provided, that such Liens were in existence prior to
the contemplation of such acquisition; (v) Liens to secure the performance of
statutory obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of business; (vi)
Liens to secure Indebtedness represented by Capital Lease Obligations or
Purchase Money Indebtedness permitted by clause (d) of the definition of
Permitted Indebtedness; provided, that such Liens cover only assets or property
acquired with such Indebtedness; (vii) Liens existing on the Issue Date; (viii)
Liens for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded; provided, that any reserve or
other appropriate provision as shall be required in conformity with U.S. GAAP
shall have been made therefor; (ix) Liens on assets or property of Unrestricted
Subsidiaries that secure Indebtedness of Unrestricted Subsidiaries that is Non-
Recourse Debt to the Issuer and its Restricted Subsidiaries; (x) Liens incurred
by the Issuer or any Restricted Subsidiary of the Issuer in the ordinary course
of business of the Issuer or such Restricted Subsidiary of the Issuer with
respect to obligations that do not exceed Euro2,500,000 at any one time
outstanding that (a) are not incurred in connection with the borrowing of money
or the obtaining of advances or credit, other than trade credit in the ordinary
course of business, and (b) do not in the aggregate materially detract from the
value of the assets or property or materially impair the use of the assets or
property in the operation of business by the Issuer or such Subsidiary; (xi)
Liens in connection with worker's compensation obligations and general liability
exposure of the Issuer or any Restricted Subsidiary of the
<PAGE>
26
Issuer; (xii) Liens arising by reason of any judgment, decree or court order, to
the extent not otherwise resulting in an Event of Default; (xiii) Liens arising
by reason of easements, rights of way, zoning restrictions, leases or subleases
to a third party and other similar charges or encumbrances in respect of real
property, in each case not interfering in any material respect with the ordinary
conduct the business of the Issuer or any of its Restricted Subsidiaries; (xiv)
Liens imposed by law, including carriers', warehousemen's, materialmen's and
mechanics' Liens, in each case for sums not yet due or being contested in good
faith by appropriate proceedings if a reserve or any other provision required
under U.S. GAAP shall have been made; and (xv) Liens arising by operation of law
in favor of depositary banks and collecting banks, incurred in the ordinary
course of business.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Issuer
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness, other than intercompany Indebtedness, of the Issuer
or any of its Restricted Subsidiaries that was permitted by the Indenture to be
incurred; provided that (i) the principal amount or accreted value, if
applicable, of such Permitted Refinancing Indebtedness does not exceed the
principal amount or accreted value, if applicable, of, plus accrued interest on,
the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded plus the amount of reasonable expenses incurred in connection with the
incurrence of such Permitted Refinancing Indebtedness, (ii) such Permitted
Refinancing Indebtedness has a final maturity date later than the final maturity
date of, and has a Weighted Average Life to Maturity equal to or greater than
the Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded, (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at least
as favorable to the Holders of the Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded,
<PAGE>
27
and (iv) such Indebtedness is incurred only by Persons who are the obligors on
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Permitted Secured Indebtedness" means any Indebtedness of the Issuer or
any Restricted Subsidiary of the Issuer permitted to be incurred or outstanding
under this Indenture which is secured by a Permitted Lien.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"Preferred Stock" as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes, however designated, which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
"Principals" means (i) Messrs. Stefan Rover, Boris Anderer, Michael Janen,
Achim Schlumpberger, Angelo Maestrini and Michael Schumacher and the Management
Investors; (ii) any Related Party of a Person referred to in clause (i); and
(iii) any Person or group of Persons which holds, directly or indirectly, Equity
Interests in any Person so long as a majority of the Voting Stock in such Person
is beneficially owned by the Persons referred to in clauses (i) and (ii).
"Private Placement Legend" means the legend set forth in Section 2.6(g)(i)
to be placed on all Notes issued under this Indenture except where otherwise
permitted by the provisions of this Indenture.
"Purchase Money Indebtedness" means Indebtedness of the Issuer and its
Restricted Subsidiaries incurred in the normal
<PAGE>
28
course of business for the purpose of financing all or any part of the purchase
price, or the cost of installation, construction or improvement, of property or
equipment.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Equity Offering" means any private or public offering of Equity
Interests, other than Disqualified Stock, of the Issuer; provided, that the net
cash proceeds of such offering (i) are included as, or contributed to the Issuer
as, common equity capital of the Issuer, and (ii) exceed Euro75,000,000, in the
case of a public offering, or Euro50,000,000, in the case of a private offering.
"Registration Rights Agreement" means the Registration Rights Agreement,
dated as of the date of this Indenture, by and among the Issuer and the Initial
Purchaser named on the signature pages thereof, as such agreement may be
amended, modified or supplemented from time to time.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Regulation S Global Note" means a Global Note in the form of Exhibit A
---------
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of the Common Depositary and registered in the name
of the Common Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Notes initially sold in reliance on Rule 903
of Regulation S.
"Related Party" means, with respect to any Principal, (i) such Principal,
any direct or indirect wholly owned Subsidiary of such Principal, and any
officer, director or employee of such Principal or any wholly owned Subsidiary
of such Principal; (ii) any member of the "immediate family" as such term is
used in Rule 16a-1(e) under the Exchange Act of such Principal or the officers,
directors and employees referred to in clause (i) above; or (iii) any trust,
corporation or partnership 100%-in-interest of the
<PAGE>
29
beneficiaries, stockholders or partners of which consists of one or more of the
persons described in clause (i) or (ii) above.
"Relevant Taxing Jurisdiction" means the Federal Republic of Germany or any
jurisdiction in which the Issuer or any successor thereto is organized or is
otherwise resident for tax purposes or any political subdivision thereof or any
authority having power to tax therein or any jurisdiction from or through which
payment is made.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means one or more Definitive Notes that bear
and are required to bear the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment permitted pursuant to clause (h) of the second paragraph of Section
4.7.
"Restricted Payment" means to (i) declare or pay any dividend or make any
other payment or distribution on account of Equity Interests of the Issuer or a
Subsidiary of the Issuer, including, without limitation, any such payment in
connection with any merger or consolidation or to the direct or indirect holders
of Equity Interests in their capacity as such, other than dividends, payments or
distributions payable (a) in Equity Interests, other than Disqualified Stock, of
the Issuer, or (b) to the Issuer, or (c) to a Restricted Subsidiary of the
Issuer; (ii) purchase, redeem or
<PAGE>
30
otherwise acquire or retire for value, including, without limitation, in
connection with any merger or consolidation, any Equity Interests of the Issuer
or of any direct or indirect parent of the Issuer; (iii) make any payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is by its terms subordinated to the Notes (other
than the purchase, repurchase or other acquisition of such indebtedness in
anticipation of satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of such purchase,
repurchase or acquisition), except a payment of interest or principal at Stated
Maturity; or (iv) make any Restricted Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of such Person
that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Senior Credit Facilities" means (i) the credit agreement dated as of July
27, 1999 between the Issuer and Deutsche Bank AG providing for up to DM
60,000,000 revolving credit borrowings, including an related notes, guarantees,
collateral documents, instruments and agreements executed in connection
therewith; (ii) the credit agreement in effect on the Issue Date, by and between
the Issuer, and Kreissparkasse Boblingen, providing for up to DM 5,500,000
revolving credit borrowings and other loans, including any
<PAGE>
31
related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith; (iii) the credit agreement dated as of
December 20, 1999, by and between the Issuer and Volksbank AG im Kreis
Boblingen, providing for up to DM 5,000,000 revolving credit borrowings and
other loans, including any related notes, guarantees, collateral documents,
instruments and agreements executed in connection therewith; and (iv) the credit
agreement in effect on the Issue Date between the Issuer and Dresdner Bank AG,
providing for up to DM 5,000,000 revolving credit borrowings and other loans
including any related notes, guarantees, collateral documents, instruments and
agreements executed in connection therewith, in each case of clauses (i), (ii),
(iii) and (iv) as amended, modified, renewed, refunded, replaced or refinanced
from time to time.
"Senior Debt" means (i) all Indebtedness outstanding under the Senior
Credit Facilities or any New Credit Facility and all Hedging Obligations with
respect to such Indebtedness; (ii) any other Indebtedness permitted to be
incurred under the terms of this Indenture, unless the instrument under which
such Indebtedness is incurred expressly provides that it is not superior, or is
subordinated, in right of payment to the Notes; and (iii) all Obligations with
respect to the foregoing. Notwithstanding anything to the contrary, Senior Debt
will not include (i) any Indebtedness or Obligation which is subordinate or
junior in any respect (other than as a result of the Indebtedness being
unsecured) to any other Indebtedness or obligation; (ii) any liability for taxes
owed or owing; (iii) any Indebtedness of the Issuer to any of its Subsidiaries
or other Affiliates or any Indebtedness of any of the Subsidiaries or other
Affiliates of the Issuer to the Issuer; (iv) any account payable or other
liability to trade creditors arising in the ordinary course of business; (v) any
Indebtedness that is incurred in violation of this Indenture, or (vi) any
Capital Stock.
"Senior Notes" has the meaning assigned in the preamble of this Indenture.
<PAGE>
32
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
under the Securities Act, as such Regulation is in effect on the Issue Date.
"Stated Maturity" means, with respect to any payment of interest or
principal on any Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation governing such
Indebtedness, excluding any contingent obligations to repay, redeem or
repurchase any such interest or principal prior to the date originally scheduled
for the making of such payment.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees of
such Person is at the time owned or controlled, directly or indirectly, by such
Person and/or one or more of the other Subsidiaries of that Person and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person, or (b) the only general
partners of which are such Person and/or of one or more Subsidiaries of such
Person.
"TIA" means the United States Trust Indenture Act of 1939 (15 U.S.C. (S)(S)
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA; provided, however, that, in the event the United States Trust
Indenture Act of 1939 is amended after such date, "TIA" means, to the extent
required by any such amendments, the United States Trust Indenture Act of 1939,
as amended.
"Trustee" means the party named as such above until a successor replaces it
in accordance with the applicable provisions
<PAGE>
33
of this Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent Global Note in the form of
Exhibit A attached hereto that bears the Global Note Legend and that has the
- ---------
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the Common
Depositary, representing a series of Notes that do not bear and are not required
to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any direct or indirect Subsidiary of the
Issuer that is designated as an Unrestricted Subsidiary of the Issuer in
compliance with Section 4.15.
"U.S. GAAP" means, at any date of determination, generally accepted
accounting principles as in effect in the United States of America on such date
of determination, consistently applied for all periods.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the management
board or analogous body of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of the
products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the
<PAGE>
34
making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) and
Capital Stock or other ownership interests owned by officers or agents of such
Person solely in their capacity as such, shall at the time be owned by such
Person or by such Person and one or more Wholly Owned Restricted Subsidiaries of
such Person.
Section 1.2 Other Definitions.
-----------------
Term Defined in
Section
Affiliate Transaction 4.11
Asset Sale Offer 3.9
Authentication Order 2.2
Change of Control Offer 4.14
Change of Control Payment Date 4.14
Covenant Defeasance 8.3
Event of Default 6.1
Excess Proceeds 4.10
Exchange Offer 2.6
Financier 4.16
incur 4.9
Judgment Currency 10.16
Legal Defeasance 8.2
Offer Amount 3.9
Offer Period 3.9
Paying Agent 2.3
<PAGE>
35
Payment Default 6.1
Promissory Note 4.16
Purchase Date 3.9
Registrar 2.3
Relevant Entity 6.1
Required Filing Dates 4.3
Restricted Payments 4.7
Tax Redemption Date 3.7
Taxes 4.23
Section 1.3 Trust Indenture Act.
-------------------
Whenever this Indenture refers to a provision of the TIA, the portion of
such provision required to be incorporated herein in order for this Indenture to
be qualified under the TIA is incorporated by reference in and made a part of
this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture securityholder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor on the indenture securities" means the Issuer and any successor
obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
in the TIA by reference to another statute or
<PAGE>
36
defined by Commission rule under the TIA have the meanings so assigned to them.
Section 1.4 Rules of Construction.
---------------------
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned to it in
accordance with U.S. GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include the
singular;
(5) words implying any gender shall apply to every gender;
(6) provisions apply to successive events and transactions; and
(7) references to sections of or rules under the Securities Act shall be deemed
to include substitute, replacement or successor sections or rules adopted
by the Commission from time to time.
<PAGE>
37
ARTICLE II
THE NOTES
Section 2.1 Form and Dating.
---------------
(a) General. The Notes and the Trustee's certificate of authentication with
-------
respect thereto shall be substantially in the form of Exhibit A hereto. The
---------
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. In addition, the Notes may have such letters, numbers or
other marks of identification. The Notes shall be in denominations of Euro
1,000 and integral multiples thereof. The Notes shall not be issuable in
bearer form.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture, and the Issuer and the
Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby. However, to the
extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes and Definitive Notes. Notes issued in global form shall be
---------------------------------
substantially in the form of Exhibit A attached hereto, including the
---------
Global Note Legend thereon and the "Schedule of Exchanges of Interests in
the Global Note" attached thereto. Notes issued in definitive form shall be
substantially in the form of Exhibit A attached hereto, but without the
---------
Global Note Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Note" attached thereto. Each Global Note shall
represent such of the outstanding Notes as shall be specified therein and
each shall provide that it shall represent the aggregate principal amount
of outstanding Notes from time to time endorsed thereon and that the
aggregate principal amount of outstanding Notes represented thereby may
from time to time be reduced or increased, as appropriate, to reflect
exchanges and
<PAGE>
38
redemptions. Any endorsement of a Global Note to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Notes
represented thereby shall be made by the Trustee or the Common Depositary,
at the direction of the Trustee, in accordance with instructions given by
the Holder thereof as required by Section 2.6 hereof. The Global Notes,
duly executed by the Issuer and authenticated by the Trustee as hereinafter
provided, shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Common Depositary.
(c) Euroclear and Clearstream Procedures Applicable. The provisions of the
-----------------------------------------------
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of
Cedelbank" and "Customer Handbook of Cedelbank" (or any replacements
thereof) shall be applicable to transfers of beneficial interests in the
Regulation S Global Notes that are held by Participants through Euroclear
or Clearstream.
Section 2.2 Execution and Authentication.
----------------------------
Two Officers shall sign the Notes for the Issuer by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
Each Note shall be dated the date of its authentication. A Note shall not
be valid until authenticated by the manual signature of the Trustee. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
The Trustee shall, upon a written order of the Issuer signed by an Officer
(an "Authentication Order"), authenticate Notes for original issue up to the
--------------------
aggregate principal amount stated in paragraph 4 of the Notes. The aggregate
principal amount of Notes outstanding at any time under this Indenture may not
exceed such amount except as provided in Section 2.7 hereof.
<PAGE>
39
The Trustee may appoint an authenticating agent acceptable to the Issuer to
authenticate Notes. An authenticating agent may authenticate Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Issuer.
Section 2.3 Registrar and Paying Agent.
--------------------------
The Issuer shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange (the "Registrar") and an office or
---------
agency where Notes may be presented for payment (the "Paying Agent"). The
------------
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuer may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuer may change any
Paying Agent or Registrar without notice to any Holder. The Issuer shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuer fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Issuer or any of
its Affiliates may act as Paying Agent or Registrar.
The Issuer initially appoints the Trustee acting through its London Branch
to act as the Registrar and Paying Agent.
For so long as the Notes are listed on the Luxembourg Stock Exchange and
the rules of such stock exchange require, the Issuer shall maintain a co-
registrar and additional Paying Agent in Luxembourg. The Issuer initially
appoints Kredietbank S.A. Luxembourgeoise to act as co-registrar and Paying
Agent in Luxembourg.
Section 2.4 Paying Agent To Hold Money in Trust.
-----------------------------------
The Issuer shall require each Paying Agent other than the Trustee to agree
in writing that the Paying Agent will hold in trust
<PAGE>
40
for the benefit of Holders or the Trustee all money held by the Paying Agent for
the payment of principal, premium or Liquidated Damages or Additional Amounts,
if any, or interest on the Notes, and will notify the Trustee of any default by
the Issuer in making any such payment. While any such default continues, the
Trustee may require a Paying Agent to pay all money held by it to the Trustee.
The Issuer at any time may require a Paying Agent to pay all money held by it to
the Trustee. Upon payment over to the Trustee, the Paying Agent (if other than
the Issuer or any of its Affiliates) shall have no further liability for the
money. If the Issuer or any of its Affiliates acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the Holders all
money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Issuer, the Trustee shall serve as Paying Agent for
the Notes.
Section 2.5 Holder Lists.
------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, the Issuer shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Issuer shall otherwise comply with TIA (S) 312(a).
Section 2.6 Transfer and Exchange.
---------------------
(a) Transfer And Exchange. A Global Note may not be transferred as a whole
---------------------
except by the Common Depositary to a nominee of the Common Depositary, by a
nominee of the Common Depositary to the Common Depositary or to another
nominee of the Common Depositary, the Common Depositary or any such nominee
to a successor Common Depositary or a nominee of such successor Common
Depositary. All Global Notes will be exchanged by the Issuer for Definitive
Notes if (i) the Issuer delivers to the Trustee
<PAGE>
41
notice from Euroclear and Clearstream that they are unwilling or unable to
continue as clearing agencies for the Notes and the Issuer fails to appoint
a successor clearing agency within 90 days, (ii) the Issuer delivers to the
Trustee notice from the Common Depositary that it is unwilling or unable to
continue to act as common depositary for Euroclear and Clearstream and a
successor Common Depositary is not appointed by the Issuer within 120 days
after the date of such notice from the Common Depositary or (iii) the
Issuer in its sole discretion determines that the Global Notes (in whole
but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee. Upon the occurrence of either
of the preceding events in (i), (ii) or (iii) above, Definitive Notes shall
be issued in such names as Euroclear and Clearstream shall instruct the
Trustee. Global Notes also may be exchanged or replaced, in whole or in
part, as provided in Sections 2.7 and 2.10 hereof. Every Note authenticated
and delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to this Section 2.6 or Section 2.7 or 2.10 hereof, shall
be authenticated and delivered in the form of, and shall be, a Global Note.
A Global Note may not be exchanged for another Note other than as provided
in this Section 2.6(a). However, beneficial interests in a Global Note may
be transferred and exchanged as provided in Section 2.6(b), (c) or (f)
hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global Notes.
-----------------------------------------------------------------
Beneficial interests in the Global Notes may be held only through
Participants acting for and on behalf of Euroclear and Clearstream. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through Euroclear and Clearstream, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions
on transfer comparable to those set forth herein to the extent required by
the Securities Act. Transfers of beneficial interests in the Global Notes
also shall require compliance with either subparagraph (i) or (ii) below,
as applicable, as well as one or more of the other following subparagraphs,
as applicable:
<PAGE>
42
(i) Transfer of Beneficial Interests in the Same Global Note. Beneficial
---------------------------------------------------------
interests in any Restricted Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same
Restricted Global Note in accordance with the transfer restrictions set
forth in the Private Placement Legend. Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered
to the Registrar to effect the transfers described in this Section
2.6(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global Notes.
-------------------------------------------------------------------------
In connection with all transfers and exchanges of beneficial interests that
are not subject to Section 2.6(b)(i) above, the transferor of such
beneficial interest must deliver to the Registrar either (A) (1) written
instructions given from Euroclear or Clearstream in accordance with the
Applicable Procedures directing the Common Depositary to credit or cause to
be credited to Euroclear's or Clearstream's account a beneficial interest
in another Global Note in a principal amount equal to the beneficial
interest to be transferred or exchanged, and (2) written instructions given
in accordance with the Applicable Procedures containing information
regarding the account of Euroclear or Clearstream to be credited with, and
the account of Euroclear or Clearstream to be debited for, such beneficial
interest, or (B) (1) a written order from Euroclear or Clearstream in
accordance with the Applicable Procedures directing the Common Depositary
and the Registrar to cause to be issued a Definitive Note in an amount
equal to the beneficial interest to be transferred or exchanged, (2)
written instructions given in accordance with the Applicable Procedures
containing information regarding the account of Euroclear or Clearstream to
be debited for such beneficial interest, and (3) written instructions given
by Euroclear and Clearstream, the Common Depositary and the Registrar
containing information regarding the Person in whose name such Definitive
Note shall be registered to effect the transfer or exchange referred to in
(1) above. Upon consummation of an Exchange Offer by the Issuer in
accordance with Section 2.6(f) hereof, the requirements of
<PAGE>
43
this Section 2.6(b)(ii) shall be deemed to have been satisfied. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount of the relevant Global Notes pursuant to
Section 2.6(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global Note. A
------------------------------------------------------------------
beneficial interest in any Restricted Global Note may be transferred to a
Person who takes delivery thereof in the form of a beneficial interest in
another Restricted Global Note if the transfer complies with the
requirements of Section 2.6(b)(ii) above and the Registrar receives the
following:
(A) if the transferee will take delivery in the form of a beneficial
interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including
---------
the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a beneficial
interest in the Regulation S Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
---------
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a beneficial
interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including
---------
the certifications and certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
If any such transfer is effected pursuant to this Section 2.6(b)(iii) at a
time when an 144A Global Note, Regulation S Global Note or IAI Global Note
has not yet been
<PAGE>
44
issued, the Issuer shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.2 hereof, the Trustee
shall authenticate such Global Note in an aggregate principal amount equal
to the aggregate principal amount of beneficial interests transferred
pursuant to this Section 2.6(b)(iii).
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global Note
-------------------------------------------------------------------------
for Beneficial Interests in the Unrestricted Global Note. A beneficial
--------------------------------------------------------
interest in any Restricted Global Note may be exchanged by any holder
thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.6(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to an Exchange Offer;
(B) such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit C hereto, including the
---------
certifications in item (1)(a) thereof, or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to
<PAGE>
45
transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note, a certificate from such
holder in the form of Exhibit B hereto, including the
---------
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D) above
at a time when an Unrestricted Global Note has not yet been issued, the Issuer
shall issue and, upon receipt of an Authentication Order in accordance with
Section 2.2 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an aggregate principal amount equal to the aggregate principal
amount of beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be exchanged
for, or transferred to Persons who take delivery thereof in the form of, a
beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests For Definitive Notes.
-----------------------------------------------------------------
(i) Beneficial Interests in Restricted Global Notes to Restricted Definitive
------------------------------------------------------------------------
Notes. If, following the occurrence of any of the events referred to in
-----
Section 2.6 (a)(i), (ii) or (iii), any holder of a beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note or to transfer such beneficial interest to a
Person who takes delivery
<PAGE>
46
thereof in the form of a Restricted Definitive Note, then, upon receipt by
the Registrar of the documents required by Section 2.6(b)(ii) and the
following documentation:
(A) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
---------
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
---------
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
---------
item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set forth in Exhibit B hereto,
---------
including the
<PAGE>
47
certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the Issuer or
any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b)
---------
thereof; or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.6(h) hereof,
and the Issuer shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.6(c) shall be registered in such name or names and in such
authorized denomination or denominations as Euroclear or Clearstream shall
instruct the Common Depositary. The Trustee shall deliver such Definitive
Notes to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.6(c)(i) shall bear the
Private Placement Legend and shall be subject to all restrictions on
transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted Definitive
--------------------------------------------------------------------------
Notes. A holder of a beneficial interest in a Restricted Global Note may
-----
exchange such beneficial interest for an Unrestricted Definitive Note or
may
<PAGE>
48
transfer such beneficial interest to a Person who takes delivery
thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer;
(B) such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted Global
Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
---------
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted Global
Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Note
that does not bear the Private Placement Legend, a certificate
from such holder in the form of Exhibit B hereto, including the
---------
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
<PAGE>
49
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to Unrestricted
-----------------------------------------------------------------
Definitive Notes. If any holder of a beneficial interest in an
----------------
Unrestricted Global Note proposes to exchange such beneficial interest for
a Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.6(b)(ii) hereof, the
Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.6(h) hereof,
and the Issuer shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.6(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Common Depositary and Euroclear or
Clearstream. The Trustee shall deliver such Definitive Notes to the
Persons in whose names such Notes are so registered. Any Unrestricted
Definitive Note issued in exchange for a beneficial interest in an
Unrestricted Global Note pursuant to this Section 2.6(c)(iii) shall not
bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in
---------------------------------------------------------------------
Global Notes.
------------
(i) Restricted Definitive Notes to Beneficial Interests in Restricted Global
------------------------------------------------------------------------
Notes. If any Holder of a Restricted Definitive Note proposes to exchange
-----
such Note for a beneficial interest in a Restricted Global Note or to
transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in a Restricted Global Note,
then, upon receipt by the Registrar of (i) written instructions given in
<PAGE>
50
accordance with the Applicable Procedures containing information regarding
the account of Euroclear or Clearstream to be credited with such beneficial
interest and (ii) the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of
Exhibit C hereto, including the certifications in item (2)(b)
---------
thereof;
(B) if such Restricted Definitive Note is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to a Non
U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the
---------
certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred pursuant
to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other
than those listed in subparagraphs (B) through (D) above, a
certificate to the effect set
<PAGE>
51
forth in Exhibit B hereto, including the certifications,
---------
certificates and Opinion of Counsel required by item (3) thereof,
if applicable;
(F) if such Restricted Definitive Note is being transferred to the
Issuer or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in
---------
item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred pursuant
to an effective registration statement under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto,
---------
including the certifications in item (3)(c) thereof;
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount of, in the case of clause
(A) above, the appropriate Restricted Global Note, in the case of clause
(B) above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note, and in all other cases, the IAI Global Note.
If any such transfer is effected pursuant to this Section 2.6(d)(i) at a
time when a 144A Global Note, Regulation S Global Note or IAI Global Note
has not yet been issued, the Issuer shall issue and, upon receipt of an
Authentication Order in accordance with Section 2.2 hereof, the Trustee
shall authenticate such Global Note in an aggregate principal amount equal
to the aggregate principal amount of Notes transferred pursuant to this
Section 2.6(d)(i).
(ii) Restricted Definitive Notes to Beneficial Interests in Unrestricted Global
--------------------------------------------------------------------------
Notes. A Holder of a Restricted Definitive Note may exchange such Note for
-----
a beneficial interest in an Unrestricted Global Note or transfer such
Restricted
<PAGE>
52
Definitive Note to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange Offer;
(B) such transfer is effected pursuant to the Shelf Registration Statement
in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer pursuant to
the Exchange Offer Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to exchange such
Notes for a beneficial interest in the Unrestricted Global Note,
a certificate from such Holder in the form of Exhibit C hereto,
---------
including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to transfer such
Notes to a Person who shall take delivery thereof in the form of
a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
---------
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are
<PAGE>
53
no longer required in order to maintain compliance with the Securities
Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.6(d)(ii), the Trustee shall cancel the Definitive Notes
and increase or cause to be increased the aggregate principal amount
of the Unrestricted Global Note pursuant to the written instructions
given to the Registrar in accordance with the Applicable Procedures
containing information regarding the account of Euroclear or
Clearstream to be credited with such beneficial interest.
(iii) Unrestricted Definitive Notes to Beneficial Interests in Unrestricted
---------------------------------------------------------------------
Global Notes. A Holder of an Unrestricted Definitive Note may exchange
------------
such Note for a beneficial interest in an Unrestricted Global Note or
transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes pursuant to the written instructions given
to the Registrar in accordance with the Applicable Procedures containing
information regarding the account of Euroclear or Clearstream to be
credited with such beneficial interest.
If any such exchange or transfer from a Definitive Note to a beneficial
interest in a Global Note is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Issuer shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.2 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
--------------------------------------------------------------
request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this
<PAGE>
54
Section 2.6(e), the Registrar shall register the transfer or exchange of
Definitive Notes. Prior to such registration of transfer or exchange, the
requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder
or by his attorney, duly authorized in writing. In addition, the requesting
Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions
of this Section 2.6(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any Restricted
----------------------------------------------------------
Definitive Note may be transferred to and registered in the name of Persons
who take delivery thereof in the form of a Restricted Definitive Note if
the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications in
---------
item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2)
---------
thereof; and
(C) if the transfer will be made pursuant to any other exemption from
the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B
---------
hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes. Any
------------------------------------------------------------
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive
<PAGE>
55
Note or transferred to a Person or Persons who take delivery thereof in the
form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to an Exchange Offer;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes to
exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto,
---------
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof
in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
---------
certifications in item (4) thereof,
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Issuer and the Registrar to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the
<PAGE>
56
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes. A Holder
--------------------------------------------------------------
of Unrestricted Definitive Notes may transfer such Notes to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Note.
Upon receipt of a request to register such a transfer, the Registrar shall
register the Unrestricted Definitive Notes pursuant to the instructions
from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the exchange offer referred to in
--------------
the Registration Rights Agreement (as therein defined, the "Exchange
--------
Offer"), the Issuer shall issue and, upon receipt of an Authentication
Order in accordance with Section 2.2, the Trustee shall authenticate (i)
one or more Unrestricted Global Notes in an aggregate principal amount
equal to the principal amount of the beneficial interests in the
Restricted Global Notes tendered for acceptance by Persons and accepted
for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently
with the issuance of such Notes, the Trustee shall cause the aggregate
principal amount of the applicable Restricted Global Notes to be reduced
accordingly, and the Issuer shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of
Definitive Notes so accepted Definitive Notes in the appropriate principal
amount.
(g) Legends. The following legends shall appear on the face of all Global
-------
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
<PAGE>
57
(i) Private Placement Legend.
------------------------
(A) Except as permitted by subparagraph (B) below, each Global Note
and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH BELOW. BY ITS
ACQUISITION HEREOF OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A "QIB") OR
(B) IT IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A PERSON
WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE TRANSACTION
MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE SECURITIES
ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT (AN "IAI") THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
<PAGE>
58
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING
TO THE TRANSFER OF THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED
FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN RESPECT OF AN
AGGREGATE PRINCIPAL AMOUNT OF NOTES LESS THAN EURO250,000, AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER
IS IN COMPLIANCE WITH THE SECURITIES ACT, (F) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (3) AGREES THAT IT WILL DELIVER TO
EACH PERSON TO WHOM THIS NOTE OR AN INTEREST HEREIN IS
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION
S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
NOTE IN VIOLATION OF THE FOREGOING."
(B) Notwithstanding the foregoing, any Global Note or Definitive Note
issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.6
(and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in substantially
------------------
the following form:
<PAGE>
59
"THIS GLOBAL NOTE IS HELD BY THE COMMON DEPOSITARY (AS DEFINED IN
THE INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT
(I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.7 OF THE INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.6(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED
TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR COMMON DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
ISSUER.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE COMMON DEPOSITARY TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF THE COMMON
DEPOSITARY OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE COMMON DEPOSITARY (AND ANY SUCH PAYMENT IS
MADE TO THE COMMON DEPOSITARY OR SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE COMMON
DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, THE COMMON DEPOSITARY, HAS AN INTEREST
HEREIN."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
----------------------------------------------
beneficial interests in a particular
<PAGE>
60
Global Note have been exchanged for Definitive Notes or a particular
Global Note has been redeemed, repurchased or canceled in whole and not in
part, each such Global Note shall be returned to or retained and canceled
by the Trustee in accordance with Section 2.11 hereof. At any time prior
to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall
be reduced accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Common Depositary at the direction of the
Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note, such other
Global Note shall be increased accordingly and an endorsement shall be
made on such Global Note by the Trustee or by the Common Depositary at the
direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
------------------------------------------------------
(i) To permit registrations of transfers and exchanges, the Issuer shall
execute and the Trustee shall authenticate Global Notes and Definitive
Notes upon the Issuer's order.
(ii) No service charge shall be made to a holder of a beneficial interest in a
Global Note or to a Holder of a Definitive Note for any registration of
transfer or exchange, but the Issuer may require payment of a sum
sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.6, and 9.5 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Note selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
<PAGE>
61
(iv) All Global Notes and Definitive Notes issued upon any registration of
transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Issuer, evidencing the same debt, and entitled
to the same benefits under this Indenture, as the Global Notes or
Definitive Notes surrendered upon such registration of transfer or
exchange.
(v) The Issuer shall not be required (A) to issue, to register the transfer
of or to exchange any Notes during a period beginning at the opening of
business 15 days before the day of any selection of Notes for redemption
under Section 3.2 hereof and ending at the close of business on the day
of selection, (B) to register the transfer of or to exchange any Note so
selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (C) to register the
transfer of or to exchange a Note between a record date and the next
succeeding interest payment date.
(vi) Prior to due presentment for the registration of a transfer of any Note,
the Trustee, any Agent and the Issuer may deem and treat the Person in
whose name any Note is registered as the absolute owner of such Note for
the purpose of receiving payment of principal of and interest and
Additional Amounts and Liquidated Damages, if any, on such Notes and for
all other purposes, and none of the Trustee, any Agent or the Issuer
shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes in
accordance with the provisions of Section 2.2 hereof.
(viii) All certifications, certificates and Opinions of Counsel required to be
submitted to the Registrar pursuant to this Section 2.6 to effect a
registration of transfer or exchange may be submitted by facsimile.
(ix) The Trustee and the Registrar shall have no obligation or duty to
monitor, determine or inquire
<PAGE>
62
as to compliance with any restrictions on transfer or exchange imposed
under this Indenture or under applicable law with respect to any transfer
or exchange of any interest in any Note (including any transfers between or
among Participants or beneficial owners of interests in any Global Notes)
other than to require delivery of such certificates and other documentation
or evidence as are expressly required by, and to do so if and when
expressly required by the terms of, this Indenture, and to examine the same
to determine substantial compliance as to form with the express
requirements hereof.
Section 2.7. Replacement Notes.
-----------------
If any mutilated Note is surrendered to the Trustee, or if a Holder of a
Note claims that its Note has been destroyed, lost or wrongfully taken and the
Issuer and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of such Note, the Issuer shall issue and the Trustee,
upon receipt of an Authentication Order, shall authenticate a replacement Note
if the Trustee's requirements for replacement of Notes are met. If required by
the Trustee or the Issuer, an indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and the Issuer to protect the
Issuer, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Issuer may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto, and may charge for its expenses (including
the fees and expenses of the Trustee and reasonable attorney's fees and
expenses) in replacing a Note.
Every replacement Note is an additional obligation of the Issuer and shall
be entitled to all of the benefits of this Indenture equally and proportionately
with all other Notes duly issued hereunder.
If any mutilated, lost, stolen or destroyed Note has become or is about to
become due and payable, the Issuer, in its sole discretion, may pay such Note
instead of issuing a new Note.
<PAGE>
63
Section 2.8. Outstanding Notes.
-----------------
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions hereof, and those described in this Section 2.8
as not outstanding. Except as set forth in Section 2.9 hereof, a Note does not
cease to be outstanding because the Issuer or an Affiliate of the Issuer holds
the Note; provided, however, that Notes held by the Issuer or a Subsidiary of
the Issuer shall not be deemed to be outstanding for purposes of Section 3.7(b)
hereof.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.1
hereof, it ceases to be outstanding and interest and Liquidated Damages and
Additional Amounts, if any, on it cease to accrue.
If the Paying Agent (other than the Issuer, a Subsidiary or an Affiliate of
any thereof) holds, on a redemption date, repurchase date or maturity date,
money sufficient to pay all of the principal and interest and Liquidated Damages
and Additional Amounts, if any, due on the Notes payable on that date, then on
and after that date such Notes shall be deemed to be no longer outstanding and
shall cease to accrue interest and Liquidated Damages and Additional Amounts, if
any.
<PAGE>
64
Section 2.9. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Issuer or any of its Affiliates shall be considered as though not outstanding,
except that for the purposes of determining whether the Trustee shall be
protected in relying on any such direction, waiver or consent, only Notes that a
Responsible Officer of the Trustee actually knows are so owned shall be so
disregarded.
Section 2.10. Temporary Notes.
---------------
Until certificates representing Notes are ready for delivery, the Issuer
may prepare and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes. Temporary Notes shall be substantially in the
form of certificated Notes but may have variations that the Issuer consider
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Issuer shall prepare and the Trustee
shall authenticate, upon receipt of an Authentication Order, definitive Notes in
exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of this
Indenture.
Section 2.11. Cancellation.
------------
The Issuer at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall dispose of
the canceled Notes in accordance with its customary procedures (subject to the
record retention requirement of the Exchange Act). The Issuer may not issue new
Notes to replace Notes that they have paid or that have been delivered to the
Trustee for cancellation.
<PAGE>
65
Section 2.12. Defaulted Interest.
------------------
If the Issuer defaults in a payment of interest or Additional Amounts or
Liquidated Damages, if any, on the Notes, the Issuer shall pay the defaulted
interest and Additional Amounts and Liquidated Damages, if any, in any lawful
manner plus, to the extent lawful, any additional interest payable pursuant to
Section 4.1, to the Persons who are Holders on a subsequent special record date,
in each case at the rate provided in the Notes and in Section 4.1 hereof. The
Issuer shall notify the Trustee in writing of the amount of defaulted interest
and Additional Amounts and Liquidated Damages, if any, proposed to be paid on
each Note, the special record date and the date of the proposed payment. The
Issuer shall fix or cause to be fixed each such special record date and payment
date; provided that no such special record date shall be less than 3 days prior
to the related payment date for such defaulted interest or Additional Amounts or
Liquidated Damages, if any. At least 7 days before the special record date, the
Issuer (or, upon the written request of the Issuer, the Trustee in the name and
at the expense of the Issuer) shall give or cause to be given to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid in accordance with Section 10.2.
Section 2.13. Record Date.
------------
The record date for purposes of determining the identity of Holders of the
Notes entitled to vote or consent to any action by vote or consent authorized or
permitted under this Indenture shall be determined as provided for in TIA (S)
316 (c).
Section 2.14. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360-day year
comprised of twelve 30-day months.
Section 2.15. CUSIP and ISIN Numbers.
----------------------
<PAGE>
66
The Issuer in issuing the Notes may use "CUSIP" and/or "ISIN" numbers, and
if the Issuer does so, the Trustee and the Common Depositary shall use the CUSIP
and/or ISIN numbers in notices of redemption or exchange as a convenience to
Holders; provided that (i) any such notice may state that no representation is
made as to the correctness or accuracy of the CUSIP and/or ISIN numbers printed
in the notice or on the Notes and that reliance may be placed only on the other
identification numbers printed on the Notes, and (ii) any such redemption shall
not be affected by any defect in or omission of such numbers. The Issuer shall
promptly notify the Trustee and the Common Depositary of any change in the CUSIP
or ISIN numbers.
ARTICLE III
REDEMPTION AND PREPAYMENT
Section 3.1. Notices to Trustee.
------------------
If the Issuer elects to redeem Notes pursuant to the optional redemption
provisions of Section 3.7 hereof, the Issuer shall furnish to the Trustee, at
least 45 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the principal amount of
Notes to be redeemed and (iv) the redemption price.
<PAGE>
67
Section 3.2. Selection of Notes To Be Redeemed.
---------------------------------
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes in compliance with the requirements of
the principal securities exchange, if any, on which the Notes are listed or, if
the Notes are not so listed, on a pro rata basis, by lot or in accordance with
any other method the Trustee considers fair and appropriate, subject to the
applicable procedures of any clearing organization; provided that no Notes of
Euro1,000 or less shall be redeemed in part. In the event of partial redemption
by lot, the particular Notes to be redeemed shall be selected, unless otherwise
provided herein, not less than 30 nor more than 60 days prior to the redemption
date by the Trustee from the outstanding Notes not previously called for
redemption.
The Trustee shall promptly notify the Issuer in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of Euro1,000 or whole multiples of Euro1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
Euro1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.3. Notice of Redemption.
--------------------
Subject to the provisions of Section 3.9 hereof, at least 30 days but not
more than 60 days before a redemption date, the Issuer shall provide a notice of
redemption to each Holder whose Notes are to be redeemed in accordance with
Section 10.2.
The notice shall identify the Notes (including CUSIP and/or ISIN numbers)
to be redeemed and shall state:
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68
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal amount
of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to
the unredeemed portion shall be issued in the name of the Holder thereof
upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying Agent to
collect the redemption price;
(f) that, unless the Issuer defaults in making such redemption payment,
interest and Additional Amounts and Liquidated Damages, if any, on Notes
called for redemption cease to accrue on and after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant to
which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of the
CUSIP and/or ISIN numbers, if any, listed in such notice or printed on the
Notes.
At the Issuer' request, the Trustee shall give the notice of redemption in
the Issuer' names and at their expense; provided, however, that the Issuer shall
have delivered to the Trustee, at least 45 days prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph and the date on which the Issuer wish the Trustee to mail such notice.
<PAGE>
69
Section 3.4. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.3 hereof,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
Section 3.5. Deposit of Redemption Price.
---------------------------
One Business Day prior to the redemption date, the Issuer shall deposit
with the Trustee or with the Paying Agent money sufficient to pay the applicable
redemption price of and accrued and unpaid interest and Additional Amounts and
Liquidated Damages, if any, on all Notes to be redeemed on that date. The
Trustee or the Paying Agent shall promptly return to the Issuer any money
deposited with the Trustee or the Paying Agent by the Issuer in excess of the
amounts necessary to pay the applicable redemption price of and accrued and
unpaid interest and Liquidated Damages and/or Additional Amounts, if any, on all
Notes to be redeemed.
If the Issuer comply with the provisions of the preceding paragraph, on and
after the redemption date, interest and Additional Amounts and Liquidated
Damages, if any, shall cease to accrue on the Notes or the portions of Notes
called for redemption. If a Note is redeemed on or after an interest record
date but on or prior to the related interest payment date, then any accrued and
unpaid interest and Additional Amounts and Liquidated Damages, if any, shall be
paid to the Person in whose name such Note was registered at the close of
business on such record date. If any Note called for redemption shall not be so
paid upon surrender for redemption because of the failure of the Issuer to
comply with the preceding paragraph, interest, Additional Amounts and Liquidated
Damages shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, and Additional Amounts and Liquidated Damages, if any, in
respect thereof, in each case at the rate provided in the Notes and in Section
4.1 hereof.
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70
Section 3.6. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Issuer shall issue
and, upon the Issuer's written request, the Trustee shall authenticate for the
Holder at the expense of the Issuer, a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.7. Optional Redemption.
-------------------
(a) Except as set forth in clauses (b) and (c) of this Section 3.7, the Issuer
shall not have the option to redeem the Notes pursuant to this Section 3.7
prior to March 31, 2005. Thereafter, the Notes will be redeemable at any
time at the option of the Issuer, in whole or in part, upon not less than
30 nor more than 60 days' notice, in cash at the redemption prices
(expressed as percentages of principal amount) set forth below, plus
accrued and unpaid interest and Liquidated Damages and/or Additional
Amounts, if any, thereon to the applicable redemption date, if redeemed
during the twelve-month period beginning on March 31 of the years indicated
below:
<PAGE>
71
Year Percentage
----------------
2005 105.750%
2006 103.833%
2007 101.917%
2008 and thereafter 100.000%
(b) Notwithstanding the foregoing, on any one or more occasions prior to March
31, 2003, the Issuer may (but will not have the obligation to), on any one
or more occasions upon not less than 30 nor more than 60 days' notice,
redeem up to 35% of the aggregate principal amount of Notes originally
issued at a redemption price in cash equal to 111.50% of the principal
amount thereof, plus accrued and unpaid interest and Liquidated Damages
and/or Additional Amounts, if any, on such Notes to the redemption date
with the net cash proceeds of one or more Qualified Equity Offerings;
provided that at least 65% of the aggregate principal amount of the Notes
originally issued (excluding Notes held by the Issuer, its Affiliates and
its Subsidiaries) remains outstanding immediately after the occurrence of
such redemption; and provided, further, that such redemption shall occur
within 60 days of the date of the closing of such Qualified Equity
Offerings.
(c) If the Issuer determines that, as a result of (i) any change in, or
amendment to, the laws or treaties or any regulations or rulings
promulgated under the laws or treaties of any Relevant Taxing Jurisdiction
affecting taxation, which change in, or amendment to, such laws, treaties,
regulations or rulings becomes effective on or after the Issue Date, or
(ii) any change in or new or different position regarding the application,
administration or interpretation of such laws, treaties, regulations or
rulings, including a holding, judgment or order by a court of competent
jurisdiction, which change, amendment, application or interpretation
becomes effective on or after the Issue Date, the Issuer is, or on the
<PAGE>
72
next Interest Payment Date would be, required to pay Additional Amounts,
and the Issuer determines that such payment obligation cannot be avoided by
the Issuer taking reasonable measures, the Notes may be redeemed, at the
option of the Issuer, in whole but not in part, at any time upon not less
than 30 nor more than 60 days' notice, which notice shall be irrevocable,
at a redemption price equal to the principal amount thereof, plus accrued
and unpaid interest to the date fixed by the Issuer for redemption (the
"Tax Redemption Date") and all Liquidated Damages and/or Additional
-------------------
Amounts, if any, then due and which will become due on the Tax Redemption
Date as a result of the redemption or otherwise; provided that no such
notice of redemption shall be given earlier than 90 days prior to the
earliest date on which the Issuer would be obligated to make such payment
or withholding if a payment in respect of the Notes were then due. Prior to
the giving of any notice of redemption of the Notes pursuant to the
foregoing, the Issuer shall deliver to the Trustee an Officers' Certificate
stating that the Issuer is entitled to effect such redemption and an
opinion of an independent tax counsel of recognized international standing
to the effect that the circumstances referred to above exist. The Trustee
shall accept such certificate and opinion as sufficient evidence of the
satisfaction of the conditions precedent described above, in which event it
shall be conclusive and binding on the Holders.
(d) Any redemption pursuant to this Section 3.7 shall be made pursuant to the
provisions of Sections 3.1 through 3.6 hereof.
Section 3.8. Mandatory Redemption.
--------------------
The Issuer shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
<PAGE>
73
Section 3.9. Offer To Purchase By Application of Excess Proceeds.
---------------------------------------------------
In the event that, pursuant to Section 4.10 hereof, the Issuer shall be
required to commence an offer to all Holders to purchase Notes (an "Asset Sale
----------
Offer"), they shall follow the procedures specified below.
- -----
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
------------
Business Days after the termination of the Offer Period (the "Purchase Date"),
-------------
the Issuer shall purchase the principal amount of Notes required to be purchased
pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than the Offer
------------
Amount has been tendered, all Notes tendered in response to the Asset Sale
Offer. Payment for any Notes so purchased shall be made in the same manner as
interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest and
Additional Amounts and Liquidated Damages, if any, shall be paid to the Person
in whose name a Note is registered at the close of business on such record date,
and no additional interest shall be payable to Holders who tender Notes pursuant
to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Issuer shall send, by
first class mail, a notice to the Trustee and each of the Holders. The notice
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Asset Sale Offer. The Asset Sale Offer shall be
made to all Holders. The notice, which shall govern the terms of the Asset Sale
Offer, shall state:
<PAGE>
74
(a) that the Asset Sale Offer is being made pursuant to this Section 3.9 and
Section 4.10 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest and Additional Amounts and/or Liquidated
Damages, if any;
(d) that, unless the Issuer defaults in making such payment, any Note accepted
for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest and Additional Amounts and/or Liquidated Damages, if any,
after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset Sale
Offer may only elect to have Notes in denominations of Euro1,000, or
integral multiples thereof, purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset Sale
Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed,
or transfer by book-entry transfer, to the Issuer, the Common Depositary,
if appointed by the Issuer, or a Paying Agent at the address specified in
the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the Issuer,
the Common Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such Note
purchased;
<PAGE>
75
(h) that, if the aggregate principal amount of Notes surrendered by Holders
exceeds the Offer Amount, the Trustee shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuer so that only Notes in denominations of Euro1,000,
or integral multiples thereof, shall be purchased) among the Holders of
Notes, based upon the aggregate outstanding principal amount of the Notes;
and
(i) that Holders whose Notes were purchased only in part shall be issued new
Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuer shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer,
or if less than the Offer Amount has been tendered, all Notes tendered, and
shall deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Issuer in accordance with the
terms of this Section 3.9. The Issuer, the Common Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Issuer for purchase, and the Issuer shall promptly issue a new Note, and the
Trustee, upon written request from the Issuer shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Issuer to the Holder thereof. The Issuer
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.9, any purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof. Upon the completion of an Asset Sale Offer in
accordance with this Section 3.9, the amount of Excess Proceeds (as defined in
Section 4.10) shall be reset at zero.
<PAGE>
76
ARTICLE IV
COVENANTS
Section 4.1. Payment of Notes.
----------------
The Issuer shall pay or cause to be paid the principal of, premium and
Additional Amounts, if any, and interest on the Notes on the dates and in the
manner provided in the Notes. Principal, premium and Additional Amounts, if
any, and interest shall be considered paid on the date due if the Paying Agent,
if other than the Issuer or an Affiliate thereof, holds as of 10:00 a.m. London
time on the due date, money deposited by the Issuer in immediately available
funds and designated for and sufficient to pay all principal, premium and
Additional Amounts, if any, and interest then due. The Issuer shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Issuer shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
and interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Additional Amounts and
Liquidated Damages, if any (without regard to any applicable grace period), to
the extent lawful, at the rate specified in paragraph 1 of the Notes.
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Section 4.2. Maintenance of Office or Agency.
-------------------------------
The Issuer shall maintain in the City of London and, for so long as the
Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, an office or
agency (which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon the Issuer in
respect of the Notes and this Indenture may be served. The Corporate Trust
Office of the Trustee shall be such office or agency of the Issuer, unless the
Issuer shall designate and maintain some other office or agency for one or more
of such purposes. The Issuer shall give prompt written notice to the Trustee of
any change in the location of such office or agency. If at any time the Issuer
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Issuer may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Issuer of
their obligation to maintain an office or agency in the City of London and, for
so long as the Notes are listed on the Luxembourg Stock Exchange, in Luxembourg,
for such purposes. The Issuer shall give prompt written notice to the Trustee
of any such designation or rescission and of any change in the location of any
such other office or agency.
The Issuer hereby initially designates (i) the Corporate Trust Office of
the Trustee as such office or agency of the Issuer in the City of London and
(ii) Kredietbank S.A. Luxembourgeoise, 43 Boulevard Royal, L-2955 Luxembourg as
such office or agency of the Issuer in Luxembourg, in accordance with Section
2.3.
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78
Section 4.3. Reports.
-------
Whether or not required by the rules and regulations of the Commission, and
whether or not the Issuer is subject to Section 13(a) or 15(d) of the Exchange
Act, or any successor provision, the Issuer shall prepare (a) quarterly reports
on Form 6-K, or any other applicable form, and annual reports on Form 20-F, or
any other applicable form, that include (I) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 20-F, respectively, if the Issuer were required to
file such Forms, (II) a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition and
results of operations of the Issuer and its consolidated Subsidiaries, showing
in reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Issuer and its Restricted Subsidiaries separate from the
financial condition and results of operations of any Unrestricted Subsidiaries
of the Issuer, and (III) with respect to the annual information only, a report
thereon by the Issuer's certified independent accountants; and (b) current
reports on Form 6-K, or any other applicable form, containing all of the
information that would be required to be filed with the Commission on Form 8-K
if the Issuer were required to file such reports.
Whether or not required by the rules and regulations of the Commission, and
whether or not the Issuer is subject to Section 13(a) or 15(d) of the Exchange
Act, or any successor provision, the Issuer shall (a) upon effectiveness of the
Exchange Offer, file with the Commission (if permitted by Commission practice
and applicable law and regulations) such annual, quarterly and current reports
on or prior to the respective dates (the "Required Filing Dates") by which the
---------------------
Issuer would have been required so to file such documents if the Issuer were so
required, and (b) within 15 days of each Required Filing Date (whether or not
permitted or required to be filed with the Commission) transmit or cause to be
transmitted by mail to all Holders, as their names and addresses appear in the
Note register,
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79
without cost to such Holders, and file with the Trustee, copies of such annual,
quarterly and current reports and other documents. Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Issuer's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
At all times that the Issuer does not file such annual, quarterly and
current reports and other documents with the Commission, or if such annual,
quarterly and current reports and other documents do not contain all of the
information required to be delivered under Rule 144A(d)(4), the Issuer shall
make available to any Holder of Notes, to securities analysts and to prospective
purchasers of the Notes, the information required by Rule 144A(d)(4) under the
Securities Act.
For so long as the Notes are listed on the Luxembourg Stock Exchange and
the rules of the Luxembourg Stock Exchange so require, reports filed with the
Commission or required to be provided to the Holders of the Notes pursuant to
the Indenture may be obtained at the office of the Paying Agent in Luxembourg.
The Issuer shall at all times comply with TIA (S) 314(a).
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80
Section 4.4. Compliance Certificate.
----------------------
(a) The Issuer shall deliver to the Trustee, within 90 days after the end of
each fiscal year, an Officers' Certificate stating that a review of the
activities of the Issuer and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Persons with a view
to determining whether the Issuer has kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as to
each such Person signing such certificate, that to the best of his or her
knowledge the Issuer has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of
this Indenture (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he or she may
have knowledge and what action the Issuer has taken or propose to take with
respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence by reason of which payments on account of
the principal of or interest or Additional Amounts or Liquidated Damages,
if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Issuer has taken or propose to
take with respect thereto. For purposes of this paragraph, such compliance
shall be determined without regard to any period of grace or requirement of
notice provided under this Indenture.
(b) So long as not contrary to the then current recommendations of the American
Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.3 above shall be accompanied by
a written statement of the Issuer's independent public accountants (who
shall be a firm of established international reputation) that in making the
examination necessary for certification of such financial statements,
nothing has come to their attention that would lead them to believe that
the Issuer has violated any provisions of Article 4 (other than Sections
4.2, 4.3, 4.4 and 4.6, as to which no belief need be expressed) or Article
5 hereof or, if any such
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81
violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge of
any such violation. In the event that such written statement of the
Issuer's independent public accountants cannot be obtained, the Issuer
shall deliver an Officers' Certificate certifying that it has used its best
efforts to obtain such statements but was unable to do so.
(c) The Issuer shall, so long as any of the Notes are outstanding, deliver to
the Trustee, forthwith (and in any event within five days) upon any Officer
or member of the Board becoming aware of any Default or Event of Default,
an Officers' Certificate specifying such Default or Event of Default and
what action the Issuer has taken or propose to take with respect thereto.
Section 4.5. Taxes.
-----
The Issuer will, and will cause its Restricted Subsidiaries to, pay and
discharge when due and payable all taxes, levies, imposts, duties or other
governmental charges imposed on it or on its income or profits or on any of its
properties except such taxes, levies, imposts, duties or other governmental
charges which are being contested in good faith in appropriate proceedings and
for which adequate reserves have been established in accordance with U.S. GAAP.
<PAGE>
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Section 4.6. Stay, Extension and Usury Laws.
------------------------------
The Issuer covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and the Issuer (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not, by resort to any such law, hinder, delay
or impede the execution of any power herein granted to the Trustee, but shall
suffer and permit the execution of every such power as though no such law has
been enacted.
Section 4.7. Restricted Payments.
-------------------
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, make or pay any Restricted Payment,
unless at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing or
would occur as a consequence of such Restricted Payment; and
(b) the Issuer would, at the time of such Restricted Payment and after giving
pro forma effect to such Restricted Payment as if such Restricted Payment
had been made at the beginning of the applicable four quarter period, have
been permitted to incur at least Euro1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to the Fixed Charge Coverage Ratio
test set forth in the first paragraph of Section 4.9 hereof; and
(c) the aggregate amount of all such Restricted Payments made after the Issue
Date (including such proposed Restricted Payment but excluding Restricted
Payments permitted by clauses (ii), (iii), (v), (vii) and (viii) of the
next succeeding paragraph), is less than the sum, without duplication, of
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83
(i) 50% of the aggregate amount of the Adjusted Consolidated Net Income
(or, if the Adjusted Consolidated Net Income is a loss, minus 100% of the
amount of such loss) of the Issuer accrued on a cumulative basis during the
period (taken as one accounting period) beginning on the first day of the
first fiscal quarter commencing after the Issue Date and ending on the last
day of the Issuer's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment,
plus (ii) 100% of the aggregate Capital Stock Sale Proceeds or other net
cash proceeds (A) received since the Issue Date from the issue or sale of
Capital Stock (other than Disqualified Stock) of the Issuer other than to
(x) a Subsidiary of the Issuer, (y) an employee stock ownership plan or
similar trust of the Issuer, or (z) management employees of the Issuer or
any Subsidiary of the Issuer (other than under bona fide employee stock
option plans of the Issuer), or (B) received from the issue or sale of
Disqualified Stock or debt securities of the Issuer other than to (x) a
Subsidiary of the Issuer, (y) an employee stock ownership plan or similar
trust of the Issuer, or (z) employees of the Issuer or any Subsidiary of
the Issuer (other than under bona fide employee stock option plans of the
Issuer); provided that such Disqualified Stock or debt securities have been
converted after the Issue Date into Capital Stock (other than Disqualified
Stock) of the Issuer and in the case of either clause (A) or (B), excluding
any net cash proceeds from a Qualified Equity Offering to the extent used
to redeem the Notes pursuant to Section 3.7(b) and excluding any amounts
utilized for any redemption, repurchase, retirement, defeasance or other
acquisition referred to in clause (b) of the next paragraph, plus (iii) to
the extent that any Restricted Investment that was made after the Issue
Date is disposed of or otherwise liquidated or repaid for cash, 100% of the
lesser of (A) the net after-tax cash return of capital with respect to such
Restricted Investment and (B) the initial book value of such Restricted
Investment, plus (iv) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the Issue Date, 100% of the
lesser of (A) the Fair Market Value of the Issuer's Investment in such
Subsidiary as of the date of such redesignation or (B) the Fair Market
Value of the Issuer's Investment in such Subsidiary as of the date on which
such Subsidiary was originally designated as an Unrestricted Subsidiary.
<PAGE>
84
The foregoing provisions will not prohibit:
(a) the payment of any dividend within 60 days after the date of its
declaration, if at such date of declaration such payment would have
complied with the provisions of the Indenture;
(b) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, the redemption, repurchase,
retirement, defeasance or other acquisition of (i) any Indebtedness that is
by its terms subordinated to the Notes or (ii) any Equity Interests of the
Issuer, in each case from the Capital Stock Sale Proceeds from the
substantially concurrent sale of Capital Stock, other than Disqualified
Stock, of the Issuer other than to (A) a Subsidiary of the Issuer, (B) an
employee stock ownership plan or similar trust of the Issuer, or (C)
management employees of the Issuer or any Subsidiary of the Issuer (other
than under bona fide employee stock option plans of the Issuer); provided,
that the amount of any such Capital Stock Sale Proceeds so utilized shall
be excluded from clause (c)(ii) of the preceding paragraph;
(c) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, the redemption, repurchase,
retirement, defeasance or other acquisition of Indebtedness that is by its
terms subordinated to the Notes with the net cash proceeds from an
Incurrence of Permitted Refinancing Indebtedness that is by its terms
subordinated to the Notes;
(d) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, the redemption, repurchase,
retirement or other acquisition of any Indebtedness or Preferred Stock
following a Change of Control under (i) provisions of such Indebtedness or
Preferred Stock substantially similar to the provision of Section 4.14
hereof; provided that the Issuer shall previously have complied
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85
with the provisions of such Section 4.14 (including making any applicable
Change of Control Payment), or (ii) Section 4.14 hereof;
(e) the payment of any dividend by a Subsidiary of the Issuer to the holders of
such Subsidiary's common equity Capital Stock in their capacity as such on
a pro rata basis;
(f) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, (i) the repurchase,
redemption or other acquisition or retirement for value by the Issuer, or
the distribution by the Issuer to any third party of funding to permit the
repurchase, redemption or other acquisition or retirement for value, of any
Equity Interests of the Issuer or any Subsidiary of the Issuer held by any
employee or former employee of the Issuer or any of the Issuer's
Subsidiaries under any equity subscription agreement, stock option
agreement or other similar agreement; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed the sum of (A) Euro500,000 in any twelve-month
period or Euro2,500,000 in the aggregate, plus (B) the net cash proceeds of
any "key man" life insurance policy received by the Issuer with respect to
the owner of any such employee Equity Interests so acquired, plus (C) the
net cash proceeds paid to the Issuer in connection with the issuance or
exercise of any such employee Equity Interests so acquired, minus (D)
repurchases of Equity Interests deemed to occur upon exercise of stock
options if such Equity Interests represent a portion of the exercise price
of such options; and (ii) the making of loans or advances to employees of
the Issuer or any of the Issuer's Subsidiaries in the ordinary course of
business, but in any event not to exceed Euro1,000,000 in the aggregate
outstanding at any one time;
(g) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, Investments in joint
ventures or other arrangements, including without limitation Investments in
partnerships, limited liability companies, corporations or other entities,
in each case engaged in a Permitted Business, in an aggregate amount,
measured as of the initial date such Investments are made, at any time not
to exceed fifty percent (50%) of the aggregate Capital Stock Sale
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86
Proceeds received since the Issue Date; provided, that the amount of any
such Capital Stock Sale Proceeds so utilized shall be excluded from any
calculation pursuant to clause (c)(ii) of the preceding paragraph or clause
(xvi) of the definition of "Permitted Indebtedness"; and
(h) so long as no Default or Event of Default shall have occurred and be
continuing immediately after such transaction, any Permitted Investment.
The amount of any non-cash Restricted Payment shall be the Fair Market
Value on the date of the Restricted Payment of any asset or property proposed to
be transferred or issued by the Issuer or such Subsidiary, as the case may be,
in connection with the Restricted Payment, as set forth in an Officers'
Certificate delivered to the Trustee as provided below.
Immediately following the date of making any determination of Fair Market
Value required under this Section 4.7, and prior to the date of making any
Restricted Payment on the basis of such determination, the Issuer shall deliver
to the Trustee an Officers' Certificate (i) stating that such Restricted
Payment, if any, is permitted under this Indenture, (ii) setting forth the basis
upon which any calculations or determinations required by this Section 4.7 were
made, and (iii) including a copy of any required resolution of the Board and/or
any opinion or appraisal issued by an accounting, appraisal or investment
banking firm.
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87
Section 4.8. Dividend and Other Payment Restrictions Affecting
-------------------------------------------------
Subsidiaries.
- ------------
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions to
the Issuer or any Restricted Subsidiary of the Issuer on its Capital Stock or
with respect to any other interest or participation in, or measured by, its
profits; (ii) pay any Indebtedness owed to the Issuer or any Restricted
Subsidiary of the Issuer; (iii) make loans or advances to the Issuer or any
Restricted Subsidiary of the Issuer; or (iv) transfer any properties or assets
to the Issuer or any Restricted Subsidiary of the Issuer. However, the foregoing
restrictions shall not apply to encumbrances or restrictions existing under or
by reason of (a) Existing Indebtedness as in effect on the Issue Date and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings of Existing Indebtedness; provided,
that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in the Existing Indebtedness as in effect on the Issue
Date; (b) the Senior Credit Facilities or any New Credit Facility permitted
under the Indenture, if (I) either (x) the encumbrance or restriction applies
only in the event of and during the continuance of any event of default, payment
default or default with respect to a financial covenant contained in such
Indebtedness or agreement, or (y) the Issuer determines at the time any such
Indebtedness is incurred, and, if applicable, at the time of any modification of
the terms of any such encumbrance or restriction, that any such encumbrance or
restriction will not materially affect the Issuer's ability to make principal or
interest payments on the Notes, and (II) the encumbrance or restriction is not
materially more disadvantageous to the Holders of the Notes than is customary in
comparable financings or agreements as determined by the Issuer in good faith;
(c) this Indenture and the Notes; (d) applicable law; (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Issuer or
any of its Restricted Subsidiaries as in effect at the time of such acquisition,
except to the extent such Indebtedness was incurred in
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88
connection with or in contemplation of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the Person, so
acquired; provided that, in the case of Indebtedness, such Indebtedness was
permitted by the terms of this Indenture to be incurred; (f) customary non-
assignment provisions in leases entered into in the ordinary course of business
and consistent with past practices; (g) Purchase Money Indebtedness that imposes
restrictions of the nature described in clause (e) above on the property so
acquired; (h) any agreement for the sale of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale; (i)
Permitted Refinancing Indebtedness; provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced; (j) secured Indebtedness otherwise permitted
to be incurred under the provisions of this Indenture that limits the right of
the debtor to dispose of the assets securing such Indebtedness; (k) provisions
with respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business; (l) protective Liens filed in connection with sale and
leaseback transactions pursuant to Section 4.17; (m) Purchase Money Indebtedness
or other Indebtedness or contractual obligations incurred in transactions
permitted under the provisions of Section 4.16; and (n) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business.
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Section 4.9. Incurrence of Indebtedness and Issuance of Preferred Equity.
-----------------------------------------------------------
The Issuer shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise (collectively,
"incur"), with respect to, any Indebtedness (including Acquired Debt) other than
- ------
Permitted Indebtedness and shall not issue any Disqualified Stock and shall not
permit any of its Subsidiaries to issue any shares of Preferred Stock; provided,
that, to the extent otherwise permitted by this Indenture, the Issuer may incur
Indebtedness (including Acquired Debt) other than Permitted Indebtedness, or
issue shares of Disqualified Stock if (i) no Default or Event of Default shall
have occurred and be continuing or would occur as a consequence of such action,
and (ii) the Fixed Charge Coverage Ratio for the Issuer's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such action is taken would have been at
least 2.00 to 1, determined on a pro forma basis (including a pro forma
application of the net proceeds of such action), as if such action had been
taken at the beginning of such four-quarter period.
Notwithstanding the first paragraph of this Section 4.9, the Issuer shall
not incur (i) any Indebtedness if such Indebtedness is subordinate or junior in
ranking in any respect to any other Indebtedness, unless such Indebtedness is
expressly subordinated in right of payment to the Notes, or (ii) any secured
Indebtedness, other than Permitted Secured Indebtedness, unless
contemporaneously with any such incurrence effective provision is made to secure
the Notes equally and ratably with such secured Indebtedness for so long as such
secured Indebtedness is secured by a Lien.
Neither the Issuer nor any Restricted Subsidiary will incur any
Indebtedness if the proceeds of any such Indebtedness are used, directly or
indirectly, to refinance any Indebtedness of the Issuer that is by its terms
subordinated in right of payment to the
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Notes unless such Indebtedness is subordinated to the Notes to at least the same
extent as such Indebtedness so refinanced.
Accrual of interest, accretion or amortization of original issue discount,
the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
shall be included in the Fixed Charges of the Issuer as accrued, but will not be
deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock
for purposes of this Section 4.9.
In the event that an item of Indebtedness is permitted to be included under
more than one of the clauses of the definition of "Permitted Indebtedness" or is
permitted to be incurred other than as Permitted Indebtedness under this Section
4.9, the Issuer shall, in its discretion, classify and reclassify such item of
Indebtedness in any manner that complies with the requirements of this Section
4.9.
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91
Section 4.10. Asset Sales.
-----------
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Issuer or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such Asset Sale at least equal to the Fair Market Value of the assets or Equity
Interests issued or sold or otherwise disposed of as evidenced by a resolution
of the Board set forth in an Officers' Certificate delivered to the Trustee and
(ii) at least 85% of the consideration received by the Issuer or such Restricted
Subsidiary in such Asset Sale is in the form of cash or Cash Equivalents;
provided, that the amount of (x) any liabilities shown on the Issuer's or such
Restricted Subsidiary's most recent balance sheet (other than contingent
liabilities and liabilities that are expressly subordinated in right of payment
to the Notes) that are assumed by an unaffiliated third party in connection with
such Asset Sale under assumption, novation or other similar agreements that
release the Issuer or such Restricted Subsidiary from any and all further
liability on such liabilities and (y) any securities, notes or other obligations
received by the Issuer or any such Restricted Subsidiary from an unaffiliated
third party in connection with such Asset Sale that are contemporaneously
(subject to ordinary settlement periods not exceeding 10 business days)
converted by the Issuer or such Restricted Subsidiary into cash or Cash
Equivalents, shall, to the extent of such liabilities so assumed or such cash or
Cash Equivalents so received, be deemed to be cash or Cash Equivalents for
purposes of this Section 4.10.
Within 270 days after the receipt of any Net Proceeds from an Asset Sale,
the Issuer shall, at its option, apply such Net Proceeds to (i) repay Senior
Debt; (ii) repay any Indebtedness, other than Indebtedness that is by its terms
subordinated to the Notes and, in the case of any revolving Indebtedness,
correspondingly permanently reduce revolving borrowing commitments with respect
thereto; (iii) the acquisition of a majority of the assets or Voting Stock of, a
Permitted Business; (iv) the making of capital expenditures; or (v) the
acquisition of other assets that are used or useful in a Permitted Business.
Pending the final application of any
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such Net Proceeds, the Issuer may temporarily reduce revolving credit borrowings
or otherwise invest such Net Proceeds in any manner that is not prohibited by
this Indenture. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph shall be deemed to
constitute "Excess Proceeds." On the earliest to occur of (i) the 271st day
---------------
following an Asset Sale, or (ii) such earlier date, if any, that the Board
determines not to apply the Net Proceeds relating to such Asset Sale as set
forth in the first sentence of this paragraph, such aggregate Excess Proceeds
which have not been so applied on or before such date shall be applied to make
an Asset Sale Offer on a pro rata basis to (A) all Holders of the Notes, and (B)
all holders of other Indebtedness of the Issuer or any Restricted Subsidiary
that is not by its terms expressly subordinated in right of payment to the Notes
to whom an Asset Sale Offer or similar offer is required to be made under the
terms of the instruments governing such other Indebtedness.
Notwithstanding the foregoing, the Issuer may defer the Asset Sale Offer
until aggregate Excess Proceeds exceed Euro5,000,000. To the extent that any
Excess Proceeds remain after consummation of an Asset Sale Offer, the Issuer may
use such Excess Proceeds for any purpose not otherwise prohibited by this
Indenture. If the aggregate principal amount of Indebtedness tendered into such
Asset Sale Offer exceeds the amount of Excess Proceeds, the Trustee shall select
the Notes and other Indebtedness to be purchased in compliance with the
requirements of the principal securities exchange, if any, on which such Notes
are listed, or, if such Notes are not so listed, on a pro rata basis, subject to
the applicable procedures of any clearing organization, among the Holders of
Notes and, if applicable, such other Indebtedness based upon the aggregate
outstanding principal amount or accreted value of the Notes and such other
Indebtedness. Upon completion of an Asset Sale Offer, the amount of Excess
Proceeds shall be reset at zero.
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Section 4.11. Transactions With Affiliates.
----------------------------
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or Guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
---------------------
(i) such Affiliate Transaction is on terms that are no less favorable to the
Issuer or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Issuer or such Restricted Subsidiary
with an unrelated Person; and (ii) the Issuer delivers to the Trustee (a) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of Euro1,000,000, a resolution of
the Board set forth in an Officers' Certificate certifying that such Affiliate
Transaction complies with clause (i) above and that such Affiliate Transaction
has been approved by a majority of the disinterested members of the Board, and
(b) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of Euro2,500,000, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of international standing. Notwithstanding the foregoing, the following
items shall not be deemed to be Affiliate Transactions: (i) any employment
agreement entered into by the Issuer or any of its Restricted Subsidiaries in
the ordinary course of business and consistent with the past practice of the
Issuer or such Restricted Subsidiary, (ii) transactions between or among the
Issuer and/or its Restricted Subsidiaries, (iii) payment of reasonable Board or
supervisory board member fees to Persons who are not otherwise Affiliates of the
Issuer and payments in respect of indemnification obligations owing to members
of the Board or the supervisory board, officers or other individuals under the
organic documents of the Issuer or under written agreements with any such
Person, (iv) Restricted Payments that are permitted by Section 4.7, (v)
transactions pursuant to agreements entered into or in effect prior to the Issue
Date and disclosed under the captions "Certain Transactions and Relationships"
of the Offering Memorandum, including modifications
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94
or amendments to such agreements entered into after the Issue Date; provided,
that the terms of any such agreement as so modified or amended are not, in the
aggregate, less favorable to the Issuer or such Restricted Subsidiary than the
terms of such agreement prior to such modification or amendment, and (vi)
transactions effected in compliance with Section 4.16.
Section 4.12. Liens.
-----
The Issuer shall not, and shall not permit any Subsidiary of the Issuer to,
directly or indirectly, create, incur, assume or suffer to exist any Lien
securing Indebtedness or trade payables on any asset whether owned on the Issue
Date or acquired after such date, or any income or profits from any such asset,
or assign or convey any right to receive income from any such asset, except
Permitted Liens.
Section 4.13. Corporate Existence.
-------------------
Subject to Article 5 hereof, the Issuer shall do or cause to be done all
things necessary to preserve and keep in full force and effect (i) its corporate
existence and the corporate or other existence of each of its Subsidiaries, in
accordance with the respective organizational documents of the Issuer or such
Subsidiary and (ii) the organizational documents and statutory rights, licenses
and franchises of the Issuer and its Subsidiaries; provided, however, that the
Issuer shall not be required to preserve any such right, license or franchise,
or the corporate existence of any of such Subsidiaries, if the Board shall
determine that (a) the preservation thereof is no longer desirable for the
conduct of the Permitted Business of the Issuer and its Subsidiaries, taken as a
whole, and (b) the loss of any such right, license, franchise or corporate
existence is not adverse in any material respect to the Holders of the Notes.
<PAGE>
95
Section 4.14. Repurchase Upon Change of Control.
---------------------------------
(a) Upon the occurrence of a Change of Control, each Holder of Notes shall have
the right to require the Issuer to repurchase all or any part (equal to
Euro1,000 or an integral multiple thereof) of such Holder's Notes pursuant
to the offer described below (the "Change of Control Offer") at a purchase
-----------------------
price in cash equal to the Change of Control Payment. Within 30 days
following any Change of Control, the Issuer shall give notice to the
Holders in accordance with Section 10.2 describing the transaction or
transactions that constitute the Change of Control and offering to
repurchase Notes on the date specified in such notice, which date shall be
no earlier than 30 days and no later than 60 days from the date such notice
is given (the "Change of Control Payment Date"), pursuant to the procedures
------------------------------
required by this Indenture and described in such notice. The Issuer shall
comply with the requirements of Rule 14e-1 under the Exchange Act and any
other securities laws and regulations, including the laws and regulations
of any non-U.S. jurisdiction in which a Change of Control Offer is made,
and with the requirements of any securities exchange on which the Notes are
then listed, in each case to the extent such laws, regulations and
requirements are applicable in connection with a Change of Control Offer
and a repurchase of the Notes as a result of a Change of Control. To the
extent that the provisions of any securities laws or regulations conflict
with the provisions of this Indenture relating to such Change of Control
Offer, the Issuer shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its obligations
relating to such Change of Control Offer described in this Indenture by
virtue thereof.
On the Change of Control Payment Date, the Issuer shall, to the extent
lawful, (i) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (ii) deposit (prior to 10:00 a.m.
London time) with the Paying Agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee the Notes so accepted, together
with an Officers' Certificate stating the aggregate principal amount of
<PAGE>
96
Notes or portions thereof being repurchased by the Issuer. The Paying Agent will
promptly deliver to each Holder of Notes so tendered the Change of Control
Payment for such Notes, and the Trustee will promptly authenticate and deliver
to each Holder a new Note equal in principal amount to any unpurchased portion
of any Note surrendered, if any; provided, that each such new Note will be in a
principal amount of Euro1,000 or an integral multiple thereof. The Issuer will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(a) Notwithstanding anything to the contrary in this Section 4.14, the Issuer
shall not be required to make a Change of Control Offer upon a Change of
Control if a third party (i) makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements
applicable to such Change of Control Offer otherwise required to be made by
the Issuer, and (ii) purchases all Notes validly tendered and not withdrawn
under such Change of Control Offer by making the applicable Change of
Control Payment.
<PAGE>
97
Section 4.15 Designation of Unrestricted Subsidiaries.
----------------------------------------
The Issuer may designate any Subsidiary of the Issuer as an Unrestricted
Subsidiary under this Indenture only if (a) no Default or Event of Default shall
have occurred and be continuing at the time of or after giving effect to such
designation; (b) the Subsidiary of the Issuer so designated has property or
assets with a Fair Market Value in an amount not exceeding Euro1,000 or the
Issuer would be permitted under this Indenture to make an Investment at the time
of and assuming the effectiveness of such designation in an amount equal to the
sum of (I) the aggregate Fair Market Value of Investments represented by Capital
Stock and other Equity Interests of such Subsidiary owned by the Issuer and its
Restricted Subsidiaries of the Issuer on such date, and (II) the aggregate Fair
Market Value of other Investments of the Issuer and its Restricted Subsidiaries
of the Issuer in such Subsidiary on such date; (c) the Issuer would be permitted
to incur Euro1.00 of additional Indebtedness, other than Permitted Indebtedness,
under the Fixed Charge Coverage Ratio test in the first paragraph of Section 4.8
at the time of and assuming the effectiveness of such designation; and (d) the
Subsidiary of the Issuer so designated as an Unrestricted Subsidiary (I) does
not own any Equity Interests of the Issuer or a Restricted Subsidiary of the
Issuer, (II) is not party to any agreement, contract, arrangement or
understanding with the Issuer or any Restricted Subsidiary of the Issuer unless
the terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Issuer or such Restricted Subsidiary than those that might
be obtained at the time from Persons who are not Affiliates of the Issuer, (III)
has at least one member of its management board or analogous body that is
neither a member of the Board or the supervisory board of the Issuer nor an
executive officer of the Issuer or any Restricted Subsidiary of the Issuer and
has at least one executive officer that is neither a member of the Board or the
supervisory board of the Issuer nor an executive officer of the Issuer or any
Restricted Subsidiary of the Issuer, and (IV) is not directly or indirectly
liable for any Indebtedness in aggregate principal amount exceeding
Euro1,000,000, unless the creditors with respect to such Indebtedness have
agreed in writing that they have no recourse, direct or indirect, against the
Issuer or any Restricted Subsidiary of the Issuer in respect of any Obligations
relating to such Indebtedness.
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98
The Issuer shall not, and shall not suffer or permit any Restricted
Subsidiary to, at any time (a) provide direct or indirect credit support for or
a Guarantee of any Indebtedness of any Unrestricted Subsidiary, including of any
undertaking, agreement or instrument evidencing any Indebtedness; (b) be
directly or indirectly liable for any Indebtedness of any Unrestricted
Subsidiary; (c) have any direct or indirect obligation (I) to subscribe for
additional Equity Interests, or otherwise contribute to the capital, of any
Unrestricted Subsidiary, or (II) to maintain or preserve in any manner any
Unrestricted Subsidiary's financial condition, solvency or financial position,
or (III) to cause any Unrestricted Subsidiary to achieve any specified levels of
operating results or capital; or (d) be directly or indirectly liable for any
Indebtedness which permits the holder, upon notice, lapse of time or both, to
declare a default on such Indebtedness, or cause the payment of such
Indebtedness to be accelerated or payable prior to its final Stated Maturity
upon the occurrence of a default with respect to any Indebtedness of any
Unrestricted Subsidiary, including any right to take enforcement action against
such Unrestricted Subsidiary.
On the date of any such designation, the Issuer shall be deemed to have
made an Investment constituting a Restricted Payment under Section 4.7 in an
amount equal to the greater of Euro1,000 or the sum referred to in clause (b) of
the first paragraph of this Section 4.15 for all purposes. The Fair Market
Value of any such Investment shall be determined and documented as provided for
in respect of valuation of non-cash Restricted Payments under Section 4.7.
The Issuer may revoke any designation of a Subsidiary as an Unrestricted
Subsidiary if (a) no Default or Event of Default shall have occurred and be
continuing at the time of and after giving effect to such revocation; and (b)
all Liens, Indebtedness and other Obligations of such Unrestricted Subsidiary
outstanding immediately following such revocation would, if incurred at such
time, be permitted to be incurred by a Restricted Subsidiary of the Issuer for
all purposes under this Indenture. Upon any such revocation such
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99
Subsidiary shall constitute a Restricted Subsidiary for all purposes under this
Indenture.
Any designation or revocation by the Board shall be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
Board giving effect to such designation or revocation and an Officers'
Certificate certifying that such designation or revocation (a) complied with the
foregoing conditions; (b) was permitted under Section 4.7; and (c) was permitted
by the other terms and provisions of this Indenture.
If, at any time, any Unrestricted Subsidiary would fail to meet the
requirements as an Unrestricted Subsidiary set forth in clause (d) of the first
paragraph of this Section 4.15 and in the second paragraph of this Section 4.15,
it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Issuer as of such date, and, if such
Indebtedness is not permitted to be incurred as of such date under Section 4.9,
the Issuer shall be in default of Section 4.9.
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100
Section 4.16 Sales of Accounts Receivable.
----------------------------
The Issuer or any of its Restricted Subsidiaries may sell from time to time
accounts and notes receivable and related assets to an Accounts Receivable
Subsidiary; provided that (i) the aggregate consideration received in each such
sale is at least equal to the aggregate Fair Market Value of the receivables
sold; (ii) no less than 85% of the consideration received in each such sale
consists of either (A) cash or a promissory note (a "Promissory Note") which is
---------------
not subordinated to any Indebtedness or Obligation other than any Indebtedness
or Obligation owing to a financing entity (the "Financier") providing the
---------
financing for the Accounts Receivable Subsidiary with respect to such
receivables and related assets, or (B) an Equity Interest in such Accounts
Receivable Subsidiary; (iii) the initial sale of receivables and related assets
includes all of the receivables and related assets of the Issuer and its
Restricted Subsidiaries that are party to such arrangements that constitute
eligible assets under such arrangements; (iv) the cash proceeds received from
the initial sale less reasonable and customary transaction costs will be deemed
to be Net Proceeds and will be applied to finance an Asset Sale Offer in
accordance with Section 4.10; and (v) the Issuer and its Restricted Subsidiaries
will sell all receivables and related assets that constitute eligible
receivables under such arrangements to the Accounts Receivable Subsidiary no
less frequently than on a weekly basis.
The Issuer (i) will not permit any Accounts Receivable Subsidiary to sell
any receivables and related assets purchased from the Issuer or any of its
Restricted Subsidiaries to any other Person, except on an arm's-length basis and
solely for consideration in the form of cash or Cash Equivalents, (ii) will not
permit the Accounts Receivable Subsidiary to engage in any business or
transaction other than the purchase, financing and sale of receivables and
related assets of the Issuer and its Restricted Subsidiaries and activities
directly incidental thereto, (iii) will not permit any Accounts Receivable
Subsidiary to incur Indebtedness in an amount in excess of the book value of
such Accounts Receivable Subsidiary's total assets, as determined in accordance
with U.S. GAAP, (iv) will, at
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101
least as frequently as monthly, cause the Accounts Receivable Subsidiary to
remit to the Issuer as payment on the outstanding balance of the Promissory
Notes, all available cash or Cash Equivalents not held in a collection account
pledged to a Financier, to the extent not applied to pay or maintain reserves
for reasonable operating expenses of the Accounts Receivable Subsidiary or to
satisfy reasonable minimum operating capital requirements, and (v) will not, and
will not permit any of its Subsidiaries to, sell accounts receivable to any
Accounts Receivable Subsidiary upon the occurrence of the events set forth in
Sections 6.1(g) or 6.1(h) with respect to such Accounts Receivable Subsidiary.
Section 4.17 Sale And Leaseback Transactions.
-------------------------------
The Issuer shall not, and shall not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided, that
the Issuer or a Restricted Subsidiary of the Issuer may enter into a sale and
leaseback transaction if (i) the Issuer or such Restricted Subsidiary could have
(a) incurred Indebtedness (other than Permitted Indebtedness) in an amount equal
to the Attributable Debt relating to such sale and leaseback transaction
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.9 and (b) incurred a Lien to secure such Indebtedness
pursuant to Section 4.12, (ii) the gross cash proceeds of such sale and
leaseback transaction are at least equal to the Fair Market Value (as set forth
in an Officers' Certificate delivered to the Trustee) of the property that is
the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and the Issuer or
such Restricted Subsidiary applies the proceeds of such transaction in
compliance with, Section 4.10.
Notwithstanding the first paragraph of this Section 4.17, sale and
leaseback transactions that are otherwise permitted under this Indenture will be
permitted at any time between (i) the Issuer and a Wholly Owned Restricted
Subsidiary of the Issuer, or (ii) Wholly Owned Restricted Subsidiaries of the
Issuer.
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102
Section 4.18 Restriction On Preferred Stock of Subsidiaries.
----------------------------------------------
The Issuer shall not permit any of its Restricted Subsidiaries to issue any
Preferred Stock, or permit any Person to own or hold an interest in any
Preferred Stock of any such Restricted Subsidiary, except for Preferred Stock
issued to and held by the Issuer or a Wholly Owned Restricted Subsidiary of the
Issuer.
Section 4.19 Limitation on Equity Interests in Restricted Subsidiaries.
---------------------------------------------------------
The Issuer will not, and will not permit any Restricted Subsidiary of the
Issuer to, transfer, convey, sell, lease or otherwise dispose of any Capital
Stock in any Restricted Subsidiary of the Issuer to any Person, other than the
Issuer or a Wholly Owned Restricted Subsidiary of the Issuer, unless (i) such
transfer, conveyance, sale, lease or other disposition is of all the Capital
Stock in such Restricted Subsidiary of the Issuer; and (ii) the net cash
proceeds from such transfer, conveyance, sale, lease or other disposition are
applied to finance an Asset Sale Offer in accordance with Section 4.10. The
Issuer will not permit any Restricted Subsidiary of the Issuer to issue any of
its Equity Interests, other than shares of its Capital Stock constituting
directors' qualifying shares or owned by officers or agents of such Person
solely in their capacity as such, to any Person other than to the Issuer or a
Wholly Owned Restricted Subsidiary of the Issuer. The foregoing restrictions
will not apply to any issuance or disposition of shares of GO Solutions GmbH to
certain individuals currently serving as officers of such entity as required
pursuant to the agreement between the Issuer and such entity as in effect on the
Issue Date.
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103
Section 4.20 Payments For Consent.
--------------------
The Issuer shall not, and shall not permit or suffer any of its
Subsidiaries or Affiliates to, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any Notes for or as an inducement to any consent, waiver or amendment of any
of the terms or provisions of this Indenture or the Notes, unless such
consideration is offered to all Holders of the Notes and is paid to all Holders
of the Notes that consent, waive or agree to amend in the time frame set forth
in the solicitation documents relating to such consent, waiver or agreement.
Section 4.21 Limitations on Issuances of Guarantees of Indebtedness.
------------------------------------------------------
The Issuer shall not permit any Restricted Subsidiary of the Issuer,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of the Issuer unless such Subsidiary simultaneously
executes and delivers a supplemental indenture to this Indenture providing for
the Guarantee of the payment of the Notes by such Subsidiary, which Guarantee
shall be senior to such Subsidiary's Guarantee of or pledge to secure such other
Indebtedness, unless such other Indebtedness is Senior Debt, in which case the
Guarantee of the Notes may be equal with the Guarantee of such Senior Debt.
Notwithstanding the foregoing, any such Guarantee by a Subsidiary of the Notes
may provide by its terms that it shall be automatically and unconditionally
released and discharged upon any sale, exchange or transfer, to any Person not
an Affiliate of the Issuer, of all of the Issuer's Equity Interests in, or all
or substantially all the assets of, such Restricted Subsidiary, which sale,
exchange or transfer is made in compliance with the applicable provisions of
this Indenture.
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104
Section 4.22 Restrictions On Business Activities.
-----------------------------------
Except to such extent as would not be material to the Issuer and its
Restricted Subsidiaries taken as a whole, the Issuer shall not, and shall not
permit any Restricted Subsidiary of the Issuer to, engage in any business other
than (i) a Permitted Business and (ii) the making of Permitted Investments and
engaging in a business in connection with any such Permitted Investment.
Section 4.23 Additional Amounts.
------------------
All payments made by the Issuer on the Notes shall be made without
withholding or deduction for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature (collectively,
"Taxes") imposed or levied by or on behalf of any Relevant Taxing Jurisdiction
- ------
unless the withholding or deduction of such Taxes is then required by law. If
any deduction or withholding for, or on account of, any Taxes of any Relevant
Taxing Jurisdiction, shall at any time be required on any payments made by the
Issuer with respect to the Notes, including payments of principal, redemption
price, interest, Liquidated Damages or premium, the Issuer will pay such
Additional Amounts as may be necessary in order that the net amounts received in
respect of such payments by the Holders of the Notes or the Trustee, as the case
may be, after such withholding or deduction, equal the respective amounts which
would have been received in respect of such payments in the absence of such
withholding or deduction; except that no such Additional Amounts will be payable
with respect to (i) any payments on a Note held by or on behalf of a Holder or
beneficial owner who is liable for such Taxes in respect of such Note by reason
of the Holder or beneficial owner having some connection with the Relevant
Taxing Jurisdiction (including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment in, or being
physically present in, the Relevant Taxing Jurisdiction) other than by the mere
holding of such Note or enforcement of rights thereunder or the receipt of
payments in respect thereof, (ii) any Taxes that are imposed or withheld as a
result of a change in law after the Issue Date where such withholding or
imposition is by reason of the failure of the Holder or beneficial owner of the
Note to comply with any request by the Issuer to provide information concerning
the nationality, residence or identity of such Holder or beneficial owner or to
make any declaration or similar claim or satisfy any information or reporting
requirement, which is required or imposed by a statute, treaty, regulation or
administrative practice of the Relevant Taxing Jurisdiction as a precondition to
exemption from all or part of such Taxes, (iii) except in the case of the
winding up of the Issuer, any Note presented for payment (where presentation is
required) in the Relevant Taxing Jurisdiction, or (iv) any Note presented for
payment (where presentation is required) more than
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105
30 days after the relevant payment is first made available for payment to the
Holder. In addition, such Additional Amounts shall also not be payable where,
had the beneficial owner of the Note been the Holder of the Note, such
beneficial owner would not have been entitled to payment of Additional Amounts
by reason of clauses (i) to (iv) inclusive above.
Upon request, the Issuer shall provide the Trustee with documentation
reasonably satisfactory to the Trustee evidencing the payment of Additional
Amounts. Copies of such documentation will be made available to the Holders upon
request.
The Issuer shall pay any present or future stamp, court or documentary
taxes, or any other excise or property taxes, charges or similar levies which
arise in any jurisdiction from the execution, delivery or registration of the
Notes or any other document or instrument referred to therein, or the receipt of
any payments with respect to the Notes, excluding any such taxes, charges or
similar levies imposed by any jurisdiction outside of the Federal Republic of
Germany, the United States of America or any jurisdiction in which a Paying
Agent is located, other than those resulting from, or required to be paid in
connection with, the enforcement of the Notes or any other such document or
instrument following the occurrence of any Event of Default with respect to the
Notes.
Section 4.24 Limitation on Repayment upon a Change of Control.
------------------------------------------------
The Issuer will not make an offer to repurchase any Indebtedness of the
Issuer or any Restricted Subsidiary that is by its terms subordinated to the
Notes or any Preferred Stock of the Issuer if the Issuer is required to do so in
connection with a change of control under such Indebtedness or Preferred Stock
until at least 91 days after the occurrence of such change of control. If such
change of control constitutes a Change of Control under this Indenture, the
Issuer shall not make any payment or deposit in respect of any repurchase of any
such Indebtedness or Preferred Stock for 30 days following the Change of Control
Payment Date relating to the Notes following such Change of Control.
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106
ARTICLE V
SUCCESSORS
Section 5.1 Merger, Consolidation or Sale of Assets.
---------------------------------------
The Issuer shall not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
properties or assets in one or more related transactions, to another Person or
group of Persons, unless (i) the Issuer is the surviving Person or the Person
formed by or surviving any such consolidation or merger (if other than the
Issuer) or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a stock corporation or limited liability
company organized or existing under the laws of the Federal Republic of Germany,
the United Kingdom, the Kingdoms of Denmark, Norway or Sweden, the Republic of
Finland or the United States or any State thereof or the District of Columbia;
(ii) the entity or Person formed by or surviving any such consolidation or
merger (if other than the Issuer) or the entity or Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Issuer under the Registration Rights
Agreement, the Notes and this Indenture pursuant to supplemental agreements in a
form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; (iv) except in the case of a
merger or consolidation of the Issuer with or into a Wholly Owned Restricted
Subsidiary of the Issuer, the Issuer or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Issuer), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made, at the time of such transaction and after giving pro forma
effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, (A) will be permitted to incur at least Euro1.00
of additional Indebtedness (other than Permitted Indebtedness) under the Fixed
Charge Coverage Ratio test set forth in the first paragraph of Section 4.9
hereof or (B) will have a Fixed Charge Coverage Ratio equal to or greater than
the Fixed Charge Coverage Ratio immediately prior to such transaction; (v) the
Issuer shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture (if any) comply with this Indenture; and (vi) the
Issuer shall have delivered to the Trustee an opinion of tax counsel reasonably
acceptable to the Trustee stating that (A) Holders of the Notes will not
recognize income, gain or loss
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for Federal Republic of Germany or United States Federal income tax purposes as
a result of such transaction, (B) any payment of principal, redemption price or
purchase price of, premium, if any, and interest and Liquidated Damages and
Additional Amounts, if any, on the Notes by the Issuer to a Holder after the
consolidation, merger, conveyance, transfer or lease of assets will not be
subject to Taxes, and (C) no other Taxes on income, including taxable capital
gains, will be payable under the tax laws of any Relevant Taxing Jurisdiction by
a Holder who is or who is deemed to be a non-resident of the Relevant Taxing
Jurisdiction in respect of the acquisition, ownership or disposition of the
Notes, including the receipt of principal of, premium, if any, and interest and
Liquidated Damages and Additional Amounts, if any, paid pursuant to such Notes.
Notwithstanding clause (iv) of the first sentence of this Section 5.1, the
Issuer shall be permitted to reorganize as a corporation in the United States of
America or any State thereof or the District of Columbia; provided that the
Issuer shall have delivered to the Trustee an Opinion of Counsel confirming that
the Holders of the Notes will not recognize income, gain or loss for Federal
Republic of Germany or United States federal income tax purposes as a result of
such reorganization and will be subject to Federal Republic of Germany or United
States federal income tax in the same manner and at the same times as would have
been the case if such reorganization had not occurred, and the conditions set
forth in clauses (i), (ii), (iii), (v) and (vi) of the first sentence of this
Section 5.1 are satisfied.
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Section 5.2 Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger, or any sale, assignment, transfer, lease,
conveyance or other disposition of all or substantially all of the assets of the
Issuer in accordance with Section 5.1 hereof, the successor Person formed by
such consolidation or into or with which the Issuer is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the Issuer shall refer instead to the
successor Person and not to the Issuer), and may exercise every right and power
of the Issuer under this Indenture with the same effect as if such successor
Person had been named as an Issuer herein; provided, however, that the
predecessor Issuer shall not be relieved from the obligation to pay the
principal of and interest and Additional Amounts and Liquidated Damages, if any,
on the Notes except in the case of a sale of all of an Issuer's assets that
meets the requirements of Section 5.1 hereof.
ARTICLE VI
DEFAULTS AND REMEDIES
Section 6.1 Events of Default.
-----------------
Each of the following constitutes an "Event of Default":
----------------
(a) default for 30 days in the payment when due of interest on, or Additional
Amounts or Liquidated Damages with respect to, the Notes;
(b) default in payment when due of the principal of or premium, if any, on the
Notes;
(c) failure by the Issuer or any of its Subsidiaries to comply with Section
4.7, 4.9, 4.10 or 4.14;
<PAGE>
109
(d) failure by the Issuer or any of its Subsidiaries for 60 days after notice
to comply with any of its other agreements in this Indenture or the Notes;
(e) default under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness
for money borrowed by the Issuer or any of its Restricted Subsidiaries (or
the payment of which is guaranteed by the Issuer or any of its Restricted
Subsidiaries) whether such Indebtedness or Guarantee now exists, or is
created after the Issue Date, which default:
(i) is caused by a failure to pay principal of or premium, if any, or interest
on such Indebtedness prior to the expiration of the grace period provided
in such Indebtedness on the date of such default (a "Payment Default") or
---------------
(ii) results in the acceleration of such Indebtedness prior to its express
maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
Euro5,000,000 or more;
(f) failure by the Issuer or any of its Restricted Subsidiaries to pay final
judgments (other than those as to which insurance coverage or indemnity
from an insurance company with assets in excess of Euro100,000,000 has been
acknowledged in writing) aggregating in excess of Euro5,000,000, which
judgments are not paid, discharged or stayed for a period of 30 days; and
(g) (1) the Issuer, (2) any Significant Subsidiary (other than an Accounts
Receivable Subsidiary) or (3) any group of Restricted Subsidiaries (other
than an Accounts Receivable Subsidiary) of the Issuer that, taken as a
whole, would constitute a
<PAGE>
110
Significant Subsidiary (each a "Relevant Entity") pursuant to or within
---------------
the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an involuntary
case,
(iii) consents to the appointment of a custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against a Relevant Entity in an involuntary case;
(ii) appoints a custodian of a Relevant Entity; or
(iii) orders the liquidation of a Relevant Entity;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
<PAGE>
111
Section 6.2 Acceleration.
------------
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration,
the principal of, premium, if any, and accrued and unpaid interest and
Additional Amounts and Liquidated Damages, if any, on, such Notes shall be due
and payable immediately. Notwithstanding the foregoing, in the case of an Event
of Default described in Sections 6.1(g) or 6.1(h), all outstanding Notes will
become due and payable without further action or notice.
In the event of a declaration of acceleration of the Notes because an Event
of Default has occurred and is continuing as a result of the acceleration of any
Indebtedness described in clause (e) of Section 6.1, the declaration of
acceleration of the Notes shall be automatically annulled if the holders of any
Indebtedness described in clause (e) of Section 6.1 have rescinded the
declaration of acceleration in respect of such indebtedness within 30 days of
the date of such declaration and if (a) the annulment of the acceleration of
Notes would not conflict with any judgment or decree of a court of competent
jurisdiction and (b) all existing Events of Default, except nonpayment of
principal or interest, Additional Amounts or Liquidated Damages on the Notes
that became due solely because of the acceleration of the Notes, have been cured
or waived.
Section 6.3 Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy to collect the payment of principal, premium, if any, and
interest and Additional Amounts and Liquidated Damages, if any, on the Notes or
to enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the
<PAGE>
112
proceeding. A delay or omission by the Trustee or any Holder of a Note in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
Section 6.4 Waiver of Past Defaults.
---------------------
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Additional Amounts and Liquidated
Damages, if any, or interest on, the Notes (including in connection with an
offer to purchase); provided, however, that the Holders of a majority in
aggregate principal amount of the then outstanding Notes may rescind an
acceleration and its consequences, including any related payment default that
resulted from such acceleration. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom shall be deemed to have
been cured for every purpose of this Indenture; but no such waiver shall extend
to any subsequent or other Default or impair any right consequent thereon.
<PAGE>
113
Section 6.5 Control by Majority.
-------------------
Holders of a majority in principal amount of the then outstanding Notes may
direct the time, method and place of conducting any proceeding for exercising
any remedy available to the Trustee or exercising any trust or power conferred
on it. However, the Trustee may refuse to follow any direction that conflicts
with law or this Indenture that the Trustee determines may be unduly prejudicial
to the rights of other Holders of Notes or that may involve the Trustee in
personal liability. The Trustee may take any other action which it deems proper
which is not inconsistent with any such discretion. Notwithstanding any
provisions to the contrary in this Indenture, the Trustee shall not be obligated
to take any action with respect to the provisions of the last paragraph of
Section 6.2 hereof unless directed to do so pursuant to this Section 6.5.
Section 6.6 Limitation on Suits.
-------------------
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the then outstanding
Notes make a written request to the Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and provide to the Trustee
indemnity satisfactory to the Trustee against any loss, liability or
expense;
(d) the Trustee does not comply with the request within 60 days after receipt
of the request and the offer and the provision of indemnity; and
<PAGE>
114
(e) during such 60-day period the Holders of a majority in principal amount of
the then outstanding Notes do not give the Trustee a direction inconsistent
with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.7 Rights of Holders of Notes to Receive Payment.
---------------------------------------------
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium and Additional Amounts
and Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of the Issuer with the
intention of avoiding payment of the premium that the Issuer would have had to
pay if the Issuer then had elected to redeem the Notes pursuant to the optional
redemption provisions of this Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to March 31,
2005, by reason of any willful action or inaction taken or not taken by or on
behalf of the Issuer with the intention of avoiding the prohibition on
redemption of the Notes prior to such date, then the premium specified in this
Indenture with respect to redemption upon the occurrence of a Change of Control
prior to such date shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the Notes.
<PAGE>
115
Section 6.8 Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.1(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Issuer for the whole amount of principal
of, premium and Additional Amounts and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest, Additional Amounts and Liquidated Damages and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agent and counsel and all other amounts due to the
Trustee pursuant to Section 7.7 hereof.
<PAGE>
116
Section 6.9 Trustee May File Proofs of Claim.
--------------------------------
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuer
(or any other obligor upon the Notes), its creditors or its property and shall
be entitled and empowered to collect, receive and distribute any money or other
property payable or deliverable on any such claims and any custodian in any such
judicial proceeding is hereby authorized by each Holder to make such payments to
the Trustee, and in the event that the Trustee shall consent to the making of
such payments directly to the Holders, to pay to the Trustee any amount due to
it for the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.7 hereof. To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.7 hereof out of the estate in
any such proceeding, shall be denied for any reason, payment of the same shall
be secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise. Nothing herein contained shall
be deemed to authorize the Trustee to authorize or consent to or accept or adopt
on behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10 Priorities.
----------
If the Trustee collects any money pursuant to this Article 6, it shall pay
out the money in the following order:
<PAGE>
117
First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, Additional Amounts and Liquidated Damages, if any, and
interest, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for principal, premium and Additional
Amounts and Liquidated Damages, if any, and interest, respectively; and
Third: to the Issuer or to such party as a court of competent jurisdiction
shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11 Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this Indenture
or in any suit against the Trustee for any action taken or omitted by it as a
Trustee, a court in its discretion may require the filing by any party litigant
in the suit of an undertaking to pay the costs of the suit, and the court in its
discretion may assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Trustee, a suit by a Holder of a Note pursuant
to Section 6.7 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
<PAGE>
118
ARTICLE VII
TRUSTEE
Section 7.1 Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent man
would exercise or use under the circumstances in the conduct of his own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the express
provisions of this Indenture and the Trustee need perform only those duties
that are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture against
the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions
expressed therein, upon certificates (or similar documents) or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture. However, the Trustee shall examine the certificates (or similar
documents) and opinions which by any provision hereof are specifically
required to be furnished to the Trustee to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).
(c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act, or its own willful misconduct,
except that:
<PAGE>
119
(i) this paragraph does not limit the effect of paragraph (b) of this Section
7.1;
(ii) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer, unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
(iii)the Trustee shall not be liable with respect to any action it takes or
omits to take in good faith in accordance with a direction received by it
from the Holders of a majority in principal amount of outstanding Notes or
pursuant to Section 6.5 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section 7.1.
(e) No provision of this Indenture shall require the Trustee to expend or risk
its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money received by it
except as the Trustee may agree in writing with the Issuer. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
Section 7.2 Rights of Trustee. Subject to Section 7.1:
-----------------
(a) The Trustee may conclusively rely upon any document reasonably believed by
it to be genuine and to have been signed or presented by the proper Person.
<PAGE>
120
(b) The Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or documents, but the Trustee, in its discretion
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Issuer, personally or by agent or attorney.
(c) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee
may consult with counsel of its selection and the advice of such counsel or
any Opinion of Counsel shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(d) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent or attorney
appointed with due care.
(e) The Trustee shall not be liable for any action it takes or omits to take in
good faith that it believes to be authorized or within the rights or powers
conferred upon it by this Indenture.
(f) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Issuer shall be sufficient if signed
by an Officer of such Issuer. A permissive right granted to the Trustee
hereunder shall not be deemed to be an obligation to act.
(g) The Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity
<PAGE>
121
against the costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction.
(h) The Trustee shall not be charged with the knowledge of any Default or Event
of Default unless either (i) a Responsible Officer of the Trustee shall
have actual knowledge of such Default or Event of Default, or (ii) written
notice of Default or such Event of Default shall have been received by the
Trustee at the Corporate Trust Office of the Trustee by the Issuer or by
any Holder and such notice references the Notes and this Indenture.
(i) The rights, privileges, protections, immunities and benefits given to the
Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its
capacities hereunder, and to each agent, custodian and other Person
employed to act hereunder.
Section 7.3 Individual Rights of Trustee.
----------------------------
The Trustee, in its individual or any other capacity, may become the owner
or pledgee of Notes and may otherwise deal with the Issuer or any Affiliate of
the Issuer with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest as provided in
TIA (S) 310(b) it must eliminate such conflict within 90 days, apply to the
Commission for permission to continue as trustee or resign. Any Agent may do
the same with like rights and duties. The Trustee is also subject to Sections
7.10 and 7.11 hereof.
<PAGE>
122
Section 7.4 Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuer's use of the proceeds from the Notes or any money
paid to the Issuer or upon the Issuer's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.5 Notice of Defaults.
------------------
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after it occurs. Except in the case
of a Default or Event of Default in payment of principal of, premium, if any, or
interest, Additional Amounts or Liquidated Damages, if any, on any Note, the
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of the Holders of the Notes.
Section 7.6 Reports by Trustee to Holders of the Notes.
------------------------------------------
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA (S) 313(a) (but if no event described in TIA (S)
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA (S)
313(b)(2).
<PAGE>
123
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Issuer and filed with the Commission and each stock
exchange on which the Notes are listed in accordance with TIA (S) 313(d). The
Issuer shall promptly notify the Trustee when the Notes are listed or delisted
on any stock exchange.
Section 7.7 Compensation and Indemnity.
--------------------------
The Issuer shall pay to the Trustee from time to time such compensation as
the Issuer and the Trustee shall from time to time agree in writing for its
acceptance of this Indenture and services hereunder. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Issuer shall reimburse the Trustee promptly upon request for all
reasonable disbursements, advances and expenses incurred or made by it in
addition to the compensation for its services. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Issuer shall indemnify and hold harmless the Trustee against any and
all losses, liabilities, claims or expenses incurred by the Trustee arising out
of or in connection with the acceptance or administration of its duties under
this Indenture, including the costs and expenses of enforcing this Indenture
against the Issuer (including this Section 7.7) and defending itself against any
claim (whether asserted by the Issuer or any Holder or any other Person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent any such claim, loss, liability or
expense may be attributable to its negligence or bad faith. The Trustee shall
notify the Issuer promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Issuer shall not relieve the Issuer of
its obligations hereunder. The Issuer shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Issuer shall pay the reasonable fees and expenses of such counsel. The Issuer
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
<PAGE>
124
The obligations of the Issuer under this Section 7.7 shall survive the
resignation and removal of the Trustee and the satisfaction and discharge of
this Indenture.
To secure the Issuer's payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest and
Additional Amounts and Liquidated Damages, if any, on particular Notes. Such
Lien shall survive the resignation and removal of the Trustee and the
satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1 (h) or (i) hereof occurs, the expenses and the
compensation for the services (including the fees and expenses of its Agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
Section 7.8 Replacement of Trustee.
----------------------
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Issuer. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Issuer in writing. The Issuer may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for relief
is entered with respect to the Trustee under any Bankruptcy Law;
<PAGE>
125
(c) a custodian or public officer takes charge of the Trustee or its property;
or
(d) the Trustee becomes incapable of acting as such hereunder.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Issuer shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuer.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuer, or the
Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder of a Note who has been
a Holder of a Note for at least six months, fails to comply with Section 7.10,
such Holder of a Note may petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuer. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders of the Notes. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the
<PAGE>
126
Issuer's obligations under Section 7.7 hereof shall continue for the benefit of
the retiring Trustee.
Section 7.9 Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10 Eligibility; Disqualification.
-----------------------------
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least
Euro100,000,000 as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA (S) 310(a)(1), (2) and (5). The Trustee is subject to TIA (S) 310(b).
Section 7.11 Preferential Collection of Claims Against Issuer.
------------------------------------------------
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
<PAGE>
127
ARTICLE VIII
LEGAL DEFEASANCE AND
COVENANT DEFEASANCE
Section 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
--------------------------------------------------------
The Issuer may, at the option of its Board evidenced by a resolution set
forth in an Officers' Certificate delivered to the Trustee, at any time, elect
to have either Section 8.2 or 8.3 hereof be applied to all outstanding Notes
upon compliance with the conditions set forth below in this Article 8.
Section 8.2 Legal Defeasance and Discharge.
------------------------------
Upon the Issuer's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, the Issuer shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
-----
Defeasance"). For this purpose, Legal Defeasance means that the Issuer shall be
- ----------
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.5 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all of its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Issuer, shall execute proper instruments acknowledging
the same), except for the following provisions which shall survive until
otherwise terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive solely from the trust
fund described in Section 8.4 hereof, and as more fully set forth in such
Section, payments in respect of the principal of, premium, if any, and
interest and
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128
Additional Amounts and Liquidated Damages, if any, on such Notes when such
payments are due;
(b) the Issuer's obligations with respect to such Notes under Article 2 and
Section 4.2 hereof;
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Issuer's obligations in connection therewith; and
(d) this Article 8.
Subject to compliance with this Article 8, the Issuer may exercise its
option under this Section 8.2 notwithstanding the prior exercise of its option
under Section 8.3 hereof.
<PAGE>
129
Section 8.3 Covenant Defeasance.
-------------------
Upon the Issuer's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, the Issuer shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be released from its obligations
under the covenants contained in Sections 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.14,
4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21, 4.22 and 4.24 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in Section
8.4 are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
-------------------
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Issuer may omit to comply with and shall have no liability in respect of any
term, condition or limitation set forth in any such covenant, whether directly
or indirectly, by reason of any reference elsewhere herein to any such covenant
or by reason of any reference in any such covenant to any other provision herein
or in any other document and such omission to comply shall not constitute a
Default or an Event of Default under Section 6.1 hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon the Issuer's exercise under Section 8.1
hereof of the option applicable to this Section 8.3 hereof, subject to the
satisfaction of the conditions set forth in Section 8.4 hereof, Sections 6.1(c)
through 6.1(f) hereof shall not constitute Events of Default.
Section 8.4 Conditions to Legal or Covenant Defeasance.
------------------------------------------
The following shall be the conditions to the application of either Section
8.2 or 8.3 hereof to the outstanding Notes:
<PAGE>
130
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Issuer must irrevocably deposit with the Trustee, in trust, for the
benefit of the Holders, cash in Euros or Government Obligations payable in
Euros, or a combination thereof, in such amounts as will be sufficient, in
the opinion of an internationally recognized firm of independent public
accountants, to pay the principal of, premium, Additional Amounts and
Liquidated Damages, if any, and interest on the outstanding Notes on the
Stated Maturity or on the applicable redemption date, as the case may be,
and the Issuer must specify whether the Notes are being defeased to final
Stated Maturity or to a particular redemption date;
(b) in the case of an election under Section 8.2 hereof, the Issuer shall have
delivered to the Trustee an Opinion of Counsel in the United States and the
Federal Republic of Germany, as the case may be, reasonably acceptable to
the Trustee confirming that, subject to customary assumptions and
exclusions, (A) the Issuer has received from, or there has been published
by, the United States Internal Revenue Service a ruling or (B) since the
Issue Date, there has been a change in the applicable United States federal
income tax law, in either case to the effect that, and based thereon such
Opinion of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for Federal Republic of Germany or
United States federal income tax purposes as a result of such Legal
Defeasance and will be subject to United States federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the Issuer shall have
delivered to the Trustee an Opinion of Counsel in the United States and the
Federal Republic of Germany, as the case may be, reasonably acceptable to
the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for Federal Republic of Germany or United
States federal income tax purposes as a result of such
<PAGE>
131
Covenant Defeasance and will be subject to Federal Republic of Germany or
United States federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such Covenant
Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing on the
date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of
which will be used to defease the Notes pursuant to this Article 8
concurrently with such incurrence) or insofar as Sections 6.1 (g) or 6.1
(h) hereof is concerned, at any time in the period ending on the 91st day
after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a breach
or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Issuer or any of its
Subsidiaries is a party or by which the Issuer or any of their Subsidiaries
is bound;
(f) the Issuer shall have delivered to the Trustee an Opinion of Counsel (which
may be subject to customary exceptions and assumptions) to the effect that
as of the 91st day following the deposit, the trust funds will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally under
the applicable laws;
(g) the Issuer shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by the Issuer with the intent of
preferring the Holders of Notes over any other creditors of the Issuer or
with the intent of defeating, hindering, delaying or defrauding creditors
of the Issuer or others; and
(h) the Issuer shall have delivered to the Trustee an Officers' Certificate and
an Opinion of Counsel (which may be subject to customary exclusions and
assumptions), each stating that all conditions precedent provided for or
relating to the
<PAGE>
132
Legal Defeasance or the Covenant Defeasance have been complied with.
Section 8.5. Deposited Money and Government Obligations to Be Held in
--------------------------------------------------------
Trust; Other Miscellaneous Provisions.
- -------------------------------------
Subject to Section 8.6 hereof, all money and Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.5, the "Trustee") pursuant
-------
to Section 8.4 hereof in respect of the outstanding Notes shall be held in trust
and applied by the Trustee, in accordance with the provisions of such Notes and
this Indenture, to the payment, either directly or through any Paying Agent
(including the Issuer acting as Paying Agent) to the Holders of such Notes of
all sums due and to become due thereon in respect of principal, premium, if any,
and interest and Additional Amounts and Liquidated Damages, if any, but such
money need not be segregated from other funds except to the extent required by
law.
The Issuer shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against all money or Government Obligations
deposited pursuant to Section 8.4 hereof or the principal and interest received
in respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of the outstanding Notes.
Notwithstanding anything in this Article 8 to the contrary, the Trustee
shall deliver or pay to the Issuer from time to time upon the request of the
Issuer any money or Government Obligations held by it as provided in Section 8.4
hereof which, in the opinion of an internationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.4(a) hereof), are in excess of the amount thereof that would then be required
to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
<PAGE>
133
Section 8.6. Repayment to Issuer.
-------------------
Any money deposited with the Trustee or any Paying Agent, or then held by
the Issuer, in trust for the payment of the principal of, premium, if any, or
interest or Additional Amounts or Liquidated Damages, if any, on any Note and
remaining unclaimed for two years after such principal, and premium, if any, or
interest or Additional Amounts or Liquidated Damages, if any, has become due and
payable shall be paid to the Issuer on its request or (if then held by the
Issuer) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured creditor, look only to the Issuer for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Issuer as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Issuer cause to be published once, in the Financial Times and the Frankfurter
Allgemeine Zeitung, notice that such money remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such notification or publication, any unclaimed balance of such money then
remaining will be repaid to the Issuer.
<PAGE>
134
Section 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any Euros or Government
Obligations in accordance with Section 8.2 or 8.3 hereof, as the case may be, by
reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
Issuer's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.2 or 8.3
hereof until such time as the Trustee or Paying Agent is permitted to apply all
such money in accordance with Section 8.2 or 8.3 hereof, as the case may be;
provided, however, that, if the Issuer makes any payment of principal of,
premium, if any, or interest or Additional Amounts or Liquidated Damages, if
any, on any Note following the reinstatement of their obligations, the Issuer
shall be subrogated to the rights of the Holders of such Notes to receive such
payment from the money held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.1. Without Consent of Holders of Notes.
-----------------------------------
Notwithstanding Section 9.2 of this Indenture, the Issuer and the Trustee
may amend or supplement this Indenture or the Notes without the consent of any
Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(c) to provide for the assumption of the Issuer's obligations to the Holders of
Notes by a successor to the Issuer pursuant to Article 5 hereof;
<PAGE>
135
(d) to make any change that would provide any additional rights or benefits to
the Holders of the Notes or that does not adversely affect the rights or
benefits hereunder of any Holder of the Note;
(e) to comply with requirements of the Commission in order to effect or
maintain the qualification of this Indenture under the TIA; or
(f) to provide for the issuance of the New Senior Notes in accordance with the
Registration Rights Agreement.
Upon the request of the Issuer accompanied by a resolutions of its Board
authorizing the execution of any such amended or supplemental indenture, and
upon receipt by the Trustee of the documents described in Section 7.2 hereof,
the Trustee shall join with the Issuer in the execution of any amended or
supplemental indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
<PAGE>
136
Section 9.2. With Consent of Holders of Notes.
--------------------------------
Subject to Section 9.1 and except as provided below in this Section 9.2,
the Issuer and the Trustee may amend or supplement this Indenture, and the Notes
may be amended or supplemented, with the consent of the Holders of a majority in
principal amount of the Notes then outstanding voting as a single class
(including consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes), and, subject to Sections 6.4 and 6.7 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest or Additional
Amounts or Liquidated Damages, if any, on the Notes, except a payment default
resulting from an acceleration that has been rescinded) or compliance with any
provision of this Indenture or the Notes may be waived with the consent of the
Holders of a majority in principal amount of the then outstanding Notes
(including additional notes, if any) voting as a single class (including
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes).
Upon the request of the Issuer accompanied by a resolution of its Board
authorizing the execution of any such amended or supplemental indenture, and
upon the filing with the Trustee of evidence satisfactory to the Trustee of the
consent of the Holders of Notes as aforesaid, and upon receipt by the Trustee of
the documents described in Section 7.2 hereof, the Trustee shall join with the
Issuer in the execution of such amended or supplemental indenture unless such
amended or supplemental indenture directly affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
amended or supplemental indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.2 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
<PAGE>
137
After an amendment, supplement or waiver under this Section 9.2 becomes
effective, the Issuer shall deliver notice to the Holders of Notes affected
thereby briefly describing the amendment, supplement or waiver in accordance
with Section 10.2. Any failure of the Issuer to deliver such notice, or any
defect therein, shall not, however, in any way impair or affect the validity of
any such amended or supplemental Indenture or waiver. Subject to Sections 6.4
and 6.7 hereof, the Holders of a majority in aggregate principal amount of the
Notes (including additional notes, if any) then outstanding voting as a single
class may waive compliance in a particular instance by the Issuer with any
provision of this Indenture or the Notes.
Notwithstanding the foregoing, without the consent of each Holder affected,
an amendment or waiver under this Section 9.2 may not (with respect to any Notes
held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or alter
the provisions with respect to the redemption of the Notes;
(c) reduce the rate of or change the time for payment of interest and
Additional Amounts and Liquidated Damages, if any, including default
interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest or Additional Amounts or Liquidated Damages,
if any, on the Notes (except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the
then outstanding Notes (including additional notes, if any) or a waiver of
the payment default that resulted from such acceleration;
<PAGE>
138
(e) make any Note payable in currency other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to waivers of
past Defaults or the rights of Holders of Notes to receive payments of
principal of or premium, if any, or interest or Additional Amounts or
Liquidated Damages, if any, on the Notes other than payments pursuant to
Sections 3.9, 4.10 and 4.14 hereof;
(g) waive a redemption payment with respect to any Note, other than payments
pursuant to Sections 3.9, 4.10 and 4.14 hereof;
(h) make any change in the provisions of this Indenture relating to the
obligations of the Issuer to make, or the rights of Holders of Notes to
receive, payments pursuant to Sections 3.9, 4.10, 4.14 and 4.23 hereof;
(i) amend the terms of the Notes or this Indenture in a way that would result
in the loss of an exemption from any of the Taxes described thereunder or
hereunder or an exemption from any obligation to withhold or deduct Taxes
as described thereunder or hereunder unless the Issuer agrees to pay
Additional Amounts, if any, in respect thereof; or
(j) make any change in Sections 6.4 or 6.7 hereof or in the foregoing amendment
and waiver provisions.
Section 9.3. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental indenture that complies with the TIA as then
in effect.
<PAGE>
139
Section 9.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement or waiver becomes effective, a consent to it
by a Holder of a Note is a continuing consent by the Holder of a Note and every
subsequent Holder of a Note or portion of a Note that evidences the same debt as
the consenting Holder's Note, even if notation of the consent is not made on any
Note. However, any such Holder of a Note or subsequent Holder of a Note may
revoke the consent as to its Note if the Trustee receives written notice of
revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.5. Notation on or Exchange of Notes.
--------------------------------
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuer in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
<PAGE>
140
Section 9.6. Trustee to Sign Amendments, Etc.
--------------------------------
The Trustee shall sign any amended or supplemental indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Issuer
may not sign an amendment or supplemental Indenture until the Board approves it.
In executing any amended or supplemental indenture, the Trustee shall be
entitled to receive and (subject to Section 7.1 hereof) shall be fully protected
in relying upon, in addition to the documents required by Section 10.4 hereof,
an Officers' Certificate and an Opinion of Counsel stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
ARTICLE X
MISCELLANEOUS
Section 10.1. Trust Indenture Act Controls.
----------------------------
Prior to the issuance of the New Senior Notes or the effectiveness of the
Shelf Registration Statement, the TIA shall apply as a matter of contract to
this Indenture for purposes of interpretation, construction and defining the
rights and obligations hereunder. Upon the issuance of the New Senior Notes or
the effectiveness of the Shelf Registration Statement, this Indenture shall be
subject to the provisions of the TIA that are required to be part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
If any provision hereof limits, qualifies or conflicts with any provision
of the TIA or another provision which is required or deemed to be included in
this Indenture by any of the provisions of the TIA, such provision or
requirement of the TIA shall control. If any provision of this Indenture
modifies or excludes any provision of the TIA that may be so modified or
excluded, the latter provision
<PAGE>
141
shall be deemed to apply to this Indenture as so modified or excluded, as the
case may be.
Section 10.2. Notices.
-------
(a) Any notice or communication by the Issuer or the Trustee to the other is
duly given if in writing and delivered in person or by facsimile (and
confirmed by overnight courier) or mailed by first-class mail (registered
or certified, return receipt requested) or overnight courier guaranteeing
next day delivery, to the other's address:
if to the Issuer:
BROKAT Infosystems Aktiengesellschaft
Industriestrasse 3
D-70565 Stuttgart
Germany
Facsimile No.: +49-711-788-44-770
Attention: General Counsel
if to the Trustee:
The Bank of New York, London Branch
One Canada Square
London, E14 5AL
United Kingdom
Facsimile No.: +44-171-893-6399
Attention: Corporate Trust Administration
The Issuer or the Trustee, by notice to the other may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given when received.
(b) Any notice or communication to Holders of Global Notes will be sent to
Euroclear and Clearstream and will
<PAGE>
142
be published in a leading newspaper having a general circulation in the
City of London, which shall initially be the Financial Times, and in the
City of Frankfurt, which shall initially be the Frankfurter Allgemeine
Zeitung. Any notice or communication to Holders of Definitive Notes will be
published in a leading newspaper having a general circulation in the City
of London, which shall initially be the Financial Times, and in the City of
Frankfurt, which shall initially be the Frankfurter Allgemeine Zeitung. Any
notice or communication to Holders of Definitive Notes shall also be mailed
by first-class mail or by overnight courier guaranteeing next-day delivery
to its address shown on the register kept by the Registrar and shall be
sufficiently given to him if so mailed within the time prescribed. Any
notice or communication shall also be so mailed to any Person described in
TIA (S) 313(c), to the extent required by the TIA. If the Issuer mails a
notice or communication to Holders, it shall mail a copy to the Trustee and
each Agent at the same time. Failure to mail a notice or communication to a
Holder or any defect in it shall not affect its sufficiency with respect to
other Holders.
All notices and communications sent to Holders, which are published and
mailed in the manner provided above, shall be deemed to have been duly given on
the first date on which publication is made.
In addition, if and so long as the Notes are listed on the Luxembourg Stock
Exchange and the rules of such stock exchange shall so require, any such notice
or communication shall be published in a leading daily newspaper having a
general circulation in Luxembourg, which shall initially be the Luxemburger
Wort.
(c) Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any
action taken in reliance upon such waiver.
<PAGE>
143
Section 10.3. Communication by Holders of Notes with Other Holders of
-------------------------------------------------------
Notes.
Holders may communicate pursuant to TIA (S) 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Issuer, the
Trustee, the Registrar and anyone else shall have the protection of TIA (S)
312(c).
Section 10.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Issuer to the Trustee to take any
action under this Indenture, except with respect to the initial authentication
of Notes on the date of this Indenture, the Issuer shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 10.5
hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to
the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to the
Trustee (which shall include the statements set forth in Section 10.5
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
Section 10.5. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
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144
(a) a statement that the Persons making such certificate or opinion has read
such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
Section 10.6. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 10.7. No Personal Liability of Directors, Officers, Employees,
--------------------------------------------------------
Members and Stockholders.
- ------------------------
No member of the Board or the supervisory board, officer, employee,
incorporator, member or stockholder of the Issuer, as such, shall have any
liability for any obligations of the Issuer under the Notes, this Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives and releases all
such liability (but only such liability). The waiver and release are part of the
consideration for issuance of the Notes.
<PAGE>
145
Section 10.8. Governing Law.
-------------
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF
ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
Section 10.9. Agent for Service; Submission to Jurisdiction; Waiver of
--------------------------------------------------------
Immunities.
- ----------
By the execution and delivery of this Indenture, the Issuer (i)
acknowledges and confirms that it has, by separate written instruments,
designated and appointed CT Corporation System, 111 Eighth Avenue, New York, NY
10011 (and any successor entity), as its authorized agent upon which process may
be served in any suit or proceeding arising out of or relating to this Indenture
that may be instituted in any federal or state court in the Borough of
Manhattan, City of New York, State of New York, U.S.A. or brought under federal
or state securities laws, and represents and warrants that CT Corporation System
has accepted such designation; (ii) submits to the jurisdiction of any such
court in any such suit or proceeding; and (iii) agrees that service of process
upon CT Corporation System and written notice of said service to the Issuer, in
accordance with Section 10.2(a) shall be deemed in every respect effective
service of process upon the Issuer in any such suit or proceeding. The Issuer
further agrees to take any and all action, including the execution and filing of
any and all such documents and instruments, as may be necessary to continue such
designation and appointment of CT Corporation System in full force and effect
for as long as any of the Notes remain Outstanding; provided, however, that the
Issuer may, and to the extent CT Corporation System ceases to be able to be
served on the basis contemplated herein shall, by written notice to the Trustee,
designate such additional or alternative agent for service of process under this
Section 10.9 that (i) maintains an office located in the Borough of Manhattan,
City of New York, State of New York, U.S.A.; and (ii) is either (a) the United
States legal counsel for the Issuer or (b) a corporate service
<PAGE>
146
company which acts as agent for service of process for other Persons in the
ordinary course of its business. Such written notice shall identify the name of
such agent for service of process and the address of the office of such agent
for service of process in the Borough of Manhattan, City of New York, State of
New York, U.S.A.
To the extent that the Issuer has, or hereafter may, acquire any immunity
from jurisdiction of any court of (i) any jurisdiction in which the Issuer owns
or leases property or assets, (ii) the United States or the State of New York or
(iii) the Federal Republic of Germany or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property and assets or
this Indenture or any of the Notes or actions to enforce judgments in respect of
any thereof, the Issuer hereby irrevocably waives such immunity in respect of
its obligations under the above-referenced documents, to the extent permitted by
law.
Section 10.10. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Issuer or their Subsidiaries or of any other Person. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
Section 10.11. Successors.
----------
All agreements of the Issuer in this Indenture and the Notes shall bind
their successors. All agreements of the Trustee in this Indenture shall bind
its successors.
Section 10.12. Severability; Independence of Covenants.
---------------------------------------
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
<PAGE>
147
All covenants and agreements in this Indenture shall be given independent
effect so that if a particular action or condition is not permitted by any of
such covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of a Default if such action is taken or condition exists.
Section 10.13. Duplicate Originals; Counterparts.
---------------------------------
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement. In addition, this Indenture may be executed in any number of
counterparts, each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
Section 10.14. Table of Contents, Headings, Etc.
--------------------------------
The table of contents, cross-reference table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict, or affect the construction of, any of the terms or
provisions hereof.
Section 10.15. Exhibits.
--------
All exhibits attached hereto are by this reference made a part hereof with
the same effect as if herein set forth in full.
Section 10.16. Judgment Currency.
-----------------
The Issuer hereby agrees to indemnify the Trustee, its directors, its
officers and each person, if any, who controls the Trustee within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act against any
loss incurred by such person as a result of any judgment or order being given or
made against the Issuer for any Euro amount due under this Agreement and such
judgment or order being expressed and paid in a currency (the "Judgment
--------
Currency") other than Euros and as a result of any
- --------
<PAGE>
148
variation as between (i) the rate of exchange at which the Euro amount is
converted into the Judgment Currency for the purpose of such judgment or order
and (ii) the spot rate of exchange in the City of London at which such party on
the date of payment of such judgment or order is able to purchase Euros with the
amount of the Judgment Currency actually received by such party. The foregoing
indemnity shall continue in full force and effect notwithstanding any such
judgment or order as aforesaid. The term "spot rate of exchange" shall include
any premiums and costs of exchange payable in connection with the purchase of,
or conversion into, Euros.
[Signatures on following page]
<PAGE>
149
Dated as of March 28, 2000 BROKAT INFOSYSTEMS AKTIENGESELLSCHAFT
By: /s/ MICHAEL JANSSEN
___________________________________________
Name: Michael Janssen
Title: Chief Financial Officer
By: /s/ ACHIM SCHLUMPBERGER
___________________________________________
Name: Achim Schlumpberger
Title: Executive Vice President
THE BANK OF NEW YORK,
as Trustee
By: /s/ TREVOR BLEWER
______________________________
Name: Trevor Blewer
Title: Assistant Vice President
<PAGE>
150
EXHIBIT A
(Face of Note)
11 1/2% SENIOR NOTES DUE 2010
No. ____ Euro _____________
Common Code [ ]
ISIN No. [ ]
BROKAT INFOSYSTEMS AKTIENGESELLSCHAFT promises to pay to The Bank of New
York Depository (Nominees) Limited or its registered assigns, the principal sum
of ______________________ Euros (Euro__________)[, or such greater or lesser
amount as may from time to time be endorsed on the "Schedule of Transfer or
Exchanges of Interests in the Global Note" attached hereto,]/1/ on March 31,
2010.
Interest Payment Dates: March 31 and September 30
Record Dates: March 15 and September 15
BROKAT INFOSYSTEMS AKTIENGESELLSCHAFT
By:_____________________________________________
Name:
Title:
By:_____________________________________________
Name:
Title:
Certificate of Authentication:
This is one of the [Global] Notes referred
to in the within-mentioned Indenture:
THE BANK OF NEW YORK,
as Trustee
By:______________________________
Authorized Signatory
/1/This language should be included only if the Note is issued in global form.
Dated: ___________________________
<PAGE>
151
(Back of Note)
11 1/2% SENIOR NOTES DUE 2010
[This Global Note is held by the Common Depositary (as defined in the
Indenture governing this Note) or its nominee in custody for the benefit of the
beneficial owners hereof, and is not transferable to any person under any
circumstances, except that (i) the Trustee may make such notations hereon as may
be required pursuant to Section 2.7 of the Indenture, (ii) this Global Note may
be exchanged in whole but not in part pursuant to Section 2.6(a) of the
Indenture, (iii) this Global Note may be delivered to the Trustee for
cancellation pursuant to Section 2.11 of the Indenture and (iv) this Global Note
may be transferred to a successor Common Depositary with the prior written
consent of the Issuer.
Unless this certificate is presented by an authorized representative
of the Common Depositary to the Issuer or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the
name of the Common Depositary or in such other name as is requested by an
authorized representative of the Common Depositary (and any such payment is made
to the Common Depositary or such other entity as is requested by an authorized
representative of the Common Depositary), any transfer, pledge or other use
hereof for value or otherwise by or to any Person is wrongful inasmuch as the
registered owner hereof, the Common Depositary, has an interest herein.]/2/
[This Note (or its predecessor) has not been registered under the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and, accordingly, may
not be offered, sold, pledged or otherwise transferred within the United States
or to, or for the account or benefit of, U.S. persons, except as set forth
below. By its acquisition hereof or of a beneficial interest herein, the Holder
(1) represents that (a) it is a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) (a "QIB") or (b) it is acquiring this Note
in an offshore transaction in compliance with Regulation S under the Securities
Act, (2) agrees that it will
/2/These two paragraphs should be included only if the Note is issued in global
form.
<PAGE>
152
not, resell or otherwise transfer this note except (a) to the Issuer or any of
its Subsidiaries, (b) to a person whom the seller reasonably believes is a QIB
purchasing for its own account or for the account of a QIB in a transaction
meeting the requirements of Rule 144A, (c) in an offshore transaction meeting
the requirements of Rule 903 or 904 of the Securities Act, (d) in a transaction
meeting the requirements of Rule 144 under the Securities Act, (e) to an
institutional "accredited investor" (as defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act (an "IAI") that, prior to such
transfer, furnishes the Trustee a signed letter containing certain
representations and agreements relating to the transfer of this Note (the form
of which can be obtained from the Trustee) and, if such transfer is in respect
of an aggregate principal amount of Notes less than Euro250,000, an opinion of
counsel acceptable to the Issuer that such transfer is in compliance with the
Securities Act, (f) in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
acceptable to the Issuer) or (g) pursuant to an effective registration statement
and, in each case, in accordance with the applicable securities laws of any
state of the United States or any other applicable jurisdiction and (3) agrees
that it will deliver to each person to whom this Note or an interest herein is
transferred a notice substantially to the effect of this legend.
As used herein, the terms "offshore transaction" and "United States" have
the meanings given to them by Rule 902 of Regulation S under the Securities Act.
The Indenture contains a provision requiring the Trustee to refuse to register
any transfer of this Note in violation of the foregoing.]/3/
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. Interest. BROKAT Infosystems Aktiengesellschaft, a stock
--------
corporation organized and existing under
/3/These two paragraphs should be removed upon the exchange of Senior Notes for
New Senior Notes in the Exchange Offer or upon the registration of the Notes
pursuant to the terms of the Registration Rights Agreement.
<PAGE>
153
the laws of Germany (the "Issuer") promises to pay interest on the principal
------
amount of this Note at 11 1/2% per annum from March 28, 2000 until maturity. In
addition, the Issuer shall pay the Additional Amounts payable pursuant to
Section 4.23 of the Indenture and the Liquidated Damages payable pursuant to
Section 5 of the Registration Rights Agreement referred to below. The Issuer
will pay interest, Additional Amounts and Liquidated Damages semi-annually on
March 31 and September 30 of each year (each an "Interest Payment Date"), or if
---------------------
any such day is not a Business Day, on the next succeeding Business Day.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of issuance;
provided that if there is no existing Default in the payment of interest, and if
this Note is authenticated between a record date referred to on the face hereof
and the next succeeding Interest Payment Date, interest shall accrue from such
next succeeding Interest Payment Date; provided further, that the first Interest
Payment Date shall be September 30, 2000. Interest will be computed on the basis
of a 360-day year of twelve 30-day months.
The Issuer shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
and interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest and Additional Amounts and
Liquidated Damages, if any (without regard to any applicable grace period), on
this Note, to the extent lawful, at the rate of interest then borne by the
Notes.
2. Method of Payment. The Issuer will pay interest on the Notes
-----------------
(except defaulted interest), Additional Amounts and Liquidated Damages to the
Persons who are registered Holders of Notes at the close of business on March 15
or September 15 preceding the Interest Payment Date (whether or not such day is
a Business Day), even if such Notes are canceled after such record date and on
or before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, Additional Amounts and Liquidated Damages, if any, and
interest at the office or agency of the Issuer maintained for such purpose
within or without the City of London and, for so long as the Notes are listed on
<PAGE>
154
the Luxembourg Stock Exchange and such stock exchange rules require, Luxembourg,
or, at the option of the Issuer, payment of interest, Additional Amounts and
Liquidated Damages may be made by check mailed to the Holders at their addresses
set forth in the register of Holders; provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium, Additional Amounts and Liquidated Damages on, all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Issuer or the Paying Agent. Such payment shall be made in
Euro Legal Tender.
3. Paying Agent and Registrar. Initially, The Bank of New York, the
--------------------------
Trustee under the Indenture, will act as Paying Agent and Registrar, and
Kredietbank S.A. Luxembourgeoise at 43 Boulevard Royal, L-2955 Luxembourg will
act as co-Paying Agent. The Issuer may change any Paying Agent or Registrar
without notice to any Holder. The Issuer or any of its Subsidiaries or
Affiliates may act in any such capacity.
4. Indenture. The Issuer issued this Note under an Indenture dated
---------
as of March 28, 2000 (the "Indenture") by and between the Issuer and the
---------
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the United States Trust Indenture Act
of 1939, as amended (15 U.S. Code (S)(S) 77aaa-77bbbb). This Note is subject to
all such terms, and Holder of this Note is referred to the Indenture and such
Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are general unsecured
Obligations of the Issuer limited to Euro125,000,000 in aggregate principal
amount.
<PAGE>
155
5. Optional Redemption.
-------------------
(a) The Issuer shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, in cash at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages and/or Additional
Amounts, if any, thereon to the applicable redemption date, if redeemed during
the twelve-month period beginning on March 31 of the years indicated below:
Year Percentage
2005 105.750%
2006 103.833%
2007 101.917%
2008 and thereafter 100.000%
(b) Notwithstanding the provisions of subparagraph (a) of this
Paragraph 5, at any time prior to March 31, 2003, the Issuer may (but will not
have the obligation to), on any one or more occasions, redeem up to 35% of the
aggregate principal amount of Notes originally issued at a redemption price
equal to 111.50% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages and/or Additional Amounts, if any, thereon to
the redemption date with the net cash proceeds of one or more Qualified Equity
Offerings; provided that at least 65% of the aggregate principal amount of Notes
originally issued (excluding Notes held by the Issuer, its Affiliates and its
Subsidiaries) remain outstanding immediately after the occurrence of such
redemption; and provided, further, that such redemption shall occur within 60
days of the date of the closing of such Qualified Equity Offerings.
(c) If the Issuer determines that, as a result of (i) any change in,
or amendment to, the laws or treaties or any regulations or rulings promulgated
under the laws or treaties of any Relevant Taxing Jurisdiction affecting
taxation, which change in, or amendment to, such laws, treaties, regulations or
rulings becomes effective on or after the Issue Date, or (ii) any change in or
new or
<PAGE>
156
different position regarding the application, administration or interpretation
of such laws, treaties, regulations or rulings, including a holding, judgment or
order by a court of competent jurisdiction, which change, amendment, application
or interpretation becomes effective on or after the Issue Date, the Issuer is,
or on the next Interest Payment Date would be, required to pay Additional
Amounts, and the Issuer determines that such payment obligation cannot be
avoided by the Issuer taking reasonable measures, the Notes may be redeemed, at
the option of the Issuer, in whole but not in part, at any time upon not less
than 30 nor more than 60 days' notice, which notice shall be irrevocable, at a
redemption price equal to the principal amount thereof, plus accrued and unpaid
interest to the date fixed by the Issuer for redemption (the "Tax Redemption
--------------
Date") and all Liquidated Damages and/or Additional Amounts, if any, then due
- ----
and which will become due on the Tax Redemption Date as a result of the
redemption or otherwise; provided that no such notice of redemption shall be
given earlier than 90 days prior to the earliest date on which the Issuer would
be obligated to make such payment or withholding if a payment in respect of the
Notes were then due.
6. Mandatory Redemption. The Issuer shall not be required to make
--------------------
mandatory redemption or sinking fund payments with respect to the Notes.
7. Repurchase at Option of Holder. The Indenture requires that
------------------------------
certain proceeds from Asset Sales be used, subject to further limitations
contained therein, to make an offer to purchase certain amounts of Notes in
accordance with the procedures set forth in the Indenture. The Issuer is also
required to make an offer to purchase Notes upon occurrence of a Change of
Control in accordance with the procedures set forth in the Indenture.
8. Notice of Redemption. Notice of redemption will be given at
--------------------
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed. Notes in denominations larger than
Euro1,000 may be redeemed in part but only in whole multiples of e1,000, unless
all of the Notes held by a Holder are to be redeemed. On and after the
redemption date interest ceases to accrue on Notes or portions thereof called
for redemption, unless the Issuer shall fail to redeem any such Note.
<PAGE>
157
9. Denominations, Transfer, Exchange. The Notes are in registered
---------------------------------
form without coupons in denominations of Euro1,000 and integral multiples of
Euro1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Issuer may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. In addition, the
Registrar need not exchange or register the transfer of any Notes for a period
of 15 days before a selection of Notes to be redeemed.
10. Persons Deemed Owners. The registered Holder of a Note may be
---------------------
treated as the owner of it for all purposes.
11. Amendment, Supplement and Waiver. Subject to certain exceptions,
--------------------------------
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of a majority in principal amount of the Notes (including additional
Notes, if any) then outstanding voting as a single class (including consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Notes). In addition, subject to certain exceptions, any existing Default
of Event of Default or compliance with any provision of the Indenture or the
Notes may be waived with the consent of the Holders of a majority in principal
amount of the Notes (including additional Notes, if any) then outstanding voting
as a single class (including consents obtained in connection with a purchase of,
or tender offer or exchange offer for, Notes). Without the consent of any
Holder of a Note, the Indenture or the Notes may be amended or supplemented to
cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes
in addition to or in place of certificated Notes, to provide for the assumption
of the Issuer's obligations to Holders of Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
rights or benefits under the Indenture of any such Holder, to comply with the
requirements of the Commission in order to effect or maintain the qualification
of the Indenture under
<PAGE>
158
the TIA, or to provide for the issuance of New Senior Notes in accordance with
the Registration Rights Agreement.
12. Defaults and Remedies.
---------------------
(a) Each of the following constitutes an "Event of Default": (i)
----------------
default for 30 days in the payment when due of interest on, or Additional
Amounts or Liquidated Damages with respect to, the Notes; (ii) default in
payment when due of the principal of or premium, if any, on the Notes; (iii)
failure by the Issuer or any of its Subsidiaries to comply with Section 4.7,
4.9, 4.10 or 4.14 of the Indenture; (iv) failure by the Issuer or any of its
Subsidiaries for 60 days after notice to comply with any of its other agreements
in this Indenture or the Notes; (v) default under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Issuer or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Issuer or
any of its Restricted Subsidiaries) whether such Indebtedness or Guarantee now
exists, or is created after the Issue Date, which default (A) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (B) results in the acceleration of
---------------
such Indebtedness prior to its express maturity, and, in each case of clauses
(A) or (B), the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
Euro5,000,000 or more; (vi) failure by the Issuer or any of its Restricted
Subsidiaries to pay final judgments (other than those as to which insurance
coverage or indemnity from an insurance company with assets in excess of
Euro100,000,000 has been acknowledged in writing) aggregating in excess of
Euro5,000,000, which judgments are not paid, discharged or stayed for a period
of 30 days; and (vii) certain events of bankruptcy or insolvency with respect to
(A) the Issuer, (B) any Significant Subsidiary (other than an Accounts
Receivable Subsidiary) of the Issuer or (C) any group of Restricted Subsidiaries
(other than an Accounts Receivable Subsidiary) of the Issuer that, taken as a
whole, would constitute a Significant Subsidiary of the Issuer.
<PAGE>
159
(b) If any Event of Default occurs and is continuing, the Trustee or
the Holders of at least 25% in principal amount of the then outstanding Notes,
may declare all the Notes to be due and payable immediately. Upon such
declaration, the principal of, premium, if any, and accrued and unpaid interest
and Additional Amounts and Liquidated Damages, if any, on, such Notes shall be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Issuer, any of its Significant Subsidiaries or any group of
Restricted Subsidiaries of the Issuer that, taken together, would constitute a
Significant Subsidiary of the Issuer, all outstanding Notes shall become due and
payable without further action or notice.
(c) Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain limitations, Holders of
a majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest. The
Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default and its consequences under
the Indenture, except a continuing Default or Event of Default in the payment of
the principal of, premium and Additional Amounts and Liquidated Damages, if any,
or interest on, the Notes.
(d) The Issuer is required to deliver to the Trustee annually a
statement regarding compliance with the Indenture, and the Issuer is required
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
(e) In the case of any Event of Default occurring by reason of any
willful action or inaction taken or not taken by or on behalf of the Issuer with
the intention of avoiding payment of the premium that the Issuer would have had
to pay if the Issuer then had
<PAGE>
160
elected to redeem the Notes pursuant to the optional redemption provisions of
the Indenture, an equivalent premium shall also become and be immediately due
and payable to the extent permitted by law upon the acceleration of the Notes.
If an Event of Default occurs prior to March 31, 2005, by reason of any willful
action or inaction taken or not taken by or on behalf of the Issuer with the
intention of avoiding the prohibition on redemption of the Notes prior to such
date, then the premium specified in the Indenture with respect to redemption
upon the occurrence of a Change of Control prior to such date shall also become
immediately due and payable to the extent permitted by law upon the acceleration
of the Notes.
13. Trustee Dealings with Issuer. The Trustee, in its individual or
----------------------------
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuer or its Affiliates, and may otherwise deal with the
Issuer or its Affiliates, as if it were not the Trustee.
14. Personal Liability of Directors, Officers, Employees, Members and
-----------------------------------------------------------------
Stockholders. No member of the Board or the supervisory board, officer,
- ------------
employee, incorporator, member or stockholder of the Issuer, as such, shall have
any liability for any obligations of the Issuer under the Notes, the Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives and releases
all such liability (but only such liability). The waiver and release are part
of the consideration for issuance of the Notes.
15. Legal Defeasance and Covenant Defeasance. The Indenture contains
----------------------------------------
provisions for defeasance of the entire Indebtedness on this Note and for
defeasance of certain covenants in the Indenture upon compliance by the Issuer
with certain condition set forth in the Indenture.
16. Authentication. This Note shall not be valid until authenticated
--------------
by the manual signature of the Trustee or an authenticating agent.
17. Abbreviations. Customary abbreviations may be used in the name
-------------
of a Holder of a Note or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties),
<PAGE>
161
JT TEN (= joint tenants with right of survivorship and not as tenants in
common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
18. Additional Rights of Holders of Restricted Global Notes and
-----------------------------------------------------------
Restricted Definitive Notes. In addition to the rights provided to Holders of
- ---------------------------
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of March 28, 2000 by and among the Issuer and the Initial
Purchaser named on the signature pages thereof.
19. Governing Law. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
-------------
GOVERN AND BE USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING
EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE
APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
THE ISSUER WILL FURNISH TO ANY HOLDER UPON WRITTEN REQUEST AND WITHOUT
CHARGE A COPY OF THE INDENTURE AND/OR THE REGISTRATION RIGHTS AGREEMENT.
REQUESTS MAY BE MADE TO: BROKAT INFOSYSTEMS AG, INDUSTRIESTRABE 3, STUTTGART D-
70565, GERMANY, ATTENTION: GENERAL COUNSEL.
<PAGE>
162
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint: ______________________________________________________
as Agent to transfer this Note on the books of the Issuer. The Agent may
substitute another to act for him.
Date: _______________
Your Signature:
________________________________________________________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee: __________________________
<PAGE>
163
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Issuer pursuant to Section 4.10 or 4.14 of the Indenture, check the box
below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased by the
Issuer pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased:
Euro______
Date: __________________
Your Signature:
________________________________________________________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee: __________________________
<PAGE>
164
SCHEDULE OF TRANSFER OR EXCHANGES
OF INTERESTS IN THE GLOBAL NOTE/4/
The following transfers or exchanges of a part of this Global Note for
an interest in another Global Note or for a Definitive Note, or transfers or
exchanges of a part of another Global Note or Definitive Note for an interest in
this Global Note, have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Exchange Amount of decrease in Amount of increase Principal Amount of Signature of authorized
Principal Amount of in Principal Amount of this Global Note officer of Trustee or
this Global Note this Global Note following such Note Custodian
decrease (or increase)
</TABLE>
/4/This schedule should only be included if the Notes are issued in global form.
<PAGE>
165
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
BROKAT Infosystems Aktiengesellschaft
Industriestrasse 3
D-70565 Stuttgart
Germany
The Bank of New York
One Canada Square
London E14 5AL
United Kingdom
Re: 11 1/2% Senior Notes due 2010
Reference is hereby made to the Indenture, dated as of March 28, 2000
(the "Indenture"), between BROKAT Infosystems Aktiengesellschaft, a stock
---------
corporation organized and existing under the laws of Germany(the "Issuer"), and
------
The Bank of New York, as trustee (the "Trustee"). Capitalized terms used but
-------
not defined herein shall have the meanings given to them in the Indenture.
________________, (the "Transferor") owns and proposes to transfer the
----------
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of Euro_______ in such Note[s] or interests (the "Transfer"),
--------
to ________________ (the "Transferee"), as further specified in Annex A hereto.
----------
In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
[ ] (1) Check if Transferee will take delivery of a beneficial interest in the
----------------------------------------------------------------------
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
- -----------------------------------------------------------
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
--------------
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a
<PAGE>
166
"qualified institutional buyer" within the meaning of Rule 144A in a transaction
meeting the requirements of Rule 144A and such Transfer is in compliance with
any applicable blue sky securities laws of any state of the United States. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the 144A Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
[ ] (2) Check if Transferee will take delivery of a beneficial interest in the
----------------------------------------------------------------------
Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
- ----------------------------------------------------------------------
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act and (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act and (iv) if
the proposed transfer is being made prior to the expiration of the Distribution
Compliance Period, the transfer is not being made to a U.S. Person or for the
account or benefit of a U.S. Person (other than an Initial Purchaser). Upon
consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note and/or the Definitive Note and in
the Indenture and the Securities Act.
[ ] (3) Check and complete if Transferee will take delivery of a beneficial
-------------------------------------------------------------------
interest in the IAI Global Note or a Definitive Note pursuant to any provision
- ------------------------------------------------------------------------------
of the Securities Act other than
- --------------------------------
<PAGE>
167
Rule 144A or Regulation S. The Transfer is being effected in compliance with the
- -------------------------
transfer restrictions applicable to beneficial interests in Restricted Global
Notes and Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):
[ ] (a) such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
[ ] (b) such Transfer is being effected to the Issuer or a subsidiary
thereof;
or
[ ] (c) such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
[ ] (d) such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that it has not engaged in any general solicitation
within the meaning of Regulation D under the Securities Act and the Transfer
complies with the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and (2) if
---------
such Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $250,000, an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the
<PAGE>
168
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Note and/or the Definitive Notes and in the Indenture and the
Securities Act.
[ ] (4) Check if Transferee will take delivery of a beneficial interest in an
---------------------------------------------------------------------
Unrestricted Global Note or of an Unrestricted Definitive Note.
- --------------------------------------------------------------
[ ] (a) Check if Transfer is pursuant to Rule 144. (i) The Transfer is
-----------------------------------------
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
[ ] (b) Check if Transfer is Pursuant to Regulation S. (i) The Transfer
---------------------------------------------
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
[ ] (c) Check if Transfer is Pursuant to Other Exemption. (i) The
------------------------------------------------
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in
<PAGE>
169
compliance with the transfer restrictions contained in the Indenture and any
applicable blue sky securities laws of any State of the United States and (ii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will not be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for the
benefit of the Issuer and the Registrar.
________________________________________________________________________________
[Insert Name of Transferor]
By:
-----------------------------
Name:
Title:
Dated: ____________________
<PAGE>
170
Annex A to Certificate of Transfer
----------------------------------
(1) The Transferor owns and proposes to transfer the following:
(Check one of (a) or (b))
(a) [ ] a beneficial interest in the:
(Check one of (i), (ii) or (iii))
(i) [ ] 144A Global Note (CUSIP_____; ISIN _____), or
(ii) [ ] Regulation S Global Note (CUSIP_____; ISIN _____), or
(iii) [ ] IAI Global Note (CUSIP_____; ISIN _____); or
(b) [ ] a Restricted Definitive Note.
(2) After the Transfer the Transferee will hold:
(Check one of (a), (b) or (c))
(a) [ ] a beneficial interest in the:
(Check one of (i), (ii), (iii) or (iv))
(i) [ ] 144A Global Note (CUSIP_____; ISIN _____), or
(ii) [ ] Regulation S Global Note (CUSIP ____), or
(iii) [ ] IAI Global Note (CUSIP ____), or
(iv) [ ] Unrestricted Global Note (CUSIP ____); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
<PAGE>
171
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
BROKAT Infosystems Aktiengesellschaft
Industriestrasse 3
D-70565 Stuttgart
Germany
The Bank of New York
One Canada Square
London E14 5AL
United Kingdom
Re: 11 1/2% Senior Notes due 2010
Reference is hereby made to the Indenture, dated as of March 28, 2000
(the "Indenture"), between BROKAT Infosystems Aktiengesellschaft, a stock
---------
corporation organized and existing under the laws of Germany(the "Issuer"), and
------
The Bank of New York, as trustee (the "Trustee"). Capitalized terms used but
-------
not defined herein shall have the meanings given to them in the Indenture.
_________________ (the "Owner"), owns and proposes to exchange the
-----
Note[s] or interest in such Note[s] specified herein, in the principal amount of
Euro__________ in such Note[s] or interests (the "Exchange"). In connection
--------
with the Exchange, the Owner hereby certifies that:
(1) Exchange of Restricted Definitive Notes or Beneficial Interests in
a Restricted Global Note for Unrestricted Definitive Notes or Beneficial
Interests in an Unrestricted Global Note
[ ] (a) Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to beneficial interest in an Unrestricted Global Note. In
- -----------------------------------------------------------------
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer
<PAGE>
172
restrictions applicable to the Global Notes and pursuant to and in accordance
with the United States Securities Act of 1933, as amended (the "Securities
----------
Act"), (iii) the restrictions on transfer contained in the Indenture and the
- ---
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the beneficial interest in an Unrestricted Global
Note is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
[ ] (b) Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
- -------------------------------------------
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
[ ] (c) Check if Exchange is from Restricted Definitive Note to beneficial
------------------------------------------------------------------
interest in an Unrestricted Global Note. In connection with the Owner's
- ---------------------------------------
Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
[ ] (d) Check if Exchange is from Restricted Definitive Note to
-------------------------------------------------------
Unrestricted Definitive Note. In connection with
- ----------------------------
<PAGE>
173
the Owner's Exchange of a Restricted Definitive Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Unrestricted Definitive Note
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive Note is
being acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(2) Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
[ ] (a) Check if Exchange is from beneficial interest in a Restricted
-------------------------------------------------------------
Global Note to Restricted Definitive Note. In connection with the Exchange of
- -----------------------------------------
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
[ ] (b) Check if Exchange is from Restricted Definitive Note to beneficial
------------------------------------------------------------------
interest in a Restricted Global Note. In connection with the Exchange of the
- ------------------------------------
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
" 144A Global Note," " Regulation S Global Note," " IAI Global Note" with an
equal principal amount, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange
<PAGE>
174
in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for the
benefit of the Issuer and the Registrar.
____________________________________
[Insert Name of Owner]
By:_________________________________
Name:
Title:
Dated: ____________________
<PAGE>
175
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
BROKAT Infosystems Aktiengesellschaft
Industriestrasse 3
D-70565 Stuttgart
Germany
The Bank of New York
One Canada Square
London E14 5AL
United Kingdom
Re: 11 1/2% Senior Notes due 2010
Reference is hereby made to the Indenture, dated as of March 28, 2000
(the "Indenture"), between BROKAT Infosystems Aktiengesellschaft, a stock
---------
corporation organized and existing under the laws of Germany(the "Issuer"), and
------
The Bank of New York, as trustee (the "Trustee"). Capitalized terms used but
-------
not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of Euro________ aggregate
principal amount of:
[ ] (1) a beneficial interest in a Global Note, or
[ ] (2) a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such
<PAGE>
176
restrictions and conditions and the United States Securities Act of 1933, as
amended (the "Securities Act").
--------------
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Issuer or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Issuer a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $250,000, an
Opinion of Counsel in form reasonably acceptable to the Issuer to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144(k) under the Securities Act or
(F) pursuant to an effective registration statement under the Securities Act,
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Issuer such certifications, legal opinions and other information as you and the
Issuer may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by
us will bear a legend to the foregoing effect. We further understand that any
subsequent transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the
<PAGE>
177
Securities Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our investment in
the Notes, and we and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
___________________________________
[Insert Name of Accredited Investor]
By:________________________________
Name:
Title:
Dated: __________________
<PAGE>
Exhibit 4.3
================================================================================
BROKAT Infosystems Aktiengesellschaft
Euro 125,000,000 11 1/2% Senior Notes due 2010
Registration Rights Agreement
March 28, 2000
WestLB Panmure Limited,
as Initial Purchasers
================================================================================
<PAGE>
BROKAT Infosystems Aktiengesellschaft
Euro 125,000,000 11 1/2% Senior Notes due 2010
REGISTRATION RIGHTS AGREEMENT
March 28, 2000
This Registration Rights Agreement (this "Agreement") is made and
entered into as of March 28, 2000 by and among BROKAT Infosystems
Aktiengesellschaft, an Aktiengesellschaft organized under the laws of the
Federal Republic of Germany (the "Company"), and WestLB Panmure Limited (the
"Initial Purchaser"), which has agreed to purchase the Company's 11 1/2% Senior
Notes due 2010 (the "Senior Notes""), subject to the terms and conditions set
forth in the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement dated March
21, 2000 (the "Purchase Agreement"), by and among the Company and the Initial
------------------
Purchaser. In order to induce the Initial Purchaser to purchase the Senior
Notes, the Company has agreed to provide the registration rights and other
agreements set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the obligations of the Initial Purchaser to purchase
Senior Notes under the Purchase Agreement. The Senior Notes are to be issued
under an indenture to be dated as of the date hereof among the Company and The
Bank of New York, as trustee. Capitalized terms used herein and not otherwise
defined shall have the meaning assigned to them in the Indenture (as defined
below).
The parties hereby agree as follows:
Section 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Affiliate: As defined in Rule 144 of the Securities Act.
---------
Agreement: As defined in the preamble.
---------
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
-------------
<PAGE>
Business Day: Any day that is not a Saturday, Sunday or a day on which
------------
banks are required or permitted to be closed in the State of New York.
Closing Date : The date hereof.
------------
Company: As defined in the preamble.
-------
Consummate: An Exchange Offer shall be deemed "Consummated" for
----------
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Securities Act of the Exchange Offer Registration
Statement relating to the Exchange Offer and the New Senior Notes to be issued
in the Exchange Offer, (b) the maintenance of such Exchange Offer Registration
Statement continuously effective and the keeping of the Exchange Offer open for
a period not less than the period required pursuant to Section 3(b) hereof and
(c) the delivery by the Company to the registrar of New Senior Notes in the same
aggregate principal amount as the aggregate principal amount of Senior Notes
tendered by holders thereof pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
---------------------
Effectiveness Deadline: As defined in Section 3(a) hereof.
----------------------
Exchange Act: The Securities Exchange Act of 1934, as amended.
------------
Exchange Offer: An offer by the Company registered under the Securities
--------------
Act to exchange any and all outstanding Senior Notes for a like aggregate
principal amount of New Senior Notes.
Exchange Offer Registration Statement: The Registration Statement
-------------------------------------
relating to the Exchange Offer, including the related Prospectus.
Filing Deadline: As defined in Section 3(a) hereof.
---------------
Holders: As defined in Section 2(b) hereof.
-------
Indenture: The indenture referred to in the preamble and any other
---------
indenture governing Notes which is identical in all material respects to the
indenture referred to in the preamble, other than such changes to any such
indenture as are necessary to comply with the TIA, and which, in either case,
has been qualified under the TIA.
Initial Purchaser: As defined in the preamble.
-----------------
Liquidated Damages: As defined in Section 5 hereof.
------------------
2
<PAGE>
New Senior Notes: The 11 1/2% new Senior Notes due 2010 that are
----------------
identical to the Senior Notes, except that such New Senior Notes bear no legends
regarding transfer restrictions, issued pursuant to an Indenture in the Exchange
Offer or as contemplated by Sections 4 and 6 hereof.
Notes: The Senior Notes, the New Senior Notes and the Private Exchange
-----
Notes.
Participating Broker-Dealer: Any Broker-Dealer that (i) holds Notes
---------------------------
that were acquired for its own account as a result of market-making activities
or other trading activities (other than Notes acquired directly from the Company
or any of its Affiliates) that intends to participate in the Exchange Offer or
(ii) holds New Senior Notes acquired in the Exchange Offer.
Private Exchange: As defined in Section 3(b) hereof.
----------------
Private Exchange Notes: As defined in Section 3(b) hereof.
----------------------
Prospectus: The prospectus included in a Registration Statement at the
----------
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Purchase Agreement: As defined in the preamble.
------------------
Recommencement Date: As defined in Section 6(d) hereof.
-------------------
Registration Default: As defined in Section 5 hereof.
--------------------
Registration Statement: Any registration statement of the Company
----------------------
relating to (a) an offering of New Senior Notes pursuant to or following the
Consummation of an Exchange Offer or (b) the registration for resale of Notes
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Rule 144: Rule 144 promulgated under the Securities Act.
--------
SEC: The Securities and Exchange Commission
---
Securities Act: The Securities Act of 1933, as amended.
--------------
3
<PAGE>
Senior Notes: As defined in the preamble.
------------
Shelf Effectiveness Deadline: As defined in Section 4(a) hereof.
----------------------------
Shelf Filing Deadline: As defined in Section 4(a) hereof.
---------------------
Shelf Registration Statement: As defined in Section 4(a) hereof.
----------------------------
Suspension Notice: As defined in Section 6(d) hereof.
-----------------
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
---
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each (a) Senior Note and, if issued,
------------------------------
the Private Exchange Notes, until the earliest to occur of (i) the date on which
such Senior Note or Private Exchange Note, as the case may be, is exchanged in
the Exchange Offer for a New Senior Note which is entitled to be resold to the
public by the holder thereof without complying with the registration and
prospectus delivery requirements of the Securities Act, (ii) the date on which
such Senior Note or Private Exchange Note, as the case may be, has been disposed
of in accordance with a Shelf Registration Statement and the purchaser thereof
has been issued a New Senior Note which is entitled to be resold to the public
by the holder thereof without complying with the registration and prospectus
delivery requirements of the Securities Act, or (iii) the date on which such
Senior Note or Private Exchange Note, as the case may be, is distributed to the
public pursuant to Rule 144 under the Securities Act and the purchaser thereof
has been issued a New Senior Note which is entitled to be resold to the public
by the holder thereof without complying with the registration and prospectus
delivery requirements of the Securities Act, and (b) New Senior Note held by a
Participating Broker-Dealer until the date on which such New Senior Note is
disposed of by such Participating Broker-Dealer pursuant to a Registration
Statement, including the delivery of the Prospectus contained therein, and such
New Senior Note is entitled to be resold to the public by the holder thereof
without complying with the registration and prospectus delivery requirements of
the Securities Act.
Trustee: The trustee under an Indenture.
-------
Section 2. SECURITIES SUBJECT TO AGREEMENT
(a) The securities entitled to the benefits of this Agreement are the
Senior Notes, the New Senior Notes and the Private Exchange Notes until all of
such Notes shall cease to be Transfer Restricted Securities.
4
<PAGE>
(b) A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person beneficially owns such Transfer
------
Restricted Securities.
Section 3. EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) below have been
complied with), the Company shall (i) cause the Exchange Offer Registration
Statement to be filed with the SEC as soon as practicable after the Closing
Date, but in no event later than 60 days after the Closing Date (such 60th day
being the "Filing Deadline"), (ii) use its best efforts to cause such Exchange
---------------
Offer Registration Statement to become effective at the earliest possible time,
but in no event later than 150 days after the Closing Date (such 150th day being
the "Effectiveness Deadline"), (iii) in connection with the foregoing, (A) file
----------------------
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause it to become effective, (B) file, if
applicable, a post-effective amendment to such Exchange Offer Registration
Statement pursuant to Rule 430A under the Securities Act and (C) cause all
necessary filings, if any, in connection with the registration and qualification
of the New Senior Notes to be made under the Blue Sky laws of such jurisdictions
as are necessary to permit Consummation of the Exchange Offer, and (iv) upon the
effectiveness of such Exchange Offer Registration Statement, commence and
Consummate the Exchange Offer. The Exchange Offer shall be on the appropriate
form permitting (i) registration of the New Senior Notes to be offered in
exchange for the Senior Notes that are Transfer Restricted Securities and (ii)
resales of New Senior Notes by Participating Broker-Dealers as contemplated by
Section 3 (d) below.
(b) If, prior to consummation of the Exchange Offer, the Initial
Purchaser holds any Senior Notes acquired by them and having the status of an
unsold allotment in the initial distribution, the Company upon the request of
the Initial Purchaser shall, simultaneously with the delivery of the New Senior
Notes in the Exchange Offer, issue and deliver to the Initial Purchaser in
exchange (the "Private Exchange") for Senior Notes held by the Initial Purchaser
a like principal amount of debt securities (the "Private Exchange Notes") that
----------------------
are identical to the New Senior Notes, except that such Private Exchange Notes
shall bear appropriate legends regarding transfer restrictions. The Private
Exchange Notes shall (i) be issued under the same Indenture, (ii) be of the same
class and series, and (iii) bear the same CUSIP number, as the New Senior Notes.
(c) The Company shall cause the Exchange Offer Registration Statement
to be effective continuously, and shall keep the Exchange Offer open for a
period of not less than the minimum period required under applicable federal and
state securities laws to Consummate the Exchange Offer; provided, however, that
in no event shall such period be less than 20 Business Days. The Company shall
cause the Exchange Offer to
5
<PAGE>
comply with all applicable securities laws. No securities other than the New
Senior Notes shall be included in the Exchange Offer Registration Statement. The
Company shall use its best efforts to cause the Exchange Offer to be Consummated
on the earliest practicable date after the Exchange Offer Registration Statement
has become effective, but in no event later than 30 Business Days thereafter
(such 30th day being the "Consummation Deadline").
---------------------
(d) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Participating Broker-Dealer may exchange Transfer Restricted
Securities held by it pursuant to the Exchange Offer. The Company acknowledges,
and such "Plan of Distribution" shall also indicate that under certain
circumstances (i) a Participating Broker-Dealer may be deemed to be an
"underwriter" within the meaning of the Securities Act, (ii) in such event a
Participating Broker-Dealer would be required to deliver a prospectus meeting
the requirements of the Securities Act in connection with any resales of the
securities received by such Participating Broker-Dealer in the Exchange Offer,
and (iii) such prospectus delivery requirement may be satisfied by the delivery
by such Participating Broker-Dealer of the prospectus contained in the Exchange
Offer Registration Statement. Such "Plan of Distribution" section shall also
contain all other information with respect to such resales by Participating
Broker-Dealers that the SEC may require in order to permit such resales, but
shall not name any such Participating Broker-Dealer or disclose the amount of
securities held by any such Participating Broker-Dealer except to the extent
specifically required by the SEC as a result of a change in policy after the
date of this Agreement. The Company shall keep the Exchange Offer Registration
Statement continuously effective, supplemented, amended and current as required
by the provisions of paragraphs (a) and (c) of Section 6 below to the extent
necessary to ensure that it is available for resales of Notes, acquired by
Participating Broker-Dealers, and shall ensure that the Exchange Offer
Registration Statement conforms with all applicable requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the SEC
as announced from time to time, for a period of one year from the Consummation
Deadline. The Company shall provide sufficient copies of the latest version of
any such prospectus to Participating Broker-Dealers promptly upon request, and
in no event later than one day following any such request, at any time during
such period in order to facilitate such resales.
Section 4. SHELF REGISTRATION
(a) If (i) the Exchange Offer is not permitted by applicable law (after
the Company have complied with the procedures set forth in Section 6(a) below),
(ii) the Exchange Offer is not consummated within 210 days of the Closing Date,
(iii) if any holder of Notes shall notify the Company within 20 Business Days
following the Consummation Deadline that (A) such holder was prohibited by law
or SEC policy
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from participating in the Exchange Offer or (B) such holder may not resell the
New Senior Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
holder or (C) such holder is a Broker-Dealer and holds Senior Notes acquired
directly from the Company or any of its Affiliates, or (iv) the holder of
Private Exchange Notes so requests, then the Company shall:
(x) cause to be filed, on or prior to 60 days after the
earlier of (i) (A) the date on which the Company determines that the
Exchange Offer Registration Statement cannot be filed as a result of
clause (a)(i) above or (B) the Closing Date, and (ii) the date on which
the Company receives the notice specified in clause (a)(ii) above (such
earlier date, the "Shelf Filing Deadline"), a shelf registration
---------------------
statement pursuant to Rule 415 under the Securities Act (which may be
an amendment to the Exchange Offer Registration Statement (the "Shelf
-----
Registration Statement")), relating to all Transfer Restricted
----------------------
Securities, and
(y) shall use its best efforts to cause such Shelf
Registration Statement to become effective on or prior to 90 days after
the Shelf Filing Deadline for the Shelf Registration Statement (such
90th day, the "Shelf Effectiveness Deadline").
(b) To the extent necessary to ensure that the Shelf Registration
Statement is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a) and the other Notes
required to be registered therein pursuant to Section 6(b)(ii) hereof, the
Company shall keep any Shelf Registration Statement required by this Section
4(a) continuously effective, supplemented, amended and current as required by
and subject to the provisions of Sections 6(b) and (c) hereof and responsive to
and in conformity with the applicable requirements of this Agreement, the
Securities Act, the Exchange Act and the policies, rules and regulations of the
SEC as announced from time to time, for a period of at least two years (as
extended pursuant to Section 6(c)(i)) following the Closing Date, or such
shorter period as will terminate when all Transfer Restricted Securities covered
by such Shelf Registration Statement have ceased to constitute Transfer
Restricted Securities.
(c) No holder of Notes may include any of its Notes in any Shelf
Registration Statement pursuant to this Agreement unless and until such holder
furnishes to the Company in writing, within 20 days after receipt of a written
request therefor, the information specified in Item 507 or 508 of Regulation
S-K, as applicable, of the Securities Act for use in connection with any Shelf
Registration Statement or Prospectus or preliminary Prospectus included therein.
No holder of Notes shall be entitled to Liquidated Damages pursuant to Section 5
hereof unless and until such
7
<PAGE>
holder shall have used its reasonable best efforts to furnish all such
information as provided in the preceding sentence. Each holder of Notes included
in any Shelf Registration Statement pursuant to this Agreement agrees promptly
to furnish additional information required to be disclosed in order to make the
information previously furnished to the Company by such holder not materially
misleading.
Section 5. LIQUIDATED DAMAGES
(a) The parties hereto acknowledge and agree that the holders of Notes
will suffer material damages if the Company fails to fulfill its obligations
under Section 3 or Section 4 hereof and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, the Company
hereby agrees to pay liquidated damages ("Liquidated Damages") if (i) any
------------------
Registration Statement required by this Agreement is not filed with the SEC on
or prior to the applicable Filing Deadline or Shelf Filing Deadline, as
applicable, (ii) any such Registration Statement has not been declared effective
by the SEC on or prior to the applicable Effectiveness Deadline or the Shelf
Effectiveness Deadline, as applicable, (iii) the Exchange Offer has not been
Consummated on or prior to the Consummation Deadline or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded immediately by a post-effective amendment to such
Registration Statement that cures such failure and that is itself declared
effective immediately (each such event referred to in clauses (i) through (iv),
a "Registration Default"). Liquidated Damages shall accrue and be payable on the
--------------------
principal amount of outstanding Notes from the date of such Registration Default
at a rate of 0.25% per annum for the first 90-day period immediately following
the occurrence of such Registration Default. The amount of Liquidated Damages
shall increase by an additional 0.25% per annum with respect to each subsequent
90-day period until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of 2.0% per annum; provided, that the Company shall
in no event be required to pay Liquidated Damages for more than one Registration
Default at any given time. Notwithstanding anything to the contrary set forth
herein, (1) upon filing of the Exchange Offer Registration Statement or the
Shelf Registration Statement, in the case of (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement or the Shelf
Registration Statement, in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement or
the Shelf Registration Statement to again be declared effective or made usable
in the case of (iv) above, the Liquidated Damages payable as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease to accrue upon the
cure of all such Registration Defaults.
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<PAGE>
(b) All accrued Liquidated Damages shall be paid in the manner provided
for the payment of interest in the Indenture, on each Interest Payment Date, as
more fully set forth in the Indenture and the Notes. All of the obligations of
the Company to pay Liquidated Damages hereunder with respect to any securities
shall survive until such time as such obligations shall have been discharged and
satisfied in full, notwithstanding the fact that any such securities shall at
any time cease to be Transfer Restricted Securities hereunder.
Section 6. REGISTRATION PROCEDURES
(a) In connection with the Exchange Offer, the Company shall (x) comply
with all applicable provisions of Section 6(c) below, (y) use its best efforts
to effect such exchange and to permit the resale of New Senior Notes by
Participating Broker- Dealers and (z) comply with all of the following
provisions:
(i) If, following the date hereof there has been announced a
change in SEC policy with respect to exchange offers such as the
Exchange Offer, that in the reasonable opinion of counsel to the
Company raises a substantial question as to whether the Exchange Offer
is permitted by applicable federal law, the Company hereby agrees to
seek a no-action letter or other favorable decision from the SEC
allowing the Company to Consummate an Exchange Offer for such Transfer
Restricted Securities in the manner contemplated hereby. The Company
hereby agrees to pursue the issuance of such a decision to the SEC
staff level. In connection with the foregoing, the Company hereby
agrees to take all such other actions as may be requested by the SEC or
otherwise required in connection with the issuance of such decision,
including without limitation (A) participating in telephonic
conferences with the SEC, (B) delivering to the SEC staff an analysis
prepared by counsel to the Company setting forth the legal bases, if
any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which
need not be favorable) by the SEC staff.
(ii) As a condition to its participation in the Exchange
Offer, each holder of Notes, including, without limitation, any Holder
who is a Broker- Dealer shall furnish, upon the request of the Company,
prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement)
to the effect that (A) it is not an Affiliate of the Company, (B) it is
not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution of the New Senior Notes to be issued in the Exchange Offer
and (C) it is acquiring the New Senior Notes in its ordinary course of
business. As a condition to its participation in the Exchange Offer,
each holder using the
9
<PAGE>
Exchange Offer to participate in a distribution of the New Senior Notes
acknowledges and agrees that, if the resales are of New Senior Notes
obtained by such holder in exchange for Senior Notes acquired directly
from the Company or an Affiliate thereof, it (1) could not, under SEC
policy as in effect on the date of this Agreement, rely on the position
of the SEC enunciated in Morgan Stanley and Co., Inc. (available June
5, 1991) and Exxon Capital Holdings Corporation (available May 13,
1988), as interpreted in the SEC's letter to Shearman & Sterling dated
July 2, 1993, and similar no- action letters (including, if applicable,
any no-action letter obtained pursuant to clause (i) above), and (2)
must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with a secondary resale transaction
and that such a secondary resale transaction must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company shall provide a supplemental letter
to the SEC (A) stating that the Company is registering the Exchange
Offer in reliance on the position of the SEC enunciated in Exxon
Capital Holdings Corporation (available May 13, 1988), Morgan Stanley &
Co. Inc. (available June 5, 1991), as interpreted in the SEC's letter
to Shearman & Sterling dated July 2, 1993, and, if applicable, any
no-action letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any person to distribute the New Senior Notes to be
received in the Exchange Offer and that, to the best of the Company's
information and belief, each holder participating in the Exchange Offer
is acquiring the New Senior Notes in its ordinary course of business
and has no arrangement or understanding with any Person to participate
in the distribution of the New Senior Notes received in the Exchange
Offer and (C) including any other undertaking or representation
required by the SEC in connection with any no action letter obtained
pursuant to clause (i) above or otherwise.
(b) In connection with the Shelf Registration Statement, the
Company shall:
(i) comply with all the provisions of Section 6(c) below and
use its best efforts to effect such registration to permit the sale of
the Notes in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the
Company pursuant to Section 4(b) hereof), and pursuant thereto the
Company will prepare and file with the SEC a Registration Statement
relating to the registration on any appropriate form under the
Securities Act, which form shall be available for the sale of the Notes
in
10
<PAGE>
accordance with the intended method or methods of distribution thereof
within the time periods and otherwise in accordance with the provisions
hereof, and
(ii) issue, upon the request of any holder or purchaser of
Senior Notes covered by any Shelf Registration Statement contemplated
by this Agreement, New Senior Notes having an aggregate principal
amount equal to the aggregate principal amount of Senior Notes sold
pursuant to such Shelf Registration Statement and surrendered to the
Company for cancellation; the Company shall, if necessary, register New
Senior Notes on the Shelf Registration Statement for this purpose and
issue the New Senior Notes to the purchaser(s) of securities subject to
the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) In connection with any Registration Statement and any related
Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements
for the period specified in Section 3 or 4 of this Agreement, as
applicable; upon the occurrence of any event that would cause any such
Registration Statement or Prospectus (A) to contain an untrue statement
of material fact or omit to state any material fact necessary to make
the statements therein not misleading or (B) not to be effective and
usable for resale of Notes during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to
such Registration Statement curing such defect, and, if SEC review is
required, use its best efforts to cause such amendment to be declared
effective as soon as practicable;
(ii) prepare and file with the SEC such amendments and post-
effective amendments to the applicable Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may
be; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be duly filed pursuant to Rule
424 under the Securities Act, and to comply fully with Rules 424, 430A
and 462, as applicable, under the Securities Act in a timely manner;
and comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus;
(iii) advise each holder promptly and, if requested by such
holder, confirm such advice in writing, (A) when the Prospectus or any
Prospectus
11
<PAGE>
supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of any
request by the SEC for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional
information relating thereto, (C) of the issuance by the SEC of any
stop order suspending the effectiveness of the Registration Statement
under the Securities Act or of the suspension by any state securities
SEC of the qualification of the Notes for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or
that requires the making of any additions to or changes in the
Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading; if at
any time the SEC shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event
contemplated by Section 6(c)(iii)(D) above shall exist or have
occurred, prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of Notes, the
Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(v) (A) in the case of an Exchange Offer, furnish counsel for
any Participating Broker-Dealer, if any, that has given at least five
Business Days' prior written or oral notification to the Company that
it will participate in the Exchange Offer and (B) in the case of a
Shelf Registration Statement, furnish counsel for the holders of Notes,
before filing with the SEC, copies of any Registration Statement or any
Prospectus included therein or any amendments or supplements to any
such Registration Statement or Prospectus (including all documents
incorporated by reference in such Registration Statement at the time of
or after the initial filing of such Registration Statement), which
documents will be subject to the review of such holders and
Participating Broker-Dealer, if
12
<PAGE>
any, for a period of at least five Business Days, and the Company will
not file any such Registration Statement or Prospectus or any amendment
or supplement to any such Registration Statement or Prospectus
(including all such documents incorporated by reference) to which a
selling holder of Notes covered by such Registration Statement (in the
case of a Shelf Registration Statement) or any Participating
Broker-Dealer (in the case of an Exchange Offer Registration
Statement), shall reasonably object. A Participating Broker-Dealer or
selling holder shall be deemed to have reasonably objected to such
filing if such Registration Statement, amendment, Prospectus or
supplement, as applicable, as proposed to be filed, contains a material
misstatement or omission;
(vi) (A) in the case of an Exchange Offer, furnish counsel for
any Participating Broker-Dealer that has given at least five Business
Days' prior written or oral notification to the Company that it will
participate in the Exchange Offer and (B) in the case of a Shelf
Registration Statement, furnish counsel for the holders of Notes, prior
to the filing of any document that is to be incorporated by reference
into a Registration Statement or Prospectus included therein, copies of
such document, and, in each case, make the Company's representatives
available for discussion of such document and other customary due
diligence matters, and include such information in such document prior
to the filing thereof as such holders, any Participating Broker Dealers
or their respective counsel, reasonably may request;
(vii) make available at reasonable times for inspection by (A)
in the case of an Exchange Offer, any Participating Broker-Dealer, and
any attorney or accountant retained by any such Participating
Broker-Dealer and (B) in the case of a Shelf Registration Statement,
furnish holders, and any attorney or accountant retained by such
holders, all material financial and other records, pertinent corporate
documents and properties of the Company and cause the Company's
officers, directors and employees to supply all material information
reasonably requested by any such Participating Broker-Dealer, holder,
attorney or accountant in connection with such Registration Statement
subsequent to the filing thereof and prior to its effectiveness, in
each case, subject to executing a confidentiality undertaking in
customary form and with respect to confidential information and/or
proprietary information of the Company;
(viii) (A) in the case of an Exchange Offer, if requested by
any Participating Broker-Dealer, or their counsel, or (B) in the case
of a Shelf Registration Statement, if requested by any holder or their
counsel, promptly incorporate in any Registration Statement or
Prospectus included therein, pursuant to a supplement or post-effective
amendment if necessary, such material information as such Participating
Broker-Dealers, holders or their respective counsel may reasonably
request to have included therein, including,
13
<PAGE>
without limitation, information relating to the "Plan of Distribution"
of the Notes, information with respect to the principal amount of Notes
being sold, the purchase price being paid therefor and any other terms
of the offering of the Notes to be sold in such offering; and make all
required filings of such Prospectus supplement or post-effective
amendment as soon as practicable after the Company is notified of the
matters to be incorporated in such Prospectus supplement or
post-effective amendment;
(ix) furnish (A) in the case of an Exchange Offer, to any
Participating Broker-Dealer, and any underwriter(s), if such
Participating Broker-Dealer or underwriter(s) have given prior written
or oral notification to the Company that they will participate in the
Exchange Offer, or (B) in the case of a Shelf Registration Statement,
to each selling holder, without charge, at least one copy of the
Registration Statement, as first filed with the SEC, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (without documents incorporated therein by
reference or exhibits thereto, unless requested);
(x) deliver to each selling holder, each Participating
Broker-Dealer and any underwriter(s), without charge, as many copies of
the Prospectus (including each preliminary prospectus) and any
amendment or supplement thereto as such Persons reasonably may request;
the Company hereby consents to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each of the
selling holders, each of the Participating Broker-Dealers, and each of
the other underwriter(s), if any, in connection with the offering and
the sale of the Notes covered by the Prospectus or any amendment or
supplement thereto;
(xi) in the case of a Shelf Registration Statement and, to the
extent that the Company is required to maintain an effective Exchange
Offer Registration Statement for any Participating Broker-Dealer, enter
into such agreements (including, without limitation, underwriting
agreements), and make such representations and warranties, and take all
such other actions in connection therewith in order to expedite or
facilitate the disposition of the Notes pursuant to any Registration
Statement contemplated by this Agreement, all to such extent as may be
reasonably requested by any holder of Notes or Participating
Broker-Dealer in connection with any sale or resale pursuant to any
Registration Statement contemplated by this Agreement; and whether or
not an underwriting agreement is entered into and whether or not the
registration is an underwritten registration, the Company shall:
(A) upon request of any holder, furnish (or in
the case of paragraphs (2) and (3), use its best efforts to cause to
be furnished) to
14
<PAGE>
each holder, upon Consummation of the Exchange Offer or upon
the effectiveness of the Shelf Registration Statement, as the
case may be, and to each Participating Broker-Dealer upon five
Business Days' prior written or oral notice to the Company
that it is participating in the Exchange Offer, but in no case
prior to the Consummation of the Exchange Offer:
(1) a certificate, dated such date, signed
on behalf of the Company by (x) the President or any
Vice President and (y) a principal financial or
accounting officer of the Company, confirming, as of
the date thereof, the matters set forth in Sections
9(d) and 9(o) of the Purchase Agreement and such
other similar matters as such holders may reasonably
request;
(2) opinions, dated the date of Consummation
of the Exchange Offer or the date of effectiveness of
the Shelf Registration Statement, as the case may be,
of counsel for the Company covering matters similar
to those set forth in paragraph (e) of Section 9 of
the Purchase Agreement and such other matters as such
holder may reasonably request, and in any event
including a statement to the effect that such counsel
has participated in conferences with officers and
other representatives of the Company, representatives
of the independent public accountants for the Company
and have considered the matters required to be stated
therein and the statements contained therein,
although such counsel has not independently verified
the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on
the basis of the foregoing (relying as to materiality
to the extent such counsel deems appropriate upon the
statements of officers and other representatives of
the Company, no facts came to such counsel's
attention that caused such counsel to believe that
the applicable Registration Statement, at the time
such Registration Statement or any post-effective
amendment thereto became effective and, in the case
of the Exchange Offer Registration Statement, as of
the date of Consummation of the Exchange Offer,
contained an untrue statement of a material fact or
omitted to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, or that the Prospectus
contained in
15
<PAGE>
such Registration Statement as of its date and, in
the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
the light of the circumstances under which they were
made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial data included in any
Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated the
date of Consummation of the Exchange Offer, or as of
the date of effectiveness of the Shelf Registration
Statement, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set
forth in the comfort letters delivered pursuant to
Section 9(g) of the Purchase Agreement;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, indemnification provisions
and procedures no less favorable to the holders, any
Participating Broker-Dealer or any underwriter than the
comparable provisions hereof;
(C) deliver such other documents and certificates as
may be reasonably requested by the selling holders or any
Participating Broker- Dealer to evidence compliance with the
matters covered in clause (A) above and with any customary
conditions contained in any agreement entered into by the
Company pursuant to this clause (xi); and
(D) if at any time during, in the case of an Exchange
Offer, the one-year period contemplated by Section 3(d)
hereof, or, in the case of a Shelf Registration, the two-year
period contemplated by Section 4(b) hereof, the
representations and warranties of the Company contemplated in
clause (A)(1) above cease to be true and correct, so advise
any
16
<PAGE>
Participating Broker-Dealer and each selling holder promptly
and, if requested by such Persons, shall confirm such advice
in writing;
(xii) prior to any public offering of Notes, cooperate with
the selling holders or any Participating Broker-Dealer and their
counsel in connection with the registration and qualification of the
Notes under the securities or Blue Sky laws of such jurisdictions as
the selling holders or any Participating Broker- Dealer may request and
do any and all other acts or things necessary or advisable to enable
the disposition in such jurisdictions of the Notes covered by the
applicable Registration Statement; provided, however, that the Company
shall not be required to register or qualify as a foreign corporation
where it is not now so qualified or to take any action that would
subject it to the service of process in suits or to taxation, other
than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) in connection with any sale of Notes that will result
in such Notes no longer being Transfer Restricted Securities, cooperate
with the holders to facilitate the timely preparation and delivery of
certificates representing Notes to be sold and not bearing any
restrictive legends;
(xiv) use its best efforts to cause the disposition of the
Notes covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Notes, subject to the proviso contained in clause
(xii) above;
(xv) provide CUSIP, ISIN and Common Code numbers for all Notes
not later than the effective date of a Registration Statement covering
such Notes and provide the Trustee with printed certificates for the
Notes which are in a form eligible for deposit with the Common
Depositary under the Indenture;
(xvi) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be
audited) covering a twelve-month period beginning after the effective
date of the Registration Statement (as such term is defined in
paragraph (c) of Rule 158 under the Securities Act);
(xvii) cause each Indenture to be qualified under the TIA not
later than the effective date of the first Registration Statement
required by this Agreement and, in connection therewith, cooperate with
the Trustee and the holders to effect such changes to any Indenture as
may be required for such Indenture to be
17
<PAGE>
so qualified in accordance with the terms of the TIA; and execute and
use its best efforts to cause the Trustee to execute, all documents
that may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable such Indenture to
be so qualified in a timely manner;
(xviii) cooperate and assist in any filings required to be
made with the National Association of Securities Dealers, Inc. and in
the performance of any due diligence investigation by any Participating
Broker-Dealer or other underwriter (including any "qualified
independent underwriter") that is required to be retained in accordance
with the rules and regulations of the National Association of
Securities Dealers, Inc.;
(xix) cause all Notes covered by the Registration Statement to
be listed on each securities exchange on which similar securities
issued by the Company are then listed if requested by the holders of a
majority in aggregate principal amount of Senior Notes or the managing
underwriter(s), if any; and
(xx) provide promptly to each Holder and any affiliated market
maker thereof, upon request, each document filed with the SEC pursuant
to the requirements of Section 13 or 15(d) of the Exchange Act.
(d) Each Holder agrees by acquisition of a Transfer Restricted Security
that, upon receipt of the notice referred to in Section 6(c)(iii)(C) or any
notice from the Company of the existence of any fact of the kind described in
Section 6(c)(iii)(D) hereof (in each case, a "Suspension Notice"), such Holder
will forthwith discontinue disposition of Transfer Restricted Securities
pursuant to the applicable Registration Statement until (i) such Holder has
received copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(iv) hereof, or (ii) such Holder is advised in writing by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings that are incorporated by reference in
the Prospectus (in each case, the "Recommencement Date"). Each Holder receiving
a Suspension Notice hereby agrees that it will either (i) destroy any
Prospectuses, other than permanent file copies, then in such Holder's possession
which have been replaced by the Company with more recently dated Prospectuses or
(ii) deliver to the Company (at the Company's expense) all copies, other than
permanent file copies, then in such Holder's possession of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 3 or 4 hereof, as applicable,
shall be extended by a number of days equal to the number of days in the period
from and including the date of delivery of the Suspension Notice to the date of
delivery of the Recommencement Date.
18
<PAGE>
Section 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the New Senior
Notes to be issued in the Exchange Offer and printing of Prospectuses),
messenger and delivery services and telephone; (iv) all fees and disbursements
of counsel for the Company and the holders of Notes, respectively; (v) the
Luxembourg Stock Exchange application and filing fees in connection with listing
the New Senior Notes; and (vi) all fees and disbursements of independent
certified public accountants of the Company (including the expenses of any
special audit and comfort letters required by or incident to such performance).
(b) The Company will, in any event, bear its internal expenses,
including, without limitation, all salaries and expenses of their officers and
employees performing legal or accounting duties, the expenses of any annual or
periodic audit or other accounting review and the fees and expenses of any
person, including special experts or consultants, retained by the Company.
(c) In connection with any Registration Statement required by this
Agreement, including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement, the Company will reimburse the
Initial Purchaser and the holders of Notes tendered in the Exchange Offer and/or
offered or sold under the Exchange Offer Registration Statement or the Shelf
Registration Statement, as applicable, for the fees and disbursements of not
more than one counsel, who shall be Paul, Weiss, Rifkind, Wharton & Garrison,
unless another firm shall be chosen by the holders of a majority in principal
amount of the Notes for whose benefit such Registration Statement is being
prepared.
Section 8. INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each holder of
Notes, its directors, officers and each Person, if any, who controls such holder
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), from and against any and all losses, claims, damages,
liabilities, judgments, (including without limitation, any reasonable legal or
other expenses incurred in connection with investigating or defending any
matter, including any action that could give rise to any such losses, claims,
damages, liabilities or judgments) caused by any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement,
preliminary prospectus or Prospectus (or any amendment or supplement thereto)
provided by the Company to any prospective seller or purchaser of Notes, or
caused by
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<PAGE>
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by any such untrue statement or omission or alleged untrue statement or
omission made therein in reliance upon and in conformity with information
relating to any such holder furnished to the Company in writing by or on behalf
of any such holder expressly for use therein.
(b) Each holder of Notes agrees, severally and not jointly, to
indemnify and hold harmless the Company, and each other holder of Notes, and
their respective directors and officers, and each person, if any, who controls
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) the Company and each other holder of Notes to the same extent as
the foregoing indemnity from the Company set forth in Section (a) above, but
only with reference to information relating to such holder furnished to the
Company in writing by or on behalf of such holder expressly for use in any
Registration Statement. In no event shall any holder of Notes, its directors,
officers or any Person who controls such holder be liable or responsible for any
amount in excess of the amount by which the total amount received by such holder
with respect to its sale of Notes pursuant to a Registration Statement exceeds
(i) the amount paid by such holder for such Notes and (ii) the amount of any
damages that such holder, its directors, officers or any Person who controls
such holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in
respect of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a holder of Notes shall not be required to
assume the defense of such action pursuant to this Section 8(c), but may employ
separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to
20
<PAGE>
it which are different from or additional to those available to the indemnifying
party (in which case the indemnifying party shall not have the right to assume
the defense of such action on behalf of the indemnified party). In any such
case, the indemnifying party shall not, in connection with any one action or
separate but substantially similar or related actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) for all indemnified parties and all such fees and expenses
shall be reimbursed as they are incurred. Such firm shall be designated in
writing by a majority of the holders of Notes, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than 20 Business Days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section
8 is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the holders of Notes, on the other hand, from their sale of Notes or
(ii) if the allocation provided by clause 8(d)(i) is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause 8(d)(i) above but also the relative fault of the
Company, on the one hand, and of the holder, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
liabilities or judgments, as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
holder, on the other hand, shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
21
<PAGE>
omission or alleged omission to state a material fact relates to information
supplied by the Company, on the one hand, or by the holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each holder of any Note agree that it would not be just
and equitable if contribution pursuant to this Section 8(d) were determined by
pro rata allocation (even if such holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no holder of any
Note, its directors, its officers or any person, if any, who controls such
holder shall be required to contribute, in the aggregate, any amount in excess
of the amount by which the total received by such holder with respect to the
sale of Notes pursuant to a Registration Statement exceeds (i) the amount paid
by such holder for such Notes and (ii) the amount of any damages which such
holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The holders' obligations to contribute pursuant to
this Section 8(d) are several in proportion to the respective principal amount
of Notes held by each holder hereunder. The holders' obligations to contribute
pursuant to this Section 8(d) are not joint.
Section 9. RULE 144A AND RULE 144
Each of the Company agrees with each holder of Notes, for so long as
any Notes remain outstanding (i) whether or not either of the Company is subject
to Section 13 or 15(d) of the Exchange Act, to make available, upon request of
any holder, to such holder or beneficial owner of Notes in connection with any
sale thereof and any prospective purchaser of Notes designated by such holder or
beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of Notes pursuant to Rule 144A, and
(ii) during any period in which either of the Company is subject to Section 13
or 15(d) of the Exchange Act, to make all filings
22
<PAGE>
required thereby in a timely manner in order to permit resales of Notes pursuant
to Rule 144.
Section 10. UNDERWRITTEN REGISTRATIONS
(a) No holder of Notes may participate in any underwritten offering
under a Registration Statement hereunder unless such holder (i) agrees to sell
such holder's Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (ii)
completes and executes all reasonable questionnaires, powers of attorney,
indemnities, underwriting agreements, lock-up letters and other documents
required under the terms of such underwriting arrangements.
(b) The holders of Notes covered by the Shelf Registration Statement
who desire to do so may sell such Notes in an underwritten offering. In any such
offering, each investment banking firm that will manage and/or participate in
the offering will be selected, subject to the consent of the Company, which
consent shall not be unreasonably withheld, by the holders of a majority in
aggregate principal amount of the Notes included in such offering.
Section 11. MISCELLANEOUS
(a) The Company acknowledges and agrees that (i) any failure by the
Company to comply with its obligations hereunder may result in material
irreparable injury to the Initial Purchaser or the holders of Notes for which
there is no adequate remedy at law; (ii) it will not be possible to measure
damages for such injuries precisely; and (iii) in the event of any such failure,
the Initial Purchaser or any holder of Notes may obtain such relief as may be
required specifically to enforce the Company's obligations hereunder, including
without limitation Sections 3, 4 and 6 hereof. The Company further agree to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
(b) The Company will not, on or after the date of this Agreement, enter
into any agreement with respect to its securities that is inconsistent with the
rights granted under this Agreement or otherwise conflicts with the provisions
hereof. Except as set forth on Schedule A hereto, neither the Company has
previously entered into any agreement granting any registration rights with
respect to its securities to any person. The rights granted hereunder do not in
any way conflict with and are not inconsistent with the rights granted to the
holders of any of the Company's securities under any agreement in effect on the
date hereof.
(c) The provisions of this Agreement may not be amended, modified or
supplemented, and waivers or consents to or departures from the provisions
hereof may
23
<PAGE>
not be given unless (i) in the case of Section 5 hereof and this Section
11(c)(i), the Company has obtained the written consent of holders of all
outstanding Notes entitled to Liquidated Damages under Section 5 hereof and (ii)
in the case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other holders whose Notes are not being tendered pursuant to such Exchange
Offer, may be given by the Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities subject to such Exchange Offer.
(d) The holders of outstanding Notes (excluding Notes held by the
Company or its Affiliates) shall be third party beneficiaries to the agreements
made hereunder between the Company, on the one hand, and the Initial Purchaser,
on the other hand, and shall have the right to enforce such agreements directly
to the extent they may deem such enforcement necessary or advisable to protect
their rights or the rights of holders of outstanding Notes hereunder.
(e) All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a holder, at the address set forth on the
records of the Registrar under the Indenture, with a copy to such
Registrar; and
(ii) if to the Company:
BROKAT Infosystems Aktiengesellschaft,
Industriestrasse 3, D-70565,
Stuttgart, Germany
Telecopier No.: +49 711 788 44 770
Attention: General Counsel
24
<PAGE>
With a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
Telecopier No.: 212/424-8500
Attention: Lars Bang-Jensen
All such notices and communications shall be deemed to have been duly
given: (i) at the time delivered by hand, if personally delivered; (ii) five
Business Days after being deposited in the mail, postage prepaid, if mailed;
(iii) when receipt acknowledged, if telecopied; and (iv) on the next Business
Day, if timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties, including, without limitation
and without the need for an express assignment, subsequent holders of
outstanding Notes (excluding Notes held by the Company or its Affiliates);
provided, that nothing herein shall be deemed to permit any assignment, transfer
or other disposition of Transfer Restricted Securities in violation of the terms
hereof, of the Purchase Agreement or the Indenture. If any transferee of any
holder shall acquire Notes in any manner, whether by operation of law or
otherwise, such Notes shall be held subject to all of the terms of this
Agreement, and by taking and holding such Notes such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) This Agreement may be executed in any number of counterparts and by
the parties hereto in separate counterparts, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(h) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
(i) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICT
OF LAW RULES THEREOF.
25
<PAGE>
(j) In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
(k) This Agreement is intended by the parties as a final expression of
their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to the subject matter hereof.
26
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
BROKAT Infosystems Aktiengesellschaft
By: /s/ MICHAEL JANSSEN
_________________________________
Name: Michael Janssen
Title: Chief Financial Officer
By: /s/ ACHIM SCHLUMPBERGER
_______________________________
Name: Achim Schlumpberger
Title: Executive Vice President
27
<PAGE>
The foregoing Registration Rights Agreement is hereby confirmed and accepted as
of the date first above written by WestLB Panmure Limited, as Initial Purchaser.
WESTLB PANMURE LIMITED
By: /s/ MARK HODERIN
_______________________________
Name: Mark Hoderin
Title: Chief Executive Officer
By: /s/ DAVID LANGSHAW
_______________________________
Name: David Langshaw
Title: Compliance Director &
Company Secretary
28
<PAGE>
Schedule A
Other Registration Rights Agreements
NONE
<PAGE>
EXHIBIT 10.1
Translation
Agreement
Regarding the Sale and Transfer of Shares
between
1 a) Y.A.C. Finance Holding S.A.
9, rue Dicks Bereldange/Luxembourg
(hereinafter referred to as "YAC")
and
1 b) Ms. Anja Fernbach
(hereinafter referred to as "Anja Fernbach")
and
1 c) Mr. Gunther Fernbach
(hereinafter referred to as "Gunther Fernbach")
(the parties 1 [a] to [c] hereinafter referred to collectively as "the sellers")
and
2. BROKAT Infosystems AG,
Industriestrasse 3, 70565 Stuttgart
(hereinafter referred to as "BROKAT")
(the sellers and BROKAT hereinafter referred to collectively as "the parties")
<PAGE>
Recitals
I. Capital increase (step I) 3
(S) 1 Capital increase, subscription 5
(S) 2 Contribution, surcharge 5
(S) 3 Change in the FFS articles of incorporation 6
II. Granting of the option to purchase all shares remaining with the sellers
after step I 8
(S) 4 Granting of the option 8
(S) 5 Targets 9
(S) 6 Acceptance of the purchase offer 10
(S) 7 Purchase price, substitution authorization 11
(S) 8 Transfer of the step II shares 12
(S) 9 Purchasing right 12
(S) 10 Preemptive right 13
III. Employee participation 14
(S) 11 Employee participation 14
IV. WarrantiesWarranties and representations representation 16
(S) 12 General 16
(S) 13 Warranties with regard to the corporate relationships of Fernbach
Company and the sellers' freedom of disposal 17
(S) 14 Warranties with regard to the enterprise and asset status of the
Fernbach companies 18
(S) 15 Warranties with regard to contractual and legal relationships and
conditions 20
(S) 16 Tax and social-welfare insurance release 23
(S) 17 Enterprise continuation 24
(S) 18 Legal consequences of violating a guarantee or representation 25
(S) 19 Limitation period 26
V. Measures before or after the signing date 26
(S) 20 Changes to the articles of incorporation of FFS, appointment of
a new member to the administrative board, sale of shares in Fernbach
Software Ireland Ltd. 26
(S) 21 Employment relationship of Gunther Fernbach 27
VI. Rights and duties of the parties for the period after the end of step II 28
(S) 22 Restructuring 28
(S) 23 Lock-up 28
(S) 24 Restraint of competition 28
VII. General provisions 30
(S) 25 Taxes, costs 30
(S) 26 Statements and declarations 30
(S) 27 Changes to the agreement 31
<PAGE>
(S) 28 Assignments 31
(S) 29 Interpretation of the agreement 31
(S) 30 Applicable law 32
(S) 31 Arbitration 32
Recitals
1. BROKAT is a stock corporation registered under record HRB 19292 in the
commercial register for companies kept at the Local Court of Stuttgart. The
share capital of BROKAT is DM 44,747,955.00 (forty-four million seven
hundred forty-seven thousand nine hundred fifty-five German marks), and is
divided into 8,949,591 no par shares.
The managing board of BROKAT is authorized under (S) 4 paragraph 2 of the
company's articles of incorporation to increase the company's share capital
with the approval of the Supervisory Board during the period up to June 30,
2003, by issuing new shares against cash contributions or non-cash
contributions once or several times, but not by more than DM 11,476,975.00
in total ("authorized capital I"). The managing board shall decide regarding
a preclusion of subscription rights with the approval of the Supervisory
Board.
Since September 16, 1998, BROKAT stock has been approved for the organized
market with the start of trading at the New Market of the Frankfurt
securities exchange. Listing on the New Market began on September 17, 1998.
BROKAT develops and markets software and hardware solutions, particularly
for secure data transmission in heterogeneous internal and inter-company
data networks. The company's business has developed positively in recent
years, and achieved market leadership in Germany in the market segment it is
active in. BROKAT desires to expand the competitive position it has achieved
domestically and abroad.
2. Fernbach Financial Software S.A. (hereinafter referred to as ,,FFS") is
registered under B 70830 in the commercial and corporate register of the
District Court of Luxembourg. The share capital of FFS is 288,500.00 euros,
divided into 57,700 shares with a par value of 5 euros each. The shares are
registered shares. According to article 5 of the articles of incorporation,
the administrative board is authorized to increase the corporation's capital
to bring it from 288,500.00 euros to 1 million euros by issuing 142,300
shares with a par value of 5 euros each, to enjoy the same rights as
existing shares. This authorization must be renewed every five years.
<PAGE>
2.1 YAC and Gunther Fernbach hold the 57,700 shares of FFS as follows:
(1) YAC 57,697 shares
(2) Gunther Fernbach 3 shares
2.2 FFS is the holding company of the following companies with the
following shareholding interests:
(1) Fernbach Software S.A. (hereinafter referred to as "FS"): 5998
shares @ LUF 1000 each of 6000 shares (one each of the other two
shares is held by Gunther Fernbach and Anja Fernbach)
(2) Fernbach Software AG (Germany) (hereinafter referred to as "FSD"):
19,999 shares @ DM 5.00 of 20,000 shares (the remaining share is
held by Gunther Fernbach)
(3) Fernbach-Software AG (Switzerland) (hereinafter referred to as
"FSC"): all 1000 shares @ SFR 100.00
(Companies [1] to [3] and FFS are referred to hereinafter
collectively as "the Fernbach companies")
(4) Fernbach Software Ireland Ltd., which no longer exists as an
operating company.
The Fernbach companies likewise develop and market software and
hardware solutions for administering transactions, especially in
the field of banking software.
3. BROKAT and the Fernbach companies see considerable synergistic effects in
cooperation, including and particularly from a geographic point of view. The
sellers and BROKAT have further agreed that BROKAT shall acquire a
shareholding interest in FFS as the holding company for the Fernbach
companies by way of stock acquisition in a first step (step I) to solidify
the partnership, to demonstrate cooperation on the market, and to promote
and finance further growth of the Fernbach companies, and BROKAT shall be
given an option, irrevocable for the sellers, to purchase all shares of FFS
as well as the shares of the Fernbach companies, to the extent they are not
held by FFS.
<PAGE>
In consideration of the foregoing, the parties hereby agree as follows:
I. Capital increase (step I)
(S) 1
Capital increase, subscription
1.1 The sellers hereby undertake to resolve as quickly as possible after
conclusion of the present agreement to increase, by 96,700 euros, from
288,500 euros to 385,200 euros, the share capital of FFS in exchange for a
cash contribution, issuing 19,340 shares with a par value of 5 euros each,
in accordance with the document enclosed as annex E, to preclude
shareholder subscription rights, and to permit only BROKAT to subscribe and
purchase the new shares (hereinafter referred to as "step I shares").
1.2 BROKAT shall be obligated to purchase the step I shares immediately after
confirmation of the credit extension by NordLB/HypoVereinsbank, and to
transfer the price named in (S) 2 to account (11424957491) of FFS at Banque
Internationale a Luxembourg prior to the capital increase, so that the
capital increase can take place on schedule.
The sellers hereby undertake as joint and several debtors to transfer 25.1
percent of all shares of FFS to BROKAT for security, in case the capital
increase has not been effectively completed after no more than one week
after payment of the price named in (S) 2. The shares must be transferred
back to the sellers immediately after the capital increase becomes
effective and BROKAT has purchased the step I shares.
(S) 2
Contribution, surcharge
2.1 BROKAT purchases the step I shares in exchange for payment to FFS
(1) of a contribution of 5 euros per share, i.e., a total of 96,700 euros
and
(2) of a surcharge of 100.75 euros per share, i.e., a total of 1,948,505
euros.
2.2 The contribution and surcharge in the total amount of 2,045,205 euros
(hereinafter referred to as "issue amount") shall be due and payable to FFS
in accordance with (S) 1.1.2 so that the resolution regarding the capital
increase according to (S) 1 (the day the resolution is adopted, hereinafter
referred to as "effective date") may then be adopted without delay.
<PAGE>
2.3 The sellers shall be obligated to make sure that the surcharge is used with
senior priority to reduce payable loan repayment claims of NordLB
Luxembourg S.A. and HypoVereinsbank Luxembourg S.A. in accordance with
annex C 13 (6), and with junior priority to increase the liquidity of the
Fernbach companies.
(S) 3
Change in the FFS articles of incorporation
3.1 The sellers warrant and represent:
After the step I shares are purchased and subscribed by BROKAT, the
Fernbach companies shall hold a shareholders' meeting at which the articles
of incorporation shall be changed to the effect that a majority of 75
percent of the share capital of FFS shall be necessary at the Fernbach
companies for basic transactions, i.e.:
(1) Changes in the articles of incorporation
(2) Change in the purpose and subject matter of the business
(3) Capital increases
(4) Appointment or dismissal of members of the administrative board and
setting the number of members of the administrative board
(5) Appointing the financial auditor
(6) Concluding, changing, or terminating employment agreements with members
of the administrative board.
3.2 The sellers warrant and represent:
BROKAT shall be entitled to appoint a member of the administrative board of
FFS. The sellers shall cooperate at all times with all their votes in
appointing or dismissing that member of the administrative board, on demand
and according to the instructions of BROKAT. YAC and Gunther Fernbach shall
appoint Mr. Michael Schumacher as member of the administrative board of FFS,
with effect as of the effective date, as the first member of the
administrative board appointed in accordance with this paragraph.
<PAGE>
Furthermore, the sellers shall appoint Arthur Andersen as financial auditor
of the Fernbach companies.
3.3 The sellers warrant and represent:
The articles of incorporation of the Fernbach companies shall be changed,
with effect as of the date this agreement is signed, to the effect that
unanimous resolutions of the administrative board of FFS shall be necessary
for transactions by the Fernbach companies relating to matters outside
normal business operations, i.e.:
(1) any form of capital increase or other issue of new shares, even within
the bounds of authorized capital
(2) acquisition, establishment, encumbrance, or sale of an enterprise or of
shareholding interests, including company agreements and joint contracts
(3) adding new lines of business and abandoning old areas of activity or
discontinuing business operations
(4) establishing and dissolving branch offices and operating locations
(5) acquisition, encumbrance, or sale of real property and equivalent rights
(6) granting credit, negotiating bills, promising warranties, and granting
other kinds of security
(7) developing and commencing distribution of new software products outside
normal business operations
(8) acquisition, utilization, or sale of own or outside license rights or
copyrights to software products outside normal business operations
(9) concluding, changing, or terminating distribution or license agreements
or other agreements regulating the utilization or exploitation of
software outside normal business operations
(10) appointing and dismissing managing directors, members of the managing
board, or holders of full power of commercial representation [Prokura]
of the subsidiaries
<PAGE>
(11) concluding, changing, or terminating employment agreements with holders
of full power of commercial representation [Prokura] and managers
(12) concluding, changing, or terminating agreements with shareholders or an
enterprise affiliated with them (affiliated enterprises are enterprises
considered to be affiliated according to the rules set down in (S)(S)
15 et seq. Corporation Law)
(13) and any and all comparable matters.
3.4 Finally, the sellers warrant and represent and shall be obligated to make
sure that
(1) the Fernbach companies prepare quarterly and annual financial statements
according to the US GAAP as individual financial statements and
consolidated financial statements and
(2) the annual financial statements (individual financial statements and
consolidated financial statements) shall be audited.
3.5 BROKAT assures that it will render reasonable support when preparing
financial statements according to US GAAP.
II. Granting the option to purchase all shares remaining with the sellers after
step I
(S) 4
Granting of the option
The sellers hereby make BROKAT the irrevocable offer (though limited according
to (S) 6) of the purchase and transfer of the following shares held by them
(hereinafter referred to as "purchase offer"):
4.1 YAC: 57,697 shares of FFS
4.2 Gunther Fernbach: 3 shares of FFS, 1 share of FS, and 1 share of FSD
4.3 Anja Fernbach: 1 share of FS
(hereinafter collectively referred to as "step II shares")
<PAGE>
(S) 5
Targets
Continuing the operative business of the Fernbach companies and achieving the
targets discussed between the contracting parties and recorded in annex A have
foremost priority during the further continuation of the Fernbach companies,
according to the mutually agreed intention of the contracting parties.
Achievement of the targets set forth in annex A by the Fernbach companies shall
be evaluated and determined as of December 31, 1999, March 31, 2000, and June
30, 2000 (hereinafter referred to as "option dates") according to the following
rules:
5.1 The companies shall have financial statements prepared as of the respective
option dates, conforming to the annual financial statements in their
content, scope, and form (hereinafter referred to as "option financial
statements"). Consolidated financial statements for the Fernbach companies
must be prepared for each option date (consolidated financial statements).
The sellers shall commission Bansbach Schubel Brosztl & Partner
Wirtschaftsprufungsgesellschaft Steuerberatungsgesellschaft, Stuttgart, to
preparing the option financial statements (,,Bansbach"). The sellers shall
be obligated to submit the necessary records to Bansbach within 15 days
after the particular option date, and to provide information. Preparation
costs shall be paid by BROKAT.
The option financial statements shall be prepared on the basis of and in
conformance with US GAAP, particularly with regard to delimiting incoming
orders and orders on hand. Actual figures and the basis of the financial
statements per December 31, 1998, shall be taken as the basis for the
purposes of determining the purchase price according to annex A. Any
special influences shall be neutralized (i.e., license payments made by
BROKAT or enterprises affiliated with BROKAT, payments of license fees
exceeding 1.0 million euros as a one-time license by customers and partners
that can be shown to have been arranged by BROKAT, capitalization of
development costs, and payment of prepaid licenses). The results of the
option financial statements that are substantial for annex A shall in each
case be updated in such a way that the result of the particular subsequent
option financial statements builds on the previous one. This applies to the
option financial statements per December 31, 1999, March 31, 2000, and June
30, 2000, which shall update the financial statements per September 30,
1999, December 31, 1999, and March 31, 2000.The costs of liquidating or
dissolving Fernbach Software Ireland Ltd. must be included when preparing
the option financial statements; saved expenses that would have been
incurred if this company's business operations were continued shall not be
included.
5.2 The option financial statements shall be submitted to both parties no more
than four weeks after the complete records are submitted according to
paragraph 5.1. They shall be consid-
<PAGE>
ered approved in a binding manner for both parties unless one of the
parties files an objection with Bansbach within one week. If no agreement
on approval is reached between all parties within an additional two weeks
since the objection was received, KPMG Stuttgart shall decide as arbitrator
on request by a party, and shall approve the option financial statements
with binding effect for the parties. Half the arbitrator's costs shall be
paid by BROKAT and half by the sellers.
(S) 6
Acceptance of the purchase offer
6.1 BROKAT shall be entitled to accept the purchase offer in a written
statement to the sellers. The acceptance statement may only be made within
one week after receipt of option financial statements approved according to
(S) 5 (1) or (2) (hereinafter referred to as "exercise periods"), with
effect as of the option date underlying the particular option financial
statements (hereinafter referred to as "effective date of exercise"). The
acceptance shall not include the share of FSD held by Gunther Fernbach, to
the extent FSD is being liquidated, merged, or dissolved at the time of
acceptance. BROKAT may accept from the sellers the offer of purchasing the
shares only for all shares offered.
6.2 BROKAT shall be obligated to accept from the sellers the offer of
purchasing the shares if:
(1) the consolidated option financial statements of the Fernbach companies
show a positive result (after interest and depreciation but before
taxes) as of the option date June 30, 2000, for the period from January
1, 2000, until June 30, 2000, after neutralization of any special
influences (i.e., license payments made by BROKAT or enterprises
affiliated with BROKAT, payments of license fees exceeding 1.0 million
euros as a one-time license by customers and partners that can be shown
to have been arranged by BROKAT, capitalization of development costs,
and payment of prepaid licenses), and
(2) the sellers confirm in writing for BROKAT and assume the warranties and
representations under (S)(S) 12 to 16 of this agreement, effective June
30, 2000. The sellers shall be entitled to attach a disclosure schedule
updated as of June 30, 2000, to the above statement insofar as the facts
and risks disclosed therein do not affect future earnings expectations
of the Fernbach companies, and thus the basis for calculating the
purchase price, to a significantly negative degree.
<PAGE>
(S) 7
Purchase price, substitution authorization
7.1 The purchase price to be paid by BROKAT on acceptance of the purchase offer
for the step II shares is DM 4 million, plus the amount resulting according
to annex A and annexes B1 to B3, but shall not exceed
DM 74,295,000 in case of acceptance as of option date December 31, 1999;
DM 71,100,000 in case of acceptance as of option date March 31, 2000;
DM 67,905,000 in case of acceptance as of option date June 30, 2000.
The purchase price shall be DM 13.9 million in case of acceptance as of
option date June 30, 2000, if the targets set forth in annex A are not
achieved on more than two option dates,
according to the option financial statements.
7.2 BROKAT shall be authorized to discharge its duty to pay the purchase price
in cash according to (S) 7.1 by way of performance of a fulfillment instead
of by transferring or issuing no-par shares from BROKAT to the sellers. The
number of shares to be transferred (hereinafter referred to as "BROKAT
shares") shall be determined according to the purchase price as set forth
in 7.1, divided by the market price of a no-par share of BROKAT. Here the
market price of a no-par share of BROKAT shall be the closing price of that
share noted in presence trading on the Frankfurt securities exchange on the
third-to-last banking day (Frankfurt am Main) before the start of the
exercise period.
7.3 If BROKAT does not accept the offer as of an option date even though the
targets were achieved according to annex A, and if BROKAT accept the offer
at a later date, then the purchase price shall be the purchase price to be
paid by BROKAT that would be the purchase price valid under this agreement
as of the option date when the targets according to annex A were first
achieved, regardless of whether or not the targets were achieved at such
later date. BROKAT shall have the substitution authorization as provided
for in (S) 7.2 in this case, as well. Section 7.2 shall apply by analogy
for determining the number of shares to be transferred.
<PAGE>
(S) 8
Transfer of the step II shares
8.1 If BROKAT accepts the purchase offer and does not exercise the substitution
authorization as provided for in (S) 7.2, the step II shares shall be due
for transfer to BROKAT one week after receipt of the statement from BROKAT
to the sellers regarding acceptance of the purchase offer, concurrently
against payment to the sellers of the purchase price as provided for in (S)
7.1.
8.2 If BROKAT accepts the purchase offer and exercises the substitution
authorization as provided for in (S) 7.2, the step II shares shall, at the
election of BROKAT:
(1) become due for transfer to BROKAT, if the purchase offer is accepted,
no more than four weeks after receipt of the statement regarding
acceptance of the purchase offer, concurrently against transfer --
without cost for the sellers -- of the BROKAT shares according to (S)
7.2
or
(2) be immediately transferred to BROKAT by the sellers in the course of an
increase in share capital by BROKAT -- without cost for the sellers --
as a contribution in kind in exchange for granting the corresponding
BROKAT shares to the sellers.
8.3 Insofar and as soon as supplemental statements for public agencies or third
parties, such as the commercial register, and/or supplemental or altered
agreements are required for the purpose of transferring the step II shares
and/or the BROKAT shares according to 8.1 or 8.2, the parties shall perform
them without delay.
(S) 9
Purchasing right
If BROKAT does not accept the purchase offer within the last exercise period,
the sellers shall be entitled to purchase the step I shares as follows:
9.1 BROKAT hereby offers the step I shares for sale to the sellers (hereinafter
referred to as ,,option offer"). The purchase price to be paid to BROKAT by
the sellers in the event the above offer for purchase of the step I shares
is accepted is
<PAGE>
DM 8 million (eight million German marks)
(hereinafter referred to as "option price").
9.2 Acceptance of the option offer by the sellers is permissible only until
December 31, 2000. Beyond this, the sellers shall be entitled to accept the
option offer only if BROKAT has not accepted the purchase offer for
purchase of the step II shares within the last exercise period according to
(S) 6.1.
9.3 Acceptance of the option offer must be stated in writing to BROKAT.
9.4 In the event of effective acceptance of the option offer according to
paragraphs 9.2 and 9.3, the option price shall become due for payment to
BROKAT two weeks after receipt of the acceptance statement, concurrently
against transfer of the step I shares without cost or charges.
(S) 10
Preemptive right
10.1 If the sellers or one from among them, on the one hand, or BROKAT, on the
other hand, intends to sell shares of FFS, those shares shall be subject to
the preemptive right of BROKAT in the event of sale by the sellers or by
one from among them, or shall be subject to the preemptive right of the
sellers in the event of sale by BROKAT. Immediately after concluding an
agreement regarding the sale, the selling party must send a complete copy
of that agreement to the entitled party. The entitled party may purchase
the shares designated in the agreement by making a statement in the valid
form to the selling party.
The preemptive right shall expire if it is not exercised within
six weeks after the entitled party receives the agreement regarding the
sale.
10.2 If the preemptive right as provided for in (S) 10.1 is exercised, the
shares subject to that right shall be transferred to the entitled party
concurrently against payment of the purchase price demanded in the
agreement on the sale according to the terms of payment named there.
10.3 If no use is made of the preemptive right according to (S) 10.1, or if use
is not made on time, the selling party shall be authorized to assign the
shares designated in the agreement on the sale to the interested purchasers
named there and on the conditions named there within six months after the
preemptive right expires.
<PAGE>
10.4 Both parties shall be obligated not to sell their shares to any buyer
other than the other party before expiration of the exercise period ending
June 30, 2000.
III. Employee participation
(S) 11
Employee participation
11.1 In preparation for concluding this agreement, the sellers have promised the
employees of the Fernbach companies an opportunity to participate in the
share capital of FFS in order to give them a participating interest in the
FFS enterprise. The sellers shall therefore offer and transfer BROKAT
shares from its own holdings to those employees as provided for the
following provisions:
(1) the sellers shall keep 20 percent of BROKAT shares (hereinafter
referred to as "employee shares") for the purpose of acquisition by
employees of the Fernbach companies;
(2) offer and grant option rights for purchasing the employee shares to the
employees to be selected by Gunther Fernbach who have an employment
relationship with the Fernbach companies at the time this agreement is
concluded, with corresponding application of the option conditions in
effect for the employees of BROKAT and of the accounting requirements
of BROKAT existing in the interest of the Group;
(3) if and insofar as the employees make use of these option rights on
time, transfer the employee shares to the holders of those option
rights concurrently against payment of a sales price of 32.00 euros per
employee share;
4) if and insofar as the employees do not make use of their option rights
on time and/or the employee shares are not subject to any option rights
and/or the conditions on which the option rights may be exercised do
not occur, as well as in all other cases in which the employees do not
acquire the employee shares, utilize those shares for its own account
but following the instructions of BROKAT;
(5) refrain from exercising and asserting any and all administrative rights
associated with the employee shares during the period in which the
sellers hold them, particularly voting rights and purchasing rights, or
transfer such rights to third parties on the instructions of BROKAT.
<PAGE>
11.2 Sellers shall pay any and all costs and taxes arising in implementation of
paragraph 11.1, including any taxes or social-welfare charges incurred or
payable by the Fernbach companies or BROKAT (hereinafter referred to
collectively as "costs"). The costs may not exceed the share proceeds. The
share proceeds correspond to the total of sales prices received by the
sellers for the employee shares according to paragraph 11.1 (3) and the
utilization prices received according to paragraph 11.1 (4) (hereinafter
referred to as "share proceeds").
11.3 The sellers' obligation to offer and transfer the employee shares to the
employees as provided for in paragraph 11.1 cannot be asserted against the
sellers as long and insofar as the costs exceed the share proceeds.
Furthermore the sellers do not need to submit the costs.
If the sellers' obligation to offer and transfer the employee shares to
the employees as provided for in paragraph 11.1 cannot be asserted against
the sellers according to the provisions of this paragraph, the sellers
shall be entitled to demand assumption of the deficit amount and provision
of security (hereinafter referred to jointly as "cost security") in a
written statement to BROKAT. The cost security must be provided to the
sellers within three months after the statement is received by BROKAT; in
any case, a written representation from BROKAT that it will assume the
deficit amount on first request shall be sufficient as cost security.
Here, too, submission of the costs by the sellers is not required.
BROKAT shall not be obligated to assume the deficit amount; however, if
the cost security is not evidenced within the above period, the
obligations of the sellers under paragraph 11.1 (1) to (3), (5), and (6)
[sic] shall expire.
11.4 To secure compliance with the obligations assumed in accordance with
paragraphs 11.1 to 11.3 above, the sellers shall transfer the employee
shares to
BROKAT Beteiligungs GmbH
as trustee immediately after they are purchased, and irrevocably instruct
this trustee to hold and utilize the employee shares according to
paragraphs 11.1 to 11.3, and to fulfill the obligations assumed towards
the employees and BROKAT for the account of the sellers.
11.5 The sellers shall be entitled to transfer the obligations under the
present (S) 11 to a third party with the approval of BROKAT.
<PAGE>
IV. Warranties and representations
(S) 12
General
12.1 The following warranties and representations by the sellers ((S)(S) 12 to
16) relate to the date this agreement is signed and to the effective date.
The warranties and representations of the sellers do not cover
circumstances, facts, or events whose occurrence or nonoccurrence are due
to instructions, actions, measures, or omissions that were made,
performed, or caused by BROKAT or enterprises affiliated with it,
particularly liquidation or any other dissolution of FSD and FSC.
12.2 To the extent the sellers make exceptions to the warranties and
representations, they are recorded in the disclosure schedule underlying
this agreement (annex C). However, information in the disclosure schedule
is fundamentally not suitable for precluding liability from violation of
one of the warranties or representations given here, unless the disclosure
schedule describes the exception with reasonable accuracy. The disclosure
schedule is arranged in sections corresponding to the sequence of sections
in this agreement. To the extent information is provided for a specific
section, it does not apply to other sections, unless a corresponding
explicit reference is made in the disclosure schedule.
12.3 If there are changes to the disclosure schedule attached to this agreement
as annex C with effect as of the date this agreement is signed, the
sellers have the opportunity to provide corresponding information in the
disclosure schedule and provide it to BROKAT as an additional annex (annex
C 1, C 2, etc.); delivery after this agreement is signed does not
interfere with liability from violation of a guarantee made here.
12.4 To the extent the sellers have provided or provide representations "to the
best of the sellers' knowledge", the sellers shall have no liability for
noncompliance only if the sellers have performed, to a reasonable extent,
investigations of the facts and circumstances on which the warranties or
representations are based, and only if neither the sellers nor any major
adviser nor any executive of the Fernbach companies have positive
knowledge of a fact, an event, or a circumstance making the guarantee or
representation incorrect.
<PAGE>
(S) 13
Warranties with regard to the corporate relationships of Fernbach Company
and the sellers' freedom of disposal
The sellers warrant:
13.1 The Fernbach companies are properly established and legally existing
companies whose share capital is fully paid and no repayments of share
capital have been performed or obligations to that effect have not been
undertaken; there is no obligation to make further contributions,
regardless of the cause in law, including due to insufficient or hidden
contributions in kind;
13.2 None of the Fernbach companies is insolvent as of payment targets and the
like, taking into account the information provided in annex C 13.2;
13.3 The articles of incorporation of the Fernbach companies are valid in the
version delivered to BROKAT in draft form on August 6, 1999, for FS, FSD,
FSC, and FFS, and shall remain unchanged until the effective date, with
the exception of necessary changes on the basis of the acquisition by
BROKAT of the Fernbach companies;
13.4 The commercial-register abstracts submitted for the Fernbach companies
accurately reflect the status of the Fernbach companies;
13.5 No other major resolutions have been adopted by the shareholders, the
supervisory boards, the administrative board, or the managing board than
those disclosed to BROKAT;
13.6 The step I and step II shares (hereinafter referred to as "the shares")
are the unencumbered property of the sellers, are not subject to any
disposal limitations, and there are no third-party rights to them,
particularly
-- none of the shares has been attached, pledged, or assigned by way of
security or for any other reason,
-- there are no third-party option or other rights for purchase or
encumbrance of the shares,
-- none of the shares is the object of a trust relationship,
<PAGE>
-- none of the shares and no right from any of the shares is the object
of third-party usufructuary rights, subordinate participating
interests, silent partnerships, or other corporate relationships;
13.7 Subject to annex [...], there are no participating interests in any of the
Fernbach companies than those of the sellers, in particular there are no
silent partnerships, interests in the purchase of shares or participating
interests or other rights, such as loans with profit participation that
could establish an interest in the earnings or assets of the Fernbach
companies or a codetermination right for decisions by the shareholders.
(S) 14
Warranties with regard to the enterprise and asset status of the Fernbach
companies
The sellers warrant that
(1) the annual financial statements of the Fernbach companies submitted to
BROKAT on August 3, 1999, for the fiscal year ending December 31, 1998
(hereinafter referred to as "annual financial statements") present a picture
of the asset, financial, and earnings situation of the Fernbach companies
corresponding to actual circumstances as of the particular reporting date,
the annual financial statements and the consolidated financial statements
were completely and correctly prepared in observance of the applicable
statutory provisions in the particular legal systems and in application of
the principles of proper and orderly bookkeeping and accounting generally
recognized there, and that in particular
-- carefully prepared inventories were used as the basis;
-- the liabilities were stated completely and with full coverage at the
time the balance sheet was prepared and within the bounds of
identification possibilities, particularly with regard to pension
accruals, with the exception of the liabilities stated in annex C 14
(1);
-- the stated assets have value content;
-- updating of balance sheet sets over the last balance sheet date has
occurred using identical, legally permissible valuation principles and
the accounting and valuation elective rights have continuously been
exercised in a consistent manner, subject to valuation changes on the
basis of tax audits or such as have been pointed out to BROKAT; and
<PAGE>
-- all legally required depreciation and valuation adjustments have been
performed and all legally required provisions have been created.
(2) no change in the asset, financial, or earnings situation of the Fernbach
companies not disclosed to BROKAT has occurred, to the best of the sellers'
knowledge, since the particular reporting date for the annual financial
statements;
(3) the assets indexed in the asset indices to the annual financial statements
are the property of the particular Fernbach company and are in its
possession, insofar as they have not been replaced in the context of the
proper and orderly course of business and are not listed in annex C.14 (3).
Subject to the limitations in annex C.14 (3), those assets and all further
assets listed in the annual financial statements or counting among the
balance sheet assets of the particular Fernbach company are the sole
property of the particular Fernbach company in whose annual financial
statements they are listed. Such sole ownership is not encumbered by any
rights whatsoever of third parties or by restraints on disposal, with the
exception of the usual reservations of ownership;
(4) the objects specified in annex C.14 (4) and leased or rented by the
particular Fernbach company are in the possession of the particular Fernbach
company and freely available for its use;
(5) except for the objects designated in annex C.14 (5), none of the Fernbach
companies have leased or rented other objects whose monthly financial burden
exceeds DM 15,000 net in an individual case;
(6) all concessions, approvals, and licenses, as well as other public approvals,
including any and all building approvals and investment approvals required
for the business of the Fernbach companies are available, and revocation
thereof has neither been threatened nor is likely; all requirements,
restrictions, and conditions specified in the concessions, approvals, and
licenses that have been granted have largely been completely fulfilled
without additional investments or other special measures being necessary;
(7) subject to annex C 14 (7), the computer systems and products of all Fernbach
companies and all parts thereof are year-2000 compliant, and guarantee
secure and fault-free functioning before and after January 1, 2000, without
even partial replacement or retrofitting;
<PAGE>
(8) the industrial property rights designated in annex C.14 (8) (patents,
utility models, copyrights, brands and trademarks, expertise), including the
registrations made by the effective date, as well as any and all utilization
rights therefrom:
(a) unless otherwise stated in annex C.14 (8a), belong to the Fernbach
companies alone and without restriction, and there are no third-party
rights to such industrial property rights or utilization rights or with
regard to utilization thereof;
(b) are legally valid and in effect, to the best of the sellers' knowledge,
and no attacks by third parties against them are present or threatened,
nor is there any danger of cancellation or voidance of the industrial
property rights, and no industrial property rights of third parties are
violated by the property rights or use thereof, to the best of the
sellers' knowledge;
(c) are secured to the effect that all payable fees have been paid and any
other measures that may be necessary to uphold and maintain the
industrial property rights have been performed completely and on time;
(d) all industrial property rights, including brands of Fernbach companies
that are necessary for continuing the business operations of the
Fernbach companies unchanged, are listed in annex C.14 (8b);
(e) with the exception of the agreements named in annex C.14 (8a), there are
no agreements relating to the business purpose of Fernbach companies
that contain the utilization of industrial property rights, including
brands;
(9) all real property and equivalent rights of Fernbach companies are listed in
annex C.14 (9).
(S) 15
Warranties with regard to contractual and legal relationships and conditions
15.1 The sellers warrant that implementation and fulfillment of this agreement
will not result in a breach of contract by any of the Fernbach companies
or represent an opportunity permitting a contract partner to terminate a
major agreement concluded with one of the Fernbach companies.
15.2 The sellers warrant that there are no obligations of any of the Fernbach
companies from the following legal relationships at the time this
agreement is concluded, with the exception of the agreements and
obligations disclosed in annex C.15.2;
<PAGE>
(1) employment or work agreements granting annual base compensation of
more than DM 100,000, or providing for termination notice periods
greater than 1 year;
(2) obligations or commitments for old-age, disability, early-retirement,
or survivors' benefits not stated completely and with complete
coverage (base interest rate 6 percent) in the annual financial
statements;
(3) plant agreements or other collective-bargaining obligations in
connection with employment relationships (including claims by third
parties, particularly the social-welfare insurance carriers and the
Labor Office), obligations arising from social plans, agreements for
the accommodation of conflicting interests, plant practices or overall
commitments with regard to rendering social-welfare benefits or other
benefits to employees;
(4) consultancy agreements of all kinds having an individual volume
exceeding DM 100,000 per annum;
(5) agreements with commercial representatives, authorized dealers, or
other distribution agents;
(6) suretyships, guarantee obligations, cumulative assumptions of debt,
letters of support, or provisions of security of all kinds
individually exceeding DM 15,000, as well as obligations vis-a-vis
third parties individually exceeding DM 15,000 which have provided
suretyships, warranties, or other security of any kind for one of the
Fernbach companies;
(7) obligations to grant and/or arising from the use of credit of any kind
with a volume exceeding DM 15,000 per annum;
(8) rental or lease agreements not ending on or before July 31, 2000,
and/or whose monthly financial burden or monthly earnings exceeds DM
15,000 in an individual case;
(9) agreements on the purchase or sale of real property or rights to real
property that have not been fulfilled or have not been completely
fulfilled;
<PAGE>
(10) agreements regarding investments (purchase of fixed assets)
establishing an obligation for one of the Fernbach companies exceeding
DM 30,000 in an individual case;
(11) competition-restricting arrangements of any kind, particularly
agreements precluding or limiting the right of one of the Fernbach
companies to do business in certain fields or areas or to use
"Fernbach" in its name;
(12) agreements regarding industrial property rights or expertise or other
intangible rights or license agreements covering industrial property
rights or expertise or other intangible rights, regardless of whether
one of the Fernbach companies is the seller, buyer, licensor, or
licensee;
(13) agreements with suppliers and/or customers that exceed the context of
ordinary business operations and that obligate one of the Fernbach
companies beyond July 31, 2000, or with regard to which one of the
Fernbach companies is more than four weeks in arrears with
performance, and/or compensation for delay exceeding DM 50,000 must be
paid in an individual case;
(14) agreements or other obligations towards the sellers or towards
enterprises in which the sellers hold a participating interest
directly or indirectly;
(15) obligations towards retired shareholders and/or their heirs;
(16) affiliation agreements within the meaning of (S)(S) 291 et seq.
Corporation Law, and cooperation agreements of any kind;
(17) contract and agreements with regard to participation by one of the
Fernbach companies in joint ventures or consortia;
(18) agreements that have not been fulfilled regarding the purchase or sale
of enterprises, participating interests in enterprises, operation
locations, or operating units;
(19) public-law agreements that have not been fulfilled.
15.3 Unless otherwise disclosed in annex C.15.3, the sellers warrant that
(1) all fixed and current assets and all enterprise risks of all Fernbach
companies that are usually insured or which one of the Fernbach
companies is obligated to insure (to-
<PAGE>
wards landlords or lessors, for instance) are insured as customary in
the industry or in accordance with the particular obligations towards
third parties;
(2) no product liability, warranty, or damage compensation claims have been
asserted against any of the Fernbach companies with a risk exceeding DM
50,000 in an individual case, and no such claims are threatening, to
the best of the sellers' knowledge;
(3) none of the Fernbach companies is involved in any legal dispute,
arbitration proceedings, administrative proceedings, or any other
public-agency proceedings with a risk exceeding DM 10,000 in an
individual case;
(4) none of the business operations of any of the Fernbach companies
violate regulations, guidelines, or orders by public agencies under
trade laws, foreign-trade laws, public construction laws, laws
concerning the interests between neighbors, public or private
securities-issuing rights, or other environmental laws, antitrust laws,
the law against unfair competition, criminal law, or the corresponding
foreign legal regulations;
(5) no court or public-agency proceedings are pending or threatening due to
major violations of public-law regulations or orders or due to
suspicion of criminal acts or administrative offenses.
(S) 16
Tax and social-welfare insurance release
16.1 Each of the Fernbach companies has submitted or shall submit all tax
returns, statements of public charges etc. on time that are required by
the effective date, and shall pay by the due date taxes and public charges
due by the effective date -- with the exception of those disclosed in
annex C 16.1.
16.2 Receivables relating to taxes, levies, customs duties, and ancillary tax
charges such as interest, penalties for the period up to the particular
balance sheet date that are not entered as liabilities in the annual
financial statements per December 31, 1998, shall be paid by the sellers
and must be reimbursed to the affected Fernbach company. The compensation
shall be gross for net, taking into account the taxes payable on it.
Back tax payments resulting from changes in valuation shall remain
excepted from the above warranted responsibility of the sellers, to the
extent they are canceled out in subsequent years or result in lower taxes
or the resulting profit remains with one of the Fernbach companies.
<PAGE>
Changes in the tax capital accounts maintained by one of the
Fernbach companies up to the effective date on the basis of a tax audit
shall not result in withdrawal rights for the sellers nor any subsequent
adjustment in the purchase price.
16.3 The sellers shall pay taxes on the income and earnings they incur on the
basis of this agreement being concluded, and any stock transfer
transaction taxes incurred in Luxembourg.
16.4 BROKAT shall give the sellers the opportunity to be involved in all
meetings and any legal remedies.
(S) 17
Enterprise continuation
17.2 [sic] The sellers warrant that the business of the Fernbach companies
shall be continued exclusively within the bounds of ordinary business
operations in conformance with cautious business practices and with the
diligence of a prudent businessman during the period between the date on
which this agreement is signed and the effective date, with the goal of
maintaining real-asset values and earning power, to the extent this is
reconcilable. In particular, but without restriction to these measures,
the sellers shall not perform the following measures nor cause them to be
performed at or for any of the Fernbach companies:
-- capital increase or other issuance of new shares
-- issuing bonds
-- concluding agreements or entering into other obligations that either
establishes an obligation of more than DM 25,000 and [sic] lies
outside normal business activities
-- making an investment that is either greater than DM 25,000 and [sic]
lies outside normal business activities
-- delaying or postponing payments of obligations in a manner that is
outside normal business activities, unless the delay or postponement
is announced to BROKAT in advance
-- issuing license or sub-licenses to third parties (except to BROKAT and
enterprises affiliated with BROKAT) with regard to rights and
industrial property rights, outside normal business activities
<PAGE>
-- changes in the company agreements of the Fernbach companies
-- concluding loan agreements with the sellers, members of their managing
boards, shareholders, employees, and consultants; disbursement of
profits reducing capital, resulting in favor of such disbursement,
payment of funds to the sellers or associated persons, except for the
administrative-board compensation disclosed to BROKAT
-- expansion of the administrative board or managing board of one of the
Fernbach companies.
(S) 18
Legal consequences of violating a warranty or representation
18.1 The following shall apply if one of the representations or warranties made
in this agreement is inaccurate:
(1) If the inaccuracy of warranties or representations becomes evident,
BROKAT shall be entitled to rescind the entire agreement
-- if the shares to be transferred by the sellers are subject to sale
restrictions or there are third-party rights to the shares that
cannot be corrected even within a reasonable additional period of
time.
-- in case of fraudulent misrepresentation.
-- in case of a change to the company agreement of one of the
Fernbach companies made without approval from BROKAT.
In these cases, BROKAT shall be entitled only within three months
after learning of the reason for rescission, but no later than
October 31, 2000.
Section 352 of the German Civil Code shall not be applicable.
(2) If the inaccuracy of warranties or representations becomes evident but
there is no right of rescission within the meaning of paragraph 1, the
sellers shall have the right to remedy the violation, insofar as the
violation does not demand an immediate remedy. If the sellers do not
remedy the violation within a reasonable period of time not to exceed
four weeks, the sellers shall place BROKAT or the Fernbach companies,
ac-
<PAGE>
cording to the judgment of BROKAT, in the same financial situation
BROKAT or the Fernbach companies would be in if the warranty or
representation made in this agreement had been accurate or had not been
violated (damages). All other rights, claims for remedy, or claims
against the sellers are precluded.
(3) BROKAT can demand damage compensation only in such case and only to such
extent as the damage exceeds DM 100,000 in total. The claim of damage
compensation by BROKAT shall be limited to the damage amount, not to
exceed DM 7 million for all damage occurrences, however.
(4) To the extent a third party raises a claim against BROKAT or the
Fernbach companies, BROKAT shall give the sellers the opportunity to
proceed against such claim at their own expense. BROKAT and the Fernbach
companies shall permit the sellers to participate in all talks and
correspondence with the third party at their own expense. On request by
the sellers, BROKAT and the Fernbach companies shall conduct litigation
against the third party or have the affected company conduct litigation
at the sellers' expense and in accordance with their instructions,
subject to the proviso that the sellers provide BROKAT or the Fernbach
companies with security in the amount of the expected costs or
expenditures that could arise from the litigation.
18.2 The sellers shall be liable to BROKAT as joint and several debtors for
violations of the warranties and representations.
(S) 19
Limitation period
19.1 Claims by BROKAT due to violation of obligations, warranties, or
representations by the sellers in accordance with (S)(S) 13 to 18 above
shall be subject to a limitation period of two years, starting on the
effective date, subject to the provisions of (S) 18.1.
19.2 Claims according to (S) 16 shall become time-barred with regard to the
taxes or levies concerned six months after receipt of a valid assessment
not subject to a reservation of subsequent examination that contains the
determination of the tax or levy concerned, but no later than the time of
expiration for the particular determination period for the tax or levy
covered by (S) 16.
V. Measures before or after the signing date
<PAGE>
(S) 20
Changes to the articles of incorporation of FFS, appointment of a new member to
the administrative board, sale of shares in Fernbach Software Ireland Ltd.
20.1 As soon as possible after this agreement is signed, the shareholders of
FFS shall change the articles of incorporation of that company to the
effect that fundamental resolutions named in (S) 3 shall require the
approval of a 75-percent majority of share capital. The sample of such a
resolution is attached to this agreement as annex E.
20.2 As soon as possible after this agreement is signed, the shareholders of
FFS shall change the articles of incorporation of that company to the
effect that the administrative board can consist of up to 4 members and
that decisions of the administrative board lying outside usual business
operations shall require a unanimous vote. The sample of such a resolution
is attached to this agreement as annex E.
20.3 As soon as possible after this agreement is signed, the shareholders of
FFS shall adopt a resolution that Mr. Michael Schumacher shall become a
member of the FFS administrative board. The sample of such a signed
resolution and of such an appointment is attached to this agreement as
annex E.
20.4 Before this agreement is signed, FFS shall, at the request of the sellers,
have transferred to one of the sellers or another enterprise not belonging
to the Fernbach companies the shares it holds in Fernbach Software Ireland
Ltd. and all rights and responsibilities associated therewith, including
but not limited to security, letters of support, warranties, provisions,
loss assumption duties, with agreement of at least a three-year
prohibition against entering into competition with BROKAT or the Fernbach
companies.
(S) 21
Employment relationship of Gunther Fernbach
Before this agreement is signed, Mr. Gunther Fernbach shall sign an agreement
with FFS and FS regarding his activities as member of the administrative board
and administrateur delegue, a draft of which is attached to this agreement as
annex F.
<PAGE>
VI. Rights and duties of the parties for the period after the end of step II
(S) 22
Restructuring
By exercising voting rights or other instruction authority, the sellers shall
cause companies they control directly or indirectly to perform or cause to be
performed the measures to restructure business operations and the corporate
structure, yet to be arranged in detail between the parties. Measures that
result in an effect on purchase price determination according to (S) 7.1 that is
unfavorable for the sellers and that were not arranged with BROKAT before this
agreement was signed shall not be made nor implemented. If necessary, this also
includes liquidation, merger, or other dissolution of subsidiaries, and the
transfer of business activities to a company specified by BROKAT.
(S) 23
Lock-up
The sellers shall be obligated for a period of two years, starting upon
acquisition of the BROKAT shares as the purchase price for transfer of the FFS
shares, not to pledge the BROKAT shares, sell them to third parties, nor offer
them for acquisition by third parties without prior approval from BROKAT. BROKAT
shall not oppose sale of up to 50 percent of the BROKAT shares even during the
course of this time period, after deduction of the employee shares left with the
sellers, a maximum of shares with an equivalent value of DM 15 million, in the
course of a private placement. Moreover, the sellers shall be considered to a
reasonable degree in this context in the event of a secondary placement.
(S) 24
Competition prohibition
24.1 The sellers shall be obligated, each for himself, not to practice,
operate, or promote any business activity, neither directly nor
indirectly, that is in direct competition with the business activities
conducted by the Fernbach companies, for a period of two years starting on
the effective date. In particular, the sellers shall not establish,
acquire, participate in, advise, or otherwise promote any enterprises that
are in competition in the above sense. The prohibition competition shall
apply for the activity territory for the business activities conducted by
the Fernbach companies on the effective date.
24.2 In the event the purchase offer is accepted by BROKAT, the sellers shall be
obligated, each for himself, not to practice, operate, or promote any
business activity, neither directly or
<PAGE>
indirectly, that is in direct competition with the business activities
conducted by the Fernbach companies on the effective takeover date, for a
period of two years starting on the effective exercise date. In
particular, the sellers shall not establish, acquire, participate in,
advise, nor otherwise promote any enterprises that are in competition in
the above sense. The prohibition competition shall apply for the activity
territory for the business activities conducted by the Fernbach companies
on the effective exercise date.
24.3 Activity for or promotion of a business activity of an enterprise
controlled by BROKAT with a majority of votes or capital is not
competition.
24.4 If a judgment by a court determines that the provision of this competition
prohibition is invalid or unenforceable in toto or in parts, the parties
are in agreement that the particular court shall have the authority to
change or eliminate the scope, term, or other provisions, and to replace
such invalid or unenforceable provisions with provisions that are valid
and enforceable and that most closely approximate the objective pursued by
the agreement from the aspect of its economic purpose.
24.5 For Gunther Fernbach, the above competition prohibition shall apply with
the proviso that, after his agreement mentioned in (S) 21 ends on the
basis of circumstances for which Gunther Fernbach is not responsible, he
shall only be subject to the competition prohibition set forth in such an
agreement.
24.6 For a period of five years after the date on which this agreement is
signed, the sellers and BROKAT (as long as BROKAT has not exercised the
option for step II shares and has not acquired the majority of FFS shares)
shall not recruit any employees of the Fernbach companies nor cause third
parties to recruit employees of the Fernbach companies.
24.7 Even after acquisition of all step II shares by BROKAT, the sellers shall
treat as confidential the confidential information that becomes known to
them from their activities or their shareholder status with the particular
Fernbach companies and in connection with their activities for those
companies or their shareholder status, and not disclose it to third parties
unless such disclosure is required by law. To the extent third parties or
public agencies request confidential information from the sellers, the
sellers shall notify BROKAT at once so that BROKAT can take appropriate
actions or waive compliance with the present (S) 24.7.
24.8 Until acquisition of the step II shares by BROKAT, BROKAT shall
<PAGE>
(1) treat as confidential and not disclose to third parties any and all
confidential information connected with the Fernbach companies, unless
such disclosure is mandatory and required by law or securities exchange
guidelines and
(2) to the extent third parties or public agencies request confidential
information from BROKAT, BROKAT shall notify the sellers at once so that
the sellers can take appropriate actions or waive compliance with the
present (S) 24.8.
VII. General regulations
(S) 25
Taxes, costs
Each party shall pay the costs incurred in connection with concluding and
implementing this agreement, and the particular company shall pay any taxes
incurred on capital.
(S) 26
Statements and declarations
The following parties are hereby authorized to receive any and all notices or
statements of will to be made to the sellers or BROKAT in accordance with the
present agreement or in connection therewith:
For the sellers:
Mr. Gunther Fernbach
Y.A.C. Finance Holding S.A.
9, rue Dicks Bereldange/Luxembourg
Copy to:
Marc Feider, Attorney at Law
Beghin Feider Loeff Claeys Verbeke
58, rue Charles Martel
L-2134 Luxembourg
Telephone: +352-444455-1
Fax: +352-444455-444
<PAGE>
For BROKAT:
BROKAT Infosystems AG
Attn.: Mr. Andreas Kinsky
Industriestrasse 3
70565 Stuttgart
Telephone: +49-711-788-44-0
Fax: +49-711-788-44-777
Copy to:
Haver & Mailaender, Attorneys at Law
Lenzhalde 83-85, 70192 Stuttgart
Telephone: +49-711-227440
Fax: +49-711-2991935
(S) 27
Changes to the agreement
To be valid, changes and supplements to this agreement, including the present
clause itself, must be made in writing or in notarized form, if this is
required.
(S) 28
Assignments
Rights and claims under this agreement may not be assigned by the sellers nor by
BROKAT, unless the assignment is made in favor of an enterprise affiliated with
BROKAT within the meaning of (S)(S) 15 et seq. Corporation Law. In the event of
assignment, BROKAT shall remain obligated to fulfill the obligations under this
agreement.
(S) 29
Interpretation of the agreement
Should provisions of this agreement be legally invalid or unenforceable in toto
or in part, the validity of the remaining provisions of this agreement shall
remain unaffected thereby. In lieu of the invalid or unenforceable provisions, a
reasonable arrangement shall apply that most closely approximates the economic
purpose which the parties wished to achieve.
<PAGE>
(S) 30
Applicable law
This agreement is governed by and shall be construed in accordance with the laws
of the Federal Republic of Germany, unless Luxembourg law is applicable on the
basis of mandatory provisions of Luxembourg law or the private international law
of the Federal Republic of Germany.
(S) 31
Arbitration
Any and all disputes arising from or in connection with this agreement shall be
regulated by an arbitration procedure, to the exclusion of courts of general
jurisdiction. The arbitration procedure is regulated in an arbitration agreement
attached to this agreement as annex D.
Stuttgart, date:
For BROKAT Infosystems AG
Stuttgart, November 2, 1999
For the sellers
Gunther Fernbach
<PAGE>
Annex A
<TABLE>
<S> <C> <C> <C> <C> <C>
1. Valuation dates: 9/30/99 12/31/99 3/31/00 6/30/00
Weighting of reporting dates 4.30 1.15 1.10 1.05 1.00
Base price in Weighted base prices in thousands of DM
thousands of DM
2. Base prices 22,000 25,300 24,200 23,100 22,000
3. Targets Plan results in thousands of DM (cumulative from 1/1/99 to
valuation date)
Sales 14,500 20,000 26,500 33,000
Result -4,418 -5,891 -6,208 -6,525
Orders on hand 8,000 8,000 8,000 8,000
4. Actual results (example) Imputed actual results in thousands of DM (cumulative from
1/1 to valuation date)
Sales according to U.S. GAAP 14,500 20,000 26,500 33,000
Result according to U.S. -4,418 -5,891 -6,208 -6,525
GAAP
Orders on hand according to 8,000 8,000 8,000 8,000
U.S. GAAP
5.a. Degree of target Unweighted
achievement (actual/target)
Sales according to U.S. GAAP 100.00% 100.00% 100.00% 100.00%
Result according to U.S. 100.00% 100.00% 100.00% 100.00%
GAAP
Orders on hand according to 100.00% 100.00% 100.00% 100.00%
U.S. GAAP
5.b. Weighting Weighting of Weighted
valuation criteria 5.25
Sales according to U.S. GAAP 2.00 200.00% 200.00% 200.00% 200.00%
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Result according to U.S. 3.00 300.00% 300.00% 300.00% 300.00%
GAAP
Orders on hand according to 0.25 25.00% 25.00% 25.00% 25.00%
U.S. GAAP
Degree of target 100.00% 100.00% 100.00% 100.00%
achievement
6. Purchase price Thousands of DM 25,300 24,200 23,100 22,000
</TABLE>
<PAGE>
Agreement
Regarding the Sale and Transfer of Shares
between
1 a) Y.A.C. Finance Holding S.A.
9, rue Dicks Bereldange/Luxembourg
(hereinafter referred to as "YAC")
and
1 b) Ms. Anja Fernbach
(hereinafter referred to as "Anja Fernbach")
and
1 c) Mr. Gunther Fernbach
(hereinafter referred to as "Gunther Fernbach")
(the parties 1 [a] to [c] hereinafter referred to collectively as "the sellers")
and
2. BROKAT Infosystems AG,
IndustriestraBe 3, 70565 Stuttgart
(hereinafter referred to as "BROKAT")
(the sellers and BROKAT hereinafter referred to collectively as "the parties")
Preamble
The parties have concluded an agreement (hereinafter referred to as "the
agreement") dated November 2, 1999/December 20, 1999, for the purchase and
transfer of shares in Fernbach Financial Software S.A. (hereinafter referred to
as "FFS"), Fernbach Software S.A. (hereinafter referred to as "FS"), and
Fernbach Software AG (Germany) (hereinafter referred to as "FSD").
Section 4 of the named agreement provided that the sellers should offer the
following shares held by them for transfer to BROKAT:
<PAGE>
YAC: 57,697 shares of FFS
Gunther Fernbach: 3 shares of FFS, 1 share FS, and 1 share of FSD
Anja Fernbach: 1 share of FS
hereinafter referred to collectively as "step II shares".
This option was able to be exercised by BROKAT as of certain option dates.
1. Exercising the option
BROKAT states that the option granted in (S) 4 is exercised as of
the exercise date December 31, 1999, as provided for in (S) 6.1 of the
agreement.
2. Purchase price
The purchase price to be calculated in accordance with (S) 7.1 of the
agreement, taking into account achievement of the targets in excess of
obligations, increased earnings potential, and the high level of engagement
by executives to achieve the targets, is
DM 35,760,000
(thirty-five million seven hundred sixty thousand German marks)
According to (S) 7.2 of the agreement, BROKAT has the authority to discharge
its duty to pay the purchase price in cash by way of performance of a
fulfillment instead of by transferring or issuing no-par shares from BROKAT
to the sellers.
BROKAT hereby states that it is exercising this substitution authority.
Accordingly, the step II shares are to be transferred according to (S) 8.2
(2) by the sellers to BROKAT without delay in the course of an increase in
the share capital of BROKAT, free of cost to the sellers, as a non-cash
contribution of the corresponding BROKAT shares to the sellers. In
--
accordance therewith, BROKAT shall concurrently transfer the 182,838 BROKAT
---------------------------------------------------------------------------
shares to the sellers. The transfer of the BROKAT shares to the sellers
-----------------------------------------------------------------------
shall be performed to the sellers no later than March 22, 2000, to a
--------------------------------------------------------------------
securities account still to be named.
-------------------------------------
<PAGE>
3. Number of shares going to the sellers
For the purchase price of DM 35,760,000, a total of 182,838 BROKAT
shares go toward the purchase price according to (S) 7.2 and the
determination of the numbers of shares to be transferred regulated in that
rule (hereinafter referred to as "BROKAT shares").
These are distributed among the sellers as follows:
YAC: 182,820 BROKAT shares
Gunther Fernbach: 15 BROKAT shares
Anja Fernbach: 3 BROKAT shares
4. Effective transfer date
The transfer of shares in the Fernbach companies FFS, FS, and FSD shall be
with effect as of January 1, 2000.
5. Employee participation
As a supplement to (S) 11.1 of the agreement, it is hereby agreed that the
sellers will additionally keep a total of 14,767 BROKAT shares from
------------
their own holdings of BROKAT shares for the employees of FFS and FS to
implement a success-related employee participation program. They shall be
offered for takeover by the employees of FFS and FS according to a separate
agreement, insofar as the goals defined in a joint business plan prepared by
BROKAT and FFS or FS are fulfilled. Thirty percent of these shares offered
for takeover shall be offered for takeover upon reaching the target in the
2000 fiscal and calendar year, the remaining 70 percent of shares upon
reaching the target in the 2001 fiscal and calendar year. Distribution of
---------------
the 29,524 employee shares under (S) 11 of the agreement shall not be
---------------------------------------------------------------------
affected by fulfillment or achievement of the targets under the business
------------------------------------------------------------------------
plan.
-----
If and insofar as the goals are not achieved, the sellers shall utilize
14,757 shares from the employee participation program according to
instructions from BROKAT, and pay the sales proceeds to a recipient
specified by BROKAT after deducting any applicable costs, in accordance with
more specific instructions from BROKAT.
The provisions of (S) 11 of the agreement shall apply by analogy for this
quantity of
<PAGE>
14,767 BROKAT shares, with the exception of the allotment arrangements. In
particular, the sellers shall refrain from exercising and asserting any
administrative rights associated with those shares during the period they
are held by the sellers, or shall transfer such rights to third parties on
the instructions of BROKAT.
Furthermore, the sellers shall transfer these shares to BROKAT Beteiligungen
GmbH (or its legal successor) as trustee immediately after acquiring them,
and shall instruct the latter to hold and utilize the shares in accordance
with this agreement and the participation agreement yet to be concluded, and
to fulfill the obligations undertaken vis-a-vis the employees and BROKAT.
The provisions of (S) 11 of the agreement for the BROKAT shares named in (S)
11.1 (1) there shall remain unchanged.
Stuttgart/Luxembourg, February 22, 2000
For BROKAT Infosystems AG For the sellers
Michael Janssen Gunther Fernbach
CFO/Managing Board
Michael Schumacher
<PAGE>
Translation
Agreement
Regarding the Sale and Transfer of Shares
between
1 a) Y.A.C. Finance Holding S.A.
9, rue Dicks Bereldange/Luxembourg
(hereinafter referred to as "YAC")
and
1 b) Ms. Anja Fernbach
(hereinafter referred to as "Anja Fernbach")
and
1 c) Mr. Gunther Fernbach
(hereinafter referred to as "Gunther Fernbach")
(the parties 1 [a] to [c] hereinafter referred to collectively as "the sellers")
and
2. BROKAT Infosystems AG,
Industriestrasse 3, 70565 Stuttgart
(hereinafter referred to as "BROKAT")
(the sellers and BROKAT hereinafter referred to collectively as "the parties")
Preamble
The parties have concluded an agreement (hereinafter referred to as "the
agreement") dated November 2, 1999/December 20, 1999, for the purchase and
transfer of shares in Fernbach Financial Software S.A. (hereinafter referred to
as "FFS"), Fernbach Software S.A. (hereinafter referred to as "FS"), and
Fernbach Software AG (Germany) (hereinafter referred to as "FSD").
<PAGE>
Section 4 of the named agreement provides that the sellers should offer the
following shares held by them for transfer to BROKAT:
YAC: 57,697 shares of FFS
Gunther Fernbach: 3 shares of FFS, 1 share FS, and 1 share of FSD
Anja Fernbach: 1 share of FS
This option can be exercised by BROKAT as of certain option dates.
1. Extension of the exercise period
The parties agree that the period for exercising the option granted in (S) 4
shall be extended as of the exercise date December 31, 1999, until
Wednesday, February 23, 2000, inclusive, in accordance with (S) 6.1 of the
----------------------------
agreement.
2. Authoritative share price on exercise of the option
The closing price in presence trading at the Frankfurt securities
exchange on February 2, 2000, in the amount of 300.00 euros is hereby
determined as the authoritative share price on exercise of the option, in
accordance with (S) 7.2 of the agreement. Taking into account the 1:3 stock
split for BROKAT stock executed on July 7, 2000, a price of 100.00 euros for
the new BROKAT stock (with a proportional amount of 1.00 euro of the share
capital after the stock split) is authoritative for the calculation
according to (S) 7.2 of the agreement.
3. Continuation in effect for all further content of the agreement
The remaining provisions of the agreement for purchase and
transfer of shares dated November 2, 1999/December 20, 1999, shall remain
unchanged.
Stuttgart/Luxembourg, February 11, 2000
For BROKAT Infosystems AG For the sellers
Michael Janssen/CFO Gunther Fernbach
Achim Dorner/VP Finance Group EMEA
<PAGE>
EXHIBIT 10.3
Translation
Agreement on Subscription and Contribution of Capital
by and between
BROKAT Aktiengesellschaft, Stuttgart
- - hereinafter referred to as "BROKAT"
and
1. Dr. Andreas von Aufschnaiter
2. Jozsef Bugovics
3. Dr. Christoph Bulfon
4. Andreas Kinsky
5. Philipp A. Schoeller
6. Dr. Nikolaus von Seemann
7. SBF Sachsische Beteiligungsfond GmbH
8. Roman E. Kainz
9. GCI Management GmbH
- - hereinafter referred to as "ME Shareholders" -
Recitals
1. BROKAT is a stock corporation recorded in the Register of Companies of the
Local Court of Stuttgart under no. HRB 19292. The capital stock amounts to
DM 40,860,665 (in words: Deutschmarks forty million eight hundred and sixty
thousand six hundred and sixty-five) and is sub-divided into 8,172,133
shares of no par value.
<PAGE>
-2-
The shares of BROKAT have been admitted to trading on the regulated market
since 16 September 1998 when trading commenced at the Neuer Markt of the
Frankfurt Stock Exchange. Listing commenced at the Neuer Markt on 17
September 1998.
BROKAT develops and markets software and hardware solutions in particular
for the safe transfer of data in heterogeneous inter-company data networks
and intra-company data networks. The corporate enterprise has developed
positively during the course of the past few years and has attained the
position of market leader in the market segment it services in Germany.
BROKAT is endeavoring to expand the competitive position attained both
nationally and internationally.
2. MeTechnology Europe GmbH (hereinafter referred to as "ME") is a company
recorded in the Register of Companies of the Local Court of Leipzig under
no. HRB 14868. The capital stock of ME amounts to DM 150,000 (in words:
Deutschmarks one hundred and fifty thousand) and is sub-divided into the
following shares:
One share with a par value of DM 3,700
One share with a par value of DM 3,800
One share with a par value of DM 7,500
One share with a par value of DM 15,000
One share with a par value of DM 25,000
One share with a par value of DM 12,500
One share with a par value of DM 24,000
One share with a par value of DM 6,000
One share with a par value of DM 7,500
One share with a par value of DM 7,500
One share with a par value of DM 6,000
One share with a par value of DM 21,000
One share with a par value of DM 5,000
One share with a par value of DM 5,000
One share with a par value of DM 500
Sum total of shares: DM 150,000
- hereinafter collectively referred to as "ME Shares"
<PAGE>
-3-
All shares in ME are held by ME Technology Aktiengesellschaft, Bienitz
(hereinafter "ME AG") which is thus sole shareholder in ME.
The capital stock of ME AG amounts to DM 1 million and is sub-divided into
200,000 shares. The sole shareholders in ME AG are:
(1) Dr. Andreas von Aufschnaiter holding 10,000 shares
(2) Jozsef Bugovics holding 30,000 shares
(3) Dr. Christoph Bulfon holding 40,000 shares
(4) Philipp A. Schoeller holding 36,000 shares
(5) Andreas Kinsky holding 6,000 shares
(6) Dr. Nikolaus Seemann Ritter
von Treuenwart holding 50,000 shares
(7) SBF Sachsische
Beteiligungsfond GmbH holding 10,000 shares
(8) Roman E. Kainz holding 10,000 shares
(9) GCI Management GmbH holding 8,000 shares
The foregoing shares in ME AG are hereinafter referred to as "ME Shares"
3. ME also develops and markets software and hardware solutions for processing
transactions in electronic networks. The business activity of ME focuses
principally on the banking sector. ME is currently undergoing a phase of
intense growth and also anticipates increasing demand and a high degree of
acceptance for its products and services.
4. ME AG and BROKAT intend to merge in order to obtain synergy benefits. The
capital stock of BROKAT is to be increased for this purpose and the ME
Shares are to be taken over during the course of the capital increase
against a non-cash contribution by BROKAT.
The Management Board of BROKAT appointed the firm of auditors and tax
consultants Bansbach Schubel Brosztl & Partner GmbH Wirtschaftsprufungs-
gesellschaft
<PAGE>
-4-
Steuerberatungsgesellschaft, Stuttgart (hereinafter referred to as "BSB")
to assess the value of the ME Shares and the number of new BROKAT Shares
appropriate to the corporate value of BROKAT. On the basis of this
expertise produced by BSB, BROKAT and the ME Shareholders mutually agreed
to increase the capital stock of BROKAT by DM 3,887,290 from the amount of
DM 40,860,665 pertaining hitherto to DM 44,747,955 by issuing 777,458
individual share certificates to the ME Shareholders against the
contribution of the ME Shares.
Now wherefore the parties hereto hereby enter into the following Agreement on
Subscription and Contribution of Capital.
(S) 1
Authorized Capital, Resolution on Increasing Capital
1. Pursuant to the resolution adopted by the extraordinary shareholders'
meeting of BROKAT on 17 August 1998 (item 4 on the agenda) the Management
Board of the company is authorized to increase with the approval of the
Supervisory Board the capital stock in the period prior to 30 June 2003
through the issue of new shares in return for cash and non-cash
contributions one or more times by a total of up to DM 16,064,265
(Authorized Capital I). The Management Board is further authorized to
decide on any exclusion of subscription rights of the shareholders with the
approval of the Supervisory Board. The Authorized Capital I was recorded in
the entry of the company in the Commercial Register on 15 September 1998.
The foregoing authorization was first exercised in accordance with a
resolution of the Management Board of 01 October 1998 and the stock capital
of the company increased by exploiting the authorized capital by DM 700,000
and increasing the capital stock from DM 40,160,665 (in words: Deutschmarks
forty million one hundred and sixty thousand six hundred and sixty-five) to
DM 40,860,665 (in words: Deutschmarks forty million eight hundred and sixty
thousand six hundred and sixty-five) through the issue of 140,000 new
bearer shares of no par value with a calculated share in the capital stock
of DM 5.00 each. The execution of the capital
<PAGE>
-5-
increase was recorded in the Company's entry in the Commercial Register on
27 October 1998.
2. For the purpose of taking over the ME Shares by means of a capital increase
against non-cash contribution in accordance with the terms of the record
appended hereto as Schedule EV 1, the Management Board of BROKAT shall
-------------
adopt the following resolution on further increasing the capital stock of
BROKAT from the Authorized Capital I:
(1) The capital stock of the Company in an amount of DM 40,860,665 (in
words: Deutschmarks forty million eight hundred and sixty thousand
six hundred and sixty-five) sub-divided into 8,172,133 shares of no
par value shall be increased by exploiting the authorized capital by
means of non-cash contributions of DM 3,887,290, increasing the
capital stock to DM 44,747,955 (in words: Deutschmarks forty-four
million seven hundred and forty-seven thousand nine hundred and
fifty-five) by issuing 777,458 new bearer shares of no par value
(hereinafter also referred to as "BROKAT Shares") with a calculated
share in the capital stock of DM 5.00 each.
(2) The new shares shall participate in profits with effect from 01
January 1999.
(3) The statutory subscription right of the shareholders shall be
excluded. The new shares shall be subscribed to and taken over by the
ME Shareholders as follows:
(1) Dr. Andreas von Aufschnaiter [_Address] 38,874 shares
(2) Jozsef Bugovics [_Address] 116,618 shares
(3) Dr. Christoph Bulfon [_Address] 155,491 shares
(4) Philipp A. Schoeller [_Address] 139,943 shares
(5) Andreas Kinsky [_Address] 23,324 shares
(6) Dr. Nikolaus Seemann Ritter
<PAGE>
-6-
von Treuenwart [_Address] 194,364 shares
(7) SBF Sachsische
Beteiligungsfond GmbH [_Address] 38,873 shares
(8) Roman E. Kainz [_Address] 38,873 shares
(9) GCI Management GmbH [_Address] 31,098 shares
Total 777,458 shares
(4) The non-cash contributions shall be effected by transferring to the
company the ME Shares and thus the entire capital stock of
MeTechnology AG, recorded in the Commercial Register of the Local
Court of Leipzig under no. HRB 14687, as follows:
(1) Dr. Andreas von Aufschnaiter 10,000 ME Shares
(2) Jozsef Bugovics 30,000 ME Shares
(3) Dr. Christoph Bulfon 40,000 ME Shares
(4) Philipp A. Schoeller 36,000 ME Shares
(5) Andreas Kinsky 6,000 ME Shares
(6) Dr. Nikolaus Seemann Ritter
von Treuenwart 50,000 ME Shares
(8) SBF Sachsische
Beteiligungsfond GmbH 10,000 ME Shares
(8) Roman E. Kainz 10,000 ME Shares
(9) GCI Management GmbH 8,000 ME Shares
The contribution of the ME Shares by the ME Shareholders shall be
commercially effective as from the date of transfer to the company and
have a right to participate in profits as from 1 January 1999.
<PAGE>
-7-
Paragraphs (1) to (4) above shall hereinafter be referred to as
"Resolution on Capital Increase"
(S) 2
Subscription and Takeover Obligation, Warranty
1. The ME Shareholders hereby undertake to
(1) take over the BROKAT Shares in accordance with the terms of the
subscription slip appended hereto as Schedule EV 2,
-------------
(2) and to transfer the ME Shares to BROKAT for the purpose of
performance of and final compliance with the contribution
obligation undertaken therein by means of non-cash contribution.
2. The ME Shareholders provide a warranty with respect to the ME Shares
in accordance with the terms of the Warranty Agreement appended as
Schedule EV 3 which was signed on 17 May 1999 (hereinafter referred to
-------------
as "Warranty Agreement"). The assertion by BROKAT of any or further
claims other than the claims provided for in this Agreement and in the
Contribution and Warranty Agreement irrespective of the legal ground
therefor shall be excluded.
(S) 3
Contribution
1. The ME Shareholders hereby transfer the ME Shares to BROKAT.
2. The ME Shares shall be transferred with effect from the effective date
hereof pursuant to (S) 5.
<PAGE>
-8-
3. The profit accruing on the ME Shares shall be due to BROKAT with effect
from 1 January 1999.
(S) 4
Consideration
1. In consideration of the ME Shareholders' contributing the ME Shares
pursuant to (S) 2 paragraph 1, BROKAT shall grant to the ME Shareholders
BROKAT shares free of charge in accordance with the terms of the
Resolution on Capital Increase.
2. The BROKAT Shares to be issued to the ME Shareholders are with profits
with effect from 1 January 1999. BROKAT shall apply for and keep
pending the BROKAT Shares' admission to trading on the regulated market
when trading commences at the Neuer Markt of the Frankfurt Stock
Exchange by 7 July 1999 at the latest.
3. The ME Shareholders have taken note of the sales prospectus dated 7
September 1998 published by BROKAT in September 1998. BROKAT warrants
that the information contained in this sales prospectus is complete and
correct in accordance with the provisions of the law on prospectus
liability, insofar as not in conflict with overriding, mandatory
legislation, in particular provisions of the Corporation Act on raising
and maintaining capital. ME Shareholders are precluded from asserting
any or further claims on account of the BROKAT Shares irrespective of
the legal ground therefor.
(S) 5
Condition Precedent
This Agreement shall become effective as soon as the Management Board of
BROKAT has adopted the legally valid Resolution on Capital Increase.
<PAGE>
-9-
(S) 6
Final Provisions
1. Each of the parties hereto shall bear the costs arising to that party,
in particular the costs of its advisers, itself.
2. Alterations and modifications to this Agreement including any such
alterations and modifications to this clause itself must be made in
writing to be legally valid, save as where a more stringent form is
imposed by law; in such a case this more stringent form must be complied
with.
3. If any provisions contained herein should be ineffective or
unenforceable, this shall not affect the validity of the remaining
provisions hereof. This shall also apply if it should transpire that
this Agreement contains a gap. A reasonable ruling shall be deemed to
replace the ineffective or unenforceable provisions or to complete the
gap which forms the closest equivalent to the intention of the parties
or which they would have intended in accordance with the spirit and
purpose of this Agreement if they had considered the issue when the
Agreement was entered into or when a provision was included at a later
date.
Frankfurt am Main/Munich/Stuttgart, 20/21 May 1999
On behalf of BROKAT by virtue of a power of attorney conferred orally and
promising to submit a written authority [handwritten]: power of attorney at
a later time:
[signed]
Dr. Peter Ladwig
<PAGE>
-10-
On behalf of
a) Vendors nos. 1, 2, 4 to 6 and 9 by virtue of a power of attorney
conferred and promising to submit the written authority of those
persons represented at a later time and on his own behalf and
b)
c) On behalf of SBF Sachsische Beteiligungsfond GmbH by virtue of a
telefax copy of a power of attorney as appended hereto:
[signed]
Dr. Christoph Bulfon
On behalf of Mr. Roman E. Kainz by virtue of a telefax copy of a power of
attorney as appended hereto:
Dr. Hermann Schlindwein
<PAGE>
Exhibit 21.1
List of Subsidiaries
BROKAT Asia Pte. Ltd., Singapore
BROKAT Ltd., United Kingdom
BROKAT Americas, Inc., USA (Includes the former operations of Transaction
Software Technologies, Inc.)
BROKAT Systeme AG, Switzerland
BROKAT Infosystems Ges.m.b.H., Austria
BROKAT Italy SRL, Italy
GO-Solutions GmbH, Germany
MeTechnology AG, Germany (In the process of being merged into its parent
company; subject to the fulfillment of all of the merger conditions under
German Law)
MeTechnology Europe GmbH, Germany (In the process of being merged into its
parent company; subject to the fulfillment of all of the merger conditions
under German Law)
MeTechnology Kft., Hungary
Brokat Australasia Pty. Ltd., Australia (Subject to completion of
organizational formalities)
Brokat Infosystems s.a.r.l., Luxembourg
Fernbach Financial Software S.A., Luxembourg (Acquisition of 100%) is subject
to completion of formalities under applicable law)
BROKAT Japan K.K., Japan (Subject to completion of organizational formalities)
<PAGE>
Exhibit 23.1
May 24, 2000
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our reports
dated:
. February 14, 2000, relating to the consolidated financial statements
of BROKAT Infosystems Aktiengesellschaft as of December 31, 1999,
June 30, 1999 and June 30, 1998, and for the six months ended
December 31, 1999 and for each of the years in the three year period
ended June 30, 1999,
. March 10, 2000 relating to the consolidated financial statements of
MeTechnology Aktiengesellschaft as of and for the year ended December
31, 1998 and
. March 10, 2000 relating to the consolidated financial statements of
ESD Vermogensverwaltungsgesellschaft mbH as of and for the year ended
December 31, 1998
and to all references to our Firm included or made a part of this Registration
Statement.
Arthur Andersen
Wirtschaftsprufungsgesellschaft
Steuerberatungsgesellschaft mbH
/s/ Andreas Schmidt
- -------------------------------
Dr. Andreas Schmidt
<PAGE>
Exhibit 23.2
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the use of our report
dated January 21, 2000 relating to the consolidated financial statements of
Transaction Software Technologies, Inc. as of September 30, 1998 and 1997 and
for the fiscal years then ended and to all references to our Firm included or
made a part of this Registration Statement.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
May 23, 2000
<PAGE>
EXHIBIT 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) [_]
----------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
One Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------------------
BROKAT Infosystems Aktiengesellschaft
(Exact name of obligor as specified in its charter)
Federal Republic of Germany Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
BROKAT Infosystems AG
Industriestrasse 3
D-70565 Stuttgart
Federal Republic of Germany
(Address of principal executive offices) (Zip code)
_____________
11-1/2% Senior Notes due 2010
(Title of the indenture securities)
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the 2 Rector Street, New York,
State of New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and
17 C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York (formerly
Irving Trust Company) as now in effect, which contains the authority to
commence business and a grant of powers to exercise corporate trust
powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed
with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed
with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 23rd day of May, 2000.
THE BANK OF NEW YORK
By: /s/ MICHAEL CULHANE
------------------------------------------
Name: MICHAEL CULHANE
Title: VICE PRESIDENT
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1999, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
ASSETS Dollar Amounts
In Thousands
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin...... $ 3,247,576
Interest-bearing balances............................... 6,207,543
Securities:
Held-to-maturity securities............................. 827,248
Available-for-sale securities........................... 5,092,464
Federal funds sold and Securities purchased under
agreements to resell................................... 5,306,926
Loans and lease financing receivables:
Loans and leases, net of unearned income................ 37,734,000
LESS: Allowance for loan and lease losses............... 575,224
LESS: Allocated transfer risk reserve................... 13,278
Loans and leases, net of unearned income, allowance,
and reserve........................................... 37,145,498
Trading Assets........................................... 8,573,870
Premises and fixed assets (including capitalized leases). 723,214
Other real estate owned.................................. 10,962
Investments in unconsolidated subsidiaries and
associated companies.................................... 215,006
Customers' liability to this bank on acceptances
outstanding............................................. 682,590
Intangible assets........................................ 1,219,736
Other assets............................................. 2,542,157
-----------
Total assets............................................. $71,794,790
===========
<PAGE>
LIABILITIES
Deposits:
In domestic offices..................................... $27,551,017
Noninterest-bearing..................................... 11,354,172
Interest-bearing........................................ 16,196,845
In foreign offices, Edge and Agreement
subsidiaries, and IBFs................................. 27,950,004
Noninterest-bearing..................................... 639,410
Interest-bearing........................................ 27,310,594
Federal funds purchased and Securities sold
under agreements to repurchase.......................... 1,349,708
Demand notes issued to the U.S.Treasury.................. 300,000
Trading liabilities...................................... 2,339,554
Other borrowed money:
With remaining maturity of one year or less............. 638,106
With remaining maturity of more than one year
through three years.................................... 449
With remaining maturity of more than three years 31,080
Bank's liability on acceptances executed and 684,185
outstanding.............................................
Subordinated notes and debentures........................ 1,552,000
Other liabilities........................................ 3,704,252
Total liabilities........................................ 66,100,355
EQUITY CAPITAL
Common stock............................................. 1,135,284
Surplus.................................................. 866,947
Undivided profits and capital reserves................... 3,765,900
Net unrealized holding gains (losses) on
available-for-sale securities........................... (44,599)
Cumulative foreign currency translation
adjustments............................................. (29,097)
-----------
Total equity capital..................................... 5,694,435
-----------
Total liabilities and equity capital..................... $71,794,790
===========
<PAGE>
I, Thomas J. Mastro, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Thomas J. Mastro
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
---
Thomas A. Renyi |
Alan R. Griffith | Directors
Gerald L. Hassell |
---
- --------------------------------------------------------------------------------
